Northgate reports strong quarterly
production and record low cash cost; Announces friendly proposal to acquire
Perseverance Corporation
���� VANCOUVER, Nov. 5 /CNW/ - (All figures in US dollars except where noted)
- Northgate Minerals Corporation (TSX: NGX; AMEX: NXG) today reported cash
flow from operations of $29,445,000 or $0.12 per diluted common share and a
net loss of $11,937,000 or $0.05 per diluted common share for the third
quarter of 2007. The net loss for the quarter included a $32,347,000 non-cash
write-down of the carrying value of the Kemess North project. Excluding this
charge, earnings would have been approximately $6,000,000 for the quarter.
����������������������� THIRD QUARTER HIGHLIGHTS
���� -� Kemess South produced 70,055 ounces of gold and 18.8 million
������� pounds of copper at a net cash cost of negative $233 per ounce
������� of gold, which was the lowest quarterly cash cost recorded in
������� the history of the mine.
���� -� On October 29, 2007, Northgate announced a friendly proposal
������� to acquire Perseverance Corporation Ltd. (Perseverance), which
������� operates two gold mines in Australia with a combined annual
������� production of approximately 200,000 ounces.
���� -� Exploration drilling at Young-Davidson continued to expand the
������� area of known underground resources and a revised resource
������� calculation is expected to be announced by the end of 2007.
���� -� On September 17, 2007, the Joint Federal-Provincial Review
� ������Panel for the Kemess North project submitted its report to the
������� Ministers of Environment, recommending that the project not be
������� allowed to proceed.
���� Ken Stowe, President and CEO, stated, "The Kemess South mine posted
strong operating results in the third quarter while recording the lowest
quarterly net cash cost of production in the history of the mine and
generating $30 million in operating cash flow. After a long search for the
right asset, we were very pleased to announce our friendly proposal to acquire
Perseverance, which currently operates two gold mines in the state of
Victoria, Australia. We expect that the all-cash transaction will close next
year in February and when it does, Northgate's 2008 gold production will be
over 430,000 ounces. The acquisition of Perseverance will guarantee our status
as a significant mid-tier gold producer and give us the opportunity to use our
operating expertise and strong balance sheet to get the most out of two mines
that have excellent potential, but have been limited by severe capital
constraints. The addition of the Fosterville and Stawell mines to our
Young-Davidson project and the continued strong cash flow from Kemess South
over its remaining mine life will provide the diversified multi-mine base from
which we can make additional acquisitions in the future."
���� -----------------------------------------------------------------
���� RESULTS OF OPERATIONS
���� Kemess South Mine Performance
���� The Kemess mine posted strong production of 70,055 ounces of gold and
18.8 million pounds of copper in the third quarter of 2007, which was
consistent with Northgate's most recent forecast. For the balance of 2007, as
a consequence of small variances and modifications to the ore release plan,
Northgate now expects Kemess South's total 2007 metal production to be
approximately 270,000 ounces of gold and 68.4 million pounds of copper.
���� During the third quarter of 2007, approximately 11.3 million tonnes of
ore and waste were removed from the open pit, which was approximately the same
as it was during the corresponding quarter of 2006. Unit mining costs during
the most recent quarter were Cdn$1.56 per tonne compared with Cdn$1.52 per
tonne in the third quarter of 2006.
���� Mill availability during the third quarter of 2007 was 93% and mill
throughput averaged 52,029 tonnes per day (tpd), compared with 90%
availability and throughput of 49,817 tpd in the third quarter of 2006. Mill
availability in the third quarter of 2007 was higher than average due to the
advantageous timing of maintenance shutdowns. Mill throughput was 4% higher
than it was in the same period last year due to the higher mill availability.
���� Gold and copper recoveries averaged 71% and 86%, respectively, in the
third quarter of 2007, which was higher than the recoveries of 68% and 82%,
respectively, recorded in the third quarter of 2006 because no
supergene-leachcap ore, which has metallurgical characteristics that generate
lower metal recoveries, was milled in the most recent quarter.
���� Metal concentrate inventory increased by 1,000 wet metric tonnes (wmt) in
the third quarter to approximately 7,000 wmt at September 30, 2007.
Concentrate inventory is expected to decline by year-end to less than 5,000
wmt.
��� �The total unit cost of production during the third quarter of 2007 was
Cdn$12.31 per tonne milled, which was significantly lower than the Cdn$14.71
per tonne milled in the corresponding period of 2006 due primarily to the
decrease in treatment and refining charges for copper concentrate that
occurred in 2007 and the higher tonnes of ore milled in the most recent
quarter. Total site operating costs in the third quarter of 2007 were Cdn$41.4
million, which was in line with third quarter 2006 costs of Cdn$40.6 million.
The net cash cost of production at Kemess in the third quarter of 2007 was at
a record low of negative $233 per ounce of gold compared to the previous
record of negative $118 per ounce reported in the third quarter of 2006.
���� The following table provides a summary of operations for the third
quarter and the nine months of 2007 and the comparable periods of 2006.
���� 2007 Kemess Mine Production
���� (100% of
���� production basis)��� Q3 2007���� Q3 2006���� 9M 2007���� 9M 2006
���� -----------------------------------------------------------------
���� Ore plus waste
����� mined (tonnes)�� 11,282,000� 11,355,290� 33,983,404� 34,645,827
���� Ore mined (tonnes) 4,799,000�� 3,970,620� 13,854,785� 12,472,892
���� Stripping ratio
����� (waste/ore)�� ���������1.35������� 1.86������� 1.45������� 1.57
���� Ore milled
����� (tonnes)��������� 4,786,712�� 4,583,196� 13,563,691� 13,666,645
���� Ore milled per
����� day (tonnes)�������� 52,029����� 49,817����� 49,684����� 50,061
���� Gold grade (grams
����� per metric tonne)���� 0.642������ 0.745������ 0.680������ 0.760
���� Copper grade (%)������ 0.207������ 0.237������ 0.207������ 0.245
���� Gold recovery (%)�������� 71��������� 68��������� 69��������� 68
���� Copper recovery (%)������ 86��������� 82������� ��83��������� 81
���� Gold production
����� (ounces)������������ 70,055����� 74,789���� 204,164���� 228,549
���� Copper production
����� (thousands pounds)�� 18,822����� 19,602����� 51,363����� 59,954
���� Net cash cost
����� ($/ounce)������������� (233)� �����(118)������� (59)������� (44)
���� -----------------------------------------------------------------
���� Safety
���� Kemess recorded no lost time injuries during the third quarter of 2007
and remains the safest metal mine in British Columbia for the first nine
months of the 2007. The Young-Davidson project continued to operate without a
lost time injury.
���� Financial Performance
���� Northgate recorded a net loss of $11,937,000 or $0.05 per diluted common
share in the third quarter of 2007 compared with net earnings of $14,902,000
or $0.07 per share during the corresponding quarter of 2006. The net loss for
the quarter included a $32,347,000 non-cash write-down of the carrying value
of the Kemess North project. Cash flow from operations during the most recent
quarter was $29,445,000 or $0.12 per diluted common share compared with cash
flow of $64,465,000 or $0.28 per diluted common share during the same quarter
last year. Per share data is based on the weighted average diluted number of
shares outstanding of 254,210,079 in the third quarter of 2007 and 226,992,626
in the corresponding period of 2006.
���� Northgate's revenue in the third quarter of 2007 was $86,756,000 compared
with $102,667,000 in the corresponding period in 2006. Revenue for the third
quarter of 2007 was reduced by mark-to-market adjustments of $17,255,000 on
Northgate's hedge book (2006 - positive $19,754,000). Due to mark-to-market
requirements of Canadian generally accepted accounting principles (Canadian
GAAP) and the large size of the Corporation's copper forward sales position
relative to quarterly copper production, earnings in future quarters may
fluctuate significantly depending on future movements in the price of copper.
Metal sales in the third quarter of 2007 consisted of 73,545 ounces of gold
and 18.9 million pounds of copper, compared with 73,792 ounces of gold and
19.1 million pounds of copper in the third quarter of 2006. During the third
quarter of 2007, the price of gold on the London Bullion Market (LBM) averaged
$681 per ounce (2006 - $622) and the price of copper on the London Metal
Exchange (LME) averaged $3.50 per pound (2006 - $3.48). The net realized metal
prices received on metal sales in the third quarter of 2007 were approximately
$608 per ounce of gold and $2.94 per pound of copper, compared with $531 per
ounce and $3.43 per pound in the third quarter of 2006. A total of $7,438,000
in gold hedging losses were reclassified from accumulated other comprehensive
income when the related sales occurred (see section on Changes in Accounting
Policies). The Corporation's gold hedging activities reduced the realized
price of gold sold during the most recent quarter by $101 per ounce, compared
with $91 per ounce in the corresponding quarter one year ago. During the
quarter, Falconbridge Limited (a wholly owned subsidiary of Xstrata Plc.)
exercised its right to revise the copper pricing quotational period from one
month after the month of arrival (MAMA) to four MAMA. In order to properly
match the new pricing periods, forward sales contracts for August, September
and October, representing a total volume of 7,050 metric tonnes of copper,
were rolled forward into the January 2008 to April 2008 period at an average
forward price of $3.41 per pound. The cost of this roll was $1,974,000, which
was expensed in the third quarter resulting in a lower realized price of
copper than would otherwise have been the case.
���� The cost of sales in the third quarter of 2007 was $59,241,000 compared
with the corresponding period last year when the cost of sales was
$59,069,000. Cost of sales in the most recent quarter reflect the reduction in
treatment and refining charges in 2007; however, this was offset by the impact
of the strengthening Canadian dollar on the Corporation's mostly Canadian
dollar costs.
���� Administrative and general expenses totaled $2,019,000 in the third
quarter of 2007, slightly higher than the $1,951,000 recorded in the
corresponding period of 2006, due to the increased administration and
compliance spending as well as the cost of various business development
initiatives.
���� Depreciation and depletion expenses in the third quarter were lower at
$8,050,000 compared to $8,397,000 during the corresponding period of 2006 due
to the impact of the increase in the reserve base announced earlier in the
year.
���� Net interest income was significantly higher at $4,611,000 in the third
quarter of 2007 compared with $1,180,000 in the corresponding quarter of 2006,
as the result of substantial increases in the Corporation's cash position due
to strong operating cash flow and the exercise of share purchase warrants in
December 2006, which brought $99,998,000 into Northgate's treasury.
���� Exploration costs in the third quarter were significantly higher at
$10,773,000 compared with $3,509,000 in the comparable period of 2006, as the
result of increased activity at the Young-Davidson property where the advanced
underground exploration program continues.
���� Capital expenditures during the third quarter of 2007 totaled $4,926,000
compared to $4,817,000 in the corresponding period of 2006 and continue to be
primarily devoted to ongoing construction of the Kemess South tailings dam.
���� Capital Resources
���� Northgate maintains a portion of its investments in AAA rated Auction
Rate Securities (ARS). ARS are floating rate securities that are marketed by
financial institutions with auction reset dates at 7, 28, or 35 day intervals
to provide short-term liquidity. Beginning in August 2007, a number of ARS
auctions began to fail and the Corporation is currently holding $72,600,000 in
ARS, which currently lack liquidity. Northgate's ARS investments were
originally structured and marketed by a major investment bank in the United
States and all of Northgate's ARS investments continue to make regular cash
interest payments and are still rated AAA by Standard & Poor's (S&P) and Aaa
by Moody's.
���� Due to the high credit worthiness of its ARS investments, third party
valuation reports which value these investments at 100% of par value, and
management's assessment that the liquidity issues surrounding the specific ASR
securities held by the Corporation will be resolved within the next twelve
months, these investments continue to be classified by the Corporation at
September 30, 2007, as available for sale short-term investments at their
original par value, which is equal to their fair value.
���� The balance of the Corporation's investments are held in R1/P1/A1 rated
investments including money market funds, direct obligation commercial paper,
bankers acceptances and other highly rated short term investment instruments
which are recorded as cash and cash equivalents. The Corporation has no
investments in Asset Backed Commercial Paper (ABCP), Mortgage Backed
Securities (MBS) or Collateralized Debt Obligations (CDO).
���� Based on the Corporation's current cash and investment balances and
expected operating cash flows, it does not anticipate that the lack of
liquidity for its ARS investments will adversely affect its ability to conduct
its business.
���� NON-GAAP MEASURE
���� The Corporation has included net cash costs of production per ounce of
gold in the discussion of its results from operations, because it believes
that these figures are a useful indicator to investors and management of a
mine's performance as they provide: (i) a measure of the mine's cash margin
per ounce, by comparison of the cash operating costs per ounce to the price of
gold; (ii) the trend in costs as the mine matures; and, (iii) an internal
benchmark of performance to allow for comparison against other mines. However,
cash costs of production should not be considered as an alternative to
operating profit or net profit attributable to shareholders, or as an
alternative to other Canadian GAAP measures and they may not be comparable to
other similarly titled measures of other companies.
���� A reconciliation of net cash costs per ounce of production to amounts
reported in the statement of operations is shown below.
���� (Expressed in thousands of US$,
����� except per ounce amounts)������������������ Q3 2007���� Q3 2006
���� -----------------------------------------------------------------
���� Gold production (ounces)��������������������� 70,055����� 74,789
���� -----------------------------------------------------------------
���� Cost of sales������������������������������ $ 59,241��� $ 59,069
���� Change in inventories and other�������������� (2,854)����� 1,069
���� Gross copper and silver revenue������������� (72,694)��� (68,991)
���� -----------------------------------------------------------------
���� Total cash cost����������������������������� (16,307)���� (8,853)
���� -----------------------------------------------------------------
���� Cash cost ($/ounce)������������������������ $�� (233)�� $�� (118)
���� -----------------------------------------------------------------
���� -----------------------------------------------------------------
���� SELECTED QUARTERLY FINANCIAL DATA
���� (Thousands of US
����� dollars, except
����� per share, per������������������������� 2007 Quarter Ended
����� ounce and per��������������������� -----------------------------
����� pound amounts)���������������������� Sep 30��� Jun 30��� Mar 31
���� -----------------------------------------------------------------
���� Revenue���������������������������� $ 86,756� $ 80,878� $ 74,313
���� Earnings
� ����(loss) for
����� the period(1)���������������������� (11,937)��� 8,647���� 9,406
���� Earnings (loss)
����� per share(1)
������ Basic���������������������������� $� (0.05) $�� 0.03� $�� 0.04
������ Diluted�������������������������� $� (0.05) $�� 0.03� $�� 0.04
���� Metal production
������ Gold (ounces)���������������������� 70,055��� 65,999��� 68,110
������ Copper (thous-
������� ands pounds)���������������������� 18,822��� 14,839��� 17,702
���� Metal Prices
������ Gold (LBM
������� - $/ounce)��������� ������������������681������ 667������ 650
������ Copper (LME Cash
������� - $/pound)�������������������������� 3.50����� 3.47����� 2.69
���� -----------------------------------------------------------------
���� (Thousands of US
����� dollars, except
���� �per share, per����������� 2006 Quarter Ended�������������� 2005
����� ounce and per� -------------------------------------------------
����� pound amounts)�� Dec 31��� Sep 30��� Jun 30��� Mar 31��� Dec 31
���� -----------------------------------------------------------------
����� Revenue������� $118,239� $102,667� $105,348� $ 85,059� $ 95,651
����� Earnings
������ (loss) for
������ the period(1)�� 19,790��� 14,902��� 50,315��� 21,735��� 44,527
����� Earnings (loss)
������ per share(1)
������� Basic������ �$�� 0.09� $�� 0.07� $�� 0.23� $�� 0.10� $�� 0.21
������� Diluted����� $�� 0.09� $�� 0.07� $�� 0.22� $�� 0.10� $�� 0.21
����� Metal production
������� Gold (ounces)� 81,746��� 74,789��� 76,127��� 77,634��� 94,405
������� Copper (thous-
�������� ands pounds)� 21,254��� 19,602��� 18,071��� 22,282��� 24,701
���� Metal Prices
������ Gold (LBM
������� - $/ounce)������� 614������ 622������ 627������ 554������ 486
������ Copper (LME Cash
������� - $/pound)������ 3.21����� 3.48����� 3.27����� 2.24����� 1.95
���� -----------------------------------------------------------------
���� (1) The figures in the table for 2006 and 2005 reflect the
�������� Corporation's change in accounting policy for metal
�������� inventories. Refer to the Corporation's consolidated
���� ����financial statements in the 2006 Annual Report for a
�������� description of this change.
���� KEMESS NORTH PROJECT
���� On September 17, 2007, after two and a half years of review and multiple
rounds of public hearings, the Kemess North Joint Federal-Provincial
Environmental Review Panel issued its report recommending that the project not
be allowed to proceed. The Federal and Provincial governments are now studying
the Panel's report and are expected to make a final decision on whether to
permit the development of Kemess North sometime in the first half of 2008.
���� While Northgate strongly disagrees with the Panel's recommendation, the
uncertainty it has created for the Kemess North project has forced the company
to redefine its project development priorities. Northgate has ceased all
project activities at Kemess North including exploration, feasibility study
work and detailed engineering and is refocusing its development activities on
projects in other jurisdictions. As a result of the panel report, Northgate
has written off the full carrying value of its investment in Kemess North.
���� In the event that the Federal and Provincial governments also disagree
with the Panel's recommendation and grant approval for the Kemess North
project to proceed and the First Nations reconsider their stance on the
project, Northgate will revisit the project at that time.
���� EXPLORATION UPDATE
���� Young-Davidson
���� Drilling continued during the third quarter at Young-Davidson with six
drill rigs in operation. One drill targeted in-fill drilling on the proposed
open-pit area. The other five rigs drilled deeper underground targets in and
around the known underground resources on the Young-Davidson property. Diamond
drilling completed in the third quarter of 2007 attempted to define the
eastern and western edges of the deposit to a depth of 1,300 metres (m), and
to expand resources below and laterally adjacent to the three main zones in
the deposit: the Lower Boundary zone, the Lucky zone, and the Lower YD zone.
���� The longitudinal section shown in Figure 1 depicts known resource areas
(as defined in the legend), historic mine workings, simplified geology, and
potential new resource areas, along with the pierce points for holes drilled.
Drill hole results reported for the first time are indicated by a five-point
star. Elevations in the longitudinal section are based on an artificial mine
grid where the surface is defined as 10,355 m.
���� Drill hole YD-07-49A was drilled in the gap between the Upper and Lower
Boundary zones. This hole had a wide mineralized section that returned 2.35
grams per metric tonne (g/t) gold over 77.6m including 5.01 g/t gold over
25.6m and 7.87 g/t gold over 10.2m. Holes YD-07-33E and YD-07-33D are both
located in an undrilled section of the Lower Boundary zone, and both returned
auriferous sections at the zone horizon. In the case of YD-07-33E, returned
assays averaged 3.32 g/t gold over 21.2m.
���� Hole YD-07-48 was drilled in the Lower Lucky zone within an assumed gap
in the mineralization. This hole returned a narrow intersection of 7.93 g/t
gold over 4.7m. This hole is located approximately 75m above YD90-22X, which
was completed earlier this year and returned 4.42 g/t gold over 31.3m
including 6.42 g/t gold over 19.5m.
���� Drill hole YD-07-46 was targeting the Lower YD zone at the 9,000 level
(approximately -1,350m). This hole intersected a barren post mineralization
dyke at the zone horizon. The hole intersected a small amount of zone material
in the footwall on the east flank of the dyke, returning 2.4 g/t gold over 9m.
This hole is currently being wedged off to intersect the entire zone on the
east flank of the dyke.
���� A total of six holes are currently in progress on the Young-Davidson
property and drilling is scheduled to continue at the current pace until the
end of 2007 and a resource update is on track to be released by year-end.
���� Drill hole collar locations for all the holes referred to in this release
can be found in Appendix 1.
���� Figure 1: Young-Davidson Property (Vertical, North Looking,
���� Longitudinal Section with Metric Grid)
���� http://files.newswire.ca/594/longsection.jpg
���� The ramp that will provide underground access to the deposit advanced by
580 m during the quarter and is now 40% complete. Underground definition
drilling has begun from the second leg of the ramp targeting the Upper Lucky
zone in order to move the resources there from Inferred to Indicated status.
Dewatering of the existing No. 3 shaft down to the 250-m level has been
completed and the underground infrastructure left by the previous operator
continues to be in excellent condition.
���� The environmental and engineering studies that will form a critical part
of the pre-feasibility study for the project are proceeding along rapidly and
will be adjusted to incorporate the updated resource figures due out at the
end of the year. A project prospectus was developed and filed with both
Provincial and Federal government ministries during the quarter in order to
initiate permitting activities.
���� Table 1 - Selected Intersections from Drill Holes at
���� Young-Davidson
���� Boundary Zone
���� -----------------------------------------------------------------
����������������������������������������� Core������ True
���� Hole ID������� From������ To������� Length�� Thickness���� Gold
�������������������� (m)������ (m)������� (m)������� (m)������ (g/t)
���� -----------------------------------------------------------------
���� YD-07-33D���� 1282.5���� 1308.0������ 25.5������ 20.3������ 2.08
���� -----------------------------------------------------------------
���� Including���� 1282.5���� 1290.0������� 7.5������� 6.0�� ����2.77
���� -----------------------------------------------------------------
������������������ 1354.7���� 1370.6������ 15.9������ 12.7������ 1.96
���� -----------------------------------------------------------------
���� Including���� 1359.0���� 1365.0������� 6.0������� 4.8������ 2.91
���� -----------------------------------------------------------------
���� YD-07-33E���� 1267.0���� 1285.7������ 18.7������ 16.0������ 2.67
���� -----------------------------------------------------------------
��� �Including���� 1274.1���� 1285.7������ 11.6������� 9.9������ 3.30
���� -----------------------------------------------------------------
���� Including���� 1277.0���� 1284.5������� 7.5������� 6.4������ 4.11
���� -----------------------------------------------------------------
������������������ 1321.5���� 1394.0������ 72.5������ 68.8������ 1.97
���� -----------------------------------------------------------------
���� Including���� 1360.8���� 1382.0������ 21.2������ 20.1������ 3.32
���� -----------------------------------------------------------------
���� Including���� 1371.5���� 1380.5������� 9.0������� 8.6������ 4.35
���� -----------------------------------------------------------------
���� YD-07-49A����� 625.2����� 702.8������ 77.6������ 42.0������ 2.35
���� -----------------------------------------------------------------
���� Including����� 633.5����� 659.1������ 25.6������ 13.7������ 5.01
���� -----------------------------------------------------------------
���� Including����� 648.9����� 659.1���� ��10.2������� 5.4������ 7.87
���� -----------------------------------------------------------------
���� Lucky Zone
���� -----------------------------------------------------------------
����������������������������������������� Core������ True
���� Hole ID������� From������ To������� Length�� Thickness���� Gold
�������������������� (m)������ (m)������� (m)������� (m)������ (g/t)
���� -----------------------------------------------------------------
���� YD-07-48������ 731.5����� 750.0������ 18.5������ 13.9������ 1.42
���� -----------------------------------------------------------------
���� Including����� 734.5����� 739.5������� 5.0������� 3.8������ 2.30
���� -----------------------------------------------------------------
������������������� 868.5����� 874.2������� 5.7������� 4.4������ 4.64
���� -----------------------------------------------------------------
������������������� 956.8����� 961.5������� 4.7������� 3.7������ 7.93
���� -----------------------------------------------------------------
���� Young-Davidson Zone
���� -----------------------------------------------------------------
����������������������������������������� Core������ True
���� Hole ID������� From������ To������� Length�� Thickness���� Gold
�������������������� (m)������ (m)��� ����(m)������� (m)������ (g/t)
���� -----------------------------------------------------------------
���� YD-07-46����� 1456.0���� 1481.5������ 25.5������ 15.6������ 1.52
���� -----------------------------------------------------------------
���� Including���� 1468.0���� 1481.5������ 13.5������� 8.3������ 2.04
���� -----------------------------------------------------------------
���� Including���� 1468.0���� 1477.0������� 9.0������� 5.6������ 2.40
���� -----------------------------------------------------------------
���� QUALITY CONTROL - ANALYSES AND SAMPLE LOCATION
���� Details of quality assurance/quality control procedures for sample
analysis and drill hole survey methodology are reported in detail in National
Instrument 43-101 (NI 43-101) Technical Reports filed on SEDAR (www.sedar.com)
on January 29, 2007. Summaries of these procedures may also be found in the
press release dated April 10, 2006
���� QUALIFIED PERSONS
���� The program design, implementation, quality assurance/quality control and
interpretation of the results is under the control of Northgate's geological
staff that includes a number of individuals who are qualified persons as
defined under NI 43-101. Overall supervision of the program is by Carl
Edmunds, PGeo, Northgate's Exploration� Manager.
����������������������������� x x x x x x
���� NOTE TO US INVESTORS:
���� The terms "Mineral Reserve", "Proven Mineral Reserve" and "Probable
Mineral Reserve" are Canadian mining terms as defined in accordance with NI
43-101 Standards of Disclosure for Mineral Projects under the guidelines set
out in the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM")
Standards on Mineral Resources and Mineral Reserves Definitions and Guidelines
adopted by the CIM Council on August 20, 2000. The terms "Mineral Resource",
"Measured Mineral Resource", "Indicated Mineral Resource", and "Inferred
Mineral Resource" used in this news release are Canadian mining terms as
defined in accordance with NI 43-101-Standards of Disclosure for Mineral
Projects under the guidelines set out in the CIM Standards.
����������������������������� x x x x x x
���� NOTICE OF CONFERENCE CALL AND WEBCAST OF THIRD QUARTER RESULTS
���� November 5 at 10:00 a.m. ET
���� You are invited to participate in the Northgate Minerals Corporation live
conference call and webcast discussing our third quarter financial results.
The call and webcast will take place on Monday, November 5, 2007, at 10:00
a.m. ET.
���� Conference Call
���� Please call 416-644-3415 or toll free in North America at 1-800-733-7560.
To ensure your participation, please call five minutes prior to the scheduled
start of the call.
���� Webcast
���� The webcast package, including the webcast link and management
presentation, will be available on the morning of November 5 and posted on
Northgate's website at www.northgateminerals.com under the Calendar of Events
section. You may also access the webcast at
www.newswire.ca/en/webcast/viewEvent.cgi?eventID 30160
���� Replay
���� A replay of the conference call will be available beginning on November 5
at 12:00 P.M. ET until November 19 at 11:59 PM ET.
���� Replay Access No.� 416-640-1917 or 1-877-289-8525
���� Passcode:��������� 212 49 495 followed by the number sign
������������ �����������������x x x x x x
���� NORTHGATE MINERALS CORPORATION is a gold and copper mining company
focused on operations and opportunities in the Americas. The Corporation's
principal assets are the Kemess South mine in north-central British Columbia
and the Young-Davidson property in northern Ontario. Northgate is listed on
the Toronto Stock Exchange under the symbol NGX and on the American Stock
Exchange under the symbol NXG.
���� NOTE TO SECURITY HOLDERS:
���� This news release does not constitute an offer to buy or an invitation to
sell, or the solicitation of an offer to buy or invitation to sell, any of the
securities of Northgate or Perseverance. Information about Perseverance is
provided by Perseverance and Northgate has not verified its accuracy or
completeness.
���� Subject to the terms and conditions set forth in the Merger
Implementation Agreement relating to the proposed transaction, Perseverance
intends to mail a scheme booklet (which will include an explanatory statement
and independent expert's report) to its shareholders. Perseverance
shareholders and other interested parties are strongly advised to read these
documents, as well as any amendments and supplements to these documents, when
they become available because they will contain important information.
���� FORWARD-LOOKING STATEMENTS:
���� This news release includes certain "forward-looking statements" within
the meaning of section 21E of the United States Securities Exchange Act of
1934, as amended. These forward-looking statements include estimates,
forecasts, and statements as to management's expectations with respect to,
among other things, future metal production and production costs, potential
mineralization and reserves, exploration results, progress in the development
of mineral properties, demand and market outlook for commodities and future
plans and objectives of Northgate Minerals Corporation (Northgate).
Forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "intend,"
"estimate," "anticipate," "believe," or "continue" or the negative thereof or
variations thereon or similar terminology. Forward-looking statements are
necessarily based upon a number of estimates and assumptions that, while
considered reasonable by management are inherently subject to significant
business, economic and competitive uncertainties and contingencies. There can
be no assurance that such statements will prove to be accurate and actual
results and future events could differ materially from those anticipated in
such statements. Important factors that could cause actual results to differ
materially from Northgate's expectations are disclosed under the heading "Risk
and Uncertainties" in Northgate's 2006 Annual Report and under the heading
"Risk Factors" in Northgate's 2006 Annual Information Form (AIF) both of which
are filed with Canadian regulators on SEDAR (www.sedar.com) and with the
United States Securities and Exchange Commission (www.sec.gov). Northgate
expressly disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future
events or otherwise.
���� APPENDIX 1 - DRILL HOLE COLLAR LOCATIONS
���� Young-Davidson
���� -----------------------------------------------------------------
����������������������������������� Elev-�� Collar�� Collar��� Depth
���� Hole ID���� Easting Northing�� ation�� Azimuth��� Dip����� (m)
���� -----------------------------------------------------------------
���� YD-07-33A�� 23248.5�� 9701.7� 10324.9������ 0����� -70��� 1546.1
���� -----------------------------------------------------------------
���� YD-07-33B�� 23248.5�� 9701.7� 10324.9������ 0����� -70��� 1461.0
���� -----------------------------------------------------------------
���� YD-07-33C�� 23248.5�� 9701.7� 10324.9������ 0����� -70����� 1550
���� -----------------------------------------------------------------
���� YD-07-33D�� 23248.5�� 9701.7� 10324.9������ 0����� -70��� 1393.3
���� -----------------------------------------------------------------
���� YD-07-33E�� 23248.5�� 9701.7� 10324.9������ 0����� -70��� 1439.0
���� -----------------------------------------------------------------
���� YD-07-34��� 22711.5� 10064.7� 10331.0�� 353.0����� -70��� 1066.8
���� -----------------------------------------------------------------
���� YD-07-37��� 23599.0�� 9976.0� 10340.1������ 9����� -70��� 1021.2
���� -----------------------------------------------------------------
���� YD-07-38��� 22711.5� 10244.0� 10330.0������ 0����� -70���� 609.0
���� -----------------------------------------------------------------
���� YD-07-39��� 22713.1� 10191.2� 10333.1���� 350����� -70���� 719.0
���� -----------------------------------------------------------------
���� YD-07-40�� ���23875��� 10125��� 10340���� 315����� -70���� 354.0
���� -----------------------------------------------------------------
���� YD-07-40A���� 23875��� 10125��� 10340���� 312����� -70���� 261.0
���� -----------------------------------------------------------------
���� YD-07-40B���� 23875��� 10125��� 10340���� 310����� -70���� 547.0
���� -----------------------------------------------------------------
���� YD-07-40C���� 23875��� 10125��� 10340���� 302����� -70���� 969.0
���� -----------------------------------------------------------------
���� YD-07-41��� 23200.8�� 9940.0� 10325.0������ 0����� -65��� 1068.0
���� -----------------------------------------------------------------
���� YD-07-42��� 23522.0�� 9935.0� 10322.0���� 356����� -70��� 1008.0
���� -----------------------------------------------------------------
���� YD-07-42A�� 23522.0�� 9935.0� 10322.0���� 356����� -70����� 1400
���� -----------------------------------------------------------------
���� YD-07-43��� 23200.8�� 9940.0� 10325.0������ 0����� -60���� 919.0
���� -----------------------------------------------------------------
���� YD-07-44��� 22685.0�� 9725.0� 10331.0������ 0����� -70����� 19.3
���� -----------------------------------------------------------------
���� YD-07-45��� 23200.8�� 9940.0� 10325.0������ 0����� -70����� 1200
���� -----------------------------------------------------------------
���� YD-07-46��� 22685.0�� 9725.0� 10331.0������ 0����� -70����� 1700
���� -----------------------------------------------------------------
���� YD-07-48��� 23110.3� 10037.4� 10318.9������ 5����� -67��� 1003.5
���� -----------------------------------------------------------------
���� YD-07-49A�� 23490.0� 10140.0� 10330.0������ 0����� -70���� 714.0
���� -----------------------------------------------------------------
���� INTERIM CONSOLIDATED BALANCE SHEETS
������������������������������������������� September 30� December 31
���� Thousands of US dollars����������������������� 2007�������� 2006
���� -----------------------------------------------------------------
��������������������������������������������� (Unaudited)
���� Assets
���� Current Assets
���� Cash and cash equivalents������������� $��� 269,191 $��� 262,199
���� Short-term investments (note 6)������������� 72,600����������� -
����Concentrate settlements
����� and other receivables���������������������� 49,636������ 17,960
���� Inventories��������������������������������� 37,626������ 26,208
���� Future income tax asset���������������������� 5,380������� 7,469
���� Deferred hedging loss���������������������������� -������� 8,583
���� -----------------------------------------------------------------
������������������������������������������������ 434,433����� 322,419
���� Other assets�������������������������������� 17,937������ 27,622
���� Future income tax asset��������������������� 10,487������� 6,291
���� Mineral property, plant and equipment������ 123,872����� 159,299
���� Investments������������������������������������ 950����������� -
���� -----------------------------------------------------------------
������������������������������������������� $��� 587,679 $��� 515,631
���� -----------------------------------------------------------------
���� -----------------------------------------------------------------
���� Liabilities and Shareholders' Equity
���� Current Liabilities
���� Accounts payable
����� and accrued liabilities�������������� $���� 67,656 $���� 22,023
���� Current portion of
����� capital lease obligations������������������� 2,506������� 2,439
���� -----------------------------------------------------------------
������������������������������������������������� 70,162������ 24,462
���� Capital lease obligations���������������������� 681������� 2,586
���� Other long-term liabilities (note 4)�������� 16,735
�� ��Provision for site closure
����� and reclamation obligations (note 5)������� 48,550������ 28,197
���� Future income tax liability�������������������� 315������ 12,638
���� -----------------------------------------------------------------
��������������� ���������������������������������136,443������ 67,883
���� Shareholders' equity
���� Common shares������������������������������ 308,841����� 307,914
���� Contributed surplus�������������������������� 3,794������� 2,596
���� Accumulated other
����� comprehensive income (note 2)�������������� (4,753)���������� -
���� Retained earnings�������������������������� 143,354����� 137,238
���� -----------------------------------------------------------------
������������������������������������������������ 451,236����� 447,748
���� -----------------------------------------------------------------
������������������������������������������� $��� 587,679 $��� 515,631
���� -----------------------------------------------------------------
���� -----------------------------------------------------------------
���� The accompanying notes form an integral part of these
���� consolidated financial statements.
���� INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
���� INCOME
���� Thousands of US
����� dollars, except
����� share and per����� Three Months Ended������� Nine Months Ended
����� share amounts,��������� Sept 30������������������ Sept 30
����� unaudited���������� 2007����� 2006(1)�������� 2007����� 2006(1)
���� -----------------------------------------------------------------
���� Revenue������ $��� 86,756� $�� 102,667� $�� 241,947� $�� 293,074
���� -----------------------------------------------------------------
���� Cost of sales����� 59,241������ 59,069����� 166,611����� 164,123
���� Administrative
����� and general������� 2,019������� 1,951������� 6,772������� 6,666
���� Depreciation
����� and depletion����� 8,050������� 8,397������ 28,009������ 25,469
���� Net interest
����� income����������� (4,611)����� (1,180)���� (12,311)����� (1,857)
�� ��Exploration������� 10,773������� 3,509������ 22,208������� 6,496
���� Currency
����� translation
����� loss (gain)������ (2,796)�������� 607������ (7,960)����� (1,804)
���� Accretion of
����� site closure
����� and reclamation
����� costs��������������� 964��������� 386������� 1,869������� 1,147
���� Writedown of
����� mineral
����� property
����� (note 7)��������� 32,347����������� -������ 32,347����������� -
���� Other�������������� 1,915���������� 40������� 2,826������� 8,423
���� -----------------------------------------------------------------
���������������������� 107,902������ 72,779����� 240,371����� 208,663
���� -----------------------------------------------------------------
���� Earnings before
����� income taxes���� (21,146)����� 29,888����� ��1,576������ 84,411
���� Income tax
����� recovery
����� (expense)
������ Current��������� (1,040)����� (1,482)����� (6,258)����� (4,455)
������ Future���������� 10,249����� (13,504)����� 10,798������� 6,996
���� -----------------------------------------------------------------
������������������������ 9,209����� (14,986)������ 4,540������� 2,541
���� -----------------------------------------------------------------
���� Net earnings
����� (loss) for
����� the period�� $�� (11,937) $��� 14,902� $���� 6,116� $��� 86,952
���� -----------------------------------------------------------------
���� -----------------------------------------------------------------
���� Other
����� comprehensive
����� income
������ Reclassification
������� of net realized
������� gains on
������� available for
������� sale securities
������� to net earnings����� -����������� -�������� (315)���������� -
������ Unrealized
������� gain (loss) on
������� available for
������� sale securities�� (276)���������� -��������� 190����������� -
������ Reclassification
������� of deferred
������� losses on
������� gold forward
������� contracts to
������� net earnings,
������� net of tax of
������� $2,538 Q3 and
������� $7,276 YTD������ 4,900����������� -������ 14,048����������� -
���� -----------------------------------------------------------------
������������������������ 4,624����������� -������ 13,923����������� -
���� -----------------------------------------------------------------
���� Comprehensive
����� income
����� (loss)������ $��� (7,313) $��� 14,902� $��� 20,039� $��� 86,952
���� -----------------------------------------------------------------
���� -----------------------------------------------------------------
���� Net earnings
����� (loss) per
����� share
������ Basic������ $�� ��(0.05) $����� 0.07� $����� 0.02� $����� 0.40
������ Diluted���� $���� (0.05) $����� 0.07� $����� 0.02� $����� 0.39
���� Weighted
����� average
����� shares
����� outstanding
������ Basic������ 254,210,079� 215,636,477� 254,111,883� 215,085,895
������ Diluted���� 254,210,079� 226,992,626� 255,329,229� 222,281,149
���� -----------------------------------------------------------------
���� -----------------------------------------------------------------
���� INTERIM CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
���� Thousands of������� Three Months Ended������� Nine Months Ended
����� US dollars,������������ Sept 30������������������ Sept 30
����� unaudited���������� 2007����� 2006(1)�������� 2007����� 2006(1)
���� -----------------------------------------------------------------
���� Retained
����� earnings,
����� beginning
����� of period��� $�� 155,291� $�� 102,546� $�� 137,238� $��� 30,496
���� Net earnings
����� (loss) for
����� the period������ (11,937)����� 14,902������� 6,116������ 86,952
���� -----------------------------------------------------------------
���� Retained
����� earnings, end
����� of period��� $�� 143,354� $�� 117,448� $�� 143,354� $�� 117,448
���� -----------------------------------------------------------------
���� -----------------------------------------------------------------
���� (1) Adjusted (note 2)
���� The accompanying notes form an integral part of these
���� consolidated financial statements.
���� INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
���� EQUITY
���� Thousands of
���� US dollars,
���� except common�� Number of������ Common������� Share
���� shares,����������� Common������ Shares���� Purchase� Contributed
���� unaudited��������� Shares������ Amount���� Warrants����� Surplus
���� -----------------------------------------------------------------
���� Balance at
����� December 31,
����� 2006�������� 253,700,033� $�� 307,914� $�������� -� $���� 2,596
������ Transitional
������� adjustment on
������� adoption of
������� financial
������� instruments��������� -����������� -����������� -����������� -
������ Shares issued
������� under employee
������� share purchase
������� plan����������� 32,807���������� 79����������� -����������� -
������ Shares issued
������� on exercise
������� of options� ���413,420��������� 519����������� -�������� (153)
������ Stock-based
������� compensation�������� -���������� 39����������� -��������� 759
������ Net income����������� -����������� -����������� -����������� -
������ Other
������� comprehensive
������� income�������������� -����������� -����������� -����������� -
���� -----------------------------------------------------------------
���� Balance at
����� March 31,
����� 2007�������� 254,146,260� $�� 308,551� $�������� -� $���� 3,202
������ Shares issued
������� under employee
������� share purchase
������� plan����������� 41,860��������� 107����������� -����������� -
������ Shares issued
������� on exercise
������� of options������ 5,600���������� 15����������� -���������� (4)
������ Stock-based
������� compensation�������� -���������� 53����������� -��������� 320
������ Net income����������� -����������� -����������� -����������� -
������ Other
������� comprehensive
������� income�������������� -����������� -����������� -����������� -
���� -----------------------------------------------------------------
���� Balance at
����� June 30,
����� 2007�������� 254,193,720� $�� 308,726� $�������� -� $���� 3,518
������ Shares issued
������� under employee
������� share purchase
������� plan����������� 46,559������ ����67����������� -����������� -
������ Shares issued
������� on exercise
������� of options������ 5,200���������� 14����������� -���������� (3)
������ Stock-based
������� compensation�������� -���������� 34����������� -��������� 279
������ Net loss������ �������-����������� -����������� -����������� -
������ Other
������� comprehensive
������� income�������������� -����������� -����������� -����������� -
���� -----------------------------------------------------------------
���� Balance at
����� September 30,
����� 2007�������� 254,245,479� $�� 308,841� $�������� -� $���� 3,794
���� -----------------------------------------------------------------
���� -----------------------------------------------------------------
���� Thousands of���������������������� �����Accumulated
���� US dollars,���������������������������������� Other
���� except common������������������������������ Compre-
���� shares,���������������������� Retained����� hensive
���� unaudited�������������������� Earnings������ Income������� Total
���� -----------------------------------------------------------------
���� Balance at
����� December 31,
����� 2006��������������������� $�� 137,238� $�������� -� $�� 447,748
������ Transitional
������� adjustment on
������� adoption of
������� financial
������� instruments���������������������� -����� (18,676)���� (18,676)
������ Shares issued
������� under employee
������� share purchase
������� plan����������������������������� -����������� -���������� 79
������ Shares issued
������� on exercise
������� of options����������������������� -����������� -��������� 366
������ Stock-based
������� compensation��������������������� -����������� -��������� 798
������ Net income�������������������� 9,406����������� -������� 9,406
������ Other
������� comprehensive
������� income��������������������������� -������� 4,125������� 4,125
���� -----------------------------------------------------------------
���� Balance at
����� March 31,
����� 2007��������������������� $�� 146,644� $�� (14,551) $�� 443,846
� �����Shares issued
������� under employee
������� share purchase
������� plan����������������������������� -����������� -��������� 107
������ Shares issued
������� on exercise
������� of options����������������������� -����������� -���������� 11
������ Stock-based
������� compensation��������������������� -����������� -��������� 373
������ Net income�������������������� 8,647����������� -������� 8,647
������ Other
������� comprehensive
������� income��������������������������� -������� 5,174������� 5,174
� ���-----------------------------------------------------------------
���� Balance at
����� June 30,
����� 2007��������������������� $�� 155,291� $��� (9,377) $�� 458,158
������ Shares issued
������� under employee
������� share purchase
������� plan������ �����������������������-����������� -���������� 67
������ Shares issued
������� on exercise
������� of options����������������������� -����������� -���������� 11
������ Stock-based
������� compensation��������������������� -����������� -��������� 313
���� ��Net loss�������������������� (11,937)���������� -����� (11,937)
������ Other
������� comprehensive
������� income��������������������������� -������� 4,624������� 4,624
���� -----------------------------------------------------------------
���� Balance at
����� September 30,
����� 2007��������������������� $�� 143,354� $��� (4,753) $�� 451,236
���� -----------------------------------------------------------------
���� -----------------------------------------------------------------
���� The accompanying notes form an integral part of these
���� consolidated financial statements.
���� INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
���� Thousands of
���� US dollars,
���� except common�� Number of������ Common������� Share
���� shares,��� ��������Common������ Shares���� Purchase� Contributed
���� unaudited��������� Shares������ Amount���� Warrants����� Surplus
���� -----------------------------------------------------------------
���� Balance at
����� December 31,
����� 2005�������� 214,011,246� $�� 195,565� $���� 8,715� $���� 1,657
������ Shares
������� issued under
������� employee
������� share purchase
������� plan����������� 45,027���������� 68����������� -����������� -
������ Shares issued
������� on exercise of
������� share purchase
������� warrants������ 314,523��������� 480�������� (102)���������� -
������ Shares issued
������� on exercise
������� of options���� 386,800��������� 490����������� -�������� (154)
������ Stock-based
������� compensation�������� -���������� 34����������� -������� 1,131
������ Net income����������� -����������� -����������� -����������� -
���� -----------------------------------------------------------------
���� Balance at
����� March 31,
����� 2006�������� 214,757,596� $�� 196,637� $���� 8,613� $���� 2,634
������ Shares issued
������� under employee
������� share purchase
������� plan����������� 30,269���������� 76����������� -����������� -
������ Shares issued
������� on exercise of
������� share purchase
������� warrant�������� 10,202���������� 27������ �����-����������� -
������ Shares issued
������� on exercise
������� of options���� 810,880������� 2,245����������� -�������� (706)
������ Stock-based
������� compensation�������� -���������� 39����������� -��������� 240
������ Net income����������� -���� �������-����������� -����������� -
���� -----------------------------------------------------------------
���� Balance at
����� June 30,
����� 2006�������� 215,608,947� $�� 199,024� $���� 8,613� $���� 2,168
������ Shares issued
������� under employee
���� ���share purchase
������� plan����������� 30,955���������� 73����������� -����������� -
������ Shares issued
������� on exercise of
������� share purchase
������� warrant��������� 2,778����������� 8����������� -����������� -
������ Shares issued
������� on exercise
������� of options����� 22,800���������� 84����������� -��������� (27)
������ Stock-based
������� compensation�������� -���������� 36����������� -��������� 244
������ Net income����������� -����������� -����������� -����������� -
���� -----------------------------------------------------------------
���� Balance at
����� September 30,
����� 2006�������� 215,665,480� $�� 199,225� $���� 8,613� $���� 2,385
���� -----------------------------------------------------------------
���� -----------------------------------------------------------------
���� Thousands of
���� US dollars,���������������������������� Accumulated
���� except common�������������������������������� Other
���� shares,��������������������� Retained Comprehensive
���� unaudited����������������� Earnings(1)������ Income������� Total
���� -----------------------------------------------------------------
���� Balance at
����� December 31,
����� 2005��������������������� $��� 30,496� $�������� -� $�� 236,433
������ Shares
���� ���issued under
������� employee
������� share purchase
������� plan����������������������������� -����������� -���������� 68
������ Shares issued
������� on exercise of
������� share purchase
������� warrants������������������������� -����������� -������ ���378
������ Shares issued
������� on exercise
������� of options����������������������� -����������� -��������� 336
������ Stock-based
������� compensation��������������������� -����������� -������� 1,165
������ Net income������������������� 21,735����� ������-������ 21,735
���� -----------------------------------------------------------------
���� Balance at
����� March 31,
����� 2006��������������������� $��� 52,231� $�������� -� $�� 260,115
������ Shares issued
������� under employee
������� share purchase
������� plan����������������������������� -����������� -���������� 76
������ Shares issued
������� on exercise of
������� share purchase
������� warrant�������������������������� -����������� -���������� 27
������ Shares issued
������� on exercise
�� �����of options����������������������� -����������� -������� 1,539
������ Stock-based
������� compensation��������������������� -����������� -��������� 279
������ Net income������������������� 50,315����������� -������ 50,315
���� -----------------------------------------------------------------
���� Balance at
����� June 30,
����� 2006��������������������� $�� 102,546� $�������� -� $�� 312,351
������ Shares issued
������� under employee
������� share purchase
������� plan����������������������������� -��� ��������-���������� 73
������ Shares issued
������� on exercise of
������� share purchase
������� warrant�������������������������� -����������� -����������� 8
������ Shares issued
������� on exercise
������� of options����������������������� -����������� -���������� 57
������ Stock-based
������� compensation��������������������� -����������� -��������� 280
������ Net income������������������� 14,902����������� -������ 14,902
���� -----------------------------------------------------------------
���� Balance at
����� September 30,
����� 2006��������������������� $�� 117,448� $�������� -� $�� 327,671
���� -----------------------------------------------------------------
���� -----------------------------------------------------------------
���� (1) Adjusted (note 2)
���� The accompanying notes form an integral part of these
���� consolidated financial statements.
���� INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
������������������������������ Three Months Ended�� Nine Months Ended
���� Thousands of���������� ���������Sept 30������������ Sept 30
����� US dollars, unaudited������� 2007�� 2006(1)����� 2007�� 2006(1)
���� -----------------------------------------------------------------
���� Operating activities:
������ Net earnings
������� for the period�������� $(11,937) $ 14,902� $� 6,116� $ 86,952
���� Non-cash items:
������ Depreciation
������� and depletion������������ 8,050���� 8,397��� 28,009��� 25,469
������ Unrealized currency
������� translation losses
������� (gains)������������������ 1,151������� 54�� ��1,827����� (288)
������ Accretion of site closure
������� and reclamation costs������ 964������ 386���� 1,869���� 1,147
������ Amortization of
������� hedging losses����������� 7,438���� 7,525��� 21,325��� 15,027
������ Amortization of
������� deferred charges������������ 81������� 75������ 229������ 489
������ Stock-based compensation���� 313������ 280���� 1,484���� 1,724
������ Future income tax
������� expense (recovery)����� (10,249)�� 13,504�� (10,798)�� (6,996)
������ Change in fair value
������� of forward contracts���� 17,255�� (19,754)�� 54,259���� 1,356
������ Writedown of
������� mineral property�������� 32,347�������� -��� 32,347�������� -
������ Gain on sale
������� of investments��������������� -�������� -����� (315)������� -
���� Changes in operating
����� working capital and other:
������ Concentrate settlements
������� and other receivables�� (16,410)�� 46,417�� (43,628)��� 1,960
������ Inventories����������������� 156��� (1,720)�� (3,515)�� (4,204)
������ Accounts payable and
������� accrued liabilities������ 4,867����� (469)�� 17,069���� 6,152
������ Settlement of
������� forward contracts������� (4,581)�� (5,132)� (13,907)� (23,825)
������ Reclamation costs paid�������� -�������� -�������� -��� (2,235)
���� -----------------------------------------------------------------
�������������������������������� 29,445��� 64,465��� 92,371�� 102,728
���� -----------------------------------------------------------------
���� Investing activities:
���� Purchase of other assets�������� -������ (45)������� -����� (131)
���� Purchase of mineral property,
����� plant and equipment������� (4,926)�� (4,817)� (11,260)�� (9,084)
���� Purchase of
����� short-term investments��� (72,600)������� -�� (72,600)������� -
���� Purchase of investments��������� -�������� -����� (322)������� -
���� -----------------------------------------------------------------
������������������������������� (77,526)�� (4,862)� (84,182)�� (9,215)
���� -----------------------------------------------------------------
���� Financing activities:
���� Repayment of capital
����� lease obligation������������ (567)�� (4,077)�� (1,838)�� (6,162)
���� Repayment of long-term debt����� -�������� -�������� -�� (13,700)
���� Issuance of common shares������ 78������ 138������ 641���� 2,564
���� -----------------------------------------------------------------
���������������������������������� (489)�� (3,939)�� (1,197)� (17,298)
���� -----------------------------------------------------------------
���� Increase / (decrease) in
����� cash and cash equivalents (48,570)�� 55,664���� 6,992��� 76,215
���� Cash and cash equivalents,
����� beginning of period������ 317,761��� 71,190�� 262,199��� 50,639
���� -----------------------------------------------------------------
��� �Cash and cash equivalents,
����� end of period����������� $269,191� $126,854� $269,191� $126,854
���� -----------------------------------------------------------------
���� -----------------------------------------------------------------
���� Supplementary information
���� Cash paid during
����� the period for:
������ Interest��������������� $���� 71� $��� 163� $��� 216� $��� 895
���� -----------------------------------------------------------------
���� -----------------------------------------------------------------
���� (1) Adjusted (note 2)
���� The accompanying notes form an integral part of these
���� consolidated financial statements.
���� NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
���� Three and nine months ended September 30, 2007 and 2006
���� (unaudited)
���� All dollar amounts are stated in United States dollars unless
���� otherwise indicated. Tables are expressed in thousands of
���� United States dollars, except share and per share amounts.
���� NOTE 1��� BASIS OF PRESENTATION
�� ��The accompanying unaudited interim consolidated financial
���� statements for Northgate Minerals Corporation ("Northgate" or the
���� "Corporation") have been prepared in accordance with generally
���� accepted accounting principles in Canada (Canadian GAAP). They do
���� not include all the disclosures required by Canadian GAAP for
���� annual financial statements and should be read in conjunction
���� with the Corporation's consolidated financial statements and the
���� notes thereto included in the Corporation's Annual Report for the
���� year ended December 31, 2006. In the opinion of management, all
���� adjustments considered necessary for fair presentation have been
���� included in these financial statements.
���� Except as disclosed in note 2 below, these financial statements
���� are prepared using the same accounting policies and methods of
���� application as those disclosed in note 2 to the Corporation's
���� consolidated financial statements for the year ended December 31,
���� 2006.
���� NOTE 2��� CHANGES IN ACCOUNTING POLICIES
���� On January 1, 2007, the Corporation adopted the Canadian
���� Institute of Chartered Accountants ("CICA") Handbook Sections
���� 1530, Comprehensive Income; Section 3251, Equity; Section 3855,
���� Financial Instruments - Recognition and Measurement; Section
���� 3861, Financial Instruments - Disclosure and Presentation; and
���� Section 3865, Hedges. These new standards resulted in changes in
���� the accounting for financial instruments, hedges and available
����for sale investments as well as recognition of certain
���� transitional adjustments that have been recorded for gold forward
���� contracts and available for sale investments. In accordance with
���� the transitional provisions, prior periods have not been
���� restated. The principal changes resulting from these new
���� standards are described below:
���� Comprehensive Income
���� Section 1530 establishes standards for reporting and presenting
���� comprehensive income. Comprehensive income, composed of net
���� income and other comprehensive income, is defined as the change
���� in shareholders' equity from transactions and other events from
���� non-owner sources. Other comprehensive income for the Corporation
���� includes unrealized gains and losses on available for sale
���� securities and changes in the fair market value of derivatives
���� designated as cash flow hedges, all net of related income taxes.
���� The components of comprehensive income are disclosed in the
���� consolidated statement of operations and comprehensive income.
���� Cumulative changes in other comprehensive income are included in
���� accumulated other comprehensive income ("AOCI") which is
���� presented as a new category in shareholders' equity. The
���� components of AOCI as at September 30, 2007, are as follows:
���� -----------------------------------------------------------------
���� Unrealized gain on available for sale securities������� $��� 203
���� Unrealized hedging losses����������������������� ���������(4,956)
���� -----------------------------------------------------------------
���� AOCI��������������������������������������������������� $ (4,753)
���� -----------------------------------------------------------------
���� Financial Instruments
���� Under Section 3855, financial assets and liabilities, including
���� derivative instruments, are initially recognized and subsequently
���� measured based on their classification as held-for-trading,
���� available for sale financial assets, held-to-maturity, loans and
���� receivables, or other financial liabilities as follows:
���� -� Held for trading financial instruments are measured at their
������� fair value with changes in fair value recognized in net income
������� for the period.
���� -� Available for sale financial assets are measured at their fair
������� value and changes in fair value are included in other
������� comprehensive income until the asset is removed from the
������� balance sheet.
���� -� Held-to-maturity investments, loans and receivables and other
������� financial liabilities are measured at amortized cost using the
������� effective interest rate method.
���� -� Derivative instruments, including embedded derivatives, are
������� measured at their fair value with changes in fair value
������� recognized in net income for the period unless the instrument
������� is a cash flow hedge and hedge accounting applies in which
������� case changes in fair value are recognized in other
������� comprehensive income.
���� Upon adoption of this new standard, the Corporation designated
���� its investments in common shares of public corporations as
���� available for sale financial assets. On January 1, 2007, the
���� Corporation recorded these investments at their fair value of
���� $329,000 with an offsetting adjustment to AOCI in shareholders'
���� equity. When the investments are sold or otherwise disposed of,
���� gains or losses will be recorded in net earnings.
���� Hedging
���� Section 3865 specifies the circumstances under which hedge
���� accounting is permissible and how hedge accounting may be
���� performed. On January 1, 2007, the Corporation elected to
���� discontinue hedge accounting for its gold forward sales
���� contracts. As a result, a liability for the fair value of these
���� contracts of $20,265,000 and a future income tax asset of
���� $6,914,000 was recorded with the net transitional adjustment of
���� $13,351,000 recognized in AOCI in shareholders' equity. Also on
���� January 1, 2007, the deferred hedging loss asset of $8,583,000
���� and the related future income tax liability of $2,929,000
���� pertaining to gold forward contracts settled in prior years in
���� advance of their maturity date were reclassified to AOCI in
���� shareholders' equity. Changes in fair value of forward contracts
���� are recognized in net income each period. The transitional
���� adjustment and hedge loss recorded in AOCI will be released into
���� net income at the time the sales associated with the forward
���� contracts occur.
���� Inventory
���� In the year ended December 31, 2006, the Corporation changed its
���� accounting policy with respect to metal inventories to
���� incorporate a full costing method and also to value additional
���� components of inventory created during the mining process. As a
���� result of this change, opening retained earnings at January 1,
���� 2006 increased by $12,819,000. There were no other material
���� adjustments required for the three and nine month periods ended
���� September 30, 2006.
���� NOTE 3��� STOCK BASED COMPENSATION
���� Options were not granted during the three months ended
���� September 30, 2007 (2006 - nil). During the three months ended
���� September 30, 2007, $279,000 (2006 - $244,000) of stock-based
���� compensation was recognized related to outstanding stock options.
���� During the three months ended September 30, 2007, a total of
���� 93,500 options were cancelled and 5,200 options were exercised.
���� At September 30, 2007, there were 5,428,800 options outstanding,
���� of which 2,911,700 were exercisable.
���� There were no options granted during the three months ended
���� June 30, 2007 (2006 - nil). During the three months ended
���� June 30, 2007, $320,000 (2006 - $240,000) of stock-based
���� compensation was recognized related to outstanding stock options.
���� During the three months ended June 30, 2007, a total of 19,800
���� options were cancelled and 5,600 options were exercised.
���� During the three months ended March 31, 2007, the Corporation
���� granted a total of 1,425,000 (2006 - 1,212,000) options to
���� employees, with a term of seven years. 1,410,000 of these options
���� are exercisable at Cdn$4.07 and 15,000 are exercisable at
���� Cdn$3.48. Twenty percent (282,000) of the options granted at
���� Cdn$4.07 vested immediately and the balance will vest in equal
���� amounts on the anniversary date of the grant over the next four
���� years and five years respectively. The fair value of the options
���� granted for the three months ended March 31, 2007 was $2,500,000
���� (2006 - $1,480,000). During the three months ended March 31,
���� 2007, $759,000 (2006 - $1,131,000) of stock-based compensation
���� was recognized related to outstanding stock options.
���� During the three months ended March 31, 2007, a total of 114,020
���� options were cancelled and 413,420 options were exercised.
���� The fair value of the share options granted during 2007 was
���� estimated using the Black-Scholes pricing model with the
���� following assumptions:
����������������������������������� For Options Granted in
���� -----------------------------------------------------------------
�������������������������� Q3����� Q3����� Q2����� Q2����� Q1����� Q1
��������������������� ���2007��� 2006��� 2007��� 2006��� 2007��� 2006
���� -----------------------------------------------------------------
���� Risk-free
����� interest rate�������� -������ -������ -������ -��� 3.94%��� 4.1%
���� Annual dividends������ -������ -������ -����� �-������ -������ -
���� Expected stock
����� price volatility����� -������ -������ -������ -��� 53.4%���� 60%
���� Expected option life�� -������ -������ -������ -����� 5.0���� 5.0
�������������������������������������������������������� years�� years
��� �Per share fair value
����� of options granted
����� (Cdn$)��������������� -������ -������ -������ -��� $2.05�� $1.42
���� -----------------------------------------------------------------
���� NOTE 4��� FINANCIAL INSTRUMENTS
���� At September 30, 2007, the Corporation had forward sales
���� commitments with major financial institutions to deliver
���� 18,000 ounces of gold at an average accumulated price of $307 per
���� ounce. These forward sales commitments are in the form of forward
���� sales contracts maturing at various dates between October 31,
���� 2007 and December 31, 2007. On January 1, 2007, the Corporation
���� adopted the CICA new standard on hedges (note 2). In conjunction
���� with the adoption of Section 3855, the Corporation elected to
���� discontinue hedge accounting. Therefore, the forward sales
���� contracts are now recorded at their fair value with changes in
���� fair value including in earnings for the period. The unrealized
���� loss on these forward sales contracts at September 30, 2007, was
���� approximately $7,882,000, which is recorded in accrued
���� liabilities. The deferred hedging loss, which was reclassified to
���� the opening balance of AOCI in shareholders' equity on January 1,
���� 2007, and the transitional adjustment required to recognize the
���� fair value of outstanding forward sales contracts on adoption of
���� Section 3855 will be released into net earnings at the time the
���� sales associated with the forward contracts occur.
���� At September 30, 2007, the Corporation had forward sales
���� contracts with a major financial institution to fix the price for
���� delivered copper for which final settlement has not occurred, and
���� in certain cases, for future production. A total volume of
���� 32,950 metric tonnes of copper were sold forward using London
���� Metal Exchange (LME) contracts maturing from November 2007
���� through October 2010 at an average forward price of $2.87 per
���� pound. The Corporation also entered into separate forward
� ���purchase contracts with the same institution to repurchase its
���� forward sales position at monthly average LME cash prices over
���� the same period. The volume of these forward sales contracts
���� match expected future pricings of copper in concentrate produced
���� and delivered to Falconbridge Limited (a wholly owned subsidiary
���� of Xstrata Plc.) under a multi-year concentrate sales agreement.
���� The copper forward sales and purchase contracts are being
���� recognized on a mark-to-market basis. The fair value of these
���� contracts at September 30, 2007 was a net loss of $35,714,000 of
���� which $18,979,000 is included in accrued liabilities and
���� $16,735,000 in other long-term liabilities.
���� NOTE 5��� SITE CLOSURE & RECLAMATION OBLIGATIONS
���� In the third quarter of 2007, the Corporation revised the
���� undiscounted estimate for the Kemess South mine site closure and
���� reclamation costs used in the determination of the provision. In
���� addition, the Corporation changed the estimated timing of when
���� the costs would be paid. The continuity of the provision for
���� these costs is as follows:
���� -----------------------------------------------------------------
���� Balance, beginning of year����������������������������� $ 28,197
���� Effect of change in estimated future cash flows���������� 14,003
���� Site closure and reclamation liability incurred�������������� 88
���� Accretion expense������������������������������������� ����1,869
���� Effect of foreign exchange�������������������������������� 4,393
���� -----------------------------------------------------------------
���� Balance, end of period��������������������������������� $ 48,550
���� -----------------------------------------------------------------
���� -----------------------------------------------------------------
���� The estimated undiscounted cash flows used to determine the
���� revised liability is $52,200,000. The majority of the site
���� closure costs at the Kemess South mine are expected to be spent
���� between 2008 and 2012 with some expenditures, such as monitoring,
���� to be spent in excess of 100 years after the mine closes. The
���� credit-adjusted risk-free rate at which the incremental estimated
���� future cash flows have been discounted is 6.25% and the inflation
���� rate used to determine future expected cost is 2.29%.
���� NOTE 6��� SHORT-TERM INVESTMENTS
���� Northgate maintains a portion of its investments in AAA rated
���� Auction Rate Securities (ARS). ARS are floating rate securities
���� that are marketed by financial institutions with auction reset
���� dates at 7, 28, or 35 day intervals to provide short term
���� liquidity. Beginning in August 2007 a number of ARS auctions
���� began to fail and the Corporation is currently holding
���� $72,600,000 in ARS, which currently lack liquidity. Northgate's
���� ARS investments were originally structured and marketed by a
���� major investment bank in the USA and all of Northgate's ARS
���� investments continue to make regular cash interest payments and
���� are still rated AAA by Standard & Poor's (S&P) and AAA by
���� Moody's.
���� Due to the high credit worthiness of its ARS investments, third
���� party valuation reports, which value these investments at 100% of
���� par value, and management's assessment that the liquidity issues
���� surrounding the specific ASR securities held by the Corporation
���� will be resolved within the next twelve months, these investments
���� continue to be classified by the Corporation at September 30,
���� 2007, as available for sale short-term investments at their
���� original par value, which is equal to their fair value.
���� The balance of the Corporation's investments are held in R1/P1/A1
���� rated investments including money market funds, direct obligation
���� commercial paper, bankers acceptances and other highly rated
���� short term investment instruments which are recorded as cash and
���� cash equivalents. The Corporation has no investments in Asset
���� Backed Commercial Paper (ABCP), Mortgage Backed Securities (MBS)
���� or Collateralized Debt Obligations (CDO).
���� NOTE 7��� WRITE-DOWN OF MINERAL PROPERTY
���� During the quarter, the Joint Federal-Provincial Environmental
���� Review Panel for the Kemess North project completed its review
���� and submitted its final report to the federal and provincial
���� Ministers of the Environment. The report recommended that the
���� project not be permitted to proceed. The Federal and Provincial
���� governments are now studying the Panel's report and are expected
���� to make a final decision on whether to permit the development of
���� Kemess North sometime in the first half of 2008.
���� In light of the negative panel recommendation, Northgate has
���� written off the full carrying value ($32,347,000) of its
���� investment in this property.
���� NOTE 8��� COMMITMENTS AND CONTINGENCIES
���� On May 28, 2007, Northgate entered into an Option and Joint
���� Venture Agreement ("Agreement") with Opawica Explorations Inc.
���� ("Opawica") and is committed to spend Cdn$750,000 in exploration
���� over the twelve month period from the effective date of the
���� Agreement. In the third quarter of 2007, the Corporation
���� fulfilled its obligation and provided an additional Cdn$562,000
���� (YTD Cdn$787,000) to Opawica to fund exploration activity.
���� NOTE 9��� SUBSEQUENT EVENT
���� On October 29, 2007, Northgate announced that it had entered into
���� a definitive Merger Implementation Agreement ("MIA") that
���� provides for the acquisition by Northgate of Perseverance
���� Corporation Ltd. ("Perseverance"), which operates two gold mines
���� in Australia with a combined annual production of approximately
���� 200,000 ounces. The transaction will be implemented via schemes
���� of arrangement between Perseverance and its shareholders and
���� warrant holders, respectively (the "Schemes"), and a resolution
���� of holders of convertible subordinated notes to approve the early
���� redemption of the notes. Under the Schemes, a wholly owned
���� subsidiary of Northgate will acquire all of the outstanding fully
���� paid ordinary shares of Perseverance. In addition, under the
���� resolution of holders of convertible subordinated notes, the
���� convertible subordinated notes will be cancelled. The transaction
���� is subject to certain conditions, including the approval of
���� securityholders.
���� Under Northgate's offer, Perseverance securityholders will
���� receive (in Australian dollars (A$)):
���� -� A$0.20 cash per ordinary share (total A$177.9 million);
���� -� A$0.08 cash for each of the Perseverance warrants issued as
������� part of the recent A$26.5 million placement (total
������� A$14.1 million).; and,
���� -� A$100,000 (face value) plus any accrued interest per
������� convertible subordinated note (total A$37.0 million).
���� Northgate has also agreed to acquire all of Perseverance's
���� existing debt from a major financial institution in Australia
���� (the "Bank") amounting to $30.6 million (A$33.5million) and is
���� extending an additional bridging facility of up to $22.8 million
���� (A$25.0 million). Northgate has also agreed to acquire
���� approximately $43.8 million (A$48.0 million) gold forward
���� contracts from the Bank and subsequent to the close of the
���� Transaction, Northgate will close out these contracts.
���� Under the terms of the debt assumption and loan agreements, all
���� debt held by Northgate will be in a first secured position and
���� interest on the bridge financing will be deferred up to the date
���� of successful conclusion of the transaction or termination of the
���� MIA.
���� The additional bridging facility eliminates any short-term
���� requirement for Perseverance to raise further equity capital.
���� In the event that the transaction does not close as a result of
���� another person acquiring an interest in Perseverance of more than
���� 20%, the Bank debt and bridging facility will become immediately
���� repayable in full and Perseverance will be required to
���� immediately close out the gold forward contracts.
���� In the event that the transaction does not close for any other
���� reason, Perseverance is required to repay the principal amount of
���� all bridge financing plus accrued interest and fees within three
���� months of the relevant termination date. The remaining Bank debt
���� and the gold forward contracts will remain in place and subject
���� to their current terms, only Northgate will be counterparty to
���� Perseverance, having assumed these assets and the associated
���� first secured lender position from the bank.
���� %CIK: 0000072931
For further information: Ms. Keren R. Yun, Manager, Investor Relations, (416)
216-2781, kyun@northgateminerals.com