Norseman Gold Regulatory News (NGL)

5 May 2009 07:00



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 31 March 2009

Norseman Gold, the AIM-listed Australian gold production company, is pleased to announce a three month progress report on its activities for the period to 31 March 2009.

Gold production from the Norseman Mine during the three months to 31 March 2009 totalled 19,902 oz at a cash operating cost of A$693 per oz Au, ahead of the Company's target of producing 6,500 oz Au per month at a cash operating cost of between A$720 and A$780 per ounce. 

The cash generated by the mine for the quarter totalled A$12.2 million before capital investment, as the Company benefited from the continued high gold price which averaged A$1,352 per oz Au for the quarter. Since the end of the quarter, the gold price has decreased in A$ terms, and currently stands at A$1,200 per oz. Operations remain un-hedged. 

The Company's third mine strategy continued to gain momentum during the quarter. At the Ok Decline government approvals have been obtained for the underground drilling programme and the site set-up was well underway at quarter's end. Drilling will commence in the current quarter. At North Royal, progress on the purchase of the dewatering equipment is well advanced, however environment approvals have delayed the commencement of the dewatering at the historic open pit. 

Operating Review:

Gold production from the Norseman mine during the three month period to 31 March 2009 totalled 19,902 oz bringing production for the 12 months to 31 March 2009, to 79,856 oz. For the quarter, the Bullen mine contributed 9,151 oz, the Harlequin mine contributed 10,715 oz and other sources 36 oz.

The gold price received during the quarter ranged from A$1,206 to A$1,519 per oz, with an average price achieved of A$1,352 per oz. The operations remain un-hedged with a gold price of A$1,200 per oz at the date hereof.

Production

Production for the quarter was in excess of the Company's target of 6,500 oz per month, as the changes implemented in October 2008, as a result of the operational review  continue to have a positive effect on the mine. The grades from the stopes continued at expected levels and the focus has been on maintaining the production profile at or above the forecast levels. 

Operating Costs

Net direct cash operating costs for the March quarter were A$693 per oz, slightly less than the December quarter (A$701/oz) and a 13% decrease on the 2008 financial year. This is the lowest full quarter cash operating cost since Norseman Gold acquired the Norseman project.

The measures introduced as a result of the operational review have continued to have a positive impact on the operational costs at the mine. The challenge for the operations now is to maintain the momentum that has been established since the Company undertook and implemented the operational review aimed at reducing site operating cash costs to match the historical production levels of the site, and stabilising production. The site personnel have continued to improve on the efficiency and productivity levels established since the review throughout the quarter. 

Management has also commenced longer term projects that aim to reduce overall operating costs but require capital investment. Examples of these projects include improved systems to manage fuel consumption, equipment and infrastructure upgrades.

From an accounting profit and loss point of view, the Norseman Project generated Earnings Before Interest and Tax (EBIT) of A$9.9 million for the quarter.

Cash Balances

The cash balance at the end of the period was A$20.0 million (A$15.9 million excluding bullion). Approximately A$5.5 million of this cash balance is committed to the cash-backed environmental bonds that are in place.

During the quarter the Company raised approximately £5 million through the issue of new shares, the proceeds of which were used to redeem A$15 million in outstanding convertible notes. Loans of A$1.5 million from directors were also repaid during the quarter, and as at quarter end the Company was debt free, except for A$6.6 million in equipment finance leases. 

Capital Expenditure

A total of A$4.4 million in capital was invested during the quarter, mostly funded from cashflow. Significant capital expenditures from cash flow were made on exploration (A$0.8 million), capitalised mine development (A$1.9 million) and other fixed assets (A$0.4 million). In addition, the Company took delivery of a new Atlas Copco H104 single boom jumbo during the quarter, which is the last piece of equipment to be delivered under the equipment replacement package.

The capital expenditure for the next quarter is expected to increase as the costs for the pre-development projects at North Royal and OK Decline are incurred.

Mine Production

The current phase of capital development at the Harlequin Decline was completed during the quarter. The two boom jumbo has moved to the Bullen Decline to complete the next stage of development at the Norseman and Bullen Reefs. This programme is currently on schedule to be completed by the end of April 2009 when the two boom jumbo will proceed to the OK Decline to complete 4 weeks of refurbishment work before returning to Harlequin.

Ore development rates were maintained with the Harlequin ore development focussing on the Redfin Reef, while the Bullen ore development focussed on the Norseman and St Patrick's Reefs and a reef north of the Mt Barker Fault (which is suitable for mining by mechanised methods). 

The focus at both mines has continued to be the drilling and development of currently mined reef as well as opening up new mining areas where possible to improve the mine flexibility. The site team have been successful in identifying a number of targets adjacent to and within the current development envelope that can be drill tested. Prioritising of these targets has commenced.

The Company's objective at both Bullen and Harlequin is to maintain the production at a consistent level while continuing to seek more efficiencies in that production. The production profile has now been maintained at greater than 19,000 ounces for 5 consecutive quarters.

Mine Exploration

The results from the Harlequin underground diamond drilling to test the HV1 East Reef have been received. Significant results from these holes include:

0.5m @ 167.8 g/t gold from 41.1m and 

0.3m @ 57.7 g/t gold from 62.7m in drill-hole HD1736

0.6m @ 71.2 g/t gold from 71.0m and

0.4m @ 36.5 g/t gold from 75.0m in drill-hole HD1738

Bullen diamond drilling was undertaken on the Butterfly Deeps, St Patrick's Reef, Norseman Reef and north of the Mt Barker Reef. Significant intersections received to date include:

5.3 m @ 1.7 g/t gold from 24.2m in drill-hole BN540

0.6 m @ 11.1 g/t gold from 24.2m in drill-hole BN604

There are assays pending on a number of completed holes at Bullen. The drill rig is currently located at Bullen and will move to Harlequin to complete further programmes during the June 2009 quarter. 

During the quarter the refurbishment of the second underground diamond drill rig was completed and this rig is scheduled to be manned up and commissioned at Bullen in the June 2009 quarter before moving to commence the drill programs at the OK Decline. 

Regional Exploration & Third Mine Development

Exploration focussed on the preparation of the potential third mine targets for drilling during the current quarter. There was also a focus on improving the understanding of, and prioritising the next round of targets for resource drilling.

North Royal

The dewatering stage of this project has progressed during the March quarter, by the completion of the tenders for the gensets, pumps and pipes and their subsequent purchase.

The request for environmental approval to increase the dewatering rate at North Royal was also submitted at the start of February but to date approval has not been given. Like other operations in Western Australia, the Company is finding that the timing for gaining environmental approval for any minor works is excessive and is delaying the start-up of development projects in the industry.

Nevertheless, dewatering of the open pit will commence in the current quarter within the constraints of the current licence. 

OK Mine

The statutory approval to re-enter the old workings at OK Decline were received during the quarter following the submission of the project management plan. Unlike the North Royal Project the OK Decline is an underground project and is controlled by a different government department which was expedient in granting approval for the refurbishment process. 

The project site has now been established and the refurbishment is expected to be completed in the next quarter, after which underground drilling will commence. The project is still on target for feasibility study completion in August 2009 and the Company can potentially commence mining from this project by September 2009.

Crown Reef

Approval has been given for an underground drilling programme to upgrade this resource, which is expected to commence in July 2009 following the drilling at the OK mine. A feasibility study is then expected to be presented for approval in November 2009 and the Company will potentially commence mining from this project by January 2010. 

The Company also approved a programme of surface drilling to commence testing the next highest priority resource targets in the extensive exploration portfolio. Results of these projects will be released as they become available.

Norseman Iron Ore

The work on the Norseman magnetite was continued as a low priority with review work of one potential iron ore project continuing. However, a small drilling programme is to be conducted on a gold project that lies within the prospective iron ore geology during the current quarter. The drill samples from this program will be assayed for gold and retained to be assessed for iron as part of the magnetite project. 

Tailings Retreatment 

The Company has continued the search for a suitable site to dispose of the 5 million tonnes of potentially re-treatable tailings, with two potential locations being short listed. As an alternative, when resources and funds are available, the Company intends to examine the use of the tailings as fill for underground pillar extraction in the historic underground workings in the upper levels of its mines. 

Corporate Review

The Company is working through the process for a dual listing of its shares on the Australian Stock Exchange ("ASX") in order to facilitate an increased shareholder base and to raise Norseman Gold's profile with Australian investors and gold companies alike. The Company continues to monitor the share price, and intends to proceed with the dual listing during the current quarter.

The Company continues to monitor the region for corporate opportunities to add further to shareholder value. 

Summary

The operations have continued to produce gold at average historical production levels for the quarter. Cash costs per oz Au have decreased for the quarter to the lowest full quarterly level since Norseman Gold acquired the Norseman project.

The preparatory work for the pre-development projects is being undertaken and the Company will focus on drilling and analysing the resources with a view to potentially commence a third mine to fill the treatment plant to capacity as soon as possible.

The Company is continuing to pursue its operational strategy of optimising gold production while reducing costs and is advancing its goal of commencing a third mine to fill the treatment plant to capacity.

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.

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:

David Steinepreis Norseman Gold Plc Tel: 44 7913 402 727

Barry Cahill Norseman Gold Plc Tel: +61 (0) 8 9473 2200

Guy Wilkes Ocean Equities Ltd Tel: 020 7786 4370

Olly Cairns Blue Oar Securities Plc Tel: +61 (0) 8 6430 1631

Hugo de Salis St Brides Media & Finance Ltd Tel: 020 7236 1177

E-mail investors@ngold.com.au

Note to editors:

Norseman Gold plc is an AIM 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 oz of gold. The mine is currently producing from two high-grade narrow-vein underground mines - the Bullen and the Harlequin. Currently, it has a total resource inventory of 3.6 million oz of gold at an average grade of 5 g/t.

The tenements cover a 1,614 sq km area centred on the Norseman Township. The landholding comprises 179 contiguous tenements consisting of 13 Exploration Licences, 106 Mining Licences, 45 Prospecting Licences, 15 Miscellaneous Licences and 29 Mining Lease Applications.

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 re-treatment of tailings or acquisitions of alternative sources of ore.