Northgate returns to Kemess North (September 17, 2010)

Vancouver – Northgate Minerals (NGX-T) quietly restarted exploration work at its Kemess North project, where dust had been gathering since 2007 when a federal-provincial environmental panel nixed the company’s development plans, and has now released several strong copper-gold hits from a drill program aimed at outlining an underground resource.

In late 2007, after a three-year review process, the joint federal-provincial environmental panel recommended the government not approve construction of Northgate’s proposed open pit mine at Kemess North. The government accepted the recommendation and Northgate wrote down its entire $32-million investment in the project. Clearly frustrated at the time, Northgate’s management turned its back on the site.

But the project, which is in north-central B.C., 430 km northwest of Prince George, is home to 719 million measured and indicated tonnes grading 0.3 gram gold per tonne and 0.15% copper, for almost 7 million oz. gold and 2.4 billion lbs. copper. And when that resource sits just 5 km away from the company’s operating Kemess South mine, it must be near impossible to ignore.

So at the beginning of 2010 Northgate quietly hired an engineering firm to assess the economic prospects of tapping into the Kemess North resource from underground, based on the idea that a lower tonnage, underground operation would have significantly less environmental impact than an open pit.

Specifically, the obstacle that proved to be the downfall of Northgate’ previous plan for Kemess North was the tailings facility – the only option was to place tailings in Duncan Lake and the local natives were strongly opposed to the destruction of the lake. Northgate is now assessing whether the higher-grade core at Kemess North could be mined by block caving methods and fed into the existing Kemess South infrastructure. Importantly, the company is eyeing a Kemess North operation that utilizes the existing, permitted Kemess South tailings facility.

The first step in that plan is to better define the grade and geometry of the high-grade core, which Northgates pegs at roughly 70 million tonnes containing 1.4 million oz. gold and 500 million lbs. copper. To that end in June the company kicked off a $3-million, 20-hole program at Kemess North using two drills.

The first results from that program are now out and indicate that previous, wide-spaced drilling underestimated the grades of the core zone. In fact, the intercepts from the first 11 holes carry grades that, compared to the current resource, are on average 22% higher for gold and 20% better for copper.

Hole 3 certainly helped those averages, as it returned the highest grade hit from the entire Kemess property to date. The hole returned 60 metres grading 3.37 grams gold and 0.95% copper, within a broader interval carrying 1.28 grams gold and 0.36% copper over 205 metres.

The first set of results also included several other promising hits, all probing the northeast quarter of the high-grade core. Hole 5 cut 273 metres grading 0.98 gram gold and 0.381% copper, including 52 metres of 2.38 grams gold and 0.74% copper. Hole 12 returned 196 metres of 1.12 grams gold and 0.411% copper, including 66 metres of 1.71 grams gold and 0.64% copper. Hole 10 intercepted 232 metres averaging 0.63 gram gold and 0.391% copper, including 92 metres of 1.11 grams gold and 0.59% copper. And hole 7A cut 272 metres of 0.59 gram gold and 0.295% copper, including 85 metres of 1.26 grams gold and 0.56% copper.

“With half of the results in hand the Kemess underground infill program has already exceeded expectation by providing the best intercept in the resource database with hole 3,” said Northgate’s president and CEO, Ken Stowe, in a statement. He continued to say the new results, combined with three previous holes, demonstrate that “a compact, continuous higher-grade zone exists in the northeastern sector of the resource being considered for a bulk underground mining operation.”

Northgate will use the results from the current drill program to calculate a new resource for the core zone, which is expects to complete in early 2011.

Next door, the Kemess South operation churns through 52,000 tonnes of ore daily. The mine is expected to produce 102,000 oz. gold and 45 million lbs. copper this year.

The company’s work at Kemess North has been overshadowed by another of its projects: in September Northgate broke ground at its Young-Davidson project near the town of Matachewan, in Ontario. Construction of the combined open pit and underground operation is expected to take 18 months, which means Northgate is targeting its first gold pour in early 2012. Once the mine is operational it is expected to produce 180,000 oz. gold annually for its first 15 years.

Northgate also owns the Fosterville and Stawell gold mines in southeast Australia. Fosterville is expected to produce 105,000 oz. in 2010 while Stawell should produce 81,000 oz. before the end of the year.

Northgate’s share price climbed 15¢ on news of the drill results from Kemess North to close at $3.58. The company has a 52-week trading range of $2.47 to $3.70 and has 291 million shares outstanding.