Northgate Minerals Corp (AMEX:NXG) - Soon Building a "Great Source of Wealth Creation"

Northgate Minerals Corp (AMEX:NXG), the Vancouver-based gold and copper producer with operations in Canada and Australia, has been reporting mixed news of late… posting a fourth quarter net loss on charges, but also recently producing its two millionth gold ounce.

Chris Mayer, editor of Agora Financial’s research newsletter Mayer’s Special Situations, has been able to cut through the noise to make several determinations today:

“We got earnings out of gold miner, Northgate Minerals (AMEX:NXG). Northgate produced a record amount of gold last year and $187 million in operating cash flows. The market values Northgate at only $880 million. That means NXG trades for less than 5 times cash flow. It also finished the year with $253 million in cash and no long-term debt.

“The big cloud that hangs over Northgate is that its Kemess mine is in its final days. Mine life has been extended to the first quarter of 2011, but after that, Northgate will lose a lot of cash flow. Its remaining two mines, Fosterville and Stawell, are high cost. They produce gold at cash costs of $655 and $633 an ounce, respectively. So the market worries about that.

“The big positive is the Young-Davidson deposit, on which construction will start this summer. Production should start in 2012. This should be a very good mine with cash costs of only $306 an ounce and a 15-year life. It has 2.8 million ounces of gold, about 75% of NXG’s total reserve base.

“This will be the next great source of wealth creation for Northgate and is its most valuable asset. NXG has a good track record and the stock is a solid way to play gold. With its strong balance sheet, low-risk profile and the Young-Davidson project, NXG should be able to deliver good returns to shareholders even if the gold price goes nowhere.”

One key Northgate mine will soon be going offline, but the Young-Davidson deposit should be the “next great source of wealth creation” for the miner. If you’re interested in learning more, the best way to stay up-to-date on this and other findings by Mayer is to review the options available at the Agora Financial research and reports page.


Rocky Vega,
The Daily Reckoning

P.S. Speaking of Vancouver-based opportunities… Chris Mayer will also be speaking at the annual Agora Financial Investment Symposium in July. You can find additional details about the event and how to attend here.

[Nothing in this post should be considered personalized investment advice. Agora Financial employees do not receive any type of compensation from companies covered. Investment decisions should be made in consultation with a financial advisor and only after reviewing relevant financial statements.]

The Daily Reckoning