Norseman Gold‘s (LON:NGL, ASX:NGL) new partner Tulla Resources has already assumed operational control of the Norseman mine in Australia and has started to re-organise its operations. 

The restructuring process is aimed at lowering operating costs and returning Norseman Gold to a consistent 100,000 ounce producer within two years.

Tulla’s plan is also to increase the current resource of 3.4 million ounces of gold at an average grade of 4.7 g/t through mine and regional exploration.

Norseman produced 22,289 ounces of gold in the six months to December, which generated a loss after tax of A$41.8 million after an A$18 million write-down for the mine. 

Interim revenues rose 8 per cent to A$32.4 million. The average gold price achieved during the six months period was A$1,607 per ounce.

Under the agreement with Tulla, which is the vehicle of Australian mining entrepreneur Kevin Maloney, it will subscribe for A$10 million of convertible loan notes in Norseman Gold.

Norseman, which raised A$3 million (£2 million) for working capital through a placing at 6c, will keep control of the mine and equipment.

Tulla Resources is to carry out a more detailed review of all aspects of the operations at Norseman, which is Australia’s oldest producing gold mine, including all four mines as part of a comprehensive forward 3 year mine plan and a growth strategy.

Bullen and OK Decline, two of the four operations at the Norseman mine have already been placed on care and maintenance. 

Australian gold miner Norseman Gold (LON:NGL, ASX:NGL) said today that operations at its North Royal open pit at its project in the Eastern Goldfields province of Western Australia continued in line with expectations during the three months to the end of September in spite of time lost due to weather.

The firm, updating the market on its latest completed quarter this morning, said that excavation continued to focus on mining the North Royal pit down to hard rock ore blocks “as quickly as possible”.

Harder rock has been encountered in the south-west corner of the pit and in the central put area, but not in areas with associated ore. The firms said that the harder rock has been drilled in preparation for blasting and that drill and blast operations will become more routine during the current quarter as more fresh rock is exposed in the pit floor.

Quantities of ore are expected to increase as the pit is dug deeper this quarter.

The firm added that gold production from the Norseman project during the quarter totalled 11,631 ounces – which was down 22 per cent on the previous quarter. The direct cash operating cost was A$1,591 per ounce of gold.

Norseman has been focused on recruiting experienced underground operators and has changed its remuneration packages to encourage and retain key workers. The firm said that once manning levels are up to the required numbers, then the production profile will improve.

Cash on hand at the end of the quarter totalled A$8.9 million.

Norseman’s share price was down 7.6 per cent to 7.1 pence in mid-morning trading today.

Australian mining firm Norseman Gold (LON:NGL, ASX:NGL) today told investors that its non executive director Michael De Villiers has resigned from the company "due to personal and business circumstances".

De Villiers’ resignation was effective from Wednesday September 7.

Norseman operates one of the world’s oldest operating gold mines, the Norseman mine in Western Australia - where gold was first discovered at 1894. It is currently working to establish and ramp up production from four mines on the Norseman site, however it has come under pressure in recent months as output targets were missed.

Last week the group released its results for the second quarter of the current financial year. In the statement Norseman said that it expects to have all four of its mines at Norseman in Australia commercially producing ore for the treatment plant by the end of the second quarter of the 2012 financial year.

Once all four mines are producing commercially, gold production is forecast to be in a range between 100,000 and 110,000 ounces per year.

Earlier this week broker Seymour Pierce said that despite its recent problems Norseman's share price undervalues the company, even when viewed with a more conservative view of the mine's production potential.

The broker said that it had been expecting the need to downgrade its forecasts once the dust had settled on a turbulent 2011. Its 2012 and 2013 production expectations have now been lowered to match the company’s comments and it assumes 100,000 ounces and 105,000 ounces for 2012 and 2013.

“However, this still means a doubling of production this year. Norseman remains one of the lowest rated gold plays around, so successfully executing the new production plan should bring further improvements in the share price,” said Seymour Pierce.

Norseman Gold PLC (LON:NGL, ASX:NGX) says its forecast gold production for the financial year to 30 June 2012 remains at more than 100,000 ounces.

The company, focused on the Norseman gold project in Australia, released an operations update for the three months to 30 June this year.

Gold production from its flagship project had increased by 27 percent in the quarter to 15,001 ounces, it said.

The gold was produced at a direct cash operating cost of A$1,081 per ounce gold - a 38 percent decrease from the previous quarter, revealed the firm.

The gold price received during the quarter ranged from A$1,387 to A$1,460 per ounce, with an average price achieved of A$1,422 per ounce.

Mining  at the North Royal Open Pit  at the project continued on target with a stockpile of ore increasing to 32,000 tonnes at 1.9 g/t gold, it added.

Cash at 30 June 2011 stood at A$11.3 million (A$10.5 million excluding bullion) with around A$6.1 million of this committed to cash-backed environmental bonds.

The firm added in the report that after the period end, it had closed a A$15 million secured working capital facility agreement with EXP T1 Ltd, a subsidiary of RK Mine Finance Trust 1, a member of the Red Kite group of Funds.

The company said it was continuing its action plan for operations. 

"While initial progress implementing the improvement strategy has been successful, the process is by no way complete and it is expected that the production profile will continue to improve through the 2011/12 financial year," it said.

Yesterday, Norseman revealed an updated resource statement for its flagship project, stating that the reserves as at March 31 remained stable at 420,000 ounces of gold, while the total reserve tonnes had increased to 2.3 million tonnes at a grade of 5.7 g/t gold.

Resources had increased in the measured category by 13 percent but decreased overall by 9 percent to 3.4 million ounces of gold.

Total resources now stand at 22 million tonnes at a grade of 4.7 g/t gold, while previously, it stood at 21 million tonnes at a grade of 5.3 g/t gold for 3.8 million ounces.

The Norseman Gold project lies in the eastern goldfields of Western Australia in the highly prospective Norseman-Wiluna greenstone belt, 725km east of Perth and 186km from Kalgoorlie.

The 221 tenements cover a 2,180 sq km area centred on the Norseman township.

Norseman Gold PLC (LON:NGL, ASX:NGX) revealed today an updated resource statement for its main Norseman Gold project in Western Australia.

The reserves as at March 31 remained stable at 420,000 ounces of gold, while the total reserve tonnes had increased to 2.3 million tonnes at a grade of 5.7 g/t gold, said the company.

Resources had increased in the measured category by 13 percent but decreased overall by 9 percent to 3.4 million ounces of gold.

Total resources now stand at 22 million tonnes at a grade of 4.7 g/t gold, while previously, it stood at 21 million tonnes at a grade of 5.3 g/t gold for 3.8 million ounces.

Norseman said the reduction in the resource  was mainly due to the re-assessment of the North Royal resource, external to the current pit design and of deeper resources previously quoted as surface resources.

Total reserve ounces were unchanged except a significant increase of 122 percent in the open pit reserve because of the inclusion of the ounces from the North Royal open pit, said the company.

Underground reserve ounces decreased by 14 percent, while the tonnage remained unchanged.

Norseman said it drilled more than 77,000 metres this financial year, of which around 60,000 metres comprised resource and exploration drilling.

It said a number of projects would be further explored and add to the resource base in the next few years, namely Butterfly Deeps, Cobbler North, Crown reef, Harlequin South reef and Royal Coachman reef.

These projects have had initial drilling conducted and the firm is expected to return to them once the current four mines are operating at acceptable production profiles.

Planned drilling programmes at the mines commissioned in the last financial year are expected to both increase existing resources and reserves, and extend the current mine plans, added the company.

Analyst Charlie Long at broker Singer Capital said in a note this morning: "Encouragingly, measured and indicated combine for 1.37 million ounces whilst inferred provides plenty of scope for future mineable ounces."

He added that as management continued to improve and rationalise the Norseman Gold project, inferred resources will be lost in exchange for better quality measured and indicated and ultimately reserves.

Singer said it thinks the resource base at Norseman should provide enough mineable ounces to justify a long term profitable mine.

Meanwhile, Asa Bridle at broker Seymour Pierce, said: "We regard today's new estimate as a solid result given the fact that exploration drilling was curtailed in the second half.

"In particular, it should be remembered that the company's numerous exploration targets such as Butterfly Deeps and Harlequin South reef received only initial drilling this year.

"The company plans to restart drilling on these targets, and increase exploration drilling at its producing mines once the production profile of the operation has been stabilised."

Seymour Pierce rates the stock a "buy" and targets a price of 52 pence (current share price: 16.25 pence).

Norseman Gold also announced today it has secured a A$15 million working capital facility agreement with EXP T1.

Under the terms of the facility agreement, Red Kite will provide up to A$15 million of working capital to Central Norseman Gold Corporation Limited ('CNGC'), with interest payable at LIBOR plus 6%, maturing on 1 July 2013 or earlier, if repaid in full.

As part of this agreement Norseman Gold has paid a fee of 2% and issued 3,000,000 warrants to Red Kite.Each warrant is exercisable for one ordinary share of Norseman Gold at 30 pence per ordinary share for a period of two years.

EXP T1 is a subsidiary of RK Mine Finance Trust 1, a member of the Red Kite group of funds.

In April, dual-listed Norseman announced quarterly results showing it produced 11,781 ounces of gold in the three months to end-March 2011, up from 11,162 in the preceding quarter to end-December.

At the time the group said it was making progress in improving the underground workings at the Norseman mine in Western Australia.

Two weeks ago before those quarterly numbers, Norseman cut its production forecast for the current financial year to end-June 2011 because the underground workings were making slower progress than forecast.

Norseman had lowered its full-year gold production forecast to between 55,000 and 60,000 ounces from a previously flagged figure of 65,000 ounces. The reduced forecast was reiterated today.

Norseman operates Australia’s longest continuously running gold mining operation, which has produced over 5.5 million ounces of gold over a period of more than 65 years from the Norseman field in Western Australia.

In addition to the two producing high-grade underground gold mines, it has a portfolio of promising exploration targets that are being advanced to help support continued future production.

In a note entitled ‘North Royal niggles’ the analyst cut his forecasts for the AIM-listed gold company, following the recent news that it would not achieve its production targets.

However Bridle still thinks the shares could be worth 165 pence a share – which gives the stock a massive 283 percent upside from the current price of 43 pence.

The Norseman mine in Western Australia is the country’s longest continuously running gold mining operation. In recent years the company has focused on new development project to find new resources and increase production, helping it give the ageing mine a new lease of life.

Earlier this month the company revealed that it is going to take longer than it expected to reach the ‘hard rock’ material in the North Royal pit, and instead it is still processing the lower-grade oxide material. This came alongside declining production at the Bullen and Harlequin parts of the mine and slower-than-expected ramp up at the Okay decline. Consequently it has had to cut its production targets.

Norseman shares have fallen from highs of 84 pence back in November 2010 to current levels, just above the 40 pence mark.

“Clearly, the downgrades made to production guidance are impacting on the stock’s short term performance and the onus is now on management to achieve the revised FY11 target and then push for the medium term goal of 140,000 ounces per year to drive the share price re-rating,” Bridle said.

He adds: “Given the investment opportunity, we believe that the continuing support of shareholders is fully justified. 

“Now the gold needs to follow to drive the re-rating.”  

Bridle explained that although the mining of the low grade oxide material got underway as scheduled, the dewatering process exposed the pillar above an old underground mine portal, which Norseman expected would consist wholly of ‘fresh’, hard rock ore. However so far only lower grade ore has been encountered.

The analyst highlights that ‘hard rock mining’ will start after July, which will then be part of the 2012 financial year.