heraldscotland

SCOTGOLD Resources is examining ways to raise more than £12.5 million to begin development of its gold and silver mine in the next few months.

The mining company's cash balance was 1.3 million Australian dollars (around £870,000) at the end of 2011, according to half-year financial figures posted yesterday.

Previously, it has raised money through share placings and has secured around £600,000 of backing from Scottish Enterprise for the mine at Cononish in the Loch Lomond and The Trossachs National Park.

Chief executive Chris Sangster said: "The last figure for development was about £12.5m so we will need to add a bit onto that and we will need to raise that through a combination of methods.

"It will be the traditional sources of financing for mining projects with the likes of debt, equity and hard assets."

Scotgold reported a widened loss from A$556,026 to A$723,203 as a result of greater legal and consultancy fees in the six months to December 31, 2011.

Australian Mining Consultants UK has been commissioned to complete a study on the Cononish project.

The consultancy is reviewing and updating the production schedule and operating costs of the development with the research due to be finished in the next month.

The last similar study on the project was done in 2009 when gold was less than half of its current US$1650 an ounce selling price.

Scotgold said: "The company is in the process of examining finance options for the project in order to be able to proceed to development in the second half of 2012 subject to a favourable outcome from the study."

The Crown Office is expected to grant a mining licence for Cononish in May with production scheduled to begin in 2013.

Other parts of the country are also being explored by Scotgold.

More than 570 samples have been taken as part of the Grampian gold project, although permission for an airborne magnetic survey of the area has not been granted by the civil aviation authority.

Initial drilling results and tests from the river vein prospect indicate at least two possible gold and silver bearing structures.

Scotgold said: "Geochemical characteristics are similar to the Cononish gold/silver vein, with high silver values and elevated levels of lead, zinc and tellurium."

Earlier this month, the company also found platinum and other metals at Sron Garbh near Tyndrum.

Scotgold's nominated adviser Westhouse Securities reiterated its buy recommendation on the stock. Analyst Rob Broke said: "With the last major hurdles clear we see a clear path to production for Cononish, a small but attractive project which would offer significant returns at current gold prices.

"We believe the market is starting to realise this but would argue that there is room for much more upside, not only due to Cononish transitioning into production, but also with further exploration work on the company's prospective licence areas."