It’s not easy building a gold mine in a National Park, even if the locals are all in favour and the boost to the regional economy is likely to be significant.
But Scotgold Resources Ltd (LON:SGZ) has now got full permission from all the relevant authorities to build a mine slightly modified from the original plan in that it will put the tailings in dry stacks that have been de-watered in the plant.
The Parks Authority did take into account objections from a group called Mountaineering Scotland, but in the end the economic well-being of the Park’s inhabitants held greater sway.
It’s helpful too, of course, that Cononish is actually a very small mine by international standards, and that all of the actual mining will take place underground.
So there will be some traffic up the valley, but guess what? – the man who owns the land that this traffic will pass through is all in favour.
“The community were in full support,” says Scotgold’s chief executive Richard Gray. “There will be a positive contribution from Cononish.”
It’s true that certain documentation remains to be completed, but to all intents and purposes the way is now clear for development of Cononish to begin in earnest.
Funding nearly there
Not all of the money to pay for that development is in place yet. But a good portion of it is.
“The first chunk of financing was put into place with our rights issue and raised £3mln,” says Gray.
“That’s 30% of what we’re looking for. We said we’d look at options for the rest of the money once the planning was in place. So we’re now looking to complete the funding fairly promptly. But with the £3mln in place we can start the project.”
The plan is to take a phased approach, to start with an operation that will produce around 12,000 ounces of gold per year.
Cashflow from that production will then be ploughed back in and used to expand the operation to a production rate of 24,000 ounces per year.
So, with another £7mln needed to get the ball really rolling, Gray says he’s ready to consider all potential sources of funding.
Among those he mentions that are under consideration are a form of senior debt, or a form of vendor finance.
It’s also worth noting though, that the company has been well supported in recent years by key shareholder Nat Le Roux, the man who underwrote the rights issue.
He now holds just over 53% of the shares, and would be unlikely to come in for any more equity.
But he is connected in some interesting ways, having formerly served as chief executive of IG Group, the derivatives trader, and as an independent director of the London Metal Exchange.
All told, the momentum is now with Scotgold, the local village of Tyndrum looks due for a long-awaited economic booster shot, and Scotgold shareholders can look forward to a re-rating as production edges closer.