Northgate Minerals said on Tuesday a preliminary assessment of its Kemess underground gold-mining project in north-central British Columbia has indicated some promising results.

The study indicates that an underground mine at the site could on average produce 95,000 ounces of gold per year, at cash costs of about $115 per ounce, over a 12-year mine life.

The project would use some of the existing facilities at Northgate's Kemess South open-pit mine. Northgate has owned and operated Kemess South for more than a decade. The mine produced more than 100,000 ounces of gold in 2010.

Vancouver-based Northgate said capital expenditures on the underground project would come to $437 million. It intends to start a full feasibility study on the project and expects it to be completed next year.

"The Kemess Underground Project represents significant development opportunity for Northgate, with a 12-year mine-life that would add to our growing production profile and reduce Northgate's average net cash cost of production," said Chief Executive Ritch Hall in a statement.

Northgate is also developing the Young-Davidson project in northern Ontario that is expected to begin production in 2012. It also owns the Fosterville and Stawell gold mines in southern Australia. (Reporting by Euan Rocha; Editing by Frank McGurty)