Vancouver — In 2002,
The indicated resource is now pegged at 407 million tonnes averaging 0.409 gram gold and 0.224% copper, based on a cutoff grade of 0.6 gram gold-equivalent per tonne. The indicated resource also includes a higher-grade core of 185 million tonnes averaging 0.511 gram gold and 0.275% copper, based on a 0.8-gram gold-equivalent cutoff. The inferred portion contains 107 million tonnes averaging 0.36 gram gold and 0.18% copper, based on a 0.6-gram cutoff.
The Nugget zone, situated 1.3 km west of the Kemess North deposit, hosts about 87 million tonnes averaging 0.38 gram gold and 0.16% copper, based on a 0.6-gram cutoff using a copper price of US95 per lb. The deposit remains open in all directions. This year, Northgate will continue to drill the Nugget zone with the goal of identifying a high-grade core similar that found at Kemess North.
Kemess North is expected to enter production once resources at Kemess South are depleted. The development plan envisions utilizing the Kemess South pit to impound mill tailings from Kemess North.
“This [mine plan] virtually eliminates the US45-per-tonne burden we currently bear for pumping tailings to our present tailings facility,” says Stowe. “We expect to substantially lower our unit milling costs and increase metal production by adding a secondary crushing stage, which, in combination with the softer Kemess North ore, should allow us to process material at a rate approaching 75,000 tonnes per day.”
Production at Kemess North would begin in 2009 at an estimated rate of 250,000 oz. gold and 50,000 tonnes copper per year. The mine life is greater than 10 years.
Capital costs are estimated at US$150 million, half of which would be devoted to prestripping. The balance of the capital would be allocated to the construction of satellite infrastructure at Kemess North and a tunnel conveyer system to bring ore to the existing mill.
This year, Northgate has five main priorities:
q move a significant portion of the resource at Kemess North into the reserve category;
q make incremental metallurgical improvements at Kemess South;
q explore the Nugget zone and other adjacent areas;
q explore the Highland Gold and Brenda properties; and
q obtain a listing on the American Stock Exchange.
In February, Northgate inked a deal with StrataGold, a subsidiary of
According to the deal, Northgate must spend $5 million on exploration over four years, the minimum for the current year being $700,000. In addition, it is required to make property payments totalling $210,000. Once vested, Northgate can boost its interest to 60% by completing a feasibility study.
Percussion drilling in 1990 defined an oxidized gold resource in the Main zone, which was estimated to host 3.2 million tonnes grading 1.1 grams gold. The Main zone resource is immediately south of a large aeromagnetic anomaly. Northgate believes that the property has the potential to host a large sediment-hosted gold deposit similar to those found in the Carlin district in Nevada.
Profit and loss
The company posted a profit for the fourth quarter of 2002, thanks to higher gold prices and increased production at its Kemess South mine in British Columbia.
Northgate earned US$356,000 (or nil per share) on revenue of US$32.6 million during the recent quarter, compared with a loss of US$7.7 million (US31 per share) on revenue of US$21.9 million in the corresponding period of 2001.
The average metals prices received on sales during the quarter, before hedging, were US$322 per oz. for gold and US70 per lb. for copper, compared with year earlier prices of US$279 per oz. and US65 per lb.
Cash costs for the quarter were US$194 per oz, substantially lower than the US$215 per oz. recorded a year earlier.
In addition new records of 74% and 86% for quarterly gold and copper recoveries, respectively, were set during the recent 3-month period.
However, for all of 2002, the company tabled a total loss of US$14.2 million (US14 per share) after the one-time cost of closing US$9.8 million worth of gold forward contracts. The comparable loss in 2001 was US$9.9 million (US58 per share) on revenue of US$98.3 million.
At the end of 2002, Kemess had forward sales commitments to deliver 350,000 oz. gold at an average accumulated price of US$302 per oz. These commitments are in the form of spot deferred contracts. A portion of this position may be brought and settled into income during 2003, and another portion will eventually be rolled into future years as part of the company’s commitments under its project loan.
“Northgate has not changed its commitment to hedge only as much future production as we are required to under the terms of our project loan and to make maximum use of puts instead of outright forward sales in order to preserve price upside for our shareholders,” says Jon Douglas, the company’s senior vice- president.
The company produced a record 282,300 oz. gold and 73 million lbs. copper from the Kemess South mine during 2002, compared with 277,000 oz. and 66 million lbs. in 2001.
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