Attention Business Editors:
Northgate Files Preliminary Assessment Report for the Young-Davidson Project
TSX: NGX
AMEX: NXG
VANCOUVER, June 24 /CNW/ - (All figures in US dollars except where noted)
Northgate Minerals Corporation (TSX: NGX, AMEX: NXG) is pleased to report the
completion of a NI 43-101 Preliminary Assessment Report (the "Preliminary
Assessment") on the Young-Davidson Project in Matachewan, Ontario. The
Preliminary Assessment indicates that the gold resources are sufficient to
produce a positive cumulative undiscounted cash flow. AMEC Americas Limited
has been commissioned to complete the Feasibility Study.
Highlights of the Preliminary Assessment Report
The Preliminary Assessment lays out the basis for the development of a
combined underground and open pit mining operation and highlights areas that
may be optimized in order to improve the project economics. Highlights of the
Preliminary Assessment, which was based on a gold price of $635 per ounce and
an exchange rate of US$/Cdn$0.90 (all figures in Q2-2008 US$) are:
- Average annual production of 158,000 ounces of gold at a net cash
cost of $405 per ounce
- A total of 1.75 million recovered ounces of gold over a 12 year mine
life
- Initial capital cost of $306 million (including 17.5% contingency)
- Sustaining capital costs of $52.9 million during the life of the mine
The after-tax net present value and after-tax internal rate of return of
the Young-Davidson Project at a variety of gold prices is shown in Table 1.
Table 1: Project Economics (after-tax, unlevered)
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Gold Price US$/oz NPV (US$M)
-------------------------------------- IRR
(Undiscounted) 5% 8%
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635 18.3 -74.0 -104.5 0.8%
735 134.0 6.5 -38.7 5.4%
835 249.1 84.3 24.0 9.6%
935 364.6 161.4 85.8 13.5%
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(Base case in bold)
Ken Stowe, President and CEO, stated: "In just two and a half years, we
have advanced the Young-Davidson project to the point where we now have a
solid conceptual understanding of the technical and operating parameters of
the mine and expect to be in a position to make a production decision in first
quarter 2009 after the feasibility study is complete. We are confident that
the economics of the project will continue to improve as exploration drilling
increases the known resource and the geotechnical drilling program provides
more information about ground conditions in the area. We will be placing
orders for certain long lead-time equipment in the coming months in order to
keep the project schedule for an early 2011 startup. With the completion of
the Preliminary Assessment, our original goal of defining a three million
ounce resource at Young-Davidson and constructing a Canadian gold mine with a
15+ year mine life has moved significantly closer to reality. I wish to
express my gratitude to our geologists and engineers at Young-Davidson who
have worked many long hours in pursuit of our goal."
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REPORT OVERVIEW
The Preliminary Assessment was prepared by AMEC Americas Limited of
Oakville, Ontario and will be filed on the SEDAR website at www.sedar.com
within the next 45 days. The economic analysis of the Young-Davidson deposit
contained in the Preliminary Assessment is based on a resource estimate
released by Northgate on February 6, 2008, which included 18.75 million tonnes
(Mt) of indicated mineral resources and 4.55 Mt of inferred mineral resources.
It should be noted that mineral resources are not mineral reserves and do not
have demonstrated economic viability. In addition, while NI 43-101 allows for
the inclusion of inferred resources in a Preliminary Assessment, unlike
measured and indicated resources, inferred resources are considered too
speculative geologically to have the economic considerations applied to them
and as such they cannot be upgraded to mineral reserves. Furthermore, owing to
the preliminary nature of the work done to date, there is no certainty that
the results projected in the Preliminary Assessment will be realized and
actual results may vary substantially.
Resource Base
The Preliminary Assessment is based on underground mineral resources with
an effective date of December 20, 2007 (Press Release February 6, 2008(1))
using a 1.90 gram per metric tonne (g/t) gold cut-off grade that consists of
11.49 Mt grading 3.79 g/t gold in the indicated category and 3.99 Mt grading
3.35 g/t gold in the inferred category. Open pit mineral resources estimated
in May 2007 uses a 0.80 g/t gold cut-off grade that consists of 4.28 Mt
grading 2.00 g/t gold in the indicated category and 0.04 Mt grading 2.11 g/t
gold in the inferred category. Mining recovery and dilution were added to the
mineral resources to calculate the mill feed.
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(1) Technical Report filed on www.sedar.com on March 26, 2008.
Table 1: Open Pit and Underground Mineral Resources
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Open Pit & Underground Zones - 2008 Mineral Resources -
Young-Davidson Property
Using Base Case Cut-off Grades of 0.80 g/t Gold - Open Pit & 1.90 g/t
Gold - Underground
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Gold Cut-off Resource Tonnes Gold Id2 Gold (oz)
Zone (g/t) Class (000) (g/t) (000)
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Open Pit(1) 0.80 Indicated 4,280 2.00 275
Underground(2) 1.90 Indicated 11,494 3.79 1,401
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Total Indicated 15,774 3.31 1,676
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Gold Cut-off Resource Tonnes Gold Id2 Gold (oz)
Zone (g/t) Class (000) (g/t) (000)
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Open Pit(1) 0.80 Inferred 42 2.11 3
Underground(2) 1.90 Inferred 3,988 3.35 430
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Total Inferred 4,030 3.34 433
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(1) Gold cut-off has applied total operating costs of US$15.70/t (mining,
processing, G&A), metal price of US$600/oz gold and
US$0.90 equals CND$1.00 and metal recovery of 89% gold
(2) Gold cut-off has applied total operating costs of US$39.22/t, metal
price of US$700/oz gold and USD$0.90 equals CND$1.00 and metal
recovery of 91.7% gold (the difference in gold price reflects the
different assumed long term gold price between the date of the open
pit and underground studies)
Total resources in the open pit decreased relative to Northgate's 2007
year end resource and reserve statement as a consequence of pit optimization
calculations performed at a gold price of $635/ounce, which reduced the size
of the pit in order to reduce initial capital costs. At higher prices of gold,
it is possible that more of the gold mineralization in the pit resource may
increase.
Mining Method
During the initial three years of the mine life, feed for the mill will
be sourced from a small open pit and the upper region of the underground mine.
The open pit design incorporates 10 metre high benches with 15 metre wide haul
roads, which will accommodate 50 metric tonne (mt) haul trucks. The stripping
ratio for the open pit is 2.9:1. Production from underground will be ramped up
as the open pit production declines. For the last nine years of the projected
mine life, mill feed will be provided exclusively from the underground mine.
The underground deposit is currently located approximately between
210 metres to 1,300 metres below surface. A new 6 metre diameter shaft will be
sunk in the footwall, central to the deposit to a depth of 1,390 metres with
three main levels (9730, 9415 and 9100). The underground mine will be
developed on 50 metre sub-level spacing using sublevel open stoping mining
methods (SLOS). The mine will operate 17 mt scooptrams to load, haul and
transfer stope production to the ore pass system from where it will be hoisted
to the surface via 18 mt skips. Initial mining capital costs are estimated to
be $103.2 million for the completion of the new production shaft, completion
of the ramp with initial lateral development, ventilation raises, a paste
backfill plant and the purchase of underground mobile equipment to complete
these activities.
Please see Figure 1: Open Pit and Underground Mine Design Schematic:
http://files.newswire.ca/593/Figure1_OpenPitSchematic.doc
Production Facility and Infrastructure
Based on pilot plant test results derived from processing an underground
bulk sample, a 5,000 mt/day autogenous grinding mill was selected for the
operation. This mill will produce an average of 158,000 ounces of gold per
year over a 12 year mine life. Gold will be recovered by gravity, flotation
and standard Carbon in Leach (CIL) circuits. Preliminary metallurgical
evaluations have indicated gold recoveries should average 91.5% over the mine
life. The initial capital cost of the process plant is $69.3 million.
Electric power for the mine site will be supplied by upgrading
approximately 50 kilometres (km) of a an existing 115 kV power line,
installing 7 km of new 115 kV line and the site distribution for an estimated
cost of $18.1 million. A preferred on-land location for the tailings
impoundment facility has been identified that incorporates and remediates an
historic tailings site. The cost for this facility is estimated at
$7.7 million. Surface facilities to support the Young-Davidson mine will
include an administration/engineering building, a warehouse and a maintenance
shop. Indirect costs such as engineering, procurement and construction
management (EPCM), freight, start-up/commissioning, vendor support, first
fills/capital spares, and owners' costs are estimated at $50.9 million. An
additional $45.6 million are estimated as contingency.
Economic Analysis
Table 2 contains a summary of the economic parameters used in the
Preliminary Assessment.
Table 2: Summary of Economic Parameters
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Item Unit Value
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Gold price US$ per ounce 635
Silver price 10
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Foreign exchange rates - US$/CDN$ 0.90
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Income tax rate - Federal % 15
- Provincial 12
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Initial Capital - Infrastructure US$ millions 36.8
- Process plant 69.3
- Mining 103.3
- Indirect Costs 51.0
- Contingency 45.6
- Mine closure 9.6
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Total Initial Capital $ 368.4
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Sustaining Capital US$ millions $52.9
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Average mining cost US$ per tonne milled 21.88
Processing cost 9.99
General and
Administration 3.47
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Total $ 35.34
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Mining - Recovery (average) % 92
- Dilution (average) 15
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Processing Recovery - Gold % 91.5
- Silver 78.0
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A number of initiatives are underway to refine and enhance the rate of
return of the Young-Davidson project, including:
1. Exploration - Surface based Diamond drilling to fill in the region
between the Boundary zone and the Young-Davidson zone will continue
with the goal of increasing the total mineral resources and
increasing the mine life of the proposed operation.
2. Resource Update at Higher Metal Prices - During the second half of
2008, the resource model will be updated to reflect more current
estimates of long term gold price. This process may reduce the
economic cutoff grade for existing resources and capture more
resource tonnes and contained gold.
3. Reduction in Backfilling Requirement - A geotechnical drilling
program is underway to determine the maximum stable excavation size
for the mine design. This will directly impact backfill requirements
and has the potential to reduce the cash cost of the operation. The
current Preliminary Assessment assumes a worst case scenario where
100% of the stopes will be paste backfilled at an average cost of
US$3.45 per mt of mill feed whereas historic mining on the property
did not utilize any backfill due to the competent and stable host
rock. In addition to a potential reduction in cash cost, it may also
be possible to increase the sublevel spacing from the 50 m spacing
used in the Preliminary Assessment which would reduce total mine
development capital.
4. Open Pit Wall Slopes - Inter-ramp wall angles in the Preliminary
Assessment were set at 55 degrees. Historic mining on the property
suggests that these angles can be increased which would reduce the
waste/ore strip ratio and reduce operating costs. The geotechnical
drilling program will confirm the appropriate inter-ramp wall angle.
Environment and Permitting
Based on numerous community meetings held throughout the district, there
is strong community support for the Young-Davidson project. Development of the
mine would bring substantial economic development to the town of Matachewan
and the surrounding district. A construction workforce of 600 people will be
created at the peak of a two year construction period and the mine will
provide direct employment for 250 people over its 12 year operating life.
Environmental baseline studies in support of permitting have been ongoing
for the past 18 months and will be completed by the end of 2008. Testing to
date on the Young-Davidson mineralization has confirmed that the mill tailings
will be non-acid generating, which will allow them to be impounded in the same
area as historic tailings from the two mines that previously operated on the
property. The current development plan envisions the remediation and expansion
of an historic on-land tailings impoundment site in order to support future
mining at Young-Davidson.
Northgate has been working cooperatively with the Matachewan First Nation
since it began exploring Young-Davidson property in 2006 and on March 26, 2008
the two parties signed a Memorandum of Understanding (MOU) which provides the
foundation for a cooperative and mutually beneficial relationship between the
Matachewan First Nation and Northgate and outlines the basic framework for the
negotiation of a long-term Impact and Benefit Agreement (IBA). Negotiation of
the IBA began in April 2008 and Traditional Use Studies in cooperation with
First Nations elders are progressing well.
Project Timeline
1. An updated Resource estimate at revised long term gold prices which
will include 2008 drilling up to September 30 will be completed in
Q4-2008 and will be used as a basis for the feasibility study.
2. The Feasibility Study is scheduled for completion by first quarter
2009.
3. Negotiations on an Impact Benefit Agreement (IBA) are ongoing.
4. Permitting activities are being advanced to support a late 2009
construction start.
5. Orders will be placed in the second half of 2008 for long lead
equipment in order to meet the project timeline.
QUALIFIED PERSONS
Carl Edmunds, PGeo, Northgate's Exploration Manager, Northgate Minerals
Corporation, is the Qualified Person responsible for reviewing and approving
the press release.
Pierre Rocque, P. Eng., Consulting Manager Mining and Geology, AMEC
Americas Limited, is the Qualified Person responsible for supervising the
preparation of the Preliminary Assessment including the cost estimates and
financial analysis.
Armando Simon, R.P.Geo, Principal Geologist, AMEC Americas Limited, is
the Qualified Person responsible for supervising the preparation of the
mineral resource estimates.
NORTHGATE MINERALS CORPORATION is a mid-tier gold and copper producer
with mining operations, development projects and exploration properties in
Canada and Australia. The company is forecasting over 400,000 ounces of
unhedged gold production in 2008 and is targeting growth through further
acquisitions in stable mining jurisdictions around the world. Northgate is
listed on the Toronto Stock Exchange under the symbol NGX and on the American
Stock Exchange under the symbol NXG.
FORWARD-LOOKING STATEMENTS:
This news release contains certain "forward-looking statements" and
"forward-looking information" as defined under applicable Canadian and U.S.
securities laws. Forward-looking statements generally can be identified by the
use of forward-looking terminology such as "may," "will," "expect," "intend,"
"estimate," "anticipate," "believe," or "continue" or the negative thereof or
variations thereon or similar terminology. Forward-looking statements are
necessarily based on a number of estimates and assumptions that are inherently
subject to significant business, economic and competitive uncertainties and
contingencies. Certain of the statements made herein by Northgate Minerals
Corporation ("Northgate") including those related to future financial and
operating performance and those related to Northgate's future exploration and
development activities, are forward-looking and subject to important risk
factors and uncertainties, many of which are beyond the Corporation's ability
to control or predict. Known and unknown factors could cause actual results to
differ materially from those projected in the forward-looking statements. Such
factors include, among others: gold price volatility; fluctuations in foreign
exchange rates and interest rates; impact of any hedging activities;
discrepancies between actual and estimated production, between actual and
estimated resources and between actual and estimated metallurgical recoveries;
costs of production, capital expenditures, costs and timing of construction
and the development of new deposits; and, success of exploration activities
and permitting time lines. In addition, the factors described or referred to
in the section entitled "Risk Factors" of Northgate's Annual Information Form
(AIF) for the year ended December 31, 2007 or under the heading "Risks and
Uncertainties" of Northgate's 2007 Annual Report, both of which are available
on SEDAR at www.sedar.com, should be reviewed in conjunction with this
document. Accordingly, readers should not place undue reliance on
forward-looking statements. The Corporation does not undertake any obligation
to update publicly or release any revisions to forward-looking statements to
reflect events or circumstances after the date of this document or to reflect
the occurrence of unanticipated events, except in each case as required by
law.
NOTE TO US INVESTORS:
The terms "Mineral Reserve", "Proven Mineral Reserve" and "Probable
Mineral Reserve" are Canadian mining terms as defined in accordance with
NI 43-101 Standards of Disclosure for Mineral Projects under the guidelines
set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the
"CIM") Standards on Mineral Resources and Mineral Reserves Definitions and
Guidelines adopted by the CIM Council on August 20, 2000. The terms "Mineral
Resource", "Measured Mineral Resource", "Indicated Mineral Resource", and
"Inferred Mineral Resource" used in this news release are Canadian mining
terms as defined in accordance with NI 43-101-Standards of Disclosure for
Mineral Projects under the guidelines set out in the CIM Standards.
----------------------------------
(1) Technical Report filed on www.sedar.com on March 26, 2008.
%CIK: 0000072931
For further information: Ms. Keren R. Yun, Director, Investor Relations, Tel:
(416) 216-2781, Email: ngx@northgateminerals.com, Website:
www.northgateminerals.com
.
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