Northgate Minerals
Announces Positive Preliminary Assessment for its Kemess
Underground Project
Production of 1.1
million Ounces of Gold and 490 Million
Pounds of Copper
at a Net Cash Cost of $115 per ounce
VANCOUVER,
Aug. 2, 2011 /CNW/ - (All figures in US dollars except where
noted) Northgate Minerals Corporation
(TSX: NGX, NYSE-Amex: NXG) is pleased to announce positive results from the
NI 43-101 Preliminary Assessment Report (the "Preliminary
Assessment") for its 100% owned Kemess
Underground Project located in north-central British
Columbia, approximately five kilometres
("km") from the Kemess South mine. The
results from the Preliminary Assessment outline the development of an
underground block/panel cave operation with average annual production of
95,000� ounces of gold at a below-industry cash cost of $115
per ounce over a mine-life of approximately 12 years.
Highlights of the
Preliminary Assessment
Highlights of the Preliminary Assessment, which
employs base case commodity price assumptions of $1,100 per
ounce for gold, $2.80 per pound for copper and $20
per ounce for silver and an exchange rate of US$/Cdn$1.00, are
as follows:�
- Average annual production of 95,000 ounces of
gold at a net cash cost of $115 per ounce.
- Average annual copper production of 41.4
million pounds.
- A total of 1.1 million recovered ounces of gold
and 490 million pounds of copper over an approximate 12-year mine-life.
- Pre-production capital cost of $437
million.
- Sustaining capital costs of $286 million
during the life of the mine.
- Pre-tax operating cash flow of $1.1
billion.
- Pre-tax net present value ("NPV") of $115
million based on a 5% discount rate.
- Pre-tax internal rate of return
("IRR") of approximately 10% with a 6-year payback on the
initial capital cost from the start of production.
- The project has significant leverage to higher
metal prices.� At
$1,500 per ounce gold and $4.00 per pound
copper, Kemess Underground is expected to
generate pre-tax operating cash flow of $2.1 billion,
pre-tax NPV 5% of $755� million and a pre-tax IRR of
27%.
- The envisaged Kemess
Underground block cave operation would leverage the existing
infrastructure and mill facilities at the Kemess
South mine, including a permitted area for tailings storage in the Kemess South open pit.
In addition, analysis of the geotechnical data
compiled during the 2010 drill season and from previous drilling campaigns
indicates that:
- The orebody is well
suited to block caving; the rock mass is projected to cave at a
hydraulic radius of 39� metres
("m"), which is significantly less than the hydraulic radius
of the planned undercut footprint of 89 m1.
- The cave fragmentation although initially
coarse will become finer as the cave matures, enabling efficient mining
operations.
The pre and after-tax operating cash flow, NPV and
IRR for the Kemess Underground Project,
using a variety of gold and copper prices, are shown below.
Table
1:� Project Economics Estimate
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�
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�
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Gold
Price
(US$/oz)
|
Copper
Price
(US$/lb)
|
Operating Cash
Flow (US$M)
|
NPV 5% Discount
(US$M)
|
IRR
(%)
|
Payback
(years)
|
Pre-tax
|
After tax
|
Pre-tax
|
After tax
|
Pre-tax
|
After tax
|
1,100
|
2.80
|
1,075
|
975
|
115
|
60
|
9.6
|
7.6
|
6.1
|
1,300
|
3.50
|
1,650
|
1,330
|
470
|
285
|
20.5
|
16.3
|
3.7
|
1,500
|
4.00
|
2,115
|
1,620
|
755
|
470
|
27.5
|
22.1
|
2.9
|
1,700
|
4.50
|
2,580
|
1,915
|
1,045
|
655
|
33.5
|
27.2
|
2.5
|
* Base case in bold.
"The Kemess
Underground Project represents significant development opportunity for
Northgate, with a 12-year mine-life that would add to our growing production
profile and reduce Northgate's average net cash cost of production"
stated Ritch Hall, Northgate's
President and CEO. "The Preliminary Assessment confirms the technical
feasibility of a block caving operation at Kemess
Underground. In today's metal price environment, it
is an extremely robust project with the ability to generate over $2
billion in operating cash flow and pay back its capital in less than
three years. Our next step will be to complete a Feasibility Study on the
project over the next year."
Report Overview
The Preliminary Assessment was prepared by AMC
Mining Consultants (Canada) Ltd ("AMC") and will be filed on
the SEDAR website at www.sedar.com within the next 45� days and will also be available on
Northgate's website at www.northgateminerals.com. The economic analysis of the Kemess
Underground Project contained in the Preliminary Assessment is based on
a resource estimate at December 31, 2010 released by Northgate
on February� 15, 2011.
Kemess
Underground Resource Base
The Preliminary Assessment is based on Indicated
Mineral Resources for the Kemess Underground
deposit at December 31, 2010 estimated using a Cdn$15
per tonne net smelter return ("NSR")
cut-off for vertical columns of blocks. The Kemess
Underground resource consists of 136.5 million tonnes
("Mt") of Indicated Resources containing 2.6 million ounces of gold
at an average grade of 0.56 grams per tonne
("g/t") and 860.6 million pounds of copper at an average grade of
0.29%. There is also an Inferred Resource of 6.0 Mt. Table 1 shows resource
estimates for NSR cut-offs of Cdn$15� and Cdn$13
per tonne and for the "All blocks" area,
which has boundaries that are 60� m outside the Cdn$13� per
tonne NSR cut-off along the western margin and 30� m
outside the Cdn$13 per tonne NSR
cut-off elsewhere.
Table 2:� 2011 Kemess
Underground Resources (using $1,100/oz
gold, $2.80/lb copper and $20/oz silver)
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Indicated
Cut-Off
(Cdn$/t NSR)
|
Tonnes
(Mt)
|
Au
(g/t)
|
Cu
(%)
|
Ag
(g/t)
|
Gold*
(Mozs)
|
Copper
(Mlbs)
|
NSR**
(Cdn$/t)
|
$15
|
136.5
|
0.56
|
0.29%
|
2.10
|
2.61
|
860.6
|
$24.96
|
$13
|
162.8
|
0.51
|
0.27%
|
1.99
|
2.87
|
964.8
|
$23.19
|
All blocks
|
185.0
|
0.48
|
0.25%
|
1.88
|
3.04
|
1032.9
|
$21.72
|
�
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�
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�
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�
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�
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�
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�
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Inferred
Cut-Off
(Cdn$/t NSR)
|
Tonnes
(Mt)
|
Au
(g/t)
|
Cu
(%)
|
Ag
(g/t)
|
Gold*
(Mozs)
|
Copper
(Mlbs)
|
NSR**
(Cdn$/t)
|
$15
|
6.0
|
0.42
|
0.22%
|
1.65
|
0.09
|
29.6
|
$19.07
|
$13
|
7.8
|
0.39
|
0.21%
|
1.57
|
0.10
|
36.6
|
$17.96
|
All
blocks
|
10.2
|
0.35
|
0.20%
|
1.43
|
0.12
|
43.7
|
$16.25
|
Note: Base case in bold
* Includes silver contribution at 55 ounces of silver to one ounce of gold
** NSR or in-situ recovered value assumes metallurgical recoveries of 90%
for copper and 68% for gold and an exchange rate of 1.00 .
�
Mine Design, Production Facility and Infrastructure
The mine design prepared for the Preliminary
Assessment outlines an 8.0 Mt per annum (approximately 24,000� tonnes per day ("tpd")),
highly automated, trackless, block caving operation similar to block caving
operations in Australia,
Indonesia and South
Africa.
The Kemess Underground
deposit is located at a depth of 300 m - 550 m below surface. The mine design
envisions ore from drawpoints being transferred to
ore passes using electric powered scoops.� Diesel powered trucks operating on a transfer level
below the extraction level will transfer ore to a primary crusher.�
Crushed ore will then be conveyed out of the mine to the surface portal (adit) in a single 3.4 km run and then transferred to a
4.7 km overland conveyor system, leading to the existing Kemess
mill infrastructure (see Figure 1).
Ore from the Kemess
Underground deposit will be processed through the existing mill at a nominal
rate of 24,000 tpd. The grinding circuit consists
of a semi-autogenous grinding ("SAG")
mill and a ball mill in combination. The finely ground ore from the milling
circuit will pass to the existing flotation, regrind and concentrate handling
circuits.� The final product will be a
gold-copper concentrate containing 22% copper and approximately one ounce per
tonne gold, which will be sold to copper smelters
in North America or Asia.
Only minimal modifications and upgrades to the existing Kemess
South mill are expected to enable efficient processing of ore from the Kemess Underground Project.
Preliminary metallurgical test work, combined with
historical results from a previous Feasibility Study, support gold and copper
recoveries of 72% and 91%, respectively, over the mine-life.
Tailings will be stored in the existing Kemess South open pit, which has already been permitted
for tailings storage and was used for this purpose towards the end of the Kemess South mine life.
Existing surface facilities will be used to support
the Kemess Underground mine. Current facilities
include offices, a 400-person accommodation camp and maintenance facilities.
The Kemess mill and
infrastructure facilities are currently on care and maintenance, in
anticipation of a production decision for the Kemess
Underground Project.
To view "Figure 1: Underground
Mine Design Schematic" please click www.northgateminerals.com/Theme/Northgate/files/Releases/2011/KUG_PEAFig1.JPG
Capital Costs
Initial pre-production capital costs are estimated
to be $437 million, most of which will be dedicated to mine
development and mine equipment, including mobile equipment, crushers and
conveyors. An additional $286 million is estimated as
sustaining capital, two-thirds of which are associated with mine development.
Table 2 below contains a summary of the economics of the Preliminary
Assessment:
Table 2: Summary of Economic Parameters
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Item
|
�
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Unit
|
�
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Value
|
Gold price
Copper price
Silver price
|
|
US$
per ounce
US$ per pound
US$ per ounce
|
�
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$1,100
$2.80
$20.00
|
Foreign exchange rates
|
�
|
US$/Cdn$
|
�
|
1.00
|
Income tax rate �
|
-�
Federal �
|
%
|
�
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15
|
�
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-�
Provincial
|
�
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�
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12
|
�
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�
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�
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�
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�
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Initial
Capital �
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-
Mine Development
|
US$ millions
|
�
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204
|
�
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-
Mine Equipment
|
108
|
�
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-
Mill Modifications
|
6
|
�
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-
EPCM
|
9
|
�
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-
Indirect Costs
|
72
|
�
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-
Contingency
|
37
|
Total
Initial Capital
|
US$ millions
|
�
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$� 437
|
Sustaining Capital
|
US$ millions
|
�
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$286
|
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�
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Item
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Unit
|
Value
|
Average mining cost
|
US$ per tonne milled
|
4.85
|
Processing cost
|
5.31
|
General
and Administration
Total
|
3.11� �
$� 13.27
|
Processing Recovery � - Gold
� � � � � � -� Copper
|
%
|
72
91
|
Environment and Permitting
As the Kemess
Mine already has in place many of the permits required for the Kemess Underground Project, permitting is
expected to be straightforward. The additional surface footprint associated
with the Kemess Underground development will be
small relative to the existing Kemess
South Mine footprint and will consist of a connecting access road,
a portal entrance to the underground mine and a zone of subsidence at surface
above the block cave area.� All other
infrastructure is in place and has been put on care and maintenance in
anticipation of future use with the underground mine.
Mill tailings will be impounded in the existing Kemess South open pit that is permitted for tailings
disposal and was already used for this purpose toward the end of the Kemess South mine-life. The small amount of waste rock
that will be generated from the development of the underground mine will be
dealt with in a manner consistent with existing Kemess
South waste rock strategies.
Northgate expects to submit a project description to
the responsible British Columbia
regulatory agencies in Q3-2011 who will determine the appropriate permitting
/ environmental assessment path. Based on our initial feedback and current
permits, it is anticipated that the permitting process will remain within
provincial jurisdiction.
Existing environmental studies for Kemess South will be continued and modified as
required; the process will also utilize the extensive baseline data collected
for the Kemess North environmental impact
assessment submission. In addition, Northgate has initiated discussions with
First Nations with respect to additional wildlife and socio-economic studies
that are of special interest to their communities.
Northgate discussions with the Tse
Keh Nay ("TKN" a group of three First
Nations in whose asserted traditional territory the Kemess
project is located) are well advanced and proceeding in a positive tone. Over
the last several months, Northgate has engaged in a number of meetings and
have arranged site visits (and are ongoing) with both the TKN leadership and
members of the community. In addition, there has been information sharing
sessions with other potentially affected First Nations. Northgate has given
the First Nations our assurance that this project will not impact Amazay Lake (an issue that was
divisive when the Kemess North Open Pit was being
reviewed by the Federal Panel in 2006). Northgate is also
supporting the TKN in their discussions with the BC government with respect
to revenue sharing of the BC Mineral Tax, as has already been negotiated with
two other new projects in the province.
Feasibility Study
Based on the results of this Preliminary Assessment,
Northgate will now commence a full Feasibility Study, which will incorporate
any identified project enhancements (i.e. mining rate, metallurgical
recoveries and project cost optimization).� It is expected that the
Feasibility Study will be completed over the next year.
* * * * * *
Conference Call and Webcast Friday, August 5,
2011
Northgate will be hosting a live conference call and
webcast discussing our second quarter financial results on August 5,
2011, at 10:00 am Toronto
time. We will also be discussing the results of the Kemess
Underground Preliminary Assessment. You may participate in our conference
call by calling 647-427-7450 or toll free in North
America at 1-888-231-8191.
A live audio webcast and presentation package will
be available on Northgate's homepage at www.northgateminerals.com.
* * * * * *
Qualified Persons
Carl Edmunds, PGeo, Northgate's Exploration Manager, Northgate
Minerals Corporation, is the Qualified Person responsible for reviewing
and approving the press release.
Mike Thomas, MAusIMM CP,� Director and Principal Mining
Consultant, AMC,� is the Qualified Person responsible for supervising
the preparation of� the Preliminary Assessment
including the cost estimates and financial analysis.
Ken Major, PEng (BC), Consultant Metallurgist, KWM Consulting
Inc., is the Qualified Person responsible for supervising the
preparation of metallurgical and processing estimates.
* * * * * *
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 estimate 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, 2010 or under the heading "Risks and
Uncertainties" in Northgate's 2010 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 Corporation 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 Corporation 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 Corporation's
public filings which have been filed with securities commissions or similar
authorities in Canada).
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