Northgate Minerals CORP company history: the story so far

History

Northgate Minerals widened from Canadian mines into Australian gold in 2008, advanced Young-Davidson toward construction, and by October 2011 faced a proposed takeover by AuRico Gold.

2007-2008: Going multi-mine

Northgate already ran the Kemess South mine in British Columbia and held the Young-Davidson project in Ontario. In October 2007 it agreed to buy Australia's Perseverance Corporation Limited, owner of the Fosterville and Stawell gold mines, for cash at an enterprise value of about US$257 million. Perseverance shareholders were offered A$0.20 per share, a 37.9% premium. Northgate also took on US$30.6 million of bank debt, offered a bridging facility of up to US$22.8 million, and bought the bank's gold hedge exposure of about US$43.8 million, to be closed after completion.

Shareholders approved the deal and it completed in February 2008. Northgate then described itself as an unhedged, multi-mine gold producer in Canada and Australia, expecting over 400,000 ounces of gold in 2008. In July 2008 it reported drilling at Young-Davidson that pointed to a near-continuous gold system, including 4.12 g/t gold over 350 metres in one hole.

2009-2011: Young-Davidson and the AuRico offer

In July 2009 a positive pre-feasibility study (an early check of whether a mine would pay) put 2.8 million ounces of gold into Young-Davidson's reserves. The final feasibility study followed in January 2010. It showed a 15-year mine life, about 180,000 ounces a year at a net cash cost of $351 an ounce, and initial capital of $339 million, up from $292.5 million in the earlier study. The pre-tax return was 12.4% at $825 an ounce gold, with production targeted for 2012. Shaft work, permits and bank financing talks were under way. The record for most of 2010 and early 2011 is quiet.

On August 29, 2011, Northgate signed an agreement to be acquired by AuRico Gold Inc., with each Northgate share to receive 0.365 of an AuRico share. In October 2011 it told holders of its 3.50% convertible notes due 2016 that, if the deal closed, the notes would become convertible into AuRico shares. As of October 4, 2011, completion was expected around October 26 but was still subject to conditions and not certain.

Written from the 6 story beats below (2007 to 4 Oct 2011), which come from the company's own announcements and filings.

Beat by beat

The events that changed the company's story, in plain English, each written against everything known about the company at the time. The dot shows whether it was good, bad or neutral for shareholders.

2011

4 Oct
Northgate told holders of its 3.50% convertible senior notes due 2016 how their conversion rights work given the pending AuRico deal under an Arrangement Agreement dated August 29, 2011. If the deal closes, each Northgate share would receive 0.365 of an AuRico share, with completion expected around October 26, 2011, and the notes would become convertible into AuRico shares; the company can pay conversions in cash or cash plus shares. The deal is still subject to conditions and the filing says it is not certain to happen. The filing does not say what happens to shareholders' positions beyond the proposed exchange ratio.
debt financing

2010

26 Jan
Northgate released the final feasibility study for its 100%-owned Young-Davidson project, prepared by AMEC. It shows a 15-year mine life, average output of 180,000 oz of gold a year at a net cash cost of $351/oz, initial capital of $339 million (up from $292.5 million in the pre-feasibility study), and a 12.4% pre-tax IRR at $825/oz gold, with production targeted for 2012. It builds on the 2.8 million ounce reserve announced in July 2009; the company is moving toward a development decision, with shaft work, permits and bank financing discussions under way.
resource reserve update

2009

16 July
Northgate announced a positive pre-feasibility study for Young-Davidson, with the headline stating 2.8 million ounces of gold added to reserves. The visible filing only lists the July 14, 2009 news release as an exhibit, so no other details are available here. This moves the project beyond drilling toward a development decision.
resource reserve update

2008

18 July
Northgate reported first-half 2008 drilling at Young-Davidson (34 surface and 59 underground holes, 33,000 m), saying the zones form a near-continuous gold system and a new area of mineralization was found near the old workings. Highlights include 4.12 g/t gold over 350.0 m in hole 75A and 3.51 g/t over 130.2 m in hole 56A; a bulk-sample cross cut averaged 5.0 g/t over 41 m true thickness and testing indicated low-cost autogenous grinding. An updated resource estimate is planned for the fourth quarter of 2008 alongside a feasibility study; this continues the long-running drilling program and builds on the earlier three-million-ounce ambition.
drilling result
19 Feb
Northgate announced it completed the acquisition of Perseverance, after Perseverance securityholders approved it in three separate Schemes of Arrangement. This resolves the deal announced in October 2007. Northgate now describes itself as an unhedged, multi-mine gold producer with operations in Canada and Australia, expecting over 400,000 ounces of gold in 2008, and says it will update its 2008 production guidance to include the Fosterville and Stawell mines.
business combination

2007

31 Oct
Northgate signed a Merger Implementation Agreement to buy all of Australia's Perseverance Corporation Limited (Fosterville and Stawell gold mines) for cash, at an enterprise value of about US$257 million. Perseverance shareholders would get A$0.20 per share, a 37.9% premium; Northgate would also take over Perseverance's bank debt of US$30.6 million, provide a bridging facility of up to US$22.8 million, and buy the bank's gold hedge exposure of about US$43.8 million, then close the hedges after completion. The deal needs Perseverance securityholder, court and regulatory approvals, with completion expected around early February 2008; a A$2.5 million break fee is payable by Perseverance in certain cases. This is a new direction beyond Northgate's existing Kemess South mine and Young-Davidson project.
business combination