Glass Earth Gold Initiates Major Strategic Refocus and Files Q2 Financials to 30 June 2013
August 29 2013 - 4:00PM
Marketwired Canada
Glass Earth Gold Limited (TSX VENTURE:GEL) (NZAX:GEL) ("Glass Earth" or the
"Company") announced today that it has filed its June 30, 2013 second quarter
Financial Statements and associated Management's Discussion and Analysis
("MD&A") report, pertaining to that period, with regulatory authorities.
The Company faced another highly challenging quarter marked by continuing losses
from placer mining operations, decline in cash resources and distressed market
conditions for gold and junior mining companies.
Considering the prevailing conditions, the Board of Directors has determined
that a major strategic refocus was warranted in order to safeguard the Company's
exploration assets and set the Company on the right foot for its next phase of
development. It has therefore been decided to dispose of placer gold mining
operations, refocus exploration activities on projects in the Hauraki region,
carry out significant cost-cuttings and consider new financing opportunities.
Disposal of Placer Mining Operations
In spite of the team's continued efforts to increase productivity levels, the
placer mining operations have not generated the expected profitability levels.
While market sentiment for gold has modestly improved, it was felt that the
market conditions would not be conducive to significant enhancement of
profitability. As a result, the Company is selling its placer mining operations
(all mining machinery and permits) in central Otago for approximately C$1.4M
pursuant to two Sale & Purchase agreements dated 29th August 2013. The placer
sale and purchase agreements are with Skevington Contractors Ltd (an arm's
length party) and are subject to TSX-V approval. No finder's fee is payable.
The Directors' decision to withdraw from mining and all exploration activities
in the South Island will conclude the Company's involvement in placer
activities.
That sale, together with two smaller sales of placer mineral permits, will
generate approximately C$1.5m, payable in cash. Of these funds, up to $910,000
will be used to retire debt associated with the purchase of placer assets in
March 2012. The balance will be used to settle placer trade payables and other
placer related costs.
Sole Focus on WKP and Neavesville in the Hauraki Region
The Board of Directors has determined that, given the current economic climate,
the Company would review its strategic objectives and focus solely on
exploration and development projects in the Hauraki Region of the North Island
of New Zealand. This area is where its key hard-rock projects of WKP and
Neavesville lie, as well as its Waihi West prospect, which is adjacent to the
Newmont owned and operated Martha gold mine at Waihi.
Simon Henderson, President and CEO of Glass Earth Gold, commented that
"The fundamental strategy of a lean and resilient team focusing on two projects,
Wharekirauponga (WKP) and Neavesville will allow the maximum opportunity to
progress these advanced projects within a 2-3 year timeframe."
Staffing
With a two project focus, Management has completed a comprehensive review of the
Company's cost structure and operational needs. This will result in significant
reductions in operational costs to build resilience and address the depressed
market conditions. Glass Earth Gold will continue to apply strong austerity
measures having reduced to core staff, whilst retaining key technical and
management ability to oversee the Company's assets.
Corporate Refinancing
Following a series of meetings with potential investors and partners, advised
investor interest in a refinancing is expected to ensure it is capitalized
appropriately for its continuing hard-rock activities at WKP and Neavesville.
FINANCIALS
Operational Activities
The Company's corporate and exploration activities for the quarter are
summarized in the attached Quarterly Overview. The Company's cash position as at
June 30, 2013 was $205,000 with trade payables of $753,000.
The Company faced another highly challenging quarter with continuing losses from
its placer mining operations, pressured from a drop in gold prices and lower
than expected productivity and grade. The wettest June ever recorded in Otago
did not help. As a result, the Company reports a net mining loss for the three
months ending June 30, 2013 of $506,000 vs $508,000 for the similar period in
2012.
Three months Three months Notes
ended ended
June 30 2013 June 30 2012
--------------- ---------------
Gold Mining Revenue 1,242,000 349,000 1
Mining costs (1,494,000) (792,000) 2
Depreciation and amortisation (254,000) (65,000)
--------------- ---------------
Gross (Loss) (506,000) (508,000) 2
Administrative and Personnel expenses (195,000) (414,000) 3
Finance (loss)/income 20,000 (8,000)
Non-cash items
Write-down of mineral properties (9,873,000) (6,330,000) 4
Impairment of placer mining assets (970,000) - 4
-------------------------------
Loss before Income Taxes (11,524,000) (7,260,000)
Income tax recovery 239,000 -
--------------------------------
Loss after Income Taxes (11,285,000) (7,260,000)
--------------------------------
Notes:
1 Sales revenues of $1.24m were slightly down on Q1 sales of $1.38m, but
with lower operating costs than Q1, giving very much the same operating
loss.
2 Included in this figure for Q2 was a cash operating loss of $262,000
for the 3 months. Depreciation of equipment and amortisation of
exploration and acquisition costs for the quarter stood at $254,000.
3 G&A expenditures down as Investor Relations expenditures reduced.
4 Write down and impairment of exploration and mining expenditures of
$9,873,000 and $970,000 are discussed extensively above and in the MD&A
report.
Accumulated Exploration Expenditures - Write-downs/offs
The decision to withdraw from the South Island has resulted in write downs/offs
of prospects and permits in that region. The main areas of write-offs were the
Sparrowhawk (Garibaldi) target and the write down of placer mining assets to net
realisable values.
In the North Island, the Muirs prospect has been written-off with the permit to
be handed over to the land owner (as required by the land access conditions).
Write-downs/offs totalled $2,775,000 in respect of South Island hard-rock and
$4,324,000 in respect of placer activities. A further write down of $2,774,000
in respect of the Muirs prospect brought the total impairment to $9,873,000.
This amount has been recorded as a loss in the Statement of Comprehensive
Income.
Placer Mining
While management devoted considerable time to improving placer mining
operations, its profitability continued to be disappointing. It reported a
similar negative cash cost of $262,000 for the quarter. Despite a movement to
24/7 operations in early June, this coincided with the wettest June and July
recorded in Otago, causing unexpected difficulties with the mining fleet and
consequent equipment failures.
The Company's response was to scale back operations to a more manageable 12/5
shift operation and seek to sell the mining assets.
About Glass Earth Gold
Glass Earth Gold is one of New Zealand's most active gold exploration companies.
In the North Island, exploration efforts are focused on large epithermal gold
systems in the Hauraki Region, akin to the operating Martha Hill mine, (Newmont
Mining).
In the Hauraki Region, Glass Earth Gold has identified and developed significant
ground positions around the active Martha Hill gold mine operations at Waihi.
The Newmont-Glass Earth Gold Waihi West JV (Newmont earning in) and Hauraki JV
(65/35), including drilling at the WKP discovery, are being actively explored
and managed by Newmont in collaboration with Glass Earth Gold.
The recent announcement that Glass Earth Gold has acquired option rights to the
Neavesville gold/silver prospect (just north of WKP) will mean an increased
exploration focus in the Hauraki region.
For more information on Glass Earth Gold, please visit www.glassearthgold.com.
To receive Company news via email, contact info@glassearthgold.com and mention
"Glass Earth news" in the subject line.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in the policies of the TSX Venture Exchange) nor New Zealand
Exchange Limited has reviewed this release and neither accepts responsibility
for the adequacy or accuracy of this release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Glass Earth Gold Limited
Simon Henderson
President and Chief Executive Officer
+64 4 903 4980
info@glassearthgold.com
Glass Earth Gold Limited
Anne Robert
Manager, Investor Relations
+ 1 514 880 0184
anne.robert@glassearth.co.nz
www.glassearthgold.com
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