Lots of one time charges,...
Northgate Reports Third Quarter Profit on Record
Throughput Exploration Continues to Provide Positive
Results
VANCOUVER, BRITISH COLUMBIA--(All figures in US dollars except
where noted) - Northgate Exploration Limited (TSX: NGX) today
reported cash flow from operations before changes in working
capital of $5,394,000 or $0.03 per common share (fully diluted)
for the three months ended September 30, 2002, from production of
69,196 ounces of gold and 16.9 million pounds of copper. Net
earnings for the quarter were $982,000 or $0.01 per common share.
This compared with a loss of $2,511,000 or $0.14 per common share
during the same quarter last year.
2002 Third Quarter Highlights
* Cash flow from operations was $5.4 million in the quarter on
production of 69,196 ounces of gold and 16.9 million pounds of
copper. Year to date cash flow from operations before one-time
items of $12.4 million has been generated from production of
204,700 ounces of gold and 52.6 million pounds of copper.
* As a result of management's continued focus on process
optimization, the Kemess South Mine set a quarterly production
record, averaging 50,300 tonnes of ore milled per day and recorded
mill availability of 91%.
* Exploration drilling at the Nugget Zone, located one kilometer
west of the proposed pit outline at Kemess North, has established
that the gold-copper porphyry system at Kemess North is much
larger and more continuous than previously known.
* The diamond-drilling program at Kemess North is virtually
complete with over 33,000 meters of core drilled. The program has
been successful at delineating a high-grade porphyry dome with
grades greater than 1 gmt gold equivalent. The broad dimensions of
the dome are estimated at 700 metres by 400 metres with a maximum
thickness of 370 metres.
OPERATING RESULTS
Management's Discussion and Analysis
Northgate reported cash flow from operations (before changes in
working capital) of $5,394,000 in the third quarter of 2002
compared with cash flow of $3,510,000 during the same period last
year. Net earnings for the quarter were $982,000 or $0.01 per
common share compared with a net loss of $2,511,000 or $0.14 per
common share during the same period last year.
Northgate's total revenues for the third quarter were $28,062,000
compared with $24,245,000 for the corresponding period in 2001 as
a result of both higher gold and copper production and an
improvement in metal prices. The average metal prices received on
sales in the third quarter of 2002, before hedging, were
approximately $314 per ounce of gold and $0.69 per pound of copper
compared with $273 per ounce and $0.67 per pound last year.
Revenues in the current quarter were enhanced by $966,000 through
the combined effects of the Corporation's gold and currency
hedging activities compared with $2,794,000 in the comparable
quarter last year.
Total operating expenses in the third quarter of 2002 were
$18,619,000, only 2% higher than the corresponding period last
year even though mine production increased 10% and mill throughput
increased 20%. Cash costs in the third quarter of 2002 were US$209
per ounce, substantially improved from the comparable quarter in
the previous year and virtually the same as the previous quarters
of 2002. Copper prices have declined slightly since the beginning
of the year and remain weak. This impacts the mine's copper
byproduct credit and has kept cash costs at higher than plan
levels.
Net interest expense declined to $1,152,000 for the three months
ended September 30, 2002 from $1,927,000 during the corresponding
period in 2001. The reduction in interest expense is attributable
to a substantial reduction in the Corporation's long-term debt as
a result of the equity financing completed in June 2002.
Administrative and general expenses dropped to $321,000 in the
quarter from $527,000 during the corresponding period of 2001,
reflecting a focus on reducing overheads and other fixed costs.
Depreciation expenses in the third quarter were $4,379,000,
substantially lower than in the corresponding period of 2001. The
lower depreciation charge resulted from the milling of
approximately 1.8 million tonnes of stockpiled supergene ore that
had been depreciated as it was mined from the Kemess South open
pit earlier in the year.
Capital expenditures during the third quarter totaled $5,958,000
compared with $7,272,000 the third quarter of last year. Ongoing
construction of the tailings impoundment facility represented the
majority of these expenditures.
OPERATIONS
Kemess Mine
The Kemess Mine produced 69,196 ounces of gold and 16.9 million
pounds of copper during the third quarter compared to 64,271
ounces of gold and 14.4 million pounds of copper in the third
quarter of 2001. In late September Kemess commissioned an electric
cable shovel, which replaced two less efficient diesel hydraulic
loaders. This shovel will increase overall mining capacity to over
130,000 tonnes per day and decrease mining costs by approximately
$750,000 per year.
The Kemess mill processed a record volume of ore during the
quarter as a result of record mill availability of 91% and the
effect of milling one month of softer supergene ore that can be
processed at a higher rate. The average recovery of copper during
the quarter was lower than previous quarters of 2002 due to the
lower recoveries inherent in supergene ore, however hypogene ore
processed during the quarter continued to produce record
recoveries as a result of the new column flotation cells installed
in the second quarter.
The following table provides a summary of operations for the third
quarter and the first nine months of 2002, compared with the
comparable periods in 2001.
/T/
(100% of production basis) 3Q 02 3Q 01 9M 02 9M 01
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Tonnes mined (ore plus
waste) 9,857,346 8,916,386 31,334,112 23,177,198
Tonnes milled (ore) 4,625,410 3,861,958 12,818,269 11,043,980
Average mill operating rate
(tpd) 50,276 41,978 46,953 40,454
Gold grade (gmt) 0.709 0.813 0.722 0.881
Copper grade (%) 0.225 0.221 0.236 0.249
Gold recovery (%) 66 64 69 66
Copper recovery (%) 74 76 79 77
Gold production (ounces) 69,196 64,271 204,748 205,655
Copper production (000's
pounds) 16,869 14,386 52,636 47,311
Cash Cost ($/ounce) 209 255 208 207
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/T/
In the third quarter of 2002, after a record 333 days with no lost
time incidents, Kemess recorded two lost time incidents. In spite
of these incidents, based on industry data, Kemess still has the
second lowest lost time incident frequency of all mines in British
Columbia during the first nine months of 2002.
2002 EXPLORATION PROGRAM AT KEMESS NORTH
Exploration drilling at the Kemess North project is virtually
complete with only two holes left to drill and over 33,000 meters
of diamond drill core recovered. Drill results at Kemess North
have confirmed the continuity and grade of the porphyry dome
structure discovered in 2001 and results at the Nugget Zone have
proven the existence of substantial gold-copper porphyry
mineralization located over 1 kilometer west of the Kemess North
pit outline. Northgate expects to have assays for the remaining
holes drilled as part of its 2002 program by the end of November
at which time a summary of the 2002 program will be disclosed.
SUBSEQUENT EVENT
Following the acquisition of the Kemess Mine in 2000, Northgate
pursued resolution of certain construction liens registered
against the mine. One lien remains unresolved and on October 18,
2002, the B.C. Supreme Court rendered a decision in favour of a
contractor in the amount of Cdn$6.5 million plus legal costs.
Northgate has provided Cdn$3 million as a purchase price
adjustment against the original acquisition cost of the mine.
Northgate is reviewing its options in relation to the judgment.
OUTLOOK
Ken Stowe, President and CEO, commented, "I am pleased to report
the return to profitability, following the substantial completion
of our operational improvement program initiated when we acquired
the Kemess Mine in 2000. The mill and the mine are now both
operating at levels that exceed our original expectations. The
management team will continue to seek further opportunities to
lower operating and capital costs, including the commissioning of
the tailing sands project scheduled for the upcoming quarter. As
the exploration season at Kemess North comes to an end, our
objectives for the current program have been met, namely,
confirmation of the potential size and scope of the mineral
resource and the accumulation of sufficient data to commence a
feasibility study. The discovery at the Nugget Zone and results of
the regional program have also been particularly encouraging.
Northgate, with its attractive assets and a large resource base,
is well positioned to benefit from improving fundamentals in the
gold market."
This news release contains certain forward-looking statements that
reflect the current views and/or expectations of Northgate
Exploration Limited with respect to its performance, business and
future events. Such statements are subject to a number of risks,
uncertainties and assumptions. Actual results and events may vary
significantly.
/T/
NORTHGATE EXPLORATION LIMITED
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States dollars)
September 30 December 31
2002 2001
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(unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 568 $ 804
Concentrate settlements and
other receivables 11,047 11,738
Inventories 7,136 8,041
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18,751 20,583
Other assets 9,816 10,329
Mineral property, plant and
equipment 205,289 205,271
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$ 233,856 $ 236,183
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LIABILITIES AND TOTAL SHAREHOLDERS'
EQUITY
Current liabilities
Accounts payable and accrued
liabilities $ 23,592 $ 21,389
Short-term debt 5,547 5,886
Current portion of capital lease
obligations 2,023 2,659
Current portion of long-term debt 9,500 11,000
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40,662 40,934
Capital lease obligations 3,905 5,064
Long-term debt 42,750 103,162
Site closure and reclamation
liabilities 10,203 10,048
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97,520 159,208
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Non-controlling interest 8,234 8,924
Shareholders' equity (deficiency)
and capital securities (note 3)
Capital securities - 87,219
Common shareholders' equity
(deficiency) 128,102 (19,168)
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128,102 68,051
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$ 233,856 $ 236,183
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The accompanying notes form an integral part of these financial
statements.
NORTHGATE EXPLORATION LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in thousands of United States dollars, except per share
amounts) (unaudited)
Three months ended Nine months ended
September 30 September 30
--------------------------------------------
2002 2001 2002 2001
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Revenue $ 28,062 $ 24,245 $ 78,347 $ 76,448
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Operating costs 18,619 18,271 55,912 52,988
Administrative and
general 321 527 1,074 1,667
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Earnings before interest,
taxes, depreciation and
depletion 9,122 5,447 21,361 21,793
Other expenses:
Depreciation and
depletion 4,379 6,141 17,210 16,604
Net interest 1,152 1,927 4,380 7,649
Exploration 2,469 439 3,255 562
Currency translation losses
(gains) (289) (1,227) 1,010 (1,372)
Mining and capital taxes 428 358 956 1,114
Non-controlling interest 1 317 (690) 555
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8,140 7,955 26,121 25,112
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Income (loss) before the
following items: 982 (2,508) (4,760) (3,319)
Loss on settlement of gold
forward sales contracts
(note 3d) - - 9,839 -
Gain on disposal of
subsidiary - (3) - 1,158
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Earnings (loss) for the
period $ 982 $ (2,511)$ (14,599)$ (2,161)
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Earnings (loss) per share
(basic and diluted) $ 0.01 $ (0.14)$ (0.17)$ (0.27)
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Weighted average shares
outstanding:
Basic 190,551,115 30,251,156 100,711,820 30,251,156
Diluted 191,445,831 156,117,225 101,726,311 155,818,417
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The accompanying notes form an integral part of these financial
statements.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
(Expressed in thousands of United States dollars) (unaudited)
Three months ended Nine months ended
September 30 September 30
--------------------------------------------
2002 2001 2002 2001
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Retained earnings
(deficit) at beginning
of period $(49,824) $(17,890) $(31,640) $(14,230)
Earnings (loss) for the
period 982 (2,511) (14,599) (2,161)
Dividends on preferred
shares - - (1,166) -
Interest on capital
securities - (1,873) (1,437) (5,883)
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Retained earnings
(deficit) at end of
period $(48,842) $(22,274) $(48,842) $(22,274)
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