Vancouver — Despite higher production and lower cash operating costs at its Kemess mine in northern British Columbia,
The company posted a consolidated net loss of $30 million (or 99 per share) on revenue of $2.8 million, compared with 1999 earnings of $2.8 million (10 per share) on revenue of $7.4 million.
Northgate attributes the loss to an interest expense of $25.7 million and currency translation losses of $5.2 million — a result of the bridge financing loan it incurred in order to acquire Kemess.
The company acquired the loan in the form of a convertible royalty that entitled it to receive 95% of the net operating cash flow from the mine after expenditures. The mine generated $7.5 million in positive cash flow during 2000; however, capital expenditures totalled $37.1 million.
At the end of last year, Northgate converted this royalty interest into a direct 95% equity interest and applied it to a single-purpose company, Kemess Mines, whose only asset is the mine of the same name.
Northgate is still refinancing its acquisition debt and hopes to close a long-term, US$100-million project loan shortly. The company’s gold hedging will be limited to 50% of its minable gold reserves, sufficient to support a portion of the project refinancing. The balance of the acquisition bridge loan will be refinanced with equity.
Production at Kemess in 2000 totalled 225,994 oz. gold and 50.4 million lbs. copper, while cash operating costs averaged US$248 gold per oz. (net of byproduct credits).
“It was an excellent year with good results from operations,” says Northgate President Ken Stowe. “The only negative was the continued weakness in the gold price. The worst is behind us, and we expect continued improvement over the balance of 2001.”
A total of 34.6 million tonnes of material was mined in 2000, and operations milled 14.1 million tonnes of ore at the daily rate of 38,630 tonnes. The average millhead grade was 0.778 gram gold per tonne and 0.22% copper. Recoveries were pegged at 64% and 74% for gold and copper, respectively.
Production in the fourth quarter amounted to 75,200 oz. gold and 15.1 million lbs. copper — a 20% improvement over the corresponding period in 1999. Cash operating costs during the recent fourth quarter averaged US$177 gold per oz. (net of byproduct credits).
These improvements are a result of modifications to the milling circuit and higher plant and equipment availability — specifically, the installation of a new conventional thickener unit, the overhaul of the filter presses, and the addition of an on-stream analysis system. Also, the conversion to bulk-handling and transportation of the concentrate is expected to save the company $4 million per year in freight costs.
Exploration drilling at Kemess North increased the mineral inventory by an estimated 3.5 million oz. gold and 1.2 billion lbs. copper. Kemess North is 5.5 km north of the South pit, which is currently being mined. A 12-hole, 4,100-metre program of diamond drilling resulted in the discovery of a copper-gold porphyry dome, expanding the original Kemess North resource to 360 million tonnes grading 0.154% copper and 0.30 gram gold. The previous (1998) estimate was 74 million tonnes at 0.18% copper and 0.34 gram gold.
A scoping study is evaluating the economic viability of developing the Kemess North deposit.
Meanwhile, exploration of the surrounding land position will be increased to evaluate targets near existing infrastructure.
This year, Northgate has budgeted a $500,000, 10-hole drill program to delineate Kemess North. Beginning in May, drilling will test along strike and to depth at the newly discovered porphyry system. The program will focus on the northeastern section of the dome.
Average annual production over the life of the mine is expected to be 260,000 oz. gold and 74 million lbs. copper at a cash cost of US$150 per oz. (net of byproduct credits).
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