NXG reports .10 v. (.05).
Northgate Reports Strong First Quarter Earnings and Record Quarterly Cash Flow of $43.5 Million
Monday May 1, 8:38 pm ET
VANCOUVER, BRITISH COLUMBIA--(MARKET WIRE)--May 1, 2006 -- (All figures in US dollars except where noted)
Northgate Minerals Corporation (TSX:NGX.TO - News)(AMEX:NXG - News) today reported cash flow from operations before changes in working capital and other items of $43,505,000 or $0.20 per share and net earnings of $21,735,000 or $0.10 per share for the first quarter of 2006.
First Quarter Production and Financial Highlights
- Production of 77,634 ounces of gold and 22.3 million pounds of copper.
- The net cash cost of gold production at the Kemess mine was a record low of $27 per ounce.
- Record quarterly cash flow from operations before working capital and other items of $43.5 million.
- Quarterly earnings of $21.7 million or $0.10 per common share.
- During April 2006, Northgate repurchased 25,000 ounces of its gold forward sales position reducing its total position by 17%.
- Northgate fixed the price it will receive for its first quarter copper sales at $2.32 per pound and all future copper production remains fully exposed to changes in the price of copper.
- On February 15, 2006, Northgate repaid the remaining principal on its syndicated credit facility.
Ken Stowe, President and CEO, stated; "Gold and copper production at Kemess unfolded as planned in the first quarter of 2006, generating a record low cash cost of $27 per ounce and record quarterly operating cash flow. Since the end of March, the prices for our commodities have escalated well beyond the average values we saw in the first quarter, so I anticipate that our financial performance in future quarters of this year should be even stronger. At the end of the day though, it will be our successful redeployment of the tremendous cash flow that the Kemess mine generates that will be the ultimate measure of our success. The recently announced acceleration of the Young-Davidson project represents our first substantial new investment in a gold project and we remain highly focused on identifying other investment opportunities that will further enhance shareholder value."
RESULTS OF OPERATIONS
Northgate recorded net earnings of $21,735,000 or $0.10 per common share in the first quarter of 2006 compared with a loss of $10,393,000 or $0.05 per share during the corresponding quarter of 2005. Per share data is based on the weighted average diluted number of shares outstanding of 215,092,200 in the first quarter of 2006 and 200,508,289 in the corresponding period of 2005.
Kemess Mine Performance
The Kemess mine posted gold and copper production of 77,634 ounces and 22.3 million pounds respectively in the first quarter of 2006. This production was slightly greater than the production forecast released in January due to higher than expected hypogene ore grades and the postponement of the supergene-leachcap ore processing campaign to the beginning of the second quarter.
During the first quarter of 2006, approximately 10.0 million tonnes of ore and waste were removed from the open pit compared to 13.3 million tonnes during the corresponding quarter of 2005. The reduction in mining volumes is consistent with the scheduled reduction in waste stripping at the Kemess South pit and will become even more pronounced by 2007. Unit mining costs during the current quarter were Cdn$1.38 per tonne compared with Cdn$1.07 per tonne in the first quarter of 2005. The unit mining cost in the most recent quarter was substantially higher than it was in the corresponding quarter of 2005 due primarily to the escalation in unit costs that occurs naturally as the pit deepens and fewer tonnes are moved using the same complement of mobile equipment. Higher diesel fuel prices also contributed to the increase. In the first quarter of 2006, two million tonnes of waste rock was moved back into the east end of the open pit as part of ongoing reclamation plan for the mine.
Mill availability during the first quarter of 2006 was 90% and throughput averaged 48,545 tonnes per day, compared with 85% availability and throughput of 44,780 tonnes per day in the first quarter of 2005. Throughput and mill availability in the first quarter of 2005 was impacted by the unscheduled five-day shutdown in February and the processing of harder ore from the eastern end of the open pit.
Gold and copper recoveries averaged 74% and 86% respectively in the first quarter of 2006, compared with 63% and 81% respectively in the first quarter of 2005. The near record metal recoveries recorded in the most recent quarter were the result of the inherently better metallurgical characteristics of the ore in the western area of the Kemess South pit and the success of several recently completed flotation circuit improvement projects, which have improved the stability of the circuit and increased metal recoveries.
Metal concentrate inventory increased by 3,000 wet metric tonnes (wmt) in the first quarter to approximately 9,500 wmt, which increased the value of concentrate in inventory compared with December 31, 2005. Concentrate inventories are expected to decline to less than 4,000 wmt by the end of May.
The total unit cost of production during the first quarter of 2006 was Cdn$8.46 per tonne milled which was somewhat lower than the Cdn$8.68 per tonne milled in the corresponding period of 2005. Total site operating costs in the first quarter of 2006 were Cdn$37.0 million compared with Cdn$35.8 in the first quarter of 2005. The slight increase in total site operating costs was due to increased costs for fuel, steel and labour, which was only partially offset by reductions in waste stripping. The cash cost of production at Kemess in the first quarter was $27 per ounce of gold. This figure was substantially lower than the $366 per ounce figure reported in the first quarter of 2005 due to the large increase in gold and copper production and the substantial increase in the copper price, which offset the slight increase in site costs, the adverse effect of the stronger Canadian dollar and the increase in treatment and refining charges for concentrate.
The following table provides a summary of operations for the first quarter of 2006 and the comparable period of 2005.
2006 Kemess Mine Production
(100% of production basis) 1Q 06 1Q 05
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Ore plus waste mined (tonnes) 10,036,939 13,276,636
Ore mined (tonnes) 5,273,672 4,528,776
Stripping ratio (waste/ore) 0.903 1.93
Tonnes milled (ore) 4,369,022 4,030,173
Average mill operating rate (tpd) 48,545 44,780
Gold grade (gmt) 0.751 0.621
Copper grade (%) 0.270 0.203
Gold recovery (%) 74 63
Copper recovery (%) 86 81
Gold production (ounces) 77,634 50,540
Copper production (000's pounds) 22,282 14,677
Cash cost ($/ounce) 27 366
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Overall safety performance at Kemess during the first quarter continued at last year's much improved pace, however, one lost time incident was recorded. Management continues to stress the "Five Point Safety System" and is confident of making further gains on the safety front as the year progresses.
Financial Performance
Northgate's revenue in the first quarter of 2006 was $85,059,000 compared with $42,559,000 in the corresponding period in 2005. Consistent with the presentation adopted in the fourth quarter of 2005, the 2005 comparative figures reflect the reclassification of a variety of costs that were previously netted against revenues into cost of sales. These costs included royalties, concentrate treatment and refining charges, concentrate freight charges, and metal deductions. Metal sales in the first quarter of 2006 consisted of 73,873 ounces of gold and 21.3 million pounds of copper, compared with 51,174 ounces of gold and 15.0 million pounds of copper in the first quarter of 2005. During the first quarter of 2006, the price of gold on the London Bullion Market averaged $554 per ounce and the price of copper on the London Metal Exchange averaged $2.24. The net realized metal prices received on sales in the first quarter of 2006 were approximately $516 per ounce of gold and $2.32 per pound of copper, compared with $375 per ounce and $1.48 per pound in the first quarter of 2005. In the first quarter of 2006, the Corporation did not reduce its gold forward sales position compared with a reduction of 21,750 ounces during the same period of 2005. However, $2,814,000 of the deferred hedging loss set up in the second quarter of 2005, when certain gold forward sales contracts were closed out prior to their original settlement dates, was amortized and included in revenue during the quarter. The Corporation's gold hedging activities reduced the realized price of gold sold during the most recent quarter by $38 per ounce, compared with $52 per ounce in the corresponding quarter one year ago. The remaining deferred hedging loss of $1,747,000, related to the close out of forward sales contracts in the second quarter of 2005, will be brought into earnings in the second quarter of 2006 when the related forward sale contracts were originally scheduled for settlement. In the first quarter of 2006, the Corporation entered into forward sales and purchase contracts with a major financial institution to fix the price of copper delivered prior to March 31, 2006 for which final settlement has not occurred. A total volume of 9,550 metric tonnes of copper were sold forward using LME contracts maturing from May 2006 through August 2006 at an average forward price of $2.32 per pound.
The cost of sales in the first quarter of 2006 was $48,170,000 compared with the corresponding period last year when the cost of sales was $40,437,000. The cost of sales in 2005 reflects the reclassification of certain marketing costs that were previously netted against revenues, as described earlier in this section. Cost of sales was higher in the most recent quarter than it was in the corresponding periods of 2005 due to higher treatment, refining and freight charges for concentrate, the strengthening Canadian dollar, and increased Canadian dollar denominated production costs.
Administrative and general expenses of $3,135,000 in the first quarter of 2006 were higher than the $2,559,000 figure recorded in the comparable period of 2005 due primarily to an increase in the Corporation's stock option expense.
Depreciation and depletion expenses in the first quarter were $9,971,000 compared to $8,390,000 during the corresponding period of 2005. The depreciation and depletion expense for the most recent quarter was higher than the same quarter one year ago due to a 5% increase in the amount of ore mined from the open pit and an increase in the amortization rate resulting from 2005 capital investments.
Net interest expense declined substantially to $25,000 for the three months ended March 31, 2006 compared to $552,000 in the corresponding quarter of 2005. On February 15, 2006, Northgate made the final repayment on its syndicated credit facility. With its debt retired and as a consequence of its large and growing cash balances, Northgate expects to record substantial interest income in future quarters.
Exploration costs in the first quarter were $944,000 compared with $393,000 in the comparable period of 2005. The higher exploration expense in the most recent quarter was the result of the initiation of a diamond drilling program in January 2006 at the recently acquired Young-Davidson property. Exploration expenses will increase this summer when diamond drilling begins at the Kemess camp and the RDN joint venture property.
Capital expenditures during the first quarter of 2006 totaled $1,936,000 compared to $3,496,000 in the corresponding period of 2005. Capital expenditures in the most recent quarter were primarily devoted to ongoing construction of the tailings dam and the Kemess North project, whereas expenditures in the first quarter one year ago included additional amounts devoted to the purchase of small equipment for the Kemess mine and the mill.
Annual General Meeting Webcast:
You are invited to participate in the Northgate Minerals Corporation (TSX:NGX.TO - News)(AMEX:NXG - News) live Annual General Meeting webcast where we will discuss our Q1 2006 financial results and our priorities and plans for 2006. The webcast will take place on Wednesday, May 3, 2006, at 10:00 am ET. Northgate's presentation package for the webcast will be uploaded for the morning of May 3 and posted on Northgate's web site at www.northgateminerals.com under Investor Info - Presentations page.
To view the webcast, go to www.northgateminerals.com and follow the link on the home page that says "webcast". Before viewing the webcast, please ensure that your system meets the Minimum System Requirements and that you have installed Windows Media Player. If you do not have high- speed internet access, please download the PDF version of our Management Presentation and follow along with the audio broadcast.
For those shareholders and stakeholders who do not have web access, you may access the audio portion of the Annual General Meeting via telephone by calling 416-695-5259 or toll free in North America at 1-800-769-8320. To ensure your participation, please call five minutes prior to the scheduled start of the meeting. The archived meeting may be accessed by dialing 416-695-5275 or 1-888-509-0081, and entering pass code 618070.
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 300,000-ounce per year Kemess South mine in north-central British Columbia, the adjacent Kemess North deposit, which contains a Proven and Probable Reserve of 4.1 million ounces of gold and the Young-Davidson property in northern Ontario with a total resource base of 1.5 million ounces of gold. Northgate is listed on the Toronto Stock Exchange under the symbol NGX and on the American Stock Exchange under the symbol NXG.
