Quarterly Results (3353A)

TIDMNGL

RNS Number : 3353A

Norseman Gold PLC

31 January 2011

Norseman Gold plc / Epic: NGL / Index: AIM / Sector: Mining & Exploration

31 January 2011

NORSEMAN GOLD PLC

('Norseman Gold' or 'the Company')

Three-Month Report On Activities For The Period Ended 31 December 2010

Norseman Gold, the AIM-listed and ASX-listed Australian gold production and exploration company is pleased to announce a three-month progress report on its activities for the period to 31 December 2010.

Overview

-- The Company's capital investment programme continued during the quarter with expenditure of A$14.6M on exploration, capitalised mine development and equipment.

-- The Company's efforts to improve its production have not yielded a positive result in the December 2010 quarter, however, the Company's new ore sources, OK Decline and North Royal Open Pit, are poised to make a marked contribution during the March 2011 quarter.

-- The Company remains committed to its "fill the mill" strategy and has made significant progress in the development of its two new mines that will ultimately result in the Company achieving its forecast 140,000 ounces per annum.

-- OK Decline, the company's third mine, has commenced producing ore from stoping, which is anticipated to increase during the March 2011 quarter.

-- Mining activities commenced in December 2010 at North Royal Open Pit the company's fourth mine. The first parcel of low-grade ore was mined in early January 2011.

-- The Company achieved record total underground development of 2,587 metres during the quarter as the focus continued on opening up more working areas to improve production performance.

-- Gold production from the Norseman Gold Project during the three months to 31 December 2010 totalled 11,162 ounces at a cash operating cost of A$1,342 per ounce gold, generating a Project EBIT of (A$5.4M).

 
                                         3 Months to   3 Months to 
                                            31/12/10      30/09/10 
 Production                       oz          11,162        12,229 
 Average Realised Gold Price    A$/oz          1,385         1,356 
 Operating Cash Cost            A$/oz          1,342         1,041 
 Project EBIT                   A$(m)          (5.4)         (1.1) 
 Capital Investment             A$(m)           14.6           6.8 
 Cash at Quarter End (incl. 
  bullion)                      A$(m)           17.1          10.9 
 
 

Operating Review

Gold production from the Norseman Gold Project during the three-month period to 31 December 2010 totalled 11,162 ounces; the Bullen Decline contributed 3,348 ounces, the Harlequin Decline contributed 5,950 ounces and the OK Decline contributed 1,113 ounces. The remaining 750 ounces came from the treatment of low-grade stockpiles.

During the quarter, gold production from the Norseman Gold Project exceeded 250,000 ounces recovered since the Company took over the operations in May 2007. To date the Company has recovered 8 tonnes of gold from the project.

The gold price received during the quarter ranged from A$1,350 to A$1 428 per ounce, with an average price achieved of A$1,385 per ounce. As a result of the lower production profile, the net direct cash operating costs per ounce for the quarter were A$1,342 per ounce of gold recovered. The operations remain un-hedged with a gold price of approximately A$1,339 per ounce at present.

Production

 
                           3 months 
                              to       3 months to   3 months to   3 months to 
                           31/03/10     30/06/10      30/09/10      31/12/10 
 Capital 
  Development   Metres           744           415           628         1,080 
 Ore 
  Development   Metres         1,272         1,682         1,687         1,507 
 
 Development    Tonnes        41,329        46,622        51,793        51,796 
 Grade           gAu/t          2.28          2.69          3.62          1.35 
 
 Mechanised 
  Stoping       Tonnes        12,193        11,770         4,261         8,437 
 Grade           gAu/t          2.50          1.80          3.14          5.47 
 
 Airleg 
  Stoping       Tonnes        35,367        30,145        21,767        28,181 
 Grade           gAu/t          9.15         10.55          8.60          8.29 
 
 U/G 
  Production    tonnes        88,889        88,537        77,821        88,414 
 
 Treated 
  Tonnes        Tonnes        89,047        89,015        92,346       113,066 
 Grade           gAu/t          5.05          5.23          4.27          3.24 
 Recovery          %           97.7%         96.7%         96.6%         94.8% 
 
 Recovered 
  Ounces          Ozs         14,114        14,469        12,229        11,162 
 

The Company continued to develop reef at the three underground mines, again exceeding the record development set in the previous quarter by completing 2,587 metres of underground development. This development continues to access further ore sources to be stoped in the future and will ultimately stabilise production from the underground mines at a more acceptable level.

Capital development at the Bullen Decline continued in the Norseman Incline, and the access to St Patrick's reef was completed. The development rig is now driving towards the old workings surrounding the Regent shaft to complete the ventilation circuit for this part of the mine. It is also anticipated that there will be remnant resources available in this area to be mined.

Additionally, work to access the high-grade O'Brien's Reef continued, although this was suspended for the last month of the quarter to allow the drilling of the Bullen West reef. Ore development continued on the upper St Patrick's reef. The production performance at Bullen has improved during the quarter but is still not up to expectations. The productivity improvement should continue into the March 2011 quarter.

The Harlequin Decline performed poorly during the quarter. Ore development concentrated on the Redfin-Perch reef to open up blocks for airleg and mechanised stoping. The development has extended through the low-grade area in the orebody to the known high-grade blocks by the end of the quarter. This long-length ore development in the Perch reef has reduced productivity and caused issues with ventilation and power to the working areas. It has also caused issues with scheduling as the orebody is not closed off along strike. A revision of the mine plan will result in the return of production to more acceptable levels but will take some months to complete. A shortage of operators and a tighter labour market through December 2010 has further exacerbated the issues, but recruitment and training are being addressed and again the March quarter should see an improvement in staffing.

Diamond drilling of the Perch reef at Harlequin will recommence in the March 2011 quarter in an effort to delineate the extent of this reef and to enable better planning of the mining of it. Also, a new footwall reef that has developed under the Perch reef will also be drilled to ensure that the mining and development of this additional high-grade reef does not further affect production at Harlequin.

At the OK Decline capital development continued to open up working areas during the quarter. Ore development took place in a number of headings on the Main, O2 and Star of Erin reef. Stoping commenced at OK in October 2010 but was slowed by the installation of the emergency egress ladder-ways in the areas of the mine that were due to be stoped. The installation is expected to be complete by the end of January 2011 and this will allow four stopes to be commenced resulting in a significant increase in the tonnes produced from this mine.

The final installation of infrastructure underground for the continued dewatering of the mine was also completed. Water from the historic working areas and water produced from mining activities can now be pumped to the treatment plant as process water, and dewatering to the bottom of the mine where known high grade stoping blocks exist can now proceed. At the time of writing dewatering efforts had advanced below the mine 17 Level.

Production Outlook

The Company's efforts to improve its production have not yielded a positive result in the December 2010 quarter, including the fact there has not been a significant increase to gold production by the commencement of stoping at OK Decline, nor from ore mining at North Royal. However, both of these new ore sources are poised to make a marked contribution and as a consequence, the Company is confident that there will be a production improvement during the March 2011 quarter that will reflect the introduction of these new ore sources to the treatment plant.

The Company expects that full time milling will commence in February 2011, initially with low-grade ore and then higher grade ore as the production increases and lower grade material is able to be stockpiled.

The Company will be reviewing its forecast in the future once it has established the production profile of these two new major ore sources.

The Company remains committed to its "fill the mill" strategy and has made significant progress in the development of the OK Decline and on the North Royal Open Pit, progress that will ultimately result in the Company achieving its forecast 140,000 ounces per annum.

Operating Costs

As a result of the lower production profile, the net direct cash operating costs per ounce for the quarter were A$1,342 per ounce of gold recovered and the Norseman Gold Project generated Earnings Before Interest and Tax ('EBIT') of (A$5.4) million. The Norseman Gold Project EBIT does not include the corporate costs of Norseman Gold Plc.

Cash Balances

Cash balances at the end of the period totalled A$17.1 million (A$15.4 million excluding bullion). Approximately A$6.1 million of this cash balance is committed to cash-backed environmental bonds.

Capital Expenditure

Capital expenditure continued to be focussed around the development of the OK Decline. Expenditure was also incurred on drilling and pre-development work at the North Royal Open Pit.

A total of A$14.6 million in capital was invested during the December 2010 quarter. Significant capital expenditures made during the quarter were on fixed and mobile plant and equipment (A$5.5 million), exploration (A$3.2 million) and capitalised mine development (A$4.6 million).

The capital investment in the December quarter takes the total capital invested for the year to date to $21.5 million of which $20.4 million has been funded from cash resources. This represents a significant investment in the future of the Norseman Gold Project and is already nearly 70% of the total capital invested from cash resources for the entire 2009/10 financial year.

Mine Exploration

Underground diamond drilling continued to return excellent results during the quarter including the best single intersection from the Bullen Decline since the company took control in May 2007.

The diamond drill rig at the Bullen Decline moved to the potential extension of the Bullen and Bullen West reef during the quarter. The geology of the target area has proven to be complicated and the diamond drill rig has moved from its initial location at the Bullen 22 Level stockpile to the O'Brien's Decline to better target the potential extension to the Bullen West reef. Significant intersections are as listed below:

Bullen West

-- 1.4m @ 451.6 g/t gold from 154.5m including

o 0.4m @ 1,734.0 g/t gold from 155.5m and

-- 0.5m @ 17.0 g/t gold from 180.0m in drill-hole BN864

Harlequin drilling continued to focus on targets that might provide another work area away from the current concentration around the Redfin-Perch reef. It is expected that the drill rig will move back to the drilling of the Redfin-Perch reef during the March 2011 quarter. Significant intersections from the drilling of HV10 and HV1E are as listed below:

HV10

-- 0.9m @ 70.9 g/t gold from 107.9m including

o 0.5m @ 120.0 g/t gold from 107.9m in drill-hole HD1871

-- 0.5m @ 35.6 g/t gold from 128.0m and

-- 0.1m @ 40.9 g/t gold from 131.5m in drill-hole HD1877

HV1E

-- 0.7m @ 28.6 g/t gold from 161.0m including

o 0.4m @ 40.2 g/t gold from 161.0m in drill-hole HD1882

The OK Decline diamond drill rig continued the programme to target the Star of Erin reef along strike from the current proposed working areas. During the March 2011 quarter, this rig will commence drilling the OK Main reef structure following completion of the Star of Erin reef programme. Further significant intersections received for the Star of Erin reef are as listed below:

-- 2.0m @ 5.2 g/t gold from 32.7m and

-- 0.7m @ 8.7 g/t gold from 154.4m in drill-hole OKD274

-- 1.3m @ 49.4 g/t gold from 114.2m including

o 0.3m @ 228.0 g/t gold from 114.2m in drill-hole OKD350

-- 5.4m @ 2.1 g/t gold from 84.4m in drill-hole OKD352

-- 0.5m @ 10.7 g/t gold from 98.2m and

-- 0.9m @ 42.0 g/t gold from 214.1m in drill-hole OKD359

-- 0.4m @ 17.1 g/t gold from 75.6m in drill-hole OKD360

-- 0.3m @ 55.0 g/t gold from 81.3m in drill-hole OKD361

-- 1.0m @ 9.9g/t gold from 68.2m and

-- 1.4m @ 9.1 g/t gold from 90.0m in drill-hole OKD371

-- 1.5m @ 6.3 g/t gold from 113.4m in drill-hole OKD374

-- 1.2m @ 5.4 g/t gold from 68.5m in drill-hole OKD394

-- 0.4m @ 14.1 g/t gold from 71.1m in drill-hole OKD396

Regional Exploration and Mine Development

The main focus for the exploration and developments efforts of the Company during the December 2010 quarter was to continue to ensure that the development of the North Royal open pit proceeded in a timely manner. In addition, work continued on the previously reported drill programme at Butterfly Deeps.

North Royal Open Pit

The Company has continued to advance the North Royal Open Pit during the quarter, to the extent that mining activities commenced in December 2010.

Dewatering continued and the pit was 77% dewatered at the end of the quarter. The dewatering rates have continued to improve although the pumps now have to be moved in-pit more often as the rate of vertical drop of the water level accelerates. At the time of writing, the dewatering was over 80% complete and is now at a level that mining can be undertaken unhindered whilst the remaining 20% is dewatered.

All regulatory approvals have now been received and additional environmental bonds have been lodged with the regulatory bodies to enable open pit mining.

The open pit earthmoving contract has been awarded and the contractor has mobilised a majority of the fleet to site. Site facilities are being established and the work force continues to be mobilised. Full time operations on twenty-four hour, seven day a week mining were started in January 2011.

The drill and blast contract has also been awarded and the first round of grade control drilling has commenced. The contractor will fully mobilise in early February 2011 when more grade control is required, and when drill and blast is expected to commence. First low grade ore was excavated in early January 2011, with first high grade expected late March 2011.

Recruitment of Norseman Gold staff to manage the North Royal Pit is well advanced with engineering and geology functions recruited and management positions near complete.

The second round drilling of the Tiara reef was completed to infill and extend the mineralisation intersected in the first round drilling with the significant results listed below. Further drilling is required for the area however there is difficulty in accessing sites adjacent to the current pit excavation. More suitable locations to follow up on this reef will be made available as the new pit cutback is mined.

-- 2.0m @ 2.9 g/t gold from 97.0m and

-- 1.0m @ 9.0 g/t gold from 107.0m in drill-hole NRRC162

-- 7.0m @ 4.3 g/t gold from 100.0m including

o 1.0m @ 14.9 g/t gold from 105.0m in drill-hole NRRC164

-- 6.0m @ 1.1 g/t gold from 98.0m in drill-hole NRRC168

-- 3.0m @ 2.2 g/t gold from 114.0m in drill-hole NRRC169

-- 2.0m @ 2.6 g/t gold from 128.0m in drill-hole NRRC170

-- 6.0m @ 1.2 g/t gold from 149.0m and

-- 2.0m @ 3.8 g/t gold from 159.0m in drill-hole NRRC171

-- 3.0m @ 7.8 g/t gold from 97.0m including

o 1.0m @ 17.1 g/t gold from 98.0m and

-- 12.0m @ 4.8 g/t gold from 135m including

o 1.0m @ 7.9 g/t gold from 137.0m

o 1.0m @ 12.2 g/t gold from 138m

o 1.0m @ 5.3 g/t gold from 139.0m

o 1.0m @ 5.1 g/t gold from 140.0m

o 1.0m @ 7.8 g/t gold from 144.0m in drill-hole NRRC174

Follow up drilling of the intersections from sterilisation drilling of the area outlined for the waste dump for the initial pit operations was completed during the quarter. The only significant result is listed below and the area of laterite mineralisation has now been effectively closed off.

-- 2.0m @ 3.4 g/t gold from 23.0m including

o 1.0m @ 6.5 g/t gold from 24.0m in drill-hole NRRC131

Butterfly Deeps

Exploration has continued drilling the underground target, Butterfly Deeps, from a drill location at the Bullen Decline. This target is an interpreted high-grade shoot down plunge of historic stoping areas in the old Butterfly workings. During the quarter the drilling progressed towards the prospective part of the target area and the following significant results were received:

-- 0.7m @ 40.6 g/t gold from 236.0m in drill-hole BFD007

-- 1.3m @ 13.8 g/t gold from 322.1m including

o 0.8m @ 17.9 g/t gold from 322.1m in drill-hole BFD008

-- 0.8m @ 11.0 g/t gold from 275.2m in drill-hole BFD009

-- 1.3m @ 6.3 g/t gold from 339.3m in drill-hole BFD010

-- 2.9m @ 2.4 g/t gold from 410.9m and

-- 2.7m @ 2.9 g/t gold from 423.0m including

o 0.7m @ 8.6 g/t gold from 424.0m in drill-hole BFD012

-- 1.9m @ 10.6 g/t gold from 292.7m including

o 1.0m @ 19.2 g/t gold from 292.7m in drill-hole BFD018

To date drilling has confirmed the expected model, which is a gold shoot below the historic Butterfly workings, south of where the Golden Fault is projected to intersect the Butterfly reef; the better drilling intersections reported above are located on and to the south of where the Golden Fault cuts the Butterfly reef.

The current drilling platform at Bullen 18 Level is not satisfactory to continue to test Butterfly Deeps much further south so a new drill location will be established to allow the continuation of this programme. In the meantime, the drill rig will move to a location to commence drilling the Crown Reef to the north and below the 300 m RL, targeting the previously defined resource.

Corporate Review

The Company is continuing on with its strategy to "fill the mill" and expects there will be noticeable improvements in gold production from the project when full time milling is resumed.

Initially, the mining schedule delivers low-grade ore only to commence this process but shortly thereafter, production from OK Decline and North Royal Open Pit will fill the treatment plant to capacity with normal ROM feed. Accordingly, it is anticipated that the gold production levels will rise to the forecast levels of 30,000 to 35,000 ounces per quarter by the end of the June 2011 quarter.

The Company will be reviewing its forecast once it has established the production profile of the two new major ore sources, and has had time to more accurately determine what is the achievable mill throughput once the blending of ore from all sources is taking place.

Competent Persons - Consent for Release

The information in this report that relates to Exploration Results, Mineral Resources and Ore Reserves is based on data generated by employees of Central Norseman Gold Corporation Limited who have the relevant experience and qualifications to qualify as competent persons.

The parts of this report that relate to Exploration Results, Mineral Resources and Ore Reserves were compiled by Barry Cahill using that data. He is a Member of the Australasian Institute of Mining and Metallurgy and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". He has consented to the inclusion in the report of the matters based on this information in the form and context in which it appears.

Significant results for drill-hole intercepts contained in this report are considered significant because the grade by width total is equal to or greater than 5.0 gram metres per tonne. That is if the intercept is 1.0 g/t gold over 5.0 m, 5.0 g/t gold over 1.0 m, 50 g/t gold over 0.1 m etc it is considered significant.

Quoted resources and reserves are as per the Company's market release of 25 August 2010 and as tabulated below.

TABLE 1: March 2010 Open Pit & Underground Resource and Reserve Summary

 
 Summary 
 for                Open Pit - 31 Mar                Underground - 31 
 Norseman                  2010                           Mar 2010                         Total 
-----------  -------------------------------  ------------------------------  ------------------------------- 
                           Grade                           Grade                            Grade 
                            g/t     Ounces                  g/t     Ounces                   g/t     Ounces 
                Tonnes      gold      gold      Tonnes      gold      gold       Tonnes      gold      gold 
-----------  -----------  ------  ----------  ----------  ------  ----------  -----------  ------  ---------- 
 Reserve - 
  Proved               0    0.0            0     230,000   12.0       89,000      230,000   12.0       89,000 
-----------  -----------  ------  ----------  ----------  ------  ----------  -----------  ------  ---------- 
 Reserve - 
  Probable       440,000    3.2       45,000   1,100,000    7.9      280,000    1,500,000    6.8      330,000 
-----------  -----------  ------  ----------  ----------  ------  ----------  -----------  ------  ---------- 
 Total 
  Reserve        440,000    3.2       45,000   1,300,000    8.9      370,000    1,700,000    7.7      420,000 
-----------  -----------  ------  ----------  ----------  ------  ----------  -----------  ------  ---------- 
 Resource - 
  Measured     5,000,000    0.7      110,000     410,000   14.4      190,000    5,400,000    1.7      300,000 
-----------  -----------  ------  ----------  ----------  ------  ----------  -----------  ------  ---------- 
 Resource - 
  Indicated    3,600,000    2.6      300,000   2,200,000   10.9      770,000    5,800,000    5.9    1,100,000 
-----------  -----------  ------  ----------  ----------  ------  ----------  -----------  ------  ---------- 
 Resource - 
  Inferred     4,100,000    5.8      760,000   6,200,000    8.0    1,600,000   10,000,000    7.5    2,400,000 
-----------  -----------  ------  ----------  ----------  ------  ----------  -----------  ------  ---------- 
 Total 
  Resource    13,000,000    2.9    1,200,000   8,800,000    8.9    2,600,000   21,000,000    5.3    3,800,000 
-----------  -----------  ------  ----------  ----------  ------  ----------  -----------  ------  ---------- 
 

Notes:

1. As is required the Resources and Reserves are calculated and reported in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, The JORC Code, 2004 Edition.

2. Resources are inclusive of reserves.

3. Resources and reserves are quoted to two significant figures so inconsistencies may exist within the table.

Forward-Looking Statements

This regulatory news release contains certain forward-looking statements which include assumptions with respect to future plans, results and capital expenditures. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. All such forward-looking statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Please refer to the Company's Admission Document available from the Company's web site for a list of risk factors. The Company's actual results could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits the Company will derive there from. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release.

* * ENDS * *

For further information visit www.norsemangoldplc.com or contact:

Barry Cahill Norseman Gold Plc Tel: [phone]

Guy Wilkes Ocean Equities Ltd Tel: [phone]

Nandita Sahgal Seymour Pierce Ltd Tel: [phone]

Jeremy Stephenson Seymour Pierce Ltd Tel: [phone]

Hugo de Salis St Brides Media & Finance Ltd Tel: [phone]

E-mail [e-mail]

Note to editors:

Norseman Gold plc is an AIM listed and ASX listed Australian gold production company, which acquired the Norseman Gold Project in May 2007 Australia's longest continually running gold operation. The Norseman Gold Project is located in the Eastern Goldfields of Western Australia in the highly prospective Norseman-Wiluna greenstone belt, 725km east of Perth and 186km from Kalgoorlie.

Gold was first found on the Norseman field in 1894 and over the last 65 years, it has produced over 5.5 million ounces of gold. The mine is currently producing from three high-grade narrow-vein underground mines - the Bullen, the Harlequin and the OK Declines and developing the North Royal Open Pit. Currently, it has a total resource inventory of 3.8 million ounces of gold at an average grade of 5.3 g/t.

The tenements cover a 2,180 sq km area centred on the Norseman Township. The landholding comprises 221 tenements consisting of 16 Exploration Licences, 107 Mining Licences, 64 Prospecting Licences, 15 Miscellaneous Licences, 5 Exploration Licence Applications, 13 Prospecting Licence Applications and 1 Mining Lease Application.

The Company's strategy is focused on extending the mine life through the conversion of resources into reserves and identifying additional resources and obtaining additional ore for the operating mill through the development of additional mines. The Company has fifteen advanced resource projects under review of which three have pre-development work being undertaken on them. It is anticipated that at least one, if not all the pre-development projects will develop into mining propositions.

This information is provided by RNS

The company news service from the London Stock Exchange

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