Northgate writes down investment in Colomac

Toronto-based Northgate Exploration (TSE) and affiliate NorthWest Gold (AMEX) have joined the growing list of Canadian gold producers to have included substantial writedowns on resource properties with their 1990 financial results. Northgate holds a 52% interest in NorthWest. After declaring a $86.7-million writedown on assets, Northgate had a net loss of $118.2 million or $5.33 per share for the year ended Dec. 31, compared with net income of $9.4 million or 42 cents per share in 1989.

Companies in the Northgate group produced 268,840 oz. gold in 1990, up from 168,200 oz. a year ago and Northgate’s 1990 revenues also climbed to $26.6 million compared with $20.9 million in the same period last year.

Group production includes 35,100 oz. from Northgate’s 35% stake in the Choquelimpie mine in Chile as well as operations owned by Sonora Gold (TSE) and Campbell Resources (TSE).

The Northgate writedown relates primarily to its interest in the Colomac gold mine in the Northwest Territories which is being operated by a unit of NorthWest Gold until fuel supplies run out, probably sometime in April.

Colomac was also a big factor in the fourth quarter when Northgate reported losses of $37.6 million or $1.68 per share on revenues of $5.5 million, compared with a profit of $926,000 or 4 cents a share on revenues of $8.2 million in the equivalent 1989 period.

Spokesman Gregory Bowes says problems at Colomac are due primarily to the mill which at year-end was operating at around 60% of its 10,000-ton-per-day design capacity. But the price of gold, now well below the mine’s US$425 per oz. break-even point, has also hurt the project.

Together the gold price and mill have prevented NorthWest from repaying a $7.5-million quarterly instalment of a $90-million non-recourse bank loan used to build the mine.

The future of the mine, which last year produced 68,480 oz. gold at an average grade of 0.05 oz. per ton, now rests on the discussions involving Northgate and its bankers. Northgate representatives are attempting to restructure the loan and raise an additional $20 million to cover this year’s capital costs. But in an interview with The Northern Miner, Bowes declined to say what progress, if any, is being made and it seems certain that the operation will be placed on care and maintenance in April.

Meanwhile, NorthWest Gold reported a 1990 net loss of $183 million or $6.12 per share on revenues of $3.5 million, compared with a loss of $1.2 million or 76 cents per share on revenues of $8.4 million in the same period last year.

NorthWest said results for 1990 include a $161.8-million writedown in the carrying value of resource properties, principally the Colomac mine, and a $19.8-million loss representing NorthWest’s 42% stake in Sonora Gold.

NorthWest also reported a fourth-quarter net loss of $30.1 million or $1.93 per share, on revenues of $785,000 compared with a loss of $3.7 million or 23 cents a share on revenues of $2.6 million in the same period last year. Northgate Exploration (TSE) 3 months ended Dec. 31 1990 1989 Revenue $5,512 $8,193 Net earnings (loss) (37,547) 926

Per share (1.68) 0.04 12 months ended Dec. 31 Revenue 26,603 20,967 Net earnings (loss) (118,233) 9,442

Per share (5.33) 0.42 NorthWest Gold 3 months ended Dec. 31 1990 1989 Revenue $785 $2,649 Net earnings (loss) (30,115) (3,680)

Per share (1.93) (0.23) 12 months ended Dec. 31 1990 1989 Revenue $3,478 $8,424 Net earnings (loss) (183,005) (1,235)

Per share (6.12) (0.07)