Vancouver — Higher prices for gold and copper resulted in a profitable first quarter for
The company earned US$39,000 in the 3-month period, compared with a loss of US$2.5 million in the corresponding period of 2003, while cash flow from operations rose to US$11.8 million (or 6 per share) from US$6.3 million (3 per share).
Also, as part of a prefeasibility study, the company has moved 4.1 million oz. gold and 1.46 billion lbs. copper to Kemess North’s reserves from the indicated resource category. The mine is in north- central British Columbia.
Gold production at the Kemess South mine was lower, though overall the company is still on track to produce 300,000 oz. at a cash cost of US$150 per oz. for the year. Copper production for 2004 is pegged at 75 million lbs.
Kemess South produced 51,500 oz. gold and 17.7 million lbs. copper during the recent quarter, compared with 62,000 oz. and 17.1 million lbs. a year earlier. Higher copper prices during the 2004 quarter more than offset lower gold production and the effect of a stronger Canadian dollar.
Mill throughput was at a record level of 157,000 tonnes per day and unit mining costs, at 84 per tonne, were 12% lower than the first quarter of 2003. Last year, the mill received 144,800 tonnes per day.
The company processed lower-grade ore while stockpiling about 400,000 tonnes of higher-grade material, which will be processed later this year.
The company expects that for the remainder of 2004, cash costs will be considerably lower than they were in the first quarter, owing to higher gold and copper production and the recent weakening of the Canadian dollar against the U.S. dollar.
Gold recovery was down 3%, to 69%, during the quarter, while copper recovery remained at 84%.
The total costs for production during the 3-month period were C$7.07 per tonne milled, compared with C$7.18 a year earlier, while full-absorption cash costs fell to US$202 from US$255 per oz.
This year, Northgate intends to spend $1.2 million exploring the 87,000 acres of claims surrounding the Kemess South mine. Plans call for diamond drilling, geophysical surveys, and prospecting. The drilling will focus on a mineralized area southwest of the Kemess South pit.
Three phases for operation were outlined at Kemess:
— From 2004 to 2006, Kemess South will produce around 310,000 oz. gold per year at a cash cost of US$118 per oz.
— From 2007 to 2009, gold production (from both pits) will average 288,000 oz. a year at a cash cost of US$141 per oz.
— Finally, from 2010 to 2020, an estimated 208,000 oz. gold will be produced annually, at an average cash cost of US$181 per oz.
Ore from Kemess North will be transported along a 4-km tunnel and 8-km conveyer to the existing ore stockpile at Kemess South. A 13-km road will have to be constructed, along with power and water lines to Kemess North.
A new tailings line will carry tailings from the mill to be submerged under Duncan Lake. Once the Kemess South open pit is exhausted, some of the tailings will be dumped there.
Unit operating costs at Kemess North are expected to be substantially lower than those at Kemess South, owing to the lower stripping ratio at Kemess North (0.81-to-1), reduced milling costs, and fixed overhead costs.
Probable reserves stand at 414 million tonnes grading 0.31 gram gold per tonne and 0.16% copper. Of the contained metals, 2.6 million oz. gold and 1.3 billion lbs. copper are recoverable. Metallurgical tests show recoveries of 62% for gold and 89% for copper.
The total capital cost of the Kemess North project is US$160 million with an internal rate of return of 8.6% at US$375 per oz. gold and US$1 per lb. copper.
The final feasibility study for Kemess North should be completed this summer, with permitting planned for the second quarter of 2005. Construction is slated to start in the summer of 2005.
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