The mining company, MinMet, has applied for $3 million (£2.1 million) of EU funds for work at its Castromil gold mine in Portugal. The company needs to raise about $4 million to finance mining at the site which is thought to contain a gold deposit of approximately 4.5 tonnes.

The EU funds are being sought under the PEDIT programme which uses employment creation as its main criteria for deciding which projects receive funds.

A mining licence for Castromil is expected "imminently" according to the company and the first gold is likely to be mined within eight months, it says.

MinMet expects the EU to take about six months to decide if it qualifies for the finance. About 30 per cent of the $3 million will be in cash, with the rest made up of interest loans and other forms of assistance.

Even with the EU funding the company still needs to raise $1 million to finance the mining at Castromil which is being undertaken by its subsidiary, Connary Minerals.

According to Mr Michael Nolan, a director of MinMet, this will be raised either by selling assets or placing more shares. He was speaking after the company's annual general meeting yesterday.

"We obviously want to get the financing for Castromil sorted out as soon as possible, but there is no immediate problem," he said.

In a separate development, the company has also announced that the British Geological Survey is to carry out further gold tests at its site in Devon, which has helped to push up its share price recently. The Devon site is operated by MinMet's subsidiary, Crediton Minerals.