Northgate Minerals Posts Fourth Quarter Net Earnings of $0.07 per Share
Record Gold Production Forecast for 2009
VANCOUVER, March 4 /CNW/ - (All figures in US dollars except where noted)
- Northgate Minerals Corporation (TSX: NGX; NYSE ALTERNEXT/AMEX: NXG) today
reported net earnings of $18,668,000 or $0.07 per diluted common share and
cash flow from operations of $5,858,000 or $0.02 per diluted common share for
the fourth quarter of 2008. For the full year, net earnings were $10,742,000
or $0.04 per diluted common share and cash flow from operations was
$64,987,000 or $0.25 per diluted common share. Northgate also achieved record
gold production in 2008 of 354,800 ounces at a net cash cost of $447 per ounce
of gold.
Fourth Quarter Highlights
- Achieved record quarterly gold production of 118,265 ounces at an
average net cash cost of $413 per ounce of gold, bringing full year
production to a record 354,800 ounces at an average net cash cost of
$447 per ounce of gold.
- Posted revenue of $137 million for the fourth quarter of 2008, a 43%
increase over the same period last year. For the full year 2008,
Northgate recorded revenue of $461 million, representing a 37%
increase over the full year 2007.
- Posted record production of 26,398 ounces of gold at a net cash cost
of $500 per ounce at the Fosterville mine, as the operational
turnaround progressed with excellent results.
- Significantly increased total gold resources at Young-Davidson, where
measured and indicated resources underground doubled to over
3.0 million ounces and inferred resources increased by over 300,000
ounces to 748,000 ounces of gold.
- Announced the first resource estimate for the recently expanded
Harrier Underground zone at Fosterville, which added indicated
resources of 159,000 ounces at an average grade of 4.01 grams per
tonne (g/t) gold and inferred resources of 221,000 ounces at an
average grade of 5.38 g/t gold.
Ken Stowe, President and CEO, stated, "2008 was a record year for
Northgate, as we produced over 354,000 ounces of gold from our three operating
mines at an average net cash cost of under $450 per ounce. At our Fosterville
and Stawell mines, we made dramatic operational improvements during our 11
months of ownership as we retooled these assets for long-term success. We also
invested considerable exploration dollars at both mines and were rewarded
during the year with one of the single largest reserve additions in Stawell's
history and an increase of 380,000 ounces of resource in the Harrier zone at
Fosterville. Looking into 2009, the heated leach circuit at Fosterville is
scheduled for commissioning in March, which will significantly improve gold
recovery in the mill. We will also continue to spend heavily on near mine
exploration at both of our Australian mines with the goal of significantly
increasing reserves by the end of the year. At Young-Davidson, we are looking
forward to completing a pre-feasibility study in the second quarter of the
year, which will be followed by a full feasibility study by year-end. The
pre-feasibility economics should improve significantly with the application of
lower cost bulk mining methods to the dramatically larger gold resource base
that we announced in December. In 2008, we laid the groundwork for a very
successful year ahead and are well positioned in the current gold price
environment to generate strong free cash flow at all of our operations."
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Executive Overview
Financial Performance
Northgate Minerals Corporation ("Northgate", or "the Corporation")
recorded consolidated revenue of $136,748,000 and $460,988,000 in the fourth
quarter and full year of 2008, respectively, compared with $95,599,000 and
$337,546,000 in the corresponding periods of 2007. Net earnings were
$18,668,000 or $0.07 per diluted share in the fourth quarter of 2008, which
includes a mark-to-market hedging gain of $48,253,000 on the Corporation's
copper forward contracts and a charge of $3,398,000 to recognize an other than
temporary decline in the value of the Corporation's auction rate securities
(ARS) investments. Net earnings during the corresponding quarter of 2007 were
$33,309,000 or $0.13 per diluted share. For the full year 2008, net earnings
were $10,742,000 or $0.04 per diluted share compared with $39,425,000 or $0.15
per diluted share in 2007. Cash flow from operations, after changes in working
capital and other items, was $5,858,000 or $0.02 per diluted share in the
fourth quarter of 2008 compared with $32,914,000 or $0.13 per diluted share
during the same quarter last year. For the full year 2008, cash flow from
operations, after changes in working capital and other items, was $64,987,000
or $0.25 per diluted share compared with $125,285,000 or $0.49 per diluted
share in 2007. Per share data is based on the weighted average diluted number
of shares outstanding of 255,601,069 and 255,453,093 in the fourth quarter and
full year of 2008, respectively. The weighted average diluted number of shares
outstanding in the corresponding periods of 2007 was 255,065,987 and
255,257,756, respectively. As of March 3, 2009, the Corporation had
255,787,748 issued and outstanding common shares and 7,320,150 outstanding
stock options.
Health, Safety and Environment
Northgate continues to promote a strong culture of safety and is striving
to ensure that the highest standards for health and safety are maintained at
its mine sites. During the fourth quarter, Fosterville recorded one lost time
injury (LTI) while Stawell recorded two LTIs. For the full year 2008,
Fosterville and Stawell each recorded three LTIs. This is a dramatic
improvement from 2007 when Fosterville and Stawell recorded 12 and three LTIs,
respectively. Northgate has actively implemented the recommendations from
safety management audits, which took place earlier in the year, to ensure
health and safety standards improve and are maintained at both Australian mine
sites. In Canada, Young-Davidson had no LTIs during the fourth quarter and is
pleased to report that there have been no LTIs recorded on the property over
the past two years. Kemess recorded one LTI during the fourth quarter for a
total of ten LTIs in 2008.
Human Resources
Northgate commenced collective agreement meetings with its workforce at
Fosterville to replace the existing Australian Workforce Agreements and a
temporary Greenfield agreement. The Greenfield agreement was put into place in
April 2008 for one year when Northgate completed its conversion to owner
mining from contractor mining. The new collective agreement is expected to be
ratified in the second quarter of 2009.
Summarized Consolidated Results
(Thousands of US dollars,
except where noted) Q4 2008 Q4 2007 2008(1) 2007
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Operating Data
Gold
Production (ounces) 118,265 41,467 354,800(2) 245,631
Sales (ounces)(3) 101,075 48,937 311,580 259,182
Realized gold price ($/ounce) 814 561 873 594
Copper
Production (thousands pounds) 14,391 16,766 51,906 68,129
Sales (thousands pounds) 11,550 16,750 49,639 69,698
Realized copper price ($/pound) 0.46 3.30 2.78 3.11
Net cash cost ($/ounce) 413 18 447 (22)
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Financial Data
Revenue $ 136,748 $ 95,599 $ 460,988 $ 337,546
Net earnings 18,668 33,309 10,742 39,425
Earnings per share
Basic 0.07 0.13 0.04 0.16
Diluted 0.07 0.13 0.04 0.15
Cash flow from operations 5,858 32,914 64,987 125,285
Cash and cash equivalents 62,419 266,045 62,419 266,045
Total assets $ 590,884 $ 634,589 $ 590,884 $ 634,589
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(1) Full year 2008 financial data and gold sales (ounces) include the
results of Northgate's Australian operations from February 19 to
December 31, 2008. Other figures are for the full year ending
December 31, 2008.
(2) Full year 2008 production for Fosterville excludes the change in
gold-in-circuit inventory previously recorded in production for the
first quarter.
(3) Prior period comparatives reflect gold sales (ounces) for Kemess
only.
2008 Annual Audited Financial Results
Financial figures for the fourth quarter and full year 2008 are unaudited
estimates and are subject to revision. Northgate will file its complete 2008
audited annual financial statements, including the notes to the consolidated
financial statements, with both the Canadian and US Securities regulatory
authorities on SEDAR (www.sedar.com) and EDGAR (www.sec.gov) by March 31,
2009.
Results of Operations - Australia
Fosterville Gold Mine
Q4 2008 Q4 2007 2008(1) 2007
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Operating Data
Ore mined (tonnes) 167,182 154,887 511,542 799,188
Ore milled (tonnes) 165,654 213,543 540,725 931,886
Ore milled per day (tonnes) 1,801 2,321 1,477 2,555
Gold
Grade (g/t) 6.03 4.00 5.39 3.27
Recovery (%) 82 70 70 77
Production (ounces)(2) 26,398 19,198 66,959 73,378
Sales (ounces) 26,325 n/a 58,876 n/a
Net cash cost ($/ounce) 500 n/a 831 n/a
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Financial Data (Thousands of US$)
Revenue $ 21,141 n/a $ 50,255 n/a
Cost of sales 12,471 n/a 48,433 n/a
Earnings (loss) from operations 3,722 n/a (13,090) n/a
Cash flow from operations 7,054 n/a (1,971) n/a
Capital expenditures(3) 7,866 n/a 38,637 n/a
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(1) Full year 2008 financial data and gold sales (ounces) include the
results of Northgate's Australian operations from February 19 to
December 31, 2008. Other figures are for the full year period ending
December 31, 2008.
(2) Full year production for Fosterville excludes the change in gold-in-
circuit inventory previously recorded in production for the first
quarter.
(3) Capital expenditures for Q4 and full year 2008 include mineral
property, plant and equipment acquired through assumption of capital
leases.
Operational Performance
The Fosterville Gold mine produced 26,398 ounces of gold during the three
months ended December 31, 2008, which was a quarterly record for the mine and
substantially higher than forecast. Gold production for the full year 2008 was
approximately 67,000 ounces. Mine development activities advanced at a high
rate during the fourth quarter and now extend into the heart of the thicker,
higher grade sections of the main Phoenix orebody, which will support
production over the next several years. During the quarter, 165,654 tonnes of
ore at a grade of 6.03 g/t were milled. The grade of ore milled during the
quarter was consistent with forecast; however, gold recovery of 82% was
significantly higher due to the lower proportion of black shale ore in the
mill feed and several leach circuit process improvements. Construction of the
heated leach circuit advanced significantly during the period and is expected
to be commissioned at the end of the first quarter of 2009. Once this is in
full operation, the heated leach circuit is expected to dramatically improve
average gold recoveries to the 90% level, which includes the processing of
black-shale ore in the mill feed.
Total operating costs for the fourth quarter climbed to A$18,544,000 as a
result of the increase in mine production, but unit costs were significantly
lower than in previous quarters due to the higher ore production and cost
reductions associated with the conversion to owner mining. The overall unit
operating cost was A$119 per tonne of ore milled. Mining costs were A$60 per
tonne of ore mined and milling costs were A$36 per tonne of ore milled. Mine
development advanced 2,000 metres (m) during the quarter and is consistent
with forecasted advance rates in 2009.
The net cash cost for the fourth quarter was $500 per ounce of gold,
which was dramatically lower than the first three quarters of 2008 when
Northgate was in the process of improving operations at the mine. The decrease
in cash cost resulted from increased mining rates, higher ore grades, improved
gold recovery and the weaker Australian dollar relative to the US dollar. Now
that Northgate has resolved most of the operational deficiencies at the mine,
efforts will turn to reducing operating costs and lowering current Australian
dollar denominated cash costs per ounce by as much as 10%. In 2009,
Fosterville is forecasting production of 112,000 ounces of gold at a net cash
cost of $445 per ounce.
Financial Performance
Fosterville's revenue for the three months ended December 31, 2008 was
$21,141,000 based on gold sales of 26,325 ounces. The cost of sales during the
quarter, excluding depreciation and depletion, was $12,471,000 and the
depreciation and depletion expense was $3,616,000. The earnings from
operations before income taxes recorded for the period was $3,722,000. The
mine generated $7,054,000 in cash flow from operations during the quarter.
Total investment in capital expenditures at Fosterville was $7,866,000,
which includes $4,060,000 for mine development, $2,000,000 for the heated
leach project and approximately $1,000,000 to expand the storage capacity of
the carbon-in-leach water dam.
Exploration Update
In the fourth quarter of 2008, Northgate announced the discovery of
significant extensions to three mineralized zones within the Harrier
Underground zone. The Harrier Underground zone is situated 1.7 kilometres
south of the current Phoenix ore body and is interpreted to be at a slightly
higher stratigraphic level down plunge of the Harrier open-pit ore body, which
was mined in 2007. The zone comprised of three distinct westerly dipping
mineralized structures, from west to east: the Osprey, Raptor and Harrier Base
Fault zones. The Harrier Base, with its Raptor splay structure, is now being
modelled as one zone and is referred to as the Harrier Base zone.
Recent drilling confirms that grades and widths of the Harrier
Underground zones are comparable to the majority of the Phoenix reserves. From
a development perspective, the presence of the two zones, Osprey and Harrier
Base, which are separated by only 80m, will reduce the amount of development
required to access each zone, thus reducing overall mining and development
costs.
Since the release of the initial results (press release dated October 30,
2008) an additional 13 drill holes have intersected the Harrier Base zone and
five holes have intersected the Osprey zone. These intersections are
consistent with those announced in the October 30 press release and have been
incorporated into the year-end resource estimate for Fosterville. To date,
drilling has added indicated resources of 1.23 million tonnes (MT) at 4.01 g/t
containing 159,000 ounces of gold and inferred resources of 1.28 MT at 5.38
g/t containing 221,000 ounces of gold. The Harrier Underground zone now
contains indicated and inferred resources of 159,000 and 545,000 ounces,
respectively.
These zones are still open both down dip and down plunge as illustrated
in the accompanying longitudinal sections and the drilling currently underway
is targeting these areas. A second drill will be added in early March.
Figure 1: Harrier Underground Longitudinal Section: Osprey Gold
Mineralization
www.northgateminerals.com/Theme/Northgate/files/Releases/FGM_Os_Feb09.jpg
Figure 2: Harrier Underground Longitudinal Section: Harrier Base Gold
Mineralization
www.northgateminerals.com/Theme/Northgate/files/Releases/FGM_Hr_Feb09.jpg
Stawell Gold Mine
Q4 2008 Q4 2007 2008(1) 2007
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Operating Data
Ore mined (tonnes) 177,561 152,791 629,665 652,372
Ore milled (tonnes) 183,415 170,554 698,396 721,723
Ore milled per day (tonnes) 1,994 1,854 1,908 1,978
Gold
Grade (g/t) 5.97 6.00 5.25 5.39
Recovery (%) 87 89 87 89
Production (ounces) 30,553 29,635 102,679 112,058
Sales (ounces) 28,549 n/a 84,200 n/a
Net cash cost ($/ounce) 383 n/a 555 n/a
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Financial Data (Thousands of US$)
Revenue $ 22,850 n/a $ 73,595 n/a
Cost of sales 11,504 n/a 46,530 n/a
Earnings (loss) from operations 5,656 n/a 111 n/a
Cash flow from operations 7,076 n/a 22,462 n/a
Capital expenditures(2) 4,091 n/a 26,336 n/a
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(1) Full year 2008 financial data and gold sales (ounces) include the
results of Northgate's Australian operations from February 19 to
December 31, 2008. Other figures are for the full year period ending
December 31, 2008.
(2) Capital expenditures for Q4 and full year 2008 include mineral
property, plant and equipment acquired through assumption of capital
leases.
Operational Performance
The Stawell Gold mine produced a total of 30,553 ounces of gold during
the three months ended December 31, 2008, which represents the highest
quarterly production during 2008 and the fourth highest quarterly production
total in the 26-year history of the mine. Gold production for the full year of
2008 was 102,679 ounces.
Mine production of 177,561 tonnes during the quarter increased to its
highest level of the year, as improvements in the mine's ventilation and
cooling systems and the commissioning of three 60-tonne haulage trucks
increased the effective mining capacity.
Approximately 183,415 tonnes of ore at a grade of 5.97 g/t were milled in
the fourth quarter of 2008. Gold recoveries in the mill were 87%, which were
on target with plan and consistent with the historic range of 87%-90%. Total
operating costs during the period were A$17,106,000 equating to an overall
unit operating cost of A$104 per tonne of ore milled. Mining costs were A$68
per tonne of ore mined and milling costs were A$26 per tonne of ore milled.
The mine development advance rate during the quarter was the highest in 2008
at approximately 1,500m and is consistent with the rate planned for 2009.
During the quarter, Northgate submitted an application to the Department
of Primary Industries (DPI) for a permit to elevate the height of the existing
tailings dam by six metres, thereby extending the capacity of the tailings dam
by nine years. In early 2009, the DPI approved this application and capital
works have begun for a three-metre lift, which will be completed by the middle
of 2009.
The net cash cost of gold for the fourth quarter was $383 per ounce and
was significantly lower than in previous quarters of the year as a result of
declining operating costs, milling of higher grade ore and the weaker
Australian dollar relative to the US dollar. In 2009, both production and cash
cost levels are expected to remain steady with production of 107,000 ounces of
gold at net cash cost of $388 per ounce.
Financial Performance
Stawell's revenue for the three months ended December 31, 2008 was
$22,850,000 based on gold sales of 28,549 ounces. The cost of sales during the
quarter, excluding depreciation and depletion, was $11,504,000 and the
depreciation and depletion expense was $4,831,000. The earnings from
operations before income taxes were $5,656,000 for the period. The mine
generated $7,076,000 in cash flow from operations during the fourth quarter.
Total investment in capital expenditures at Stawell during the quarter
was $4,091,000, which includes $2,611,000 for mine development and
approximately $600,000 for scheduled equipment repair.
Exploration Update
Surface and underground diamond drill exploration has recommenced with
two underground and one surface diamond drill rigs on site. The principal
exploration target for the surface drill is the North Magdala area in the
vicinity of the historic exploration intercept of 9.4m of 8.4 g/t gold (true
thickness estimated at 8.0m). The underground drill rigs are targeting the sub
GG6 area in which drilling in 2008 identified multiple intersections of GG6
grade material (6.0 g/t gold) over mineable widths.
Figure 3: Stawell Gold Mine (Vertical, West Looking, Longitudinal Section
with Metric Grid)
www.northgateminerals.com/Theme/Northgate/files/Releases/SGM_LS_Feb09.jpg
Results of Operations - Canada
Kemess South Mine
Q4 2008 Q4 2007 2008 2007
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Operating Data
Ore plus waste
mined (tonnes) 7,388,248 8,042,000 28,260,894 42,025,404
Ore mined (tonnes) 5,027,556 3,206,000 13,851,896 17,060,785
Stripping ratio
(waste/ore) 0.47 1.51 1.04 1.46
Ore stockpile
rehandle (tonnes) 1,173,710 2,367,337 7,152,037 4,012,198
Ore milled (tonnes) 4,171,027 4,238,626 16,924,271 17,802,317
Ore milled per
day (tonnes) 45,337 46,072 46,252 48,773
Gold
Grade (g/t) 0.661 0.459 0.505 0.627
Recovery (%) 69 66 67 68
Production (ounces) 61,314 41,467 185,162 245,631
Sales (ounces) 46,201 48,937 168,504 259,182
Copper
Grade (%) 0.196 0.238 0.174 0.214
Recovery (%) 80 75 79 81
Production (thousands
pounds) 14,391 16,766 51,906 68,129
Sales (thousands
pounds) 11,550 16,750 49,639 69,698
Net cash cost ($/ounce) 391 18 271 (22)
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Financial Data (thousands
of US$)
Revenue $ 44,504 $ 84,532 $ 304,042 $ 407,734
Cost of sales 37,872 60,322 215,971 226,933
Earnings (loss) from
operations before income
taxes (3,894) 16,058 53,994 122,250
Cash flow from operations 2,237 36,983 93,603 145,676
Capital expenditures 1,857 2,534 8,076 13,741
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Operational Performance
The Kemess South mine posted production of 61,314 ounces of gold and 14.4
million pounds of copper in the fourth quarter of 2008, bringing full year
2008 production to 185,162 ounces of gold and 51.9 million pounds of copper.
Metal production in the fourth quarter was adversely impacted by a burst water
pipe, which caused serious damage to the mill's Distributed Control System
(DCS), resulting in six days of downtime just before Christmas. This event,
combined with a one week delay in accessing some higher grade ore in the
western end of the open pit, were responsible for the shortfall in production
during the quarter. However, the ounces that did not materialize in the fourth
quarter of 2008 will be produced in the first quarter of 2009.
Mining operations returned to near normal levels in the western end of
the open pit once waste rock was removed from the northwest corner where
localized sloughing had occurred earlier in the year. A new radar-based wall
monitoring system was installed to ensure safe operation until the western end
of the pit is mined out in mid-2009.
During the fourth quarter of 2008, approximately 7.4 MT of ore and waste
were removed from the open pit compared to 8.0 MT during the corresponding
quarter of 2007. Unit mining costs during the current quarter were Cdn$2.27
per tonne compared with Cdn$2.37 per tonne in the same period of 2007. For the
full year 2008, mining costs averaged Cdn$2.12 per tonne mined compared with
Cdn$1.76 per tonne in 2007. The unit cost was negatively impacted by higher
consumable costs and lower production.
Mill availability during the fourth quarter of 2008 averaged 85% and
throughput averaged 45,337 tonnes per day (tpd), compared with 90%
availability and throughput of 46,072 tpd in the fourth quarter of 2007. Mill
throughput was lower in the most recent quarter due to the unexpected DCS
related outage. For 2008, Kemess milled approximately 16.9 MT of ore grading
0.505 g/t gold and 0.174% copper, and mill availability averaged 85%. In the
prior year, Kemess milled 17.8 MT of ore grading 0.627 g/t gold and 0.214%
copper, and mill availability was 91%.
Gold and copper recoveries averaged 69% and 80%, respectively, in the
fourth quarter of 2008 compared with 66% and 75% in the fourth quarter of
2007. Recoveries in the mill were consistent with historic norms for hypogene
ore, which was processed during the quarter. For the full year, gold and
copper recoveries were 67% and 79%, respectively, compared with 68% and 81% in
2007.
Metal concentrate inventory increased to over 11,000 wet metric tonnes
during the fourth quarter of 2008 due to poor rail car availability. This
issue has continued in the first two months of the year; however, the company
anticipates that inventory levels should decline to normal levels by the end
of the first quarter of 2009.
The total unit cost per tonne milled during the fourth quarter of 2008
was Cdn$14.48 (2007 - Cdn$13.16). The increase was related to lower mill
throughput in the quarter combined with higher charges for the cost of
consumables. The unit cost per tonne milled includes Cdn$3.25 (2007 -
Cdn$3.31) for marketing costs, which was comprised mainly of treatment and
refining costs and transportation fees. Annual smelting and refining terms for
2009 are expected to settle at around $75 per dry metric tonne (dmt) and 7.5�
per pound of copper with no price participation and it is expected that Kemess
concentrate will be processed on comparable terms. Total site operating costs
in the fourth quarter of 2008 were Cdn$47.0 million, compared with costs of
Cdn$41.9 million in the fourth quarter of 2007. The increase is due primarily
to the higher cost of mill consumables. The net cash cost of production at
Kemess in the fourth quarter was $391 per ounce, which was significantly
higher than previous quarters of 2008. The higher cash cost was attributable
to the precipitous drop in copper prices from an average of $3.62 per pound in
the first nine months of the year to $1.77 per pound in the last three months
of 2008, combined with the decline in copper production at the mine. For the
full year 2008, Kemess produced 185,162 ounces of gold and 51.9 million pounds
of copper at a net cash cost of $271 per ounce. In 2009, Kemess is forecasting
production of 173,000 ounces of gold and 54.0 million pounds of copper at a
net cash cost of $517 per ounce.
Financial Performance
Revenue from the Kemess South mine in the fourth quarter of 2008 was
$44,504,000 compared with $84,532,000 in the corresponding period of 2007,
excluding the effects of mark-to-market adjustments on Northgate's copper
hedge book. Metal sales in the fourth quarter of 2008 consisted of 46,201
ounces of gold and 11.6 million pounds of copper, compared with 48,937 ounces
of gold and 16.8 million pounds of copper in the same period last year. During
the fourth quarter of 2008, the price of gold on the London Bullion Market
averaged $795 per ounce and the price of copper on the London Metal Exchange
averaged $1.77 per pound. Net realized prices for sales in the quarter were
approximately $830 per ounce of gold and $0.46 per pound of copper. Since the
Corporation's metal pricing quotational period is three months after the month
of arrival (MAMA) for copper and one MAMA for gold at the smelting facility,
the realized price calculation incorporates the actual settlement price for
prior quarter sales, as well as the forward price profiles of both metals. The
average market prices for gold and copper in the same quarter of 2007 were
$788 per ounce and $3.26 per pound, respectively, while realized prices were
$561 per ounce and $3.30 per pound. All of the Corporation's gold and copper
sales during the most recent quarter were sold at market prices compared to
2007, when a significant portion of the Corporation's sales were hedged at
lower than prevailing prices.
The cost of sales in the fourth quarter of 2008, excluding depreciation
and depletion, was $37,872,000, which declined from the corresponding period
last year of $60,322,000. The primary driver of the lower expense is the
positive impact of the strengthening US dollar on primarily Canadian
denominated consumable costs including diesel fuel, mill steel, equipment
maintenance and labour costs.
Depreciation and depletion expenses in the fourth quarter were $9,780,000
compared to $6,081,000 during the corresponding period of 2007, when less ore
was mined from the open pit while the main haul road was being realigned,
resulting in significantly lower production.
Cash invested in capital expenditures during the fourth quarter of 2008
totalled $1,857,000 compared to $2,534,000 in the corresponding period of
2007. Capital expenditures in the most recent quarter were primarily devoted
to the ongoing construction of the tailings dam and road infrastructure.
Capital investments in 2009 and 2010 will continue to decline as construction
of the tailings dam draws to a close, but closure related capital expenses,
which are credited against the outstanding closure liability shown on the
Corporation's balance sheet, will increase as Kemess moves towards the end of
its reserve life.
Project Update - Young-Davidson Project
In the fourth quarter of 2008, the total gold resources at Young-Davidson
increased dramatically, with measured and indicated resources underground
doubling to over 3.0 million ounces and inferred resources increasing by over
300,000 ounces to 748,000 ounces. A Technical Report compliant with National
Instrument 43-101 "Standards of Disclosure for Mineral Projects" of the
Canadian Securities Administrators ("NI 43-101") for Young-Davidson was filed
on SEDAR (www.sedar.com) and on Northgate's website
(www.northgateminerals.com) in January 2009. The project focus has now shifted
to the completion of a pre-feasibility study, which will incorporate the new,
dramatically larger resource, employ a variety of low cost bulk mining methods
and make better use of the existing ramp and shaft infrastructure at the site.
The pre-feasibility study is expected to be completed by mid-year and 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 Young Davidson 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 YD09-93, 50m west of YD08-91 and 50m below YD08-92, was
"dyked out" on the main part of the zone in hole 91, but the lower portion
intersected 3.7m of 5.95 g/t gold and a second interval of 4.2m of 2.84 g/t
gold. Hole 88 immediately west of the former Young-Davidson pit intersected
1.87 g/t over 5.7m and hole YD08-92, 50m west of YD08-88, intersected 7.1m of
6.20 g/t gold (4.76 g/t gold cut to 20g). Hole 90 did not intersect any gold
mineralization.
Figure 4: Young-Davidson Property (Vertical, North Looking, Longitudinal
Section with Metric Grid
www.northgateminerals.com/Theme/Northgate/files/Releases/YD_Feb09.jpg
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.
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Mineral Reserves and Resources
Northgate's mineral reserves and resources were updated as of December
31, 2008. Metal prices, exchange rates and other parameters used in this
calculation are detailed in the notes to the mineral reserve and resource
table.
At Kemess South, proven mineral reserves total 34,193,000 tonnes
containing 447,000 ounces of gold and 126 million pounds of copper. These
reserves exist in three distinct areas: the west pit, the east pit and in
surface stockpiles. The highest grade ore remaining at Kemess South's camp is
contained in the west pit and is scheduled to be mined out during 2009.
At Fosterville, a significant infill drilling program and mine plan
re-estimate was undertaken during 2008 to confirm and optimize the historic
reserve estimates made by the previous operator of the mine. This exercise
resulted in a net loss of 140,000 ounces of reserves, but increased the
average reserve grade from 4.41 g/t to 4.85 g/t. The remaining decline in
reserve ounces was due to mining of approximately 94,000 in situ ounces during
2008.
Historic Fosterville resources, which had previously been inclusive of
reserves, were recalculated with different modeling assumptions at December
31, 2008 to be exclusive of reserves in accordance with NI 43-101. In
addition, the cut-off grade for underground resources was raised from 2.0 g/t
to 3.0 g/t and the cut-off grade for open pit resources was raised from 0.7
g/t to 1.0 g/t to more closely reflect the actual economic cut-off grade at
the mine. As a result of these changes in cut-off grade, model assumptions and
depletion, measured and indicated resources declined by 177,000 ounces and
inferred resources decreased by 236,000 ounces. However, this decline was
offset by the successful exploration drilling during the year, which extended
mineralization in the Harrier Underground zone, adding indicated resources of
159,000 ounces at an average grade of 4.01 g/t gold and inferred resources of
221,000 ounces at an average grade of 5.38 g/t gold. Measured and indicated
resources at Fosterville now total 647,000 ounces and inferred resources total
1,319,000 at December 31, 2008. Exploration drilling in 2009 will focus on
increasing the size of the Harrier zone and moving resources from inferred to
indicated, so that they have the potential to be converted into reserves once
a mine plan confirms the economics of this zone.
At Stawell, proven and probable reserves at December 31, 2008 stood at
1,954,000 tonnes containing 268,000 ounces of gold. During the year, 118,000
ounces were mined and exploration added a total of 133,000 ounces of new
reserves. For these reserve statements, only those reserves on the Magdala
1040RL extraction level were recast at the new higher reserve price assumption
of $675 ounce. The balance of the reserve will be recalculated using the new
higher prices during the first half of 2009.
Indicated resources at Stawell were 281,000 ounces and inferred resources
were 115,000 ounces at December 31, 2008. Both of these figures increased
relative to the previous year, primarily as a result of successful exploration
drilling.
At the Young-Davidson property, exploration drilling during 2008
increased measured and indicated resources on the property from 18,736,000
tonnes containing 1,882,000 ounces of gold to 30,929,000 tonnes containing
3,293,000 ounces. Inferred resources increased from 4,546,000 tonnes
containing 454,000 ounces at the end of 2007 to 6,888,000 tonnes containing
748,850 ounces in 2008. During 2009, Northgate will be conducting a
feasibility study on the Young-Davidson project with the goal of moving
measured and indicated resource ounces into proven and probable reserves.
The Kemess North resource has been left unchanged since the previous
year's estimates. This resource was downgraded from a reserve in the fourth
quarter of 2007 when the British Columbia government denied Northgate a
development permit for the project.
1. Mineral Reserves - Canadian and Australian Operations
Grades Contained Metal
----------------------------------
At December Quantity Gold Copper Gold Copper
31, 2008 Category (tonnes) (g/t) (%) (ounces) (000s lbs)
-------------------------------------------------------------------------
Kemess South Proven 34,193,000 0.41 0.17 447,000 126,000
-------------------------------------------------------------------------
Fosterville Proven 430,000 7.92 n/a 109,000 n/a
Probable 3,187,000 4.43 n/a 454,000 n/a
---------------------------------------------------------
3,617,000 4.85 564,000
-------------------------------------------------------------------------
Stawell Proven 121,000 7.63 n/a 30,000 n/a
Probable 1,833,000 4.04 n/a 238,000 n/a
---------------------------------------------------------
1,954,000 4.27 268,000
-------------------------------------------------------------------------
Total Proven &
Probable
Reserves 39,764,000 1,279,000 126,000
-------------------------------------------------------------------------
2. Mineral Resources - Canadian Operations
Grades Contained Metal
----------------------------------
At December Quantity Gold Copper Gold Copper
31, 2008 Category (tonnes) (g/t) (%) (ounces) (000s lbs)
-------------------------------------------------------------------------
Kemess North Measured 451,139,000 0.31 0.16 4,453,000 1,563,000
Indicated 268,051,000 0.29 0.13 2,486,000 790,000
---------------------------------------------------------
719,190,000 0.30 0.15 6,939,000 2,353,000
-------------------------------------------------------------------------
Young-Davidson
Open Pit Indicated 4,955,000 1.70 n/a 270,000 n/a
Underground Measured 3,170,000 3.95 n/a 402,000 n/a
Indicated 22,804,000 3.57 n/a 2,621,000 n/a
---------------------------------------------------------
30,929,000 3.31 3,293,000
-------------------------------------------------------------------------
Total Measured &
Indicated
Resources 750,119,000 10,232,000 2,353,000
-------------------------------------------------------------------------
Young-Davidson
Open Pit Inferred 15,000 1.74 n/a 850 n/a
Underground Inferred 6,873,000 3.39 n/a 748,000 n/a
-------------------------------------------------------------------------
Total Inferred
Resources 6,888,000 748,850
-------------------------------------------------------------------------
3. Mineral Resources - Australian Operations
At December 31, Quantity Gold Grade Contained Gold
2008 Category (tonnes) (g/t) (ounces)
-------------------------------------------------------------------------
Fosterville Measured 3,675,000 2.06 244,000
Indicated 6,097,000 2.05 403,000
---------------------------------------------------------
9,772,000 2.05 647,000
-------------------------------------------------------------------------
Stawell Indicated 3,555,000 2.46 281,000
-------------------------------------------------------------------------
Total Measured
& Indicated
Resources 13,327,000 928,000
-------------------------------------------------------------------------
Fosterville Inferred 11,114,000 3.69 1,319,000
Stawell Inferred 769,000 4.66 115,000
-------------------------------------------------------------------------
Total Inferred
Resources 11,883,000 1,434,000
-------------------------------------------------------------------------
Notes to Mineral Reserves and Resources
1 Mineral reserves and mineral resources for Kemess South have been
estimated in accordance with the definitions contained in the
Canadian Institute of Mining, Metallurgy and Petroleum (CIM)
Standards and National Instrument 43-101.
2 Mineral reserves for Fosterville and Stawell have been estimated in
accordance with the AusIMM JORC Code and have been reconciled to CIM
Standards as prescribed by National Instrument 43-101.
3 All mineral resources are exclusive of mineral reserves.
4 Mineral resources that are not mineral reserves do not have
demonstrated economic viability.
5 Mineral reserves and resources are rounded to 1,000 tonnes, 0.01 g/t
gold and 1,000 ounces. Minor discrepancies in summations may occur
due to rounding.
6 Mineral reserves were calculated using the following parameters:
- Kemess South: exchange rate Cdn$/US$1.20; gold price $675/oz;
hedged copper price $2.52/lb; unhedged copper price $1.50/lb; and
silver price $12.00/oz. Operating assumptions for the west pit
were as follows: Gold recovery 66.1%; Copper recovery 82.4%;
mining costs CDN$1.80/tonne; milling costs Cdn$4.09/tonne; and G&A
costs Cdn$1.57/tonne. For the east pit, operating assumptions were
as follows: gold recovery 52.5%; copper recovery 70.8%; mining
costs Cdn$1.20/tonne; milling costs Cdn$3.94/tonne; and, G&A costs
CDN$1.37/tonne.
- Fosterville: exchange rate A$/US$0.70; gold price $675/oz; cut-off
grade applied was variable for underground ore depending on width,
mining method and ground conditions; dilution of 10%-20% and
mining recovery of 70%-100% were applied depending on mining
method.
- Stawell: exchange rate A$/US$0.70; gold price $675/oz for the
Magdala 1040RL extraction level; gold price $595/oz for all other
underground reserves; cut-off grade applied was variable for
underground ore depending upon width, mining method and ground
conditions. Dilution of 2-3m and mining recovery of 95%-100% were
applied to the underground reserves, dependent upon mining method.
7 Mineral resources were calculated using the following parameters:
- Kemess North: (mineral reserves now reclassified as mineral
resources following the decision of the BC government to deny
Northgate the requisite development permit) calculated at the time
of the feasibility study: exchange rate Cdn$/US$1.40; gold price
$375/oz; copper price $1.00/lb; and, silver price $5.00/oz.
Resources for Kemess North, calculated at the time of the
feasibility study: exchange rate Cdn$/US$1.40; gold price $425/oz;
copper price $1.20/lb; and silver price $5.00/oz.
- Fosterville: exchange rate A$/US$0.70; gold price $750/oz; cut-off
grade applied were 0.5 g/t gold for oxide, 1.0 g/t gold for near-
surface sulphide (above 5050mRL) and 3.0 g/t gold for underground
sulphide (below 5050mRL).
- Stawell: exchange rate US$/A$0.70; gold price $750/oz for the mid-
Magdala and C7 dukes extension areas; gold price $595/oz for all
other areas. Magdala surface above 130mRL and above a nominal
0.8g/t Au cut-off; Wonga surface within a $595/oz optimised pit
shell.
- Young-Davidson: gold price $750/oz; assays are cut to 20 g/t gold
and 20 g/t silver for all zones; underground mineralized
wireframes constructed based on approximately a 1.70 g/t gold cut-
off grade, and a 1.3 g/t incremental cut-off grade and a minimum
true thickness of 3m; open pit mineralized wireframes constructed
based on approximately a 0.60 g/t gold cut-off grade, and a
minimum true thickness 5m; resources are reported at a 2.3
internal cut-off grade; underground blocks are 15m by 15m by 7m
wide while open pit blocks are 5m by 5m by 5m. Both block models
have a percent mineralization field; 3.0m equal length composites
created within the mineralized wireframes; inverse distance
squared grade interpolation; standard search radii lengths and
orientations employed for each mineralized lens; a 2.69 specific
gravity was used; Maptek's Vulcan(R) 7.5 software was used.
8 Mineral reserve estimates were prepared by:
- Kemess South: Gordon Skrecky, Chief Mine Geologist, Kemess mine.
Mr. Skrecky is a member of the Association of Professional
Engineers and Geoscientists of British Columbia and has over
22 years of experience in mineral resource estimation.
- Fosterville: Roddy Ormonde, Mine Technical Superintendent,
Northgate and Marcus Binks, Processing Manager, Northgate. Mr
Ormonde is a member of the Australasian Institute of Mining and
Metallurgy and has over 16 years of relevant engineering
experience. Mr Binks is a member of the Australasian Institute of
Mining and Metallurgy and has over 15 years of relevant
metallurgical experience.
- Stawell: Glenn Miller, Mine Technical Superintendent, Northgate.
Mr. Miller is a member of the Australasian Institute of Mining and
Metallurgy and has over 17 years of relevant engineering
experience.
9 Mineral resource estimates were prepared by:
- Kemess North: including the Nugget Zone, (now all classified as
resources): Jim Gray of GR Technical Services Ltd. and Carl
Edmunds, Exploration Manager, Northgate. Mr. Gray is a member of
the Association of Professional Engineers and Geoscientists of the
province of British Columbia, the Association of Professional
Engineers, Geologists and Geophysicists of Alberta and the
Canadian Institute of Mining and Metallurgy and has over 30 years
of relevant engineering experience. Mr. Edmunds is a member of the
Association of Professional Engineers, Geologists and
Geophysicists of British Columbia and has 21 years of experience
in mineral resource estimation.
- Fosterville: Ian Holland, Production Manager, Northgate and Simon
Hitchman, District Exploration Geologist, Northgate. Mr. Holland
is a member of the Australasian Institute of Mining and Metallurgy
and has over 13 years of relevant geological experience. Mr
Hitchman is a member of the Australasian Institute of Mining and
Metallurgy and the Australian Institute of Geoscientists and has
over 21 years of relevant geological experience.
- Stawell: Mark Haydon, Geology Manager, Northgate, who is a member
of the Australasian Institute of Geoscientists and has over 15
years of relevant geological experience.
- Young-Davidson: Carl Edmunds, Exploration Manager, Northgate.
Corporate Administration
At December 31, 2008, 16,200 tonnes of copper forward sales contracts
remained outstanding at an average price of $2.52 per pound over the period
from November 2009 through October 2010. The change in fair value of the
forward contracts during the quarter was a gain of $48,253,000. The fair value
of these contracts at December 31, 2008 was an asset of $37,134,000 of which
$6,338,000 is included in trade and other receivables for contracts expiring
in 2009 and $30,796,000 is included in other assets. Northgate had no forward
gold contracts outstanding at December 31, 2008.
In February 2009, the Corporation closed out 9,000 tonnes of these copper
forward sales contracts for proceeds of $19,182,000. The closed out contracts
were equally spread over the maturity dates from November 2009 to October
2010.
Corporate administration costs in the fourth quarter of 2008 were
$2,673,000 compared with $3,689,000 in the same quarter last year. While
administrative expenses in Australia increased $398,000, this was more than
offset by lower compensation expenses in the corporate office reflecting the
current economic environment.
Exploration costs in the fourth quarter of 2008 were $4,830,000 compared
to $7,679,000 in the corresponding quarter of 2007. In Canada, exploration
costs of $3,063,000 were incurred primarily at the Young-Davidson property
where the underground ramp development was completed in December and the
remaining shaft refurbishment continues. Exploration expenses in Australia
totalled $1,767,000 during the fourth quarter with $883,000 incurred at
Fosterville and $884,000 incurred at Stawell.
Net interest income was significantly lower at $617,000 in the fourth
quarter of 2008 compared with $4,813,000 in the corresponding quarter of 2007,
resulting from the substantial drawdown in the Corporation's cash balance,
which was used to fund the acquisition of Perseverance Corporation Pty Ltd
("Perseverance").
Northgate granted a total of 155,000 options to employees in the fourth
quarter of 2008, compared to 50,000 in the corresponding period of 2007. At
December 31, 2008, there were 5,758,500 options outstanding, of which
3,080,400 were exercisable.
Northgate recognized an income tax expense of $27,086,000 in the fourth
quarter of 2008 compared to a recovery of $1,486,000 in the corresponding
quarter of 2007. The significant increase in the future income tax expense is
due primarily to a reversal of a future tax asset related to mineral tax
credits. This future tax asset had been recognized in previous years when the
consensus forward price of copper was in excess of $3.00 per pound. The future
income tax expense also reflects the future tax liability relating to
Northgate's copper forward contracts, which are in a significant asset
position. Cash paid during the period for income taxes was $656,000 while no
cash taxes were paid in the corresponding quarter of 2007. Cash payments are
related entirely to Northgate's Canadian operations and are required as the
Corporation is now cash taxable in Canada.
Liquidity and Capital Resources
Working Capital: At December 31, 2008, Northgate had working capital of
$21,947,000 compared with working capital of $235,739,000 at December 31,
2007. The decrease in working capital was primarily the result of the
acquisition of Perseverance. Northgate purchased all outstanding ordinary
shares, warrants, options and convertible securities of Perseverance for cash.
Cash and cash equivalents at December 31, 2008 amounted to $62,419,000
compared with $266,045,000 at December 31, 2007.
During the quarter, Northgate generated cash flow from operations of
$5,858,000 compared to $32,914,000 for the corresponding quarter in 2007. Cash
flow from operations was negatively impacted by lower than expected gold and
copper production at the Kemess mine and the continuing decline of copper
prices. Based on the forecasted gold and copper prices and the foreign
exchange rates used in the current production forecasts at the date of this
press release, Northgate believes that its working capital at December 31,
2008, together with future cash flow from operations, is more than sufficient
to meet its normal operating requirements for the next year.
On June 6, 2008, Northgate filed a short-form universal base shelf
prospectus (the "Prospectus") with the Securities Commissions in each of the
provinces and territories of Canada and a corresponding registration statement
was filed with the United States Securities and Exchange Commission. The
Prospectus will facilitate offerings of Northgate's debt securities, common
shares, warrants, share purchase contracts and share purchase or equity units
or any combination thereof up to an aggregate offering size of Cdn$250,000,000
over a 25-month period.
Financial Instruments: Northgate has exposure to credit risk, liquidity
risk and market risk from its use of financial instruments.
Credit Risk - Credit risk is the risk of potential loss to the
Corporation if a customer or counterparty to a financial instrument fails to
meet its contractual obligations. The Corporation is exposed to credit risk
from its receivables, copper forward contracts and investment securities.
In general, the Corporation manages its credit exposure with respect to
operational matters by transacting only with reputable, highly-rated
counterparties. The Corporation monitors the financial condition of its
customers and counterparties to contracts.
Gold dor� produced in Australia is sold exclusively to AGR Matthey, a
reputable precious metal refiner that has been in business for many years. The
Corporation believes there are other buyers in the marketplace that would buy
such production under approximately the same financial terms. Concentrate
produced at Kemess is sold under a long-term contract to Xstrata Canada
Corporation ("Xstrata"), a wholly-owned subsidiary of the publicly traded
international mining company, Xstrata plc. Kemess gold-copper concentrate is
of a quality that is readily saleable to a number of smelters under current
market conditions. In the event that Xstrata is unable to purchase Kemess
concentrate, it could be sold to other smelters once appropriate logistical
arrangements were put in place.
Northgate is currently also exposed to credit risk on its copper forward
contracts to the extent that the counterparty, Mitsui Bussan Commodities Ltd.
("Mitsui"), a reputable international commodities trading group, fails to meet
its contractual obligations. Northgate has mitigated this risk by obtaining a
parental guarantee from Mitsui's parent company, Mitsui and Co., Ltd. of
Japan. At December 31, 2008, the credit risk exposure relating to the
Corporation's copper forward contracts, which are in an unrealized gain
position, is $37,134,000. In February 2009, Northgate closed out 9,000 tonnes
of these contracts and received the corresponding payment of $19,182,000.
The Corporation limits its exposure to credit risk on investments by
investing only in securities rated AAA by credit rating agencies such as S&P
and Moody's. Management continuously monitors the fair value of its
investments, including ARS (refer to ARS discussion below), to determine
potential credit exposures. Any credit risk exposure on cash and cash
equivalents is considered negligible as the Corporation places deposits only
with major established banks in the countries in which it operates.
The carrying amount of financial assets represents the maximum credit
exposure. As at December 31, 2008, the Corporation's gross credit exposure is
as follows:
-------------------------------------------------------------------------
(Thousands of US dollars)
-------------------------------------------------------------------------
Cash and cash equivalents $ 62,419
Concentrate settlements and other receivables 11,972
Income taxes receivable 6,837
Unrealized gain on copper forward contracts - short-term 6,338
Restricted cash (included in Other Assets) 22,614
Unrealized gain on copper forward contracts - long-term 30,796
Auction rate securities 39,291
-------------------------------------------------------------------------
$ 180,267
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liquidity Risk - Liquidity risk is the risk that the Corporation will not
be able to meet its financial obligations as they fall due. The Corporation
manages this risk such that it will have the ability to discharge its
liabilities when due, both under normal and stressed conditions, without
incurring significant losses or risking damage to the Corporation's
reputation.
The Corporation uses detailed cash forecasts to ensure cash is available
to discharge its obligations when they come due. Cash needed for this purpose
is invested in highly liquid investments.
Market Risk - Market risk is the risk that changes in market prices, such
as commodity prices, foreign exchange rates and interest rates, will affect
the Corporation's income or the value of its financial instruments. Northgate
manages this risk such that it controls this exposure within acceptable
parameters while optimizing the return on risk.
- Commodity Price Risk - Northgate is exposed to commodity price risk
through the price of gold and copper and also through various input
prices such as fuel and electricity. The Board of Directors has
established a Hedging Committee, which assists management in the
identification and analysis of price risks and potential strategies
to mitigate these risks.
The Corporation reviews major input prices on a regular basis and may
enter into long-term contracts to mitigate the price volatility.
The Corporation monitors the price of commodities continuously and
considers the risk exposure to fluctuating prices. In managing that
risk, the Corporation is cognizant that investors generally seek
exposure to the underlying commodities, particularly gold, through
their investment.
All of the Corporation's future gold production is unhedged and is
fully exposed to future price movements.
Gold and copper sales agreements include provisions where final
prices are determined by quoted market prices in a period subsequent
to the date of sale. Revenue and the related receivables are based on
forward prices for the expected date of final settlement. These
financial assets are therefore exposed to movements in the commodity
price.
- Foreign Exchange Rate Risk - The Corporation is exposed to foreign
exchange risk on its financial assets and liabilities denominated in
Canadian dollars. Movements in the Canadian dollar relative to the US
dollar may have a significant impact on earnings.
- Interest Rate Risk - The Corporation is exposed to interest rate risk
on its Short-Term Loan (defined below) and its capital leases. The
short-term loan bears interest at LIBOR plus 100 basis points. The
capital leases bear interest at a fixed rate.
Capital Lease Financing: The Corporation has invested significantly in
plant and equipment at the Fosterville and Stawell mines, including the
conversion to owner mining at Fosterville, which was completed in the second
quarter. Total capital lease financing at Fosterville and Stawell for the year
ended December 31, 2008 was $14,983,000. In the fourth quarter, Stawell
acquired $393,000 in plant and equipment through assumption of a capital
lease.
Investments: Northgate continues to maintain a portion of its investments
in auction rate securities ("ARS"). The par value of the ARS held by the
Corporation is $72,600,000. All of the ARS currently held by the Corporation
were rated AAA at the time of purchase. ARS 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 the
Corporation 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. All ARS currently held by the
Corporation were purchased on its behalf by Lehman Brothers Inc. ("Lehman"),
acting in its capacity as broker agent of Northgate using the discretion
conferred on it. Based on representations from Lehman, Northgate had believed
that the securities conformed to Northgate's internal investment management
policy. Subsequent to the ARS investments of Northgate becoming illiquid,
management of the Corporation received from Lehman a loan collateralized by
the ARS held in the Corporation's investment account managed by Lehman,
pursuant to a Client Agreement between Lehman and Northgate dated October 18,
2007 (the "Short-Term Loan").
Based on investigation conducted after the securities in question became
illiquid, Northgate concluded that a number of representations from Lehman had
been incorrect, and that Lehman had mishandled Northgate's account. On July 3,
2008, Northgate filed a Statement of Claim (the "FINRA Claim") with the
Financial Industry Regulatory Authority ("FINRA") in New York, a
self-regulatory organization with jurisdiction over customer-broker disputes,
regarding alleged mishandling of Northgate's investment account (including the
unauthorized purchase of ARS) by Lehman and several of its employees.
Northgate has alleged that Lehman's inappropriate conduct constituted, among
other things, breach of contract, breach of fiduciary duty, fraudulent
misrepresentation and abuse of discretionary authority. Among the relief
sought by Northgate in the FINRA Claim is a ruling of FINRA relieving
Northgate of its obligation to repay the Short-Term Loan as partial
compensation for losses suffered as a result of the misconduct of Lehman,
effectively 'setting-off' the debt owing by the Corporation to Lehman against
the damages claimed by Northgate from Lehman and its employees.
On September 15, 2008, Lehman Brothers Holdings Inc. ("Lehman Holdings"),
the parent corporation of Lehman, filed for Chapter 11 bankruptcy protection
in the United States, and shortly thereafter Lehman commenced liquidation
proceedings. On September 17, 2008, Barclays Capital ("Barclays") announced
plans to buy certain assets from Lehman Holdings and its subsidiaries pursuant
to an Asset Purchase Agreement with Lehman Holdings, Lehman and other Lehman
affiliates (the "Purchase Agreement"). While Barclays has assumed from Lehman
the management of the account in which the ARS of the Corporation are held,
based on available information, Northgate believes that Barclays did not
assume the Short-Term Loan in the manner prescribed by the court-approved
Purchase Agreement.
From a legal perspective, the FINRA Claim survives the bankruptcy of
Lehman such that the Corporation now may claim against the bankrupt Lehman
estate. In order to preserve its right to claim against the Lehman estate at
the appropriate stage of the bankruptcy administrative process, the
Corporation has arranged for the filing of the necessary Securities Investor
Protection Corporation customer claim and bankruptcy proof of claim with the
appropriate authorities. The Corporation continues to work with its US legal
counsel to collect and analyze additional information regarding Lehman,
including with respect to the residual value in the Lehman estate, applicable
insurance coverage and the aggregate value of competing claims against the
Lehman estate so as to be able to make an informed determination regarding a
prudent course of action going forward.
The estimated fair value of the Corporation's ARS holdings at December
31, 2008 was $39,291,000, which reflects a $30,106,000 decline from the
estimated fair value of $69,397,000 at December 31, 2007. Following the
bankruptcy of Lehman, Northgate retained an independent valuator (the
"Valuator") to assess the fair value of the ARS investments of the
Corporation. The Valuator considered several factors in making such
assessment, including the probability of future defaults by the respective
issuers, the potential impact of recent events in the global financial
markets, the relative seniority of each security within the capital structure
of the issuer, the credit position of financial guarantors and the value of
investments and reserves held by the issuers. While the Corporation continues
to earn interest on all its ARS investments, the estimated fair value of those
issued by derivative product companies (companies involved in the issuance of
credit default swaps) has fallen significantly below par value. Accordingly,
for its investments in these particular securities, the Corporation has
recognized an other than temporary impairment of $20,310,000 into earnings for
the year ended December 31, 2008. The conclusion for an other than temporary
impairment is based on a variety of factors, including the very substantial
decline in the estimated fair value of individual investments over an extended
period, recent downgrades in issuer credit ratings and continuing adversity in
the credit and capital markets.
Based on information currently available, the Corporation believes that
the decline in estimated fair value for the remainder of its ARS investments
(issued by Regulation XXX Insurance companies) is temporary. In determining
that the loss in value is temporary, management considered the fact that these
particular securities have a lower probability of future default, continue to
make interest payments at present, 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. While
the foregoing valuation judgments are based on current information available
and are intended to conform to applicable accounting principles, it is
possible that the actual damage to the Corporation would be considered to be
equal to the par value of the securities under applicable US laws.
Short-Term Loan: Northgate received from Lehman a Short-Term Loan
collateralized by the Corporation's ARS investments subsequent to such ARS
investments becoming illiquid (refer to previous discussion on the Short-Term
Loan under "Investments", above).
As of December 31, 2008, the principal outstanding on the Short-Term Loan
was $43,096,000. 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.
Taxes: In the prior quarter, the Corporation reported on correspondence
received from the Canada Revenue Agency ("CRA") indicating that the CRA's
initial estimate of the Corporation's 95% royalty interest on the Kemess
property, which had been converted to an equity interest in December 2000, was
significantly lower than Northgate's initial valuation. The Corporation filed
its response with the CRA in June 2005. The CRA remained silent on the matter
until July 2007.
The Corporation continued discussions with the CRA and its independent
advisor, Natural Resources Canada, and provided them with an independent
valuation, which supported Northgate's position. In early 2009, the
Corporation received notice from the CRA indicating that they accepted
managements' position on the valuation.
Acquisition of Perseverance: On February 18, 2008, Northgate completed
its acquisition of Perseverance and a total of A$230,552,000 (US$210,516,000)
was paid to Perseverance securityholders. The financial results of
Perseverance have been included in the interim consolidated financial
statements of the Corporation from February 19, 2008.
In connection with the acquisition of Perseverance, the Corporation was
required to pledge a cash amount of A$109,400,000 in the form of a stand-by
letter of credit ("SBLC") in favour of a major Australian financial
institution. A portion of the SBLC was released upon Northgate satisfying a
portion of the debt obligations assumed by the Corporation in connection with
the Perseverance acquisition. The funds remaining in the SBLC at December 31,
2007 were used to settle Perseverance's gold forward contracts for
A$49,317,000 (US$45,550,000) and to pledge certain performance guarantees in
Australia for A$8,020,000 (US$7,434,000). The SBLC was fully extinguished in
the second quarter of 2008.
-------------------------------------------------------------------------
Non-GAAP Measures
Adjusted Net Earnings
The Corporation has prepared a calculation of adjusted net earnings,
which has removed certain non-cash adjustments from its Canadian generally
accepted accounting principles (Canadian GAAP) calculation of net earnings, as
it believes this may be a useful indicator to investors. Adjusted net earnings
may not be comparable to other similarly titled measures of other companies.
(Expressed in thousands
of US$, except share
amounts) Q4 2008 Q4 2007 2008 2007
-------------------------------------------------------------------------
Net earnings $ 18,668 $ 33,309 $ 10,742 $ 39,425
Adjustments
Write-down of
ARS 3,398 - 20,310 -
Unrealized gain
on derivatives
related to the
acquisition
of Perseverance
hedge book - (10,646) (9,836) (10,646)
Write-down of
mining
properties,
net of tax - 328 - 18,879
Fair value
adjustment on
copper forward
contracts,
net of tax (33,671) (21,586) (22,829) 15,581
Valuation
allowance
against tax
asset relating
to mineral
tax credit 10,966 - 10,966 -
Effect of
provisional
pricing on
concentrate
sales, net of
tax 8,016 1,272 (9,273) 2,023
-------------------------------------------------------------------------
Adjusted net
earnings 7,377 2,677 80 65,262
-------------------------------------------------------------------------
Diluted common
shares
outstanding 255,601,069 255,065,987 255,453,093 255,257,756
-------------------------------------------------------------------------
Adjusted net
earnings per
diluted common
share $ 0.03 $ 0.01 $ 0.00 $ 0.26
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash Cost
Northgate 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:
Q4 2008
(Expressed in
thousands of US$,
except per ounce
amounts) Fosterville Stawell Kemess Combined
-------------------------------------------------------------------------
Gold production (ounces) 26,398 30,553 61,314 118,265
-------------------------------------------------------------------------
Cost of sales $ 12,471 $ 11,504 $ 37,872 $ 61,847
Change in inventories and
other 737 208 11,947 12,892
Gross copper and silver
revenue - - (25,869) (25,869)
-------------------------------------------------------------------------
Total cash cost $ 13,208 $ 11,712 $ 23,950 $ 48,870
-------------------------------------------------------------------------
Cash cost ($/ounce) $ 500 $ 383 $ 391 $ 413
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Q4 2007
(Expressed in
thousands of US$,
except per ounce
amounts) Fosterville Stawell Kemess Combined
-------------------------------------------------------------------------
Gold production (ounces) n/a n/a 41,467 41,467
-------------------------------------------------------------------------
Cost of sales n/a n/a $ 60,322 $ 60,322
Change in inventories and
other n/a n/a (4,124) (4,124)
Gross copper and silver
revenue n/a n/a (55,467) (55,467)
-------------------------------------------------------------------------
Total cash cost n/a n/a $ 731 $ 731
-------------------------------------------------------------------------
Cash cost ($/ounce) n/a n/a $ 18 $ 18
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Full Year 2008
(Expressed in
thousands of US$,
except per ounce
amounts) Fosterville(1) Stawell(1) Kemess Combined
-------------------------------------------------------------------------
Gold production (ounces) 60,540 85,824 185,162 331,526
-------------------------------------------------------------------------
Cost of sales $ 48,433 $ 46,531 $ 215,970 $ 310,934
Change in inventories and
other 1,850 1,104 (966) 1,988
Gross copper and silver
revenue - - (164,817) (164,817)
-------------------------------------------------------------------------
Total cash cost $ 50,283 $ 47,635 $ 50,187 $ 148,105
-------------------------------------------------------------------------
Cash cost ($/ounce) $ 831 $ 555 $ 271 $ 447
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Financial and operational data include the results of Fosterville and
Stawell from February 19 to December 31, 2008.
Full Year 2007
(Expressed in
thousands of US$,
except per ounce
amounts) Fosterville Stawell Kemess Combined
-------------------------------------------------------------------------
Gold production (ounces) n/a n/a 245,631 245,631
-------------------------------------------------------------------------
Cost of sales n/a n/a $ 226,933 $ 226,933
Change in inventories and
other n/a n/a (8,616) (8,616)
Gross copper and silver
revenue n/a n/a (223,721) (223,721)
-------------------------------------------------------------------------
Total cash cost n/a n/a $ (5,404) $ (5,404)
-------------------------------------------------------------------------
Cash cost ($/ounce) n/a n/a $ (22) $ (22)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Notice of Conference Call and Webcast of Year-End Results
March 4, 2009 at 10:00 a.m. Toronto time
Conference Call
Please call 416-644-3417 or toll free in North America at 1-800-732-9307.
To ensure your participation, please call five minutes prior to the scheduled
start of the call.
Webcast
The webcast package, including the webcast link and management
presentation, will be available on the morning of March 4 and posted on
Northgate's website at www.northgateminerals.com under the Calendar of Events
section. You may also access the webcast at
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2526480.
Replay
March 4, 2009 at 12:00 p.m. ET until March 18, 2009 at 11:59 p.m. ET.
Replay Access No. 416-640-1917 or 1-877-289-8525
Passcode: 212 955 48 followed by the number sign.
Northgate Minerals Corporation is a mid-tier gold and copper producer
with mining operations, development projects and exploration properties in
Canada and Australia. The company is forecasting record gold production of
392,000 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 Alternext US (formerly
AMEX) under the symbol NXG.
Note to US Investors:
The terms "Mineral Reserve", "Proven Mineral Reserve" and "Probable
Mineral Reserve" are Canadian mining terms as defined in accordance with NI
43-101 Standards of Disclosure for Mineral Projects under the guidelines set
out in the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM")
Standards on Mineral Resources and Mineral Reserves Definitions and Guidelines
adopted by the CIM Council on August 20, 2000. The terms "Mineral Resource",
"Measured Mineral Resource", "Indicated Mineral Resource", and "Inferred
Mineral Resource" used in this news release are Canadian mining terms as
defined in accordance with NI 43-101-Standards of Disclosure for Mineral
Projects under the guidelines set out in the CIM Standards.
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, 2007 or under the heading "Risks and Uncertainties" in Northgate's 2007
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.
Interim Consolidated Balance Sheets
December 31 December 31
Thousands of US dollars 2008 2007
-------------------------------------------------------------------------
(Unaudited)
Assets
Current Assets
Cash and cash equivalents $ 62,419 $ 266,045
Trade and other receivables 18,310 14,014
Income taxes receivable 6,837 -
Inventories 41,546 35,234
Prepaids 1,989 3,087
Future income tax asset 5,259 1,194
-------------------------------------------------------------------------
136,360 319,574
Other assets 53,606 80,181
Long-term receivables - 25,117
Deferred transaction costs 775 1,799
Future income tax asset 1,923 16,507
Mineral property, plant and equipment 358,798 121,337
Investments 39,422 70,074
-------------------------------------------------------------------------
$ 590,884 $ 634,589
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued liabilities $ 56,469 $ 32,551
Taxes payable - 3,310
Short-term loan 43,096 44,835
Capital lease obligations 4,533 2,267
Provision for site closure and reclamation
obligations 8,420 -
Future income tax liability 1,895 872
-------------------------------------------------------------------------
114,413 83,835
Capital lease obligations 6,211 282
Other long-term liabilities 3,368 12,089
Provision for site closure and reclamation
obligations 37,849 49,120
Future income tax liability 14,350 2,487
-------------------------------------------------------------------------
176,191 147,813
Shareholders' equity
Common shares 311,908 309,455
Contributed surplus 5,269 3,940
Accumulated other comprehensive income (90,270) (3,282)
Retained earnings 187,786 176,663
-------------------------------------------------------------------------
414,693 486,776
-------------------------------------------------------------------------
-------------------------------------------------------------------------
$ 590,884 $ 634,589
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Interim Consolidated Statements of Operations and Comprehensive Income
Thousands of US dollars,
except share and per Three Months Ended Twelve Months Ended
share amounts, Dec 31 Dec 31
unaudited 2008 2007 2008 2007
-------------------------------------------------------------------------
Revenue $ 136,748 $ 95,599 $ 460,988 $ 337,546
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cost of sales 61,847 60,322 310,934 226,933
Depreciation and
depletion 18,285 6,131 67,290 34,140
Administrative and
general 2,673 3,689 11,863 10,461
Net interest income (617) (4,813) (6,937) (17,124)
Exploration 4,830 7,679 32,595 29,887
Currency translation
loss (gain) 222 342 (6,725) (6,704)
Accretion of site
closure and
reclamation costs 365 690 1,984 2,559
Writedown of mineral
property - 382 - 31,815
Writedown of auction
rate securities 3,398 - 20,310 -
Other income (9) (10,646) (10,691) (7,820)
-------------------------------------------------------------------------
90,994 63,776 420,623 304,147
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings before
income taxes 45,754 31,823 40,365 33,399
Income tax recovery
(expense)
Current 397 (188) (5,261) (6,446)
Future (27,483) 1,674 (24,362) 12,472
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(23,086) 1,486 (29,623) 6,026
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earnings for the
period $ 18,668 $ 33,309 $ 10,742 $ 39,425
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other comprehensive
income
Reclassification of
net realized gains
on available for
sale securities to
net earnings - - - (315)
Unrealized loss on
available for sale
securities (7,709) (3,486) (30,547) (3,296)
Reclassification of
other than
temporary loss on
available for sale
securities to net
earnings 3,398 - 20,310 -
Unrealized loss on
translation of
self-sustaining
operations (32,627) - (76,751) -
Reclassification of
deferred losses on
gold forward
contracts to net
earnings, net of
tax - 4,956 - 19,005
-------------------------------------------------------------------------
(36,938) 1,470 (86,988) 15,394
-------------------------------------------------------------------------
Comprehensive income
(loss) $ (18,270) $ 34,779 $ (76,246) $ 54,819
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earnings per share
Basic $ 0.07 $ 0.13 $ 0.04 $ 0.16
Diluted $ 0.07 $ 0.13 $ 0.04 $ 0.15
Weighted average
shares outstanding
Basic 255,601,069 254,329,720 255,269,183 254,166,789
Diluted 255,601,069 255,065,987 255,453,093 255,257,756
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Interim Consolidated Statement of Shareholders' Equity
Thousands of Accumulated
US dollars, Other
except Compre-
common Number of Common Contri- hensive
shares, Common Shares buted Income Retained
unaudited Shares Amount Surplus (loss) Earnings Total
-------------------------------------------------------------------------
Balance at
December
31, 2007 254,452,862 $309,455 $ 3,940 $ (3,282) $176,663 $486,776
Transitional
adjustment
on adoption
of inventory
standard - - - - 381 381
Shares issued
under
employee
share
purchase
plan 382,909 406 - - - 406
Shares issued
on exercise
of options 881,300 1,846 (492) - - 1,354
Stock-based
compensation - 201 1,821 - - 2,022
Net earnings - - - - 10,742 10,742
Other
comprehensive
income
(loss) - - - (86,988) - (86,988)
-------------------------------------------------------------------------
Balance at
December
31, 2008 255,717,071 $311,908 $ 5,269 $(90,270) $187,786 $414,693
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Thousands of Accumulated
US dollars, Other
except Compre-
common Number of Common Contri- hensive
shares, Common Shares buted Income Retained
unaudited Shares Amount Surplus (loss) Earnings Total
-------------------------------------------------------------------------
Balance at
December
31, 2006 253,700,033 $307,914 $ 2,596 $ - $137,238 $447,748
Transitional
adjustment
on adoption
of financial
instruments
standard - - - (18,676) - (18,676)
Shares issued
under
employee
share
purchase
plan 177,209 367 - - - 367
Shares issued
on exercise
of options 575,620 991 (302) - - 689
Stock-based
compensation - 183 1,646 - - 1,829
Net earnings - - - - 39,425 39,425
Other
comprehensive
income - - - 15,394 - 15,394
-------------------------------------------------------------------------
Balance at
December
31, 2007 254,452,862 $309,455 $ 3,940 $ (3,282) $176,663 $486,776
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Interim Consolidated Statements of Cash Flows
Three Months Ended Twelve Months Ended
Thousands of US Dec 31 Dec 31
dollars, unaudited 2008 2007 2008 2007
-------------------------------------------------------------------------
Operating activities:
Net earnings for
the period 18,668 $ 33,309 $ 10,742 $ 39,425
Non-cash items:
Depreciation and
depletion 18,285 6,131 67,290 34,140
Unrealized currency
translation
losses (gains) (4,087) (1,379) (6,215) 1,362
Unrealized gain on
derivatives - (10,646) (9,836) (10,646)
Accretion of site
closure and
reclamation costs 365 690 1,984 2,559
Loss on disposal
of assets (99) - 13 -
Amortization of
hedging losses - 7,523 - 28,848
Amortization of
deferred charges 53 (15) 214 214
Stock-based
compensation 292 345 2,022 1,829
Accrual of employee
severance costs 602 - 1,571 -
Future income tax
expense (recovery) 27,483 (1,674) 24,362 (12,472)
Change in fair
value of forward
contracts (48,253) (31,513) (32,716) 22,746
Writedown of auction
rate securities 3,398 - 20,310 -
Writedown of mineral
property - 382 - 31,815
Gain on sale of
investments - - (1) (315)
Changes in operating
working capital and
other (10,849) 29,761 (14,752) (14,220)
-------------------------------------------------------------------------
5,858 32,914 64,987 125,285
-------------------------------------------------------------------------
Investing activities:
Release of
restricted cash - - 67,496 -
Increase in
restricted cash (288) (51,000) (25,011) (51,000)
Purchase of
mineral property,
plant and
equipment (7,416) (2,565) (27,940) (13,825)
Mineral property
development (6,491) - (30,450) -
Transaction costs
paid 19 (1,673) (2,893) (1,673)
Acquisition of
Perseverance, net
of cash acquired - - (198,772) -
Acquisition of
receivables - (25,434) - (25,434)
Repayment of
Perseverance hedge
portfolio - - (45,550) -
Proceeds from sale
of equipment 155 - 3,389 -
Purchase of
investments - - - (72,922)
Proceeds from sale
of investments - - 1 -
-------------------------------------------------------------------------
(14,021) (80,672) (259,730) (164,854)
-------------------------------------------------------------------------
Financing activities:
Repayment of
capital lease
obligations (1,343) (638) (6,259) (2,476)
Financing from
credit facility 402 44,835 9,147 44,835
Repayment of credit
facility (925) - (10,886) -
Repayment of other
long-term
liabilities (200) - (946) -
Issuance of common
shares 60 415 1,760 1,056
-------------------------------------------------------------------------
(2,006) 44,612 (7,184) 43,415
Effect of exchange
rate changes on
cash and cash
equivalents 888 - (1,699) -
-------------------------------------------------------------------------
Increase (decrease)
in cash and cash
equivalents (9,281) (3,146) (203,626) 3,846
Cash and cash
equivalents,
beginning of
period 71,700 269,191 266,045 262,199
-------------------------------------------------------------------------
Cash and cash
equivalents, end
of period $ 62,419 $ 266,045 $ 62,419 $ 266,045
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplementary information
Cash paid during the period for:
Interest $ 926 $ 266 $ 3,669 $ 482
Income taxes 656 - 6,053 -
Purchase of mineral
property, plant and
equipment by
assumption of
capital lease
obligations 393 - 14,983 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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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