-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
IUXwiKlKlef+vmyw3C1IIk1ZYQ7VJbygaVtKFWpE8UXXe3K5lep4fSOoxJB/7vlc
zw1az7+ioXUCR8VkQifh0A==
UNITED STATES FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER
For the month of November,
2006. Indicate by check mark whether
the registrant files or will file annual reports under cover of Form 20-F or
Form 40-F: Form 20-F
Form 40-F
Indicate by check mark if the
registrant is submitting the Form 6-K in paper as permitted by Regulation S-T
Rule 101(b)(1): ____ Indicate by check mark whether
by furnishing the information contained in this Form, the registrant is also
thereby furnishing the information to the Commission pursuant to Rule
12g3-2(b) under the Securities Exchange Act of 1934. Yes
No
If "Yes" is marked, indicate
below the file number assigned to the registrant in connection with Rule
12g3-2(b): 82-_____________ SIGNATURES Pursuant to the
requirements of the Securities and Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereto
duly authorized. Exhibit Index
1.
Report for the Third Quarter ended September 30, 2006
(All dollar amounts are stated in US Dollars unless otherwise indicated) RESULTS OF OPERATIONS Northgate recorded net earnings of $14,902,000 or $0.07 per
diluted common share in the third quarter of 2006 compared with earnings of
$8,765,000 or $0.04 per share during the corresponding quarter of 2005. Earnings
for the third quarter of 2006 included a $13,504,000 noncash future income tax
expense. Cash flow from operations (before changes in working capital and other
items) was $25,370,000 or $0.11 per diluted common share in the third quarter of
2006 compared with cash flow of $19,731,000 or $0.10 per diluted common share
during the same quarter last year. Cash flow from operations (before changes in
working capital) during the most recent quarter included the $19,754,000 effect
of settling copper futures contracts that were entered into earlier in the year
to fix the price of copper sales reported in the first quarter of 2006. The
settlement of these contracts had no effect on the Corporation's earnings. Per
share data is based on the weighted average diluted number of shares outstanding
of 226,992,626 in the third quarter of 2006 and 200,764,355 in the corresponding
period of 2005. Kemess Mine Performance The Kemess mine posted gold and copper production of 74,789
ounces and 19.6 million pounds respectively in the third quarter of 2006. Gold
and copper production were higher than our most recent production estimate for
the quarter due to a small change in the ore release schedule. For the full
year, Kemess South is expected to produce approximately 310,000 ounces of gold
and over 81.5 million pounds of copper. During the third quarter of 2006, approximately 11.4 million
tonnes of ore and waste were removed from the open pit compared to 12.2 million
tonnes during the corresponding quarter of 2005. Unit mining costs during the
most recent quarter were Cdn$1.52 per tonne compared with Cdn$1.26 per tonne in
the third quarter of 2005. The unit mining cost in the most recent quarter was
substantially higher than it was in the corresponding quarter of 2005 due
primarily as the result of higher maintenance costs and preliminary expenses
related to the north wall pushback which is discussed in detail in the section
entitled "Changes to the Kemess South Life of Mine Plan". Mill availability during the third quarter of 2006 was 90%
and throughput averaged 49,817 tonnes per day, compared with 90% availability
and throughput of 52,669 tonnes per day in the third quarter of 2005. Mill
availability in the most recent quarter was consistent with the prior year
comparative period while mill throughput was lower due to the smaller amount of
supergene ore milled in the most recent quarter and challenges associated with
processing stockpiled supergene leach cap ore. Gold and copper recoveries averaged 68% and 82% respectively
in the third quarter of 2006, compared with 65% and 75% respectively in the
third quarter of 2005. Metal recoveries recorded in the third quarter of 2006
were higher than they were in the same quarter one year ago because there was
less supergene leach cap ore processed during the most recent quarter. Supergene
leach cap ore has metallurgical characteristics that generate lower metal
recoveries. Less than 10% of the remaining Kemess South ore body is comprised of
this type of ore. Metal concentrate inventory increased by 2,000 wet metric
tonnes (wmt) in the third quarter to approximately 8,000 wmt at September 30.
Inventories at the end of the quarter were expected to be substantially lower,
but poor railcar availability reduced total shipments during the quarter. The total unit cost of production during the third quarter of
2006 was Cdn$8.82 per tonne milled which was significantly higher than the
Cdn$7.48 per tonne milled in the corresponding period of 2005. The increase in
unit cost in the most recent quarter was the result of higher mining costs,
lower mill throughput and the impact of higher road maintenance costs related to
bridge rehabilitation in the quarter. Total site operating costs in the third
quarter of 2006 were Cdn$40.6 million compared with Cdn$36.4 million in the
third quarter of 2005. The net cash cost per ounce of gold produced at Kemess
remained negative in the third quarter of 2006. Strong copper and silver prices
dramatically increased the byproduct credit which more than offset the negative
effect of the stronger Canadian dollar and higher treatment and refining charges
for concentrate allowing the mine to produce gold for negative $118 per ounce
compared to a net cash cost of $194 per ounce in the third quarter of 2005.
The following table provides a summary of operations for the
third quarter and the nine months of 2006 and the comparable periods of 2005. 2006 Kemess Mine Production Safety and Environmental Performance The Kemess South mine recorded no lost time injuries during
the third quarter of 2006 and broader measures of safety performance remain
excellent. So far this year, Kemess South ranks as the safest metal mine in
British Columbia. Financial Performance Northgate's revenue in the third quarter of 2006 was
$102,667,000 compared with $64,631,000 in the corresponding period in 2005.
Consistent with the presentation adopted in the fourth quarter of 2005, the 2005
comparative figures reflect the reclassification into cost of sales of a variety
of costs that were previously netted against revenues. These costs included
royalties, concentrate treatment and refining charges, concentrate freight
charges, and metal deductions. Metal sales in the third quarter of 2006
consisted of 73,792 ounces of gold and 19.1 million pounds of copper, compared
with 75,044 ounces of gold and 17.2 million pounds of copper in the third
quarter of 2005. During the third quarter of 2006, the price of gold on the
London Bullion Market averaged $622 per ounce (2005 $439) and the price of
copper on the London Metal Exchange averaged $3.48 per pound (2005 $1.70). The
net realized metal prices received on sales in the third quarter of 2006 were
approximately $531 per ounce of gold and $3.43 per pound of copper, compared
with $402 per ounce and $1.70 per pound in the third quarter of 2005. In the
third quarter of 2006, the Corporation reduced its gold forward sales position
by 18,000 ounces by settling forward contracts for cash consideration of
$5,132,000. A total of $7,525,000 in deferred gold hedging losses were amortized
in the third quarter of 2006 and as at September 30, 2006 an unamortized
deferred hedging loss of $13,359,000 (of which $11,997,000 is included in
current assets) was recorded for certain gold forward sales contracts that were
closed out prior to their original settlement dates. This deferred hedging loss
will be brought into earnings over the period that the related forward sale
contracts were originally scheduled for settlement. The Corporation's gold
hedging activities reduced the realized price of gold sold during the most
recent quarter by $91 per ounce, compared with $37 per ounce in the
corresponding quarter one year ago. In the third quarter of 2006, the
Corporation entered into forward sales and purchase contracts with a major
financial institution to fix the price of copper delivered prior to September
30, 2006 for which final settlement has not occurred. A total of 8,150 metric
tonnes of copper were sold forward during the third quarter using LME contracts
maturing from November 2006 through February 2007 at an average forward price of
$3.47 per pound. Q3/2006 Interim Report | 2
The cost of sales in the third quarter of 2006 was
$59,069,000 compared with the corresponding period last year when the cost of
sales was $44,064,000. The cost of sales in 2005 reflects the reclassification
of certain marketing costs that were previously netted against revenues, as
described earlier in this section. Cost of sales was higher in the most recent
quarter than it was in the corresponding period of 2005 due to higher sales of
copper, higher treatment, refining and freight charges for concentrate and the
strengthening Canadian dollar. The concentrate treatment and refining charges
and price participation charges that Kemess pays for processing its concentrate
are set annually based on world terms for similar concentrates. During 2006, the
global concentrate market has moved into deficit and on January 2007 when
concentrate processing terms are renegotiated our annual costs are expected to
drop by substantially compared to 2006 costs. Administrative and general expenses totaled $1,951,000 in the
third quarter of 2006 compared to a total of $1,045,000 recorded in the
corresponding period of 2005. The significantly higher expense in the current
quarter was the result of increased spending on regulatory and legislative
compliance costs related to the Corporation's SarbanesOxley 404 compliance
project, additional salaries and administration costs that are being incurred at
the Young-Davidson property and one time expenses related to the amalgamation of
Northgate group companies which was completed on July 31, 2006. Depreciation and depletion expenses in the third quarter were
$8,397,000 compared to $7,220,000 during the corresponding period of 2005. The
depreciation and depletion expense for the most recent quarter was higher than
it was in the same quarter one year ago due to a 6% increase in the amount of
ore mined from the open pit and increased amortization resulting from 2005
capital investments. The Corporation recorded net interest income of $1,180,000 in
the third quarter of 2006 compared to a net interest expense of $646,000 in the
corresponding quarter of 2005. Since the Corporation repaid its credit facility
on February 15, 2006, its cash balances have grown substantially and interest
income has begun to exceed the small interest expense arising from capital
leases for mobile equipment at Kemess. Interest income is expected to continue
to grow in future quarters as the Corporation's cash balances continue to
increase. Exploration costs in the third quarter were $3,509,000
compared with $1,887,000 in the comparable period of 2005. The higher
exploration expense in the most recent quarter was the result of the diamond
drilling program at the YoungDavidson property acquired in November 2005.
Exploration spending is expected to remain at the same level in the fourth
quarter as the underground exploration program at the YoungDavidson property
ramps up and other more seasonal exploration programs wind down. Capital expenditures during the third quarter of 2006 totaled
$4,817,000 compared to $5,159,000 in the corresponding period of 2005. Capital
expenditures in the most recent quarter were primarily devoted to ongoing
construction of the Kemess South tailings dam and Kemess North permitting
activities, whereas expenditures in the third quarter one year ago included
additional amounts devoted to the purchase of small equipment for the Kemess
mine and the mill. Q3/2006 Interim Report
Subsequent to the end of the third quarter of 2006, Northgate
entered into forward sales contracts and monthly average purchase contracts to
fix the price for approximately 47% of the Kemess mine's expected 2007 copper
production. 1,250 tonnes of copper production per month was sold forward at an
average price of $3.15 per pound using LME contracts from May 2007 through April
2008. NonGAAP Measure The Corporation has included net cash costs of production per
ounce of gold in the discussion of its results from operations because it
believes that these figures are a useful indicator to investors and management
of a mine's performance as they provide: (i) a measure of the mine's cash margin
per ounce, by comparison of the cash operating costs per ounce to the price of
gold; (ii) the trend in costs as the mine matures; and, (iii) an internal
benchmark of performance to allow for comparison against other mines. However,
cash costs of production should not be considered as an alternative to operating
profit or net profit attributable to shareholders, or as an alternative to other
Canadian GAAP measures and they may not be comparable to other similarly titled
measures of other companies. A reconciliation of net cash costs per ounce of production to amounts
reported in the statement of operations is shown below. 2006 2005 74,789 75,665 59,069 44,064 1,069 14,707 194 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 $ 102,667 $ 105,348 $ 85,059 $ 95,651 $ 64,631 $ 54,461 $ 42,559 $ 64,418 $ 14,902 $ 50,315 $ 21,735 $ 37,857 $ 8,765 $ 12,205 $ 0.07 $ 0.23 $ 0.10 $ 0.18 $ 0.04 $ 0.06 $ 0.07 $ 0.22 $ 0.10 $ 0.18 $ 0.04 $ 0.06 (1)
Consistent with the presentation adopted in the fourth quarter of 2005, revenue
figures for 2005 and 2004 have been adjusted to reflect the reclassification
into cost of sales of a variety of costs that were previously netted against
revenues. REVISIONS TO KEMESS SOUTH LIFE OF MINE PLAN During the annual Kemess South life of mine plan review,
Northgate's engineers, in consultation with external geotechnical consultants,
have determined that modifications to the previous pit design will be necessary
to safely extract all of the remaining reserves in the west end. The pit walls
in the northwestern corner will be laid back in varying degrees requiring the
removal of an estimated 22 million more tonnes of waste than originally
contemplated. The removal of this additional waste will be achieved using the
existing shovel and haul truck fleet. The final walls in this area of the pit
will also be blasted using controlled blasting techniques that are designed to
increase their structural integrity. Q3/2006 Interim Report | 4
Ore mining and milling activities will continue to proceed
normally as the pushback progresses. However, as a consequence of the pit design
changes, the sequencing of ore release from the Kemess South pit has been
modified. Production of gold and copper in 2006 is now expected to total 310,000
ounces and 81.5 million pounds, respectively, and preliminary planning estimates
for 2007 production call for production of 285,000 ounces of gold and 75 million
pounds of copper. The pushback of the Kemess South pit will increase the
reserves by exposing approximately 420,000 tonnes of high grade copper ore
grading 0.115 grams/tonne gold and 0.687% copper. The net smelter return (NSR)
of these additional reserves at the average prices for gold and copper that
prevailed during the third quarter of 2006 is estimated at approximately $12
million, offsetting slightly over 40% of the $29 million cost of the pushback.
The $17 million net cost of the pushback will ensure that all of the remaining
reserves at Kemess can be safely extracted. In addition to the changes described above, engineers and
geologists at Kemess are examining the potential to mine indicated resources in
the eastern east end of the open pit that are not yet part of the current mine
plan. These resources were not economic at the price parameters used to
calculate the Corporation's reserves at the end of 2005 (gold $450/oz, copper
$1.35/lb, CDN/US exchange rate 1.30), but the current high metal price
environment dramatically changes the economics of these resources. Diamond
drilling of these resources was conducted over the past two months to confirm
grades and tonnes and Northgate expects to complete its analysis of the
economics of these resources prior to the end of 2006. YOUNGDAVIDSON UPDATE Surface Diamond Drilling Program A total of 25,000 metres of surface-based diamond drilling
has been completed this year at the YoungDavidson property in Ontario. The goal
of the surface based drilling program is to outline the broad extent of the
mineralization at Young-Davidson with a target of doubling the original
underground inferred resource. The light pink areas of potential new resources
in Figure 1 show the dramatic progress that has been made towards this goal and
Northgate expects to release a revised NI 43101 resource estimate for the
Young-Davidson property before the end of November. Figure 1: YoungDavidson Property (Vertical, North Looking,
Longitudinal Section) Q3/2006 Interim Report
Advanced Underground Exploration Program The $22 million underground exploration program at the
YoungDavidson property will involve driving a ramp down 450 metres and
dewatering the existing No. 3 shaft in order to gain access to the deposit from
underground which will facilitate the closer spaced diamond drilling necessary
to convert mineral resources to reserves. In September, the government of Ontario granted the permits
required to commence the program and construction of necessary surface
infrastructure began shortly thereafter. Tender documents for the underground
ramp development and shaft dewatering have been sent to qualified contractors
and collaring of the surface portal for the decline ramp is anticipated to begin
before the end of the year. Northgate has hired Luc Guimond as Project Manager to
supervise the underground development program at YoungDavidson and coordinate
the feasibility study for project. Previously Mr. Guimond was Mine Manager at
Newmont's Holloway mine in Ontario. KEMESS CLAIMS EXPLORATION RESULTS During the summer exploration season, a deep penetrating IP
survey was conducted in the area surrounding the Kemess North deposit. This
survey outlined several previously unknown exploration targets which are shown
in pink in Figure 2. Northgate plans to drill several diamond drill holes to
test the largest of these targets to the east of Kemess North during November,
prior to the end of the 2006 exploration season. While the large target to the
east of Kemess North Offset looks to be quite deep on the section view provided,
the proposed drill holes will be collared at much lower elevations to the north
and south of the plane of the section. Assay results from these holes are
expected towards the end of December. Figure 2: Kemess North Area (Vertical, North Looking,
Longitudinal Section) KEMESS NORTH UPDATE On September 14, 2006 the Joint Federal Provincial
Environmental Review Panel for the Kemess North Project announced that public
hearings on the project would commence in Prince George on October 30, 2006, and
continue in Smithers on November 20, 2006. The two public hearing sessions
currently scheduled are designed to provide interested individuals and
organizations the opportunity to better understand the project and to
communicate their views to the panel. The public hearing phase of the review
process will conclude on December 15, 2006 and the panel's final report is
expected to be completed 60 days later. Q3/2006 Interim Report | 6
OUTLOOK The Kemess Mine posted strong operating results during the
third quarter, recording the lowest quarterly cash production cost in the
history of the mine and adding over $55 million in cash to Northgate's balance
sheet. The fourth quarter of 2006 is shaping up to be one of Northgate's best
ever, with the Kemess Mine forecast to have its highest gold and copper
production of the year in a very strong metal price environment. Our exploration
team at YoungDavidson continues to achieve excellent results and we plan to
complete our first resource update for the property by the end of November.
Project activity is expected to accelerate in the fourth quarter with the
collaring of the portal for the new exploration ramp. In addition to the
excellent progress we are making on our internal growth initiatives at
Young-Davidson and Kemess North, we continue to pursue a number of external
opportunities which are consistent with our growth strategy. Note: This interim report includes certain
"forwardlooking statements" within the meaning of section 21E of the United
States Securities Exchange Act of 1934, as amended. These forwardlooking
statements include estimates, forecasts, and statements as to management's
expectations with respect to, among other things, future metal production and
production costs, potential mineralization and reserves, exploration results,
progress in the development of mineral properties, demand and market outlook for
commodities and future plans and objectives of Northgate Minerals Corporation
(Northgate). Forwardlooking statements generally can be identified by the use
of forwardlooking terminology such as "may," "will," "expect," "intend,"
"estimate," "anticipate," "believe," or "continue" or the negative thereof or
variations thereon or similar terminology. Forwardlooking statements are
necessarily based upon a number of estimates and assumptions that, while
considered reasonable by management are inherently subject to significant
business, economic and competitive uncertainties and contingencies. There can be
no assurance that such statements will prove to be accurate and actual results
and future events could differ materially from those anticipated in such
statements. Important factors that could cause actual results to differ
materially from Northgate's expectations are disclosed under the heading "Risk
and Uncertainties" in Northgate's 2005 Annual Report and under the heading "Risk
Factors" in Northgate's 2005 Annual Information Form (AIF) both of which are
filed with Canadian regulators on SEDAR (www.sedar.com) and with the
United States Securities and Exchange Commission on EDGAR (www.sec.gov).
Northgate expressly disclaims any intention or obligation to update or revise
any forwardlooking statements whether as a result of new information, future
events or otherwise. Q3/2006 Interim Report
Interim Consolidated
| Balance Sheets September 30 December 31 2006 2005 $ 126,854 $ 50,639 16,925 18,885 20,016 15,019 11,997 4,561 175,792 89,104 14,745 14,117 1,362 -- 22,482 15,000 160,850 177,966 $ 375,231 $ 296,187 $ 27,064 $ 19,556 2,447 4,215 -- 13,700 29,511 37,471 3,286 7,680 26,299 26,193 1,285 1,229 60,381 72,573 199,225 195,565 8,612 8,715 2,384 1,657 104,629 17,677 314,850 223,614 $ 375,231 $ 296,187 The accompanying notes form an integral part of these financial statements.
Q3/2006 Interim Report | 8
Interim Consolidated
| Statements of Operations 2006 2005 2006 2005 102,667 64,631 293,074 161,651 59,069 44,064 164,123 130,729 1,951 1,045 6,666 4,610 8,397 7,220 25,469 24,199 646 1,691 3,509 1,887 6,496 3,229 607 386 298 1,147 877 40 625 8,423 546 72,779 55,357 208,663 165,492 29,888 9,274 84,411 -- 6,996 -- 2,541 14,902 8,765 86,952 0.07 0.04 0.40 0.07 0.04 0.39 215,636,477 200,658,352 215,085,895 200,531,976 226,992,626 200,764,355 222,281,149 200,531,976
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, DC 20549
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF
1934
Northgate Minerals
Corporation
(Translation of registrant's name into English)
815 Hornby Street,
Suite 406
Vancouver, British Columbia
Canada V6Z 2E6
(Address of principal executive
offices)
Registrant:
Northgate Minerals
Corporation
Date: November 10, 2006
/s/ Jon
Douglas
Jon Douglas
Chief Financial
Officer
Management's
|
Discussion & Analysis
(100% of production basis)
3Q06
3Q05
9M06
9M05
Ore plus waste mined (tonnes)
11,355,290
12,188,741
34,645,827
38,326,233
Ore mined (tonnes)
3,970,620
3,756,746
12,472,892
12,859,394
Stripping Ratio (waste/ore)
1.86
2.24
1.57
1.98
Tonnes Milled (ore)
4,583,196
4,845,506
13,666,645
13,327,284
Average mill operating rate (tpd)
49,817
52,669
50,061
48,818
Gold grade (gmt)
0.745
0.752
0.760
0.665
Copper grade (%)
0.237
0.210
0.245
0.208
Gold recovery (%)
68
65
68
65
Copper recovery (%)
82
75
81
80
Gold production (ounces)
74,789
75,665
228,549
185,557
Copper productions (000s pounds)
19,602
16,917
59,954
49,022
Cash cost ($/ounce)
(118)
194
(44)
277
3
|
(Expressed in thousands of
US$,
Quarter Ended
except per ounce amounts)
September 30
Gold production (ounces)
Cost of sales
$
$
Change in concentrate
inventory
(5,963)
Gross copper & silver revenue
(68,991)
(23,394)
Total cash cost
$
(8,853)
$
Cash cost per ounce
$
(118)
$
Selected Quarterly Financial
Data
(expressed in
thousands of US dollars except per share data)
2006 Quarter Ended
2005 Quarter Ended
2004 Quarter Ended
Revenue (1)
Earnings (loss)
$ (3,342)
$ (10,393)
Earnings (loss)
per share
Basic
$ (0.02)
$ (0.05)
Diluted
$ (0.02)
$ (0.05)
5
|
President and CEO
Chairman
October 30, 2006
7
|
(Expressed in thousands
of US dollars) (unaudited)
ASSETS
Current assets:
Cash and cash equivalents
Concentrate settlements and
other receivables
Inventory
Deferred hedging loss
Other assets
Deferred hedging loss
Future income tax asset
Mineral property, plant and equipment
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities
Current portion of capital
lease obligations
Current portion of long-term debt
Capital lease obligations
Provision for site closure
and reclamation obligations
Future income tax liability
Shareholder's Equity
(Note 2)
Common shares
Warrants
Contributed surplus
Retained earnings
On behalf of the Board of
Directors,
Terrence A. Lyons, Director
Patrick D. Downey, Director
Interim
Consolidated | Statements of
Retained Earnings (Deficit)
Three Months
Ended September 30
Nine Months
Ended September 30
(Expressed in thousands of US dollars)
(unaudited)
Revenue
$
$
$
$
Cost of sales
Administrative and general
Depreciation and depletion
Interest expense (income)
(1,180)
(1,857)
Exploration
Currency translation losses
(gains)
(428)
(1,804)
(389)
Accretion of site closure
and reclamation costs
Other expense (income)
Earnings (loss) before income taxes
(3,841)
Income tax recovery
(expense):
Current
(1,482)
(509)
(4,455)
(1,129)
Future (note 4)
(13,504)
(14,986)
(509)
(1,129)
Net earnings (loss) for the period
$
$
$
$
(4,970)
Net earnings (loss) per
share:
Basic
$
$
$
$
(0.02)
Diluted
$
$
$
$
(0.02)
Weighted average shares
outstanding:
Basic
Diluted
Three months ended September 30 | Nine months ended September 30 | |||||||
(Expressed in thousands of US dollars)
(unaudited) |
2006 |
2005 |
2006 |
2005 |
||||
Retained earnings (deficit) at beginning of period | $ | 89,727 | $ | (28,945) | $ | 17,677 | $ | (15,210) |
Net earnings (loss) for the period | $ | 14,902 | $ |
8,765 |
$ | 86,952 | $ | (4,970) |
Retained earnings (deficit), end of period | $ | 104,629 | $ | (20,180) | $ | 104,629 | $ | (20,180) |
The accompanying notes form an integral part of these financial statements.
9 | |
Q3/2006 Interim Report |
Interim Consolidated | Statements of Cash Flows
|
Three months ended September 30 | Nine months ended September 30 | ||||||
(Expressed in thousands of US dollars) (unaudited) |
2006 |
2005 |
2006 |
2005 |
||||
CASH PROVIDED BY (USED IN) |
|
|
|
|||||
Operations |
|
|
|
|||||
Earnings for the period |
$ |
14,902 |
$ |
8,765 |
$ |
86,952 |
$ | (4,970) |
Non-cash items: |
|
|
|
|
||||
Depreciation and depletion |
8,397 |
7,220 |
25,469 |
24,199 |
||||
Unrealized currency translation losses (gains) |
55 |
510 |
(288) |
245 |
||||
Accretion of site closure and reclamation costs |
386 |
298 |
1,147 |
877 |
||||
Amortization of deferred hedging loss |
7,525 |
2,684 |
15,027 |
2,836 |
||||
Amortization of deferred charges |
75 |
230 |
489 |
677 |
||||
Stock-based compensation |
280 |
46 |
1,724 |
807 |
||||
Future income tax recovery |
13,504 |
-- |
(6,996) |
-- |
||||
Other expenses (income) |
-- |
(22) |
-- |
(22) | ||||
Change in fair value of forward contracts |
(19,754) |
-- |
1,356 |
-- |
||||
|
25,370 |
19,731 |
124,880 |
24,649 |
||||
Changes in non-cash operating working capital and other: |
|
|
|
|
||||
Concentrate settlements and other receivables |
46,417 |
(5,234) |
1,960 |
(1,167) | ||||
Inventories |
(1,720) | (1,142) | (4,204) | (2,112) | ||||
Accounts payable and accrued liabilities |
(469) |
981 |
6,152 |
1,972 |
||||
Settlement of forward contracts |
(5,132) |
-- |
(23,825) | (10,146) | ||||
Reclamation costs paid |
-- |
-- |
(2,235) |
-- |
||||
|
64,466 |
14,336 |
102,728 |
13,196 |
||||
Investments |
|
|
||||||
Purchase of other assets |
(45) |
-- |
(131) |
-- |
||||
Sale of property |
-- |
171 |
-- |
171 |
||||
Purchase of mineral property, plant and equipment |
(4,817) | (3,812) | (9,084) | (10,571) | ||||
|
(4,862) | (3,641) | (9,215) | (10,400) | ||||
Financing |
||||||||
Repayment of capital lease obligation |
(4,077) | (1,205) | (6,162) | (3,643) | ||||
Repayment of long-term debt |
-- |
(5,250) | (13,700) | (15,750) | ||||
Issuance of common shares |
137 |
67 |
2,564 |
180 |
||||
|
(3,940) | (6,388) | (17,298) | (19,213) | ||||
Increase (decrease) in cash and cash equivalents |
55,664 |
4,307 |
76,215 |
(16,417) | ||||
Cash and cash equivalents at beginning of period |
71,190 |
28,533 |
50,639 |
49,257 |
||||
Cash and cash equivalents, end of period |
$ |
126,854 |
$ |
32,840 |
$ |
126,854 |
$ |
32,840 |
Supplementary Information: |
|
|
|
|
||||
Cash paid during the period for: |
|
|
|
|
||||
Interest |
$ |
163 |
$ |
972 |
$ |
895 |
$ |
2,841 |
Non cash financing activities: |
|
|
|
|
||||
Purchase of mineral property, plant & equipment by assumption of capital lease obligations |
-- |
$ |
1,347 |
-- |
$ |
1,347 |
The accompanying notes form an integral part of these financial statements
Q3/2006 Interim Report |
| 10 |
Notes to |
Consolidated Financial Statements Nine months ended September 30, 2006 and 2005
(Dollar amounts in tables are expressed in thousands of United States dollars
unless indicated) (unaudited)
1. Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Canada ("Canadian GAAP"). They do not include all the disclosures required by Canadian GAAP for annual financial statements and should be read in conjunction with the Corporation's consolidated financial statements and the notes thereto included in the Corporation's Annual Report for the year ended December 31, 2005. In the opinion of management, all adjustments considered necessary for fair presentation have been included in these financial statements.
These financial statements are prepared using the same accounting policies and methods of application as those disclosed in Note 2 to the Corporation's consolidated financial statements for the year ended December 31, 2005. Certain prior year balances have been reclassified to conform to the current year presentation. For the three and nine month periods ended September 30, 2005, $14,222,000 and $39,678,000, respectively, was reclassified, increasing revenue and cost of sales.
2. Shareholders' Equity
(a) Common shares
Number of Shares | Amount | ||
Balance, December 31, 2005 | 214,011,246 | $ | 195,565 |
Issued in Q1 2006: | |||
Pursuant to Employee Share Purchase Plan | 45,027 | 102 | |
On exercise of warrants | 314,523 | 480 | |
On exercise of options | 386,800 | 490 | |
Issued in Q2 2006: | |||
Pursuant to Employee Share Purchase Plan | 30,269 | 113 | |
On exercise of warrants | 10,202 | 27 | |
On exercise of options | 810,880 | 2,247 | |
Issued in Q3 2006: | |||
Pursuant to Employee Share Purchase Plan | 30,955 | 109 | |
On exercise of warrants | 2,778 | 8 | |
On exercise of options | 22,800 | 84 | |
Balance, September 30, 2006 (unaudited) | 215,665,480 | $ | 199,225 |
(b) Stockbased compensation
There were no options granted during the three months ended September 30, 2006 (2005 nil). During the three months ended September 30, 2006, $244,001 (2005 $16,133) of stockbased compensation was recognized for options that vested during the quarter.
During the three months ended September 30, 2006, 22,800 options were exercised and 18,200 options were either cancelled or expired.
At September 30, 2006, there were 4,693,340 options outstanding, of which 2,184,340 were exercisable.
There were no options granted during the three months ended June 30, 2006 (2005 50,000). During the three months ended June 30, 2006, $240,000 (2005 $85,000) of stockbased compensation was recognized for options that vested during the quarter.
During the three months ended June 30, 2006, 810,880 options were exercised and 56,500 options were either cancelled or expired.
11 | |
Q3/2006 Interim Report |
During the three months ended March 31, 2006, the Corporation
granted a total of 1,352,000 (2005 1,205,000) options to employees, with a
term of seven years. 1,217,000 of these options are exercisable at Cdn$2.60,
100,000 are exercisable at Cdn$2.52 and 35,000 are exercisable at Cdn$2.65.
Twenty percent (242,000) of these options vested immediately and the balance
will vest in equal amounts on the anniversary date of the grant over the next
four years. The fair value of the options granted for the quarter ended March
31, 2006 was $1,480,000 (2005 $604,000). During the three months ended March
31, 2006, $1,131,000 (2005 $578,000) of stockbased compensation was
recognized for options that vested during the quarter. During the three months ended March 31, 2006, a total of 86,800 options were
cancelled and 386,800 options were exercised. The fair value of the share options granted during 2006 was estimated using
the BlackScholes pricing model with the following assumptions (there were no
options granted in Q3 2006 or Q3 2005):
For Options | For Options | For Options | For Options | |
Granted | Granted | Granted | Granted | |
in Q2 2006 | in Q2 2005 | in Q1 2006 | in Q1 2005 | |
Riskfree interest rate | | 2.5% | 4.1% | 2.50% |
Annual dividends | | | | |
Expected stock price volatility | | 55% | 60% | 56% |
Expected option life | | 3.5 years | 5.0 years | 3.5 years |
Per share fair value of options granted (Cdn$) | | $0.62 | $1.42 | $0.76 |
3. Financial Instruments
During the three months ended September 30, 2006, the Corporation reduced its gold forward sales position by 18,000 (2005 $nil) ounces at a cost of $5,132,000 (2005 $nil). For the nine months ended September 30, 2006, 73,000 ounces were settled at a cost of $23,825,000. In accordance with Accounting Guideline 13, "Hedging Relationships", the losses associated with the early settlement of these contracts were deferred and are being amortized over the same period as the forward sales contracts were originally scheduled to be closed out. As at September 30, 2006, $13,359,000 ($11,997,000 in current assets) of the deferred hedging loss from early settlement of contracts remained deferred and will be amortized over the period that the forward sales contracts were originally scheduled to settle (October 2006 December 2007).
At September 30, 2006, Northgate had remaining gold forward sales commitments with a major financial institution to deliver 66,000 ounces of gold at an average accumulated price of $307 per ounce. These commitments are in the form of forward sales contracts maturing at various dates between February 28, 2007 and December 31, 2007. The unrealized loss on these forward contracts at September 30, 2006 was approximately $20,115,000, and have not been recognized in these financial statements.
At September 30, 2006, the Corporation had forward sales contracts with a major financial institution to fix the price of delivered copper for which final settlement has not occurred. A total of 11,650 metric tonnes of copper were sold forward using LME contracts maturing from October 2006 through February 2007 at an average forward price of $3.35 per pound. The Corporation also entered into separate forward purchase contracts with the same institution to repurchase its forward sales position at monthly average cash LME prices over the same period. The volume of forward sales and purchases in each future contract month match the expected future pricing periods for copper in concentrate delivered to Xstrata (formerly Falconbridge) under a multiyear concentrate sales agreement. The copper forward sales and purchase contracts are being recognized on a marktomarket basis. The fair value of these contracts at September 30, 2006 was a net loss of $2,158,000.
In October, 2006, the Corporation entered into additional forward sale contracts for copper to fix the price of approximately 47% of its estimated 2007 copper production. LME contracts for a total of 15,000 metric tonnes of copper were entered into at an average forward price of $3.15 per pound maturing from May 2007 through April 2008.
Also in October, 2006, the Corporation entered into a fixed-price agreement to purchase a total of 12,000,000 litres of lowsulphur diesel fuel (approximately 50% of expected 2007 consumption) from a supplier for delivery during 2007.
Q3/2006 Interim Report |
| 12 |
4. Future Income Taxes
As a result of the substantial increase in gold and copper prices and resulting increase in earnings, the Corporation determined that it was more likely than not that the Corporation will utilize available tax losses and other tax deductions and released $20,500,000 in valuation allowance for the Corporation's future income tax assets. This release increased second quarter net earnings by the same amount.
During the third quarter, the Company recognized future income tax expense of $13,504,000 to reflect the utilization of those tax losses and other tax deductions to offset taxable income.
5. Commitments and Contingencies
In the previous quarter, the Corporation entered into a Cooperation Agreement with the Tse Keh Nay (3 Nations) related to the operation of Northgate's existing Kemess South mine. The Corporation paid Cdn$500,000 on signing of the agreement and the Corporation will provide funding to benefit the Tse Keh Nay member communities in the amount of Cdn$1,000,000 per year over the remaining Kemess South mine life.
Also in the previous quarter, Northgate launched an unsolicited offer to purchase all the outstanding common shares of Aurizon Mines Ltd ("Aurizon"). On July 7, 2006, the Corporation withdrew its offer after the British Columbia Court of Appeal upheld a previous lower court injunction against Northgate's offer. As a result of this ruling, Aurizon was awarded its costs and damages that are yet to be determined. The Corporation accrued an estimate of these costs and damages as a charge against earnings in the second quarter of 2006.
13 | | Q3/2006 Interim Report |
Our Corporate | | |
Information |
Northgate Minerals Corporation is a gold and copper mining company focused on operations and opportunities in the Americas. The Corporation's principal assets are the 300,000ounce per year Kemess South Mine in northcentral British Columbia, the adjacent Kemess North deposit, which contains a Proven and Probable Reserve of 4.1 million ounces of gold and the YoungDavidson property in northern Ontario with a total resource base of 1.5 million ounces of gold. Northgate is listed on the Toronto Stock Exchange under the symbol NGX and on the American Stock Exchange under the symbol NXG.
Shareholder Information | Toronto Office |
Transfer Agent | Northgate Minerals Corporation |
Shareholder enquiries relating to address changes and share certificates | 18 King Street East |
should be directed to: | Suite 1602 |
Toronto, Ontario | |
Computershare Investor Services | Canada M5C 1C4 |
510 Burrard Street | Telephone: (416) 363-1701 |
Vancouver, British Columbia | Facsimile: (416) 363-6392 |
Canada V6C 3B9 | |
Telephone: (604) 661-0222 | Kemess South Mine |
Toll Free: 1-800-564-6253 | PO Box 3519 |
Facsimile: (604) 669-1548 | Smithers, British Columbia |
Canada V0J 2N0 | |
Stock Exchange Listings | Telephone: (604) 881-8400 |
Facsimile: (604) 881-8418 | |
The Toronto Stock Exchange | |
Stock Symbol: NGX | YoungDavidson Project |
Warrant Symbols: NGX.WT / NGX.WT.A | PO Box 187 |
The American Stock Exchange | Matachewan, Ontario |
Stock Symbol: NXG | Canada P0K 1M0 |
Facsimile: (705) 565-2531 | |
Shareholders and investors requiring additional | |
information should contact the Corporation at | |
(604) 681-4004 or by email at ngx@northgateminerals.com, | |
or visit our website at www.northgateminerals.com. | |
Corporate Offices | |
Northgate Minerals Corporation | |
815 Hornby Street | |
Suite 406 | |
Vancouver, British Columbia | |
Canada V6Z 2E6 | |
Telephone: (604) 681-4004 | |
Facsimile: (604) 681-4003 |
Selected Quarterly Financial Data
|
2006 Quarter Ended |
|
2005 Quarter Ended |
2004 Quarter Ended |
||||||||||||
|
Sep 30 |
|
Jun 30 |
|
Mar 31 |
|
Dec 31 |
|
Sep 30 |
|
Jun 30 |
|
Mar 31 |
|
Dec 31 |
|
Gold Production (ounces) |
|
74,789 |
|
76,127 |
|
77,634 |
|
94,405 |
|
75,665 |
|
59,352 |
|
50,540 |
|
94,673 |
Copper Production (000s lbs) |
|
19,602 |
|
18,071 |
|
22,282 |
|
24,701 |
|
16,917 |
|
17,427 |
|
14,677 |
|
23,856 |
Cash Cost ($/ounce) |
$ |
(118) |
$ |
(44) |
$ |
27 |
$ |
59 |
$ |
194 |
$ |
307 |
$ |
366 |
$ |
111 |
Northgate Minerals Corporation |
815 Hornby Street |
Suite 406 |
Vancouver, British Columbia |
Canada V6Z 2E6 |
|
Tel: (604) 681-4004 |
Fax: (604) 681-4003 |
|
www.northgateminerals.com |
_>0SRI'7=M(F/E]>55'9<%[;3C 6C2L:7:<(!I5YS?!">Q/C)@(:;J@
MAN9"M.:@O:I`5I"`L3;%,I)]K*"+:0EPB\J+F@HVKA8@J;2H%I'P4=Q1JT`U
MNF)T3;A*%N3%R'"DR9N*B'*.Y-*=2PR2[TXLA!!3DI4KB2FY,7H4I2E2N,LG
M.44D@BM)4I!13A)(+,%+ "A78YI(%I`X$;BF$6R"5/2^NPD,JA
MSSW[#XJ08VIQ 2X
MP"UWT2`LG-ZYUEKV4Y-C7%DDM#B[D%L/]QU";K7R_DOX=_5]MOHC/JST6RH7
M5]98^LB0]K`6D#SWH=70.B7;O0ZPVW;SL8T_DL7$=)NS&]+?EVYI%._T&TDO
M)DC3:&Z"93G-=B4DMLM8^#JTO+3X$F1^12"$:N_/3^`8#F/%0VNKOKVU=GK-
M=.&_)H9;ZS&`M;9$;I;X2?% IUY1PMIL
MH #P-73\5QPZIU,"!D'YM:?X)_VOU4#^D#YL"7W7*.@^U7O8SU_!Z?/R
MOLW2LG*8=MC@65DB"'V>UO\`FB5PA:#H[1W>>/O6ED=1SLFD4Y%@>UKMX`&W
M6(U546&`-H!`U,3)^.JGQ8I8XZ_,3KU"R602EIL&C9C@\0?@0JSZBU:CZS8=
MNX-)[\0.Y0KJF"=L$G33L/[T2+-:%(+F$>*@:QVT5NRE!+"%'+$$\10;7M,@
MZ^(T*(,I_%H%@_EC7_.Y3PF+`>RC.(]%W$&0=C/[NJ/@?>W^]$8^]C7,IAS9
MG %"NS:3N,$
ME^T97^CK_P`XI+F?7K_T5G^>_P#N22X5<;I]?
MW%K0X;*XD3^:I3K$>;BFP+
MJ?3L=N!:;#!^01JLJBYI(,02V)UD>2YQS;GM!^8K&G)U4L+?5E,?:UQ8V>TQ
MIHF:=UPD>S9R&NBUS[#I8/88@P(W*J_(MK(<''>W6.P![0GRR[[18]C"]K_H
M\P">Z`VFYY@M(W$:E$5U(4;[%+^U,G]UG^:$DW[.?^^W\4D[T>"WU>+<-MKG
M`OKKWSN(=ND'YE3R;K?:"VIYB(((@3YE$RZZMX+'-?KK!&B!GT!_IEQAK6^X
M^4J*A:1J$]>;?8V'-K]L-:`W4GP5U_4\TX;L,AK:"YKG-#1R#I[N52P:F[C8
M!!:X-'P(1K;'PYC(VEK!9\B(_%-K4'Q41X-G.ULQI!(+#(;R1#56NLG*+]CA
M[8VZ2KUEE==N/988#:7P3XP%FV95F1>;0V3M@`:<)V3YAIT"H'0I1;'YC_P5
M?/>'XQEKFP1])2FX\D,^&J%EFUM!<7;V@C0M$)P)5+9?I-FRMP#'62[\W17\
M7(-;[B*R[<^2`=6Z<'14>E"R^IY;9Z,.`(8!JCXU.0Z_):,A[0'0XZ>[311R
MGZB/W=5\(GAB>[?^WV`2<=Q!\_\`8J>9EN>6'T7,#+`3/
%-UF!9>"U["[<'3
M[@YO(^82)].NS)Q\))EH+W^M)_7RO!W^Y<4.(+ON^7M
M7U<<]0Q6B!4]T<#3^]-^U:AQ0?FX?W*]UG`Q>E=/?F,I-[FN:T5DQ.XQV"RL
M7(ONJ]1V'72\_1J