(Sharecast News) - Commercial gold producer Scotgold Resources announced on Friday that the transition to the long hole stoping mining method at its Cononish mine was progressing well, and was in line with its mine plan.
The AIM-traded firm said it would be prudent, however, to raise additional equity funds now to procure a resolution definition drill rig, and for additional working capital, as Cononish was developed towards full production.
It said the fundraising would raise £1.5m gross, and up to £2m by way of a proposed subscription by certain shareholders, as well as an open offer to all qualifying participants for new shares, in each case at a price of 15p each.
The long hole stoping at Cononish started on 4 April, with the mine producing consistently and the grade of the stope ore on-plan.
Scotgold said the subsequent stope blocks to be mined along the 115-metre stoping length of the eastern section of the 430 West drive increased in grade as it continued to retreat east.
The firm said it had entered into a subscription agreement with existing shareholders Maurice and Nicole Mason, under which they subscribed directly for 3,333,333 shares at the issue price to raise £0.5m.
It said the Masons had also undertaken to subscribe for 3,333,333 open offer shares, also equivalent to £0.5m, under the basic and the excess application facility.
The company confirmed that it will provide an opportunity for existing shareholders to subscribe for up to 10,065,262 new shares in the open offer at the issue price, to raise at least £1m up to a maximum of £1.5m.
Assuming the maximum number of shares issued, when combined with the subscription shares, the total number of new shares issued would represent around 20% of Scotgold's existing ordinary shares.
The issue price for the open offer shares and the subscription shares represented a discount of 6.25% to the middle market closing price per share of 16p on 20 April.
"Long hole stoping at Cononish is performing well," said chief executive officer Phil Day.
"With the previous optimisation initiatives completed in 2022 in the underground mine and processing plant, we are now removing ore from the mine and producing gold concentrate through the processing plant in line with our mine plan."
Day said the additional funds raised would allow the company to purchase a more advanced resolution definition drill rig, to further improve development of the underground mine, and its grade control modelling.
"This will be invaluable as we progress towards full production at Cononish and for future development of its current eight-year mine life."
At 1017 BST, shares in Scotgold Resources were up 6.25% at 17p.
Reporting by Josh White for Sharecast.com.
