BBC admits to publishing ‘fake news’ on Scotgold that led to share spike

Scotgold Resources’ Cononish project in Scotland in 2020. Credit: Scotgold Resources

The BBC Executive Complaints Unit (ECU) has upheld a viewer’s complaint that it had broadcast “fake news” about to a non-existent gold discovery made by Scotgold Resources which caused the company’s share price to subsequently soar.

In the verdict published on Thursday, July 6, 2023, Fraser Steele, head of the ECU, admitted that news reports on BBC Radio 4 Today , BBC Radio 2 and BBC1 Scotland that the miner had found another vein of gold at its Cononish mine located in the Scottish Highlands “were incorrect and would have misled their audiences.”

The source of the story was BBC Scotland reporter, David Henderson, who first included the misinformation in the report of his mine visit and interview with Scotgold’s then CEO Phil Day published on the BBC News (Scotland Business) website on January 30, 2023.

In the interview, Day told the BBC his company had carried out some testing and believed it was likely there was a second vein containing gold running parallel to the vein it was already mining, which could extend the working life of the mine and potentially increase profits.

However, there were some brief news reports on BBC bulletins on the morning of January 30 which reported Scotgold as having said it had “found another vein of gold at its Cononish mine” (or very similar wording).

In the ECU’s judgement, that was more definitive than the hope or expectation expressed by the company’s former executive and would have left the audience with a misleading impression. 

As such, the viewer’s complaint was upheld in relation to those reports, the ECU said in a statement.

Stock spike

When news of this alleged “discovery” broke, investors rushed to buy Scotgold shares. This caused the stock to soar 54% – adding around £15 million to its valuation – only to fall rapidly in the following days as the company admitted that it has not even drill-tested the said gold vein.

A week later, the company announced a £3 million equity placement priced at 40p a share to follow through with its 2023 mine plan and support an exploratory drilling program at the Cononish mine.

On March 27, Scotgold shocked shareholders by announcing that its gold grades, revenues and working capital had suddenly deteriorated, to a point where its ability to keep operations going was in question.

It cited failed efforts to optimize production using what it considered a more cost-effective method of mining called long hole stoping. Any delays in switching to the new process, the miner warned, will inevitably put a strain on its finances.

The value of their shares crashed to 12p, leaving the company with a market capitalization below £10 million at the time.

On April 26, the company launched yet another fundraising scheme, pricing its new shares at just 15p – revealing that it had only £8,000 cash left at the end of March.

Year-to-date, Scotgold’s stock has plummeted over 70%, sitting at a market value of about £14 million.

The Cononish mine entered commercial production in July 2022, becoming the first in Scotland.

(Hat tip: Jon Chapman)