Norseman Gold (LON:NGL, ASX:NGX) has successfully completed a private placement of 22.22 million new shares at a price of 45 pence per to raise £10 million before costs.
The cash call, a 13% discount to Friday’s closing price, was announced earlier this week.
The group will use the money to bring the North Royal open pit at its Norseman mine in Western Australia into production, and to provide additional working capital.
In an operational update, the group said its efforts to stabilise and improve the production profile at the existing Bullen and Harlequin Declines is beginning to have a positive effect, while the new ore sources, OK Decline and North Royal Open Pit, are poised to make a marked contribution during the upcoming quarters.
The update also included a reduced production target, however in medium term, Norseman is still on track.
As stated in the December 2010 quarterly results, the company has reviewed its forecasts following the establishment of the production profile of these two major ore sources – OK and North Royal, and after reviewing the immediate and medium term forecasts from the existing declines.
Norseman is now forecasting 2010/2011 full year production at 65,000 ounces recovered.
The reduction in the forecast production profile is attributable to three main factors: the decline in performance of the existing operating mines at Bullen and Harlequin during the first half of the year; the slower than expected ramp up to full production for the OK Decline due to various infrastructure and access issues which are now resolved; and the reduction in available hard rock feed from the North Royal open pit which has reduced the amount of soft oxide material that could be treated in the early stages of the mining schedule at the pit.
It continues to make progress in executing its "fill the mill' strategy with the treatment plant to be initially filled with lower grade ore and then higher grade ore from July 2011.
The targeted production for the full year 2011/12 is between 120,000 and 140,000 recovered ounces which means the company is still on track to meet its medium term production target.
The operating performance at the Bullen Decline has improved over the last quarter and the outlook for production remains positive.
The production profile at the Harlequin Decline has been unsatisfactory in recent times, due to personnel shortages and reliability issues with the underground production loaders. The production profile has suffered and the operational strategy has been re-assessed.
The focus at the mine has been to fill the shortfall in personnel, to mine high grade ore, and to establish a new mining area. To date, half the required personnel have been recruited.
The mine has also established a crew of miners to commence the stope clean-up and ore recovery work similar to that commenced at the Bullen Decline.
The ramp up of production at OK Decline has been slowed by the delay in establishment of emergency egress, changes to the primary ventilation system associated with ladder way installation and mine dewatering, and delays in access to high grade areas of the Star of Erin reef.
As of February 2011 the first two of these issues have been resolved and stoping has commenced on the next scheduled stopes, with a total of four stopes now available to be mined in the schedule.
Stoping has improved in tonnages to date and further improvement is expected over the next few weeks. The first encounter of high grade material in the Star of Erin reef is expected in two weeks.
The North Royal Open Pit continued to develop, with oxide ore being mined and stockpiled for blending and treatment. The schedule to "fill the mill" with high grade material has been delayed somewhat to July 2011 as drilling has not found the required hard rock for immediate feed to the treatment plant.
In the interim, the treatment plant will receive lower grade material from the North Royal open pit which will create an associated reduction in ounces recovered for the 2010/11 financial year.
Overall, the reserve and resource for the initial stage 1 pit remains unchanged at 51,000 ounces reserve and 100,000 ounces resource.
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.
This progress has come at a price. The company has made a significant and ongoing investment in these developments, in the last three months alone it has spent A$14.6 million on exploration, mine development and equipment.
A lot of progress has been made with the help of this investment and now NGL is ready to start reaping the rewards.
The large Norseman mining area encompasses a number of underground gold mines - Bullen, Harlequin and OK Decline. The North Royal open pit will be the fourth mining operation on the Norseman site.