The workspace would not suit everyone. A soggy, gritty, cramped cavern 50 metres beneath a Welsh hillside accessible only by a series of ladders that drop through craggy holes into the darkness.

But a smile spread over Dai Walker’s grime-caked face as the miner described the challenge of hunting for gold in the hills of north-west Wales and the joy when he and his colleagues find a few specks.

“It’s hard work, it’s not a place for the weak.” he said. “But when you see a bit of gold, it’s special. It makes you keep going back. I love the history; I like thinking about all the miners that have been here over the years. There’s hardly a family around here that doesn’t have a connection with the mine.”

This is a big moment in the history of the Clogau St David’s mine near Dolgellau in Gwynedd. Clogau used to be the UK’s richest goldmine, with members of the British royal family using the precious metal from the hills of Eryri (Snowdonia) in wedding bands for more than a century.

By the 1990s Clogau was considered exhausted, but in 2018 a company called Alba Mineral Resources acquired a licence and embarked on a programme of rehabilitation and exploration, deploying modern technology to try to track seams of gold.

It has now revealed that gold has been extracted from Clogau once again and this weekend an auction for a 1oz (28g) coin made from its gold to celebrate the revival of the site – and to test the keenness of the market for the metal – will begin.

“It’s an important moment for us,” said Mark Austin, the chief operating officer and senior geologist. “It’s been quite the journey.”

Gold hunting in these hills is not something to rush. Over the last five years the team has painstakingly drained flooded tunnels, removed hills of spoil left by their predecessors, often by hand, and made the parts of the network they need to access secure enough to satisfy modern safety regulations.

They had to show Natural Resources Wales and the Eryri national park that the water extracted from the mine would not harm the river that tumbles down the hillside and make sure they did not disturb the bats living in the old mine.

Austin said they had found gold in spoil heaps, left by the miners who worked here from 1854, and that they had pinpointed what they believed to be untapped reserve after drilling into the hillside.

The zone they are focusing on has been named the Llecfraith payshoot, which has the geological make-up associated with Welsh gold.

What they are looking for in particular are quartz veins with a “stripey and dirty” texture. A motto of the old-timers was: “Mine the streaky bacon, not the white elephant.” “There’s definitely gold there,” said Austin. The question is how much and how accessible it is.

The Guardian was taken down to “level five”, where blasting and digging is taking place. There is no easy way in and it is not comfortable: anyone entering has to wear a harness in case they slip from one of the ladders, and manoeuvring through the cracks and low tunnels is a challenge. It isn’t quiet; the constant drip of water echoes around the confined spaces.

Walker was working the vein at the payshoot, extracting ore that had previously been blasted from the rock face, loading it into a bag 0.7 tonne at a time. It is then hauled to surface ground level, transferred to a small wagon and rolled out along an old railway track into the fresh air.

There in a small plant, the ore is crushed and hammered and poured on to shaking tables. The flecks of gold, because they are heavier, separate and are sent on to a refinery.

In the office, George Frangeskides, Alba’s chair, described the economics of the operation. He said this was not (yet) a fully fledged mining operation but “bulk sampling”. “It’s a pilot plant, a boutique mine,” added Frangeskides.

When the mine last closed, gold was valued at less than a couple of hundred pounds per ounce; now it is more than £2,300. Sometimes Welsh gold, because of its rarity and its royal associations, can fetch five, 10 or 20 times the spot price.

The coin that is being auctioned, which features an image of a dragon atop the nearby mountain of Cadair Idris on one side and miners from the site’s golden age on the other, has a guide price of £20,000 to £25,000.

A maximum of 10 or 12 people work at the site, including veterans of previous mining in the Dolgellau gold belt, but if the gold they suspect is in the hillside is found, it could mean many more jobs and a boom for an area that relies heavily on tourism and agriculture.

“We’re throwing everything at it,” said Frangeskides. “The UK mining industry has been in the doldrums but there are success stories coming in.” He cites lithium finds in Cornwall and gold mining in Scotland.

At Clogau they may soon know whether they are sitting on a fortune. “The only way is to blast it, bulk sample it, process it, see what the grade is,” said Frangeskides. “That’s the name of the game. We’re on the cusp of proving this thing up. This is the crunch time.”