Norseman Gold PLC (LON:NGL, ASX:NGX) 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.
The comment was included in the miners’s results report for the 12 months to June 31 2011, a period which saw significant investments in developing the OK Decline and the North Royal open pit. The company is currently producing from the Harlequin and Bullen declines.
The total investment in mine development during the year was in excess of A$22 million, while exploration cost more than A$7.8 million and plant and equipment outlay came to A$11 million.
The already flagged production issues that are being addressed led to an 11.4 percent drop in full year revenues to A$65.9 million.
Norseman announced in April it would make a loss for the period and quantified that in July to between A$13 and A$14 million before tax and exceptional items. The figure reported today of A$12.9 million was thus just below the bottom of the range and compares to a small profit of A$230,000 a year earlier.
Gold production for the year came in at 50,173 ounces, as announced in the July trading statement. This was achieved at a net direct operating cash cost of A$1,227 per ounce.
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.
The OK Decline was officially classed as "in production" in January 2011 and is only now contributing suitable ore for the processing plant.
The North Royal Open Pit, which is to be the project's fourth source of ore, has been almost totally dewatered, and significant progress made in the pre-stripping required to expose the identified ore zones. Substantial volumes of oxide ore has already been obtained from these activities which has been stockpiled for blending.
It is anticipated that commercially viable quantities of fresh, hard rock ore will be mined in the second quarter of the 2012 financial year, at which point the Project will have achieved its target of having four, fully productive mines.
Chairman Vincent Pendal said: “Despite the difficulties, in the coming year the board looks forward to an improved production profile from the four operating mines and a comparable improvement in the company's financial result as the hard work and capital invested begin to deliver results.”
The forecast for the coming year is sensitive to variation in gold production. While the directors consider that the forecast gold production provided by management of in excess of 100,000 ounces of gold for the coming year is achievable, directors also recognise that competition for resources (equipment and skilled labour) within the mining industry has the potential to negatively impact the production forecast.
Norseman said it will be will be dependent upon achieving at least 85 percent of the baseline gold price of A$1,450 per ounce in the coming twelve months to enable sufficient funds to be generated from operations to remain a going concern or alternatively will have to raise additional equity or debt.