Shares in Scotgold Resources (LON: SQZ) fell more than 18% on Monday after the troubled miner withdrew its full-year guidance as it began a third-party review of its operation on “disappointing” production figures for the first half of 2023.
The company behind the Cononish mine, which received initial approval for the mine in 2018, poured first gold in December 2020 and achieved commercial production in July last year, said the review will take 12 months.
Scotgold said it will initially encompass an assessment of the mine design, schedule and production forecasts.
“[It will also] inform 2023 production forecasts and will also incorporate a second stage of power and ventilation upgrades to improve mine accessibility and enable the mine to operate all development and production equipment simultaneously to improve mine development rates,” it said in the statement.
The miner reiterated concerns over its ability to keep operations going at Scotland’s first commercial gold and silver mine. Despite efforts to optimize production, it has had to revise output targets downward several times in the past year.
Scotgold has now decided to withdrawn 2023 guidance as both gold production and sales fell in the first half of the year due to a halt in production at its Cononish mine early this year.
Sales of the precious metal dropped to £3.5 million ($4.5m) in the first half of the year from £6.3 million in the same period of 2022, as production declines to 2,314 ounces from 4,755 ounces a year prior.
The fall in production was a result of halted development on the 430 West Ore Drive in late February due to declining gold grades, the company said.
It also said it would update the market on production forecasts once the third-party review is complete and the findings have been analyzed.
Scotgold’s update comes on the heels of the BBC News admission to have broadcasted “fake news” about a non-existent gold discovery made by the company, which caused the miner’s share price to subsequently soar.
When news of this alleged find broke, investors rushed to buy Scotgold shares. This caused the stock to soar 54% – adding around £15 million to its valuation – only to fall rapidly in the following days as the company admitted that it has not even drill-tested the said gold vein.
The company’s shares have fallen more than 75% year-to-date, leaving it with a market capitalization of £11.51 million (about $15m).