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Scotgold Resources announces Cononish 4Q21 production and operation update

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Global Mining Review,

Scotgold Resources Ltd has provided a 4Q21 production and operations update for its Cononish Gold and Silver Mine in Scotland and 2022 strategy as the company targets production of approximately 23 500 oz/yr run rate of gold by end of 1Q23.


  • 4Q21 production to 31 December 2021totalled 1508 oz of gold (Au).
  • Highest gold concentrate production recorded in December 2021 since first gold pour – 101 t of concentrate produced equating to approximately 700 pz of contained gold (approximately 60% increase to company’s previous best monthly concentrate production).
  • November production negatively impacted by COVID-related supply of explosives for the mine – short-term supply issue resolved in November and ore extraction now continues in line with the company’s mine plan.
  • 4Q21 gold concentrate gold and shipments totalled 231.5 t, with a sales value of over £2.6 million.
  • Phase 1 ramp-up nearly completed as of 31 December 2021 with the processing plant achieving 2500 t feed rate for the month of December.
  • 1Q22 gold production guidance range is for 1400 – 2200 oz of Au.
  • Low-CAPEX optimisation initiatives, primarily the addition of a thickener into the tailings circuit, are underway to achieve optimisation phase production run rate of approximately 16 000 – 17 500 oz/yr run rate of gold.
  • Phase 2/expansion phase targeted for 1Q23 hereto achieve 23 500 oz/yr run rate of gold.
  • 2022 strategy focused on continuing to optimise Cononish processing plant and mining efficiencies to increase production profile whilst building a multi-asset gold production company in Scotland through targeted exploration.
  • Renegotiated the tranches of the Bridge Barn Loan that were repayable in 2022.
  • Additional loan of £500 000 to provide buffer through 1Q22 short term mine plan grade variability.

Scotgold Resources CEO, Phil Day, said” “I’m delighted to report on our record-breaking gold concentrate production in December 2021, which saw a 60% increase in production from our previous record month.

“Our 2021 initiatives to increase production efficiencies and ramp-up production are working. It has taken hard-work, dedication, extensive planning and committed teamwork to transform our mining operations during the past 9 months since I joined as CEO. Like many mines around the world, we have endured significant COVID disruptions, with many people infected or isolating repeatedly, along with significant challenges with our extensive supply chains. I’m honoured to be leading such an exceptional team here in Scotland and the UK who have worked tirelessly during these difficult times, with conviction to deliver.

“We have almost completed Phase 1 ramp-up production and we continue to be cash generative as our production revenues exceed operational costs. We forecast that this cash generation will continue during 2022 as we increase the production profile firstly to 4000 feed t by 2Q22 and then 4500 feed t by 4Q22 (equating to 16 000 – 17 200 oz/yr run rate of gold) and up to 23 500 oz/yr Au run rate by end of 1Q23. This will allow us to develop the mine, increase our resources, continue exploration, and should drive significant shareholder value.

“Scotgold has negotiated a newly restructured debt agreement with its original debt provider Bridge Barn which affords us continued operational flexibility for growth and expansion by removing the need to repay tranches 1 and 2 plus interest, in 2022.

“Ultimately, our vision is to become a mid-tier multi asset gold producer in Scotland. Expanding the resource and achieving full mine optimisation and production at Cononish is the first step in our strategy. Our second step is the continued exploration of our additional licence areas which run across the prospective Grampian area of Scotland – the Caledonides Mobile Belt. We have identified three prospective areas, close to Cononish and it’s our intention to explore these in conjunction with our mine optimisation and development work at Cononish during 2022 and 2023.

“We will continue to update the market on Cononish’s progress through quarterly production and sales reports which is line with standard reporting for listed gold producers and corporate and exploration updates. With our 1Q22 gold production target of 1400 – 2200 oz of Au and run rate of 17 500 oz/yr Au by 2Q22, I look forward to 2022 as we continue to build credibility and deliver results as a unified team.”

Cononish production and optimisation

During 4Q21, the company produced 1508 oz Au and 7200 oz of silver (Ag) from Cononish. In line with the newly appointed management and leadership team in April 2021, a redesign of the 2021 mine schedule/design was completed in May 2021. The redesign allowed faster access to higher grade zones within the ore body at Cononish by utilising a method of mining called ‘cut and fill stoping’. This method utilises the fact that the gold vein in some zones of Cononish has better continuity vertically than it does horizontally. In addition to a redesign of the mine schedule/design, the company completed modifications and upgrades to the process plant including the relining the ball mill in October 2021; purchased critical and required spares for the processing plant and mining operations; and implemented maintenance planning practices to ensure the mine runs efficiently.

During 4Q21 production continued to be ramped up in line with the mine plan re-design and Phase 1 ramp-up production is near completion, with 6168 t of ore fed to the processing plant. Whilst strong operational progress has been made at Cononish during 4Q21, November 2021’s underground development and production was negatively impacted by COVID-19 related supply issues for explosives, that are used to blast the mine face for ore extraction. This meant that 1011 oz Au were produced in November and December 2021, 290 Au oz lower than the company targeted due to November’s production impact. This issue was resolved during November and ore extraction continues in line with the company’s mine plan. However, the company is delighted to report that in December 2021, Scotgold had a record month of production in terms of gold concentrate with 101 t produced. The concentrate grade equates to around 700 oz of contained Au and 3000 oz of contained Ag and marks a 60% increase to the company’s previous record monthly concentrate production.

In terms of 2022 mine plan development, the focus of 1Q22 will be to prepare for access to the second ‘cut and fill stope’, which is planned to be accessed in 2Q22. This focus on mine development is very normal in underground mines and is well understood to come with some risk of grade variability. That grade variability has been experienced over the past two weeks with low grade ore being produced. The company has limited knowledge when this will improve and as a result the company’s working capital remains challenging. As such, the board has taken the prudent decision to accept an additional loan of £500 000 provided by Jane Styslinger, a related party of Non-Executive Director, Bill Styslinger, as defined by the AIM Rules for Companies (the additional loan) to mitigate this risk and ensure continued financial robustness during this period while this work is completed. Additional financing may be required if the grade remains poor until the company is able to access the next ‘cut and stope’ area in 2Q22. In 3Q22, Scotgold plans to commence retreat long hole stoping, as per the original mine design, which will significantly transform the ability to access reserve mine gold grade more readily.

Additionally, the focus in 1Q22 – 2Q22, will be the implementation of several low-CAPEX processing plant and mine optimisation initiatives by the end 2Q22. The planned tailings thickener is expected to provide significant optimisation to the throughput of the processing plant. As such, Scotgold has a target of achieving optimisation phase production monthly run rate of approximately 4000 feed t to the process plant by end of 2Q22 ramping up to 4500 feed t by 4Q22 which equates to approximately 16 000 – 17 500 oz/yr run rate of gold by the end of 2Q22.

It is the company’s plan to continue to increase the production rates of its processing plant and achieve Phase 2 production at Cononish – this entails achieving a run rate of 23 500 oz/yr Au. Scotgold is completing due diligence work to determine whether to install an Ore Sorter between the existing crushing unit and the mill. The installed crushing unit is already designed for the Phase 2 production rate so will not require expansion. This option will realise an increase in ounces of gold processed per tonne at lower tonnages and potentially lower CAPEX and OPEX. A significant benefit includes the reduction of fine tailings generated from the processing plant, which is a constraint to the expansion of Cononish’s Reserves. Scotgold expects the due diligence to be completed by the end of 2Q22 and the sorter, if approved, to be operational by the end of 1Q23. The alternative is to install a further mill and downstream processing capacity as per the original Phase 2 mine plan upgrade.

4Q21 sales

4Q21 gold and silver concentrate shipments totalled 231.5 t, with a sales value of over £2.6 million. Gold concentrate is sold directly to Scotgold’s off-take partner, MRI Trading AG.

Some gravity gold production (to produce gold doré for the Scottish jewellery industry) was produced and sent to the refiners in December 2021. The company is continuing to actively look at increasing the production capabilities for doré gold in addition to its gold concentrate. Once the tailings thickener is in place, by the end of 2Q22 the company expect to have significant on-shift resources freed up to allow us to prioritise improvements to this circuit.

Resource/reserve expansion

It is the company’s intention to increase and optimise the current Cononish reserves which stand at 555 000 t of ore broken down as follows:

  • Proven reserves: 65 000 t comprised of 11.5 g/t Au and 51.5 g/t Ag.
  • Probable reserves: 490 000 t comprised of 11.1 g/t Au and 47.2 g/t Ag.
  • Total gold resource: 266 000 oz (estimated value: £332.5 million).
    • Gold price/oz (24/09/2020): £1250.
  • Total silver resource: 1 096 000 oz (estimated value: £20.8 million).
    • Silver price/oz (24/09/2020): £18.99.

With the implementation of Phase 2, the current life of mine stands at 8.5 years. The company believes there is significant potential to increase the resource at Cononish, with corresponding increase of life of mine. There are several areas within the Cononish resource that have not yet been adequately tested but are capable of hosting mineable high-grade pods. Scotgold plans to explore these areas with drilling to increase the resource in addition to investigating the extension of the resource along down dip and strike. As these areas are part of the current resource vein Scotgold believes they may more readily convert to reserves. Operating in the national park, the company is constrained by the quantity of tailings that it can deposit without a new planning application. The ore sorter, if implemented, would significantly reduce the quantity of tailings produced making this process simpler or alternatively Scotgold may apply for further extensions to its planning permission.

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