Some investors may find gold alluring but would prefer to keep their cash close to home, supporting businesses and fostering employment on these shores. Scotgold is an intriguing option for anyone falling into this bracket.
The company is just weeks away from commercial gold production at the Cononish mine, located in the Loch Lomond and Trossachs National Park.
The mine is in place, the processing plant has been built and production will officially begin on November 30, with around 10,000 ounces of gold forecast for 2021.
Looking ahead: Scotgold recently raised £3million on the stock market so it can expand more quickly
Mining for gold in the middle of a national park is far from easy and Scotgold has spent years working with environmentalists and planning authorities to ensure that its operations will not blight the landscape.
Chief executive Richard Gray experienced further delays this year too, as a particularly wet Scottish winter was followed almost immediately by a stringent lockdown.
Now, however, the company is set fair. Local communities are on board, ecological concerns have been appeased and production is starting, as the gold price approaches record highs.
The timing is fortuitous, so much so that Scotgold recently raised £3million on the stock market so it can expand more quickly over the next couple of years, more than doubling production to 23,000 ounces annually by 2022.
Gray is also investing in exploration activities. Scotgold has mining rights over more than 700,000 acres of land stretching across the centre of Scotland.
Early indications suggest that considerably more gold could be found along this terrain, enhancing Scotgold’s long-term production.
In the near term, prospects are bright. Scotgold will export three quarters of its gold as concentrate to be refined overseas but the rest is smelted on site and refined as Scottish gold.
Edinburgh-based jewellery firm Hamilton & Inches and Orkney designer Sheila Fleet have both worked with Scotgold in the past and are keen to take as much Scottish gold as they can, around 2,500 ounces next year.
This will be turned into premium jewellery, with owners knowing that it contains gold produced in Scotland, according to the highest ethical and environmental standards.
Depending on demand – and future production – Scotgold may gradually refine more of its gold locally, possibly at an industrial hub in Central Scotland, such as Grangemouth.
Brokers SP Angel expect sales of around £9.6million next year, soaring to £22million in 2022. Costs are among the lowest in the industry so Scotgold is likely to be highly profitable, with profits of £3million forecast for 2021 tripling to £9million the following year.
Midas verdict: Midas recommended Scotgold a year ago, when the shares were 54p. They have more than doubled since then, to £1.19, as commercial production has moved ever closer. At this level, cautious investors may choose to sell a chunk of stock and bank some profit.
But selling out completely would seem wrong. This is a rare British mining success story, which should deliver strong growth over the coming years. New investors, with a patriotic bent, may want to tuck a few shares away even after the recent strong performance.
Traded on: AIM Ticker: SGZ Contact: scotgoldresources.com or 01838 400 306