Q3 conference call slides


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Northgate Minerals Corporation Q310 Earnings Conference Call

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Q3 conference call slides

  1. 1. Northgate Minerals Corporation November 10, 2010
  2. 2. This Northgate presentation contains “forward-looking information” or “forward-looking statements”, as such terms are defined in applicable Canadian and US securities legislation, concerning Northgate’s future financial or operating performance and other statements that express management’s expectations or estimates of future developments, circumstances or results. Generally, forward-looking information can be identified by the use of forward-looking terminology such as “expects”, “believes”, “anticipates”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “plans” and variations of such words and phrases, or by statements that certain actions, events or results “may”, “will”, “could”, “would” or “might” “be taken”, “occur” or “be achieved”. Forward-looking information is based on a number of assumptions and estimates that, while considered reasonable by management based on the business and markets in which Northgate operates, are inherently subject to significant operational, economic and competitive uncertainties and contingencies. Northgate cautions that forward-looking information involves known and unknown risks, uncertainties and other factors that may cause Northgate’s actual results, performance or achievements to be materially different from those expressed or implied by such information, including, but not limited to gold and copper price volatility; fluctuations in foreign exchange rates and interest rates; the impact of any hedging activities; discrepancies between actual and estimated production, between actual and estimated reserves and resources or between actual and estimated metallurgical recoveries; costs of production; capital expenditure requirements; the costs and timing of construction and development of new deposits; and the success of exploration and permitting activities. In addition, the factors described or referred to in the section entitled "Risk Factors" in Northgate's Annual Information Form for the year ended December 31, 2009 or under the heading "Risks and Uncertainties" in Northgate's 2009 Annual Report, both of which are available on the SEDAR website at www.sedar.com, should be reviewed in conjunction with the information found in this presentation. Although Northgate has attempted to identify important factors that could cause actual results, performance or achievements to differ materially from those contained in forward-looking information, there can be other factors that cause results, performance or achievements not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate or that management’s expectations or estimates of future developments, circumstances or results will materialize. Accordingly, readers should not place undue reliance on forward-looking information. The forward-looking information in this presentation is made as of the date of this presentation, and Northgate disclaims any intention or obligation to update or revise such information, except as required by applicable law. The Company prepares its disclosure in accordance with the requirements of securities laws in effect in Canada, which differ from the requirements of U.S. securities laws. Terms relating to mineral resources in this presentation are defined in accordance with National Instrument 43-101-Standards of Disclosure for Mineral Projects under the guidelines set out in the Canadian Institute of Mining, Metallurgy, and Petroleum Standards on Mineral Resources and Mineral Reserves. The Securities and Exchange Commission (the "SEC") permits mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. The Company uses certain terms, such as, “measured mineral resources” “indicated mineral resources”, “inferred mineral resources” and “probable mineral reserves”, that the SEC does not recognize (these terms may be used in this presentation and are included in the Company’s public filings which have been filed with securities commissions or similar authorities in Canada). Cautionary Note to US Investors Regarding Mineral Reporting Standards 2Q3 2010 Conference Call & Webcast
  3. 3. Q3 2010 Highlights and Financial Review Northgate Minerals Corporation
  4. 4. Strong Operating and Financial Results Production Gold production of 64,999 ounces Copper production of 10.9 million pounds Cash Costs Average net cash cost of $645 per ounce Financial Adjusted net earnings of $1.7MM or $0.01 per share Cash flow from operations of $13.5MM or $0.05 per share Young- Davidson Fully funded with completion of convertible note offering for net proceeds of $163.5MM Kemess Underground Intersected highest grade-thickness interval ever drilled on the property at 3.37 g/t gold and 0.95% copper over 60 m Fosterville Promising exploration results within the lower Phoenix resource block and Phoenix footwall Stawell Discovered gold in two previously untested areas; Drilling in GG6L intersected high-grade mineralization 4Q3 2010 Conference Call & Webcast
  5. 5. 5Q3 2010 Conference Call & Webcast Gold (oz) Cash Cost ($/oz) Fosterville 22,436 774 Stawell 16,530 939 Kemess 26,033 347 Gold Production / Cash Cost 64,999 oz $645 / oz Copper Production 10.9 million pounds Sales Realized Price Gold Sales 58,083 oz $1,234 / oz Copper Sales 7.4 MM lbs $3.96 / lb
  6. 6. 6Q3 2010 Conference Call & Webcast Q3 2010 Q3 2009 YTD 2010 YTD 2009 Revenue $88.3 $120.2 $336.3 $374.3 Operating Cash Flow $13.5 $50.5 $40.7 $145.7 Cash/cash equivalents $168.2 $235.9 $168.2 $235.9 Adjusted net earnings $1.7 $7.7 $2.0 $45.0 per share $0.01 $0.03 $0.01 $0.18 Net earnings $(8.9) $(8.6) $0.32 $18.2 per share $(0.03) $(0.03) $0.00 $0.07 US$ millions, except per share amounts
  7. 7. 7Q3 2010 Conference Call & Webcast Convertible Debenture Terms: Principle US$170 million Coupon 3.5% Premium 30% (US$4.08/share) Maturity October 1, 2016 Settlement Method Cash, shares, or combination Ranking Senior unsecured Conversion Notes are not convertible solely at the option of the holder until July 2016 (or occurrence of specified events). Note holders can exercise their conversion rights at a share price of US$4.08. We expect to settle the notes by cash as Young-Davidson will generate more than enough free cash flow to repay the notes prior to their maturity.
  8. 8. 8Q3 2010 Conference Call & Webcast Benefits of Convertible Debenture vs. Project Loan Facility: 1. Lower coupon rate (3.5% versus 5%+) 2. Fixed Interest rate over 6-year term (no exposure to rising rates) 3. Limited covenants and ratios provide more operating flexibility and lower default risk 4. Unsecured Debentures do not encumber Northgate’s assets 5. Larger principle amount available 6. Absolutely no gold or F/X hedging required
  9. 9.  Northgate is forecasting production of 274,000 ounces in 2010 » Q4 production forecast: 67,500 ounces at a cash cost of $570 /oz 9Q3 2010 Conference Call & Webcast * Assumes $3.75/lb copper; US$/Cdn$0.98 and US$/A$0.98 for Q4 2010. Gold Production (ounces) Cash Cost ($/oz)* H1-2010 Actual Q3 Actual Q4 Forecast Total YTD Actual Full Year Forecast Fosterville 54,897 22,436 21,000 98,500 $703/oz $750/oz Stawell 37,070 16,530 21,000 74,500 $915/oz $915/oz Kemess 49,670 26,033 25,500 101,000 $447/oz $335/oz Combined 141,637 64,999 67,500 274,000 $664/oz $640/oz Full Year 2010 Gold production 274,000 ounces Copper production 42.4 million pounds Net Cash Cost* $640 per ounce
  10. 10. Northgate Minerals Corporation Young-Davidson Fosterville Gold Mine Kemess Underground Stawell Gold Mine
  11. 11. Building Young-Davidson
  12. 12. 12Q3 2010 Conference Call & Webcast Young-Davidson is fully-funded and advancing on budget » In September, 30% engineering control budget completed » 60% of the contracts awarded (approximately $145 million) » 35% of the equipment purchase orders placed » 35% of the engineering complete » New budget has confirmed no change to project capital cost estimate » Project contingency remains untouched
  13. 13. 13Q3 2010 Conference Call & Webcast Ramp development: » Average rate of 11.6 m per day. Ramp extended to total length of 3,605 m Initiatives over next six months: » Continue major earthworks » Commission new hoist and commence sinking operations of existing shaft. » Start the pilot hole and raise bore first leg of a new 5.5 m diameter shaft. » Complete erection of process plant building. » Prepare materials required for construction of tailings dam. » Install major process equipment. » Award electrical/mechanical installation contract. » Start open pit pre-production development.
  14. 14. 14Q3 2010 Conference Call & Webcast Young-Davidson site in 2007Young-Davidson site in 2007 Young-Davidson TodayYoung-Davidson Today
  15. 15. 15Q3 2010 Conference Call & Webcast 1) Pouring concrete for new Hoist Room at #3 Shaft (needed for sinking existing shaft). 1 2 3 2) Construction of frame for Hoist Room. 3) Installation of Hoist Room Drum 4) & 5) Completing construction of Hoist Room 4 5
  16. 16. 16Q3 2010 Conference Call & Webcast 6) Cleaning bedrock for mill foundation 7) Setting up for Cement Plant 8) Establishing permanent foundations for the headframe Backlegs. 6 7 8
  17. 17. 17Q3 2010 Conference Call & Webcast 9) Reaming diamond drill hole for Young-Davidson Pit dewatering 10) Highway construction 11) Highway construction 9 10 11
  18. 18. 18 One of the best holes drilled on the property Hole YD10-198 intersects 3.46 g/t gold over 79.5m »Assays pending for two holes around hole 198 »Fault complications in previous holes »Two drills on the property
  19. 19.  Indicated resource: 572,000 tonnes @ 1.86 g/t  Resource now being evaluated from a pit optimization perspective to assess potential for conversion of new resource into reserves 19Q3 2010 Conference Call & Webcast
  20. 20. Fosterville Gold Mine
  21. 21. Q3 production » 166,912 tonnes of ore mined » Mine development advanced 2,144 m » Production of 22,436 ounces of gold at a net cash cost of $774 per ounce » Solid cash flow from operations of $8.9 million 21Q3 2010 Conference Call & Webcast Review of Operations Australia Fosterville1
  22. 22. 22 22 Harrier Decline Area of Current Drill Program (Phoenix Footwall) Phoenix Orebody Hole ID Interval (m) Gold Assay (g/t) Section UDE037 4.7 14.1 Extension UDE038 5.0 5.8 Extension UDE038 24.9 5.4 Footwall incl. 5.6 11.5 Footwall and 4.3 10.1 Footwall UD756 6.3 4.7 Footwall UD756 18.6 5.5 Footwall Incl. 9.1 8.1 Footwall  Footwall: potential to add new reserves close to existing development and increase ounces per vertical metre  Extension (6850mN): potential to increase zone 150 m south along strike and down plunge.
  23. 23. Harrier Resource  Sufficient drilling completed on Harrier Underground North and Harrier Decline  Resource estimation initiated; to be included in year end statement 23 Fosterville Long Projection Harrier Decline: 8.6 m @ 5.9 g/t and 11.9 m @ 5.6 g/t Harrier UG North: Infill drilling to south and to the north Q3 2010 Conference Call & Webcast
  24. 24. Stawell Gold Mine
  25. 25. 25Q3 2010 Conference Call & Webcast Q3 Operating Results  Improved production in Q3: » 16,530 ounces of gold (14,832 oz in Q2) » 191,087 tonnes of ore mined » Mine development advanced 1,488 m  Production to return to historical levels in Q4 and beyond  Mining in GG6; average grade of 6.3 g/t Australia Stawell 6,419 oz 4,709 oz 3.46 5,402 oz 2.94 2.63
  26. 26. 26 Gold found in two “Big Fish” targets » Mineralization in these areas consistent with the Golden Gift and Magdala Ore bodies Past/present mining1,500,000 oz 600,000 ozContinuation Of Golden Gift Basalt Dome +0.5MM oz Potential Structural Offset NE over SW +0.5MM oz Potential +0.5MM oz Potential Big fish North Magdala Wonga Northgate Gift Q3 2010 Conference Call & Webcast
  27. 27. High Grade Mineralization Discovered in Previously Untested Area  SD649A intersected multiple gold-bearing intervals » 13.7 g/t gold over 5.45 m incl, 25.0 g/t over 2.2 m; » 15.4 g/t gold over 2.5 m » Mineralization consistent with golden gift ore zones, (produced over 600,000 oz) » 1.6 km south of existing mine workings 27Q3 2010 Conference Call & Webcast
  28. 28. Most significant discovery in Victoria region » First exploration hole drilled in previously untested area » Follow-up drilling to better define discovery 28Q3 2010 Conference Call & Webcast Hole ID From (m) To (m) Interval (m) Gold Assay (g/t) MD5696A 1969.4 1971.2 1.8 4.53 MD5696A 1978.6 1982.2 3.6 3.83 incl. 1980.8 1982.2 1.4 7.20
  29. 29. Potential to add to high-grade reserves » Follow-up drilling in Q4 and 2011 29Q3 2010 Conference Call & Webcast Hole ID From (m) To (m) Interval (m) Gold Assay (g/t) MD5790 273.2 278.4 5.2 5.7 incl. 274.7 276.2 1.5 13.0 MD5281 493.7 510.1 16.4 4.9 incl. 502.5 510.1 7.6 7.1 MD5281 535 545.6 10.6 24.0
  30. 30. Kemess South
  31. 31. 31Q3 2010 Conference Call & Webcast Solid Operations in 2010 Continues to generate free cash flow » Expect to make $26 million+ in free cash flow in Q4 2010 Solid Q3 production »26,033 ounces of gold; 10.9 million pounds of copper Looking ahead in Q4-2010: »Forecasting copper production of 12.4 million lbs »Net cash cost of production declines significantly to <$0 /oz * Assumes $3.75/lb copper; US$/Cdn$0.98 and US$/A$0.98 for Q4 2010.
  32. 32. Kemess Underground
  33. 33. 33 $3 million diamond drill program Kemess North resource contains 720 million tonnes » High-grade core is at bottom of deposit 26-hole program of 16,000m » More tightly define 70+ million tonne higher grade core, containing 1.4MM ozs of gold and 500mm lbs of copper » Determine geotechnical characteristics » Assess potential for underground bulk mining, using existing facilities, including permitted tailings capacity in Kemess South open pit Q3 2010 Conference Call & Webcast Canada Kemess Underground
  34. 34. 34 11 Holes completed to date » Significant gold-copper mineralization, 22% higher for gold and 20% higher for copper » Hole KN-10-03: 60m of 3.37 g/t gold and 0.95% copper within broader interval of 205 m, 1.28 g/t gold and 0.36% copper – highest grade thickness intercept on Kemess property Q3 2010 Conference Call & Webcast
  35. 35. Drill collars relative to $13 NSR* outline KN-10-08KN-10-01A KN-10-03 KN-10-09A KN-10-05 KN-10-04 KN-10-14 KN-10-16 KN-10-17 KN-10-18 KN-10-19KN-10-21 KN-10-22 KN-10-23 KN-10-24 KN-10-25 KN-10-25A KN-10-26 *NSR based on $800 gold, $2.25 Cu, 0.90 FX with full allowance for recoveries, freight and TC/RC 35Q3 2010 Conference Call & Webcast » Balance of the drill results anticipated in early December » Resource re-estimated Q1 2011
  36. 36. 36Q3 2010 Conference Call & Webcast Other targets within Kemess Camp » Known areas of similar gold- copper mineralization immediately to the east » Attractive exploration targets for future years. » Open between Offset and Ora: – Hole 24 in Ora: 153 m of 0.62 g/t Au and 0.53% Cu ended in mineralization
  37. 37. Northgate Minerals Corporation Our Focus Questions & Answer Near Term Highlights
  38. 38. Kemess:  $26 million+ of free cash flow forecast in Q4-2010  Extensive reclamation efforts  Balance of Kemess UG drilling expected in December Kemess:  $26 million+ of free cash flow forecast in Q4-2010  Extensive reclamation efforts  Balance of Kemess UG drilling expected in December Young-Davidson:  Construction activities underway  On schedule and on budget  Follow-up drilling on newly discovered YD West zone Young-Davidson:  Construction activities underway  On schedule and on budget  Follow-up drilling on newly discovered YD West zone Upcoming Highlights 38Q3 2010 Conference Call & Webcast Fosterville:  Promising results from Phoenix Extension / Phoenix Footwall  Harrier UG North / Harrier Decline to be included in reserve statement at end of the year Fosterville:  Promising results from Phoenix Extension / Phoenix Footwall  Harrier UG North / Harrier Decline to be included in reserve statement at end of the year Stawell:  Follow-up drilling on two new gold discoveries  Follow-up drilling in GG6L; potential to add high-grade reserves Stawell:  Follow-up drilling on two new gold discoveries  Follow-up drilling in GG6L; potential to add high-grade reserves Creating Value
  39. 39. 39 Vision to be the Leading Intermediate Gold Producer Operations All operations and projects in stable jurisdictions Financial Strong balance sheet Gold Price Exceptional leverage to gold price from three operating mines to fund growth initiatives Experience An experienced management team with a depth of operating experience in turning around underappreciated assets Organic Growth Excellent exploration upside and organic growth at Young-Davidson, Kemess Underground, Fosterville and Stawell Q3 2010 Conference Call & Webcast
  40. 40. Northgate Minerals Corporation