2 Nov 2015 07:00
SCOTGOLD RESOURCES LIMITED
SEPTEMBER 2015 QUARTERLY ACTIVITIES REPORT
CONONISH GOLD PROJECT
On 5 August 2015, Scotgold Resources Limited ('Scotgold' or 'the Company') announced the results of the Bankable Feasibility Study ('BFS') for its wholly owned Cononish Gold and Silver Project conducted by Bara Consulting Ltd of the UK. This study is based upon the Mineral Resource Statement announced in January 2015 and confirms the Ore Reserve Estimate announced in May 2015, both of which were compiled using guidelines recommended in the JORC Code (2012). The Cononish Gold and Silver Project is part of the Company's gold portfolio located in Scotland.
Summary of BFS highlights:
PRODUCTION | |
Average Production | 72,000 tonnes per annum |
Average LoM Grade (Au Eq) | 11.8 grams/tonne |
Average Metal Produced | 23,370 ounces equivalent gold* per annum |
Life of Mine | 8 years |
FINANCIAL (at Gold US$1,100/oz & Silver US$15/oz) | |
Peak Funding Requirement | £18.5M |
Unit Operating Costs | £327/ounce equivalent gold (US$523/ounce equivalent gold) |
EBITDA | £67M |
Net pre-tax cashflow | £43M |
NPV (10%) pre-tax | £23M |
IRR pre-tax | 45% |
Payback Period | 19 months |
* Ounces equivalent gold = ounces gold + ounces silver*15/1100 - ratio calculated at base case prices of $1,100/ ounce gold and $15.00/ ounce silver
PRE-TAX CASHFLOW SENSITIVITY TO GOLD PRICE | |||||||||
Gold Price | US$700/ ounce | US$900/ ounce | US$1,000/ ounce | US$1,100/ ounce | US$1,200/ ounce | US$1,300/ ounce | US$1,500/ ounce | ||
Pre Tax Cashflow | £1.5M | £22.5M | £32.9M | £43.4M | £53.9M | £64.3M | £85.3M | ||
NPV (10%) | (£4.4M) | £9.3M | £16.1M | £22.9M | £29.8M | £36.6M | £50.3M | ||
IRR | 0% | 25% | 35% | 45% | 54% | 64% | 82% | ||
· Robust Project economics using a base case gold price of US$1,100/ounce (£688/ ounce) with a EBITDA of £67.4M, a pre-tax free cashflow of £43.4M, pre-tax NPV(10%) of £22.9M and a pre-tax IRR of 45%.
· Low operating cost with Life of Mine ('LoM') average of £327/ ounce equivalent gold (US$523/ ounce equivalent gold) (including Royalties) and Project breakeven (0% IRR) at US$689/ ounce equivalent gold
· Peak Funding Requirement of £18.5M and all in LoM Capital including contingencies, replacements etc. of £24.0M
· Average annual gold production of 23,370 ounces equivalent gold with peak production in Year 2 of 28,540 ounce equivalent gold.
· Average LoM grade of 11.8 grams equivalent gold /tonne and peak grade of 15.4 grams equivalent gold/ tonne in year 2.
· Rapid Implementation schedule of 16 months post contract and finance completion and short payback period of 19 months from full production.
· Based on the earlier PFS, the Company has been offered indicative terms by leading banks to provide debt finance for the majority of the project's funding requirement.
· Completion of this BFS facilitates the selection of the preferred finance route and the signing of a mandate with the selected institutions in near future
For greater detail on this study and the parameters used to derive these results, refer to the Company's announcement (05/08/2015 - Cononish Gold and Silver Project Bankable Feasibility Study) on the Company's website.
The BFS Study Executive Summary is also published on Scotgold's website at www.scotgoldresources.com
GRAMPIAN GOLD PROJECT
Structural study
The Company engaged the services of Dr. Pablo Gumiel and Dr. Mónica Arias of Consulting de Geología y Minería, S.L., to conduct a structural study of the Cononish deposit and Tyndrum area. Dr. Gumiel is an expert in structural geology and the structural control of mineral deposits with over 38 years' experience in research and mining exploration. Dr. Arias has over 15 years' experience as a specialist in database management of geological-mining data, Geographical Information Systems (GIS) and 3D geological modelling. Drs. Gumiel and Arias have spent 30 field days, over three 10 day periods in May, July and September 2015, collecting data in conjunction with the exploration team.
In addition, Drs. Gumiel and Arias have undertaken significant work to develop, and expand existing, structural models for both the Cononish deposit and the wider Tyndrum area. The study aims to bring the large volume of existing data together into one model, utilising all of the various datasets. When the ongoing review of the combined data model has been completed, this study will create a 'first pass' prospectivity model, utilising a set of structural and geochemical criteria that appear to control the distribution of gold across the Cononish/Tyndrum area. This model will be used to determine which areas have the highest likelihood of gold-bearing quartz veins being located. The structural and geochemical criteria used in the model will be tested and refined through field work and further understanding of the structural setting of the Cononish deposit. The controls for the Tyndrum area are anticipated to be applicable across the Grampian Project region and will therefore aid and focus regional exploration. Once the prospectivity modelling is complete, Scotgold will re-evaluate high grade outcrop samples identified by previous exploration close to the Cononish project.
Stream sediment program
In order to advance its understanding of the regional setting, over the past four years, the Company has embarked on a regional stream sediment sampling program. To date more than 1100 stream sediment samples have been taken across the regional area with assay results returned for 1,055 samples (to end-September 2015). Analysis of the returned stream sediment data, in conjunction with work undertaken by Drs. Gumiel and Arias, has indicated the presence of a significant number of gold anomalies in the better covered Glen Orchy licence area and a number of anomalies throughout the other licence areas. Five key anomalies in the Knapdale licence area have been infilled and the results are currently awaited. Anomalies in Glen Lyon, Inverliever and Ochills require infill sampling to gain a greater understanding of the distribution of gold in these areas. The stream sediment sampling program has a further ~350 samples to be collected, with the majority of the outstanding samples forming an infill program which aims to follow up anomalous results or to increase data coverage.
Licence areas update
The Company holds five option agreements with the Crown over the highly prospective Dalradian sequence in the south western Grampian Highlands of Scotland. The Crown has informed the Company, subject to the conclusion of the appropriate legal agreements, that is has re-granted all the Company's existing option areas for a further 3 years, subject to a reduction in area in the Inverliever option area. The Company is currently finalising these agreements with the Crown and expects them to be concluded shortly.
CORPORATE
On 27th August 2015, the Company announced a pro-rata non-renounceable rights issue (Rights Issue or Offer) of fully paid ordinary shares in the capital of the Company (New Shares) on the basis of one (1) New Share for every ten (10) existing shares held at the record date of 4 September 2015 (Record Date) at an issue price of 1.3 cents each, together with one (1) free attaching unlisted option per New Share subscribed (Options). The Options are exercisable at £0.01 on or before 30 September 2017.
Subsequently the Company advised that its pro-rata non-renounceable rights issue had closed on 30 September 2015.
A total of 95,295,889 new shares were applied for under the Rights Issue to raise approximately $1,238,846 (before costs) and a total of 95,295,889 Options will be issued under the Rights Issue. Accordingly, the shortfall under the Rights Issue was 18,243,341 shares and 18,243,341 Options, as follows:
Event | Number | $ | % of total offered under Rights Issue |
Shares applied for under Rights Issue | 91,090,481 | $1,184,176 | 80% |
Shares applied for under Excess Entitlements Facility (by eligible shareholders in excess of their entitlement) | 4,205,408 | $54,670 | 4% |
Total shares to be issued | 95,295,889 | $1,238,846 | 84% |
Total free attaching Options to be issued | 95,295,889 | ||
Remaining Shortfall shares to be placed | 18,243,341 | $237,163 | 16% |
Remaining Shortfall free attaching Options | 18,243,341 |
On the 28th October 2015 the Company announced that it has completed the placement of the following securities:
· The placement of the shortfall from the Company's rights issue, comprised of 18,243,341 fully paid ordinary shares at an issue price of 1.3c per share to raise $237,163, together with one (1) free attaching unlisted option per share.
· A placement under the Company's existing Listing Rule 7.1 capacity of 10,556,659 fully paid ordinary shares at an issue price of 1.3c per share to raise $137,237, together with one (1) free attaching option per share issued.
The Company's enlarged issued share capital now comprises 1,259,488,361 ordinary shares, with voting rights. The Company does not hold any ordinary shares in treasury. Therefore the total number of ordinary shares in the Company with voting rights will be 1,259,488,361.
Forward Looking Statements
This announcement contains certain statements that may constitute "forward looking statements". Such statements are only predictions and are subject to inherent risks and uncertainties, which could cause actual values, results, performance achievements to differ materially from those expressed, implied or projected in any forward looking statements.
Competent Persons Statement
The information in this report that relates to the 2015 Ore Reserves for Cononish Gold Project (refer ASX announcement dated 25/05/2015) is based on information compiled by Pat Willis, a Competent Person who is registered as a Professional Engineer (Pr.Eng.) with the Engineering Council for South Africa (ECSA) and a Fellow in good standing and Past President of the Southern Africa Institute of Mining and Metallurgy (FSAIMM).. Mr Willis is employed by Bara Consulting Limited, an independent consulting company. Mr Willis 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 Willis 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 the 2015 Mineral Resources Estimate for Cononish Gold Project (refer ASX announcement dated 22/01/2015) is based on information compiled by Malcolm Titley, a Competent Person who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Titley is employed by CSA Global (UK) Limited, an independent consulting company. Mr Titley 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 Titley consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
Further, the Company confirms it is not aware of any new information or data that materially affects the information contained in the original announcements and that all material assumptions and technical parameters underpinning the estimate of Resources and Reserves continue to apply and have not materially changed.
For further information please contact:
Scotgold Resources Limited | Westhouse Securities Limited | Capital Markets Consultants | Vicarage Capital Limited |
Richard Gray - CEO | Alastair Stratton / Robert Finlay | Simon Rothschild | Rupert Williams |
Tel: +44 (0)7905 884 021 | Tel: +44 (0)20 7601 6100 | Tel +44 (0)7703 167 065 | Tel: +44 (0)20 3651 2911 |
Tenement details
The Company holds a Lease (100%) from the Crown Estate Commissioners over Cononish Farm, county of Perth, Scotland UK.
The Company holds a Lease (100%) from the landowner over Cononish Farm, county of Perth, Scotland UK.
The Company holds five Mines Royal Option Agreements (100%) with the Crown Estate Commissioners as detailed below:
· Glen Orchy: Location - counties of Perth and Argyll, Scotland UK
· Glen Lyon: Location - counties of Perth and Argyll, Scotland UK
· Inverliever: Location - counties of Dunbarton, Argyll and Perth, Scotland UK
· Knapdale: Location - county of Argyll, Scotland UK
· Ochils: Location - county of Clackmannan, Perth, Kinross and Stirling, Scotland UK
No tenements were acquired or disposed of during the quarter, although as previously noted, the Inverliever option area will reduce in size on finalization of matters with the Crown Estates.
No other beneficial interests are held in any farm-in or farm-out agreements.
No other beneficial interests in farm-in or farm out agreements were acquired or disposed of during the quarter