THE company which runs Scotland’s only gold and silver mine is on the brink of collapse, putting the future of around 80 jobs at risk.
In a statement to the stock market, Scotgold Resources said it could call in the administrators in a matter of days after talks over emergency funding were unsuccessful.
It came after discussions with a potential new investor, which were first announced to the market on October 16 and which the firm had hoped would provide it with sufficient funding to continue as a going concern, failed to result in a deal.
Scotgold, which owns and operates the Cononish mine near Tyndrum, had just two weeks earlier announced that the “most advanced prospective investor” had withdrawn from discussions with the firm, having decided not to proceed with investment.
The company said to the market yesterday: “On 16 October, the company announced that it was in advanced financing discussions with a strategic investor. Unfortunately, these discussions have not resulted in an investment at this time.
“Therefore, the directors, having assessed the options open to them, are now considering the appointment of administrators over the coming days.
“Further announcements will be made in due course.”
The latest development is likely to deal a decisive blow to those hoping the Cononish project could ultimately forge a global reputation for gold and silver mining in Scotland and bring a boost to the economy of the Tyndrum area in the process.
Scotgold has seen the prospects for the mine steadily deteriorate over the course of this year, after first signalling problems with its plans for Cononish in March. That was when it first raised concerns over its ability to continue as a going concern, after disclosing that significantly less mineralised ore would be yielded from the mine than originally envisaged.
The discovery triggered a change to the company’s mining strategy in a bid to make the most of the resource. But it came with the caveat that if there was a delay to the start of the new approach, involving a technique known as long hole stope mining, or if the yield was subsequently below plan, “then a material uncertainty would exist that casts significant doubt over the ability of the consolidated entity to continue as a going concern in the very immediate term”.
A review commissioned by the company in July subsequently found there were no “fatal flows” in the mining resource estimate and grade control modelling process. But it also concluded that an initial assessment of the draft mine plan and associated cash flow forecasts indicated that “significant capital investment is required”.
The prospect of Scotgold falling into administration was then raised by the company on September 11, when it warned it could fail in the following weeks if a new payment plan was not agreed with one unsecured creditor. Shares in the company were suspended.
The outlook for Scotland worsened further in late September when it announced it had put the majority of its employees on short-term unpaid leave as it entered talks with an administration specialist “as a precautionary measure”.
Scotgold, which employs around 80 people at the Cononish mine, said at the time that it had taken the step while efforts to secure an emergency funding deal took place.
The employees affected remain on unpaid leave, a spokeswoman for the company said today.
The biggest shareholder in Scotgold is non-executive director Nat le Roux, who holds a 33% stake. Its other biggest shareholders are directors of the company.