Blackmont Advises Not To Count Northgate Minerals Out Just Yet

Northgate Minerals Corp. (NXG) shares were down another 4% and counting on Wednesday, after shares dropped Tuesday more than 10% following the announcement that Northgate's Kemess North gold and copper project in B.C. was likely a no go.

But despite the free fall, Blackmont analyst Richard Gray said Northgate isn't done yet and remains confident the company's Young-Davidson project can help turn the company's fortunes around.

"Development of Young-Davidson will have its challenges, but is crucial for the company after the news that the Kemess North is unlikely to go ahead," he told clients in a note.

Mr. Gray said Young-Davidson continues to progress as its advances towards pre-feasibility, expected in early 2008, and production of 175,000 ounces per year, targeted for 2010.

He did, however, modify his Young-Davidson parameters, saying costs at the project were up from C$295 per ounce previously to C$325 per ounce. He also decreased the project's net present value from C$223-million to C$177-million.

The analyst added that Kemess North has been eliminated from his Northgate valuation but told clients "the impact is minimal as we believed the project was essentially uneconomic using our forecasts for gold, copper and the Canadian dollar."

He reduced his price target for Northgate shares from C$5 to C$4.50 but left his "buy" rating unchanged.

NXG 1-yr chart:

Comments

[ritr54:]

It did not appear in their press release that the committee had significant grounds for recommending disapproval of a permit to NXG. I think the government will likely ignore the recommendation. NXG can't pay taxes if they don;t make money!

2007 Sep 20 12:50 PM