20th Nov 2008 07:00
Norseman Gold plc / Epic: NGL / Index: AIM / Sector: Mining & Exploration
20 November 2008
NORSEMAN GOLD PLC
('Norseman Gold' or the 'Company')
Three Month Report On Activities For The Period Ended 30 September 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 30 September 2008.
Overview
Operating Review:
Gold production from the Norseman mine during the three month period to 30 September 2008 totalled 19,007 ounces bringing production for the 12 months to 30 September 2008, to 75,763 oz. For this quarter, the Bullen Mine contributed 10,633 oz, the Harlequin mine 7,548 oz and other sources 826 oz.
The gold price received during the three month period to 30 September 2008 ranged between A$914 and A$1,126 per oz, with an average price achieved of A$983 per oz. The operations remain un-hedged with a gold price of A$1,140 per oz at the date hereof.
Production
|
|
|
3 months to 31 December '07 |
3 months to 31 March '08 |
3 months to 30 June '08 |
3 months to 30 September '08 |
|
Capital Development |
madv |
505 |
321 |
187 |
273 |
|
Ore Development |
madv |
1,038 |
1,114 |
1,166 |
1,291 |
|
Development |
t |
33,461 |
27,855 |
34,042 |
39,369 |
|
Grade |
gAu/t |
4.13 |
4.60 |
3.65 |
4.21 |
|
Mechanised Stoping |
t |
3,446 |
5,922 |
5,537 |
9,309 |
|
Grade |
gAu/t |
5.37 |
6.48 |
9.03 |
7.54 |
|
Airleg Stoping |
t |
40,961 |
43,576 |
50,325 |
47,609 |
|
Grade |
gAu/t |
8.34 |
9.41 |
9.58 |
7.20 |
|
U/G Production |
t |
77,868 |
77,353 |
89,904 |
96,287 |
|
Treated Tonnes |
t |
115,698 |
92,573 |
99,993 |
110,556 |
|
Grade |
gAu/t |
4.84 |
6.67 |
6.76 |
5.47 |
|
Recovery |
% |
92.0% |
96.2% |
97.1% |
97.8% |
|
Recovered Ounces |
ozs |
16,552 |
19,088 |
21,116 |
19,007 |
The decrease in production for the quarter was due to lower than anticipated gold grades within the airleg stopes. Overall, the gold grade was down 19% however this was partially countered by an increase in throughput of 10%. Since the end of the quarter, miners have been moved to higher grade stopes and the current mine plan envisages an improving trend in the next quarter to be in line with the average grades achieved in the March and June quarters.
The focus of capital development moved to the Harlequin Decline during the quarter with the development to the next levels of the Redfin Reef commencing. A number of skilled operators have been sourced for this work and the advance rates are beginning to improve.
Ore development rates continued to improve with the Harlequin ore development focussing on the Redfin Reef, while the Bullen Decline ore development focussed on the St Patrick's Reef, which has produced promising results.
Importantly at Bullen, diamond drilling has redefined the ore location in the hanging wall at the Norseman Reef where development had proceeded along an unexpected low grade section. It has also been redefined elsewhere within the Norseman Reef, where the ore orientation had been pushed around by a number of porphrytic intrusions. Development in these drives is now proceeding along the mineralised laminated reef.
The improvement in the development rate is critical to the Company achieving one of its objectives of increased production. Increasing the level of production requires development to be completed to open up new stoping areas.
Operating Costs
Industry wide cost pressures continue to impact on the cash costs of the operation with pricing increasing for most of the supplies used on site. Increases in cost were experienced for diesel fuel and steel based inputs, including ground support and grinding media and reagents. While the site was beginning to experience some relief from the escalating diesel fuel prices towards the end of the quarter, these costs have continued to impact on the site's operating costs. In addition to these market driven cost increases, the site has carried additional costs, principally in labour and equipment, in anticipation of an increased level of monthly production.
The price of a number of consumables increased during the quarter due to the loss of gas supply caused by an explosion at a production facility located in north Western Australia. While the gas disruption did not directly affect the Company's operations, a number of gas dependent suppliers increased their prices to compensate for the increased cost of gas or the requirement to import more expensive alternatives into the state. At quarter's end, the Company is continuing to work towards having these prices returned to pre-explosion levels.
Net direct cash operating costs per oz for the September quarter were A$855 per oz, which is a 16% increase on the June quarter and a 7% increase on the 2008 financial year. Most of the increase in costs can be attributed to the reduction in gold produced. Overall, costs on a dollar basis increased by 4.4% for the quarter.
As announced on 21 October 2008, the Company has undertaken an operational review aimed at reducing site operating cash costs to match the historical production levels of the site. On the basis that the cost reduction measures implemented have the desired impact on site, and based on a consistent production of 6,500 oz per month, the Company expects the direct cash cost target range of A$720 to A$780 per oz in the December 2008 quarter.
From an accounting profit and loss point of view, the Norseman Project generated an operating surplus over the quarter. However, after non-operating costs and depreciation/amortisation are included, the project generated an EBIT loss of A$1.1million.
The Project was cash flow negative to the extent of A$0.3 million, however this included the funding of capital investment in the project to the extent of A$2.8 million.
The price of diesel fuel continues to be a major cost driver for the operation. The Company therefore continues to actively canvass alternative energy sources, particularly in power generation, in order to reduce its impact wherever possible.
Cash Balances
The cash balance (excluding bullion) at the end of the period was A$7.2 million (A$9.2 million including bullion). In addition, bullion sales for which the cash proceeds were outstanding at period end totalled A$0.9 million.
Capital Expenditure
A total of A$2.8 million in capital was invested during the quarter, funded entirely from cash flow. Significant capital expenditures during the period were made on exploration (A$0.9million), capitalized mine development (A$1.0 million) and mine infrastructure (A$0.8 million).
Tailings Storage
The new tailings storage facility that was completed during the June quarter was licensed and is now approved to receive tailings. Deposition has commenced and the performance of the facility to date has been excellent. The facility has been designed to have the capacity to provide +5 years tailings storage for the operations.
Development
The capital development programme has moved its focus to the Harlequin Decline for the quarter. Development of the decline to access the next levels of the Redfin Reef proceeded satisfactorily during the quarter with the major impact being the recruitment of suitably experienced operators for the new two boom jumbo. The rate of development has increased for the quarter and the Company is anticipating further improvements in this area.
Harlequin ore development focussed mainly on the Redfin Reef at the 240 and 250 Levels. Development continued right through the quarter on these levels as there are multiple headings due to the high grade reef splitting into hanging wall and footwall reef at these levels over a significant strike extent. Redfin development was also extended on levels above the 240 where the reef had continued along strike and not been driven on higher levels.
Bullen ore development continued to focus on the Norseman and St Patricks Reef. At St Patricks the 342 Level was developed outside the reserve envelope for good grades.
Development in the December quarter at Harlequin will focus on continuing the current levels at Redfin Reef and the commencement of the ore driving of the up-dip levels, while Bullen will concentrate on continuing the levels being developed at the Norseman Reef and the St Patricks Reef.
Development Exploration
At Harlequin, underground diamond drilling continued the testing of the Redfin Reef. This drilling is continuing to test the orebody extremities to define the strike extent of the orebody on the currently defined levels. The significant results from the latest holes include;
0.8m @ 10.3 g/t gold from 172.7m in drill-hole HD1700
0.7m @ 13.4 g/t gold from 171.3m and
3.9m @ 13.5 g/t gold from 178.3m in drill-hole HD1701
1.4m @ 4.7 g/t gold from 228.1m and
0.3m @ 19.2 g/t from 237.9m in drill-hole HD1704
1.1m @ 6.6 g/t gold from 198.6m in drill-hole HD1711
The Company is waiting on assay results for further completed drill holes. The drilling rig has now moved onto drilling the depth extensions of the HV1E Reef and will then target infill drilling the footwall of the HV1E Reef.
Bullen diamond drilling focussed on the Norseman Reef for most of the quarter and then commenced drilling the deeper part of the St Patricks Reef below the current ore development. Significant intersections received to date include;
2.5m @ 2.0 g/t gold from 50.0m in drill-hole BN515
0.3m @ 27.3 g/t gold from 76.1m in drill-hole BN530
There are assays pending on a number of completed holes at Bullen. The drill rig will be alternated between programmes at Harlequin and Bullen in the December quarter.
Regional Exploration & Project Development:
The focus of the exploration for the quarter continued on the near resource targets that can quickly be developed as a third mine, to increase the production profile of the operation and increase the treatment rate to plant capacity.
At Lady Miller, resource drilling continued on in-fill as well as deeper diamond drilling to test the previously defined steeply plunging high grade zone of mineralisation that extends under the floor of the historic open pit. Significant intersections have been received including:
1m @ 8.8 g/t gold from 26 m in drill-hole LMRC020
3m @ 2.8 g/t gold from 45 m in drill-hole LMRC039
1m @ 7.9 g/t gold from 24 m in drill-hole LMRC040
3m @ 4.2 g/t gold from 59 m in drill-hole LMRC041
Further drilling is planned for Lady Miller to target the conversion of inferred resources to indicated status and to test the extent of the plunging high grade shoot. In preparation for the mining of a pit cutback at Lady Miller, the process for the conversion of the prospecting licence to the north of the open pit to a mining lease has commenced.
At Mararoa North, significant intersections have been received including:
2.2m @ 3.2 g/t gold from 144.0 m in drill-hole S4598
0.6m @ 11.7 g/t gold from 125.4m in drill-hole S4600
0.8m @ 10.6 g/t gold from 129.0m in drill-hole S4601
The Mararoa North near surface results demonstrated that the mineralised reef extends to within 50 metres of the surface. The mineralisation extends for up to 400 metres, and as well as the near surface zone contains a higher grade zone that has developed at depth. The Mararoa North zone will now be ranked as an underground target, as there is insufficient surface mineralisation to support an open pit operation, and the same concept will be followed up with the nearby Crown Reef.
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. At the end of the quarter the programmes were complete and assay results were pending.
The initial review of the resources in close proximity to the established mining centres has resulted in a number of highly promising targets being recognised. The targets have been analysed and drill programmes designed and planned.
Project development work continued on the optimisation of the open pittable resources at Lady Miller and North Royal, as well as progressing the reports required to gain statutory approvals and commence open pit mining.
Norseman Iron Ore
The cataloguing of the historical drill samples and pulps held on-site was completed during the quarter. Samples from Lady Miller have been sent for evaluation of specific gravity ('SG') and the database is being interrogated to determine whether the pulps held on site relate to those areas of most interest for the magnetite mineralisation. A result of the SG determination and the sample review will be completed in the coming quarter.
Tailings Retreatment
The Company has continued the search for a suitable site to dispose of the 5 million tonnes of potentially retreatable tailings, with two potential locations being short listed. The work will now focus on the suitability of the sites for an existence of any potential mineralisation and the potential for any environmental issues.
Resource and Reserve
The annual resource reserve review has been completed and finalised with the resource increasing by 5% to 16 million tonnes for 2.0 million oz and the reserve declining by 8% to 1.2 million tonnes for 0.3 million oz. The cut off date for the calculation was March 2008. Exploration since March 2008 has been positive and the Company is confident that the reserve growth will exceed depletion from mining over the coming year. The details of the resources and reserves are shown in the following table.
|
Summary for Norseman |
Total |
Open Pit |
Underground |
||||||
|
Tonnes |
Grade |
Ounces |
Tonnes |
Grade |
Ounces |
Tonnes |
Grade |
Ounces |
|
|
Reserve - Proved |
31,000 |
4.5 |
4,440 |
19,000 |
1.0 |
640 |
12,000 |
9.8 |
3,800 |
|
Reserve - Probable |
1,140,000 |
8.3 |
304,000 |
320,000 |
3.3 |
34,000 |
820,000 |
10.2 |
270,000 |
|
Total Reserve |
1,171,000 |
8.2 |
308,440 |
339,000 |
3.2 |
34,640 |
832,000 |
10.2 |
273,800 |
|
Resource - Measured |
5,240,000 |
0.8 |
136,000 |
5,100,000 |
0.7 |
110,000 |
140,000 |
5.8 |
26,000 |
|
Resource - Indicated |
5,300,000 |
6.7 |
1,150,000 |
3,100,000 |
2.4 |
240,000 |
2,200,000 |
12.9 |
910,000 |
|
Resource - Inferred |
5,100,000 |
4.3 |
710,000 |
3,300,000 |
2.5 |
270,000 |
1,800,000 |
7.6 |
440,000 |
|
Total Resource |
15,640,000 |
4.0 |
1,996,000 |
11,500,000 |
1.7 |
620,000 |
4,140,000 |
10.3 |
1,376,000 |
The information in the table above has been compiled by Mr Russell McBeath, who is a member of the Australian Institute of Mining and Metallurgy, and is a full time employee of the company. Mr McBeath has sufficient experience which is relevant to the style of mineralisation and the 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 McBeath consents to the inclusion in this report of the matters based on the information in the form and context in which it appears.
Loan Facility:
As previously released subsequent to the end of the quarter on 21 October 2008, the Company and Central Norseman Gold Corporation Limited ('CNGC'), the principal operating subsidiary of the Company, entered into loan facility agreements with Wildpark Nominees Pty Ltd ('Wildpark') and Ascent Capital Holdings Pty Ltd ('Ascent Capital'), companies associated with three directors of the Company, being Barry Cahill, David Steinepreis and Gary Steinepreis, whereby these companies (the 'Lenders') have made available a $1,500,000 loan facility to CNGC (the 'Loan Facility').
The Loan Facility was entered into to provide CNGC with additional working capital and in advance of the Company's dual listing on the Australian Stock Exchange ('ASX') ('IPO'), which is anticipated pending completion of the necessary documentation.
Each director's interest in the Loan Facility, through their respective associated companies are as follows:
Barry Cahill (through Wildpark) $ 500,000
David Steinepreis and Gary Steinepreis (through Ascent Capital) $1,000,000
The key terms of the Loan Facility are as follows:
The draw-down period is between 10 October 2008 and the earlier of 10 April 2009, the date upon which the Company is admitted to the ASX, or the date upon which the Company undertakes a separate fundraising ('Secondary Raising').
The loan facility has an interest rate of 8% per annum payable monthly in arrears.
Should the IPO or Secondary Raising occur prior to 10 April 2009, the Lenders may elect to transfer all or part of the $1,500,000 to the Company in consideration for the issue by the Company of new ordinary shares in the Company. The issue price per share shall be the same as the offer price in the IPO or Secondary Raising.
The Lenders have indicated that it is their intention to participate in the IPO or Secondary Raising.
The Loan Facility was entered into with associated companies of three directors of the Company and, owing to the amount involved, was classified as a related party transaction under the AIM rules. The independent directors of the Company, being Vince Pendal and Michael de Villiers, having consulted with nominated adviser, Blue Oar Securities Plc, consider the terms of the Loan Facility to be fair and reasonable insofar as its shareholders are concerned.
Subsequent to the quarter, the Company through CNGC has also entered into a security agreement with the Lenders to provide security for the loans by way of a fixed & floating charge over CNGC's mobile equipment, mine inventory and mine stockpiles.
Corporate Review:
The Company is working through the process for a dual listing for the Company's 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 region for corporate opportunities to add further to shareholder value.
Outlook/Conclusion:
The operations have continued to produce gold at average production levels for the quarter. Cash costs per oz have increased for the quarter due to increasing input costs, which are expected to ease in the coming quarter.
The Company is continuing to pursue its operational strategy of optimising gold production while reducing costs and is advancing its goal of commencing at 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 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 2 million oz of gold at an average grade of 4 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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