Scotgold Resources said results from the project development study on its 100% owned Cononish Gold and Silver project in the Grampian Highlands in the UK has confirmed the project is very cash generative with £65.9m cashflow over the life of the project.

The study was conducted by Australian Mining Consultants with inputs from Scotgold’s processing, tailings and environmental consultants and will allow the company to move to development before the year end.

The project has good potential with £23.4m pre tax free cashflow with a pre tax Net Present Value10 of £10.6M and a pre tax Internal rate of return of 25.4% at base case prices including payback of initial capital after 18 months of the commencement of production.

Scotgold director and CEO Chris Sangster said at base case gold price assumptions, project financials are robust with more than acceptable returns.

"The project is highly leveraged to gold prices and at current prices is highly cash generative with over £65M in pre tax free cashflow over the life of mine," added Chris.

Scotgold stated the project’s base case average operating costs are estimated at $575 per ounce Au equivalent while the annualized processing plant recovery is found at 21,000 ozs Au and 74,700 ozs Ag to concentrate and doré.

The company intends to mine at an annual rate of 72,000 tons at Cononish, where about 25% of gold will be recovered by gravity for smelting on site to a doré bar with the rest from a sulphide rich concentrate which will be treated through a third party facility remote from site.

Overall, the processing plant is expected to recover 93% Au and 90% Ag to doré and concentrate and recovered production at 21,000 ounces of gold and 74,700 ounces of silver annually.

Total recovered production to doré and concentrate over the project life is found at 131,600 ounces of gold and 465,000 ounces of silver.

The company plans to begin project development in the fourth quarter of this year with the first production of gold in the fourth quarter of 2013.