Interview: Chris Sangster, Chief Executive of Scotgold Resources

THE lounge of the Balmoral Hotel is a far cry from Chris Sangster’s usual workplace – a tiny rustic office at Upper Tyndrum Station.

But the chief executive of Scotgold Resources has spent the past 14 months travelling around to meetings to ensure that the miner’s flagship project isn’t thwarted by planners for a second time.

It’s obvious that the plain-talking Sangster would rather be back at Cononish in the Loch Lomond and the Trossachs National Park getting on with the real work of drilling for gold and silver but he and the company’s chairman, John Bentley, are taking no chances. They are fitting in as many last-minute meetings as possible ahead of a crucial vote next week by the National Park Authority Board.

Their caution is understandable given that the miner, which was set up in 2007 with the sole focus of exploring for gold and silver in central Scotland, came up against surprise opposition less than two weeks before the vote last year on its first planning application.

The pair say that a report published on 10 August, 2010, by the park’s head of planning, Gordon Watson, claiming that the gold mine’s economic benefits would be “very transitory”, was the first inkling they received of resistance to the project, which many in the company and members of the local community had expected to be waved through.

By the time the hostility from some camps had been declared, it was almost too late for Scotgold to do anything about it, and the project was narrowly voted down at a boisterous meeting just eight days after Watson’s first report.

Sangster accepts that, in hindsight, the company could be criticised for not having done enough the first time round to secure planning permission, but he insists: “It certainly wasn’t apparent at the time because we would have taken steps to resolve it.

“The depth of their [national park officials’] concerns only became apparent in their report, which is unfortunate because if some of those had been more apparent earlier on, we probably would have gone along the route that we have continued to go along now.”

This time, however, both he and Bentley have been lobbying hard from the word go and their diligence is paying off. On Thursday, in his second report into the project, Watson concluded that “the temporary adverse impacts are outweighed by the anticipated outcome of a higher quality landscape and recreational experience being delivered in the long term”.

Three days after the initial application was thrown out, Sangster re-entered detailed negotiations with members of the park authority board to see how certain environmental and cosmetic concerns could be overcome.

He also commissioned an independent report from Professor David Bell of Stirling University to spell out the economic case for the mine, which produced better results than expected. Bell determined that the contribution to Scotland’s economy of the mine, which is likely to have a lifespan of eight to ten years, would be about £80 million – £30m more than even the company itself had dared hope for.

The difference second time round, says Sansgter, is the firm sought to involve more organisations, including national groups such as the Scottish Council for Development and Industry, CBI Scotland, the Scottish Chambers of Commerce, the Assay Office Scotland and the British Jewellers Association.

It’s little surprise then that Sangster is feeling “confident” that next week’s vote will go Scotgold’s way, but that won’t stop him and Bentley from hauling the 1,000-page long planning application, which has to be carried in four cardboard boxes, into a few 11th-hour negotiations. “There are always last-minute detailed questions and issues,” Bentley concedes.

The pair admits that there may be a few celebrations if next Tuesday’s result is positive but, in many ways, planning approval would only be the start of the journey.

And before the first gold bullion stamped with “made in Scotland” can roll off the production line, Sangster will have to go on another charm offensive – this time with investors.

The company has to raise “north of £15m” to fund the mine and is keen to proceed as quickly as possible to capture the benefits of the high gold prices, which have soared in the 14 months since the company has been embroiled in negotiations over planning.

Even if the vertiginous price rises taper off, however, Sangster says the company has a comfortable cushion given the project’s relatively low production costs.

“When in operation, the mine will have a relatively low operating cost per ounce of gold produced and, therefore, I don’t think people will see the gold price go below what we anticipate the operating cost will be. There’s a healthy margin,” he says.

The miner, who was born to Scottish parents but was brought up in Surrey, says negotiations have already begun with banks to meet some of the £15m through debt financing, but the company is also considering another rights issue – its third since September 2010.

“It’ll probably be a combination of all of the traditional ways [of raising money]” he says.

Although earlier this year Sangster sent an unusually humble letter to investors admitting that their patience had been “tested”, he is confident that any further fundraising will have support from shareholders in this country but also Down Under, where the company is also listed on the Australian Securities Exchange.

Having spent 28 years in the industry, he is quite sanguine about the events of the past 14 months and points out that mining investors are also used to such delays, given that some 80 per cent of planning applications for mines get turned down first time.

“Delays are endemic to a certain extent,” he says philosophically.