30 Apr 2012 11:19
30 April
Scotgold Resources Limited ("Scotgold" or the "Company")
March 2012 Quarterly Report
Cononish Gold and Silver Project
Positive Development Study results
·; Robust project economics using base case gold price of US$1,100 with £23.4M (A$35.7M) pre tax free cashflow over life of mine, pre tax IRR of 24.8% and NPV10 of £10.8M (A$16.2M)
·; Project highly cash generative at current gold prices of US$1,655/oz with £65.9M (A$100.7M) pre tax free cashflow over life of mine, pre tax IRR of 62.5%, NPV10 of £40.5M (A$61.9M)
·; Decision notice granting planning permission issued, mining lease expected in mid May.
River Vein
·; Drill holes confirm the continuity of mineralization at depth including:
·; RV01: 9.7g/t Au, 13.3g/t Ag, 0.6% Pb, 2.1% Zn over 40cms (intersection width) - 60 metres below surface
·; RV02: 4.39g/t Au, >200g/t Ag, 1.8% Pb, 167ppm Mo, 43g/t Te over 40cms (intersection width) - 70 metres below surface
Sron Garbh Mafic complex
·; Highly anomalous platinum, palladium and gold results, selected AQ drill hole results best intercepts include
·; SQ AQ 16 - 0.22g/t Au, 0.78g/t Pd, 0.58g/t Pt, 0.75% Cu, 0.18% Ni and 0.01% Co over 2 metres
·; SQ AQ 15 - 0.08g/t Au, 0.43g/t Pd, 0.35g/t Pt, 0.58%Cu, 0.17% Ni and 0.02% Co over 1.25 metres
·; SQ AQ 21 - 0.15g/t Au over 20 metres
·; 'Magmatic Cu - Ni - PGE - Au' 'style' of mineralisation appears similar to that observed in other major deposits
Cononish Gold and Silver Project
Planning Permission
At a special meeting of the National Parks Authority Board (the "Parks Board") on 24 / 25 October 2011, the Parks Board recommended approval of planning permission for the Cononish Gold and Silver project subject to agreeing a number of outstanding conditions and the conclusion of legal agreements.
Negotiations regarding the conditions and legal agreements were subsequently concluded and on 13th February 2012 the National Parks Authority issued the Decision Letter formally granting planning permission.
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 the mining lease which is thus expected in mid May 2012.
Cononish Project Development Study.
In December 2011, Scotgold Resources commissioned Australian Mining Consultants UK Ltd ("AMC") to conduct the Cononish Project Development Study with input from Scotgold's processing, tailings and environmental consultants and the company.
AMC identified a 'mining inventory' (derived from Measured, Indicated and Inferred Resources from the existing resource statement estimated in accordance with the JORC code and completed by Snowden Mining Industry Consultants Ltd) of 427,900 t grading of 10.2g/t gold and 37.1g/t silver (diluted) using a cut off grade of 3.5g/t Au over the diluted width.
(Note: The 'mining inventory' does not constitute an 'Ore Reserve' as defined by JORC).
Based on the mining inventory, a seven year life of mine is currently envisaged inclusive of a one year pre production 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 with the balance of the gold reporting 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 21,000 ounces of gold and 74,700 ounces of silver annually.
Total recovered production to doré and concentrate over the project life is estimated to be 131,600 ounces of gold and 465,000 ounces of silver.
Preproduction project expenditure is estimated at £22.3M, with a further sustaining and deferred capital cost of £2.4M over the life of the project, including an overall 15% contingency allowance.
Overall operating costs (exclusive of smelter transport and royalty charges) amount to approximately £90 / t with an average operating cash cost1 (including smelter, transport and royalty charges) of US$575 / £360 / oz Au equivalent2.
Operating costs are estimated with an overall 16% contingency allowance
The results from the study demonstrate a robust project at the base case gold price with very attractive returns at current spot gold prices.
Key project financial parameters are shown in Table 1 below using a base case gold price of US$1100 / oz and the then current (NY close 13/4/2012) spot prices.
Unit | Spot Gold ($) | Base Case Gold | |
Gold Price $ / oz | US$ | $1655 | $1100 |
US$ : £ exchange rate used | 1.60 | 1.60 | |
Gold Price £ / oz | £ | £1039 | £687 |
Total Pre Production Costs | £ | £22.3M | £22.3M |
A$ | $34.1M | $34.1M | |
Net Present Value (NPV 10 ) | £ | £40.5M | £10.6M |
A$ | $61.9M | $16.2M | |
Free Cashflow | £ | £65.9M | £23.4M |
A$ | $100.7M | $35.7M | |
Pre tax Internal Rate of Return | % | 62.5% | 25.4% |
Average Operating cash cost1 | US$/oz Au eq2 | 624 | 575 |
Payback from start of production | Months | 18 | 31 |
Note Silver price $20/oz
Table 1 Financial Highlights
At base case prices, the project generates £23.4M pre tax free cashflow with a pre tax Net Present Value10 of £10.6M and a pre tax Internal rate of return (IRR) of 25.4%.
At current spot prices, the project is highly cash generative with £65.9M pre tax free cashflow over the life of the project, a pre tax IRR above 60% and payback initial investment within 18 months of the commencement of production.
Base Case average operating costs1 are estimated to be US$575 per ounce Au equivalent2 after commissioning of the project.
Scotgold have been actively pursuing a number of financing options with various parties and as a result, have commenced a further limited infill drilling program in part of the Inferred Resource with the aim of increasing the potential debt capacity of the project.
An initial program of six holes has been laid out and the first three holes have been completed and assays are awaited. The drilling program is expected to be completed by the end of May. A further study update will then be completed incorporating the results of the drilling program.
The company believes, subject to financing, that project development will begin in Q4 2012 leading to the first production of gold in Q4 2013
Exploration Update
River Vein Prospect:
Further rock chip sampling carried out in late 2011 revealed a significant number of additional molybdenum-bearing fractures in the River Vein area (refer to Figure 1 available at www.scotgoldresources.com under ASX releases).) and a number of 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).
A program of four diamond drill holes was laid out to test continuity of the gold vein and molybdenum fractures. Drill statistics are shown in Appendix 1.
A total of 800m drilling was completed and significant results from the initial two holes are shown in Table 2 below
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.
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.
Table 2 - Results from RV01 and RV02
River Vein drilling - Au vein | |||||||||
From | To | Width | Au g/t | Ag g/t | Mo % | Pb% | Zn % | Comment | |
RV01 | 99.95 | 100.35 | 0.4 | 9.72 | 13.33 | 0.00% | 0.58% | 2.15% | River Vein? |
125.75 | 126.27 | 0.52 | 3.26 | >200 | 0.01% | 1.37% | 0.00% | Au Vein | |
164.75 | 165.30 | 0.55 | 0.38 | 2.13 | 0.00% | 0.01% | 0.00% | Au vein? | |
RV02 | 14.90 | 15.17 | 0.27 | 0.03 | 3.55 | 0.02% | 0.04% | 0.00% | Mo fracture |
39.10 | 39.35 | 0.25 | 0.93 | 0.55 | 0% | 0.01% | 0.00% | Au Vein | |
124.50 | 124.90 | 0.40 | 4.39 | >200 | 0.02% | 1.82% | 0.01% | River Vein? | |
163.40 | 163.60 | 0.20 | 0.01 | 0.01% | 0.00% | 0.00% | Mo fracture | ||
179.20 | 179.70 | 0.50 | 0.04 | 0.02% | 0.00% | 0.00% | Mo fracture | ||
203.70 | 204.05 | 0.35 | 0.01 | 0.02% | 0.00% | 0.00% | Mo fracture | ||
Note - widths are intersection widths
SRON GARBH
The Sron Garbh intrusive complex is situated 2km from Tyndrum, outside the border of the National Park and about 5 km northeast of the Cononish gold and silver deposit.
During 2011, Scotgold mapped the complex and identified a number of differing rock types including 'gabbroic / appinitic' and dioritic 'phases'.
A check rock chip sample in the vicinity of a high Cu - Ni sulphide occurrence previously sampled, returned a value of 0.18g/t Au, 4.3 g/t Ag, 0.82% Cu, 0.21%Ni and 0.03%Co.
The sample was re-assayed for Platinum and Palladium and returned values of 1.14g/t Pt and 0.79g/t Pd. (Results for other PGEs (Osmium, Iridium, Rhodium, and Ruthenium) are awaited).
An initial AQ diamond core program was undertaken to examine and sample the differing igneous rock types found near surface within the complex (refer to Figure 2 available at www.scotgoldresources.com under ASX releases). Fifteen AQ diamond drillholes were completed and selected results are shown in Table 3 below.
Table 3 Selected AQ drill intercepts at Sron Garbh
HOLE NO. | FROM | Interval | Au g/t | Pd g/t | Pt g/t | Ag g/t | Co%
| Cu%
| Ni %
| Se g/t | Comment |
SGAQ 14 | 11.60 | 0.65 | 0.19 | 0.56 | 0.41 | 3.9 | 0.03 | 0.61 | 0.16 | 9.3 | 'Leopard rock' |
SQAQ 15 | 4.75 | 1.25 | 0.08 | 0.43 | 0.35 | 3.4 | 0.02 | 0.58 | 0.17 | 5.6 | 'Leopard rock' |
SGAQ 16 | 10.40 | 2.00 | 0.22 | 0.78 | 0.58 | 5.5 | 0.01 | 0.75 | 0.18 | 6.9 | 'Leopard rock' |
SGAQ 17 | 13.00 | 1.00 | 0.01 | 0.10 | 0.07 | 0.7 | 0.01 | 0.15 | 0.11 | 3.2 | 'Leopard rock' |
SGAQ 18 | 9.35 | 0.95 | 0.01 | 0.15 | 0.10 | 0.0 | 0.01 | 0.07 | 0.03 | 1.3 | 'Leopard rock' |
and | 15.00 | 3.00 | 0.26 | 0.00 | 0.00 | 11.3 | 0.00 | 0.01 | 0.01 | 0.0 | Diorite |
SGAQ 26 | 19.60 | 1.00 | 0.11 | 0.31 | 0.37 | 1.0 | 0.04 | 0.65 | 0.21 | 12.5 | 'Leopard rock' |
SGAQ 28 | 4.70 | 1.50 | 0.03 | 0.29 | 0.25 | 2.7 | 0.03 | 0.17 | 0.12 | 7.1 | 'Leopard rock' |
SGAQ 20 | 18.85 | 5.35 | 0.14 | 0.00 | 0.00 | 0.6 | 0.00 | 0.00 | 0.00 | Fe rich diorite | |
SGAQ 21 | 5.00 | 20.00 | 0.15 | 0.00 | 0.00 | 1.0 | 0.00 | 0.00 | 0.00 | Fe rich diorite | |
SGAQ 22 | 1.00 | 22.50 | 0.12 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | Fe rich diorite |
Intervals combined from consecutive assays over 0.1g/t Au, Pd or Pt
Note holes SGAQ 13, 19, 24 ,25, 27 - no Au Pd Pd assays above 0.1g/t, holes SGAQ 23A, B and 29 abandoned
Full drill statistics are shown in Appendix 2
Selected results best intercepts include
·; SQ AQ 16 - 0.22g/t Au, 0.78g/t Pd, 0.58g/t Pt, 0.75% Cu, 0.18% Ni and 0.01% Co over 2 metres
·; SQ AQ 15 - 0.08g/t Au, 0.43g/t Pd, 0.35g/t Pt, 0.58%Cu, 0.17% Ni and 0.02% Co over 1.25 metres
·; SQ AQ 26 - 0.11g/t Au, 0.31g/t Pd, 0.37g/t Pt, 0.65% Cu, 0.21% Ni and 0.04% Co over 1 metre
·; SQ AQ 28 - 0.03g/t Au, 0.29g/t Pd, 0.25g/t Pt, 0.17% Cu, 0.12% Ni and 0.03% Co over 1.5 metres
·; SQ AQ 21 - 0.15g/t Au over 20 metres
·; SQ AQ 22 - 0.12g/t Au over 22.5 metres
Drilling has intersected highly anomalous grades of Gold, Platinum, Palladium, Copper Nickel and Cobalt, in and close to the 'Gabbroic / Appinitic' zone which appears to form an outer annular ring to the complex. Mineralisation of pyrrhotite, minor chalcopyrite and pentlandite is seen to be contained in 'sulphide blebs' in a 'leopard rock' textured zone.
These characteristics are diagnostic of the world - wide 'magmatic Cu - Ni - PGE - Au' group of deposits associated with mafic / ultramafic intrusives such as Aguablanca in Spain, certain parts of the Sudbury mines in Ontario, Canada; Voisey's Bay in Labrador Canada and Lac des Isles in Quebec, Canada. Such deposits occur as sulphide concentrations (massive through to disseminated sulphides) associated with a variety of mafic and ultramafic magmatic rocks.
In addition to the Cu - Ni PGE Au mineralization associated with the gabbroic / appinitic rim, a separate low grade but wide zone of gold mineralisation occurs associated with quartz veinlets in the 'iron rich' dioritic core of the complex. This mineralisation possibly represents a later or earlier phase to the intrusion which in its own right, warrants further follow up.
For further information please contact:
United Kingdom:
Scotgold Resources Limited | Westhouse Securities Limited | Bankside Consultants |
John Bentley (Chairman) Chris Sangster (CEO) | Richard Baty / Petre Norton | Simon Rothschild / Elena Kuza |
Tel: +44 (0)77 2562 9509 | Tel: +44 (0)20 7601 6100 | Tel +44 (0)20 7367 8888 |
Australia:
Scotgold Resources Limited | Professional Public Relations |
Shane Sadleir (Non-Executive Director) | Belinda Newman |
Tel: +61 (8) 9428 2950 Mobile: +61 (0) 411 704 498 | Tel: +61 (8) 9388 0944 Mobile: +61 (0) 401 802 210 |
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 / 55) where the number 55 represents the ratio of base gold price used to silver price used. This ratio was calculated using base case prices of US$1100/oz Au and US$20 / oz Ag
3. Exchange rate GBP£1 = AUS$1.5279
4. NPV10 represents the pre tax Net Present Value calculated at a 10% discount rate.
Competent Person's Statement:
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.
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.
Appendix 1 Drill Statistics River Vein
Hole No. | Easting | Northing | Alt | Dip | Azimuth | Size | EOH |
RVNQ01 | 225193 | 733983 | 110 | -45 | 238 | NQ | 173.56 |
RVNQ02 | 225193 | 733983 | 110 | -45 | 261 | NQ | 224.08 |
RVNQ03 | 225184 | 734025 | 108 | -45 | 275 | NQ | 198.34 |
RVNQ04 | 225184 | 734025 | 108 | -45 | 246 | NQ | 204.92 |
Appendix 2 Drill Statistics Sron Garbh
Hole No. | Easting | Northing | Altitude | Dip | Azimuth | EOH | Comment |
SGAQ13 | 232390 | 733199 | 435 | -45 | 146 | 20 | Gabbro / diorite |
SGAQ14 | 232412 | 733191 | 430 | -35 | 261 | 15 | Gabbro / diorite |
SGAQ15 | 232411 | 733150 | 453 | -40 | 217 | 13 | Gabbro / diorite |
SGAQ16 | 232419 | 733133 | 448 | -15 | 290 | 17 | Gabbro / diorite |
SGAQ17 | 232360 | 733199 | 454 | -30 | 205 | 19 | Gabbro / diorite |
SGAQ18 | 232305 | 733128 | 500 | -35 | 170 | 23 | Gabbro / diorite |
SGAQ19 | 232333 | 733096 | 496 | -8 | 260 | 17 | Gabbro / diorite |
SGAQ20 | 232353 | 733040 | 493 | -40 | 60 | 24 | Fe rich diorite |
SGAQ21 | 232378 | 733023 | 487 | -27 | 280 | 25 | Fe rich diorite |
SGAQ22 | 232385 | 733004 | 486 | -35 | 44 | 24 | Fe rich diorite |
SGAQ23A | 232313 | 732991 | 499 | -27 | 318 | 2 | Abandoned |
SGAQ23B | 232313 | 732991 | 499 | -48 | 316 | 2 | Abandoned |
SGAQ24 | 232312 | 733060 | 506 | -20 | 272 | 29 | Diorite |
SGAQ25 | 232321 | 733027 | 497 | -25 | 285 | 24 | Diorite - not sampled |
SGAQ26 | 232337 | 733114 | 492 | -25 | 275 | 25 | Diorite |
SGAQ27 | 232250 | 733080 | 523 | -40 | 190 | 18 | Gabbro / diorite |
SGAQ28 | 232238 | 733085 | 528 | -30 | 225 | 24 | Gabbro / diorite |
SGAQ29 | 232228 | 733084 | 536 | -24 | 180 | 11 | Abandoned |
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 licences of some 3200km2 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 April 2011 Scotgold announced that it had accepted an offer of a Regional Selective Assistance (RSA) grant from economic development agency, Scottish Enterprise, of up to £600,000 for the establishment of mine facilities and job creation, conditional on the firm obtaining planning permission.
·; 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