TIDMSGZ
RNS Number : 0978S
Scotgold Resources Ltd
15 March 2016
SCOTGOLD RESOURCES LIMITED
INTERIM FINANCIAL REPORT 31 DECEMBER 2015
DIRECTORS' REPORT
Your Directors submit the financial report of Scotgold Resources
Limited and Controlled Entities (the "Company" or the "Group") for
the half-year ended 31 December 2015. 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:
Nathaniel le Roux Non-Executive Chairman
Richard Gray Managing Director
Richard Harris Non-Executive Director
Chris Sangster Non-Executive Director
Phillip Jackson Non-Executive Director
REVIEW OF OPERATIONS
Cononish Gold and Silver Project
Bankable Feasibility Study ("BFS")
On 5 August 2015, 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:
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/0978S_1-2016-3-15.pdf
* 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 US$700/ US$900/ US$1,000/ US$1,100/ US$1,200/ US$1,300/ US$1,500/
Price ounce ounce ounce ounce ounce ounce ounce
------------ ------------- ------------- -------------- ------------- ------------- -------------- ---------------
Pre Tax GBP1.5M GBP22.5M GBP32.9M GBP43.4M GBP53.9M GBP64.3M GBP85.3M
Cashflow
NPV (GBP4.4M) GBP9.3M GBP16.1M GBP22.9M GBP29.8M GBP36.6M GBP50.3M
(10%)
IRR 0% 25% 35% 45% 54% 64% 82%
------------ ------------- ------------- -------------- ------------- ------------- -------------- ---------------
Key features of the Project are:
-- Robust Project economics using a base case gold price of
US$1,100/ounce (GBP688/ ounce) with an EBITDA of GBP67.4M, a
pre-tax free cashflow of GBP43.4M, pre-tax NPV(10%) of GBP22.9M and
a pre-tax IRR of 45%.
-- Low operating cost with Life of Mine ('LoM') average of GBP327/ 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 GBP18.5M and all in Life of Mine
Capital including contingencies, equipment replacements etc. of
GBP24.0M.
-- Average annual gold production of 23,370 ounces equivalent gold with peak
production in Year 2 of 28,540 ounce equivalent gold.
-- Average Life of Mine 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.
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 the Company's website at
www.scotgoldresources.com
Bulk Processing Trial ("BPT")
Subsequent to the reporting period, on 24th February 2016 the
Company announced that it intended undertaking a Bulk Processing
Trial ("BPT"). The fact that Cononish has an existing stockpile of
ore on surface provides the Company with an opportunity to
establish a pilot scale processing trial at low cost which will
provide both tangible evidence that gold can be produced from
Cononish and reduce the perceived technical risk of the project as
it relates to the processing of ore.
A stockpile of approximately 7000t of ore grading around 7.9g/t
Au and 39g/t Ag is stockpiled on the mine 'platform' at Cononish.
It is proposed to install a small scale pilot plant (portable and
skid mounted) to treat around 2,400t (approximately 1,200 m3) of
this material over approximately a six- month period. The material
to be treated forms part of the Probable Reserves for the project
(refer ASX and AIM announcements dated 25/05/2015 and 26/05/2015
respectively).
The material will be treated through the plant which will
utilise gravity separation via a centrifugal device, similar to the
planned full scale plant. However, the flotation circuit process
will be replaced by a spiral bank to generate a sulphide rich
concentrate.
The capital cost of the plant is estimated at GBP140,000, with
delivery expected by mid-April and, subject to receiving the
necessary planning permission, the BPT would commence on or
around1st May 2016.
Planning application with Loch Lomond & The Trossachs
National Park Planning Authority is well underway with positive
discussions having been recently held and a formal application has
been made.
The objectives of the BPT are to demonstrate the marketability
and profitability of Scottish gold production from Cononish. It
will also give further confidence to metallurgical test-work
already completed and to provide a basis for a review of the
current development plan under the current Bankable Feasibility
Study.
In undertaking this bulk processing trial, it is not intended
that the Cononish project is brought into commercial production but
rather that the experience gained and proof of gold production will
facilitate the financing of the project, which can then proceed as
planned or with a revised phased approach, depending on the
outcomes of the BPT and BFS review.
Grampian Project
Stream sediment program
In order to advance its understanding of the regional setting,
over the past four years, the Company has and continues to conduct
a regional stream sediment sampling program. 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.
Initial 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
an Initial Structural Study of the Cononish deposit and Tyndrum
area. In addition significant work was undertaken to develop, and
expand existing, structural models for both the Cononish deposit
and the wider Tyndrum area. The study aimed to bring the large
volume of existing data in various datasets, including the stream
sediment data discussed above, together into one model. 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.
On 27 November 2015 the Company announced the completion of the
Initial Structural Study and Database review.
Highlights of the report included:
6 highly prospective targets are identified within 2.5 km of the
Cononish Gold and Silver Project; 5 further highly prospective
targets are outlined within the study area;
The study highlighted the Beinn Udlaidh and Arrivain areas in
particular as having prospectivity at least comparable to the
Cononish deposit and further exploration work for these is being
prioritised accordingly.
The study also indicates that structural analysis will be a key
tool for the identification of "pay shoots" within the Cononish
deposit and therefore is expected to assist with future resource
expansion at depth and along strike.
Corporate
Rights Issue
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
GBP0.01 on or before 30 September 2017.
A total of 95,295,889 new shares were applied for under the
Rights Issue to raise approximately
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