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Tuesday, August 10, 2010

Northgate Minerals (AMEX:NXG) Crushed on Costs, Production

You know a gold miner is in trouble when they can't produce in the type of rising gold price environment we've been in, and that doesn't bode well for Northgate Minerals (AMEX:NXG) (TSE:NGX), which did just that in the latest quarter.

Higher gold prices couldn't overcome the production problems at two of the company's mines, or the rising costs associated with them.

Their Kemess mine in British Columbia, Canada and the Stawell mine in Australia fell in production during the quarter, causing gold sales to plummet 34 percent to 65,943 ounces.

Earnings plunged from $5.4 million, or 2 cents a share last year, to $4.3 million, or 1 cent a share in the latest quarter

Not including an unrealized gain, the company loast $7.1 million, or 2 cents a share. Last year Northgate had a profit of $10.1 million, or 4 cents a share excluding items.

Revenue in the quarter also dropped, falling to $122.7 million, a decline of 5.8 percent.

The real story for the latest quarter for Northgate was its inability to manage costs, which skyrocketed to $693 an ounce, an almost 50 percent gain over last year.

This is the primary reason why they couldn't grow in about as good as a gold price environment a gold mining company could ask for.

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