10th Mar 2008 07:02
Norseman Gold PLC10 March 2008 Norseman Gold plc / Epic: NGL / Index: AIM / Sector: Mining & Exploration 10 March 2008 NORSEMAN GOLD PLC ("Norseman Gold" or the "Company") Three Month Report on Activities for the Period Ended 31 January 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 31January 2008. Also included is information related to the first full ninemonths of results since the Company took over operations of the Norseman GoldMine in Western Australia, the country's longest continuously producing goldmine. Overview • Total production of 16,111 ounces from 112,601 tonnes treated. January'sproduction of 6,026 ounces from 27,364 tonnes at improved grade of 5.76g/tcompared favourably to prior months and produced an operating profit andpositive cash flow. • Forecast production for the full year ending 30 June 2008 of between 75,000and 80,000 ounces, with cash operating costs of between A$730 and A$760 perounce on the bases and assumptions set out below. With operational improvementsnow in place and at higher levels of production relative to fixed costs, cashoperating costs should fall. • Operations remain un-hedged with a gold price of A$1,053 per ounce at datehereof. • Continued focus on development to improve production levels includingunderground drilling producing visible gold intersections, and regionalexploration programmes for a third mine to allow production to rise to thetarget of 150,000 ounces of gold per annum. Review of previous tailings dumpre-processing feasibility study also being undertaken. • The major fleet replacement programme has commenced and this new equipmentwill enable estimated annual operating cost savings of A$3.1 million. • Active in corporate development, new senior experienced staff recruited,merger and acquisition opportunities being assessed and examining ASX listingprocess. • Regional exploration drilling now on-going. Norseman CEO Barry Cahill said, "The last quarter has been an incredibly busyperiod for the Company. Firstly, we have experienced a reduction in productiondue to encountering an unexpected lower grade section at the Bullen mine,however present mining indicates that we should encounter the higher grade reefin the coming months, allowing the higher grade stopes to come into theproduction schedule and improve the mine grade. Secondly, slow development ratesat Harlequin have delayed the commencement of mining of higher grade stopingblocks. "The Company forecasts production for the financial year to June 30th to bebetween 75,000 and 80,000 ounces and we remain committed to increasingproduction to 150,000 ounces p.a. in the medium term through the identificationand development of a third mine within the area. "The next three months looks to be an exciting time for Norseman. Havingcompleted our senior management recruitment drive, we are now ideally placed tonot only continue with the development of the Bullen and Harlequin Mines, but toaccelerate the exploration program to increase the Company's resource andreserve base with an aim to commencing a third mine at the operation." Operating Review Production 3 months to 3 months to 3 months to 9 months to 31 31 July '07 31 October '07 31 January '08 January '08Capital Development m 401 431 434 1,266 Ore Development m 1,122 1,188 1,019 3,329Development t 33,033 38,600 32,161 103,794Grade gAu/t 4.97 4.89 3.90 4.61Mechanised Stoping t 4,167 2,187 5,835 12,189 Grade gAu/t 4.70 6.17 5.07 5.14Airleg Stoping t 49,884 45,570 41,138 136,592Grade gAu/t 9.62 8.15 7.68 8.55U/G Production t 87,084 86,357 79,134 252,575Treated Tonnes t 128,002 106,631 112,601 347,234Grade gAu/t 5.90 5.76 4.71 5.39Recovery % 96.4% 95.1% 94.43% 95.0%Recovered Ounces ozs 23,394 18,539 16,111 58,044 Gold production from the Norseman mine during the three month period to 31January 2008 totalled 16,111 ounces. For the nine month period to 31 January2008, total recovered ounces were 58,044. Of this, the Bullen Mine contributed39,177 ounces, while the Harlequin mine contributed 15,752 ounces and oxidetreatment provided 3,115 ounces. The gold price received during the three monthperiod to 31 January 2008 ranged between A$875 per ounce and A$1,020 per ounce,with an average price achieved of A$935 per ounce. The current gold price isA$1,053 per ounce. The reduced production compared to the previous quarter was due to two mainfactors. First, the Bullen mine encountering an unexpected low grade section ofthe Norseman Reef. Drilling in front of current development shows the highergrade reef, and this is expected to be developed later in the financial year.This higher grade development will allow better grade stopes to come into theproduction schedule and improve the mine grade. Second, at the Harlequin mine, slow capital development rates caused a delay inthe scheduled commencement of the ore development at the Redfin Reef, but thishas now started and production is expected to improve over the remainder of thecurrent financial year and beyond. On the basis of: 1. 7 months production reported above; and 2. the Company forecast of production for the remaining 5 months of the financial year; which forecast assumes an improvement in recovery rates from: a. production of higher grade reef at Norseman once reached; which 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 ounces and 80,000 ounces. It remains the Company's objective to increase production to 150,000 ounces perannum in the medium term through continued operational improvements and theidentification and development of a third mine. To achieve this level ofproduction will require resources to be converted into reserves throughcontinued exploration drilling and capital development. To enable the growth strategy to be achieved it has recruited a number of seniorpositions in particular, the Exploration Manager, Principal Mining Engineer,Manager Mining and Finance Manager. The executive team recruitment is nowcomplete. Operating Costs The nature of costs in underground mines is such that a large proportion arefixed so that any reduction in the production profile will raise the cash costper ounce of production. Therefore the Company's operating costs per ounce forthe quarter increased. The total cost of production met forecast expectationsbut due to the short term operational issues, the recovered ounces have not beenproduced at the targeted rate. Company forecasts for the current financial year to date predicted an averagemonthly production of 8,500 ounces at a cash cost of A$580 per ounce, while theactual production has averaged 6,100 ounces which raised cash costs per ounce.The increase in operating cash cost per ounce has been partly offset by anincrease in the average A$ gold price. In terms of actual costs and in line with all the operators in Australia, theprice of labour continued to increase as a result of the mining industry skillshortage. The price of diesel has also put upward pressure on power generationcosts but the Company is evaluating ways to alleviate this. However, importantly, the Company has continued its cost reduction programmesthat have included reducing the use of hire equipment and contract labour.Finance has been approved for an equipment package totalling approximately A$9.5million, which will reduce the use of hire equipment, with an expected annualoperating cost savings of A$3.1 million when fully implemented. Actualequipment deliveries will take place between March 2008 and October 2008. The Company has also continued to negotiate with its suppliers to improve theprices of the products and services. Some of these initiatives have alreadystarted to have some effect, with January producing a positive operating result.Investigations still continue into the potential of gas power to replace thediesel power station, however the Company has not been able to source a supplyof gas at an attractive price. With the operational improvements already in place and on the same bases andassumptions set out above, the Board forecasts cash operating costs of betweenA$730 and A$760 per ounce for the full year ending 30 June 2008. With operational improvements now in place and at higher levels of productionrelative to fixed costs, cash operating costs should fall. The Companyestimates that if a consistent production level of 8,500 ounces per month can bereached, the equivalent cash cost to that forecast above would fall to betweenA$550 and A$600 per ounce. Development The Company continued its focus on the underground development programme.Following the completion of the capital development plan at Harlequin mine, thecapital development jumbo moved to Bullen to commence the six month programme. At Bullen, ore development continued to drive through the unexpected lower gradesection of the upper levels of the Norseman Reef. Diamond drill intercepts tothe north of the development faces have confirmed the presence of high gradereef but there are still some low grade zones to develop through during the nextquarter. The development also proceeded to the south in the Norseman Reeffootwall with some success, as well as continuing the 319 in-stope ramp to the342 level, where a run of high grade reef was driven. At Harlequin, following management changes and the departure of the capitaldevelopment jumbo, the focus was on developing the Redfin Reef to access thehigh grade ore zones, as well as increasing the rate at which the oredevelopment was occurring. Development Exploration Bullen diamond drilling moved from the Mararoa Reef below the 16 Level to focuson the active workings at the Norseman/St Patricks area, particularly thedrilling in front of the 250m Level and the 265m Level, and for extensionaltargets on the northern side of the Mt Barker fault. The drilling below the 16 Level Mararoa, particularly down dip, beneath thepreviously drilled intersections was below expectations. The drill rig will haveto return to this level, to follow up the potential of a horizontal grade trendalong strike where more promising intersections occurred. These included 0.80m @10.73 g/t gold from 134.75m in drill-hole BN443 and 0.80m @ 10.89 g/t gold from161.65m in drill-hole BN446. The drilling in the Norseman Reef area is to test the low grade area above the283m Level. This is ongoing with assay results still pending. Intersectionscloser to the Mt Barker Fault have been promising with visible gold logged in anumber of drill holes including 2.00m @ 69.08 g/t gold from 149.55m and 2.30m @3.84 g/t gold from 210.00m in drill-hole BN485. Drilling to the north of the MtBarker Fault intersected some promising narrow reef structures with visiblegold, but assays have yet to be returned. At Harlequin, underground diamond drilling completed the testing of the MarlinReef below the currently working levels. The drill rig then moved onto the nextlevels of the Redfin Reef. The Marlin Reef drilling returned few holes withsignificant assays in the intersected mineralised structure, which means theresource and reserve at the reef will be depleted in the future. The current Redfin drilling has been successful with seven out of the eightinitial drill holes being logged with visible gold present. These include 2.76m@ 10.43 g/t gold from 129.00m in drill-hole HD1687-2. The Company is now waitingon assay results for the further drill holes. Regional Exploration A series of regional drilling programmes started in November 2007 with the aimof discovering a third mine at Norseman. If successful, this is expected toprovide increased production for the years to 30 June 2009, 2010 and beyond. The first programme of surface diamond drilling was planned to target previouslydefined inferred resource blocks (approximately 45,000 ounces) located to thenorth of the Regent shaft. These are located above the 16 Level and were notaccessible for underground drilling. The holes were drilled to infill the areato allow an indicated resource to be estimated and to extend the blocks towardsthe 16 Level. In addition to the main target of the Mararoa Reef, some of thedrill holes were "pushed on" to target footwall reef structures indicated fromprevious drilling. The programme has been drilled and the significant intersections and assays arelisted below; • 0.60m @ 9.84g/t gold from 158.80m in drill-hole S4547 • 0.40m @16.50 g/t gold from 181.40m and • 1.70m @ 11.78 g/t gold from 214.00m in drill-hole S4549 • 1.70m @ 5.65 g/t gold from 182.90m in drill-hole S4553 The exploration staff are continuing with the analysis of these positiveresults. Initial indications are that there is 1,200m of strike of the MararoaReef to be tested above the -200m level. The second programme was surface RC drilling in the North Royal area, designedto target the area between the main open pit, the Number 5 pit and the southernextensions (inferred resource of approximately 74,000 ounces). The area wastargeted due to significant mineralisation previously mined in the area andlimited previous drilling targeting the extensions. This programme is completeand assay results are pending. The third programme planned is aimed at extending the Lady Miller resource(indicated & inferred resource of approximately 42,000 ounces) to the north. Thedrilling programme will test the extent of mineralisation contained in ajasperlite formation that extends up to 800m to the north of the previouslymined open pit. Historic drilling results along the trend of the jasperliteinclude 17 metres @ 5.86 g/t gold from 89m, 2 metres @ 3.15 g/t gold from 76m,3.6 metres @ 2.83 g/t gold from 92.35m and 8.1 metres @ 2.79 g/t gold from62.15m. Drilling is to commence around 11 March 2008 on the Lady Miller area after whichthe drilling rig will return to the Mararoa Reef for approximately 2,500m ofdrilling. Tailings Storage Government approvals for the construction of its new long term tailings storagefacility have also been received. Tenders have been issued to a number ofinterested parties for the construction of the facility, with award of thecontract and construction expected to commence in the current quarter. Thisfacility has been designed with a view to meeting the needs of the Company forup to 10 years. Tailings Retreatment The Company is reviewing a previous feasibility study into the retreatment ofthe large tailings dumps located next to the processing plant. This consists ofapproximately 5,000,000 tonnes at 0.68 g/t of gold for approximately 100,000ounces of gold, currently in the Company's total resource calculations.Retreatment of these tailings has the potential to generate additional ounces ata greatly reduced cash cost, given that the major costs associated with mining,crushing and milling has already been incurred by past owners. Shouldretreatment prove feasible, the retreatment of tailings would be expected toenhance production in the year to 30 June 2010. Cash Balance Cash balance at the end of the period was A$14.5 million with significantcapital expenditures during the period on exploration (A$1.3 million), minedevelopment (A$1.22 million capitalised) and equipment and other capital items(A$0.55 million). Other major cash outflows in the quarter included convertiblenote interest (A$0.35 million), corporate administration (A$0.4 million) andtiming differences on accruals for the previous quarter (A$3 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 month of February 2008 has experienced improvements in grades and goodprogress has continued with mine development. Cash costs per once are predictedto fall as previously stated as recent cost saving initiatives return positiveresults and production levels return to close to expected levels. Operations forFebruary continue the positive cashflow from January. 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 certainforward looking statements, which include assumptions with respect to futureplans, results and capital expenditures. The reader is cautioned thatassumptions used in the preparation of such information may prove to beincorrect. All such forward looking statements involve substantial known andunknown risks and uncertainties, certain of which are beyond the Company'scontrol. Please refer to the Company's Admission Document available from theCompany's web site for a list of risk factors. The Company's actual resultscould differ materially from those expressed in, or implied by, theseforward-looking statements and, accordingly, no assurances can be given that anyof the events anticipated by the forward-looking statements will transpire oroccur, or if any of them do so, what benefits the Company will derive therefrom.All subsequent forward-looking statements, whether written or oral, attributableto the Company or persons acting on its behalf are expressly qualified in theirentirety by these cautionary statements. Furthermore, the forward-lookingstatements contained in this news release are made as at the date of this newsrelease. * * ENDS * * For further information visit www.norsemangoldplc.com or contact: David Steinepreis Norseman Gold Plc Tel: 61 (0) 89 420 9300 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 7242 4477 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