🕐23.07.09 - 15:16 Uhr

Norseman Gold - Company Update: Jun09 quarterly report is significantly ahead of
guidance and sets new records - "were not fancy but were cheap"



Please see the attached comment from Ocean Equities with regard to Norseman golds earlier announcement.
Kind regards
Chris
Chris Welsh St Brides Media & Finance Ltd Chaucer House 38 Bow Lane London EC4M 9AY
www.sbmf.co.uk T: +44 (0) 207 236 1177 | M: +44 (0) 7720 848 102 | F: +44 (0) 207 236 1188
________________________________ From: Research at Ocean Equities [mailto:] Sent: 23 July 2009 13:41 To: ; Sam Spring Subject: Norseman Gold - Company Update: Jun09 quarterly report is significantly ahead of guidance and sets new records - "were not fancy but were cheap"
News Norseman Gold ("Norseman") has announced an operating update for the quarter ended Jun09.

The quarter built on momentum achieved since the Oct08 operational review and saw record levels of production and cash costs significantly ahead of guidance.

Production was 22,013 oz (previous 19,902 oz) at a cash cost of A$636/oz (previous A$693/oz).

The quarter was the third consecutive period that the Company beat its production and cost guidance of 6,500 oz per month/19,500 oz per quarter at a cash cost of between A$720/oz and A$780/oz.


The Companys cash margin remained strong at A$580/oz (A$326/oz after total capex), with the realised gold price declining 10% qoq to A$1,216/oz as cash costs fell a further 8% (and where ~12% lower than the bottom range of guidance).

Net direct cash costs of A$636/oz were the lowest full quarter operating cash costs since Norseman acquired the project in May07.

Management believes there is potential to further reduce cash costs from existing operations and the introduction of the 3rd mine will enable the plant to operate at its optimum capacity (currently only ~60% utilised).


The mines generated cash flows of A$7m (previous quarter A$12.2m), before capital investment of A$5.6m during the quarter.

Cash at the end of Jun09 was A$35.3m including bullion, or ~30% of the Companys market cap - refer Exhibits 2, 6 & 7 for further details.

From an accounting P&L point of view, the Norseman Project generated EBIT of A$8.5m for the quarter and A$23m for the full year ended Jun09.

The Company is trading at just ~3.9x FY08/09 reported EBIT (which included a very difficult period prior the Oct08 restructuring) and ~2.7x annualised EBIT based on the Jun09 results.
Despite recently upgrading its fleet, the Company has agreed to hire purchase a further 6 items of underground equipment (valued at A$8m) in order to increase the rate at which Norseman can develop its resources/reserves and commence development of its 3rd mine strategy.

We see this as a significant positive in that it will support the Company accelerating the development of its 3rd mine strategy, further support the rapid increase in reserves (previously a concern to the market now addressed - refer to our recent June 30th report for further details), and help maintain (or increase) production from the existing underground mines.

During the quarter further significant resource drilling and progress for development of a 3rd mine was made, however the Sep09 quarter will be critical to the later strategy with the generation of further drilling results - refer to our recent July 20th report or the full quarterly report for further details.
Norseman has strengthened and restructured its board by the appointment of Peter Bilbe who is an experienced technical director, while the two Steinepreis brothers, David and Gary, have moved from Executive to Non-executive directors.
Analysis Until a 3rd source of ore is found to increase the capacity utilisation of the mill, Norsemans production profile and cash costs will be largely driven by the grade of ore sourced from the Bullen and Harlequin underground mines.

The obvious question for investors in the near term: is whether the current record level of production/average grade is sustainable?
As Exhibit 2 illustrates, the Jun09 quarters record production came from only 105kt of treated tonnes (average is 107kt) with grade improving to 6.6g/t (average 6.0g/t).

While production from Harlequin remained extremely impressive, achieving a new quarterly record level and being the primary reason for the grade of airleg increasing to 10.73g/t (benefiting from the high grade Redfin reef), the improvement in the performance at Bullen was the key driver for the increase in total production qoq.

Production from Bullen increased ~14% qoq, back towards historically achieved levels.

Refer to Exhibit 5 for further details and discussion.


While there has historically been significant volatility in the production sourced from the two high grade, narrow vein underground mines, and care must be taken making quarterly forecasts development rates, recent mine exploration and improved results from mechanised mining at Bullen are particularly encouraging and in our view will support Norsemans continuation to beat cash cost and production guidance.

Indeed ore development rates have been maintained at a high level and the recent focus at both mines has been to continue the drilling and development of currently mined reef as well as opening up new mining areas to improve mine flexibility and sustain (if not improve) current production levels.


Key Events/Valuation Triggers We believe the key drivers to the Companys share price are Norseman continuing to beat guidance and provide visibility for its 3rd mine strategy are.

Newsflow is expected to be: Full Annual accounts in early September including new guidance; European roadshow late Sep/Oct; further mine exploration drilling results (from Harlequin/Perch Reefs); further regional exploration and 3rd mine development updates; resource/reserve upgrades when available.


We will update our Australian Gold Sector report once reporting season is complete and review our valuation forecasts for Norseman.

Given that the Companys Jun09 results were significantly ahead of guidance; Australian gold equities have remained firm; and the A$ gold price is still ~A$1,200/oz, we anticipate an upward revision to our previous preferred valuation of �0.46 p/sh.
Sam Spring, CFA, CA Mining Analyst Ocean Equities Ltd Authorised and Regulated by the Financial Services Authority Member of the London Stock Exchange
Telephone: +44 (0)207 786 4378 Fax: +44 (0)207 786 4371 E-mail: Website: www.oceanequities.co.uk This e-mail may contain confidential information and information proprietary to Ocean Equities Limited ("Ocean") and is intended only for the use of the intended recipient(s).

If the reader of this message is not the intended recipient(s), you are notified that you have received this message in error and that any review, dissemination, distribution or copying of this message is strictly prohibited.

If you have received this message in error, please notify the sender immediately and delete all information related to the message from your computer. This e-mail and any advice or opinions in it are subject to the terms and conditions of any applicable Ocean client account agreement.

The information contained in this e-mail is drawn from sources believed to be reliable, but the accuracy and completeness of the information is not guaranteed, nor in providing it does Ocean assume any liability.

This information is given as of the date appearing in this e-mail, and Ocean does not assume any obligation to update the information or advise on further developments relating to these securities.

Ocean and the directors, officers and employees of Ocean and companies with which they are associated may, from time to time, hold securities mentioned in this message.

Ocean may also act as advisor or broker for certain of the companies mentioned in this message and may receive remuneration for its services. Any opinions contained in this message are those of the sender and are not given or endorsed by Ocean unless otherwise clearly indicated in this message and the authority of the author to do so is duly verified. Ocean is a member of the London Stock Exchange and regulated and authorised by the Financial Services Authority and its registered office is 3 Copthall Avenue, London EC2R 7BH.
______________________________________________________________________ This email has been scanned by the MessageLabs Email Security System. For more information please visit http://www.messagelabs.com/email ______________________________________________________________________
______________________________________________________________________ This email has been scanned by the MessageLabs Email Security System. For more information please visit http://www.messagelabs.com/email ______________________________________________________________________



Products & Services | Jobs