TIDMNGL
RNS Number : 5362X
Norseman Gold PLC
16 February 2012
16 February 2012
Norseman Gold plc / Epic: NGL / Index: AIM / Sector: Mining
& Exploration
NORSEMAN GOLD PLC
('Norseman Gold' or 'the Company')
Corporate Changes
and
Three-Month Report on Activities for the quarter ended 31
December 2011
Norseman Gold, the AIM-listed and ASX-listed Australian gold
production and exploration company, is pleased to announce that
Australian resource specialist Tulla Resources Group Pty Ltd
('Tulla') has entered into an agreement to subscribe for A$10
million (approximately GBP6.8 million) of convertible loan notes in
Norseman Gold and through its associated company, L2 Project
Management - Norseman Pty Ltd ('L2 PM'), will assume management and
operational control of the Norseman Gold Project's entire site with
immediate effect.
Additionally, the Company announces a three month progress
report on its activities for the quarter ended 31 December 2011 and
initial forward plans for the Norseman Gold Project.
Overview
-- Operational review initiated in October 2011 by new Chairman,
Mr David Steinepreis, focussed on all mining activities
-- Agreement signed with resources specialist, Tulla, under
which it has agreed to subscribe for A$10 million (approximately
GBP6.8 million) of secured convertible loan notes and through its
associate, L2 PM, assume management and operational control for the
entire site at the Norseman Gold Project with immediate effect
-- Norseman Gold to retain ownership of the mine and equipment and oversee manager performance
-- Initial review by Tulla indicates relatively early turnaround in operations is achievable
-- Bullen and OK Decline placed on care and maintenance whilst
operational review and forward planning completed
-- More comprehensive restructure and review underway focussed
on establishing forward mine plan for three years
-- Strategy being implemented to lower costs, become a
consistent 100,000 ounce producer within two years and increase
resource base through both mine and regional exploration - current
resource inventory of 3.4 million ounces of gold at an average
grade of 4.7 g/t
-- Board restructuring ongoing - new Chairman, David
Steinepreis, leading Interim Board following the resignation of
Barry Cahill - new experienced technical directors to join the
Board with Tulla's assistance
-- Equity placement to raise approximately A$3 million
(approximately GBP2.04 million) through the issue of 50 million
ordinary shares at A$0.06 (approximately 4p) per share - further
strengthens the balance sheet to implement new strategy
-- Gold production for the quarter was 10,658 ounces at a net
direct cash operating cost of A$1,673 per ounce gold and stockpiles
totalled 79,000 tonnes at 1.5 g/t
-- Operations remain un-hedged
Norseman Gold Chairman, David Steinepreis, said, "I believe that
with Tulla's assistance we can stabilise the operation and then
start to build production, profitability and in turn shareholder
value. We have already introduced a number of initiatives aimed at
improving the performance of the mine, which, as highlighted by its
historic production profile (circa 80,000 ounces of gold from just
two mines in 2009), has significant potential."
"We remain positive on the quality of the Norseman Gold Project
which has a current resource inventory of 3.4 million ounces of
gold at an average grade of 4.7 g/t and this confidence has been
underpinned by Tulla's investment and agreement to actively manage
the development of the Norseman Gold Project given its experience
of the mine and understanding of the ore bodies and their
potential. We look forward to keeping shareholders updated on our
progress with a view to reaching our target to become a consistent
100,000 ounce per annum gold producer within two years and build a
much larger operation and Company in the years to follow."
Corporate Transaction
Following an operational review initiated in October 2011 by new
Chairman, David Steinepreis, the Company has signed an agreement
which sees Tulla through its associated company, L2 PM take over
the management and operational control for the entire Norseman Gold
Project site with immediate effect. The Company has entered into an
agreement with Tulla whereby Tulla will subscribe for A$10 million
(approximately GBP6.8 million) of secured convertible notes.
Importantly, Norseman Gold will retain ownership of the mine and
equipment and oversee the manager's performance.
Established in the early 1990s, Tulla is the Maloney family's
private investment group based in Sydney. The company has had a
long-standing involvement in the resources and related services and
transport industries including investments in: TSX listed THEMAC
Resources, which owns 100% of the Copper Flat Project, a porphyry
copper-molybdenum-gold-silver project in south-central New Mexico,
USA; ASX listed Altona Mining, a copper miner in Finland and which
is advancing a major copper development project in Queensland,
Australia; and ASX listed Queensland Mining Corporation, a copper
gold play, concentrating its exploration and development activities
in the Cloncurry region of north west Queensland.
The Maloney family previously controlled ASX listed The MAC
Services Group Limited (MSL). MSL developed, owned and operated
high quality, large scale, integrated mining accommodation
facilities and ancillary services which serviced the needs of mine
owners, contracted mining service providers and other essential
contractors working in remote and regional areas on major energy
and resource projects. MSL was subsequently taken over by Oil
States International Inc (NYSE:OIS) in December 2010 for
approximately A$650 million. The Maloney family owned approximately
52% of MSL at the time of the takeover.
Tulla undertook an initial review prior to completion of the
agreement with Norseman Gold and is now commencing a more detailed
review of all aspects of the operations, including all four mines.
Its initial findings indicate that it believes that it can lower
operational costs and become a consistent 100,000 ounces per annum
gold producer within two years. Tulla is now preparing a
comprehensive forward 3 year mine plan and a growth strategy. It
will also look to ramp up regional exploration together with mine
exploration to expand Norseman Gold's resource base. The Bullen and
OK Decline have been placed on care and maintenance and the staff
from those mines relocated to other locations at the Norseman Gold
Project site whilst the forward plan is being prepared.
As part of the restructuring, Barry Cahill has resigned as
Managing Director of Norseman Gold. A new team of experienced
technical directors will join the Board with Tulla's assistance. In
the meantime, an Interim Board is operating, headed by experienced
investor/director, David Steinepreis.
Fund Raising
The Company has entered into an agreement whereby Tulla will
subscribe for A$10 million (approximately GBP6.8 million) of
secured convertible loan notes (the "Convertible Loan Notes")
("Convertible Loan Note Subscription"). Tranche 1 of A$3.5 million
(approximately GBP2.38 million) has been issued and Tranche 2 of
A$6.5 million (approximately GBP4.42 million) will be issued
following the completion of the security arrangements as detailed
below. The security arrangements must be completed within 5
business days or the agreement may be terminated by Tulla with
immediate effect. An additional A$3 million (approximately GBP2.04
million) ("the Equity Placing") is being raised by way of a
conditional placing of up to 50,000,000 new ordinary shares of
GBP0.0125 each in the capital of the Company (the "Placing Shares")
at a price of A$0.06 (approximately 4p) per ordinary share. The
Company has entered into an agreement with an Australian Broker to
manage the Equity Placing. The Equity Placing is conditional on the
lodgement of a prospectus for the purposes of section 708A(11) of
the Australian Corporations Act to remove any secondary trading
restrictions on the sale of securities.
The combined proceeds of the Equity Placing and the Convertible
Loan Note Subscription will amount to approximately A$13 million
(approximately GBP8.84 million), before expenses, and will provide
additional working capital for the Company. Following receipt of
these proceeds, Norseman Gold will have cash resources of
approximately A$22.3 million (approximately GBP15.17 million).
The funds raised will be utilised for working capital, complete
the forward planning and review and to implement the strategy to
lower costs and improve the production profile.
The Convertible Loan Notes will bear interest at a rate of 10%
per annum payable quarterly in arrears (with the first payment due
on 31 March 2012), have a duration of 36 months from the date of
issue, be convertible by the holder into ordinary shares of
GBP0.0125 each in the capital of the Company ("Ordinary Shares")
("Conversion Shares") at a price of 6 pence per ordinary share, and
carry a share purchase warrant ("Warrant") entitling Tulla to
acquire a further Ordinary Share at a price of 12 pence per
ordinary share for every Conversion Share (calculated by reference
to the nominal amount of the Convertible Loan Notes) at any time
within 36 months from the date of issue of the Convertible Loan
Notes. It is anticipated that the Convertible Loan Notes will be
issued prior to 31 March 2012 and will not be admitted to trading
on any public market. The Convertible Loan Notes and Warrants are
fully transferable.
The conversion rights applicable to the Convertible Loan Notes
and the grant and potential exercise of Warrants are conditional on
receipt of shareholder approval at an Extraordinary General Meeting
which is expected to take place on or before 31 March 2012. If such
approvals and any necessary waivers from ASX (or failing such
waivers, further shareholder approvals) are not obtained, the
interest rate on the Convertible Loan Notes will increase to 20%
per annum from the advance date and each Convertible Loan Note
holder will be entitled to require redemption of his Convertible
Loan Notes at any time after 31 March 2012.
The Convertible Loan Notes will be secured by a first ranking
mortgage over certain exploration tenements, second ranking
mortgage over certain mining leases and a second ranking general
security agreement over all other assets relating to the Norseman
Gold Project, each granted by the Company's subsidiary, Central
Norseman Gold Corporation Limited ("CNGC"). The securities will
rank behind the security granted to (and subject to a priority deed
with) EXP T1 Ltd, a subsidiary of RK Mine Finance Trust 1, a member
of the Red Kite group of funds, as announced on 4 July 2011.
The existing convertible loan note holders acknowledge the new
Convertible Loan Notes and inclusion of Tulla as part of the
security arrangements over the Norseman Gold Project. The second
ranking mortgage over certain mining leases and a second ranking
general security agreement over all other assets relating to the
Norseman Gold Project granted to the Convertible Loan Note holder
ranks equally with the existing convertible loan note holders.
EXP T1 Ltd has agreed to a standstill arrangement in relation to
facility agreement between CNGC and the Red Kite group dated 1 July
2011 ("Facility Agreement") and will not enforce any rights which
may arise under the Facility Agreement for a period of 3 months
from 14 February 2012 unless any other security holder or creditor
calls an event of default. In addition, EXP T1 Ltd will receive a
capital repayment of A$500,000 (approximately GBP340,136) on 30
June 2012, defer capital repayments for July and August 2012 with
these amounts to be amortised over the remaining 10 months of the
loan, will be issued 10,000,000 ordinary shares of GBP0.0125 each
in the capital of the Company issued without charge at a deemed
issue price of A$0.06 (approximately 4p) per ordinary share and
3,000,000 warrants on the same terms and conditions for the
Warrants to be issued to Tulla being at a price of 12 pence per
ordinary share at any time within 36 months from the date of issue
of the Convertible Loan Notes, subject to shareholder approval.
Subject to Shareholder approval, the Company will issue a total
of 35 million warrants. 5 million to David Steinepreis, Chairman of
the Company, and 10 million to Ascent Capital Holdings Pty Ltd, a
company controlled by entities associated with Gary Steinepreis and
David Steinepreis, and 20 million to L2 PM, on the same terms and
conditions for the Warrants to be issued to Tulla being at a price
of 12 pence per ordinary share at any time within 36 months from
the date of issue of the Convertible Loan Notes.
It is also proposed that, subject to shareholder approval at the
Extraordinary General Meeting to be held on or before 31 March 2012
and in accordance with the ASX Listing Rules, that David
Steinepreis and Ascent Capital Holdings Pty Ltd, or their nominees,
be provided the opportunity to subscribe for up to 10,000,000 new
ordinary shares of GBP0.0125 each in the capital of the Company at
a price of A$0.06 per share to raise A$600,000 on the same terms
and conditions as the Equity Placing.
Quarterly Review
Gold production from the Norseman Gold Project during the
three-month period to 31 December 2011 totalled 10,658 ounces, down
8% on the September 2011 quarter: Bullen contributed 4,002 ounces
(up 11%), Harlequin contributed 4,434 ounces (down 8%), the OK
Decline contributed 1,045 ounces (down 18%), and the North Royal
Open Pit contributed 1,177 ounces (down 40%). As at the end of
December 2011 the Norseman Gold Project's broken ore stockpiles
totalled 79,000 tonnes at 1.5 g/t.
The gold price received during the quarter ranged from A$1,485
to A$1,705 per ounce, with an average price of A$1,605 per ounce.
As a result of the decreased production profile, the net direct
cash operating cost per ounce for the quarter was A$1,673 per ounce
of gold recovered. Actual direct operating costs dropped marginally
from the previous quarter and were under budget for the quarter.
The operations remain unhedged.
Norseman Gold Project earnings before interest and tax (EBIT)
was a loss of A$8.4 m for the quarter. The Norseman Gold Project
EBIT does not include the corporate costs of Norseman Gold plc.
Production
3 months 3 months 3 months 3 months
Units to 31/03/11 to 30/06/11 to 30/09/11 to 31/12/11
--------------------- -------- ------------- ------------- ------------- -------------
Capital Development metres 1,003 576 596 514
--------------------- -------- ------------- ------------- ------------- -------------
Ore Development metres 1,061 1,316 1,312 823
--------------------- -------- ------------- ------------- ------------- -------------
Development tonnes 41,048 44,011 47,850 35,955
--------------------- -------- ------------- ------------- ------------- -------------
Grade gAu/t 1.54 2.49 1.68 2.50
--------------------- -------- ------------- ------------- ------------- -------------
Mechanised Stoping tonnes 15,640 23,915 27,303 15,707
--------------------- -------- ------------- ------------- ------------- -------------
Grade gAu/t 3.42 3.78 3.28 5.10
--------------------- -------- ------------- ------------- ------------- -------------
Airleg Stoping tonnes 28,951 30,265 28,571 25,522
--------------------- -------- ------------- ------------- ------------- -------------
Grade gAu/t 7.52 8.77 5.31 6.49
--------------------- -------- ------------- ------------- ------------- -------------
U/G Production tonnes 85,639 98,191 103,724 77,184
--------------------- -------- ------------- ------------- ------------- -------------
Open Pit Waste bcm 502,272 747,908 776,836 579,316
--------------------- -------- ------------- ------------- ------------- -------------
Open Pit Ore tonnes 11,252 32,857 48,659 30,895
--------------------- -------- ------------- ------------- ------------- -------------
gAu/t 1.84 1.90 2.84 1.47
------------------------------ ------------- ------------- ------------- -------------
Treated Tonnes tonnes 114,099 112,084 118,384 94,585
--------------------- -------- ------------- ------------- ------------- -------------
Grade gAu/t 3.40 4.34 3.20 3.67
--------------------- -------- ------------- ------------- ------------- -------------
Recovery % 94.4% 95.8% 95.5% 95.5%
--------------------- -------- ------------- ------------- ------------- -------------
Recovered Ounces ozs 11,781 15,001 11,631 10,658
--------------------- -------- ------------- ------------- ------------- -------------
Stockpiles tonnes 12,000 32,000 66,000 79,000
--------------------- -------- ------------- ------------- ------------- -------------
gAu/t 1.7 1.9 1.7 1.5
------------------------------ ------------- ------------- ------------- -------------
Production Outlook
The Board and Tulla are confident that they can improve the
production profile at the Norseman Gold Project mine, which has
been underlined by their commitment of capital. The appointment of
L2 PM to manage the Norseman Gold Project will see a comprehensive
restructure and review. Tulla and the Company are focussed on
implementing a comprehensive forward 3 year mine plan and a growth
strategy to generate value for shareholders. This is currently
being prepared although the main aims are to:
-- reduce costs across all areas of the mine in order to fit forward cashflows
-- focus on profitable production areas of the Norseman Gold
Project mine to target a quick turnaround
-- implement a mine plan based on profitability
-- increase the resources base through defined mine and regional
exploration programmes - current resource stands at of 3.4 million
ounces of gold at an average grade of 4.7 g/t
-- re-structure the Board of Directors with highly experienced
technical professionals to ensure strategy implementation -
potentially with experience of operations at the Norseman Gold
Project
-- target 100,000 ounce consistent organic production within two
years and increase this thereafter while remaining focussed on
profitability
-- re-establish extensive regional exploration on the highly
prospective Norseman Gold Project field.
Cash Balances
Cash balances at the end of the quarter ended 31 December 2011
totalled A$16.6 million (A$15.6 million excluding bullion).
Approximately A$6.1 million of this cash balance is committed to
cash-backed environmental bonds and the Company estimates that it
had approximately 3,800 ounces of gold sitting in stockpiles.
During the quarter, the Company raised GBP5.1 million (before
expenses) via the issue of a Convertible Loan Note Facility, plus
an additional GBP6.9 million (before expenses) via a share
placement, both of which were approved by shareholders at the
Annual General Meeting held on 9 December 2011.
Following the investment announced today the balance sheet for
the Company has been significantly strengthened and the Company is
well placed to implement the turn-around strategy.
Capital Expenditure
A total of A$7.3 million in capital was invested during the
December 2011 quarter. The majority of this was in capitalised mine
development (A$5.3 million) and capitalised exploration (A$1.1
million). This level of capital expenditure, a reduction from
previous quarters, reflects the management's continued efforts to
conserve cash resources while gold production has remained below
expectations.
Corporate Changes
The Company made a number of Board changes during the quarter.
Mr. David Steinepreis, an experienced investor / director, joined
the Company on 25 October 2011 and took over as Chairman following
Mr. Pendal's departure. Mr Pendal, who had been Chairman since
2007, was up for re-election at the Annual General Meeting by
rotation but chose not to be renominated. Mr. Pendal therefore
ceased to be a director immediately after the Annual General
Meeting on 9 December 2011. Mr. Peter Bilbe also resigned from the
Board for personal reasons during the quarter.
Subsequent to the end of the quarter, Mr. Barry Cahill also
stepped down as Managing Director and has also resigned from the
Boards of the Company and its subsidiaries. Mr Kelvin May, Company
Secretary, has been appointed to the Board as an interim measure
while technical directors are sourced with the assistance of
Tulla.
The Company appointed a new Nominated Adviser and Joint Broker,
Northland Capital Partners Limited, during the quarter.
Note: A$/GBP exchange rate of 1.47 applied as at 8 February 2012
- source Bloomberg.
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 the former
Managing Director, 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 28 July 2011 and as tabulated below.
TABLE 1: March 2011 Open Pit & Underground Resource and
Reserve Summary
Summary for Open Pit - 31 March Underground - 31 Total
Norseman 2011 March 2011
---------------- ----------------------------- ------------------------------- -------------------------------
Tonnes Grade Ounces Tonnes Grade Ounces Tonnes Grade Ounces
g/t gold g/t gold g/t gold
gold gold gold
---------------- ----------- ------ -------- ----------- ------ ---------- ----------- ------ ----------
Reserve -
Proved 13,000 1.8 760 320,000 8.3 85,000 330,000 8.5 90,000
---------------- ----------- ------ -------- ----------- ------ ---------- ----------- ------ ----------
Reserve -
Probable 1,000,000 3.1 99,000 990,000 7.2 230,000 2,000,000 5.1 330,000
---------------- ----------- ------ -------- ----------- ------ ---------- ----------- ------ ----------
Total Reserve 1,000,000 3.1 100,000 1,300,000 7.7 320,000 2,300,000 5.7 420,000
---------------- ----------- ------ -------- ----------- ------ ---------- ----------- ------ ----------
Resource
- Measured 5,000,000 0.7 110,000 580,000 12.3 230,000 5,600,000 1.9 340,000
---------------- ----------- ------ -------- ----------- ------ ---------- ----------- ------ ----------
Resource
- Indicated 4,100,000 2.7 360,000 2,600,000 9.0 750,000 6,700,000 5.1 1,100,000
---------------- ----------- ------ -------- ----------- ------ ---------- ----------- ------ ----------
Resource
- Inferred 3,200,000 2.8 290,000 6,900,000 7.7 1,700,000 10,000,000 6.2 2,000,000
---------------- ----------- ------ -------- ----------- ------ ---------- ----------- ------ ----------
Total Resource 12,000,000 1.9 760,000 10,000,000 8.3 2,700,000 22,000,000 4.7 3,400,000
---------------- ----------- ------ -------- ----------- ------ ---------- ----------- ------ ----------
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, email
investors@ngold.com.au or contact:
David Steinepreis Norseman Gold Plc. Tel: +44 (0) 7913402727
William Vandyk / Rod Venables Northland Capital Partners Ltd Tel: 020 7796 8800
Guy Wilkes Ocean Equities Ltd Tel: 020 7786 4370
Susie Geliher / Hugo de Salis St Brides Media & Finance Ltd
Tel: 020 7236 1177
Notes
Norseman Gold plc is an AIM and ASX listed Australian gold
production company, which operates the 2,360 sq km Norseman Gold
Project, Australia's longest continually running gold operation.
Located in the Eastern Goldfields of Western Australia in the
highly prospective Norseman-Wiluna greenstone belt, the project
currently has a total resource inventory of 3.4 million ounces of
gold at an average grade of 4.7 g/t.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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