Small goldmining and exploration company Glass Earth has been hit by a dramatic drop in the price of gold and lower-than-expected productivity and grade at its loss-making Otago alluvial mine, near Alexandra.
In what it called a “highly challenging” March quarter, Glass Earth made a loss of $820,000, compared with a loss of $1.2 million in the same period last year.
Glass Earth has alluvial gold operations in Otago in an area between Alexandra and the Macraes Flat goldmine, owned by OceanaGold Corporation.
Glass Earth is also exploring gold prospects in both the South Island and North Island, looking for large gold systems in the Hauraki region like the active Martha Hill goldmine.
Glass Earth chief executive Simon Henderson said yesterday: “The uncertainties around the price of gold remain a major concern.”
The company forecast “modest” profits in the next quarter and positive cash generation based on a price of US$1400 an ounce, which he said was “sustainable”.
At the start of the year, the price of gold was US$1680 an ounce and is now about US$1390, down almost 17 per cent, after 12 years of annual gains.
Glass Earth shares last traded at 5.5 cents, down from 16c at the start of the year and a peak above 70c in 2007.
Mining revenues in the three months were almost $1.4m, compared with just $167,000 last year. But revenues in the March quarter were outweighed by mining costs of $1.6m.
The company said management had devoted a considerable amount of time to setting up “placer” (alluvial) mining, but profits had been disappointing.
The alluvial mine sustained a cash loss of $246,000 for the quarter, but cash losses were expected to be smaller in the June quarter.
In the quarter, the company recovered 830 ounces of gold, which was 20 per cent under budget and the main reason for the cash loss.
Instead of working at two sites during the day only, the company will now work at one site 24 hours a day, seven days a week, from the end of this month to cut leased equipment costs and improve efficiencies.