---Adds more background and broker comments---
Norseman Gold (LON:NGL) this morning confirmed a major Chinese mining firm is taking a stake in the company.
Zhaojin Mining Industry will buy 100 million new shares priced at A$0.04 to gain a 8.95 per cent stake in the company.
The investment follows the recent share placing which was underwritten by strategic investor Tulla Resources. The shares that Zhaojin are buying come from Tulla’s allocation in the placing.
Analysts have welcomed the addition of the Chinese firm’s financial backing and specialist expertise.
In a note, Northland Securities analyst Dr Ryan Long says the backing of Zhaojin, one of China’ largest gold mining companies with a value of £1.5 billion, is positive for two reasons.
Firstly, according to Long, it brings a major strategic investor and validates Tulla’s attempts to reinvigorate the mining operations.
And secondly he points out that Zhaojin specialises in high grade narrow ore bodies, like the ones present at the Norseman mine, and it is expected to lend its expertise to help improve operations.
Tulla became involved in Norseman earlier in February, and since then it has been working to improve operations at the group’s mining complex in Australia.
This has included the appointment of new management, investments and a re-assessment of the mining operation. Part of which involved a ‘back to basics’ approach and a number of cost cutting measures.
This morning Norseman also said that the suspension of mining at its Harlequin underground operation is likely to extend beyond the two to three months forecast in its last update.
However the group is looking at alternatives to mitigate any shortfall, with the North Royal pit potentially offering one avenue of increased production.
Norseman is also considering a number of “alternative opportunities” including the recommencement of operations at the Bullen and OK mines.
Also on the agenda as it re-opening of Scotia open pit and the re-processing of low grade stockpiles and tailings.
The Harlequin underground operations were suspended in July to address “a range of safety and infrastructural issues that require improvement”.
Gold production for the period July 1 to 27 August 2012 was 3,125 ounces.