17 Apr | Norseman Gold
So we’ve been trawling the depths of AIM for months now adding distressed companies to a dossier of potential turnarounds. It’s a bulging bundle, but I am an optimist by nature.
Our latest investment, Norseman Gold – like many companies we’ve bought into over the years – has certainly seen better days (we added 41,768 shares of Norseman to our portfolio at 3.92 pence a share on 20th March 2012). When looking to add a holding to our portfolio, better days usually equates to higher prices so provided a few criterion are met, I’m happy to trade recent bad performance for a battered share price and a low entry point.
And Norseman’s share price is battered.
Now that chart (thanks to Share Price) alone would send many investors with even an iota of risk aversion about them, running for the hills. So when the negatives are staring you in the face, you’ve really got to isolate the positives and come to your own conclusions as to whether the company has a future.
If you conclude it does have a future, those very market mechanisms that dragged the share price to those depths can pull it back up…..and quick. If it does have a future?
Whenever I research a company I try to avoid dredging up too much old information. If we assume the dynamism of the market we by proxy assume that old information has – to a large degree – been factored into the current share price.
In the case of Norseman, recent events add further weight to the case for cleaning the slate and taking a fresh look at where the company is and where it’s heading rather than where it’s been. But more on that in a moment.
Like people, companies can and do change – personnel change, company directions change, methods change, market conditions obviously change, it’s a minefield of information (or a goldfield in this case) so it’s important to extract the relevant, current information and leave the information tailings (pardon the pun) out of the equation.
Question: So what’s new, current and relevant at Norseman? Answer: Lots!
But I’m getting a little ahead of myself. For those of you new to the world of Norseman Gold Plc here’s what they’re about:
Norseman Gold plc is an AIM and ASX listed gold production and exploration company. Its key asset is the Norseman Project, which lies at the southern extent of the Norseman-Wiluna Greenstone Belt in the Eastern Goldfields Province of the Yilgarn Block, Western Australia. The Norseman Project is operated and managed by resource specialist, Tulla Resources Group Pty Ltd, which is focussed on producing 100,000 ounces of gold per annum by 2014 and increasing the resource base, currently standing at 3.4 million ounces of gold at an average grade of 4.7g/t. A review of operations is currently underway aimed at maximising future production and reducing costs.
Now in that snippet of company information there’s a lot to like. Besides the information itself, the very fact that recently released information has made it to the company home page shows us there’s healthy level of importance placed on investor relations. If you’ve ever gone digging for company information yourself, you’ll know (that outside of what they’re required to publish) there’s some AIM listed company website home-pages out there in dire need of an update.
Without getting all tied up in Norseman minutia (if you want to get knee deep in Norseman numbers here’s a link to their most recent half yeary accounts) lets take a look at some of the key points from that report’s Chairman’s Statement.
Since the period end (31 December 2011), Norseman Gold has undergone significant structural changes to strengthen its balance sheet and improve its future production profile and financial performance. This restructuring process has seen Australian resource specialist Tulla Resources Group Pty Ltd (‘Tulla’) assume management and operational control of the Norseman Gold Project with a view to lowering operating costs, producing a consistent 100,000 ounces per annum within two years and increasing the project’s current resource inventory of 3.4 million ounces of gold at an average grade of 4.7 g/t through mine and regional exploration. In addition, with Tulla’s assistance, the Group is focussed on strengthening its Board and key management team to facilitate the onward development of the Norseman Gold Project, with the Group retaining ownership of the mine and equipment and overseeing manager performance.
Tulla, through its associated company, L2 Project Management – Norseman Pty Ltd (‘L2 PM’), is currently developing a defined strategy and mine plan for three years based on profitability, which we hope to update shareholders on in the next quarter report due by the end of April 2012. Its initial forward plan outlined in the announcement dated 16 February 2012, indicated that it believed a relatively early turnaround in operations was achievable. The Norseman Gold Project’s ability to generate significant revenues has been demonstrated by its previous performance, when in 2009, at a time when only two of the mines were operational, a total of c. 80,000 ounces of gold was produced. In order to rapidly increase the financial performance of the project and husband cash reserves, the decision was made to put the under-performing Bullen and OK mines on care and maintenance until the review has been completed. This does not mean the Group has abandoned these mines, but provides it with the flexibility to fully re-assess the mine plan and ensure it can be optimised while preventing the drain on cash reserves created by under-performing mines.
I guess time will tell if new management with an eye for cutting costs and a defined strategy and mine plan coupled with a bullish outlook for the price of gold can see Norseman bounce back into profitability. The price certainly is attractive.
I for one eagerly await the next quarterly report due out by the end of April.
Thanks again for dropping by.
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