With $375 million due to be spent during the next two years on building the Young-Davidson Mine near Kirkland Lake, Northgate Minerals is officially moving ahead this summer on its ambitious new gold mine.
With project approval received from the company's board of directors in early February and a $100-million share offering in the fall of 2009, Northgate (TSX:NGX) has high hopes for Young-Davidson, located in Matachewan, 60 kilometres west of Kirkland Lake.
Northgate spent $18 million in 2005 to acquire the past-producer, which generated a million ounces of gold as operated by Ventures Ltd. and Hollinger Mines through the 1950s. The company, which also has the Fosterville and Stawell producing mines in Australia, is looking to offset the impending closure of its copper-gold Kemess Mine in British Columbia in 2011.
"The Young-Davidson project is very significant for the company and is important for us to keep up our production profile," says Peter MacPhail, COO of Northgate.
"This is an exciting project for Northgate – a big project. We've had a lot of support and we hope to keep that going."
The project has 2.8 million ounces of reserves, which will largely be mined from underground operations over the course of a 15-year mine life, though officials expect it could extend beyond their initial projections.
Exploration work in past years has focused in, around and below the past-producing mine. Work this year will step beyond the footprint of these historical projects to look for new finds to extend the local project's life.
"That would be 15 years that we see currently without finding any more and with these things, you always find more. So this is a long-life, quality gold mine getting built here."
The two-year construction phase is set to begin this summer in preparation for full production to begin in 2012.
Aside from the $375-million pricetag associated with the start-up capital costs, the mine is also expected to generate $50 million in annual spending, with 600 people to be employed through the peak of the construction phase.
Through 2010, work will feature engineering activity and the start of construction of the mill, whose outer shell is expected to be complete prior to the winter months. This would provide shelter for building activity to continue in shelter while the snow flies, says MacPhail.
Earth works for the preparation of tailings will begin in September, as will shaft deepening and construction.
The Young-Davidson project is very significant for the company, and is important for us to keep up our production profile.
COO of Northgate
An exploration ramp which has been dug to roughly 500 metres underground will be further deepened. Also on site is a historic shaft from the mine's life as a past-producer in the 1940s and 1950s, which will also be deepened from 400 metres to 1,000 metres. A second production shaft will also be installed on the property.
Contractors' bids for underground shaft development are in the process of being evaluated. The engineering company used on the project to date has been AMEC, which also served in a similar role for De Beers Canada's Victor Mine project, and will continue to act as the engineering firm for Northgate.
Other contracts, such as the construction of the mill and earth works, will go out in the coming months.
Also due for tender will be a contract for the open pit operations, which will last two years and will be performed by an external company rather than Northgate's own workforce.
Work through 2010 will also involve the construction of a 6,000-tonne-per-day mill, something MacPhail refers to as a "fairly good-sized operation."
Once in operation, Young-Davidson will produce 200,000 ounces of gold per year. This is an important number for Northgate as the two Australian mines combined produce the same amount, says MacPhail.
The number of full-time staff on-site during regular operations is set to reach between 275 and 300.
This level of employment is something that could help lift the fortunes of the area, says MacPhail, particularly in light of the impending loss of 685 jobs at Xstrata's Kidd Metallurgical site in May.
"We hope to fill some of that gap and offer work to some of those people who might be affected by that."