Half Yearly Report

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

28 February 2011

NORSEMAN GOLD PLC

('Norseman Gold' or 'the Company')

Interim Report for the half year ended 31 December 2010

NORSEMAN GOLD PLC

Results for Announcement to the Market

No Dividends have been declared or paid.

1. Details of entities over which control has been gained or lost during the period.

None

2. Details of individual and total dividends or distributions and dividend or distribution payments. The details must include the date on which each dividend or distribution is payable, and (if known) the amount per security of foreign sourced dividend or distribution.

Not applicable - no dividends have been declared or paid

3. Details of any dividend or distribution reinvestment plans in operation and the last date for the receipt of an election notice for participation in any dividend or distribution reinvestment plan.

Not applicable

4. Details of associates and joint venture entities including the name of the associate or joint venture entity and details of the reporting entity's percentage holding in each of these entities and - where material to an understanding of the report - aggregate share of profits (losses) of these entities, details of contributions to net profit for each of these entities, and with comparative figures for each of these disclosures for the previous corresponding period.

Not applicable

NORSEMAN GOLD PLC

CHAIRMAN AND MANAGING DIRECTOR'S STATEMENT

The interim financial results of the Group represent the results of the Norseman Operations for the period 1 July 2010 to 31 December 2010. During this period in which the operations focussed on the development of the two new mines, the Group produced 23,391 ounces of gold, which generated a loss after tax of AUD$0.8 million.

The average gold price achieved during the 6 months period was AUD$1,369 per ounce.

Despite the low production performance, some major milestones were achieved during the half year in pursuit of the Company's "fill the mill" strategy.

Capital and normal development at both Harlequin and Bullen achieved record levels and is the main reason behind the general drop in mined grade during the half. These excellent levels of development will enable more working areas to be opened up for stoping in the future and provide more stability in terms of production.

At the OK Decline rehabilitation and development continued, and the mine fired the first production ore stopes in early 2011. The reserve first used to justify reopening this mine has now been increased with the addition of the Star of Erin and other reserve delineation. Now that the mine has begun stoping, it is anticipated production will increase steadily in the coming months.

Dewatering at the North Royal Open Pit has continued to the point where mining activities were able to be commenced in December. Dewatering of the bottom of the open pit is continuing in conjunction with the commencement of mining. An earthmoving contractor was appointed, as was a drill and blast contractor. In early 2011, the first low grade ore was extracted and taken to the ROM pad for processing.

Ore generated from these sources have enabled the mill to recommence full time, seven days-a-week milling operations. As more ore is generated, stockpiles will be created which will, in turn, enable blending of different ores through the processing plant to achieve optimal output and stabilise gold production.

Production for the half year was below the Group's target from the Bullen and Harlequin Declines. Following the receipt of results from grade control drilling in the North Royal open pit, a review of the current full year production has been carried out, and the full year forecast has been revised down to 65,000 ounces.

Although cash costs per ounce increased above targeted levels during the half, this was a reflection of ounces produced from lower grade ore as opposed to increasing total costs. The Group managed to keep a tight rein on costs, and total costs were held to within budget. The Group remains focussed on the productivity and grade of the operating mines to ensure that the improvement in performance and profitability continues. The Group has now shifted from a development focus to production in the new year with the emphasis on returning the operations to profitability in the June quarter, as production ramps to maximum mill capacity.

From a balance sheet perspective, as at 31 December the group remained in a positive cash position with AUD$15.6 million on hand. Despite the positive cash at 31 December the Group considered it prudent to raise approximately AUD$16.0 million in February 2011 to ensure it has sufficient cash on hand for all the capital expenditure needed to bring on the two new mines and allow for unforeseen delays. In addition, the Group's production remains unhedged, and is debt free aside from equipment finance funding obligations.

During the half year, a strong balance sheet enabled the Group to expend AUD$21.4m in capital investment, including AUD$8.6m in mine development, AUD$5.0m in exploration activities, and AUD$8.0m in plant, equipment and mine infrastructure.

The outlook for the Group in the coming year continues to be positive and the Group is poised to see a significant increase in gold production from the extensive capital investment program undertaken in the past 18 or more months. The Group will continue with its strategy to fill the mill by further advancing its development projects with the aim of opening our fifth and subsequent mines. The Group acknowledges that the performance of the operations while in the current growth and development phase has been difficult but the continued success of the growth strategy that has been pursued will ensure positive returns to the Group from the Norseman Operations in the medium and long term.

Vince Pendal Barry Cahill

Chairman Managing Director

25th February 2011

Responsibility Statement

The Directors confirm that to the best of their knowledge the interim financial information for the six months ended 31 December 2010, which has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Group as required by DTR 4.2.4 R and the Chairman and CEO's Statement includes a fair review of the information required by DTR 4.2.7 R and DTR 4.2.8R.

By order of the board

Barry Cahill

Managing Director

25th February 2011

NORSEMAN GOLD PLC

INDEPENDENT REVIEW REPORT TO NORSEMAN GOLD PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2010 which comprises group statement of comprehensive income, group statement of changes in equity, group balance sheet, group cash flow statement and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules For Companies.

As disclosed in note 1.1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the IndependentAuditor of the Entity, issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules For Companies.

UHY Hacker Young LLP

25 February 2011

Interim Financial Information of Norseman Gold plc

The following interim financial information of Norseman Gold plc is for the period from 1 July 2010 to 31 December 2010. The financial information was approved by the Directors on 25 February 2011.

NORSEMAN GOLD PLC

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 31 DECEMBER 2010

NORSEMAN GOLD PLC

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 31 DECEMBER 2010

NORSEMAN GOLD PLC

GROUP BALANCE SHEET

AS AT 31 DECEMBER 2010

NORSEMAN GOLD PLC

GROUP CASH FLOW STATEMENT

FOR THE PERIOD ENDED 31 DECEMBER 2010

NORSEMAN GOLD PLC

NOTES TO THE FINANCIAL INFORMATION

FOR THE PERIOD ENDED 31 DECEMBER 2010

1. Accounting policies

The principal accounting policies applied in the preparation of financial information are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated below.

1.1 Basis of preparation

This interim report, which incorporates the financial information of the Company and its subsidiary undertakings ("the Group"), has been prepared using the historical cost convention and in accordance with International Financial Reporting Standards ("IFRS"), including IAS 34 'Interim Financial Reporting' and IFRS 6 'Exploration for and Evaluation of Mineral Resources', as adopted by the European Union ("EU").

These interim results for the six months ended 31 December 2010 are unaudited and do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. They have been prepared using accounting bases and policies consistent with those used in the preparation of the financial statements of the Company and the Group for the year ended 30 June 2010 and those to be used for the year ending 30 June 2011. The financial statements for the year ended 30 June 2010 have been delivered to the Registrar of Companies and the auditors' report on those financial statements was unqualified and did not contain a statement made under Section 498(2) or Section 498(3) of the Companies Act 2006.

1.2 Goodwill

Goodwill is the difference between the amount paid on the acquisition of the subsidiary undertakings and the aggregate fair value of their separable net assets. Goodwill is capitalised as an intangible asset and in accordance with IAS 36 is not amortised but tested for impairment annually and when there are any indications that its carrying value is not recoverable. As such, goodwill is stated at cost less any provision for impairment in value. If a subsidiary undertaking is subsequently sold, goodwill arising on acquisition is taken into account in determining the profit and loss on sale.

1.3 Mine properties in production phase

Exploration and evaluation expenditure

Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to

abandon the area is made. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. Economically recoverable reserves are determined by the following: for open pit operations - proven and probable reserves; and for underground operations - proven and probable reserves and reasonably assured potential additional reserves. Accumulated costs associated with underground operations include an estimate of the future costs associated with the conversion of 'indicated' and 'inferred' resources into the 'measured category'. This estimate is based on the historical cost per ounce discovered. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

Costs of site restoration are provided when an obligating event occurs from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal and rehabilitation of the site in accordance with clauses of the mining permits. Such costs have been determined using estimates of future costs, current legal

NOTES TO THE FINANCIAL INFORMATION

FOR THE PERIOD ENDED 31 DECEMBER 2010

requirements and technology on a discounted basis. Any changes in the estimates for the costs are accounted for on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.

1.4 Inventories

(i) Raw Materials and Stores

Inventories of raw materials and stores expected to be used in production are valued at average cost. Obsolete or damaged inventories of such items are valued at net realisable value. There is a regular and ongoing review of inventories for surplus items and provision is made for any anticipated loss on their disposal.

(ii) Work in Progress and Gold in Circuit

Inventories of broken ore, work in progress and gold in circuit are valued at the lower of cost and net realisable value. Cost comprises direct material, labour and transportation expenditure incurred in getting inventories to their existing location and condition, together with an appropriate portion of fixed and variable overhead expenditure based on weighted average costs incurred during the period in which such inventories were produced. Net realisable value is the amount anticipated to be realised from the sale of inventory in the normal course of business less any anticipated costs to be incurred prior to its sale.

1.5 Revenue

Revenue from the sale of goods (precious metals) is recognised upon production. Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

1.6 Share based payments

In prior periods, the Company made share-based payments to certain Directors and advisers by way of issue of share options. The fair value of these payments was calculated by the Company using the Black-Scholes option pricing model. The expense was recognised on a straight line basis over the period from the date of award to the date of vesting, based on the Company's best estimate of shares that will eventually vest. All options have now either been exercised, or lapsed and been cancelled. The total expense relating to these options was transferred to Retained earnings in the year ended 30 June 2010.

1.7 Foreign currency transactions and balances

(i) Functional and presentational currency

Items included in the Group's financial information and statements are measured using Australian Dollars ("AUD$"), which is the currency of the primary economic environment in which the Group operates ("the functional currency"). The financial information and statements are also presented in AUD$ which is the Group's presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Transactions in the accounts of individual Group companies are recorded at the rate of exchange ruling on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rates ruling at the balance sheet date. All differences are taken to the income statement.

For the purpose of presenting consolidated financial information and statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are classified as equity and transferred to the Group's translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of.

NOTES TO THE FINANCIAL INFORMATION

FOR THE PERIOD ENDED 31 DECEMBER 2010

1.8 Capital management

The Group's objective when managing capital is to ensure that adequate funding and resources are obtained to enable it to develop its projects through to profitable production, while in the meantime safeguarding the Group's ability to continue as a going concern. This is aimed at enabling it, once the projects come to fruition, to provide appropriate returns for shareholders and benefits for other stakeholders. The Group manages the capital structure in the light of changes in economic conditions and risk characteristics of the underlying projects. Conditions attached to borrowings are monitored regularly in the light of management accounts. Capital will continue to be sourced from equity and from borrowings as appropriate. During the period to 31 December 2010 no debt covenants have been breached.

1.9 Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

(i) Group as a lessee

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or loss.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. Operating lease incentives are recognised as a liability when received and subsequently reduced by allocating lease payments between rental expense and reduction of the liability.

 (ii) Group as a lessor

Leases in which the Group retains substantially all the risks and benefits of ownership of the leased asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as rental income. 

1.10 Critical accounting judgements and estimates

The preparation of financial information and statements in conformity with International Financial Reporting Standards requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial information and statements and the reported amounts of income and expenses during the reporting period. Although these estimates are based on management's best knowledge of current events and actions, actual results ultimately may differ from those estimates. IFRSs also require management to exercise its judgement in the process of applying the Group's accounting policies.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial information and statements are as follows:

Impairment of intangible assets

Determining whether an intangible asset is impaired requires an estimation of whether there are any indications that its carrying value is not recoverable.

At each reporting date, the company reviews the carrying value of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset's fair value less costs to sell and value in use, is compared to the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to the income statement.

NOTES TO THE FINANCIAL INFORMATION

FOR THE PERIOD ENDED 31 DECEMBER 2010

Valuation of goodwill and investments

Management value goodwill and investments after taking into account ore reserves, and cash-flow generated by estimated future production, sales and costs. If the assumed factors vary from actual occurrence, this will impact on the amount of the asset which should be carried on the balance sheet.

Provision of restoration costs

Provisions for restoration are established in the consolidated balance sheet when the obligating event occurs. Such costs have been determined using estimates of future costs, current legal requirements and technology on a discounted basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation.

Exploration and Development

Exploration and development costs are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. If the amount of economically proven reserves varies, this will impact on the amount of the asset which should be carried on the balance sheet.

Share based payments

The Group records charges for share based payments.

For option based share based payments management estimate certain factors used in the option pricing model, including volatility, exercise date of options and number of options likely to be exercised. If these estimates vary from actual occurrence, this will impact on the value of the equity carried in the reserves.

For conditional grants of shares at a discount management estimate the expected actual issuance of those shares. If this estimate varies from actual occurrence this will impact on the value of the equity carried in the reserves.

NOTES TO THE FINANCIAL INFORMATION

FOR THE PERIOD ENDED 31 DECEMBER 2010

2. Profit / (Loss) per share

The basic (loss)/profit per ordinary share has been calculated using the (loss)/profit for the period of AUD$(802,799) (31 December 2009: AUD$609,530, 30 June 2010: AUD$3,112,347) and the weighted average number of ordinary shares in issue of 184,658,251 (31 December 2009: 172,157,717, 30 June 2010: 172,344,767).

The diluted (loss)/profit per share has been calculated using a weighted average number of shares in issue and to be issued of 184,658,251 (31 December 2009: 172,157,717, 30 June 2010: 173,504,767). The diluted loss per share has been kept the same as the basic loss per share, as the Company has no options on issue at 31 December 2010. The diluted profit per share in previous reporting periods was kept the same as the basic profit per share because the outstanding options on issue (31 December 2009:3,200,000, 30 June 2010: 1,160,000) were exercisable at a price greater than the average market price of the Company's Ordinary Shares in the period, thus being anti-dilutive.

3. Segmental reporting

For the purposes of segmental information, the Group has determined that its operations are confined to a single operating segment, located in a single geographical region, Australia. All material revenue is derived from the development of mineral resources from its Norseman Gold Project in Australia, which is the Group's sole cash generating unit.

Revenues are generated from the production of precious metals, principally gold, and to a lesser extent, silver. The precious metals are sold to either the local, government controlled mint directly, or through the trading desk of a large Australian based trading bank.

4. Property, plant & equipment

Unaudited

31 December 2010

NOTES TO THE FINANCIAL INFORMATION

FOR THE PERIOD ENDED 31 DECEMBER 2010

4. Property, plant & equipment (continued)

Unaudited

31 December 2009

Audited

30 June 2010

Plant and equipment pledged as security for liabilities

Included in mine infrastructure & mobile equipment is $16,673,731 (30 June 2010: $15,896,289 December 2009: $17,890,037) which has been pledged as security for the related finance lease liabilities in current and non-current liabilities as disclosed in Note 12.

NOTES TO THE FINANCIAL INFORMATION

FOR THE PERIOD ENDED 31 DECEMBER 2010

5. Mine properties in production phase

6. Exploration & evaluation expenditure

The amounts for intangible exploration and evaluation ("E & E") assets represent costs incurred in relation to the Group's operations at Norseman. These amounts will be written off to the income statement as exploration expenses unless commercial reserves are established or the determination process is not completed and there are no indicators of impairment. The outcome of ongoing exploration and evaluation, and therefore whether the carrying value of E & E assets will ultimately be recovered, is inherently uncertain. The Directors have assessed the value of the exploration and evaluation expenditure carried as intangible assets and in their opinion no provision for impairment is currently necessary.

7. Goodwill

Goodwill arose on the acquisition of the Company's subsidiary undertakings. The Group tests goodwill for impairment at least annually.

NOTES TO THE FINANCIAL INFORMATION

FOR THE PERIOD ENDED 31 DECEMBER 2010

8. Inventories

9. Cash at bank and in hand

The Group has total cash on hand of $15,576,334 of which $6,140,829 is held as security against the obligations for restoration and decommissioning expenditure under the mining production and exploration licences.

10. Trade and other payables

11. Provisions

NOTES TO THE FINANCIAL INFORMATION

FOR THE PERIOD ENDED 31 DECEMBER 2010

11. Provisions (continued)

The Directors have considered environmental issues and the need for any necessary provision for the cost of rectifying any environmental damage, as might be required under local legislation and the Group's license obligations, and have provided the above provisions for any future costs of decommissioning or any environmental damage.

NOTES TO THE FINANCIAL INFORMATION

FOR THE PERIOD ENDED 31 DECEMBER 2010

12. Interest-bearing loans and borrowings

 (a) Assets pledged as security

The carrying amounts of assets pledged as security for current and non-current interest bearing liabilities are:

(b) Finance lease commitments 

The Group has finance leases for various items of mine infrastructure and mobile equipment with a carrying amount of $16,673,731 (30 June 2010: $15,896,289, 31 December 2009: $17,890,037). These lease contracts expire within 3 to 4 years with no residual payable.

NOTES TO THE FINANCIAL INFORMATION

FOR THE PERIOD ENDED 31 DECEMBER 2010

13. Share capital and options

The Ordinary Shares rank pari passu in all respects including the right to receive all dividends and other distributions declared, made or paid. At 31 December 2010, the number of ordinary shares of £0.0125 each on issue is 197,720,000 (30 June 2010: 172,610,000, 31 December 2009: 172,520,000).

On 4 October 2010, the number of Ordinary shares issued and fully paid was increased from 172,610,000 Ordinary shares of £0.0125 each to 197,610,000 Ordinary shares of £0.0125. This related to a private placement of shares, issued at £0.45: the share price at the date of issue was £0.51.

On 29 October 2010, the number of Ordinary shares issued and fully paid was increased from 197,610,000 Ordinary shares of £0.0125 each to 197,660,000 Ordinary shares of £0.0125. This related to the exercise of 50p share options; the share price at the date of exercise was £0.6239.

On 3 December 2010, the number of Ordinary shares issued and fully paid was increased from 197,660,000 Ordinary shares of £0.0125 each to 197,720,000 Ordinary shares of £0.0125. This related to the exercise of 50p share options; the share price at the date of exercise was £0.7425.

 Share options

The details of share options outstanding are as follows:

14. Reserves

Group

NOTES TO THE FINANCIAL INFORMATION

FOR THE PERIOD ENDED 31 DECEMBER 2010

14. Reserves (continued)

15. Share-based payments

16. Exploration expenditure commitments

In order to maintain an interest in the mineral assets in which the Group is involved, the Group is committed to meet the conditions under which the licences were granted. The timing and amount of exploration expenditure commitments and obligations of the Group are subject to the work programme required as per the licence commitments and may vary significantly from the forecast based upon the results of the work performed. Exploration results in any of the projects may also result in variation of the forecast programmes and resultant expenditure. Such activity may lead to accelerated or decreased expenditure.

NOTES TO THE FINANCIAL INFORMATION

FOR THE PERIOD ENDED 31 DECEMBER 2010

17. Reconciliation of operating cash flows to net cash inflow from operating activities