Scotgold Resources is looking to raise additional funds, both to procure a new drill rig and for additional working capital, as its Cononish mine continues to be developed towards full production.
Its directors have decided to undertake an open offer, which they hope can raise between £1.5m and £2m, at a price of 15 pence per share.
The transition to the long hole stoping mining method at the gold mine - which started on 4 April - has "progressed well" and is in line with management’s plan. The company is now looking to buy a resolution definition drill rig - versus using a contractor drill rig - to bolster grade control modelling for mine planning.
Scotgold has entered into a subscription agreement with existing shareholders Maurice and Nicole Mason, who have subscribed directly for an aggregate of 3,333,333 ordinary shares to raise gross proceeds of £500,000.
The company will provide an opportunity for existing shareholders to subscribe for up to 10,065,262 new shares at the issue price in order to raise a minimum further £1m and up to a maximum of £1.5m.
Non-executive directors Nathaniel Le Roux, Ian Proctor and William Styslinger, along with non-executive chair Peter Hetherington, have each undertaken to subscribe their shares to the open offer. Charles Outhwaite, a significant shareholder, has also subscribed his shares.
Assuming the maximum number of open offer shares are issued, when combined with the subscription shares, the total number of new issued would represent approximately 20% of the company's existing ordinary shares.
The issue price represents a discount of approximately 6.25% to the middle market closing price per ordinary share of 16 pence on 20 April.
Phil Day, chief executive of Scotgold, said: “With the previous optimisation initiatives completed in 2022 in the underground mine and processing plant, we are now removing ore from the mine and producing gold concentrate through the processing plant in line with our mine plan.
“The additional funds raised will allow us to purchase a more advanced resolution definition drill rig, to further improve development of the underground mine and our grade control modelling.
“This will be invaluable as we progress towards full production at Cononish and for future development of its current eight-year mine life.”
In February, Scotgold raised gross proceeds of £2.5m through an offering of 6,250,000 shares at a price of 40p per share, representing approximately 9.48% of its enlarged share capital.
However, since then, Scotland's first commercial gold producer warned that mining difficulties "cast significant doubt" over its ability to continue as a going concern in the immediate term.
Its interim results for the six months ended 31 December 2022 revealed a loss before taxation of A$9.5m - up from A$5.3m during the same period in 2022.
However, the company did also see total revenues rise from A$6.4m to A$9.5m during the period.
Don't miss the latest headlines with our twice-daily newsletter - sign up here for free.
