Drop in gold price delays Scottish mine opening

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Scotgold Resources says fall will impede the raising of equity.

The development of Scotland’s first commercial gold mine has been delayed due to the sudden drop in gold price and the ongoing challenge of raising equity.

Scotgold Resources, the company behind the development of the Scottish gold mine at Tyndrum, said the fluctuation in price has impeded the mine’s opening, scheduled for this summer.

Scotgold’s Final Cononish Development Study, released on April 30, describes how the sudden decline in gold price recorded in mid April has dented confidence among investors helping to fund the mine’s development.

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However the company says the mine is still a viable project. At base case gold price assumptions Scotgold says the project will provide healthy returns, forecast to be more than £39 million in pre-tax free cashflow over the initial seven year life of mine.

Scotgold’s executive chairman John Bentley said: "The recent sharp decline in the gold price has severely dented market confidence, albeit that there has been significant positive movement since the lows of circa $1,350 per ounce recorded on 15 April 2013.

"The potential to raise the required equity financing for the project is considered to be severely challenging under current market conditions. The board has thus decided to defer an immediate raise pending an improvement in market sentiment."

Scotgold is said to be considering a number of strategic alternatives with a view to advancing the project and achieving the objective of opening the mine – Scotland’s first commercial gold mine.

Bentley added: "Importantly, with all the work that has been completed on the planning conditions and the tailings dam design the mine is capable of producing first gold within 15 months of funding."

The mine secured a pre-development loan worth almost £1.2 million in November last year from RMB Resources to help continue the drilling programme at the mine in the Loch Lomond National Park. Bentley said RMB is still backing the scheme while evaluating the project’s debt capacities under a range of varying gold price scenarios.

The gold mine, Scotland’s first commercial gold mining venture, is forecast to produce 20,000 ounces of gold a year. When first announced in 2011 the mine was aiming to be fully operational by summer 2013.

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