Posts Tagged Kemess Mine

Northgate Reports Third Quarter Cash Flow of $50.5 million

Northgate Minerals Corporation  today announced its financial and operating results for the fiscal quarter ended September 30, 2009.  

                            Third Quarter 2009 Highlights

    -   Generated excellent cash flow from operations of $50.5 million or
        $0.20 per share, for a year-to-date total of $145.7 million

    -   Reported adjusted net earnings of $7.7 million or $0.03 per share

    -   Produced 80,791 ounces of gold and 11.9 million pounds of copper at
        an average net cash cost of $539 per ounce of gold

    -   Sold 85,397 ounces of gold at a realized price of $982 per ounce and
        12.8 million pounds of copper at a realized price of $3.39 per pound

    -   Successfully completed an equity offering for net proceeds of $88.5
        million to fund the development of the Young-Davidson mine

    -   Northgate's cash balance at the end of the third quarter 2009 was
        $235.9 million

    -   Successful organic growth at Northgate's operations:

        -  Discovered a significant extension of mineralization at
           Fosterville, confirming that the Phoenix fault system continues
           down plunge

        -  Discovered a new gold zone located 300 metres (m) east of current
           reserves at Young-Davidson. The new zone is completely open down
           dip. In addition to this discovery, Northgate also reported drill
           results for 29 shallow diamond drill holes located in and around
           historic mine workings immediately east of current reserves, which
           have the potential to add to the 2.8 million ounces of reserves
           already on the property

        -  Identified approximately 870,000 tonnes of additional mineral
           reserves containing 93,000 ounces at Stawell, extending the mine-
           life until Q2-2012

Financial Performance

 Northgate recorded consolidated revenue of $120.2 million in the third quarter of 2009, compared with $99.3 million in the same period last year. Revenues were higher due to a 25% increase in gold production over the same period last year combined with higher realized metal prices for gold and copper in the most recent quarter. Revenues for the nine month period ending September 30, 2009 were $374.3 million.

The net loss for the quarter was $8.6 million or $0.03 per share compared with a net loss of $29.4 million or $0.12 per share in the corresponding quarter of 2008. Adjusted net earnings were $7.7 million or $0.03 per share in the third quarter of 2009, which was significantly higher than the adjusted net loss of $28.4 million or $0.11 per share in the same period last year. Adjusted net earnings do not include certain non-cash items from its calculation of net earnings prepared in accordance with Canadian generally accepted accounting principles. Northgate has prepared this figure as it may be a useful indicator to investors. Non-cash items in the third quarter of 2009 include a $10.4 million write-down of investments in auction rate securities and a $5.8 million (net of tax) mark-to-market loss on Northgate’s copper forward sales contracts.

During the third quarter of 2009, Northgate generated excellent cash flow from operations of $50.5 million or $0.20 per share, which was a dramatic improvement over the $0.6 million or $0.00 per share generated in the corresponding quarter of 2008. In the first three quarters of 2009, Northgate has generated cash flow from operations of $145.7 million.

In the third quarter of 2009, Northgate’s cash and cash equivalents increased by $115.2 million following the completion of a bought deal financing with net proceeds of $88.5 million and strong free cash flow from operations. Northgate’s balance sheet now boasts cash and cash equivalents of $235.9 million and each operation is expected to generate strong operating cash flow for the balance of the year.

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Northgate Minerals Confirms it is in Talks With Dioro

Northgate Minerals Corp. is currently engaged in advanced discussions with the board of directors of Dioro Exploration NL regarding a potential material transaction. Northgate will provide further updates on the status of its discussions with the Dioro board as appropriate and in accordance with applicable regulations and its internal disclosure policies.

About Dioro

Dioro Exploration NL is an integrated gold producer listed on the Australian Securities Exchange (ASX) and Toronto Stock Exchange. Further information regarding Dioro is available at its website.

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High Grade Copper-Zinc Showing Discovered by Cariboo Rose at Carruthers Pass

Cariboo Rose Resources has been informed that Hawthorne Gold Corp. has terminated its option of the Carruthers Pass property in north-central BC. Hawthorne has forwarded a report outlining the results of their 2008 exploration program. The report details sampling carried out on cliffs above a high-grade boulder protruding from a talus apron. Two significant new bedrock massive sulphide occurrences were located and sampled. Other mineralized zones were also located but massive sulphides were not observed. Previous sampling of the large massive sulphide boulder returned significant values in copper, zinc, silver and gold. Grab samples by Phelps Dodge in 2001 from this exposure returned the following:

Sample #

Copper (%)

Zinc (%)

Silver (grams/t)

Gold (ppb)

62692

1.12

7.05

56

2,100

72638

2.62

2.99

>99

169

63454

3.13

4.50

>99

458

Govt-A

4.44

4.48

250

3,170

 Sampling undertaken during the 2008 program (104 samples in total) returned several anomalous results with the following table representing selective grab samples from the more significant copper rich showings. 

Sample #

Copper (%)

Zinc (%)

Silver (grams/t)

Gold (ppb)

39710

6.78

4.81

171.0

1.47

39707

5.15

0.12

28.3

0.15

39750

4.16

0.06

66.9

0.04

39729

2.50

0.04

23.6

0.04

39737

2.28

3.76

96.3

1.21

39720

1.61

0.07

19.5

0.07

 The prospecting/sampling program identified at least two mineralized or sulphide-bearing altered horizons which vary between two to four metres thick and can be traced across the outcrop exposures for at least 100 metres. Within these horizons, pods of massive sulphides occur and which are represented by the samples above. It is strongly suspected that these are the source of the boulder occurrence.

An airborne geophysical survey over the property was completed in 2004. A total of 295 line kilometres were flown utilizing a DIGHEM multi-coil, multi-frequency electromagnetic system supplemented with a high sensitivity magnetometer. The geophysical contractor, Fugro Airborne Surveys of Toronto, reports that “the surveyed property contains several anomalous features, many of which are considered to be of moderate to high priority as exploration targets”. The Fugro report itemizes fourteen target areas that contain discrete electromagnetic anomalies attributable to bedrock sources. These targets have had little follow-up exploration.

The Carruthers Pass property consists of 130 mineral claim units covering 3,250 hectares located approximately 70 kilometres south of the Kemess gold-copper mine and 200 kilometres north of Smithers. Under the terms of a 2003 agreement with Phelps Dodge, Cariboo Rose may earn a 100% interest in the Carruthers Pass Property by completing $750,000 ($187,000 remaining) in exploration and issuing shares valued at $120,000 (cash or shares, $40,000 remaining) before the sixth anniversary of the agreement (May 31, 2012). Phelps Dodge retains a back-in privilege to earn a 60% interest by incurring exploration expenditures that are the greater of 200% of prior expenditures or $1,500,000 (with the back-in election to be made before the expiry of the 90 day period following the earlier of May 31, 2011 or the completion of 2,500 metres of drilling [1,100 remaining]). Phelps Dodge may earn an additional 10% interest by completing a feasibility study within three years of earning its back-in interest. Should Phelps Dodge elect not to exercise its back-in privilege it will be entitled to a 2 1/2% net smelter return royalty that may be reduced to 1% by payment of $1,500,000.

G. L. Garratt, P.Geo., who is a qualified person within the context of National Instrument 43-101, has read and takes responsibility for this news release.

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Northgate Minerals Elects Directors

Mark J. Daniel, Paul J. Dowd and Richard J. Hall have been newly elected to the board of directors of Northgate Minerals Corp. pursuant to the annual general meeting of shareholders on May 8, 2009. Mr. Dowd and Mr. Hall were previously appointed to the board in December, 2008. The election of Mr. Daniel follows the retirement of C. William (Bill) Daniel, who served on the board since 2003.

Serving on the board in addition to the three newly elected members are: Terrence A. Lyons, chairman of the board; Kenneth G. Stowe, president and chief executive officer of the corporation; Patrick D. Downey; Douglas P. Hayhurst; and Conrad A. Pinette.

Mr. Stowe, president and chief executive officer, stated: “We have assembled a board that has a wealth of expertise in our industry and is committed to the growth of our company. I am looking forward to working with our newly elected and returning members of our board team to build upon our many recent successes, and to deliver growth and a solid rate of return to Northgate’s shareholders. On behalf of our management team and the board of directors, I wish to extend our heartfelt gratitude to Mr. Bill Daniel for his professional contributions and dedicated service to our board over the past six years.”

Mr. Daniel has been appointed chairman of Northgate’s corporate governance and compensation committee and also as a member of the health, safety and environment committee. Over his career, Mr. Daniel worked for the Bank of Canada and a number of other Canadian government organizations prior to joining the Conference Board of Canada in 1979. During his 15-year career with the Conference Board, he benchmarked leadership and management practices in some of the most successful companies in North America, Europe and Japan. Mr. Daniel joined Vale Inco (formerly CVRD Inco) in 1996, retiring as vice-president, human resources in 2007. Since that time, he has consulted to organizations on performance improvement, executive development, succession planning and organization design. Mr. Daniel holds a PhD in economics from the University of Minnesota.

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Northgate Minerals Q1 Earnings

Northgate Minerals Corp. had net earnings of $21.41-million, or eight cents per diluted common share, and cash flow from operations of $45,202,000, or 18 cents per diluted common share, for the first quarter of 2009 (all figures in United States dollars, except where noted). Northgate’s cash flow from operations includes cash proceeds of $19,182,000 from the early settlement of 9,000 tonnes of copper forward contracts.

First quarter of 2009 highlights:

 

  • Began commissioning the heated, leach circuit at the Fosterville mine, which will significantly improve gold recoveries;
  • Total gold production was 107,477 ounces, exceeding the first quarter production forecast:
    • Kemess produced 59,306 ounces during the first quarter, which was 10,000 ounces above forecast.
    • Fosterville continued its strong turnaround, producing 25,779 ounces during the first quarter, which was 2,000 ounces above forecast.
  • Average net cash cost of production was $396 per ounce, which was significantly lower than first-quarter guidance.
  • Gold sales for the first quarter totalled 111,850 ounces at a realized price of $935 per ounce.
  • Substantial progress was made on the prefeasibility study work at Young-Davidson, where the mine plan is being redesigned around the new, larger, 3.3-million-ounce, measured and indicated, gold resource, using low-cost, bulk-mining methods to reduce operating costs and increase annual production.
  • Successful exploration drilling at Stawell:
    • Discovered two additional zones of gold mineralization on either side of the GG5 mining zone.
    • Hole SD-622W6 in the North Magdala target area intersected 5.7 metres of 19.6 grams per tonne gold.

 

Ken Stowe, president and chief executive officer, stated: “Strong financial results were achieved from our operations during the first quarter, as we beat the forecast for both gold and copper production, generating excellent cash flow from operations of $45-million. Kemess performed extremely well during the quarter, exceeding our expectations for production and costs. We were equally as pleased with the strong operating results from both Fosterville and Stawell, where we achieved another solid quarter of production and lower cash costs. On the exploration front, drill results over the past six months, in the North Magdala target at Stawell and in the Harrier zone at Fosterville, have been sufficiently compelling that we are commencing development towards both of these areas, while exploration continues. Prefeasibility work at Young-Davidson is moving along well, with completion expected by the end of June.”

Executive overview

Financial performance

Northgate Minerals recorded consolidated revenue of $123,818,000 in the first quarter of 2009, compared with $86,093,000 in the same period last year. Net earnings were $21.41-million, or eight cents per diluted share, in the first quarter of 2009, compared with net earnings of $20,427,000, or eight cents per diluted share, for the corresponding quarter of 2008. Cash flow from operations, after changes in working capital and other items, was $45,202,000, or 18 cents per diluted share, in the first quarter of 2009, which includes the early settlement of 9,000 tonnes of copper forward contracts for cash proceeds of $19,182,000. Cash flow for the same period last year was $15.45-million, or six cents per diluted share. Financial results for the corresponding quarter of 2008 exclude results from Fosterville and Stawell prior to Northgate’s acquisition of Perseverance Corporation Ltd. on Feb. 19, 2008. Per-share data are based on the weighted-average diluted number of shares outstanding of 255,762,702 in the first quarter of 2009, and 255,338,997 in the corresponding quarter of 2008. As of May 8, 2009, the corporation had 255,854,675 issued and outstanding common shares, and 6,958,450 outstanding common share options.

Health, safety and environment

Northgate promotes a strong culture of health and safety at its mine sites, and strives to ensure that the highest standards are maintained. During the first quarter of 2009, both Kemess and Young-Davidson performed without a single lost-time incident (LTI). Young-Davidson has continued with its exemplary performance, as the property has not recorded a single LTI over the past two years. In Australia, Stawell had no LTIs during the quarter, while Fosterville recorded one LTI.

Human resources

Negotiations between management and employee representatives at Fosterville progressed during the quarter, with the goal of executing the site’s first employee collective agreement by the end of the second quarter of 2009.

 

                         SUMMARIZED CONSOLIDATED RESULTS

                                                            Q1 2009       Q1 2008

Operating data
Gold
Production (ounces)                                         107,477    88,386 (1)
Sales (ounces)                                              111,850    61,539 (2)
Realized gold price ($/ounce) (3)                               935           962
Copper
Production (thousands pounds)                                15,007        14,380
Sales (thousands pounds)                                     14,788        13,375
Realized copper price ($/pound) (3)                            2.07          3.68
Net cash cost ($/ounce)                                         396       262 (4)
Financial data (thousands of U.S. dollars,
except where noted)
Revenue                                                     123,818        86,093
Net earnings                                                 21,410        19,665
Earnings per share
Basic                                                          0.08          0.08
Diluted                                                        0.08          0.08
Cash flow from operations                                    45,202        15,450
Cash and cash equivalents                                    88,379        52,688
Total assets                                                593,322       715,625

(1) Production in the first quarter of 2008 for Fosterville excludes the change 
in gold-in-circuit inventory previously recorded. Production figures are for the
full quarter ending March 31, 2008.
(2) Gold sales in the first quarter of 2008 include the results for Fosterville 
and Stawell from Feb. 19 to March 31, 2008.
(3) Metal-pricing quotational period is three months after the month of arrival 
(MAMA) at the smelting facility for copper, and two MAMA for gold. Realized 
prices reported will differ from the average quarterly reference prices, as 
realized price calculations incorporate the actual settlement price for 
prior-period sales, as well as the forward price profiles of both metals for 
unpriced sales at the end of the quarter.
(4) Cash costs in the first quarter of 2008 include the results for Fosterville 
and Stawell from Feb. 19 to March 31, 2008.

 

Operational performance

The Fosterville mine produced 25,779 ounces of gold during the three months ended March 31, 2009, which exceeded Northgate’s first-quarter forecast and represented a significant improvement from gold production of 10,440 ounces in the corresponding quarter of the previous year. During the quarter, 165,355 tonnes of ore were mined, and mine development advanced 1,900 metres, compared with 110,904 tonnes mined and 1,420 m advanced, respectively, in the corresponding period of 2008. Mining rates dramatically increased in the first quarter of 2009, compared with the same period last year, resulting from an increase in the number of working faces made available by the substantial mine development completed since taking ownership of the mine. In addition, production figures for the first quarter of 2008 were adversely affected by a temporary suspension of underground mining activities, in order to facilitate a thorough review of operating procedures and provide additional safety training to mining personnel.

During the first quarter of 2009, approximately 168,000 tonnes of ore were milled at a grade of 5.53 grams per tonne, which was a significant improvement from the 139,000 tonnes of ore milled at a grade of 4.30 g/t in the first quarter of 2008. Gold recoveries of 86 per cent in the first quarter of 2009 were dramatically higher than the 54-per-cent recovery recorded in the same period last year. Higher recoveries were attributable to the lower quantity of carbonaceous ore milled during the most recent quarter, and a variety of significant process improvements made by Northgate’s engineers in the Biox and leach circuits over the past year. Subsequent to the first quarter, the new heated, leach circuit was fully commissioned in April, and is expected to further improve gold recoveries in future quarters.

Total operating costs for the first quarter of 2009 were $16,661,000 (Australian) or $99 (Australian) (2008 — $161 (Australian)) per tonne of ore milled. Operating costs continued to decline from previous quarters, as a result of increased mining efficiencies from the conversion to owner mining, increased mine output, and other improvements to the manner in which the mine has operated. Mining costs were $54 (Australian) (2008 — $74 (Australian)) per tonne of ore mined, and milling costs were $35 (Australian) (2008 — $53 (Australian)) per tonne of ore milled. Operating costs for the corresponding period of 2008 reflect results from the date of acquisition of Perseverance (Feb. 19, 2008) to March 31, 2008.

The net cash cost of production for the first quarter of 2009 was $430 per ounce of gold, which was dramatically lower than the net cash cost of $1,415 per ounce of gold in the same period last year. The decrease in net cash cost resulted from lower mining costs, higher ore grades, improved gold recovery, lower diesel prices and the stronger U.S. dollar relative to the Australian dollar.

Financial performance

Fosterville’s revenue for the three months ended March 31, 2009, was $23,782,000, based on gold sales of 26,363 ounces, compared with $4,398,000 and gold sales of 4,568 ounces in the corresponding period of 2008. The cost of sales for the first quarter of 2009, excluding depreciation and depletion, was $11,017,000 (2008 — $6,346,000), and the depreciation and depletion expense was $5,155,000 (2008 — $1,667,000). Earnings from operations before income taxes recorded for the period were $6,483,000, compared with a loss from operations of $3,781,000 in the corresponding period of 2008.

During the first quarter of 2009, the mine generated $12,748,000 in cash flow from operations, while $1,908,000 was utilized in the corresponding period of 2008. Financial performance for the corresponding period of 2008 reflects results from the date of acquisition of Perseverance (Feb. 19, 2008) to March 31, 2008.

Total investment in capital expenditures at Fosterville was $9,747,000, which included $4,661,000 for mine development. Capital expenditures for plant and equipment totalled $5,086,000, which included $2,461,000 for the heated, leach project, and $732,000 for the raising of the tailings dam. Cash expenditures in the corresponding period of 2008 were $2,596,000.

Exploration update

Two surface diamond drills are in operation on the Harrier underground zone, located 1.7 kilometres south of the current Phoenix mining area. Ten holes were drilled (6,269 m) in the first quarter, eight of which were directed at the Osprey and Harrier base zones. It is now apparent that there is a moderate southerly plunging orientation to both the Osprey and Harrier zones, similar to the Phoenix deposit. The base of the southern lens of the Osprey zone is defined by holes SPD512, 512A and 512B. The upper limit of the northern lens is defined by holes SPD504A and 504B. Within the Osprey zone, hole SPD511 intersected three m of 5.7 grams per tonne gold.

The base of the Harrier lens is similarly defined by holes SPD512 and 512A. Within the Harrier base zone, hole SPD504A intersected 6.4 m of 4.8 g/t gold, and hole SPD511 intersected 2.3 m of 5.2 g/t gold.

Both the Harrier and Osprey lenses are open downplunge. Phase 2 and 3 exploration activities during the balance of 2009 will infill the high-grade zones already known to exist and step out downplunge, to explore the full extent of these zones. While exploration continues from surface in the Harrier zone, the decision has been made to advance development in the Ellesmere orebody, originally scheduled in 2010, to the second half of 2009, in order to reduce the lead time involved in drifting over to the Harrier zone. Bringing forward the Ellesmere development would allow Harrier to be brought into production by 2012.

The Stawell mine produced a total of 22,392 ounces of gold during the three months ended March 31, 2009, compared with 28,363 ounces of gold in the corresponding period last year. During the quarter, gold production was 15 per cent lower than forecast, due to a combination of lower mining rates, ore grades and gold recovery. In January, underground production blasting was interrupted for 10 days, while an excessive blast vibration event was investigated. The suspension led to production sequencing delays, which resulted in processing a greater amount of lower-grade oxide ore from stockpiles than had been initially projected. Despite the lower production in the first quarter, it is expected that total gold production for 2009 will meet the original forecast of 107,000 ounces.

Mine production during the quarter of 155,000 tonnes of ore was slightly higher than the 150,000 tonnes mined in the same period of 2008, but lower than planned due to the 10-day interruption in mining. Underground mine development continued in the Golden Gift (GG) production zones, GG1, GG3 and GG5L, during the quarter, and the development advance totalled 1,407 m (2008 — 1,201 m). Progress was made in upgrading the underground ventilation systems for the lower areas of the mine, and improving secondary egress routes.

During the first quarter of 2009, approximately 180,000 tonnes of ore were milled at an average grade of 4.45 g/t, compared with 167,000 tonnes of ore at 5.96 g/t in the same period last year. Gold recoveries of 87 per cent in the first quarter of 2009 were slightly lower than the 89-per-cent recovery recorded in the same period of 2008, as a result of the higher volume of lower-grade, stockpiled, oxide ore processed.

Total operating costs for the first quarter of 2009 were $14,542,000 (Australian), or $81 (Australian) (2008 — $89 (Australian)) per tonne of ore milled. The decline in operating cost is primarily attributable to the increase in mill throughput, quarter over quarter. Mining costs were $57 (Australian) (2008 — $57 (Australian)) per tonne of ore mined and milling costs were $24 (Australian) (2008 — $29 (Australian)) per tonne of ore milled. Operating costs for the corresponding period of 2008 reflect results from the date of acquisition of Perseverance (Feb. 19, 2008) to March 31, 2008.

The net cash cost of production for the first quarter of 2009 was $432 per ounce of gold, which was significantly lower than the cost of $536 per ounce of gold recorded in the same period last year. The decrease in net cash cost resulted from the stronger U.S. dollar relative to the Australian dollar, which more than offset the effect of lower ore grades.

Financial performance

Stawell’s revenue for the three months ended March 31, 2009, was $22,415,000, based on gold sales of 24,635 ounces. The cost of sales during the quarter, excluding depreciation and depletion, was $11.05-million (2008 — $7,245,000), and the depreciation and depletion expense was $5,818,000 (2008 — $3,387,000). Earnings from operations before income taxes recorded for the period were $4,693,000, compared with earnings of $683,000 in the corresponding period of 2008. During the first quarter of 2009, Stawell generated $13,008,000 in cash flow from operations, compared with $6,592,000 in the corresponding quarter of 2008. Financial performance for the corresponding period of 2008 reflects results from the date of acquisition of Perseverance (Feb. 19, 2008) to March 31, 2008.

Total investment in capital expenditures at Stawell was $5,926,000, which includes $3,179,000 for mine development, and $2,747,000 for plant and equipment. The plant and equipment expenditure includes $1,064,000 for the purchase of a new haul truck and $732,000 for the raising of the tailings dam. Capital expenditures in the corresponding period of 2008 were $2,622,000.

Exploration update

The surface drill working on the North Magdala target area successfully intersected the target horizon with an intercept of 5.7 m of 19.6 g/t gold (true thickness estimated to be 5.1 m), located 100 m north of the historic hole SD622 that had intersected 9.4 m of 8.4 g/t gold (true thickness estimated at eight m). A second hole from underground intersected the same zone with an intercept of 2.5 m of 6.6 g/t gold. These three intersections are higher grade than similar styles of mineralization mined in higher levels of the mine, which averaged five m to eight m thickness, with an average grade of 4.5 g/t to five g/t gold. A second, deep-surface, drill hole will attempt to intersect the North Magdala target with another 100-metre step-out, farther to the north.

On the strength of the recently delineated 28,000-ounce inferred resource in the Dukes Flank area and the very encouraging results in the North Magdala target, the decision has been made to begin development into Dukes Flank from the C7 zone. This development will provide a platform for resource conversion drilling into Dukes Flank and underground exploration of North Magdala.

A second exploration highlight during the quarter was the discovery of two zones in close proximity to the current GG5 workings. These two zones have initial intersections of 7.7 m of 18.1 g/t gold and 7.5 m of 10.6 g/t gold (each with an estimated true thickness of five m) in the G5L South block, and 10 m of 6.9 g/t gold in the G5 Open Flank (true thickness estimated at 5.5 m). Definition drilling is under way, and it is anticipated that these zones will be converted to the indicated and inferred resource categories within three months.

Operational performance

Kemess posted gold and copper production of 59,306 ounces and 15.0 million pounds, respectively, in the first quarter of 2009. Metal production was significantly higher than forecast, as a result of better-than-expected gold grades, and the mining and processing of some higher-grade ore from the western end of the open pit, which had been delayed from the fourth quarter of 2008.

During the first quarter of 2009, approximately 6.8 million tonnes of ore and waste were removed from the western end of the open pit, compared with 8.5 million tonnes during the corresponding quarter of 2008. Early in the second quarter of 2009, mining operations in the west pit were temporarily scaled back, in response to typical spring thaw conditions. During this period, the mill continues to operate normally with previously stockpiled ore. When normal operations resume toward the end of May, the remaining ore in the west end of the open pit will be mined, and mining operations will move back into the east end of the open pit for the remainder of the mine life.

Unit mining costs were $2.30 (Canadian) per tonne moved, compared with $2.07 per tonne moved in the first quarter of 2008. The unit mining costs in the most recent quarter were higher than they were in the same period last year, due to the significantly lower volume of material moved and higher maintenance costs, as higher-than-planned hours were accumulated on the hauling truck fleet in the extreme cold weather during the most recent quarter.

Mill throughput and mill availability during the first quarter of 2009 were 47,913 tonnes per day (tpd) and 91 per cent, respectively, which was consistent with the performance in the first quarter of 2008 of 46,636 tpd and 89 per cent. The ore milled in the first quarter of 2009 had grades of 0.606 g/t for gold and 0.187 per cent for copper, compared with grades of 0.522 g/t gold and 0.182 per cent copper in the same period of 2008. Gold and copper recoveries were consistent, year over year, and averaged 71 per cent and 85 per cent, respectively, in the first quarter of 2009, compared with 70 per cent and 85 per cent in the same period last year. Recoveries during the quarter were better than forecast due to improvements in the metallurgical process. Going forward, these improvements will have a very positive impact on the lower-grade ore, which makes up the majority of the remaining reserves at Kemess.

Metal concentrate inventory declined by 2,000 wet metric tonnes (wmt) to approximately 10,000 wmt in the first quarter of 2009. Railcar availability continued to be poor due to extreme winter conditions experienced throughout Canada in February and March.

The average unit cost of production at Kemess was $13.25 (Canadian) per tonne milled during the first quarter of 2009, including $3.61 (Canadian) per tonne for concentrate marketing costs, comprising treatment and refining costs, and transportation fees. The unit cost in the same quarter in 2008 was $13.58 (Canadian) per tonne milled, which included $3.18 (Canadian) per tonne for marketing costs. Concentrate marketing costs have increased, year over year, as the 2009 smelting and refining terms for 2009 have increased to $75 per dry metric tonne (dmt) and 75 cents per pound of copper, compared with terms of $45 per dmt and 45 cents per pound in 2008. However, site operating costs of $41.6-million (Canadian) have come down approximately 6 per cent in the first quarter of 2009 ($44.2-million (Canadian) in the first quarter of 2008). The decrease in site operating costs is attributed primarily to the lower cost of diesel fuel and mill steel.

The net cash cost of production at Kemess in the first quarter was $367 per ounce of gold, compared with $105 per ounce reported in the first quarter of 2008. The net cash cost was significantly lower than forecast, due to the stronger gold and copper production from higher-than-expected ore grades and metal recoveries, as well as the higher-than-forecast copper prices. However, the net cash cost was significantly higher than the comparative quarter of 2008, due to the lower copper price and higher marketing costs, which were only partially offset by the weaker Canadian dollar and lower Canadian-dollar-denominated site costs.

Financial performance

Revenue from Kemess in the first quarter of 2009 was $86,153,000, compared with $104,016,000 in the corresponding period of 2008, excluding the effects of mark-to-market adjustments on Northgate’s hedge books. Metal sales in the first quarter of 2009 consisted of 60,852 ounces of gold and 14.8 million pounds of copper, compared with 44,724 ounces of gold and 13.4 million pounds of copper in the first quarter of 2008. During the first quarter of 2009, the price of gold on the London Bullion Market averaged $909 per ounce, and the price of copper on the London Metal Exchange (LME) averaged $1.56 per pound. The net realized metal prices received on sales in the first quarter of 2009 were approximately $963 per ounce of gold and $2.07 per pound of copper, compared with $965 per ounce and $3.68 per pound in the first quarter of 2008. Since Northgate’s metal pricing quotational period is three months after the month of arrival (MAMA) at the smelting facility, for copper, and two MAMA for gold, the realized prices reported differ from the average quarterly reference prices. The realized price calculations incorporate the actual settlement price for prior-period sales, as well as the forward price profiles of both metals for unpriced sales at March 31.

The cost of sales in the first quarter of 2009 was $37,251,000, which was lower than the corresponding period last year, when the cost of sales was $49,164,000. The decrease in the most recent quarter reflects the lower costs of production, as well as the impact of the strengthening U.S. dollar.

Depreciation and depletion expense in the first quarter was $12,402,000, compared with $7,745,000 during the corresponding period of 2008. The higher depreciation and depletion expense for the most recent quarter reflects the increase in tonnes of ore mined.

Capital expenditures during the first quarter of 2009 totalled $1,877,000, compared with $1,789,000 in the corresponding period of 2008. Capital expenditures in the most recent quarter reflect the impact of the strengthening U.S. dollar, and were primarily devoted to continuing construction of the tailings dam and the purchase of new mill liners.

Exploration update — Young-Davidson

Prefeasibility work at Young-Davidson is moving along well, with completion expected by the end of June. This will include revised economics for the development of the project, using the dramatically higher measured and indicated gold resource of 3.3 million ounces that was announced in December, 2008. The new larger resource has allowed for the application of lower-cost, bulk-mining methods that will decrease mining costs and increase annual production. In addition, the capital estimates will be updated to reflect changes in equipment pricing and contractor unit rates that have taken place over the past 12 months. A feasibility study is scheduled for completion by year-end.

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 the deposit. Drilling in late 2008 and early 2009 has targeted the area outside of the known resource, immediately west of the open pit. The results are highlighted by hole 91, which intersected 25.5 m of 4.49 g/t gold, including 15 m of 6.29 g/t gold and 3.5 m of 3.07 g/t gold. Hole YD09-97, located 100 m west of hole 91, intersected 11.5 m of 2.62 g/t gold, and hole YD09-96, located 150 m west of hole 91, intersected 6.3 m of 1.53 g/t gold. Hole YD09-98, located 200 m west of hole 91, intersected three m of 1.56 g/t gold, and hole YD09-99, located 50 m below hole 91, intersected 3.7 m of 1.87 g/t gold and 5.8 m of 3.59 g/t gold. Assays on remaining holes are pending.

Exploration diamond drilling on the property during the balance of 2009 will focus on testing various geophysical anomalies that have similar characteristics to those of the known Young-Davidson deposit.

Corporate overview

In the first quarter of 2009, Northgate closed out 9,000 tonnes of copper forward sales contracts for proceeds of $19,182,000. The closed-out contracts were spread equally over the maturity dates from November, 2009, to October, 2010. At March 31, 2009, there were 7,200 tonnes of copper forward sales outstanding at an average price of $2.49 per pound over the period from November, 2009, through October, 2010. The change in fair value of the remaining forward contracts during the quarter was a loss of $8,433,000, resulting from the significant increase in the price of copper since Dec. 31, 2008. The fair value of these contracts at March 31, 2009, was an asset of $9,519,000, of which $4,075,000 is included in trade and other receivables for contracts expiring within 12 months, and $5,444,000 is included in other assets. Northgate had no forward gold contracts outstanding at March 31, 2009.

Corporate administration costs in the first quarter of 2009 were $2,282,000, compared with $3,161,000 in the corresponding quarter of the prior year, representing a decrease of 28 per cent. The decrease is due mainly to reduced stock-based compensation, which is $466,000 lower compared with the first quarter of 2008, as a result of Northgate’s lower share price at the grant date. Australian corporate administration costs of $351,000 have also decreased by $318,000, compared with the corresponding period in 2008, due to reduced staffing and the elimination of duplicate administration costs. Canadian corporate expenditures of $1,931,000 mainly comprise personnel costs, as well as continuing compliance and investor relations costs.

Northgate granted a total of 1,566,000 options to employees in the first quarter of 2009, compared with 1.48 million options in the corresponding quarter of 2008. At March 31, 2009, there were 6,963,150 options outstanding, of which 3,981,100 were exercisable.

Exploration costs in the first quarter of 2009 were $3,249,000, compared with $6,161,000 in the first quarter of 2008. Costs incurred in Canada were $1,367,000, a decrease of $4,206,000 from the corresponding quarter in 2008 due to decreased exploration activity at Young-Davidson, which is now focused on prefeasibility work rather than exploration activities at site. This decrease was offset by exploration expenses in Australia of $1,882,000, as Fosterville and Stawell continue to identify additional zones with the potential to extend each site’s mine life.

Net interest income was significantly lower, at $380,000, in the first quarter of 2009, compared with $3,612,000 in the corresponding quarter of 2008. The decrease is attributable to lower average cash balances compared with 2008, when Northgate had cash and cash equivalents in excess of $250-million prior to the acquisition of Perseverance for cash consideration. The decrease also results from increased interest expenses resulting from plant and equipment acquired by Fosterville and Stawell, beginning in the second quarter of 2008, through the assumption of capital leases.

Northgate recorded an income tax expense of $11,805,000 in the first quarter of 2009, compared with $1,319,000 in the corresponding quarter of 2008. Current income taxes in the current quarter were $22,853,000, of which $19,555,000 relates to the Canadian operations. This amount is attributable to the strong financial results at Kemess in the current quarter, and the settlement of the copper forward contracts. Northgate’s Australian operations are also forecast to be cash taxable in the current fiscal year and have recognized a current income tax expense of $3,298,000. The current income tax expense is offset by a future income tax recovery of $11,048,000, resulting mainly from the reversal of future tax liabilities relating to the copper forward contracts, which were in a significant asset position at Dec. 31, 2008.

Other income for the three months ended March 31, 2009, includes an insurance settlement of $554,000 relating to the collapse of a buried section of the process water line at Kemess, which occurred in the third quarter of 2008, and resulted in 10 days of lost production. No amount had previously been accrued in the consolidated financial statements. Other income in the corresponding period in 2008 includes a one-time, non-cash, mark-to-market gain of $9,836,000, related to the settlement of Perseverance’s gold forward contracts. In connection with the acquisition of Perseverance, Northgate had entered into an agreement to acquire Perseverance’s portfolio of gold forward contracts, based on the value of the underlying forward contracts at Oct. 30, 2007. A gain was recorded to recognize the difference in the fair value of the portfolio and the settlement amount.

Liquidity and capital resources

Working capital

At March 31, 2009, Northgate had working capital of $68.33-million, compared with working capital of $21,947,000 at Dec. 31, 2008. The increase in working capital was driven entirely by increases to current assets, as current liabilities have decreased by 2 per cent since Dec. 31, 2008. Northgate’s cash and cash equivalents have increased by $25.96-million due to strong cash flow from operations and the settlement of a portion of the corporation’s copper forward contracts. Trade and other receivables have increased in light of higher quarter-end gold and copper prices. Inventories have increased by $10,577,000 due to the timing of deliveries of concentrate at Kemess and the increase in ore stockpiles. Northgate’s cash balance at March 31, 2009, amounted to $88,379,000, compared with $62,419,000 at Dec. 31, 2008. All cash is held on deposit with major established banks in Canada and Australia.

During the quarter, Northgate generated cash flow from operations of $45,202,000, compared with $15.45-million for the corresponding quarter of 2008. The increased cash flow resulted from the increase in revenues from higher gold sales, and the inclusion of the results from Fosterville and Stawell for the entire quarter, whereas the corresponding quarter in 2008 included financial results from these two operations from Feb. 19, 2008, onward. The increase was also attributable to the settlement of 9,000 tonnes of Northgate’s copper forward contracts, which generated proceeds of $19,182,000.

Northgate continues to hold investments in auction-rate securities (ARS), which are floating-rate securities marketed by financial institutions, with auction reset dates at seven-, 28- or 35-day intervals, to provide short-term liquidity. Beginning in August, 2007, auctions at which these securities were to be resold began to fail, and, as of the date hereof, attempts to conduct auctions have generally ceased. Currently, these securities cannot be readily converted to cash for use by Northgate to make capital investments or for other business purposes, although the underlying payment and other obligations of the original issuers of these securities remain intact, and these issuers continue to make regular interest payments to the corporation. The par value of these securities held by Northgate is $72.6-million. The estimated fair value of Northgate’s ARS holdings at March 31, 2009, was $36,817,000, which reflects a $2,474,000 decline from the estimated fair value of $39,291,000 at Dec. 31, 2008.

The decline in value is related mainly to Northgate’s ARS investments issued by Regulation XXX insurance companies. The corporation has concluded that this decline is temporary. In determining that the loss in value is temporary, the corporation considered the fact that: these particular securities have a lower probability of future default; continue to make interest payments; are insured by monoline insurance companies; and continue to maintain a credit rating above investment grade. Management also considered the senior rank of its holdings in the capital structures of the respective issuers, and the fiduciary obligation of the major insurance companies who own the Regulation XXX entities, as factors that improve the likelihood that these investments might eventually return to par value.

The estimated fair value of the corporation’s ARS investments issued by derivative product companies (companies involved in the issuance of credit default swaps) increased slightly in the three months ending March 31, 2009. In previous periods, decreases in the estimated fair value of these ARSs were determined to be other than temporary and recognized into net earnings. Previous permanent impairments are not reversed and, consequently, the increase in estimated fair value was not recognized in net earnings.

Northgate previously received a short-term loan collateralized by the corporation’s ARS investments, subsequent to such ARS investments becoming illiquid. As of March 31, 2009, the principal outstanding on the short-term loan was $42,478,000. Northgate continues to treat the short-term loan as an obligation of the corporation, and has continued to classify it as a current liability, based on its original maturity date.

Northgate believes that its working capital at March 31, 2009, together with future cash flow from operations, are more than sufficient to meet its normal operating requirements for the next year, notwithstanding the current continuing illiquidity and impairment of its ARS investments.

,

No Comments

Northgate Minerals Exceeds Q1 Production Forcast

Northgate Minerals Corp. has provided first quarter 2009 gold production and net cash cost for the Fosterville and Stawell mines in Victoria, Australia, and the Kemess South mine in British Columbia, Canada. All figures are in United States dollars except where noted.

First quarter 2009 highlights:

 

  • Consolidated production of 107,477 ounces of gold, which represents a 22-per-cent increase from the prior year and exceeds the first quarter production forecast;
  • Average net cash cost of production was $392 per ounce of gold, which was approximately 20 per cent lower than guidance;
  • Made substantial progress on the prefeasibility study work at Young-Davidson, where the mine plan is being redesigned around the new larger 3.3-million-ounce measured and indicated gold resource, using low-cost bulk mining methods to reduce operating costs and increase annual production;
  • Began commissioning the heated leach circuit at the Fosterville mine.

 

 

SUMMARY OF OPERATIONS FOR Q1 2009 COMPARED WITH THE SAME PERIOD IN 2008 
     (Unaudited, thousands of U.S. dollars, except where noted) 

                                            First quarter  First quarter
                                                     2009      2008
Fosterville
Gold production (ounces)                            25,779    10,440(1)
Net cash cost ($/ounce) (2)(3)                         430     1,190
Stawell
Gold production (ounces)                            22,392    28,363
Net cash cost ($/ounce) (2)(3)                         432       536
Kemess South
Gold production (ounces)                            59,306    49,583
Copper production (thousands pounds)                15,007    14,380
Net cash cost ($/ounce) (2)                            362       105
Consolidated
Gold production (ounces)                           107,477    88,386(1)
Copper production (thousands pounds)                15,007    14,380
Net cash cost ($/ounce) (2)(3)                         392       259

(1) Production in first quarter 2008 for Fosterville excludes the change 
in gold-in-circuit inventory previously recorded.
(2) The cash cost figure for first quarter 2009 is an unaudited estimate 
and is subject to revision.
(3) The cash cost figure for first quarter 2008 includes the results for 
Fosterville and Stawell from Feb. 19 to March 31, 2008.

 

Ken Stowe, president and chief executive officer, commented: “We achieved solid results in the first quarter of 2009. In Australia, we essentially met the quarterly production and cash cost forecasts we provided in early January. In addition, we began commissioning the heated leach circuit at Fosterville in March and early results support a 90-per-cent gold recovery target, which will enhance the long-term profitability of the mine. At Kemess, both production and cash costs exceeded our expectations due to higher-than-expected ore grades and metal recoveries, as well as higher-than-forecast copper prices.”

,

No Comments

Northgate Minerals Q4 Earnings

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.

,

No Comments

Northgate Minerals Reports Record Gold Production

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.

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