REG - Scotgold Resources - Q1 2022 Production and Operations Update

Scotgold ResourcesAnnouncement

21/04/2022 10:30

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RNS Number : 8971I  Scotgold Resources Ltd  21 April 2022

21 April 2022

 

Scotgold Resources Limited ("Scotgold" or "the Company")

Q1 2022 Production and Operations Update - Cononish Gold and Silver Mine,
Scotland

 

Scotgold Resources Limited (AIM: SGZ), Scotland's first commercial gold
producer, provides a Q1 2022 production and operations update for three months
ended 31 March 2022 ("Q1 2022") for its Cononish Gold and Silver Mine in
Scotland ("Cononish"), as the Company targets production of c.23,500oz p.a.
run rate of gold by Q1 2023.

 

Cononish Q1 2022 Production

·    Gold production totalled 1,257 gold ounces for Q1 2022 - marginally
lower than production guidance of 1,400 - 2,200 oz gold.

·    Phase 1 Ramp-up completed during Q1 2022 with process plant feed
throughput during March at approx. 3,000 tonnes of feed.

·    Circa 8,600 tonnes of ore was mined and transferred to Run Of Mine
(ROM) feed pad (whereby it is blended prior to being fed into the process
plant) during Q1 2022 with an average gold content of 7.7 g/t.

·    Access to the "cut and fill 2" (CAF2) stope area at Cononish
underground mine achieved as of 21 March 2022 after developing the mine a
further 325 meters in the quarter. This significant step is crucial to allow
the mining of reserve mine gold grade in line with life of mine plan.

·    The first cut of the (CAF2) stope saw 2,700 tonnes of ore at an
average of 20 g/t of gold mined and transferred to ROM pad, almost all of this
will be processed during April 2022.The increase in gold grade being
transferred to the ROM pad has seen April 2022 achieve record levels of gold
concentrate production. Just over 138 tonnes of concentrate has been produced
during April thus far, comfortably ahead of any previous full months
production.

·    There are a further three more cuts to extract in the (CAF2) stope
equating to an additional 6,000 tonnes of ore at around 17 g/t gold.

·    A noticeable increase in free gold was seen in the ore process once
the (CAF2) was accessed. The gold produced through the gravity circuit will be
released in subsequent updates.

·    Covid still remained an interruption to the business, particularly in
the early part of Q1 2022. In some cases, Scotgold had up to ten employees in
quarantine at any given time.

·    In summary, Q1 2022 was a quarter during which Scotgold executed the
plan to develop tunnels in the underground mine to allow access to further
areas of the mine where high grade ore exists. This meant the process plant
had to process lower grade ore during this period. The Company is pleased with
how the process plant performed during this difficult quarter. Long hole stope
mining is still on plan to commence in late Q3 2022 as per the original mine
design and during the time it takes to develop sufficient mine tunnels for the
effective extraction of ore "cut and fill" stope mining of specific areas such
as around "cut and fill 1" (CAF1) and now (CAF2) areas will be the method
utilised to access reserve grade ore.

 

Q1 2022 sales

·    Q1 2022 gold concentrate gold and shipments totalled 175 tonnes with
a sales value of £1.6m.

·    Shipping of concentrate was affected in late February until April due
to global events. Cash revenue was affected the Company receive funds only
upon concentrate shipment loading.

 

Mine Development

·    2022 continues to be a year of focus on mine development and
enhancement of the localised mine plan management to continue to increase and
sustain gold grade/recoveries in line with management targets.

·    Long hole stope mining continues to be the target by late Q3 2022.

 

Cononish Growth

·    Q2 2022 gold production guidance range is for 2,600 to 3,200
ounces of gold.

·    Low-capex optimisation initiatives, including the addition of a
thickener into the tailings circuit, are nearing construction completion, and
now focussing on transport and delivery to site to aim for delivery of up to
4,000 feed tonnes and achieve Optimisation Phase Production run rate of c
16,000 - 17,500 ounces p.a. run rate of gold by end Q2 2022.

·    Phase 2/Expansion Phase targeted for Q1 2023 to achieve 23,500 ounces
p.a. run rate of gold.

 

Financials

·    Entered into an agreement with Fern Wealth GmbH, a wealth management
company based in Zug, Switzerland, to arrange the procurement of up to
£3million funding from a syndicate of high-net- worth investors to fast-track
Cononish optimisation initiatives.

 

Scotgold Resources CEO, Phil Day said, "Whilst we achieved slightly lower gold
production through the quarter as we developed through the lower grade areas
in the mine so to access the areas of known high grade and set up "cut and
fill" stopes, we have focussed and delivered on our Q1 2022 objectives.
Objectives included developing the mine and maintaining the process plant feed
throughput at Phase 1 rates, seeing us achieve a 10% increase on Q4 2021
mining and feed throughput to the process plant rate.  These targets have
been realised thanks to the hard-work and determination of our committed team
here in Tyndrum.

 

"As we enter Q2 2022, we have reached an exciting time in Cononish's
optimisation and production ramp-up. We successfully accessed the (CAF2) stope
at Cononish on 21 March in line with schedule and are beginning to see the
results. Cononish is a high-grade operation, and we are delineating gold
grades of up to 35g/t for processing. Importantly by adopting this "cut and
fill" methodology to the short term mine plan we can better extract certain
areas of the mine, obtain better indications of the geotechnical and resource
characteristics in localised areas which allows for better stability and
reliability of gold production going forward from the Cononish mine.  Our
intention is to continue developing tunnels in the mine so that we can access
even further areas utilising the "cut and fill" stope mining method to exploit
higher grade areas efficiently. By late Q3 2022, when sufficient tunnel
development in the mine has been conducted, the original long hole stoping
method of mining will commence and we expect to see yet another step change in
performance, gold grade accessibility, stability of production and reduced
costs per tonne of ore mining.

 

"Optimising our flagship Cononish gold mine to maximise its intrinsic value
remains a core priority for 2022. Cononish is already a cash generative
operation yielding attractive margins, however we believe we will be able to
maximise this value more efficiently by utilising debt funding, instead of
cashflows, to fast-track plans. We look forward to updating the market further
on our debt funding package and optimisation initiative implementation and
remain confident of achieving our near-term objectives and longer-term
strategy in line with achieving 23,500 ounces of gold run rate by the end of
Q1 2023."

 

Cononish Gold & Silver Mine Production and Optimisation

 

During Q1 2022 production continued to be ramped up in line with the Cononish
2022 mine plan.  Scotgold achieved slightly lower than its Q1 2022 production
guidance, 1,257 ounces of gold and 5,881 ounces of silver from Cononish.

 

During the period the Company is pleased to report that Phase 1 Ramp-up
production was completed with an average run rate of 3,000 tonnes of feed to
the process plant. This was an extremely important target to achieve as it
allows the processing of mine development ore and minimises waste. Sufficient
development of the underground mine is the goal and is predicted to be
achieved in late Q3 2022 after which, long hole stope mining will occur bring
consistency of gold grade to the process plant, achieve a step change in the
cost of mining achieved and increase the mining rate.

 

As outlined in Cononish's mining plan, the Company spent Q1 2022 developing
the underground mine by 325 meters and preparing the access to the (CAF2)
stope at the Cononish underground mine. This way access to the reserve mine
grade gold grade improves and better understanding of the localised areas
within the resource model which also improves overall grade control with the
objective of significantly increasing the gold grade/recoveries being
delineated and processed in the processing plant. Access to the (CAF2) stope
was achieved on target on 21 March 2022 and the results of which have been
instantaneous.  Current diluted mine grades of up to 35 g/t of gold are now
being seen and being transferred to the ROM pad.

 

The increase in gold grade being transferred to the ROM pad has seen April
2022 achieve record levels of monthly gold concentrate production. Just over
138 tonnes of concentrate has been produced during April thus far, comfortably
ahead of any previous full months production. The bottom section of the (CAF)
has also extended 22 meters beyond the known area of gold mineralisation.

 

In Q3 2022, Scotgold plans to commence retreat long hole stoping, as per the
original mine design, which will also increase the ability to access reserve
mine gold grade more readily.

 

Looking ahead to Q2 2022 and the remainder of the year, Scotgold will be
focused on the implementation of several mine optimisation initiatives at its
processing plant and mine to maximise efficiencies and in turn increase its
gold production profile in line with its stated targets.  To this end, the
Company were pleased to announce on 7 April 2022 that it had entered into an
agreement with Fern Wealth GmbH, a sophisticated wealth management company
based in Zug, Switzerland whose focus is to seek out and manage quality
investment opportunities for their Investors, to arrange the procurement of up
to £3 million loan funding from a syndicate of high-net-worth investors.

 

Subject to the successful receipt of loan financing, the Company intends to
use the proceeds received to fast-track the Company's Optimisation Initiatives
to achieve a gold production run rate of c.23,500oz p.a. by the end of Q1
2023.

 

The core Optimisation Initiatives planned for the remainder of 2022 include:

 

·    Design, construct, and commission a tailings thickener, a
cost-effective technology to improve the throughput and recoveries of
concentrate product in the processing plant to achieve a monthly run rate of
c. 4,000 feed tonnes to the process plant by end of Q2 2022 which equates to
c. 16,000 - 17,500 ounces p.a. run rate of gold;

·    Enhancing mining efficiencies of the underground mine to ensure
continuous and sustainable operations; and

·    Design, construct, and commission an ore sorter at the processing
plant between the existing crushing unit and the Mill to realise an increase
in ounces of gold processed per tonne at lower tonnages and potentially lower
CAPEX and OPEX. Due diligence to be completed by the end of Q2 2022 and the
sorter, if approved, to be operational by the end of Q1 2023.

 

Figure 1. Cononish Phased production development plan

 Phased Production Development  Expected to commence by end  Annual Rate of Ore Production  Target Average Annual Rate of Gold Production
 Phase 1                        Q1 2022                      36,000 tonnes                  9,910oz
 Optimisation Phase Production  Q2 2022                      51,000 tonnes                  17,500oz
 Phase2/Expansion Phase         Q1 2023                      72,000 tonnes                  23,500oz

 

Q1 2022 - Sales

 

Q1 2022 gold concentrate gold and shipments totalled 175 tonnes with a sales
value of £1.6m. Gold concentrate is sold directly to Scotgold's off-take
partner MRI Trading AG. Shipping of concentrate was affected in late February
until April due to global events. Cash revenue was affected the Company
receive funds only upon concentrate shipment loading.

 

The information contained within this Announcement is deemed by the Company to
constitute inside information as stipulated under Article 7 of the Market
Abuse Regulation (EU) No. 596/2014 (as amended) as it forms part of the
domestic law of the United Kingdom by virtue of the European Union
(Withdrawal) Act 2018 (as amended). Upon the publication of this Announcement
via the Regulatory Information Service, this inside information is now
considered to be in the public domain.

 

 

**ENDS**

 Scotgold Resources Limited  SP Angel Corporate Finance LLP   Celicourt Communications

 Chief Executive Officer     Nomad and Broker                 Financial PR

 Philip Day                  Ewan Leggat / Charlie Bouverat   Felicity Winkles

                             Tel +44 (0) 20 3470 0470         Tel +44 (0) 208 434 2643

                                                              Tel +44 (0) 774 8843 871

Notes

 

Scotgold Resources Ltd (AIM: SGZ), is Scotland's and the UK's first commercial
gold producer. The Company poured first gold in November 2020 at its Cononish
Gold and Silver Mine ('Cononish) in Tyndrum, Scotland and is developing it
into a +23,500-ounce gold mine per annum by Q1 2023. Cononish is a high-grade
underground mining operation with a central processing plant producing gold
concentrate for off-take and gold doré for the Scottish Jewellery industry.
Once in full production, the mine has anticipated forecast operating costs of
c.£544/oz AISC, which will place Cononish in the lowest quartile of gold
mining operations globally.

 

It is Scotgold's vision to build a mid-tier gold mining company in Scotland
with multiple operations in the country that enhance the local environment and
economy in ways that have an enduring positive impact.

 

 

 

 

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