Northgate Reports First Quarter Production Results And Updated 2008 Production Forecast
VANCOUVER, April 21 - (All figures are in US dollars except where
noted) - Northgate Minerals Corporation (TSX: NGX, AMEX: NXG) today reported
its first quarter 2008 operating results and updated 2008 production forecast,
as well as its exploration plans for its Australian operations.
FIRST QUARTER 2008 HIGHLIGHTS
- Total quarterly gold production of approximately 90,000 ounces at
Northgate's three operating mines at an average net cash cost of
production of $347 per ounce of gold.
- Kemess produced 49,583 ounces of gold at a cash cost of $105 per
ounce.
- Stawell produced 28,363 ounces of gold at a cash cost of $428 per
ounce.
- Fosterville produced 11,655 ounces of gold at a cash cost of $1,185
per ounce. Cash costs were temporarily much higher than normal as
mining activities were curtailed to facilitate the smooth and safe
transition to owner mining soon after the acquisition closing of
Perseverance Corporation.
- Kemess produced 14.4 million pounds of copper in concentrate.
- A new three-year collective agreement was ratified by the
International Union of Operating Engineers Local 115, representing
the 300 production and maintenance employees at Kemess.
- Indicated resources underground at Young-Davidson increased by 137%.
- A Memorandum of Understanding ("MOU") for the development of the
Young-Davidson mine was signed with the Matachewan First Nation.
2008 PRODUCTION FORECAST HIGHLIGHTS
- Total gold production is forecast to be 425,000 ounces: 236,000
ounces at Kemess; 112,000 ounces at Stawell; and, 77,000 ounces at
Fosterville. Gold production attributable to Northgate from the date
of acquisition for Stawell and Fosterville is 95,000 ounces and
70,000 ounces, respectively, bringing total production attributable
to Northgate to 401,000 ounces. All of Northgate's present and future
gold production is unhedged.
- Northgate's overall cash cost of gold production, net of by-product
credits, is forecast to be $272 per ounce of gold assuming a copper
price of $3.50 per pound and exchange rates of Cdn$/US$1.00 and US$/A
$0.93.
- In Australia, Northgate plans to spend a total of $10 million for
exploration on near mine targets designed to increase mineable
reserves at Stawell and Fosterville.
Ken Stowe, President & CEO, commented, "This is the first time we are
reporting production for our two newly acquired Australian mines. The
transition to Northgate ownership has gone smoothly and the management teams
at both sites are now working diligently on addressing the critical strategic
issues that we identified during our due diligence. At Stawell, the key
challenge is to increase ore reserves and we are ramping up an aggressive
$7 million exploration program, which has already had significant success at
the Golden Gift 6 zone as announced last week. At Fosterville, we are in the
process of implementing a number of fundamental operating changes that are
required in order to produce the dramatic improvements in performance that we
expect to see over the remainder of 2008. The conversion to owner mining,
which was announced only a few days after the acquisition was completed, is
one such important example. Meanwhile, closer to home, we are pleased to have
reached a new three-year collective agreement at Kemess without any disruption
to scheduled production. In addition, excellent progress continues to be made
at the Young-Davidson project with the announcement in February of a 137%
increase in indicated resources underground and the signing of a Memorandum of
Understanding with the Matachewan First Nation. 2008 will truly be a
transformational year for the company."
RESULTS OF OPERATIONS - Q1 2008
Canadian Operations
Kemess South Mine
The Kemess South mine posted production of 49,583 ounces of gold and
14.4 million pounds of copper in the first quarter of 2008 at a net cash cost
of $105 per ounce. Metal production was adversely affected by a number of
factors, including several unscheduled power outages by BC Hydro, which
disrupted scheduled production for a total of five days in the quarter. In the
first quarter, Kemess milled approximately 4.2 million tonnes of ore grading
0.522 grams per metric tonne (g/t) gold and 0.182% copper.
The following table provides a summary of operations from the Kemess
South mine for the first quarter of 2008:
| (100% of production basis) | Q1 2008 |
| Ore plus waste mined (tonnes) | 8,536,638 |
| Ore mined (tonnes) | 4,766,372 |
| Stripping ratio (waste/ore) | 0.791 |
| | |
| Ore milled (tonnes) | 4,243,891 |
| Ore milled per day (tonnes) | 46,636 |
| | |
| Gold grade (g/t) | 0.522 |
| Copper grade (%) | 0.182 |
| | |
| Gold recovery (%) | 70 |
| Copper recovery (%) | 85 |
| | |
| Gold production (ounces) | 49,583 |
| Copper production (thousands pounds) | 14,380 |
| | |
| Net cash cost ($/ounce)(1) | 105 |
(1) Cash cost figures are unaudited estimates and are subject to
revision.
Young-Davidson Project
Significant progress on all fronts was made at Young-Davidson during the
first quarter. On February 6, 2008, a revised resource estimate was announced
in which total indicated underground resources increased by 137% to 1.42
million ounces. Total resources on the property include 1,418,000 ounces of
indicated and 440,000 ounces of inferred resources underground and a further
464,000 ounces of measured and indicated resources in the proposed open pit.
Exploration drilling continued from surface and underground during the
quarter. To date, a total of 10,353 metres of diamond drilling have been
completed as part of the $5 million 2008 drilling program, which is designed
to increase resources between the two main zones of mineralization at depth
and move additional inferred resources into the indicated category in the
Upper Boundary zone.
The underground ramp development continued with an additional 674 metres
during the quarter. A cross cut drift was completed through the Upper Boundary
zone where a 40-tonne bulk sample was extracted for grinding circuit pilot
plant testing.
On March 26, 2008, Northgate signed an MOU with the Matachewan First
Nation. The MOU outlines the framework for the negotiation of an Impact and
Benefit Agreement, which will establish the long-term working relationship
between Northgate and the Matachewan First Nation during the development and
operation of the mine.
Northgate is also working on a 43-101 compliant Preliminary Assessment
Report, which is nearing completion and is expected to be released by the end
of the second quarter of 2008.
Australian Operations
Stawell Gold Mine
The Stawell mine produced a total of 28,363 ounces of gold in the first
quarter of 2008 at a net cash cost of $428 per ounce. Gold production
attributable to Northgate from the date of acquisition was 11,508 ounces.
During the quarter, gold production was 1,600 ounces higher than forecast,
primarily due to significantly higher than predicted ore grades in the
underground mine. Approximately 167,000 tonnes of ore were milled at a grade
of 5.96 g/t in the first quarter of 2008. Gold recoveries in the mill were in
line with expectation at 89%.
Fosterville Gold Mine
The Fosterville mine produced 11,655 ounces of gold in the first quarter
of 2008 at a net cash cost of $1,185 per ounce. Gold production attributable
to Northgate from the date of acquisition was 4,782 ounces. Production at
Fosterville during the quarter was negatively affected by two mining shutdown
events. The first was a 10 day suspension of underground mining that began
just before Christmas while the mine was still controlled by its previous
owner. During this suspension, ore from surface stockpiles was milled to
maintain gold production, which reduced the amount and quality of ore
available for processing in January. Upon assuming control of the mine on
February 19, 2008, Northgate temporarily suspended underground mining
activities for a period of eight days from February 21 - 28, 2008 in order to
facilitate a thorough review of operating procedures in the underground and
provide additional safety training to its mining personnel. In addition to
taking these safety steps, a number of key initiatives were put in motion to
ensure the long-term success of the mine, including conversion to owner mining
from contractor mining and implementation of a gold recovery enhancement
program to improve overall efficiency and lower costs. The transition to owner
mining, which includes the purchase of new mining fleet, is well advanced and
is expected to be completed by June 2008.
During the quarter, gold recoveries in the milling circuit were well
below historic levels due to the treatment of a very high proportion (60%) of
stockpiled inherently lower recovery carbonaceous ores during the month of
January due to the extended shutdown of underground activities in late
December. This ore type is primarily associated with the Fosterville fault and
typically makes up about 8%-10% of the ore delivered to the mill. Current and
future ore sources have significantly less carbon content and recoveries had
returned to normal levels by March 2008.
A comprehensive recovery improvement project has been initiated in order
to significantly increase the 75%-80% average gold recovery levels achieved in
the past. The project team includes both Northgate staff and world-renowned
experts in the field. A pilot plant is expected to arrive on site at the end
of April, which will expedite the testing of a number of process improvements
that have already been identified as having a high probability of success.
Approximately 139,000 tonnes of ore were milled at a grade of 4.3 g/t in
the first quarter of 2008.
The following table provides a summary of operations from Australian
operations during the first quarter:
2008 Q1 Australian Mine Production
| (100% of production basis)(1) | Stawell | Fosterville |
| Ore mined (tonnes) | 150,217 | 110,904 |
| Ore milled (tonnes) | 166,835 | 139,492 |
| | | |
| Gold grade (g/t) | 5.96 | 4.30 |
| Gold recovery (%) | 89 | 54 |
| | | |
| Gold production (ounces) | 28,363 | 11,655(3) |
| | | |
| Net cash cost ($/ounce)(2) | 428 | 1,185 |
(1) Production from Stawell and Fosterville attributable to Northgate as
of February 18, 2008.
(2) Cash cost figures are unaudited estimates and are subject to
revision.
(3) Gold production at Fosterville includes a gold in circuit inventory
drawdown of approximately 1,200 ounces.
2008 PRODUCTION FORECAST FOR AUSTRALIAN MINES
Northgate acquired Perseverance Corporation Ltd. on February 19, 2008.
The production forecast provided herein incorporates full first quarter
production figures with forecast figures for the last three quarters of the
2008 calendar year. 2008 gold production for Stawell and Fosterville is
attributable to Northgate from the date of the acquisition.
Stawell Gold Mine
The Stawell Gold mine is located in the historic Stawell goldfield that
has produced approximately five million ounces of gold dating back to the
mid-19th century Victorian gold rushes. Since the commencement of modern day
production in 1984 to the end of 2007, approximately 1.8 million ounces of
gold have been produced from the Stawell operation. The following chart
provides a summary of historical production at the Stawell Gold mine.
www.northgateminerals.com/Theme/Northgate/files/Releases/2008/SGM_History.gif
In 2008, the Stawell mine plan calls for 736,000 tonnes to be milled at
an average grade of 5.3 g/t. Gold recovery is forecast to be 89% and total
gold production is expected to be 112,000 ounces.
Capital expenditures at Stawell include $3.5 million for mill capital and
$7.5 million for the development infrastructure required for the G5 mining
block where current reserves are being mined. Infrastructure will consist of
ramp, level and vent raise development. In addition, taking advantage of the
conversion to owner mining at Fosterville, the productivity of the Stawell
underground truck fleet will be dramatically upgraded by the addition of three
new 60-tonne trucks for a total investment of approximately $5 million. The
present 50-tonne trucks at Stawell will be transferred to Fosterville, which
operates at much shallower depths, where these trucks can be more efficiently
utilized.
Fosterville Gold mine
The Fosterville Gold mine is located 20 kilometres east of Bendigo in the
heart of a region that is estimated to have produced 22 million ounces of gold
since the first discovery in 1851. While historic production at Fosterville
focused on over 20 small open pits, underground development began in 2006. The
last open pit ore was mined in late 2007 and future production is expected to
come predominately from underground.
In 2008, the Fosterville mine plan calls for the mill to process a total
of 572,000 tonnes at a grade of 5.6 g/t. Gold recovery is estimated to be 75%
on average during the year and total 2008 production is forecast to be 77,000
ounces. Gold production will ramp up significantly in the fourth quarter to
long-term levels as the previously underfunded underground development gets
ahead of the production front for the first time since underground operations
commenced in 2006. Although it is not built into the current plan, it is also
expected that significant benefits of the metallurgical improvement program
will start to become evident as the year progresses.
Capital development in the underground is forecast to be $21 million,
which will be used to advance the decline below the 4900-level and establish
the infrastructure for mining in the wider areas of the main Phoenix orebody.
In addition, $25 million will be invested during the year on mobile and fixed
plant equipment in conjunction with the conversion to owner mining.
The following table provides a summary of quarterly gold production and
cash costs for 2008.
| 2008 Gold Production | | | | |
| (ounces)(1) | Kemess | Stawell | Fosterville | Total |
| Q1 Actual | 49,583 | 28,363 | 11,655 | 89,601 |
| | | | | |
| Forecast | | | | |
| Q2 | 47,000 | 27,000 | 17,000 | 91,000 |
| Q3 | 67,500 | 29,000 | 19,000 | 115,500 |
| Q4 | 71,500 | 28,000 | 29,000 | 128,500 |
| | 236,000 | 112,000 | 77,000 | 425,000 |
| 2008 Gold Cash Cost | | | | |
| ($/oz)(2,3) | Kemess | Stawell | Fosterville | Combined |
| Q1 Actual | 105 | 428 | 1,185 | 347 |
| | | | | |
| Forecast | | | | |
| Q2 | 182 | 501 | 878 | 405 |
| Q3 | (76) | 466 | 744 | 196 |
| Q4 | (54) | 465 | 545 | 195 |
| | $ 20 | $ 464 | $ 764 | $ 272 |
(1) Production from Stawell and Fosterville attributable to Northgate as
of February 18, 2008
(2) Cash cost figures are unaudited estimates and are subject to
revision.
(3) Assuming copper price of $3.50 per pound and an exchange rate of
Cdn$/US$1.00 at Kemess; US$/A$0.93 for Fosterville and Stawell
2008 EXPLORATION PLAN
Stawell Gold Mine
During 2008, Northgate has allocated $7 million towards an aggressive
exploration plan at Stawell in order to identify new underground resources and
to convert resources to reserves through underground diamond drilling and
surface exploration. Northgate recently announced very positive drill results
from the Golden Gift 6 (GG6) zone at the Stawell Gold mine in a press release
dated April 15, 2008 and will be completing a resource estimation for this
zone in June. In addition to the drill results at GG6, Northgate is also
targeting the North Magdala zone as a high priority target given its close
proximity to existing mine workings (Figure 1) and the highly prospective
nature of the target. The North Magdala campaign will be conducted from both
surface and underground. Five to six holes will be wedged off an existing
surface hole (SD622), which had an intercept of 9.4m @ 8.35 g/t gold.
Coupled with the recent results in GG6, the North Magdala program is expected
to add significant resources and extend the present mine life at Stawell.
Figure 1: Stawell - North Magdala Target (Vertical, West Looking,
Longitudinal Section with Metric Grid)
www.northgateminerals.com/Theme/Northgate/files/Releases/2008/SGM_NMag.gif
Fosterville Gold Mine
Northgate has allocated $3 million during 2008 towards definition
drilling of the Wirrawilla Zone (Figure 2), which lies about 1.5 kilometres
south of the Fosterville processing facility and 800 metres south of and 500
metres above the known southern extents of the Phoenix resource.
Mineralization at Wirrawilla plunges south, averaging true widths of 3m - 5m.
The drill spacing in this zone is presently 100m north-south by 50m down
plunge. Significant Wirrawilla downhole drill intercepts include:
SPD261: 10.7m at 11.2 g/t gold
SPD382A: 6.5m at 7.9 g/t gold
SPD379: 4.9m at 6.5 g/t gold
The Wirrawilla area has an inferred resource of 4.6 million tonnes @
3.3 g/t gold for 500,000 contained ounces using a 2.0 g/t gold lower cut-off.
At a higher 3.0 g/t gold cut-off, which approximates the present underground
mining cut-off grade, there is 2.7 million tonnes @ 4.1 g/t gold for
350,000 contained ounces.
The resource definition drilling program will begin in late April and
entail 5,000m of reverse circulation and 12,000m of diamond drilling to
increase the drill hole density to 50m north-south and 50m down-dip.
Geotechnical and metallurgical studies will be undertaken as drilling
progresses.
On a regional basis, Northgate has begun a program to evaluate the
extensive land package around the Fosterville mining lease. Within the land
package, the first priority is a reconnaissance drill program at Myrtle Creek
south of Fosterville, where there are extensive historic workings that have
not been subject to modern exploration and diamond drill testing.
Figure 2: Fosterville Wirrawilla Area
www.northgateminerals.com/Theme/Northgate/files/Releases/2008/Wirrawilla.gif
Northgate will release its full first quarter financial results after
market close on May 1, 2008. A conference call and webcast for investors and
analysts will take place on the following day at 10:00 am Toronto time.
NORTHGATE MINERALS CORPORATION is a mid-tier gold and copper producer
with mining operations, development projects and exploration properties in
Canada and Australia. The company is forecasting over 400,000 ounces of
unhedged gold production in 2008 and is targeting growth through further
acquisitions in stable mining jurisdictions around the world. Northgate is
listed on the Toronto Stock Exchange under the symbol NGX and on the American
Stock Exchange under the symbol NXG.
FORWARD-LOOKING STATEMENTS
This news release contains certain "forward-looking statements" and
"forward-looking information" as defined under applicable Canadian and U.S.
securities laws. Forward-looking statements generally can be identified by the
use of forward-looking terminology such as "may," "will," "expect," "intend,"
"estimate," "anticipate," "believe," or "continue" or the negative thereof or
variations thereon or similar terminology. Forward-looking statements are
necessarily based on a number of estimates and assumptions that are inherently
subject to significant business, economic and competitive uncertainties and
contingencies. Certain of the statements made herein by Northgate Minerals
Corporation ("Northgate") including those related to future financial and
operating performance and those related to Northgate's future exploration and
development activities, are forward-looking and subject to important risk
factors and uncertainties, many of which are beyond the Corporation's ability
to control or predict. Known and unknown factors could cause actual results to
differ materially from those projected in the forward-looking statements. Such
factors include, among others: gold price volatility; fluctuations in foreign
exchange rates and interest rates; impact of any hedging activities;
discrepancies between actual and estimated production, between actual and
estimated reserves and resources and between actual and estimated
metallurgical recoveries; costs of production, capital expenditures, costs and
timing of construction and the development of new deposits; and, success of
exploration activities and permitting time lines. In addition, the factors
described or referred to in the section entitled "Risk Factors" of Northgate's
Annual Information Form (AIF) for the year ended December 31, 2007 or under
the heading "Risks and Uncertainties" of Northgate's 2007 Annual Report, both
of which are available on SEDAR at www.sedar.com, should be reviewed in
conjunction with this document. Accordingly, readers should not place undue
reliance on forward-looking statements. The Corporation does not undertake any
obligation to update publicly or release any revisions to forward-looking
statements to reflect events or circumstances after the date of this document
or to reflect the occurrence of unanticipated events, except in each case as
required by law.
No interests defined.
