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Norseman Gold produces 11,781oz in Q3, working on improving underground workings

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Norseman Gold PLC (LON:NGL, ASX:NGX) has produced 11,781 ounces of gold in the three months to end-March 2011, up from  11,162 in the preceding quarter to end-December.

In a third quarter results report, the group said is making progress in improving the underground workings at the Norseman mine in Western Australia.  Two weeks ago, Norseman cut its production forecast for the current financial year to end-June 2011 because the underground workings were making slower progress than forecast.

Norseman had lowered its full-year gold production forecast to between 55,000 and 60,000 ounces from a previously flagged figure of 65,000 ounces. The reduced forecast was reiterated today.

Progress at the North Royal open pit has been satisfactory but the company is currently looking to improve performance.

At the Bullen Decline, drilling was started on a potential block that the company believes can be easily accessed for mechanised mining. Norsamen also successfully trialled the extraction method for the mining of underground remnant pillars. It is anticipated that this method will supplement the production profile at Bullen for the long term.

The Harlequin Decline continued to perform poorly during the quarter, however work has been commenced on a number of initiatives to rectify the production short fall.  Infrastructure is being developed to increase the productivity and improve the ventilation, and this work is expected to be completed during the June 2011 quarter. 

At the OK Decline capital development continued to open up working areas during the quarter.  Stoping continued to ramp up slowly as personnel were recruited and trained to undertake the stoping operations. 

As announced earlier this month, the company has conducted a review into its operations, including a detailed examination of mining schedules.  A strategy to reduce costs and increase short term production has been implemented.

The first stage of the strategy has been to cut all capital expenditure except where associated with the ongoing development of the North Royal open pit or where short term production increases would result from the expenditure.

The second stage has been to cut all excess manpower and equipment to match the current production output of the underground mines.  As a result, the company will reduce its workforce by up to 50 personnel, and reduce the size of the underground fleet by number of items of plant including three diamond drill rigs and a twin boom jumbo.

The intent of these two initial measures is to return each of the underground mines to profitability in as short a time as practicable.

The third and final stage of the plan is to look at the medium to long-term future of each of the underground mines to establish a mine plan that will ensure their profitability out from their current status.  This third-stage planning is continuing.

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