Northgate Minerals Corp. released record gold production in the fourth quarter of 2008, as well as the 2009 production forecast and exploration plans for its Canadian and Australian operations.
(All figures are in United States dollars, except where noted.)
Fourth quarter 2008 highlights:
- Achieved record quarterly gold production of 118,265 ounces, bringing total 2008 production to a record 354,800 ounces;
- Strong turnaround at Fosterville with 26,398 ounces produced, representing a new quarterly record;
- Production at Stawell of 30,553 ounces of gold, the fourth-highest quarterly production in the long 26-year history of the mine;
- Kemess produced 61,314 ounces of gold and 14.4 million pounds of copper;
- Northgate’s average net cash cost of production for its three operating mines was $421 per ounce of gold;
- Doubled the total gold resource base to over four million ounces at the Young-Davidson property;
- Announced the discovery of significant extensions to three mineralized zones at Fosterville.
2009 production forecast highlights:
- Northgate is forecasting record gold production of 392,000 ounces from its three operating mines in Canada and Australia;
- Copper production from the Kemess mine is forecast to be 54 million pounds;
- Northgate’s average cash cost of production, net of byproduct credits, is forecast to be $461 per ounce of gold assuming a copper price of $1.40 per pound and exchange rates of $1 (Canadian)/$1.25 (U.S.) and $1 (Australian)/$1.43 (U.S.);
- Exploration spending in Australia is forecast to be $8.2-million, split almost equally between the two operations, in support of mine-life extensions;
- Exploration spending for the Young-Davidson property is forecast to be $1.2-million, which will focus on targets outside of the known resource area.
Ken Stowe, president and chief executive officer, commented: “When we acquired Perseverance Corp. only 11 months ago, our stated and primary goals were to quickly increase the mine life at Stawell through an aggressive exploration program and underground infrastructure enhancements, and to dramatically improve the productivity at Fosterville. The results are readily apparent. At Stawell, after only five months of ownership, we added 140,000 ounces to the reserve in July, the single-largest reserve addition in the mine’s history. At the same time, working conditions underground have dramatically improved through significant investments in ventilation and cooling. Furthermore, ore haulage costs have been reduced by approximately 30 per cent with the acquisition of larger trucks. At Fosterville, having successfully completed the conversion to owner mining, our considerable turnaround efforts began to show tangible results in all areas during the fourth quarter, with the mine reporting the highest quarterly production in its history at a cash cost of $513 per ounce. In addition, we made considerable progress on the heated leach circuit, which will further improve gold recovery at the operation while allowing us to retreat previously produced high-grade leach circuit tailings containing over 50,000 ounces of gold. Our strong balance sheet will allow us to continue aggressive exploration programs at both Australian mines, where we plan to invest $8.2-million, building on our success in the GG6 zone at Stawell and the recent exciting results from the Harrier underground zones at Fosterville. In Canada, production of gold at Kemess is expected to decline slightly from 2008 levels. Mining in the west end of the pit is currently scheduled to be completed by midyear, at which time the mill will begin processing lower-grade stockpiles and east pit ores. At Young-Davidson, we are taking a fresh look at all aspects of the mine development plan based upon the very impressive doubling of the gold resource base announced in December. Once this rescoping has been completed, we will then commence feasibility study work. With record combined gold production from Kemess, Stawell and Fosterville forecast for 2009 and strong prospects for continued exploration success in Australia and at Young-Davidson, the year ahead should be an exciting one for Northgate and our shareholders.”
Consolidated fourth quarter production results
SUMMARY OF OPERATIONS
Q4 2008 Q4 2007 2008 2007
Production
Gold (ounces)(1) 118,265 41,467 354,800 245,631
Copper (thousands pounds) 14,391 16,766 51,906 68,129
Net cash cost ($/ounce)(2) 421 18 445 (22)
(1) Full-year production for Fosterville excludes the change in
gold-in-circuit inventory previously recorded in production for the
first quarter.
(2) Fourth quarter and full year 2008 cash-cost figures are unaudited
estimates and are subject to revision.
RESULTS OF OPERATIONS -- KEMESS SOUTH MINE
Q4 2008 Q4 2007 2008 2007
Ore plus waste mined
(tonnes) 7,388,248 8,042,000 28,260,894 42,025,404
Ore mined (tonnes) 5,027,556 3,206,000 13,851,896 17,060,785
Stripping ratio
(waste/ore) 0.47 1.51 1.04 1.46
Ore stockpile rehandle
(tonnes) 1,173,710 2,367,337 7,152,037 4,012,198
Ore milled (tonnes) 4,171,027 4,238,626 16,924,271 17,802,317
Ore milled per day
(tonnes) 45,337 46,072 46,252 48,773
Gold grade (g/t) 0.661 0.459 0.505 0.627
Recovery (%) 69 66 67 68
Production (ounces) 61,314 41,467 185,162 245,631
Copper grade (%) 0.196 0.238 0.174 0.214
Recovery (%) 80 75 79 81
Production (thousands of
pounds) 14,391 16,766 51,906 68,129
Net cash cost
($/ounce)(1) 395 18 272 (22)
(1) Fourth quarter and full year 2008 cash-cost figures are unaudited
estimates and are subject to revision.
Operational performance
The Kemess South mine posted production of 61,314 ounces of gold and 14.4 million pounds of copper in the fourth quarter of 2008, which was considerably lower than the forecast of 74,000 ounces and 18.5 million pounds, respectively. Metal production was adversely impacted by a burst water pipe, which caused serious damage to the mill’s distributed control system (DCS), resulting in six days of downtime just before Christmas. This event, combined with a one-week delay in accessing some higher-grade ore in the western end of the open pit, was responsible for the shortfall in production during the quarter. However, the ounces that did not materialize in the fourth quarter of 2008 will be produced in the first quarter of 2009.
Mining operations returned to near-normal levels in the western end of the open pit once waste rock was removed from the northwest corner where localized sloughing had occurred earlier in the year. A new radar-based wall monitoring system was installed to ensure safe operation until the western end of the pit is mined out in mid-2009.
The mill operated at an average throughput of 45,337 tonnes per day during the quarter and would have achieved a more typical 49,000-tonne-per-day rate had it not been for the unexpected DCS-related outage that occurred just before Christmas. Recoveries in the mill of 69 per cent for gold and 80 per cent for copper were consistent with historic norms for the hypogene ore, which was processed during the quarter.
The cash cost of production at Kemess in the fourth quarter was $395 per ounce, which was significantly higher than earlier quarters of 2008 due to the precipitous drop in copper prices from an average of $3.62 per pound in the first three quarters to $1.77 per pound in the fourth quarter. For the full year of 2008, the cash cost of production at Kemess averaged $272 per ounce.
RESULTS OF OPERATIONS -- STAWELL GOLD MINE
Q4 2008 Q4 2007 2008 2007
Ore mined (tonnes) 177,561 152,791 629,665 652,372
Ore milled (tonnes) 183,415 170,554 698,396 721,723
Ore milled per day (tonnes) 1,994 1,854 1,908 1,978
Gold grade (g/t) 5.97 6.00 5.25 5.39
Recovery (%) 87 89 87 89
Production (ounces) 30,553 29,635 102,679 112,058
Net cash cost ($/ounce)(1) 393 n/a 541 n/a
(1) Fourth quarter and full year 2008 cash-cost figures are unaudited
estimates and are subject to revision.
The Stawell gold mine produced a total of 30,553 ounces of gold during the three months ended Dec. 31, 2008. This represents the highest quarterly production during 2008 and the fourth-highest quarterly production total in the 26-year history of the mine.
Mine production of 177,561 tonnes during the quarter increased to its highest level of the year, as improvements in the mine’s ventilation and cooling systems and the commissioning of three 60-tonne haul trucks increased the effective mining capacity.
Approximately 183,415 tonnes of ore at a grade of 5.97 grams per tonne were milled in the fourth quarter of 2008. Gold recoveries in the mill were 87 per cent, which were on target with plan and consistent with the 87-per-cent-to-90-per-cent historic range.
The net cash cost of gold for the fourth quarter was $393 per ounce, which was significantly lower than previous quarters of the year, attributable to the decreased mining costs, milling of higher-grade ore and the weaker Australian dollar relative to the United States dollar.
RESULTS OF OPERATIONS -- FOSTERVILLE GOLD MINE
Q4 2008 Q4 2007 2008 2007
Ore mined (tonnes) 167,182 154,887 511,542 799,188
Ore milled (tonnes) 165,654 213,543 540,725 931,886
Ore milled per day (tonnes) 1,801 2,321 1,477 2,555
Gold grade (g/t) 6.03 4.00 5.39 3.27
Recovery (%) 82 70 70 77
Production (ounces)(1) 26,398 19,198 66,959 73,378
Net cash cost ($/ounce)(2) 513 n/a 836 n/a
(1) Full-year production for Fosterville excludes the change in
gold-in-circuit inventory previously recorded in production for the
first quarter.
(2) Fourth quarter and full year 2008 cash-cost figures are unaudited
estimates and are subject to revision.
The Fosterville gold mine produced 26,398 ounces of gold during the three months ended Dec. 31, 2008, which was a quarterly record for the mine and substantially higher than forecast. The ore grade milled during the quarter was consistent with forecast; however, gold recovery was significantly higher due to the lower proportion of black shale ore in the mill feed and several leach circuit process improvements that were implemented based on the results of the pilot plant. Gold recovery is expected to improve further in 2009 once the $4.75-million heated leach circuit is commissioned in the first quarter.
Mine development activities continued at a high rate during the fourth quarter and now extend into the heart of the thicker, higher-grade sections of the main Phoenix orebody, which will support production over the next several years.
Net cash cost for the fourth quarter was $513 per ounce of gold, which was dramatically lower than the first three quarters of 2008, as Northgate worked on the turnaround of the operation. The decrease in costs is the result of increased mining rates, higher ore grades, improved gold recovery and the weaker Australian dollar relative to the United States dollar.
Year ending 2008 financial results
Northgate’s audited financial results for the year ended Dec. 31, 2008, are scheduled for release before market opens on March 4, 2009, and the corporation’s year-end conference call and webcast for investors and analysts will be held at 10 a.m. ET on the same day.
2009 production forecast
Northgate is forecasting a record year for production in 2009 of 392,000 ounces of gold at a net cash cost of $461 per ounce.
Gold Copper Cash cost
(ounces) (thousands (ounces)
of pounds)
Kemess 173,000 54,000 $517
Stawell 107,000 N/A $388
Fosterville 112,000 N/A $445
------- ------ ----
392,000 54,000 $461
Assuming copper price of $1.40 per pound and exchange rates of
$1 (Canadian)/$1.25 (U.S.) and $1 (Australian)/$1.43 (U.S.).
KEMESS SOUTH MINE -- PROJECTED 2009 MINE PRODUCTION Ore plus waste mined (tonnes) 24,523,000 Ore mined (tonnes) 18,024,000 Stripping ratio (waste/ore) 0.36 Ore milled (tonnes) 17,581,000 Ore milled per day (tonnes) 48,167 Gold grade (g/t) 0.484 Copper grade (%) 0.181 Gold recovery (%) 64 Copper recovery (%) 77 Gold production (ounces) 173,000 Copper production (thousands pounds) 53,800 Net cash cost ($/ounce) 517
In 2009, the mine plan calls for the removal of 18 million tonnes of ore and 6.5 million tonnes of waste from the Kemess open pit. During the first three quarters of the year, the Kemess mill will process higher-grade ore that will be mined from the western end of the open pit. Beginning in the fourth quarter, milling of much lower-grade ore from surface stockpiles and from the eastern end of the open pit is scheduled to commence.
The Kemess mill is expected to operate at a throughput of 48,167 tonnes per day with the mill operating at 90-per-cent availability. The majority of the ore milled during the year will be hypogene ore with only a small quantity (10 per cent) of supergene and leachcap ore. Total metal production for 2009 is anticipated to be 173,000 ounces of gold and 54 million pounds of copper.
Production of gold-copper concentrate is forecast to total 131,000 dry metric tonnes, which will be shipped to Xstrata Copper’s Horne smelter in Rouyn-Noranda, Que. Annual smelting and refining terms for 2009 are expected to settle at around $75 per dry metric tonne and 7.5 cents per pound of copper with no price participation and it is expected that Kemess concentrate will be processed on comparable terms.
The unit mining cost is forecasted at $1.75 per tonne moved and the total average unit cost of production is forecast to be $11.90 per tonne milled, including $3.17 per tonne milled for concentrate marketing costs. Assuming byproduct copper and silver prices of $1.40 per pound and $9 per ounce, respectively, and an exchange rate of $1 (Canadian) per $1.25 (U.S.), the net cash cost is projected to be $517 per ounce of gold produced in 2009.
Since Kemess is approaching the end of its mine life, capital expenditures will amount to only $3.6-million.
STAWELL GOLD MINE -- PROJECTED 2009 MINE PRODUCTION Ore mined (tonnes) 724,000 Ore milled (tonnes) 833,000 Ore milled per day (tonnes) 2,280 Gold grade (g/t) 4.49 Gold recovery (%) 89 Gold production (ounces) 107,000 Net cash cost ($/ounce) 388
In 2009, the Stawell mine plan calls for 833,000 tonnes to be milled at an average grade of 4.49 g/t. Gold recovery is forecast to be 89 per cent and total gold production is expected to be 107,000 ounces. Ore for the mill will be sourced from the GG3, GG5 and Magdala reserve blocks while development toward the newly discovered GG6 zone is completed. Unit operating costs are forecast to total $72 (Australian) per tonne milled, consisting of mining costs of $46 (Australian) per tonne mined, milling costs of $23 (Australian) per tonne milled, and general and administrative costs of $8 (Australian) per tonne milled.
Although Stawell is a mature and well-run operation, there are still certain areas where improvements can be made. Due to the success of the pilot plant project at Fosterville in 2008, the plant itself will be shipped to Stawell where tests will be conducted to determine whether the historic 89-per-cent recovery at the mine can be improved in the future.
Capital expenditures at Stawell are forecast to total $10-million including $2.8-million for new mining equipment, $3.5-million for additional ventilation improvements, $1.1-million for a tailings dam raise and $1-million for upgrades, and the purchase of critical spares in the mill. Mine development capital and resource definition drilling costs are forecast to be $17.1-million primarily related to the GG5 reserve block and development toward the GG6 zone, which will support production in 2010 and 2011.
Exploration expenditures of $4-million are forecast for 2009 and will focus on three targets. The first target will be Sub-GG6, where a 6,900-metre program will be conducted to follow up on 2008 drilling, which yielded some very-high-grade intersections. The second will be the promising North Magdala target, where a planned drill program of 5,000 metres will be conducted. Lastly, 2,000 metres will be devoted to the Wonga Gift target. The balance of the exploration budget will be devoted to the exploration of several other promising targets on the 1,000-hectare Stawell mining lease. In addition to this extensive diamond drilling program, Stawell geologists will continue their very successful program of revisiting resource areas in the upper areas of the mine to identify additional reserves, which can be mined with very low development costs due to their proximity to existing workings.
FOSTERVILLE GOLD MINE -- PROJECTED 2009 MINE PRODUCTION Ore mined (tonnes) 731,000 Ore milled (tonnes) 733,000 Ore milled per day (tonnes) 2008 Gold grade (g/t) 5.41 Gold recovery (%) 84 Gold production (ounces) 112,000 Net cash cost ($/ounce) 445
In 2009, the Fosterville mine plan calls for the mill to process a total of 731,000 tonnes at a grade of 5.41 g/t. Gold recovery is estimated to be 84 per cent on average during the year and total production is forecast to be 112,000 ounces. Mine production during the year will come primarily from the heart of the main Phoenix orebody with the remaining production from the Ellesmere orebody. Unit operating costs are forecast to total $97 (Australian) per tonne milled, consisting of mining costs of $54 (Australian) per tonne mined, milling costs of $34 (Australian) per tonne milled, and general and administrative costs of $10 (Australian) per tonne milled.
The heated leach circuit is scheduled to be commissioned in the first quarter of 2009. Pilot plant tests indicated that gold recovery of 90 per cent on average can be achieved once this circuit is in full operation. Once this last operational deficiency has been corrected, attention will be turned to reduce operating costs at the mine with the goal of lowering Australian-dollar-denominated cash costs per ounce by as much as 10 per cent by optimizing the operation.
Capital expenditures at Fosterville are forecast to total $12-million, including $2.1-million for the completion of the heated leach project, $2.1-million for new mobile equipment, $1-million for a tailings dam raise, $900,000 for equipment rebuilds and approximately $500,000 for the tailings retreatment project. Mine development capital and resource definition drilling costs are forecast to be $14.5-million primarily related to the continuing development of the Phoenix and Ellesmere orebodies.
Exploration expenditures in 2009 are forecast to be $4.2-million and will focus on three areas. The key focus of the exploration program is the Harrier underground zone, with an 11,500-metre program that is already under way to follow up on the excellent results obtained during the 2008 program. The second target area is Phoenix Deeps, the downplunge extension of the main orebody at Fosterville where a drill program totalling 5,300 metres is planned. The third target area is known as Pegasus, which is a theorized structural repeat of the Phoenix mineralization at greater depth that will be drill tested during the year. A total of 3,500 metres have been allocated to this program.
Young-Davidson project
Upon completion of the underground ramp development at the end of 2008, mining equipment was demobilized and the remaining shaft refurbishing work on the 13th level will be completed in early 2009. The number of people working at the property is now 23, down from an average of 115 in 2008, and this group will continue to perform a variety of activities related to permitting and development, while keeping the mine dewatered.
The new resource estimate was released in December, 2008, and a National Instrument 43-101 technical report will be filed on SEDAR and on Northgate’s website at the end of January, 2009. The project focus has now shifted to optimize the National Instrument 43-101 preliminary economic assessment report, which was filed in August, by incorporating the new, dramatically larger resource, using the geotechnical information that has been collected, and making better use of the existing ramp and shaft infrastructure at the site. Once this process is completed, a full feasibility study will be commissioned.
The rocks that host the Young-Davidson deposit are known to extend to the west under barren cover rocks. Historically, only a handful of drill holes have been tested along strike west of Young-Davidson. Other targets on the property are geophysical anomalies that have similar characteristics to those of the known Young-Davidson deposit. Exploration in 2009 will focus on these targets outside of the known resource area.
Two thousand nine exploration spending at Young-Davidson is forecast to total approximately $1.2-million out of a total project budget of $8.6-million. The balance of the expenditures will be for permitting, engineering and feasibility studies, and site care and maintenance.
