Quote:
Write downs impact on Glass Earth
Simon Hartley — 31 August 2012
Accumulated exploration cost write-offs have pushed boutique gold producer Glass Earth Gold Ltd (TSX-V & NZAX: GEL) into an $8.49 million loss for the half year to June, but remains confident cash-flows from gold recovery are achievable.
Glass Earth, one of the country's largest gold explorers, commissioned three gold recovery units around the Maniototo area in Central Otago during the past two months to unearth alluvial gold in a bid to boost cash-flows, but was hampered by snow at its sites.
Glass Earth holds $1.57 M cash in hand, compared to $2.48 M at June last year.
Chief executive Simon Henderson said there was a “strategic review of cash allocation” done during the second quarter, to focus cash on “best potential” gold targets.
Subsequently, exploration work carried out between 2005-08 at older prospects, and a “pruning” of the prospect portfolio and its overall permit holding costs, prompted $6.3 M in write downs.
Henderson noted there had been several “one-off costs” including a surge in administrative and readying for gold production costs and asset write-down.
“While these one-off charges have resulted in a loss for the quarter, they will support the company's ongoing production programme which should generate a steady flow of cash to support its administrative and exploration costs,” Henderson said.
In June Simon Henderson had forecast gold revenue for the remainder of the year of up to $2 M and, if production targets were met, estimated gold revenue in 2013 would be up to $6 M.
In June, Glass Earth clinched $C2.35 M ($NZ2.95 M) from private equity placements out of Canada, to refinance a $4 M buy-out of its former joint venture partner.
The partner buy-out was $2 M in shares and $2 M cash, the latter to comprise 25 monthly payments of $80,000 from proceeds of the alluvial gold diggings around the Maniototo.
*Simon Hartley is senior business reporter for the Otago Daily Times.