A Highland stock that really could be a gold mine...
THE Scottish Highlands are usually associated with hill walks, wet weather and outstanding natural beauty. But they are also home to sizeable gold and silver deposits, panned by amateur prospectors for centuries.
That informal fortune-hunting is now turning professional. Scotgold is in the final stages of developing a mine, just north of Loch Lomond, capable of producing about 12,000 troy ounces (370kg) of gold a year.
The project has been years in the making, but commercial production is scheduled to begin in February next year, the company is fully funded and has the backing of local communities and planning ng authorities.
Traded on the London Stock k Exchange’s junior AIM market, Scotgold shares are 54p and should shoot higher as the firm moves closer to selling its gold.
Like many of our national mining projects, Scotgold has not had an easy time since it was s founded in 2007. While there was as never any doubt that gold existed ed in the Grampian Highlands, there were two considerable hurdles to overcome – gaining permission to extract the precious metal and finding financiers willing to stump up the necessary cash.
Scotgold’s mine is on Cononish Farm, where sheep and cattle graze in the summer. Idyllic though it seems, employment here is scarce, so most locals have been hugely supportive of the Scotgold project and the opportunities it presents.
Persuading people in Edinburgh was more challenging, but the company was making all the right moves when the gold price collapsed back in 2012. A financing package fell away and Scotgold found itself near collapse.
Salvation came in the form of several wealthy individuals, led by Nathaniel Le Roux, an industry veteran who is now chairman of Scotgold and a 49 per cent shareholder. He installed a new chief executive, Richard Gray, who has spent his entire career building and running mines.
Gray analysed the project from top to bottom and came up with a realistic plan about how to move to commercialisation. In 2016, Scotgold produced its first gold from a hillside next to the mine. The gold was sold to upmarket Scottish jewellers Hamilton & Inches and Sheila Fleet, and was turned into soughtafter designs made exclusively from Scottish gold.
About the same time, Gray and his team came up with a way to process the gold that is much more environmentally friendly than traditional methods – and more practical for a small company. Today, the group is just months from producing gold at the mine itself. The project will start slowly, with about 7,000oz of gold expected to be produced next year, rising to 12,000oz in 2021 and considerably more in the future.
About 75 per cent of the gold will be sent to Europe to be refined. The rest will be smelted on the Cononish site, refined and hallmarked with the Scotgold insignia, before being turned into authentic Scottish jewellery.
Scotgold is not just a shot in the arm for Scottish pride, it is also likely to be highly profitable. The Cononish ore has been defined as very high grade, meaning that every ton of rock that is gouged from the hillside will yield about 14 grams of gold, twice as much as most underground mines.
That reduces the cost of production and increases profit margins. Brokers estimate that Scotgold will deliver profits of £1 million next year, moving to £14 million or more by 2021, and even more thereafter.
Although the company is focused on the Cononish mine, it has exploration rights for more than 1,000 square miles of land in and around the Scottish Highlands.
Initial work has already been carried out over some of this, and the results are promising, suggesting that at least three more mines could be created over the next decade.
The terrain is part of a geological belt stretching from Scotland through Ireland all the way to North America – a seam on which many highly profitable mines have been developed down the years.