25th Feb 2009 07:00
Norseman Gold plc / Epic: NGL / Index: AIM / Sector: Mining & Exploration
25 February 2009
NORSEMAN GOLD PLC
('Norseman Gold' or the 'Company')
Quarterly Activities Report For The Period Ended 31 December 2008
Norseman Gold, the AIM-listed Australian gold production company, is pleased to announce a three month progress report on its activities for the period to 31 December 2008.
|
Overview |
3 Months to 31/12/08 |
3 Months to 30/09/08 |
|
|
Production |
oz |
19,831 |
19,007 |
|
Average Realised Gold Price |
A$/oz |
1,180 |
983 |
|
Operating Cash Cost |
A$/oz |
701 |
855 |
|
Project EBIT |
A$(m) |
5.6 |
-1.1 |
|
Capital Investment |
A$(m) |
4.5 |
2.8 |
|
Cash at Quarter End (incl. bullion) |
A$(m) |
10.2 |
9.2 |
Gold production from the Norseman Mine during the three months to 31 December 2008 totalled 19,831 oz at a cash operating cost of A$701 per oz Au. This is on the target of 6,500 oz Au per month and ahead of the targeted cash operating cost of between A$720 and A$780 per month provided at the time of the October 2008 restructuring.
Operations remain un-hedged, and since the end of the quarter, the gold price has increased significantly in A$ terms, and currently stands at A$1,480 per oz. The cash generated by the mine for the quarter totalled A$8.4 million before capital investment, as the Company benefited from an increase in the gold price which averaged A$1,180 per oz Au for the period.
Additionally, exploration during the quarter was successful in adding a total of 1.6 million oz Au to the resource base, which has increased from 16.0 Mt at a grade of 4.0 g/t gold for 2.0 Moz as at March 2008 to 21.0 Mt at a grade of 5.4 g/t gold for 3.6 Moz as at February 2009, an increase of 80%. Importantly three high priority prospects are being scoped as the Company seeks to develop a third mine and fill the treatment plant to capacity at Norseman with first mining from two of these able to potentially commence in the second half of 2009.
Operating Review:
Gold production from the Norseman mine during the three month period to 31 December 2008 totalled 19,831 oz bringing production for the 12 months to 31 December 2008, to 79,042 oz. For the quarter, the Bullen mine contributed 10,699 oz, the Harlequin mine contributed 8,900 oz and other sources 232 oz.
The gold price received during the three month period to 31 December 2008 ranged from A$1,087 to A$1,286 per oz, with an average price achieved of A$1,180 per oz. The operations remain un-hedged with a gold price of A$1,480 per oz at the date hereof.
Production
|
|
|
3 months to 31/03/08 |
3 months to 30/06/08 |
3 months to 30/09/08 |
3 months to 31/12/08 |
|
Capital Development |
metres |
321 |
187 |
273 |
508 |
|
Ore Development |
metres |
1,114 |
1,166 |
1,291 |
1,260 |
|
Development |
tonnes |
27,855 |
34,042 |
39,369 |
38,652 |
|
Grade |
gAu/t |
4.60 |
3.65 |
4.21 |
4.39 |
|
Mechanised Stoping |
tonnes |
5,922 |
5,537 |
9,309 |
7,569 |
|
Grade |
gAu/t |
6.48 |
9.03 |
7.54 |
3.64 |
|
Airleg Stoping |
tonnes |
43,576 |
50,325 |
47,609 |
52,250 |
|
Grade |
gAu/t |
9.41 |
9.58 |
7.20 |
8.06 |
|
U/G Production |
tonnes |
77,353 |
89,904 |
96,287 |
98,471 |
|
Treated Tonnes |
tonnes |
92,573 |
99,993 |
110,556 |
105,507 |
|
Grade |
gAu/t |
6.67 |
6.76 |
5.47 |
5.94 |
|
Recovery |
% |
96.2% |
97.1% |
97.8% |
98.3% |
|
Recovered Ounces |
ozs |
19,088 |
21,116 |
19,007 |
19,831 |
Production for the quarter exceeded the Company's target of 6,500 oz per month, as the changes implemented in October 2008 as a result of the operational review started to have a positive effect on the mine. The grades from the stopes increased as expected 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 December quarter were A$701 per oz, an 18% decrease on the September quarter (A$855/oz) and a 12% decrease on the 2008 financial year. This is the lowest full quarter cash operating cost since Norseman Gold acquired the Norseman project.
As announced on 21 October 2008, the Company undertook and has implemented an operational review aimed at reducing site operating cash costs to match the historical production levels of the site, and stabilising production. At that time, the Company indicated it was confident that as a result of the review the direct cash operating costs would reduce to within a range of between A$720 and A$780 per ounce for the December quarter.
The measures introduced as a result of the operational review have started to have a positive impact on the operational costs at the mine, particularly towards the end of the quarter. In addition, the Company has benefited from a significant fall in the cost of diesel fuel and fuel linked consumables during the quarter as a result of the fall in the oil price from the record highs of last summer. The cost of labour continues to be high compared to historical levels but has remained relatively steady. Importantly, however, the quality of the people that the Company has been able to hire has improved.
From an accounting profit and loss point of view, the Norseman Project generated Earnings Before Interest and Tax (EBIT) of A$5.6 million for the quarter.
Cash Balances
The cash balance at the end of the period was A$10.2 million (A$6.6 million excluding bullion). In addition, bullion sales for which the cash proceeds were outstanding at the period end totalled A$2.0 million. Approximately A$5.5 million of this cash balance is tied up by the cash-backed environmental bonds that are in place.
Capital Expenditure
A total of A$4.5 million in capital was invested during the quarter, almost entirely funded from cashflow. Significant capital expenditures were made on exploration (A$1.9 million), capitalised mine development (A$1.7 million) and other fixed assets (A$0.8 million). The Company took delivery of a new Atlas Copco underground diamond drill unit, which was funded through vendor finance over 36 months. The drill unit is the second last piece of equipment to be delivered under the equipment upgrade package that commenced in April 2008. The final piece under this package, a H104 single boom jumbo, is due for delivery in the March 2009 quarter.
Mine Production
The current phase of capital development at the Harlequin Decline was near completion with the development to the 280m RL of the Redfin Reef commencing. The two boom jumbo will move to the Bullen Decline to complete the next stage of development at the Norseman and Bullen Reefs. This programme is expected to be completed by the end of April 2009 when the two boom jumbo will return to Harlequin. The rate of development has improved with the use of the more experienced operators that the Company has been able to recruit.
Ore development rates were maintained with the Harlequin ore development focussing on the Redfin Reef, while the Bullen ore development focussed on the Norseman and St Patrick's Reefs and a reef north of the Mt Barker Fault (which is amenable to mining by mechanised methods).
At Harlequin, a focus has been placed on bringing long-hole stopes on line as a lower grade but higher tonnage supplement to the lower tonnage high grade Redfin Reef production. At the end of the quarter a number of these stopes were available to be mined in the current quarter.
The Company's objective at both Bullen and Harlequin is to maintain the production at a consistent level while continuing to seek more efficiencies.
Mine Exploration
At Harlequin, underground diamond drilling tested the HV6 Reef in the area of the Redfin Reef to determine if there was a high grade section to the reef. Significant results from these holes include:
0.2m @ 51.5 g/t gold from 179.5m in drill-hole HD1712
The rig then moved to drill for extensions to the HV1 East Reef. Significant results from these holes include:
0.2m @ 32.7 g/t gold from 48.9m in drill-hole HD1731
0.5m @ 22.3 g/t gold from 54.5m in drill-hole HD1732
0.3m @ 28.2 g/t gold from 46.8m in drill-hole HD1734
0.5m @ 13.6 g/t gold from 61.4m in drill-hole HD1735
The Company is waiting on assay results for further completed drill holes.
Bullen diamond drilling focussed on the St Patrick's Reef and before moving to the Butterfly area. Significant intersections received to date include:
1.0m @ 11.1 g/t gold from 84.9m in drill-hole BN536
There are assays pending on a number of completed holes at Bullen. The drill rig is currently located at Bullen and will alternate between programmes at Harlequin and Bullen in the March 2009 quarter.
Regional Exploration & Project Development
The focus of the regional exploration programme during the quarter continued to be the near resource targets that are considered to have the potential to be quickly developed as a third mine, and thereby increase the production profile of the operation and increase the utilisation of the treatment plant, which is currently operating at below optimum capacity.
The pace of the regional exploration and project development programme has to date been determined by the level of cash-flow generated by the operations.
North Royal
At North Royal, drilling was undertaken to upgrade the resource base from inferred to indicated and to tie off existing mineralised zones to the east and to the west. Extensional drilling was also undertaken to the north of the open pit to determine the extent of mineralisation in that direction. Significant intersections have been received including:
2.0m @ 2.5 g/t gold from 5.0 m in drill-hole NRRC014
1.0m @ 7.0 g/t gold from 31.0m in drill-hole NRRC015
6.0m @ 7.9 g/t gold from 30.0m in drill-hole NRRC027
3.0m @ 1.9 g/t gold from 39.0m in drill-hole NRRC041
1.0m @ 5.1 g/t gold from 36.0m in drill-hole NRRC055
Extensive work was also undertaken during the quarter on the resource base at North Royal with positive results.
A new resource on the northern end of the pit was calculated at 319 kt at 3.9 g/t gold for 40 koz and a pillar resource was calculated at 1,200 kt at 14.7 g/t for 540 koz.
The financial analysis of these resources has demonstrated the potential to mine gold from a number of pit cutbacks based around the historic North Royal open pits.
The Company has now approved the commencement of the dewatering of the pits to allow the drilling of the resources from the pit floor which will enable a reserve to be generated for feasibility study purposes. The target for this programme is to commence mining which could potentially start as early as November 2009.
OK Mine
Target development work was also commenced on the historic OK underground mine approximately 2 km to the south of the treatment plant.
Analysis of historic data had demonstrated the potential for depth extensions of the previously mined Reef but also for the extension of the Reef to the west at higher levels in the mine.
Approval has been given to commence work in the coming quarter to refurbish the OK decline to allow access for a drill rig to undertake a programme to drill the western extent of the OK Reef. This drill programme will commence in April 2009. Following this, a feasibility study is expected to be presented for approval in August 2009 and the Company can potentially commence mining from this project by September 2009.
Crown Reef
Resource generation work has also been completed on the historically mined Crown Reef with positive results. The review has generated a significant resource of 4.6Mt at 8.2 g/t gold for 1.2Moz, which is within 600 metres of current development at the access point from the Mararoa Reef to the Norseman and St Patrick's Reef.
Approval has been given for an underground drill programme to upgrade this resource, which is expected to commence in July 2009 following the drilling at OK West. A feasibility study is then expected to be presented for approval in November 2009 and the Company will potentially commence mining from this project by January 2010.
The Company is confident that one, if not all, of the three projects outlined above will deliver the resources that will allow a third mine to be commenced which will provide additional ore to enable the treatment plant to be run at full capacity.
Lady Miller
At Lady Miller, drilling to target the conversion of inferred resources to indicated status and to test the extent of the plunging high grade shoot has been completed. Significant intersections have been received including:
7.6m @ 4.2 g/t gold from 116.0 m in drill-hole LM26
1.0m @ 6.4 g/t gold from 68.0 m and
1.0m @ 10.0 g/t gold from 75.0 m in drill-hole LM29
5.6m @ 3.9 g/t gold from 135.0 m in drill-hole LM32
1.0m @ 10.3 g/t gold from 98.0 m and
8.8 m @ 3.5 g/t gold from 136.0 m in drill-hole LM33
5.0m @ 8.2 g/t gold from 135.0 m in drill-hole LMRC045
3.0m @ 2.1 g/t gold from 124.0 m in drill-hole LMRC046
2.0m @ 8.2 g/t gold from 138.0 m and
5.0m @ 3.3 g/t gold from 157.0 m in drill-hole LMRC051
2.0m @ 16.6 g/t gold from 105.0 m in drill-hole LMRC054
2.0m @ 6.5 g/t gold from 84.0 m and
2.0 m @ 3.1 g/t gold from 95.0 m and
3.0 m @ 2.6 g/t gold from 104.0 m and
7.0 m @ 18.6 g/t gold from 115.0 m in drill-hole LMRC055
5.0m @ 1.2 g/t gold from 130.0 m and
1.0 m @ 7.3 g/t gold from 150.0 m and
1.0 m @ 7.4 g/t gold from 156.0 m in drill-hole LMRC056
7.0 m @ 4.11 g/t gold from 142.0 m in drill-hole LMRC057
The drilling was successful in confirming the presence of the high grade shoot. However, unfortunately the higher sections of the shoot have been stoped out by historic underground mining and the strike of the shoot is limited in length. The initial optimisations of the resource of 820 kt at 2.2 g/t gold for 58 koz, show that there is a potential pit cut back to be mined, but the ore mined would not be a significant quantity as a fill-the-treatment-plant option and would be most profitably mined as one of a suite of smaller pits.
As the resources and costs required to bring Lady Miller into production (particularly the time and cost to obtain government regulatory approval) would be the same as for a larger pit, work on Lady Miller has been moved to a lower priority. Notwithstanding this, the lease was converted to a mining lease by the quarter's end.
Norseman Iron Ore
The work on the Norseman magnetite was minimal due to the high priority given to the gold projects and to allow a new, upgraded database system to be established.
Tailings Retreatment
The Company has continued the search for a suitable site to dispose of the 5 million tonnes of potentially re-treatable tailings, with two potential locations being short listed. As an alternative, when resources and funds are available, the Company intends to examine the use of the tailings as fill for underground pillar extraction in the historic underground workings in the upper levels of its mines.
Resources and Reserves
The Company published its annual resource and reserve review with the September quarterly update announced on 20 November 2008. At that time, the operation was estimated to have total resources of 16.0 Mt at a grade of 4.0 g/t gold for 2.0 Moz.
During the quarter, the Company has added a total of 5.4 Mt at a grade of 9.2 g/t gold for 1.6 Moz to this resource base as a result of the regional exploration and development programmes undertaken on the Crown Reef, North Royal and Lady Miller as outlined in the table below:
|
Current Resource |
Previous Resource |
Change |
|||||||
|
kt |
g/t |
koz |
Kt |
g/t |
koz |
kt |
g/t |
koz |
|
|
Crown Reef |
4,600 |
8.2 |
1,200 |
430 |
6.8 |
93 |
4,200 |
1.4 |
1,100 |
|
North Royal - Pillars |
1,200 |
14.7 |
540 |
- |
0 |
- |
1,200 |
14.7 |
500 |
|
North Royal - North End |
319 |
3.9 |
40 |
420 |
5.2 |
70 |
-100 |
-1.3 |
-30 |
|
Lady Miller |
820 |
2.2 |
58 |
770 |
2.3 |
58 |
50 |
-0.1 |
- |
|
5,400 |
9.2 |
1,600 |
|||||||
|
These Resources were calculated by Mr Jonathan Sharp MSc (Hons) BSc (Geology), who is a Member of the Australasian Institute of Mining and Metallurgy, and the Resource Geologist for the Company. Mr Sharp has extensive Mining and Exploration Geology and evaluation experience in a variety of mineral deposit styles and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is 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". Mr Sharp consents to inclusion in the report of the matters based on this information in the form and context in which it appears. |
|||||||||
These additions to the resource base increase the resource estimate for Norseman to just under 3.6 million oz, an increase of 80% on the figure released in the September 2008 quarterly update.
Corporate Review
The Company is working through the process for a dual listing for its shares on the ASX in order to facilitate an increased shareholder base and to raise Norseman Gold's profile with Australian investors and gold companies alike. The Company continues to monitor the share price, and intends to proceed with the dual listing if and when it considers that this would be in the best interest of its shareholders.
The Company continues to monitor the region for corporate opportunities to add further to shareholder value.
Summary
The operations have continued to produce gold at average historical production levels for the quarter. Cash costs per oz Au have decreased for the quarter to the lowest full quarterly level since Norseman Gold acquired the Norseman project. This is in part due to the operational review undertaken and implemented in the quarter, and also the general reduction in operating consumables, particularly fuel and fuel related consumables.
The Company is continuing to pursue its operational strategy of optimising gold production while reducing costs and is advancing its goal of commencing a third mine to fill the treatment plant to capacity.
Competent Persons - Consent for Release
The information in this report that relates to Exploration Results, Mineral Resources and Ore Reserves is based on data generated by employees of Central Norseman Gold Corporation Limited who have the relevant experience and qualifications to qualify as competent persons.
The parts of this report that relate to Exploration Results, Mineral Resources and Ore Reserves were compiled by Barry Cahill using that data. He is a Member of the Australasian Institute of Mining and Metallurgy and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". He has consented to the inclusion in the report of the matters based on this information in the form and context in which it appears.
Forward-Looking Statements
This regulatory news release contains certain forward looking statements, which include assumptions with respect to future plans, results and capital expenditures. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. All such forward looking statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Please refer to the Company's Admission Document available from the Company's web site for a list of risk factors. The Company's actual results could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits the Company will derive there from. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release.
* * ENDS * *
For further information visit www.norsemangoldplc.com or contact:
David Steinepreis Norseman Gold Plc Tel: 44 7913 402 727
Guy Wilkes Ocean Equities Ltd Tel: 020 7786 4370
Olly Cairns Blue Oar Securities Plc Tel: +61 (0) 8 6430 1631
Romil Patel Blue Oar Securities Plc Tel: 020 7448 4400
Hugo de Salis St Brides Media & Finance Ltd Tel: 020 7236 1177
Victoria Thomas St Brides Media & Finance Ltd Tel: 020 7236 1177
Note to editors:
Norseman Gold plc is an AIM listed Australian gold production company, which acquired the Norseman Gold Project in May 2007, Australia's longest continually running gold operation. The Norseman Gold Project is located in the Eastern Goldfields of Western Australia in the highly prospective Norseman-Wiluna greenstone belt, 725km east of Perth and 186km from Kalgoorlie.
Gold was first found on the Norseman field in 1894 and over the last 65 years it has produced over 5.5 million oz of gold. The mine is currently producing from two high-grade narrow-vein underground mines - the Bullen and the Harlequin. Currently, it has a total resource inventory of 3.6 million oz of gold at an average grade of 5 g/t.
The tenements cover a 745 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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Norseman Gold