Boutique gold producer Glass Earth Gold - also one of the country's biggest gold explorers - has bought out its Otago joint-venture partner for $4 million in cash and shares and is targeting quadrupling of gold production from Central Otago this year.
It appears 2012 could be the year Glass Earth finally hits its straps after five years of, at times, surviving hand-to-mouth, and repeatedly having to seek near-urgent recapitalisation.
Glass Earth, whose principal listing is the Toronto stock exchange, has spent about $35 million in gold exploration throughout the country in almost five years, much of it in Otago, and is this year expanding gold production from one to three sites in Central Otago.
With $C3.6 million ($NZ4.51 million) cash in hand at the end of last year, the existing placer-gold (loose alluvial) production unit in the Ida Valley will be joined by two more, at adjacent sites in the Manuherikia valley.
On Thursday, Glass Earth bought placer-gold production joint-venture partner Goldmines New Zealand Ltd and the other 50% share of the joint venture's mining operator, Dunstan Mining Ltd, which had overseen placer mining and exploration projects throughout Otago.
Glass Earth chief executive Simon Henderson said all operations, equipment and staff from Dunstan and Goldmines had moved directly under Glass Earth's umbrella.
"Taking full control of placer-mining activities will enable the company to significantly accelerate and increase production capacity. We want to be generating a healthy cash surplus from placer [gold production], which will set us apart from other greenfields [new development] operations," he said when contacted yesterday.
Glass Earth at present targets 20-25 ounces of gold per week from the Ida Valley, but has budgeted this year for a total 100-110 ounces per week from the three sites.
At yesterday's spot gold price, 25oz was worth $US41,500 and 110oz worth $US182,600 (respectively $NZ50,550 and $NZ222,400).
In 2010, gold from the Ida Valley generated $357,000 revenue for Glass Earth. In 2011, the joint-venture gold production contributed $C752,000 ($NZ943,775) in gross revenue using just one gold recovery unit.
Mr Henderson said the two units being commissioned would be in the second and third quarters respectively this year.
On the question of funding streams for operations, he said the buy-out payments totalling $2 million cash were spread over 25 months, at $80,000 per month, which left Glass Earth's cash position largely intact.
Mr Henderson hoped with improved cashflow there would be no need to seek any recapitalisation from shareholders this year, instead focusing on "delivering some value to shareholders".
Craigs Investment Partners broker Peter McIntyre said while as a "niche operator", Glass Earth's production costs would be low compared with the overheads of major producers, but it would "at some stage" have to consider going back to the market.
"Glass Earth needs a year of getting a few runs on the board for when they do have to go back to the market," he said.
In the North Island, exploration is focused on large epithermal [hard rock] gold systems in the central North Island Hauraki region, including a joint venture with Newmont near its Waihi mines and its own exploration project, at Muirs Reef.
"That [recent assays from Muirs] has been a real shot in the arm for us," Mr Henderson said.
