Norseman Proactive Investors Presentation, October 2009

5th Oct '09 by marben100

16 comments 7107 reads

I attended Norseman Gold's presentation at the Proactive Investors event on 1st October, which this thread is intended to document and discuss. However, I will not repeat material that is stated in the presentation slides, which are well worth downloading and studying. There is also a general discussion thread for the company, which includes up to date production & cost history and you'll find more background detail in the wiki.

Proactive saved the best to last andI was delighted that Barry Cahill had flown over from Aus to deliver an informative and entertaining presentation. He is also presenting to institutional investors here.

Pre- and Post-presentation chat

I and others buttonholed Barry before the event began. Firstly, it was pleasure to shake his hand after his achievements over the last year. Obviosuly Norseman has been helped by a firm gold price but Barry and his team have done a sterling job of raising production and driving down costs. On that latter issue, Barry warned that Australian labour costs were rising again, due to the recovery in the nickel market leading to greater demand for skilled mineworkers.

Gold Price

He was also asked his view on the gold price, which currently stands at around A$1,150. Note that it's the A$ gold price that counts, NOT the US$ one because a high proportion of Norseman's costs are incurred in A$. Barry's view is that the current price is "about right", given historical average prices and inflation. If he is correct, then I suspect that there is strong chance of an overshoot, as markets rarely find the "right price" and then just settle there! Norseman's profitability is heavily geared to the PoG so an overshoot for a meaningful time would have a dramatic effect on short-term profitability and cashflow.

Strategy

Whilst NGL is profitable and cashflow positive at current cost and PoG levels, Barry reiterated his strategy to drive down costs by increasing the number of ore sources, from the current two at Harlequin and Bullen, thus making fuller utilisation of the mill. Barry was also asked about the possibility of Norseman paying a dividend (which David Steinepreis had suggested at Norseman's April Minesite presentation). He indicated that current levels of cash and cashflow were sufficient to carry out his strategy and that the Board would have to decide what to do with any excess cash.…

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marben100

15th Oct '09

Norseman has now published Barry's audio of the presentation here: http://www.brr.com.au/event/61572 (which he gave at the AJM Gold Conference). So, now you can hear it "from the horse's mouth".

[edit[Now I'm listening to it, it has a slightly different slant for an Aussie "mining savvy" audience. [not surprising]

Eh up... some interesting things I didn't note from the UK presentation: Barry reckons Norseman will get to 1Moz RESERVES within the next 3-4 years... He seems confident of filling the mill and achieving 140,000oz/yr production ultimately. There is more detail in this audio than I heard in London for a less specialist audience.

24th Nov '09

Norseman has now released an updated version of the Proactive presentation, delivered to Australian investors on Monday. I observe the following differences from the September UK one:

Whereas the UK presentation presented an aspiration to increase ore being processed from 400ktpa to mill capacity of 700ktpa, the new presentation specifically identifies 200ktpa of extra ore to come from the OK Decline, which is now under development.
Dewatering of North Royal has now commencing offering a portential fourth mine.
Forecast producttion for FY10 is slightly ahead of FY09 BUT cash costs are now expected to be slightly higher (~A$750/oz). I presume this is due to higher start-up costs at OK. A forecast of around 105koz is published for FY11, with costs dropping below A$700/oz.
The London presentation mentioned a 122koz resource at OK. The latest presentation refers to 200koz of resources "expected to expand as drilling progresses"* Detailed resource models for OK are presented.

*Whilst the feasibility study was based on a two year mine life, it appears likely to me that this life can be increased significantly as further resources are discovered at OK.

The 2008/9 annual report is also now available.

Cheers,

Mark

StrollingMolby

15th Sep '10

I note that Barry Cahill and Norseman Gold Plc (LON:NGL) are scheduled to present at the Proactive Investors Forum on Thursday 30 September.

http://www.proactiveinvestors.co.uk/register/event_details/89

Any holders still here, or have you been deterred by the production dissappointments? Perhaps time to dust down my spreadsheet again given the gold price...

Thanks for highlighting that, SM. Whilst not a holder currently, I certainly have some pointed questions to ask Mr C! Will put that in my in my diary. To be fair to BC, he did achieve great things in 2008/9, which resulted in some very nice profits for me. However, to call 2009/10 a disappointment would be understating things.

For me to invest in NGL again, I'd have to be convinced that the company is likely to deliver on production expectations going forward. That will be a hard sell after the recent failure. Dusting down spreadsheets is a bit pointless if you can't place reliance on forward production/cost figures.

NGL is very lucky that the PoG has remained so strong - otherwise they'd have been in deep trouble by now.

Cheers,

Mark

I can't believe they've issued guidance of production of 105-110k oz production in the year to 2011, having revised guidance down from 80k oz to 65oz this year (and then only producing 60k over a rolling 12-mth period). I simply can't trust them that a fourth mine coming on stream will provide such an uplift.

In any event, I'll try and get along on 30-Sep to hear from him.

I've also registered to go next Tuesday 21 Sep where I wish to hear from Lonrho Plc (LON:LONR) and Goldplat Plc (LON:GDP). Also presenting are Anglesey Mining (LON:AYM) and Ironclad Mining (ASX: IFE).

Hi SM,

Besdies OK, I think a key part of the uplift is due to come from Bullen, which has been below par over the last 12 months. I would hope they've been developing some new ore there.

Clearly the accident/fatality at OK won't have helped. See http://www.investegate.co.uk/Article.aspx?id=201008060858116643Q , http://www.investegate.co.uk/Article.aspx?id=201008190700132572R and http://www.investegate.co.uk/Article.aspx?id=201008250749595935R

Brings home the very real physical risks of narrow vein mining.

Mark

17th Sep '10

Refreshed Norseman Gold Plc (LON:NGL) presentation released ahead of investor roadshow to Hong Kong and Europe by Barry Cahill.

http://www.norsemangoldplc.com/images/stories/investor_update_september_2010_-_presentation_v3_compatibility_mode_2.pdf

1st Oct '10

Barry was on good form at last night's Proactive presentation - but still seemed to think it was I who owed him some beers, in the light of my gains last year, rather than the converse in the light of him missing targets. Clearly he forgot our bet after last year's presentation. :0) The presentation is as per SM's link above. Here are my notes & thoughts.

Bullen

Firstly, what went wrong with Bullen? (which is the main cause of below par output). Barry's explanation was that the Bullen reef had become "feathered". That means that instead of the reef being contiguous downdip, it split into "fingers", interspersed with country rock. This feathering was not readily detectable from previous explo drilling. Explo work continues at Bullen to try and find better reef. Work is currently focussed on two headings there and, subject to successful explo, Barry hopes to open a third heading, but no improvement to production from Bullen is expected near term.

OK Fatality

Due to ongoing official enquiries Barry had to be close-lipped regarding the OK accident. Based on what I was told privately, I am satisfied with the company's behaviour and Barry is confident that NGL will not be subject to a large fine or material compensation costs. Naturally, events at OK had a big impact on morale & working in the current quarter, so output can be expected to be below par. Work is returning to normal now.

Production outlook & Placing

Barry's view is that whilst the first half may be disappointing, he expects to produce 70,000oz in the second half, as both OK and North Royal come into full production from April onwards.

Barry appeared confident about the placing (though again had to be tight-lipped) - and market behaviour in London seems to suggest that the market is also confident. My understanding is that the placing is to fund CAPEX. Development of OK will cost/have cost A$18m in total; North Royal will take A$15m. Concerning North Royal, the initial open-pit grade is expected to be 4.5g/t. Overall cash costs are expected to be A$600/oz.

Mill, Future developments & Crown

Concerning the mill, Barry indicated that mill processing costs work out at A$35/tonne. He also indicated that at some future point the existing pachuca tanks, which are becoming obsolete, would be replaced by mechanically agitated tanks. This and other measures could increase mill capacity but, obviously, mill upgrades will only be considered when the mill can be filled comfortably from Norseman's mines.

The presentation makes reference to further mines/mine extensions at Tiara, Kakahi Queen (the name of a NZ type of fishing fly :0)) and Renegade. I asked about explo work that had previously been reported at Crown but was now omitted. Barry indicated that Crown had been de-prioritised because the CAPEX requirement to develop it (a 1Moz resource) was too large, at present.

Summary & my thoughts

So, to sum up Barry remains confident of achieving record breaking production - but that won't be fully evident for another year or so. He made a frank statement: "you can either back me now, or wait to see the production reports & then back me. I can understand that there has been a loss of credibility." [not his exact words but my recollection].

I think that's fair and I will choose the latter option - unless the SP becomes very depressed in the intervening period and the risk/reward looks attractive to me.

Cheers,

Mark

3rd Nov '10

There's a nice video webcast with Barry here: http://www.norsemangoldplc.com/index.php?option=com_content&task=blogcategory&id=919&Itemid=39

Cheers,

Mark

Shocker

8th Nov '10

So, overall cost per ounce is going to remain well above $600 well into next year at the least?

I've been finding out what I can about Norseman for a while but costs that high and a patchy track record aren't very enticing... nevertheless if they drop to about 50p I will be a lot more interested. Too much risk otherwise, for me.

p3dr036

22nd Jul '11

I took a punt on NGL after the Master Investor Show on 23rd April after the previous day's fall by over 50%. It seemed to me to have been oversold and having spoken to one or two at the show. I bought at 16.25p the Monday after the show .

I bought into NGL on the basis that I expected [hoped? that Barry Cahill who had already gone to the mine to take day -to-day control would succeed in turning matters around. If Cahill is able to achieve this I expect the share price to go some way towards the 40-50p levels last seen in February and March this year.

The jury's still out of course!

24th Aug '11

On 22 July I said "The jury's still out of course!"

Well at least half of the jury is back in now and the shares are doing very nicely thank you!!''

Thank you Norseman Gold!!!

Fangorn

Yes indeed they are P3dr.

Happy with my 18.75p/sh purchase. Doing far better than my VGM bottom fishing @ 100p/sh and CEY @ 101p.

Most of my market pessimism related purchases are faring reasonably well..hope it continues.

Some interesting moves today. BNK being one I've had my eye on - quite a fall over the last two weeks or so.Look fairly good value @ 275, as does Bowleven. Just too many choices out there at the moment.

My original July post was slightly in error - I actually bought into NGL on 18th April not the 23rd!

I did exactly the same thing with VGM - though my bottom fishing was at 93p and 100p!]!

But I wouldn't worry as I feel our 100p will look pretty good in a few months.time. VGM already touched 120p on opening today. It fell back to 118p, presumably on some profit taking.

Dave Paxton is continuing the process of further developing the mine. In my view the company is winning out and even 120-140p levels will look cheap in a few months time as the gold output figures increase as they drill out more ore and less rock!.

25th Aug '11

Despite the rapid retrace of gold over the last few days I'm pretty bullish long term. VGM I hope, will significantly bounce back - my bottom fish was a top up to an old holding acquired at 2.6p(old money). I hope you're correct in your assessment of Dave P and his abilities - I see several on Advfn are not. Time will tell that's for sure.

I also took the plunge on CEY despite my political risk misgivings...but the attractions around the 100p mark were simply too great to ignore.

Norseman Proactive Investors Presentation, October 2009

Pre- and Post-presentation chat

Gold Price

Strategy

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Marben100

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