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MINING NEWS: Northgate drops Kemess North plans Vancouver junior charges $32.3M against third-quarter profits; moves on with takeover of Australian company, more ventures Rose Ragsdale For Mining News
Northgate Minerals Corp. of Vancouver has posted a loss of $11.9 million for the third quarter after dropping plans to develop the Kemess North project in northern British Columbia. The quarterly loss reflects a $32.35 million charge against the value of the Kemess North project, which a joint panel of the governments of British Columbia and Canada recommended be scrapped.
The loss compared with a profit of $14.9 million, or 7 cents a share, in the third quarter of 2006. Northgate reports its financial results in U.S. dollars.
The company also announced a friendly $257 million deal to acquire Perseverance Corp. Ltd. of Australia, a move that will nearly double its annual production.
Northgate also said it is looking for acquisitions with potential to produce between 50,000 and 200,000 ounces per year and properties with regional exploration potential in politically stable jurisdictions. The company further vowed to look for underperforming gold or gold and copper mines where it thinks it could add value.
In early November, Northgate CEO Ken Stowe told analysts that with the addition of Perseverance, the company will have three operating mines, including a key foothold in Australia to build on.
“We’ll still have a strong balance sheet, we’ll have no debt and at the conclusion of the transaction we’ve already funded getting out all the hedges Perseverance has,” he said.
No go with Kemess North expansion Northgate, operator of the Kemess South Mine, wanted to extend the life of its existing mine by developing the lower grade, higher sulfide copper-gold deposit about 5.5 kilometers, or 3 miles, to the north. Kemess South is the second-largest metal mine in British Columbia with annual production of 16.4 million metric tons, or 18.1 million tons, of gold and copper concentrate.
Northgate believed the expansion could deliver another 14 years of mine life with production averaging 85,000 to 100,000 metric tons per day of copper-gold concentrate from estimated ore reserves at Kemess North.
After two and a half years of review and multiple rounds of public hearings, the Kemess North Joint Federal-Provincial Environmental Review Panel issued a report Sept. 17 recommending that the project be scrapped because it would not be in the public’s interest. The Canadian and B.C. governments are now studying the panel’s report and are expected to make a final decision on permitting the development sometime in the first half of 2008.
While they strongly disagree with the panel’s recommendation, Northgate officials said the uncertainty it has created for the Kemess North project forced the company to redefine its project development priorities.
Northgate has ceased all project activities at Kemess North including exploration, feasibility study work and detailed engineering and is refocusing its development activities on projects in other jurisdictions.
As a result of the panel report, Northgate also wrote off the full carrying value of its investment in Kemess North, the company said.
“In the event that the federal and provincial governments also disagree with the panel’s recommendation and grant approval for the Kemess North project to proceed and the First Nations reconsider their stance on the project, Northgate will revisit the project at that time,” Stowe said.
First Nation chief calls Kemess North ‘ill-conceived’ While news of the panel’s decision raised questions about the future of other mine projects in the region, some observers said the Kemess North expansion is a special case rather than the beginnings of a trend.
Takla Lake First Nation Chief Dolly Abraham said the difference between the “ill-conceived Kemess North project” and current and future resource projects in British Columbia is that they do not include the total destruction of a lake, with the exception of Taseko’s proposed Prosperity Mine.
Abraham said Northgate’s Stowe “was wrong to give the impression that the Tse Keh Nay’s spiritual connection to Amazay Lake was the lone factor that swayed the panel against his project.”
“In fact, the panel assessed many impacts, including those to the environment in the short-term and the long-term,” Abraham said in a letter Nov. 9.
The chief said the review panel was further concerned that once Northgate was no longer available to cover the costs of the impacts, reclamation and remediation expenses would revert to government.
Those factors, combined with the marginal nature of the project as determined by an independent analysis commissioned by the panel, led to the conclusion that “the benefits of (the project) do not outweigh the costs,” Abraham added.
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