Glencar Mining is only one of a host of Irish resources companies to try and make its fortune abroad. African Gold, Aminex, Ennex, Kenmare, Minmet, Ormonde and Providence - not to mention more established miners such as Arcon and Ivernia - have travelled as far as Kazakhstan, Zimbabwe, Tanzania, Mozambique and Siberia in search of riches, with contrasting fortunes.

In fairness to Glencar, it has a better reputation than many of its peers and, almost uniquely among the Irish companies working abroad, has actually brought two gold mines on stream.

Glencar's first mine, the Teberebie gold prospect in Ghana, was brought into production in the late 1980s but then had to be sold on after the 1987 stock market crash. Teberebie has since turned out to be one of the biggest gold mines in Ghana.

The success of the Teberebie mine led Glencar to concentrate its resources on gold exploration in Ghana, with the result that the Wassa mine began production in January last year. The mine was developed by Satellite Goldfields, which is owned 90 per cent by Wassa Holdings and 10 per cent by the Ghanaian government. Glencar, in turn, owns 66 per cent of Wassa and, as a result, owns 59 per cent of the Wassa mine.

Developing the Wassa mine has not come cheap for Glencar, with the $42.5 million (€43.2 million) capital cost coming from loans from Standard Bank and the Commonwealth Development Corporation.

That was sufficient to bring Wassa into production and begin gold production at a rate of 10,000 tonnes of ore a day with a target production of 130,000 ounces of gold a year. Engineering & Mining Journal estimated last November that that was equivalent to operating costs of $145 per ounce of gold, putting Wassa among the lowest cost gold producers in the world.

Reserves were then estimated at 23 million tonnes of ore, which would produce 1.04 million ounces of gold over the life of the mine.

Glencar's current problem is that it is not getting the gold recovery rates that it expected to get from the thousands of tonnes of ore being produced at Wassa, and that has meant that the project failed to reach "economic completion" by the end of last September, the date originally agreed with the lending banks. Those banks agreed to extend the "economic completion" date until the end of next month, but yesterday's events and the fact that Glencar is back talking to the bankers suggest that this revised date will not be met.

Glencar was guarantor for the senior finance for the development of Wassa and planned to provide a further $5.5 million in working capital for the mine. These funds, which were to have come from the aborted rights issue, were to be provided, to Satellite Goldfields as a loan.

In the prospectus on the aborted rights issue, Glencar did not disguise the fact that it was not getting the gold recovery it had targeted because of technical problems and a higher clay content in the ore being mined in the first year than in ore mined in subsequent years. The group did say, however: "It is expected, over time, that gold recoveries achieved at Wassa will be at, or close to, original feasibility study levels."

But chief executive Mr Hugh McCullough said yesterday that production assumptions made at the time the rights issue prospectus was prepared had since then been shown to be over-optimistic. In that situation, Glencar had little option but to postpone the rights issue. Otherwise the group could have been accused of raising equity finance from investors based on incomplete information.

Chairman Mr Richard Hooper said that, even before this latest problem, Glencar had received an approach from a mining major about buying into Wassa. If that mining major is still interested in investing in Wassa, it is fair to say that it will strike a harder bargain and that Glencar's shareholding might be diluted.

Glencar's other options are to renegotiate its arrangements with the lending banks, which have already extended the "economic completion" deadline by six months or hope that the rights issue can be reactivated sooner rather than later so that the group can provide the working capital it is required to provide as guarantor of the senior finance.