Northgate Minerals Corporation ( NXG)

3Q 2010 Earnings Call

November 10, 2010 10:00 a.m. ET


Ken Stowe - President and CEO

Jon Douglas - SVP and Chief Financial Officer


Anita Soni - Credit Suisse

Elliott Glazer- DuPasquier



Good morning, at this time I would like to welcome everyone to the Northgate Minerals Corporation third quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions) I would now like to turn the call over to Mr. Ken Stowe, President and CEO of Northgate Minerals Corporation. You may begin your conference.

Ken Stowe

Thanks operator and good morning everyone. As Northgate’s CEO it is my pleasure to welcome you to our third quarter 2010 conference call and webcast. Before we get started I want to call your attention to several points. First of all this morning’s third quarter news release can be found in the news release section of our website at

Secondly, for those of you who are using the traditional conference call lines, slides for today’s presentation are also available on our website under the calendar of events tab. Lastly for those of you using the conference call lines who would like to try the webcast instead, you can gain access to it by clicking the conference call and webcast header on Northgate’s homepage and following the instructions.

Jon Douglas, our Chief Financial Officer will begin today’s formal presentation by providing an overview of our quarterly operational and financial results and afterwards I will provide more details on our operations and discuss our exploration and growth initiatives.

As always, at the end of our formal presentation we will welcome any questions you may have. Before we begin please note that in responding to questions and talking about our financial and operating performance, and our exploration and development projects, we may make forward-looking statements. These statements are subject to known and unknown risks and future results may differ materially. For further information on known risk factors I encourage you to review our 2009 AIF and our annual report. And now here is Jon Douglas, Chief Financial Officer.

Jon Douglas

Thank you, Ken. Good morning everyone. I would like to begin my remarks today by briefly summarizing our third quarter highlights, which can be found on page four of today’s presentation. Our three mines in Canada and Australia produced a total of 64,999 ounces of gold and 10.9 million pounds of copper during the quarter, at an average next cash cost of $645.00 per ounce. Financially, this translated into cash flow from operations after changes in working capital of $13.5 million and adjusted net earnings of $1.7 million. Critically important to the future of Northgate, we completed $170 million six-year convertible debt financing for net proceeds of $163.5 million last quarter which provides us with the remaining funds we require to complete the construction of the Young-Davidson mine in Matachewan, Ontario.

At our Kemess underground exploration project, we intersected the highest grade thickness interval ever drilled anywhere on the Kemess property with an interval of 3.37 grams of gold and 0.95% copper over 60 meters and expect to release the remaining holes form this year’s exploration program in the first half of December.

Finally, in Australia, we had some very nice exploration results in the lower Phoenix resource block and some very high grade exploration intercepts in the GG6 lower zone. We had two exciting discovery holes at Stawell where we discovered two new gold-bearing dome structures at our mining leased. The most recent of which had assays in the 13 to 15 gram per ton range.

Turning to slide five of our presentation, you will see the breakdown of gold production and cost by mine, as well as our metal sales and realized prices for the quarter. Our Fosterville mine followed up last quarter’s record production with production of 22,436 ounces of gold, which was slightly less than our guidance. At our Stawell mine, production improved form the previous quarter from 16,530 ounces at a cash cost of $939 per ounce and we expect to see further improvements in the fourth quarter now that we have turned the corner on our recovery plan.

Our Kemess shaft mine continued to operate on plan even as it enters the final months of its life, delivering gold production of 26,033 ounces at a net cash cost of only $347 per ounce as a result of the recent surge in copper prices. Our metal sales, the driver of our financial revenues, were substantially lower than our production for the second quarter in a row, as a result of continued rail car availability issues which have now been complicated by a stratus election to ship Kemess concentrate production offshore through the port of Vancouver for the remainder of the Kemess mine life.

While a stratus election does not affect our realization on concentrate shipments, it does complicate our logistics and makes it more difficult to reduce the inventory that has built up over the last five months. While we do expect to draw down our concentrate inventory form about 12,500 metric tons to slightly under 10,000 metric tons by the end of the fourth quarter, we will not be able to bring concentrate inventory back to normal levels until after milling at Kemess ceases sometime in February of 2011.

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