Norseman Gold earns A$0.8m in Q4 as production and gold prices rise

Western Australia operating Norseman Gold (LON:NGL, ASX: NGL) reported higher production and realized gold prices at lower production costs during the fourth quarter to end-June 2010, which helped it post EBIT (earnings before interest and taxes) of A$0.8 million from its flagship Norseman gold project.

Gold production in Q4 amounted to 14,469 oz (ounces) compared to 14,114 oz in Q3, while average realized price rose from A$1,224/oz to A$1,343/oz and cash costs declined from A$990/oz to A$943/oz. Production in the full financial year 2009/10 totalled 60,464 oz at a cost of A$932/oz, generating a project EBIT of A$3.1 million at Norseman.

For the quarter, the Bullen Decline contributed 4,170 ounces, and the Harlequin Decline contributed 9,641 ounces with 561 ounces from development ore at the OK Decline.  The remaining 97 ounces came from the treatment of low grade stockpiles.

The company expects to further increase production and the resources at the Norseman project, expecting to complete 80,000 metres of underground drilling during the 2010/11 financial year with four rigs currently operating.

The development of the OK Decline at the project resulted in expenses of A$8.6 million on exploration, capitalised mine development and equipment. During the quarter, ore development has opened up areas for stoping in the first half of the new 2010/11 financial year. Dewatering at North Royal Open Pit has continued and 46% of the water volume was pumped by the end of the quarter.

Documents have now been submitted for regulatory approval.

Norseman now expects the OK Decline to steadily increase its production profile with more ore development undertaken and stoping, and the Bullen Decline to access new mining areas and stabilize the production profile.

The company’s forecast for the 2010/11 financial year remains at 105,000 to 110,000 ounces recovered at cash costs of between A$670 to A$730 per ounce of gold, which is based on increasing the production profile at the mining operation as part of the "fill the mill" strategy. The development of the North Royal Open Pit is slated for the December quarter of 2010. Norseman expects to report drilling results from the North Royal Open Pit and Harlequin South in the September quarter. Drilling at the latter has intersected reef with a number of significant assays returned, according to Norseman.

Cash balances at the end of the period totalled A$16.7 million with A$5.5 million committed to cash-backed environmental bonds.

“The coming quarter and the new financial year will see the company continue to pursue its production growth strategy, with stoping to commence at OK Decline, the third mine, and resource and pit optimisation work continuing on North Royal Open Pit with a view to commencing this mine, as the fourth mine, in the December Quarter 2010,” Norseman said in the report.

The Norseman gold project is located in the Eastern Goldfields of Western Australia in the highly prospective Norseman-Wiluna greenstone belt, 725 kilometres east of Perth and 186 kilometres from Kalgoorlie.


Currently, it has a total resource inventory of 20.0 million tons at a grade of 5.5 grams per ton gold for 3.7 Moz (million ounces) of gold. The tenements cover a 1,614 sq km (square kilometre) area centred on the Norseman Township.  The landholding comprises 179 contiguous tenements consisting of 13 exploration licences, 106 mining licences, 45 prospecting licences, 15 miscellaneous licences and 29 mining lease applications.