MINING group Scotgold has reaffirmed its commitment to the Cononish gold and silver project in Argyll after a new feasibility study increased the mine’s value, and lowered peak funding forecasts.

A new strategy incorporates a phased output plan as part of series of measures chosen after the group struggled to secure a funding package to satisfy shareholders.

Scotgold told investors that the project’s total earnings before interest, tax, depreciation and amortisation (EBITDA) had increased to £100 million from £67m with peak funding reducing to £7.4m from £10.4m as a result of the new strategy.

But the changes mean the group has to reapply for planning permission, which requires an increase in working capital. This will come by way of a £1m loan from its chairman, Nat le Roux – which includes repayment of an existing £300,000 loan facility.

The new strategy resulted from an updated bankable feasibility study (BFS), which has led Scotgold to choose to phase the development schedule and change its planned storage solution for waste rock.

The changes will also result in improved pre-tax net present value of £43m, up from previous forecasts of £23m.

Scotgold said a phased project scenario was now the most viable option in the current economic climate. Conditional on planning consent and a funding agreement, the group will initially mine 3,000 tonnes per month from early 2019 with proceeds used to build-up output to 6,000 tonnes per months by the third quarter of 2021.

Chief executive Richard Gray, said: “With our improved economic returns and short-term funding secured which avoids undue dilution for the existing shareholders, we now look forward to securing an attractive full financing package and subject to permitting, putting our mine into production at the earliest opportunity”.

The company anticipates that the planning process with Loch Lomond and the Trossachs national park will be complete by the end of this year, with the project beginning in Q1 2018.

In November, the group sold at auction the first gold mined from the site, as part of its ongoing bulk processing trial. The average price accepted was £4,557.9 per ounce, a premium of 378 per cent over the spot price at the time of £953.

As part of the scenarios considered by Bara Consulting, which carried out the study, the assumed gold price is $1,150 per ounce, revised up from $1,100 in the original 2015 bankable feasibility study.

The amount of gold expected to be sold from Cononish is estimated at 175,762 ounces.

The lifetime of the mine has been extended to ten years as a result of the phased plan, with full output expected to come two and a half years after half output commences.

The plan also changes the tailings storage facility – where the mined ore is stored on site – to a less environmentally evasive dry stack system. This reduces capital expenditure, but will increased operating costs.

Mr le Roux said: “The revised development plan now completed significantly lowers the financing hurdle and improves the economic returns, with significant further enhancement from the current sterling price of gold.”