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 /PRNewswire/ - (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 $755 million and a pre-tax
IRR of 27%.
- The envisaged Kemess Underground block cave operation would
leverage the existing infrastructure and mill facilities at the
Kemess South mine, including a permitted area for tailings storage
in the Kemess South open pit.
In addition, analysis of the geotechnical data
compiled during the 2010 drill season and from previous drilling
campaigns indicates that:
- The orebody is well suited to block caving; the rock mass is
projected to cave at a hydraulic radius of 39 metres ("m"),
which is significantly less than the hydraulic radius of the
planned undercut footprint of 89 m1.
- The cave fragmentation although initially coarse will become
finer as the cave matures, enabling efficient mining
operations.
The pre and after-tax operating cash flow, NPV
and IRR for the Kemess Underground Project, using a variety of gold
and copper prices, are shown below.
Table 1: Project Economics Estimate
|
|
|
|
|
|
Gold
Price
(US$/oz)
|
Copper
Price
(US$/lb) |
Operating Cash
Flow (US$M) |
NPV 5% Discount
(US$M) |
IRR
(%) |
Payback
(years) |
Pre-tax |
After tax |
Pre-tax |
After tax |
Pre-tax |
After 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 $20/oz silver)
|
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|
|
|
|
|
|
Indicated
Cut-Off
(Cdn$/t NSR) |
Tonnes
(Mt) |
Au
(g/t) |
Cu
(%) |
Ag
(g/t) |
Gold*
(Mozs) |
Copper
(Mlbs) |
NSR**
(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 |
$21.72 |
|
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|
|
|
|
|
|
Inferred
Cut-Off
(Cdn$/t NSR) |
Tonnes
(Mt) |
Au
(g/t) |
Cu
(%) |
Ag
(g/t) |
Gold*
(Mozs) |
Copper
(Mlbs) |
NSR**
(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
$286 million is estimated as
sustaining capital, two-thirds of which are associated with mine
development. Table 2 below contains a summary of the economics of
the Preliminary Assessment:
Table 2: Summary of Economic Parameters
|
|
|
|
|
Item |
|
Unit |
|
Value |
Gold price
Copper price
Silver price
|
|
US$ per ounce
US$ per pound
US$ per ounce |
|
$1,100
$2.80
$20.00 |
Foreign exchange rates |
|
US$/Cdn$ |
|
1.00 |
Income tax rate |
- Federal |
% |
|
15 |
|
- Provincial |
|
|
12 |
|
|
|
|
|
Initial Capital |
- Mine Development |
US$ millions |
|
204 |
|
- Mine Equipment |
108 |
|
- Mill Modifications |
6 |
|
- EPCM |
9 |
|
- Indirect Costs |
72 |
|
- Contingency |
37 |
Total Initial Capital |
US$ millions |
|
$ 437 |
Sustaining Capital |
US$ millions |
|
$286 |
|
|
|
Item |
Unit |
Value |
Average mining cost |
US$ per tonne milled |
4.85 |
Processing cost |
5.31 |
General and
Administration
Total |
3.11
$ 13.27 |
Processing Recovery
- Gold
- Copper |
% |
72
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".
SOURCE Northgate Minerals Corporation