Vancouver — Cost-cutting, coupled with its gold and currency hedging programs, enabled
The company earned US$982,000 (or US1 per share) on revenue of US$28 million in the recent 3-month period, compared with a loss of US$2.5 million (US$14 per share) on revenue of US$24.2 million in the third quarter of 2001.
The average metal prices received on sales in the recent quarter, before hedging, was US$314 per oz. of gold and US69 per lb. of copper, compared with US$273 per oz. gold and US67 per lb. copper a year earlier.
The improvement in quarterly revenue is attributed to the company’s gold and currency hedging, as well as to improved metal prices.
The company’s chief asset is the Kemess mine, in the Toodoggone River area of north-central British Columbia, which it acquired from bankrupt Royal Oak Mines in 2000. The mill and the mine are now both operating at levels that exceed Northgate’s original expectations.
Kemess produced 69,196 oz. gold and 7,660 tonnes copper in the third quarter, compared with 64,271 oz. gold and 6,530 tonnes copper a year earlier. Recently, the mine commissioned an electric cable shovel, which replaced two less efficient diesel hydraulic loaders. The new shovel is expected to increase daily mining capacity to beyond 130,000 tonnes and decrease annual mining costs by US$750,000.
The Kemess mill cranked out a record 4.6 million tonnes of ore last quarter, reflecting a 91% mill availability. The average recovery of copper was 74%, down 2% from the third quarter of 2001 as a result of lower recoveries inherent in the supergene ore. Gold recovery was pegged at 66%, up 2% over the year-earlier period.
Cash flow from operations, before changes in working capital, was US$5.4 million (US3 per share), compared with US$3.5 million in the third quarter of 2001; total operating costs were 2% higher, at US$18.6 million; and cash costs fell considerably, to US$209 from US$255 per oz.
Northgate has almost completed a $5-million, 34,000-metre exploration drilling program at the Kemess North mine, and assays for the remaining holes are expected by the end of November.
“We have confirmed the potential size and scope of the mineral resource [at Kemess North] and accumulated sufficient data to commence a feasibility study,” says Northgate President Ken Stowe. “The discovery at the Nugget zone and results of the regional program have been particularly encouraging. Northgate, with its attractive assets and a large resource base, is well-positioned to benefit from improving fundamentals in the gold market.”
At the Nuggest zone, 1 km west of Kemess North, crews encountered thick intersections of gold-copper porphyry mineralization. Among the more impressive holes was no. 23, which cut 53.4 metres grading 0.451 gram gold and 0.198% copper starting at a down-hole depth of 118.6 metres. This was followed first by a 62-metre interval of 0.134 gram gold and 0.55% copper starting at 432 metres down-hole, and then by a 54-metre interval of 0.186 gram gold and 0.374% copper starting at 542 metres down-hole. Also, hole 30 cut 12.8 metres of 0.078 gram gold and 0.702% copper starting at 75.4 metres down-hole. Assays are pending for two other holes: 34 and 40.
Deeper zone
At Kemess North itself, drilling intersected a deeper zone of mineralization in the Central cirque area. Among the highlights was hole 16, which cut 206 metres of 0.54% copper and 0.29 gram gold starting at 407 metres down-hole. This included a 45.5-metre section grading 1.25% copper and 0.47 gram gold. Hole 24 cut 164 metres averaging 0.16% copper and 0.36 gram gold starting at 119 metres down-hole, which was followed by 378.6 metres of 0.3% copper and 0.48 gram gold starting at 327 metres down-hole. This intercept included a 71-metre section that assayed 0.44% copper and 0.89 gram gold.
Kemess North is 7 km north of the Kemess South mine and hosts a resource of 442 million tonnes grading 0.4 gram gold per tonne and 0.23% copper. The 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 averaging 0.5 gram gold and 0.29% copper, based on a cutoff grade of 0.6 gram gold.
Northgate describes the surface expression of the porphyry system at Kemess North as an extensive surface gossan that extends for 3.5 km in strike length. Exploration drilling last year confirmed the existence of a north-south-trending fault that truncates mineralization to the east.
Drilling at Kemess East, 750 metres southeast of Kemess North, focused on finding the faulted-off eastern margin of the mineralization at Kemess North. At last report, the company had partial assay results from hole 32, drilled at Kemess East. The hole intersected a 15.5-metre section averaging 1.17 grams gold per tonne.
Brenda
About 19 km northwest of Kemess North, Northgate is exploring the Brenda property, which is under option from
Meanwhile, in Stewart, B.C., Northgate has completed two diamond drill holes on the Praxis property, which is under option from Praxis Goldfields. Assay results are pending.
The drilling targeted Eskay Creek-style mineralization in a volcanogenic massive sulphide environment. The claims host a volcanic massive sulphide depositional environment, and previous exploration by Praxis identified several priority targets. Northgate stands to earn a 51% interest in Praxis Goldfields’ ground by spending $3.3 million over four years. Once vested, the two companies will enter into a joint venture. If Praxis does not elect to participate in the venture, or fails to meet its share of planned expenditures, its interest will revert to a 2% net smelter return royalty, half of which may be purchased by Northgate for $2 million.
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