12.4% Pre-Tax Internal Rate of Return at $825/oz Gold Price
VANCOUVER, Jan. 25 /PRNewswire-FirstCall/ -- (All figures in US
dollars except where noted) Northgate Minerals Corporation (TSX:
NGX, NYSE Amex: NXG) is pleased to announce positive results from
the Feasibility Study on its 100% owned Young-Davidson project in
Matachewan, Ontario. The Feasibility Study was completed by AMEC
Americas Limited ("AMEC"), an independent and
internationally-recognized engineering firm and confirms a 15-year
mine-life with average annual production of 180,000 ounces of gold
at a net cash cost of $351 per ounce. Highlights of the Feasibility
Study The Feasibility Study incorporates the proven and probable
gold reserve of 2.8 million ounces that was announced in July
2009(1). Highlights of the Feasibility Study presented below are
based on a gold price of $825 per ounce and an exchange rate of
US$/Cdn$0.90: - Average annual production of 180,000 ounces of gold
at a net cash cost of $351 per ounce. - After the first two years
of open pit production, average annual production for the remaining
mine life will increase to 190,000 ounces of gold at a net cash
cost of $341 per ounce. - 15-year mine-life at a mill throughput of
6,000 tonnes per day ("tpd"). - Initial capital cost of $339
million. - Sustaining capital costs of $236 million during the life
of the mine. - Pre-tax operating cash flow of $646 million, net
present value ("NPV") 5% of $264 million, with an Internal Rate of
Return ("IRR") of 12.4%. - Targeting production in 2012.
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-------------------------------- Technical Report filed on SEDAR
(http://www.sedar.com/) on August 27, 2009. Ken Stowe, President
and CEO, stated: "Today, we have taken another step towards
realizing our vision of building a financially robust and long-life
gold mine in one of the best mining jurisdictions in the world.
Following on the Pre-feasibility Study that was released in July
2009, the Feasibility Study that was recently completed confirms
solid project economics, with annual gold production of 180,000
ounces and operating costs well below the current industry average.
At today's prices, this translates into a healthy rate of return of
over 20%. With the Feasibility Study work behind us, we look
forward to the year ahead, where we will focus our efforts on the
detailed engineering, underground development, permitting and
construction activities. In addition, we will continue to explore
targets on the Young-Davidson property outside of the 2.8 million
reserve envelope where there is potential to add higher grade open
pit and underground reserves that are not part of the current
Feasibility Study and would positively impact the early years of
the project." Young-Davidson Feasibility Study Results The
Feasibility Study is based on the same 2.8 million ounces of proven
and probable gold reserves announced on July 14, 2009 when the
results of the Pre-Feasibility Study were released. The Feasibility
Study outlines a project with average annual production of 180,000
ounces of gold at a net cash cost of $351 per ounce over a 15-year
mine-life. After the first two years of open pit production,
average annual production over the remaining mine life will rise to
190,000 ounces of gold per year from underground at a net cash cost
of $341 per ounce. The cash cost of production for the mine is
forecast to be well below current industry average due to the
favorable geometry, strong continuity and thickness of the orebody,
as well as the very competent nature of the host rock, which allows
low cost bulk mining techniques to be employed. Operating costs
have been developed from first principles and are based on staffing
levels, consumables and expenditures required to support the mine
and its associated processing, maintenance and administrative
activities. Unit operating costs are projected to be Cdn$31.63 per
metric tonne ("mt") of ore, which are approximately the same as
they were in the Pre-Feasibility Study, although the confidence of
the cost projection has increased significantly. The net cash cost
per ounce of gold in US dollars has increased slightly from the
Pre-Feasibility study stage, but solely as a result of the change
in base case exchange rate assumption from US$/Cdn$0.85 to
US$/Cdn$0.90. Engineering investigations during the Feasibility
phase of the project focused on design and development of the
surface and underground facilities, including the shafts and
hoisting facility, the tailings storage facility, the processing
plant and the upgraded 47 kilometre ("km") transmission line
connection to the Hydro One grid. This work resulted in a modest
increase in initial capital cost of the project compared with the
Pre-Feasibility Study. Underground production was advanced by
taking advantage of the existing mine infrastructure to more
quickly develop the new production shaft and improved sequencing of
tonnes from the open pit. The pre-production capital cost estimate
is $339.4 million, up $46.9 million from the estimate of $292.5
million contained in the Pre-Feasibility Study. Of the increase,
$17 million arises from the change in the base case exchange rate
assumption and the balance from refinement of capital estimates
appropriate for a Feasibility Study quality estimate. Capital costs
herein are expressed in Q4-2009 US dollars, but these costs are
largely Canadian dollar denominated. Table 2 contains a summary of
the economics of the Feasibility Study. The Young-Davidson Project
is expected to generate $646 million in pre-tax operating cash flow
and has a pre-tax NPV (5%) of $264 million and a pre-tax IRR of
12.4% at the base case gold price assumption of $825 per ounce and
an exchange rate of US$/Cdn$0.90. The pre-tax and after tax metrics
for the Young-Davidson project, at a variety of gold prices, are
shown in the following table: Table 1: Project Economics Estimate
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Operating NPV 5% Gold Cash Flow (US$M) Discount (US$M) IRR Price
------------------------------------------------------ Payback
US$/oz After After After (years) Pre-tax tax Pre-tax tax Pre-tax
tax
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825 $646 $466 $264 $166 12.4% 10.3% 6.9 925 $887 $631 $418 $275
16.3% 13.6% 5.9 1025 $1,131 $799 $573 $383 19.9% 16.6% 5.1 1125
$1,379 $969 $729 $492 23.3% 19.5% 4.5
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* Base case in bold. Table 2: Summary of Economic Parameters
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Item Value
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Gold price (US$ per ounce) 825 Silver price (US$ per ounce) 12.50
Foreign exchange rates (US$/Cdn$) 0.90 Tax rates (%) Federal Income
Tax 15 Provincial Income Tax 10 Provincial Mining Tax 10
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Pre-Production Capital (US$ millions) Infrastructure 75.0 Process
plant 81.1 Mining 95.7 Indirect costs 56.5 Contingency 31.1
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Total Pre-Production Capital $339.4
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Sustaining Capital & Mine Closure (US$ millions) Completion of
Underground Mine Infrastructure 128.6 Sustaining Capital & Mine
Closure 107.8
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Total Sustaining Capital & Mine Closure $236.4
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Average mining cost (Cdn$ per tonne milled) 19.03(1) Process cost
(Cdn$ per tonne milled) 10.08 General and administration (Cdn$ per
tonne milled) 2.52
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Total (Cdn$ per tonne milled) $31.63
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Processing Recovery (%) Gold 92.4 Silver 70.7
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(1) Includes open pit mining cost of Cdn$3.46 per tonne mined and
underground mining cost of Cdn$20.63 per tonne mined. Project
Update During the fourth quarter of 2009, shaft dewatering
activities and ramp development resumed at site in order to
continue advanced exploration and establish the underground access
conditions necessary for the modified construction concept for the
new production shaft. Rather than blind sinking a new production
shaft from surface, it was decided to deepen the existing
Matachewan Consolidated Mine ("MCM") shaft from 775 metres ("m") to
1,515m and raise a new main production shaft in two sections from
the bottom of the known reserve at 1,515m. This construction method
will advance the underground development schedule and significantly
increase the certainty of completing the underground development
according to the Feasibility Study schedule. A wide variety of
other activities have also commenced in preparation for a final
development decision: - Purchase orders totalling $6.75 million for
underground equipment, for use in the ramp development, has been
issued and the equipment is scheduled for delivery in the first
quarter of 2010. - Bid proposals for the shaft development have
been received and are currently being evaluated in order to support
an award by Northgate shortly. - Discussions are underway for an
EPCM contract for the project. - Several permit applications have
been submitted to regulators and preparation of others is well
advanced. - Hydro One is scheduled to complete the Environmental
Assessment process in February 2010 for upgrading the 47 km of the
115 kilovolts (kV) transmission line from Kirkland Lake to
Matachewan Junction. - The hiring process of key members of
Young-Davidson's project team has been initiated. - Northgate has
received indicative terms for project financing from a wide variety
of major banks who are interested to provide financing for the
project. Infrastructure The Young-Davidson property is located 3 km
west of the town of Matachewan, in the gold-producing Abitibi
greenstone belt of northern Ontario. It is readily accessible to,
and serviced by, surrounding mining communities such as Kirkland
Lake (60 km) and Timmins (165 km) via Highways 566, 66 and 101.
Electric power for the mine site will be supplied by upgrading
approximately 47 km of an existing 115 kV power line and installing
7 km of a new 115 kV line and a mine site transformer station. The
mining operations will consist of an open pit and underground mine.
Access to the underground mine will be via the ramp, deepening the
existing MCM shaft and the development of a new production shaft.
Surface facilities will consist of a modern 6,000 tpd process plant
utilizing conventional gold processing technology. Additional
surface facilities to support the Young-Davidson mine will include
an administration/engineering building, a warehouse and a
maintenance shop. The tailings impoundment facility location has
been selected to incorporate and remediate an historic tailings
site. The Young-Davidson property sits on the site of two past
producing mines, both with track records of successful mining and
simple metallurgy, producing approximately one million ounces of
gold between the mid 1930's and the mid 1950's. All of the existing
underground workings left by the previous owners are in excellent
condition. The photos below show the head frame and hoist room
building as well as entrance to the ramp providing access
underground. To view image click here:
http://www.northgateminerals.com/Theme/Northgate/files/Releases/YD_Fig_1.g
if Environment, Permitting and Community Relations Environmental
and permitting activities are ongoing and open houses will continue
to be held with the local communities and First Nations, where
there is strong community support for the Young-Davidson project.
Northgate has also been working cooperatively with the Matachewan
First Nation and on July 2, 2009, the two parties signed an Impact
and Benefits Agreement. Mineral Reserves and Resources The open pit
and underground mineral reserves have not changed since the release
of the Pre-Feasibility Study and assume a gold price of US$725 per
ounce and an exchange rate of US$/Cdn$0.85. Proven and probable
reserves total 2.8 million ounces of gold and are detailed in the
following table: Table 3: Open Pit and Underground Mineral Reserve
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Gold Silver ------------------------------------- Tonnes Grade
Grade Zone Category (000) (g/t) Ounces (g/t) Ounces
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Open Pit(1) Probable 4,939 1.66 264,000 Underground(2) Proven 3,469
3.22 359,000 0.58 65,000 Probable 22,740 2.92 2,135,000 0.97
708,000
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Total Proven and Probable Reserve 31,148 2.75 2,758,000 0.77
773,000
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(1) The open pit gold cut-off considers ore-based operating costs
of US $12.11/tonne (processing, G&A), a gold recovery of 91%, a
US $0.68/tonne stockpile rehandle cost and royalty costs as
appropriate within the claim boundaries. A 0.62 gram per tonne
("g/t") cut-off was applied within royalty free claims, 0.68 g/t
cut-off and 0.69 g/t cut-off applied to claims subject to royalty
agreements. (2) A 1.7 g/t gold cut-off grade was applied to the
underground resource model for the sublevel cave and longhole
shrinkage mining methods based on 15% dilution, mining costs of
Cdn$21.74, process costs of Cdn$11.40 and G&A costs of Cdn$2.75
and a gold recovery of 92.5%. A 2.3 g/t gold cut-off grade was
applied to the longhole retreat mining method to account for the
additional capital development and lower productivity of this
mining method. No cut-off grade was applied for silver. The
Feasibility Study confirms that the project provides strong returns
in the current economic environment. The present reserve base is an
excellent starting point and will likely be expanded by upgrading
the mineral resources into the reserve category through additional
work. Current project economics do not factor in the 6 million
tonnes of inferred and 132,000 tonnes of indicated resources as
outlined the in the Table 4. The mineral resources are based on a
gold price of $750 per ounce (Cdn$806 per ounce) and estimation
parameters as documented in the January 2009 Technical Report. The
Young-Davidson orebody remains open down plunge below existing
reserves and resources. Table 4: Open Pit and Underground Mineral
Resource Estimate
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Gold Silver Gold ------------------------------------- Cut-off
Tonnes Grade Grade Zone Category (g/t) (000) (g/t) Ounces (g/t)
Ounces
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Under- ground(2) Indicated 2.30 132 3.08 13,100 3.09 13,100
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Gold Silver Gold ------------------------------------- Cut-off
Tonnes Grade Grade Zone Category (g/t) (000) (g/t) Ounces (g/t)
Ounces
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Open Pit(1) Inferred 0.60 15 1.74 850 Under- ground(2) Inferred
2.30 5,950 3.40 650,000 1.13 216,000
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Total Inferred 5,965 3.40 650,850 1.13 216,000
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(1) Open pit mineralized wireframes constructed based on
approximately 0.60 g/t gold cut-off grade and a minimum true
thickness of 5m. (2) Underground mineralized wireframes were
constructed based on approximately 1.70 g/t gold cut-off grade and
1.3 g/t gold incremental cut-off grade and minimum true thickness
of 3m. No cut- off grade was applied for silver. In 2010, Northgate
will focus its exploration efforts on geological settings known to
host gold mineralization elsewhere on the property, which would
have the potential to add to reserves and provide ore to the mill
during the early years of production. Part of this exploration will
focus on the mafic volcanic rocks from which there has been
historic gold production at a higher grade and where the Company
recently reported near surface gold discoveries, including hole
YD09-120, which intersected 7.6 g/t gold over 13.5m. Northgate will
also be targeting what is believed to be the fault offset of the
main Young-Davidson gold deposit, which is in close proximity to
the planned infrastructure. Qualified Persons John Andrew Cormier,
PEng, Project Manager, Northgate Minerals Corporation, is the
Qualified Person responsible for reviewing and approving this press
release. 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.
We are forecasting gold production of 316,000 ounces in 2010.
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, 2008 or under the
heading "Risks and Uncertainties" in Northgate's 2008 Annual
Report, both of which are available on the SEDAR website at
http://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 Company 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 Company 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 Company's public filings which have
been filed with securities commissions or similar authorities in
Canada). DATASOURCE: Northgate Minerals Corporation CONTACT: Ms.
Keren R. Yun, Director, Investor Relations, Tel: (416) 363-1701
ext. 233, Email: , Website: http://www.northgateminerals.com/
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