Vancouver — After closing out a large portion of its hedge position,
The company posted a quarterly loss of US$12 million (or 17 per share) on revenue of US$26.4 million, compared with a loss of US$660,000 (9 per share) on revenue of US$24.4 million during the second quarter of 2001.
Cash flow from operations totalled US$3.37 million in the recent quarter (before changes in working capital and a one-time loss of US$9.8 million as a result of closing out a large portion of its gold hedging position). During the second quarter of 2001, the company’s cash flow amounted to US$4.34 million.
Total operating expenses during the recent quarter were US$19.3 million, 13% higher than the year-earlier period. The increase is due to a 30% increase in the mining rate and a 9% increase in mill throughput.
The Kemess mine, in north-central British Columbia, cranked out 67,360 oz. gold and 17.3 million lbs. copper during the recent 3-month period, compared with 68,028 oz. and 14.3 million lbs. a year earlier. Cash costs increased to US$216 from US$207 per oz.
The production shortfall stemmed from unresolved labour contract issues in April and the unscheduled downtime of two large semi-autogenous grinding mills. In addition, unplanned repairs were made to the two tailings lines.
Once these issues were resolved, operations resumed at full capacity through May and June, with gold production averaging 24,500 oz. per month. Cash costs during that same time averaged US$181 per oz. gold, net of byproduct credits.
Gold recoveries between the two second quarters increased to 71% from 65%; copper recoveries, to 83% from 72%. The improvements reflect the addition of two column flotation cells to the cleaner circuit of the Kemess mill.
The average metal prices Northgate received on sales during the quarter, before hedging, were US$310 per oz. gold and US72 per lb. copper, compared with US$268 and US75 in the year-earlier period.
In June, Northgate closed its C$125 million unit offering of common shares and warrants. The proceeds were put toward long-term debt. This year, the company has reduced its long-term debt and other obligations by more than US$170 million, to US$45 million.
“We have substantially reduced debt and improved the balance sheet,” says President Ken Stowe. “In addition, the new column cells have demonstrated that higher recoveries and concentrate grade are attainable over the balance of the mine life, resulting in greater annual cash flow.”
Meanwhile, at the Kemess North project, Northgate is using four dill rigs in a 34,000-metre drilling campaign which began in mid-June. Initial results from the first 18 holes confirm the size and grade of the existing 5.7-million-oz. resource, as well as the presence of a higher-grade porphyry dome that measures 400 metres long.
Kemess North hosts a resource of 442 million tonnes grading 0.4 gram gold per tonne and 0.23% copper. This calculation is based on a gold-equivalent cutoff grade of 0.6 gram gold per tonne and on gold and copper prices of US$325 per oz. and US90 per lb., respectively. The deposit hosts a higher-grade core of 170 million tonnes grading 0.5 gram gold and 0.29% copper, based on a cutoff grade of 0.6 gram gold.
“The initial drill results from Kemess North are further confirmation of the potential size and scope of the mineral resource,” says Stowe. “Over the balance of the year, we will focus on completing the tailings sand project, while receiving additional drill results from Kemess North.
The best intersections to date are as follows:
– Hole 01 cut 154.2 metres averaging 0.89 gram gold and 0.46% copper starting at 407.4 metres down-hole, including a 59.2-metre section that averaged 1.05 grams gold and 0.54% copper;
– Hole 03 cut 79.8 metres of 0.81 gram gold and 0.3% copper starting at 447.1 metres down-hole;
– Hole 04 cut 111.4 metres of 0.84 gram gold and 0.37% copper starting at 264 metres down-hole;
– Hole 05 cut 98.5 metres averaging 0.96 gram gold and 0.44% copper starting at 409.7 metres down-hole;
– Hole 09 cut 105.4 metres of 0.71 gram gold and 0.37% copper starting at 392.6 metres down-hole;
– Hole 13 hit 200.2 metres of 0.61 gram gold and 0.3% copper starting at 390.8 metres down-hole;
– Hole 16 intersected 206 metres of 0.54 gram gold and 0.29% copper starting at 407 metres down-hole, including a 45.5-metre interval of 1.25 grams gold and 0.47% copper.
Northgate’s exploration program at Kemess North is designed to determine the ultimate extent of the porphyry dome structure that was discovered last year, as well as expand the size of the resource. The initial holes were collared within the boundaries of the resource. Additional drilling will gradually step out to the southwest. Drills will also target Kemess East, which is believed to be the faulted northeastern extension of the Kemess North deposit.
Brenda
In other news,
“The property fits perfectly into our regional exploration strategy of targeting attractive properties that could potentially benefit from the significant infrastructure already in place at Kemess,” says Stowe. “We expect to begin exploration in August, utilizing knowledge gained at Kemess North over the past two summers. The program is expected to include geophysical surveys and diamond drilling.”
Northgate stands to earn a 60% interest in the property by spending $2 million and paying $140,000 to Canasil over four years. Upon exercising the option, the parties will enter into a joint venture. If Canasil does not participate in the joint venture or fails to meet its share of planned expenditures, its interest will revert to a 2% net smelter return, half of which may be purchased by Northgate for $2 million.
The Brenda property consists of 178 mineral claim units covering 44 sq. km, about 25 km northwest of Northgate’s Kemess South gold-copper mine. The property is in a belt of northwest- and northeast-trending block faults at the transition from porphyry-type gold-copper occurrences in the south to epithermal-type gold-silver vein and breccia deposits in the northwest.
Says Canasil President Bahman Yamini: “Northgate’s technical capabilities, financial resources and proven track record of successful operation and exploration at Kemess ideally suit the exploration of this potentially large mineralized system.”
Previous exploration by Canasil identified a large anomalous zone measuring 900 by 400 metres with coincident gold and silver geochemical anomalies, as well as induced-polarization chargeability anomalies. Diamond drilling in this zone encountered significant amounts of pyrite, copper sulphides and gold.
Previous drill results from this zone include the following:
q Hole 93-1 intersected 47.86 metres averaging 1.1 grams gold and 0.13% copper starting at 9.14 metres down-hole.
q Hole 93-3 cut 108.80 metres aof 0.48 gram gold and 0.14% copper starting at 12.2 metres down-hole.
q Hole 96-3 intersected 26.21 metres averaging 0.92 gram gold and 0.1% copper starting at 15.54 metres down-hole.
q Hole 96-7 cut 62.5 metres grading 0.84 gram gold and 0.14% copper starting at 7.3 metres down-hole.
q Hole 97-1 intersected 24.8 metres averaging 1.12 grams gold and 0.13% copper starting at 148 metres down-hole.
q Hole 07-2 cut 39.95 metres averaging 1.12 grams gold and 0.18% copper starting 65.35 metres down-hole.
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