Northgate Minerals Corporation: Exhibit 99.1

Management’s Discussion and Analysis (“MD&A”) provides a review and analysis of the performance of Northgate Minerals Corporation (“Northgate” or the “Corporation”) over the past two years, highlighting various trends and issues. Risks that can be expected to impact future operations are also discussed. These issues and risks may cause actual results to differ materially from those described in forward-looking statements contained in the MD&A. Where used, the words “anticipate”, “expect”, “intended”, “forecast”, “should”, and similar expressions are intended to identify forward-looking statements.

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, except as required by applicable law.

This MD&A of the results of operations and liquidity and capital resources of Northgate for the 2010 and 2009 fiscal years should be read in conjunction with the consolidated financial statements and related notes. All the financial information presented herein is expressed in United States (“US”) dollars, unless otherwise stated. Financial information presented in tables is expressed in thousands of US dollars, unless otherwise indicated. The accompanying consolidated financial statements and related notes are presented in accordance with Canadian generally accepted accounting principles (“GAAP”). These statements, together with this MD&A dated March 28, 2011, are intended to provide shareholders with a reasonable basis for assessing the operational and financial performance of Northgate, as well as certain forward-looking statements relating to Northgate’s potential future performance. Additional information can be found in Northgate’s Annual Information Form (“AIF”), which is filed with the Canadian Securities regulatory authorities on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and Northgate’s annual report on Form 40-F, which is filed with the US Securities and Exchange Commission (“SEC”) at www.sec.gov.

Northgate is a leading gold and copper producer with mining operations, development projects and exploration properties in Canada and Australia. Its principal assets are the Fosterville and Stawell Gold mines in Victoria, Australia, the Kemess South mine in north-central British Columbia and the Young-Davidson development property in northern Ontario. Northgate’s common shares trade on the Toronto Stock Exchange under the symbol NGX and on the NYSE Amex under the symbol NXG.

A summary of the key performance indicators for the past three years is shown in the table below.

Total revenues in 2010 were consistent with 2009, driven by a 26% increase in the price of gold and a 46% increase in the price of copper, which offset lower metal sales. A loss of $13,768,000 was recognized in revenue for the year ended December 31, 2010 (2009 – $37,674,000) for the change in fair value of outstanding copper forward sales contracts. Total revenues increased in 2009 from 2008 due to increased gold sales and higher gold prices.

Northgate recorded a net loss of $71,704,000 or $0.25 per diluted common share in 2010, which includes a $76,936,000 impairment recorded against the carrying value of long-lived assets at Fosterville (refer to discussion in Fosterville Gold Mine Performance section below) and a $3,475,000 write-down of certain exploration tenements in Australia. Northgate’s net earnings in 2010 included an income tax expense of $15,732,000, $12,727,000 attributable to its Canadian operations and $3,005,000 attributable to its Australian operations. The Corporation was not cash taxable in 2010. Northgate’s net loss in 2009 of $49,506,000 or $0.19 per diluted common share included an impairment of $83,486,000 recorded against the carrying value of long-lived assets at Fosterville and an other than temporary impairment of $10,979,000 on its investments in auction rate securities (“ARS”). The net loss in 2009 included an income tax expense of $6,719,000 attributable entirely to its operations in Canada. Net earnings of $10,720,000 in 2008 included an income tax expense of $29,750,000 due primarily to the reversal of a future income tax (“FIT”) asset related to British Columbia mineral taxes, which had been recognized in 2007 when the consensus forward price of copper was in excess of $3.00 per pound. The tax expense also reflected the FIT of Northgate’s copper forward sales portfolio, which was in a significant asset position at the end of 2008.

Per share data is based on the weighted average diluted number of shares outstanding of 290,922,452, 264,603,527 and 255,453,093 in 2010, 2009 and 2008, respectively. As of March 28, 2011, the Corporation had 291,899,281 issued and outstanding common shares and 9,228,200 outstanding stock options.

Total assets increased to $905,484,000 in 2010 from $741,679,000 in 2009. This increase resulted primarily from a higher cash and cash equivalent balance arising from cash flow from operations of $87,285,000 and the proceeds from Northgate’s October 2010 convertible senior notes offering, which was partially used for capital development during the year. This increase was partially offset by an impairment recorded against the carrying value of long-lived assets at Fosterville. Total assets also increased from 2009 as a result of the stronger Australian and Canadian dollars versus the US dollar. In 2009, total assets increased from the 2008 value of $591,629,000 primarily as a result of strong cash flow from operations and the proceeds from Northgate’s September 2009 equity offering, which was partially offset by an impairment recorded against the carrying value of long-lived assets at Fosterville.

Total long-term liabilities consist mainly of long-term debt, provision for site closure and reclamation costs and FIT liability. Total long-term liabilities increased by $143,957,000 to $181,597,000 in 2010, mainly as a result of the Corporation’s issuance of convertible senior notes in October 2010. The convertible senior notes were accounted for as a compound financial instrument with the debt component recorded in liability and the conversion feature recorded in shareholders’ equity. The debt component as of December 31, 2010 was $131,235,000. The non-current FIT liability of $11,343,000 as of December 31, 2010 was mainly the result of the temporary difference related to the development spending on the Young-Davidson project, which are capitalized as mineral property, plant and equipment for accounting purposes, but deductible as Canadian exploration expenditure for income tax purposes. In 2009, long-term liabilities decreased 39% from 2008 mainly due to a $13,860,000 decrease in long-term site closure and reclamation costs, which were reclassified as current liabilities to reflect reclamation expenditure at the Kemess South mine expected to be incurred in 2010. In addition, the non-current FIT liability reversed in 2009 as Northgate’s copper forward sales contracts reversed from a gain to a loss position at the end of 2009.

Fosterville and Stawell produced 100,441 and 71,482 ounces of gold, respectively, in 2010 compared with 103,360 and 85,998 ounces of gold in 2009. At Fosterville, a re-sequencing of ore reserves from several mining levels in the Phoenix and Ellesmere zones and temporary ground issues in the Ellesmere area resulted in decreased mining rates during the second half of 2010. At Stawell, the decrease in gold production was due to changes to the orebody model resulting in a mining sequence change, which resulted in mining of lower-grade ore. Metal production at Kemess South continued to decline in 2010 as ore grades declined towards the end of its reserve life. Mining activities at Kemess South were completed in March 2011 according to plan. Gold production at Kemess South was 100,790 ounces in 2010 compared with 173,040 ounces in 2009 and 185,162 ounces in 2008. Copper production at Kemess South was 40.7 million pounds in 2010 compared with 52.5 million pounds in 2009 and 51.9 million pounds in 2008.

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 51). The net cash cost is calculated by subtracting the net non-gold by-product revenues from the actual cash cost of production. At Kemess South, the net cash cost of production in 2010 was $363 per ounce, which was slightly higher than the net cash cost of $348 per ounce in 2009. The difference was attributable to a higher Canadian dollar relative to the US dollar, but was also offset by stronger copper prices in 2010. During 2010, the Canadian dollar traded within a range of US$/Cdn$0.93 to US$/Cdn$1.00, hitting a 2010 low in February before bouncing back to just above parity in April. As the sovereign debt crisis in Greece unfolded in May, the US dollar strengthened against most currencies. The Canadian dollar then traded sideways in the third quarter, eventually breaking through parity and reaching a 2010 high at the end of the year. The average copper price on the London Metal Exchange (“LME”) in 2010 was $3.42 per pound, reducing the net cash cost at Kemess South. In 2011, Kemess South is projected to end production in March as low-grade stockpiles are processed and depleted. The combined effect of lower ore grades and a stronger Canadian dollar is expected to yield an average net cash cost of $285 per ounce in 2011.

At Fosterville, the net cash cost of production in 2010 was $738 per ounce compared to $576 per ounce in 2009 due to a strengthening Australian dollar relative to the US dollar, which averaged 16% higher in the most recent year, combined with higher mining costs and slightly lower production. The net cash cost at Stawell in 2010 was $969 per ounce compared to $616 per ounce in 2009 resulting from the stronger Australian dollar relative to the US dollar and lower production than forecast. Cash costs in 2011 are expected to be in the range of $885 to $930 per ounce at Fosterville and $800 to $850 per ounce at Stawell.

The gold price (US$ per troy ounce) on the London Bullion Market (“LBM”) ended 2009 at $1,088 per ounce, having dropped from an all-time high of $1,214 per ounce in the fourth quarter of 2009. In the first quarter of 2010, the gold price traded within a $100 range before breaking through its all-time high in May and reaching new highs in June over concern that a number of European nations may require emergency access to the European Financial Stability Facility set up by the European Union and the International Monetary Fund. After a short-lived correction in July, the price of gold resumed its climb in anticipation of further quantitative easing by the US Federal Reserve and hit a new all-time high of $1,421 per ounce in November upon the announcement by the US Federal Reserve of $600 billion in quantitative easing measures. Concurrently, the US dollar lost ground against most major world currencies.

The copper price closed 2009 at $3.33 per pound on the LME and soon traded between the $2.80 and $3.60 range for the first three quarters of the year before breaking through the $4.00 mark in November and eventually reaching a 2010 and all-time high of $4.42 at year-end. Various factors contributed to the price volatility, from the financial crisis in the Eurozone to the anticipation of further quantitative easing by the US Federal Reserve to support a sluggish economic recovery. Furthermore, a drop in the US dollar against major world currencies, reduction in copper inventories, and a smaller copper surplus played a role in strengthening copper prices.

The gold-copper concentrate produced by the Kemess South mine was being shipped to Xstrata Canada Corporation’s (“Xstrata”) Horne smelter (Rouyn-Noranda, Quebec) for smelting and refining until the third quarter of 2010, when Xstrata exercised its option to divert Kemess South concentrate at its Horne smelter. Since then, Kemess South concentrate has been delivered to the Port of Vancouver for shipments to offshore smelters. Northgate’s realization on sales of concentrate remains unchanged under the terms of its contract with Xstrata. Annual terms for processing of concentrate in 2010 were $46.50 per dry metric tonne (“dmt”) of concentrate and $0.0465 per pound of copper ($46.50/4.65) . Annual terms have been settled at $56.00/5.60 for 2011.

The Canadian dollar performed erratically in 2010 against the US dollar, reaching a low of US$/Cdn$0.93 in February before climbing to a high of and closing the year at $1.00. The Australian dollar followed a similar pattern but with a wider range, reaching a low of US$/A$0.81 in early June before hitting a high of and closing the year at $1.02.

The balance of this MD&A contains a detailed discussion of the factors contributing to Northgate’s financial results for the past two years.

For the second year in a row, the Fosterville Gold mine produced over 100,000 ounces of gold. Production in 2010 of 100,441 ounces of gold represented a slight decrease from 103,360 ounces in 2009. A re-design of ore reserves on several mining levels during the second half of the year, coupled with temporary ground issues in the Ellesmere area during the fourth quarter, necessitated the processing of low-grade surface stockpiles resulting in slightly lower gold production for the year. In 2010, Fosterville produced a quarterly record of 28,476 ounces of gold in the second quarter.

In 2010, 729,080 tonnes of ore at a grade of 4.96 grams per tonne (“g/t”) were mined and mine development advanced 8,317 metres (“m”), compared with 780,195 tonnes of ore at a grade of 4.80 g/t and 8,520 m advanced in 2009. Mining rates were lower in 2010 compared to the same period last year due to the re-design of ore reserves and temporary ground issues during the fourth quarter, which have since been rectified.

During 2010, 817,535 tonnes of ore at a grade of 4.57 g/t were milled compared with 781,879 tonnes of ore at a grade of 4.79 g/t in 2009. Gold recoveries in the milling circuit of 82% were lower than the 85% achieved in 2009, as a result of processing low-grade surface stockpile and a higher proportion of black shale ore. However, this was partially offset by a 5% increase in throughput.

Total operating costs for the year were A$80,614,000 (2009 – A$74,481,000), equating to an overall unit operating cost of A$99 (2009 – A$95) per tonne of ore milled. Mining costs were A$60 (2009 – A$52) per tonne of ore mined and milling costs were A$35 (2009 – A$34) per tonne of ore milled. Unit costs were higher as a result of higher mining costs, which were negatively impacted by the lower mine throughput. Unit operating costs are forecast to increase by 12% in 2011, as a result of a 36% increase in operating development.

The 2010 net cash cost of $738 per ounce was 28% higher than in 2009 due to a strengthening Australian dollar relative to the US dollar, combined with higher mining costs and slightly lower production. Fosterville is forecasting production of 97,000 – 102,000 ounces of gold in 2011 at a net cash cost of $885 – $930 per ounce using a US$/A$ exchange rate of $1.00.

Fosterville’s revenue in 2010 increased by 23% to $123,462,000 from the previous year due to higher gold prices. Cost of sales increased by 24% to $74,145,000 as a result of higher mining costs and a stronger Australian dollar. Depreciation and depletion expense, which is calculated using the units of production method, increased from $30,168,000 in 2009 to $36,614,000 in 2010 primarily as a result of the increase in tonnes milled and a stronger Australian dollar. The loss from operations before income taxes in 2010 was $75,409,000 compared to $79,861,000 in 2009. The loss in 2010 includes an impairment write-down recorded on the carrying value of the Fosterville asset group of $76,936,000 (2009 – $83,486,000), which is described below.

In 2010, Fosterville generated $37,492,000 in cash flow from operations compared to cash flow from operations of $34,960,000 in the same period last year. Total investment in capital expenditures at Fosterville during 2010 was $49,868,000, consisting of $36,686,000 for mine development and $11,319,000 for the acquisition of plant and equipment, which included $1,589,000 acquired through equipment financing. Investment in capital expenditures in 2009 was $36,075,000, consisting of $22,706,000 for mine development and $12,834,000 for plant and equipment, which included $1,269,000 acquired through equipment financing. Mine development expenditures in 2010 included approximately $16,035,000 to prepare the Harrier zone for production in 2011.

At the end of each year, Northgate re-estimates reserves at all of its properties and revises its life of mine (“LOM”) plans. LOM plans incorporate management assumptions and estimates of revenues and related costs, as well as the conversion of a portion of resources to reserves over the LOM. When this annual exercise was performed in early 2011, there were indicators of impairment at the Fosterville Gold mine as of December 31, 2010 and consequently a recoverability test was performed for the long-lived assets. A potential impairment is determined if the carrying values of the assets, which generate independent and identifiable cash flows (in this case the Fosterville mine), exceed the undiscounted pre-tax cash flows expected from their use and eventual disposition. If a potential impairment is identified, the actual value of the impairment is calculated by comparing the fair value of the long-lived assets to their accounting carrying value. The fair value of the Fosterville mine as at December 31, 2010 was established by using a LOM discounted cash flow (“DCF”) model incorporating the following assumptions: gold prices of A$1,350/oz for 2011, A$1,300/oz for 2012 to 2013, A$1,250/oz for 2014 to 2015 and A$1,200/oz thereafter; a discount rate of 6.5%; and a net asset value (“NAV”) multiplier of 1.0x.

The impairment at Fosterville arose as a result of adverse changes to the LOM plan in three areas. Firstly, when the results of the 2010 resource definition drilling in the Harrier orebody and the Phoenix extension area were analyzed as part of the year-end reserve and resource estimation process, it showed the geometry of these areas to be more complex and less continuous than originally projected, which necessitated a 9% reduction in the estimated grade of ore scheduled for milling during the LOM. Secondly, as a result of the increased complexity of these orebodies, estimates of capital development costs also increased. Lastly, as a result of the downward revision to the grade of ore processed, the estimate of future gold recovery was reduced by 3% to approximately 85%.

The Stawell mine produced 71,482 ounces of gold in 2010, which was lower than the previous year’s production. A combination of complex geology in the orebody, poor reserve performance on the reserve extremities and ventilation restrictions hampered production throughout the year. Stawell’s production has gradually improved since the poor performance during the second quarter of the year and the mine is projected to improve production in 2011 by at least 20%.

In 2010, 772,850 tonnes of ore at a grade of 3.48 g/t were mined compared to 707,283 tonnes of ore at a grade of 4.31 g/t in 2009. Improved mine output was overshadowed by poor grade performance. The mining development advance for 2010 was 6,721 m compared with 7,016 m in 2009. Mining development in 2010 was focused on advancing the GG6 decline and in the GG7, GG5L, GG3, North Magdala and the C7/U3 mining fronts.

In 2010, 826,454 tonnes of ore at a grade of 3.23 g/t were milled compared with 759,819 tonnes of ore at a grade of 4.07 g/t in 2009. Due to the issues Stawell experienced in the second quarter of the year, low-grade stockpiles were processed, resulting in lower production and recoveries. Gold recoveries in the mill of 83% were lower than the previous year. However, a flotation circuit improvement project that was undertaken in 2010 is expected to improve recoveries in 2011, which are expected to average 88% for the year.

Total operating costs during 2010 were A$75,251,000 (2009 – A$66,591,000) equating to an overall unit operating cost of A$91 (2009 – A$87) per tonne of ore milled. Mining costs were A$65 (2009 – A$58) per tonne of ore mined and milling costs were A$23 (2009 – A$24) per tonne of ore milled. The increase in unit operating costs was primarily attributable to the increase in mining costs, which were high due to additional production drilling and higher equipment maintenance costs. Unit costs are expected to decline in 2011 as mine output is expected to increase by 9%.

The net cash cost of production for the year of $969 per ounce (2009 – $616) was negatively impacted by lower gold production and higher mining costs. In 2011, Stawell is forecast to produce 86,000 – 91,000 ounces of gold at a net cash cost between $800 – $850 per ounce using a US$/A$ exchange rate of $1.00.

Stawell’s revenue for the year of $87,711,000 was higher than revenues generated in 2009 of $85,515,000 as lower gold production was offset by higher gold prices throughout the year. The cost of sales for this period was $69,403,000 compared to $52,998,000 in 2009 and the depreciation and depletion expense was $47,082,000 compared to $33,380,000 in 2009. The increase in cost of sales and depreciation and depletion expense reflect the higher ore production and mill throughput, as well as an increased amortization rate as a result of the substantial capital upgrades made since Northgate acquired the mine. The stronger Australian dollar also contributed to the higher US dollar-denominated costs. The mine recorded a loss from operations for the period of $36,491,000 compared to a loss of $6,035,000 in 2009.

Stawell generated $14,544,000 in cash flow from operations during the year compared to $27,087,000 in 2009. Total investment in capital expenditures at Stawell during 2010 was $36,124,000 compared to $33,350,000 in 2009. Investment in capital expenditures in 2010 consisted of $23,430,000 for mine development and $12,705,000 for plant and equipment, which included $3,484,000 acquired through equipment financing. In 2009, investment in capital expenditures consisted of $21,789,000 for mine development and $11,560,000 for plant and equipment, which included $1,465,000 acquired through equipment financing.

Gold and copper production at Kemess South in 2010 was 100,790 ounces and 40.7 million pounds, respectively. Ore production was sourced from the eastern end of the Kemess South pit and will continue there until the end of the mine-life in March 2011.

Ore and waste mined from the open pit totalled 38.0 million tonnes in 2010 compared to 30.3 million tonnes mined in the prior year. In 2010, approximately 17.1 million tonnes of crushed waste rock previously stored in the eastern end of the open pit was moved into the western end to provide access to east pit ore. The unit cost for mining in 2010 decreased to Cdn$1.13 per tonne moved compared with Cdn$1.61 per tonne in 2009 due to a combination of shorter haul distances from the eastern end of the pit and higher tonnes of waste and ore mined.

Mill throughput of 51,361 tonnes per day (“tpd”) in 2010 was slightly higher than mill throughput of 50,265 tpd in 2009. Mill availability of 91% during 2010 was also consistent with the 91% achieved in 2009.

Average gold and copper recoveries in 2010 were 61% and 78%, respectively, compared with 66% and 81% recorded in 2009. As ore milled in 2010 was sourced from the low-grade eastern end of the pit, recoveries were expected to be lower than those in 2009 when more than half the ore milled was sourced from the higher-grade western end of the open pit.

The average unit cost of production at Kemess South in 2010 was Cdn$9.85 per tonne milled, which was 14% lower than the Cdn$11.42 per tonne milled in 2009. These unit costs include marketing costs of Cdn$2.26 in 2010 and Cdn$3.05 in 2009, comprised mainly of treatment and refining costs and concentrate transportation fees. The decrease in unit cost was due primarily to lower mining costs as a result of shorter ore and waste haul distances from the eastern end of the pit. Also supporting the improved costs were lower settlement terms for treatment and refining charges in 2010 relative to the prior year. Although total tonnes moved were 26% higher, site operating costs dropped by about 7% due to the much lower mining costs driven by lower haul distances, as well as lower marketing costs. The net cash cost of production was $363 per ounce of gold produced in 2010, compared with $348 per ounce in 2009. The slightly higher cash cost in 2010 was attributable to lower gold production and a higher Canadian dollar relative to the US dollar, but was also offset by stronger copper prices and lower operating costs.

Metal concentrate inventory decreased to about 8,000 wet metric tonnes during the fourth quarter of 2010 due to improved rail car availability. Inventory balances have steadily declined since year-end and Northgate expects all of its production and concentrate inventory at Kemess South to be shipped to the smelting facility by early April 2011.

The Kemess South mine is forecast to produce 12,000 ounces of gold and 5.3 million pounds of copper during 2011 at a net cash cost of $285 per ounce using copper prices of $4.00 per pound and a US$/Cdn$ exchange rate of $1.00.

Revenue generated from the Kemess South mine in 2010 was $287,642,000 compared with $337,052,000 in 2009 and declined due to lower metal production, which was partially offset by higher gold and copper prices during the year. Metal sales in 2010 consisted of 97,730 ounces of gold and 38.9 million pounds of copper compared with 180,040 ounces of gold and 51.2 million pounds of copper in 2009.

During 2010, the price of gold on the LBM averaged $1,225 per ounce and the price of copper on the LME averaged $3.42 per pound. Net realized prices for sales during the year were approximately $1,309 per ounce of gold and $3.61 per pound of copper. The realized prices reported differ from the average annual reference prices as the realized price calculation incorporates the actual settlement price for prior period sales, as well as the forward price profiles of both metals at December 31 for unpriced sales. For the first three quarters of 2010, the metal pricing quotational period was three months after the month of arrival (“MAMA”) at the receiving facility for copper and one MAMA for gold produced at Kemess South. Commencing in the fourth quarter of 2010, the metal pricing quotational period was three months after the month of ship loading for copper and one month after the month of ship loading for gold produced at Kemess South. Northgate also hedged 32.8 million pounds of its 2010 copper sales, which decreased the realized price of copper by $0.14 per pound. The average market prices for gold and copper in 2009 were $973 per ounce and $2.34 per pound, respectively, while realized prices were $1,020 per ounce and $2.87 per pound.

The cost of sales in 2010 was $179,010,000 compared with $188,109,000 in 2009. The cost of sales declined in 2010 as a result of lower mining and marketing costs, but the decrease was partially offset by a stronger Canadian dollar compared to 2009. Treatment and refining charges in 2011 will increase slightly as terms have been settled at $56.00/5.60 compared with $46.50/4.65 in 2010.

Depreciation and depletion expenses were $30,042,000 in 2010 compared with $40,193,000 in 2009. The lower depreciation and depletion expense reflects a higher estimated residual value for plant and equipment at Kemess South based on an independent appraisal, which was finalized late in 2009.

Exploration expenditures during 2010 were $2,270,000, all of which were related to the Kemess Underground project. No further exploration was performed at Kemess South, compared to $55,000 in 2009, since the mine is approaching the end of its reserve life.

Capital expenditures decreased to $6,735,000 in 2010 compared to $7,553,000 in 2009. The most significant capital expenditures in 2010 were $3,633,000 for mill liners and $2,921,000 on the tailings dam construction.

In July 2010, Northgate achieved a significant milestone when it received notice from the Ontario Ministry of Northern Development, Mines and Forestry of acceptance of the Closure Plan for its Young-Davidson Project. The Closure Plan sets out the framework for the development, operation and ultimate closure of the Young-Davidson mine and outlines plans for rehabilitation of these areas affected by historic and future mining. Acceptance of the Closure Plan allowed Northgate to commence construction on the property. As a result, Northgate mobilized the appropriate resources to the site and broke ground in early August.

In addition, Northgate closed a $170 million convertible note offering in October 2010, which has provided the Corporation with sufficient funds to complete the construction of the Young-Davidson mine. At the end of February 2011, Northgate had 80% of the contracts awarded, 90% of the equipment purchase orders placed and 60% of the engineering completed. Currently, Young-Davidson remains on schedule and budget.

Northgate expects to invest an additional $300 million before production begins in 2012. Activities scheduled for 2011 include the completion of the major earthworks required for preparation of the project site, commissioning the new hoist and commencing sinking operations of a new shaft, erecting the process plant building and constructing the power line to energize the site by the end of the year.

Concurrent to construction activities, Northgate is also focusing on increasing the reserves on the property. The main Young-Davidson deposit is open to the west, east and at depth. Northgate has earmarked $2 million in 2011 for a 12,000 metre diamond drill program utilizing two surface drills. The main focus of the drill program is on the syenite-hosted gold mineralization in the newly-discovered YD West zone, which returned one of the best holes ever drilled on the Young-Davidson property in 2010.

At December 31, 2010, 7,725 tonnes of copper forward sales contracts were outstanding at an average price of Cdn$3.37 per pound for the period from January 2011 through April 2011. The fair value of these contracts at December 31, 2010 was a liability of $16,435,000, which is included in accounts payable and accrued liabilities. The change in fair value of the forward contracts during the year was a loss of $13,768,000. Northgate had no gold forward sales contracts outstanding at December 31, 2010.

Corporate administration costs in 2010 were $12,524,000 compared with $10,679,000 in 2009. Costs in Australia of $1,693,000 were largely consistent with 2009 despite the strengthening Australian dollar. Canadian corporate administration costs, consisting primarily of employee salaries, as well as ongoing compliance and investor relations costs, were $10,831,000 in 2010. The year-over-year increase of $1,904,000 is attributable to the stronger Canadian dollar and a higher non-cash expense related to Northgate’s employee stock option program. Both the number of options awarded in 2010 and their value (2,110,000 and Cdn$2.14 per share), determined using the Black-Scholes pricing model, increased from 2009 (1,616,000 and Cdn$0.61 per share), which resulted in a higher expense of $1,400,000.

Northgate granted a total of 2,110,000 options to employees in 2010, compared with 1,616,000 granted in 2009. At December 31, 2010, there were 7,342,200 options outstanding, of which 4,001,700 were exercisable.

Exploration costs in 2010 were $22,129,000 compared with $14,637,000 in 2009. In Canada, the exploration expense increased to $5,824,000 from $4,668,000 primarily due to the diamond drilling program initiated at Kemess Underground to more tightly define the 70+ million tonne higher-grade core of the Kemess North deposit. Exploration costs in Australia increased to $16,305,000 in 2010 compared with $9,969,000 in 2009 in support of ongoing efforts at both Fosterville and Stawell to identify additional areas of mineralization.

Northgate recognized an income tax expense of $15,732,000 for the year ended December 31, 2010, compared to $6,719,000 for the year ended December 31, 2009. The current income tax recovery in 2010 was $1,309,000 compared to a current income tax expense of $29,472,000 in 2009. The recovery in 2010 related to activities in Canada and resulted from a return of income taxes paid in 2010 for the 2009 taxation year, partially offset by British Columbia mineral taxes paid during the year. The Canadian operation will not be cash taxable in 2011 as the tax shields generated from the Young-Davidson development spending and Kemess reclamation activity will offset income generated from Kemess South. In Australia, the Corporation has sufficient tax shields such that the Australian operations are also not expected to be cash taxable in 2011.

The future income tax (“FIT”) expense was $17,041,000 for 2010 compared to a recovery of $22,753,000 in 2009. The FIT expense in Canada was $14,036,000 in 2010, which is largely caused by temporary differences relating to the development spending on Young-Davidson, which are capitalized as mineral property, plant and equipment for accounting purposes, but deductible as Canadian exploration expenditure for income tax purposes. The FIT expense in Australia was $3,005,000 in 2010, relating to a valuation allowance applied against certain tax shields, which are not expected to be utilized by Northgate based on the latest LOM projections.

The table below summarizes selected quarterly operating and financial results for the previous eight quarters.

		2010 Quarter Ended										2009 Quarter Ended
		Dec 31			Sep 30			Jun 30		Mar 31		Dec 31			Sep 30			Jun 30		Mar 31
Revenue	$	148,701		$	88,331		$	122,737	$	125,278	$	110,698		$	120,163		$	130,297	$	123,818
Earnings (loss)		(72,020	)		(8,881	)		4,260		4,937		(67,755	)		(8,563	)		5,402		21,410
Earnings (loss) per share
Basic	$	(0.25	)	$	(0.03	)	$	0.01	$	0.02	$	(0.23	)	$	(0.03	)	$	0.02	$	0.08
Diluted	$	(0.25	)	$	(0.03	)	$	0.01	$	0.02	$	(0.23	)	$	(0.03	)	$	0.02	$	0.08
Metal production
Gold (ounces)		66,077			64,999			68,275		73,362		80,753			80,791			93,377		107,477
Copper (000s pounds)		10,625			10,869			9,643		9,529		11,750			11,934			13,805		15,007
Realized metal prices
Gold ($/ounce)		1,393			1,234			1,274		1,128		1,181			982			924		935
Copper ($/pound)		4.27			3.96			2.42		3.49		3.54			3.39			2.65		2.07

In 2010, Northgate produced 272,713 ounces of gold. At Fosterville, record quarterly production was achieved in the second quarter before production was curtailed later in the year due to a re-design of ore reserves for several mining levels. At Stawell, the second quarter of the year saw a decrease in production due to complex geology of the orebody and poor reserve performance. Stawell’s quarterly performance improved in the second half of the year compared to the low in the second quarter. At Kemess South, gold production came in on plan in its final full year of operation. The net loss in the fourth quarter of 2010 was impacted by the mineral property impairment charge of $76,936,000 recorded at Fosterville.

In 2009, gold production was robust early in the year as higher-grade ore from the western end of the open pit at Kemess South was mined and processed. As production moved to the eastern end of the pit in the second half of the year, gold production at Kemess South declined significantly, consistent with plan, due to lower ore grades. The Australian sites saw strong production early in the year. However, geotechnical issues at Stawell necessitated a change in the stoping sequence and, as a result, lower-grade ore was mined in the second half of the year. At Fosterville, higher than expected dilution on some of the stopes mined in the second half of the year reduced the mill head grade and had a small impact on production. Net earnings were also higher than expected early in 2009 as a result of higher gold output and sales in addition to higher gold prices. The net loss in the third quarter of 2009 included a charge of $10,440,000 to recognize an other than temporary impairment on Northgate’s ARS investments. The net loss in the fourth quarter was due entirely to the mineral property impairment charge of $83,486,000 recorded at Fosterville.

Cash and cash equivalents at December 31, 2010 was $334,840,000 compared with $253,544,000 at December 31, 2009. Working capital at December 31, 2010 was $271,731,000 compared with $173,806,000 at December 31, 2009. The increase in both liquidity measures was due primarily to the increase in cash and cash equivalents from proceeds of Northgate’s convertible senior notes offering in October 2010.

Cash flow from operations in 2010 declined to $87,285,000 from $187,161,000 in the prior year. The primary reason for the decline in cash flow from operations was a 42% decrease in annual gold production at Kemess South as the mine nears the end of its mine-life. Gold production at Stawell also decreased 17% from 2009 due to production challenges encountered during the year.

In October 2010, the Corporation completed a public offering of $170,000,000 convertible senior notes, including the exercise of a $20,000,000 over-allotment option by the underwriters. The notes mature on October 1, 2016 and will pay interest semi-annually at a rate of 3.50% per annum beginning on April 1, 2011.

Holders of the convertible senior notes may, within specified time periods, convert their notes prior to July 1, 2016 under specified circumstances. The initial conversion rate is 244.9780 common shares per $1,000 principal amount of notes, which represents an initial conversion price of approximately $4.08 per common share. The conversion rate, and thus the conversion price, will be subject to adjustment in certain circumstances. Northgate may, in lieu of delivery of common shares upon conversion of all or a portion of the convertible notes, elect to pay cash or a combination of cash and common shares.

The Corporation received net proceeds totalling $163,419,000 from the offering of the convertible senior notes, which will be used towards the development of the Young-Davidson mine.

On September 30, 2009, the Corporation issued 34,300,000 common shares to a syndicate of underwriters on a bought deal basis at a price of Cdn$2.92 per share for net proceeds of $88,516,000. The proceeds are being used towards the development of the Young-Davidson mine and for general corporate purposes.

Northgate believes that its working capital at December 31, 2010, together with future cash flow from operations, is sufficient to meet its normal operating requirements for the next year. There are no restrictions on the ability of the Corporation’s subsidiaries to transfer funds to Northgate.

Northgate’s investment management policy permits short-term excess cash to be invested in R1/P1/A1 rated investments including money market funds, direct obligation commercial paper, bankers’ acceptances and other highly rated short-term investment instruments, which are presented as cash and cash equivalents. Notwithstanding the flexibility of the short-term investment policy, all cash and cash equivalents are currently being held as cash with major banks and their subsidiaries in Canada and Australia.

Financial Instruments: Northgate has exposure to credit risk, liquidity risk and market risk from its use of financial instruments.

Credit Risk – Credit risk is the risk of potential loss to Northgate if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Northgate is exposed to credit risk from its receivables and investment securities. This risk may also arise on the copper forward contracts to which Northgate is a party.

In general, Northgate manages its credit exposure with respect to operational matters by transacting only with reputable, highly-rated counterparties. Northgate monitors the financial condition of its customers and counterparties to contracts.

Gold doré produced in Australia was sold exclusively to AGR Matthey, a reputable precious metal refiner. In early 2010, AGR Matthey wound up its joint venture with and ceded control of the refinery in Perth, Australia, to the Western Australia Mint, which is wholly-owned by the government of Western Australia. Northgate believes there are other buyers in the marketplace that would buy such production under approximately the same financial terms should its current sales agreement be terminated. Concentrate produced at Kemess South is sold under contract to Xstrata, a wholly-owned subsidiary of the publicly traded international mining company, Xstrata plc. Kemess South gold-copper concentrate is of a quality that is readily saleable to a number of smelters under current market conditions. In the event that Xstrata is unable to purchase the Kemess South concentrate, it could be sold to other smelters once appropriate logistical arrangements are put in place.

Northgate may also be exposed to credit risk on its copper forward contracts to the extent that the counterparty, Mitsui Bussan Commodities Ltd. (“Mitsui”), a reputable international commodities trading group, fails to meet its contractual obligations. Northgate has mitigated this risk by obtaining a parental guarantee from Mitsui’s parent company, Mitsui and Co., Ltd. of Japan. At December 31, 2010, there is no credit risk as the forward contracts are in a payable position and have been recognized as a liability.

Northgate limits its exposure to credit risk on investments by investing only in securities rated R1/P1/A1 for short-term investments and AAA for longer-term securities by credit rating agencies such as S&P and Moody’s. Management continually monitors the fair value of its investments to determine potential credit exposures. Any credit risk exposure on cash and cash equivalents is considered negligible as Northgate places deposits only with major established banks and their subsidiaries in Canada and Australia.

Liquidity Risk – Liquidity risk is the risk that Northgate will not be able to meet its financial obligations as they fall due. Northgate manages this risk such that it will have the ability to discharge its liabilities when due, both under normal and stressed conditions, without incurring significant losses or risking damage to Northgate’s reputation.

Northgate uses detailed cash forecasts to ensure cash is available to discharge its obligations when they come due. Cash needed for this purpose is invested in highly liquid investments.

Market Risk – Market risk is the risk that changes to: i) commodity prices; ii) foreign exchange rates; or, iii) interest rates, will affect Northgate’s income or the value of its financial instruments. Northgate actively manages this risk by executing strategies to limit excessive exposure to the extent possible while optimizing the return on investments designed to mitigate such risk. Northgate’s Board of Directors has established a Finance Committee, to assist the Board with its oversight responsibilities for financial risk management including the identification and analysis of market risks and potential strategies to mitigate such risks.

Equipment Financing: During 2010, Northgate secured a five-year equipment financing of $8,863,000 for the development of Young-Davidson. Northgate also continued to make significant investments in plant and equipment in Australia during 2010. Total purchases financed at Fosterville and Stawell for the year ended December 31, 2010 was $5,073,000 (2009 – $2,734,000) with three-year terms. At December 31, 2010, equipment financing obligations were $18,708,000 (2009 – $10,651,000), of which $7,945,000 will be paid in the upcoming year (2009 – $5,995,000).

Investments: At December 31, 2010, Northgate continued to hold auction rate securities (“ARS”), which are floating rate debt securities marketed by financial institutions with auction reset dates at 7, 28, or 35-day intervals to provide short-term liquidity. The par value of these securities held by the Corporation is $72,600,000. Beginning in August 2007, auctions for these ARS began to fail, and shortly thereafter attempts to conduct such auctions generally ceased. For the past several years, these securities could not be readily converted to cash for use by the Corporation to make capital investments or for other business purposes, although the underlying payment and other obligations of the original issuers of these securities remained intact, and these issuers or their guarantors continued to make regular interest payments to the Corporation. All ARS held by the Corporation were purchased on its behalf by Lehman Brothers Inc. (“Lehman Brothers”), acting in its capacity as broker agent of the Corporation using the limited discretion conferred on it. Based on representations from Lehman Brothers, the Corporation had believed that the securities conformed to its internal investment management policy.

On July 3, 2008, Northgate filed a Statement of Claim with the Financial Industry Regulatory Authority (“FINRA”) in New York, a self-regulatory organization with jurisdiction over customer-broker disputes, regarding alleged mishandling of the Corporation’s investment account (including the unauthorized purchase of auction rate securities) by Lehman Brothers. The Corporation has alleged that Lehman Brothers’ inappropriate conduct constituted, among other things, breach of contract, breach of fiduciary duty, fraudulent misrepresentation and abuse of discretionary authority. Lehman Brothers filed for bankruptcy in September of 2008. In order to preserve its right to claim against the Lehman Brothers estate at the appropriate stage of the bankruptcy administrative process, the Corporation has filed the necessary bankruptcy proofs of claim with the appropriate authorities in the US. The Corporation continues to work with its US legal counsel to collect and analyze additional information regarding the Lehman Brothers estate so as to be able to make an informed determination regarding a prudent course of action going forward.

Following the bankruptcy of Lehman, the Corporation retained an independent valuator (the “Valuator”) to assist with management’s assessment of the fair value of its ARS investments. The Valuator considered several factors in making such assessment, including the probability of future defaults by the respective issuers, the potential impact of recent events in the global financial markets, the relative seniority of each security within the capital structure of the relevant issuer, the credit position of financial guarantors and the value of investments and reserves held by the respective issuers.

The estimated fair value of the Corporation’s ARS holdings at December 31, 2010 was $36,003,000, which reflects a $1,699,000 decline from the estimated fair value of $37,702,000 at December 31, 2009. The Corporation recognized an other than temporary impairment of $374,000 for the year ended December 31, 2010 (2009 – $10,979,000), largely related to the further decline in value on the ARS investments issued by derivative product companies (companies involved in the issuance of credit default swaps). The conclusion for an other than temporary impairment is based on a variety of factors, including the very substantial decline in the estimated fair value of individual investments over an extended period, downgrades in issuer credit ratings, the absence of default insurance and continuing adversity in the credit and capital markets.

The Corporation assessed the overall decline in the estimated fair value related to its other holdings of Regulation XXX auction rate securities and concluded that the decline is temporary. The Corporation considered the fact that these particular securities have a lower probability of future default, continue to make interest payments, are insured by monoline insurance companies with a stable financial outlook and continue to maintain a credit rating above investment grade. Management also considered the senior rank of its holdings in the capital structures of the respective issuers and the fiduciary obligation of the major insurance companies who own the Regulation XXX entities as factors that improve the likelihood that these investments might eventually return to par value.

In February 2011, the Corporation sold its entire portfolio of ARS for total consideration of $40,940,000. The resulting gain of $4,936,000, being the excess of proceeds over the carrying value of the ARS, will be offset by the reclassification of previously unrealized losses from other comprehensive income to net earnings. The net impact on net earnings is expected to be immaterial.

Short-Term Loan: Northgate received from Lehman the Short-Term Loan collateralized by Northgate’s ARS investments subsequent to such ARS investments becoming illiquid.

As of December 31, 2010, the principal outstanding on the Short-Term Loan was $40,161,000 (2009 – $41,515,000). The Short-Term Loan matured on June 6, 2008. Northgate has continued to classify it as a current liability based on its original maturity date.

In February 2011, the Corporation repaid in full the Short-Term Loan outstanding with funds received from the sale of its portfolio of ARS.

Northgate is committed to maintaining effective environmental management systems at each of its mining operations and exploration projects and conducts regular corporate environmental audits of all its properties.

Northgate regularly updates its estimate of future site reclamation and closure costs. The total provision at December 31, 2010 for site closure and reclamation is $47,913,000. The obligations per mine site are as follows:

Northgate had security bonds totalling Cdn$29,575,000 at December 31, 2010 (2009 – Cdn$18,659,000) posted in connection with its reclamation obligations for the Kemess South mine and the Young-Davidson property. The final security installment for the Kemess South mine required by the Government of British Columbia’s Ministry of Energy, Mines and Petroleum Resources (“MEMPR”) in accordance with the reclamation obligations, which was amended in 2002, was made in January 2010. A revised reclamation and closure plan was submitted to the MEMPR later in 2010.

Northgate also had cash deposits of A$10,460,000 (2009 – A$10,523,000) as security against performance guarantees relating to the future reclamation of Fosterville and Stawell at December 31, 2010.

Northgate’s success is in great part dependent on recruiting and retaining a competent, professional workforce. To motivate and maintain its workforce, Northgate offers a challenging and rewarding work environment, as well as a competitive compensation program comprised of salary, bonuses and benefits. Northgate also maintains a staff development and succession program for its key executives and operational management.

Northgate also offers a share option plan to key employees of the Corporation. At December 31, 2010, 7,342,200 options were outstanding under the plan. Each option will be for a term of not less than seven years, with vesting of 20% on the date of grant and 20% on the anniversary date of the grant over the next four years. An employee share purchase plan (“ESPP”) is also available to all full-time employees of the Corporation in Canada. Under the terms of the ESPP, each full-time employee can buy treasury shares up to 5% of their base salary at the current market price and Northgate will contribute additional shares equal to 50% of the employee’s contribution.

Hourly employees at Kemess South are members of the International Union of Operating Engineers (Local 115). In April 2008, a new three-year agreement was ratified, which will expire on December 31, 2011. The agreement includes an enhanced severance package, which provides for a lump-sum payment to an employee who remains at Kemess South until the employee’s last scheduled shift.

In April 2008, Northgate put in place Australian Workforce Agreements and a Greenfield agreement at Fosterville as part of the conversion to owner mining from contract mining. Virtually all of the employees of the contractor joined Northgate during this conversion. On July 1, 2009, a three-year collective agreement was ratified by the Employee Collective, covering 227 hourly employees.

On September 26, 2008, a new collective agreement was ratified by the Employee Collective, comprised of the 155 production and maintenance employees at Stawell. All employment conditions are secured for five years with the exception of wages, which will be reviewed after three years. This agreement replaced the previous three-year agreement that expired on September 26, 2008.

Northgate had the following contractual obligations and commitments as at December 31, 2010.

		1 Year		2–3 Years		4–5 Years		6+ Years		Total
Accounts payable and accrued liabilities	$	77,100	$	—	$	—	$	—	$	77,100
Severance and long service leave ^{1, 2}		16,442		347		1,105		2,240		20,134
Equipment financing obligations (including interest)		8,950		8,249		3,488		—		20,687
Operating leases		827		473		53		—		1,353
Unrealized loss on copper forward contracts ³		16,561		—		—		—		16,561
Short-Term Loan ⁴		40,161		—		—		—		40,161
Convertible senior note (including interest)		5,950		11,900		11,900		175,950		205,700
Asset retirement obligations ⁵		23,657		5,177		18,322		10,657		57,813
Other liabilities		448		88		88		412		1,036
Closure bonding requirements		1,535		—		—		—		1,535

Northgate has a sales agreement with Xstrata for the shipment and sale of Kemess South gold-copper concentrate. Under the terms of the agreement, treatment and refining charges are adjusted annually based on prevailing world terms, which have been settled at $46.50/4.65 for 2010 and $56.00/$5.60 for 2011 with no price participation fee. This agreement expires on March 31, 2011.

Northgate’s interest in Kemess South is subject to a 1.62% royalty on the value of payable metals produced.

Northgate also has an exclusive sales arrangement with the Western Australia Mint for gold doré bars produced at Fosterville and Stawell.

In July 2009, Northgate and the Matachewan First Nation (“MFN”) signed an Impact and Benefits Agreement (“IBA”), which establishes a framework within which the two parties have committed to work together to advance the permitting, development and operation of a mine on the Young-Davidson property. The IBA also sets out a variety of cooperative initiatives between the MFN and Northgate relating to employment, training and other business opportunities in connection with the Young-Davidson project.

Northgate has a commitment to reclaim land occupied by its mines once operational activities have ceased and is committed to reclaiming any disturbance as a result of exploration and development activities. The undiscounted costs for reclamation are currently $57,813,000. Reclamation for Kemess South is expected to take place primarily from 2011 to 2014 with some expenditures, such as monitoring, to continue afterwards. Mine expenditures at Fosterville and Stawell are expected to be spent between 2011 and 2015 with some expenditures to continue afterwards.

Northgate also has a commitment to reclaim the Young-Davidson property as per the mine production closure plan on record.

Disclosure controls and procedures (“DCP”) are designed to provide reasonable assurance that information required to be disclosed by Northgate in reports filed with or submitted to various securities regulators is recorded, processed, summarized and reported within the time periods specified. This information is gathered and reported to Northgate’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), so that timely decisions can be made regarding disclosure.

Northgate’s management, under the supervision of, and with the participation of, the CEO and CFO, have designed and evaluated Northgate’s DCP, as required in Canada by National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings. Based on this evaluation, the CEO and CFO have concluded that, as of the end of the period covered by this report, Northgate’s DCP were effective.

Northgate’s management is responsible for designing, establishing and maintaining adequate internal control over financial reporting (“ICFR”). ICFR is a process designed by, or under the supervision of, senior management, and effected by the Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and preparation of Northgate’s consolidated financial statements in accordance with Canadian GAAP. These controls include policies and procedures that:

Northgate’s management, with the participation of the CEO and CFO, evaluated the effectiveness of the Corporation’s ICFR as of December 31, 2010. In making this evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.

Based upon its assessment, management concluded that, as of December 31, 2010, the Corporation’s ICFR was effective.

Northgate continually reviews and enhances its systems of controls and procedures. However, because of the inherent limitations in all control systems, management acknowledges that ICFR will not prevent or detect all misstatements due to error or fraud.

No changes were made in Northgate’s ICFR during the year ended December 31, 2010, that have materially affected, or are reasonably likely to affect, the Corporation’s ICFR.

At Kemess South, future revenues are dependent on the prices of gold and copper on world markets, the level of treatment and refining, price participation charges of custom smelters for processing concentrate and rail, truck and ocean freight rates associated with delivering this concentrate to market. These prices and charges can vary significantly from year to year and affect revenues and earnings. Operating costs at the mine are largely denominated in Canadian dollars and, as a result, future US dollar earnings will be directly affected by fluctuations in the US$/Cdn$ exchange rate to the extent that these costs are not hedged with foreign currency instruments.

At Fosterville and Stawell, future revenues are dependent on the Australian dollar price of gold. Operating costs at Fosterville and Stawell are largely denominated in Australian dollars and, as a result, future US dollar earnings will be directly affected by fluctuations in the US$/A$ exchange rate to the extent that these costs are not hedged with foreign currency instruments.

Fluctuations in interest rates can affect Northgate’s results of operations and cash flows. Loans and cash balances are subject to variable interest rates while capital lease agreements are subject to fixed interest rates.

The following table shows the approximate impact on Northgate’s 2011 operating cash flow of variations in commodity prices and exchange rates, based on the projected production at the Kemess South, Fosterville and Stawell mines in 2011, if the change was to remain in effect for the full year. These impacts include the effect of copper derivatives that Northgate had entered into as of December 31, 2010.

Although Northgate has carefully prepared the mineral reserve and resource figures included herein and believe that the methods of estimating mineral reserves and resources have been verified by mining experience and production history, such figures are estimates and no assurance can be given that the indicated levels of recovery of gold and copper will be realized. The ore grade actually recovered by Northgate may differ from the estimated grades of the mineral reserves and resources. Such figures have been determined based upon assumed gold and copper prices and operating costs. Market price fluctuations of gold and copper, as well as increased production costs or reduced recovery rates, may negatively impact the economic viability of reserves containing low grades of mineralization and may ultimately result in a restatement of reserves. Short-term factors that can impact the ore reserves, such as the need for orderly development of orebodies or the processing of new or different grades, may impair the profitability of a mine in any particular accounting period.

Mineral resources estimated for properties that have not commenced production are based, in most instances, on very limited and widely-spaced drill hole information, which is not necessarily indicative of conditions between and around the drill holes. Accordingly, such estimates may require revision as more drilling information becomes available or as actual production experience is gained.

The business of mining is generally subject to certain types of risks and hazards, including environmental hazards, industrial accidents, unusual or unexpected geotechnical occurrences and changes in the regulatory environment. Such occurrences could result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage, delays in mining, monetary losses and possible legal liability. Northgate carries insurance to protect itself against certain risks of mining and processing in amounts that it considers to be adequate, but which may not provide adequate coverage in certain unforeseen circumstances. However, Northgate may become subject to liability for pollution or other hazards against which it cannot insure or against which it may elect not to insure, because of high premium costs or other reasons. Northgate may also become subject to liabilities, which exceed policy limits. In such cases, Northgate may be required to incur significant costs that could have a material adverse effect upon its financial performance and results of operations.

Northgate is subject to various legal claims, judgments, potential claims and complaints, including unexpected environmental remediation costs in excess of current reserves, arising out of the normal course of business. While Northgate believes that unfavourable decisions in any pending procedures or the threat of procedures related to any future assessment, or any amount it might be required to pay, will not have a material adverse effect on its financial condition, there is a risk that if such decisions are determined adversely to Northgate, they could have a material adverse effect on its profitability.

Northgate’s mining operations and exploration activities are subject to extensive federal, provincial and state regulations in Canada and Australia governing prospecting, development, production, exports, taxes, labour standards, occupational health and safety, water disposal, toxic substances, environmental protection, mine safety, relationships with Aboriginal groups and other matters. Compliance with such laws and regulations increases the costs of planning, designing, drilling, developing, constructing, operating and closing mines and other facilities. Northgate believes that it is in substantial compliance with all current laws and regulations. However, such laws and regulations are subject to change. Amendments to current laws and regulations governing operations and activities of mining companies or more stringent implementation or interpretation thereof could have a material adverse impact on Northgate, cause a reduction in levels of production and delay or prevent the development of new mining properties.

To fund its growth, Northgate is often dependent on securing the necessary capital through debt or equity financings. The availability of this capital is subject to general economic conditions and lender and investor interest in Northgate and its projects. To increase its access to capital, Northgate maintains relationships with key financial participants and has an active investor relations program in order to inform institutional and retail investors and other stakeholders.

On July 2, 2010, Northgate renewed its short-form base shelf prospectus originally filed on June 6, 2008 with the Securities Commissions in each of the provinces and territories of Canada, except Quebec, and a corresponding amendment to its shelf registration in the United States. This prospectus will allow Northgate to make offerings of debt securities, common shares, warrants to purchase common shares and warrants to purchase debt securities, share purchase contracts, share purchase or equity units, subscription receipts, preference shares and units (all of the foregoing, collectively, the "Securities") or any combination thereof up to an aggregate offering size of Cdn$250,000,000 over a 25-month period. Securities may be offered separately or together, in amounts, at prices and on terms to be determined based on market conditions at the time of sale and set forth in an accompanying shelf prospectus supplement. The net proceeds from the sale of the Securities will be used to fund capital expenditures, development and construction expenditures, exploration activities, potential future acquisitions and for general corporate purposes.

In October 2010, Northgate completed a public offering of $170,000,000 convertible senior notes for net proceeds of $163,419,000 to be used in the development of the Young-Davidson mine and for general corporate purposes. Accordingly, the shelf prospectus could be utilized for an aggregate offering size up to approximately Cdn$77,000,000 until expiration of the prospectus on July 11, 2012.

Northgate is dependent upon its workforce to conduct its operations. Northgate’s three operating mines have programs to recruit and train the necessary manpower for their operations, but each mine’s output may be affected by strikes, lockouts and other work stoppages at and around each mine.

Northgate’s accounting policies are described in note 2 to the consolidated financial statements. These consolidated financial statements are prepared in accordance with Canadian GAAP, which require Northgate to make various judgments with respect to certain estimates and assumptions. The following policies are considered by management to be most critical in understanding the judgments that are involved in the preparation of Northgate’s consolidated financial statements and the uncertainties inherent within them.

Northgate recognizes revenue from the sale of its Kemess South concentrate upon transfer of title and delivery at the receiving smelter, which usually occurs at the earlier of delivery of concentrate at the loading port or receipt of provisional payment from the buyer. Sales of gold-copper concentrate are based on specific sales agreements and are subject to adjustment upon final settlement of shipment weights, assays and metal prices. In addition, sales agreements include provisions where final prices are determined by quoted market prices in a period subsequent to the date of sale. Revenues are initially recorded at the time of sale based on forward prices for the expected date of final settlement. Subsequent variations to weights, assays and metal prices are recognized in revenue each period end and in the period of final settlement.

Northgate recognizes revenue from the sale of its gold doré from Fosterville and Stawell upon delivery, which occurs when the doré is picked up by the customer’s agent at the mine-site. Sales of gold doré are based on specific sales agreements and are subject to adjustment upon final settlement of shipment weights and assays. Revenues are recorded at the time of sale based on the spot price at the date of delivery. Final pricing and payment generally occurs within three days of delivery. Subsequent variations to weights, assays and metal prices are recognized in revenue each period end.

Minimum standards for site closure and mine reclamation have been established by various governmental agencies that affect certain operations of the Corporation. Northgate accounts for reclamation liabilities by recognizing any statutory, contractual or other legal obligations related to the retirement of tangible long- lived assets when such obligations are incurred, if a reasonable estimate of fair value can be made. The determination of site closure and reclamation costs require assumptions with respect to future estimated costs, discount rates and inflation rates, changes in which can materially affect the recognized amount of the liability. These obligations are measured initially at fair value and the resulting costs are 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 estimated amount or timing of costs. Upward revisions in the amount of undiscounted estimated cash flows are discounted using the current credit-adjusted risk-free rate. Downward revisions in the amount of undiscounted estimated cash flows are discounted using the credit-adjusted risk-free rate that existed when the original liability was incurred. The asset retirement cost is assigned to the related asset and amortized to net earnings over the life of the asset.

Northgate records mine development expenditures at cost and acquired mineral properties at the fair value at the time they were acquired. The fair values of acquired mineral properties are based on independent valuations and reflect the nature and amount of material interests believed to be contained or potentially contained in properties to which they relate.

A significant portion of Northgate’s mineral property is depreciated on a unit-of-production basis. Under the unit-of-production basis, the calculation of depreciation and depletion of mineral property, plant and equipment is based on the amount of proven and probable reserves expected to be recovered. If these estimates of reserves prove to be inaccurate, or if Northgate revises its mining plan reducing the amount of reserves expected to be recovered, Northgate could be required to increase or decrease the amount of future depreciation, depletion and amortization expenses, or could be required to write down the recorded value of its mineral property, plant and equipment.

In addition, Canadian GAAP requires Northgate to consider at the end of each accounting period whether events or changes in circumstances indicate that the carrying amount of its long-lived assets may not be recoverable. When such indicators are identified, impairment testing is carried out where the carrying value of Northgate’s asset groups, the lowest level of assets and liabilities for which there are independent identifiable cash flows, is compared to the related undiscounted expected future cash flows expected from the use and eventual disposition of the corresponding assets and liabilities.

The determination of expected future cash flows are based on detailed mine plans and requires significant judgment and estimates with respect to metal prices, foreign exchange rates, operating costs as well as the residual value of assets. For the recoverability tests carried out at December 31, 2010, metal price assumptions for Kemess South were $1,300/oz to $1,350/oz for gold and $3.50/lb to $4.25/lb for copper in 2011, and gold price assumptions for Fosterville and Stawell were A$1,350/oz for 2011, A$1,300/oz for 2012 to 2013, A$1,250/oz for 2014 to 2015 and A$1,200/oz thereafter. Changes in these assumptions can materially affect actual future results.

If Northgate determines there has been an impairment because its prior estimates of future cash flows have proven to be inaccurate due to reductions in the price of gold and copper, increases in the costs of production, reductions in the amount of reserves expected to be recovered or otherwise, or because Northgate has determined that the deferred costs of non-producing properties may not be recovered based on current economics or permitting considerations, Northgate would be required to write down the recorded value of its mineral property, plant and equipment, which would reduce Northgate’s earnings and net assets.

The mineral properties for which there are no independent identifiable cash flows are assessed for impairment on other factors that may indicate the need for a write-down.

Northgate records its investment in ARS at estimated fair value. In estimating the fair value of ARS, several variables are considered, including the probability of future defaults, the impact of ongoing events in the global financial markets, the relative seniority of each ARS within the capital structure of the issuer, the credit circumstances of financial guarantors, and the value of investments and reserves held by the issuer.

A decline in the estimated fair value of the ARS that is determined to be temporary is recorded in other comprehensive income in the period when the impairment occurred. In determining if a decline in estimated fair value is temporary, Northgate considers whether interest payments continue to be made, the probability of future defaults, the credit rating of the issuer and the existence of financial guarantors. Northgate also considers the senior rank of its holdings in the issuers’ capital structure and the fiduciary obligation and financial capacity of companies who own the issuers.

A decline in estimated fair value that is determined to be other than temporary is recognized in earnings in the period in which the impairment occurred. In determining whether an impairment is other than temporary, Northgate considers various factors, including a substantial decline in estimated fair value for an extended period of time, issuer defaults on interest payments, the presence of default insurance, significant downgrades in the credit rating of the issuer and adverse market conditions, which have negatively impacted individual securities.

Northgate recognizes future tax assets associated with tax loss carry forwards and other tax deductions only if it is more likely than not that the related benefits will be realized in the future. The evaluation of whether future tax assets should be recognized is based on expected future income for tax purposes. The determination of expected future income for tax purposes requires significant judgments and estimates with respect to metal prices, foreign exchange rates and operating costs. Changes in those assumptions can materially affect the recognized amount of a future income tax asset. In future years, if Northgate determines it is no longer more likely than not that the benefit of its future tax assets will be realized, it would be required to set up a valuation allowance with a corresponding future income tax expense in results from operations.

On February 13, 2008, the Accounting Standards Board confirmed that publicly accountable entities will be required to prepare financial statements in accordance with IFRS for interim and annual financial statements for fiscal years beginning on or after January 1, 2011. Several existing Canadian standards have converged with IFRS before the transition date. Other IFRS will be adopted for the first time on January 1, 2011. Northgate’s financial statements for the quarter ended March 31, 2011, including comparative amounts, will be prepared in accordance with IFRS.

Northgate’s IFRS conversion plan has been reviewed with the Audit Committee and includes an assessment of the impact of the conversion on the consolidated financial statements and related disclosures. The plan also considers the impact of the conversion on the Corporation’s information technology systems, ICFR, DCP and business activities that may be influenced by GAAP measurements. Northgate’s conversion plan is set out in four phases:

Training has been provided to the Corporation’s Audit Committee and its corporate finance employees in Canada. The plan also includes an analysis of the impact of IFRS on Northgate’s current accounting policies as changes in accounting policy are likely and may materially impact the financial statements.

Northgate has completed Phase 1 and Phase 3 concurrently and is undertaking Phase 2 and Phase 4, which involve a detailed analysis of IFRS by topic and preparation of the opening balance sheet. Detailed gap analysis has confirmed the following as high-impact areas: mineral property, plant and equipment, including impairment, site closure and reclamation provision, convertible senior notes and income taxes. Preliminary quantitative assessments of the material adjustments to Northgate’s IFRS opening balance sheet are described below. The final adjustments may differ from the preliminary calculations as management continues to evaluate policy choices and monitor ongoing projects by the International Accounting Standards Board that could affect the ultimate differences between Canadian GAAP and IFRS.

IFRS and GAAP contain the same basic principles of accounting for property, plant and equipment. However, differences in application do exist. For example, IFRS requires that each component of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately over its useful life. While Canadian GAAP contains similar requirements, in practice, the concept is applied less stringently. This method of componentizing property, plant and equipment may result in an increase in the number of components that are recorded and depreciated and, as a result, may impact the calculation of depreciation expense.

Upon transition to IFRS, an entity has the elective option to reset the cost of its property, plant and equipment based on fair value in accordance with the provisions of IFRS 1 and to use either the cost model or the revaluation model to measure its property, plant and equipment subsequent to transition. Northgate currently intends to apply the IFRS 1 election and reset the Kemess South mine plant and equipment at fair value upon transition to IFRS on January 1, 2010, and to use the cost model to measure all of Northgate’s property, plant and equipment subsequent to transition.

Based on preliminary calculations, applying the IFRS 1 election will result in an increase of approximately $30 million to the mineral property, plant and equipment carrying value as at January 1, 2010.

International Accounting Standards (“IAS”) 36, Impairment of Assets, uses a one-step approach for testing and measuring asset impairments, with asset carrying values being compared to the higher of value in use and fair value less costs to sell. Value in use is defined as being equal to the present value of future cash flows expected to be derived from the asset in its current state. In the absence of an active market, fair value less costs to sell may also be determined using discounted cash flows. The use of discounted cash flows under IFRS to test and measure asset impairment differs from Canadian GAAP where undiscounted future cash flows are used to compare against the asset’s carrying value to determine if impairment exists. This may result in more frequent write-downs in the carrying value of assets under IFRS since asset carrying values that were previously supported under Canadian GAAP based on undiscounted cash flows may not be supported on a discounted cash flow basis under IFRS. However, under IAS 36, previous impairment losses may be reversed where circumstances change such that the impairment has reduced. This also differs from Canadian GAAP, which prohibits the reversal of previously recognized impairment losses.

Northgate has determined that the long-lived assets at Stawell, not impaired under Canadian GAAP, are likely impaired under IFRS as of January 1, 2010. The impairment under IFRS is currently estimated to be approximately $40 million, which would result in a retained earnings adjustment on the date of transition. Furthermore, for the year ended December 31, 2010, an additional impairment of approximately $5 million is expected to be recognized for IFRS purposes.

IFRS requires the recognition of a provision on the basis of a legal or constructive obligation arising from a past event, if there is a probable outflow of resources and the amount can be estimated reliably. The threshold for recognition of a provision under Canadian GAAP is higher than under IFRS as liabilities for restructuring and site closure and reclamation provision are recognized only when there is a legal obligation. In addition, in estimating the reclamation costs, Canadian GAAP requires the use of third-party costs whereas the estimate under IFRS is based on the entity’s best estimate. Furthermore, in calculating the provision, IFRS requires the use of the current market-based discount rate at each reporting date whereas Canadian GAAP requires the use of the entity’s credit-adjusted risk free rate, which is revised only when there is an upward revision in expected cash outflows.

Upon transition to IFRS, an entity has the elective option to use a simplified method to calculate the net book value of the asset retirement obligation asset. Northgate currently intends to apply this election upon transition to IFRS and currently estimates the transition adjustment to be approximately a $2 million increase to the site closure and reclamation provision.

Under IFRS, there is an exemption whereby a deferred tax liability (asset) is not recognized if it arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither accounting profit nor taxable profit. This exemption does not exist under Canadian GAAP. Under Canadian GAAP, if the cost of acquiring an asset differs from its tax base, the cost of future income taxes recognized at the time of the acquisition will adjust the cost of the asset (using the “simultaneous equations” method). This difference will have an impact on Northgate’s historic asset acquisitions that are not considered to be business combinations, and will result in a lower carrying value of the asset acquired and the deferred tax liability under IFRS.

Under IFRS, a deferred tax liability (asset) is recognized for exchange gains and losses related to non-monetary assets and liabilities that are re-measured into the functional currency using historical exchange rates or indexing for tax purposes. Under Canadian GAAP, there is no deferred tax impact for a temporary difference arising from the difference between the historical exchange rate and the current exchange rate translations on the cost of non-monetary assets and liabilities of integrated foreign operations. This difference will affect Northgate’s Canadian operations whose functional currency under IFRS is assessed to be the US dollar; however, the tax pools of the Canadian entity are denominated in Canadian dollars. Accordingly, a deferred tax will be recognized on the non-monetary assets (i.e. mineral property, plant and equipment) for foreign exchange translation gains and losses between the historical exchange rates and the spot rate at period end.

Under Canadian GAAP, future income taxes are separately classified as current and long-term on the balance sheet. Under IFRS, deferred income taxes are classified as long-term. Therefore, upon IFRS transition, a reclassification adjustment will be made to present all current deferred taxes as long-term.

Lastly, all transitional adjustments to the Corporation’s opening IFRS balance sheet as of January 1, 2010 will result in a corresponding adjustment to the deferred tax asset or liability established based on the adjustment to the accounting carrying values. The quantitative calculations of IFRS adoption related to income taxes are currently being carried out.

Where a company may choose to settle in cash or shares (or a combination thereof) upon conversion of the debt by the holder, IFRS considers the conversion feature to be an embedded derivative, which must be separately accounted for at fair value on initial recognition and at each subsequent period end. The debt component on initial recognition is calculated as the residual between the amount of proceeds of the convertible debt and the fair value of the conversion feature. Transaction costs are allocated pro-rata between the debt and embedded derivative liability. Transaction costs related to the debt component are recorded against the liability, and the transaction costs related to the conversion feature are immediately expensed through earnings because this component is measured at fair value through profit or loss. Subsequent to initial recognition, the debt component is accreted at the effective interest rate while the option component is re-measured at fair value at each period end.

Northgate issued $170,000,000 convertible senior notes in October 2010 with the option to elect to pay cash or a combination of cash and common shares upon conversion. Under Canadian GAAP, the convertible debt is considered to be a compound financial instrument with a debt and equity component. The debt component was calculated as the net present value of the Corporation’s contractual obligation to make principal and interest payments, discounted at the market interest rate on similar borrowings but without the conversion feature. The equity portion was calculated as the residual between the proceeds and the fair value of the debt component. Transaction costs were prorated between the debt and equity components. Subsequent to initial recognition, the debt component is accreted at the effective interest rate and the equity component is not re-measured.

For IFRS purposes, Northgate will account for the convertible debt as a liability with an embedded derivative measured at fair value. Therefore, the carrying values of the debt and derivative components may be materially different from those under Canadian GAAP. The Corporation is currently in the process of quantifying the impact to its December 31, 2010 IFRS financial statements. There is no impact on the opening IFRS balance sheet as the convertible notes were issued in October 2010.

IFRS 1 provides the framework for the first-time adoption of IFRS and specifies that, in general, an entity shall apply the principles under IFRS retrospective. IFRS 1 also specifies that the adjustments that arise on retrospective conversion to IFRS from other GAAP should be directly recognized in retained earnings. Certain optional exemptions and mandatory exceptions to retrospective application are provided for under IFRS 1.

Internal Control over Financial Reporting and Disclosure Controls and Procedures

As the review of IFRS accounting policies is completed, appropriate changes to ensure the integrity of ICFR and DCP will be made. For example, any changes in accounting policies could result in additional controls or procedures being required to address reporting of first-time adoption as well as ongoing IFRS reporting requirements. At this point, Northgate has not identified any potential changes in accounting policies that would have a material impact on the Corporation’s internal control over financial reporting. The Corporation will ensure that its key stakeholders are informed about the anticipated effects of the IFRS transition.

The transition to IFRS is currently not expected to have a material impact on Northgate’s IT systems. Northgate’s Australian operations converted to IFRS from Australian GAAP in 2005 and, thus, the transition to IFRS will not require any significant changes in Australia. Production at Kemess South in Canada is currently anticipated to be complete in 2011 and, accordingly, changes are expected to be nominal. The IT system that has been selected and implemented for Young-Davidson and Corporate is capable of and designed to report under IFRS.

The transition to IFRS may have an impact on Northgate’s business activities where agreements make references to GAAP-based financial measures. Currently, no material impacts on business activities have been identified.

Overall, Northgate’s IFRS transition is progressing in line with the conversion plan. Management expects to complete its first interim consolidated financial statements prepared under IFRS for the three months ended March 31, 2011 with no significant issues or delay.

The Corporation has prepared a calculation of adjusted net earnings, which has removed certain non-cash adjustments from its Canadian GAAP calculation of net earnings, as it believes this may be a useful indicator to investors. Adjusted net earnings may not be comparable to other similarly titled measures of other companies.

Northgate has included net cash costs of production per ounce of gold in the discussion of its results from operations, because it believes that these figures are a useful indicator to investors and management of a mine’s performance as they provide: (i) a measure of the mine’s cash margin per ounce, by comparison of the cash operating costs per ounce to the price of gold; (ii) the trend in costs as the mine matures; and, (iii) an internal benchmark of performance to allow for comparison against other mines. However, cash costs of production should not be considered as an alternative to net earnings or to other Canadian GAAP measures and may not be comparable to other similarly titled measures of other companies. A reconciliation of net cash costs per ounce of production to amounts reported in the Statement of Operations is shown in the table below.

This Northgate MD&A contains "forward-looking information", as such term is defined in applicable Canadian securities legislation and “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, concerning Northgate's future financial or operating performance and other statements that express management's expectations or estimates of future developments, circumstances or results. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "expects", "believes", "anticipates", "budget", "scheduled", "estimates", "forecasts", "intends", "plans" and variations of such words and phrases, or by statements that certain actions, events or results "may", "will", "could", "would" or "might" "be taken", "occur" or "be achieved". Forward-looking information is based on a number of assumptions and estimates that, while considered reasonable by management based on the business and markets in which Northgate operates, are inherently subject to significant operational, economic and competitive uncertainties and contingencies. Northgate cautions that forward-looking information involves known and unknown risks, uncertainties and other factors that may cause Northgate's actual results, performance or achievements to be materially different from those expressed or implied by such information, including, but not limited to, gold and copper price volatility; fluctuations in foreign exchange rates and interest rates; the impact of any hedging activities; discrepancies between actual and estimated production, between actual and estimated reserves and resources or between actual and estimated metallurgical recoveries; costs of production; capital expenditure requirements; the costs and timing of construction and development of new deposits; and the success of exploration and permitting activities. In addition, the factors described or referred to in the section entitled "Risk Factors" in Northgate's Annual Information Form for the year ended December 31, 2010 or under the heading "Risks and Uncertainties" in Northgate's 2010 Annual Report, both of which are available on the SEDAR website at www.sedar.com, should be reviewed in conjunction with the information found in this MD&A. Although Northgate has attempted to identify important factors that could cause actual results, performance or achievements to differ materially from those contained in forward-looking information, there can be other factors that cause results, performance or achievements not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate or that management's expectations or estimates of future developments, circumstances or results will materialize. Accordingly, readers should not place undue reliance on forward-looking information. The forward-looking information in this MD&A is made as of the date of this MD&A, and Northgate disclaims any intention or obligation to update or revise such information, except as required by applicable law.

The Corporation prepares its disclosure in accordance with the requirements of securities laws in effect in Canada, which differ from the requirements of US securities laws. Terms relating to mineral resources in this MD&A are defined in accordance with National Instrument 43-101-Standards of Disclosure for Mineral Projects under the guidelines set out in the Canadian Institute of Mining, Metallurgy, and Petroleum Standards on Mineral Resources and Mineral Reserves. The Securities and Exchange Commission (the "SEC") permits mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. The Corporation uses certain terms, such as, “measured mineral resources”, “indicated mineral resources”, “inferred mineral resources” and “probable mineral reserves”, that the SEC does not recognize (these terms may be used in this MD&A and are included in the Corporation’s public filings, which have been filed with securities commissions or similar authorities in Canada).

The accompanying consolidated financial statements are the responsibility of management, have been prepared in accordance with Canadian generally accepted accounting principles and, where appropriate, reflect management’s best estimates and judgment based on currently available information. The financial information presented elsewhere in the annual report is consistent with that in the consolidated financial statements.

The Corporation has developed and maintains adequate systems of internal accounting and administrative controls, consistent with reasonable cost. Such systems are designed to provide reasonable assurance that the financial information is relevant and reliable and that the Corporation’s assets are appropriately accounted for and adequately safeguarded.

The Board of Directors of the Corporation (the “Board”) is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal control, and is ultimately responsible for reviewing and approving the consolidated financial statements and the accompanying Management’s Discussion and Analysis (“MD&A”). The Board carries out this responsibility principally through its Audit Committee.

The Audit Committee is appointed by the Board and none of its members are affiliated with the Corporation, nor are they involved in the daily operations of the Corporation. The Audit Committee meets periodically with management and the external auditors to discuss internal controls, auditing matters and financial reporting issues, and to satisfy itself that the responsibilities of each party have been properly discharged. The Audit Committee also reviews the consolidated financial statements, MD&A and the external auditors’ report. Fees and expenses for audit services are reviewed and the engagement or reappointment of the external auditors is also considered. The Audit Committee reports its findings to the Board and recommends approval of the consolidated financial statements for issuance to the shareholders.

The consolidated financial statements of Northgate Minerals Corporation have been audited by KPMG LLP Chartered Accountants. Their report outlines the scope of their examination and opinion on the consolidated financial statements.

We have audited the accompanying consolidated financial statements of Northgate Minerals Corporation, which comprise the consolidated balance sheets as at December 31, 2010 and 2009, the consolidated statements of operations and comprehensive income (loss), cash flows and shareholders’ equity for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinions.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Northgate Minerals Corporation as at December 31, 2010 and 2009 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

Commitments and contingencies (note 20)
Subsequent event (note 21)
The accompanying notes form an integral part of these consolidated financial statements.

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

Supplementary cash flow information (note 19)
The accompanying notes form an integral part of these consolidated financial statements.

					Equity					Accumulated
	Number of		Common		Component					Other
Thousands of US dollars,	Common		Shares		of Convertible		Contributed			Comprehensive			Retained
except share amounts	Shares		Amount		Senior Notes		Surplus			Income			Earnings			Total
Balance at December 31, 2008	255,717,071	$	311,908	$	—	$	5,269		$	(89,503	)	$	187,764		$	415,438
Shares issued under equity offering, net of transaction costs and income taxes (note 14D)	34,300,000		89,306		—		—			—			—			89,306
Shares issued under employee share purchase plan	306,715		422		—		—			—			—			422
Shares issued on exercise of options	364,600		1,030		—		(321	)		—			—			709
Stock-based compensation	—		213		—		1,254			—			—			1,467
Net loss	—		—		—		—			—			(49,506	)		(49,506	)
Other comprehensive income	—		—		—		—			85,798			—			85,798
Balance at December 31, 2009	290,688,386		402,879		—		6,202			(3,705	)		138,258			543,634
Shares issued under employee share purchase plan	226,948		449		—		—			—			—			449
Shares issued on exercise of options	941,650		3,483		—		(1,131	)		—			—			2,352
Stock-based compensation	—		225		—		2,727			—			—			2,952
Equity component of convertible senior notes, net of transaction costs and income taxes (note 10)	—		—		33,832		—			—			—			33,832
Net loss	—		—		—		—			—			(71,704	)		(71,704	)
Other comprehensive income	—		—		—		—			32,421			—			32,421
Balance at December 31, 2010	291,856,984	$	407,036	$	33,832	$	7,798		$	28,716		$	66,554		$	543,936

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

Notes to Consolidated Financial Statements
Years ended December 31, 2010 and 2009
All dollar amounts are stated in United States dollars unless otherwise indicated.
Tables are expressed in thousands of United States dollars, except share and per share amounts.

Northgate Minerals Corporation (“Northgate” or the “Corporation”) is engaged in gold and copper mining and related activities including exploration, development and processing. The Corporation’s principal producing assets are its 100% interests in the Fosterville and Stawell Gold mines in Australia and the Kemess South mine in Canada. The Corporation also holds a 100% interest in the Young-Davidson property, a development project in Canada.

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).

The consolidated financial statements include the accounts of the Corporation and its subsidiary companies and divisions. All material inter-company and inter-divisional balances and transactions have been eliminated.

Except as otherwise noted, these financial statements are expressed in United States dollars (“US$”). The US$/Canadian dollar (“Cdn$”) exchange rate as at December 31, 2010 was $1.01 (2009 – $0.96) and the average rate for the year ended December 31, 2010 was $0.97 (2009 – $0.88) . The US$/Australian dollar (“A$”) exchange rate as at December 31, 2010 was $1.02 (2009 – $0.90) and the average rate for the year ended December 31, 2010 was $0.92 (2009 – $0.79) .

Cash equivalents are highly liquid investments, such as term deposits with major financial institutions, having a term to maturity of three months or less at the time of acquisition that are readily convertible to specified amounts of cash. The Corporation classifies cash equivalents as held for trading financial instruments and accounts for them at fair value, with fair value adjustments charged to earnings.

Long-term investments are designated as available for sale and measured at fair value in the balance sheet with fair value adjustments charged to other comprehensive income except if an impairment is determined to be other than temporary in which case the impairment is charged to earnings.

Concentrate inventory and unshipped gold doré are recorded at the lower of production costs on a first-in, first-out basis, and net realizable value. Stockpiled ore and any work-in-process inventories (gold in circuit) are valued at the lower of average production costs or net realizable value. Production costs include costs related to mining, crushing, mill processing, as well as depreciation on production assets and certain allocations of mine-site overhead expenses attributable to the production process, as applicable. Supplies inventory, which includes the costs of consumables used continuously in operations, such as fuel, grinding media, chemicals and spare parts, is recorded at the lower of average cost or net realizable value.

Stockpiled ore not expected to be milled in the next year is classified as long-term and is included in other assets.

Write-downs to net realizable value are recognized in cost of sales. Under certain circumstances, a previously recognized write-down may be reversed if the net realizable value has increased.

Mineral property acquisition costs are deferred on a property-by-property basis and amortized using the unit-of-production method based on estimated proven and probable reserves.

Mine development costs incurred after the commencement of production are capitalized or deferred to the specific ore blocks or mine areas for which they provide physical access. Depreciation and depletion is recorded using the unit-of-production method based on proven and probable reserves within the specific ore block or area. Infrastructure and underground development costs that provide a benefit over the entire mine-life are amortized using the units of production method, based on accessible proven and probable mineral reserves.

Mineral exploration costs incurred on a producing property that are not related to an orebody classified as proven and probable reserves are charged to earnings as incurred. Mineral exploration costs on non-producing properties are charged to earnings as incurred. When proven and probable reserves are established and economic feasibility is determined on a non-producing property, then further costs of exploration and development are deferred on a project-by-project basis.

Deferred development costs include all costs directly related to development, as well as a proportion of the costs related to direct supervision and the cost of power used by the equipment. Interest costs are capitalized when a period of time is necessary to prepare an asset for its intended use. Interest costs relating to development projects are capitalized until the commencement of production.

Plant and equipment is carried at cost less accumulated depreciation. Certain mining and milling assets are depreciated using the unit-of-production method based on estimated proven and probable reserves expected to be processed. Depreciation for all other equipment is provided using the straight-line method over the estimated useful life of the related assets. Estimated useful lives for mining equipment and major asset categories range from two to ten years. Replacements and major improvements are capitalized.

The Corporation tests for impairment of long-lived assets, such as mineral property, plant and equipment, when events or circumstances indicate that a potential impairment exists. Long-lived assets are aggregated to the lowest level of assets and liabilities from which cash flows are expected to be generated. This aggregate is referred to as an asset group. An asset group is impaired if the undiscounted cash flows expected to be earned from their use is less than their carrying amount, at which time long-lived assets are written down to their fair value.

Fair value is calculated by applying: i) a discount rate to present value the future cash flows expected to be generated by each asset group; and ii) a multiple to the discounted future cash flows. The discount rate is based on an estimate of the Corporation’s real weighted average cost of capital adjusted for the risks associated with the individual asset group. Gold companies often trade at a multiple to the present value of their expected future cash flows. The estimate of the Corporation’s multiple is determined by a number of factors including, but not limited to, a comparison to market peers and remaining mine-life.

Minimum standards for site closure and mine reclamation have been established by various governmental agencies that affect certain operations of the Corporation. The Corporation recognizes all statutory, contractual or other legal obligations related to the retirement of tangible long-lived assets when such obligations are incurred and a reasonable estimate of fair value can be made. These obligations are measured initially at fair value and the resulting costs are 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 estimated amount or timing of the costs. Upward revisions in the amount of undiscounted estimated cash flows are discounted using the current credit-adjusted risk-free rate. Downward revisions in the amount of undiscounted estimated cash flows are discounted using the credit-adjusted risk-free rate that existed when the original liability was incurred. The asset retirement cost is assigned to the related asset and amortized to net earnings over the life of the asset.

Financial liabilities, including accounts payable and accrued liabilities, taxes payable, short-term loans, equipment financing obligations, convertible senior notes and other long-term liabilities, are accounted for at their amortized cost.

The Corporation recognizes revenue from the sale of its gold-copper concentrate upon transfer of title, which occurs at the earlier of delivery of concentrate at the loading port or receipt of provisional payment from the buyer. Sales of gold-copper concentrate are based on specific sales agreements and are subject to adjustment upon final settlement of shipment weights, assays and metal prices. In addition, sales agreements include provisions where final prices are determined by quoted market prices in a period subsequent to the date of sale. Revenues are recorded at the time of sale based on forward prices for the expected date of final settlement. Subsequent variations to weights, assays and metal prices are recognized in revenue each period end and in the period of final settlement.

The Corporation recognizes revenue from the sale of its gold doré upon delivery, which is when the doré is picked up by the customer’s agent at the mine-site. Sales of gold doré are based on specific sales agreements and are subject to adjustment upon final settlement of shipment weights and assays. Subsequent variations to weights and assays are recognized in revenue upon final settlement.

Mark-to-market gains or losses related to metal forward contracts are recognized in revenue.

The functional currency of the Corporation’s Canadian operations is the United States dollar. Monetary assets and liabilities denominated in other than United States dollars are translated at the exchange rate in effect at the balance sheet date. Non-monetary assets and liabilities are translated using historical rates. Revenues and expenses denominated in other than United States dollars are translated at rates of exchange in effect during the period. Gains and losses on translation are included in results from operations for the period.

The functional currency of the Corporation’s Australian operations is the Australian dollar. All assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at rates of exchange in effect during the period. Gains and losses on translation are included in equity as a separate component of other comprehensive income or loss.

The Corporation measures stock-based compensation related to stock options granted to directors, employees and non-employees at fair value and recognizes the compensation expense for options expected to vest over the vesting period, with a corresponding credit to contributed surplus. Any consideration paid by directors, employees and non-employees on the exercise of stock options is credited to share capital, together with a share of related stock-based compensation originally recorded in contributed surplus. Compensation costs associated with the Corporation’s Employee Share Purchase Plan (“ESPP”) are recognized based on the fair value of the shares that the Corporation is required to contribute on the date they are issued.

The Corporation uses the asset and liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are determined based on differences between the financial statement carrying values of existing assets and liabilities and their respective income tax bases (temporary differences) and loss carry forwards. Future income tax assets and liabilities are measured using the tax rates expected to be in effect when the temporary differences are likely to reverse. The effect on future income tax assets and liabilities of a change in tax rates is included in operations in the period in which the change is substantively enacted. The amount of future income tax assets recognized is limited to the amount of the benefit that is more likely than not to be realized. Investment tax credits earned from exploration expenditures are recorded as a tax receivable to the extent that it is more likely than not to be realized. A corresponding deduction is recognized in exploration expense or mineral property, plant and equipment if such costs are capitalized.

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management estimates relate to the determination of mineral reserves, receivables or payables from sales of concentrate, values of concentrate in inventory and in transit, valuation of financial instruments, determination of other than temporary declines in the value of investments, site closure and reclamation obligations, impairment of long-lived assets, useful lives for depreciation and depletion, and valuation allowances for future income tax assets. Actual future outcomes could differ from present estimates and assumptions, potentially having material future effects on the consolidated financial statements.

Basic earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding during the period. The Corporation uses the treasury stock method to compute the dilutive effects of stock options. Under the treasury stock method, the calculation of diluted earnings per share assumes that the proceeds to be received on the exercise of stock options are applied to repurchase common shares at the average market price for the period. The dilutive effect of convertible senior notes are determined by adjusting the numerator for related interest expensed during the period, net of tax, and the denominator for the additional weighted average number of common shares on an “if converted” basis as at the later of the beginning of the period and the date of issuance of the convertible senior notes. The computation of diluted net income per share assumes conversion or exercise of securities only when such conversion or exercise would have a dilutive effect on net income per share.

The Corporation may utilize derivative financial instruments to reduce cash flow risk relating to gold and copper sales and foreign currency risk on Canadian or Australian dollar operating costs. The Corporation recognizes derivative financial instruments on a mark-to-market basis with changes in fair value recognized in net earnings for the period.

Business Combinations, Consolidated Financial Statements and Non-controlling Interests

In January 2009, the Accounting Standards Board (“AcSB”) issued the Canadian Institute of Chartered Accountants (“CICA”) Handbook Section 1582, Business Combinations, which is converged with International Financial Reporting Standards (“IFRS”) 3, Business Combinations, and replaces CICA Handbook Section 1581, Business Combinations. Section 1582 provides guidance on the application of the purchase method of accounting for business combinations. The new standard is effective on a prospective basis to business combinations for which the acquisition date is on or after January 1, 2011. Earlier application is permitted. If an entity applies this Section before January 1, 2011, it must also adopt CICA Handbook Section 1601, Consolidated Financial Statements, and CICA Handbook Section 1602, Non-controlling Interests. These standards provide guidance for the preparation of consolidated financial statements and accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. The Corporation elected to adopt Section 1582, Section 1601 and Section 1062 prospectively, effective January 1, 2010. Adoption of these standards did not have an impact on the Corporation’s consolidated financial statements due to the adoption on a prospective basis and no business combination occurring in 2010.

On February 13, 2008, the AcSB confirmed that publicly accountable entities will be required to prepare financial statements in accordance with IFRS for interim and annual financial statements for fiscal years beginning on or after January 1, 2011. Several existing Canadian standards have converged with IFRS before the transition date. Other IFRS will be adopted for the first time on January 1, 2011. The Corporation’s financial statements for the quarter ended March 31, 2011, including comparative amounts, will be prepared in accordance with IFRS.

An analysis of the impact of IFRS on Northgate’s current accounting policies has been performed and changes in accounting policies will materially affect certain areas of the financial statements. The following items have been identified as high-impact areas: mineral property, plant and equipment, including any impairment, convertible senior notes, income taxes and asset retirement obligations. The quantitative impacts on Northgate’s financial statements are currently being finalized.

At December 31, 2010, the carrying value of supplies inventory at the Kemess South mine was recorded at its net realizable value of $8,850,000, resulting in a write-down of $584,000 (2009 – $363,000).

At December 31, 2010, the carrying value of gold in circuit and stockpiled ore at Stawell was recorded at its net realizable value of $2,847,000, resulting in a write-down of $900,000 (2009 – $463,000).

At December 31, 2010, the carrying value of unshipped doré, gold in circuit and stockpiled ore at Fosterville was recorded at its net realizable value of $5,791,000, resulting in a write-down of $786,000 (2009 – $850,000).

The cost of sales amount recorded in the statement of operations is comprised of the following items:

Depreciation and depletion included in inventory is reported as a depreciation and depletion expense in the statement of operations when the related inventory is sold.

There were no cash deposits held against the Corporation’s Australian credit cards as at December 31, 2010 (2009 – $269,000).

Included in plant and equipment is $23,922,000 of assets under construction and currently not being amortized.

Non-producing mineral properties include acquisition costs for the Young-Davidson property and certain mining and exploration rights in Australia. From July 2009 onwards, non-producing mineral properties also include development costs related to the Young-Davidson property, which have been capitalized as a result of a positive Pre-feasibility Study. The study established proven and probable reserves and demonstrated the economic feasibility of the project. Costs recorded in non-producing mineral properties are not currently being amortized.

Included in non-producing mineral properties is $2,438,000 of capitalized interest costs incurred during the year ended December 31, 2010.

The Corporation tested the recoverability of its long-lived assets for potential impairment at December 31, 2010. The carrying value of the Corporation’s asset groups, the lowest level of assets and liabilities for which there are independent identifiable cash flows, was compared to the related undiscounted cash flows expected from the use and eventual disposition of the corresponding assets and liabilities. The undiscounted cash flows are based on detailed mine plans, which incorporate management assumptions and estimates of revenues and related costs.

Significant assumptions for Kemess South included copper prices of $3.50/lb to $4.25/lb and gold prices of $1,300/oz to $1,350/oz for 2011, which reflect the short remaining life of the mine. The Corporation also made an estimate of the disposal value of its plant and equipment based on the most recent third-party valuation reports and the latest market conditions. The Corporation concluded that no charge for impairment was required. Actual future results may differ from the assumptions made by the Corporation.

The Corporation also tested the recoverability of the long-lived assets of the Fosterville and Stawell mines. Significant assumptions for the Australian operations included a gold price of A$1,350/oz for 2011, A$1,300/oz for 2012 to 2013, A$1,250 for 2014 to 2015 and A$1,200/oz thereafter, recognizing the longer term nature of these asset groups. The Corporation also estimated the revenues and costs related to the conversion of a portion of resources to reserves over the life of the mines. The Corporation concluded that no charge for impairment was required for Stawell. However, the carrying value of the long-lived assets of Fosterville exceeded their undiscounted cash flows over the life of the mine. Accordingly, the Corporation wrote down the carrying value of the assets to their fair value. The Corporation calculated the fair value by discounting the estimated cash flows expected from the use and eventual disposition of the assets and applying a multiple to the discounted cash flows. The discount rate and multiple used in the determination of fair value was 6.5% and 1.0x. Consequently, an impairment charge of $76,936,000 for Fosterville was recorded in earnings for the year ended December 31, 2010 (2009 – $83,486,000). Actual future results may differ from the assumptions made by the Corporation.

The Corporation acquired a number of exploration tenements via the Perseverance acquisition in 2008. Management regularly reviews the Corporation’s tenement holdings to ensure current and future exploration activities are consistent with the strategic plan for the Corporation’s Australian assets. As a result of the review in 2010, certain tenements were returned to the state of Victoria and a write-down equal to the carrying value of these tenements of $3,475,000 was recorded for the year ended December 31, 2010 (2009 – $1,363,000).

At December 31, 2010, Northgate continued to hold auction rate securities (“ARS”), which are floating rate debt securities marketed by financial institutions with auction reset dates at 7, 28, or 35-day intervals to provide short-term liquidity. The ARS held by the Corporation as of December 31, 2010 had a par value of $72,600,000. Beginning in August 2007, auctions for these ARS began to fail, and shortly thereafter attempts to conduct such auctions generally ceased. For the past several years, these securities could not be readily converted to cash for use by the Corporation to make capital investments or for other business purposes, although the underlying payment and other obligations of the original issuers of these securities remained intact, and these issuers or their guarantors continued to make regular interest payments to the Corporation. All ARS held by the Corporation were purchased on its behalf by Lehman Brothers Inc. (“Lehman Brothers”), acting in its capacity as broker agent of the Corporation using the limited discretion conferred on it. Based on representations from Lehman Brothers, the Corporation had believed that the securities conformed to its internal investment management policy.

Following the bankruptcy of Lehman Brothers, the Corporation retained an independent valuator (the “Valuator”) to assist with management’s assessment of the fair value of its ARS investments. The Valuator considered several factors in making such assessment, including the probability of future defaults by the respective issuers, the potential impact of recent events in the global financial markets, the relative seniority of each security within the capital structure of the relevant issuer, the credit position of financial guarantors and the value of investments and reserves held by the respective issuers.

The Corporation believes that, based on its cash and cash equivalents balance of $334,840,000 at December 31, 2010 and expected operating cash flow, the illiquidity and impairment of its ARS investments will not have a material impact on the Corporation’s ability to carry on its business. Subsequent to year-end, the Corporation sold its entire portfolio of ARS investments (note 21).

Subsequent to the ARS investments of the Corporation becoming illiquid, management of the Corporation received from Lehman Brothers a short-term loan collateralized by the ARS held in the Corporation’s investment account managed by Lehman Brothers, pursuant to a Client Agreement between Lehman Brothers and Northgate dated October 18, 2007 (the “Short-Term Loan”). As of December 31, 2010, the principal outstanding on the Short-Term Loan was $40,161,000 (2009 – $41,515,000). The Short-Term Loan matured on June 6, 2008 and has been classified as a current liability. Subsequent to year-end, the Corporation used the proceeds from the sale of its entire portfolio of ARS investments to repay the outstanding balance of the Short-Term Loan (note 21).

The Corporation has entered into equipment financing agreements to finance the purchase of certain mining equipment. The financing arrangements have remaining terms ranging from one to five years with interest rates ranging from 5.50% to 9.95% and are secured by a charge over the financed assets.

Future principal payments on equipment financing arrangements as of December 31, 2010 are as follows:

In October 2010, the Corporation completed a public offering of $170,000,000 convertible senior notes, including the exercise of a $20,000,000 over-allotment option by the underwriters. The notes are due on October 1, 2016 and will pay interest semi-annually at a rate of 3.50% per annum with the first interest payment due on April 1, 2011.

Holders of the convertible senior notes may, within specified time periods, convert their notes prior to July 1, 2016 under the following circumstances: (1) the closing sale price of Northgate’s common shares exceeds 130% of the conversion price for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the immediately preceding quarter; (2) the trading price per $1,000 principal amount of the convertible notes is equal to or less than 97% of the product of the closing sale price of Northgate’s common shares and the applicable conversion rate; (3) the convertible notes are called for redemption by the Corporation; (4) upon the occurrence of specified corporate transactions; and (5) a “delisted event” occurs and is continuing. In addition, the notes will be unconditionally convertible at the option of the holder from July 1, 2016 to the business day immediately preceding the maturity date of the notes.

The initial conversion rate is 244.9780 common shares per $1,000 principal amount of notes, which represents an initial conversion price of approximately $4.08 per common share. The conversion rate, and thus the conversion price, will be subject to adjustment in certain circumstances. Northgate may, in lieu of delivery of common shares upon conversion of all or a portion of the convertible notes, elect to pay cash or a combination of cash and common shares.

The Corporation received net proceeds totalling $163,419,000 from the offering of the convertible senior notes, net of transaction costs of $6,581,000. Of the net proceeds, $129,942,000 was allocated to the liability based on the fair value of similar debt instruments without an associated conversion option. The fair value was calculated as the net present value of the Corporation’s contractual obligation to make principal and interest payments, discounted at 8.00%, being the market interest rate on similar borrowings but without the conversion feature. The remaining portion of the net proceeds of $33,477,000, plus future income taxes of $355,000 related to transaction costs recorded in equity, was allocated to the conversion feature and recorded in shareholders’ equity.

For the year ended December 31, 2010, interest of $2,728,000 in relation to the convertible notes has been recorded at the effective interest rate of 8.71% . Interest cost on the convertible notes, net of interest income earned on unused funds, has been capitalized to mineral property, plant and equipment.

The effect of outstanding convertible senior notes was anti-dilutive for the year ended December 31, 2010 and therefore excluded from the computation of diluted net earnings per share.

Accrued severance costs are comprised of severance and retention payments accrued for Kemess South employees. On April 8, 2008, a new three-year collective agreement (the “Agreement”) was ratified by the International Union of Operating Engineers Local 115, which represents the 300 production and maintenance employees at Kemess South. The Agreement includes an enhanced severance package, which provides for a lump-sum payment to an employee who remains at Kemess South until the employee’s last scheduled shift. The payment is based on an employee’s service years as calculated at the time of the last shift.

In 2008, the Corporation also communicated details of a severance package to salaried Kemess South employees. The package provides for a lump-sum payment to a salaried employee who remains at Kemess South until the close of the mine. The payment is based on an employee’s service years as calculated at the time of the employee’s termination date.

The Corporation is recognizing all estimated severance and retention liabilities in earnings ratably over the service period. As at December 31, 2010, all accrued severance and retention costs have been classified as a current liability and included in accounts payable and accrued liabilities.

The Corporation’s Australian employees are entitled to 13 weeks of long-service leave for every 10 years of service in accordance with Australian legal requirements. The obligation is accrued and expensed over the 10-year period.

Provisions for site closure and reclamation costs are based principally on legal and regulatory requirements established by various government agencies in Canada and Australia. Under current regulations, the Corporation is required to meet performance standards to minimize the environmental impact from its operations and to perform site restoration and other closure activities at its mining and development sites. The exact nature of environmental remediation requirements that may be encountered in the future, if any, cannot be predicted with certainty, because environmental requirements currently established by government agencies may change.

Expenditures for Kemess South are expected to take place primarily from 2011 to 2014 with some expenditures, such as monitoring, to continue afterwards. The credit-adjusted risk-free rate at which the estimated future cash flows have been discounted is 5.33% and the inflation rate used to determine future expected costs is 2.00% .

Expenditures at Fosterville and Stawell are expected to be spent primarily from 2011 to 2015 with some expenditures, such as monitoring, to continue afterwards. The inflation rate used to determine future expected costs in Australia is 3.00% . The credit-adjusted risk-free rate at which the estimated future cash flows have been discounted is 5.70% at Fosterville and 4.67% at Stawell.

The respective discount rates were determined by using an appropriate measure for the risk-free rate in each country in which the Corporation operates, plus a risk premium reflective of the Corporation’s credit profile when the liability was recognized.

A reconciliation of total provision for site closure and reclamation obligation is as follows:

In 2010, the Corporation revised the undiscounted estimate for mine-site closure and reclamation costs at Kemess South, Young-Davidson, Stawell and Fosterville. Accordingly, the amounts recorded for the obligation and the related asset were increased.

At December 31, 2010, the Corporation had security bonds totalling Cdn$29,575,000 (2009 – Cdn$18,659,000) posted in connection with its reclamation permit for Kemess South and Young-Davidson (note 5).

At December 31, 2010, the Corporation also had cash deposits of A$10,460,000 (2009 – A$10,523,000) as security against performance guarantees relating to the future reclamation of Fosterville and Stawell (note 5). During 2010, the Corporation and the Department of Primary Industries (“DPI”) of the state of Victoria reviewed the current closure plan for Stawell, which will impact the amount of performance guarantee required to be posted with the DPI. While the updated closure plan and its impact on the closure bonding had not been finalized at December 31, 2010, management has estimated that a further A$1,500,000 will be required in additional security.

The Corporation’s objective when managing capital is to maintain a strong capital base to ensure investor, creditor and market confidence and to sustain future development and growth. The Corporation considers capital to be equity and long-term debt. The Corporation sets the amount of capital in proportion to risk by managing the capital structure and making adjustments in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Corporation may issue new shares or seek debt financing. The Corporation has implemented a rigorous planning and budgeting process to determine the funds necessary to ensure it has the liquidity to meet its operating requirements and growth objectives. In assessing liquidity, the Corporation takes into account its expected cash flows from operations and its cash and cash equivalent holdings.

The Corporation is subject to certain restrictions by third parties and is required to maintain a margin account with respect to its copper forward contracts, which may require further deposits based on copper prices. There were no margin requirements at December 31, 2010 and 2009.

The Corporation’s Short-Term Loan, secured by the ARS investments, and convertible senior notes require debt service payments from time to time (note 8 and note 10). The Corporation’s site closure plans require the Corporation to post closure bonds and deposits from time to time. Estimated future costs of reclamation are accrued as an asset retirement obligation and posted bonds are recorded in other assets.

Neither the Corporation nor any of its subsidiaries are subject to any other externally imposed capital requirements such as loan covenants or capital ratios.

There were no changes to the Corporation’s approach to capital management during the year ended December 31, 2010.

100,000,000,000,000 Class A preference shares, without par value, of which 100,000,000,000 have been designated Series I and 100,000,000,000 as Series 2.

The Corporation has a stock option plan pursuant to which it can issue up to 14,000,000 common shares to directors, officers, employees and service providers. Stock options are granted at the discretion of the Compensation and Corporate Governance Committee, acting on behalf of the Board, at exercise prices based on the closing market price of the Corporation’s common shares on the date immediately prior to the grant of the stock options. Each option will be for a term of not less than seven years, with vesting of 20% on the date of grant and 20% on the anniversary date of the grant over the next four years. Options may not be granted with exercise periods longer than ten years. At December 31, 2010, 4,288,350 stock options were available for issue under the plan.

The continuity of options granted and outstanding under the stock option plan is as follows:

Outstanding Options					Exercisable Options
Exercise	Number of	Weighted Average		Weighted Average	Number of		Weighted Average
Price (Cdn$)	Options	Remaining Life (years)		Exercise Price (Cdn$)	Vested Options		Exercise Price (Cdn$)
$0.69 – $0.90	40,000	4.87	$	0.82	24,000	$	0.82
$0.91 – $1.78	1,364,000	5.01		1.03	471,400		1.04
$1.79 – $1.84	550,000	1.08		1.79	550,000		1.79
$1.85 – $2.65	991,600	2.56		2.55	911,600		2.58
$2.66 – $4.07	4,396,600	4.73		3.52	2,044,700		3.58
	7,342,200	4.21	$	2.78	4,001,700	$	2.79

During the year ended December 31, 2010, the Corporation recognized a stock-based compensation expense of $2,727,000 (2009 – $1,255,000) based on the fair value of options granted and vested during the year. The amount recognized as an expense is net of $231,000 of stock-based compensation capitalized to mineral property, plant and equipment related to the development of Young-Davidson. The weighted average fair value of options granted in 2010 was Cdn$2.14 per share (2009 – Cdn$0.61) . The fair value of share options was estimated using the Black-Scholes option-pricing model with the following assumptions:

The expected life of the options used in the option-pricing model was estimated to be five years based on historical experience.

For purposes of the fully diluted earnings per share calculations, all outstanding options were excluded from the calculation of the weighted average number of shares outstanding, as they were anti-dilutive.

The ESPP is available to all full-time employees of the Corporation in Canada. Under the terms of the ESPP, each full-time employee can buy treasury shares up to 5% of their base salary at the current market price and the Corporation will contribute additional shares equal to 50% of the employee’s contribution. During the year ended December 31, 2010, the Corporation recognized $225,000 (2009 – $212,000) in stock-based compensation expense associated with the ESPP.

On September 30, 2009, the Corporation issued 34,300,000 common shares to a syndicate of underwriters on a bought deal basis at a price of Cdn$2.92 per share for proceeds of $89,306,000, net of transaction costs of $4,106,000.

The Corporation has exposure to credit risk, liquidity risk and market risk from its use of financial instruments.

Credit risk is the risk of potential loss to the Corporation if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Credit risk arises principally from the Corporation’s cash and cash equivalents, restricted cash, receivables and investment securities. It may also arise on the Corporation’s copper forward and other derivative contracts.

In general, the Corporation manages its credit exposure with respect to operational matters by transacting only with reputable, highly-rated counterparties. The Corporation monitors the financial condition of its customers and counterparties to contracts.

Gold doré produced in Australia is sold exclusively to Western Australia Mint, which is wholly-owned by the government of Western Australia. The Corporation believes there are other buyers in the marketplace that would buy the production under approximately the same financial terms. Concentrate produced at Kemess South is sold under a contract to Xstrata Canada Corporation (“Xstrata”), a wholly-owned subsidiary of the publicly traded international mining company, Xstrata plc. Kemess South gold-copper concentrate is of a quality that is readily saleable to a number of smelters under current market conditions. In the event that Xstrata is unable to purchase the Kemess South concentrate, it could be sold to other smelters once appropriate logistical arrangements were put in place.

The Corporation may also be exposed to credit risk on its copper forward contracts to the extent that the counterparty, Mitsui Bussan Commodities Ltd. (“Mitsui”), fails to meet its contractual obligation. The Corporation has mitigated this risk by obtaining a guarantee from Mitsui’s parent company, Mitsui and Co., Ltd. of Japan.

The Corporation limits its exposure to credit risk on investments by investing only in securities rated AAA by credit rating agencies such as S&P and Moody’s. Management continuously monitors the fair value of its investments, including its investments in ARS (note 7), to determine potential credit exposures. Any credit risk exposure on cash and cash equivalents is considered negligible as the Corporation places deposits only with major established banks and their subsidiaries in the countries in which it operates. Excess cash is invested in R1/P1/A1 rated investments including direct obligation commercial paper, bankers’ acceptances and other highly rated short-term investment instruments, which are recorded as cash and cash equivalents.

Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they fall due. The Corporation manages this risk such that it will have the ability to discharge its liabilities when due, both under normal and stressed conditions, without incurring significant losses or risking damage to the Corporation’s reputation.

The Corporation uses detailed cash forecasts to ensure cash is available to discharge its obligations when they come due. Cash needed for this purpose is invested in highly liquid investments.

		1 Year		2–3 Years		4–5 Years		6+ Years		Total
Accounts payable and accrued liabilities	$	77,100	$	—	$	—	$	—	$	77,100
Severance and long service leave ^{1, 2}		16,442		347		1,105		2,240		20,134
Equipment financing obligations (including interest)		8,950		8,249		3,488		—		20,687
Operating leases		827		473		53		—		1,353
Unrealized loss on copper forward contracts ³		16,561		—		—		—		16,561
Short-Term Loan ⁴		40,161		—		—		—		40,161
Convertible senior notes (including interest)		5,950		11,900		11,900		175,950		205,700
Asset retirement obligations ⁵		23,657		5,177		18,322		10,657		57,813
Other liabilities		448		88		88		412		1,036
Closure bonding requirements (note 12)		1,535		—		—		—		1,535
	$	191,631	$	26,234	$	34,956	$	189,259	$	442,080

Market risk is the risk that changes to commodity prices, foreign exchange rates or interest rates will affect the Corporation’s income or the value of its financial instruments. The Corporation manages this risk by executing strategies to limit excessive exposure to the extent possible while optimizing the return on investments designed to mitigate such risks.

Commodity Price Risk – The Corporation is exposed to commodity price risk through the price of gold and copper and also through various input prices such as fuel, steel and electricity. The Board has established a Finance Committee, which assists management in the identification and analysis of price risks and potential strategies to mitigate this risk.

The Corporation reviews major input prices on a regular basis and may enter into long-term contracts to mitigate the price volatility.

The Corporation monitors the price of the commodities it produces and considers the risk exposure to fluctuating prices. In managing that risk, the Corporation is cognizant that investors generally seek exposure to the underlying commodities, particularly gold, through their investment.

All of the Corporation’s future gold production is unhedged and is fully exposed to future price movements.

The Corporation has entered into forward sales contracts with Mitsui to fix the price of copper for certain future production. A total volume of 7,725 tonnes of copper were sold forward using London Metals Exchange (“LME”) contracts as at December 31, 2010. These contracts mature from January 2011 through April 2011 at an average forward price of Cdn$3.37 per pound. The Corporation also entered into separate forward purchase contracts with Mitsui to repurchase in US dollars, over the same period, its forward sales position at the difference between the monthly average LME prices in the month of settlement and the forward price of Cdn$3.37. The volume of forward sales and purchases in each future contract month match the expected future pricing periods for copper in concentrate to be delivered to Xstrata under a concentrate sales agreement. The copper forward sales and purchase contracts are being recognized on a mark-to-market basis in net earnings. The fair value of these contracts at December 31, 2010 was a liability of $16,435,000, which is included in accounts payable and accrued liabilities.

At December 31, 2009, the Corporation sold forward 17,375 tonnes of copper at an average forward price of Cdn$3.31 per pound maturing between April 2010 and April 2011. The fair value of these contracts was a liability of $8,228,000 at December 31, 2009, of which $5,507,000 was included in accounts payable and accrued liabilities and $2,721,000 was included in other long-term liabilities.

In 2009, the Corporation closed out all copper forward sales contracts that were outstanding at December 31, 2008 for net proceeds of $7,689,000.

A change of $0.05 per pound in the forward price of copper would have changed the fair value of the outstanding contracts as at December 31, 2010 and, consequently, earnings before income taxes, by $846,000 (2009 – $1,839,000).

Gold and copper sales agreements include provisions where final prices are determined by quoted market prices in a period subsequent to the date of sale. Revenue and the related receivables are based on forward prices for the expected date of final settlement. These financial assets are therefore exposed to movements in the commodity price. A change of $0.05 per pound in the price of copper would have changed the related receivable as at December 31, 2010 and earnings before income taxes by $694,000 for the year ended December 31, 2010 (2009 – $505,000). A $10 per ounce change in the price of gold would have changed the related receivable as at December 31, 2010 and earnings before income taxes by $133,000 for the year ended December 31, 2010 (2009 – $320,000).

Foreign Currency Risk – The Corporation is exposed to foreign currency risk on its financial assets and liabilities denominated in Canadian dollars. Movements in the Canadian dollar relative to the US dollar will have an impact on future earnings.

The Corporation’s financial assets and liabilities denominated in Canadian dollars are as follows:

A 10% strengthening or weakening of the United States dollar against the Canadian dollar as at December 31, 2010 would have decreased or increased earnings before income taxes by $23,423,000 for the year ended December 31, 2010 (2009 – $14,228,000). This analysis assumes that all other variables remain constant.

Interest Rate Risk – The Corporation is exposed to interest rate risk on its Short-Term Loan, which bears interest at LIBOR plus 100 basis points.

A change of 50 basis points in the LIBOR rate for the year ended December 31, 2010 would have changed earnings before income taxes by $207,000 for the year ended December 31, 2010 (2009 – $214,000). This assumes all other variables, in particular foreign currency rates, remain constant.

The carrying values of cash and cash equivalents, accounts receivable, restricted cash, and accounts payable and accrued liabilities approximate fair values due to their short terms to maturity or ability to readily convert to cash. The carrying value of the short-term credit facility approximates its fair value as it bears interest based on market rates of interest. The carrying values of equipment financing obligations are not materially different from their fair values.

The fair value of the debt component of the Corporation’s convertible senior notes as at December 31, 2010 is $137,800,000, calculated as the net present value of the Corporation’s contractual obligation to make principal and interest payments. The discount rate used is 8.00%, being the market interest rate on similar borrowings but without the conversion feature.

The fair value of investments in equity securities classified as available for sale is determined using bid prices at the balance sheet date with any unrealized gains or losses recognized in other comprehensive income. The fair value of ARS investments is determined based on a third-party valuation and other observable and unobservable variables (note 7).

Commodity contracts are valued by determining the difference between contractual forward rates and the current forward prices for the residual maturity of the contracts. When in a gain position, the fair value of the commodity contracts is determined by discounting the expected future cash flows to the balance sheet date using the LIBOR rate at that date for the expected period to the settlement of these contracts, plus an amount representing the risk premium of the counterparty. When in a loss position, a spread representing the risk premium of the Corporation is added to LIBOR for the discounting of the expected future cash flows. The change in fair value of the forward contracts recognized in the results from operations was a loss of $13,768,000 for the year ended December 31, 2010 (2009 – loss of $37,674,000) and has been included in revenue.

The following table outlines the Corporation’s financial assets and liabilities measured at fair value by level within the fair value hierarchy described below. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

		Fair value at December 31, 2010
		Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	334,840	$	334,840	$	—	$	—
Metals receivable		36,345		—		36,345		—
Auction rate securities		36,003		—		—		36,003
Equity investments		515		515		—		—
Liabilities:
Unrealized loss on copper hedges		16,435		—		16,435		—

The Corporation’s cash instruments are valued using quoted market prices in active markets, and therefore are classified as Level 1.

The Corporation recognizes revenue from the sale of its concentrate upon transfer of title and delivery, which usually occurs on receipt of the provisional payment from the buyer. The provisional payment is based on average metal prices from the previous month. The final prices of concentrate sales are determined by quoted market prices in a period subsequent to the date of sale. At period-end, the Corporation revalues its unsettled revenues using quoted forward rates based on the month of expected settlement. Because the inputs are derived from observable market data, concentrate receivables and payables are classified as Level 2.

The Corporation’s ARS are valued using a valuation technique that incorporates a number of variables, including the probability of future defaults, the potential impact of events in the global financial markets, the relative seniority of each auction rate security within the capital structure of the issuer, the credit circumstances of the financial guarantors, and the value of investments and reserves held by the issuers. Since there is not an active market for ARS and the securities have little price transparency, they are classified as Level 3.

The Corporation’s equity investments are classified as Level 1 as they are valued based on quoted bid prices in active markets.

The Corporation’s copper forward contracts are valued based on current forward prices for the residual maturity of the contracts and, when in a gain position, discounted using the 12-month LIBOR rate plus a risk premium for the counterparty, and, when in a loss position, at the 12-month LIBOR plus a risk premium for the Corporation. Because the inputs are derived from observable market data, the copper forward contracts are classified as Level 2.

A summary of the changes in the fair value of the Corporation’s Level 3 financial assets (ARS) for the years ending December 31 are as follows:

There were no transfers between Level 1 and Level 2 of the fair value hierarchy and no transfers in or out of Level 3 of the hierarchy during the year ended December 31, 2010 and 2009.

Total income tax expense for the year ended December 31, 2010 was $15,377,000 (2009 – $5,154,000) and was allocated as follows:

Income tax expense recognized in net earnings differs from the amount, which would result from applying the statutory Canadian income tax rate for the following reasons:

The tax effects of temporary differences that give rise to significant portions of the future tax assets and future tax liabilities are presented as follows:

At December 31, 2010, the Corporation has approximately Cdn$172,188,000 of capital losses for Canadian tax purposes available indefinitely to reduce taxes payable on future capital gains.

The Corporation’s Australian subsidiaries have non-capital losses of approximately A$151,296,000 available for Australian income tax purposes, which can be carried forward indefinitely to reduce future taxable income.

The Corporation’s primary segment reporting basis is by individual mine as the assessment of performance and resource allocation decisions are made on the same basis. The Corporate segment includes costs incurred for corporate activity in both Canada and Australia, as well as revenues and costs that are not attributable to the individual mines for performance assessment. Hedging activity and exploration costs are also included in the Corporate segment as the decisions concerning these expenditures are approved at the Corporate level.

During the first quarter of 2010, the Corporation determined that the Young-Davidson project qualified as an operating segment and has restated the comparative information to conform to the current period presentation. In prior years, the operating results of Young-Davidson had been included in the Corporate segment.

The operating segment results for the year ending December 31, 2010 are as follows:

											Young-
		Kemess			Fosterville			Stawell			Davidson			Corporate			Total
Revenues	$	287,642		$	123,462		$	87,711		$	—		$	(13,768	)	$	485,047
Depreciation and depletion		30,042			36,614			47,082			—			293			114,031
Exploration		2,270			9,955			6,350			2,952			602			22,129
Net interest expense (income)		(86	)		290			420			—			(2,800	)		(2,176	)
Earnings (loss) from operations, before income taxes		71,681			(75,409	)		(36,491	)		(3,239	)		(12,514	)		(55,972	)
Capital expenditures ¹		6,735			49,868			36,124			94,872			316			187,915
Mineral property, plant and equipment		43,294			60,201			144,714			117,989			885			367,083
Total assets		140,443			84,723			162,041			123,697			394,580			905,484

The operating segment results for the year ending December 31, 2009 are as follows:

Revenue for the years ended December 31, 2010 and 2009 include the effect of mark-to-market adjustments associated with forward contracts.

The Corporation has an agreement with Xstrata for the shipment and sale of Kemess’ gold-copper concentrate. The Corporation also has a sales arrangement with Western Australia Mint for gold doré bars produced at Fosterville and Stawell.

The mineral property, plant and equipment by geographical region are presented as follows:

For the year ended December 31, 2010, other income included a gain of $1,619,000 for an insurance settlement related to equipment that was damaged at Stawell in February 2010.

For the year ended December 31, 2010, other income included a gain of $1,619,000 for an insurance settlement related to equipment that was damaged at Stawell in February 2010. As part of the insurance claim, the Corporation was required to issue an irrevocable purchase order to purchase new equipment. The purchase commitment was entered into in April 2010 at a purchase price of A$2,059,000.

In June 2010, the Corporation signed an Exploration and Option to Enter Joint Venture Agreement with Nevada Exploration Inc. (“NGE”) on NGE's Awakening Gold Project (the “Property”) in Humboldt County, Nevada. The Agreement grants Northgate the option to earn an initial 51% interest in the Property by spending $4,100,000 in exploration and making additional payments totalling $436,000 over five years. Northgate's exploration commitment in the first year is $500,000.

The Corporation’s interest in the Kemess South mine is subject to a 1.62% royalty on the value of payable metals produced.

In February of 2011, Northgate sold 100% of the auction rate securities that it had held as investments since 2007. Northgate used the proceeds of $40,940,000 to repay the outstanding balance of the Short-Term Loan originally made by Lehman Brothers in 2007 in association with the investment account in which Northgate’s investments had been held (the “Account”). Northgate elected to sell the auction rate securities and repay the Short-Term Loan after Barclays confirmed to Northgate in February 2011 that the Short-Term Loan and the Account had been duly acquired by Barclays from Lehman Brothers as part of the court-approved purchase following the Lehman Brothers bankruptcy in September of 2008.

To ensure comparability of financial information, certain comparative figures have been reclassified to conform to the presentation adopted in the current reporting period.

		2010			2009			2008¹
Revenue	$	485,047		$	484,976		$	460,988
Net earnings (loss) before income taxes		(55,972	)		(42,787	)		40,470
Net earnings (loss)		(71,704	)		(49,506	)		10,720
Per basic common share		(0.25	)		(0.19	)		0.04
Per diluted common share		(0.25	)		(0.19	)		0.04
Total assets		905,484			741,679			591,629
Long- term liabilities		181,597			37,640			61,778
Metal production
Gold (ounces)		272,713			362,398			354,800
Copper (thousands pounds)		40,666			52,496			51,906
Realized metal prices
Gold ($/ounce)		1,256			994			873
Copper ($/pound)		3.61			2.87			2.78
Foreign exchange rates
US dollar (“US$”)/Canadian dollar (“Cdn$”)		0.97			0.88			0.94
US$/Australian dollar (“A$”)		0.92			0.79			0.86
Net cash cost ($ per ounce) ²		660			477			447


¹	On February 18, 2008, Northgate acquired Perseverance Corporation Ltd. (“Perseverance”), an Australian gold producer with two fully-permitted gold mines. 2008 financial figures include the results of Northgate’s Australian operations from February 19, 2008 to December 31, 2008.
²	The net cash cost of production per ounce of gold is a non-GAAP measure. Refer to page 51 for a discussion of non-GAAP measures.

		2010			2009
Operating Data
Ore mined (tonnes)		729,080			780,195
Ore milled (tonnes)		817,535			781,879
Ore milled per day (tonnes)		2,239			2,141
Gold
Grade (g/t)		4.57			4.79
Recovery (%)		82			85
Production (ounces)		100,441			103,360
Sales (ounces)		100,544			103,518
Net cash cost ($/ounce)		738			576
Financial Data
Revenue	$	123,462		$	100,140
Cost of sales		74,145			59,693
Loss from operations		(75,409	)		(79,861	)
Cash flow from operations		37,492			34,960
Capital expenditures ¹		49,868			36,075

		2010			2009
Operating Data
Ore mined (tonnes)		772,850			707,283
Ore milled (tonnes)		826,454			759,819
Ore milled per day (tonnes)		2,258			2,081
Gold
Grade (g/t)		3.23			4.07
Recovery (%)		83			87
Production (ounces)		71,482			85,998
Sales (ounces)		71,025			87,110
Net cash cost ($/ounce)		969			616
Financial Data
Revenue	$	87,711		$	85,515
Cost of sales		69,403			52,998
Loss from operations		(36,491	)		(6,035	)
Cash flow from operations		14,544			27,087
Capital expenditures ¹		36,124			33,350

		2010		2009
Operating Data
Ore plus waste mined (tonnes)		38,045,427		30,292,285
Ore mined (tonnes)		18,632,507		15,965,275
Stripping ratio (waste/ore)		1.04		0.90
Ore stockpile rehandle (tonnes)		1,999,523		6,380,062
Ore milled (tonnes)		18,748,466		18,352,557
Ore milled per day (tonnes)		51,361		50,265
Gold
Grade (g/t)		0.273		0.445
Recovery (%)		61		66
Production (ounces)		100,790		173,040
Sales (ounces)		97,730		180,040
Copper
Grade (g/t)		0.126		0.161
Recovery (%)		78		81
Production (thousand pounds)		40,666		52,496
Sales (thousand pounds)		38,939		51,188
Net cash cost ($/ounce)		363		348
Financial Data
Revenue	$	287,642	$	337,052
Cost of sales		179,010		188,109
Earnings from operations		71,681		97,028
Cash flow from operations		63,294		106,003
Capital expenditures		6,375		7,553

	i.	Commodity Price Risk – Northgate is exposed to commodity price risk through the price of gold and copper and also through various input prices such as fuel, steel and electricity.

		Northgate reviews major input prices on a regular basis and may enter into long-term contracts to mitigate price volatility. Northgate also monitors the price of the commodities it produces and considers the risk exposure to fluctuating prices. In managing that risk, Northgate is cognizant that investors generally seek exposure to the underlying commodities, particularly gold, through their investment in the Corporation’s common shares.

		The value of Northgate’s copper forward sales contracts are exposed to the movement in the copper price. A change of $0.05 per pound in the forward price of copper would have changed the fair value of outstanding contracts at December 31, 2010 and consequently, earnings before income taxes by $846,000 (2009 – $1,839,000).

		Northgate’s future gold production is fully unhedged and exposed to future price movements.

		Gold and copper sales agreements include provisions where final prices are determined by quoted market prices in a period subsequent to the date of sale. Revenue and the related receivables are based on forward prices for the expected date of final settlement. These financial assets are therefore exposed to movements in the commodity price. A change of $0.05 per pound in the price of copper would have changed the related receivable as at December 31, 2010 and earnings before income taxes by $694,000 for the year ended December 31, 2010 (2009 – $505,000). A $10 per ounce change in the price of gold would have changed the related receivable as at December 31, 2010 and earnings before income taxes by $133,000 for the year ended December 31, 2010 (2009 – $320,000).

	ii.	Foreign Exchange Rate Risk – Northgate is exposed to foreign exchange rate risk on its financial assets and liabilities denominated in Canadian dollars. Movements in the Canadian dollar relative to the US dollar may have a significant effect on future earnings. A 10% strengthening or weakening of the US dollar against the Canadian dollar as at December 31, 2010 would have decreased or increased earnings before income taxes by $23,423,000 for the year ended December 31, 2010 (2009 – $14,228,000). This analysis assumes that all other variables, in particular interest rates, remain constant.

		Northgate is also exposed to the effect of movements in the Australian dollar relative to the US dollar, which may also have a significant effect on Northgate’s net investment in its Australian operations.

	iii.	Interest Rate Risk – Northgate is exposed to interest rate risk on its Short-Term Loan (refer to the discussion on Short-Term Loan below), which bears interest at LIBOR plus 100 basis points. A change of 50 basis points in the LIBOR rate for the year ended December 31, 2010 would have changed earnings before income taxes by $207,000 for the year ended December 31, 2010 (2009 – $214,000). This assumes all other variables, in particular foreign currency rates, remain constant.

		2010		2009
Kemess South mine	$	35,581	$	37,363
Fosterville Gold mine		5,543		4,530
Stawell Gold mine		5,305		5,081
Young-Davidson property		1,484		516
	$	47,913	$	47,490
Estimated undiscounted cash flows used to determine the total liability	$	57,813	$	52,373

¹	The estimated severance liability will be recognized ratably over the estimated period of service. As at December 31, 2010, accrued severance of $6,192,000 has been recognized in accounts payable and accrued liabilities.
²	The provision for long service leave included above is undiscounted. As at December 31, 2010, accrued long service leave of $9,658,000 has been recognized in accounts payable and accrued liabilities, and $2,424,000 has been recognized in other long-term liabilities.
³	The unrealized loss on copper forward contracts included above is undiscounted. As at December 31, 2010, an unrealized loss of $16,435,000 on copper forward contracts has been recognized in accounts payable and accrued liabilities.
⁴	The Short-Term Loan is secured by Northgate’s ARS investments. This amount represents the principal amount only. The loan bears interest at LIBOR plus 100 basis points.
⁵	The asset retirement obligations included above are undiscounted. The Kemess South and Young-Davidson portions of the asset retirement obligation are backed by Cdn$29,575,000 in security bonds included in other assets. The Fosterville and Stawell portion is backed by A$10,460,000 in security bonds also included in other assets.

			Impact on
	Change		Operating Cash Flow (millions)
US$/A$ exchange rate	$0.02	$	3.5
Gold price	$10 per ounce	$	2.0
US$/Cdn$ exchange rate	$0.02	$	0.1

•	Phase 1 – Project planning and preliminary study;
•	Phase 2 – Detailed gap and impact analysis;
•	Phase 3 – Strategy and solutions identification; and,
•	Phase 4 – Solutions development and implementation.

(Expressed in thousands of US$, except share amounts)		2010			2009
Net loss	$	(71,704	)	$	(49,506	)
Adjustments
Write-down of ARS		374			10,979
Write-down of mineral properties, net of tax		80,411			84,849
Fair value adjustment on copper forward contracts, net of tax		10,103			26,869
Adjusted net earnings		19,184			73,191
Diluted common shares outstanding		292,205,521			265,335,675
Adjusted net earnings per diluted common share	$	0.07		$	0.28

2009		Fosterville			Stawell			Kemess South			Combined
Gold production (ounces)		103,360			85,998			173,040			362,398
Cost of sales	$	59,693		$	52,998		$	188,109		$	300,800
Change in inventories and other		(152	)		(51	)		(5,507	)		(5,710	)
Gross copper and silver revenue		—			—			(122,300	)		(122,300	)
Total cash cost	$	59,541		$	52,947		$	60,302		$	172,790
Cash cost per ounce	$	576		$	616		$	348		$	477


Kenneth G. Stowe	Jon A. Douglas
President & Chief Executive Officer	Senior Vice President & Chief Financial Officer

March 28, 2011

As at December 31
Thousands of US dollars		2010		2009
Assets
Current Assets
Cash and cash equivalents	$	334,840	$	253,544
Trade and other receivables		62,051		27,961
Income taxes receivable		2,236		—
Inventories (note 4)		44,569		44,599
Prepaid expenses		2,367		2,566
Future income tax asset (note 16)		5,619		5,541
		451,682		334,211
Other assets (note 5)		40,819		27,544
Future income tax asset (note 16)		9,381		14,507
Mineral property, plant and equipment (note 6)		367,083		327,416
Investments (note 7)		36,519		38,001
	$	905,484	$	741,679
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued liabilities	$	109,385	$	59,132
Income taxes payable		—		29,395
Short-term loan (note 8)		40,161		41,515
Equipment financing obligations (note 9)		7,945		5,995
Provision for site closure and reclamation obligations (note 12)		22,460		23,501
Future income tax liability (note 16)		—		867
		179,951		160,405
Equipment financing obligations (note 9)		10,763		4,656
Convertible senior notes (note 10)		131,235		—
Other long-term liabilities (note 11)		2,803		8,995
Provision for site closure and reclamation obligations (note 12)		25,453		23,989
Future income tax liability (note 16)		11,343		—
		361,548		198,045
Shareholders' Equity
Common shares (notes 14A and 14D)		407,036		402,879
Equity component of convertible senior notes (note 10)		33,832		—
Contributed surplus		7,798		6,202
Accumulated other comprehensive income (loss)		28,716		(3,705	)
Retained earnings		66,554		138,258
		543,936		543,634
	$	905,484	$	741,679

On behalf of the Board of Directors,

Terrence A. Lyons, Director	Douglas P. Hayhurst, Director

Years ended December 31
Thousands of US dollars, except share and per share amounts		2010			2009
Revenue	$	485,047		$	484,976
Cost of sales (note 4)		322,558			300,800
Depreciation and depletion		114,031			104,126
Administrative and general		12,524			10,679
Net interest income		(2,176	)		(1,580	)
Exploration		22,129			14,637
Currency translation (gain) loss		(8,614	)		1,143
Accretion of site closure and reclamation costs		1,677			3,253
Write-down of mineral properties (note 6)		80,411			84,849
Write-down of investments (note 7)		374			10,979
Other income (note 18)		(1,895	)		(1,123	)
		541,019			527,763
Loss before income taxes		(55,972	)		(42,787	)
Income tax recovery (expense) (note 16)
Current		1,309			(29,472	)
Future		(17,041	)		22,753
		(15,732	)		(6,719	)
Net loss		(71,704	)		(49,506	)
Other comprehensive income (loss)
Unrealized loss on available for sale securities		(1,465	)		(1,463	)
Reclassification of realized loss on available for sale securities to net earnings		232			—
Reclassification of other than temporary loss on available for sale securities to net earnings		374			10,979
Unrealized gain on translation of self-sustaining operations		33,280			76,282
		32,421			85,798
Comprehensive income (loss)	$	(39,283	)	$	36,292
Net loss per share
Basic	$	(0.25	)	$	(0.19	)
Diluted		(0.25	)		(0.19	)
Weighted average shares outstanding
Basic		290,922,452			264,603,527
Diluted		290,922,452			264,603,527

		2010		2009
Concentrate and unshipped gold doré	$	13,390	$	16,059
Gold in circuit		5,385		3,868
Stockpiled ore		5,437		3,310
Supplies		20,357		21,362
	$	44,569	$	44,599

		2010		2009
Change in inventory	$	1,121	$	5,989
Mining and milling costs		240,336		209,842
Marketing and other costs		81,101		84,969
	$	322,558	$	300,800

		2010		2009
Restricted cash	$	40,441	$	27,544
Other		378		—
	$	40,819	$	27,544

				Accumulated
				Depreciation, Depletion		Net Book
2010		Cost		Impairment and Write-down		Value
Plant and equipment	$	565,955	$	426,013	$	139,942
Mineral properties (producing)		382,302		260,733		121,569
Mineral properties (non-producing)		167,914		62,342		105,572
	$	1,116,171	$	749,088	$	367,083

		2010		2009
Auction rate securities (“ARS”)	$	36,003	$	37,702
Other		516		299
	$	36,519	$	38,001

		2010			2009
Balance at the beginning of the year	$	47,490		$	46,269
Effect of change in estimated future cash flows		15,721			420
Site closure and reclamation costs paid		(20,633	)		(11,089	)
Accretion expense		1,677			3,253
Effect of foreign exchange		3,658			8,637
Balance at the end of the year	$	47,913		$	47,490

	2010				2009
				Average Exercise				Average Exercise
	Number			Price (Cdn$)	Number			Price (Cdn$)
Balance, beginning of year	6,325,850		$	2.49	5,758,500		$	2.92
Granted	2,110,000			3.55	1,616,000			1.06
Exercised	(941,650	)		2.54	(364,600	)		2.10
Cancelled	(152,000	)		2.85	(684,050	)		3.24
Balance, end of year	7,342,200		$	2.78	6,325,850		$	2.49
Exercisable	4,001,700		$	2.79	3,525,800		$	2.72

	2010	2009
Risk-free interest rate	3.28%	2.30%
Annual dividend rate	—	—
Expected stock price volatility	67%	64%

Level 1 –	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 –	Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 –	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

		2010			2009
Income tax expense recorded in net earnings	$	15,732		$	6,719
Income tax benefits recorded in shareholders’ equity		(355	)		(1,565	)
	$	15,377		$	5,154

		2010			2009
Loss before taxes	$	(55,972	)	$	(42,787	)
Canadian income tax rate		28.50%			30.00%
Tax recovery based on statutory income tax rate		(15,952	)		(12,836	)
Expenses not deductible or income not taxable		(104	)		3,599
Investment tax credit		(207	)		(1,070	)
Change in valuation allowance, tax rates and other items		33,968			17,104
Difference in tax rates in foreign jurisdictions		(1,601	)		—
Effect of foreign exchange		(2,129	)		(2,904	)
Mining taxes		1,757			2,826
Income tax expense	$	15,732		$	6,719

		2010			2009
Future income tax assets
Non-capital loss carry forwards and other deductions	$	46,446		$	31,189
Net capital loss carry forwards		27,033			26,037
Reclamation liabilities		10,025			10,644
Employee provisions		5,274			3,784
Accrued liabilities		—			3,825
Unrealized loss on copper forward contracts		4,375			2,360
British Columbia mineral tax deductions		—			12,230
Financing costs		1,385			2,063
Mineral property, plant and equipment		86,769			45,177
Other		2,730			1,060
Future income tax assets		184,037			138,369
Valuation allowance applied		(139,296	)		(100,099	)
Total future income tax assets		44,741			38,270
Future income tax liabilities
Mineral property, plant and equipment		(36,610	)		(13,857	)
Investment tax credits		(1,022	)		(2,446	)
Other		(3,452	)		(2,786	)
Total future income tax liabilities		(41,084	)		(19,089	)
Net future income tax asset	$	3,657		$	19,181
Allocated as follows:
Current portion of future income tax asset	$	5,619		$	5,541
Non-current portion of future income tax asset		9,381			14,507
Current portion of future income tax liability		—			(867	)
Non-current portion of future income tax liability		(11,343	)		—
Net future income tax asset	$	3,657		$	19,181

		2010		2009
Canada	$	273,874	$	299,321
Australia		211,173		185,655
	$	485,047	$	484,976

		2010		2009
Cash paid during the year for:
Interest	$	2,160	$	2,298
Income taxes		26,913		587
Non-cash transactions:
Purchase of mineral property, plant and equipment through financing arrangements		13,936		2,734
Mine construction financed by accounts payable and accrued liabilities		18,836		—
Insurance premiums financed by a loan facility		650		856
Investment tax credit recorded as a reduction to mineral property, plant and equipment		5,366		—
Interest capitalized to mineral property, plant and equipment		1,435		—
Accretion on convertible senior notes capitalized to mineral property, plant and equipment		1,293		—
Deferred transaction costs transferred to liability or equity		—		775
Future income tax benefits recorded directly in equity		354		1,565