Northgate Minerals Pontificates Goodness
History is spectacular when you look back at how things "fall" into place. Take Northgate Minerals, for example. Sinch had been advocating Northgate for quite some time as a result of the Davidson-Young mine, and while that prompted me to put it on my stock watch list, I was not inclined to get shares UNTIL I read of their aqcuisition of Primero Mining. I though that was a great deal that should provide near-term revenue while getting the Y-D mine going. I was happy and content to wait out things and then this spectacular PR came across my reading last night.
For those who don't want to read the link, the skinny on the results of Northgates preliminary assessment is this:
1.1 million ounces of gold and 490 million pounds of copper from the Kemes underground project for a net cash cost of $115/ ounce over a mine life of 12 years.
According to my wife, the average mine life is 25 years, so the reported life of the Kemes project seems abbreviated, maybe conservative, but look back at the cash cost. Its the lowest in the industry. If you read Sinch's article here ( a good read I might add), he mentions that Barrick Gold revised their cash cost target to be between $290-320/ ounce, but here Northgate is callign a $115/ounce cash cost!!!
So, imagine how things went last nigth as I read and re-read this only for my wife and I to find out I have notbeen listening to my wife talk to me for the past 5-10 minutes. Obviously, I survived (thanks hun!). Anyways...
Highlights of the Preliminary Assessment, which employs base case commodity price assumptions of $1,100 per ounce for gold, $2.80 per pound for copper and $20 per ounce for silver and an exchange rate of US$/Cdn$1.00, are as follows:
- Average annual production of 95,000 ounces of gold at a net cash cost of $115 per ounce.
- Average annual copper production of 41.4 million pounds. A total of 1.1 million recovered ounces of gold and 490 million pounds of copper over an approximate 12-year mine-life.
- Pre-production capital cost of $437 million. Sustaining capital costs of $286 million during the life of the mine. Pre-tax operating cash flow of $1.1 billion.
- Pre-tax net present value ("NPV") of $115 million based on a 5% discount rate. Pre-tax internal rate of return ("IRR") of approximately 10% with a 6-year payback on the initial capital cost from the start of production.
- The project has significant leverage to higher metal prices. At $1,500 per ounce gold and $4.00 per pound copper, Kemess Underground is expected to generate pre-tax operating cash flow of $2.1 billion, pre-tax NPV 5% of $755 million and a pre-tax IRR of 27%. The envisaged Kemess Underground block cave operation would leverage the existing infrastructure and mill facilities at the Kemess South mine, including a permitted area for tailings storage in the Kemess South open pit.
So, again, many thanks Sinch for your tireless efforts brigning these companies to our attention and analyzing these companies for us and the community. You are a world of wealth and its nice to see your articles are making it out to other financial outlets as well. Now, the problem I face is long standing classic....not enough money or else I would doubled down today.