Gold miner Scotgold Resources plunged in value after warning output in its first year of production on a Scottish hillside would be “materially less” than previous guidance.
It also revealed it was investigating financing options, including short-term loans from the directors.
The firm’s shares sank nearly 30% in early trading on the Alternative Investment Market in London before partly reversing their slide to end the session at 55p, or 22% lower than Monday’s close.
The initial “pour” of Scotland’s first commercially produced gold from Cononish, near Tyndrum, Argyll, came at the end of last November.
But Scotgold later admitted production at the start of 2021 was “negligible” due to “multiple materials handling issues”, while recruitment was impacted by the Christmas period and lockdown.
In a new trading update, the firm said: “The company is pleased to announce that it has resolved the various outstanding technical issues affecting the processing plant at Cononish, which is operating consistently and currently focusing on ramping up to full design capacity expeditiously.
“The company commenced a review of the mine plan for Cononish at the beginning of April 2021, and it has been concluded that the ramp-up of underground mining production will be slower than originally planned.
“Mine development is insufficient for the mine to provide optimal ore quantity and quality in the short term, however, this is not predicted to have long term impacts.”
Scotgold, which has had a new chief executive, Phillip Day, at the helm since the start of April, added: “The mine team … has undergone a reshuffle in leadership and approach to ensure it can deliver reliable and robust short-term mine plans.
“Accordingly, the company expects production for calendar year 2021 to be materially less than the guidance range previously announced on March 31 2021.
“A further update in connection with the ramp-up of production, including new estimates for ore to be processed and gold to be produced for the calendar year 2021 will be announced as soon as the company has completed the review of the mine plan for Cononish.”
Scotgold said the recent delays to production ramp-up “have had and are expected to have” a negative impact on its cash position.
It added: “To ensure the company has adequate funds available for working capital through this production ramp-up period, the company is investigating financing options, including short-term debt financing from the directors. A further update will be made to shareholders in due course.”
Scotgold recently raised £1.5 million from a share placement to cushion the blow of slower-than-expected progress for its trouble-hit operation in Argyll.
A lag between production build-up and sales receipts for gold from the site has meant further working capital is required until the project becomes cash flow positive.
Suffolk-based Bridge Barn – a company owned and controlled by Scotgold chairman Nathaniel le Roux – has agreed to provide debt funding of £500,000, if required.