SGZ.L Regulatory News (SGZ)

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

Interim Financial Report 31 December 2011

DIRECTORS' REPORT

Your directors submit the financial report of the Group for the half-year ended 31 December 2011. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:

DIRECTORS

The following persons were Directors of Scotgold Resources Limited during the half year and up to the date of this report unless otherwise stated:

REVIEW OF OPERATIONS

The Company's strategy over the past 6 months in Scotland continues to focus on advancing the 100% owned Cononish Gold and Silver Project to production whilst continuing to explore its large, highly prospective land position around Cononish and elsewhere in Scotland. The Company's land position extends to some 3,200km2.

Background

Scotgold Resources Limited (ASX:SGZ) was established in 2007 and listed on the ASX in January 2008 after raising $A4.9M through an IPO, with the objective of advancing the Cononish Gold and Silver Project in Scotland's Grampian Highlands to a production decision and to explore the highly prospective tenements comprising the Grampian Gold Project for additional deposits. The Company's shares were also admitted to trading on the AIM market (AIM:SGZ) of the London Stock Exchange in February 2010.

Scotgold has focused initially on the development of the Cononish Gold and Silver Project and has identified resources (estimated in accordance with the JORC Code) in the Measured, Indicated and Inferred categories (see tables 1 and 2 below for breakdown) of 163,000 oz of gold and 596,000oz of silver (at 3.5g/t gold cut-off).

Table 1: 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 1,000 t or 1,000 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 100,000 oz Au and 160,000 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 2: 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 1,000 t or 1,000 oz.

The Grampian Gold Project comprises relevant Crown Licences of some 3,200km2 surrounding the Cononish deposit and covers some of the most prospective areas of the Dalradian geological sequence in Scotland. This mineralized sequence, which extends westward from the UK to Greenland, the eastern seaboard of Canada and the Appalachian belt in the US, and eastward into Sweden and Norway has been identified by the British Geological Survey as being highly prospective for both significant gold and base metal deposits. On a more local scale, the Dalradian sequence extends to the south west from Scotland into the north of Ireland where it hosts other gold deposits at Omagh (Cavancaw), Curraghinalt and Clontibret.

Cononish Gold and Silver Project

On 19th July 2011, the Company announced that it had submitted its revised application for planning permission for the Cononish Gold and Silver Project. The revised application was made following extensive discussions with the National Parks Authority ('NPA') subsequent to the refusal in August 2010.

Central to the new application was a material reduction in the scale of the Tailings Management Facility (afforded by a commitment to underground disposal post the creation of a suitable underground void) and a revised form for this Facility, in order to minimize the visual impact on the landscape. 

In the new application, Scotgold sought additional independent specialist input in respect of restoration, landscape assessment and socio-economic impacts to address issues and concerns articulated in the reasons for refusal and give confidence to the NPA in the revised proposals incorporated in the new application. Further detail regarding the restoration proposals, their intended outcomes and a comprehensive independent analysis of the potential socio-economic benefits of the project to the local, regional and national economies, which underline the many positive impacts a mine at Cononish would be expected to bring to the local and national Scottish economy, was provided in the application.

Significant local and political support for the application was registered.

On 13th October 2011, the Director of Planning and Rural Development issued a report to the National Parks Board (the 'Board') recommending approval of the application for planning permission subject to agreeing a number of outstanding conditions and the conclusion of legal agreements.

The recommendation for approval was upheld unanimously by the Board at a special board meeting on 24th / 25th October 2011.

Subsequent to the recommendation, Scotgold engaged with the NPA to finalise these conditions and legal agreements and on 13th February 2012, the NPA issued the Decision Letter formally granting planning permission for the Cononish Gold and Silver Project.

Subsequent to the issue of the Decision Letter, and the expiry of the requisite judicial review period of three months, the Crown Estate will issue a mining lease; this is expected to be in May 2012.

Scotgold have commissioned Australian Mining Consultants UK Ltd ("AMC") to complete the Cononish Gold and Silver Project Development Study. AMC are reviewing and updating the mining development and production schedule and mining capital and operating costs (with a target +/-15% accuracy), based on the updated resource at Cononish.

AMC will also oversee the compilation of the overall Project Development Study with contributions from the Company, its processing, tailings and environmental consultants as a key component of its development decision. Final inputs to the study are now substantially complete and the study is expected to be completed within the next month.

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.

Exploration Update

The Company continues to actively pursue exploration activities on its substantial land position outside the National Park at the Beinn Udlaidh and Auch project areas. It is noted that 85% of the area currently under license to Scotgold is located outside the National Park (see figure 1 available at www.scotgoldresources.com under ASX releases).

Grampian Gold Project

Regional fieldwork including ongoing stream sediment sampling continued over the Inverliever, Cononish - Glen Orchy and Glen Lyon licence areas. A total of 573 sample results have now been received and interpretation is on-going.

Reprocessing of British Geological Survey aeromagnetic and gravity data over areas of the Grampian Gold project area is nearing completion and results are awaited.

The planned airborne magnetic survey continues to be delayed as clearance from civil aviation authorities to fly the proposed configuration remains as yet ungranted. Alternative arrangements for an airborne survey are being considered.

River Vein Prospect:

Further detailed mapping and rock chip sampling carried out during 2011 revealed a significant number of additional molybdenum-bearing fractures. In one area the coarse-grained quartz and feldspar vein shows a dense concentration of molybdenite crystals. Rock chip samples taken from this zone returned in excess of 1% Mo, with RV105 assaying 2.72% Mo and RV109 1.42% Mo.

Three rock chip samples further confirmed the high grade gold mineralization on the River Vein, the best result being RV101 (74.58g/t Au, 20.6g/t Ag, 0.55% Pb, >1.0% Zn).

In order to further quantify the extent and grade of both the gold vein and molybdenite fractures, a program of four diamond drill holes was laid out.

A total of 800m drilling was completed and significant results from the initial two holes for which assays have been received are shown below. The best results were:

RV01:9.7g/t Au, 13.3g/t Ag, 0.6% Pb, 2.1% Zn over 40cms (intersection width) - 70 metres below surface; and 3.5g/t Au, >200g/t Ag, 1.4%Pb, 100ppm Mo and 34g/t Te over 52 cms (intersection width) - 88 metres below surface

RV02: 4.39g/t Au, >200g/t Ag, 1.8% Pb, 167ppm Mo, 43g/t Te over 40cms (intersection width) - 87 metres below surface

The drilling results indicate at least two possible gold and silver bearing structures. Geochemical characteristics are similar to the Cononish gold/silver vein, with high silver values and elevated levels of lead, zinc and tellurium.

The intersection widths, while narrow, demonstrate continuity of the River Vein structure sampled on surface. The host sequences are a mixture of psammites and semi-pelites which appear more favourable for vein formation and continuity in other Dalradian gold occurrences.

Four narrow molybdenum fractures with values exceeding 0.01% Mo were also intersected in the second hole, RV02. Results from RV03 and RV04 are awaited.

Subsequent events

On 7th March 2012, the Company announced the discovery of highly anomalous PGE, gold and base metal values at the Sron Garbh mafic complex (refer to press release available at www.scotgoldresources.com under ASX releases)

Corporate activities

On 22nd July 2011, the Company announced a non-renounceable rights issue of shares on the basis of one share for every five shares held at the record date of 4th August 2011 at an issue price of A$0.05 per share. The rights issue closed with 87% uptake on 23rd August 2011.

On 31st August, 28,181,626 shares were issued to raise $1,409,081 before expenses

On 22nd September 2011, the Company announced that it had placed the balance of the shortfall of 4,079,256 shares for a further $203,963 before expenses.

For further information please contact

United Kingdom:

Australia:

Competent Persons' Statements:

The information in this report that relates to Exploration Results is based on information compiled by Mr David Catterall. Pr Sci Nat, who is a member of the South African Council for Natural Scientific Professions. Mr Catterall is employed as a consultant to Scotgold Resources Ltd. Mr Catterall has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr Catterall consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

The Information in this report that relates to Mineral Resources and Exploration Results is based on information compiled by EurGeol Dr S C Dominy FAusIMM (CP), FGS (CGeol), MAIG, General Manager (UK) and Executive Consultant with Snowden based in the London, England 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.

AUDITORS' INDEPENDENCE DECLARATION

Section 307C of the Corporations Act 2001 requires our auditors, HLB Mann Judd, to provide the directors of the company with an Independence Declaration in relation to the review of the interim financial report. This Independence Declaration is set out on page 9 and forms part of this directors' report for the half-year ended 31st December 2011.

This report is signed in accordance with a resolution of the Board of Directors made pursuant to section 306(3) of the Corporations Act 2001.

AUDITOR'S INDEPENDENCE DECLARATION

As lead auditor for the review of the financial report of Scotgold Resources Limited for the half-year ended 31 December 2011, I declare that to the best of my knowledge and belief, there have been no contraventions of:

a) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

b) any applicable code of professional conduct in relation to the review.

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

CONDENSED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2011

CONDENSED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

CONDENSED STATEMENT OF CASH FLOWS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

NOTES TO THE FINANCIAL STATEMENTS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

These interim consolidated financial statements are a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001, applicable accounting standards including AASB 134 'Interim Financial Reporting', Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board ('AASB'). Compliance with AASB 134 ensures compliance with IAS 34 'Interim Financial Reporting'.

This condensed half-year report does not include full disclosures of the type normally included in an annual financial report. Therefore, it cannot be expected to provide as full an understanding of the financial performance, financial position and cash flows of the group as in the full financial report.

It is recommended that this financial report be read in conjunction with the annual financial report for the year ended 30 June 2011 and any public announcements made by Scotgold Resources Limited and its subsidiaries during the half-year in accordance with continuous disclosure requirements arising under the Corporations Act 2001 and the ASX Listing Rules.

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period.

Basis of preparation

The interim report has been prepared on a historical cost basis. Cost is based on the fair value of the consideration given in exchange for assets. The company is domiciled in Australia and all amounts are presented in Australian dollars, unless otherwise noted.

For the purpose of preparing the interim report, the half-year has been treated as a discrete reporting period.

Reporting Basis and Conventions

The financial report has been prepared on the basis of accounting principles applicable to a going concern, which assumes the commercial realisation of the future potential of the Group's assets and the discharge of their liabilities in the normal course of business.

The financial report has also been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, and financial assets and financial liabilities for which the fair value basis of accounting has been applied.

Significant accounting judgements and key estimates

The preparation of interim financial reports requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates.

Except as described below, in preparing this interim report, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial report for the year ended 30 June 2011.

Adoption of new and revised Accounting Standards

In the half-year ended 31 December 2011, the Group has reviewed all of the new and revised Standards and interpretations issued by the AASB that are relevant to its operations and effective for annual reporting periods beginning on or after 1 July 2011.

It has been determined by the Group that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change is necessary to Group accounting policies.

The Group has also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the half-year ended 31 December 2011. As a result of this review the Directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change necessary to Group accounting policies.

The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phases is dependent upon the successful development and commercial exploitation or sale of the respective areas.

Movements in ordinary share capital of the Company were as follows:

Movements in options were as follows:

Options are exercisable at $0.08 on or before 30 April 2012. No value has been assigned to these options as they are free attaching options.

NOTE 4 - CONTINGENT LIABILITIES

Scotgold Resources Limited and its controlled entities have no known material contingent liabilities as at 31 December 2011.

NOTE 5 - SEGMENT INFORMATION

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of Scotgold Resources Limited.

NOTE 6 - SUBSEQUENT EVENTS

On 13th February 2012,the National Parks Authority issued the Decision Letter formally granting planning permission for the Cononish Gold and Silver Project.

Subsequent to the issue of the Decision Letter, and the expiry of the requisite judicial review period of three months, the Crown Estate will issue a mining lease; this is expected to be in May 2012.

DIRECTORS' DECLARATION

FOR THE HALF-YEAR ENDED 31 DECEMBER

In the opinion of the directors of Scotgold Resources Limited ("the company"):

1) The attached financial statements and notes thereto are in accordance with the Corporations Act 2001 including:

(a) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

(b) giving a true and fair view of the Group's financial position as at 31 December 2011 and of its performance for the half-year then ended; and

2) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is signed in accordance with a resolution of the Board of Directors made pursuant to s. 303(5) of the Corporations Act 2001.

INDEPENDENT AUDITOR'S REVIEW REPORT

To the members of Scotgold Resources Limited

Report on the Condensed Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Scotgold Resources Limited ("the company"), which comprises the condensed statement of financial position as at 31 December 2011, the condensed statement of comprehensive income, condensed statement of changes in equity and condensed statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the half-year end or from time to time during the half-year.

Directors' responsibility for the half-year financial report

The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity's financial position as at 31 December 2011 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of the company, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.