Restructure Update (3671Y)

TIDMNGL

RNS Number : 3671Y

Norseman Gold PLC

29 February 2012

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

29 February 2012

ASX:NGX

AIM:NGL

NORSEMAN GOLD PLC

("Norseman Gold" or "the Company")

Restructure Update

Norseman Gold, the AIM and ASX-listed Australian gold production and exploration company, is pleased to announce an update with regards to its restructuring process, following the Company's agreement with Australian resource specialist Tulla Resources Group Pty Ltd ('Tulla') announced on 16 February 2012. Tulla and Norseman Gold have commenced the site re-organisation and are moving rapidly to establish the profitable mine strategy with Tulla assuming management and operational control of the Norseman Gold Project's entire site.

The restructuring process is aimed at lowering operating costs, ensuring Norseman Gold develops in to a consistent 100,000 ounce producer within two years and increasing the Company's current resource inventory of 3.4 million ounces of gold at an average grade of 4.7 g/t through mine and regional exploration. As part of this restructuring process, Norseman Gold has executed a formal management agreement with a company associated with Tulla and Tulla has entered into an agreement to subscribe for A$10,000,000 of convertible loan notes ('Notes') in Norseman Gold.

More information on the strategy and results of the initial re-organisation will be provided in the next quarter report due by end of April 2012.

Set out below is a summary of the material transaction documents concerning the restructuring process.

   1.            Heads of Agreement for Restructure 

The heads of agreement is dated 14 February 2012 and is between Norseman Gold, its subsidiary Central Norseman Gold Corporation Ltd ('CNGC'), Tulla, EXP T1 Ltd ('Red Kite') and David Steinepreis as trustee of the Security Trust. The key material terms of the heads of agreement include:

   (a)       Tulla to subscribe for A$10,000,000 of Notes in Norseman Gold in two tranches: 

(a) A$3,500,000 conditional on execution of a general security agreement in favour of Tulla and a loan note instrument on the same terms as the convertible notes issued by Norseman Gold in October 2011 ('Tranche 1'). This has occurred.

(b) A$6,500,000 conditional on execution of the Tulla security documents (mining mortgages and a priority deed) and the management agreement ('Tranche 2').

(b) Norseman Gold to issue 10,000,000 Shares and 3,000,000 warrants to Red Kite conditional on shareholder approval.

   (c)       Norseman Gold to pay Tulla a loan facility fee of A$500,000 on 30 June 2012. 

(d) Norseman Gold to issue 20,000,000 warrants to L2 Project Management - Norseman Pty Ltd ('L2'), the manager under the management agreement and 15,000,000 warrants in total to David Steinepreis and Ascent Capital Holdings Pty Ltd, conditional on shareholder approval.

(e) Norseman Gold to make a placement of 50,000,000 shares at 6 cents each to raise A$3,000,000 and, subject to shareholder approval, a placement of 10,000,000 shares in total to David Steinepreis and Ascent Capital Holdings Pty Ltd or nominees to raise a further A$600,000.

(f) CNGC, Norseman Gold and Red Kite as the parties to a gold sales and purchase deed dated 30 June 2011 acknowledge that it is in good standing.

(g) Red Kite agree to a standstill arrangement in relation to the facility agreement between Norseman Gold and Red Kite dated 1 July 2011 for a period of three months conditional on Norseman Gold and CNGC not appointing a liquidator or administrator, no creditor taking enforcement action against Norseman Gold or CNGC, and neither Tulla nor David Steinepreis as trustee of the Security Trust calling an event of default.

(h) Norseman Gold to make a principal repayment of A$500,000 to Red Kite on 30 June 2012 in relation to the facility agreement. Further, Red Kite to agree to a moratorium on further principal repayments until 30 August 2012, with the July and August payments to be amortised over the remaining 10 month term of the facility agreement.

ASX announcements of 4 July 2011 and 26 October 2011 respectively address the initial transaction with Red Kite and the placing of convertible loan notes and associated warrants to investors.

   2.            Convertible Loan Notes issued to Tulla 

The Company issued the Tranche 1 Notes on 16 February 2012 and expects to shortly issue the Tranche 2 Notes. The Notes are not admitted to trading on AIM or ASX.

The Notes bear interest at a rate of 10% per annum payable quarterly in arrears (with the first payment due on 31 March 2012), have a maturity date of 10 February 2015, and will, subject to shareholder approval, be convertible by the holder into shares ('the Conversion Shares') at a price of 6 pence per share.

In addition, and subject to shareholder approval, Tulla is entitled to one warrant for each potential Conversion Share (calculated by reference to the nominal value of the Notes and rounded down to the nearest whole number). Each warrant entitles the holder to subscribe for a further share at a price of 12 pence per share at any time before the expiry date which is 36 months from the date of issue.

The conversion rights of the Notes and the issue of the warrants are conditional on receipt of shareholder approval. If these approvals are not obtained, the interest rate on the Notes will increase to 20% per annum and each Noteholder will be entitled to require redemption of its Notes at any time after 31 March 2012.

Redemption by Norseman Gold may occur on the maturity date or before the maturity date, provided that:

(a) the shares have traded on AIM in excess of 12 pence for a period of 10 business days preceding the redemption notice; or

   (b)       on lapse of conversion rights notified in the event of a takeover offer. 

Norseman Gold may purchase Notes at any time by agreement with the Noteholder.

Norseman Gold's obligations in respect of the Notes are secured by the general security agreement and mining mortgages referred to below.

   3.            Tulla Security Documents 

Tulla will be granted the following securities over assets of CNGC:

(a) a first ranking mining mortgage over various exploration licences of CNGC. Red Kite and David Steinepreis as trustee of the Security Trust will respectively take second and third ranking mining mortgages over these exploration licences;

(b) a second ranking mining mortgage over mining leases of CNGC being mining lease 63/13 and mining lease 63/14 which ranks behind the mortgage of Red Kite but ranks pari passu with the mortgage granted to David Steinepreis as trustee of the Security Trust; and

(c) a second ranking general security (including a fixed and floating charge) over all of the assets of CNGC which ranks behind the charge of Red Kite but ranks pari passu with the charge granted to David Steinepreis as trustee of the Security Trust.

To facilitate the Tulla securities, the existing priority arrangements between CNGC, Red Kite and David Steinepreis as trustee of the Security Trust will be amended.

   4.            Management Agreement 

The management agreement is between L2 as manager, CNGC as client and Norseman Gold as guarantor.

Under the management agreement:

(a) CNGC appoints L2 to manage and operate the day to day operations of the Norseman Gold Project. L2 is an entity that is associated with Tulla.

(b) L2 is entitled to full and exclusive possession of CNGC's assets. Ownership of all assets remains with CNGC.

(c) For its services, L2 is entitled to remuneration of A$250,000 per annum plus a 16% loading on all chargeable costs.

(d) The term of the management agreement is three years plus three years by mutual consent and then yearly by mutual consent. The management agreement may be terminated by CNGC by notice in the event that L2 is in breach of any material obligation which is not remedied within 30 days.

* * ENDS * *

For further information visit www.norsemangoldplc.com, email [e-mail] or contact:

David Steinepreis Norseman Gold Plc. Tel: [phone]

   William Vandyk / Rod Venables               Northland Capital Partners Ltd Tel: [phone] 

Guy Wilkes Ocean Equities Ltd Tel: [phone]

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

Notes

Norseman Gold plc is an AIM and ASX listed Australian gold production company, which operates the 2,360 sq km Norseman Gold Project, Australia's longest continually running gold operation. Located in the Eastern Goldfields of Western Australia in the highly prospective Norseman-Wiluna greenstone belt, the project currently has a total resource inventory of 3.4 million ounces of gold at an average grade of 4.7 g/t.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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