Scotgold shares fall on Conish mine’s delayed ramp-up

The Cononish gold and silver mine is located near Tyndrum on the West Highland Way. (Image courtesy of Scotgold Resources.)

Shares in Scottish miner Scotgold Resources (LON: SGZ) dropped Friday as much as 14% in early trading after it revealed that plans to ramp up production at the Cononish mine will take longer than expected.

The company, which kicked off operations at Scotland’s first commercial gold and silver mine in December, said that slower than anticipated labour build-up and training, due in part to the current covid-19 restrictions, will impact March production.

“The full planned 24/6 operations are now not expected before the end of March,” it said in the statement, adding that it intended to use the delay in the ramp-up to complete and implement the results of an ongoing design review of the primary crusher support structure.

Cononish’s processing plant is expected to treat 1,000 tonnes of ore in March, reaching design capacity of 3,000 tonnes per month from April onwards. 

Scotgold said that, as a consequence, it has lowered its production guidance from between 7,800 and 8,700 ounces to 7,000-7,900 ounces of gold produced.

The coronavirus pandemic has had a significant impact on the Cononish mine’s overall development schedule, the company said. It triggered a shutdown in 2020, reduced access to specialist suppliers and consultants from overseas and, more recently, it has hindered recruitment and training of new staff.

This delayed production build-up has negatively impacted the company’s cash position and Scotgold is now looking into possible short-term debt financing options.

CEO to retire

The gold miner also announced on Friday that its chief executive Richard Gray is retiring at the end of March.

Gray, who oversaw the transition of Scotgold into a gold miner and producer, will become non-executive director. He will be replaced on April 1 by Pala Investments’ former head of technical operations Philip Day.

Prior to Pala, Day held the position of VP for process engineering at AMEC Americas, and has also previously held operational, managerial and technical roles for BHP, WMC Resources, Minara Resources and Wiluna Gold.

Scotgold, which received initial approval for Cononish in 2018, worked to reopen the abandoned gold mine near Tyndrum for 12 years.

The asset churned out gold in August 2016, following the launch of an ore processing trial. After the local authorities gave the project their blessing, the company began building a large-scale operation.

As many as 52 jobs could be created during full production, and the firm has offered nearly £500,000 (about $612,000) in payments to support the nearby local community of Tyndrum.

Shares in Scotgold recovered some of the losses and by mid-afternoon, they were trading only 2.7% lower to £71, leaving it with a market capitalization of £36.23 million.

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