Final Results

RNS Number : 5366S

Scotgold Resources Ltd

13 September 2010

 



13 September 2010

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

Preliminary Financial Report

for the Year Ended 30 June 2010

Scotgold is a gold exploration and development company with projects located in the Grampian region of central Scotland. The Cononish gold and silver deposit forms the core economic basis of the Company's Grampian Project.

Highlights:

·      Snowden update:  new drilling and review of data lead to an increased resource estimate for the Cononish gold and silver project. Total metal inventory now stands at 163,000oz Au and 596,000 oz Ag

·      Infill and extension drilling (at the eastern extension) at Cononish continues to return encouraging values

·      Breccia hosted gold and silver mineralisation discovered at Beinn Udlaidh and exploration target defined

·      Encouraging results from vein systems at Beinn Udlaidh and Auch

Post balance sheet event:

·      On 18 August 2010 the Company advised that the Loch Lomond and The Trossachs National Parks Board had voted to refuse the Company's application for planning permission for the establishment of the proposed gold and silver mine at Cononish

·      The Company is considering its options to advance the project which may include appeal to the Scottish Ministers.

Chris Sangster, Scotgold's Chief Executive, commented:

"The Company is disappointed at the decision by the Parks Board given the high degree of interaction throughout the planning process and the very narrow final majority. Scotgold is currently considering its options in order to further progress Cononish.

"Exploration continues at our prospects outside the boundaries of the National Park with highly encouraging results."

For further information:

United Kingdom:

Scotgold Resources Limited	Westhouse Securities Limited	Bankside Consultants
Chris Sangster (CEO)	Richard Baty / Petre Norton	Simon Rothschild / Oliver Winters
Tel:         [phone]	Tel:         [phone]	Tel:       [phone]

Australia:

Scotgold Resources Limited	Professional Public Relations
Shane Sadleir (Non-Executive Director)	Karen Oswald
Tel:         [phone] Mobile: [phone]	Tel:         [phone] Mobile:  [phone]

Review of Operations

CONONISH GOLD AND SILVER PROJECT PROGRESS

RESOURCES AND EXPLORATION

In May 2008, Scotgold released the first Mineral Resource Statement on the Cononish gold-silver deposit reported in accordance with the JORC code, prepared by Snowden Mining Industry Consultants ("Snowden"). The Measured, Indicated and Inferred Mineral Resource categories totalled 154,000 ounces of gold and 589,000 ounces of silver (using 3.5 g/t gold cut-off).

Snowden subsequently noted "based on our experience of the Cononish vein system, we believe that there is an Exploration Target around the mine of between 0.5 Mt to 1.0 Mt at a grade of between 10 g/t Au to 15 g/t Au for up to 320,000 oz Au. Much of this potential is based on the along strike and down dip extensions of the Cononish vein, but there are indications that other reefs are present in the area too. At this stage, such figures are highly conceptual and there is no guarantee that further exploration will define additional resources."

During 2009, the Company identified extensive additional, high grade gold mineralisation in and around the Cononish gold and silver project, following a thorough search of historic data generated by previous exploration companies.

The zones of mineralisation lay outside the envelope of the project's current JORC Resources and included:

·      30.5 g/t Au and 22.9 g/t Ag (weighted average) in a 1.59 m quartz vein exposed over 12 metres within existing adit,

·      73.1 g/t Au over 1.77 metres in quartz vein intersected in diamond drilling,

·      16.1 g/t Au over 2.1 m in trench in quartz vein at surface, and  

·      55 g/t Au in grab sample of quartz vein at surface.

As a result of these further investigations and exploration by Scotgold during 2008 - 2009, Snowden was asked in late 2009 to undertake an update on the Cononish resource.

The revised resource for Cononish is shown below.

Cononish Main Vein Gold Mineral Resources (reported at a 3.5 g/t Au cut-off).

Reported using the 2004 JORC Code (JORC, 2004). Tonnages and contained ounces rounded to the nearest 1,000 t or 1,000 oz. Grade rounded to the nearest 0.1 g/t Au. The Inferred Resource grade is reported with a grade range to indicate the likely upside due to the information effect.

Classification	Tonnes (t)	Grade (g/t) Gold	Ounces (oz) Gold
Measured	53,000	17.9	31,000
Indicated	73,000	10.2	24,000
Inferred	311,000	10.8 (10-16)	108,000

Scotgold Note:Incorporating the grade range, the Inferred Mineral Resource is estimated to lie between 100,000 oz Au and 160,000 oz Au. It should be noted that any upside may not exist or it may only be present in a portion of the resource.

Cononish Main Vein Silver Mineral Resources (reported at a 3.5 g/t Au cut-off).

Reported using the 2004 JORC Code (JORC, 2004). Tonnages and contained ounces rounded to the nearest 1,000 t or 1,000 oz.

Classification	Tonnes (t)	Grade (g/t) Silver	Ounces (oz)  Silver
Measured	53,000	75.0	128,000
Indicated	73,000	43.1	101,000
Inferred	285,000	40.1	367,000

This update gives a total metal inventory of 163,000 oz Au and 596,000 oz Ag.

Snowden notes that there is resource potential in the eastern adit zone and that the estimation of additional Mineral Resources are likely once further drilling is complete.

Scotgold resumed drilling at the Cononish gold and silver project in Scotland in October 2009. The objectives of the program were to:

·      infill a portion of the existing Inferred Mineral Resource at Cononish as a part of the Company's ongoing program to advance  the project to production; and

·      test high grade gold targets which lie within the recently identified eastern extension of the Cononish mineralisation and outside  the envelope of the previously existing Mineral Resource.

The drilling program also targeted mineralisation outside the previously defined resource envelope, specifically the potential down dip continuation of the mineralisation encountered in trenches (up to 16.12 g/t Au over 2.10 metres) surface drill holes (up to 73.10 g/t Au over 1.77 metres) and underground holes (up to 12.35 g/t Au over 1.49 metres).

A program of short AQ size diamond drill holes was also planned from within the Cononish adit to test for possible extensions to the identified mineralisation in the eastern part of the adit outside the existing resource, in particular a 1.6 metre-wide quartz vein where high grades (up to 119.9 g/t gold and 97.2g/t silver) have been reported from historic assays and also possible 'off adit' intersections on the Cononish vein.

The first phase of the program was completed recently and results are shown in Tables 1 and 2 below:

Table 1 Infill Drilling Results

Hole	From(m)	To (m)	Downhole intersection (m)	Est. true thickness (m)	Au g/t	Ag g/t	Comment
Con 09 01	103.95	106.00	2.05	1.98	9.84	41.6	Main vein intersection
Con 10 02	103.00	104.50	1.50	1.41	15.82	52.5	Main vein intersection
Con 10 02a	126.90	127.25	0.35	0.31	0.39	42.4	Main vein Sheared, dyke
Con 10 05	67.24	83.75	11.04	6.16	5.09	22.8	Mineralised intersection
Including	66.24	70.46	4.22	2.35	2.55	7.2	Upper vein
And	79.15	83.00	3.85	2.15	14.82	55.5	Main vein intersection

The drilling into the main vein within the Inferred Resource zone above the 400 level continues to encounter high grades and excellent widths of gold and silver mineralisation in most cases.

 

Table 2 Eastern Extension Results

Hole	From (m)	To (m)	Downhole intersection (m)	Est. true thickness (m)	Au g/t	Ag g/t	Comment
EA 01	49.30	51.60	2.30	1.99	2.68	1.8	Main vein intersection
	60.40	64.00	3.60	2.25	7.84	12.2
EA 03 inc.	60.40	60.65	0.25	0.18	28.35	16.6	Main vein intersection
	63.00	64.00	1.00	0.72	15.67	33.8
EA 03	46.73	47.30	0.57	0.52	3.67	4.8	Main vein intersection
EA 04	62.80	65.00	2.20	1.58	0.94	1.4	Out of payshoot?
EA 05	112.6	113.15	0.55	0.25	0.54	0.5	Out of payshoot?
EA 06	74.92	76.00	1.08	0.68	1.24	<0.5	Out of payshoot?
EA UG 03	2.50	3.00	0.50		5.16	3.4	'Adit' vein
EA UG 02	0.50	1.00	0.50		7.50	5.4	'Adit' vein

Results from the eastern extension indicate a westerly plunging payshoot extending over 300 metres beyond the eastern boundary of the previously defined JORC resource, delineated by surface holes EA 01, 02 and 03, underneath the recently announced extension of the resource to the east. Further drilling to define this area is hampered by extreme topography and will be followed up by underground drilling during mine development.

Underground holes EA UG 03 and 02 were drilled to test the possible extension of the high grade vein ( the 'adit' vein) encountered in the adit. The results indicate vein continuity with encouraging values and warrants further investigation at a later stage.

Scotgold believes that there is potential to define further resources close to the Cononish mine, subject to appropriate studies. The extensive gold-in-soil anomalies, mineralisation associated with outcrops and trenching and the large, unexplained geophysical anomaly clearly warrants further follow-up.

PLANNING

The Cononish gold and silver project was granted planning permission in 1996 for the establishment of an underground mine, processing facility, tailings management facility and associated infrastructure. The permission was valid for ten years from the commencement of the development (deemed to have started in April 1997).

In April 2007, prior to expiry of the permission, Scotgold submitted an application for extension. Since April 2007, the Company has been engaged in work to update the technical aspects of the proposed development and assess their impacts in relation to new legislation and land designation relating to the site.

Since April 2007, Scotgold held a number of meetings with the Planning Authority (Loch Lomond and The Trossachs National Park Authority) and in July 2009 submitted a 'scoping document' to the Planning Authority as commencement of the Planning Application process.

As part of the 'pre-application consultation' process under Scottish planning law, the Company subsequently held three 'public' meetings. A presentation was made to the local Community Council and Strathfillan Community Development Trust and two public 'open days' were held in Tyndrum, which is the nearest town to the proposed mine.

A substantial proportion of the community attended the open days and public support for the project has been most encouraging. This support has been reflected in reporting on the Cononish project by the mainstream UK news media over recent months.

Scotgold lodged their application for revision and extension to their existing planning permission on 25 January 2010. The application was subsequently validated and the parties signed a non-legally binding processing agreement which indicated a decision date of 7 June 2010, with final notices due to be issued shortly thereafter.

The application was prepared with the assistance of Scotgold's planning and environmental consultants, Dalgleish Associates. Dalgleish Associates is a well established consultancy based in Scotland, specialising in resource (minerals and renewable energy) projects in the United Kingdom with considerable expertise in the Scottish system.

Specialised technical input regarding the application was provided by Scotgold's tailings consultants AMEC Earth and Environmental (UK), Cantab Consulting (as competent person for 'sign off' of the tailings management facility), Vibrock Ltd (ground vibration and noise consultants) and Rathmell (archaeological studies).

The application envisages a development along the same scales as previously proposed, including the establishment of an underground mine with associated processing and tailings management facilities and infrastructure associated with the project and concurrent restoration of the site.

Scotgold believes the application contains many improvements to the previously permitted development and is in line with currently accepted 'best practice'.

In response to EU Directive 2006/21/EC regarding the management of waste from extractive industries (and subsequent to Scotgold's application), the Scottish Government adopted the Management of Extractive Waste (Scotland) Regulations 2010 and issued draft guidance documents on the application of these regulations. The guidelines require the submission of a 'Waste Management Plan' and for it to be notified publicly by the Planning Authority.

In addition, responses to the application were received from statutory consultees including Scottish Natural Heritage and Scottish Environmental Protection Agency, who indicated 'holding' objections pending provision of further information and clarification on a number of issues. The Planning Authority also requested clarification and further information regarding certain aspects of the application, notably in relation to the socio-economic impacts of the development.

A number of meetings were held with the relevant bodies in order to provide such information and clarification. The Company submitted the further requisite documentation relating to all requests for further information and clarification to the Planning Authority on 7th June.

Under the Town and Country Planning Act (Scotland) 1997 and the Environmental Impact Assessment (Scotland) Regulations 1999, it was deemed that this further documentation, in addition to the Waste Management Plan, was required to be re-advertised for a period of 28 days.

On 18 August 2010 the Company advised that the Loch Lomond and The Trossachs National Parks Board had voted to refuse the Company's application for planning permission for the establishment of the proposed gold and silver mine at Cononish.

At the date of this report the company is considering its options in relation to this refusal but is likely to appeal to the Scottish Ministers. Any appeal would need to be lodged within three months and Scotgold will make a further release to advise its intentions.

Scotgold is extremely disappointed at the decision, given the ongoing interaction with the Parks Board over a substantial time frame though are encouraged that the decision was by a very narrow majority. It is considered that the proposal has significant merit in the local, regional and national context and the proposed development would have minimal environmental impact.

Scotgold remains committed to exploration at its other prospects located outside the National Park's boundaries (85% of our current license areas are outside the National Park) at Beinn Udlaidh and other areas.

A copy of Scotgold's representation, which was made to the Loch Lomond and The Trossachs National Parks Board prior to the vote, is available at the Company's website.

STUDY UPDATE

In June 2010, Scotgold commissioned Australian Mining Consultants (AMC) to update critical components of the Cononish Scoping study.

The study will enable the Company to finalise development options for the project leading to a production decision. Subject to certain project milestones including planning permission and financing for the project, Scotgold anticipates first gold production in late 2011.

AMC will review and update the mining development and production schedule and capital and operating costs (with a target +/-15% accuracy) based on recent additions to the resource at Cononish (see ASX Release 5th February 2010 - Cononish Drilling and JORC Update).

A summary from the 2009 AMC scoping study can be found on the company’s website
 www.scotgoldresources.com/assets/pdf/asx/Scoping_Study_feb09.pdf - Cononish Scoping Study confirms economic viability – 17th February 2009). The study estimated annualised production of 21,000 ozs of gold and 80,000 ozs of silver for a six and a half year production life. Returns using the then spot price of gold (£662 / oz) gave an NPV of £25.6M and an IRR of 74%. Operating costs were estimated to be £229 /oz.

In conjunction with the study update, following a detailed metallurgical testwork programme conducted at AMMTEC Laboratories in Perth (Australia), Scotgold commissioned Gekko Systems Pty Ltd (Gekko) to complete a Definitive Costing Study (+/- 10% accuracy) for the Cononish project processing plant.

Scotgold recently completed a further phase of metallurgical testwork to optimize and finalise the plant flowsheet. The testwork examined various combinations of flotation and gravity / flotation circuits to maximise gold recovery to 'free gold' (recovered on site) and overall recovery. All testwork indicated a high amenability to the proposed flowsheet arrangements with recoveries from all testwork in excess of 90% for gold.

Discussions with Gekko and Scotgold's metallurgical consultant finalised the flowsheet for the purposes of the study.

The flowsheet encompasses two stage crushing, milling followed by a gravity recovery section and subsequent flotation. Concentrates from both the gravity and flotation process will be combined and reground to maximize recovery of 'free gold' and to reduce the mass of concentrate required to be transported for further processing.

A final sample is being processed to confirm recoveries to be used in the AMC study.

As part of the planning application, AMEC Earth and Environmental (AMEC) completed a feasibility level design for the Tailings Management Facility for the Cononish project. The design provides for a facility to retain 0.8Mt of tailings to cater for possible future extensions to resources at Cononish and is designed in accordance with all applicable EU and UK legislation.

GRAMPIAN GOLD PROJECT PROGRESS

REGIONAL EXPLORATION

When Scotgold acquired the Cononish Gold and Silver Project and the greater Grampian Gold Project area in 2007, the Company also obtained a large volume of paper-based historic exploration data generated by previous exploration companies and this data has now been captured electronically into a Geographic Information System (GIS) database.

The Scotgold GIS database includes a broad range of exploration data consisting of rock and soil sample geochemistry, induced polarization (IP), very low frequency (VLF), magnetic and gravity geophysical data, digital geology, mineral occurrences and other data which can be viewed in conjunction with topographic and cartographic information (contours, towns, roads, property boundaries etc).

Specific historical data captured for the Grampian Gold Project GIS includes:

·      3,189 rock chip samples (boulder and outcrop)

·      11,459 soil samples (surface and deep overburden) 

·      1,923 stream sediment samples 

·      2,184 geophysical data points 

Most of the historic data is centred around the town of Tyndrum and it extends over an area of 7 km by 37 km, along the Tyndrum Glen Fyne Fault.

A distinction is made between rock chips derived from outcrop and those from boulders which may be some distance from their source. Glacial deposits are known to occur in the area, which have the potential to transport boulders over large distances.

Scotgold's preliminary analysis of the historic data indicates that there are many high grade outcrop and boulder samples within the Company's licence areas, as shown in the table below:

Grade category	Number of outcrop samples	Number of boulder samples
Samples greater than 100 g/t gold	3	10
Samples greater than 10 g/t gold	35	79
Samples greater than 1 g/t gold	95	166

Scotgold subsequently embarked on a comprehensive follow up program to validate this data and to further extend the coverage over other parts of the Grampian Gold Project, including an extensive rock chip and mapping program in the field.

Amongst the highlights of the verification program were high grade outcrops identified at Halladay's Vein (217.2 and 196.8 g/t gold and > 200 g/t silver) and Coire nan Sionnach (51.2 g/t gold and 14.4 g/t silver).

The results of the program show little difference between the gold and silver assays of the 367 new outcrop samples recently collected when compared to their equivalent datasets within the historic database, thus confirming its reliability for use in regional exploration by Scotgold.

The frequency of high grade outcrops in the new and historic datasets, and their alignment with regional structural features, are similar to that at the Cononish Project. This pattern supports Scotgold's contention that its Grampian Gold Project has the potential to host a number of other 'Cononish style' gold deposits, in addition to other styles of mineralization such as the breccia pipes at Beinn Udlaidh.

Table 3 shows an overall comparison of the 2009 outcrop rock chip sampling results with the equivalent historic database data. The data indicates that there is no overall difference between the new and old datasets.

Grade category	Historic Data No. of outcrop samples (%)	Scotgold Data No. of outcrop samples (%)
Total samples	728	367
Samples greater than 100 g/t gold	3 (0.4%)	2 (0.5%)
Samples greater than 5 g/t gold	55 (7.5%)	17 (6.1%)
Samples greater than 1 g/t gold	72 (9.9%)	47 (10.3%)

The results provide confirmation of the significant number of high grade outcrop gold values and the prospectivity of the 250 km² "principal zone of interest" which surrounds the Cononish Gold and Silver deposit.

From the historical database, follow up verification sampling and ongoing exploration initiatives, Scotgold identified a number of priority targets for follow up including

·      Beinn Udlaidh breccia hosted mineralistion 

·      Beinn Udlaidh Au Vein 

·      Auch vein systems 

·      'Near Cononish' targets - Kilbridge, Coire nan Sionnach and Halladays vein

BEINN UDLAIDH PROSPECT

BRECCIA HOSTED GOLD SILVER MINERALSIATION

In September 2009, Scotgold identified significant breccia-hosted gold-silver mineralization at the Beinn Udlaidh prospect in association with a lamprophyre field. The prospect is located five kilometers north northwest of the high grade Cononish Gold and Silver Deposit, highlighting the potential of Beinn Udlaidh prospect to host a large additional gold/silver resource.

Multiple breccia bodies have been mapped in the Beinn Udlaidh prospect area. Previous exploration at Beinn Udlaidh had recorded high grade gold and silver values (up to 359 g/t Au and 2,520 g/t Ag) from float samples.

Initially, Scotgold has drilled a single, short, 12 metre-deep drill hole (BEBULB1) into one of the breccia bodies (BU1) to test its potential to host economic gold-silver mineralization.

The entire length of BEBULB1 was mineralized (>0.1 g/t gold) averaging 12 metres @ 1.45 g/t gold and 8.9 g/t silver. Higher grade results (>0.5 g/t gold) from the drill hole include:

BEBULB1                 1.5 metres @ 2.90g/t gold and 20.2g/t silver from 1.5 metres

2.0 metres @ 2.65g/t gold and 13.6g/t silver from 4 metres

0.5 metres @ 12.3g/t gold and 78.7g/t silver from 9.5 metres

Scotgold considered the initial results are extremely encouraging, given the limited drilling and the number of other breccia bodies which have had no drill testing. BEBULB1 was drilled by Scotgold's man-portable AQ diamond core drill rig which has a limited penetration depth.

Breccia-hosted, precious metal deposits occur throughout the world and are known to host very large resources. Examples in Australia are Kidston (4.5 M oz gold), Mt Leyshon (3.5 M oz gold) and Mt Wright (1 M oz gold) all of which are located in North Queensland. Examples in North America are Golden Sunlight in Wyoming (3.8 M oz gold) and Cripple Creek in Colorado (21 M oz gold) which are associated with lamprophyre fields.

The breccia bodies at Beinn Udlaidh are spatially associated with lamprophyre intrusions which are also commonly observed in many world class goldfields e.g. Yilgarn Block, W.A.; Carlin Trend, Nevada; Superior Province, Canada.

Scotgold undertook a further drilling programme during the last quarter of 2009 to test a number of the identified breccia pipes, a further seven short AQ holes into six of the nineteen breccia pipes identified to date. Assay results are shown in Table 4. The initial 'discovery hole' BEBULB1 into pipe BU1 is also included for reference.

Au g/t	Pipe BU 01		Pipe BU 20		Pipe BU 15		Pipe BU 05		Pipe BU 16		Pipe BU 11		Pipe BU 11		Pipe BU 01
	BU AQ 10		BU AQ 11		BU AQ 15		BU AQ 05		BU AQ 13		BU AQ 11-2		BU AQ 11-1		Ben UL B
Whole intersection	0.21	1.31	0.28	1.30	0.12	0.34	0.13	0.221	0.09	3.47	0.07	0.08	0.02	0.05	1.45	8.91
Over (m)	17		16		16.5		16		16		15.5		15.5		12
Selected	0.26	1.59	0.52	2.60	0.20	0.64	0.21	0.45	0.20	10.49	0.28	0.32	0.07	0.25	1.45	8.91
Over (m)	14		8		7.5		8		5		3		3		12
Best	1.50	8.38	6.99	40.24	0.55	1.24	1.03	<0.5	1.28	49.75	1.06	1.90	0.15	0.50	12.31	78.66
Over (m)	0.5		0.5		0.5		0.5		0.5		0.5		0.5		0.5
Samples	34		32		33		32		32		31		31		24
No samples >0.1g/t Au	23		5		11		13		5		4		2		20
% age anomalous (+0.1g/t Au)	68%		16%		33%		41%		16%		13%		6%		83%
No samples >1.0g/t Au	1		1		0		1		1		1		0		7
Comment	Last 3m in lamprophyre								Hole collared in psammite				Predom. lamprophyre		'Discovery Hole'

Table 4: Summary and analysis of recent AQ drilling results at Beinn Udlaidh

Scotgold considered the high number of anomalous values (>0.1g/t Au) in five of the subsequent holes within the short (in relation to pipe size) interval sampled to be highly encouraging especially given the high grade rock and boulders samples discovered nearby (up to 359 g/t gold and 2,520 g/t silver), the limited drilling and the number of other breccia bodies in the area which have had no drill testing or sampling,.

As a result, Scotgold confirmed an Exploration Target at Beinn Udlaidh of between 0.57 and 5.7 Mt at a grade of between 1 and 2 g/t Au.

Limited drilling to date at the Beinn Udlaidh breccia pipefield has confirmed anomalous gold grades. Economic gold grades encountered in breccia hosted mineralisation may lie in the range of 1.0g/t to 2.0g/t based on similar style occurrences elsewhere in the world. Breccia hosted mineralisation may show zonation and include higher grade zones.

The basis for the tonnage potential is the current mapped area of individual pipe outcrops to a depth of between 10m (observed / drilled) to 100m, using a specific gravity of 2.65 and a 'complexity factor' of 70%. It is noted that breccia pipes can extend to depths greater than 100m.

It should be noted that the potential quantity and grade of the Exploration Target is conceptual in nature, there has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource.

An extensive program of field mapping, litho-geochemical characterisation sampling and halnd held geophysics, additional AQ drilling and initial NQ drilling is planned for the continuing 2010 field season.

BEINN UDLAIDH Au VEIN

Previous explorers had also identified a 900 metre long mineralized vein structure (i.e. Beinn Udlaidh Gold Vein) which is located one to two kilometres east and south of the mapped breccias and a number of diamond core holes were drilled into this structure in 1989 to a vertical depth of approximately 100 metres. The drilling intersected gold and silver mineralization over 500 metres strike, with better results including:

GO 88-01                2.57 metres @ 3.8 g/t gold and 221 g/t silver from 51.97 metres

GO 88-04                1.02 metres @ 2.9 g/t gold and 109 g/t silver from 104.73 metres

GO 88-05                1.47 metres @ 3.3 g/t gold and 21 g/t silver from 102.54 metres

GO 88-09                1.56 metres @ 1.2 g/t gold and 36 g/t silver from 123.30 metres

GO 88-11                0.53 metres @ 2.2 g/t gold and 95 g/t silver from 60.97 metres

Scotgold drilled three 13 to 20 metre-deep, diamond cores holes into the structure to check previous results. All 3 holes intersected significant gold values with better results (>0.5 g/t gold) including:

BUAQ1                    1 metre @ 1.98g/t gold and 83.6g/t silver from 1.5 metres

2 metres @ 12.85g/t gold and >200g/t silver from 4 metres

1 metre @ 2.43g/t gold and 31.3g/t silver from 7 metres

(or 6.5 metres @4.75g/t Au and 87.0g/t Ag)

BUAQ2                    1.5 metres @ 1.93g/t gold and 69.1g/t silver from 18 metres

BUAQ3                    1 metre @ 3.53g/t gold and 135g/t silver from 3.5 metres

0.5 metres @ 1.87g/t gold and 43.4g/t silver from 6 metres

The mineralization has been recorded over 900 metres strike and remains open laterally and at depth.

Exploration continues with a further rock chip sampling program and AQ drilling to test for extensions to the known strike to the vein.

AUCH VEIN SYSTEMS

Confirmatory rock chip sampling indicated the presence of high grade gold veins in the Auch prospect area. Follow up rock chip sampling and AQ drilling is in progress.

Competent Persons Statement:

The information in this report that relates to Exploration Results is based on information compiled by Mr David Catterall, SANCASP .(Pr Sci Nat), MIMMM, GSSA.. Mr Catterall is employed by MSA Geosciences Pty Ltd who provide exploration services to Scotgold Resources Ltd. Mr Catterall has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr Catterall consents to the inclusion in the report of the matters based on his information in the form and context in which it appears

The Information in this report that relates to Mineral Resources is based on resource estimates compiled by EurGeol Dr S C Dominy FAusIMM (CP), FGS (CGeol), FIMMM (CEng), MAIG, General Manager (UK) and Executive Consultant with Snowden based in the London, England Office. Dr. Dominy has sufficient experience that is relevant to the style of deposit under consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore reserves. Dr Dominy consents to the inclusion in the report of the matters based on this information in the form and context in which it appears.

This financial report has been reviewed by HLB Mann Judd and a full copy is available at www.scotgoldresources.com.

All amounts are reported in Australian dollars

STATEMENT OF COMPREHENSIVE INCOME

For The Year Ended 30 June 2010

		CONSOLIDATED
		2010		2009
		$		$
Revenue		46,623		94,378
Administration costs		(391,415)		(221,073)
Depreciation		(46,714)		(74,165)
Employee and consultant costs		(376,029)		(145,374)
Listing and share registry costs		(116,666)		(43,895)
Office and communication costs		(175,746)		(123,986)
Other expenses		(78,231)		(85,184)
LOSS BEFORE INCOME TAX EXPENSE		(1,138,160)		(599,299)
Income tax expense		-		-
NET LOSS FOR THE YEAR		(1,138,160)		(599,299)
Other Comprehensive Income		-		-
Comprehensive loss for the year		(1,138,160)		(599,299)
Basic loss per share (cents per share)		1.18		0.95

STATEMENT OF FINANCIAL POSITION

As at 30 June 2010

		CONSOLIDATED
		2010		2009
		$		$
CURRENT ASSETS
Cash and cash equivalents		1,592,997		695,461
Trade and other receivables		122,548		35,026
Other current assets		6,527		8,308
Total Current Assets		1,722,072		738,795
NON CURRENT ASSETS
Trade and other receivables		87,719		102,564
Plant and equipment		199,573		221,341
Mineral exploration and evaluation		8,917,502		6,331,773
Total Non Current assets		9,204,794		6,655,678
TOTAL ASSETS		10,926,866		7,394,473
CURRENT LIABILITIES
Trade and other payables		298,948		202,085
Other current liabilities		36,189		41,082
Interest bearing liabilities		7,478		13,551
Total Current Liabilities		342,615		256,718
NON CURRENT LIABILITIES
Interest bearing liabilities		-		7,478
Total Non Current Liabilities		-		7,478
TOTAL LIABILITIES		342,615		264,196
NET ASSETS		10,584,251		7,130,277
EQUITY
Issued capital		12,324,019		7,731,885
Reserves		-		602,304
Accumulated losses		(1,739,768)		(1,203,912)
TOTAL EQUITY		10,584,251		7,130,277

STATEMENT OF CHANGES IN EQUITY

For The Year Ended 30 June 2010

	CONSOLIDATED
	Contributed Equity		Accumulated Losses		Option Reserve		Total Equity
Year Ended 30 June 2009	$		$		$		$
Balance 1 July 2008	7,731,885		(604,613)		331,000		7,458,272
Share Placement	-		-		297,992		297,992
Option issue expenses	-		-		(26,688)		(26,688)
Loss for the year	-		(599,299)		-		(599,299)
As at 30 June 2009	7,731,885		(1,203,912)		602,304		7,130,277
Year Ended 30 June 2010
Balance 1 July 2009	7,731,885		(1,203,912)		602,304		7,130,277
Share Placements	5,197,500		-		-		5,197,500
Transfer of option reserve on option expiry	-		602,304		(602,304)		-
Share issue expenses	(605,366)		-		-		(605,366)
Loss for the year	-		(1,138,160)		-		(1,138,160)
As at 30 June 2010	12,324,019		(1,739,768)		-		10,584,251

STATEMENT OF CASH FLOWS

For The Year Ended 30 June 2010

		CONSOLIDATED
		2010		2009
		$		$
CASH FLOWS FROM OPERATING ACTIVITIES
Payment to suppliers		(1,250,511)		(531,323)
Interest income received		46,623		94,378
Net Cash Outflow From Operating Activities		(1,203,888)		(436,945)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration expenditure		(2,446,502)		(2,492,012)
Payment for other fixed assets		(24,946)		(125,949)
Net Cash Outflow From Investing Activities		(2,471,448)		(2,617,961)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares and options		5,197,500		297,992
Share and option issue transaction costs		(605,366)		(26,688)
Hire purchase repayments		(11,948)		(14,429)
Net Cash Inflow From Financing Activities		4,580,186		256,875
Net increase / (decrease) in cash held		904,850		(2,798,031)
Effect of exchange rate fluctuations on cash and cash equivalents		(7,314)		(17,282)
Cash and cash equivalents at the beginning of this financial year		695,461		3,510,774
Cash and cash equivalents at the end of this financial year		1,592,997		695,461

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2010

These accompanying notes form part of the financial statement

NOTE 1 - MINERAL EXPLORATION AND EVALUATION

Opening balance	6,331,773	3,850,163
Expenditure during the year	2,585,729	2,481,610
Closing balance	8,917,502	6,331,773

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

NOTE 2 - ISSUED CAPITAL

(a) Issued capital

$	2010	2009
117,306,762 ordinary shares fully paid	12,324,019	7,731,885

(b) Movements in ordinary share capital of the Company were as follows:

Date	Details	No of Shares	Value (¢)	$
Balance at 30 June 2008		63,415,852		7,731,885
Balance at 30 June 2009		63,415,852		7,731,885
03/07/2009	Placement	9,500,000	8.50	807,500
20/10/2009	Placement	10,900,000	11.00	1,199,000
27/11/2009	Placement	18,190,910	11.00	2,001,000
24/02/2010	Placement	15,300,000	7.78	1,190,000
Transaction costs arising on share issues				(605,366)
Balance at 30 June 2010		117,306,762		12,324,019

(c) Movements in options were as follows:

Date	Details	No of Options	Issue Price (¢)	Value $
Balance at 30 June 2008		9,000,000		331,000
14/07/2008	Entitlements Issue	28,484,204	1.00	284,842
11/09/2008	Shortfall allocation	1,315,000	1.00	13,150
Transaction costs arising on options issue				(26,688)
Balance at 30 June 2009		38,799,204		602,304
Balance at 30 June 2009		38,799,204		602,304
30/04/2010	Expiry of options	(38,799,204)		(602,304)
Balance at 30 June 2010		-		-

(d) Voting and dividend rights

Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held.

At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.

NOTE 3 - NOTES TO THE CASH FLOW STATEMENT

	2010 $	2009 $
Reconciliation of loss after income tax to net operating cash flows
Loss from ordinary activities	(1,138,160)	(599,299)
Depreciation	46,714	74,165
Exchange loss on revaluation of loans	(9,286)	22,721
	(1,100,732)	(502,413)
Movement in assets and liabilities
Receivables	5,851	37,944
Other current assets	(97,819)	5,766
Payables	(11,188)	21,758
Net cash used in operating activities	(1,203,888)	(436,945)

NOTE 4 - LOSS PER SHARE

Number	2010	2009
Weighted average number of ordinary shares outstanding during the year used in the calculation of basic loss per share	96,539,464	63,415,852

There are no potential ordinary shares on issue at the date of this report.

NOTE 5 - MATTERS SUBSEQUENT TO THE END OF FINANCIAL YEAR

On 18 August 2010 the Company advised that the Loch Lomond and The Trossachs National Parks Board had voted to refuse the Company's application for planning permission for the establishment of the proposed gold and silver mine at Cononish.

At the date of this report the company is considering its options in relation to this refusal but is likely to appeal to the Scottish Ministers. Any appeal would need to be lodged within three months and Scotgold will make a further release to advise its intentions.

Scotgold is extremely disappointed at the decision, given the ongoing interaction with the Parks Board over a substantial time frame though are encouraged that the decision was by a very narrow majority. It is considered that the proposal has significant merit in the local, regional and national context and the proposed development would have minimal environmental impact.

Scotgold remains committed to exploration at its other prospects located outside the National Park's boundaries (85% of our current license areas are outside the National Park) at Beinn Udlaidh and other areas.

A copy of Scotgold's representation, which was made to the Loch Lomond and The Trossachs National Parks Board prior to the vote, is available at the Company's website.

It is the opinion of management that the refusal to grant planning approval does not in itself create an impairment issue.

No other matters or circumstances have arisen after balance date that have significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future periods.

NOTE 6 - PUBLICATION OF FINANCIAL REPORT

The report is extracted from the Company's full annual report for the year ended 30 June 2010. A copy of the full report is available on the Company's website: www.scotgoldresources.com.

GLOSSARY OF GEOLOGICAL TERMS

ADIT	a type of entrance to an underground mine which is horizontal or nearly horizontal.
APPIN GROUP	the oldest subgroup of the Dalradian Supergroup, c. 4 km thick, made up of quartzites, pelitic and limestone units.
AQ	nominal diamond drill core diameter of 27mm.
ARGYLL GROUP	a subgroup of the Dalradian Supergroup, c. 9km thick, made up of tillites, quartzites, pelitic and psammitic units.
ASSAY	a procedure to determine the proportions of metal in an ore or to test an ore or mineral for composition, weight, purity etc..
AZIMUTH	the angle of horizontal difference, measured clockwise, of a bearing from a standard direction, as from north or south.
BASE METALS	more common chemically active metals, e.g. copper, lead, tin, zinc etc..
BEDROCK	the solid rock lying beneath superficial material such as gravel or soil.
BRECCIA	a rock composed of angular fragments of minerals or rocks in a matrix (cementing material), that may be similar or different in composition to the fragments.
BRECCIA PIPE	a mass of breccia, often in an irregular and cylindrical shape, that appears as an iron-stained knob, from several feet to several hundred feet in diameter. Breccia pipes may or may not be silicified. They usually consist of fragments of the host rock (the rock layer they are contained in) cemented together by silica.  Breccia-hosted, precious metal deposits occur throughout the world and are known to host very large resources.  Examples in Australia are Kidston (4.5 M oz gold), Mt Leyshon (3.5 M oz gold) and Mt Wright (1 M oz gold) all of which are located in North Queensland.  Examples in North America are Golden Sunlight in Wyoming (3.8 M oz gold) and Cripple Creek in Colorado (21 M oz gold) which are associated with lamprophyre fields.
CALCAREOUS ROCK	a rock that contains as much as 50% calcium carbonate.
COMPLEXITY FACTOR	a factor applied to the tonnage to indicate uncertainty in the geometric shape at depth.
DALRADIAN SUPERGROUP	a succession of Late Precambrian and Cambrian marine sedimentary rocks which have been metamorphosed in parts of Scotland and Ireland.  It is typically developed in the high grounds which lie southeast of the Great Glen of Scotland.  It is made up of four subgroups the Grampian, Appin, Argyll and Southern Highland groups.
DIAMOND DRILLING	a diamond-studded rotary-drilling bit, used for coring and drilling in very hard rock.
DIP	the angle in degrees between a horizontal plane and an inclined earth feature.
GEOCHEMICAL SURVEYS	the application of methods and techniques of geochemistry to the search for mineral or petroleum deposits.
GRADE	the relative quantity or percentage of mineral content in an ore body.
HIGH GRADE	a high quantity or percentage of mineral content in an ore body.
INCLINATION	See DIP
INDICATED MINERAL RESOURCE	part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.
INFERRED MINERAL RESOURCE	part of a Mineral Resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes which may be limited or of uncertain quality and reliability.
IP ANOMALY	an anomaly in the 'induced potential', where geophysicists put electrical pulses into the ground and then measure the decay of voltage.
JORC	the Australian 'Joint Ore Reserves Committee' sets out minimum standards, recommendations and guidelines for Public Reporting in Australasia of Exploration Results, Mineral Resources and Ore Reserves.
LAMPROPHYRE	ultrapotassic, igneous rock primarily occurring as dykes, lopoliths, laccoliths, stocks and small intrusions.  It is an alkaline, silica-undersaturated and ultramafic rock.
LOW GRADE	a low quantity or percentage of mineral content in an ore body.
MEASURED MINERAL RESOURCE	part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence. It is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.
METALIFFEROUS	containing, yielding, or producing metal or ore.
METASEDIMENT	sediment or sedimentary rock that shows evidence of having been subjected to metamorphism.
MINERALISATION	a process by which valuable minerals are introduced into a rock, resulting in an ore deposit, either actual or potential.
MINERAL RESOURCE	is a concentration or occurrence of material of intrinsic economic interest in or on the Earth's crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories
PELITES	metamorphosed sediment with a dominantly mudstone/siltstones protolith.
PRECIOUS METALS	naturally occurring metallic chemical element of high economic value, which is not radioactive, commonly part of the platinum group.
PSAMMITES	metamorphosed sediment with a dominantly sandstone protolith.
QUARTZ	crystalline silica, SiO2.  .
STRIKE	parallel to the direction taken by a structural surface such as a fault or bedding plane as it intersects the horizontal.
VEIN	a tabular or sheet like body of one of more minerals deposited in openings of fissures, joints or faults, frequently with associated replacement of host rock.

 

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