23rd Jul 2009 07:00
Norseman Gold plc / Epic: NGL / Index: AIM / Sector: Mining & Exploration
NORSEMAN GOLD PLC
('Norseman Gold' or the 'Company')
Three Month Report On Activities For The Period Ended 30 June 2009
Norseman Gold, the AIM-listed and ASX-listed Australian gold production company, is pleased to announce a three month progress report on its activities for the period to 30 June 2009.
|
Overview |
3 Months to 30/06/09 |
3 Months to 31/03/09 |
|
|
Production |
oz |
22,013 |
19,902 |
|
Average Realised Gold Price |
A$/oz |
1,216 |
1,352 |
|
Operating Cash Cost |
A$/oz |
636 |
693 |
|
Project EBIT |
A$(m) |
8.5 |
9.9 |
|
Capital Investment |
A$(m) |
5.6 |
4.4 |
|
Cash at Quarter End (incl. bullion) |
A$(m) |
35.3 |
20.0 |
Gold production from the Norseman Mine during the three months to 30 June 2009 totalled 22,013 ounces at a cash operating cost of A$636 per ounce Au. The production for the quarter is a record for the Company since taking over the Norseman Project in May 2007.
The full year production was 80,753 ounces of gold produced at a cash operating cost of A$715 per ounce, which was ahead of the forecast of between 75,000 to 80,000 ounces of gold produced at a cash operating cost of between A$720 and A$780 per ounce.
The full year unaudited EBIT for the Norseman Project is A$23.0 million.
Operations remain un-hedged, and since the end of the quarter, the gold price has decreased in A$ terms, and currently stands at A$1,170 per ounce. The cash generated by the mine for the quarter totalled A$7.0 million before capital investment, as the Company benefited from the high gold price that averaged A$1,216 per ounce Au for the quarter.
Resource drilling and level development at Harlequin have discovered a potential new reef called the Perch Reef. The currently developed ore zone is 30 metres of strike at an average reef width of 0.8 metres at an average grade of 145.8 g/t gold.
The Board was strengthened in the quarter with the appointment of an experienced technical director.
Operating Review:
Gold production from the Norseman mine during the three month period to 30 June 2009 totalled 22,013 ounces bringing production for the 12 months to 30 June 2009 to 80,753 ounces. The quarterly production was the best quarterly result that the Norseman project has achieved since the Company took control of the operations in May 2007. For the quarter, the Bullen mine contributed 10,391 ounces, the Harlequin mine contributed 11,406 ounces and other sources contributed 216 ounces.
The gold price received during the quarter ranged from A$1,165 to A$1,315 per ounce, with an average price achieved of A$1,216 per ounce. The operations remain un-hedged with a gold price of A$1,170 per ounce at the date hereof.
Production
|
|
|
3 months to 30/09/08 |
3 months to 31/12/08 |
3 months to 31/03/09 |
3 months to 30/06/09 |
|
Capital Development |
metres |
273 |
508 |
590 |
555 |
|
Ore Development |
metres |
1,291 |
1,260 |
1,212 |
1,279 |
|
Development |
tonnes |
39,369 |
38,652 |
39,876 |
36,620 |
|
Grade |
gAu/t |
4.21 |
4.39 |
2.50 |
3.40 |
|
Mechanised Stoping |
tonnes |
9,309 |
7,569 |
15,174 |
18,114 |
|
Grade |
gAu/t |
7.54 |
3.64 |
4.19 |
4.66 |
|
Airleg Stoping |
tonnes |
47,609 |
52,250 |
48,665 |
44,481 |
|
Grade |
gAu/t |
7.20 |
8.06 |
9.63 |
10.73 |
|
U/G Production |
tonnes |
96,287 |
98,471 |
103,715 |
99,215 |
|
Treated Tonnes |
tonnes |
110,556 |
105,507 |
102,217 |
105,025 |
|
Grade |
gAu/t |
5.47 |
5.94 |
6.12 |
6.66 |
|
Recovery |
% |
97.8% |
98.3% |
98.9% |
98.0% |
|
Recovered Ounces |
ozs |
19,007 |
19,831 |
19,902 |
22,013 |
Production for the quarter was in excess of the Company's target of 6,500 oz average per month. The grades from the stopes continued at expected levels and the focus has been on maintaining the production profile at or above the forecast levels.
Operating Costs
Net direct cash operating costs for the June quarter were A$636 per ounce, a 9% decrease on the March quarter (A$693 per ounce). This is the lowest full quarter cash operating cost since Norseman Gold acquired the Norseman project. The full financial year net direct cash operating costs were A$715 per ounce, below the bottom range of the forecast of between A$720 to A$780 per ounce.
Management are committed to continue to explore all avenues to reduce costs and increase productivity with the aim of maintaining production at the current levels while controlling costs. The introduction of the third mine will enable the plant to operate at its optimum capacity and will also allow for further reduction in cash costs.
From an accounting profit and loss point of view, the Norseman Project generated Earnings Before Interest and Tax ('EBIT') of A$8.5 million for the quarter. Full year EBIT for the Norseman Project was approximately A$23.0 million. Given the Project's lack of interest bearing debt, Net Profit Before Tax ("NPBT") will be similar for both the quarter and the full year.
Cash Balances
Cash balances at the end of the period totalled A$35.3 million (A$32.7 million excluding bullion). Approximately A$5.5 million of this cash balance is committed to the cash-backed environmental bonds that are in place.
Capital Expenditure
A total of A$5.6 million in capital was invested during the quarter, mostly funded from cashflow. Significant capital expenditures from cash flow were made on exploration (A$2.2 million) and capitalised mine development (A$1.8 million). In addition, the Company reached agreement with equipment supplier Atlas Copco to purchase a further six items of underground equipment valued at A$8.0 million. The equipment includes a third underground diamond drill rig, a second two boom drill jumbo for delivery in the September quarter and replacement large loaders for first half 2010 delivery. The drills are to be used to increase the rate at which the Company develops its resources and reserves and to commence development of any potential third mine.
Mine Production
The current phase of capital development at the Bullen Decline was completed during the quarter. The two boom jumbo has returned to the Harlequin Decline to complete the next stage of development at the Redfin and HV1 Reefs. The new two boom jumbo is expected to be delivered in the September quarter and will operate between the Bullen Decline and any refurbishment work required at the OK Decline. This will allow the current jumbo to focus on the development of the orebodies at the Harlequin Decline.
Ore development rates were maintained with the Harlequin ore development focussing on the Redfin Reef and the HV5B West Reef, while the Bullen ore development focussed on the Norseman and St Patrick's Reefs and a reef north of the Mt Barker Fault (which is suitable for mining by mechanised methods).
The focus at both mines has continued to be the drilling and development of currently mined reef as well as opening up new mining areas where possible to improve the mine flexibility. The site team has been successful in identifying a number of targets adjacent to and within the current development envelope that can be drill tested. Drilling is continuing at Harlequin in the Redfin and Perch Reef, while the new diamond drill rig will go to Bullen Decline and focus on the drilling of the St Patrick's and Norseman Reef.
The Company's objective at both Bullen and Harlequin is to maintain the production at a consistent level while continuing to seek more efficiencies. The production profile has now been maintained at greater than 19,000 ounces for 6 consecutive quarters.
Mine Exploration
A number of results from the Harlequin underground diamond drilling conducted to test the Redfin Reef have been received. This drilling has discovered the existence of a potential new reef called the Perch Reef. The Perch Reef has developed in the footwall of Redfin and appears to strike alongside the plunge of the Redfin Reef. The development on the Redfin -280W Level has subsequently been extended to drive along the Perch Reef with a resultant payable zone in development of 30 metres of strike at an average reef width of 0.8 metres at an average grade of 145.8 g/t gold. At the end of June, the development was suspended to allow the development of a hanging wall diamond drill cuddy. Once this is completed a programme of drilling will be conducted to further test the extent of both the Perch Reef and the Redfin Reef. Significant results into the Perch Reef and Redfin Reef from these holes include:
2.3m @ 350.7 g/t gold (uncut, 178.6 g/t cut) from 56.2m includes
0.3m @ 1,146.6 g/t gold (uncut) and
1.2m @ 7.6 g/t gold from 162.0m in drill-hole HD1763
1.3m @ 284.8 g/t gold (uncut, 208.4 g/t cut) from 50.9m and
3.5m @ 1.9 g/t gold from 101.0m and
2.2m @ 25.2 g/t gold from 108.6m in drill-hole HD1766
1.4m @ 72.8 g/t gold from 74.1m includes
0.5m @ 222.0 g/t gold in drill-hole HD1770
0.3m @ 17.3 g/t gold from 110.6m in drill hole HD1797
Note: Cut grades are applied using the Redfin Reef statistics where grades above 300 g/t gold are cut to 300 g/t gold.
The area of the Perch Reef and Redfin Reef under discussion had also been intersected in holes previously released in the Company's quarterly reports, as listed below;
0.8m @ 19.0 g/t gold from 177.3m in drill-hole HD1699
0.3m @ 19.2 g/t from 237.9m in drill-hole HD1704
The Company expects that drilling in the diamond drill cuddy will commence in the September quarter and results of this drilling will be analysed as it is received. The Perch Reef can potentially give the Harlequin Decline a complementary production source to the Redfin Reef which will allow the production from this mine to be further stabilised at present levels into the future.
Readers are advised to go to www.norsemangoldplc.com to view diagrams of the Perch Reef and Redfin Reef including the location of intercepts.
At the Bullen Decline diamond drilling was undertaken on the Norseman Reef and on large remnant pillars on the Mararoa Reef. Significant intersections received to date include:
9.8 m @ 1.8 g/t gold from 248.0m including
1.0m @ 8.2 g/t gold from 250.0m in drill-hole BN609B
1.9m @ 15.3 g/t gold from 204.7m and
0.9m @ 11.2 g/t gold from 207.0m in drill-hole BN610
1.5 m @ 18.2 g/t gold from 36.5m and
0.9m @ 6.3 g/t gold from 44.3m in drill-hole BN618
There are assays pending on a number of completed holes at the Bullen Decline. The Company owned and operated underground diamond drill rigs are currently located at Harlequin Decline and OK Decline. The Board has approved the purchase of a third underground diamond drill rig and this unit is expected to be on site and operational at the Bullen Decline by late in the September quarter.
Regional Exploration & Third Mine Development
Exploration commenced with the drilling of targets within and around the OK Decline this quarter. The focus on improving the understanding of, and prioritising the next round of targets for resource drilling continued during the quarter particularly in the areas where drilling has commenced. Geological logging of drill holes has enabled the understanding of the structural controls of the targeted reef to be more fully understood and has allowed further targeting of potential high grade zones within the identified reef at OK West, Golden Goose and Royal Coachman.
North Royal
The dewatering equipment has been delivered to site and pipe-work has been installed. At the end of June, the infrastructure component of the project was 90% complete with the final pump installation and adjoining pipe-work yet to be installed. A number of rainfall events during the quarter have delayed completion of this work.
The request for environmental approval to increase the dewatering rate at North Royal has progressed. A site inspection and meeting early in the September quarter between Company management and the Western Australian Department of Environment and Conservation Officers had positive results and the Company is confident of approval for the extended licence in the quarter.
Dewatering of the open pit within the constraints of the current licence was commenced during the quarter and has resulted in the visible lowering of the water level in the pit. Unfortunately the delays in the progression of the dewatering of this project have caused the schedule to slip and it is unlikely that the resource drilling from the bottom of the northern end of the North Royal pit will take place prior to January 2010.
OK Mine
The refurbishment of the decline was completed during the quarter and diamond drilling into the OK West target commenced. The drilling to date has completed 7 of 24 drill holes with assay results for 3 holes received. All holes have encountered reef of varying thicknesses with no significant assays received to date. Drilling will continue during the September quarter.
Concurrent with the underground drilling programmes, surface drilling commenced on two targets in the vicinity of the OK Decline. These targets, if the drilling is successful would be easily accessible from the OK workings and consequently have a high priority with-in the current exploration strategy.
The first target, Golden Goose, is located approximately 670 metres from the OK workings. At the quarter end, 10 holes of a 20 hole programme have been drilled with assays received for 5 holes. No significant assays have been received but all holes that have intersected the target location (the drilling of 2 holes was terminated due to deviation away from the target zone) showed reef intersections within the core at the target zone. The focus of the drilling is now on identifying the continuity of the structure from the current location back to the OK workings and identifying high grade zones within the reef. Intersections were also received within the pre-collar drilling of these holes although these results have yet to be analysed.
The second target, Royal Coachman, was drilled with 7 holes of which assays have been returned for 4 of the holes with no significant assays received. All holes intersected reef and the results confirm that the reef conforms to the proposed model. A drilling programme is now being designed to drill this reef from an underground location of the OK Decline, a more cost effective method of exploring this reef. This will be targeting potential high grade sections of this reef.
The continued analysis of the data being generated from the drilling at OK has identified a number of other targets that can be potentially drilled from underground locations. Once drill proposals have been generated for these targets they will be ranked and executed depending on their ranking.
Crown Reef
The Crown Reef was not advanced during the quarter as the drilling programme at the Crown Reef will commence following the completion of the drilling at the OK Decline.
The Company is pleased with the success of the current drilling programmes in identifying the existence of the reef and drilling will now focus on identifying mineable high grade zones within the identified reef.
Norseman Iron Ore
The work on the Norseman magnetite has seen little progress during the June quarter due to the exploration team's focus on the drilling of the projects as part of the third mine strategy.
Tailings Retreatment
There has been little progress on the tailings retreatment project while the drilling programmes, which are part of the third mine strategy, are underway. When resources are available, the Company intends to examine the use of the tailings as fill for underground pillar extraction in the historic underground workings in the upper levels of its mines.
Corporate Review
The Company dual listed its shares on the Australian Securities Exchange ('ASX'), with trading commencing on 25 June 2009 (company code NGX), in order to facilitate an increased shareholder base and to raise Norseman Gold's profile with Australian investors and gold companies alike. The listing was accompanied by a placement of 20 million shares at A$0.45 to raise A$9.0 million. The placement was managed by Patersons Securities as Lead Manager and closed heavily oversubscribed.
As part of the process of dual listing on the ASX and recognising the Company's emergence as a profitable gold producer, the Board has decided it is timely for a restructure. As a consequence, David Steinepreis and Gary Steinepreis will be moving from their roles as Executive Directors of the Company to becoming Non-executive Directors, with Gary assuming the role of Chairman of the Audit Committee. Further the Board has appointed well respected mining veteran Peter Bilbe, currently a Non-executive Director of the operating subsidiary Central Norseman Gold Corporation Ltd, as a Non-executive Director of the Company to add his extensive mining experience to the Board. Peter will also Chair the Remuneration Committee. Peter Ross Bilbe, aged 59, is currently a director of RMA Energy Limited, Aurax Resources Limited, Independence Group NL and Northern Iron Limited. He was formerly a director of Mount Gibson Iron Limited and Aztec Resources Limited. There is no further information to be disclosed in relation to paragraph (g) of Schedule (2) of the AIM rules. The Board believes that the new structure is appropriate to continue the strategy of growing the Company into the future.
The Company continues to monitor the region for corporate opportunities to add further to shareholder value.
Summary
The operations have continued to produce gold at average historical production levels for the quarter. Cash costs per ounce of gold have decreased for the quarter to the lowest full quarterly level since Norseman Gold acquired the Norseman project.
The Company continues to pursue the third mine / 'fill the mill' strategy by committing funds to the development projects. The September quarter will be critical to this strategy with the generation of further drilling results. The success of these results will dictate the rate of project development for the next six months.
The Company is continuing to pursue its operational strategy of optimising gold production while reducing costs and is advancing its goal of commencing a third mine to fill the treatment plant to capacity.
Competent Persons - Consent for Release
The information in this report that relates to Exploration Results, Mineral Resources and Ore Reserves is based on data generated by employees of Central Norseman Gold Corporation Limited who have the relevant experience and qualifications to qualify as competent persons.
The parts of this report that relate to Exploration Results, Mineral Resources and Ore Reserves were compiled by Barry Cahill using that data. He is a Member of the Australasian Institute of Mining and Metallurgy and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". He has consented to the inclusion in the report of the matters based on this information in the form and context in which it appears.
Forward-Looking Statements
This regulatory news release contains certain forward looking statements, which include assumptions with respect to future plans, results and capital expenditures. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. All such forward looking statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Please refer to the Company's Admission Document available from the Company's web site for a list of risk factors. The Company's actual results could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits the Company will derive there from. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release.
* * ENDS * *
For further information visit www.norsemangoldplc.com or contact:
Barry Cahill Norseman Gold Plc Tel: +61 (0) 8 9473 2200
Guy Wilkes Ocean Equities Ltd Tel: 020 7786 4370
William Vandyk Astaire Securities Plc Tel: 020 7448 4400
Hugo de Salis St Brides Media & Finance Ltd Tel: 020 7236 1177
E-mail [email protected]
Note to editors:
Norseman Gold plc is an AIM listed and ASX listed Australian gold production company, which acquired the Norseman Gold Project in May 2007, Australia's longest continually running gold operation. The Norseman Gold Project is located in the Eastern Goldfields of Western Australia in the highly prospective Norseman-Wiluna greenstone belt, 725km east of Perth and 186km from Kalgoorlie.
Gold was first found on the Norseman field in 1894 and over the last 65 years it has produced over 5.5 million oz of gold. The mine is currently producing from two high-grade narrow-vein underground mines - the Bullen and the Harlequin. Currently, it has a total resource inventory of 3.7 million oz of gold at an average grade of 5.5 g/t.
The tenements cover a 1,614 sq km area centred on the Norseman Township. The landholding comprises 179 contiguous tenements consisting of 13 Exploration Licences, 106 Mining Licences, 45 Prospecting Licences, 15 Miscellaneous Licences and 29 Mining Lease Applications.
The Company's strategy is focused on extending the mine life through the conversion of resources into reserves and identifying additional resources and obtaining additional ore for the operating mill through re-treatment of tailings or acquisitions of alternative sources of ore.
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