Grant of up to ?600,000 from Scottish Enterprise

RNS Number : 7684D

Scotgold Resources Ltd

29 March 2011

 



Scotgold Resources Limited

Grant of up to £600,000 from Scottish Enterprise

Scotgold Resources Ltd (Scotgold) is pleased to announce that it has accepted an offer of a Regional Selective Assistance (RSA) grant of up to £600,000 (Aus$ 1,000,000) in respect of the Cononish Gold and Silver project from Scottish Enterprise.

The grant is to assist in the establishment of the mine facilities and job creation and is conditional on Scotgold obtaining planning permission. It is payable retrospectively in instalments subject to certain capital expenditure and job creation milestones.

Commenting on the grant, Chris Sangster, Director and CEO of Scotgold said:

"We are delighted at the magnitude and scope of assistance from Scottish Enterprise which will prove a significant benefit in the establishment of the mine at Cononish. We are clearly appreciative of this measure of support for the project shown by Scottish Enterprise. The project presents significant local employment and economic investment opportunities - it will require 52 full time jobs to operate a mine at Cononish and also stimulate indirect employment opportunities locally."

Scotgold also believe that there are wider national implications for a successful minerals operation at Cononish within the Scottish context. Minerals operations are recognised as significant potential drivers for growth in national economies, and it is also acknowledged by the British Geological Survey that Scotland is highly prospective but under-explored for minerals. Combined with its very low political and sovereign risk, these factors make Scotland a most attractive potential opportunity for investment in mineral activities.

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 /Louise Mason
Tel: [phone]	Tel: [phone]	Tel [phone]

Australia:

Scotgold Resources Limited	Professional Public Relations
Shane Sadleir (Non-Executive Director)	Karen Oswald
Tel:           [phone] Mobile: [phone]	Tel:           [phone] Mobile: [phone]

Notes to Editors

1.  Scottish Enterprise

Scottish Enterprise is a sponsored public non departmental body of the Scottish Government which encourages economic development, enterprise, innovation and investment in business and administers the RSA scheme on behalf of the Scottish Government. RSA is the main national scheme of financial assistance to industry. It provides discretionary grants to investment projects that will create and safeguard employment in areas designated for regional aid under European Community law. Payment of RSA is made in instalments, typically over several years as job and capital expenditure targets are met.

2.  Regional Selective Assistance Grant

Scotgold submitted its application for RSA last year and has now received the formal offer of a grant of £600,000 which it has accepted.

In the offer letter, the purpose of the grant is to assist in:

1)   "implementing investment in plant and machinery to fully establish the Cononish gold and silver mine and the full processing and production facility;"

2)   "creating 47 and safeguarding 1 permanent full-time jobs; and"

3)   "investing in mining infrastructure, facilities, a processing plant and equipment totalling £10,366,000 ("the assets")"

The grant is conditional on the company obtaining planning permission for the project and subject to various capital expenditure and job creation milestones as detailed below:

·      First instalment - £130,000 - expenditure of £1,500,000 on the 'assets' of the project and creation of at least 10 permanent full time jobs and safeguarded one permanent job

·      Second instalment - £250,000 - expenditure in total of £5,000,000 on the 'assets' of the project and creation of at least 30 permanent full time jobs and safeguarded one permanent job

·      Final instalment - £220,000 - expenditure in total of £10,366,000 on the 'assets' of the project and creation of at least 47 permanent full time jobs and safeguarded one permanent job

It is estimated that the project will create 52 jobs in a rural community where employment is largely centred on the seasonal tourist trade. These new permanent jobs in the area will have a significant positive impact in the current economic climate through diversifying local rural employment opportunities. The majority of these jobs can be filled by locally available skills, and there are obviously also considerable indirect employment opportunities created through construction and by the goods and services required, with wider implications for the area. Over the life of the project the financial contribution from mining operations to the local and national economy, based on Office for National Statistics multipliers, is estimated at c. £50m at 2010 levels.

Scotgold believes that the project may boost local tourist numbers and spend in the area. Opportunities exist to possibly develop some form of jewellery manufacturing enterprise based on premium 'Scottish Gold' as well as to capitalize further on the obvious unique attraction of Scotland's only gold mine.

3. Cononish Gold and Silver Project

The Cononish Gold and Silver project consists of the establishment of a small underground mining operation with associated processing facilities and infrastructure. In production, it is estimated the mine would produce 20,000ozs of gold and 80,000 ozs of silver annually over a production life (excluding pre-production) of six and a half years.

A scoping study on the Cononish Project completed by Australian Mining Consultants Ltd (AMC) in mid 2009 indicated positive returns using a gold price of US$ 720 / oz (GBP£450 /oz). At the current gold price of around US$ 1400 / oz (GBP £860 / oz), the Project has the potential to generate significant cashflows for the Company.  Based on this 2009 study, at a gold price of US$ 1270 / oz (GBP£800 / oz), the Project would generate around US$ 87 million (GBP £55 million) free cashflow over its lifetime. Scotgold is in the process of updating this study prior to a production decision, subject to obtaining planning permission.

4. Scotgold Resources

·      Scotgold Resources is a junior mining exploration and development company listed on the Australian Securities Exchange in January 2008 and the Alternative Investment Market 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 deposit south of Tyndrum, Argyll, as its core asset and the delivery of Scotland's first commercial gold mine.

·      Scotgold acquired the 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 Tyndrum area.

·      In January 2010 Scotgold lodged a planning application to revise and extend planning permission for its mine as the extant permission had lapsed. The application was narrowly refused by the Loch Lomond and the Trossachs Board in August 2010, despite overwhelming community support, and the company has lodged an appeal with Scottish Ministers. Following revisions to the previous planning application in light of, in the main, concerns over landscape and visual impact, Scotgold is seeking to lodge a new application after the lodging of a Proposal of Application Notice in December 2010.

 

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