Norseman Gold (ASX: NGX, LON: NGL) said it has now shifted from a development focus to production in the new year with the emphasis on returning the operations to profitability in the June quarter, as production ramps to maximum mill capacity.
In its interim results report for the six months to end-December 2010, the Australian miner said the outlook for the group in the coming year continues to be positive and it is poised to see a significant increase in gold production from the extensive capital investment program undertaken in the past 18 or more months.
Revenue from continuing operations fell 20% to A$30.1 million from A$37.9 million in the previous first half, and it made a loss of A$802,799 compared with a profit of A$609,530.
Capital and normal development at both the Harlequin and Bullen declines at the Norseman mine in Western Australia achieved record levels and is the main reason behind the general drop in mined grade during the half.
“These excellent levels of development will enable more working areas to be opened up for stoping in the future and provide more stability in terms of production,” the company said.
At the OK Decline rehabilitation and development continued, and the mine fired the first production ore stopes in early 2011.
The reserve first used to justify reopening this mine has now been increased with the addition of the Star of Erin and other reserve delineation.
Now that the mine has begun stoping, it is anticipated production will increase steadily in the coming months.
Dewatering at the North Royal open pit has continued to the point where mining activities were able to be commenced in December.
Dewatering of the bottom of the open pit is continuing in conjunction with the commencement of mining. An earthmoving contractor was appointed, as was a drill and blast contractor.
In early 2011, the first low grade ore was extracted and taken to the ROM pad for processing.
Earlier this month, Norseman Gold completed a private placement to raise £10 million, or A$16 million, before costs to bring the North Royal open pit at its Norseman mine in Western Australia into production, and to provide additional working capital.
As at 31 December 2010 the group remained in a positive cash position with A$15.6 million on hand.
The abovementioned fundraising was considered prudent to ensure it has sufficient cash on hand for all the capital expenditure needed to bring on the two new mines and allow for unforeseen delays.
In addition, the group's production remains unhedged, and is debt free aside from equipment finance funding obligations.
Norseman is forecasting 2010/2011 full year production at 65,000 ounces recovered.
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.
The group will continue with its strategy to fill the mill by further advancing its development projects with the aim of opening its fifth and subsequent mines.
“The group acknowledges that the performance of the operations while in the current growth and development phase has been difficult but the continued success of the growth strategy that has been pursued will ensure positive returns to the group from the Norseman operations in the medium and long term,” it said.
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.