Rock Creek moves closer to production

A recent Dow Jones report puts a slightly more definite timetable on what NovaGold Resources has been telling Alaskans for the last year: That it's getting ready to make the leap from explorer to mine operator when it starts production at what will be both its first producing mine and the Seward Peninsula's first hard rock gold mine since World War I.

NovaGold President and Chief Executive Officer Rick Van Nieuwenhuyse told Dow Jones in late January that if all goes according to schedule the company's Rock Creek project north of Nome, Alaska, should start production this time next year versus "sometime in the first half of 2006," which is what the company said in November.

Van Nieuwenhuyse also said Rock Creek, which will cost about $50 million to put into production and $200 (cash cost) per ounce to produce, will ramp up to full production of 100,000 ounces a year by the summer of 2006.

The Rock Creek and nearby Saddle deposits contain a resource of greater than 1 million ounces of gold.

In addition to Rock Creek, Vancouver-based NovaGold also owns the Big Hurrah property, 45 miles east of Nome near Solomon - the only lode gold mine to ever produce on the Seward Peninsula. It yielded about 27,000 ounces of gold from underground workings, mainly between 1903 and 1907. (Other lode mining was for tin and fluorite at a number of small mines near Tin City northwest of Nome.)

NovaGold's initial exploration started at Big Hurrah in 2004 and the results are pending. Historic work on the property has identified multiple shallow mineralized zones grading as much as 10 grams/tonne gold with similar characteristics to Rock Creek.

The company said the initial mineralized zone it is targeting could contain 100,000 to 200,000 ounces of gold.

Feasibility study pending

NovaGold expects to complete a feasibility study for Rock Creek in the next few months, receive final mine permits by summer and then make a production decision, Van Nieuwenhuyse said. Rising fuel costs, cement and steel have played havoc with the mining industry's cost estimates, but he told Dow Jones that the $50 million capital estimate was "reasonably safe."

Some mining exploration companies fail to make the move into production because they don't have the right people, Van Nieuwenhuyse told Dow Jones, pointing to the fact that an exploration geologist doesn't know how to build, operate or finance a mine, and junior companies often try to run lean, with a few individuals trying to do everything.

But Nieuwenhuyse, a former Placer Dome exploration vice president, said NovaGold has a team of experienced operations people, several of whom worked at Placer Dome and other mining companies.

"It's exciting, and it's scary," he told Dow Jones of the pending transition.

Looking at re-starting Nome dredges

NovaGold acquired Rock Creek, along with about 14,000 acres of patented land in and around Nome, in its 1999 purchase of Alaska Gold Co.

The company said last year that it is continuing to evaluate the prospect of re-starting gold production from it Nome Gold Project in conjunction with its existing sand and gravel operations - by utilizing dredges or with conventional open pit mining. Historically more than 4 million ounces of gold have been recovered from the Nome area on land owned by Alaska Gold.

Nome mayor excited about mine, needs gas for power

"We can't wait until the second half of the year when they do their assessment for Rock Creek," Denise Michels, mayor of Nome, told Mining News Jan. 25. "The mine means economic development and new job creation. It will benefit the community and region as a whole."

Unemployment is high in Nome in the winter months and NovaGold will be able to provide year-round jobs, Michels said.

But "for the mine to come online its needs more access to power. … A Nome utility is constructing a new power station this summer," but it's fueled by diesel, which the mayor says is expensive.

What the area needs is cheaper, alternative power such as natural gas or wind power, Michels said, noting federal and state studies showed shallow gas in the area.

The Bering Strait region's 9,800 residents (3,500 in Nome) aren't a big enough market to make gas production economically feasible, she said. But the power needs of Rock Creek might change that.

"Any alternative source to help offset costs would be wonderful," Michels said.