Vancouver – Northgate Minerals (NGX-T) has been rewarded for a serious drilling effort at its Young-Davidson project in Ontario with a new resource estimate that pushes the gold count past 3 million ounces.
The property, which is near Matachewan in the Abitibi greenstone belt, hosts a small open-pit resource and a larger underground deposit. Underground, Young-Davidson now contains 25.97 million measured and indicated tonnes grading 3.62 grams gold per tonne. An additional 6.87 million inferred tonnes averaging 3.39 grams gold brings the total underground resource to 3.77 million oz. gold.
The open pit zone is home to 4.95 million indicated tonnes grading 1.7 grams gold as well as 15,000 inferred tonnes grading 1.74 grams gold. Combining measured, indicated, and inferred resources in the open pit and underground zones, Northgate has delineated 4 million oz. gold at Young-Davidson.
The new estimate more than doubles the previous underground gold resource from February. Since then Northgate has punched 114 holes into the project, totaling 41,131 metres, and company president and CEO Ken Stowe called the effort a “resounding success.”
Investors were also pleased with the new resource estimate. Northgate’s share price gained 11¢ to close at $1.08. The company has a 52-week trading range of 68¢ to $3.49 and has 255.6 million shares issued.
Gold at Young-Davidson is hosted in an intrusive syenite rock dipping roughly 70 degrees to the south. The new resources carry almost the same grade as resources previously delineated, which indicates a consistent grade distribution throughout the deposit.
Northgate did more than drilling at Young-Davidson in 2008. The company drove the underground ramp to a total length of 3,000 metres and a vertical depth of roughly 475 metres, to provide access to the deposit for exploration and bulk sampling. Young-Davidson also contains historic underground workings; over the year Northgate finished de-watering the No. 3 shaft to the 13th level, which is some 625 metres below surface. The No. 3 shaft will provide ventilation and secondary access to the underground ramp workings. The company also extracted a bulk sample from the upper boundary zone for metallurgical testing.
Northgate says that, with the new resource estimate complete, focus will shift to optimizing the preliminary economic assessment for Young-Davidson. The PEA first came out in August and showed the project as just economic, but with a significantly larger resource now defined the company believes an updated report with show considerably better numbers. The company has also re-assessed how best to utilize the existing infrastructure at the site.
But Northgate is not finished with exploration drilling at Young-Davidson. Exploration in 2009 will focus on targets on the property outside of the resource area that have been put aside until now. The rocks that host gold at Young-Davidson are known to extend to the west under barren cover rocks; to date only a few holes have ever been drilled through those barren rocks. Exploration is certainly less of a focus, though, as three of the four drill rigs that had been turning at the project have been demobilized and only one will continue with exploration work.
In addition to exploring Young-Davidson, Northgate operates three gold mines and from July to September produced 64,588 oz. gold. The company reported a net loss of US$29.4 million for the quarter, a loss that included a US$16.9-million charge for an other-than-temporary decline in the value of the company’s auction-rate securities investments. The company’s copper forward contracts provided a mark-tomarket hedging gain of almost US$23 million that helped offset the loss. Consolidated revenue for the quarter came in just under US$100 million.
Gold production in the fourth quarter is expected to double, to 130,000 oz.; if it manages that target it would be the strongest production quarter in Northgate’s history. The strong production forecast stems from repair and expansion work now complete at all three of the company’s mines.
At Kemess, in central British Columbia, production in the third quarter was unusually low due to remedial work on the west wall of the pit, which necessitated the processing of lower-grade stockpiles. The company also had to contend with the unexpected collapse of a buried line that feeds process water to the concentrator; the concentrator was shut down for ten days while the line was prepared.
At Stawell, which is some 250 km west of Melbourne in Australia, the company expects improved productivity and working conditions underground after investing in new haulage trucks and underground ventilation and cooling systems. Northgate also delineated an additional 140,000 oz. of gold reserves at the mine in just five months of drilling, at a discovery cost of only US$20 per oz.
And at Northgate’s other Australian mine, Fosterville, the company accelerated its underground development program and now, for the first time, has access to a sufficient number of working areas to meet the mine ramp-up plan. In addition, Northgate is installing a US$4.75-million heated leach circuit at Fosterville, which will increase overall gold recovery to 90%. The new circuit will be operational by the middle of 2009.
And recent drilling identified significant extensions to three north-striking areas of gold mineralization, which collectively extend over 500 metres along strike and 300 metres in depth. Good intercepts include 4.9 grams gold over 9 metres, 8 grams gold over 15 metres, and 7 grams gold over 7.7 metres.
Northgate’s preliminary forecast indicates the company will produce 390,000 oz. gold at a net cash cost of US$395 per oz. as well as 54 million lbs. copper.