Northgate financing will advance Kemess North project

Vancouver — Northgate Exploration (NGX-T) is attempting to raise $140 million through equity financing and recapitalization. A portion of the funds would be applied to the Kemess North project in north-central British Columbia, where drilling this past year defined an expanded inferred resource containing 5.7 million oz. gold.

The financing will consist of a $20-million unit offering of shares and share purchase warrants, as well as a $5-million issue of flow-through shares which will be sold through a special warrant issue. An additional $25 million will be raised as a rights offering to current shareholders. The offering will consist of 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.” says Northgate President Ken Stowe. “With this major objective complete, the company will now focus on growth opportunities, and in particular on developing Kemess North.”

Kemess North, which is 7 km north of the Kemess South gold-copper mine, 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 on 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 grade 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).

Details of the $140-million financing are outlined below.

Almost 16 million special warrants are being issued to a syndicate of investment dealers consisting of Griffiths McBurney & Partners, CIBC World Markets, TD Newcrest and Trilon Securities. The special warrants will be priced at $1.26 per unit for gross proceeds of $20 million.

The underwriters have the option to buy 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 five years from the closing date.

Each special warrant will entitle the holder to acquire one share of Northgate and half a purchase warrant. Each whole warrant entitles the holder to acquire one share for $3 at any time until the fifth anniversary of the closing date of the deal.

More than 3.5 million flow-through special warrants priced at $1.40 per flow-through special warrant will be issued, for a gross proceeds of $5 million. Each flow-through special warrant entitles the holder to acquire an additional flow-through share at no extra cost.

Another component of the financing is 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 share and half a warrant. Each whole warrant entitles the holder to acquire one share for $3 at any time until the fifth anniversary of the closing date of the deal.

In addition, Northgate announced 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 Dec. 31, 2002, at 110% of par plus accrued and unpaid dividends and, prior to Dec. 31, 2003, at 120% of par plus accrued and unpaid dividends. Both series 1&2 preferred shares are convertible into common shares at $1.51 per share or are retractable at $25 per share, plus accrued and unpaid dividends, prior to Dec. 31, 2006, or the date of a change of control of the company.

Proceeds from the issue of the flow-through special warrants will be used to explore Kemess North. 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.