Norseman Gold

Western Australia-focused Norseman Gold has lowered indicated annual production and raised cost expectations after an interim profits setback.

The AIM-quoted company saw pre-tax profits fall 24% to £396,000 in the six months to December, on turnover 11% lower at £22. A reduction in ore grades led to increased cash costs per ounce. Norseman now suggests the year to June could show production of between 75,000 and 80,000 oz of gold, against the 80,000 to 85,000 which previously looked likely, with possible cash costs up nearly 9% to between $721 and $766 an ounce, against today’s $1,105 gold price.

With no debt apart from equipment financing obligations and cash, including gold bullion, of £15m, the company is keeping its production un-hedged and working to improve mine productivity. Norseman has started to produce from its OK Decline mine and says it also identified a new ore body there, the Star of Erin, which it expects will ‘substantially’ increase the mine’s reserve.

Long term, Norseman’s prospects look fair, but it could prove a bumpy ride for shareholders. The shares have risen three-fold to 46p since Growth Company Investor’s recommendation last April and it makes sense to take a significant slice of that profit.