SGZ.L Regulatory News (SGZ)

SCOTGOLD RESOURCES LIMITED

INTERIM FINANCIAL REPORT

31 DECEMBER 2013

DIRECTORS' REPORT

Your Directors submit the financial report of the Group for the half-year ended 31 December 2013. 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

Cononish Gold and Silver Project

Subsequent to the successful conclusion of the Rights Issue and the recently announced Heads of Agreement and Placing, the Company is in an excellent position to further its stated intention to examine a smaller initial Cononish project treating higher grade material through a less capital intensive processing facility.

To this end, the Company recently appointed Australian Mining Consultants UK Ltd to produce an initial mining schedule to examine the feasibility and practicality of this approach. Initial results are being evaluated and work is continuing to optimise a possible production profile.

Similarly, the Company's tailings consultants are examining alternative configurations of the Tailings Management Facility in order to optimise initial construction costs and the Company is in the process of studying possible alternative configurations and throughput rates for the processing plant in order to reduce initial capital expenditure whilst not precluding an expansion to the originally proposed project should prices and market conditions be favourable in due course.

The results from these initial evaluations will be incorporated into pre scoping / scoping study level evaluation which will form the basis for further detailed work to finalise the project profile.

As previously reported, all necessary permitting has either been granted or can be finalised in a short time frame and given the advanced state of project development, the Company believes Cononish could be producing gold and silver within 18 months of obtaining financing.

Grampian Gold Project

Evaluation of the results from Company's stream sediment sampling program over the Grampian Gold Project area is ongoing. A program of infill stream sediment sampling and further rock chip sampling is planned for the coming field season to further define priority target areas. Initial fieldwork on this program commenced recently.

FINANCING

Rights Issue

On 26 November 2013, the Company announced a Non - Renounceable Rights Issue ("Rights Issue"). The Rights Issue closed on 6 January 2014 with eligible shareholders applying to take up 90% of the Rights Issue, the Company successfully placed the balance of the shortfall shares to investors. As a result the Company raised a total of $830,872 before expenses through the issue of 166,174,304 new shares.

Heads of Agreement and Placing

On 25 February 2014, the Company entered into an agreement with three strategic investors (the "Investors") to take a significant shareholding in the Company. The agreement with the Investors is a staged process and will result in them investing up to A$1,825,000. This agreement with the Investors was done alongside a wider placement that was closed at the time and raised a further A$225,000.

The first stage of the transaction was an immediate placing of 90 million shares at a price of A$0.0075 (approximately 0.4 pence) per share to raise A$675,000 (the "Placing"). The Investors subscribed for 60 million of the 90 million placing shares ("Placing Shares") with the balance issued through the wider placement.

In addition the Investors, subject to certain conditions including shareholder and regulatory approvals, will commit to a convertible note issue and further placing which when aggregated with its participation in the Placing will amounting to a total investment of A$1,825,000 (the "Finance Agreement"). The major investor is Nat le Roux, the former CEO of IG Group plc, and a non-executive director of the London Metal Exchange.

The Finance Agreement includes a commitment from both the Company and the Investors to establish a new company ("Marketco") which will market a proportion of the future gold and silver produced onsite at Cononish in the form of dore bars. This product will be identifiable and marketable as Scottish gold and silver and Scotgold will undertake to sell it to Marketco at a premium of 10% to the Comex Fix less any costs associated with refining the dore bars. Scotgold will hold 40% of the shares in Marketco with the remainder being held as to 20% by public interest entities including the Strathfillan Community Development Trust with the balance being held by the Investors.

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 2012 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 2012 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.

AUDITOR'S 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 the next page and forms part of this directors' report for the half-year ended 31 December 2013.

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.

Chris Sangster

Managing Director

Dated Scotland 12 March 2014

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 2013, 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.

Perth, Western Australia M OHM

12 March 2014 Partner, HLB Mann Judd

CONDENSED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF YEAR ENDED 31 DECEMBER 2013

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR THE HALF YEAR ENDED 31 DECEMBER 2013

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

These interim consolidated financial statements are general purpose financial statements 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 the financial report be read in conjunction with the annual financial report for the year ended 30 June 2013 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 cost.

Going Concern

At 31 December 2013, the group had cash available of $173,758, but had a working capital deficit of $3,296,940 due primarily to the loan from RMB Bank of $2,994,812 which was due for repayment on 31 December 2013 but which has been extended to 30 June 2014 conditional upon the cash balance being adequate to meet three months' working capital for the duration of the extension. This condition was met at balance date and subsequent to year end.

The Company has entered into a binding Heads of Agreement with three strategic investors (the "Investors") to take a significant shareholding in the Company. The agreement with the Investors will result in the Company raising up to A$1,825,000, with a further A$225,000 raised through a wider placement.

Under the first stage of the transaction, the company completed a placement of 90 million shares at a price of A$0.0075 (approximately 0.4 pence) per share to raise A$675,000 (the "Placing"). The Investors have subscribed for 60 million of the 90 million Placing shares as announced to ASX on 28 February 2014.

In addition the Investors, subject to certain conditions including shareholder and regulatory approvals, will commit to a convertible note issue and further placing which when aggregated with its participation in the Placing will amount to a total investment of A$1,825,000 (the "Finance Agreement"). The major investor is Nat le Roux, the former CEO of IG Group plc, and a non-executive director of the London Metal Exchange.

The details of the Finance Agreement with the Investors are as follows:

· 60 million Placing shares have been placed with the Investors as referred to above;

· Subject to shareholder and regulatory approval unlisted convertible notes amounting to A$1,000,000 will be issued with a two year term and a 1% per annum coupon (the "Notes"). The Notes will be convertible into Scotgold ordinary shares at a price of A$0.0075 per ordinary share at any time between issue and maturity with anti-dilution provisions in the event of a new capital raising. Holders of the Notes will receive one attaching unlisted option per ordinary share converted under the Notes with the options being exercisable at any time before 31 March 2016 at a price of A$0.012 per ordinary share. It is the intention that the proceeds of the note will be substantially used to pay down a portion of the Company's current RMB Resources loan. This element of the transaction will be subject to the approval of RMB Resources to the terms of any loan repayment; and

· Coterminous with the issue of the Notes, and provided the Notes are issued before 30 June 2014, a further placement to the Investors of 50 million ordinary shares will be made at a price of A$0.0075 per share (the "Second Placement Shares") to raise $375,000 before costs. The Second Placement Shares will be issued together with one attaching unlisted option per share, the option being exercisable before 31 March 2015 at a price of A$0.012 per ordinary share.

The Finance Agreement includes a commitment from both the Company and the Investors to establish a new company ("Marketco") which will market a proportion of the future gold and silver produced onsite at Cononish in the form of dore bars. This product will be identifiable and marketable as Scottish gold and silver and Scotgold will undertake to sell it to Marketco at a premium of 10% to the Comex Fix less any costs associated with refining the dore bars. Scotgold will hold 40% of the shares in Marketco with the remainder being held as to 20% by public interest entities including the Strathfillan Community Development Trust with the balance being held by the Investors.

The Company intends to convene a meeting of shareholders as soon as practicable to complete the conditional aspects of the Finance Agreement.

The Board considers that the Company is a going concern and recognises that additional funding is required to ensure that the Company can continue to fund its operations and further develop their mineral exploration and evaluation assets during the twelve month period from the date of this financial report. On 22 January 2014, a further $88,273 was raised being the balance of th entitlements issue.

Although the company has the above binding agreement in place, the loan with RMB (31 December 2013: $2,994,812) is due to mature on 30 June 2014. The above agreement is conditional in part upon RMB Bank giving formal written agreement to extend at least £1,000,000 of the Company's existing loan until at least 1 July 2015. The current maturity date is 30 June 2014.

The Directors believe the Company will obtain sufficient funding to enable it and the consolidated entity to continue as going concerns and that it is appropriate to adopt that basis of accounting in the preparation of the financial report. However, the existence of the above conditions constitute a material uncertainty in relation to the company's ability to continue as a going concern and whether it will therefore realise its assets and extinguish its liabilities in the normal course of business.

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.

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 2013.

Accounting policies and methods of computation

The accounting policies and methods of computation adopted are consistent with those of the previous financial year and corresponding interim reporting period. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards.

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.

On 13 December 2013 the company announced that RMB Resources Limited had received approval from its investment committee for the term of the corporate facility provided by RMB Australia Holdings Limited to be extended to 30 June 2014, conditional upon the cash balance being adequate to meet three months working capital for the duration of the extension. The loan is currently fully drawn.

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

Details of options are as follows:

NOTE 5 - CONTINGENT LIABILITIES

Scotgold Resources Limited and its controlled entities have no known material contingent liabilities as at 31 December 2013.

NOTE 6 - 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 7 - MATTERS SUBSEQUENT TO THE END OF THE HALF YEAR

On 6 January 2014 the company announced the closing of a Rights Issue subscribed for to 90% and raising $742,599. On 22 January the company announced the placement of the whole of Rights Issue shortfall raising a further $88,273.

On 26 February 2014 the company announced a placement of 90 million shares to raise $675,000 as outlined in Note 1 to the accounts.

DIRECTORS' DECLARATION

FOR THE HALF YEAR ENDED 31 DECEMBER 2013

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 2013 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.

...............................................................

Chris Sangster

Managing Director

Dated Scotland 12 March 2014

For further information please contact:

Australia: