Notes
Northgate Minerals Corporation (NXG) engages in mining and exploring gold and copper properties in Canada and Australia. The company has a 100% interest in the Kemess South open pit mine, and its associated infrastructure and mineral rights located in north-central British Columbia, as well as owns interests in the Young-Davidson property near Matachewan, Ontario. It also holds interests in the Fosterville mine, a gold mine situated in Bendigo, Melbourne; and the Stawell mine, an underground gold mine located in central Victoria, Melbourne. The company was founded in 1919. It was formerly known as Kirkland-Hudson Bay Gold Mines Limited and changed its name to Northgate Exploration Limited in 1958. Further, it changed its name to Northgate Minerals Corporation in 2004. Northgate Minerals Corporation is headquartered in Vancouver, Canada.http://www.northgateexploration.ca/
One of its mines, the Kemess mine, will deplete by the end of 2010. It account for 76% of gold production in the first quarter of 2008. So the company is spending money on acquisitions and exploration.
30JUL08 - $2.32
* Yahoo Stats:Market Cap (intraday): 592.20M
Enterprise Value (30-Jul-08): 596.74M
Forward P/E (fye 31-Dec-09): 5.25
PEG Ratio (5 yr expected): 0.14
Price/Sales (ttm): 1.72
Price/Book (mrq): 1.19
Enterprise Value/EBITDA (ttm): 9.977
On Dec. 31, 2007 book value was all tangible.
Since, then company has made an acquisition. It bought a Australian miner, Perseverance, for about $200 million. In the quarterly report, updated to March 31, the tangible book value has declined by about $50 million.
Also, it holds about $70 million in ARS, which lack liquidity, although the company says all interest payments are being received.
There are no currently outstanding preferred shares or warrants.
Thoughts: The main story here is the decline of the Kemess mine, and its replacement. If you believe the analysts, there will be no problem replacing it, since the PEG is a nice, low 0.14. ThatŐs obviously very speculative, given the circumstances. If true, or even remotely true, this stock is extremely undervalued.
23AUG08 - $1.72
From the most recent quarterly report:"Northgate Minerals Corporation recorded consolidated revenue of $138,880,000 in the second quarter of 2008, compared with consolidated revenue of $80,878,000 in the same period last year. Net earnings for the quarter were $1,085,000 or $0.00 per diluted common share, compared with net earnings of $8,647,000 or $0.03 per diluted common share during the corresponding quarter of 2007. Net earnings in the most recent quarter were lower than they are expected to be in future quarters due to the low gold output from the recently acquired Australian operations. The low output was combined with temporarily higher costs as Northgate implemented various improvement projects in order to rectify a number of production challenges, which were inherited from the previous owner. These projects are being undertaken to set the operations up for long-term success, and are now possible due to Northgate's strong financial position relative to the previous owner. Cash flow from operations after changes in working capital was $40,859,000 or $0.16 per common share compared with $43,685,000 or $0.17 per diluted common share during the second quarter of 2007.
"Second Quarter 2008 Highlights
- Total gold production of 83,561 ounces at Northgate's three operating mines at an average net cash cost of production of $423 per ounce of gold.
- Gold production for the Kemess South mine was 46,124 ounces at a net cash cost of $92 per ounce.
Northgate is invovled in the auction-rate securities debacle. From the recent conference call:
"The second area, which quite rightly generates significant questions is our auction rate security investments. Our ARS portfolio had a fair market value at the end of June of $52 million, compared to its original par value of $72.6 million. These investments are still illiquid, but the bonds continue to make regular cash interest payments, still carry investment grade ratings.
"At June 30, we still considered the impairment on our ARS portfolio to be temporary, and as a result the loss associated with it has been run through other comprehensive income.
"Also at June 30th, $44 million of the loan we have from Lehman Brothers who purchase these ARS investments for Northgate was still outstanding. On July 3, 2008 we filed the statement of claim with FINRA in New York. This claim lists Lehman Brothers and certain Lehman employees as respondents to the claim.
"The statement of claim requested that the FINRA arbitration panel award relief to Northgate. The Lehman's wrong for purchase of these auction rate securities to currently illiquid. Statement of claim also ask the FINRA panel to relief Northgate or any obligation to repay the loan that's currently outstanding from Lehman as part of the compensation for damages caused by Lehman's actions.
23AUG08 - $1.71
Market Cap (intraday): 436.81M
Enterprise Value (21-Aug-08): 413.87M
Trailing P/E (ttm, intraday): 10.18
Forward P/E (fye 31-Dec-09): 4.50
PEG Ratio (5 yr expected): 0.10
Price/Sales (ttm): 1.07
Price/Book (mrq): 0.84
Enterprise Value/Revenue (ttm): 1.02
Enterprise Value/EBITDA (ttm): 5.757
THOUGHTS
A PEG of 0.10 is unbelievably great if true. There are 5 analysts covering this company, and the average estimate is for profit growth of 45% over the next 5 years. There is a lot of uncertainty: the acquisition in Australia, and the decline of its major mine by the end of 2010.
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