25th Apr 2008 07:00
Norseman Gold PLC25 April 2008 Norseman Gold plc / Epic: NGL / Index: AIM / Sector: Mining & Exploration 25th April 2008 NORSEMAN GOLD PLC ("Norseman Gold" or the "Company") Three Month Report On Activities For The Period Ended 31 March 2008 Norseman Gold, the AIM listed Australian gold production company, is pleased toannounce a three month progress report on its activities for the period to 31March 2008. Also included is information related to the last 11 months ofresults since the company took control of the operations of the Norseman GoldMine in Western Australia, the country's longest continuously producing goldmine. Reader's should note that this report covers the operating period from 1stJanuary 2008 to the 31st March 2008, reported as a full financial quarter tobring the Company reporting in line with financial year reporting. Overview • Total production of 19,088 ounces from 92,573 tonnes treated. This quarter'sproduction resulted in a 15% increase in recovered ounces when compared to theprevious quarter and has produced an operating profit and positive cash flow forthe Company. • On the bases and assumptions set out below, forecast production for the fullfinancial year to the end of June 2008 year remains in the range of 75,000 to80,000 ounces. Production for the 11 months since the Company took control ofthe operations now stands at 71,106 recovered ounces and production for the 9months to 31 March 2008 was 56,112 recovered ounces. • Operations remain un-hedged with a gold price of A$953 per ounce at datehereof. • Capital expenditure for the quarter totalled A$2.3 million includingexploration expenditure of A$0.7 million and mine development of A$1.4 million. • Preparation for the delivery and commissioning of new equipment, includingthree underground trucks, an underground loader and an underground two boomjumbo commenced during the quarter. The first four items directly replace fourunits of hire equipment that have been in use for a number of years. • Regional exploration drilling continued on schedule with the two major drillprogrammes being completed at Lady Miller and on the Mararoa Reef. Assay resultsare pending. Operating Review Production 3 months to 3 months to 3 months to 11 months to 31 31 September '07 31 December '07 31 March '08 March '08Capital Development madv 348 505 321 1,456Ore Development madv 1,175 1,038 1,114 4,077Development t 36,765 33,461 27,855 121,254Grade gAu/t 5.00 4.13 4.60 4.68Mechanised Stoping t 2,570 3,446 5,922 15,301Grade gAu/t 6.75 5.37 6.48 5.68Airleg Stoping t 48,324 40,961 43,576 166,009Grade gAu/t 8.00 8.34 9.41 8.79U/G Production t 87,659 77,868 77,353 302,564Treated Tonnes t 114,705 115,698 92,573 405,950Grade gAu/t 5.75 5.84 6.67 5.72Recovery % 96.6% 92.0% 96.2% 95.2%Recovered Ounces ozs 20,472 16,552 19,088 71,106 Gold production from the Norseman mine during the three month period to 31 March2008 totalled 19,088 ounces. For the eleven month period to 31 March 2008,total recovered ounces were 71,106. Of this, the Bullen Mine contributed 46,500ounces, while the Harlequin mine contributed 19,560 ounces and oxide treatmentprovided 5,046 ounces. The gold price received during the three month period to31 March 2008 ranged between A$997 and A$1,050 per ounce, with an average priceachieved of A$1,023 per ounce. The current gold price is A$953 per ounce. The main progress during the quarter was the improved performance at Harlequin,brought about by the management changes and the accesses to the high gradeRedfin Reef being opened up. The Bullen development continued through the low grade section of the NorsemanReef and the programme of developing alternative headings to compensate for thelow grade zone continue to provide improved production results. On the basis of: 1. 9 months production reported above; and 2. the Company forecast of production for the remaining 3 months of the financial year; which forecast assumes an improvement in recovery rates from: a. production of higher grade reef at Norseman once reached; where the higher grade reef is apparent from forward test drilling results; and b. operational improvements in place at both mines; the Company forecasts production for the financial year to 30 June 2008 willtotal between 75,000 and 80,000 ounces. It remains the Company's objective to increase production to 120,000 ounces perannum in the near term and 150,000 ounces per annum in the medium term throughcontinued operational improvements and the identification and development of athird mine. To achieve this level of production will require resources to beconverted into reserves through continued exploration drilling and capitaldevelopment. Operating Costs The Company continued to experience cost pressures during the quarter,particularly from increases in the costs of diesel fuel, which impacts directlyon power generation costs. However, as a result of costs saving initiatives instigated at the mine over thepast six months, and ongoing negotiations with major suppliers that areachieving cost reductions, total operating costs overall remained relativelystable. As a result, when combined with the improvement in production, direct operatingcash costs per ounce for the quarter reduced to A$763 per ounce, which is a 20%improvement on the same measure in the December quarter. With operational improvements and costs savings already in place, and on thebases and assumptions set out above, the Company forecasts that direct operatingcash costs for the full year ending 30 June 2008 will be between A$730 and A$760per ounce. With operational improvements now in place, costs continuing to be wellcontrolled and at higher levels of production relative to fixed costs, cashoperating costs should fall. The Company estimates that if a consistentproduction level of 8,500 ounces per month can be reached, the equivalent cashcost to that forecast above would fall to between A$550 and A$600 per ounce. From an accounting profit and loss point of view, in each of the three months inthe quarter, the Norseman Project generated a positive operating result, andover the full quarter, the project was cash flow positive to the extent ofA$2.63 million. Equipment deliveries, training and commissioning commenced in the last week ofMarch 2008 and will continue through April 2008 as the first 5 units of newmobile equipment are delivered to the underground mines. The last week of thequarter was spent commissioning the first of the new units and training theoperating and maintenance personnel in the proper care and use of the units. Itis anticipated that the new equipment will begin to have a positive effect onproductivity during the June quarter. The intensive training that the Companyhas provided with the delivery of the new equipment represented a substantialinvestment in our personnel and the Company believes this will also assist theoperations with staff retention. The refurbishment of the pachuca tanks (high, narrow tanks with a centralcylinder for the introduction of compressed air into pulp during the cyanideprocess) in the treatment plant was also completed during the quarter. Thetreatment of the tanks is anticipated to extend their life for +5 years andcompletes this part of the refurbishment programme that the Company commenced onacquisition 11 months ago. The Company will continue to negotiate with suppliers to improve the price ofthe products and services supplied. Development The underground capital development programme continued at Bullen for thequarter with the next stage of the Norseman Incline completed to the 235mReduced Level ("RL"). The capital development programme will now focus on thedevelopment below the 18 Level on the Bullen Reef and the Norseman Decline belowthe 330m RL. The Company expects that the rate of development will increase withthe delivery of the new Two Boom Jumbo in mid April 2008. Bullen ore development maintained its focus away from the upper levels of theNorseman Reef with the major development areas in the St Patrick's Reef 319Decline and the 342 m RL levels and the recommencement of the 18 Level at theBullen Reef. Norseman Reef ore development continued to drive through the lower grade sectionof the upper levels. The 283m RL level was driven to the expected high gradeposition during the quarter and was driven through to the Mt Barker Fault.Stoping will commence in this area during the June quarter. Norseman Reef oredevelopment will now recommence on the 265m RL to drive to the same high gradeposition up dip on the reef. Harlequin ore development focussed on the driving of the lower levels of thehigh grade Redfin Reef. The advance on these levels has been slowed by therequirement to upgrade the power and ventilation to enable the practical miningof these areas but it is anticipated that these upgrades will be completed inthe June quarter. To supplement the advance, ore headings were commenced in thehigher levels of the Redfin Reef in areas where re-interpretation of the geologyhas shown that sections of the reef have been left un-mined. Development Exploration At Harlequin, underground diamond drilling continued the testing of the RedfinReef. The current Redfin Reef drilling has continued to be successful with anumber of drill holes being logged with visible gold present. The results fromthese holes include; • 0.15m @ 57.48 g/t gold from 112.85m in drill-hole HD1676 • 1.64m @ 37.91 g/t gold from 129.95m in drill-hole HD1680 • 1.60m @ 37.04 g/t gold from 111.10m in drill-hole HD1681 • 0.85m @ 61.63 g/t gold from 131.55m in drill-hole HD1685 • 1.84m @ 31.00 g/t gold from 128.20m in drill-hole HD1686 • 2.76m @ 10.43 g/t gold from 129.00m in drill-hole HD1687-2 • 1.86m @ 400.83 g/t gold from 150.70m in drill-hole HD1691 The Company is waiting on assay results for further completed drill holes. Thedrilling into the Redfin Reef, as part of this programme, is expected tocontinue through the June quarter. Bullen diamond drilling focussed on the Norseman Footwall Reef below the 308 mRL and the northern side of the Mt Barker Fault. No other significant resultshave been reported although assays are pending on a number of completed holes.The drilling in the June quarter will continue to focus on the northern side ofthe Mt Barker Fault. Regional Exploration The regional exploration focus was based around the previously describeddrilling programmes conducted at the Lady Miller area and the on the MararoaReef to the north of the Regent Shaft. Over 7,000 metres in 60+ holes of ReverseCirculation ("RC") drilling was completed in these two programmes, whichcontinued into April 2008. The exploration team is now waiting to receive allthe assays from these programmes to complete the analysis of the results. The Company's exploration team also has been working methodically through thelarge number of prospects identified on the leases and validating data relatedto the prospects so that they can be ranked in order of priority for furtherinvestigation in upcoming drill programmes. Whilst the task is ongoing, therealready appears to be a number of prospects that will require drill testing toadd to the resource inventory over the next 12 months. This progress is clearlyvindicating the Company's belief in the potential substantial endowment of theNorseman field that remains to be exploited. Tailings Storage Construction has commenced on the new valley tailings dam facility. Theconstruction is scheduled to take 12 weeks to complete at a total cost of A$2.5million. The facility has been designed to have the capacity to provide +5 yearstailings storage for the operations. Tailings Retreatment The Company has continued to review a previous feasibility study into theretreatment of the large tailings dumps located next to the processing plant.The search for a suitable site to dispose of the 5 million tonnes of retreatedtailings has commenced, with a number of potentially suitable locations beingidentified. Community consultation has also commenced due to the historicsignificance of the tailings dumps to the Norseman town's history. Cash Balances The cash balance (excluding bullion) at the end of the period was A$11.2 million(A$16.4 million including bullion) with significant capital expenditures duringthe period on exploration (A$0.7million), capitalized mine development (A$1.4million) and equipment and other capital items (A$0.2 million). Corporate Review The Company is working through the process for a dual listing for the Company'sshares on the Australian Stock Exchange in order to facilitate an increasedshareholder base and to raise Norseman Gold's profile with Australian investorsand gold companies alike. It is also continuing to monitor the region forcorporate opportunities to add to shareholder value. Outlook / Conclusion The operations have continued to improve during the quarter and are on track tomaintain this trend to the end of the financial year. Cash costs per ounce arepredicted to fall as previously stated as recent cost saving initiatives returnpositive results and production levels return to close to expected levels. The Company continues to advance and expand its drill programmes to increase thereserve and resource base at Norseman and hence its production potential. Competent Persons - Consent for Release The information in this report that relates to Exploration Results, MineralResources and Ore Reserves is based on data generated by employees of CentralNorseman Gold Corporation who have the relevant experience and qualifications toqualify as competent persons. The parts of this report that relate to Exploration Results, Mineral Resourcesand Ore Reserves were compiled by Barry Cahill using that data. He is a Memberof the Australasian Institute of Mining and Metallurgy and has sufficientexperience which is relevant to the style of mineralisation and type of depositunder consideration and to the activity which they are undertaking to qualify asa Competent Person as defined in the 2004 Edition of the "Australasian Code forReporting of Exploration Results, Mineral Resources and Ore Reserves". He hasconsented to the inclusion in the report of the matters based on thisinformation in the form and context in which it appears. Forward-Looking Statements. This regulatory news release contains certain forward looking statements, whichinclude assumptions with respect to future plans, results and capitalexpenditures. The reader is cautioned that assumptions used in the preparationof such information may prove to be incorrect. All such forward lookingstatements involve substantial known and unknown risks and uncertainties,certain of which are beyond the Company's control. Please refer to the Company'sAdmission Document available from the Company's web site for a list of riskfactors. The Company's actual results could differ materially from thoseexpressed in, or implied by, these forward-looking statements and, accordingly,no assurances can be given that any of the events anticipated by theforward-looking statements will transpire or occur, or if any of them do so,what benefits the Company will derive therefrom. All subsequent forward-lookingstatements, whether written or oral, attributable to the Company or personsacting on its behalf are expressly qualified in their entirety by thesecautionary statements. Furthermore, the forward-looking statements contained inthis 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, whichacquired the Norseman Gold Project in May 2007, Australia's longest continuallyrunning gold operation. The Norseman Gold Project is located in the EasternGoldfields of Western Australia in the highly prospective Norseman-Wilunagreenstone belt, 725km east of Perth and 186km from Kalgoorlie. Gold was first found on the Norseman field in 1894 and over the last 65 years ithas produced over 5.5 million ounces of gold. The mine is currently producingfrom two high-grade narrow-vein underground mines - the Bullen and theHarlequin. Currently, it has a total resource inventory of 1.9 million ouncesof gold at an average grade of 4.1 g/t. The tenements cover a 687 sq km area centred on the Norseman Township. Thelandholding comprises 146 contiguous tenements consisting of 10 ExplorationLicences, 102 Mining Licences, 20 Prospecting Licences, 14 MiscellaneousLicences and 29 Mining Lease Applications. The Company's strategy is focused on extending the mine life through theconversion of resources into reserves and identifying additional resources andobtaining additional ore for the operating mill through re-treatment of tailingsor acquisitions of alternative sources of ore. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Norseman Gold