In leaving Otago, Glass Earth is booking $13.5 million in impairments and asset writedowns to do so, having posted a second quarter before-tax loss yesterday of $617,370.
Glass Earth Gold chief executive Simon Henderson said when contacted yesterday: ''I'm very disappointed. We thought we would be able to pull off the alluvial production ... but we were dragged down from reaching it.''
During the past seven years, dual-listed Glass Earth has spent more than $40 million in exploration, mainly around Otago, having in March 2012 established the first of three alluvial (loose) gold operations in the Maniototo, in the Ida and Manuherikia valleys to create much needed cashflow.
But despite repeated successes in raising mainly Canadian funding, Glass Earth remained plagued by cashflow problems, including subsequent monthly repayments to buying out a former joint venture partner.
Glass Earth is now refocusing, paring down operations to three hard rock gold prospects in central North Island targets, including two Newmont Waihi Gold joint ventures.
Several factors hastened Glass Earth's Otago exit, with continuing losses from its alluvial Maniototo operations because of declining global gold prices, lower than expected on-site productivity, unseasonal weather conditions and lower grades of gold per tonne.
Mr Henderson said the Maniototo alluvial operations had been sold for $1.75 million to Skevington Contracting Ltd of Palmerston in North Otago; the proceeds to be used to pay off debt.
''While management devoted considerable time to improving placer [alluvial] mining operations, its profitability continued to be disappointing,'' Mr Henderson said.
In June 2012, Glass Earth clinched almost $3 million in private placement funding to refinance its $4 million buyout of its former joint venture partner.
The buyout was of Goldmines New Zealand Ltd and the other 50% share in mining operator Dunstan Mining Ltd - both companies included Alexandra-based miner Bob Kilgour as a director.
Mr Henderson said because of unseasonal rain and the gold price plummeting 30%-40%, Glass Earth could not reach its production and financial targets.
The buyout from Mr Kilgour's companies was $2 million in shares and $2 million in cash, the latter to be spread over 25 monthly payments of $80,000, from proceeds from the Maniototo production.
While sometimes attaining weekly production of around 100oz a week, Glass Earth was falling short of reaching its target of 5000oz a year, in order to meet monthly repayments and retain some cashflow.
From the three Maniototo property sales, up to $1,110,243 will to be paid to Mr Kilgour for the alluvial mining assets, with the balance of the $1.71 million used to pay trade-related debts.
During calendar 2012, Glass Earth raised $7.08 million in capital, starting the new year with about $3.17 million cash in hand.
Glass Earth delivered its second quarter result to June yesterday, reporting gold sales of $1.51 million for the quarter but posting a pre-tax loss of $617,250.
Including the writedown of the Otago mineral properties and asset impairments, Glass Earth's after-tax loss for the quarter was $13.76 million.
''Despite a movement to 24/7 operations in early June [in Maniototo], this coincided with the wettest June and July recorded in Otago, causing unexpected difficulties with the mining fleet and consequent equipment failures,'' Mr Henderson said.
However, Mr Henderson was upbeat about the joint ventures with Newmont at Waihi West, WKP and other adjacent projects.
He said that subject to roading access agreements, Glass Earth would continue with its intended staged purchase of Eurasian Minerals Inc interests at the gold-silver Neavesville prospect, north of Waihi.
For its 2012 calendar year report 2012, Glass Earth's after tax loss was up from $2.09 million in 2011 to $13.54 million, from writing off accumulated exploration costs of $9.39 million, generally for exploration during 2005-08.
Gold revenue from Otago of $3.62 million was undermined by increased mining costs, including establishment, commissioning and refurbishment of plant costing $5.03 million, prompting a before-tax loss of $1.77 million from the Maniototo mining.
The exit
Glass Earth Gold's South Island exit after seven years
Sold: Three alluvial (loose) gold production units in the Ida and Manuherikia valleys, to a North Otago company for $1.75 million.
Focus: Central North Island's Hauraki region. Three hard rock prospects WKP and Waihi West in joint ventures with Newmont Waihi Gold (both at 35% Glass Earth, 65% Newmont). Purchase of nearby Neavesville prospect from Eurasian Minerals to go ahead, subject to access agreement.
