Quarterly Results (1261R)

TIDMNGL

RNS Number : 1261R

Norseman Gold PLC

31 October 2011

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

Final

NORSEMAN GOLD PLC

('Norseman Gold' or 'the Company')

Three-Month Report On Activities For The Period Ended 30 September 2011

Norseman Gold, the AIM-listed and ASX-listed Australian gold production and exploration company announces a three-month progress report on its activities for the period to 30 September 2011.

Overview

-- Mining continued at the North Royal open pit with an estimated 66,000 tonnes containing approximately 3,600 ounces of gold now stockpiled for blending with hard rock ore

   --      Hard rock ore is expected from the North Royal open pit in the December quarter 

-- Ore mined from underground and open pit operations increased for the third consecutive quarter

-- Gold produced for the quarter was 11,631 ounces at a direct cash operating cost of A$1,591 per ounce of gold

-- The production outlook is expected to improve through the next quarter as new personnel are employed to alleviate the current manpower issue in the underground mines and as the North Royal open pit continues to be mined towards hard rock ore

-- Cash on hand at the end of the quarter totalled A$8.9million, or A$7.5 million excluding gold bullion

-- Subsequent to quarter end Norseman completed a conditional GBP6.9m equity placement and GBP5.1m convertible loan note placement, appointed Northland Capital Partners Limited as Nominated Adviser and joint Broker and Mr. David Steinepreis to the Board of Directors (announced 26 October 2011)

 
                                         3 Months to 30/09/11   3 Months to 
                                                                   30/06/11 
 Production                       oz                   11,631        15,001 
 Average Realised Gold Price    A$/oz                   1,609         1,422 
 Operating Cash Cost            A$/oz                   1,591         1,081 
 Project EBIT                   A$(m)                   (5.5)         (1.0) 
 Capital Investment             A$(m)                     4.9           6.7 
 Cash at Quarter End (incl. 
  bullion)                      A$(m)                     8.9          11.3 
 
 

Operating Review

Gold production from the Norseman Gold Project during the three-month period to 30 September 2011 totalled 11,631 ounces, down 22% on the June 2011 quarter; the Bullen Decline contributed 3,619 ounces (down 27%), the Harlequin Decline contributed 4,796 ounces (down 22%), the OK Decline contributed 1,268 ounces (down 56%) and the North Royal Open Pit contributed 1,948 ounces (up 109%). As at the end of September 2011 the project stockpiles totalled 66,000 tonnes at 1.7 g/t.

Although recovered ounces decreased, total tonnes mined from both underground and open pit increased for the third quarter in succession, as did the total processed tonnes. The lower recovered ounces were therefore a reflection of a lower average grade. Stockpiled ore now totals approximately 66,000 tonnes containing an estimated 3,600 ounces of gold, a 1,600 ounce increase from last quarter. The Company is currently looking to add a third shift at the mill in expectation that it will begin operating at full capacity in the current quarter in line with its fill the mill strategy.

The gold price received during the quarter ranged from A$1,381 to A$1,765 per ounce, with an average price achieved of A$1,609 per ounce. As a result of the decreased production profile, the net direct cash operating costs per ounce for the quarter were A$1,591 per ounce of gold recovered. Actual direct operating costs remained stable in line with previous quarters and were under budget for the quarter. The operations remain un-hedged with a gold price of approximately A$1,630 per ounce at present.

Production

 
                                    3 months       3 months       3 months      3 months 
                                   to 31/12/10    to 31/03/11    to 30/06/11    to 30/0911 
 Capital Development    metres           1,080          1,003            576           596 
 Ore Development        metres           1,507          1,061          1,316         1,312 
 
 Development            tonnes          51,796         41,048         44,011        47,850 
 Grade                   gAu/t            1.35           1.54           2.49          1.68 
 
 Mechanised Stoping     tonnes           8,437         15,640         23,915        27,303 
 Grade                   gAu/t            5.47           3.42           3.78          3.28 
 
 Airleg Stoping         tonnes          28,181         28,951         30,265        28,571 
 Grade                   gAu/t            8.29           7.52           8.77          5.31 
 
 U/G Production         tonnes          88,414         85,639         98,191       103,724 
 
 Open Pit Waste           bcm                -        502,272        747,908       776,836 
 Open Pit Ore           tonnes               -         11,252         32,857        48,659 
              gAu/t                          -           1.84           1.90          2.84 
 
 Treated Tonnes         tonnes         113,066        114,099        112,084       118,384 
 Grade                   gAu/t            3.24           3.40           4.34          3.20 
 Recovery                  %             94.8%          94.4%          95.8%         95.5% 
 Recovered Ounces         ozs           11,162         11,781         15,001        11,631 
 
 Stockpiles             tonnes               -         12,000         32,000        66,000 
              gAu/t                          -            1.7            1.9           1.7 
 

Bullen Decline

Development at Bullen continued on access to the Mararoa reef ore, with headings mainly accessing low grade material on the way to the higher grade sections of the ore block. Ore development also continued in St Patrick's reef through narrow but high grade veins. However the expected improvement in the development rate for this quarter was slowed due to reduced manpower, although the Company is actively seeking to address this issue.

The pillar recovery programme at Bullen is awaiting the final geotechnical report after which a crew will be manned up and the programme will continue.

Harlequin Decline

Harlequin development continued on HV1, Mako and Perch reef. The development rates did not improve as expected during the quarter due to a lack of manning with the second single boom development jumbo stood down for a lack of experienced operators. The development continued in expected grade in Mako and Perch, but low grade in HV1. Slower than expected development advance and development past the expected reserve-resource boundary reduced the availability of long hole stoping areas, which are now targeted to come into production in the December 2011 quarter.

OK Decline

At the OK Decline development continued in the 02, 03 and Main reef, with minor stoping in the upper levels of the mine. The progress was hampered by the loss of manning due to personnel being allocated to Bullen and Harlequin to ensure that priority access to future high grade areas were developed during the quarter. This has meant that mining at the OK Decline has had to be scaled back to day shift only. Dewatering has advanced to the top of the 21 Level (lowest point at the 22 Level). Decline and access rehabilitation is required to access the ore on the 19 Level and below, which will occur once full manning is achieved and the development rates return to the targeted levels.

North Royal Open Pit

North Royal open pit continued in line with expectations during the quarter. As expected during this part of the year, time was lost due to the weather as the quarter encompasses the winter rainfall period. Excavation continued to focus on mining the pit down to hard rock ore blocks as quickly as possible. Harder rock has been encountered in the south west corner of the pit and in the central pit area, but not in areas where there was associated ore. The harder rock has been drilled in preparation for blasting. Drill and blast operations will become more routine during the December quarter as more fresh rock is exposed in the pit floor. Ore from harder rock is still expected in this, the December quarter, with quantities increasing as the pit is dug deeper.

Production Outlook

The Company has been focussed on the employment of experienced underground operators and has changed the remuneration packages and introduced incentive bonus schemes to encourage and retain its workforce. Recruitment to fill an estimated 60 vacancies on site has continued and a number of new employees are arriving in the December quarter. Once the manning levels are up to the required numbers then the production profile will improve as expected. Meanwhile, OK Decline will continue to be under resourced as resources are diverted to Harlequin and Bullen to ensure that the higher grade areas at Bullen and Harlequin are accessed in a timely manner.

The Company is continuing to focus on training new entrants to the mining industry, and training its current employees to improve their skills and capabilities to further relieve the operator shortage and to assist with retention. The Company is also in discussion with contract mining companies with a view converting at least one of the underground mines to contract mining in lieu of owner/operator mining.

The Company has also recruited a number of new technical staff who will arrive on site in the December quarter.

The production outlook is expected to improve through the quarter as new personnel are employed in the underground mines and the North Royal open pit continues to be mined towards hard rock ore.

Operating Costs

Due to the decrease in the recovered ounces the net direct cash operating costs per ounce for the quarter increased to A$1,593 per ounce of gold recovered and the Norseman Gold Project generated Earnings Before Interest and Tax ('EBIT') of ($5.5) million. The Norseman Gold Project EBIT does not include the corporate costs of Norseman Gold Plc. Actual operating costs remained in line with previous quarters, and were approximately A$1.9 under budget.

Cash Balances

Cash balances at the end of the period totalled A$8.9 million (A$7.5 million excluding bullion). Approximately A$6.1 million of this cash balance is committed to cash-backed environmental bonds and the Company estimates that it had approximately 3,600 ounces of gold sitting in stockpiles.

In addition, the loan facility provided by Red Kite announced in July 2011 has been fully drawn.

Subsequent to quarter end Norseman completed a conditional GBP6.9m equity placement and GBP5.1m convertible loan note placement (announced 26 October 2011).

Capital Expenditure

A total of A$4.9 million in capital was invested during the September 2011 quarter. The majority of this was in capitalised mine development (A$3.8 million) and capitalised exploration (A$0.9 million). This level of capital expenditure, a reduction from previous quarters, reflects the management's continued efforts to conserve cash resources while gold production has remained below expectations.

Mine Exploration

Underground diamond drilling operated between the single hydraulic rig and the smaller compressed air rig as drilling was confined to exploring extensional resources around current development.

Significant intersections from the drilling of Redfin and Perch reef are as listed below:

Redfin

   --     3.0m @ 1.8 g/t gold from 171.8m and 
   --     4.6m @ 2.5 g/t gold from 182.2m in drill-hole HD1971 

Perch

   --     1.7m @ 7.8 g/t gold from 172.0m including 

o 1.0m @ 11.5 g/t from 172.0m in drill-hole HD1926

North Royal drilling continued to focus on the grade control of the orebody as the pit benches were mined.

Corporate Review

During the quarter Mr. Michael De Villiers resigned as a director for personal reasons.

Subsequent to the end of the quarter the company announced the following items;

-- The appointment of Northland Capital Partners Limited ("Northland") as its Nominated Adviser and joint Broker.

-- The Company has raised GBP5,087,000 through a placing of secured Convertible Loan Notes and a conditional placing of up to 138,260,000 new ordinary shares of GBP0.0125 each in the capital of the Company at a price of 5p per share to raise an additional GBP6,913,000.

-- The Company has the appointed Mr David Steinepreis to the Board of Directors with immediate effect. David (aged 54) is a Chartered Accountant and a former partner of International accounting firm, KPMG, where he specialised in strategic corporate advice and taxation for listed companies. In 1987, Mr. Steinepreis entered commerce as a director, adviser and shareholder of a number of ASX listed companies in the gold, diamonds, oil and new mining technology sectors and since that time he has gained a reputation in the junior mining sector for building a series of successful enterprises in Australia and the UK. He is a UK resident since 2006, is Managing Director of AIM listed North River Resources Plc and was formerly a director of Norseman Gold Plc, having resigned on 30 July 2010 to pursue other interests.

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 28 July 2011 and as tabulated below.

TABLE 1: March 2011 Open Pit & Underground Resource and Reserve Summary

 
 Summary for            Open Pit - 31 Mar                Underground - 31                      Total 
  Norseman                     2011                          Mar 2011 
----------------  -----------------------------  -------------------------------  ------------------------------- 
                     Tonnes     Grade   Ounces      Tonnes     Grade    Ounces       Tonnes     Grade    Ounces 
                                 g/t      gold                  g/t       gold                   g/t       gold 
                                 gold                           gold                             gold 
----------------  -----------  ------  --------  -----------  ------  ----------  -----------  ------  ---------- 
 Reserve - 
  Proved               13,000    1.8        760      320,000    8.3       85,000      330,000    8.5       90,000 
----------------  -----------  ------  --------  -----------  ------  ----------  -----------  ------  ---------- 
 Reserve - 
  Probable          1,000,000    3.1     99,000      990,000    7.2      230,000    2,000,000    5.1      330,000 
----------------  -----------  ------  --------  -----------  ------  ----------  -----------  ------  ---------- 
 Total Reserve      1,000,000    3.1    100,000    1,300,000    7.7      320,000    2,300,000    5.7      420,000 
----------------  -----------  ------  --------  -----------  ------  ----------  -----------  ------  ---------- 
 Resource 
  - Measured        5,000,000    0.7    110,000      580,000   12.3      230,000    5,600,000    1.9      340,000 
----------------  -----------  ------  --------  -----------  ------  ----------  -----------  ------  ---------- 
 Resource 
  - Indicated       4,100,000    2.7    360,000    2,600,000    9.0      750,000    6,700,000    5.1    1,100,000 
----------------  -----------  ------  --------  -----------  ------  ----------  -----------  ------  ---------- 
 Resource 
  - Inferred        3,200,000    2.8    290,000    6,900,000    7.7    1,700,000   10,000,000    6.2    2,000,000 
----------------  -----------  ------  --------  -----------  ------  ----------  -----------  ------  ---------- 
 Total Resource    12,000,000    1.9    760,000   10,000,000    8.3    2,700,000   22,000,000    4.7    3,400,000 
----------------  -----------  ------  --------  -----------  ------  ----------  -----------  ------  ---------- 
 

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] 
   William Vandyk            Northland Capital Partners Ltd               Tel: [phone] 
   Rod Venables               Northland Capital Partners Ltd               Tel: [phone] 
   Susie Geliher                 St Brides Media & Finance 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 3.4 million ounces of gold at an average grade of 4.7 g/t.

The tenements cover a 2,360 sq km area centred on the Norseman Township. The landholding comprises 221 tenements consisting of 85 Exploration Licences, 108 Mining Licences, 3 Prospecting Licences, 15 Miscellaneous Licences, 5 Exploration Licence Applications, 3 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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