This paper introduces a new method for navigated spine surgery using a stereoscopic video see-through head-mounted display (HMD) and an optical tracking system. Vertebrae are segmented from volumetric CT data and visualized in-situ. A surgical drilling device is virtually extended with a mirror for intuitive planning of the drill canal, control of drill direction and insertion depth. The first designated application for the virtually extended drilling device is the preparation of canals for pedicle screw implantation in spine surgery. The objective of surgery is to install an internal fixateur for stabilization of injured vertebrae. We invited five surgeons of our partner clinic to test the system with realistic replica of lumbar vertebrae and compared the new approach with the classical, monitor-based navigation system providing three orthogonal slice views on the operation site. We measured time of procedure and scanned the drilled vertebrae with CT to verify accuracy of drilling.