L&M mining's Earnscleugh flats gold dredge near Alexandra has sunk and staff are working around the clock to refloat the 400-tonne vessel, which is integral to the $3 million start-up operation.
L&M Mining's owner, Geoff Loudon, wants to reassure the 35 full-time staff their jobs are safe and the priority is to pump out, refloat, beach and repair the dredge, which weighs up to 850 tonnes when laden with gravel.
Mr Loudon said it was still too early to estimate how long the salvage and repairs would take, and when operations could resume.
Mr Loudon said staff noticed about dawn on Monday that the dredge was taking on water. It ''quickly settled'', but there was ample time to safely get off the vessel.
''We don't know the cause, but most likely it was a leak,'' Mr Loudon said.
The 30m by 12m dredge sat on steel pontoons. The deck was under about 2m of water in the pit, but access was relatively easy as most of the dredge's superstructure was above water, Mr Loudon said. He described much of the equipment on the dredge as ''indestructible'', and noted the diesel engine was not going at the time it sank, meaning water had not flooded the pistons.
''We're going hammer and tongs to get it refloated. With no production, there's no gold, and we want the 35 to be employed,'' Mr Loudon said.
He denied a request to access the pit, as the operation was ''in lock-down'' while the ''situation was still being assessed''.
The Earnscleugh operation, on a 150ha block, is one of the country's largest alluvial gold-mining operations, processing about 150cu m of gravel an hour. The dredge came from Waikaka, in Southland, where operations had been mothballed in 2002 in the face of declining gold prices.
L&M Mining has estimated the Earnscleugh flats gold resource was about 110,000oz.
During the past year, it had returned on average about 750oz per month; varying from 500oz to 900oz per month, depending on the gravel quality, Mr Loudon said. He estimated there was four years' more work at Earnscleugh.
The 750oz would be worth $US1.24 million ($NZ1.47 million), at yesterday's spot gold price of $US1661.
The dredge had been used for ''many years'' by L&M, and was understood to have sunk twice while in operation on the West Coast, Mr Loudon said.
''Some of the old-timers are helping now, telling us what happened on the Coast,'' Mr Loudon said.
Because the dredge had been working for so many years for L&M, he declined to give an estimate of its replacement value, saying only that ''it would be fully repaired''.
L&M Mining initially started at Earnscleugh early in 2010, initially using a small ''pilot plant'' to assess the commercial viability of the gold prospect, before moving to full dredging operations early in 2011.
''We wanted to make sure the gold was there, and was recoverable,'' Mr Loudon said.
L&M told an Alexandra business forum in mid-2011 it was spending $10 million around Central Otago for the next six years of the operation.
The majority of the 150ha being mined was farmland, with 14 million cu m of gravel wash and 32 million cu m of overburden being processed. Both were gold-bearing gravels, with the wash containing the higher gold concentration.
The resource consents granted by the Central Otago District Council and Otago Regional Council contained 132 conditions, plus regular monitoring of noise, air, dust and water.
The tenement has never been mined before, but it is near the historic Earnscleugh Tailings Reserve, where gold was mined in the 19th and 20th centuries.
While privately held, L&M Mining Ltd was part of the wider L&M group, which until recently included stock exchange listed L&M Energy, of which Mr Loudon was chairman. He provided a $6.3 million bridging loan to the cash-strapped methane gas explorer last year, then successfully completed an almost $13 million takeover last week, with the company delisting from the New Zealand and Australian bourses early next month. The purchase price valued L&M Energy at $56.7 million.
