Norseman Gold (LON:NGL) , the AIM-listed and ASX-listed Australian gold producer, has raised £10m in a private share placing priced at 45p per share. Funds from the deal have been earmarked to bring its North Royal open pit into production – the company’s fourth mine at its Norseman Gold project in the Eastern Goldfields of Western Australia. The fundraising follows an £11.25m share placing last October, which was also priced at 45p, to pay for work at North Royal.
Norseman has been working hard on speeding up the development of the two newest mines – OK Decline and North Royal – because production levels are falling away at the existing Bullen and Harlequin Declines. In today’s update, the company said that forecast production for 2010/11 was now 65,000 ounces recovered. That is down substantially on the 105,000 to 110,000 ounces recovered that it was forecasting last October. In addition, the cost of recovery has spiralled as a result of the decreasing production figures, with costs per ounce rising to $1,385 in the last three months of 2010 – up from an annual forecast of between A$670 to A$730 per ounce.
Nevertheless, Norseman insisted that the targeted production for the full year 2011/12 remained between 120,000 and 140,000 recovered ounces. That means it is still on track to meet its medium term production target. Equally, it noted that efforts to stabilise and improve the production profile at the Bullen and Harlequin Declines was beginning to have a positive effect. In addition, OK Decline and North Royal are poised to make a marked contribution during the coming quarters.
Norseman blamed the reduction in forecasted near-term production on three main factors: the decline in performance of Bullen and Harlequin during the first half of the year, the slower than expected ramp up to full production for the OK Decline and the reduction in available hard rock feed from the North Royal open pit. However, it said it was continuing to make progress in executing its “fill the mill” strategy – which aims to fill up unused capacity at the Norseman processing mill. The treatment plant is set to be initially filled with lower grade ore and then higher grade ore from July 2011. Investors responded positively to today’s update and the Norseman Gold share price gained 1.6% to 46.5p as a result.
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