NORTHGATE EXPLORATION LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of United States dollars) (unaudited)
Three months ended Nine months ended
September 30 September 30
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2002 2001 2002 2001
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CASH PROVIDED BY
(USED IN) OPERATIONS
Income (loss) for the
period $ 982 $ (2,511) $ (14,599) $ (2,161)
Non-cash items:
Depreciation and
depletion 4,379 6,141 17,210 16,603
Non-controlling interest 1 317 (690) 555
Unrealized currency
translation losses
(gains) (114) (443) 212 (136)
Accrual for reclamation
costs 27 - 112 -
Amortization of deferred
financing charges 119 3 353 101
Gain (loss) on disposal
of subsidiary - 3 - (1,158)
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5,394 3,510 2,598 13,804
Changes in non-cash
operating working
capital:
Concentrate settlements
and other receivables (3,903) 237 691 (2,145)
Inventories 6,867 2,000 905 3,603
Accounts payable and
accrual liabilities (2,546) 849 2,203 (5,787)
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5,812 6,596 6,397 9,475
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INVESTMENTS
Proceeds received from
investments - - - 4,248
Additions to other assets (3) (2,403) (9) (2,403)
Additions to mineral
property, plant and
equipment (5,958) (7,272) (17,228) (12,839)
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(5,961) (9,675) (17,237) (10,994)
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FINANCING
Deferred revenue - (2,287) - -
Repayment of capital
lease obligations (710) (1,028) (1,795) (2,210)
Repayment of debt (4,848) (2,226) (74,985) (14,340)
Issuance of debt 3,355 6,721 12,734 14,619
Issuance of preferred
shares - - 56,475 -
Dividends on preferred
shares - - (1,166) -
Issuance of common shares
and warrants (168) - 107,997 -
Draw (repayment) of
capital securities - 1,249 (88,656) 4,681
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(2,371) 2,429 10,604 2,750
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Increase (decrease)
in cash and cash
equivalents (2,520) (650) (236) 1,231
Cash and cash equivalents
at beginning of period 3,088 4,291 804 2,410
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Cash and cash equivalents
at end of period $ 568 $ 3,641 $ 568 $ 3,641
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Supplementary information:
Cash paid during the period
for:
Interest on capital
securities $ - $ - $ 14,860 $ -
Other interest $ 829 $ 926 $ 17,244 $ 3,353
Income taxes $ - $ - $ - $ -
Non cash financing
activities:
Issuance of common
shares on redemption of
preferred shares $ - $ - $ 56,475 $ -
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The accompanying notes form an integral part of these financial
statements.
NORTHGATE EXPLORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended September 30, 2002 and 2001
(Expressed in thousands of United States dollars)
/T/
1. Basis of Presentation
The accompanying unaudited interim financial statements have been
prepared in accordance with generally accepted accounting
principles in Canada. They do not include all the disclosures
required by generally accepted accounting principles for annual
financial statements and should be read in conjunction with the
Corporation's consolidated financial statements including the
notes thereto included in the Annual Report for the year ended
December 31, 2001. In the opinion of management, all adjustments
considered necessary for fair presentation have been included in
these financial statements. Operating results for the three months
ended September 30, 2002 are not necessarily indicative of the
results that may be expected for the full year ending December 31,
2002.
These financial statements are prepared using the same accounting
policies and methods of application as those disclosed in note 2
to the Corporation's consolidated financial statements for the
year ended December 31, 2001 except as disclosed in notes 2 and
3(c).
2. Reporting Currency and Foreign Currency Translation
As of December 31, 2001, the Corporation adopted the United States
dollar as the primary currency of measurement and display. The
Corporation has translated the September 30, 2001 amounts
previously reported in Canadian dollars using a translation of
convenience, whereby such amounts have been translated at the rate
of exchange in effect in 2001.
Effective January 1, 2002, the Corporation adopted the CICA's new
standards for the translation of foreign currencies. These bring
Canadian practice into alignment with most other industrialized
nations. Under the new rules, gains and losses on non-current,
monetary items with a fixed and ascertainable life denominated in
currencies other than the United States dollar are no longer
deferred and amortized over the life of the items but charged
directly to earnings as they occur. The change has been applied
retroactively, although because the Corporation has no significant
non-current, monetary items with a fixed and ascertainable life
denominated in currencies other than the United States dollar,
there was no impact of this change on the prior period financial
statements.
/T/
3. Share Capital
(a) Preferred shares:
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Number of shares Amount
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Class A Series 1:
Balance, December 31, 2001 - $ -
Issued in Q1 2002 for cash at
Cdn$25 per share 1,800,000 28,238
Converted in Q2 2002 for common shares
at $1.51 per share (1,800,000) (28,238)
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Balance, September 30, 2002 - -
Class A Series 2:
Balance, December 31, 2001 - -
Issued in Q1 2002 for cash at
Cdn$25 per share 1,800,000 28,237
Converted in Q2 2002 for common shares
at $1.51 per share (1,800,000) (28,237)
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Balance, September 30, 2002 - -
Total preferred shares,
September 30, 2002 - $ -
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(b) Common shareholders' equity (deficiency)
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Sept. 30, 2002 Dec. 31, 2001
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Common shares (i) $168,331 $ 12,472
Warrants 8,613 -
Retained earnings (deficit) (48,842) (31,640)
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$128,102 $(19,168)
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(i) Common shares:
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Number of shares Amount
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Balance, December 31, 2001 30,251,156 $ 12,472
Issued in Q1 - 2002:
On exercise of previously
issued special warrants 15,873,000 12,552
On exercise of previously
issued flow-through
special warrants 3,865,429 3,396
On exercise of rights at
$1.26 per share 19,841,270 15,690
Share issuance costs - (1,439)
Issued in Q2 - 2002:
Pursuant to a Prospectus
offering 60,975,610 73,511
On conversion of
convertible preferred
shares 59,602,650 56,475
On exercise of options 144,000 85
Other (2,000) (2)
Share issuance costs - (4,240)
Issued in Q3 - 2002:
Share issuance costs - (167)
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Balance, September 30, 2002 190,551,115 $168,331
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/T/
(c) Stock-based compensation
Effective January 1, 2002, the Corporation adopted the CICA's new
handbook section 3870, Stock-Based Compensation and Other
Stock-Based Payments. Under the new standard, stock-based payments
to non-employees, and employee awards that are direct awards of
stock, call for settlement in cash or other assets, or are stock
appreciation rights that call for settlement by the issuance of
equity instruments, granted on or after January 1, 2002, are
accounted for using the fair value based method. No compensation
costs are recorded for all other stock-based employee compensation
awards. Consideration paid by employees on the exercise of stock
options is recorded as share capital and contributed surplus. The
Corporation discloses the pro forma effect of accounting for these
awards under the fair value based method. The adoption of this new
standard has resulted in no changes to amounts previously
reported.
During the first and third quarters of 2002, the Corporation
granted 140,000 options and 50,000 options, respectively, to
officers, directors and employees exercisable at $1.45 for 5
years. These options vest 20% on each anniversary date for the
next four years. During the second quarter, 48,000 previously
issued options were vested. The Corporation uses the intrinsic
value method of accounting for share options granted to directors,
officers and employees. If the fair value method had been used to
determine compensation cost for share options granted to
directors, officers and employees, the Corporation's net loss and
loss per share for the three-month period and nine-month period
ended September 30, 2002 would have been as follows:
/T/
Q3 - 2002 YTD - 2002
----------------------------- -------------------------------
Fair value As Fair value
As of options reported of options
reported vested Pro forma vested Pro forma
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Net loss $ 982 9 $ 973 $(14,599) 36 $(14,635)
Basic loss
per common
share 0.01 - 0.01 (0.17) - (0.17)
Diluted loss
per common
share 0.01 - 0.01 (0.17) - (0.17)
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The fair value of share options was estimated using the Black-Scholes
option-pricing model with the following assumptions:
Nine months ended
September 30, 2002
-----------------------------------
Risk-free interest rate 4.5%
Annual dividends -
Expected stock price volatility 95%
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/T/
The expected life of the options used in the option-pricing model
were determined as one-half of the weighted average life of the
option terms.
(d) On June 25, 2002 the Corporation closed a Cdn$125 million
equity financing in which it issued 60,975,610 common shares and
20,325,203 share purchase warrants. Proceeds from the issue were
used to repay long-term debt, close out a portion of the
Corporation's gold forward sales position, and for general
corporate purposes. Coincident with the closing, all of the
Corporation's convertible preferred shares were converted into
common shares at Cdn$1.51 per share.
4. Financial instruments
At September 30, 2002, Kemess Mines Ltd. had forward sale
commitments with major financial institutions to deliver 350,000
ounces of gold at an average accumulated price of $301 per ounce.
These forward sales commitments are in the form of short dated
spot deferred contracts. A portion of the position may be brought
and settled into income in 2002 and a portion will eventually be
rolled into future years as part of the Corporation's commitments
under its project loan.
During the third quarter of 2002, Kemess Mines Ltd. brought
$703,500 of premium revenue into income upon the expiry of 150,000
ounces of gold call options.
5. Subsequent Event
The Corporation and its subsidiaries are involved in certain
claims and lawsuits relating to unresolved construction liens at
the Kemess South Mine. On October 18, 2002 the B.C. Supreme Court
rendered a decision in favour of the contractor in the amount of
Cdn$6.5 million plus legal costs. Northgate had already provided
Cdn$3 million as a purchase price adjustment against the original
acquisition of the mine. Northgate is reviewing its options in
relation to the judgment. |
