Northgate Minerals Announces Production Growth for its Three Year Plan 2011 - 2013
Exploration Activities Continue to Focus on Reserve and Resource Expansion
VANCOUVER, Jan. 10 /CNW/ - (All figures in US dollars except where noted) - Northgate Minerals Corporation (TSX: NGX, NYSE Amex: NXG) is pleased to announce its production and cash cost guidance for the three-year period of 2011 through 2013.
2011 - 2013 Operating Outlook Highlights
- Northgate is forecasting 2011 gold production in the range of
195,000 - 205,000 ounces at an average net cash cost of $810 - $855
per ounce(1) from our three operating mines.
- Production in the following two years is expected to increase
significantly, with dramatically lower cash costs, as Northgate's new
low-cost and long-life Young-Davidson mine ramps up production in the
first half of 2012.
- 2012 production and cash costs are forecast to be in the range of
285,000 - 300,000 ounces and $725 - $750 per ounce, respectively.
- 2013 production and cash costs are forecast to be in the range of
340,000 - 355,000 ounces and $615 - $645 per ounce, respectively.
- In addition to a robust three year production outlook, Northgate
continues to focus its exploration programs on reserve expansion and
organic growth:
- 2011 exploration spending in Australia is forecast to be
$11.5 million in support of mine-life extensions at both
Fosterville and Stawell.
- At Young-Davidson, 2011 exploration spending is forecast to be
$2.0 million, which will focus on increasing resources on the
property.
- With the drill program at Kemess Underground complete, Northgate
is completing a new underground resource estimate, which will
support various studies in 2011 to determine the economics of a
potential underground mine at Kemess.
- With the successful completion of a convertible note offering in
October 2010, the construction of Young-Davidson is fully funded and
we are in a strong financial position to support our exploration
programs and capital expenditures at our other operations during this
period of growth.
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(1) Assumes a copper price of $4.00 per pound and exchange rates of
US$/Cdn$1.00 and US$/A$1.00.
"We look forward to a very exciting year ahead, as we undergo the major construction phase of the Young-Davidson mine, which is progressing on schedule and on budget," commented Ken Stowe, Northgate's President and CEO. "Our outlook for 2012 and 2013 is even more exciting as we now have a solid production growth platform that will see our annual production increase significantly and our cash costs decrease dramatically. With a successful 2010 exploration year, one that brought several discoveries in previously untested areas at all of our operations, we look forward to robust exploration programs in 2011 and fully expect to add meaningful ounces to the Company's reserve and resource base."
2011 Production Forecast
Estimated 2011 gold production and cash costs for Northgate's three operating mines are shown below:
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Gold (ounces) Cash Cost ($/oz)(1)
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Fosterville 97,000 - 102,000 $885 - $930
Stawell 86,000 - 91,000 $800 - $850
Kemess South 12,000 $285
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195,000 - 205,000 $810 - $855
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(1) Assuming copper price of $4.00 per pound and exchange rates of
US$/Cdn$1.00 and US$/A$1.00.
In addition to gold production, Kemess South is expected to produce approximately 5.3 million pounds of copper during the first quarter of 2011, prior to closure of the mine in February.
2011 Sensitivities
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Impact
Operating Cash Flow Variable Change (US$ millions)
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Gold Price $25 per ounce $5.5
US$/A$ Foreign Exchange Rate $0.05 $8.9
US$/Cdn$ Foreign Exchange Rate $0.05 $0.5
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Impact
Cash Cost per Ounce Variable Change (US$ per ounce)
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US$/A$ Foreign Exchange Rate $0.05 $40
US$/Cdn$ Foreign Exchange Rate $0.05 $5
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2012 and 2013 Outlook
Estimated 2012 and 2013 gold production and cash costs are shown below:
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2012 2013
Production Cash Cost Production Cash Cost
(ounces) ($/oz)(1) (ounces) ($/oz)(1)
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Fosterville 96,000-100,000 $965-$995 92,000-98,000 $855-$910
Stawell 105,000-110,000 $630-$650 114,000-117,000 $655-$670
Young-Davidson 84,000-90,000 $580-$610 134,000-140,000 $420-$440
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285,000-300,000 $725-$750 340,000-355,000 $615-$645
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(1) Assuming exchange rates of US$/Cdn$1.00 and US$/A$1.00.
In addition to increased production in 2012 and 2013, the Young-Davidson mine will begin to transition to higher grade underground ore in 2014. As a result, the annual production at Young-Davidson will rise to approximately 175,000 ounces per year and to over 200,000 ounces annually in subsequent years.
Further Growth Opportunity - Kemess Underground
The current three year plan shows production from three mines: the Fosterville and Stawell Gold mines in Australia and the Young-Davidson mine in Canada. In addition, Northgate is currently updating its resource estimate for the Kemess Underground Project, which is expected for completion in the first quarter of 2011. A budget of $1.4 million has been allocated in 2011 for feasibility work, using the new resource estimate, to determine the potential for an underground mine at Kemess, which could come into production as early as 2014 and contribute to Northgate's growing production profile and further reduce the Corporation's average net cash cost of production.
Projected 2011 Mine Production
Fosterville Gold Mine
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Ore mined (tonnes) 810,000
Ore milled (tonnes) 810,000
Ore milled per day (tonnes) 2,200
Gold grade (g/t) 4.45
Gold recovery (%) 84
Gold production (ounces)(1) 97,000 - 102,000
Net cash cost ($/ounce)(2) 885 - 930
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(1) 2011 production forecast includes approximately 1,400 ounces from the
carbon-in-leach (CIL) tails retreat.
(2) Assuming an exchange rate US$/A$1.00.
In 2011, the Fosterville mine plan calls for the mill to process approximately 810,000 tonnes of ore. Mill head grades are expected to average 4.45 grams per tonne (g/t) and gold recovery is estimated at an average of 84%. Production in 2011 is forecast to be in the range of 97,000 - 102,000 ounces of gold, with quarterly gold output relatively consistent throughout the year in the range of 23,500 - 26,500 ounces. Mine production will come primarily from the heart of the main Phoenix orebody with the remaining production from the Ellesmere and the recently-developed Harrier Underground orebodies. In addition, approximately 100,000 tonnes of oxide ore at a grade of 2.48 g/t will be sourced from the Harrier and John's open pits. Unit operating costs are forecast to total A$111 per tonne milled, consisting of underground mining costs of A$71 per tonne mined, milling costs of A$33 per tonne milled and general and administrative (G&A) costs of A$10 per tonne milled. Open pit mining costs are estimated at A$5.80 per tonne of ore and waste mined and the pits have an average stripping ratio of 7:1.
Northgate will continue to develop the infrastructure for the Harrier orebody in 2011. Substantial progress was made in 2010 as the development decline exceeded plan for the year. By the end of last year, the main Harrier vent rise was completed, which will help establish primary ventilation and secondary access for the Harrier orebody in the first half of 2011 in preparation for production mining by mid-year. In addition, surface mining will recommence with planned pit expansions on the previously mined Harrier and John's pits, which previously produced approximately 25,000 ounces of gold.
Capital expenditures at Fosterville are forecast to total $10.8 million, which is lower than last year's forecast of $12.5 million. Capital expenditures in 2011 include $9.0 million for new mobile equipment and $1.4 million for mine infrastructure. Mine development capital and resource definition drilling expenditures are forecast to be $27.3 million. Approximately 80% of mine development capital will be allocated to the Harrier Underground development, with the balance primarily allocated to the ongoing development of the Phoenix orebody.
Stawell Gold Mine
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Ore mined (tonnes) 835,000
Ore milled (tonnes) 845,000
Ore milled per day (tonnes) 2,300
Gold grade (g/t) 3.75
Gold recovery (%) 88
Gold production (ounces) 86,000 - 91,000
Net cash cost ($/ounce)(1) 800 - 850
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(1) Assuming an exchange rate US$/A$1.00.
In 2011, the Stawell mine plan calls for approximately 845,000 tonnes to be milled at an average grade of 3.75 g/t, with gold recovery forecast to be 88%. Total gold production is forecast to be in the range of 86,000 - 91,000 ounces. The quarterly gold output will steadily increase over the year: production in the first quarter of 2011 is forecast to be 18,000 ounces, increasing to 27,000 ounces by the fourth quarter, which will result in steadily decreasing cash costs over the year. Ramp up of production is expected to continue in the years 2012 - 2013, with production forecast to be in the range of 105,000 - 117,000 ounces, as ore will be increasingly sourced from the higher-grade GG6 zone.
In 2011, ore for the mill will be sourced from the GG2, GG3, C7/U3 and GG6 zones. In addition, approximately 85,000 tonnes of oxide ore at a grade of 1.95 g/t will be sourced from the Wonga pit. Unit operating costs are forecast to total A$86 per tonne milled, consisting of underground mining costs of A$60 per tonne mined, milling costs of A$22 per tonne milled and G&A costs of A$9 per tonne milled. Open pit mining costs are estimated at $7.11 per tonne of ore and waste mined and the pit has an average stripping ratio of 2:1.
Mine production for 2011 will come primarily from the C7/U3 zones and we will continue to establish the infrastructure for the GG6 zone, which started production in the last quarter of 2010. Surface mining will also recommence in 2011 with the expansion of the previously mined Wonga pit.
Capital expenditures at Stawell are forecast to total $12.7 million, a significant decrease from the forecast of $15.6 million in the previous year. Capital expenditures in 2011 include $10.7 million for new mining equipment and $1.2 million for structural refurbishment of the crusher and flotation circuit in the mill. Mine development capital and resource definition drilling costs are forecast to be $26.2 million, primarily related to the C7/U3, GG2, GG3 GG6 and North Magdala extensions reserve blocks, which will support production in 2011 and beyond.
Kemess South Mine
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Ore milled (tonnes) 2,619,000
Ore milled per day (tonnes) 44,000
Gold production (ounces) 12,000
Copper production (thousands pounds) 5,300
Net cash cost ($/ounce)(1) 285
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(1) Assuming an exchange rate US$/Cdn$1.00.
The Kemess South mine is expected to operate until February 2011. Production will be sourced from previously mined and stockpiled ore. Total gold and copper production for 2011 is anticipated to be 12,000 ounces and 5.3 million pounds, respectively, at a net cash cost of $285 per ounce of gold. There are no capital expenditures planned in 2011.
2011 Exploration Program
Northgate's 2011 exploration program will primarily be devoted to following up on a number of exciting discoveries identified in 2010 and we are pleased to announce an aggressive $14.5 million exploration program in 2011, including:
- $2.0 million at Young-Davidson to drill outside the known resource
area.
- $3.8 million at Fosterville for resource conversion and infill
drilling primarily in the Phoenix Extension and Footwall zones and
investigative drilling of other targets on the mining lease.
- $7.7 million at Stawell for drill programs totalling 24,000 (m)
focusing on mining lease and near-mine exploration targets.
Exploration at Young-Davidson
In 2011, the exploration spending for Young-Davidson is budgeted at $2.0 million for a 12,000 m Diamond drill program utilizing two surface drills. The main focus of the drill program will be on the syenite-hosted gold mineralization in the YD West zone discovered in hole 198, which returned one of the best holes on the property at 3.46 g/t over 79.5 m. Since the discovery of the YD West zone, two Diamond drills have been on the property to test the size of this zone and more recent drilling has focused in closer proximity to hole 198. Results of two holes are currently pending and are expected to be released shortly. One Diamond drill will continue to concentrate in this zone in 2011 (see figure 1) with the focus on defining the extent of the resource with a drill density sufficient to allow for resource estimation.
Figure 1 - Young-Davidson Longitudinal Section (looking north)
www.northgateminerals.com/Theme/Northgate/files/Releases/0111-fig1.gif
The Young-Davison orebody remains open in all directions. Geophysical surveys consisting of induced-polarized (IP) gravity and airborne magnetics completed in 2010 have defined compelling drill targets on both the east and west flanks of the current deposit (see figure 2) and a single drill will be used to test these targets.
Figure 2 - Young-Davidson Property Geological Map with 2011 Drill Targets
www.northgateminerals.com/Theme/Northgate/files/Releases/0111-fig2.gif
Fosterville Gold Mine
Exploration expenditures in 2011 are forecast to be $3.8 million for approximately 18,000 m of Diamond drilling. The majority of work will focus on resource conversion targets below and along trend from the currently mined Phoenix deposit, the Footwall and Extension, and will follow up on the excellent drill results recently released, including 5.4 g/t gold over 24.9 m, 6.3 g/t over 23.3 m and 14.1 g/t over 4.7 m (see press release dated November 10, 2010). These results indicate the potential to add new reserves, increase ounces per vertical metre and extend the Phoenix zone another 150 m south along strike and down plunge.
In addition, resource definition and exploration drilling will continue from the Harrier decline, which has served as an excellent drill platform along the Fosterville Fault. Drill programs in 2010 included a number of similar targets and sufficient drilling was completed to initiate a resource estimate, which will be included in the 2010 year-end statement of reserves and resources.
A third exploration program will focus on the Harrington's Hill South pit, where exploration drilling will cover a strike length of approximately 650 m, extending from immediately south of the Harrier Pit to south of John's pit. Collectively, these pits have produced approximately 40,000 ounces of gold from oxide material and with an additional 19,000 ounces of gold from sulphide material mined from the Harrier pit. Both reverse circulation (RC) and Diamond drilling methods will be used to target sulphide-hosted gold mineralization at depths suitable for an open pit environment.
Project scoping will also be initiated on the Pegasus structure, a separate gold bearing structure occurring east of the Ellesmere and Falcon open pits. Drilling on section 8550N in 2010 identified moderate widths and grades and future exploration will test along strike and down dip.
Investigative drilling will be initiated on the Peregrine Fault structure (Fosterville Splays drill program), which lies about 175 m below the Phoenix orebody. During 2010, drill intercepts on Section 6050 returned 3.2 g/t gold over 17.0 m, including 4.4 g/t over 8.0 m and 5.1 g/t over 3.0 m.
Investigative drilling will also target the Fosterville Fault - Phoenix Fault intersection where there is potential for gold mineralization, a location which has received little drilling in the deeper parts of the Phoenix orebody.
Figure 3 - Exploration Targets Shown on Longitudinal Projection of the Fosterville Gold Mine
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Stawell
At Stawell, exploration expenditures of $7.7 million are forecast in 2011 focusing mainly on three target areas on or immediately adjacent to the current mining lease. Two of these areas, the Wonga Dome and Northgate Gift, were discovered by Diamond drilling during our "Big Fish" exploration campaign in 2010, having been postulated to exist based on geological/geophysical evidence and interpretation. The third target area, Golden Gift 6 Lower (GG6L), was discovered in 2009 while drilling off the GG6 deposit, which is now in its initial stages of production and development.
Drilling on the first of the "Big Fish" targets, the Wonga Dome, intersected several zones of gold bearing mineralization including 13.7 g/t over 5.45 m and 15.4 g/t over 2.5 m (see press release dated November 1, 2010). The mineralization is consistent with the Stawell Golden Gift style ore zones, which in total have produced over 600,000 ounces of gold during the past decade. In 2011, a total of 10,400 m of surface Diamond drilling is planned and by the middle of the year, we hope to have enough information to evaluate whether mineralization in the area is sufficiently robust to support drifting across to the zone to complete resource definition drilling. Any reserves that may ultimately be delineated in this zone could be mined as early as 2013 as the area is reasonably close to our existing underground infrastructure.
Drilling will also take place from underground with a total 12,500 m planned. The majority of drilling will take place within two zones: the Northgate Gift and GG6L.
The Northgate Gift was discovered in 2010 (see press release dated August 31, 2010) when hole MD5696A intersected gold bearing intervals of 4.53 g/t gold over 1.8 m and 3.83 g/t over 3.6 m. The Northgate Gift is the fault offset extension of the Magdala/Golden Gift orebodies, which have combined to produce over two million ounces of gold on the property over the past 26 years. This target area is deeper and further from existing underground workings than the Wonga target area, but is believed to have much greater size potential. As illustrated on the accompanying diagram, the exploration program will consist of four parent holes, each with several daughter holes, and will take the entire year to complete.
The final component of our 2011 exploration program will focus on the GG6L zone, where several excellent intervals, including 24.0 g/t over 10.0 m and 13.2 g/t over 4.0 m, were returned in 2010. The GG6L mineralized zone extends over 200 m along strike and over 180 m in vertical height at present. Drilling in 2011 will focus on adding to high-grade reserves similar to the 6.3 g/t reserve grade found within the GG6 zone.
Also within GG6L, the discovery of a potentially significant waterloo zone further east of the main basalt contact provides another high-grade area to focus on. Potential for increasing the size of GG6L zone is promising. Multiple ore surfaces in the GG6L zone and extensions at depth, as well as the identification of the waterloo zone, all present excellent opportunities for additional ounces to be discovered in this zone.
In addition to these drill programs, the mine geology group at Stawell will also be focusing on grade control and resource definition programs focusing on converting resources to reserves.
Figure 4 - Exploration Targets Shown on Longitudinal Projection of the Stawell Gold Mine
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Awakening Project, Nevada
The Awakening project has a budget of $0.8 million to drill test a number of coincident geological/geophysical/geochemical targets defined by the 2010 geophysical program and the compilation data provided by the partner Nevada Exploration Inc. Subject to availability of drill rigs, a 4,000 m drill program is expected be initiated in the first quarter, with one to two drill rigs on the property.
Northgate Minerals Corporation is a gold and copper producer with mining operations, development projects and exploration properties in Canada and Australia. Our vision is to be the leading intermediate gold producer by identifying, acquiring, developing and operating profitable, long-life mining properties.
Cautionary Note Regarding Forward-Looking Statements and Information:
This Northgate press release contains "forward-looking information", as such term is defined in applicable Canadian securities legislation and "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, 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, 2009 or under the heading "Risks and Uncertainties" in Northgate's 2009 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.
Cautionary Note to US Investors Regarding Mineral Reporting Standards:
The Company prepares its disclosure in accordance with the requirements of securities laws in effect in Canada, which differ from the requirements of U.S. securities laws. Terms relating to mineral resources in this press release are defined in accordance with National Instrument 43-101-Standards of Disclosure for Mineral Projects under the guidelines set out in the Canadian Institute of Mining, Metallurgy, and Petroleum Standards on Mineral Resources and Mineral Reserves. The Securities and Exchange Commission (the "SEC") permits mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. The Company uses certain terms, such as, "measured mineral resources" "indicated mineral resources", "inferred mineral resources" and "probable mineral reserves", that the SEC does not recognize (these terms may be used in this press release and are included in the Company's public filings which have been filed with securities commissions or similar authorities in Canada).
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