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DAILY NEWS Dec 29, 2011 7:18 AM - 0 comments

ScotGold's Cononish ages nicely in the barrel

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By: Matthew Allan
2011-12-29

Tyndrum, a tiny village of around 160 people in Scotland's Grampian Highlands, sits at the northern edge of the Loch Lomond and Trossachs National Park on the side of a highway.

There is nothing particularly special about the village. Like many rural communities in Scotland, and indeed many rural communities throughout the world, it suffers from a lack of substantial industry and has fallen on increasingly hard times. Aside from a few seldom-used walking trails in the area and some sheep farming, Tyndrum now mostly serves as a rest stop for travelers from Glasgow, 90 km southeast, on their way to someplace better.

In the past two years, however, the village has found itself at the centre of a traditional argument between environmental conservationists and a mining company, and has emerged as a welcome symbol for the way forward.

Tyndrum Gold

Since 2007, Australia-based junior gold explorer ScotGold (SGZ-L, SGZ-A) has been advancing a small underground gold project in the hills surrounding Tyndrum. Named Cononish, the high-grade gold-silver deposit was first discovered nearly 30 years ago after local sheep farmer John Burton found gold there while panning in a nearby stream. Ennex International and Caledonia Mining subsequently advanced the project nearly to production in the 1980s and 1990s, developing an underground adit roughly 1,280 metres before low metals prices made the project uneconomic.

According to a recent BBC documentary on the town filmed and directed by Richard Macer, Burton is still waiting for the project to bring prosperity to the town, like most of the other residents. This time, they hope things will turn out differently. Should the project go ahead, the town council has grand plans to build a state-of-the-art mining interpretation centre, attracting visitors interested in seeing Scotland's only gold mine. Hoping to cash in on the coming action, one member has even crafted a limited edition whiskey from the area, a 15-year-old speyside single malt called Tyndrum Gold.

Standing in the way of the proposed mine, however, is the Loch Lomond and Trossachs National Park Authority, which in October 2010 refused to approve an initial application from ScotGold to reopen the mine. Created along with the national park seven years ago, the park authority cited the visual impact of the 830,000-tonne tailings facility as the "main showstopper" behind its refusal.

"Will the mine rejuvenate a poor rural community," asks the BBC's Macer, "or will it devastate a beautiful tranquil glen?"

A question of stakeholders

The Tyndrum conundrum is in many ways conventional. While the vast majority of townsfolk support the mine, various groups of people from outside the community are fervently against it, such as the environmental conservation group Friends of Loch Lomond.

They say ScotGold's proposed five-storey-high tailings wall will blight the pristine landscape in an area that has already been designated for protection. While the mine reclamation plan notes there will eventually be vegetation covering it, the environmentalists argue the structure will remain unnatural, retaining a linear, engineered shape in an area of gently rolling hills. 

ScotGold contends opening the mine will bring many economic benefits to the people of Tyndrum, creating around 52 full-time jobs, increasing tax revenues and dramatically upping spending on local businesses and supplies. With a preliminary initial capital cost of around £12.5 million, the company hopes to produce 21,000 oz. gold and 80,000 oz. silver annually from the mine for 8 years, at operating costs of approximately £229 per oz. gold after byproduct credits (US$350 per oz.).

ScotGold's plan is to extract ore from the Cononish gold-silver vein, a steeply dipping quartz vein up to 8.3 metres wide but with an average width of about 2 metres. The vein already has a known vertical dimension of about 500 metres and has been traced along strike for over 1 km, with about 590 metres of the existing underground adit driven on the vein.

Balance

While the Loch Lomond Park Authority has a duty to help better the lives of the villagers living within its boundaries, its first aim is to safeguard the long-term conservation of the natural wilderness of the park. It must strike the right balance between meeting the needs of its villagers and preserving the natural heritage of the park.

Last year, the Park Authority's trustees rejected ScotGold's application by 12 votes to 10, arguing the park's long-term conservation must be given greater weight than the potential short-term economic benefits of the Cononish mine.

After the decision, ScotGold began work on a new mine plan, this time in close collaboration with the park authority to minimize the tailings footprint. A smaller tailings facility would mean a smaller mine, but if it remains feasible a smaller mine is better than no mine at all.

The company was able to reduce the tailings area to 400,000 tonnes from 830,000 tonnes, dramatically reducing the visual footprint of the dam while also increasing reforestation and landscaping plans. It reapplied for permission to open the mine in early 2011, and after receiving the blessing of the Park Authority's planning department (who noted the park would likely have a better glen after closure than what they started with), the park's trustees gave ScotGold the go-ahead this October. The vote was unanimous.

Looking ahead

Now, ScotGold is working with AMC Consultants to finalize a project development study in advance of financing arrangements. The company expects to complete the study in first-quarter 2012. 

Should all go to plan, ScotGold believes production could commence as early as mid-2013 at Cononish, bringing Scotland its only operating gold mine. There may also be the potential to develop a small jewellery manufacturing industry based on gold and silver from the mine. The appeal of a regional gold brand, such as 'Scottish gold,' has had great success in nearby Wales.

Shares of ScotGold currently trade near their 52-week low, at 4.5 pence in London and 6.5¢ in Australia. The company has 189 million shares outstanding.



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