Northgate Minerals TSX:NGX, AMEX:NXG is a Vancouver based gold, copper and silver producer that also engages in heavy exploration in Fosterville, Australia, Stawell, Australia and Matachewan, Ontario (in the vicinity of the Abitibi Gold Belt). Its main operating mines which include Fosterville and Stawell gold mines in Australia also included Kemess South in Northern British Columbia however that mine has been winding down operations. Kemess South produced 2.7 million ounces of gold and 700 million pounds of copper since opening in 2000 (consequently net cash costs have skyrocketed due to falling reserves, $(56) in 2006 when output was over 310,000 ounces compared to $370 in 2010 when output was 100,789 gold ounces). After merging Primero Mining into the company it will have over 13 million ounces of gold reserves/resources. Market value is $1.2 billion (summer 2011). Its largest property, Young-Davidson is being developed with the support of the Matachewan First Nation which is supplying most of the workers for construction and development.
Northgate Minerals was formed primarily through two takeovers, Australian miner Perseverance Corp. on February 18 2008 (initiated November 2007) and Primero Mining in July of 2011; The acquisition of Perseverance gave it the status of operator for three mines which had an annual output of 480,000 ounces of gold equivalent & 71 million pounds of copper, at the time. After acquiring Perseverance Corp., Northgate's resources amounted to 7 million ounces of gold and 260 million pounds of copper.
On August 29, 2011 Northgate Minerals was acquired by AuRico Gold of Halifax, NS for C$1.46 billion.
In late 2010/early 2011 Northgate produced at an annual rate of about 320,000 gold equivalent ounces (considering both Northgate and Primero) which is comparable to New Gold and Eldorado Gold both of which have a market value many times greater than Northgate (though production will decline sharply in the second half when Kemess South shuts down). With production expected to increase by 72% or 230,000 by 2013, boosting total production up to 550,000 as new projects come on tap (seven million ounces of gold between San Dimas and Young-Davidson), Northgate could soon become a major player in the industry. Because the Kemess South mine is coming to a close, 2011 gold production is expected to be in the area of 195-205 thousand ounces (44% lower than in 2010) at a cash cost of $805-$845/oz.
Kemess South - Dwindling reserves have forced production down to 12,000 gold ounces in 2011 compared to 100,789 gold ounces in 2010. Also produces copper (40.7 million pounds in 2010 expected to decrease to 5.3 million pounds in 2011). Kemess South was the company's first operation.
Young - Davidson - $1.5 billion open pit mine that was purchased in November of 2005 for $18 million. It is located 60 km west of Kirkland Lake (where Kinross Gold and Kirkland Lake Gold operate/operated/Kirkland Lake Gold is another $1 billion market cap gold developer). Young-Davidson broke ground in September 2010 (permit obtained two months early in July 2010) and is scheduled to begin producing in 2013 when it begin its 15 year mine life. Over 3 million ounces of gold reserves; 2.8 million ounces of gold were added to resources July 2009. Located within the Abitibi Gold Belt, nearby Timmins was one of Canada's largest gold mines in terms of historic production having produced more than 64 million ounces. Gold production centered on Young-Davidson dates back to the 1930's.
Young - Davidson is on traditional first nation reserve land but it has already received permission from the Matachewan First Nation as well as a key permit. The initial capital cost of the mine is $340 million. Young - Davidson will produce 180,000 ounces of gold per year beginning in 2013 (total reserves 2.5 to 3.0 million ounces) at a cost of $350 an ounce. Long term employment : 275 jobs.
San Dimas and Young-Davidson which are both of similar size (15 year mine life/3+ million ounces of gold equivalent each). San Dimas consists of three underground gold-silver mines.
24 mining leases to land in Powell and Cairo townships, Larder Lake Mining Division, Ontario which contain at least 600,000 tonnes in reserves. Royalty rate for mines in the region will be 5% when the price of gold goes above US$270/oz in addition to $1/tonne of ore mined.
Venture conducted by three exploration companies; Kiska Metals (in charge of advancing the project), Brixton Metals Corporation and Northgate Minerals. Northgate's operates its potential 50% share through subsidiary Leviathan Resources Pty Ltd (Northgate must spend $1.5 million in three separate exploration licenses (the licenses cover 120 km of new land) by March 31, 2012 to retain its 50% interest). The mine has already been producing albeit at less than 100% potential (presents additional opportunities through exploration). The 240 km long gold belt is anchored by Stawell Gold Mines (SGM). Victoria Goldfields (collective name of the properties) accounts for 3/4 of all gold production in Victoria, Australia. Total land area being considered is 870 squared km.
Stawell is home to over 5 million ounces of gold reserves and is producing at a rate of 100,000 gold equivalent ounces per year (graded 8 g/t). The gold is found within quartz vein systems within volcanogenic sediments located on the western portion of a Magdala basalt antiform. The basaltic rock is in fluid drenched, iron-rich volganogenic sediments (this condition is thought to have contributed to gold formation). Production is up from the 90,800 ounces of gold produced by Fosterville in 2006.
Other opportunities have been discovered near Stawell Gold Mines including Murtoa, Westmere Dome Target and Dundonnell.
Northgate and Kiska Metals have, prior to this, engaged in joint exploration ventures in British Columbia (RDN) and the Yukon Territories (both gold).
Prior to the Primero takeover Northgate's revenue from 2008 to 2010 was flat (ranged from $461 to $485 million each year) while its operating income and net earnings were even less appealing (operating income was in the red for both 2009 and 2010 with 2010 being twice as bad (-$92 million). Investors in it for the long term should not be concerned since much of that is due to unusual expense ($92 million which was only $28 million that last time the company reported positive operating income) and other expenses used in prepping projects like Young-Davidson (3 million ounces of gold/15 year mine life/commercial production by 2013). Average net gold cash cost was US$184 million in 2008 following the acquisition of Perseverance Corp.
2010 was the first year that Primero reported revenue; revenue was $60.28 million. Gross profit was just over $14 million but because of $22.79 million expenses directly related to financing projects operating income was $20.38 million in the red, taxes totalled $11.04 million (no taxes paid in years prior to 2010) bringing net income down to -$34.49 million (down from -$0.91 million in 2009 and -$.78 million in 2008). 2010 diluted basic earnings per share was -93 cents (down from -43 cents in 2009, -1.10 in 2008).
In the summer of 2010 it initiated a $370.4 million takeover of Primero Mining, 35.5% of Primero was purchased from Goldcorp which will receive 11% of the new company's shares in return (amounts to 46.7 million shares). The deal gives Northgate the San Dimas gold mine in Durango, Mexico.
May 12, 2011 purchased another property near Young - Davidson, 50 miles southeast of Timmins, Ontario from Matachewan Consolidated Mines, Limited. It includes 24 mining leases to land in Powell and Cairo townships, Larder Lake Mining Division, Ontario which contain at least 600,000 tonnes in reserves. Royalty rate for mines in the region will be 5% when the price of gold goes above US$270/oz in addition to $1/tonne of ore mined regardless of price.
In November of 2007 it conducted a friendly takeover of Perseverance Mining of Australia which, at the time produced about 200,000 ounces of gold per year (takeover completed in early 2008). The combined company initially produced more than 275,000 oz of gold per year. With high prices for copper and rising prices for gold, this company should be able to show a large increase in profits for the next few years. The takeover gave it the lucrative Victoria Goldfields properties in the Stawell corridor of Victoria, Australia.