Scotland gets its first commercial gold mine

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By Russell Bruce

At the meeting of the board of Loch Lomond and the Trossachs National Park this afternoon the board gave unanimous approval to the planning application for the Cononish Gold Mine near Tyndrum.

The Cononish mine, owned by Scotgold Resources, is expected to produce 154,000 ounces of gold and 589,000 ounces of silver over the next 10 years.

Scotgold plan to create 52 jobs and according to an independent report commissioned from economist Professor David Bell of Stirling University, the mine will general £80 million for the Scottish economy over its 8 to 10 year period of operation.

Situated in the north west of Loch Lomond and the Trossachs National Park the Cononish Gold mine near Tyndrum has a long and complex planning history dating back to the 1980s.

Previously owned by Fynegold, the assets were taken over by Scotgold Resources in 2007, an Australian company listed on the Australian stock exchange and on AIM in the UK.

Chris Sangster, Scotgold’s CEO has been working for the last four years to get the mine up and running. Extensive geological studies have been carried out to provide reliable estimates of the gold and silver in the Cononish seam.

With the 1996 planning permission from Stirling Council having expired Chris Sangster and his team of advisers prepared an application to the new planning authority for the area, Loch Lomond and the Trossachs National Park.

The application received enthusiastic local support from the community and many others. It was widely expected that the application would be recommended for approval, by the Director of Planning.

However, due to environmental concern over the tailings management it was recommended for refusal and after a stormy meeting of the National Park Board last August the application was refused by a narrow majority.

Scotgold were back to the drawing board and engaged in discussions with the planners to find a solution to the concerns of the National Park. A new application was submitted earlier this year and Gordon Watson, Director of Rural Development and Planning, recommended the new application for approval on 13^th October.

To keep the project on track and with no earnings coming in, the company announced their third rights issue in two years in early August. Between planning the rights issue and trading opening on Monday 8^th August, the stock market had taken an almighty plunge.

In a testament of faith by Scotgold’s patient investors, 87% of the rights issue was taken up. Investors have seen the value of shares bought at the discounted rights price now double.

SNP MSP for Stirling, Bruce Crawford, welcomed the planning approval and said:

“This is fantastic news for Cononish and the surrounding communities. I have fully supported the application throughout and I am delighted with this announcement.

“The mine will support 50 jobs in the Tyndrum area, providing an important boost to the local economy of the area at a time of severe economic difficulties. I have no doubt that Scottish gold and silver will become very popular with those looking for unique Scottish jewellery.

“This will not just have a huge impact on the surrounding communities but is estimated to bring in £80million in additional economic activity for Scotland as a whole.

“I look forward to this project now moving forward and to the positive difference this exciting business can make to the area.”

The Tyndrum Mineral Field is a historic mining area containing several vein-hosted deposits of base metals, including lead, copper and zinc. The best known are the historic Tyndrum eighteenth century lead mines, discovered in 1741 and which produced lead for more than a century. Some veins also contain gold and by far the most important is the Cononish vein-hosted gold and silver deposit 4km South-west of Tyndrum.

Previous exploration has also identified the Tyndrum-Glen Fyne Fault – one of the major fault structures of the Dalradian metamorphic complex with gold potential lying against and north of the Highland Boundary Fault.

Scotgold were granted further exploration licences in 2007 in areas to the north and south of Cononish. The company believes the Loch Fyne exploration block contains significant potential for gold mineralization.

The British Geological Survey (BGS), carried out geochemical surveys over the entire area held by Scotgold and have expressed the view that there are significant metalliferous deposits yet to be discovered in the Dalradian of Scotland.

At the time of the 2010 planning application the price of gold was trading around $900 an ounce. Since then the price of gold has risen steadily reaching over $1900 an ounce at one point. Having since fallen back, the price has steadied recently at above $1600, well above Scotgold’s extraction costs.

Because of its rarity Scottish gold tends to command higher prices. The opening of the mine is expected to boost the prospects of Scotland’s jewellers with many craftsman designers expected to take advantage of Scotland’s gold rush.

The news has cheered investors and the electronic ticker shows considerable activity, mainly from small investors since the news broke.

Scotgold are planning to raise £15m to get the mine up and running and part of that is likely to be another call on shareholders with a further rights issue.

According to Snowden Mining Industry Consultants Ltd, who completed an independent JORC compliant resource report on Scotgold’s Cononish gold project, there is strong potential for a further 160,000 to 320,000 ounces of gold within a few kilometers of Cononish mine.

Readers should not take this article as a recommendation to buy shares in Scotgold and should seek appropriate advice if inclined to do so. They should also note the writer was a board member of the Loch Lomond & the Trossachs National Park for 8 years until the end of June 2010 and holds shares in Scotgold.