Northgate raises $140 million

Vancouver — Northgate Exploration (NGX-T) has raised $140 million through equity financing and recapitalization in order to strengthen the company’s financial position.

The financing will consist of a $20 million unit offering of common shares and share purchase warrants as well as a $5 million issue of flow-through common shares which will be sold through a special warrant issue. An additional $25 million will be raised as a rights offering to current common shareholders. The offering will consist of common shares and warrants that will be underwritten by BC Pacific Capital, Northgate’s largest shareholder. The remaining $90 million will consist of a private placement of 8% convertible preferred shares arranged by Trilon Financial.

“I am delighted to announce this transaction as it strengthens Northgate’s financial position and completes the refinancing of the acquisition debt incurred to acquire the Kemess Mine in 2000.” said Ken Stowe, President and CEO of Northgate. “With this major objective complete, the company will now focus on growth opportunities and, in particular, developing the Kemess North project where drilling this year has defined an expanded inferred resource containing 5.7 million oz. gold.”

The Kemess North project is situated 7 km north of the Kemess South gold-copper mine in western British Columbia. The project now hosts a resource of 442 million tonnes grading 0.4 gram gold per tonne and 0.23% copper. This calculation is based on a gold-equivalent cutoff grade of 0.6 gram gold per tonne and gold and copper prices of US$325 per oz. and US90 per lb., respectively. The deposit hosts a higher-grade core of 170 million tonnes grading 0.5 gram gold and 0.29% copper based on a cutoff of 0.6 gram gold.

Reserves at Kemess South are pegged at 145.9 million tonnes grading 0.65 gram gold per tonne and 0.24% copper. This year, Northgate hopes to produce a total of 275,000 oz. gold and 30,390 tonnes copper at a cash cost of US$200 per oz. gold (net of byproduct credits).

The details of the $140 million financing are as follows;

• An issuance of 15.87 million special warrants to a syndicate of investment dealers comprised of Griffiths McBurney & Partners, CIBC World Markets, TD Newcrest and Trilon Securities. The special warrants will be priced at $1.26 per unit for a gross proceeds of $20 million.
• The underwriters have the option to purchase up to 3.9 million additional special warrants at a price of $1.26 per unit for a gross proceeds of $5 million up to 5 years from the closing date.
• Each special warrant will entitle the holder to acquire one common share of Northgate and one-half of a purchase warrant. Each whole warrant entitles the holder to acquire on common share for $3.00 at any time until the fifth anniversary of the closing date of the deal.
• An issuance of 3.57 million flow-through special warrants at a price of $1.40 per flow-through special warrant for a gross proceeds of $5.0 million. Each flow-through special warrant entitles the holder to acquire an additional flow-through common share for no extra cost.
• A rights offering of up to 19.8 million units priced at $1.26 per unit for a gross proceeds of $25 million. Each unit consists of one common share and one-half of one warrant. Each whole warrant entitles the holder to acquire on common share for $3.00 at any time until the fifth anniversary of the closing date of the deal.
• A private placement to Trilon of $90 million convertible preferred shares. The preferred shares will be issued in two series. The $45 million Series 1 convertible preferred shares will have a cumulative and fixed dividend rate of 8% and are not redeemable. The $45 million Series 2 convertible preferred shares will also have a cumulative and fixed dividend rate of 8% but will be redeemable prior to December 31, 2002 at 110% of par plus accrued and unpaid dividends and prior to December 31 2003 at 120% of par plus accrued and unpaid dividends. Both series 1&2 preferred shares are convertible into common shares at a price of $1.51 per common share or are retractable at $25 per share, plus accrued and unpaid dividends, prior to December 31, 2006 or the date of a change of control of the company.

The net proceeds from the issue of the flow-through special warrants will be put towards exploration at Northgate’s Kemess North project during 2002. The net proceeds from the issue of the unit special warrants, the rights offering and the preferred shares will be used to repay Northgate’s financial obligation to Trilon. The remainder, estimated at $4 million will be used for working capital purposes including the expenses of the financing.