PERTH (miningweekly.com) – The recent decline in the gold price has forced junior Scotgold Resources to delay a capital raising to fund the development of its Cononish gold project, despite the project’s robust economics.

A final development project for the Cononish operation has found that at a base case gold price of $1 300/oz, the project could deliver some £26.3-million in pre-tax cash flow over the life-of-mine, with a net present value of £11.8-million and an internal rate of return of 26%.

At a capital cost of £22.3-million, the Cononish project would deliver some 19 000 oz/y of gold and 73 000 oz/y of silver.

“The results from the final development study continue to demonstrate the viability of the Cononish project,” said Scotgold executive chairperson John Bentley.

“At base case gold price assumptions, the project provides a healthy return. The project is highly leveraged to gold prices and at the current spot prices, is highly cash generative, with over £39-million in pre-tax cash flow over the initial seven-year life-of-mine.”

However, Bentley noted that the recent decline in the gold price had severely dented market confidence, and the potential to raise equity financing for the project was considered to be severely challenging under the market conditions.

“The board has thus decided to defer an immediate raise, pending an improvement in market conditions.”

Bentley noted, however, that the company was evaluating a range of project debt capacities under varying gold-price scenarios to evaluate an optimal approach to finance the project.

“In addition, we are considering a number of strategic alternatives with a view to advancing the project and achieving the overriding objective of delivering Scotland’s first commercial gold mine.

“Importantly, with all the work that has been completed on the planning conditions and the tailings dam design, the mine is capable of producing first gold within 15 months of funding,” Bentley said.