Irish-based Glencar Mining Plc said on Tuesday it would sell its Wassa gold mine in Ghana as depressed prices and a production shortfall meant the project was unable to meet its scheduled debt repayments.

Last year Glencar raised $5.35 million to overcome a cash shortfall at Wassa caused by slow recoveries from the leaching process and a lower-than-expected gold price, the company said in a statement.

"...the anticipated increase in the recovery rate was slower to become established and instead of experiencing an increase in gold price there was a further significant fall which was not sufficiently offset by the limited protection provided by the company's hedge position," the statement said.

Glencar Chief Executive Hugh McCullogh told Reuters the company had designed its hedging strategy in mid-1997, when gold was trading at about $360 an ounce, compared with current priceds of around $274.

"We were limited in what hedging we could do. Originally, with a higher and more vibrant gold market we could have done puts and calls and exotic options," McCullogh said.

"But in a declining gold market we could only do flat forwards," he said, adding that Glencar did a flat forward for 292,000 ounces at $324 for a period of four years.

"We used up a lot of that hedge book. We didn't hedge enough, that's the problem. We are totally unhedged now," McCullogh said.

A flat forward is a sale over a period of time during which prices are averaged out for the period covered by the contract.

Glencar's total bank debt amounted at present to $32 million, McCullogh said.

Apart from the declining gold market, start-up delays and operational problems had compounded the problems at Wassa, he added.

Glencar's statement said a division of Standard Bank London had been appointed to conduct the sale of Wassa.

The mine, which employed 400 people, initially produced 100,000 ounces per annum but eventually output dropped, with figures showing total production at the mine in January and February of 13,200 ounces, well below expectations.