Replies to post #2087 on Northgate Minerals Corp (NXG)

[bosar53]

When Brascan set Northgate up at Kemess it was with the intention of leveraging the assets through the discovery and exploitation of better grade porphyrys in the immediate area.

K-S was thought to be marginal at best. The K-N of today.

Exploration spending should jump into the 10s of millions of dollars range once DL is available to provide a few decades worth of disposal for the region.

The fact that Kemess is able to supply funds to develop a substantial gold mine in Ontario would probably be a great surprise to those who took the great leap 6-7 years ago. gl

[canadaboybill]

Hey Hypno, I have a few thoughts

We have had a number of really good reports from this company for some time now, so we were due for one that failed to please. This one hurt because it was surprising and this pushhback idea is a bit mickey mouse. Mgmt certainly has been showing some cracks lately.

NXG has always suffered from two things: too much copper and a short mine life. The TD issued a report that shows NXG trades at 3.2 times cashflow whereas their peers tarde at 22 times. That's price multiple of 7 times - say $21 sp. The trick is that our current CFPS is not sustainable without a metal price increase. Next year will be weak compared to this year, and the year after weaker yet. Still, there should be room for some multiple expansion from the miserly 3.2 times.

On KN, it is marginal at $1.58 copper - it is super rich at $3 copper. The trick is how to ensure that they get $3 or even $2.50 a pound, so that the mine can proceed. Hedging on exchanges doesn't work because they are only good for a few years. Ideally NXG should align itself with a copper user that would like to have a locked in source of copper for years to come. Such a user might be a full partner, or just guarantee a long-term price. Both work for NXG, but it may be hard to find.

The other aspect of KN is that there is still a lot more to explore. This new anaomaly may have KS or better grades - no-one knows, but we will soon.

Finally, I finally noticed that the TD values KN at $0 - so anything there at all will be a substantial chance for multiple expansion.

On YD, we should get a boost this month. YD may be able to offset the twin problems we suffer from. That may increase our of a better multiple.

Mgmt is talking like an acquisition could happen any time. That may give multiple expansion, esp if not dilutive.

I too am disappointed, but this puppy is still dirt cheap. I am going to hold on umtil I get a better feel for KN. I still thing it will bring a double when approved.

JMO.