Northgate has banker image after 1988 spending spree

By investing more than $134.6 million in 12 North American precious and base metal mining companies, Northgate has indirect interests in 150,000 oz of gold production and a stake in a number of promising development projects.

The extent of its holdings makes Northgate difficult to analyse and perhaps explains why its shares are currently trading at $6.63 on the Toronto Stock Exchange with a 52-week range of $8.50 and $6.25.

The largest transaction was a $40-million bridge loan to help Neptune Resources (TSE) keep its Colomac gold project in the Northwest Territories on track for a spring 1990 production start up.

Neptune ran into trouble when the federal and territorial governments declined to back the 200,000 oz-per-year project with an a loan guarantee amounting to $18 million.

Just as significant was the acquisition of a 13% stake in Campbell Resources (TSE) for $19.7 million. Northgate financed the transaction by issuing $40 million in subordinated debentures and 3.6 million share purchase warrants to the Bronfman-controlled Great Lakes Group which holds a diluted 20% stake in Northgate.

Last year was not good for Campbell. After shutting down the Henderson II gold-copper mine in Chibougamau, Que., the company reported a loss of $65.4 million or $1.21 per share. This included a $58.4 million write-down in the carrying value of the mine and a $6.8-million provision for potential future reclamation costs relating to discontinued coal operations.

More encouraging is an $18.2- million expansion program at Campbell’s Joe Mann mine in Chibougamau that is expected to increase the operation’s gold production to 100,000 oz by 1992 from 36,000 oz in 1988.

Northgate’s investment activities left it with total assets of $322 million, more than $150 million in cash and $55.4 million in long-term debt. In 1988, the Toronto company reported a net income of $2.26 million, or 10 cents per share, on revenues of $17.8 million. In 1987 it reported a net income of $60.1 million, or $3.19 per share, on revenues of $60.7 million.

The number of shares outstanding increased to 22 million in 1988 from 18.9 million 12 months ago.

Northgate’s immediate plans are to rationalize and consolidate its existing investments, while attempting to become a large made- in-North America gold producer.

As proof, Northgate and affiliate Westfield Minerals (TSE) agreed to sell their combined 15% stake in Australia’s Whim Creek Consolidated to Dominion Mining Ltd. for $39(A) million.

Control of Westfield was recently sold by Whim Creek to American Resource, a Bermuda-based merchant banking company which is controlled by the Bronfman-owned Hees International Bancorp.

Rumor has it that American Resource’s 46% stake in Westfield, bought for $25.8 million, may eventually wind up in Northgate’s hands.

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