RNS Number : 6938U
Scotgold Resources Ltd
30 March 2023
 

Logo, company name Description automatically generated

30 March 2023

 

Scotgold Resources Limited ("Scotgold" or the "Company")

Interim Results

 

Scotgold Resources Limited (AIM: SGZ), Scotland's first commercial gold producer, announces its Interim Results for the six months ended 31 December 2022 ('H1 2023').

 

Operational Overview

·      Production for six months ended 31 December 2022, totalled 3,809 ounces of gold

·      H1 2023 gold concentrate sales totalled £5.4m (A$9.5m) from 550 tonnes of concentrate shipments to our off-take partner

·      First Scottish gold doré sales were made to Scottish jewellery companies in December 2022 totalling £25,420

 

Financials

·      Total revenues of A$9.5m in H1 2023 (H1 2022: A$6.4m)

·      Loss before taxation in H1 2023 of A$9.5m (H1 2022: A$5.3m)

·      Cash at 31 December 2022 of A$67k (30 June 2022: A$168k)

·      Net debt of A$25.0m at 31 December 2022

 

Chairman Statement

The period under review, whilst challenging, has seen progress and important milestones being achieved at our Cononish gold mine, in Tyndrum, Scotland ('Cononish'), as we continue to develop Scotland's first commercial gold mine towards full production, producing both gold concentrate for off-take and Scottish gold doré for the jewellery industry.

 

During H1 2023 (1 July to 31 December 2022) we implemented initiatives for the underground mining operation and processing plant to enable our operation to run more efficiently. Power and ventilation upgrades in the underground mine and de-bottlenecking of the process plant (floatation and tailings filtration) were completed as well as mine development in the underground mine, to allow three development drives, allowing the Company to drive to the first stope mining area initially planned for calendar Q2 2023, as well as inclining to the 445 level to open even further development drives in late 2023. Additionally, limited resource definition and grade control drilling commenced October 2022, providing essential information for the correct design and shape of stopes, with the aim of higher certainty in grade prediction for the 2023 mine plan, when mining transitions from development tunnelling to long hole stoping.

 

Production for the three months ended 31 September 2022, totalled 2,004 ounces of gold, however this was lower than the 2,600 to 3,200 ounces targeted for the quarter, as a result of the successful, but delayed power and ventilation upgrades in the underground mine, which stalled mine development on the waste ramp in September 2022.

 

During the three months to 31 December 2022, operational difficulties continued in the underground mine. December 2022 was impacted by changes in the short-term mine schedule to expedite continuous long hole stoping in the western areas of the mine in 2023, as reported on 21 December 2022, and harsher than expected weather conditions. Production totalled 1,805 ounces (previously forecasted 3,000-3,500 ounces of gold) and an additional 324 ounces was mined in December but stored underground as weather conditions didn't allow for the mining trucks to move the ore to the ROM pad safely. This ore was then processed at the beginning of January 2023.

 

Gold concentrate sales for the period totalled £5.4m (A$9.5m) from 550 tonnes of concentrate shipments to our off-take partner. 

 

Additionally, first Scottish gold doré sales were made to Scottish jewellery companies in December 2022 totalling £25,420 and sales continue post-period end with Scottish gold jewellery launches planned in 2023.

 

Post-period mine development

 

As reported on the 19 January 2023, in our 2023 mine plan and strategy update, whilst the majority of capital project works completed in H1 2023 focussed on increasing the mine production rate, mine production would still be the limiting factor for gold production, until long hole stoping commenced, forecasted at this stage for calendar Q2 2023.

 

Post-period end, in January 2023, mine development focussed on the 430 West ore drive, 415 East ore drive and the incline ramp accessing the 445 level and achieved record development rates with 3,003 tonnes of ore mined, and 2,620 tonnes of ore fed to the process plant. However, average grade of the ore processed was lower than predicted (5.65g/t actual vs 7.35g/t planned of gold).

 

In February 2023, development on the 430 West ore drive continued. However, as the 430 West ore drive progressed in late February and into early March 2023, gold grades began to decline significantly, and the 430 West ore drive turned to waste, contradicting the grade control model. Total ore production in February was negatively impacted, with actual 977 tonnes mined and 1,441 tonnes processed.

 

As a result of the 430 West ore drive turning to waste and the need to focus on ore production, the Company shifted development priorities on 3 March 2023 to the 415 East ore drive. In parallel, plans commenced to bring forward long hole stoping to early April (instead of previously forecasted for calendar Q2 2023), to secure the short to medium term production profile and enhance gold production thereafter. Stope drilling continues to be undertaken successfully and the transition to Long hole stope mining is on track to commence in 5 days time.

 

Financial Position

 

Post-period end, on 9 February 2023, the Company undertook an equity fundraise to provide funds to support the planned transition from tunnel development mining to long hole stoping. 7,428,460 new Ordinary Shares totalling gross proceeds of £3.0m (US$3.6m) at a price of 40p per share were issued after a Placing, Subscription and Retail Offer. Seven Directors of Scotgold and a significant shareholder participated in the Subscription for a total of 1,435,000 Subscription Shares with a total value of £574,000 (US$700,280).

 

Further to the Capital Raising, Bridge Barn Limited, a company owned and controlled by Mr Nathaniel le Roux and provider of debt funding to the Company, has agreed the option to defer a total of £2.5m capital repayments due by the Company in calendar year 2023 by up to 9 months from the due date.

 

As reported on 27 March 2023, the Company's mine plan anticipated that 5,818 tonnes of mineralised ore would be mined in February and March 2023 ahead of the transition to long-hole stoping in Q2 2023. Actual tonnes mined are now expected to be between 550 and 600 in March and about 3,000 tonnes of waste to place into required areas for commencement of stope drilling.

 

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.

 

In order to safeguard against this potential shortfall in working capital over the next few months the Directors have determined to take steps to strengthen the Company's cash position. The Company is in advanced discussions with its gold offtake partner, and is reviewing final documentation, to secure a US$500,000 advance to assist with short-term working capital. The Directors of the Company have also discussed, if the need arises, the provision of additional working capital, in the form of equity or a short-term convertible loan.

 

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.

 

Our people and commitment to sustainability

 

We are supported and driven by our team. We currently have 96 employees and continually invest in our people.  In this regard, we were pleased to report that we have been working with Forth Valley College in Falkirk on apprenticeship schemes where we currently have placed students in mechanical engineering roles.  In addition, in July 2022, we launched a partnership with the University of St Andrews for a five-year student bursary programme. Our team is working closely with the University teaching staff and students on the MSc Strategic Resources course involving work at both the University and at our Cononish site.

 

We are committed to the principles of sustainable and responsible mining in all aspects of our business. We are dedicated to the safety of our workforce and local communities. To that end, we are proud of our no cyanide status, as one of the only gold producers globally that does not use it in our processing.  We also utilise dry stack tailings to ensure safety and a minimal environmental footprint. The Company can also confirm that there have been no serious health and safety incidents this year. We work in accordance to the UK's HSC best practice and have a zero-harm safety culture focused on continuous improvement to achieve an injury free and healthy work environment.

 

We also support work of Loch Lomond and The Trossachs National Park and contribute to the Strathfillan Development Trust, which is a local charity representing the residents of Tyndrum, Crianlarich and Inverarnan.

 

Finally, I would like to extend my appreciation to our colleagues here in Scotland who have worked with dedication during very challenging times. I would also like to extend my gratitude to all our stakeholders for their continued support and as we continue to develop the mine during this critical time, we will update on developments and progress in this regard.

 

 

Chairman

Peter Hetherington

29 March 2023

 

 

The information contained within this announcement is deemed to constitute inside information as stipulated under the retained EU law version of the Market Abuse Regulation (EU No. 596/2014) (the "UK MAR") which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. The information is disclosed in accordance with the Company's obligations under Article 17 of the UK MAR. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

 

For further information please visit www.scotgoldresources.com or contact the following:

 

Scotgold Resources Limited

 

Chief Executive Officer

 

Phil Day 

 

CFO

 

Sean Duffy

Shore Capital

 

Nomad and Broker

 

Toby Gibbs / John More

 

Celicourt Communications

 

Financial PR

 

Felicity Winkles/Ariana Fanning

 

Via Celicourt Communications

Tel +44 (0) 20 7408 4090

Tel +44 (0) 208 434 2643

Tel +44 (0) 774 8843 871

 

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE HALF YEAR ENDED 31 DECEMBER 2022                                                           

 


Notes

31 December 2022

 

31 December 2021


 

$

 

$






Gold Concentrate Sales

2

9,488,508


6,431,437

Production Costs


(11,896,042)


(6,431,437)

Sale of scrap metal


-


2,411

Net (loss) / profit from operations

 

(2,407,534)

 

2,411






Interest income


7,930


1,816

Loss on settlement of loan

3

-


(1,359,008)






Administration costs


(1,107,011)


(694,442)

Interest expense

4

(1,010,577)


(808,668)

Depreciation and amortisation of plant and equipment and Right of Use assets

6,7

(1,465,587)


(1,403,670)

Depreciation of mining development asset

9

(1,734,676)


-

Employee and consultant costs, excluding share-based payments


(1,104,391)


(842,503)

Share-based payments

13

(111,269)


(153,468)

Other expenses


-


(218,557)

Currency exchange expense


(537,935)


(96,883)






LOSS BEFORE INCOME TAX


(9,471,050)


(5,572,972)






Income tax benefit


-


-






LOSS FOR THE PERIOD


(9,471,050)


(5,572,972)






Other Comprehensive Income










Items that may be reclassified to Profit or Loss





Exchange difference on translation of foreign subsidiaries


50,630


281,768






Total comprehensive result for the period


(9,420,420)


(5,291,204)






Basic and diluted (loss) per share (cents per share)


(14.89)


(9.62)

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022


Notes

31 December 2022

 

30 June

2022


 

$

 

$

CURRENT ASSETS










Cash and cash equivalents


67,098


168,086

Trade and other receivables

5

1,026,445


4,686,404

Inventories


887,104


1,295,839

Other current assets


282,536


1,048,210

Total Current Assets


2,263,183


7,198,539






NON-CURRENT ASSETS










Trade and other receivables

5

1,471,832


1,463,125

Plant and equipment

6

14,449,238


14,515,295

Right of use assets

7

2,750,647


3,025,490

Mineral exploration and evaluation

8

3,209,042


3,051,622

Mine development expenditure

9

22,428,489


23,996,356

Total Non-Current Assets


44,309,248


46,051,888






TOTAL ASSETS


46,572,431


53,250,427






CURRENT LIABILITIES










Trade and other payables


4,601,880


3,999,379

Other current liabilities


1,481,721


1,100,811

Borrowings

10

859,446


1,175,358

Total Current Liabilities


6,943,047


6,275,548






NON-CURRENT LIABILITIES










Borrowings

10

24,204,192


22,266,513

Provisions

11

727,327


781,898

Total Non-Current Liabilities


24,931,519


23,048,411






TOTAL LIABILITIES


31,874,566


29,323,959






NET ASSETS


14,697,865


23,926,468






EQUITY










Issued capital

12

57,835,768


57,755,221

Reserves


1,592,517


1,430,619

Accumulated losses


(44,730,421)


(35,259,372)






TOTAL EQUITY


14,697,865


23,926,468

 

 


 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF YEAR ENDED 31 DECEMBER 2022

 

 

Issued Capital

 

Accumulated Losses

 

Options Reserve

 

Share-based payment reserve

 

Foreign Currency Translation Reserve

 

Total Equity


$


$


$


$


$


$

HALF YEAR TO 31 DECEMBER 2021

 


 


 


 


 


 

Balances at 1 July 2021

52,640,345


(24,474,388)


134,769


900,806


(249,608)


28,951,924

Total comprehensive result for the period

-


(5,572,972)


-


-


281,768


(5,291,204)













Transactions with owners in their capacity as owners:

Issue of shares

5,114,876


-


-


-


-


5,114,876

Share-based payments

-


-


-


153,468


-


153,468













Balances at 31 December 2021

57,755,221

 

(30,047,360)

 

134,769

 

1,054,274

 

32,160

 

28,929,064

 












HALF YEAR TO 31 DECEMBER 2022












Balances at 1 July 2022

57,755,221

 

(35,259,372)

 

134,769

 

1,169,443

 

126,407

 

23,926,468

Total comprehensive result for the period

-


(9,471,050)


-


111,269


50,631


(9,309,150)

Issue of shares

             80,547


-


-


-


-


80,547














Balances at 31 December 2022

57,835,768

 

(44,730,422)

 

134,769

 

1,280,712

 

177,038

 

14,697,865

 

 

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

FOR THE HALF YEAR ENDED 31 DECEMBER 2022

 

 

 

31 December

 

 

31 December


 

2022

 

2021


 

$

 

$






CASH FLOWS FROM OPERATING ACTIVITIES










Receipts from customers


13,078,275


5,976,072

Payments to suppliers


(13,283,761)


(7,635,639)

Interest income received


7,930


1,816

Net Cash outflow from Operating Activities


(197,556)

 

(1,657,751)






CASH FLOWS FROM INVESTING ACTIVITIES










Payments for exploration expenditure


-


(92,229)











Purchase of plant and equipment


(701,677)


(382,544)






Net Cash Outflow from Investing Activities


(701,677)

 

(474,773)






CASH FLOWS FROM FINANCING ACTIVITIES










Proceeds from issue of shares and options


82,569


-

Proceeds from short term unsecured loan


1,440,367


1,883,594

Repayment of lease liabilities


(712,950)


(1,422,739)

Net Cash Inflow from Financing Activities


809,986

 

460,855






Net (decrease) in cash held


(89,247)


(1,671,669)






Effect of exchange rate fluctuations on cash and cash equivalents


(11,741)


10,498






Cash and cash equivalents at the beginning of the period


168,086


2,624,342






Cash and cash equivalents at the end of the period

 

67,098

 

963,171

 

 

 

NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Preparation

 

These consolidated financial statements for the interim half-year reporting period ended 31 December 2022 are general purpose financial statements, which have been prepared in accordance with the requirements of the Corporations Act 2001, Accounting Standards and Interpretations, including AASB 134 'Interim Financial Reporting', and other applicable requirements of the law.   The condensed consolidated interim financial statements have been prepared in accordance with the AIM rules. The six months results for 31 December 2022 have not been audited nor reviewed pursuant to statutory requirements in both the United Kingdom and Australia.

 

 

These financial statements have been prepared on a historical cost basis and are presented in Australian dollars. These general-purpose financial statements do not include all the notes of the type normally included in annual financial statements. Accordingly, these financial statements are to be read in conjunction with the annual report for the year ended 30 June 2022 and any public announcements made by the Company during the interim reporting period.

 

The Company is a listed public company, incorporated in Australia and operating in Scotland.  The entity's principal activity is mine development and mineral exploration. These financial statements are for the consolidated entity consisting of Scotgold Resources Limited and its controlled entities.

 

The accounting policies adopted are consistent with those of the previous financial year and the corresponding interim period, except for the policies stated below.

 

Revenue from sale of goods

 

Revenue from the sale of goods is recognised when control of the goods has passed to the buyer based upon agreed delivery terms.

 

Sale of concentrates

 

Revenue from the sale of concentrates is recognised when control has passed to the buyer based upon agreed delivery terms, generally being when the product is loaded onto the ship and bill of lading received, or delivered to the customer's premises. In cases where control of the product is transferred to the customer before shipping takes place, revenue is recognised when the customer has formally acknowledged their legal ownership of the product, which includes all inherent risks associated with control of the product. In these cases, the product is clearly identified and immediately available to the customer and this is when the performance obligation is met.

 

The price to be received on sales of concentrate is provisionally priced and recognised at the estimate of the consideration receivable that is highly probable of not reversing by reference to the relevant contractual price and the estimated mineral specifications, net of treatment and refining charges where applicable. Subsequently, provisionally priced sales are repriced at each reporting period up until when final pricing and settlement is confirmed, with revenue adjustments relating to the quality and quantity of commodities sold being recognised in sales revenue.

 

Provisionally priced sales for which price finalisation is referenced to the relevant metal price index have an embedded commodity derivative. The embedded derivative is carried at fair value through profit or loss as part of trade receivables.

 

The period between provisional pricing and final invoices is generally 120 days.

 

 

Provisional pricing adjustments

 

The Group's sales contracts may provide for provisional pricing of sales at the time the product is delivered to the vessel with final pricing determined using the index on or after the vessel's arrival to the port of discharge. This provisional pricing relates to the quality and quantity of the commodity sold, which is included in sales revenue, and an embedded derivative relating to the pricing of the commodity sold. Provisional pricing adjustments relating to the embedded derivative are separately identified as movements in the financial instrument rather than being included within Sales revenue. The final pricing adjustment mechanism, being an embedded derivative, is separated from the host contract and recognised at fair value through profit or loss. These amounts are disclosed separately as Provisional pricing adjustments in Other revenue, rather than being included within Sales revenue for the Group.

 

Going Concern                                         

 

For the period ended 31 December 2022 the Group recorded a loss of $9.5m (2021: $5.6m) and had a working capital deficiency of $4.8m (2021: $13.0m). The Group recorded net operating cash outflows of $0.1m for the financial period (2022: $1.7m).

 

These conditions indicate a material uncertainty that may cast significant doubt over the ability of the consolidated entity to continue as a going concern and therefore its ability to realise its assets and discharge its liabilities in the normal course of business.

 

The ability of the consolidated entity to continue as a going concern is dependent on the quantity and grade of ore mined and processed matching the forecast quantity and grade and adherence to the planned product shipment schedule.

 

The Group also recognises the inherent operational risks (such as mining fleet availability, processing plant recovery and environmental accidents and disputes) and macro-economic factors (such as the gold price and foreign exchange movements) which could further impact the Group's ability to continue as a going concern.

 

The financial statements have been prepared on the basis that the Company is a going concern, which contemplates the continuity of normal business activity, realisation of assets and settlement of liabilities in the normal course of business.

 

Directors believe that there will be sufficient funds available to continue to meet the Group's working capital requirements as at the date of this report and that sufficient funds will be available to finance the operations of the Group for the following reasons:

 

·      Since the period end, the Group has issued a further 7,428,460 new Ordinary Shares worth £3.0m.

·      Agreed the option to defer a total of £2.5 million capital repayments due by the Company in calendar year 2023 to Bridge Barn Limited by up to 9 months from the due date.

·      The Company is in advanced discussions with its gold offtake partner, and is reviewing final documentation, to secure a US$500,000 advance to assist with short-term working capital. The Directors of the Company have also discussed, if the need arises, the provision of additional working capital, in the form of equity or a short-term convertible loan.

 

 

 

Accordingly, the Directors believe that the consolidated entity has access to sufficient financing to be able to continue as a going concern.

 

Should the consolidated entity not be able to continue as a going concern it may be required to realise its assets and discharge its liabilities other than in the ordinary course of business, and at amounts that differ from those in the financial statements. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or liabilities that might be necessary should the consolidated entity be unable to continue as a going concern.

 

Statement of Compliance

 

The financial report was authorised for issue on 29 March 2023.

 

The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

 

New or amended standards adopted by the entity

 

The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.

 

Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

 

Key estimates and judgements

 

Judgement is exercised in estimating variable consideration. This is determined by past experience with respect to the final selling price received on the assay results as taken at the goods final destination.

 

Revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised under the contract will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

 

NOTE 2 - GOLD CONCENTRATE SALES

 

Six months to

 

31 December

 

31 December

 

2022

 

2021

 

$

 

$

From continuing operations




Sales revenue from contracts with customers




Production and sale of gold concentrate

9,488,508


6,431,437 

Sales revenue

9,488,508


6,431,437 

 

 

NOTE 3 - LOSS ON SETTLEMENT OF LOAN

 

On 4 May 2021, four directors and one material shareholder who is not a director (collectively "the Loan Providers"), made available to SGZ Cononish Limited an unsecured, interest-free, short-term loan facility of £ 2,000,000, with the due date for repayment thereof being 4 November 2021. The loan facility was drawn down by SGZ Cononish Limited in two tranches of £ 1,000,000 each on 12 May 2021 and 6 August 2021 respectively.

 

On 27 September 2021, the loan was settled by Scotgold Resources Limited on behalf of SGZ Cononish Limited by the issuing by Scotgold Resources Limited of 3,301,420 shares to the Loan Providers (these shares being referred to hereinafter as "the Settlement Shares") at a price of 60.58p. This was deemed a non-cash financing activity.

 

 

NOTE 4 - INTEREST EXPENSE

 

Six months to

 

31 December

 

31 December

 

2022

 

2021

 

$

 

$

Interest expense is attributable to the following:








Secured loan (see Note 10)

844,688


648,450

Lease liabilities (see Note 10)

112,781


153,343

Unwinding of discount on provision for restoration and decommissioning

(see Note 11)

53,108


6,875

Total interest cost expensed

1,010,577


808,668

 

 

 

NOTE 5 - TRADE AND OTHER RECEIVABLES

 

Current trade and other receivables comprise the following:

 

31 December 2022


30 June 2022


$


$

Trade debtors

414,973


4,008,959

GST/VAT receivable

329,178


436,108

Other receivables

282,294


241,337


1,026,445


4,686,404

 

 

Non-current trade and other receivables comprise the following:

 

 

31 December 2022


30 June 2022


$


$

Rehabilitation, restoration and land management Bond deposits

1,471,832


1,463,125

 

 

1,471,832


1,463,125

 

 

NOTE 6 - PLANT AND EQUIPMENT

 

Plant and equipment

31 December 2022


30 June 2022


$


$

Cost

17,384,651


16,634,431

Accumulated depreciation

(2,935,413)


(2,119,136)


14,449,238


14,515,295

 

16,686,237

58,522

80,846

16,825,605

385,540

-

114,042

499,582

(680,878)

(2,343)

(7,535)

(690,756)

16,390,899

56,179

187,353

16,634,431

489,900

33,117

21,658

544,675

1,605,064

5,529

47,148

1,657,741

(79,432)

(1,534)

(2,314)

(83,280)

2,015,532

37,112

66,492

2,119,136

14,375,367

19,067

120,861

14,515,295

16,196,337

25,405

59,188

16,280,930

 

 

NOTE 7 - RIGHT-OF-USE ASSETS


31 December


30 June


2022


2022


$


$

Cost

6,060,186


6,859,368

Accumulated Depreciation

(3,309,539)


(3,833,878)


2,750,647


3,025,490

The movements in Right-of-use assets are as follows:





Six months to 31 December


Year ended 30 June


2022


2022


$


$

Cost




Opening balance

6,859,368


4,601,501

Additions

355,385


1,566,768

Modifications of rights

-


977,541

Foreign exchange movement

(1,154,567)


(286,442)

Closing balance

6,060,186


6,859,368





Accumulated Depreciation




Opening balance

3,833,878


1,823,539

Depreciation expensed

623,171


1,954,136

Foreign exchange movement

(1,147,510)


56,203

Closing balance

3,309,539


3,833,878

 

 

 

NOTE 8 - MINERAL EXPLORATION AND EVALUATION


Six months to


Year to


31 December


30 June


2022


2022


$

 

$

Opening balance

3,051,622


2,990,000

Additional expenditure capitalised during the period

-


185,422

Foreign exchange movement

157,420


(123,800)

Closing balance

3,209,042


3,051,622

 

 

 

The ultimate recoupment of exploration expenditure carried forward is dependent upon successful development and commercial exploitation, or sale of the respective areas.

 

As at 31 December 2022, management have not identified any indicators of impairment in respect of this asset.

 

NOTE 9 - MINE DEVELOPMENT EXPENDITURE


Six months to


Year to


31 December

2022


30 June

2022


$

 

$

Opening balance

23,996,356


25,770,548

Additions

-


935,058

Movement in Provision for restoration and decommissioning

(see Note 11)

-


121,030

Amortisation

(1,734,676)


-

Transfer to plant and equipment

-


(2,247,870)

Transfer to production costs

-


(582,410)

Foreign exchange movement

166,809


-

Closing balance

22,428,489


23,996,356





As at 31 December 2022, management have not identified any indicators of impairment in respect of the mine development asset.

 

NOTE 10 - BORROWINGS


31 December

 

30 June


2022

 

2022

Non-current

$

 

$

Secured loan facility

16,716,174


16,146,988

Unsecured loan facility

6,167,111


4,548,865

Right-of-use lease liabilities

1,320,907


1,570,660


24,204,192


22,266,513

 


31 December

 

30 June


2022

 

2022

Current

$

 

$

Right-of-use lease liabilities

859,446


1,175,358


859,446


1,175,358





Total borrowings

25,063,638


23,441,871

 

All of the borrowings are denominated in £ (Pounds sterling).

 

Loan from company controlled by shareholder

 

There have been no material changes or variations 'to the terms of the secured loan facility other than those listed in the subsequent events section in the Directors' report.

 

The secured loan is in good standing at the reporting date.

 

 

Movements on the secured facility loan for the six months ended 31 December 2022:

 


Third Tranche

Fourth Tranche

  Fifth Tranche

Sixth Tranche

Seventh Tranche

Eight Tranche

Total


$

$

$

$

$

$

$

Balance at beginning of period

1,037,797

2,060,388

2,051,698

989,012

980,990

9,027,103

16,146,988

Interest at effective rate

42,269

84,539

84,539

39,032

39,032

394,391

683,802

Interest Payment

(13,409)

(26,817)

(26,817)

(12,382)

(12,383)

(125,107)

(216,915)

Foreign exchange movement

6,560

13,028

12,977

6,240

6,193

57,301

102,299

Balance at end of period

1,073,217

2,131,138

2,122,397

1,021,902

1,013,832

9,353,688

16,716,174









The effective interest rate on the secured loan facility is 8.38% (Year ended 30 June 2022 - 8.38%) per annum.

 







Lease liabilities

 

The movements in lease liabilities are as follows:

 

Six months to


Year to

 

31 December


30 June

 

2022


2022


$


$

Opening balance

2,746,017


2,660,513

Additional rights acquired

393,987


1,801,023

Modifications to rights

-


883,049

Interest expense

112,781


295,033

Repayments

(712,950)


(2,775,775)

Foreign exchange movement

(359,482)


(117,826)

Balance at end of period

2,180,353


2,746,017





Non-current portion

1,320,907


1,570,659

Current portion

859,446


1,175,358

 

 

The effective interest rate on the lease liabilities is 7.44% (year ended 30 June 2022 - 7.44%) per annum. Right-of-use assets with an aggregate net carrying value of $2,750,647 (30 June 2022 - $3,025,490) are financed by the lease liabilities.

 

 

 

NOTE 11 - PROVISIONS



31 December

 

30 June



2022

 

2022

 


$

 

$



 

 

 

Provision for restoration and decommissioning


727,327


781,898






This provision represents the best estimate of the present value of expenditures required to effect restoration of the Cononish mine area at the end of mining operations at the mine as well as to carry out aftercare and monitoring activities in terms of the Decommissioning and Restoration Plan formulated in accordance with the requirements set out in the Section 75 Agreement entered into by SGZ Cononish Limited on 12 September 2018, based on the mine development activities carried out up to and including 31 December 2022.

 

In arriving at the amount of the provision, an annual inflation rate of 2.0% has been applied to estimated future costs stated at current levels and the resultant cashflows have been discounted back to 31 December 2022 using a discount rate of 0.98%.

 

 

The movements in the provision are as follows:

 

Six months to


Year to

 

31 December


30 June

 

2022


2022


$


$

Opening balance

781,898


908,915

Unwinding of discount

(108,074)


(1,470)

Adjustment for mine development progress and change in rate

55,102


(119,560)

Foreign exchange movement

(1,599)


(5,987)

Closing balance

727,327


781,898

 

 

NOTE 12 - ISSUED CAPITAL

 

 

31 December

 

30 June

 

31 December

 

30 June

 

2022

 

2022

 

2022

 

2022

 

No. of shares

 

No. of shares

 

$

 

$

Ordinary shares - fully paid

59,673,291


59,523,291


57,835,768


57,755,221









 

(a)              Movements in ordinary share capital

During the six months ended 31 December 2022

 

Date

Details

Shares

 

Value

(cents)

 

$


Balance at the beginning of the period

59,523,291




57,755,221

19/12/2022

Exercise of options

150,000


0.54


80,547









Balance at 31 December 2022

59,673,291




57,835,768


 

 






During the year ended 30 June 2022

 

 

 

 

 

 

Date

Details

Shares

 

Value

(cents)

 

$









Balance at 30 June 2021

56,221,871




52,640,345

24/09/2021

Conversion of Directors' Loan

3,301,420


1.549


5,114,876


Balance at 30 June 2022

59,523,291




57,755,221








 

 

 

(b)              Movements in options

On 19 December 2022, 150,000 options were exercised at an option price of 30p. Otherwise, there have been no movements in options since the prior reporting year ended 30 June 2022, other than the share-based payment changes disclosed in Note 13.

 

The options outstanding at 31 December 2022, excluding options issued to key management and senior managers as share-based payment, are as follows:

 

Number



Exercise Price


Expiry Date

Option Reserve









$



30,000



$8.00


31 March 2022

134,769



 






Details of options issued to key management and senior managers are set out in Note 12.

 

NOTE 13 - SHARE-BASED PAYMENTS

 

The rules of the Enterprise Management Incentive Scheme of the Company provide that the Board may at its discretion grant Enterprise Management Incentive Scheme options to employees of the Company and its controlled entities to acquire ordinary shares in the Company at such exercise price and in such numbers as it considers appropriate and to attach such performance conditions to the vesting of such options as it considers appropriate, subject to compliance with the provisions of Schedule 5 of the United Kingdom Income Tax (Earnings and Pensions) Act 2003 and other applicable legislation.

 

No new options were granted or cancelled in the period.

 

 

Charges in respect of share-based payment have been recognised as follows:                           

 


Charged to profit or loss

 

  Charged to mine development

 

Increase in share-based payment reserve


$

 

$

 

$

Cumulative to 30 June 2021

631,873


268,933


900,806

During year ended 30 June 2022

268,637


-


268,637

Cumulative to 30 June 2022

900,510


268,933


1,169,443

During period ended 31 December 2022

111,269


-


111,269

Cumulative to 31 December 2022

1,011,779


268,933


1,280,712

 

 






 

 

NOTE 14 - RELATED PARTIES

 

Basic remuneration of £177,375 per annum is payable in terms of the service agreement and Mr Phillip Day shall be eligible to join the Group pension fund. The annual leave entitlement of Mr Phillip Day amounts to 18.75 days plus a pro rata number of public holidays in Scotland. The service agreement further provides that Mr Phillip Day shall be reimbursed for the reasonable cost of necessary travel incurred in connection with visits to the operations of the Group in Scotland, including flights to and from Switzerland and car hire in the United Kingdom, and that the Group shall provide accommodation to Mr Phillip Day while he is visiting the operations.

 

The agreement for the rendering of consultancy services with PAW Consulting Services GmbH provides for a consultancy service fee of £4,479 per month, excluding VAT, to be payable net of any amounts in respect of income tax and national insurance contributions required to be deducted by law. In addition, the Group shall reimburse all reasonable expenses incurred by PAW Consulting Services GmbH in rendering the consultancy services.

 

Sean Duffy is remunerated in terms of a contract of employment which provides for a fixed salary of £155,000 per annum, as well as an annual leave entitlement of 18.75 days plus a pro rata number of public holidays in Scotland and eligibility to join the Group pension fund.

 

Each of the Directors is a related party.

 

Mr Richard Barker provides the services of Company Secretary through his service company Barston Corporation Pty Ltd. The services as Company Secretary provided by Mr Barker are charged at commercial, arm's length rates.

 

NOTE 15 - COMMITMENTS FOR EXPENDITURE

 

Amounts payable to Loch Lomond and the Trossachs Countryside Trust

 

The following amounts are payable to the Loch Lomond and the Trossachs Countryside Trust in terms of Clause 18 of the Section 75 Agreement entered into with the owner of the land on which the Cononish mine is situated, the Loch Lomond and the Trossachs National Park Authority and the Crown Estate Scotland in respect of the development of the Cononish mine:


$

Not later than one year

88,810

Later than 1 year but not later than 2 years

88,810

Later than 2 years but not later than 5 years

266,430

Later than 5 years

88,810


532,860

 

Other than the commitments disclosed above, there have been no material changes during the period to the commitments disclosed in the annual report for the period ended 31 December 2022.

 

 

 

NOTE 16 - CONTINGENT LIABILITIES

 

There have been no material changes during the period to the contingent liabilities disclosed in the annual report for the year ended 30 June 2022.

 

 

NOTE 17 - SEGMENT INFORMATION

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.  The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of Scotgold Resources Limited.

 

The comparative information disclosed is for the period ended 31 December 2021 in the case of segment loss, interest expense and depreciation and for the year ended 30 June 2022 in the case of balances of and movements in segment assets and liabilities.

 

Six months ended 31 December 2022









 










 

Scotland


Scotland


Australia


Other


Total


Mining


Exploration








$


$


$


$


$











Segment income

9,484,289


-


-


-


9,484,289

Segment loss

(7,470,977)


-


(1,888,804)


-


(9,359,781)











Segment assets

2,047,791


107,561


106,739


1,151


2,263,242

Segment non-current assets

42,562,214


3,209,040


272,670


-


46,043,924

Segment liabilities

(30,618,758)


(226,091)


(227,795)


(9,746)


(31,082,390)

Segment non-current liabilities

(792,176)


-


-


-


(792,176)











Included in segment result:




















Interest expense

1,010,577


-


-


-


1,010,577

Depreciation

3,200,264


-


-


-


3,200,264

 

 

 

 

Comparative figures










 

Scotland


Scotland


Australia


Other


Total

For the six months ended 31 December 2021:

Mining

$


Exploration

$


 

$


 

$


 

$

 










Segment other income

6,431,437


33






6,431,470

Segment loss

5,171,720


6,315


394,937


-


5,572,972











As at 30 June 2022:




















Segment assets

6,999,511


91,226


106,739


1,063


7,198,539

Segment non-current assets

42,727,597


3,051,622


272,669


-


46,051,888

Segment liabilities

(5,855,231)


182,854


227,795


9,668


(6,275,548)

Segment non-current liabilities

(23,044,179)


(4,232)


-


-


(23,048,411)











Included in segment result for the six months ended 31 December 2021:




















Interest expense

808,213


455


-


-


808,668

Depreciation

1,399,608


4,062


-


-


1,403,670











 

NOTE 18 - MATTERS SUBSEQUENT TO THE END OF PERIOD

 

On 16 January, the Group issued 7,428,460 new Ordinary Shares totalling gross proceeds of £3.0 million (US$3.6 million) at a price of 40p per share, These shares were issued after the successful equity Placing, Subscription and Retail Offer.

 

Seven Directors of Scotgold and a significant shareholder participated in the Subscription for a total of 1,435,000 Subscription Shares with a total value of £574,000 (US$700,280).

 

Further to the Capital Raising, Bridge Barn Limited, a company owned and controlled by Mr Nathaniel le Roux and provider of debt funding to the Company, has agreed the option to defer a total of £2.5 million capital repayments due by the Company in calendar year 2023 by up to 9 months from the due date.

 

Apart from the above, no other matter or circumstance has arisen since 31 December 2022 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial periods.

 

 

 

DIRECTORS OPINION

 

1.   In the opinion of the Directors of Scotgold Resources Limited (the 'Company'):

a.   the accompanying financial statements and notes are in accordance with the Corporations Act 2001 including:

i. giving a true and fair view of the consolidated entity's financial position as at 31 December 2022 and of its performance for the half-year then ended; and

ii. complying with Australian Accounting Standards, the Corporations Regulations 2001, professional reporting requirements and other mandatory requirements,

b.   there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable,

c.   the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board,

 

This declaration is made in accordance with a resolution of the Board of Directors made pursuant to Section 303(5) of the Corporations Act 2001

 

 

 

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,     

PHILLIP DAY - Managing Director and CEO

 

Dated at Tyndrum, this 29th day of March, 2023

 

 

 

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