Northgate Minerals - very speculative gold miner
I decided to work over the pitch I just entered for an old pick and pretend I know something about gold mining.
Northgate was/is in the process of trying to get approval to expand their Kemess South mine in British Columbia to a nearby location, Kemess North, to extend the mine life. Current projections show KS being tapped out about mid 2010 and NXG doesn't have much in the way of new locations.
On 17 Sep, a review panel recommended not approving the KN plan. That recommendation now goes to the federal and provincial Ministers of the Environment. They could either concur and not recommend the mine go forward or overturn the review panel and allow NXG to proceed.
The CEO gave a presentation at the Denver Gold Forum on 25 Sep and one of the slides included this statement, "Kemess North reserves will be reclassified as resources, since there is no longer a reasonable expectation of receiving permits to proceed with the Project." He also indicated they will proceed by focusing on another project, Young Davidson. Therefore, it looks like NXG isn't willing to spend much more time and money pursuing KN, or they could be bluffing to try and worry the gov't over the lost jobs.
The 25 Sep presentation indicates the YD mine can be brought on line in 2010 as KS production is winding down. It also indicates they think the production cost at YD will be $325 per oz. (hey, I don't have to worry if that's Canadian or US)
However, the presentation shows ore grades in the range of 2 - 3 grams per ton. Based on a 26 Jul 07 blog by fellow Fool dwot, I doubt that gold can be produced from that ore grade for anywhere near $325 per oz, it'll take around 10 tonnes of ore to produce an ounce of gold and I don't see how you can mine and process ore at $32 per tonne. They don't mention copper or some other mineral production being used to lower the net cost of the gold, but that's a possibility. Perhaps dwot or another wise Fool can weigh in.
The company does have quite a bit of cash on the books, has a book value of $1.80 per share and two to three more years of solid earnings from KS.
At this point, this is a very speculative play. IF the Canadian government overturns the panel recommendation and grants approval for KN, NXG could trade up to near the multiple for other gold miners, an easy double, maybe a triple. If they can produce at YD for $325, there's also quite a bit of upside - but we won't know the answer to that for some time. If the gov't concurs with the panel, there shouldn't be more than a dollar of downside.
I don't see any point in closing my CAPS pick until this plays out. I've already taken the accuracy hit and another couple points isn't going to kill me.
I'm not recommending anyone try this gamble. But, if you're considering it please do a lot more homework (including reading everything dwot's posted on mining) and don't use money you can't afford to lose.