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Scotgold shares boosted by more positive news on production at Cononish

Scotgold Resources' gold mine at Cononish.
Scotgold Resources' gold mine at Cononish.

Shares in Scotgold Resources rose slightly today (July 2), by nearly 1% to 54p, after it said it was mining high-grade gold ore in the hills of Argyll “far quicker than anticipated”.

Scotgold has been in production at Cononish, near Tyndrum, since late last year and in an update last month said it was pleased with the quality of ore.

“Mining in the latter part of June was accessing ore which peaked at 40 grammes (1.4oz) per tonne.”

In its latest production and corporate update, the Alternative Investment Market-listed company said: “As previously stated, Scotgold’s dual focus is to further enhance safe production through consistency and stability of mine and process plant operations in parallel with the opening of multiple faces of ore in the underground mine itself.

“Successful roll-out of this strategy has enabled the company to optimise the mine design – allowing access to higher grade ore zones far quicker than anticipated.

‘Mining activity continued uninterrupted throughout June’

“Mining in the latter part of June was accessing ore which peaked at 40 grammes (1.4oz) per tonne. Mining in this general zone will continue for two months and is expected to achieve a blended grade average above 10 grammes (0.35oz) per tonne.”

Scotgold added: “Mining activity continued uninterrupted throughout June, increasing the volume of ore stored on the stockpile.”

The company is rolling out a “risk analysis approach” to better manage any potential technical problems, such as those which have hampered production ramp-up to date.

Action to mitigate production glitches

These include a recent bearing failure in a key production area which “is expected to be resolved in the coming days”.

Scotgold said the hitch “serves to demonstrate the types of one-off issues that can impact on output”.

The firm added its new “methodical” risk analysis, aimed at analysing, predicting or mitigating the effects of one-off issues, would “certainly have limited unplanned downtime arising from the bearing failure to an almost negligible level” by ensuring the availability of critical spare parts.

“Once fully implemented, the risk analysis approach will greatly increase the reliability of the mine and process plant operations, and enable more consistent runtime”, it said.

The company aims to make its second shipment of gold concentrate in the first half of July. Dore – an alloy of precious metals containing a high percentage of gold and silver – has been successfully refined through “normal treatment processes”, Scotgold said.

FTSE 100 in the red

Meanwhile, London’s top index closed the week slightly in the red, as a quiet day for UK news was eclipsed by happenings across the pond. The FTSE 100 dipped 1.89 points to 7,123.

Banks led the charge lower, with Standard Chartered, Lloyds Banking Group, HSBC and Barclays all crowding in the day’s bottom 10 performers.

Other fallers included BP and Shell, as the oil giants were faced with a stagnant oil price of just under $76 a barrel.