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03 May | Norseman Gold Results

Reassurance that Norseman Gold is getting operations back on track came in the form of their third quarter results released Tuesday 1st May 2012.

We wrote about Norseman a couple of weeks ago, having taken up 41,768 shares at 3.92 pence in late March (Norseman shares have changed hands at well over 60 pence within the past 18 months). It was a very speculative buy at best and one based entirely on Norseman’s intention to conduct a “complete review of operations“.

Norseman’s problem has never been lack of gold – they own Australia’s longest continuously running gold mining operation, which has produced over 5.5 million ounces of gold over a period of more than 70 years. Their trouble of late has been extracting that gold at a price that makes their operations profitable.

With their review of operations complete, the “resultant restructuring programme” can now be implemented with a “return to basics” approach to cost minimisation. Their third quarter results showed progress in this direction.

Here are a few of the highlights:

  • Operations have seen dramatic cost reductions since 1 January 2012.
  • Production activity is being focussed on mining from the North Royal Open Pit (North Royal) to generate positive cashflow. The short term Mine Plan has identified an Indicated JORC Resource of 200,000 tonnes @ 6g gold (Au) and an Inferred JORC Resource of 200,000 tonnes @ 6g Au. Additional Resources are minable at North Royal, with the aim being to produce 80,000 ounces of gold from these Resources over the next 12 months.
  • Pre-strip at North Royal is now well advanced with higher grade hard rock now exposed. A new optimised pit design and schedule for North Royal is nearing completion and importantly mining is already continuing at an accelerated rate.
  • Gold production for the quarter ended 31 March 2012 was 6,258 ounces. Gold production since the end of the quarter has increased and the mill is currently operating 24 hours a day, 7 days a week.
  • Strategy to become a consistent 100,000 ounce gold producer within one year is in place with the additional aim of increasing our resource base through both mine and regional exploration – current resources inventory of 3.4 million ounces of gold at an average grade 4.7 grams per tonne.

So we’ve cherry-picked a few of the report’s highlights above – you can obtain the full results in a pdf format from the Norseman Gold website.

I like the way Norseman have initially focussed production on North Royal – looking to begin this new phase of the company with mining they believe to be profitable in the short term – before putting in place new mine plans and schedules for Harlequin (and all going well OK, Bullen and Crown in the future). It’s a systematic approach that seems in line with their new “return to basics” philosophy and one that importantly looks to minimise cash burn and maximise savings in the early stages of their turnaround.

Whilst production for the quarter (6,258 ounces) is still well off Norseman’s 25,000 ounce target, with operations now continuing around the clock, I’m confident we’ll see a significant increase in those figures come early August.

For those of you looking for a little more information on where Norseman is at and where they’re heading, there’s an informative piece over at Minesite (free registration required) that was published recently.

Thanks again for dropping by.

Paul
rsvp@investorsoiree.co.uk