Executives
Ken Stowe - President and CEO
Jon Douglas - SVP and CFO
Analysts
Steven Butler - Canaccord Genuity
Mike Parkin - Bank of America.
David Christie - Scotia Capital
Michael Anthony
Northgate Mineral Corporation (NXG) Q2 2010 Earnings Call August 10, 2010 10:00 AM ET
Operator
Good morning my name is Christopher and I will be your conference operator today. At this time I would like to welcome everyone to the Northgate Mineral Corporation second quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions) I’d now like to turn the call over to Mr. Ken Stowe, President and CEO of Northgate Mineral Corporation. You may begin your conference.
Ken Stowe
Thanks operator and good morning everyone. As Northgate’s CEO it’s my pleasure to welcome you to our second quarter 2010 conference call and webcast. Before we get started I want to call your attention to several points. First of all this morning’s Q2 news release can be found in the news release section of our website at www.northgateminerals.com.
Secondly for those of you who are using the traditional conference call lines, slides for today’s presentation are also available on our website under the calendar of events tab. Lastly for those of you using the conference call lines who would like to try the webcast instead you can gain access to it by clicking the conference call and webcast header on Northgate’s homepage and following the instructions.
Jon Douglas, CFO will begin today’s formal presentation by providing an overview of our quarterly operational and financial results and afterwards I will provide more details on our operations and discuss our exploration and growth initiatives.
As always at the end of our formal presentation we will welcome any questions you may have. Before we begin please note that in responding to questions and talking about our financial and operating performance, and our exploration and development projects, we may make forward-looking statements. These statements are subject to known and unknown risks and future results may differ materially. For further information on known risks factors I encourage you to review our 2009 AIF and our annual report. And now you will hear Jon Douglas, the CFO.
Jon Douglas
Thank you, Ken. Good morning everyone. I will begin my remarks today by summarizing the highlights of our second quarter which you can find on page 4 of today’s presentation. Our three mines in Canada and Australia produced a total of 68,275 ounces of gold and 9.6 million pounds of copper during the quarter at an average net cash cost of $693 per ounce.
Gold production was lower than planned and overall cost was higher than expected due to production issues of our Stawell mine. On the exploration front we were granted the exploration permit for this year’s Kemess underground program that have begun diamond drilling which is focused on the 90 million ton high grade zone which in the Kemess North deposit which we are now examining as a potential underground block caving operation.
In early July, the Ministry of Northern Development in Mines and Forest granted us the closure permit for the Young-Davidson mine which is the key permit governing the construction of new mines in Ontario. On August 4, we began construction of the mine as of date we have awarded approximately 140 million in contracts all of which have come in at/or slightly below our feasibility study estimates leaving our 31 million project contingency intact.
On the exploration front at Young-Davidson whole 198 intercepted 50 meters true thickness of gold mineralization at a grade of 3.46 grams per metric ton just left and about 100 meters to the north of the current ore body. If this turns out to be the faulted off extension of the current 4 million ounces of in situ gold at YD it has the potential to dramatically increase the total ounces within the property within easy reach of the underground infrastructure that we are currently constructing.
Now turning to page 5 of our presentation, I would like to go over the details of our production statistics for the quarter. Our Fosterville mine turned in a record production quarter of 28,476 ounces at a cash cost of $669 per ounce and our Kemess South mine produced 24,967 ounces of gold at a net cash cost of slightly less than $500 per ounce which was consistent with our guidance.
Unfortunately, performance of our Stawell mine was significantly lower than forecast with production of only 14,832 ounces of gold at cash cost of a little over $1000 per ounce. Ken will go into detail on the issues we faced at Stawell and the recovery plan has been implemented later in this presentation. But in summary we note much lower grade ore than we expected and generated less gold at a significantly higher cash cost per ounce.
Our metal sales, the driver of revenue from a financial point-of-view, were lower than our production during the second quarter primarily as a result of an increase in concentrate inventory at Kemess. Low rail car availability at the end of the quarter, which was a result of poor planning by CN Rail, we recently took on some business from Hud Bay was the reason behind all this and they didn’t really come out and change the fleet size to accommodate their new business and so we were left with less rail cars than we anticipated. We expect inventories to fall back to normal levels at the end of the third quarter which add about $8 million of cash flow and a couple of million dollars to earnings in our next quarter.
Turning to the next page, you will find a summary of our financial results for the second quarter of 2010. Revenues for the quarter were $122.7 million which was slightly lower than the same quarter last year as a result primarily of the much lower grade ore we processed at Kemess as the mine reaches the end of its flight, which was only partially offset by higher gold prices.
Operating cash flow for the quarter was $10.9 million which was lower than expected as a result of the lower than expected production at Stawell and the concentrate inventory build at Kemess.
Finally, our net income for the quarter was $4.3 million or $0.01 per common share. Financially speaking, we are still in excellent shape with $204 million of cash on hand at June 30 and strong free cash flow expected from Kemess over its remaining long-life which of course we will use to construct the Young-Davidson mine.
To complete the financing picture for Young-Davidson, we’ll be putting in place approximately $30 million in capital leases for mobile mining equipment, and we are still targeting $100 million seven-year project loan facility. We made really excellent progress towards this end during the quarter, and I would expect that we will be announcing the signing of an engagement letter with a major mining bank within the next few weeks.
Lastly before I turn the presentation over to Ken, I’d like to take a moment to update our 2010 production and cash cost guidance, details of which can be found on page 8 of our presentation. Due to the production issues that we’ve experienced and we’ll continue to experience at Stawell in the third quarter, we are reducing our annual production estimate to 81,000 ounces from 99,000 ounces. This change in addition to a small reduction related to the rescheduling of tailings retreatment at Fosterville, means we now expect to produce a total of 288,000 ounces of gold in 2010 at a net cash cost of $610 per ounce.
Looking at our second half forecast production compared to our actual production in the first half, we are forecasting production of 146,000 ounces of gold up from 141,637 ounces that we produced in the first half of the year. And more importantly as Stawell recovers and Kemess processes some higher grade copper ore, our cash cost in the second half of the year is expected to drop by about 17% from the $673 per ounce, to $555 per ounce in the second half of the year.
And now I would like to turn the presentation over to Ken.
Ken Stowe
Thanks Jon for the overview of the financial and operating results. I’d now like to go into some detail on the different operations in some of our exploration and growth initiatives within the company.
First I’d like to move to Young-Davidson, which is in a very exciting phase of its development right now. Page 11 of the presentation gives an overview what’s going on. We have our key permit in hand. As Jon said we’ve commenced construction activities on site clearing the plan site and getting ready to start work on the various new parts of the project we will be putting in place, realigning the highway, putting a transmission line in to get power and getting set up for the commission and the operation towards the end of next year.
Slide 12 gives a breakdown of the project over the next few years by the end of this year getting set up so we can continue constructing the mill through the winter time, getting a new hoist in place so we can start shaft sinking on deepening the existing shaft which will use to raise bore, the new shaft, production shaft to come on site.
Towards the end of next year we hope to be commissioning the new mill and then sometime in the first half of 2012, we will be mining from the open pit and putting gold. Over the next two years to follow, we’ll finish the shaft sinking and get the new production shaft in place and start converting from an open pit to an underground operation sometime in 2014.
Slide 13, just gives the same slide we’ve shown for the last year or two on the initial production profile, I would say from the operation based on the feasibility study. It should be a low cost, very long life operation. Equally exciting I think now is some of the recent exploration results that we’ve had. And slide 14 gives a wrong section through the deposit and showing where the hole we released a month or so ago.
We think now has begun to solve the fault offset that’s been postulated for decade actually this property. I think we’ve now identified where it is and we will be able to follow-up on this. The hole that we released is one of the best holes ever drilled on the property and gives us excellent upside to increase the resource.
The Young-Davidson pit which is right above where this hole is drilled is actually the end of the gold trend that comes all the way down from Val d’Or through Kirkland Lake. It’s interesting we’ve now been able to locate a depth where this gold trend supposedly had disappeared. We’ve now found where it is and we will be doing follow-up drilling as we’ve shown on the slide 15 and 16. It gives a projection of it on plan, but also slide 16 shows some of the holes we drilled previously looking for this fault offset mineralization and probably just didn’t go down deep enough. We didn’t realize the time that the mineralization had moved on that fault.
So now we are busy, we have two drills on site drilling, trying to get more pierce points into this mineralization so we can get a good idea exactly of what its orientation is and hopefully how close it does come to surface and that’s a key thing. We are now trying to project it upwards and see how close it comes to surface obviously it would be a lot more attractive getting into that mineralization earlier. So it’s a very exciting time on an exploration front also at Young-Davidson.
Slide 17 shows some of the holes we’ve been drilling at surface just to the east of the future open pit where there were former mine workings. And we’re actually just in the process right now of doing resource modeling and hoping to create some more open pit reserves that we’ll be able to go through the plant in the early years. So we should be telling people something about that sometime later this year.
Moving onto to Australia and Fosterville, Fosterville had an all round excellent quarter. I think the key slide to look at it is slide 19, and after the initial two quarters when we took over this operation which was floundering at best and was having problem getting into an underground mining mode from a former open pit producer. You can see that the production in the last two years has been very steady, still improving, so we set a record mine production and also gold production in the last quarter. All around excellent results from this operation which resulted with the gold price we’ve been seeing at record cash flow.
The next slide we are still projecting record production from Fosterville this year, beating its production from last year. At the same time the decline we are putting toward this Harrier Underground which should be the second key production area underground at the operation, the decline is progressing very well, its ahead of schedule and we’ve achieved being into this area to start having access to mine sometimes late in 2011.
But equally important this is an ideal platform for resource drilling, we are doing it to lower Phoenix and other near mine targets as we are going by with this decline. One of the challenges on the Phoenix Extension is being able to drill it from surface and with this underground platform it will dramatically improve our productivity identifying how large the Phoenix deposit is also.
Budget for the year is over $11 million at Fosterville and most of that is focused on resource to reserve conversion in sort of known areas but we are doing some work on some other regional targets, elsewhere on the lease but also just off the lease to some of our exploration tenements which holds some promise. The property as a whole has had relatively little exploration outside the known areas where they have mined.
Slide 21, gives a good long section through the Harrier Decline showing the Phoenix deposit, we’ve been getting very good results of the Harrier Underground North area which we’ve been expanding that area as we expected to create more reserves. So the Harrier area is growing, by the end of this year we should have a lot more reserves and resources in that deposit.
Equally important as we are going down on the EBIT decline, while there is a couple of dotted circles closer to decline, we show some of the recent exploration results where they were formerly the odd hole or two that had gold and will be falling up in those and strangely identify some potential resources to the mine and obviously very near to infrastructure and easy to remind and developed and brought into the plant.
Regionally, just to highlight a couple of things that we will be drilling this summer, in the next few months, one is Goornong South which actually lies just to the north of the mine lease. Fosterville style mineralization has some potential to grow, they had identified a small open pittable resource and we are looking to see our biggest system there. So we’ll have the drill turning there in the next few weeks or few months.
And the second one is the Toolleen mine which produced a small amount of gold at high grade back in the 1950s. It’s within trucking distance of the mill and we will be following up on some of the fairly preliminary drilling that’s been done there over the years just to say and see where some of these high grade gold shoots go and if there is potential for any larger size.
Moving on down to Stawell mine where obviously we have lots of challenges at the operation as the manager likes to say, if that wasn’t for bad luck in the quarter you would have no luck. Production was good in the first quarter, regarding to a few challenges in the second quarter and it seems we always have to move over Stawell, is that when we begin the year, because of very nature and the age of the mine, quite often we have a very large percentage of resources that are in the mines land and we have relied in the past and they have relied in the past on the very higher resource conversion and that happened to reserve conversion; the second quarter that they got in to few areas where that didn’t work and seriously impacted the availability of reasonable grade ore.
Cost have been in budget but we’ve had to do a number of things in terms of dollars we spent though we have had to do a number of things to try to rectify the issue. The key thing that we are looking forward to is getting into the G6 area that’s the first new mining area that Northgate will be involved with its Stawell, we started developing towards it almost two years ago. It’s a high grade ore source which will be the backbone of that operation for the next two or three years. And we will be getting into that ore zone in the fourth quarter of this year.
Slide 26 goes through some of the challenges that we did have, some of the areas where they were planning to mine in had in the mid-mine or somewhat higher up in the mine had much more complex geology and geometry than the initial drilling where they were able to identify, there were more faults in. So as a result of that, when they went in to combine it with the old mine design, they had a lot more delusion and some of the ore actually wasn’t anywhere they expected it to be, with that complexity on geology.
What we have done now is put in a plan; there will be a lot more drilling so we can better define where we are going to be mining. And in those more complex areas and we designed the mine to control resolution. We've already seen some very positive effects of doing that.
As normal in an operation there were some equipment issues which we have identified and corrected. So they aren’t the issue moving forward. We did have one area in GG7 where there was poor reserves-to-reserves conversion, much lower than historical averages. That obviously had significant effects and so we are relying on some of those areas to provide the main feed. But as we move through this year and get into G6 and with some of the other changes we've implemented. We see production coming back up to the former level of around 25,000 ounces. As they said G6 is much higher grade than most of the remaining known reserves and at Stawell, it’s over 6 grams per ton. This will be the backbone of the operation for the next three years.
If Stawell is to continue to operate past G6, we need to identify some more areas like that. That's why we have started drilling to what we call our big fish targets and slide 27 shows that. The three key areas that we're doing work on right now, the Northgate Gift, the North Magdala area, and the Wonga Gift, all these have potential for over 0.5 million ounces of good grade material.
Slide 28 shows the hole that we are actually drilling right now towards the Northgate Gift. This is the longest hole ever drilled underground in Australia. The hole is getting close to the target we feel. We've actually through the slide we come into the area which is close to default offset of the mine then we should be very close to it. The hole was shut down for a month are so while we were doing some mine development area, where we were just getting ready to restart drilling on it. But we feel we are getting close to the potential fault offset of the basic mine, where two million ounces have been produced over the last 25 years. This is basic fundamental works required till we can try to identify where these big targets are.
We are drilling in area that's never been drilled out and looking forward I can say a big fish target. Slide 29 is the Wonga Gift Dome. We have a hole presently going from surface right now towards this. The slide shows where the target is and we are obviously getting close to where the geo-physics indicates if the mineralization is, it should be close to here. Once we have this hole down, we will be to put a number of dotter hole out this hole and do some basic exploration around where this potential target is. Moving on to Kemess which once again continues to perform in an excellent fashion in all regards. Strong free cash flow expected for this year, over $60 million net of some reclamation cost to $24 million, excellent production, very low cost with the short hauls we got in the east end of the pit. We are mining higher up in the mine now and also being able to deposit tellings in to Kemess pit itself. Production will increase this year which will drive the cash cost down and obviously generate more money for us.
But Kemess continues to operate to the very higher standard which is only I would say is always the challenge when your mine is coming close to its last. Now we are within a couple or three quarters of the mine ending. It speaks very highly of the personnel, that they are keeping their mind focus clearly on the job at hand. Just a few slides on the Kemess Underground drill program is well advanced. We should in the next month or two be finished with the drilling. If the data we need from both the geotechnical and also the internal drilling to complete our feasibility study on the potential for underground mining at the Kemess Underground deposit.
A couple of slides just show you where the high grade part of it is. This high grade mineralization is three or four times higher grade than the average grade in the overall Kemess North deposit. We will be releasing these drill results once we’ve completed the 20-hole program. We will release these in a package to whatever the results were. Just a few words now also on our new project in Nevada, the Awakening Gold Project. We signed and completed our agreement in June. We’ve now been down to Nevada and we are actually just putting in place some geophysical surveys and some basic work to start targeting where we are going to put drill holes early in 2011.
This is following up on our new concept to try to identify buried deposits in Nevada. These are the deposits that don't come to surface under the pediment and it’s the technology that we’ve signed up with and successfully opened up large chunks of Nevada to be explored for more gold that's probably sitting there but just can't be seen from surface.
In conclusion, just to summarize by operation, Fosterville should have a very good year this year. We are making excellent progress on the Harrier decline and increasing the reserves/resources in the Harrier deposit. Stawell, as we work through these challenges and issues from the Q2 and we will carry on into Q3. Q4 we expect to be returning to the former run rate of above 25,000 ounces. Property and exploration dollars, the key at Stawell is to find some significant news on mineralization and we have three large rooms in addition to a number of regional targets that I didn't speak about that we are also conducting more early stage work on.
Kemess will generate significant cash flow in the second-half of the year. We are pleased that our reclamation efforts are advancing at the same time. So that we will have minimum liability when the mine ceases operating. We are all eagerly obviously the results on the drilling of the Kemess Underground to see if we can make something out of that project also. Young-Davidson is busy now with all the construction activities but we are also excited by the recent exploration success, and we think this is going to be a solid foundation for Northgate moving into the decades in the future.
With that I would like to open it up to any questions that people might have.
Question-and-Answer session
Operator (Operator Instructions) Your first question comes from the line of Steven Butler from Canaccord Genuity.
Steven Butler - Canaccord Genuity
A question for you on
[Technical Difficulty]
Operator
Your next question comes from the line of Mike Parkin from Bank of America.
Mike Parkin - Bank of America.
I was just wondering what’s the progress of the long hole that you are putting in at Stawell for testing the two big fish. When would we expect the result from those?
Ken Stowe
Obviously if we hit something when we are drilling those with the material we would say otherwise the main purpose of those drill holes though is to get information on those areas where we have no information. If we see anything in bonus we actually hit gold mineralization on the first hole but what we are trying to get the basic geology and structural information to make sure we are in the right horizon, and vicinity of things that's key thing. So if the hole was to hit something that significantly we would obviously release it straight away.
Operator
Your next question comes from the line of David Christie from Scotia Capital. Your line is now open.
David Christie - Scotia Capital
Just a couple quick questions. First of all in the GG6 zone which you are moving into at Stawell. Is that material in resource or reserve because it appears that the stuff you were beginning to mine was in resource. Is that what you were saying at the beginning for this quarter?
Ken Stowe
Most of it is reserve actually. There is also resource but there is a significant in terms of this reserve.
Jon Douglas
78,000 ounces it seems to me or some thing like that is reserve and there is another 18 or 20 more at least.
Ken Stowe
At resources and we expect it to grow once we are actually in there and drilling.
David Christie - Scotia Capital
So, this quarter your mining material that was resourced and you are converting as you are going, is that the issue?
Ken Stowe
Some of it yes. At Stawell, I think we have probably started the year with the mine plan head around about 50% to 60% of reserve in the mine plan and then some of it was resource.
David Christie - Scotia Capital
So half resource, half reserve kind of thing, okay.
Ken Stowe
We have got a reserve but obviously as you get closer to combining, you are doing the drilling and you don’t go through reserve-resource conversion but it obviously happens as you do it.
David Christie - Scotia Capital
Yes. So what's the difference in drill spacing? I'm just trying to understand the structural complexity issue.
Ken Stowe
Maybe Peter MacPhail, the Chief Operating Officer or Chris do you know?
Peter MacPhail
A typical drill spacing at Stawell would be on the order of 25 meter centers, and that would to get to reserve as we do still definition drilling we tighten that up, it's probably half of that.
David Christie - Scotia Capital
So the resource drilling was what kind of spacing?
Peter MacPhail
Resource must be in the 50 meters.
Ken Stowe
Historical reserves conversion at Stawell has been around 85%. These zones that they were now mining were getting towards the fringes of those ore bodies, which obviously the complexity does increase.
David Christie - Scotia Capital
Okay.
Ken Stowe
So that is stored on information based on that if they were at the extremities of them.
David Christie - Scotia Capital
Okay, that's fine I understand. As you go to develop things like the Phoenix extension and the Harrier Underground North, what kind of return are you looking for on those as you go to sink money into those deposits?
Ken Stowe
We made the decision to go to Harrier. We basically did a calculation of the reserve gold price. If we had enough ounces identified to breakeven at that point. We started that decline expecting that we would find more on the way, which is what we have done and are in process of doing. So, we've done it in a slightly different way.
David Christie - Scotia Capital
On the Kemess North Underground, what do you figure you need to have there as far as ounces and pounds before you could actually start looking at some kind of economic study?
Ken Stowe
The 70 million tonne plus that we've identified is actually there. As we expected it is obviously because we do have drilling into it. If the drilling we are doing now confirms that, that's large enough to be an economic deposit in the right price environment.
David Christie - Scotia Capital
What's the right price environment Ken?
Ken Stowe
Anything that you are talking about right now is definitely right. Obviously that's why we are going to the feasibility study to know the sensitivity of that and what the capital cost would be as obviously a number of factors go into it.
David Christie - Scotia Capital
And how deep is it exactly?
Ken Stowe
We did do a scoping study to make sure that it made sense before we did the drilling.
Jon Douglas
Depth is not really the issue Dave. 300 to 600 meters below the surface but you are going to add it into a mountain.
David Christie - Scotia Capital
Right, okay.
Ken Stowe
So you are not going at depth per se, you are going into a mountain.
David Christie - Scotia Capital
So you would ramp in pricing okay.
Ken Stowe
Right.
Operator
Your next question comes from the line of Steven Butler from Canaccord Genuity. Your line is now open.
Steve Butler - Canaccord Genuity
Ken, how would you envision permitting, obviously it's leaping ahead assuming positive economics but how would you envision the permitting process for Kemess North Underground. Obviously you wouldn't have the footprint issues yet and therefore the Duncan Lake issues or you could therefore shoot a Coors Light commercial there. How would you envision the permitting process there? Tricky still obviously or much improved?
Ken Stowe
Much improved. Order of magnitude much improved. We actually have adequate tilling capacity already permitted and ready to go so we don't see significant permitting issues.
Steve Butler - Canaccord Genuity
Would you envision scalings into the old pit as well?
Ken Stowe
Yes. We are already doing that and we have capacity left there and we will have some capacity remaining in our existing tailings but most of it would go into the Kemess pit which we are already doing.
Steve Butler - Canaccord Genuity
Okay and the other thing, do you envision any 2011 production for Kemess to sell. I mean my model shows almost well effectively no ounces but what are you thinking there for 2011?
Ken Stowe
At least about a quarter plus or minus I don’t know which week it is.
Steve Butler - Canaccord Genuity
Okay.
Ken Stowe
But this should be around the quarter. So around, if it continues the normal run rate around 25,000 ounces.
Steve Butler - Canaccord Genuity
I saw it referenced in the MD&A to the lower deprecation expense reflects a higher estimated realizable residual value for the Kemess infrastructure. Can you share that number with us?. I believe an old number you had shared with the market or with analysts quite some time ago. But this updated number improved and what is it sitting at?
Jon Douglas
We've used from an accounting perspective a $25 million figure. The actual estimates of the fair market value that we had from various estimators has been upwards of $60 million. Part envision and sale of that infrastructure, that’s not using it, in its current location if we were go ahead with the Kemess Underground but actually selling it off but accounting demands that you be a little more conservative in your approach.
Steve Butler - Canaccord Genuity
What amount of the infrastructure guys would you use for Kemess North Underground. Would you say one SAG and one line?
Ken Stowe
Half a mill.
Steve Butler - Canaccord Genuity
Pardon.
Ken Stowe
Half the mill. One or two grinding lines and flotation equipment goes with it.
Steve Butler - Canaccord Genuity
Right, lastly my first question which I asked in the cyberspace, so Ken was relating to the CapEx per quarter obviously it’s running at about sovereignty at about $10 million per quarter for both faster growing installment, the maintenance capital area is obviously fairly high, is that the number you’ve still seen sustainable going forward at both mines fairly high underground sustaining capitals for both mines?
Ken Stowe
Well we have been developing at both mines towards new mining areas. Like at Stawell to G6 and Fosterville to Harrier. If we don’t develop towards any new areas like Stawell, we don’t develop towards the new one and the capital will drop. But we’ve been putting a decline to get into that and also we are spending big chunk of that capital and Fosterville is going into the Harrier decline.
Steve Butler - Canaccord Genuity
Can you guesstimate roughly how much of your $10 million per quarter lately has been for that ramp development if you will?
Jon Douglas
Maybe you can talk to Jon later and give the actual numbers. Some stuff out line agree with Ken. It’s a significant amount and the run rate that we’ve seen recently is rather extraordinary. Overall, spending about $20 million a year at each of these places for underground development capitalized underground development if you appreciate that as well as other stuff we’d be a better rate.
Operator
(Operator Instructions)
Your next question comes from the line of Michael Anthony.
Michael Anthony
Now, I know you all made the acquisition of those two mines in Australia, how is that affecting all with the taxes and all?
Jon Douglas
You mean the recent changes to the proposed changes to the Australian taxes?
Michael Anthony
Yes, sir.
Jon Douglas
Initially that was potentially going to be an issue that they have introduced an excess profit tax that was going to raise tax rates rather significantly. Recently, through the government has backed away from that and the current proposal would see no change to the current tax environment.
Michael Anthony
Alright. On cash-on-hand right now, what are you all having in cash, and how much that you all have? You don’t mind me asking.
Jon Douglas
We have got no long-term debt and we have got about $204 million in cash in various Canadian banks.
Michael Anthony
Okay and how, you all gave in a broader outlook into the future in kind of like guidance?
Jon Douglas
We have provided guidance in the presentation for the balance of this year’s production. We will provide guidance for the next year in January as we typically do our production and cash cost.
Michael Anthony
Alright, so things look very positive going forward.
Jon Douglas
Yes, no, I think when you listen to the presentation.
Michael Anthony
I missed part of it.
Ken Stowe
With the Young-Davidson which is a new property and we have given guidance on what it should produce for its first fifteen years, that’s basically transition in the company from Kemess which has been the company for the last 10 years until Young -Davidson would be the cornerstone and that’s coming in and that would be a very long lived mine and well cost line.
Michael Anthony
So, you are all going to start it how soon?
Ken Stowe
It should be producing gold there some time early in 2012.
Michael Anthony
Alright, that’s fine. Thank you all, and congratulations on the quarter.
Operator
There are no further questions at this time.
Ken Stowe
Since there are no more questions, I’d like to thank you all for attending our quarterly conference call. For those of you who wish to review our remarks through our conference replay, please dial 416-849-0833 or 1-800-642-1687 using the pass code 81614630 followed by the number sign, or please visits our website at www.northgateminerals.com. Thanks and have a good day.
Operator
This concludes today's conference call. You may now disconnect.
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