Scotgold shares lose their shine after feasibility study released

5th Aug 2015 10:14

(ShareCast News) - Shares in Scotgold fell after the miner released results of a feasibility study for its Cononish gold and silver project in Scotland.The study said the mine would produce 72,000 tonnes of metals per annum, and would last eight years.Using a base case gold price of $1,100 an ounce and silver at $15 ounce, Scotgold said the pre-tax net present value would be £22.5m, and the mine would pay itself off in 19 months.The peak funding requirement for the project was estimated at £24m for gold and £18m for silver.Scotgold chief executive Richard Gray said the project was robust, as the mine would be profitable if gold was priced as low as $700 per ounce."Once concluded, we look forward to putting this fully permitted project into development and pursuing its strong upside potential, which includes a possible Mineral Resource extension and the likely price premium for gold with proven Scottish provenance."Shore Capital said yields were "minuscule" and the upside looked limited relative to market cap."Considering that Scotgold's market cap is a relatively full £8.5m, the upside looks rather limited to us, particularly given that Scotgold still has to raise the funds with which to construct the project (let alone keep the company going)," Shore Capital analyst Yuen Low said in a note.