28th Nov 2007 07:00
Norseman Gold PLC28 November 2007 Norseman Gold plc / Epic: NGL / Index: AIM / Sector: Mining & Exploration 28 November 2007 NORSEMAN GOLD PLC ("Norseman Gold" or the "Company") Three Month Report On Activities For The Period Ended 31 October 2007 Norseman Gold, the AIM listed Australian gold production company, is pleased toannounce a three month progress report on its activities for the period to 31October 2007. Also included is information related to the first full six monthsof results since the Company took over operations of the Norseman Gold Mine inWestern Australia, the country's longest running producing gold mine. Summary • Total production of 18,539 ounces from 106,631 tonnes treated for the three month period to 31 October 2007. Forecast cash operating costs to 30 June 2008 at A$550 per ounce • Planned refurbishment of the Phoenix Mill successfully completed on time and on budget during September and October • Continued focus on development, particularly at the Harlequin mine, to improve production levels in the second half of the financial year • A$1.2 million spent to date on capital items; the major fleet replacement programme is advancing and it is expected to be completed by the end of the first quarter of 2008 at a total cost of approximately A$10.3 million (subject to asset financing), with an expected annual saving of A$3.1 million when fully implemented • Commencement of regional exploration programme to identify a third mine at Norseman that will allow mining to increase to approximately 700,000 tonnes of ore per annum, leading to an expected 150,000 ounce production capacity for the year to 30 June 2010 • Cash generated from operations for the period totalled A$3.1 million with cash balance at the period end of A$19.3 million • Operations remain unhedged with a gold price of A$940 per ounce at date hereof Norseman Gold Chairman Vince Pendal said, "This has been an encouraging periodfor the Company as it works to restore the Norseman Mine to its former glory.Management continues to work diligently to restore the mine to profitability andcreate a base from which we can grow the Company in what has been one of thetoughest operating environments for the West Australian gold industry that I canrecall. "While cash costs have been rising throughout the industry, we have only justrecently started to see the benefits of a rising gold price in Australian dollarterms. In this environment, whilst our cash costs for the period were higherthan we had anticipated at the time of the acquisition of the mine, I am pleasedto report that our operations have been cashflow positive, despite our continuedfocus on development at both Bullen and Harlequin and the fact that the PhoenixMill was shut down for refurbishment for 17 days during September and October. "Looking forward, our cash operating costs for the second half of this financialyear are expected to improve as production levels increase and the operationsstart to reap the benefits of the fleet replacement programme that has beeninstigated. The Board currently anticipates that total production for the yearto 30 June 2008 will be between 85,000 and 95,000 ounces and the budget is for120,000 ounces for the year to 30 June 2009. "The Board is currently considering a dual listing for the Company on theAustralian Stock Exchange to facilitate an increased shareholder base and createa wider interest in Norseman Gold, particularly given our view that theAustralian gold industry is entering a consolidation phase. In this respect,the Company is well placed, having a highly motivated and well-regardedmanagement team, a healthy cash position and an unhedged and ungeared balancesheet." 3 months to 3 months to 6 months to 31 July '07 31 October '07 31 October '07Capital Development m 401 431 832Ore Development m 1,122 1,188 2,310Development t 33,033 38,600 71,633Grade gAu/t 4.97 4.89 4.93Mechanised Stoping t 4,167 2,187 6,354Grade gAu/t 4.70 6.17 5.21Airleg Stoping t 49,884 45,570 95,454Grade gAu/t 9.62 8.15 8.92U/G Production t 87,084 86,357 173,441Treated Tonnes t 128,002 106,631 234,633Grade gAu/t 5.90 5.76 5.84Recovery % 96.4% 95.1% 95.3%Recovered Ounces ozs 23,394 18,539 41,933 Operating Review Production Gold production from the Norseman Mine during the three month period underreview totalled 18,539 ounces. For the six month period to 31 October 2007, theBullen Mine contributed 28,563 ounces, while the Harlequin mine contributed11,228 ounces and oxide treatment provided 2,142 ounces. The principal reason for the reduction in ounces produced, when compared to theprior three month period, was the planned shutdown of the Phoenix Mill, whichtook place between 25 September and 12 October. During this time, three of thesix Pachuca tanks at the mill were relined and the concrete plinth of the SAGmill was refurbished. This work was successfully completed on schedule and themill was restarted without experiencing any drop-off in recoveries achieved. Management continues to focus on grade with development of the high grade RedfinReef at Harlequin and Bullen currently driving towards higher grade, both ofwhich are expected to benefit production levels from December 2007. The gold price received during the three month period to 31 October 2007 rangedbetween A$782 per ounce and A$850 per ounce, with an average price achieved ofA$822 per ounce. The current gold price is A$940 per ounce. It is currently anticipated that production for November will total in theregion of 7,500 ounces, with increases expected thereafter as higher gradestopes are mined. The Board is currently estimating that production for thefinancial year to 30 June 2008 will total between 85,000 ounces and 95,000ounces, with production targeted at 120,000 ounces for the year to 30 June 2009. Operating Costs Operating costs during the period were greater than expected, principally due toincreases in the price of diesel and labour. Diesel is used both by theunderground mobile equipment and to power the generators used by the mine. Inthis respect, the Company is currently investigating switching the mine fromdiesel-powered power generation to gas-powered power generation as a cost savingexercise. Norseman also incurred additional costs as it was required to hire certain itemsof mobile equipment to replace various items of the fleet that required majormaintenance. In this regard the Company is currently in the process of placingorders for approximately A$10.3 million of new mobile equipment (subject toasset financing) which is due to be delivered to the mine between January 2008and May 2008. It is expected that A$3.1 million will be saved annually as aresult of this new equipment which will counteract the cost increases that havebeen experienced over the six months that the Company has operated the mine. The increases in the costs experienced are not considered to be unique toNorseman, but a phenomenon that is being experienced across the Australian, andindeed global mining industry. In the light of this inflationary environment,the Board has increased its forecast cash operating cost for the year to 30 June2008 from A$500 per ounce to approximately A$550 per ounce. Development A major focus during the quarter continued to be on capital development at themines, an area which was neglected during the eleven month period ofadministration. Capital development totalled 431 metres, an increase of 7% overthe previous quarter, while ore development totalled 1,188 metres, an increaseof 6% over the previous quarter. At Bullen, ore development focussed on driving through the lower grade sectionof the upper levels of the Norseman Reef. Development also commenced on thesouthern end of the ore drives and onto a footwall position of the Norseman Reefto the south, which has not previously been driven. At Harlequin, development work switched from the Marlin Reef to the Redfin Reef,where the -220 Level was driven with good reef width and grades that matched thereserve expectations. The capital development of the higher grade -240 Levelalso commenced. Development Exploration Bullen diamond drilling focussed on the drilling of the Mararoa Reef below the16 level and in the area adjacent to the old Butterfly workings. The next targetat Bullen will be to drill up dip of the Norseman - Level 284 to enabledevelopment to be more directed to the location of the high grade section of theNorseman Reef to the north. At Harlequin, underground diamond drilling focussed on the Marlin Reef below the-180 Level, with the next target being the drilling of the next levels of theRedfin Reef. Regional Exploration A regional drilling programme commenced in November 2007 with the aim ofdiscovering a third mine at Norseman, to enable the Company to meet its mediumterm annual production target of 150,000 ounces of gold for the year to 30 June2010. Initially the Company is targeting an area to the north of the old Regent shaftworkings above the Mararoa Reef with a surface diamond drilling programme. Tailings The Company is in the process of advancing its new tailings facility. Duringthe period, a Notice of Intent for this tailings facility was submitted. It iscurrently anticipated that final approvals will be received by December 2007,with construction due to commence in January 2008. Corporate Review • The Board is currently considering a dual listing for the Company's shares on the Australian Stock Exchange in order to facilitate an increased shareholder base and to raise Norseman Gold's profile with Australian investors and gold companies alike • A continuation of "no gold hedging policy" • Continued monitoring of the region for corporate opportunities to add to shareholder value Competent Persons - Consent for Release The information in this report that relates to Exploration Results, MineralResources and Ore Reserves is based on data generated by employees of CentralNorseman Gold Corporation who have the relevant experience and qualifications toqualify as competent persons. The parts of this report that relate to Exploration Results, Mineral Resourcesand Ore Reserves were compiled by Barry Cahill using that data. He is a Memberof the Australasian Institute of Mining and Metallurgy and has sufficientexperience which is relevant to the style of mineralisation and type of depositunder consideration and to the activity which they are undertaking to qualify asa Competent Person as defined in the 2004 Edition of the "Australasian Code forReporting of Exploration Results, Mineral Resources and Ore Reserves". He hasconsented to the inclusion in the report of the matters based on thisinformation in the form and context in which it appears. * * ENDS * * For further information visit www.norsemangoldplc.com or contact: David Steinepreis Norseman Gold Plc Tel: 61 (0) 89 420 9300 Guy Wilkes Ocean Equities Ltd Tel: 020 7786 4370 Olly Cairns Blue Oar Securities Plc Tel: +61 (0) 8 6430 1631 Romil Patel Blue Oar Securities Plc Tel: 020 7448 4400 Hugo de Salis St Brides Media & Finance Ltd Tel: 020 7242 4477 Note to editors: Norseman Gold plc is an AIM listed Australian gold production company, whichacquired the Norseman Gold Project in May 2007, Australia's longest continuallyrunning gold operation. The Norseman Gold Project is located in the EasternGoldfields of Western Australia in the highly prospective Norseman-Wilunagreenstone 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 ithas produced over 5.5 million ounces of gold. The mine is producing at a rateof around 85-95,000 ounces per annum, sourced from two high-grade narrow-veinunderground mines - the Bullen and the Harlequin. Currently, it has a totalresource inventory of 1.9 million ounces of gold at an average grade of 4.1 g/t. The tenements cover a 687 sq km area centred on the Norseman Township. Thelandholding comprises 146 contiguous tenements consisting of 10 ExplorationLicences, 102 Mining Licences, 20 Prospecting Licences, 14 MiscellaneousLicences and 29 Mining Lease Applications. The Company's strategy is focused on extending the mine life through theconversion of resources into reserves and identifying additional resources. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Norseman Gold