Northgate Minerals Reports First Quarter Results
VANCOUVER, May 10 /CNW/ --
Strong Cash Flow from Operations of $40.1 Million
Notice: Conference Call and Webcast of Annual General Meeting and Q1
Results Today at 10:00 am ET
Dial in: 647-427-7450 or 1-888-231-8191
VANCOUVER, May 10 /CNW/ - (All figures in US dollars except where noted)
- Northgate Minerals Corporation ('Northgate' or the 'Corporation')
(TSX: NGX) (NYSE Amex: NXG) today announced its financial and operating
results for the three months ended March 31, 2011 in accordance with
the newly adopted International Financial Reporting Standards ('IFRS').
First Quarter Highlights
-- The net profit was $19.8 million or $0.07 per share.
-- The adjusted net profit((1)) was $7.5 million or $0.02 per
share.
-- Strong cash flow from operations of $40.1 million or $0.14 per
share.
-- First quarter production was 51,210 ounces of gold and 6.5
million pounds of copper at an average net cash cost of $699
per ounce.
o Production guidance for 2011 remains unchanged: 195,000 ounces -
205,000 ounces at a cash cost of $805 - $845 per ounce.
-- First quarter metal sales were 56,937 ounces of gold at a
realized price of $1,386 per ounce and 9.0 million pounds of
copper at a realized price of $2.77 per pound.
-- Northgate's cash balance at the end of the first quarter 2011
was $308.1 million.
-- Construction activities at Young-Davidson remain on schedule
and on budget. At the end of the first quarter 2011, Northgate
had invested approximately $130 million towards construction of
the Young-Davidson mine.
-- Subsequent to the end of the first quarter, Northgate entered
into a Cdn$40 million three-year senior secured revolving
credit facility with BNP Paribas.
'First quarter production was highlighted by an excellent performance at
Kemess South, as the mine wrapped up with higher gold and copper
production than forecast' commented Ken Stowe, President and CEO.
'While production at our Australian mines came in lower than plan, we
are pleased to report that our guidance remains the same for the year
as both mines are forecasting higher production for the balance of
2011. On the development front, we are excited with the excellent
progress being made at Young-Davidson, as the project remains on
schedule and on budget.'
'As the Kemess South mine came to a close in March, I would like to take
this opportunity to thank our dedicated workforce that has been a part
of the Northgate-Kemess family since taking ownership of the mine in
2000. The work and commitment of our workforce have been exemplary,
transforming the mine into a world-class asset, with production close
to 3 million ounces of gold and 700 million pounds of copper. We now
look forward to the rebirth of Kemess, having recently released an
updated resource estimate for the Kemess Underground project and are
expecting to complete a Preliminary Assessment by the summer.'
Financial Performance
Northgate recorded consolidated revenue of $123.0 million in the first
quarter of 2011, compared with revenue of $125.3 million recorded in
the same period last year. Revenues were strong in the first quarter as
a result of higher metal prices.
The adjusted net profit for the first quarter of 2011 was $7.5 million
or $0.02 per share, compared with $6.3 million or $0.02 per share in
the first quarter of 2010. The net profit for the first quarter of 2011
was $19.8 million or $0.07 per share, compared with $3.9 million or
$0.01 per share in the first quarter of 2010.
Northgate generated excellent cash flow from operations of $40.1 million
or $0.14 per share in the first quarter of 2011. The Corporation
continues to maintain a strong balance sheet, with cash and cash
equivalents totalling $308.1 million as of March 31, 2011.
Corporate Revolver
Subsequent to the end of the first quarter 2011, Northgate entered into
a Cdn$40 million, three-year senior secured revolving credit facility
(the 'Revolver') with BNP Paribas. While Northgate does not forecast
the need to draw down any funds, the Revolver provides additional
financial capacity, if necessary, for the construction of the
Young-Davidson mine.
Adoption of International Financial Reporting Standards ('IFRS')
In February 2008, the Accounting Standards Board confirmed that
publicly-accountable entities will be required to prepare financial
statements in accordance with IFRS for interim and annual financial
statements for fiscal years beginning on or after January 1, 2011.
Accordingly, Northgate has adopted IFRS effective January 1, 2011,
which is reflected in our unaudited condensed consolidated interim
financial statements for the first quarter ended March 31, 2011. In
addition, all comparative figures for the 2010 fiscal year, included in
our interim financial statements and related first quarter management's
discussion and analysis ('MD&A'), have been restated in accordance with
IFRS. Previously, Northgate prepared its consolidated annual and
consolidated interim financial statements in accordance with Canadian
generally accepted accounting principles ('Canadian GAAP').
Details of the significant accounting differences between IFRS and
Canadian GAAP can be found in Northgate's first quarter MD&A and note
16 of our interim financial statements.
Results from Operations
Fosterville Gold Mine
Fosterville achieved production of 20,632 ounces of gold in the first
quarter of 2011. Early in the year, the mill was impacted by issues
within the BIOX® circuit, which affected production for the quarter.
These issues have since been resolved and there is no material impact
to the mine's annual production forecast. Production is back on track,
highlighted by a monthly record of just over 11,000 ounces in March. We
are pleased to announce that Fosterville produced its half-millionth
ounce of gold on the property in April.
During the quarter, mine development continued to progress well and was
in line with forecast. A total of 188,906 tonnes of ore was mined and
mine development advanced 2,203 m. Development towards the new Harrier
zone also continued to progress well and production is on track to
commence in the second half of 2011.
During the quarter, 161,064 tonnes of ore was milled at a grade of 4.96
grams per tonne ('g/t'), compared with the 191,663 tonnes milled at a
grade of 5.11 g/t in the corresponding quarter of 2010.
The average net cash cost of production for the first quarter of 2011
was $1,012 per ounce, which was adversely effected by the dramatic
increase in the Australian dollar relative to the US dollar and, to a
lesser extent, by lower gold production. In the most recent quarter,
the Australian dollar averaged 11% higher compared to the corresponding
period last year. For the balance of 2011, cash costs in Australian
dollars are expected to decrease relative to the first quarter and the
annual forecast remains consistent with the original guidance provided.
Stawell Gold Mine
During the first quarter, the Stawell mine produced 16,006 ounces of
gold, as a result of lower head grades mined. In the second quarter of
2011, production is expected to rise as grades improve and the annual
production forecast remains unchanged.
During the quarter, a total of 197,317 tonnes of ore was mined and mine
development advanced 1,493 m. Also during the quarter, 211,349 tonnes
of ore was milled at an average grade of 2.85 g/t. Although mill
production was higher than plan, the processing of higher carbonaceous
and low-grade ore resulted in lower-head grades, which impacted gold
recoveries and production during the quarter.
Total operating costs were lower during the first quarter at A$76 per
tonne of ore milled. Mining costs were A$50 per tonne of ore mined.
During the first quarter of 2011, the average net cash cost of
production was $1,010 per ounce, resulting from the dramatic increase
in the Australian dollar relative to the US dollar and lower gold
production. For the balance of 2011, cash costs in Australian dollars
are expected to decrease relative to the first quarter and the annual
forecast remains consistent with the original guidance provided.
Kemess South
During the first quarter, Kemess South posted strong production of
14,572 ounces of gold and 6.5 million pounds of copper. Quarterly
production exceeded original guidance as a result of higher grades and
higher mill throughput. After processing all remaining stockpiles, the
mill ceased production in March. The net cash cost of production for
the first quarter was negative $85 per ounce of gold, as a result of
higher copper prices, which increased 33% from the same period last
year.
During the quarter, approximately 0.3 million tonnes of ore and waste
were removed from the eastern end of the open pit. Unit mining costs
were low at Cdn$0.92 per tonne moved.
2011 Production Forecast
Production for the full year 2011 remains unchanged from the original
forecast:
Total Forecast 2011 Cash Cost ($/oz) (1)
(ounces)
Fosterville 97,000 - 102,000 $885 - $930
Stawell 86,000 - 91,000 $800 - $850
Kemess (Actual) 14,572 ($85)
195,000 - 205,000 $805 - $845
(1) Assuming exchange rates of US$/Cdn$1.00 and US$/A$1.00 for Q2 to Q4
2011.
Building Young-Davidson
Construction activities at Young-Davidson remain on schedule and on
budget. By the end of the first quarter 2011, Northgate had invested
approximately $130 million towards construction of the Young-Davidson
mine. In addition, 80% of the contracts worth approximately $170
million were awarded, 90% of the equipment purchase orders were placed
and 66% of the engineering was completed.
Young-Davidson is scheduled for commissioning activities in the fourth
quarter of 2011 and is targeting start-up of production in late Q1
2012. The mine is expected to generate an average of 180,000 ounces of
gold annually over an initial 15-year mine life.
Exploration Overview
Young-Davidson
Exploration at Young-Davidson in the first quarter was part of a $2.0 m
drill program to explore for other deposits outside of the known
reserves and resources currently being developed. Two drills totaling
5,000 m operated during the quarter focusing on the YD West zone. Hole
YD10-198B (see press release dated April 13, 2011), located
approximately 115 m below discovery hole 198, returned 5.43 g/t gold
over 10.95 m. Drilling for the balance of 2011 will continue to focus
on the YD West zone with the intent of delineating additional
resources. If the 2011 drilling program is successful, it is expected
that an initial mineral resource estimate for the YD West zone will be
completed by the end of the year.
In addition to this exploration program, underground delineation
drilling in support of future underground mining activities began in
late 2010 and is currently focusing on a sector of the Upper Boundary
Zone. This portion of the program is nearly complete and will be
reported upon during the second quarter of 2011 once all results have
been received. It is expected that the results of this program will be
incorporated into the annual reserve and resource re-estimate at the
end of 2011.
Kemess Underground
During the quarter, Northgate released an updated resource estimate for
its Kemess Underground project, located five kilometres north of the
Kemess South mine in north-central British Columbia. The updated
resource estimate followed on the completion of a 30-hole infill
diamond drill program at Kemess Underground that was completed in
2010. The updated resource estimate now contains an indicated resource
of 136.5 million tonnes with 2.6 million ounces of gold and 860.6
million pounds of copper. This represents 18% increase in tonnes, a
10% increase in contained gold and a 9% increase in contained copper
when compared with the May 2010 total.
The mineral resource estimate will form the basis of a Preliminary
Assessment, which will outline the economics and timeline for mining
the current resources. Northgate expects to file the Preliminary
Assessment in the third quarter of 2011.
Australia
At Stawell, drilling focused mainly on three target areas on or
immediately adjacent to the current mining lease. Two of these areas,
the Northgate Gift and Wonga Dome, were discovered by diamond drilling
during our 'Big Fish' exploration campaign in 2010. The third target
area is GG6L, located below GG6, where there is potential to add to
high-grade reserves.
During the quarter, approximately 8,800 m of drilling was completed.
Within the Northgate Gift, a wedge hole intersected a target zone
located 240 m above and south of the initial discovery hole, which
suggests a continuous mineralized horizon. Follow-up drilling, which
will take all of 2011 to complete, will better define the size and
geometry of the zone and associated mineralization
Within the Wonga Dome, subsequent drilling has intersected lower
sections of the basalt dome, where it is flanked by coarser grained
sediments less favourable for gold mineralization. The next few holes
are designed to intersect the basalt dome at a similar elevation and
geologic setting as discovery hole 649 (13.7 g/t over 5.45 m - see
press release dated November 1, 2010), at which point Northgate will
evaluate whether mineralization in the area is sufficiently robust to
support driving across to the zone to complete resource definition
drilling.
Exploration activity at Fosterville, which had been scheduled for the
first quarter, was deferred until the second quarter and commenced in
April. Exploration expenditures are forecast to be $3.8 million for
approximately 18,000 m of diamond drilling, mainly focusing on resource
conversion targets below and along trend from the currently mined
Phoenix deposit.
Summarized Consolidated Results
(Thousands of US Q1 2011 Q1 2010
dollars, except where
noted)
Financial Data
Revenue $ 123,027 $ 125,278
Adjusted net profit 7,476 6,291
( 1)
Per share 0.02 0.02
(basic)
Net profit 19,755 3,887
Per share 0.07 0.01
(basic)
Cash flow from 40,109 12,052
operations
Cash and cash 308,088 230,306
equivalents
Total assets $ 815,415 $ 713,710
Operating Data
Gold production
(ounces)
Fosterville 20,632 26,421
Stawell 16,006 22,238
Kemess 14,572 24,703
Total gold 51,210 73,362
production
Gold sales (ounces)
Fosterville 19,137 25,944
Stawell 16,470 21,411
Kemess 21,330 27,773
Total gold 56,937 75,128
sales
Realized gold price 1,386 1,128
($/ounce) (2)
Net cash cost
($/ounce) (3)
Fosterville 1,012 679
Stawell 1,000 794
Kemess (85) 502
Average net cash cost 696 654
($/ounce)
Copper production 6,497 9,529
(thousands pounds)
Copper sales 8,998 11,145
(thousands pounds)
Realized copper price 2.77 3.49
($/pound) (2)
1 Adjusted net profit is a non-IFRS measure. See section entitled
'Non-IFRS Measures' in the Corporation's interim MD&A Report.
2 Commencing in the fourth quarter of 2010, metal pricing quotational
period is three months after the month of ship loading for copper
and one month after the month of ship loading for gold produced at
Kemess South. Previously, the metal pricing quotational period was
three months after the month of arrival ('MAMA') at the receiving
facility for copper and one MAMA for gold. Therefore, realized
prices reported will differ from the average quarterly reference
prices, since realized price calculations incorporate the actual
settlement price for prior period sales, as well as the forward
price profiles of both metals for unpriced sales at the end of the
quarter.
3 Net cash cost per ounce of production is a non-IFRS measure. See
section entitled 'Non-IFRS Measures' in the Corporation's interim
MD&A Report.
Interim Condensed Consolidated Statements of Financial
Position
(Previously referred to as the Consolidated Balance
Sheets)
March 31 December 31 January 1
Thousands of US dollars, 2011 2010 2010
unaudited
Assets
Current Assets
Cash and cash equivalents $ 308,088 $ 334,840 $ 253,544
Trade and other receivables, 44,151 62,051 27,961
including derivatives
Income taxes receivable — 2,236 —
Inventories (note 3) 28,569 46,268 44,599
Prepaid expenses 3,915 2,367 2,566
Assets held for sale (note 4) 13,075 — —
Total Current Assets 397,798 447,762 328,670
Non-current Assets
Other assets 41,740 40,819 27,544
Deferred tax assets 21,898 13,014 20,113
Mineral property, plant and 352,497 323,903 316,086
equipment
Investments (note 5) 1,482 36,519 38,001
Total Non-current Assets 417,617 414,255 401,744
Total Assets $ 815,415 $ 862,017 $ 730,414
Liabilities and Shareholders'
Equity
Current Liabilities
Accounts payable and accrued $ 73,458 $ 93,534 $ 51,717
liabilities, including
derivatives
Income taxes payable 3,873 — 29,395
Short-term loan (note 6) — 40,161 41,515
Equipment financing obligations 7,742 7,945 5,995
Provisions (note 7) 26,880 38,359 31,717
Total Current Liabilities 111,953 179,999 160,339
Non-current Liabilities
Equipment financing obligations 13,011 10,763 4,656
Convertible senior notes 132,594 131,235 —
Option component of convertible 36,787 47,414 —
senior notes
Other long-term liabilities 378 379 3,619
Provisions (note 7) 31,226 30,459 29,963
Total Non-current Liabilities 213,996 220,250 38,238
Total Liabilities 325,949 400,249 198,577
Shareholders' Equity
Common shares 407,197 407,029 402,879
Contributed surplus 10,083 8,915 7,090
Accumulated other comprehensive 29,621 23,014 (4,108)
income (loss)
Retained earnings 42,565 22,810 125,976
Total Shareholders' Equity 489,466 461,768 531,837
Total Liabilities and $ 815,415 $ 862,017 $ 730,414
Shareholders' Equity
Subsequent event (note 15)
The accompanying notes form an integral part of these condensed
consolidated interim financial statements.
Interim Condensed Consolidated Statements of Comprehensive Income
Three Months Ended March 31
Thousands of US dollars, except share 2011 2010
and per share amounts, unaudited
Revenue $ 123,027 $ 125,278
Operating expenses
Cost of sales (note 3) 110,095 116,102
Administrative and general 3,785 3,786
Exploration 4,901 4,127
Other expenses (note 11) 852 249
119,633 124,264
Profit from operating activities 3,394 1,014
Financing income (expenses)
Interest income 1,659 932
Finance costs (note 10) (753) (744)
Currency translation gain 5,184 4,293
Fair value adjustment on option 10,627 —
component of convertible notes
Write-down of investments — (340)
16,717 4,141
Profit before income taxes 20,111 5,155
Income tax expense (356) (1,268)
Net profit for the period 19,755 3,887
Other comprehensive income (loss)
Unrealized loss on available for (114) (866)
sale securities
Unrealized gain on translation of 1,787 4,965
foreign operations
Reclassification of impairment on
available for sale investments to
profit or loss - 340
Reclassification of realized loss
on available for sale investments to
profit or loss 4,934 -
6,607 4,439
Comprehensive income $ 26,362 $ 8,326
Earnings per share (note 12)
Basic $ 0.07 $ 0.01
Diluted $ 0.03 $ 0.01
Weighted average shares outstanding
(note 12)
Basic 291,877,902 290,718,756
Diluted 334,617,292 292,005,260
The accompanying notes form an
integral part of these condensed
consolidated interim financial
statements.
Interim Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31
Thousands of US dollars, unaudited 2011 2010
Operating Activities
Net profit for the period $ 19,755 $ 3,887
Adjustments for:
Depreciation and depletion 31,592 31,558
Unrealized currency translation (352) (324)
gains
Loss (gain) on disposal of assets (394) 333
Stock-based compensation 1,225 1,386
Accrual of employee severance 995 438
costs
Interest income (1,659) (932)
Finance costs 753 744
Income tax expense 356 1,268
Income tax credited to (97) —
exploration expense
Change in fair value of forward (967) 2,894
contracts
Fair value adjustment on option (10,627) —
component of convertible notes
Write-down of investments — 340
Gain on sale of investments (17) —
Changes in operating working 1,666 (2,080)
capital and other (note 14)
Interest received 1,468 932
Interest paid (3,461) (564)
Income taxes paid (127) (27,828)
40,109 12,052
Investing Activities
Increase in restricted cash — (9,879)
Purchase of plant and equipment (4,975) (8,768)
Mineral property development (14,680) (12,541)
Assets under construction (45,938) (2,848)
Proceeds from sale of equipment 49 251
Proceeds from sale of investments 40,954 —
Purchase of investments (201) —
Deferred transaction costs paid (123) —
(24,914) (33,785)
Financing Activities
Repayment of equipment financing (2,748) (1,514)
obligations
Cash from equipment financing 1,275 —
Repayment of short-term loan (40,161) (378)
Repayment of other long-term (453) (217)
liabilities
Issuance of common shares 111 223
(41,976) (1,886)
Effect of exchange rate changes on 29 381
cash and cash equivalents
Decrease in cash and cash (26,752) (23,238)
equivalents
Cash and cash equivalents, 334,840 253,544
beginning of period
Cash and cash equivalents, end of $ 308,088 $ 230,306
period
The accompanying notes form an
integral part of these condensed
consolidated interim financial
statements.
* * * * * * *
This press release for the first quarter ended March 31, 2011 should be
read in conjunction with Northgate's first quarter MD&A, which is
available on our website at www.northgateminerals.com.
* * * * * * *
Annual General Meeting and Q1 2011 First Quarter Results Conference Call
and Webcast
Northgate will be hosting its Annual General Meeting ('AGM') on Tuesday,
May 10, 2011 at 10:00 am, Toronto time. The AGM will be held at The TMX
Broadcast and Conference Centre, 130 King Street West, Toronto,
Canada. This event will also include an overview of Northgate's 2011
first quarter financial results.
You may participate in our conference call by calling 647-427-7450 or toll free in North America at 1-888-231-8191. To ensure your participation, please call five minutes prior to the
scheduled start of the call.
A live audio webcast and presentation package will be available on
Northgate's homepage at www.northgateminerals.com. Information pertaining to the conference replay, available from May 10
to May 24, 2011, can also be found on our website.
* * * * * * *
Northgate Minerals Corporation is a gold and copper producer with mining operations, development
projects and exploration properties in Canada and Australia. Our
vision is to be the leading intermediate gold producer by identifying,
acquiring, developing and operating profitable, long-life mining
properties.
* * * * * * *
Qualified Person
The program design, implementation, quality assurance/quality control
and interpretation of the results are under the control of Northgate's
geological staff, which includes a number of individuals who are
qualified persons as defined under NI 43-101. Carl Edmunds, PGeo,
Northgate's Exploration Manager, has reviewed the geologic content of
this release.
Cautionary Note Regarding Forward-Looking Statements and Information:
This Northgate press release contains 'forward-looking information', as
such term is defined in applicable Canadian securities legislation and
'forward-looking statements' within the meaning of the United States
Private Securities Litigation Reform Act of 1995, concerning
Northgate's future financial or operating performance and other
statements that express management's expectations or estimates of
future developments, circumstances or results. Generally,
forward-looking information can be identified by the use of
forward-looking terminology such as 'expects', 'believes',
'anticipates', 'budget', 'scheduled', 'estimates', 'forecasts',
'intends', 'plans' and variations of such words and phrases, or by
statements that certain actions, events or results 'may', 'will',
'could', 'would' or 'might', 'be taken', 'occur' or 'be achieved'.
Forward-looking information is based on a number of assumptions and
estimates that, while considered reasonable by management based on the
business and markets in which Northgate operates, are inherently
subject to significant operational, economic and competitive
uncertainties and contingencies. Northgate cautions that
forward-looking information involves known and unknown risks,
uncertainties and other factors that may cause Northgate's actual
results, performance or achievements to be materially different from
those expressed or implied by such information, including, but not
limited to gold and copper price volatility; fluctuations in foreign
exchange rates and interest rates; the impact of any hedging
activities; discrepancies between actual and estimated production,
between actual and estimated reserves and resources or between actual
and estimated metallurgical recoveries; costs of production; capital
expenditure requirements; the costs and timing of construction and
development of new deposits; and the success of exploration and
permitting activities. In addition, the factors described or referred
to in the section entitled 'Risk Factors' in Northgate's Annual
Information Form for the year ended December 31, 2010 or under the
heading 'Risks and Uncertainties' in Northgate's 2010 Annual Report,
both of which are available on the SEDAR website at www.sedar.com, should be reviewed in conjunction with the information found in this
press release. Although Northgate has attempted to identify important
factors that could cause actual results, performance or achievements to
differ materially from those contained in forward-looking information,
there can be other factors that cause results, performance or
achievements not to be as anticipated, estimated or intended. There can
be no assurance that such information will prove to be accurate or that
management's expectations or estimates of future developments,
circumstances or results will materialize. Accordingly, readers should
not place undue reliance on forward-looking information. The
forward-looking information in this press release is made as of the
date of this press release, and Northgate disclaims any intention or
obligation to update or revise such information, except as required by
applicable law.
Cautionary Note to US Investors Regarding Mineral Reporting Standards:
The Corporation prepares its disclosure in accordance with the
requirements of securities laws in effect in Canada, which differ from
the requirements of US securities laws. Terms relating to mineral
resources in this press release are defined in accordance with National
Instrument 43-101-Standards of Disclosure for Mineral Projects under
the guidelines set out in the Canadian Institute of Mining, Metallurgy,
and Petroleum Standards on Mineral Resources and Mineral Reserves. The
Securities and Exchange Commission (the 'SEC') permits mining
companies, in their filings with the SEC, to disclose only those
mineral deposits that a company can economically and legally extract or
produce. The Corporation uses certain terms, such as, 'measured mineral
resources', 'indicated mineral resources', 'inferred mineral resources'
and 'probable mineral reserves', that the SEC does not recognize (these
terms may be used in this press release and are included in the
Corporation's public filings which have been filed with securities
commissions or similar authorities in Canada).
To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/May2011/10/c2914.html
Ms. Keren R. Yun, Director, Investor Relations
Tel: 416-216-2781 Email: ngx@northgateminerals.com