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Today’s quarterly report from Norseman Gold (LON:NGL, ASX:NGX) revealed that production increased 2.3 per cent to 6,402 ounces in the June quarter.
The company also updated investors on its activities at the flagship Norseman Gold project in Australia.
Operations continued at the North Royal open cut with work occurring in both north and south zones of the pit and mining has now progressed through the oxide zone into fresh rock.
After the end of the quarter, underground operations at the Harlequin mine were suspended following communication with the Department of Mines and Petroleum.
The company said today there are a number of safety issues that need to be looked at before the board can reinstate operations at Harlequin.
Norseman reckons it will take two to three months to restart production at Harlequin.
During this period, North Royal production will be flexed to meet the existing targets of 17,000 ounces for the next quarter and be on track for the 80,000 ounces targeted for the year to end June 2013.
“The suspension of production activities at Harlequin is necessary to provide a safe platform for Norseman to re-establish production,” Norseman told investors today.
“The board is of the view that taking this action will place the Harlequin underground mine in a stronger position for sustainable long term production.”
Broker Ocean Equities said: “The key to turning around operations will be providing sufficient feed to keep the mill operating near capacity on a sustainable basis.”
However, it added that the pressure on management to prove up new alternative sources of ore following the mine’s suspension significantly boosts the risk/reward for investors.
On the financial front, the company had A$1.45 million in the bank at the end of June with a further A$6 million held as cash backed environmental bond deposits.
After the end of the quarter, Norseman finalised a placement to raise around A$25 million including cash of A$17 million and conversion of existing debt of A$8 million.
The placing proceeds will be used to fund the company’s working capital requirements including the reduction of existing creditors.
Norseman shares dipped 0.05 pence or 1.9 per cent to 2.7 pence.