TIDMNGL
RNS Number : 5668F
Norseman Gold PLC
28 April 2011
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 31 March
2011
Norseman Gold, the AIM-listed and ASX-listed Australian gold
production and exploration company is pleased to announce a
three-month progress report on its activities for the period to 31
March 2011.
Overview
-- The Company's capital investment programme continued during
the quarter with expenditure of A$12.6M on exploration, capitalised
mine development and equipment.
-- Mining activities at North Royal Open Pit continued on target
providing a fourth source of ore to the mill with a stockpile of
excess oxide low grade ore now awaiting treatment at the mine ore
pad.
-- As previously announced in the Production and Profit Update,
released April 15(th) , the OK Decline has continued to make slow
progress in its ramp up and the existing underground mines, Bullen
and Harlequin, have continued to struggle to lift production to
acceptable and forecast levels with treated tonnage and grade below
expectations.
-- Gold production from the Norseman Gold Project during the
three months to 31 March 2011 totalled 11,781 ounces at a cash
operating cost of A$1,492 per ounce gold, generating a Project EBIT
of (A$4.1M). As previously announced gold production for the year
is now forecast to be 55,000 to 60,000 ounces (35,172 ounces year
to date 31 March 2011).
-- The Company's review and action plan for its operations has
continued. A strategy to reduce costs and increase short term
production has been implemented with the intent to return each of
the underground mines to profitability in as short a time as
possible and preserve cash resources. The review of the medium to
long-term future of each of the underground mine is continuing, as
is the potential to accelerate access to North Royal hard rock
deeper down the pit that would enable the stockpiled material to be
treated earlier.
-- Cash balances at the end of the period totalled A$18.8
million (A$18.3 million excluding bullion). Approximately A$6.1
million of this cash balance is committed to cash-backed
environmental bonds.
3 Months to
3 Months to 31/03/11 31/12/10
Production oz 11,781 11,162
Average Realised Gold Price A$/oz 1,380 1,385
Operating Cash Cost A$/oz 1,492 1,342
Project EBIT A$(m) (4.1) (5.4)
Capital Investment A$(m) 12.6 14.6
Cash at Quarter End (incl.
bullion) A$(m) 18.8 17.1
Operating Review
Gold production from the Norseman Gold Project during the
three-month period to 31 March 2011 totalled 11,781 ounces; the
Bullen Decline contributed 3,508 ounces, the Harlequin Decline
contributed 5,368 ounces, the OK Decline contributed 1,815 ounces
and the North Royal Open Pit contributed 326 ounces. The remaining
764 ounces came from the treatment of low-grade stockpiles.
The underperformance of the underground mines has had the double
headed effect of producing lower tonnes and consequently poured
gold, as well as reduced volumes of hard-rock ore with which softer
oxide ore from North Royal can be blended. As a result, as at the
end of March 2011, Norseman currently has a stockpile of lower
grade ore, approximately 12,000 tonnes at 1.7 g/t gold, from the
North Royal Open Pit awaiting blending material to allow it to be
treated.
The gold price received during the quarter ranged from A$1,327
to A$1,420 per ounce, with an average price achieved of A$1,380 per
ounce. As a result of the lower production profile, the net direct
cash operating costs per ounce for the quarter were A$1,492 per
ounce of gold recovered. The operations remain un-hedged with a
gold price of approximately A$1,409 per ounce at present.
Production
3 months
to 3 months to 3 months to 3 months to
30/06/10 30/09/10 31/12/10 31/03/11
Capital
Development Metres 415 628 1,080 1,003
Ore
Development Metres 1,682 1,687 1,507 1,061
Development Tonnes 46,622 51,793 51,796 41,048
Grade gAu/t 2.69 3.62 1.35 1.54
Mechanised
Stoping Tonnes 11,770 4,261 8,437 15,640
Grade gAu/t 1.80 3.14 5.47 3.42
Airleg
Stoping Tonnes 30,145 21,767 28,181 28,951
Grade gAu/t 10.55 8.60 8.29 7.52
U/G
Production tonnes 88,537 77,821 88,414 85,639
Treated
Tonnes Tonnes 89,015 92,346 113,066 114,099
Grade gAu/t 5.23 4.27 3.24 3.40
Recovery % 96.7% 96.6% 94.8% 94.4%
Recovered
Ounces Ozs 14,469 12,229 11,162 11,781
Capital development at the Bullen Decline recommenced in the
O'Brien's Decline as it headed towards this new reef that contains
a defined new ore source in a separate operating area. Access was
completed to the Regent Shaft 9 Level and drilling was commenced on
a potential block that the Company believes can be easily accessed
for mechanised mining.
The extraction method for the mining of underground remnant
pillars was also trialled successfully during the quarter. The
method involves the installation of artificial pillars and the
removal of intact ore pillars from old airleg stopes. It is
anticipated that this method will supplement the production profile
at Bullen for the long term as there are a large number of airleg
stopes containing pillars that are amenable to this extraction
method.
The Harlequin Decline continued to perform poorly during the
quarter, however work has been commenced on a number of initiatives
to rectify the production short fall. Infrastructure is being
developed to increase the productivity and improve the ventilation
to the long-tram development in the Perch reef and this is
anticipated to be completed during the June 2011 quarter. Ore
recovery has commenced in old drives and stopes to extract remnant
pillars and broken ore from within these areas. The new working
area at HV1 will be commenced mid June 2011 quarter to ease the
production reliance on the constrained areas of the Perch/Redfin
reef. Development will commence on a number of levels on the new
footwall reef, the Mako reef, which has developed under the Perch
reef.
At the OK Decline capital development continued to open up
working areas during the quarter. Ore development took place in a
number of headings on the Main, O2 and Star of Erin reef, however
productivity was not at acceptable rates. Stoping continued to ramp
up slowly as personnel were recruited and trained to undertake the
stoping operations. Water from the historic working areas and water
produced from current mining activities continued to be pumped from
the bottom of the mine directly to the treatment plant. At the time
of writing, dewatering efforts had advanced below the mine's 18
Level.
Production Outlook
As previously announced in the Production and Profit Update,
released April 15(th) , in light of the continued below forecast
performance the Company has conducted a review into its operations,
including a detailed examination of mining schedules. The result of
the review has indicated that there would not be a marked increase
in the production profile of the underground mines at Norseman in
the next quarter. As a result and based on these latest mining
schedules, gold production for the year is now forecast to be
55,000 to 60,000 ounces.
As a consequence of this review, a strategy to reduce costs and
increase short term production has been implemented.
The first stage of the strategy has been to cut all capital
expenditure except where associated with the ongoing development of
the North Royal Open Pit or where short term production increases
would result from the expenditure.
The second stage has been to cut all excess manpower and
equipment to match the current production output of the underground
mines. As a result, the Company will reduce its workforce by up to
50 personnel, and reduce the size of the underground fleet by
number of items of plant including three diamond drill rigs and a
twin boom jumbo.
The intent of these two initial measures is to return each of
the underground mines to profitability in as short a time as
practicable.
The third and final stage of the plan is to look at the medium
to long-term future of each of the underground mines to establish a
mine plan that will ensure their profitability out from their
current status. This third-stage planning is continuing.
Progress at North Royal Open Pit has been satisfactory but the
Company is currently looking to improve performance. As the pit
progresses it has been producing increasing quantities of oxide
ore, but this can be processed in limited quantities only, as it
requires blending with underground hard rock. Excess oxide ore is
therefore being stockpiled until sufficient hard rock material is
available. Site management are currently considering mining options
that will accelerate access to North Royal hard rock deeper in the
pit, which will enable the stockpiled material to be treated as
soon as possible.
The Company's recently announced forecast of between 55,000 and
60,000 ounces of gold production for the 2010/11 financial year is
a result of the review of its operations. Further longer term
forecasts will be made once the review of the longer term
production profile is complete.
Operating Costs
As a result of the lower production profile, the net direct cash
operating costs per ounce for the quarter were A$1,492 per ounce of
gold recovered and the Norseman Gold Project generated Earnings
Before Interest and Tax ('EBIT') of (A$4.1) million.
The Norseman Gold Project EBIT does not include the corporate
costs of Norseman Gold Plc. The Company now forecasts that it will
post an operating loss of between (A$5million) and (A$8million)
before tax and abnormal items. This is against last year's
operating profit of A$0.2 million
Cash Balances
Cash balances at the end of the period totalled A$18.8 million
(A$18.3 million excluding bullion). Approximately A$6.1 million of
this cash balance is committed to cash-backed environmental
bonds.
Capital Expenditure
A total of A$12.6 million in capital was invested during the
March 2011 quarter. Significant capital expenditures made during
the quarter were on fixed and mobile plant and equipment (A$1.2
million), exploration (A$1.9 million) and capitalised mine
development (A$8.1 million).
Of the mine development costs capitalised, the major item was
the pre-strip of the North Royal Open Pit. Expenditure was also
incurred on drilling and pre-development work at North Royal.
Mine Exploration
Underground diamond drilling continued to investigate numerous
targets in the vicinity of the current underground workings to
delineate ore that could be easily accessed as an immediate
production centre.
The diamond drill rig at the Bullen Decline moved to the
potential blocks that have been interpreted to lie along the
Mararoa reef structure particularly around the 9 Level of the
Regent Shaft. Significant intersections are as listed below:
Mararoa (Regent)
-- 0.2m @ 54.9 g/t gold from 84.5m in drill-hole BN885
-- 2.0m @ 5.4 g/t gold from 110.7m and
-- 1.6m @ 5.0 g/t gold from 118.0m in drill-hole BN888
-- 1.3m @ 39.7 g/t gold from 128.4m including
o 0.9m @ 57.3 g/t gold from 128.4m in drill-hole BN889
-- 1.6m @ 6.5 g/t gold from 14.9m and
-- 3.1m @ 6.1 g/t gold from 137.3m including
o 1.0m @ 11.7 g/t gold from 138.4m and
o 0.4m @ 12.1 g/t gold from 139.3m in drill-hole BN890
-- 2.0m @ 4.4 g/t gold from 129.5m in drill-hole BN891
Harlequin diamond drilling moved to drill targets at Salamander
and around the limit of the resource at the Perch and Redfin reef.
Drilling capacity at Harlequin was increased by the addition of the
OK Decline drill rig. Significant intersections from the drilling
of Salamander and Perch are as listed below:
Salamander
-- 1.5m @ 10.4 g/t gold from 88.6m including
o 0.3m @ 49.4 g/t gold from 90.3m in drill-hole HD1909
-- 16.0m @ 3.4 g/t gold from 42.0m including
o 1.0m @ 10.4 g/t gold from 42.0m and
o 0.4m @ 23.7 g/t gold from 43.0m and
o 1.1m @ 9.0 g/t gold from 43.8m in drill-hole HD1920
Perch
-- 12.3m @ 1.5 g/t gold from 152.0m in drill-hole HD1925
The OK Decline diamond drill rig continued drilling into the
Star of Erin reef before moving to Harlequin Decline. Further
significant intersections received for the Star of Erin reef are as
listed below:
-- 1.7m @ 8.9 g/t gold from 28.6m in drill-hole OKD365
-- 4.2m @ 19.9 g/t gold from 91.5m including
o 0.5m @ 160.0 g/t gold from 92.7m in drill-hole OKD372
-- 2.9m @ 18.5 g/t gold from 118.8m including
o 0.5m @ 77.8 g/t gold from 119.9m and
o 0.6m @ 15.2 g/t gold from 120.7m in drill-hole OKD383
-- 0.3m @ 19.4 g/t gold from 254.8m in drill-hole OKD403
-- 0.4m @ 22.3 g/t gold from 289.7m in drill-hole OKD409
North Royal drilling focussed mainly on the grade control of the
orebody as the pit benches were mined. Grade control results to
date reflect the orebody model upon which the open pit was
designed.
Regional Exploration and Mine Development
The exploration diamond drill rig completed the planned
Butterfly Deeps programme and then commenced the Crown reef
drilling programme at the Bullen Decline.
Butterfly Deeps
At Butterfly Deeps the following significant results were
received:
-- 1.9m @ 40.0 g/t gold from 482.5m including
o 0.9m @ 83.7 g/t gold from 482.5m in drill-hole BFD014
The current drilling platform at Bullen 18 Level is not
satisfactorily positioned to continue to test Butterfly Deeps much
further south, so a new drill location will be established to allow
the continuation of this programme.
Crown Reef
Drilling commenced to target the Crown reef below the 16 Level
at Bullen Decline. The programme is targeted to test a number of
potential ore blocks which potentially contain between 50,000 to
100,000 ounces of gold and are easily accessible from the current
Bullen Decline workings.
Initial significant intersections from this drilling are listed
below:
-- 2.0m @ 3.6 g/t gold from 236.2m and
-- 4.1m @ 6.3 g/t gold from 249.7m in drill-hole CRD013
Cobbler
Results were also received from lake drilling conducted to the
north of the current Cobbler Open Pit resource with significant
intersections listed below:
-- 2.9m @ 3.9 g/t gold from 94.0 m and
-- 1.1m @ 5.2 g/t gold from 113.3m including
o 0.2m @ 27.6 g/t gold From 113.3m in drill-hole ASS021
These results are particularly pleasing as they extend this
defined resource to the north.
Corporate Review
The Company undertook a capital raising during the quarter and
issued 22,222,222 shares at an issue price of 45p to raise
GBP10,000,000 before costs. The funds from the raising will be used
to continue with the development of the North Royal Open Pit and to
provide working capital.
The Company's Chief Operating Officer, Don Harper, has resigned
to pursue a career advancement opportunity within the mining
industry.
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.
Significant results for drill-hole intercepts contained in this
report are considered significant because the grade by width total
is equal to or greater than 5.0 gram metres per tonne. That is if
the intercept is 1.0 g/t gold over 5.0 m, 5.0 g/t gold over 1.0 m,
50 g/t gold over 0.1 m etc it is considered significant.
Quoted resources and reserves are as per the Company's market
release of 25 August 2010 and as tabulated below.
TABLE 1: March 2010 Open Pit & Underground Resource and
Reserve Summary
Summary
for Open Pit - 31 Mar Underground - 31
Norseman 2010 Mar 2010 Total
----------- ------------------------------- ------------------------------ -------------------------------
Grade Grade Grade
g/t Ounces g/t Ounces g/t Ounces
Tonnes gold gold Tonnes gold gold Tonnes gold gold
----------- ----------- ------ ---------- ---------- ------ ---------- ----------- ------ ----------
Reserve -
Proved 0 0.0 0 230,000 12.0 89,000 230,000 12.0 89,000
----------- ----------- ------ ---------- ---------- ------ ---------- ----------- ------ ----------
Reserve -
Probable 440,000 3.2 45,000 1,100,000 7.9 280,000 1,500,000 6.8 330,000
----------- ----------- ------ ---------- ---------- ------ ---------- ----------- ------ ----------
Total
Reserve 440,000 3.2 45,000 1,300,000 8.9 370,000 1,700,000 7.7 420,000
----------- ----------- ------ ---------- ---------- ------ ---------- ----------- ------ ----------
Resource -
Measured 5,000,000 0.7 110,000 410,000 14.4 190,000 5,400,000 1.7 300,000
----------- ----------- ------ ---------- ---------- ------ ---------- ----------- ------ ----------
Resource -
Indicated 3,600,000 2.6 300,000 2,200,000 10.9 770,000 5,800,000 5.9 1,100,000
----------- ----------- ------ ---------- ---------- ------ ---------- ----------- ------ ----------
Resource -
Inferred 4,100,000 5.8 760,000 6,200,000 8.0 1,600,000 10,000,000 7.5 2,400,000
----------- ----------- ------ ---------- ---------- ------ ---------- ----------- ------ ----------
Total
Resource 13,000,000 2.9 1,200,000 8,800,000 8.9 2,600,000 21,000,000 5.3 3,800,000
----------- ----------- ------ ---------- ---------- ------ ---------- ----------- ------ ----------
Notes:
1. As is required the Resources and Reserves are calculated and
reported in accordance with the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves, The JORC
Code, 2004 Edition.
2. Resources are inclusive of reserves.
3. Resources and reserves are quoted to two significant figures
so inconsistencies may exist within the table.
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: +44 (0)20 7786
4370
------------------ -------------------------- --------------------
Nandita Sahgal Seymour Pierce Ltd Tel: +44 (0)20 7107
8000
------------------ -------------------------- --------------------
Jeremy Stephenson Seymour Pierce Ltd Tel: +44 (0)20 7107
8000
------------------ -------------------------- --------------------
Hugo de Salis St Brides Media & Finance Tel: +44 (0)20 7236
Ltd 1177
------------------ -------------------------- --------------------
Susie Geliher St Brides Media & Finance Tel: +44 (0)20 7236
Ltd 1177
------------------ -------------------------- --------------------
E-mail investors@ngold.com.au
------------------ -------------------------- --------------------
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 three high-grade narrow-vein
underground mines - the Bullen, Harlequin and the OK Decline - and
the North Royal open pit. Currently, it has a total resource
inventory of 3.8 million oz of gold at an average grade of 5.3
g/t.
The tenements cover a 2,180 sq km area centred on the Norseman
Township. The landholding comprises 221 tenements consisting of 16
Exploration Licences, 107 Mining Licences, 64 Prospecting Licences,
15 Miscellaneous Licences, 5 Exploration Licence Applications, 13
Prospecting Licence Applications and 1 Mining Lease
Application.
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 the development of a fourth and subsequent mines.
The current treatment plant capacity is 720,000 tonnes per annum
and, at capacity, the treatment plant can produce up to 140,000
ounces of recovered gold.
The Company has fifteen advanced resource projects under review
of which three have pre-development work being undertaken on them.
It is anticipated that at least one if not all the pre-development
projects will develop into mining propositions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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