THE company mining for gold in Argyll has warned it may face a “material uncertainty” that would cast a “significant doubt” over its ability to continue as a going concern in the “very immediate term”.

Shares in Scotgold Resources lost nearly two-thirds of their value yesterday after the company revealed significantly less mineralised ore would be yielded from the Cononish mine near Tyndrum in February and March than initially envisaged.

It comes after the company raised £3 million in February through a share placing, subscription and retail offer to support the delivery of its 2023 mine plan and its planned transition from tunnel development to long-hole stoping, as well as its exploratory drill programme.

The company noted that long stope mining is a “widely used method in underground mining that supports cost effective and efficient extraction of ore”.

Scotgold said its mine plan anticipated that 5,818 tonnes of mineralised ore would be mined in February and March before the transition to long-hole stoping. However, it ran into difficulties as work progressed on the 430 West ore drive in late February and early March, when “gold grades began to decline significantly”.

With the 430 West ore drive turning to waste, “contradicting the grade control model”, the company said total ore production in February was “negatively impacted, with actual 977 tonnes mined and 1,441 tonnes processed”.

In light of the problems and the need to focus on ore production, Scotgold said it shifted its focus to the 415 East ore drive on March 3, while beginning moves to commence long-hole stoping in early April.

Scotgold said it now expects there to be just between 500 to 600 tonnes mined in March, with about 300 tonnes of waste to be placed into areas for the commencement of stope drilling.

The company told the city that, further to recent mining performance being below plan, it has opened talks with its gold offtake partner to secure a $500,000 advance to assist with short-term working capital. It also said directors have discussed the prospect of providing a short-term convertible loan to ensure the company continues with the long-hole stoping strategy.

Scotgold said: “The company's management team continuously assess the cash position of the company.

"As a result of recent mining performance being below plan, largely due to lower than expected grades in the 430 West ore drive resulting in the subsequent decision to bring forward long -hole stope mining, the directors now believe that, in the event that the planned commencement of long-hole stoping in April is delayed, or the anticipated tonnes of ore mined in April and the following months is significantly below the current mine plan, then a material uncertainty would exist that casts significant doubt over the ability of the consolidated entity to continue as a going concern in the very immediate term and therefore its ability to realise its assets and discharge its liabilities in the normal course of business.”

The company added: “The ability of the consolidated entity to continue as a going concern over the long term will remain dependent on the quantity and grade of ore mined and processed being within a reasonable tolerance of the forecast quantity and grade and adherence to the planned product shipment schedule.”

The difficulties Scotgold has encountered with regard to mining performance came as the company announced separately that the email accounts of executive directors “have been accessed by unauthorised persons and specious emails sent in their names to numerous people”.

“Whilst we believe the vulnerability has been fixed it is impossible to ever be certain of this. The police have also been informed on this matter and will continue to investigate.”

Shares in Scotgold closed the day down 63%, or 24.1p, at 13.9p.