Northgate Minerals Announces Positive Preliminary Assessment for its Kemess Underground Project
VANCOUVER, Aug. 2, 2011 /CNW/ --
Production of 1.1 million Ounces of Gold and 490 Million
Pounds of Copper
at a Net Cash Cost of $115 per ounce
VANCOUVER, Aug. 2, 2011 /CNW/ - (All figures in US dollars except where
noted) Northgate Minerals Corporation (TSX: NGX, NYSE-Amex: NXG) is
pleased to announce positive results from the NI 43-101 Preliminary
Assessment Report (the 'Preliminary Assessment') for its 100% owned
Kemess Underground Project located in north-central British Columbia,
approximately five kilometres ('km') from the Kemess South mine. The
results from the Preliminary Assessment outline the development of an
underground block/panel cave operation with average annual production
of 95,000 ounces of gold at a below-industry cash cost of $115 per
ounce over a mine-life of approximately 12 years.
Highlights of the Preliminary Assessment
Highlights of the Preliminary Assessment, which employs base case
commodity price assumptions of $1,100 per ounce for gold, $2.80 per
pound for copper and $20 per ounce for silver and an exchange rate of
US$/Cdn$1.00, are as follows:
-- Average annual production of 95,000 ounces of gold at a net
cash cost of $115 per ounce.
-- Average annual copper production of 41.4 million pounds.
-- A total of 1.1 million recovered ounces of gold and 490 million
pounds of copper over an approximate 12-year mine-life.
-- Pre-production capital cost of $437 million.
-- Sustaining capital costs of $286 million during the life of the
mine.
-- Pre-tax operating cash flow of $1.1 billion.
-- Pre-tax net present value ('NPV') of $115 million based on a 5%
discount rate.
-- Pre-tax internal rate of return ('IRR') of approximately 10%
with a 6-year payback on the initial capital cost from the
start of production.
-- The project has significant leverage to higher metal prices.
At $1,500 per ounce gold and $4.00 per pound copper, Kemess
Underground is expected to generate pre-tax operating cash flow
of $2.1 billion, pre-tax NPV 5% of $755 million and a pre-tax
IRR of 27%.
-- The envisaged Kemess Underground block cave operation would
leverage the existing infrastructure and mill facilities at the
Kemess South mine, including a permitted area for tailings
storage in the Kemess South open pit.
In addition, analysis of the geotechnical data compiled during the 2010
drill season and from previous drilling campaigns indicates that:
-- The orebody is well suited to block caving; the rock mass is
projected to cave at a hydraulic radius of 39 metres ('m'),
which is significantly less than the hydraulic radius of the
planned undercut footprint of 89 m(1).
-- The cave fragmentation although initially coarse will become
finer as the cave matures, enabling efficient mining
operations.
The pre and after-tax operating cash flow, NPV and IRR for the Kemess
Underground Project, using a variety of gold and copper prices, are
shown below.
Table 1: Project Economics Estimate
Gold Copper Operating Cash NPV 5% Discount IRR
Price Price Flow (US$M) (US$M) (%) Payback
(US$/oz) (US$/lb) (years)
Pre-tax After After After
tax Pre-tax tax Pre-tax tax
1,100 2.80 1,075 975 115 60 9.6 7.6 6.1
1,300 3.50 1,650 1,330 470 285 20.5 16.3 3.7
1,500 4.00 2,115 1,620 755 470 27.5 22.1 2.9
1,700 4.50 2,580 1,915 1,045 655 33.5 27.2 2.5
* Base case in bold.
'The Kemess Underground Project represents significant development
opportunity for Northgate, with a 12-year mine-life that would add to
our growing production profile and reduce Northgate's average net cash
cost of production' stated Ritch Hall, Northgate's President and CEO.
'The Preliminary Assessment confirms the technical feasibility of a
block caving operation at Kemess Underground. In today's metal price
environment, it is an extremely robust project with the ability to
generate over $2 billion in operating cash flow and pay back its
capital in less than three years. Our next step will be to complete a
Feasibility Study on the project over the next year.'
Report Overview
The Preliminary Assessment was prepared by AMC Mining Consultants
(Canada) Ltd ('AMC') and will be filed on the SEDAR website at www.sedar.com within the next 45 days and will also be available on Northgate's
website at www.northgateminerals.com. The economic analysis of the Kemess Underground Project contained in
the Preliminary Assessment is based on a resource estimate at December
31, 2010 released by Northgate on February 15, 2011.
Kemess Underground Resource Base
The Preliminary Assessment is based on Indicated Mineral Resources for
the Kemess Underground deposit at December 31, 2010 estimated using a
Cdn$15 per tonne net smelter return ('NSR') cut-off for vertical
columns of blocks. The Kemess Underground resource consists of 136.5
million tonnes ('Mt') of Indicated Resources containing 2.6 million
ounces of gold at an average grade of 0.56 grams per tonne ('g/t') and
860.6 million pounds of copper at an average grade of 0.29%. There is
also an Inferred Resource of 6.0 Mt. Table 1 shows resource estimates
for NSR cut-offs of Cdn$15 and Cdn$13 per tonne and for the 'All
blocks' area, which has boundaries that are 60 m outside the Cdn$13 per
tonne NSR cut-off along the western margin and 30 m outside the Cdn$13
per tonne NSR cut-off elsewhere.
Table 2: 2011 Kemess Underground Resources (using $1,100/oz gold,
$2.80/lb copper and $20/oz silver)
Indicated
Cut-Off Tonnes Au Cu Ag Gold* Copper NSR**
(Cdn$/t NSR) (Mt) (g/t) (%) (g/t) (Mozs) (Mlbs) (Cdn$/t)
$15 136.5 0.56 0.29% 2.10 2.61 860.6 $24.96
$13 162.8 0.51 0.27% 1.99 2.87 964.8 $23.19
All blocks 185.0 0.48 0.25% 1.88 3.04 1032.9 $21.72
Inferred
Cut-Off Tonnes Au Cu Ag Gold* Copper NSR**
(Cdn$/t NSR) (Mt) (g/t) (%) (g/t) (Mozs) (Mlbs) (Cdn$/t)
$15 6.0 0.42 0.22% 1.65 0.09 29.6 $19.07
$13 7.8 0.39 0.21% 1.57 0.10 36.6 $17.96
All blocks 10.2 0.35 0.20% 1.43 0.12 43.7 $16.25
Note: Base case in bold
* Includes silver contribution at 55 ounces of silver to one ounce of
gold
** NSR or in-situ recovered value assumes metallurgical recoveries of
90% for copper and 68% for gold and an exchange rate of 1.00 .
Mine Design, Production Facility and Infrastructure
The mine design prepared for the Preliminary Assessment outlines an 8.0
Mt per annum (approximately 24,000 tonnes per day ('tpd')), highly
automated, trackless, block caving operation similar to block caving
operations in Australia, Indonesia and South Africa.
The Kemess Underground deposit is located at a depth of 300 m - 550 m
below surface. The mine design envisions ore from drawpoints being
transferred to ore passes using electric powered scoops. Diesel
powered trucks operating on a transfer level below the extraction level
will transfer ore to a primary crusher. Crushed ore will then be
conveyed out of the mine to the surface portal (adit) in a single 3.4
km run and then transferred to a 4.7 km overland conveyor system,
leading to the existing Kemess mill infrastructure (see Figure 1).
Ore from the Kemess Underground deposit will be processed through the
existing mill at a nominal rate of 24,000 tpd. The grinding circuit
consists of a semi-autogenous grinding ('SAG') mill and a ball mill in
combination. The finely ground ore from the milling circuit will pass
to the existing flotation, regrind and concentrate handling circuits.
The final product will be a gold-copper concentrate containing 22%
copper and approximately one ounce per tonne gold, which will be sold
to copper smelters in North America or Asia. Only minimal modifications
and upgrades to the existing Kemess South mill are expected to enable
efficient processing of ore from the Kemess Underground Project.
Preliminary metallurgical test work, combined with historical results
from a previous Feasibility Study, support gold and copper recoveries
of 72% and 91%, respectively, over the mine-life.
Tailings will be stored in the existing Kemess South open pit, which has
already been permitted for tailings storage and was used for this
purpose towards the end of the Kemess South mine life.
Existing surface facilities will be used to support the Kemess
Underground mine. Current facilities include offices, a 400-person
accommodation camp and maintenance facilities.
The Kemess mill and infrastructure facilities are currently on care and
maintenance, in anticipation of a production decision for the Kemess
Underground Project.
To view 'Figure 1: Underground Mine Design Schematic' please click www.northgateminerals.com/Theme/Northgate/files/Releases/2011/KUG_PEAFig1.JPG
Capital Costs
Initial pre-production capital costs are estimated to be $437 million,
most of which will be dedicated to mine development and mine equipment,
including mobile equipment, crushers and conveyors. An additional $286
million is estimated as sustaining capital, two-thirds of which are
associated with mine development. Table 2 below contains a summary of
the economics of the Preliminary Assessment:
Table 2: Summary of Economic Parameters
Item Unit Value
Gold price US$ per ounce $1,100
Copper price US$ per pound $2.80
Silver price US$ per ounce $20.00
Foreign exchange rates US$/Cdn$ 1.00
Income tax rate - Federal % 15
- Provincial 12
Initial Capital - Mine Development 204
- Mine Equipment 108
- Mill Modifications 6
US$ millions
- EPCM 9
- Indirect Costs 72
- Contingency 37
Total Initial Capital US$ millions $ 437
Sustaining Capital US$ millions $286
Item Unit Value
Average mining cost 4.85
Processing cost US$ per tonne milled 5.31
General and Administration 3.11
Total $ 13.27
Processing Recovery - Gold % 72
- Copper 91
Environment and Permitting
As the Kemess Mine already has in place many of the permits required for
the Kemess Underground Project, permitting is expected to be
straightforward. The additional surface footprint associated with the
Kemess Underground development will be small relative to the existing
Kemess South Mine footprint and will consist of a connecting access
road, a portal entrance to the underground mine and a zone of
subsidence at surface above the block cave area. All other
infrastructure is in place and has been put on care and maintenance in
anticipation of future use with the underground mine.
Mill tailings will be impounded in the existing Kemess South open pit
that is permitted for tailings disposal and was already used for this
purpose toward the end of the Kemess South mine-life. The small amount
of waste rock that will be generated from the development of the
underground mine will be dealt with in a manner consistent with
existing Kemess South waste rock strategies.
Northgate expects to submit a project description to the responsible
British Columbia regulatory agencies in Q3-2011 who will determine the
appropriate permitting / environmental assessment path. Based on our
initial feedback and current permits, it is anticipated that the
permitting process will remain within provincial jurisdiction.
Existing environmental studies for Kemess South will be continued and modified as required; the process will also
utilize the extensive baseline data collected for the Kemess North
environmental impact assessment submission. In addition, Northgate has
initiated discussions with First Nations with respect to additional
wildlife and socio-economic studies that are of special interest to
their communities.
Northgate discussions with the Tse Keh Nay ('TKN' a group of three First
Nations in whose asserted traditional territory the Kemess project is
located) are well advanced and proceeding in a positive tone. Over the
last several months, Northgate has engaged in a number of meetings and
have arranged site visits (and are ongoing) with both the TKN
leadership and members of the community. In addition, there has been
information sharing sessions with other potentially affected First
Nations. Northgate has given the First Nations our assurance that this
project will not impact Amazay Lake (an issue that was divisive when
the Kemess North Open Pit was being reviewed by the Federal Panel in
2006). Northgate is also supporting the TKN in their discussions with
the BC government with respect to revenue sharing of the BC Mineral
Tax, as has already been negotiated with two other new projects in the
province.
Feasibility Study
Based on the results of this Preliminary Assessment, Northgate will now
commence a full Feasibility Study, which will incorporate any
identified project enhancements (i.e. mining rate, metallurgical
recoveries and project cost optimization). It is expected that the
Feasibility Study will be completed over the next year.
* * * * * *
Conference Call and Webcast Friday, August 5, 2011
Northgate will be hosting a live conference call and webcast discussing
our second quarter financial results on August 5, 2011, at 10:00 am
Toronto time. We will also be discussing the results of the Kemess
Underground Preliminary Assessment. You may participate in our
conference call by calling 647-427-7450 or toll free in North America at 1-888-231-8191.
A live audio webcast and presentation package will be available on
Northgate's homepage at www.northgateminerals.com.
* * * * * *
Qualified Persons
Carl Edmunds, PGeo, Northgate's Exploration Manager, Northgate Minerals
Corporation, is the Qualified Person responsible for reviewing and
approving the press release.
Mike Thomas, MAusIMM CP, Director and Principal Mining Consultant,
AMC, is the Qualified Person responsible for supervising the
preparation of the Preliminary Assessment including the cost estimates
and financial analysis.
Ken Major, PEng (BC), Consultant Metallurgist, KWM Consulting Inc., is
the Qualified Person responsible for supervising the preparation of
metallurgical and processing estimates.
* * * * * *
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.
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 estimate 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 U.S. 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).
(1) Hydraulic radius (m) = area/perimeter, which is a common measure to
allow assessment of the ability of a rock mass to cave, affected by the
particular rock mass characteristics'.
To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/August2011/02/c8694.html
Ms. Keren R. Yun, Director, Investor Relations
Tel: 416-216-2781 Email: ngx@northgateminerals.com Website: www.northgateminerals.com