Ambler JV agreement announced

Hunting hard in remote elephant country, NovaGold Resources can claim a lion's share of kills. Now the aggressive junior has to prove whether it's found any trophies that will make the company a metals producer.

NovaGold announced March 26 an agreement with Kennecott Exploration and Kennecott Arctic to acquire a 51 percent interest in the Ambler gold, silver, copper and base metals property in remote northwestern Alaska.

Previous exploration on Arctic, the most advanced target on the Ambler property, identified an inferred resource containing 817,000 ounces of gold, 62.1 million ounces of silver, 3.2 billion pounds of copper, 4.2 billion pounds of lead and 640 million pounds of lead.

That puts the Arctic deposit in the top volcanogenic massive sulfide deposits in the world based on in-situ metal value, according to the company's statement.

With the Ambler agreement in place, NovaGold now has a share in its third such large mineral deposit in North America.

NovaGold currently holds a 70 percent interest in Donlin Creek in southwestern Alaska, estimated to contain about 28 million ounces of gold. Partner Placer Dome must spend $30 million to earn back a 70 percent share of that development project.

NovaGold, through its Canadian subsidiary, also is working to earn a 100 percent interest in Galore Creek, in northwestern British Columbia, estimated to contain 5 million ounces of gold, 60 million ounces of silver and 5 billion pounds of copper.

It's quite an impressive list for a company that started less than seven years ago with a few geologists dedicated to Alaska exploration.

"We're growing as a company," Greg Johnson, vice president of corporate development, told Mining News in an interview April 2. "Our goal as a company is to grow into a quality, exploration-focused, producer … a mid-tier gold producer in the northwest."

2004 spending plans outlined

NovaGold plans to spend about $7 million on projects in Alaska this year, with the bulk of that - about $5 million - going to develop the company's 100 percent owned Rock Creek gold project.

NovaGold is preparing to initiate the permitting process for Rock Creek, now in the hands of engineers, later this year; work that will run concurrently with completion of a final feasibility study. The goal is gold production beginning sometime in late 2005 or early 2006.

The company will also spend about $500,000 on its Nome Gold project, a large, low-grade placer gold resource, part of its sand and gravel operation in Nome, acquired in its purchase of Alaska Gold in 1999.

On the recently acquired Ambler property, NovaGold plans to spend about $1.5 million this year, to develop an updated geologic model through detailed re-logging of existing core. An initial 6,000-foot core drill program is also planned later this summer.

To fund exploration in Alaska, NovaGold anticipates re-investing this year's revenue from its Nome sand-and-gravel, land and gold businesses.

Across the border, NovaGold will spend about $5 million on Galore Creek, including completion of an updated geological model and resource estimate, a scoping study and a summer drilling program to complete a minimum of 60,000 feet of samples.

The company's other early-stage exploration properties in northwestern Canada will also receive some attention, with spending planned from $500,000 to $1 million. Brewery Creek in the Yukon will be the main focus.

NovaGold's partners on two other properties are also spending millions this year. At Donlin Creek, operator Placer Dome plans to spend $6 million, Johnson said. And at the Shotgun gold project in southwest Alaska, operator TNR will spend up to $1.5 million, he said.

Ambler's history

NovaGold's latest project should breathe new life into a long-explored but never developed property in northwest Alaska. One hundred and fifty miles east of Kotzebue Sound, the Ambler property consists of 35,000 acres of patented and Alaska State mining claims that cover a large volcanogenic massive sulfide district.

Rio Tinto subsidiaries Kennecott Exploration and Kennecott Arctic discovered the property in 1967 and worked on it, off and on, through late 1990s. Within the Ambler property is the Arctic resource, a mineralized area that received extensive exploration.

Following airborne geophysical surveys completed in 1996, Kennecott staked a "very large group of claims in the Ambler-Survey Pass area," according to the 1997 Alaska Mineral Industry report.

In 1998, Kennecott spent $2 million on the western part of the Ambler Copper Belt, the state said, and reported "encouraging" results from drilling. "A new geologic model suggests that mineralization extends deeper," the 1999 state report said. "No work was done in 1999, but the company is considering the possibility of developing Arctic as an open pit and underground mine. Lack of access to transportation remains the key problem to making Bornite and Arctic viable mining operations."

Other companies, including Teck and Cominco, explored the area. Several other volcanogenic massive sulfide deposits have been identified in the region, according to state reports.

The Arctic deposit estimate reported by the Alaska Division of Geological and Geophysical Surveys was based on 70 wide spaced drill holes, according to NovaGold's press release.

Ambler agreement details

NovaGold's agreement with Kennecott allows the junior to earn a 51 percent interest in the Ambler property, by matching Kennecott's historical spending on the property, totaling $20 million. NovaGold has until 2016 to do so, although as operator, it must spend a minimum of $5 million on exploration and development during the first five years of the agreement.

In addition, NovaGold must obtain agreements with area land owners to provide access for mine development. "The strategy in our approach is for us to work with local Native corporations and the state of Alaska to develop the best options for access and infrastructure," Johnson said.

During the second phase, NovaGold must complete a pre-feasibility study, resulting in a positive rate of return for a mining project. The company's focus will be to make the Ambler property "as attractive of an investment as possible," Johnson said.

Upon completion of a positive feasibility study, Kennecott can regain management and acquire an extra 2 percent of the project by making a payment to NovaGold equal to 4 percent of the project's net present value at that time.

It's a monetary incentive to NovaGold that also allows Kennecott's parent company to achieve its goal of developing a large-scale project, Johnson said. "Rio Tinto is only interested in very large projects that have long mine lives," he said.

The potential for growth certainly exists. Mineralization generally parallels topography and occurs within 600 feet or less from surface. The felsic volcanic package which hosts the volcanogenic massive sulfide mineralization throughout the district has been mapped over a strike length exceeding 50 miles east and west of the Arctic mineralization, according to NovaGold's press release.