Northgate Minerals Corporation

Northgate Minerals Corporation

February 25, 2005 12:49 ET

CORRECTION: Strong Fourth Quarter Caps Record Year For Northgate: 2004 Cash Flow Of $73 Million Generates $31 Million In Net Earnings


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: NORTHGATE MINERALS CORPORATION

TSX SYMBOL: NGX
AMEX SYMBOL: NXG

FEBRUARY 25, 2005 - 12:49 ET

CORRECTION: Strong Fourth Quarter Caps Record Year For
Northgate: 2004 Cash Flow Of $73 Million Generates $31
Million In Net Earnings

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Feb. 25, 2005) - The
following corrects and replaces the release sent on Feb. 24, 2005 at
22:09 ET. In the tables titled: Interim Consolidated Statements of
Operations, Interim Consolidated Statements of Retained Earnings
(Defecit), and Interim Consolidated Statements of Cash Flows, the header
should read "Twelve Months Ended", as opposed to "Nine Months Ended".
Also, in the final table regarding the fair value of share options, the
last column header should read "For Options Granted in Q1 2003", as
opposed to "For Options granted in Q1 2004". The complete and corrected
release follows.


(All figures in US dollars except where noted) - Northgate Minerals
Corporation (TSX:NGX)(AMEX:NXG) today reported cash flow from operations
before changes in working capital of $23,233,000 or $0.12 per common
share and net earnings of $12,205,000 or $0.06 per share for the fourth
quarter of 2004. Cash flow from operations for all of 2004 was
$72,890,000 or $0.36 per share and earnings were $31,255,000 or $0.16
per share.

Fourth Quarter and Full Year Highlights - 2004

- The Kemess mine had record quarterly production of 94,673 ounces of
gold and 23.9 million pounds of copper.

- Annual production was a record 303,475 ounces of gold and 78.3 million
pounds of copper.

- The net cash cost of gold production at the Kemess mine was $111 per
ounce, lowering year to date costs to $135 per ounce.

- Cash flow from operations in the quarter was $23,233,000 bringing the
2004 total to $72,890,000.

- Net earnings for the quarter were $12,205,000, increasing the 2004
earnings to $31,225,000.

Ken Stowe, President and CEO, stated; "As we had forecast, the fourth
quarter was an outstanding quarter in all regards. During 2004,
Northgate posted record cash flow and earnings based on the outstanding
operating performance at Kemess and buoyant prices for gold and copper.
In spite of this success, we have not become complacent and have
launched several new continuous improvement initiatives to improve the
operating efficiency of our mill and mine. At the same time, we added
additional ore to our reserve at Kemess South and completed the final
feasibility study for the Kemess North project. Kemess North has the
potential to keep our efficient, world class mining infrastructure
operating for many years to come and we are optimistic that there will
be significant progress on the permitting front for Kemess North in the
very near future."

RESULTS OF OPERATIONS

Northgate recorded net earnings of $12,205,000 or $0.06 per share in the
fourth quarter of 2004 compared with net earnings of $2,807,000 or $0.01
per share during the corresponding quarter of 2003. For the full year
2004, net earnings were $31,255,000 or $0.16 per share compared with
$3,991,000 or $0.02 in 2003. Cash flow from operations (before changes
in working capital) was $23,233,000 or $0.12 per share in the fourth
quarter of 2004 compared with cash flow of $11,064,000 or $0.06 per
share during the same quarter last year. For the full year 2004, cash
flow from operations (before changes in working capital) was $72,890,000
or $0.36 per share compared with $37,983,000 or $0.19 in 2003. Earnings
and cash flow during 2004 were significantly higher than they were in
2003 due to an 8% increase in metal sales and substantially higher
realized prices for gold and copper.

Earnings and cash flow figures for 2004 and 2003 reflect the retroactive
adoption of a required change in the Corporation's accounting policy for
revenue recognition. This change has the effect of delaying the
recognition of sales revenue from the time concentrate is produced at
the Kemess mill until Northgate receives a preliminary payment from the
buyer. Accordingly, revenue and the cost of sales reported in the
Corporation's financial statements for a specific period do not
correspond directly to metal production. The company also retroactively
adapted the required change in accounting policy for asset retirement
obligations. The Corporation has restated the 2003 comparative figures
for this change, so that the basis of presentation for 2003 is
consistent with that used for 2004. A summary of these changes can be
found in Note 1 to the attached financial statements.

Kemess Mine Performance

The Kemess mine posted record gold and copper production of 94,673
ounces and 23.9 million pounds respectively, in the fourth quarter of
2004. This record production was the result of record mill throughput
for hypogene ore of 52,136 tonnes per day combined with above-average
ore grades. Over the course of 2004, ore grades and quarterly metal
production varied considerably as different areas of the Kemess pit were
mined as scheduled. For the full year, the grade of ore milled was close
to the Kemess South reserve grade and metal production was consistent
with the forecast released by Northgate at the beginning of 2004.

During the fourth quarter of 2004, approximately 13.6 million tonnes of
ore and waste were removed from the open pit compared to 14.5 million
tonnes during the corresponding quarter of 2003. Unit mining costs
during the current quarter were Cdn$1.02 per tonne compared with
Cdn$0.87 per tonne in the fourth quarter of 2003. The mining cost in the
most recent quarter was higher than the 2004 annual average due to an
unusually large amount of mobile equipment maintenance work scheduled in
the quarter. The unit mining cost in the fourth quarter of 2003 was
unusually low due to the high amount of ore and waste that was removed
from the open pit as a result of slightly lower haul distances. For the
total 2004 year, mining costs averaged Cdn$0.93 per tonne compared with
Cdn$0.92 per tonne in 2003.

Mill availability during the fourth quarter of 2004 was 90% and
throughput averaged 52,136 tonnes per day, compared with 92%
availability and throughput of 49,830 tonnes per day in the fourth
quarter of 2003. While mill availability was slightly lower in the most
recent quarter than it was one year ago, the operational changes
implemented in the milling circuit in September allowed the mill to
process almost 5% more ore. For the full year, mill availability
averaged 90% compared with 91% in 2003.

Gold and copper recoveries averaged 70% and 84% respectively in the
fourth quarter of 2004 compared with 71% and 84% respectively in the
fourth quarter of 2003. All the ore processed in both periods was
hypogene ore with similar characteristics.

The total unit cost of production during the fourth quarter of 2004 was
Cdn$7.59 per tonne milled which was substantially higher than the
Cdn$6.85 per tonne milled recorded in the corresponding period of 2003.
Total site operating costs in the fourth quarter of 2004 were Cdn$36.4
million compared with Cdn$31.3 in the fourth quarter of 2003 and an
average of Cdn$32.4 during the first three quarters of 2004. Total site
operating costs in the fourth quarter of 2004 were higher due to
increased consumption and prices for grinding media, unusually high
maintenance costs for mobile equipment and the cost of operating two
additional haul trucks that were acquired during the quarter. The cash
cost of production at Kemess in the fourth quarter was $111 per ounce
bringing the average 2004 cash cost to $135 per ounce. Both these
figures represent records for the Kemess mine. Record copper production
and strong copper prices, which averaged $1.40 per pound for the fourth
quarter and $1.30 per pound for the full year, generated these excellent
results in spite of the strengthening Canadian dollar and the unusually
large amount of waste stripping (1.9:1 versus the life of mine average
of 1:1) that was completed during the year. Using the Gold Institute
methodology, which many other gold companies use, cash costs at Kemess
were $65 per ounce in the fourth quarter and $81 per ounce for the
entire year.

The following table provides a summary of operations for the fourth
quarter and full year of 2004 and the comparable periods of 2003.



2004 Kemess Mine Production

(100% of production basis) 4Q 04 4Q 03 2004 2003
---------------------------------------------------------------------

Ore plus waste mined
(tonnes) 13,637,789 14,480,180 56,000,000 53,872,000
Ore mined (tonnes) 4,831,968 5,466,208 19,329,000 18,633,000
Stripping ratio
(waste/ore) 1.82 1.65 1.90 1.88

Tonnes milled (ore) 4,796,471 4,584,324 18,589,662 18,632,837
Average mill operating
rate (tpd) 52,136 49,830 50,791 51,049

Gold grade (gmt) 0.876 0.744 0.735 0.702
Copper grade (%) 0.270 0.261 0.231 0.225

Gold recovery (%) 70 71 69 70
Copper recovery (%) 84 84 83 82

Gold production (ounces) 94,673 78,761 303,475 294,117
Copper production
(000's pounds) 23,856 22,165 78,291 76,177

Productivity measures:
Tonnes mined per shift
worked 842 880 826 803
Tonnes milled per shift
worked 280 293 290 281

Cash cost ($/ounce)
Full Absorption Method 111 185 135 219
Gold Institute Method 65 145 81 175
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---------------------------------------------------------------------


Safety performance at Kemess continued to improve in the fourth quarter
and by the end of 2004 the operation had worked 170 consecutive days
without a lost time accident. The initiatives implemented earlier in the
year by the renewed health and safety committee has played a large part
in achieving these improved results.

Financial Performance

Northgate's revenue in the fourth quarter of 2004 was $51,186,000
compared with $37,341,000 in the corresponding period in 2003. Both
these figures include the effect of the accounting policy change for
revenue recognition (see Note 1 to the financial statements). Metal
sales in the fourth quarter of 2004 consisted of 87,146 ounces of gold
and 20.6 million pounds of copper compared with 73,553 ounces of gold
and 19.3 million pounds of copper in the corresponding quarter of the
previous year. The net realized metal prices received on sales in the
fourth quarter of 2004 were approximately $402 per ounce of gold and
$1.40 per pound of copper compared with $364 per ounce and $0.93 per
pound in the fourth quarter of last year. In the fourth quarter of 2004,
the Corporation closed out 21,750 ounces of its gold forward sales
position, which reduced the realized price of gold sold during the
quarter by $32 per ounce compared to the close out of 20,000 ounces in
the fourth quarter of 2003 which reduced the realized price of gold by
$28 per ounce. Net realized prices for the full year were $387 per ounce
and $1.30 per pound for copper compared with $356 and $0.81 in the
corresponding periods of 2003.

The cost of sales in the fourth quarter of 2004 was $25,616,000 compared
with the corresponding period last year when the cost of sales was
$25,030,000. The cost of sales reported during both periods reflects the
changes in accounting policies for revenue recognition and asset
retirement obligations. As a result of the revenue recognition change,
the cost of sales that are reported during a quarter do not necessarily
correspond to the operating costs that were actually incurred in that
quarter because costs associated with concentrate production are
included in inventory until the associated revenue is recognized. For
the full year, the cost of sales was $103,722,000 compared with
$84,387,000 in 2003.

Administrative and general expenses were $1,816,000 in the fourth
quarter of 2004 compared with $902,000 in the comparable period of 2003.
Expenses in the fourth quarter included a $246,000 charge for winding up
an employee benefit plan that is no longer in use. For the full year
administrative and general costs were $6,083,000 compared with
$3,873,000 in 2003. Expenses during both periods of 2004 were higher
than they were in the corresponding periods of 2003 primarily as a
result of increased corporate activities and staffing.

Depreciation and depletion expenses in the fourth quarter were
$8,251,000, compared to $10,311,000 during the corresponding period of
2003. The depreciation and depletion expense for the most recent quarter
was lower primarily due to an 11% reduction in the amount of ore mined
from the open pit compared to one year ago as well as a slight decline
in the amortization rate that occurred as a result of the additional
reserves that were established at Kemess South in August. Amortization
of the Corporation's mineral property, plant and equipment is based on
the unit-of-production method as ore is mined from the Kemess South pit.
For the full year, depreciation was $36,160,000 compared with
$34,058,000 in 2003.

Net interest expense was $208,000 for the three months ended December
31, 2004 compared to $604,000 in the corresponding quarter of 2003. The
decrease in net interest expense in the most recent quarter is the
result of increased interest income derived from the Corporation's
increased cash reserves combined with the continued reduction of
long-term debt. In 2004, the total net interest expense was $3,049,000
compared with $3,611,000 in 2003.

Exploration expenses in the fourth quarter were $450,000 compared with
$120,000 in the comparable period of 2003. The higher exploration
expense in the most recent quarter was the result of diamond drilling
program that extended later into the fall than it had in the previous
year. Exploration expenditures for the full year amounted to $3,134,000
compared with $3,408,000 in 2003.

Capital expenditures during the fourth quarter of 2004 totaled
$6,940,000 compared to $3,563,000 in the corresponding period of 2003.
Capital expenditures in the most recent quarter included $1,280,000 for
the completion of flotation cell retrofit in the Kemess mill, $3,234,000
for the purchase of two additional haul trucks and $918,000 related to
feasibility study work on the Kemess mine expansion project (Kemess
North). The two trucks represent the final addition to the Kemess South
haulage fleet to achieve the Kemess South life-of-mine plan. Due to a
large increase in mining productivity over the past few years, the
ultimate haulage truck requirement was reduced by one truck from the
original life of mine plan. The balance of the capital in the current
quarter was dedicated to the seasonal construction of the tailings dam.
In the fourth quarter of 2003, the capital expenditures related
primarily to construction of the tailings dam, the Kemess North
pre-feasibility study and the construction of a small bridge along the
main access road to the mine. Capital expenditures during all of 2004
totaled $24,016,000 compared with a total of $16,621,000 in 2003.

Changes to Accounting Policies

On January 1, 2004, the Corporation retroactively adopted accounting
policy changes related to revenue recognition and asset retirement
obligations (site closure and reclamation costs), as a result of changes
to Canadian generally accepted accounting principles ("GAAP"). These
changes are discussed in Note 1 of the Corporation's fourth quarter
consolidated financial statements.

KEMESS NORTH UPDATE

For the past several months, Northgate has been awaiting a formal
announcement from the Federal and Provincial governments on the Draft
Agreement for the Joint BC/Canada Panel Review of the Kemess North
Project. This announcement will signal the commencement of the
harmonized environmental review of the project and lay out specific
timelines for the different phases of the review. Northgate estimates
that once the environmental review process commences, it will take
between 10-12 months to complete. Northgate has been advised that an
announcement is imminent, which would see the process completed in early
2006, allowing a development decision to be made in the second quarter
of 2006. Northgate wishes to acknowledge the considerable efforts of the
British Columbia Government to date.

CONFERENCE CALL AND WEBCAST OF 2004 ANNUAL FINANCIAL RESULTS

You are invited to participate in the Northgate Minerals Corporation
live conference call and webcast discussing our 2004 financial results.
The call and webcast will take place on Friday, February 25, 2005, at
10:00 am ET. Northgate's 2004 financial results will be released the
evening of February 24, 2005 and the presentation package for the
conference call will be uploaded for the webcast the morning of February
25 and posted on Northgate's web site at www.northgateminerals.com under
Investor Info - Presentations page.

Webcast:

To view the webcast, go to www.northgateminerals.com and follow the link
on the home page that says "webcast". Before viewing the webcast, please
ensure that your system meets the Minimum System Requirements and that
you have installed Windows Media Player. If you do not have high-speed
internet access, please download the PDF version of our Management
Presentation and follow along with the audio broadcast.

Teleconference:

You may participate in the Northgate Conference Call by calling
416-695-9757 or toll free in North America at 1-877-461-2814 with
reservation number T543353S. To ensure your participation, please call
five minutes prior to the scheduled start of the call. The archived
teleconference may be accessed for 90 days by dialing 416-641-2127 or
1-877-296-3930 with reservation number 3353.

Northgate Minerals Corporation is a gold and copper mining company
focused on operations and opportunities in the Americas. The
Corporation's principal assets are the 300,000-ounce per year Kemess
mine in north-central British Columbia and the adjacent Kemess North
deposit, which contains a Proven and Probable Reserve of 4.1 million
ounces of gold. Northgate is listed on the Toronto Stock Exchange under
the symbol NGX and on the American Stock Exchange under the symbol NXG.

Forward-Looking Statements

This news release includes certain "forward-looking statements" within
the meaning of section 21E of the United States Securities Exchange Act
of 1934, as amended. These forward-looking statements include estimates,
forecasts, and statements as to management's expectations with respect
to, among other things, future metal production and production costs,
potential mineralization and reserves, exploration results, progress in
the development of mineral properties, demand and market outlook for
commodities and future plans and objectives of Northgate Minerals
Corporation (Northgate). Forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may,"
"will," "expect," "intend," "estimate," "anticipate," "believe," or
"continue" or the negative thereof or variations thereon or similar
terminology. Forward-looking statements are necessarily based upon a
number of estimates and assumptions that, while considered reasonable by
management are inherently subject to significant business, economic and
competitive uncertainties and contingencies. There can be no assurance
that such statements will prove to be accurate and actual results and
future events could differ materially from those anticipated in such
statements. Important factors that could cause actual results to differ
materially from Northgate's expectations are disclosed under the heading
"Risk Factors" in Northgate's 2003 Annual Report and under the heading
"Trends, Risks and Uncertainties" in Northgate's 2003 Annual Information
Form (AIF) both of which are filed with Canadian regulators on SEDAR
(www.sedar.com) and with the United States Securities and Exchange
Commission (www.sec.gov). Northgate expressly disclaims any intention or
obligation to update or revise any forward-looking statements whether as
a result of new information, future events or otherwise.



NORTHGATE MINERALS CORPORATION

INTERIM CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States dollars)

December 31 December 31
2004 2003
---------------------------------------------------------------------
(Unaudited) (Restated)
ASSETS
Current assets
Cash and cash equivalents $ 49,257 $ 7,743
Concentrate settlements and other
receivables 11,300 13,051
Inventories 12,906 12,200
---------------------------------------------------------------------
73,463 32,994

Other assets 13,649 15,476
Mineral property, plant and equipment 180,669 189,964
---------------------------------------------------------------------
$ 267,781 $ 238,434
---------------------------------------------------------------------
---------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 16,091 $ 15,219
Current portion of capital lease obligations 4,854 3,566
Current portion of long-term debt 21,000 12,000
---------------------------------------------------------------------
41,945 30,785

Capital lease obligations 10,653 9,554
Long-term debt 22,500 43,500
Provision for site closure and reclamation 21,149 15,983
---------------------------------------------------------------------
96,247 99,822

Shareholders' equity (Note 2) 171,534 138,612
---------------------------------------------------------------------
$ 267,781 $ 238,434
---------------------------------------------------------------------
---------------------------------------------------------------------

The accompanying notes form an integral part of these financial
statements.


INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in thousands of United States dollars,
except per share amounts)

Three months ended Twelve months ended
December 31 December 31
(Unaudited) 2004 2003 2004 2003
--------------------------------------------------------------------
(Restated) (Restated)

Revenue (note 1) $ 51,186 $ 37,341 $ 188,952 $ 131,423
---------------------------------------------------------------------

Cost of sales 25,616 25,030 103,722 84,387
Administrative and
general 1,816 902 6,083 3,873
---------------------------------------------------------------------
27,432 25,932 109,805 88,260
---------------------------------------------------------------------

Earnings before
interest, taxes,
depreciation &
depletion & other
expenses 23,754 11,409 79,147 43,163
Other expenses:
Depreciation and
depletion 8,251 10,311 36,160 34,058
Accretion of site
closure & reclamation
liability 238 143 894 572
Net interest 208 604 3,049 3,611
Exploration 450 120 3,134 3,408
Currency translation
losses (gains) 403 (410) 92 (1,089)
Mining and capital taxes 769 468 2,277 1,420
Other (income) expense (195) -- (348) (193)
Non-controlling interest -- -- -- 19
---------------------------------------------------------------------
10,124 11,236 45,258 41,806
---------------------------------------------------------------------
Earnings before income
taxes 13,630 173 33,889 1,357
Future income tax
recovery (expense) (1,425) 2,634 (2,634) 2,634
---------------------------------------------------------------------
Earnings for the
period $ 12,205 $ 2,807 $ 31,255 $ 3,991
---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings per share
- basic & diluted $ 0.06 $ 0.01 $ 0.16 $ 0.02
---------------------------------------------------------------------
---------------------------------------------------------------------

Weighted average shares
outstanding:
Basic 200,472,671 198,735,220 200,065,821 197,712,564
Diluted 200,812,618 200,161,973 200,567,253 198,621,170
---------------------------------------------------------------------
---------------------------------------------------------------------


INTERIM CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
(Expressed in thousands of United States dollars)

Three months ended Twelve months ended
December 31 December 31
(Unaudited) 2004 2003 2004 2003
--------------------------------------------------------------------
(Restated) (Restated)

Retained earnings
(deficit) at
beginning of period
As previously
reported $ (27,415) $ (48,977) $ (39,457) $ (48,522)
Adjustment for
retroactive change
in accounting for
asset retirement
obligations (Note 1) -- (1) (296) 875
Adjustment for
retroactive change
in accounting for
revenue recognition
(Note 1) -- (294) (6,712) (2,809)
--------------------------------------------------------------------

Retained earnings
(deficit) at
beginning of period
as restated (27,415) (49,272) (46,465) (50,456)

Earnings for the period 12,205 2,807 31,255 3,991
--------------------------------------------------------------------
Retained earnings
(deficit) at end of
period $ (15,210) $ (46,465) $ (15,210) $ (46,465)
--------------------------------------------------------------------
--------------------------------------------------------------------
The accompanying notes form an integral part of these financial
statements.


INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of United States dollars)

Three months ended Twelve months ended
December 31 December 31
(Unaudited) 2004 2003 2004 2003
--------------------------------------------------------------------
(Restated) (Restated)

CASH PROVIDED BY
(USED IN)
Operations
Earnings for the
period $ 12,205 $ 2,810 $ 31,255 $ 3,991
Non-cash items:
Depreciation and
depletion 8,251 10,311 36,160 34,058
Non-controlling interest -- -- -- 19
Accretion of site
closure & reclamation
liability 238 143 894 572
Unrealized currency
translation losses
(gains) 865 203 406 858
Amortization of deferred
expenses 249 231 934 871
Stock-based compensation -- -- 512 248
Future income tax
(recovery) expense 1,425 (2,634) 2,634 (2,634)
Other losses -- -- 95 --
--------------------------------------------------------------------
23,233 11,064 72,890 37,983
Changes in non-cash
operating working
capital:
Concentrate settlements
& other receivables 2,843 (5,748) 1,751 (5,135)
Inventories (4,665) 440 (706) (3,511)
Accounts payable &
accrued liabilities 792 1,464 872 (436)
--------------------------------------------------------------------
22,203 7,220 74,807 28,901
--------------------------------------------------------------------
Investments
Other assets (819) (760) (819) (689)
Additions to mineral
property, plant
& equipment (4,244) (3,563) (17,518) (12,914)
--------------------------------------------------------------------
(5,063) (4,323) (18,337) (13,603)
--------------------------------------------------------------------
Financing
Repayment of capital
lease obligations (1,023) (766) (4,111) (3,133)
Repayment of debt (3,000) (2,250) (12,000) (9,000)
Issuance of common shares,
net of share issuance
costs 39 75 1,155 177
--------------------------------------------------------------------
(3,984) (2,941) (14,956) (11,956)
--------------------------------------------------------------------
Increase (decrease) in
cash and cash
equivalents 13,156 (44) 41,514 3,342
Cash and cash equivalents
at beginning of period 36,101 7,787 7,743 4,401
--------------------------------------------------------------------
Cash and cash equivalents
at end of period $ 49,257 $ 7,743 $ 49,257 $ 7,743
--------------------------------------------------------------------
--------------------------------------------------------------------
Supplementary information:
Cash paid during the
period for:
Interest $ 357 $ 463 $ 2,990 $ 2,558
Income taxes $ -- $ -- $ -- $ --
Non cash financing
activities:
Issuance of common
shares for acquisition
of non-controlling
interest in Kemess
Mines Ltd. $ -- $ -- $ -- $ 6,790
Purchase of mineral
property, plant &
equipment by assumption
of capital lease
obligations $ 2,696 $ -- $ 6,498 $ 3,707
--------------------------------------------------------------------
The accompanying note forms an integral part of these financial
statements


NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Twelve months ended December 31, 2004 and 2003
(Dollar amounts in tables are expressed in thousands
of United States dollars unless indicated) (Unaudited)


1. Basis of Presentation

The accompanying unaudited interim consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles in Canada ("Canadian GAAP"). They do not include all the
disclosures required by generally accepted accounting principles for
annual financial statements and should be read in conjunction with the
Corporation's consolidated financial statements and the notes thereto
included in the Corporation's Annual Report for the year ended December
31, 2003. In the opinion of management, all adjustments considered
necessary for fair presentation have been included in these financial
statements.

These financial statements are prepared using the same accounting
policies and methods of application as those disclosed in Note 2 to the
Corporation's consolidated financial statements for the year ended
December 31, 2003, with the exception of policy changes related to
revenue recognition and site closure and reclamation costs which were
adopted effective January 1, 2004 as a result of changes to Canadian
GAAP.

Revenue recognition

Prior to January 1, 2004, Canadian GAAP for mining companies permitted
the recognition of revenue upon production of concentrate. Under
Emerging Issues Committee Abstract 141 ("EIC-141"), which for the
Corporation is effective January 1, 2004, the recognition of sales
revenue under Canadian GAAP was harmonized with US GAAP. Effective
January 1, 2004, the Corporation retroactively adopted the change in
accounting policy for revenue recognition. Revenue from sale of the
Corporation's concentrate is now recorded when pervasive evidence of an
arrangement exists, delivery has occurred and the sales price is fixed
and determinable. Under the Corporation's current concentrate sales
contract these conditions are fulfilled upon receipt of provisional
payment from the buyer typically within seven days of the date that
concentrate is loaded into railcars for shipment to the receiving
smelter. Prices used for provisionally priced sales are based on market
prices prevailing at the time of shipment and are adjusted based upon
market prices until final settlement with the buyer pursuant to the
terms of the sales contract. Adoption of EIC-141 resulted in a decrease
in inventory and an increase in the deficit of $6,712,000 as at December
31, 2003. The impact on the three months ending December 31, 2003 was a
decrease in revenue of $5,769,000, an increase in the cost of sales of
$575,000, an increase in currency translation gain of $3,000 and an
increase in the opening deficit of $294,000. The impact on the year
ending December 31, 2003 was a decrease in revenue of $6,429,000, a
decrease in the cost of sales of $2,526,000 and a decrease in opening
deficit of $2,809,000.

Site closure and reclamation costs

Effective January 1, 2004, the Corporation adopted the CICA's Handbook
section 3110, "Asset Retirement Obligations" ("HB 3110"). Under this new
standard, the recognition, measurement and disclosure of liabilities
related to the retirement of tangible long-lived assets under Canadian
GAAP have been harmonized with US GAAP. HB 3110 requires the recognition
of any statutory, contractual or other legal obligation, related to the
retirement of tangible long-lived assets when such obligations are
incurred, if a reasonable estimate of fair value can be made. These
obligations are measured initially at fair value and the resulting costs
capitalized into the carrying value of the related asset. In subsequent
periods, the liability is adjusted for the accretion of the discount and
any changes in the amount or timing of the underlying future cash flows.
The asset retirement cost is amortized to income over the life of the
asset. Prior to the adoption of HB 3110, the Corporation accounted for
reclamation and closure costs according to provisions of Section 3061,
"Property, Plant and Equipment" of the CICA Handbook and accrued the
amount associated with the retirement of tangible long-lived assets as a
charge to results from operations over the life of the mine using the
unit-of-production method. The Corporation adopted HB 3110 retroactively
with restatement of prior periods presented. Adoption of HB 3110
resulted in an increase in mineral property, plant and equipment of
$2,770,000, an increase in provision for site closure and reclamation of
$3,065,000 and an increase in opening deficit of $295,000 as of January
1, 2004. In addition, for the quarter ending December 31, 2003, adoption
of HB 3110 resulted in a decrease in cost of sales of $77,000, an
increase in depreciation and depletion of $138,000, and increase in
accretion of site closure and reclamation costs of $143,000 and a
decrease in foreign currency translation gain of $88,000. For the year
ending December 31, 2003, adoption of HB 3110 resulted in a decrease in
cost of sales of $308,000, an increase in depreciation and depletion of
$552,000, an increase in accretion of site closure and reclamation costs
of $572,000 and a decrease in foreign currency translation gain of
$355,000.

The continuity of the provision for site closure and reclamation costs
for the year ended December 31, 2004 is as follows:



---------------------------------------------------------------------
---------------------------------------------------------------------
Balance, December 31, 2003, as previously reported $ 12,918
Effect of change in accounting policy 3,065
---------------------------------------------------------------------
Balance, December 31, 2003, as restated 15,983

Q1 2004

Liabilities incurred in the period 173
Accretion expense 220
Effect of foreign exchange (217)

Q2 2004

Liabilities incurred in the period 168
Accretion expense 213
Effect of foreign exchange (354)

Q3 2004

Liabilities incurred in the period 175
Accretion expense 222
Effect of foreign exchange 994

Q4 2004

Liabilities incurred in the period 2,416
Accretion expense 238
Effect of foreign exchange 918
---------------------------------------------------------------------
---------------------------------------------------------------------
Balance, December 31, 2004 (unaudited) $ 21,149
---------------------------------------------------------------------
---------------------------------------------------------------------


The expected site closure costs used in the determination of this
provision total $28.2 million, which is expected to be spent over a
period of three years beginning in 2009 after the reserves at Kemess
South are depleted. The credit-adjusted risk free rate at which the
estimated future cash flows have been discounted is 5.625%.



2. Shareholders' Equity

---------------------------------------------------------------------
---------------------------------------------------------------------
December 31 December 31
2004 2003
---------------------------------------------------------------------
(Unaudited) (Restated)

Common shares (a) $ 177,464 $ 176,179
Common share purchase warrants 8,613 8,613
Contributed surplus (b) 667 285
Retained earnings (deficit) (15,210) (46,465)
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$ 171,534 $ 138,612
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---------------------------------------------------------------------

(a) Common shares

---------------------------------------------------------------------
---------------------------------------------------------------------
Number of shares Amount
---------------------------------------------------------------------

Balance, December 31, 2003 198,759,915 $ 176,179

Issued in Q1 2004:
On exercise of share purchase warrants 1,500,000 949
On exercise of options 47,100 52
Issued in Q2 2004:
On exercise of options 4,000 6
Issued in Q3 2004:
On exercise of options 152,000 110
Issued in Q4 2004:
On exercise of options 8,000 5
Pursuant to Employee Share Purchase Plan 20,035 34
Reclass Fair Value of Exercised Option
from Contributed Surplus 129

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Balance, December 31, 2004 (unaudited) 200,491,050 $ 177,464
---------------------------------------------------------------------
---------------------------------------------------------------------


As of February 24, 2004 the Corporation had 200,507,855 issued and
outstanding common shares.

(b) Stock-based compensation

During the three months ended December 31, 2004, the Corporation did not
grant any options to employees. During the three months ended September
30, 2004, the Corporation granted 25,000 options to employees
exercisable at Cdn$2.38 for seven years. Five thousand (20%) of these
options vested immediately, with the balance vesting in equal amounts on
the anniversary date of the grant over the next four years. During the
three months ended June 30, 2004, the Corporation granted 55,000 options
to employees exercisable at Cdn$2.49 for seven years and 150,000 options
to employees exercisable at Cdn$2.21 for seven years. 41,000 (20%) of
these options vested immediately, with the balance vesting in equal
amounts on the anniversary date of the grant over the next four years.
During the three months ended March 31, 2004, the Corporation granted
1,240,000 options to employees exercisable at Cdn$2.88 for seven years.
238,000 (20%) of these options vested immediately, with the balance
vesting in equal amounts on the anniversary of the grant date over the
next four years. No options vested in the three months ended December
31, 2004. For the twelve months ended December 31, 2004 stock-based
compensation was $512,000.

At December 31, 2004, there were 3,291,200 options outstanding of which
1,185,300 were exercisable.

The fair value of the share options granted during each quarter of 2004
was estimated using the Black-Scholes pricing model with the following
assumptions:



For For For For
Options Options Options Options
Granted Granted Granted Granted
in Q4 in Q4 in Q3 in Q3
2004 2003 2003 2003
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Risk-free interest rate -- -- 2.50% 2.50%
---------------------------------------------------------------------
Annual dividends -- -- -- --
---------------------------------------------------------------------
Expected stock price
volatility -- -- 61% 54%
---------------------------------------------------------------------
Expected option life -- -- 4 years 3 years
---------------------------------------------------------------------
Per share fair value of
options granted (Cdn$) -- -- $ 1.09 $ 0.51
---------------------------------------------------------------------


For For For For
Options Options Options Options
Granted Granted Granted Granted
in Q2 in Q2 in Q1 in Q1
2004 2003 2004 2003
---------------------------------------------------------------------

Risk-free interest rate 2.50% 2.50% 2.50% 2.50%
---------------------------------------------------------------------
Annual dividends -- -- -- --
---------------------------------------------------------------------
Expected stock price
volatility 64% 54% 67% 63%
---------------------------------------------------------------------
Expected option life 4 years 3 years 4 years 3 years
---------------------------------------------------------------------
Per share fair value of
options granted (Cdn$) $ 1.08 $ 0.56 $ 1.51 $ 0.85
---------------------------------------------------------------------


3. Financial Instruments

At December 31, 2004, Kemess Mines Ltd., a wholly owned subsidiary of
the Corporation, had forward sales commitments with major financial
institutions to deliver 261,000 ounces of gold at an average forward
price of $307 per ounce. These forward sales commitments are in the form
of forward sales contracts maturing between January 27, 2005 and
December 31, 2007. The unrealized loss on these forward sales contracts
at December 31, 2004 was approximately $37,376,000.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Northgate Minerals Corporation
    Mr. Ken G. Stowe
    President and Chief Executive Officer
    (416) 216-2772
    or
    Northgate Minerals Corporation
    Mr. Jon A. Douglas
    Senior Vice President and Chief Financial Officer
    (416) 216-2774
    www.northgateminerals.com