Fosterville Achieves Record Quarterly Production

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VANCOUVER, Aug.

5, 2011 /CNW/ - (All figures based in accordance with International Financial Reporting Standards ("IFRS") and expressed in US dollars except where noted) - Northgate Minerals Corporation ("Northgate" or the "Corporation") (TSX: NGX; NYSE Amex: NXG) today announced its financial and operating results for the three and six months ended June 30, 2011.

Second Quarter Highlights

Operating and Financial

• Gold production for the second quarter of 2011 totalled 43,798 ounces at an average net cash cost of $944 per ounce.
• The Fosterville mine achieved a quarterly record of 29,181 ounces of gold at a net cash cost of $787 per ounce.

• Gold sales were 44,372 ounces at a realized price of $1,502 per ounce.
• Reported a net loss of $13.0 million or $0.04 per share.
  
  The adjusted net loss⁽¹⁾ for the second quarter of 2011 was $16.7 million or $0.05 per share.  The net loss and adjusted net loss figures include a $12.7 million expense resulting from revisions to the reclamation cost estimate at Kemess South.
• Strong cash flow from operations in Australia of $23.1 million.  On a consolidated basis, Northgate reported cash flow from operations of ($3.7) million or ($0.01) per share, as a result of working capital changes and expenses associated with closing Kemess South and putting the facility on care and maintenance.
• Northgates cash balance at the end of the second quarter 2011 was $244.5 million.

Business Combination for Strong Value Creation

• On July 13, 2011, Northgate announced a proposed business combination with Primero Mining Corp. (TSX:P) to create a leading mid-tier gold producer with significant value creation opportunities.
  
  The new company will benefit from a diversified production base, expansion potential from a portfolio of mines and projects and enhanced near-term cash flow.

Significant Development Opportunity

• Northgate recently released positive results from a NI 43-101 Preliminary Assessment for the Kemess Underground Project.  The results outline the development of an underground block/panel cave operation. Average annual production is expected to be 95,000 ounces of gold and 41.4 million pounds of copper at a below-industry cash cost of $115 per ounce over a 12-year mine-life.

Building Young-Davidson

• Construction activities at Young-Davidson remain on schedule and on budget.
  
  To date, Northgate has invested approximately $180 million towards the construction of the Young-Davidson mine.

Expanding YD West Zone

• At Young-Davidson, hole YD11-234B intersected one of the best intervals ever drilled on the property of 4.31 grams per tonne ("g/t") gold over 79.6 metres ("m").

"Second quarter production was highlighted by an excellent performance at Fosterville, as the mine achieved record quarterly production of over 29,000 ounces of gold" commented Richard Hall, President and CEO. "Our mines in Australia are projected to ramp up production in the second half of the year and to generate strong cash flow from operations."

"As we look to the future of Northgate, we are excited about the value creation opportunity from the recently announced proposed business combination with Primero that we believe will create a stronger company going forward.

Combined with the excellent progress being made at Young-Davidson and the positive results from the Kemess Underground Project, we have established a strong pipeline of operations and projects to deliver both near and long-term value for our shareholders."

Financial Performance

Northgate recorded consolidated revenue of $67.4 million in the second quarter of 2011.

Record gold production from Fosterville and stronger gold prices drove revenue from Northgates Australian mines higher during the second quarter compared to the first quarter of the year.

Northgate reported a net loss of $13.0 million or $0.04 per share during the second quarter of 2011.

The adjusted net loss for the same period was $16.7 million or $0.05 per share.

The net loss and adjusted net loss figures included a $12.7 million expense related to increases to reclamation cost estimates at Kemess South.  In future periods, Northgate believes that any additional increases to these cost estimates will not be material.

During the second quarter, the Fosterville and Stawell mines generated excellent cash flow from operations of $23.1 million, driven by record production at Fosterville.

On a consolidated basis, Northgate reported cash flow from operations of ($3.7) million or ($0.01) per share in the second quarter of 2011, which was mainly attributable to the increased spending on decommissioning and site rehabilitation activities at Kemess South as previously mentioned.

The Corporation continues to maintain a strong balance sheet, with cash and cash equivalents totalling $244.5 million as of June 30, 2011.

Corporate Development

Business Combination with Primero Mining Corp. for Strong Value Creation

Northgate has announced a proposed business combination with Primero to create a new, leading mid-tier gold producer with significant value creation opportunities.

The combined company will benefit from a robust gold growth profile and strong cash flow from a portfolio of producing mines, supported by a robust resource base (see press release dated July 13, 2011).

The new company will be led by Joe Conway, current President and CEO of Primero.

Highlights of the transaction include:

• Diversified production base:  Three producing gold mines with 320,000 gold equivalent ounces in 2011E increasing to 550,000 ounces in 2013E coming from the addition of Young-Davidson and expansion at San Dimas, plus exploration pipeline, all located in pro-mining jurisdictions.
• Leading growth profile:  Expected production growth of 72% from 2011E to 2013E and declining cash costs, which will place the combined company amongst the leaders of its expected peer group.
• Strong, complementary management team:  Combines a proven CEO with an experienced technical team.
• Solid financial position and cash flow:  Fully-funded development of Young-Davidson with expected sufficient cash flow to re-pay all corporate debt and pursue accretive opportunities.
• Unique re-valuation opportunity:  Currently trading below peer average net asset value and cash flow multiples.
• Enhanced capital markets presence:  A market capitalization of over $1.4⁽²⁾ billion is expected to appeal to a broader shareholder base, increase analytical following and improve share trading liquidity.

The proposed business combination will be effected by way of a Plan of Arrangement completed under the Business Corporations Act of British Columbia.

Under the terms of the Plan of Arrangement, each Primero shareholder will receive 1.50 common shares of Northgate for each Primero share held.  The transaction will be carried out by way of a court-approved Plan of Arrangement and will require approval of the shareholders of Primero at a special meeting of Primero shareholders.  The transaction is also subject to obtaining approval of the shareholders of Northgate at a special meeting of Northgate shareholders.  The respective shareholder meetings for Northgate and Primero are scheduled to take place on September 21, 2011.

Significant Development Opportunity at Kemess Underground

Northgate recently released positive results from a NI 43-101 Preliminary Assessment for the Kemess Underground Project.  The results outline the development of an underground operation that is well suited to block caving.

Average annual production is expected to be 95,000 ounces of gold and 41.4 million pounds of copper at a below-industry cash cost of $115 per ounce over a 12-year mine-life.

At $1,500 per ounce gold and $4.00 per pound copper, Kemess Underground is expected to generate pre-tax operating cash flow of $2.1 billion, pre-tax net present value ("NPV") at a 5% discount rate of $755 million and a pre-tax internal rate of return ("IRR") of 27% (see press release dated August 2, 2011).

The envisaged Kemess Underground block cave operation would leverage the existing infrastructure and mill facilities at the Kemess South mine, including a permitted area for tailings storage within the Kemess South open pit.

Based on the results of the Preliminary Assessment, Northgates Board of Directors has approved the commencement of a full Feasibility Study, which is expected to be completed over the next year.

Results from Operations

Fosterville Gold Mine

Fosterville capped off the quarter with a monthly record of 12,500 ounces in June and achieved gold production of 29,181 ounces for the second quarter, which was also a record for the mine.

The excellent performance at Fosterville follows on a strong first quarter; year-to-date, the mine has produced 49,813 ounces of gold and continues to forecast annual production consistent with original guidance.

As a result of record gold production at the mine, Fosterville also generated record cash flow from operations of $21.3 million during the quarter.

Cash flow from operations is expected to remain strong for the balance of the year.

During the quarter, approximately 200,000 tonnes of ore were mined and mine development advanced 2,190 m.

Also during the quarter, a record 226,218 tonnes were milled at a higher than planned grade of 4.82 g/t, resulting in record gold production.

The average net cash cost of production for the second quarter of 2011 was $787 per ounce, which was lower than the original guidance provided, despite a 4% increase in the Australian dollar relative to the US dollar during the quarter.  Cash costs also declined from the $1,012 per ounce cash cost figure recorded in the first quarter of 2011.

For the first half of the year, the average cash cost of production was $880 per ounce, which was lower than guidance.

As the Australian dollar has continued to climb in 2011, Northgate has revised its exchange rate assumption to US$/A$1.08 for the second half of the year (from the original assumption of US$/A$1.00).

As a result, the annual cash cost forecast at Fosterville has increased slightly to $910 - $950 per ounce.

Stawell Gold Mine

During the second quarter, the Stawell mine produced 15,354 ounces of gold.

Production was impacted by lower head grades mined.  In the second half of 2011, production at Stawell is expected to rise as grades improve from the GG6 ore zone, which is expected to come into production in August.

The annual forecast has been lowered to approximately 81,000 - 85,000 ounces of gold to reflect the lower production in the first half of the year.

During the quarter, approximately 193,000 tonnes of ore was mined and mine development advanced 1,768 m, which was in line with plan.

 Also during the quarter, 204,000 tonnes of ore was milled at an average grade of 2.81 g/t.

Although mill production was higher than plan, the processing of higher carbonaceous and low-grade ore resulted in lower head grades, which impacted production during the quarter.

Recoveries improved to 83% in the second quarter, from 77% in the corresponding period last year.

Unit operating costs remained low during the second quarter at A$83 per tonne of ore milled (2010 - A$90).

Mining costs were A$54 per tonne of ore mined (2010 - A$66).

During the second quarter of 2011, the average net cash cost of production was $1,173 per ounce, resulting from the 20% year-over-year increase in the Australian dollar relative to the US dollar and lower gold production during the quarter.  For the second half of 2011, cash costs are expected to decrease as gold production increases.  The annual production and cash cost forecast for Stawell has been revised slightly to reflect lower production in the first half of the year and the stronger Australian dollar.

Kemess South

During the second quarter of 2011, activities on site mainly focused on mine closure and rehabilitation and placing the Kemess mill on care and maintenance in anticipation of a production decision for the Kemess Underground Project.

Northgates asset retirement obligation was increased by $12.7 million, all of which was expensed in the second quarter.

Reclamation activities were negatively impacted by a wet spring and summer, which delayed progress and resulted in increased costs to retain staff and equipment. As detailed engineering and surveying were completed on the spillway construction at the tailings impoundment facility as well as other reclamation projects, the cost estimates also increased.

The balance of the 2011 reclamation work at Kemess is expected to be completed by the end of the third quarter.

At that time, the reclamation obligation will be approximately equal to the amount of the reclamation bond posted with the Provincial government.

Now that most of the 2011 reclamation work is complete and detailed costs estimates for future work have been reviewed by the Provincial government, we believe that any additional increases to rehabilitation activities will not be material.

2011 Production and Cash Cost Forecast

Production and cash cost forecast for the full year 2011 is outlined as follows:

¹ Assuming exchange rates of US$/Cdn$1.00 and US$/A$1.06 for Q3 to Q4 2011.
² Metal production data for the three months ended June 30, 2011 include the actual settlements for prior period sales at Kemess.

Building Young-Davidson

Northgate is extremely pleased with the ongoing construction activities at Young-Davidson.

As of the end of the second quarter 2011, Northgate has invested approximately $180 million towards construction of the mine, which remains on schedule and on budget.

All major construction contracts have been awarded or are imminent (worth approximately $250 million) and approximately 85% of the engineering has been completed. In addition, almost all of equipment purchase orders have been placed and much of the equipment has already been delivered to site.  We expect the balance of equipment will be delivered in the fall.

The mill building was enclosed by early July and the installation of process equipment has begun.

After completing an intensive optimization study in June, the Board of Directors approved a mid-shaft loading facility, which is a modification to the original mine design that will allow for early underground ore production to supplement open pit production in the initial years of the mine-life.

The facility is scheduled to be operational by the first quarter of 2013, one year ahead of the feasibility schedule for underground ore production.

Underground Ramp and Shaft

Activities underground continue to make excellent progress.

For the second quarter of 2011, the development rate averaged over 14 m per day.

The ramp was extended an additional 315 m to an approximate length of 4,450 m and has passed a vertical depth of over 700 m (eventual depth of 1,500 m).

In July, the first leg (446 m) of the new Northgate production shaft was completed.

The second leg (to a depth of 700 m) is expected to commence early next year.

Young-Davidson is scheduled to commence commissioning activities in the fourth quarter of 2011 and is targeting start-up of production in late Q1 2012.  Initial production will come from an open pit scheduled to produce approximately 85,000 ounces in 2012 and 135,000 ounces in 2013. Over a 15-year mine-life, the mine is expected to generate average annual production of 180,000 ounces of gold.

Expanding YD West Zone

Drilling on the newly discovered YD West zone, just west of the currently known reserves at Young-Davidson, continues to achieve excellent results.

Hole YD11-234B, which was reported in June, returned 4.31 g/t gold over 79.6 m.  This intersection is located approximately 130 m above and 55 m east of Discovery Hole YD10-198, which returned 3.46 g/t over 79.5 m.  Together, these holes are amongst the highest grade-thickness intervals intersected to date on the property.  By the end of the second quarter, a total of seven holes have intersected the YD West zone and all but one has returned ore-grade intersections (see press release dated June 7, 2011).

These have been significant intersections as they demonstrate the continuity of the YD West Zone, which remains open up and down dip and to the west.

Two diamond drills will continue to explore the YD West zone until a sufficient number of intercepts have been obtained to estimate an initial resource.

The YD West zone appears to have excellent potential to add significant gold resources to the project.

Summarized Consolidated Results

Interim Condensed Consolidated Statements of Comprehensive Income

Thousands of US dollars,		Three Months Ended June 30				Six Months Ended June 30
except share and per share amounts, unaudited		2011		2010		2011		2010
Revenue		$ 67,416		$ 122,737		Products & Services | Jobs