NGX:
Northgate loses 17 U.S. cents per share in Q2
Northgate Exploration Ltd NGX
Shares issued 190,551,115 Aug 7 2002 close $ 1.48
Wednesday August 7 2002 News Release
Mr. Terry Lyons reports
NORTHGATE REPORTS SECOND QUARTER RESULTS; KEMESS NORTH DRILLI ...
(All figures in U.S. dollars except where noted.)
Northgate Exploration has recorded cash flow from operations before one-time items and changes in working capital of $3,377,000 or four cents per common share (fully diluted) for the three months ended June 30, 2002, from production of 67,360 ounces of gold and 17.4 million pounds of copper.
Initial results from Northgate's 34,000-metre drilling program at Kemess North have confirmed the size and grade of the 5.7-million-ounce inferred mineral resource, including a substantial high-grade porphyry dome having a 400-metre longitudinal section grading in excess of one gram per tonne gold equivalent.
In conjunction with Northgate's $125-million (Canadian) equity offering and debt reduction program, the corporation reduced its gold hedging position, incurring a one-time loss of $9,839,000. As a result, after allowing for depreciation, interest, mining and capital taxes and the one-time reduction of its hedging position, there was a net loss of $12,048,000 or 17 cents per common share for the quarter. This compared with a loss of $660,000 or nine cents per common share during the same quarter last year.
2002 second quarter highlights
Northgate closed its $125-million (Canadian) unit offering of common shares and warrants on June 25, 2002. Proceeds from the financing were primarily used to repay long-term debt. Since the beginning of 2002, Northgate has reduced its long-term debt and other obligations by over $170-million ($265-million (Canadian)) to $45-million. At June 30, 2002, the corporation's ratio of long-term debt to total capitalization was less than 28 per cent.
Northgate's 34,000-metre drilling program at Kemess North commenced in mid-June. Initial results from the first 18 holes were available subsequent to June 30 and wide intersections of gold-copper mineralization within the existing Kemess North pit outline were returned, including a high-grade porphyry dome of greater than one gram per tonne equivalent.
Higher metal recoveries were realized following the installation of two column flotation cells in mid-May. During the second quarter, gold and copper recoveries averaged 71 per cent and 83 per cent, a significant increase from recoveries of 65 per cent and 72 per cent achieved during the same period in 2001.
Cash costs in May and June averaged $181 per ounce of gold, net of byproduct credits following the successful resolution of one time repair and maintenance issues which impaired results in April.
Operations
Kemess mine
The Kemess mine produced 67,360 ounces of gold and 17.3 million pounds of copper during the second quarter compared with 68,028 ounces of gold and 14.3 million pounds of copper in the second quarter of 2001. Record mine production of 10.9 million tonnes and a 9-per-cent increase in mill throughput essentially offset higher than life-of-mine average ore grades processed during the quarter last year within the normal mining sequence.
Operating results in April masked strong performance in May and June at the Kemess mine. Production in April, 2002, was adversely affected by the unresolved labour contract and unscheduled downtime on one of the two large SAG mills. Further, unplanned repairs to the two tailings lines that related to a construction defect also led to downtime during the month. Following resolution to all these issues, operations resumed at full capacity through May and June with gold production on plan, averaging 24,500 ounces per month. Positive operating results have continued into the third quarter.
Gold and copper recoveries increased to 71 per cent and 83, compared with 65 per cent and 72 per cent during the second quarter of 2001, despite the lower grades milled in the current quarter. These significant process improvements reflect the successful commissioning of two new column flotation cells in the cleaner circuit of the Kemess mill. At long-term metal prices of $325 per ounce gold and 95 cents per pound copper, each 1-per-cent increase in gold and copper recovery increases both operating cash flow and earnings by $1.3-million and $500,000 per year. In addition to these enhanced recoveries, these process improvements have also resulted in a higher hypogene concentrate grade produced of 24 per cent copper, compared with a grade of 21.5 per cent produced in 2001. Each 1-per-cent increase in concentrate grade has a $1.2-million positive annual cash flow impact through the reduction in treatment and transportation costs.
The following table provides a summary of operations for the second quarter and first half of 2002, compared with the comparable periods in 2001:
OPERATIONAL RESULTS
Three months ended June 30
(100 per cent of production basis)
2002 2001
Tonnes mined
(ore plus waste) 10,949,200 7,523,843
Tonnes milled
(ore) 3,964,216 3,639,557
Average mill
operating
rate (t/d) 43,563 39,995
Gold grade (g/t) 0.737 0.900
Copper grade (%) 0.2385 0.241
Gold recovery (%) 71 65
Copper recovery (%) 83 72
Gold production
(ounces) 67,360 68,028
Copper production
(thousands
of pounds) 17,316 14,263
Cash cost
($/ounce) 216 207
OPERATIONAL RESULTS
Six months ended June 30
(100 per cent of production basis)
2002 2001
Tonnes mined
(ore plus waste) 21,344,604 14,260,812
Tonnes milled
(ore) 8,192,859 7,182,022
Average mill
operating
rate (t/d) 45,264 39,680
Gold grade (g/t) 0.729 0.917
Copper grade (%) 0.242 0.265
Gold recovery (%) 70 67
Copper recovery (%) 82 77
Gold production
(ounces) 135,553 141,384
Copper production
(thousands
of pounds) 35,767 32,925
Cash cost
($/ounce) 207 185
The Kemess South mine continues to operate safely with no lost-time accidents recorded during the second quarter.
On June 17, 2002, members of the International Union of Operating Engineers -- Local 115, representing approximately 300 employees at the Kemess mine, voted to accept a new three-year collective agreement negotiated with the assistance of a provincial mediator. The previous agreement expired on Dec. 31, 2001.
2002 exploration program at Kemess North
Drilling on the Kemess North project commenced in mid-June with four drill rigs. Initial drill results from the first 18 holes have been successful at confirming the size and grade of the existing 5.7-million-ounce Kemess North resource, including the presence of a high-grade porphyry dome having a 400-metre longitudinal section grading in excess of one gram per tonne gold equivalent (see attached longitudinal section).
The most significant intersections from the initial holes in the 2002 program compared with the mineral reserves at Kemess South were:
Hole Intersected Gold Copper
width (m) (g/t) (%)
KN-02-01 154.2 0.89 0.46
KN-02-03 79.8 0.81 0.30
KN-02-03 111.4 0.84 0.37
KN-02-04 98.5 0.96 0.44
KN-02-09 105.4 0.71 0.37
KN-02-13 200.2 0.61 0.30
KN-02-16 206.0 0.54 0.29
Mineral Gold Copper
reserves Tonnes (g/t) (%)
Kemess South
(as at
Dec. 31,
2001) 132,587,800 0.70 0.23
The 2002 exploration program is designed to determine the ultimate extent of the high-grade porphyry dome structure that was discovered in 2001 and expand the size of the Kemess North resource. The initial diamond drill holes were located within the boundaries of the resource outline. Further drilling will gradually step out to the southwest, through the western cirque to the Nugget target. Drilling will also be focused on Kemess East, which is believed to be the faulted northeastern extension of the Kemess North deposit. Further updates will follow in the months ahead.
The corporation is also pleased to announce the appointment of Dave Hendriks to the position of project manager, Kemess North. Mr. Hendriks has been working for the corporation in various capacities since Northgate acquired Kemess in 2000. Most recently, he was responsible for the successful completion of the latest stage of the mill process optimization project which involved the column cell installation and commissioning. Mr. Hendriks will be responsible for all facets of the Kemess North project, including the preparation of a feasibility study, which is scheduled for completion by the end of 2003.
Corporate finance
Northgate closed its $125-million (Canadian) unit offering of common shares and warrants on June 28, 2002. Proceeds from the financing were used to repay long-term debt, to reduce its gold hedging position and the balance for general corporate purposes. Since the beginning of 2002, Northgate has reduced its long-term debt and other obligations by over $170-million ($265-million (Canadian)) to $45-million. At June 30, 2002, the corporation's ratio of long-term debt to total capitalization was less than 28 per cent.
Concurrent with the offering, the corporation's $90-million (Canadian) Class A, Series 1 and 2 preferred shares were converted into 59,602,650 common shares. At the end of the quarter, the corporation had 190,551,115 common shares outstanding.
Outlook
Ken Stowe, president and chief executive officer, commented: "I am pleased to report on our year-to-date progress. Following the closing of the equity offering in June, we have achieved an important objective of substantially reducing debt and improving the balance sheet. 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 flows and thereby creating significant long-term value for shareholders. The initial drill results from Kemess North are further confirmation of the potential size and scope of the mineral resource. Over the balance of the year, we will focus our attention on completing the tailings sand project and look forward to receiving additional drill results at Kemess North. Northgate is well capitalized and our operations continue to exceed our expectations. With annual production in excess of 270,000 ounces and our large resource base, we have tremendous leverage to rising gold prices."
WARNING: The company relies upon litigation protection for "forward-looking" statements.
KEMESS NORTH PROJECT
2002 SUMMARY OF DRILLING RESULTS
Interval Length Cu Au
Hole (m) (m) (%) (g/t)
KN-02
-12B 509.0-634.0 125.0 0.236 0.419
incl. 509.0-540.0 31.0 0.362 0.675
KN-02
-17B 597.9-640.0 42.1 0.263 0.359
KN-02
-01 170.6-566.0 395.4 0.291 0.528
incl. 407.4-561.6 154.2 0.464 0.887
incl. 422.8-482.0 59.2 0.542 1.049
KN-02 Hole lost before
-02 intersecting target
KN-02
-03 353.2-714.4 361.2 0.237 0.413
incl. 447.1-526.9 79.8 0.297 0.809
KN-02
-04 264.0-375.4 111.4 0.368 0.841
incl. 321.6-375.4 53.8 0.408 1.186
KN-02
-05 224.6-544.4 330.8 0.294 0.570
incl. 409.7-508.2 98.5 0.435 0.959
KN-02
-06 228.0-496.0 268.0 0.224 0.406
KN-02
-07 478.3-517.7 39.4 0.300 0.430
incl. 587.4-619.4 32.0 0.270 0.541
KN-02
-08 284.8-404 119.2 0.212 0.547
KN-02
-09 229.0-498.0 270.0 0.285 0.586
incl. 392.6-498.0 105.4 0.367 0.710
KN-02
-10 242.3-368.5 126.2 0.184 0.296
KN-02 Did not intersect
-11 the porphyry system
KN-02
-12 517.9-584.4 66.5 0.250 0.326
KN-02
-13 69.7-159.5 89.8 0.152 0.333
incl. 390.8-591.0 200.2 0.303 0.614
incl. 494.4-526.0 31.6 0.497 1.594
KN-02
-14 11.2-70.7 59.5 0.207 0.262
incl. 240.0-269.0 29.0 0.194 0.381
KN-02
-15 79.5-161.5 82.3 0.266 0.413
incl. 211.9-296.0 84.1 0.180 0.337
KN-02
-16 407.0-613.0 206.0 0.290 0.537
incl. 539.5-585.0 45.5 0.469 1.252
Re-bottomed hole KN-00-12.
Re-bottomed hole KN 01-17.
All assays by ALS Chemex.
All intervals calculated from the assays
of individual samples taken approximately
every two metres in the holes.
CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended June 30
(thousands of U.S. dollars)
2002 2001
Revenue $ 26,405 $ 24,471
-------- --------
Operating costs 19,292 17,011
Admin and general 417 502
-------- --------
Earnings before
interest, taxes,
depreciation and
depletion 6,696 6,958
Other expenses
Depreciation
and depletion 5,873 4,823
Net interest 1,584 2,355
Exploration 746 99
Currency
translation
losses (gains) 1,073 1,086
Mining and
capital taxes 197 586
Non-controlling
interest (568) (170)
-------- --------
8,905 8,779
-------- --------
(Loss) before the
following items (2,209) (1,821)
Loss on settlement
of gold forward
sales contracts 9,839 -
Gain on disposal
of subsidiary - 1,161
-------- --------
Earnings (loss)
for the period $(12,048) $ (660)
======== ========
(Loss) per share
(basic and diluted) $ (0.17) $ (0.09)
CONSOLIDATED STATEMENT OF OPERATIONS
Six months ended June 30
(thousands of U.S. dollars)
2002 2001
Revenue $ 50,285 $ 52,203
-------- --------
Operating costs 37,293 34,717
Admin and general 753 1,140
-------- --------
Earnings before
interest, taxes,
depreciation and
depletion 12,239 16,346
Other expenses
Depreciation
and depletion 12,831 10,463
Net interest 3,228 5,722
Exploration 786 123
Currency
translation
losses (gains) 1,299 (145)
Mining and
capital taxes 528 756
Non-controlling
interest (691) 238
-------- --------
17,981 17,157
-------- --------
(Loss) before the
following items (5,742) (811)
Loss on settlement
of gold forward
sales contracts 9,839 -
Gain on disposal
of subsidiary - 1,161
-------- --------
Earnings (loss)
for the period $(15,581) $ 350
======== ========
(Loss) per share
(basic and diluted) $ (0.33) $ (0.12)
CONSOLIDATED STATEMENT OF
RETAINED EARNINGS (DEFICIT)
Three months ended June 30
(thousands of U.S. dollars)
2002 2001
Retained earnings
(deficit) at
beginning
of period $(36,610) $(15,299)
Earnings (loss)
for the period (12,048) (660)
Dividends on
preferred shares (1,166) -
Interest on
capital
securities - (1,931)
-------- --------
Retained earnings
(deficit) at
end of period $(49,824) $(17,890)
======== ========
CONSOLIDATED STATEMENT OF
RETAINED EARNINGS (DEFICIT)
Six months ended June 30
(thousands of U.S. dollars)
2002 2001
Retained earnings
(deficit) at
beginning
of period $(31,640) $(14,230)
Earnings (loss)
for the period (15,581) 350
Dividends on
preferred shares (1,166) -
Interest on
capital
securities (1,437) (4,010)
-------- --------
Retained earnings
(deficit) at
end of period $(49,824) $(17,890)
======== ======== |
