NovaGold to build hydroelectric plant?

Vancouver-based NovaGold Resources has been waiting a while now for Coast Mountain Power to develop the Forest Kerr hydroelectric project. Nothing has happened, and NovaGold needs the power for its planned Galore Creek gold-copper-silver mine in northwestern British Columbia. So the mining company decided to make an offer for Coast Mountain Power and build the hydroelectric power plant itself.

The value of the transaction is approximately C$40 million, representing a 42 percent premium to the one-month weighted average trading price of Coast Mountain shares prior to the offer. "There is a tremendous amount of synergies between Coast Mountain and our project," NovaGold's president and CEO, Rick Van Nieuwenhuyse, told Mining News. "There are technical similarities - we have to build a tunnel to divert the water at the mine. From a broader perspective, we quite like the idea of looking at green power options."

At NovaGold's Donlin Creek and Rock Creek projects in Alaska, both in the development stage, the company is considering wind power as an alternative to diesel. At the Ambler exploration project, NovaGold is looking at both wind and hydroelectric power. The Forest Kerr project in British Columbia is fully permitted and could be constructed within the same period as the mine. It would generate and transmit up to 115 megawatts of electricity into the British Columbia hydroelectric grid, potentially reducing the cost of power for consumers in the area.

Permits expected in early '07

NovaGold began the Environmental Assessment process for Galore Creek in May with the submission of a pile of documentation that is "about five-and-a-half feet tall", according to Van Nieuwenhuyse. "It's quite a prescriptive process here in British Columbia," he added. The company hopes to receive permits for the mine in February or March next year, then spend about 18 months constructing a road and diversion tunnel before starting site work.

An agreement between NovaGold and the Tahltan First Nation for participation in the Galore Creek project was signed in February. It may be the first such agreement with a mining company signed before the Environmental Assessment process, Van Nieuwenhuyse said. "This agreement establishes a high standard against which all proposed resource development projects in Tahltan territory will be measured," said Curtis Rattray, chairman of the Tahltan Central Council.

NovaGold has pledged to establish procedures that will engage the Tahltan in all aspects of environmental protection; to maximize training and employment of Tahltan members throughout the mine life; to ensure access for Tahltan businesses to opportunities for the supply of goods and services to the mine; and to make financial contributions to the Tahltan Heritage Trust Fund to mitigate any adverse social and cultural impacts of mine development. During mine operations, Trust Fund payments are guaranteed to be no less than C$1 million annually, and may increase if the mine makes high profits.