Chapter 15- Northgate Minerals enjoys successful fourth quarter

Summary:
Northgate Minerals has earned revenue of $41.5 million with a net income of $27.9 million during the fourth quarter. This company also produced 80,753 ounces of gold and 11.8 million pounds of copper with an average cost of $537 per ounce of gold. They then sold 78,015 ounces of gold for $1,181 per ounce and 10.4 million pounds of copper for $3.54 per pound. In total, Northgate has earned revenue of $186.2 million and a net income of $73.2 million during year 2009. They produced a record of 362,398 ounces of gold during this year. As for the expenses, the average cost of the whole year was $477 per ounce. By the end of the year, Northgate had a cash balance of $235.5 million. They then extended the mine life Kerness South by one year and allowed $2.6million for the exploration at the Young Davidson mine. This budget goes towards funding the extensive drillings required for the exploration at this new mine. Young Davidson is said to have a 15 year mine life and is able to provide Northgate with 180,000 ounces of gold per year which is around revenue of $1.2billion. This mine is expected to start running in 2012.

Connections:
Ratios are used in chapter 15.3 which could be used for this company too. The ratio that relates to this chapter is rate of return on net sales. It is shown on the textbook that rate of return on net sales is equal to net income divided by net sales times 100. This would make Northgate’s rate of return on net sales 67.2% for the fourth period and 39.3% for the whole year. The textbook also mentioned that comparing this figure with other years gives an indication of how well a company is performing. Although the fourth period is still part of the whole year, it is obvious that Northgate has done better than any other quarter during the fourth quarter with a high rate of return on net sales of 67.2%.


Reflection:
Over the past year, I have seen many companies that did bad during the recession in my Money Management class. Just last week, when everyone did a accounting presentation companies, it is obvious that most of them were barely surviving. Therefore I am positive that Northgate has been a really successful company over the past years and it is a promising stock to invest in. However I believe that this company will struggle a little for the next half year due to the construction of the Young Davidson mine. This mine has excellent growth potential and could end up making this company a lot of money. However they would need to borrow loans and accumulate a lot more expenses in order to get this mine set up. Therefore I think it would not be wise to invest in this company yet until the Young Davidson mine is up and running.

http://www.northernnews.ca/ArticleDisplay.aspx?e=2504816