Northgate Minerals Generates Cash Flow from Operations of $45.2 Million in the First Quarter
Gold Production of 107,477 ounces at a Cash Cost of $396/ounce
VANCOUVER, May 8 /CNW/ - (All figures in US dollars except where noted) -
Northgate Minerals Corporation (TSX: NGX; NYSE Amex: NXG) today reported net
earnings of $21,410,000 or $0.08 per diluted common share and cash flow from
operations of $45,202,000 or $0.18 per diluted common share for the first
quarter of 2009. 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 2009 Highlights
- 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 pre-feasibility 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 g/t gold.
- Began commissioning the heated leach circuit at the Fosterville mine,
which will significantly improve gold recoveries.
Ken Stowe, President and CEO, 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. Pre-feasibility work at
Young-Davidson is moving along well, with completion expected by the end of
June."
Executive Overview
Financial Performance
Northgate Minerals Corporation ("Northgate" or "the Corporation")
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
$21,410,000 or $0.08 per diluted share in the first quarter of 2009, compared
to net earnings of $20,427,000 or $0.08 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 $0.18 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 $15,450,000 or $0.06 per diluted share.
Financial results for the corresponding quarter of 2008 exclude results from
Fosterville and Stawell prior to Northgate's acquisition of Perseverance
Corporation Limited ("Perseverance") on February 19, 2008. Per share data is
based on the weighted average diluted number of shares outstanding of
255,762,702 in the first quarter of 2009 and 255,338,997 in the corresponding
quarter of 2008. As of May 8, 2009, the Corporation had 255,854,675 issued and
outstanding common shares and 6,958,450 outstanding common share options.
Health, Safety and Environment
Northgate promotes a strong culture of health and safety at its mine
sites and strives to ensure that the highest standards are maintained. During
the first quarter of 2009, both Kemess and Young-Davidson performed without a
single lost time incident (LTI). Young-Davidson has continued with its
exemplary performance, as the property has not recorded a single LTI over the
past two years. In Australia, Stawell had no LTIs during the quarter, while
Fosterville recorded one LTI.
Human Resources
Negotiations between management and employee representatives at
Fosterville progressed during the quarter with the goal of executing the
site's first employee collective agreement by the end of the second quarter of
2009.
Summarized Consolidated Results
Q1 2009 Q1 2008
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Operating Data
Gold
Production (ounces) 107,477 88,386(1)
Sales (ounces) 111,850 61,539(2)
Realized gold price ($/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)
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Financial Data (Thousands of US 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
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(1) Production in Q1 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 Q1 2008 include the results for Fosterville and Stawell
from February 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 Q1 2008 include the results for Fosterville and Stawell
from February 19 to March 31, 2008.
Results of Operations - Australia
Fosterville Gold Mine
Q1 2009 Q1 2008
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Operating Data
Ore mined (tonnes) 165,355 110,904
Ore milled (tonnes) 167,924 139,492
Ore milled per day (tonnes) 1,866 1,533
Gold
Grade (g/t) 5.53 4.30
Recovery (%) 86 54
Production (ounces) 25,779 10,440(2)
Sales (ounces)(1) 26,363 4,568
Net cash cost ($/ounce) 430 1,415
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Financial Data (Thousands of US dollars)(1)
Revenue 23,782 4,398
Cost of sales 11,017 6,346
Earnings (loss) from operations 6,483 (3,781)
Cash flow from operations 12,748 (1,908)
Capital expenditures 9,747 2,596
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(1) Financial data and gold sales (ounces) for Q1 2008 include the
results of Fosterville from February 19 to March 31, 2008. Other
figures are for the three month period ending March 31, 2008.
(2) Production in Q1 2008 for Fosterville excludes the change in gold-in-
circuit inventory previously recorded.
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
(m), compared with 110,904 tonnes mined and 1,420m advanced, respectively, in
the corresponding period of 2008. Mining rates dramatically increased in the
first quarter of 2009 compared to 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 (g/t), 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% in the first quarter of 2009
were dramatically higher than the 54% 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(R)
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 A$16,661,000 or
A$99 (2008 - $A161) 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
A$54 (2008 - A$74) per tonne of ore mined and milling costs were A$35 (2008 -
A$53) per tonne of ore milled. Operating costs for the corresponding period of
2008 reflect results from the date of acquisition of Perseverance (February
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 US 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 to $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 was $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 (February 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 (km) south of the current Phoenix mining area.
Ten holes were drilled (6,269m) 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 (Figure 1) 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 3.0m of 5.7 g/t gold.
The base of the Harrier lens (Figure 2) is similarly defined by holes
SPD512 and 512A. Within the Harrier Base zone, hole SPD504A intersected 6.4m
of 4.8 g/t gold and hole SPD511 intersected 2.3m of 5.2 g/t gold.
Both the Harrier and Osprey lenses are open down plunge. Phase 2 and 3
exploration activities during the balance of 2009 will infill the high grade
zones already known to exist and step out down plunge 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 ore
body, 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.
Figure 1: Harrier Underground Longitudinal Section: Osprey Gold
Mineralization
www.northgateminerals.com/Theme/Northgate/files/Releases/May07_Osprey.jpg
Figure 2: Harrier Underground Longitudinal Section: Harrier Base Gold
Mineralization
www.northgateminerals.com/Theme/Northgate/files/Releases/May07_Harrier.jpg
Stawell Gold Mine
Q1 2009 Q1 2008
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Operating Data
Ore mined (tonnes) 154,718 150,217
Ore milled (tonnes) 180,199 166,835
Ore milled per day (tonnes) 2,002 1,833
Gold
Grade (g/t) 4.45 5.96
Recovery (%) 87 89
Production (ounces) 22,392 28,363
Sales (ounces)(1) 24,635 12,247
Net cash cost ($/ounce) 432 536
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Financial Data (Thousands of US dollars)(1)
Revenue 22,415 11,739
Cost of sales 11,050 7,245
Earnings from operations 4,693 683
Cash flow from operations 13,008 6,592
Capital expenditures 5,926 2,622
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(1) Financial data and gold sales (ounces) include the results of
Perseverance from February 19 to March 31, 2008. Other figures are
for the three month period ending March 31, 2008.
The Stawell mine produced a total of 22,392 ounces of gold during the
three months ended March 31, 2009 compared to 28,363 ounces of gold in the
corresponding period last year. During the quarter, gold production was 15%
lower than forecast due to a combination of lower mining rates, ore grades and
gold recovery. In January, underground production blasting was interrupted for
ten 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 plan 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 1,407m (2008 -
1,201m). 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 was
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% in the first
quarter of 2009 were slightly lower than the 89% 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 A$14,542,000 or
A$81 (2008 - A$89) 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 A$57 (2008 - A$57) per tonne of ore mined and
milling costs were A$24 (2008 - A$29) per tonne of ore milled. Operating costs
for the corresponding period of 2008 reflect results from the date of
acquisition of Perseverance (February 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 US 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 $11,050,000 (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
(February 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 5.7m of 19.6 g/t gold
(true thickness estimated to be 5.1m), located 100m north of the historic hole
SD622 that had intersected 9.4m of 8.4 g/t gold (true thickness estimated at
8.0m). A second hole from underground intersected the same zone with an
intercept of 2.5m 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 5.0m - 8.0m thickness with an average grade of 4.5 g/t - 5.0
g/t gold. A second deep surface drill hole will attempt to intersect the North
Magdala target with another 100m step out further 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 7.7m of 18.1 g/t gold and 7.5m of 10.6 g/t gold (each
with an estimated true thickness of 5.0m) in the G5L South Block and 10m of
6.9 g/t gold in the G5 Open Flank (true thickness estimated at 5.5m).
Definition drilling is underway and it is anticipated that these zones will be
converted to the indicated and inferred resource categories within three
months.
Figure 3: Stawell Gold Mine: (Vertical, West Looking, Longitudinal
Section with Metric Grid)
www.northgateminerals.com/Theme/Northgate/files/Releases/May07_SGM.jpg
Kemess Mine
Q1 2009 Q1 2008
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Operating Data
Ore plus waste mined (tonnes) 6,752,463 8,536,638
Ore mined (tonnes) 6,146,976 4,766,372
Stripping ratio (waste/ore) 0.099 0.791
Ore milled (tonnes) 4,312,171 4,243,891
Ore milled per day (tonnes) 47,913 46,636
Gold
Grade (g/t) 0.606 0.522
Recovery (%) 71 70
Production (ounces) 59,306 49,583
Sales (ounces) 60,852 44,724
Copper
Grade (%) 0.187 0.182
Recovery (%) 85 85
Production (thousands pounds) 15,007 14,380
Sales (thousands pounds) 14,788 13,375
Net cash cost ($/ounce) 367 105
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Financial Data (Thousands of US dollars)
Revenue 86,153 104,016
Cost of sales 37,251 49,164
Earnings from operations 33,575 47,039
Cash flow from operations 5,875 27,316
Capital expenditures 1,877 1,789
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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 to 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 towards 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 Cdn$2.30 per tonne moved compared with Cdn$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%, respectively, which was consistent
with the performance in the first quarter of 2008 of 46,636 tpd and 89%. The
ore milled in the first quarter of 2009 had grades of 0.606 g/t for gold and
0.187% for copper, compared with grades of 0.522 g/t gold and 0.182% copper in
the same period of 2008. Gold and copper recoveries were consistent year over
year and averaged 71% and 85%, respectively, in the first quarter of 2009
compared with 70% and 85% 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 Cdn$13.25 per tonne
milled during the first quarter of 2009, including Cdn$3.61 per tonne for
concentrate marketing costs, comprised of treatment and refining costs and
transportation fees. The unit cost in the same quarter in 2008 was Cdn$13.58
per tonne milled, which included Cdn$3.18 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 $0.75 per pound of copper compared with terms of $45 per dmt and $0.45 per
pound in 2008. However, site operating costs of Cdn$41.6 million have come
down approximately 6% in the first quarter of 2009 (Cdn$44.2 million 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 to $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 US dollar.
Depreciation and depletion expense in the first quarter was $12,402,000
compared to $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 to $1,789,000 in the corresponding period of 2008. Capital
expenditures in the most recent quarter reflect the impact of the
strengthening US dollar and were primarily devoted to ongoing construction of
the tailings dam and the purchase of new mill liners.
Exploration Update - Young Davidson
Pre-feasibility 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 25.5m of 4.49 g/t gold including 15m of 6.29 g/t gold and 3.5m of
3.07 g/t gold. Hole YD09-97, located 100m west of hole 91, intersected 11.5m
of 2.62 g/t gold and hole YD09-96, located 150m west of hole 91, intersected
6.3m of 1.53 g/t gold. Hole YD09-98, located 200m west of hole 91, intersected
3.0m of 1.56 g/t gold and hole YD09-99, located 50m below hole 91 intersected
3.7m of 1.87 g/t gold and 5.8m 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.
Figure 4: Young-Davidson Property (Vertical, North Looking, Longitudinal
Section with Metric Grid)
www.northgateminerals.com/Theme/Northgate/files/Releases/May07_YD.jpg
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 December 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 to $3,161,000 in the corresponding quarter of the prior
year, representing a decrease of 28%. The decrease is due mainly to reduced
stock-based compensation, which is $466,000 lower compared to 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 to the corresponding period in 2008 due to
reduced staffing and the elimination of duplicate administration costs.
Canadian corporate expenditures of $1,931,000 are comprised mainly of
personnel costs, as well as ongoing compliance and investor relations costs.
Northgate granted a total of 1,566,000 options to employees in the first
quarter of 2009, compared to 1,480,000 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
to $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 pre-feasibility 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 to 2008
when Northgate had cash and cash equivalents in excess of $250,000,000 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 to $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 December 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 ten 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 October
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
$68,330,000 compared with working capital of $21,947,000 at December 31, 2008.
The increase in working capital was driven entirely by increases to current
assets as current liabilities have decreased by 2% since December 31, 2008.
Northgate's cash and cash equivalents have increased by $25,960,000 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 December
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 to $15,450,000 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 February 19, 2008 onwards. 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 7, 28, or 35 day intervals to provide short-term
liquidity. Beginning in August 2007, auctions at which these securities were
to be re-sold 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 $72,600,000. 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 December
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 ARS 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 $42,478,000. Northgate continues to treat the short-term loan as an
obligation of the Corporation and has continued to classify it as a current
liability based on its original maturity date.
Northgate believes that its working capital at March 31, 2009, together
with future cash flow from operations, is more than sufficient to meet its
normal operating requirements for the next year, notwithstanding the current
ongoing illiquidity and impairment of its ARS investments.
Non-GAAP Measures
Adjusted Net Earnings
The Corporation has prepared a calculation of adjusted net earnings,
which has removed certain non-cash adjustments from its Canadian generally
accepted accounting principles (Canadian GAAP) calculation of net earnings as
it believes this may be a useful indicator to investors. Adjusted net earnings
may not be comparable to other similarly titled measures of other companies.
(Expressed in thousands of US$,
except share amounts) Q1 2009 Q1 2008
-------------------------------------------------------------------------
Net earnings $ 21,410 $ 19,665
Adjustments
Unrealized gain on derivatives related to
the acquisition of Perseverance hedge book - (9,836)
Effect of provisional pricing on
concentrate sales, net of tax (3,331) (9,733)
Fair value adjustment on copper forward
contracts, net of tax of $2,530
(2008 - $10,530) 5,903 18,802
-------------------------------------------------------------------------
Adjusted net earnings $ 23,982 $ 18,898
-------------------------------------------------------------------------
Diluted common shares outstanding 255,762,702 255,338,997
-------------------------------------------------------------------------
Adjusted net earnings per diluted
common share $ 0.09 $ 0.07
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash Cost
The Corporation has included net cash costs of production per ounce of
gold in the discussion of its results from operations, because it believes
that these figures are a useful indicator to investors and management of a
mine's performance as they provide: (i) a measure of the mine's cash margin
per ounce, by comparison of the cash operating costs per ounce to the price of
gold; (ii) the trend in costs as the mine matures; and, (iii) an internal
benchmark of performance to allow for comparison against other mines. However,
cash costs of production should not be considered as an alternative to net
earnings or as an alternative to other Canadian GAAP measures and may not be
comparable to other similarly titled measures of other companies.
A reconciliation of net cash costs per ounce of production to amounts
reported in the statement of operations is shown in the following table.
Q1 2009
(Expressed in thousands
of US$, except per
ounce amounts) Fosterville Stawell Kemess Combined
-------------------------------------------------------------------------
Gold production (ounces) 25,779 22,392 59,306 107,477
-------------------------------------------------------------------------
Cost of sales $ 11,017 $ 11,050 $ 37,251 $ 59,318
Change in inventories and
other 63 (1,380) 9,011 7,694
Gross copper and silver revenue - - (24,472) (24,472)
-------------------------------------------------------------------------
Total cash cost $ 11,079 $ 9,671 $ 21,790 $ 42,540
-------------------------------------------------------------------------
Cash cost ($/ounce) $ 430 $ 432 $ 367 $ 396
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Q1 2008
(Expressed in thousands
of US$, except per
ounce amounts) Fosterville(1) Stawell(1) Kemess Combined
-------------------------------------------------------------------------
Gold production (ounces) 4,021 11,508 49,583 65,112
-------------------------------------------------------------------------
Cost of sales $ 6,346 $ 7,245 $ 49,164 $ 62,755
Change in inventories and
other (658) (1,075) 8,301 6,568
Gross copper and silver revenue - - (52,280) (52,280)
-------------------------------------------------------------------------
Total cash cost $ 5,688 $ 6,170 $ 5,185 $ 17,043
-------------------------------------------------------------------------
Cash cost ($/ounce) $ 1,415 $ 536 $ 105 $ 262
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Quarterly data for the Stawell and Fosterville gold mines only
include results from February 19, 2008 to March 31, 2008.
Interim Consolidated Balance Sheets
March 31 December 31
Thousands of US dollars 2009 2008
-------------------------------------------------------------------------
(Unaudited)
Assets
Current Assets
Cash and cash equivalents $ 88,379 $ 62,419
Trade and other receivables 33,861 18,310
Income taxes receivable - 6,837
Inventories (note 3) 52,123 41,546
Prepaids 1,434 1,989
Future income tax asset 5,174 5,259
-------------------------------------------------------------------------
180,971 136,360
Other assets 27,728 53,606
Deferred transaction costs 775 775
Future income tax asset 3,300 3,741
Mineral property, plant and equipment 343,612 357,725
Investments (note 4) 36,936 39,422
-------------------------------------------------------------------------
$ 593,322 $ 591,629
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued liabilities $ 42,457 $ 56,469
Income taxes payable 14,863 -
Short-term loan (note 5) 42,478 43,096
Capital lease obligations 3,467 4,533
Provision for site closure and reclamation
costs 8,182 8,420
Future income tax liability 1,194 1,895
-------------------------------------------------------------------------
112,641 114,413
Capital lease obligations 5,953 6,211
Other long-term liabilities 3,879 3,368
Provision for site closure and reclamation
obligations 36,617 37,849
Future income tax liability 3,313 14,350
-------------------------------------------------------------------------
162,403 176,191
Shareholders' equity
Common shares 312,038 311,908
Contributed surplus 5,664 5,269
Accumulated other comprehensive loss (95,957) (89,503)
Retained earnings 209,174 187,764
-------------------------------------------------------------------------
430,919 415,438
-------------------------------------------------------------------------
$ 593,322 $ 591,629
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes form an integral part of these unaudited interim
consolidated financial statements.
Interim Consolidated Statements of Operations and Comprehensive Income
Three Months Ended March 31
Thousands of US dollars, except share and
per share amounts, unaudited 2009 2008
-------------------------------------------------------------------------
Revenue $ 123,818 $ 86,093
-------------------------------------------------------------------------
Cost of sales (note 3) 59,318 62,755
Depreciation and depletion 23,497 12,851
Administrative and general 2,282 3,161
Net interest income (380) (3,612)
Exploration 3,249 6,161
Currency translation loss (gain) 2,581 (7,112)
Accretion of site closure and reclamation
costs 722 741
Other income (666) (9,836)
-------------------------------------------------------------------------
90,603 65,109
-------------------------------------------------------------------------
Earnings before income taxes 33,215 20,984
Income tax recovery (expense)
Current (22,853) (1,586)
Future 11,048 267
-------------------------------------------------------------------------
(11,805) (1,319)
-------------------------------------------------------------------------
Net earnings for the period $ 21,410 $ 19,665
Other comprehensive income (loss)
Unrealized loss on available for sale
securities (2,486) (4,498)
Unrealized loss on translation of
self-sustaining operations (3,968) (6)
-------------------------------------------------------------------------
(6,454) (4,504)
-------------------------------------------------------------------------
Comprehensive income $ 14,956 $ 15,161
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earnings per share
Basic $ 0.08 $ 0.08
Diluted $ 0.08 $ 0.08
Weighted average shares outstanding
Basic 255,753,359 254,677,588
Diluted 255,762,702 255,338,997
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes form an integral part of these unaudited interim
consolidated financial statements.
Interim Consolidated Statements of Cash Flows
Three Months Ended March 31
Thousands of US dollars, unaudited 2009 2008
-------------------------------------------------------------------------
Operating activities:
Net earnings for the period $ 21,410 $ 19,665
Non-cash items:
Depreciation and depletion 23,497 12,851
Unrealized currency translation gain (1,124) (6,607)
Unrealized gain on derivatives - (9,836)
Accretion of site closure and reclamation
costs 722 741
Loss on disposal of assets 70 -
Amortization of deferred charges 54 54
Stock-based compensation 439 905
Accrual of employee severance costs 655 -
Future income tax recovery (11,048) (267)
Change in fair value of forward contracts 8,433 30,920
Gain on sale of investments - (1)
Changes in operating working capital and
other (note 10) 2,094 (32,975)
-------------------------------------------------------------------------
45,202 15,450
-------------------------------------------------------------------------
Investing activities:
Release of restricted cash - 53,064
Increase in restricted cash (72) (30,549)
Purchase of plant and equipment (9,740) (3,965)
Mineral property development (7,839) (3,132)
Transaction costs paid - (1,925)
Acquisition of Perseverance, net of cash
acquired - (196,590)
Repayment of Perseverance hedge portfolio - (45,550)
Proceeds from sale of equipment 72 -
Proceeds from sale of investments - 1
-------------------------------------------------------------------------
(17,579) (228,646)
-------------------------------------------------------------------------
Financing activities:
Repayment of capital lease obligation (1,112) (1,077)
Financing from credit facility 102 7,948
Repayment of credit facility (719) (7,746)
Repayment of other long-term liabilities (151) (304)
Issuance of common shares 86 1,236
-------------------------------------------------------------------------
(1,794) 57
-------------------------------------------------------------------------
Effect of exchange rate changes on cash and
cash equivalents 131 (218)
-------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents 25,960 (213,357)
Cash and cash equivalents, beginning of
period 62,419 266,045
-------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 88,379 $ 52,688
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes form an integral part of these unaudited interim
consolidated financial statements.
Interim Consolidated Statement of Shareholders' Equity
Number of Common
Thousands of US dollars, Common Shares Contributed
except common shares, unaudited Shares Amount Surplus
-------------------------------------------------------------------------
Balance at December 31, 2008 255,717,071 $ 311,908 $ 5,269
Shares issued under employee
share purchase plan 102,713 86 -
Shares issued on
exercise of options - - -
Stock-based compensation - 44 395
Net earnings - - -
Other comprehensive loss - - -
-------------------------------------------------------------------------
Balance at March 31, 2009 255,819,784 $ 312,038 $ 5,664
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Accumulated
Other
Thousands of US dollars, Retained Comprehensive
except common shares, unaudited Earnings Income Total
-------------------------------------------------------------------------
Balance at December 31, 2008 $ 187,764 $ (89,503) $ 415,438
Shares issued under employee
share purchase plan - - 86
Shares issued on
exercise of options - - -
Stock-based compensation - - 439
Net earnings 21,410 - 21,410
Other comprehensive loss - (6,454) (6,454)
-------------------------------------------------------------------------
Balance at March 31, 2009 $ 209,174 $ (95,957) $ 430,919
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Number of Common
Thousands of US dollars, Common Shares Contributed
except common shares, unaudited Shares Amount Surplus
-------------------------------------------------------------------------
Balance at December 31, 2007 254,452,862 $ 309,455 $ 3,940
Transitional adjustment on
adoption of inventory standard - - -
Shares issued under employee
share purchase plan 50,440 104 -
Shares issued on exercise of
options 736,300 1,571 (439)
Stock-based compensation - 52 853
Net earnings - - -
Other comprehensive loss - - -
-------------------------------------------------------------------------
Balance at March 31, 2008 255,239,602 $ 311,182 $ 4,354
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Accumulated
Other
Thousands of US dollars, Retained Comprehensive
except common shares, unaudited Earnings Income Total
-------------------------------------------------------------------------
Balance at December 31, 2007 $ 176,663 $ (3,282) 486,776
Transitional adjustment on
adoption of inventory standard 381 - 381
Shares issued under employee
share purchase plan - - 104
Shares issued on exercise of
options - - 1,132
Stock-based compensation - - 905
Net earnings 19,665 - 19,665
Other comprehensive loss - (4,504) (4,504)
-------------------------------------------------------------------------
Balance at March 31, 2008 $ 196,709 $ (7,786) $ 504,459
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes form an integral part of these unaudited interim
consolidated financial statements.
This press release should be read in conjunction with the Corporation's
first quarter MD&A report and Notes to the interim consolidated financial
statements, which can be found on www.northgateminerals.com, in the "Investor
Info" section, under "Financial Reports - Quarterly Reports".
Annual General Meeting and Q1 2009 Financial Results
Northgate will be hosting its Annual General Meeting ("AGM") on Friday,
May 8, 2009 at 10:00 am, Toronto time. The AGM will be held at The Suites at
One King West, King Gallery, 1 King Street West, Toronto, Canada.
This event will also include an overview of Northgate's 2009 first
quarter financial results, which are scheduled for release before market opens
on May 8, 2009.
Webcast and Conference Call information, including podcast and conference
replay details, can be found on Northgate's website at
www.northgateminerals.com.
Northgate Minerals Corporation is a gold and copper producer with mining
operations, development projects and exploration properties in Canada and
Australia. The company is forecasting record gold production of over 390,000
ounces in 2009 and is targeting growth through further acquisition
opportunities in stable mining jurisdictions around the world. Northgate is
listed on the TSX under the symbol NGX and on the NYSE Amex (formerly AMEX)
under the symbol NXG.
Forward-Looking Statements:
This Northgate press release contains "forward-looking information", as
such term is defined in applicable Canadian securities legislation, concerning
Northgate's future financial or operating performance and other statements
that express management's expectations or estimates of future developments,
circumstances or results. Generally, forward-looking information can be
identified by the use of forward-looking terminology such as "expects",
"believes", "anticipates", "budget", "scheduled", "estimates", "forecasts",
"intends", "plans" and variations of such words and phrases, or by statements
that certain actions, events or results "may", "will", "could", "would" or
"might" "be taken", "occur" or "be achieved". Forward-looking information is
based on a number of assumptions and estimates that, while considered
reasonable by management based on the business and markets in which Northgate
operates, are inherently subject to significant operational, economic and
competitive uncertainties and contingencies. Northgate cautions that
forward-looking information involves known and unknown risks, uncertainties
and other factors that may cause Northgate's actual results, performance or
achievements to be materially different from those expressed or implied by
such information, including, but not limited to gold and copper price
volatility; fluctuations in foreign exchange rates and interest rates; the
impact of any hedging activities; discrepancies between actual and estimated
production, between actual and estimated reserves and resources or between
actual and estimated metallurgical recoveries; costs of production; capital
expenditure requirements; the costs and timing of construction and development
of new deposits; and the success of exploration and permitting activities. In
addition, the factors described or referred to in the section entitled "Risk
Factors" in Northgate's Annual Information Form for the year ended December
31, 2008 or under the heading "Risks and Uncertainties" in Northgate's 2008
Annual Report, both of which are available on the SEDAR website at
www.sedar.com, should be reviewed in conjunction with the information found in
this press release. Although Northgate has attempted to identify important
factors that could cause actual results, performance or achievements to differ
materially from those contained in forward-looking information, there can be
other factors that cause results, performance or achievements not to be as
anticipated, estimated or intended. There can be no assurance that such
information will prove to be accurate or that management's expectations or
estimates of future developments, circumstances or results will materialize.
Accordingly, readers should not place undue reliance on forward-looking
information. The forward-looking information in this press release is made as
of the date of this press release, and Northgate disclaims any intention or
obligation to update or revise such information, except as required by
applicable law.
%CIK: 0000072931
For further information: Ms. Keren R. Yun, Director, Investor Relations, Tel:
(416) 363-1701 ext. 233, Email: ngx@northgateminerals.com, Website:
www.northgateminerals.com
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