The View from England: Silly season launched in Scotland

The British Broadcasting Corporation has launched a three-part TV series on a “mountain full of treasure,” and it’s in Scotland. Apart from being bullish for the valuation of Scotland’s first gold mine, it is a clear signal that the Northern Hemisphere is starting its silly season.

Definitions of ‘silly season’ are hard to find but in North America this sleepy summer period is known, rather unimaginatively, as the “slow news season.” In Europe, we have less prosaic descriptions, such as ‘Mätäkuun juttu’ (rotting-month story) in Finland, ‘La saison des marronniers’ (the conker-tree season) in France, ‘Sommerloch’ (summer hole) in Germany and ‘Nyhetstorka’ (news drought) in Sweden.

Wikipedia tells us that in Spain the term ‘Serpiente de verano’ (summer snake) is often used, not for the season but for the news items themselves. The term is apparently a reference to stories of exotic creatures, which naturally receive more headlines in summer.

Media in the U.K. have described these summer months as ‘silly’ since the middle of the 19th century. Domestic news was in short supply as Parliament and the law courts were in recess, and most people of substance had left London. Before then the term ‘cucumber time’ was used in England to denote the slow season for tailors — the gentry being generally out of town at a time when cucumbers were being harvested.

Although now rather dated, this reference to cucumbers was used in many other European countries to describe slow business in summer. Examples include the Czech ‘Okurková sezóna,’ Danish ‘Agurketid,’ Dutch ‘Komkommertijd,’ Estonian ‘Hapukurgihooaeg,’ Hungarian ‘Uborkaszezon,’ Icelandic ‘Gúrkutíð,’ Norwegian ‘Agurktid,’ Polish ‘Sezon ogórkowy’ and Slovak ‘Uhorková sezóna.’

On July 12, as if to prove the point, BBC2 aired the first of a three-part documentary on gold-mining in Scotland (the program was first shown on Scottish TV in March). The series, called ‘Gold Town’, focuses on the Cononish mine, which is part of Scotgold Resources’ Grampian gold project (incorporating 13 option agreements over prospective land in the north of Scotland).

In 1984, Irish firm Ennex International discovered gold-bearing quartz veins half way up Beinn Chùirnat near the former lead-mining village of Tyndrum. This hill in the Grampians is one of Scotland’s 222 Corbetts, which are hills of 2,500-3,000 feet (a height of over 3,000 feet qualifies as a mountain, called a Munro, in Scotland). The site is above Cononish Farm on the northern boundary of the Loch Lomond and Trossachs National Park, some 90 km northwest of Glasgow.

Adits were driven but exploration was slow, and Caledonian Mining took over the Cononish project in 1994 before Scotgold assumed the reins in 2007. The latter company, based in Perth (the town in Australia rather than Scotland), released a bankable feasibility study in 2011, but falling gold prices prevented development. Scotgold was recapitalised in 2014 and a new feasibility study was published in 2015.

In 2016, Scotgold auctioned off ten 1oz gold rounds (from development work) at an average price of £4,500 per ounce (currently US$6,100 per ounce). The five-times multiple over the prevailing international gold price reflects the rarity value of British gold.

Another bankable feasibility study was published in 2017, with proven and probable reserves confirmed as 555,000  tonnes at 11.1 grams per tonne gold and 47.7 grams per tonne silver (although under 12% of the tonnage is in the proven category).

Capital expenditure for the nine-year mine was calculated at £27 million (US$38 million) and life-time operating expenses estimated at £80 million (US$110 million) for total costs of over US$700 per ounce. Pre-tax net present value was calculated at £43 million (US$60 million) using a 10% discount rate and US$1,150 per ounce gold.

Revised planning permission was granted in October 2018 (the original permission having been given in 2012), with work commencing two months later. Progress has been slow, although a ramp-up to annual production of 23,400 ounces (gold-equivalent) by February 2022 is still expected.

Earlier this year a new management team was installed and more finance sought. The first shipment of concentrate was delivered on May 11 (25 tonnes of 182 grams per tonne gold). Scotgold announced it was “encouraged” but warned “performance has been intermittent to date.”

Scotgold has suffered the classic junior company yo-yo ride in its share price. The valuation reached £4.50 per share in 2011 ahead of the initial planning permission, but traded in the £0.20-0.80 per share range between 2014 and the end of 2019.

More recently, the valuation recovered from only £0.40 per share in September 2019 to over £1.50 in October 2020 but had fallen back below £0.70 per share by March this year. The price jumped one-third to £0.94 per share after the first, local, airing of ‘Gold Town,’ before dropping back to £0.50 per share on the worrying corporate announcements three months ago.

At the start of July, Scotgold said it was mining high-grade gold “far quicker than anticipated,” and an average grade of 10 grams per tonne is expected over the next two months. This news, coupled with the BBC series being aired to a wider market, has seen the company’s valuation climb back to around £0.60 per share, valuing Scotgold at £35 million (US$48 million).

These are sobering price fluctuations, even for the silly season.

— Dr. Chris Hinde is a mining engineer and the director of Pick and Pen Ltd., a U.K.-based consulting firm he set up in 2018 specializing in mining industry trends. He previously worked for S&P Global Market Intelligence’s Metals and Mining division.