In a release to the Australian Stock Exchange on Tuesday, the company said the loss included $12 million of non-cash items, of which just over $10 million was attributed to the structure of the gold forward sales through to December 31, 2008. The remainder of the loss was attributed to Kainantu.

Highlands, which produced around 9500 ounces of gold-in-concentrate for the half-year after commencing operations in January, said it was currently in discussions with its financiers with a view to restructure its gold hedge book “to better reflect the production profile of the Kainantu mine”.

Upon the successful restructuring of the hedge book, these unrealised, non-cash losses will be reversed out of the company’s accounts.

The Kainantu operation, currently in the ramp-up stage, was expected to produce at annual rate of around 115,000 ounces per annum, however, the company plans to increase output at the mine to around 265,000ozpa within three years.

Two incidents earlier this year – a landowner dispute and flooding – also forced the company to halt production for several days.

In March, the company’s general manager of finance and chief financial officer Jeff Forbes resigned after working with the company since August 1998.