Northgate Minerals Corp. had net earnings of $18,668,000, or seven cents per diluted common share, and cash flow from operations of $5,858,000, or two cents per diluted common share, for the fourth quarter of 2008 (all figures in United States dollars, except where noted). For the full year, net earnings were $10,742,000, or four cents per diluted common share, and cash flow from operations was $64,987,000, or 25 cents per diluted common share. Northgate also achieved record gold production in 2008 of 354,800 ounces at a net cash cost of $447 per ounce of gold.
Fourth-quarter highlights:
- Achieved record quarterly gold production of 118,265 ounces at an average net cash cost of $413 per ounce of gold, bringing full-year production to a record 354,800 ounces at an average net cash cost of $447 per ounce of gold;
- Posted record production of 26,398 ounces of gold at a net cash cost of $500 per ounce at the Fosterville mine, as the operational turnaround progressed with excellent results;
- Significantly increased total gold resources at Young-Davidson, where measured and indicated resources underground doubled to over 3.0 million ounces, and inferred resources increased by over 300,000 ounces to 748,000 ounces of gold;
- Announced the first resource estimate for the recently expanded Harrier underground zone at Fosterville, which added indicated resources of 159,000 ounces at an average grade of 4.01 grams per tonne gold, and inferred resources of 221,000 ounces at an average grade of 5.38 g/t gold;
- Posted revenue of $137-million for the fourth quarter of 2008, a 43-per-cent increase over the same period last year — For the full year of 2008, Northgate recorded revenue of $461-million, representing a 37-per-cent increase over the full year of 2007.
Ken Stowe, president and chief executive officer, stated: “Two thousand eight was a record year for Northgate, as we produced over 354,000 ounces of gold, from our three operating mines, at an average net cash cost of under $450 per ounce. At our Fosterville and Stawell mines, we made dramatic operational improvements during our 11 months of ownership, as we retooled these assets for long-term success. We also invested considerable exploration dollars at both mines, and were rewarded during the year with one of the single-largest reserve additions in Stawell’s history and an increase of 380,000 ounces of resource in the Harrier zone at Fosterville. Looking into 2009, the heated leach circuit at Fosterville is scheduled for commissioning in March, which will significantly improve gold recovery in the mill. We will also continue to spend heavily on near-mine exploration at both of our Australian mines with the goal of significantly increasing reserves by the end of the year. At Young-Davidson, we are looking forward to completing a prefeasibility study in the second quarter of the year, which will be followed by a full feasibility study by year-end. The prefeasibility economics should improve significantly with the application of lower-cost, bulk-mining methods to the dramatically larger gold resource base that we announced in December. In 2008, we laid the groundwork for a very successful year ahead, and are well positioned in the current gold price environment to generate strong free cash flow at all of our operations.”
Executive overview
Financial performance
Northgate Minerals recorded consolidated revenue of $136,748,000 and $460,988,000, in the fourth quarter and full year of 2008, respectively, compared with $95,599,000 and $337,546,000 in the corresponding periods of 2007. Net earnings were $18,668,000, or seven cents per diluted share, in the fourth quarter of 2008, which includes a mark-to-market hedging gain of $48,253,000 on the corporation’s copper forward contracts and a charge of $3,398,000 to recognize an other-than-temporary decline in the value of the corporation’s auction-rate securities (ARS) investments. Net earnings during the corresponding quarter of 2007 were $33,309,000, or 13 cents per diluted share. For the full year 2008, net earnings were $10,742,000, or four cents per diluted share, compared with $39,425,000, or 15 cents per diluted share, in 2007. Cash flow from operations, after changes in working capital and other items, was $5,858,000, or two cents per diluted share, in the fourth quarter of 2008, compared with $32,914,000, or 13 cents per diluted share, during the same quarter last year. For the full year 2008, cash flow from operations, after changes in working capital and other items, was $64,987,000, or 25 cents per diluted share, compared with $125,285,000, or 49 cents per diluted share, in 2007. Per-share data is based on the weighted-average diluted number of shares outstanding of 255,601,069 and 255,453,093, in the fourth quarter and full year of 2008, respectively. The weighted-average diluted number of shares outstanding in the corresponding periods of 2007 was 255,065,987 and 255,257,756, respectively. As of March 3, 2009, the corporation had 255,787,748 issued and outstanding common shares and 7,320,150 outstanding stock options.
Health, safety and environment
Northgate continues to promote a strong culture of safety and is striving to ensure that the highest standards for health and safety are maintained at its mine sites. During the fourth quarter, Fosterville recorded one lost time injury (LTI), while Stawell recorded two LTIs. For the full year 2008, Fosterville and Stawell each recorded three LTIs. This is a dramatic improvement from 2007, when Fosterville and Stawell recorded 12 and three LTIs, respectively. Northgate has actively implemented the recommendations from safety management audits, which took place earlier in the year, to ensure health and safety standards improve and are maintained at both Australian mine sites. In Canada, Young-Davidson had no LTIs during the fourth quarter, and is pleased to report that there have been no LTIs recorded on the property over the past two years. Kemess recorded one LTI during the fourth quarter for a total of 10 LTIs in 2008.
Human resources
Northgate commenced collective agreement meetings with its work force at Fosterville to replace the existing Australian work force agreements and a temporary Greenfield agreement. The Greenfield agreement was put into place in April, 2008, for one year, when Northgate completed its conversion to owner mining from contractor mining. The new collective agreement is expected to be ratified in the second quarter of 2009.
SUMMARIZED CONSOLIDATED RESULTS
(thousands of United States dollars, except where noted)
Q4 2008 Q4 2007 2008 (1) 2007
Operating data
Gold
Production (ounces) 118,265 41,467 354,800 (2) 245,631
Sales (ounces) (3) 101,075 48,937 311,580 259,182
Realized gold price ($/ounce) 814 561 873 594
Copper
Production (thousands pounds) 14,391 16,766 51,906 68,129
Sales (thousands pounds) 11,550 16,750 49,639 69,698
Realized copper price ($/pound) 0.46 3.30 2.78 3.11
Net cash cost ($/ounce) 413 18 447 (22)
------ ------ ------ ------
Financial data
Revenue $136,748 $95,599 $460,988 $337,546
====== ====== ====== ======
Net earnings $18,668 $33,309 $10,742 $39,425
====== ====== ====== ======
Earnings per share
Basic $0.07 $0.13 $0.04 $0.16
Diluted $0.07 $0.13 $0.04 $0.15
Cash flow from operations 5,858 32,914 64,987 125,285
Cash and cash equivalents 62,419 266,045 62,419 266,045
Total assets $590,884 $634,589 $590,884 $634,589
(1) Full year 2008 financial data and gold sales (ounces) include the results of
Northgate's Australian operations from Feb. 19 to Dec. 31, 2008. Other figures are for
the full year ended Dec. 31, 2008.
(2) Full year 2008 production for Fosterville excludes the change in gold-in-circuit
inventory previously recorded in production for the first quarter.
(3) Prior-period comparatives reflect gold sales (ounces) for Kemess only.
2008 annual audited financial results
Financial figures for the fourth quarter and full year 2008 are unaudited estimates, and are subject to revision. Northgate will file its complete 2008 audited annual financial statements, including the notes to the consolidated financial statements, with both the Canadian and United States securities regulatory authorities on SEDAR and EDGAR by March 31, 2009.
