Northgate plans first gold pour at Young-Davidson

Northgate Minerals (NGX-T, NXG-X) will pour its first gold at its 100%-owned Young-Davidson mine late in the first quarter of 2012.

The mine, just outside the town of Matachewan, Ont., about 60 km west of Kirkland Lake in the Abitibi greenstone belt, would produce an average of 180,000 oz. gold a year over the course of its initial 15-year mine life.

The Young-Davidson property sits on the site of two past-producing mines, which yielded about 1 million oz. of gold between the mid-1930s and mid-1950s. All of the existing underground workings are in excellent condition.

The first leg of production will come from a small open pit with production in the range of 84,000-90,000 oz. gold in 2012 and 134,000-140,000 oz. in 2013. 

Once underground development is complete, production is expected to ramp up to about 175,000 oz. of gold in 2014 and 220,000 oz. in 2015.

The life-of-mine cash cost is estimated to be US$400 per oz., partly due to the competent nature of the host rock, which allows for low-cost bulk-mining techniques,
the company says.

Currently Young-Davidson has reserves of more than 2.8 million oz. gold. Open-pit reserves are around 5 million tonnes grading 1.6 grams gold per tonne, while underground reserves are about 26 million tonnes at 3 grams gold.

The project remains on schedule and at the end of March, 80% of the contracts (worth about US$170 million) had been awarded, with 90% of the equipment purchase orders placed and 66% of the engineering completed.

So far Northgate has spent US$130 million on construction and says it will spend another US$250 million over the next year using existing funds.

During the first quarter, the ramp was extended 290 metres to a length of 4.2 km. The vertical depth is about 680 metres and will be completed to a depth of 1,500 metres over the next 30 months.

Northgate has commissioned a new hoist and has started sinking operations of the existing shaft, which will extend to a depth of 1,500 metres.

Surface facilities will include a modern 6,000-tonne-per-day process plant.

The current estimate of the total capital cost of the project is $377.1 million. 

Electric power will come from upgrading about 47 km of an existing 115-kilovolt power line and installing 7 km of a new 115-kV line and a mine site transformer station. Meanwhile, Northgate is trying to add resources and has drilled 5,300 metres so far this year in the YD West zone. This zone was discovered when hole 10-198 intersected 3.46 grams gold per tonne over 79.5 metres. Highlights from 2011 drilling include: 10.9 metres of 5.43 grams gold per tonne in hole 10-198B, which was about 115 metres below the discovery hole.

If the 2011 drilling program is successful, Northgate expects to put out an initial resource estimate for the YD West zone before year-end.

At presstime Northgate was trading at $2.71 per share. Over the last year it has traded between a low of $2.42 per share (Jan. 25, 2011) and a high of $3.62 per share (Sept. 21, 2010). It has 291.9 million shares outstanding.