Cononish gold miner Scotgold Resources has put staff on unpaid leave “until further notice” as it prepares for administration.
A creditor has also launched legal proceedings against the troubled company.
Scotgold became Scotland’s only commercial gold miner when it started operations at Cononish, near Tyndrum in Argyll, a few years ago.
But it has hit the buffers financially this year and is now desparately trying to raise cash to avoid a collapse.
Financing discussions ‘ongoing’
Trading of its shares on London’s Alternative Investment Market was suspended earlier this month when it said it needed “significant” funding to continue as a going concern.
In an update today, Scotgold said: “Financing discussions are ongoing.
“They are at an advanced stage, with confirmatory diligence being undertaken.
“These have not yet reached final agreement.”
It added: “The company is in discussion with an administration specialist as a precautionary measure in the event it cannot secure financing and needs to appoint an administrator.”
Scotgold insisted accumulated debts “will be addressed if a successful re-finance is achieved”.
But it warned a creditor’s legal action could “reduce the timescale to achieve a funding solution and necessitate an administration appointment”.
About 85 people work for Scotgold
The firm said it was hoping to resolve this particular debt through negotiation and a repayment proposal.
As of November last year, Scotgold employed 96 people and its 2022 annual report highlighted “ambitious growth plans to continue to increase headcount during 2023”.
It is understood the payroll had fallen to around 85 before today’s announcement.
Scotgold said: “The company has placed the majority of its employees on short-term unpaid leave until further notice.”
This will give it time to “advance the financing discussions and preserve funds” to help retain some “key trained staff” across mining and plant and maintenance”, it added.
These retained staff will “maintain the company’s assets and ensure compliance with statutory, regulatory and environmental reporting obligations for the immediate future”.
A source told The Press and Journal “limited” mining operations are continuing.
Efforts to ramp up production at Cononish this year have hit challenges. Bosses were forced to shore up the firm’s finances after production levels fell “below plan” in the first quarter.
And in late March shares in the firm slumped more than 65% after it highlighted the potential for a “material uncertainty” over its “very immediate” future.
Scotgold said much of its recent output had “turned to waste”, rather than deliver valuable gold.
It also revealed it had called in the police after the email accounts of executive directors were accessed by “unauthorised persons” and “specious emails” sent in their names to numerous people.
Shareholders have pumped millions of pounds of fresh capital into the business.
The company also announced the appointment of an interim boss earlier this year.
Chief financial officer Sean Duffy moved into the chief executive’s role to replace Phil Day, who quit to spend more time with his family in Australia.
Scotgold, whose mining activities in Argyll featured in popular BBC TV series Gold Town, has previously said Cononish is only the beginning of its Scottish gold ambitions.