Key Performance Indicators
A summary of the key performance indicators for the past three years is shown in the table below.
Total revenues in 2008 were 37% higher than they were in 2007, despite a 25% decline in gold and copper production at Kemess, as a result of higher gold prices and the inclusion of production from Fosterville and Stawell in Australia. Total revenues declined in 2007 from 2006 due primarily to lower metal sales from Kemess, which was only partially offset by higher metal prices.
Northgate recorded consolidated net earnings of $10,720,000 or $0.04 per diluted common share for the year ended December 31, 2008, compared with net earnings of $39,425,000 or $0.15 per diluted common share in the same period last year. Net earnings in the current year included an other than temporary impairment on auction rate securities ("ARS") investments of $20,310,000, while 2007 net earnings include a $31,433,000 noncash write-down of the Kemess North property. Net earnings for 2008 also includes future income tax expense of $24,489,000 relating to the reversal of a future tax asset recorded in 2007 when the consensus forward price of copper was in excess of $3.00 per pound. The tax expense also reflects the future tax impact of Northgate's copper forward sales portfolio, which was in a significant asset position at year-end. Net earnings of $39,425,000 in 2007 were dramatically lower than in 2006 due primarily to lower metal sales from Kemess, the increased activity at Young-Davidson and the write-down of the Kemess North property.
Per share data is based on the weighted average diluted number of shares outstanding of 255,453,093, 255,257,756 and 222,892,929 in 2008, 2007 and 2006, respectively.
Total assets declined to $591,629,000 in 2008 from $634,589,000 in 2007. This decline resulted from the revaluation of Northgate's ARS investments and the decrease in future tax assets. In 2007, total assets increased from the 2006 value of $515,631,000, primarily as a result of the cash generated in that year. Total long-term liabilities, which consist mainly of capital lease obligations, provision for site closure reclamation obligations and future income tax liabilities, decreased 3% to $61,778,000 in 2008. As the price of copper closed the year at $1.28 per pound, Northgate's copper forward sales contracts, previously recorded in a net loss position in 2007, reversed and were recorded as an asset in 2008. Furthermore, the total provision for site closure and reclamation decreased year over year in spite of the acquired obligations of the Fosterville and Stawell mines, due to the increase in value of the US dollar relative to the Canadian and Australian dollars. The decrease in liabilities was diminished by an increase in future tax liabilities resulting primarily from the tax effect of the significant gain in Northgate's copper sales portfolio. In 2007, total long-term liabilities increased approximately 47% as a result of the unfavourable movement in the value of Northgate's copper forward sales contracts and revisions in the reclamation plan related to the Kemess mine.
Over the past five years, Kemess has produced an average of 265,000 ounces of gold and 70.6 million pounds of copper annually. Metal production peaked at Kemess in 2006 and has declined significantly since then due to declining ore grades as the mine approaches the end of its reserve life in late 2010. In 2008, Kemess produced 185,162 ounces of gold and 51.9 million pounds of copper and is forecasting production of 173,000 ounces of gold and 54.0 million pounds of copper in 2009.
Gold production increased year-over-year, resulting from the acquisition of the Fosterville and Stawell mines on February 18, 2008. During the year, Fosterville produced 66,959 ounces of gold and Stawell produced 102,679 ounces of gold. In 2009, Fosterville and Stawell are forecasting production of 112,000 and 107,000 ounces of gold, respectively.
A commonly used performance metric in the gold mining industry is the net cash cost to produce an ounce of gold (see non-GAAP measures on page 45). This metric is calculated by subtracting the net by-product revenues from non-gold metals from the actual cash cost of production. For the first three quarters of the year, the Canadian dollar had maintained relative parity with the US dollar, but moved back towards historical averages in the final quarter of 2008 in conjunction with the downturn in the world economy and declines in commodity prices. Although the costs of mining and milling inputs such as diesel fuel, steel grinding balls and labour escalated dramatically in the three years prior to the decline in commodity prices that occurred in the second half of 2008, the net cash cost of gold production at Kemess was actually below zero in 2007 and 2006 due to strong copper prices, which more than offset the adverse effects of rising input costs and the strengthening Canadian dollar. In 2008, the rapid decline in copper prices in the second half of the year, combined with lower ore grades, increased the net cash cost of production to $271 per ounce. In 2009, the combined effect of declining ore grades, the weaker Canadian dollar and declining prices for fuel and steel are expected to yield a net cash cost of $517 per ounce at Kemess.
In Australia, the net cash cost of production in 2008 was $831 per ounce at Fosterville and $555 per ounce at Stawell. Cash costs in 2009 are expected to decline to an average of $417 for these two mines as a result of operational improvements and the steep decline in the value of the Australian dollar relative to the US dollar. The Australian dollar peaked in 2008 at US$/A$0.979 and declined to $0.70 by the end of the year as commodity prices declined and the world economy slipped into recession.