EIGHT people could be left out of work at a Kangaroo Flat mining project after an industry regulator refused to renew GBM Gold's licences, CEO John Harrison says.

The workers began processing mining sand for gold and other metals in recent months but Earth Resources' decision to refuse GBM mining licences has frozen the project, he said.

GBM Gold had spent $1.6 million on the project to clean sand for industrial purposes.

"It's an important part of our rehabilitation strategy for Kangaroo Flat, turning a waste product into a valuable resource," Mr Harrison said.

Earth Resources refused to renew mining licences of Kralcopic, a GBM subsidiary, on Friday due to concerns it was unable to provide surety of its finances.

"GBM Gold is a bendigo-based company that has been employing Bendigo residents for the past 12 years and spent in excess of $25 million," Mr Harrison said.

"This decision threatens the company and the investment of its 684 shareholders, of which the largest grouping in Victoria are Bendigo residents."

GBM's board is still examining its options, Mr Harrison said.

"As you would understand, we were only told what was happening at a-quarter-to-six on Friday night and my directors are in Hong Kong and Singapore," he said.

"It's taken a while to start sorting out what it means for us and what we need to do.

"I think legal action is the only option, unless the regulator starts to relent."

Earth Resources executive director Anthony Hurst said last Friday that Kralcopic "was given every opportunity to demonstrate it had the finance, but the company has been unable to provide the necessary detail".

"Communities need to have confidence that mine operators will be held accountable by the state's mining regulator to fulfill their obligations," he said on Wednesday.

GBM is in the midst of its largest ever fundraiser to pay off debts and start projects in Bendigo, Mr Harrison said.

It wants to raise $6.7 million through a rights issue on the ASX.

Mr Harrison has confirmed the rights issue will still go ahead on 9 September, with the backing of underwriter Metropolis Enterprised Group Limited.

Earth Resources declined to renew licences two days after GBM shared a new rights issue prospectus with the ASX.

"The information Kralcopic is referring to in their stock exchange update was known when we made our decision not to renew their licences and we remain unsatisfied they can meet their requirements - this does not change the situation," Mr Hurst said on Wednesday.

GBM Gold is still seeking joint-venture partners to turn disused Woodvale evaporation pond into a solar farm capable of powering thousands of homes across Bendigo.

"Losing the licence doesn't change that," Mr Harrison said.

The evaporation ponds were once used to store water pumped out of mines.

Earlier

THE state's mining regulator has set a "bad precedent" by declining to renew mining company GBM Gold's mining licences, the CEO John Harrison says.

The regulator's decision sent a negative signal to the market on risks to junior mining exploration companies in Victoria, John Harrison said a statement scheduled for release to the Australian Stock Exchange today.

"We are considering our options to appeal against the decision including, but not limited to, resorting to any judicial review," he said.

GBM has been forced to stop work on its Kangaroo Flat project that could see mining and processing of potentially-gold laden sand, Mr Harrison said.

"The future of this project is now in extreme doubt even though the wash plant to recover the contained gold and sulphides was increasing output up to full production," he said.

Earth Resources decided not to renew the licences last Friday out of concerns the company was not able to finance its operations and meet obligations at its Bendigo sites.

The regulator based its decision on financial details provided by GBM's subsidiary Kralcropic, which were independently assessed by consultant Pricewaterhouse Coopers.

More: Regulator refuses to renew mining licences

GBM Gold suspended trading on the ASX last October after several delays and unsuccessful attempts sourcing money to repay $3.5 million in loans to previous owners Unity Mining.

It is trying for the second time this year to $6.7 million for those loans and to fund future ventures with a rights issue, the company stated in documents submitted to the ASX on 14 August.

A previous attempt was abandoned in June after Nex Kiwi Group Holdings Limited - a group that had agreed to underwrite a previous rights issue - terminated its agreement with GBM.

The mining company has since entered a new underwriting agreement with Metropolis Enterprises Group Limited.

Earth Resources declined to renew licences two days after GBM shared its second rights issue prospectus with the ASX.

"After being informed of this latest development, the underwriter ... reaffirmed to GBM Gold that it will continue its underwriting commitment to the rights issue with all terms and conditions remaining intact," Mr Harrison said.

"Metropolis also confirmed that it will arrange further funding to support GBM Gold's future development as described in the prospectus lodged 14 August 2019."

Earth Resources said on Friday that Kralcropic's Bendigo sites would be exempted from applications for future mining licences until the government and community had been consulted.

Plans to rehabilitate the Woodvale evaporation ponds would not be affected by Earth Resource's decision, the regulator said.

More to come.

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