Northgate closes Perseverance acquisition (March 03, 2008)

VANCOUVER–Northgate Minerals (NGX-T, NXG-X) has completed its friendly takeover of Australian gold producer Perseverance in an all-cash deal valued at roughly US$257 million.

The acquisition gives Northgate a pair of producing gold mines — Fosterville and Stawell — in Australia’s Victoria State that together churned out about 189,000 oz. gold last fiscal year.

Northgate’s purchase is part of a larger plan to secure producing assets in politically stable regions. The deal also sees the mid-tier producer gaining about 7,700 sq. km of exploration landholdings in the Victorian gold belt.

Fosterville churned out 76,700 oz. gold for the year ending June 30, 2007, slightly below projections due to more lower-grade open-pit ore being processed. Ore production has come from a series of open pits along with recent underground development contributing the first ore flow from stoping in early 2007.

Late last year, underground activities at Fosterville were briefly suspended after several workers were affected by fumes from a blasting round. At the same time, a period of heavy rain in late December created issues with underground access to the Falcon and Phoenix areas of the mine. Those were remedied by year-end. Gold production continued during the interruption from ore stockpiles.

The Stawell mine, which Perseverance acquired through its takeover of fellow Aussie miner Leviathan Resources in 2006, produced 112,490 oz. gold last year from both open-pit and underground operations.

The mine life at Fosterville is projected at about seven years, while Stawell’s is three years. Stawell, however, has operated for about 25 years with just a few years of reserves in front of it.

The mines provide Northgate with stable cash flow and production as its Kemess South gold-copper mine in B.C. winds down and its Young Davidson gold project in northeastern Ontario moves towards production by 2011.

With the Perseverance acquisition under its belt, Northgate projects 2008 gold production at 434,000 oz. and copper at about 71 million lbs. (32,200 tonnes). Pro forma average cash production costs for 2008 are estimated at US$184 per oz., net of Kemess copper credits and based on a US$2.95 per lb. copper price.