Scotgold halts trading as firm’s future in limbo

Trading of Scotgold Resources (LSE: SQZ) shares was halted Monday amid the “highly uncertain” outcome of funding discussions.

The company pursuing what could be Scotland’s first commercial gold-silver mine said that while talks to secure additional financing were at an “advanced stage,” it risked going into administration if it failed to secure a significant investment.

Scotgold also revealed that one unsecured creditor had recently demanded full payment of outstanding interest. Although the firm has sufficient funds to make such a payment, it didn’t believe that doing so would be in the best interest of all stakeholders. 

“In the event of default there is a material risk the business could be placed into administration in the next few weeks,” it noted.

Scotgold’s board made the decision to halt trading, pending clarification of the miners financial position and said that a mine plan until July 2025 has been received and is under internal review. 

During July and August gold concentrate shipments totalled 235 tonnes with a sales value of £1.9 million ($3.2 million), Scotgold said. Scottish gold doré sales made to Scottish jewelry companies during those past couple of months totalled £46,160 (about $78,570).

The company, which received initial approval for the Cononish mine in 2018, poured first gold in December 2020 and achieved commercial production in July last year.

A few months later, on March 27, Scotgold shocked shareholders by announcing that its gold grades, revenues and working capital had suddenly deteriorated, to a point where its ability to keep operations going was in question.

It cited failed efforts to optimize production using what it considered a more cost-effective method of mining called long hole stoping. Any delays in switching to the new process, the miner warned at the time, would inevitably put a strain on its finances.

Scotgold launched in July a third-party review of its operations after “disappointing” production results in recent months. This would initially encompass an assessment of the mine design, schedule and production forecasts.

Also in July, a “fake news” report about a non-existent, second gold vein discovery at Cononish caused company shares to soar in value. The BBC later admitted the report was incorrect.