Northgate Minerals Corporation

Source: Energy Digital

Date :17/09/2007 12:29:42

Kemess Mine regains its luster

Northgate Minerals Corporation has taken what was once a troubled mine and turned it into a golden opportunity

Written by James Buchanan & Produced Nick Ledue

Northgate Minerals Corporation is a mid-tier gold and copper mining company with a long history of mining operations in North America.

Currently, its premier asset is the Kemess Mine, which is located in the mountains of north-central British Columbia.

The company was founded in 1919 under the name of Kirkland-Hudson Bay Gold Mines. Then in 1958, the company was reorganized leading to a name change to Northgate Exploration.

In February of 2000, Northgate acquired a 95 percent royalty interest in the Kemess Mine, which had been formerly owned by Royal Oak Mines, which had filed for bankruptcy in April of 1999.

According to an April 1999 report in the Puget Sound Business Journal, Royal Oak had been carrying debt of $600 million, a large portion of which was undertaken to build the Kemess Mine, which cost $470 million.

“That mine was supposed to transform Royal Oak into a world mining leader, but a combination of low gold prices and cost overruns made it instead a lead weight around Royal Oak’s neck,” reads the report.

However, since then gold prices have rebounded strongly, and Northgate — which acquired the 5 percent minority share in 2003 and changed its name again in 2004 to Northgate Minerals Corporation — believes the site can be profitably mined.

According to the company, annual metal production of the mine is forecast to be 300,000 ounces of gold and 75 million pounds of copper for the life of the mine.

In 2006, the company reported producing 310,296 ounces of gold and 81.2 million pounds of copper at the mine, with one of the lowest cash costs for gold in the industry of negative $56 per ounce. As a result, the company recorded record earnings of $107 million, leading it to achieve a cash flow of $147 million.

In the company’s second quarter 2007 report, the company has taken 66,000 ounces of gold and 14.8 million pounds of copper from the mine as of July 26, 2007. Net earnings were reported at $8.6 million.

Further, Ken Stowe, president and CEO of Northgate, said in the press release, “The discovery of another large mineralized system in the Kemess camp is very exciting. Equally important is the success of the Titan deep penetrating IP survey technique, which has proven itself to be an excellent predictive tool for spotting drill holes on the Kemess property in areas where there is no surface expression of mineralization.”

Northgate is also seeking to expand its operations at Kemess to what it terms the Kemess North Development. According to the company, this one project has the potential to extend the productive life of the company’s existing Kemess infrastructure by another 11 years, to 2020.

Based on results from a 2004 feasibility study, the company believes there are 4 million ounces of proven and probable gold reserves at the site and 1.46 billion pounds of copper. Capitol costs are expected to be approximately $190 million with a cash cost to mine the gold at approximately $180 per ounce.

Environmental protection efforts at the mine include a tailings impoundment — which is a zoned earth fill embankment dam constructed across the South Creek valley — which is seven kilometers from the mine processing plant. Water from the slurry that carries the tailings to the impoundment area is decanted and returned to the mill for reuse, which enables the facility to maintain a 0 percent discharge of process water to the environment, reads the company’s website.

Northgate is also pursuing a Progressive Reclamation Program (PRP) at the site to ensure that closure and reclamation of the mine are concurrent to the exhaustion of the mine’s reserves.

The PRP also helps control erosion throughout the processing mill and mine. The company has also been recognized by the Canadian Ministry of Mines & Energy in 2001 for outstanding reclamation achievement.

Further, the company expects that mine closure and reclamation costs will come to approximately $19 million.

According to its website, Northgate is also conducting fish monitoring studies at Kemess Creek and adjacent streams. According to these studies, bull trout in the area have shown little appreciable impact due to the mine’s activities.

The company notes it also takes sustainable mining quite seriously, and is participating in the Towards Sustainable Mining initiative of the Mining Association of Canada and the Mining Association of British Columbia.

Under the program, the associations working with their members have created a number of programs such as a crisis communications guide and training workshops, external outreach guide and training workshops, formation of a national advisory committee on orphaned mines, and gap analysis and industry benchmarking.

Key issues identified in the industry by the Towards Sustainable Mining initiative include social responsibility, crisis communications, legacy of orphaned and abandoned mines, and capacity for dialogue with communities of interest.

On this latter issue, the intent is to develop and maintain clear lines of communication with mine area communities so they are kept informed on the mining operations and to facilitate cooperation.