SGZ.L Regulatory News (SGZ)

Scotgold Resources Limited ("Scotgold" or the "Company")

Final Cononish Development Study by AMC re-affirms positive project economics

Highlights:

·; Strong project economics using base case gold price of US$1,300 / oz (£812 /oz) with £26.3M pre tax free cashflow over life of mine, pre tax IRR of 26% and NPV10 of £11.8M

·; Project highly cash generative at current spot price (24/04/2013) of US$1,428/oz (£935 /oz) with £39.8M pre tax free cashflow over life of mine, pre tax IRR of 37%, NPV10 of £21.1M and payback 26 months from start of production

·; Annualized processing plant recovery of 20,200 ozs Au equivalent to concentrate and doré

·; Average operating cash cost1 of $698 per oz Au equivalent 

John Bentley, Executive Chairman said

"The results from the final Development Study continue to demonstrate the viability of the Cononish Project. At base case gold price assumptions, the project provides healthy returns. The project is highly leveraged to gold prices and at current spot prices is highly cash generative with over £39M in pre tax free cashflow over the initial seven year life of mine.

"However, the recent sharp decline in the gold price has severely dented market confidence, albeit that there has been significant positive movement since the lows of c.$1350 / oz recorded on 15 April 2013. The potential to raise the required equity financing for the project is considered to be severely challenging under current market conditions. The Board has thus decided to defer an immediate raise pending an improvement in market sentiment.

"As regards debt financing, RMB Resources (RMB) remain supportive of the project and are evaluating project debt capacities under a range of varying gold price scenarios in order to assist the Company in evaluating an optimal approach to financing the project. 

"In addition, we are considering a number of strategic alternatives with a view to advancing the project and achieving the overriding objective of delivering Scotland's first commercial gold mine. Importantly, with all the work that has been completed on the planning conditions and the tailings dam design the mine is capable of producing first gold within 15 months of funding."

Cononish Gold and Silver Project Development Study Results.

Scotgold Resources Limited ("Scotgold Resources" or the "Company") (ASX:SGZ AIM:SGZ) is pleased to announce results from the Cononish Project Development Study conducted by AMC Consultants (UK) Ltd ("AMC") on its 100% owned Cononish Gold and Silver project in the Grampian Highlands of the United Kingdom.

The Executive Summary of AMC's Development Study can be found on Scotgold's website at www.scotgoldresources.com under ASX announcements.

Key project financial parameters are shown in Table 1 below using a base case gold price of US$1300 / oz and current (London PM fix 24/04/2012) spot prices.

Table 1 Project Financial Highlights

Note Silver price $22.50/oz

Notes:

1. Average operating cash cost is calculated from total operating (non capital) costs (including smelter, transport, royalty costs) divided by recovered Au equivalent ozs. - see Note 2

2. Au equivalent ozs. Gold equivalent ozs are calculated: Recovered gold ozs + (Recovered silver ounces / 57.8) where the number 57.8 represents the ratio of base case gold price used to silver price used. This ratio was calculated using base case prices of US$1300/oz Au and US$22.5 / oz Ag

3. NPV10 represents the project Net Present Value calculated at a 10% discount rate.

At base case prices, the project generates £26.3M pre tax free cashflow with a pre tax Net Present Value10 of £11.8M and a pre tax Internal rate of return (IRR) of 25.9%.

At current spot prices (London pm fix 24/04/2013 - £935 / oz), the project is highly cash generative with £39.8M pre tax free cashflow over the life of the project, a pre tax IRR of 37.4% and payback initial investment within 26 months of the commencement of production.

Base Case average operating costs are estimated to be $698 per ounce Au equivalent after commissioning of the project.

Scotgold has estimated anticipated project post tax returns as follows

Note - post tax returns assume 100% project basis before corporate costs

Cononish Project Development Study.

Scotgold Resources commissioned AMC to complete the Cononish Project Development Study in December 2012. The overall study was compiled by AMC with input from Scotgold's processing, tailings and environmental consultants and the Company.

Tables 2 and 3 show the current Resource Statement considered for the study and assumes 100% conversion of Inferred Resources.

Table 2: Cononish Main Vein Gold Mineral Resources (reported at a 3.5 g/t Au cut-off).

Reported using the 2004 JORC Code (JORC, 2004). Tonnages and contained ounces rounded to the nearest 100 t or 100 oz. Grade rounded to the nearest 0.1 g/t Au. The Inferred Resource grade is reported with a grade range to indicate the likely upside due to the information effect.

Scotgold Note: Incorporating the grade range, the Inferred Mineral Resource is estimated to lie between 85,000 oz Au and 127,000 oz Au. It should be noted that any upside may not exist or it may only be present in a portion of the resource.

Table 3: Cononish Main Vein Silver Mineral Resources (reported at a 3.5 g/t Au cut-off).

Reported using the 2004 JORC Code (JORC, 2004). Tonnages and contained ounces rounded to the nearest 100 t or 100 oz.

The Mineral Resources quoted in Table 2 and 3 above are INCLUSIVE of those Mineral Resources modified to produce the Ore Reserves.

AMC has declared ore reserves for the project as shown in Table 4 below

Table 4: Cononish Ore Reserves (reported at a 3.5 g/t Au cut-off).

Notes:

1. The Reserve was estimated using; gold price of US$1,300/oz, and silver price ofUS$22.50/oz, and Exchange Rate GBP:USD of 1:1.6

2. A mining study on the Cononish Gold Project was carried out by AMC Consultants (UK) Limited. This study utilised the Mineral Resource estimation by Simon Dominy of Snowden Mining Industry Consultants Pty Ltd, November 2012. The Ore Reserves were estimated by Martin Staples of AMC Consultants (UK) Limited in April 2013.

3. Reported at a diluted Au cut-off grade of 3.3 g/t

The study considers a mining production rate of 72,000 tpa for underground operations subsequent to a one year pre production and commissioning period.

A conventional gravity / flotation concentrator is planned which will treat 72,000 tpa. It is intended that about 25% of gold will be recovered by gravity for smelting on site to a doré bar. The balance of the gold reports to a sulphide rich concentrate which will be treated through a third party facility remote from site.

The overall recovery from the processing plant is predicted at 93% for Au and 90% for Ag to doré and concentrate and recovered production (to doré and concentrate) is estimated at 19,000 ounces of gold and 73,000 ounces of silver annually.

Total recovered production to doré and concentrate over the project life is estimated to be 121,800 ounces of gold and 469,700 ounces of silver.

Preproduction project expenditure is estimated at £22M, including an overall 15% contingency allowance on capital expenditure (excluding working capital and fixed bond amounts).

Overall operating costs (exclusive of smelter transport and royalty charges) are estimated at approximately £86.50 per tonne of material with an average operating cash cost (including smelter, transport and royalty charges) of US$698 (£436 / oz) Au equivalent.

Operating costs are estimated with an overall 16.6% contingency allowance.

The AMC Cononish Development Study Executive Summary is included in Appendix A on Scotgold's website at www.scotgoldresources.com under ASX announcements.

Project Development

Since the update of the resource statement in November 2012 (see Press Release - Cononish Resource Update 14 November 2012), Scotgold has advanced a number of aspects relating to the project to enable the shortest possible lead time to development subject to securing finance.

The decision notice issued by the Planning Authority on 13 February 2012 required a number of conditions to be satisfied prior to the start of development. In conjunction with Scotgold's planning and other consultants, submissions have been made for all but two of the conditions with 60% having been signed off to date. Scotgold expects the remaining two submissions to be made within the next month with final sign off from the Planning Authority for all outstanding conditions around two months subsequently.

In January 2013, Scotgold commissioned AMEC Earth and Environmental (AMEC) to commence detailed design of the Tailings Management Facility. Final designs are at an advanced stage and on behalf of Scotgold, AMEC has prequalified six companies to tender for the works. Final tender documents are nearing completion.

Scotgold has signed a non binding Letter of Intent with Consulmet Pty in respect of final design for the processing plant which will commence when finance is secured.

Project Financing

On completion of the final Development Study for Cononish and subject to an offer for finance by RMB via the gold pre payment facility previously mandated, it was Scotgold's immediate intention to seek the balance of finance through a combination of equity and possible further debt opportunities.

The quantum of the prepayment facility contemplated by RMB is estimated on the forward price based on the spot gold price 'on the day' and other factors.

The recent sharp decline in the gold price has negatively impacted on the amount potentially available from such a facility and hence increased the amount to be sourced from other avenues by the Company.

In consequence, it is the Directors view, that under current market conditions, this approach to successfully finance the project would be severely challenging and have decided to defer an approach to the market until market conditions are more receptive.

RMB remain supportive of the project and are re-evaluating the potential debt capacity of the project for the pre payment facility under various gold price assumptions in order to assist Scotgold in evaluating optimal scenarios for financing development of the project.

In view of the above, Scotgold are considering a number of alternative strategic alternatives to finance the project to progress to production.

The Company's cash position as of 31 March 2013 was AUS$ 0.6m and this was augmented shortly thereafter through the final drawdown of £0.3m of the RMB pre-development financing totaling £1.5m. . All discretionary spending on the project has been cut and steps are being made to reduce the Company's overhead costs and burn rate whilst options to progress the Cononish project are evaluated.

Chris Sangster

Managing Director

For further information please contact:

United Kingdom:

Australia:

Competent Persons Statement:

The Information in this report that relates to Mineral Resources is based on resource estimates compiled by EurGeol Dr S C Dominy FAusIMM (CP), FGS (CGeol), FIMMM (CEng), FAIG (RPGeo), Executive Consultant with Snowden based in the Ballarat, Australia Office. Dr. Dominy has sufficient experience that is relevant to the style of deposit under consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore reserves. Dr Dominy consents to the inclusion in the report of the matters based on this information in the form and context in which it appears

The Information in this report that relates to Ore Reserves is based on information compiled by Mr. Martin W Staples BSc, FAusIMM., Director and Principal Mining Engineer with AMC Consultants (UK) Ltd based in the Maidenhead, UK office. Mr. Staples has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr. Staples consents to the inclusion in the report of the matters based on his information in the form and context in which it appears

Forward Looking Statements:

This release includes certain "forward looking statements." All statements, other than statements of historical fact, are forward looking statements that involve various risks and uncertainties.

There can be no assurances that such statements will prove accurate and actual results and future events could differ materially from those anticipated in such statements.

Background

Scotgold Resources

·; Scotgold Resources is a mining exploration and development company listed on the Australian Securities Exchange in January 2008 and the AIM market of the London Stock Exchange in the UK in February 2010.

·; The Company was formed with its sole focus on exploring for gold and silver in Scotland, with the already identified Cononish Gold and Silver Project as its core asset. Once in production, the Project will be Scotland's first commercial gold mine.

·; The Company holds Crown options of some 4200km2 covering the highly prospective Dalradian terrain in the SW Grampians of Scotland

·; Scotgold acquired the Cononish Gold and Silver Project in 2007 and has been working towards bringing the project to production in conjunction with its ongoing exploration efforts at Cononish and in the south west Grampians.

·; In July 2011 Scotgold submitted its reapplication for planning permission, which was recommended for approval in October 2011 subject to finalizing conditions and various legal agreements

·; In February 2012, the Decision Notice granting planning permission was issued by the Planning Authority

Glossary of Technical Terms