Norseman Gold (LON:NGL, ASX:NGL) today revealed its new strategic partner is Tulla Resources, which will take over the running of its mine and lend A$10 million (£6.8 million) to the Aussie gold group.
Norseman said in December it was in talks with a potential partner and suspended its shares in Australia last month ahead of today’s announcement.
Tulla is an Australian resources company and the family vehicle of the Maloney family, which previously ran MAC Services, a supplier of mining accommodation facilities that was sold to Oil States International for A$650 million.
Tulla has investments in TSX listed THEMAC Resources, which owns 100% of the Copper Flat Project, a porphyry copper-molybdenum-gold-silver project in south-central New Mexico; ASX listed Altona Mining, a copper miner in Finland and ASX listed Queensland Mining.
Tulla will take over running the Norseman mine with immediate effect, while Norseman's managing director Barry Cahill has resigned.
Norseman will retain ownership of the mine and equipment. The miner will raise a further A$3 million (£2 million) through a placing at 6c.
It said today that Tulla undertook an initial review prior to completion of the agreement and is now commencing a more detailed review of all aspects of the operations, including all four mines.
Initial findings indicate that it believes that it can lower operational costs and become a consistent 100,000 ounces per annum gold producer within two years.
Tulla is now preparing a comprehensive forward 3 year mine plan and a growth strategy.
Norseman, which is the oldest working mine in Australia, produced 10,658 ounces in the three months to December at a net direct cash operating cost of A$1,673 per ounce gold.
Chairman David Steinepreis said that with Tulla’s input Norseman can stabilise the operation and then start to build production, profitability and in turn shareholder value.
The plan has meant two of the four mines, Bullen and OK Decline, have been placed on care and maintenance while the operational review and forward planning is completed.
In the latest quarter, Bullen contributed 4,002 ounces (up 11%), Harlequin contributed 4,434 ounces (down 8%), the OK Decline contributed 1,045 ounces (down 18%), and the North Royal Open Pit contributed 1,177 ounces (down 40%).
As at the end of December, broken ore stockpiles totalled 79,000 tonnes at 1.5 g/t.
“We remain positive on the quality of the Norseman Gold Project which has a current resource inventory of 3.4 million ounces of gold at an average grade of 4.7 g/t and this confidence has been underpinned by Tulla's investment and agreement to actively manage the development,” said Steinepreis.
The mine posted an underlying loss of A$8.4 million for the quarter to December before corporate costs. Cash balances at the end December 2011 totalled A$16.6 million, while Norseman said it had approximately 3,800 ounces of gold sitting in stockpiles.
After the fund raising Norseman said it will have cash of A$22.3 million (approximately £15.17 million).
Tulla will be issued A$10 million of convertible loan notes with a coupon of 10% and that convert at 6p per share.
Shares in Norseman fell 1.37p to 4.58p.