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GLASS EARTH GOLD LIMITED
For the year ended December 31, 2011
MANAGEMENT’S DISCUSSION AND ANALYSIS
(All amounts stated in Canadian dollars, unless otherwise indicated)
Attention is called to a caution in respect of
Forward-Looking Statements - included at page 33
ANNUAL OVERVIEW
EXPLORATION
(please refer to the individual sections following for fuller description of the exploration
activities).
· WKP gold project in Hauraki, New Zealand (Glass Earth 35%)
Five, long (up to 720m), diamond drill holes provided a successful follow-up of the
encouraging results from the 2010 diamond drilling campaign on WKP West.
Ø WKP 27 intersected 152.4m @ 1.16 g/t Au including 1.4m @ 30.7 g/t
Au and 77.7 g/t Ag; ;
Ø WKP 28 intersected 49m @ 1.08 g/t Au and 3.32 g/t Ag; and a new zone
was discovered at WKP South (WKP 29);
Ø WKP 29 intersected 3.2 m @ 37.0 g/t Au and 17.0 g/t Ag:
Ø WKP 30 consolidated this discovery, intersecting 9.0 m @ 3.2 g/t Au and 2.6
g/t Ag;
Ø The strong resistor targeted extends both north and south of those drill holes.
Aeromagnetic and CSAMT resistivity geophysical surveys indicate that this
new zone has a strike potential of at least one kilometer;
Ø WKP 31 was completed in December to a depth of 598m. Initial assay
results include 9.7m of 17.2g/t Gold and 24.2 g/t Silver.
Glass Earth and its partner Newmont have committed to an extensive drilling campaign for 2012 of approximately 6,000m to advance this project.
·
MUIRS gold project in Mamaku, New Zealand (Glass Earth 100%)
An independent review of the Muirs-Massey Reefs area was completed in April 2011, leading to more defined exploration work.
Ø A 5 hole diamond/RC drilling program completed in Q1
Ø Further trenching over the recently detected high surface gold values (up
to 17 gm/t Au in situ rock chips) commenced in April 2011;
Ø Ten trenches were dug with a combined length of 235m and all, but
one, intersected significant quartz veining and were channel
sampled. Assay results received were very positive including 24m @ 5.72 g/t Au;
Ø A 17 hole drill program of approximately 2,345m at the Massey
Reef commenced in late November with the intention that it enable
a resource calculation to be undertaken for the Massey Reef;
Ø The first two drill holes have been completed at the Massey Reef with the
first drillhole (MSDDH08) penetrating a highly altered andesitic volcanic
unit with variable quartz veining throughout. Results included an intercept
of 17m @ 1.71 gm/t Au. The second drill hole (MSDDH09) reached 191m
with assays pending.
· OPHIR gold project in Otago, New Zealand (Glass Earth 50%)
Ø Metallurgical work on Ophir ore samples is encouraging, with between 82-
85% of gold recovered in gravity separation processes;
Ø Progress was made on the design and costing of a pilot processing plant for
the Wai-iti shear zone.;
Ø Additional drilling was undertaken (17 holes for 446m) across 8 shear
zones. Initial lab results are encouraging, including 4.2 gm/t Au over 8m
in OPH013, and 5.8 g/t Au over 6m in OPH014;
Ø Remaining samples from the drill program were submitted for assay by
cyanide leach;
Ø Additional work is being undertaken as a pre-requisite to a formal
proposal for capex and mining for the consideration of the Joint
Venture.
FINANCIAL
· Successful Fundraising – the Company raised a gross $2.9m by private placement
in late Sep/early October together with an additional $0.25m upon the exercise of warrants and options;
· The Company’s cash position as at December 31 2011 was $3,614,000;
· Financial results - The net loss for the year ended December 31, 2011 was
$1,714,000 including a non-cash write-off of accumulated exploration expenditures of $695,000.
PLACER MINING
· Placer mining continued with only one Gold Recovery Unit effectively operating at a time. Cash contribution from the Company’s 50% owned placer mining operation(s) totaled $316,000 for the year ended December 31, 2011;
· The placer joint venture owns 3 Gold Recovery Units and has mining permits and resource consents to allow all three to be operating.
· In March 2012, the Company acquired the other 50% of the placer JV for $4m incash, deferred cash and Glass Earth Gold Ltd shares (see Subsequent Event note on page 27).
· The Company intends to have a second GRU running in Q2 and a third in Q3.
This, together with increased throughput and 100% ownership should
ensure a significant improvement in gold production and cash generated.
Q4 2011 Exploration Activity
Progress was made on the Ophir project (50% GENZL) with the design and costing of a pilot
processing plant completed for the Wai-iti shear zone. Remaining samples from the Q3 drill
programme were submitted for assay by cyanide leach. Initial lab results are encouraging.
A programme of shallow drilling was completed across the Hindon and Game Hen targets
(East Otago). Six drill holes were completed at Hindon targeting gold-bearing shear zones
identified through geological mapping and rock chip sampling (up to 7.5 gm/t Au). Samples
have been submitted for assay. An additional eight drill holes were completed to target the
Game Hen shear. Rock chip sampling of this structure has indicated grade of 1.3 - 41.4 gm/t
Au, with anomalous (Macraes like) arsenic levels (up to 5000 gm/t).
At Sparrowhawk geological mapping and sampling was completed to investigate areas with
anomalous gold (identified in Q2 2011 soil sampling). Encouraging rock chip samples
returned values up to 8.73 gm/t Au. Trenching is to be completed in Q1 2012.
A programme of soil sampling was undertaken at the Moeraki project to test geophysical
anomalies parallel to the Hyde Macraes Shear Zone (identified in the 2007 airborne
RESOLVETM survey). Results were encouraging and follow-up sampling will be completed in
Q1 2012.
Q3 2011 Exploration & Mining Activity
South Island placer mining at Gunclub continued although, inhibited somewhat by winter snows and the building of a large water storage dam. Production was down although the high New Zealand gold price almost offset this.
Exploration continued at Drybread with further shallow drilling and sample processing. A Mining Permit was granted for Drybread on 26 August 2011. The drilling results are very encouraging and a Gold Recovery Unit and associated plant has been moved on site with gold production expected to commence in late November.
Stage 1 drilling was completed at Shepherds Flat (57 holes for 709m) and results were encouraging. Stage 2 has been planned and is expected to start in December. Shallow drilling has also been carried out on 3 other prospects in the adjoining Maniototo Valley with good results.
Q4 2011 Exploration & Mining Activity
South Island placer work comprised of ongoing mining at Gunclub.
Exploration continued at Drybread to provide grade control in preparation for mining. Pilot
mining commenced in November with a protracted settling in period.
A full analysis of Shepherds Flat drilling was completed and presented to Joint Venture
partner Placer Gold International who has agreed to proceed to stage two of the Shepherds
Flat Joint Venture.
A reconnaissance drill programme was completed at greenfields target Beatties (Maniototo
Valley). An area of encouraging grade was encountered, and a follow-up drill programme is
to be completed.
A second phase of drilling was completed at Kirk Creek to build on earlier positive results.
Results from this second phase of drilling downgraded this prospect.
Hauraki Region - WKP
Q2 2011 Exploration Activity
Helicopter supported diamond drilling continued with WKP 28 (April), WKP29 (May/June) and
WKP 30 (Jul/Aug). Results for WKP 28 & 29 were released on August 26 (see below) with
assay results awaited on WKP 30.
WKP WEST
WKP 28, confirmed significant low grade gold mineralisation, highlighted by narrow
intervals of high grade, and is consistent with strong ground-based resistivity (geophysical) surveying. This demonstrates the zone has potential for over 800 m strike and a vertical extent of over 250 m. To date, the five long, angled, diamond holes drilled have all intersected significant gold-silver mineralisation over broad widths confirming a potentially very large epithermal gold system.
NEW TARGET ZONE - “WKP SOUTH”
WKP 29, drilled westward (previous holes were drilled eastward into the WKP West resistor) targeted a potentially new mineralized zone to the south-west, represented by a strong resistor, intersecting an exciting zone of high grade gold-silver mineralisation.
The strong resistor extends both north and south of the current drill hole, with another drill hole WKP 30, (results pending) drilled beneath WKP 29, angling at depth and traversing the resistor for a length of 720m. Aeromagnetic and CSAMT resistivity geophysical surveys indicate this new zone has a strike potential of at least a kilometre.
Q3 2011 Exploration Activity
Assay results from the 720m diamond drill hole, WKP 30 were received after some delays at the laboratory. These results will be the subject of a separate press release. The intersection of andesites (the preferred host for epithermal mineralization) with rhyolites, in this large and fertile system, is encouraging. A substantial infill/expansion drill program is warranted.
Q4 2011 Exploration Activity
Drillhole WKP 31, drilled at a 68 degree dip southwards from the center of the prospect was
completed in December to a depth of 598m. Initial assay results include 9.7m of 17.2g/t
Gold and 24.2 g/t Silver. Remaining assays, geological logging and metallurgical testing are
underway.Significant recent drilling results at Central Zone, WKP Project
Drillhole ID From To Interval m Au g/t Ag g/t
WKP 31 146.1 155.8 9.7 17.2 24.2
Q4 2011 Exploration Activity at Muirs
The first two drillholes (of seventeen) have been completed at the Massey Reef this
quarter. Drilling commenced late November and the first drillhole MSDDH08 reached 86.5m
on the 13th of December. The drillhole penetrated a highly altered andesitic volcanic unit
with variable quartz veining throughout. Results included an intercept of 17m @ 1.71 gm/t
Au.
The second drillhole MSDDH09 reached 191m underneath and on section with MSHDH08.
MSDDH09 intersected quartz veining from 64.6m to 67m and silicic hydrothermal breccia
from 103m to 117m, assays are pending.
Mining at Gunclub (Gold Recovery Unit #2) encountered a lower grade section of the resource, as indicated by drilling and trenching results, with consequent lower production. The rebuild of GRU #3 was completed and commenced mining at Drybread in Q4. Gold Recovery Unit #1 is to be reconfigured and is planned to commence mining at Drybread in mid-2012.
C$392,000 for Investor Relations explained: The Company is developing an improved Investor Relations programme, which covers the Canadian and European investor base (including London). The objective is to ensure that the market is fully informed of Glass Earth’s progress as it enters an exciting time in its development path. Increased expenditure on personal presentations by the CEO and internet based dissemination of information, as assisted by IR professionals in Canada and London are budgeted to continue.
In 2009/2010, in tandem with the approach of limiting overheads, the Company placed significant effort into developing some its numerous placer gold targets and a near surface hard rock gold ‘pod’ deposit (Ophir) - both with a view to establishing smaller scale mining that could provide a source of ongoing revenue that would contribute significantly to the Company’s cash requirements.
Progress has been steady, with one placer mine in production and a 40 tonne gold recovery unit (“GRU”) leased out from December 2009 to June 2011. A replacement placer mine commenced in early December 2010. In addition, the Company has signed a Letter of Intent with a Venture Partner to provide funding of up to NZ$1.5m (circa C$1.1m) to develop 2 placer mines. These initiatives are expected to generate significant contributions towards the Company’s cash requirements.
In March 2011, several additional exploration staff were hired and a large office/workshop leased in central Otago, to use as a base for operations.
The Directors have approved a rolling 12 month budget that allows the Company to continue as a Going Concern based on this year's fundraising, the cash budgeted to be generated from mining activities and contributions from joint venture partners.
The Mamaku-Muirs and Central Volcanic Regions exploration expenditures, including
staffing, permit rental, resistivity surveys and field work are currently budgeted for modest activity through 2012 apart from trenching and drilling campaigns at the Muirs prospect.
The Otago Region is a major focus of Company funded exploration endeavour and mining activities.
Outstanding Share and Option Data
Subsequent to the 1:5 share consolidation on 18 March, 2010, as at March 26, 2012, the following items were issued and outstanding:
· 66,162,409 common shares;
· 2,828,000 common share purchase options with an average exercise price of $0.4361 per share and expiry dates of between March 27, 2012 and August 17, 2015;
· 9,106,500 unlisted common share purchase warrants with an exercise price of $0.35 per share and an expiry date of May 5, 2012;
· 5,102,840 unlisted common share purchase warrants with an exercise price of $0.35 per share and an expiry date of June 7, 2012;
· 5,517,790 unlisted common share purchase warrants with an exercise price of $0.50 per share and an expiry date of December 23, 2012;
· 340,000 unlisted common share purchase warrants with an exercise price of $0.50 per share and an expiry date of December 29, 2012;
· 2,027,426 unlisted common share purchase warrants with an exercise price of $0.50 pershare and an expiry date of January 6, 2013.
· 1,150,400 unlisted common share purchase warrants with an exercise price of $0.50 per share and an expiry date of January 8, 2013
· 2,665,949 unlisted common share purchase warrants with an exercise price of $0.80 per share and an expiry date of September 23, 2013 and
· 340,900 unlisted common share purchase warrants with an exercise price of $0.80 per share and an expiry date of October 5, 2013
There are no shares subject to TSX Venture escrow provisions.
Also in the annual report: