DOUBTS continue to hang over the long-term future of Scotgold Resources after the mining company withdrew its production guidance for 2023, pending the outcome of a new investigation into its gold and silver mine in Argyll.

Shares in Scotgold dropped more than 14% as it announced the review of its Cononish mine plan, which followed a “disappointing” first half of gold production and with regard to the development of the underground mine near Tyndrum.

Scotgold told the stock market that its ability 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 previously planned product shipment schedule”.

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The update underlined the continuing difficulties facing the company as it bids to maximise the extraction of resources from the Cononish mine.

In March, the miner was forced to announce that it may face a “material uncertainty” that could cast a “significant doubt” over its ability to continue as a going concern in the “very immediate term”. That came as it revealed that significantly less mineralised ore would be yielded from Cononish than initially envisaged.

Scotgold has since embarked on a new production strategy, which has seen it halt work on the 430 West Ore drive development amid declining ore grades and shift its focus to the mine’s 415 East Ore drive.

In parallel, it moved to a mining process called long-hole stoping, which resulted in a steady increase in gold concentrate production in the second quarter.

However, the company announced yesterday that a third-party review will be carried out of the Cononish mine plan, initially encompassing the mine design, schedule, and production forecasts for the next 12 months.

The probe will include an investigation of the issues and impact of stopping the 430 West Ore drive development in late February, which had led to a production in the first quarter being “severely impacted”, and will incorporate a second stage of power and ventilation upgrades “to improve mine accessibility and enable the mine to operate all development and production equipment simultaneously to improve mine development rates.”

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Scotgold added: “This second stage of power and ventilation upgrade allows a step change in development rates and opens up more mining fronts by enabling equipment to operate in parallel. This is necessary to complete the capital development required for ventilation, resource definition drilling and continuation of the incline to open up more mining fronts.”

But the company said it had withdrawn its 2023 production guidance and will update the market on production forecasts and its mine plan once the review has been completed and its findings analysed.

Interim chief executive Sean Duffy, who was appointed following the resignation of Phil Day last month, said: “H1 2023 has been disappointing in terms of gold production and development of the underground mine at Cononish. The impact of the declining of gold grades in the 430 West Drive, late February was significant and evident in the resultant production figures for the period.

“Notwithstanding these difficulties, LHS (long-hole stoping) has progressed in line with our plans and I want to thank our dedicated team for working safely and tirelessly to deliver this, with Q2 2023 production being steady and increasing as a result.

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“We have begun a mine plan review following reconciling Cononish’s mine development and production over the past six months. This review will allow us to recalibrate our current 2023 mine plan to best optimise LHS going forward as we continue to develop the mine with a view to achieving full production in the long-term.”

Scotgold said it produced 2,314 ounces of gold and sold 2,145 ounces, generating sales worth £3.5 million, in the first half. Sales of Scottish gold dore made to Scottish jewellery companies totalled £183,478 during the first half.

The company said it raised £5m during the first half to support the delivery of its 2023 mine plan, procure a definition drill rig, and for additional working capital, as Cononish was developed towards full production. It held £620,000 of cash on June 30.

Shares in Scotgold Resources closed down 14.3%, or 2.5p, at 15p.