REG - Scotgold Resources - Q2 2022 Production, Sales, and Operations Update

Scotgold ResourcesAnnouncement

11/07/2022 07:00

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RNS Number : 9276R  Scotgold Resources Ltd  11 July 2022

 

11 July 2022

 

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

 

Q2 2022 Production, Sales, and Operations Update - Cononish Gold and Silver
Mine, Scotland

 

Record gold production - Q2 2022 guidance exceeded, £5.0 million sales
attained, and commercial production achieved

 

Scotgold Resources Limited (AIM: SGZ), Scotland's first commercial gold
producer, is pleased to provide Q2 2022 production, sales and operations
update for the three months ended 30 June 2022 ("Q2 2022") for its Cononish
Gold and Silver Mine in Scotland ("Cononish").

 

Gold Sales

·    Q2 2022 gold concentrate shipments totalled 415 tonnes with a sales
value of £5.0 million (79% of H1 2022)

·    H1 2022 gold concentrate shipments totalled 551 tonnes with a sales
value of £6.3 million

 

Cononish Gold Production

·    Q2 2022 gold production totalled 3,531 ounces, a 188% increase to Q1
2022

·    Q2 2022 exceeded guidance being 2,600 to 3,200 ounces

·    7,541 ounces of gold have been produced at Cononish in total, 3,531
ounces in the last quarter (47% of the total)

·    Record gold concentrate production in June 2022 - 164 tonnes of
concentrate processed equating to c.1,339 ounces of contained gold c.17%
increase to previous concentrate production record in April 2022

·    Gold grades in flotation concentrate of up to 400g/t realised during
Q2 2022

·    Commercial production achieved

·    Cononish generated cashflows that exceed all-in sustaining costs for
the Company

 

Q2 Mining and Processing

·    5,112 tonnes of ore were delineated from the Cononish underground
mine and transferred to ROM pad

·    Grade mill feed for processing plant averaged 19 g/t of gold

·    Processing plant gold recovery levels were above 90%

 

Plant optimisation and Mine development

·    Pre-constructed tailings thickener is on-site - expected installation
during Q3 2022

·    Cut and fill - stoping mining method progressing well to continue to
improve production profile - third cut and fill stope targeted for Q3 2022

·    2022 focus to enhance resource model/mine plan management to continue
to increase gold grade/recoveries in line with management targets

·    As a direct result of opening up the mine through development mining
achieved in Q1 2022, the gold grades mined in Q2 2022 were higher than
anticipated. Mine optimisation work being conducted in Q3 2022 will continue
to allow further areas of the mine open and even further mining faces being
accessed

 

Cononish Growth

·    Grade control drilling and mine development will continue to increase
the short-range geological understanding in Q3 2022, further improving grade
reconciliation to reserve. The scheduled commissioning of key optimisation
initiatives in Q3 2022, which include the thickener and mine power and
ventilation upgrades are expected to deliver increased mill throughput and
mining rates. Consequently, gold production guidance range for Q3 2022 has
been set at 2,900 - 3,500 ounces of gold

·    Low capex optimisation initiatives, including the addition of a
thickener into the tailings circuit, are underway to allow the process plant
to process up to 4,500 feed tonnes and achieve Optimisation Phase Production
run rate of c.16,000 - 17,500 ounces p.a. run rate of gold

·    As part of the Company's vision to grow, Scotgold plans to continue
exploration activities in and around its current Cononish mine and within its
licenced 2,900km2 area in preparation for exploratory drilling in 2023

 

Financials

·    £2.1 million Fern Wealth Debt Facility drawn for the processing and
mine optimisation initiatives. The revenue earnt by Scotgold in Q2 2022 will
enable the Company to pay for the mine optimisation and tailings thickener
initiatives as planned

·    Commercial production achievement

o  As previously disclosed in each of the Company's recent Annual Reports,
the Directors considered commercial production to have been reached when the
Company experienced three consecutive months of positive operating cash flow

o  This occurred on 30 June 2022 and therefore we consider the Company to be
in commercial production from 1 July 2022 onwards

 

Scotgold Resources CEO, Phil Day said, "This has been our strongest quarter
yet for Scotgold, characterised by record gold production which exceeded
guidance, record gold sales translating into significant cash generation and
continued progress on the ground to meet our production and operational
targets.

 

"In the short term, we are focusing on our transitional optimisations at
Cononish, undertaking low capex initiatives to continue to drive the
production ramp up. The recent arrival of our thickener, currently undergoing
installation in our process plant, will bolster our throughput of ore,
generating further increases in gold concentrate output. Furthermore, with our
2022 mine development work, we continue to move rapidly towards phase 2
production levels of 23,500oz run rate of gold.

 

"Our team are performing exceptionally well and, together, have facilitated
the achievement of our forecasted results. We remain impressed with Cononish's
high-grade gold geology and anticipate that the operations and cost control
discipline of our team will enable the mine to be even more cash generative
and profitable as it moves from phase 1 to phase 2 production."

 

Results Investor Webcast - Friday 15 July

 

The Company will host a live investor webcast via the Investor Meet Company
(IMC) on Friday 15 July at 12.30 BST to discuss the results, followed by an
opportunity to ask questions.

 

Investors can sign up to Investor Meet Company for free and add "Scotgold
Resources" via the following link to join the webinar:

 

https://www.investormeetcompany.com/scotgold-resources-limited/register-investor
(https://www.investormeetcompany.com/scotgold-resources-limited/register-investor)

 

Q2 2022 - Cononish Gold & Silver Mine Production, Sales, and Operations

 

Production

 

During Q2 2022 production continued to be ramped up in line with the Cononish
2022 mine plan.  Scotgold exceeded its Q2 2022 production target with
production totalling 3,531 ounces of gold and 18,382 ounces of silver from
Cononish, a 188% increase in total gold production from Q1 2022 which saw
1,224 ounces of gold produced. Gold production for H1 2022 totalled 4,755 and
24,263 ounces of silver from Cononish.

 

Scotgold is committed to responsible mining and is pleased to report it is one
of the few global gold producers that does not use cyanide for either its
flotation gold concentrate production or gravity gold at Cononish.

 

Sales

 

Q2 2022 gold concentrate shipments totalled 415 tonnes with a sales value of
£5.0 million. Gold concentrate is sold directly to Scotgold's off-take
partner MRI Trading AG.

 

Table 1: The following table summarises quarterly gold production and sales at
Cononish including H2 2021 and H1 2022

 

                       Gold produced  Silver produced  Gold Sales  Gold sales price  Gold sales

                       (ounces)       (ounces)         (ounces)    (£/ounce)         (£ million)
 Quarter ended
 Q3 2021 30 September  1,123            5,101             602      1,329             0.8
 Q4 2021 31 December   1,508            7,200          1,891       1,375             2.6
 H2 2021               2,631          12,301           2,493       1,364             3.4
 Q1 2022 31 March      1,224            5,881             854      1,522             1.3
 Q2 2022 30 June       3,531          18,382           3,034       1,648             5.0
 H1 2022               4,755          24,263           3,888       1,620             6.3

 

Mining and Processing

5,112 tonnes of ore were delineated from the Cononish underground mine and
transferred to ROM pad at Cononish during Q2 2022 with an average grade mill
feed of 19 g/t of gold.

 

Processing plant gold recovery levels has maintained above 90% throughout the
quarter.

 

Processing Plant Optimisation

 

As announced on 21 June 2022, the Company received Tranche 2 of the Fern
Wealth Debt Facility totalling £2.1 million of a £3 million loan. The
revenue earnt by Scotgold in Q2 2022 will enable the Company to pay for the
mine optimisation and tailings thickener initiatives as planned.

 

Optimisation initiatives include the design, construction, and commissioning
of a tailing's thickener, enhancing mining efficiencies of the underground
mine to ensure continuous operations and the installation of 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 a more effective
capex and opex.

 

The pre-constructed tailings thickener is now on site where it is planned for
installation during Q3 2022.  Once the tailings thickener is operational the
expected gold ounces run rate of the process plant is targeted to be at 16,500
- 17,500 ounces of gold on an annualised basis.  See Table 2.

 

Scotgold received initial test work results as part of its ore sorter due
diligence indicating 93% recovery of gold with a corresponding 35% rejection
of mass. Scotgold will update the market on more test work results and the
design, construction, and 2023 commissioning plans for the ore sorter in due
course.  The ore sorter will be pivotal to allow the process plant achieving
phase 2 throughput when installed in line with the current crushing circuit
already sized for phase 2 throughput. The ore sorter in combination with the
crushing circuit is potentially a more effective capex and opex solution as
the majority of the non-gold bearing rock will be rejected prior to the
current mill, flotation, and dry stack tailings areas, preventing the
necessity of these areas needing upgrading for process phase 2 throughput. It
will also enable the process plant to produce less tailings that require
filtering and drying prior to stacking per unit of gold for processing which
is a significant opex benefit.

 

Table 2: 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 - Achieved Q1 2022     Q1 2022 - Achieved           36,000 tonnes                  9,910oz
 Optimisation Phase Production  Q3 2022                      51,000 tonnes                  16,500 - 17,500oz
 Phase2/Expansion Phase         Q1 2023                      72,000 tonnes                  23,500oz

 

 

Mine Optimisation and Development

 

In Q2 2022 Scotgold continued to focus on the development of the mine, opening
further underground mine faces for cut and fill - stope mining. Stope mining
allows for faster and more effective extraction of ore and gives improved
detailed grade control definition to the mine plan, increasing gold recoveries
and production.

 

In late April 2022, the second cut and fill stope placement and extraction
commenced and continued through May and into June 2022. Highly defined grade
control information has allowed the preparation of a third cut and fill stope
for extraction through Q3/Q4 2022, if required.  The third cut and fill stope
will again improve exploitation of higher-grade areas efficiently and will
allow sufficient tunnel development to continue in the mine to support the
original mine design method of long hole stoping, whereby Scotgold expects
further improvements in performance, gold grade accessibility, stability of
production and reduced costs per tonne mined.

 

Mine optimisation initiatives are planned through Q3 2022 with ventilation and
power upgrades and underground definition drilling. These will allow Scotgold
to mine faster and have continued improvement in grade control granularity as
is standard practice in mining.

 

Cononish Resource/Reserve Exploration and Upgrade

 

As part of the Company's vision to grow, Scotgold plans to continue
exploration activities in and around its current Cononish mine and within its
licenced 2,900km(2) area in preparation for exploratory drilling.

 

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    Shore Capital            Celicourt Communications

 Chief Executive Officer       Nomad and Broker         Financial PR

 Philip Day                    Toby Gibbs / John More   Felicity Winkles / Josh Funnell

 Via Celicourt Communications  Tel +44 (0)20 7408 4090  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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