Review panel gives Kemess North a no

Vancouver – A prolonged decision process administered by a joint federal-provincial environmental review panel has finally come to its conclusion, dealing Northgate Minerals (NGX-T, NXG-X) a significant blow in recommending planned development of the Kemess North copper-gold deposit in north-central British Columbia not be approved as proposed.

The panel concluded, “development of the Kemess North copper-gold project in its present form would not be in the public interest,” and that, “economic and social benefits provided by the project, on balance, are outweighed by the risks of significant adverse environmental, social and cultural effects, some of which may not emerge until many years after mining operations cease.”

Under the Canadian Environmental Assessment Act, the panel’s recommendation will go to Ministers of the Environment at the federal and provincial levels.

Northgate’s Kemess North deposit has been described as a “larger sister” to its Kemess South porphyry copper-gold deposit currently being mined by open pit methods and located about six km away.

A 2004 feasibility study on Kemess North indicated positive economics and an estimated production life of almost a dozen years.

Plans are for Kemess North ore to be initially blended with the current Kemess South operation until its reserves are exhausted, then continue using the existing processing facilities. Life-of-mine production of about 2.7 million oz. gold and 1.2 billion lbs. (550,000 tonnes) copper were projected from the North deposit where proven and probable reserves of 414 million tonnes grading 0.31 gram gold per tonne and 0.16% copper were tabled.

In 2005, after roughly three years of preparation, Northgate completed its environmental impact assessment report for proposed development and handed it over to the review panel. While a final report was anticipated by mid-2006, the process became protracted due to the proposed use of a nearby lake for tailings-waste containment.

The issue was a polarizing one with strong environmental and First Nations opposition to usage of Duncan Lake (Amazay, in local First Nations language) as a tailings impoundment.

As Kemess North rock is rich in sulphides and would be a significant source of acid rock drainage (ARD), disposing of the material in an aqueous environment is technically logical in that the ARD potential is mitigated.

Northgate’s news release states despite the review panel finding that the project “would not likely result in significant adverse environmental effects” and that it “concludes that Duncan (Amazay) Lake is the only waste disposal alternative which is environmentally effective, and technically and economically feasible”, it still recommends it not be approved as proposed. However the panel does concede that the Environment Ministers are free to disagree with recommendations and approve Kemess North.

The main issues reviewed in the panel’s final decision relates to the loss of Duncan Lake (and its eventual restoration), its long-term water management implications and the effect on First Nations culture and traditional use in the area.

The panel’s report included 32 recommendations should the project be approved and proceed.

Northgate will spend the next several days to review the report and initiate discussions with federal and provincial authorities.

About 475 direct jobs would be created by development of Kemess North.

Interestingly, the company recently extended the life of its Kemess South mine by one year, until late-2010, due to robust metals prices allowing for the addition of 18 million tonnes of new, low-grade reserves mapped out in the eastern end of the Kemess South pit. The zone contains about 175,000 oz. gold and 57 million lbs. (26,000 tonnes) of copper.

Kemess South was built by the now bankrupt Royal Oak Mines in the mid-1990s. Northgate acquired the mine from creditors in 2000 for US$180 million and subsequently implemented operating enhancements to boost output and trim costs.

Shares of Northgate dropped as much 10% in September 18th trading to the $2.80-level.