Half Yearly Report

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

29 February 2012

NORSEMAN GOLD PLC

('Norseman Gold' or 'the Company')

Interim Report for the half year ended 31 December 2011

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

5. The financial report has been prepared using the historical cost convention and in accordance with International Financial Reporting Standards ("IFRS").

NORSEMAN GOLD PLC

CHAIRMAN'S STATEMENT

The interim financial results of the Group represent the results of the Norseman Operations for the period 1 July 2011 to 31 December 2011. Since the period end, Norseman Gold has undergone significant structural changes to strengthen its balance sheet and improve its future production profile and financial performance. This restructuring process has seen Australian resource specialist Tulla Resources Group Pty Ltd ('Tulla') assume management and operational control of the Norseman Gold Project with a view to lowering operating costs, producing a consistent 100,000 ounces per annum within two years and increasing the project'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. In addition, with Tulla's assistance, the Group is focussed on strengthening its Board and key management team to facilitate the onward development of the Norseman Gold Project, with the Group retaining ownership of the mine and equipment and overseeing manager performance.

Tulla, through its associated company, L2 Project Management - Norseman Pty Ltd ('L2 PM'), is currently developing a defined strategy and mine plan for three years based on profitability, which we hope to update shareholders on in the next quarter report due by the end of April 2012. Its initial forward plan outlined in the announcement dated 16 February 2012, indicated that it believed a relatively early turnaround in operations was achievable. The Norseman Gold Project's ability to generate significant revenues has been demonstrated by its previous performance, when in 2009, at a time when only two of the mines were operational, a total of c. 80,000 ounces of gold was produced. In order to rapidly increase the financial performance of the project and husband cash reserves, the decision was made to put the underperforming Bullen and OK mines on care and maintenance until the review has been completed. This does not mean the Group has abandoned these mines, but provides it with the flexibility to fully re-assess the mine plan and ensure it can be optimised while preventing the drain on cash reserves created by under-performing mines.

As part of the restructuring agreement, and underlining its commitment to the success of the Norseman Gold Project, Tulla agreed to subscribe for A$10 million (approximately £6.8 million) of convertible loan notes in Norseman Gold. The funds raised will be utilised for working capital, completing the forward planning and reviewing and implementing the strategy to lower costs and improve the production profile. Further details relating to this agreement can be found in the 'Funding' section of this report.

As anticipated, due to the underperformance of some of the Group's assets, Norseman Gold is reporting production of 22,289 ounces of gold, which generated a loss after tax of AUD$41.8 million during the six month period to 31 December 2011. The average gold price achieved during the six months period was AUD$1,607 per ounce.

During the half year, the Group continued to invest in the Norseman Gold Project, expending AUD$12.3m in capital investment, including AUD$9.1m in mine development, AUD$2.0m in exploration activities, and AUD$1.2m in plant, equipment and mine infrastructure.

Cash balances at the end of the period ended 31 December 2011 totalled A$16.6 million (A$15.6 million excluding bullion). Approximately A$6.1 million of this cash balance is committed to cash-backed environmental bonds and the Group estimates that it had approximately 3,800 ounces of gold sitting in stockpiles. It should be noted that the Group's cash position will strengthen substantially on receipt of the proceeds of the agreed Equity Placing and Convertible Loan Note Subscription. Following receipt of these proceeds, Norseman Gold will have cash resources of approximately A$22.3 million (approximately £15.17 million).

Further details regarding the operational and corporate restructuring process are below.

Production Outlook and Resource & Reserve Inventory

The Board and Tulla are confident that they can improve the production profile at the Norseman Gold Project, which has been underlined by their commitment of capital. Tulla and Norseman Gold are focussed on implementing a comprehensive forward three year mine plan and a growth strategy to generate value for shareholders. This is currently being prepared although the main aims are to:

·; reduce costs across all areas of the mine in order to fit forward cashflows

·; focus on profitable production areas of the Norseman Gold Project to target a quick turnaround

·; implement a mine plan based on profitability

·; increase the resources base through defined mine and regional exploration programmes - current resource stands at 3.4 million ounces of gold at an average grade of 4.7 g/t

·; re-structure the Board of Directors with highly experienced technical professionals to ensure strategy implementation - potentially with experience of operations at the Norseman Gold Project

·; target 100,000 ounce consistent organic production within two years and increase this thereafter while remaining focussed on profitability

·; re-establish extensive regional exploration on the highly prospective Norseman Gold Project field.

Quoted resources and reserves are as per the Group's market release of 28 July 2011 and as tabulated below.

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

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.

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 the Principal Mining Engineer, Russell McBeath, 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.

Corporate Update

The Group has initiated a corporate restructuring process aimed at strengthening Norseman Gold's board and key management team. I joined the Company on 25 October 2011 and took over as Chairman following Mr. Pendal's departure. Mr. Pendal, who had been Chairman since 2007, was up for re-election at the Annual General Meeting by rotation but chose not to be re-nominated. Mr. Peter Bilbe also resigned from the Board for personal reasons during the period.

Subsequent to the period end, Mr. Barry Cahill stepped down as Managing Director and also resigned from the Board of the Company and its subsidiaries. Mr. Kelvin May, Company Secretary, has been appointed to the Board as an interim measure while technical directors are sourced with the assistance of Tulla.

The Company appointed a new Nominated Adviser and Joint Broker, Northland Capital Partners Limited, during the period.

Following the announcement of 16 February 2011, Norseman Gold has entered into an agreement with Australian resource specialist Tulla. Established in the early 1990s, Tulla is the Maloney family's private investment group based in Sydney. The company has had a long-standing involvement in the resources and related services and transport industries including investments in: TSX listed THEMAC Resources, which owns 100% of the Copper Flat Project, a porphyry copper-molybdenum-gold-silver project in south-central New Mexico, USA; ASX listed Altona Mining, a copper miner in Finland and which is advancing a major copper development project in Queensland, Australia; and ASX listed Queensland Mining Corporation, a copper gold play, concentrating its exploration and development activities in the Cloncurry region of north west Queensland.

The Maloney family previously controlled ASX listed The MAC Services Group Limited (MSL). MSL developed, owned and operated high quality, large scale, integrated mining accommodation facilities and ancillary services which serviced the needs of mine owners, contracted mining service providers and other essential contractors working in remote and regional areas on major energy and resource projects. MSL was subsequently taken over by Oil States International Inc (NYSE:OIS) in December 2010 for approximately A$650 million. The Maloney family owned approximately 52% of MSL at the time of the takeover.

Funding

The Company has entered into an agreement whereby Tulla will subscribe for A$10 million (approximately £6.8 million) of secured convertible loan notes (the "Convertible Loan Notes") ("Convertible Loan Note Subscription"). Tranche 1 of A$3.5 million (approximately £2.38 million) has been issued and Tranche 2 of A$6.5 million (approximately £4.42 million) will be issued following the completion of the security arrangements as detailed below. The security arrangements were to have been completed within 5 business days or the agreement may be terminated by Tulla with immediate effect. Although these arrangements have not been completed within the stipulated 5 days, Tulla have not given any indication that they intend terminating the agreement, and the security arrangements are close to being finalised. An additional A$3 million (approximately £2.04 million) ("the Equity Placing") is being raised by way of a conditional placing of up to 50,000,000 new ordinary shares of £0.0125 each in the capital of the Company (the "Placing Shares") at a price of A$0.06 (approximately 4p) per ordinary share. The Company has entered into an agreement with an Australian Broker to manage the Equity Placing. The Equity Placing is conditional on the lodgement of a prospectus for the purposes of section 708A(11) of the Australian Corporations Act to remove any secondary trading restrictions on the sale of securities.

The combined proceeds of the Equity Placing and the Convertible Loan Note Subscription will amount to approximately A$13 million (approximately £8.84 million), before expenses, and will provide additional working capital for the Company. Following receipt of these proceeds, Norseman Gold will have cash resources of approximately A$22.3 million (approximately £15.17 million).

The funds raised will be utilised for working capital, complete the forward planning and review and to implement the strategy to lower costs and improve the production profile.

The Convertible Loan Notes will bear interest at a rate of 10% per annum payable quarterly in arrears (with the first payment due on 31 March 2012), have a duration of 36 months from the date of issue, be convertible by the holder into ordinary shares of £0.0125 each in the capital of the Company ("Ordinary Shares") ("Conversion Shares") at a price of 6 pence per ordinary share, and carry a share purchase warrant ("Warrant") entitling Tulla to acquire a further Ordinary Share at a price of 12 pence per ordinary share for every Conversion Share (calculated by reference to the nominal amount of the Convertible Loan Notes) at any time within 36 months from the date of issue of the Convertible Loan Notes. It is anticipated that the Convertible Loan Notes will be issued prior to 31 March 2012 and will not be admitted to trading on any public market. The Convertible Loan Notes and Warrants are fully transferable.

The conversion rights applicable to the Convertible Loan Notes and the grant and potential exercise of Warrants are conditional on receipt of shareholder approval at an Extraordinary General Meeting which is expected to take place on or before 31 March 2012. If such approvals and any necessary waivers from ASX (or failing such waivers, further shareholder approvals) are not obtained, the interest rate on the Convertible Loan Notes will increase to 20% per annum from the advance date and each Convertible Loan Note holder will be entitled to require redemption of his Convertible Loan Notes at any time after 31 March 2012.

The Convertible Loan Notes will be secured by a first ranking mortgage over certain exploration tenements, second ranking mortgage over certain mining leases and a second ranking general security agreement over all other assets relating to the Norseman Gold Project, each granted by the Company's subsidiary, Central Norseman Gold Corporation Limited ("CNGC"). The securities will rank behind the security granted to (and subject to a priority deed with) EXP T1 Ltd, a subsidiary of RK Mine Finance Trust 1, a member of the Red Kite group of funds, as announced on 4 July 2011.

The existing convertible loan note holders have acknowledged the new Convertible Loan Notes and inclusion of Tulla as part of the security arrangements over the Norseman Gold Project. The second ranking mortgage over certain mining leases and a second ranking general security agreement over all other assets relating to the Norseman Gold Project granted to the Convertible Loan Note holder ranks equally with the existing convertible loan note holders.

EXP T1 Ltd has agreed to a standstill arrangement in relation to facility agreement between CNGC and the Red Kite group dated 1 July 2011 ("Facility Agreement") and will not enforce any rights which may arise under the Facility Agreement for a period of 3 months from 14 February 2012 unless any other security holder or creditor calls an event of default. In addition, EXP T1 Ltd will receive a capital repayment of A$500,000 (approximately £340,136) on 30 June 2012, defer capital repayments for July and August 2012 with these amounts to be amortised over the remaining 10 months of the loan, will be issued 10,000,000 ordinary shares of £0.0125 each in the capital of the Company issued without charge at a deemed issue price of A$0.06 (approximately 4p) per ordinary share and 3,000,000 warrants on the same terms and conditions for the Warrants to be issued to Tulla being at a price of 12 pence per ordinary share at any time within 36 months from the date of issue of the Convertible Loan Notes, subject to shareholder approval.

Subject to Shareholder approval, the Company will issue a total of 35 million warrants: 5 million to David Steinepreis, Chairman of the Company; 10 million to Ascent Capital Holdings Pty Ltd, a company controlled by entities associated with Gary Steinepreis and David Steinepreis; and 20 million to L2 PM, on the same terms and conditions for the Warrants to be issued to Tulla being at a price of 12 pence per ordinary share at any time within 36 months from the date of issue of the Convertible Loan Notes.

It is also proposed that, subject to shareholder approval at the Extraordinary General Meeting to be held on or before 31 March 2012 and in accordance with the ASX Listing Rules, that I (David Steinepreis) and Ascent Capital Holdings Pty Ltd, or our nominees, be provided the opportunity to subscribe for up to 10,000,000 new ordinary shares of £0.0125 each in the capital of the Company at a price of A$0.06 per share to raise A$600,000 on the same terms and conditions as the Equity Placing.

David Steinepreis

Chairman

29 February 2012

Responsibility Statement

The Directors confirm that to the best of their knowledge the interim financial information for the six months ended 31 December 2011, 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'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

David Steinepreis

Chairman

29 February 2012

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 2011 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 2011 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.

Emphasis of matter - Going concern

In forming our conclusion on the financial statements, which is not qualified, we have considered the adequacy of the disclosure made in note 1.2 to the financial statements concerning the Group's ability to continue as a going concern. The Group incurred a loss of AUD$41,803,938 during the period ended 31 December 2011, had lower than expected production levels throughout the period, and following the closure of the OK and Bullen mines and engagement of a management company has been unable to develop accurate medium to long term production and cash flow forecasts. These conditions, along with other matters explained in note 1.2 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

UHY Hacker Young LLP

29 February 2012

Interim Financial Information of Norseman Gold plc

The following interim financial information of Norseman Gold plc is for the period from 1 July 2011 to 31 December 2011. The financial information was approved by the Directors on 29 February 2012.

NORSEMAN GOLD PLC

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 31 DECEMBER 2011

NORSEMAN GOLD PLC

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 31 DECEMBER 2011

NORSEMAN GOLD PLC

GROUP BALANCE SHEET

AS AT 31 DECEMBER 2011

NORSEMAN GOLD PLC

GROUP CASH FLOW STATEMENT

FOR THE PERIOD ENDED 31 DECEMBER 2011

NORSEMAN GOLD PLC

NOTES TO THE FINANCIAL INFORMATION

FOR THE PERIOD ENDED 31 DECEMBER 2011

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 2011 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 2011 and those to be used for the year ending 30 June 2012. The financial statements for the year ended 30 June 2011 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 Going Concern

The Group incurred an operating loss of AUD$16,314,881 and a net loss of AUD$41,803,938 (including a substantial provision for asset impairment) for the six months, which follows an operating loss of AUD$12,892,977 and net loss of AUD$21,800,925 for the full financial year ended 30 June 2011. The operating loss in the current year has been as a result of lower than anticipated gold production from the three operating underground mines, Harlequin, Bullen and the OK Decline, at the Company's Norseman Project. The Reserves of these three mines have not altered materially.

The Group's operations continued to invest heavily with major investments in mine development and infrastructure, particularly the North Royal open pit. This ongoing investment in the Norseman Project's future resulted in a total net cash invested in capital assets of AUD$12,768,788, which was funded from capital raisings and finance drawdown.

The Group is dependent on cash flow generated from its mining operations to fund its ongoing activities. During the year, a capital raising via a share placement was undertaken, plus funds were raised from the issue of a Convertible Loan Note debt facility. The Group also fully drew down the finance facility provided to wholly owned subsidiary Central Norseman Gold Corporation Limited by Red Kite in July 2011. These funds were used to provide the capital required to enable the continued development of the North Royal Open Pit.

Despite recent and continued investment, gold production from the Project has continued to fall well short of expectations, to the extent that the OK Decline was placed on care & maintenance in December. Subsequent to the period end, the Bullen mine has also been placed on care & maintenance. Both of these actions have had a significant positive impact on the operating costs of the Project overall.

The North Royal Open Pit, which has been in development since December 2010, has proceeded largely in line with expectations, and began blasting and extracting the first fresh, hard rock ore in December 2011.

Also subsequent to the end of the period, the Group has secured further funding via a further Convertible Loan Note facility and, as part of the funding package, has appointed a management company to take over management of the Project on the Group's behalf. Importantly the Group retains ownership to all assets.

The Directors have reviewed the Group's performance and its ability to continue as a going concern. Following the recent closure of the OK Decline and Bullen, the Directors have not been able to develop accurate, medium to long term production forecasts which would enable an assessment of likely cash flows to be generated from the reduced operations. The appointed management company is currently undertaking a full review of all Project operations with a view to preparing a cogent mine plan for the Project going forward.

The Reserve position of all four mines has not altered materially, and the Directors believe that a cogent and profitable mine plan can be developed which will take the Company forward and restore it to profitability and positive cashflow. There is however, some risk that a suitable mine plan may not be developed.

The Directors acknowledge this risk, however they believe that the Group has sufficient funds, or access to funds, through capital raising or alternative sources, and the ability to generate funds from its operations to enable the Group to continue to trade for the foreseeable future while these plans are developed and implemented, and accordingly these accounts have been prepared on a going concern basis.

1.3 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.

1.4 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 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.

1.5 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.

1.6 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.

1.7 Share based payments

The Company incurred share-based expenses upon the issue of share options to certain directors, contractors and employees by way of issue of share options. The fair value of these payments is calculated by the Company using the Black-Scholes option pricing model. The expense is 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.

In addition, the Company has incurred share-based expenses upon the issue of share warrants to holders of Convertible Loan Notes and to financiers. The fair value of these payments is calculated by the Company using the Black-Scholes option pricing model. The expense has been fully recognised in the year of issue as the warrants vested on issue and it is not within the Company's control as to when the holders of the warrants will exercise the warrants.

1.8 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.

1.9 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 2011 no debt covenants have been breached.

1.10 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. 

1.11 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 tangible and intangible assets

Determining whether a tangible or 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.

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.

2. Profit / (Loss) per share

The basic (loss)/profit per ordinary share has been calculated using the (loss)/profit for the period of AUD$(41,803,938) (31 December 2010: AUD$(802,799), 30 June 2011: AUD$(21,800,925)) and the weighted average number of ordinary shares in issue of 228,275,701 (31 December 2010: 184,658,251, 30 June 2011: 199,199,851).

The diluted (loss)/profit per share has been calculated using a weighted average number of shares in issue and to be issued of 228,275,701 (31 December 2010: 184,658,251, 30 June 2011: 199,199,851). The diluted loss per share has been kept the same as the basic loss per share, as the options on issue are exercisable at a price greater than the current market value, 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 2011

Unaudited

31 December 2010

Audited

30 June 2011

Plant and equipment pledged as security for liabilities

Included in mine infrastructure & mobile equipment is equipment with a written down value of $15,137,697 (December 2010: $16,673,731 June 2011: $15,260,266) which has been pledged as security for the related finance lease liabilities in current and non-current liabilities as disclosed in Note 12.

5. Mine properties in production phase

Expenditure on developing mine properties in production represents costs incurred in relation to development of operating mines at the Group's operations at Norseman. The Directors review this carrying value periodically to ensure the carrying value will be recovered by ongoing mining activities. In view of the fact that two mines were placed (or were to be placed) on care and maintenance during the period, the Directors have assessed the carrying values of the capitalised mine development costs against those two mines on decided to impair the value of those assets in full. Should a decision be made in the future to reopen either or both of these mines a further assessment of these values will be made.

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.

8. Inventories

9. Cash at bank and in hand

The Group has total cash on hand of $15,571,230 of which $6,141,793 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

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.

12. Interest-bearing loans and borrowings

The Finance Facility is a secured facility provided to Central Norseman Gold Corporation Limited by EXP T1 Ltd.

Terms of the Finance Facility

Key conditions of this secured facility are as follows:

·; Facility limit - AUD$15,000,000

·; Repayment - repayable in 24 months in monthly instalments of principal and interest. Principal repayments are required to be made in the first 12 months. Repayment is to commence on 1 July 2012. The facility may be paid out early with no penalty.

·; Interest - calculated at 600 basis points above the daily mean of the 3 month LIBOR quoted for the month of calculation,

·; Security - secured against the assets and undertakings of Central Norseman Gold Corporation Limited, as well as by a Deed of Guarantee from the Company.

Terms of the Convertible Notes

(a) Introduction

The Convertible Loan Notes were issued in October 2012 to provide working and capital and bring the North Royal open pit into production. The total value of notes issued was £5,087,000.

(b) Conversion period

Each Convertible Loan Note may be converted at any time into Ordinary shares within the conversion period. On conversion, the newly converted Ordinary shares will rank pari passu with the Ordinary shares in issue at the date of conversion. In respect of each Convertible Loan Note, the conversion period commenced on the date of issue of the Convertible Loan Note (which was in October 2011) and expires on the second anniversary of the Convertible Loan Note.

The Company is discharged from its liabilities under the Convertible Note Deed in respect of a Convertible Loan Note when the Convertible Loan Note is either redeemed (see below) or is converted in accordance with its conditions of issue.

(c) Value and conversion price

Each Convertible Loan Note bears interest at a rate of 10% and has a conversion price of £0.06 per share.

The number of Ordinary Shares resulting from the conversion of a Convertible Loan Note shall be calculated by dividing the Conversion Amount by the conversion price (as detailed above).

The nominal value of the loan notes has been split between the liability element and an equity component, representing the fair value of the embedded option to convert the liability into equity of the Company as follows:

Group

31 December 2011

AUD$

Nominal value of the convertible loan notes issued 7,720,443

Equity component (235,482)

__________

Liability component 7,484,961

Interest charged 139,602

Interest paid -

__________

Liability component at 31 December 2011 7,624,563

=========

The interest charged for the period is calculated by applying an effective interest rate of 10% to the liability component.

The directors estimate the fair value of the liability component of the convertible notes at 31 December to be approximately AUD$7,484,961. This fair value has been calculated by discounting the future cash flows at a rate of 11.8%.

(d) Restrictions on conversion

The conversion of a Convertible Loan Note into Ordinary Shares was subject to approval by shareholders in general meeting. This approval was obtained at the Company's Annual General Meeting held on 9 December 2011.

(e) Security

The Convertible Loan Notes are secured against the assets and undertakings of Central Norseman Gold Corporation Limited.

 (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 $15,137,697 (31 December 2010: $16,673,731, 30 June 2011: $15,179,085,). These lease contracts expire within 1 to 3 years with no residual payable.

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 2011, the number of Ordinary shares of £0.0125 each on issue is 358,202,222 (30 June 2011: 219,942,222, 31 December 2010: 197,720,000).

On 9 December 2011, the number of Ordinary shares issued and fully paid was increased from 219,942,222 Ordinary shares of £0.0125 each to 358,202,222 Ordinary shares of £0.0125. This related to the issue of 138,260,000 shares at an issue price of 6p per share.

 Share options and warrants

The details of share options and warrants outstanding are as follows:

14. Reserves

Group