Northgate sizes up Kemess North

According to a recently completed prefeasibility study, Northgate Exploration‘s (NGX-T) Kemess North gold-copper project in north-central British Columbia contains a minable resource of 4 million oz., enough for a mine life of 11 years.

The resource is contained in 369 million tonnes running 0.34 grams gold and 0.18% copper. The estimate is based on a gold price of US$325 per oz., and US95 per lb. of copper.

The plan at Kemess North calls for development of an open-pit operation in 2005, with pre-stripping to begin a year later. Initially, a primary crusher, semi-autogenous grinding (SAG) mill and truck maintenance depot would be built at Kemess North. By the fourth quarter of 2006, ore would be crushed and milled to minus 0.5 inch and sent some 7 km to the south to Kemess South’s mill and flotation circuit. The first ore would see treatment in the fourth quarter of 2006.

Under an optimized mine plan, the North and South pits will run in tandem beginning in late 2006. The scheme allows for an annual mining rate of around 50 million tonnes per year, and annual mill throughput of 25 million tonnes. It also minimizes waste stripping (Kemess North’s life of mine stripping ratio is 0.6-to-1), and requires the addition of only two 260-ton haul trucks, two bulldozers, a grader and a small pit-wall drill.

By late 2009, when Kemess South is depleted of ore, the mine’s two SAG mills and crusher will be moved to Kemess North, where the three mills will combine for an annual throughput rate of 34 million tonnes until 2019. Ultimately, the depleted South mine will be used for tailings impoundment.

Between 2004 and 2009, gold production from Kemess is forecast at 283,000 oz. at a cash cost of US$173 apiece, falling to an average of 228,000 oz. at US$135 per oz. over the subsequent decade. Cash costs over the operation’s entire 16-year mine life are pegged at US$150 per oz. Conversely, copper production over the same periods will be 77 million and 117 million lbs., respectively.

During the second quarter, Kemess South produced 69,226 oz. of gold and 19.5 million lbs. of copper, both up from a year earlier, thanks a 16% increase in mill throughput to 50,526 tonnes daily, and the processing of higher-grade ore during the last half of June. In all, the mine is expected to produce about 293,000 oz. of gold and 73.5 million lbs. of copper in 2003, as mining moves back to higher-grade areas of the pit.

Northgate says that Kemess North’s hypogene ore is similar to that at Kemess South. So far, metallurgical test work indicates life-of-mine recoveries of 62% for gold and 89% for copper. Northgate hopes that fine-tuning of the Kemess South flotation circuit will improve recovery assumptions used in the final feasibility study.

The proposed operation generates an internal rate of return of 11% at a gold price of US$375 per oz., US95 per lb. copper, and exchange rate of US$1.50 per Canadian dollar. Capital costs ring in at $157 million ($127 million coming early on), with annual sustaining capital of $5.5 million between 2010 and 2019.

Northgate expects to wrap up an ongoing final feasibility study at Kemess North during the first quarter of 2004. Geotechnical and condemnation drilling, pit design and the selection of sites for roads and tailings impounds continue. The company has also begun environmental studies in anticipation of an environmental impact study.

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