Northgate writes off value of remote Colomac gold mine

Northgate Exploration’s (TSE) affiliate NorthWest Gold (AMEX) recently declared a $149.5-million writedown on the carrying value of its remote Colomac gold mine in the Northwest Territories. While the open pit mine being warmed up toward commercial production, the writedown forced NorthWest to report a loss of $152.9 million or $4.19 per share on revenues of $2.7 million in the nine months ended Sept. 30. In the equivalent period last year, NorthWest reported net income of $2.4 million or 16 cents per share on revenues of $5.7 million.

NorthWest says the writedown was necessary because the price of gold had fallen drastically to a low of US$346 per oz. in June from US$450 when the mine feasibility study was completed. The 50% owned Northgate affiliate also attributed its decision to lower than expected production and ongoing financial requirements.

Continuation of normal operations at the mine now rests on attempts by NorthWest to reschedule debts that include a $7.5-million loan payment due Dec. 31, the company says.

Meanwhile, NorthWest reported a third-quarter loss of $151.5 or $4.15 per share on revenues of $717,000 compared with a loss of $147,000 or 16 cents per share on revenues of $1.3 million in the same period last year.

Since production began in May, Colomac has produced 50,250 oz. of the yellow metal, including 11,400 oz. in October. Lower than expected output is due to mechanical difficulties within the operation’s 10,000-ton-per-day mill.

The Colomac writedown was a big factor in financial results released recently by Northgate. In the first nine months of this year, the Toronto company reported a loss of $80.7 million or $3.65 per share on revenues of $21.1 million compared to a profit of $8.5 million or 38 cents per share on revenues of $12.7 million in the 1989 period.

Northgate reported a third-quarter loss of $81.2 million or $3.68 per share compared to a profit of $675 million or 3 cents a share in the same period last year. Third-quarter revenues increased to $5.1 million from $3.8 million a year earlier.

Results for the third quarter and nine months of 1990 include a net charge against earnings of $78.3 million relating to the Colomac writedown, Northgate says.

The Northgate group of companies including NorthWest Gold, Campbell Resources (TSE), Sonora Gold (TSE), Geddes Resources (TSE) and Audrey Resources (TSE) produced 188,300 oz. gold in the first nine months of 1990, up from 109,900 oz. in the equivalent 1989 period. The increase was due largely to higher output from Campbell’s Joe Mann mine in Chibougamau, Que.

NorthWest Gold (AMEX) 3 months ended Sept. 30 1990 1989 Revenue $717 $1,337 Net earnings (loss) (151,521) (147)

per share (4.15) (0.01)

9 months ended Sept. 30 1990 1989 Revenue $2,693 $5,775 Net earnings (loss) (152,890) 2,445

per share (4.19) 0.1604

Northgate Exploration (TSE) 3 months ended Sept. 30 1990 1989 Revenue $5,096 $3,797 Net earnings (loss) (81,233) 675

per share (3.68) 0.03

9 months ended Sept. 30 1990 1989 Revenue $21,091 $12,774 Net earnings (loss) (80,686) 8,516 per share (3.65) 0.3804