Northgate eyes $85 million

Northgate Exploration (NGX-T) has arranged an $85 million equity financing with a group of underwriters led by Griffiths McBurney & Partners.

Under the deal, the syndicate has agreed to buy 41.5 million units at $2.05 apiece. One unit comprises one share plus a third of a share purchase warrant. One whole warrant allows the holder to buy one share for $3 any time before Dec. 28, 2006.

The underwriters also have an option to buy up to another 19.5 million units under the same terms. The option ends upon closing of the deal.

Northgate plans to use the proceeds to repay long-term debt and reduce its existing gold hedging position.

Should the over-allotment option be fully subscribed, Northgate would be able to reduce its long-term debt to US$45 million from the current US$170 million.

At the end of the first quarter, Northgate’s hedge book contained forward sale commitments covering 420,000 oz. of gold at an average price of US$298 per oz. These forward sales commitments are in the form of short dated spot deferred contracts. The company also had outstanding call options of 400,000 oz. exercisable at an average of US$301 per oz.

In conjunction with the financing, BC Pacific Capital, Northgate’s largest shareholder has agreed to convert all of its $90 million issue of Class A Preference Series, Series 1 and 2 shares into common shares of the company at closing. The move will result in the issuance of about 59.6 million shares.

Northgate’s president and CEO Ken Stowe says, “I am delighted to announce this transaction as it positions us for significant future growth from a solid financial base. We will continue to pursue fast-track development of the Kemess North project and expand our resource base beyond 10 million ounces of gold.”