Shares in Scotgold Resources Limited (AIM:SGZ) crumbled 60% as the miner said gold grades had been lower than expected and it issued a ‘going concern’ warning alongside plans to raise US$500,000.
Going concern is an accounting term that refers to a business’s ability to meet its future financial obligations.
Investors tend to take fright when the words are used, which was the case earlier on Monday with Scotgold when it issued a wide-ranging update on its activities.
The company, which owns the Cononish Gold and Silver Mine near Loch Lomond in Scotland, said gold grades in the 430 West ore drive had not been as high as anticipated.
The company is switching to a method of mining called long hole stoping, which is more cost-effective than the current means of uncovering the ore.
However, any delay in switching to this process inevitably will put a strain on Scotgold’s finances, investors were told.
As such, the company is in advanced discussions with its gold offtake partner to secure a US$500,000 advance “to assist with short-term working capital”.
At the same time, Scotgold’s directors have discussed providing a short-term convertible loan.
At 9.30 am, the shares, which hit 151p in 2020, were changing hands for 14.95p, down 23.05p. The business is now valued at just over £10mln.