The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
2008 strategy targets commercial gold production at Rock Creek, exploration and problem-solving at Donlin Creek, Ambler properties
Vancouver-based NovaGold Resources Inc. April 14 assured investors that it has a "clearly defined strategy" to rebuild shareholder value from the setbacks suffered in the market last fall when the company and partner Teck Cominco Ltd. elected to delay development of the Galore Creek Project in northern British Columbia.
NovaGold's new strategy is a focus on Rock Creek and Donlin Creek, the junior's gold projects in Alaska.
NovaGold also reported earnings of $28 million, or 27 cents per share, for the first quarter of its fiscal year, which ended Feb. 29. That compared with a year-ago net loss of $4.9 million, or 5 cents a share, for the first three months of fiscal 2008. The increase in earnings for the quarter was primarily related to a $15.3 million gain on disposal of shares in US Gold Corp. and a $15.2 million suspension cost recovery at Galore Creek, net of related non-controlling interest, the company said.
Revenues for the quarter ended Feb. 29, totaled $1.7 million, up 55 percent from $1.1 million in the same period in 2007.
NovaGold said it had about $13.8 million in cash on hand as of Feb. 29, of which about $10.2 million was committed to the Galore Creek Project. The company also completed a $100 million offering of convertible notes in March.
"This continues to be a challenging time to build mines, with strong inflationary pressures and intense industry competition for staff, contractors and equipment," said NovaGold President Rick van Nieuwenhuyse. "Despite the challenges, we are on target to achieve commercial production in mid-2008. The setback at Galore in late November had a significant impact on shareholder value, which we are determined to rebuild."
Rock Creek nears commercial production
NovaGold said commercial production at the Rock Creek gold mine near Nome and progress in advancing toward feasibility and permitting at the Donlin Creek project in western Alaska "should be a significant catalyst to add shareholder value this year."
The company said Rock Creek's processing facilities have been both wet and dry commissioned, and a test gold pour has been completed in an on-site refinery.
To bring the Rock Creek mill up to full operation, crews must finish building a tailings storage facility. High snowfalls and severe winter conditions have slowed construction progress, but the work should be finished in time to allow for commercial production by mid-2008.
"Due to engineering considerations, the tailings storage area construction has weather condition restraints, and once the construction phase is complete, similar weather delays will not be an issue at Rock Creek," said Peter Harris, NovaGold's chief operating officer.
Harris said the delay in construction of the tailings storage facility has allowed the company to spend more time testing the mill circuit and once the tailings storage is finished, the ramp-up to full production should take less time than it would have had there been less time with the mill. The company expects Rock Creek to produce C$25 million in cash flow in 2008.
NovaGold has set aside C$7 million of about C$42 million in planned spending at Rock Creek in 2008 to continue exploration around the mine and the nearby Saddle deposit. Van Nieuwenhuyse said that the company plans to upgrade the 250,000-ounce gold resource at Saddle into the measured and indicated categories and transition Saddle into the Rock Creek mine plan.
The company also hopes to include the Big Hurrah property, about 40 kilometers to the east of Rock Creek, in the mine plan in 2009.
Some C$29.2 million had been spent as of Feb. 29, the company said.
2008 exploration is focused on Donlin
NovaGold said its primary exploration focus in 2008 will be on the Donlin Creek gold property in southwest Alaska.
Donlin Creek LLC, a 50-50 partnership between NovaGold and Barrick Gold Corp., began its 21,000-meter drill program for 2008 in mid-February at Donlin.
NovaGold spokeswoman Rhylin Bailie told Mining News that the 2008 campaign is about half finished and an additional campaign at Donlin is being considered.
The current drill program under way in the East Acma area is located outside areas included in the company's resource estimate for Donlin Creek and is designed to rapidly determine the limits of mineralization for that region. Assay results are expected by the middle of 2008 and will be used to update Donlin's resource estimate.
The next drill target at Donlin Creek will be the Dome prospect about five kilometers, or three miles, north of the main Donlin Creek pit area.
Van Nieuwenhuyse said early indications are that the mineralization grades at Dome are similar to those found at Acma. The company plans to move drills to Dome in May.
Processing rates and power options
The partnership is also studying power, logistics, processing and other details of project design. One of its key objectives is finding the optimal production rate for the mine. Under study are production rates from 50,000 metric tons per day up to 100,000 metric tons per day which would produce between 1.5 million and 2.5 million ounces of gold annually.
Another key issue for the Donlin Creek project is power supply. Two options are currently under review, on-site generation using diesel generators with co-wind generation and possibly tying into the Alaska railbelt power grid. The second option would involve building more than 200 miles of transmission line to connect Donlin to the existing power grid.
Van Nieuwenhuyese said one advantage of bringing power from the grid is that it would bring sustainability to the region.
When asked about this possibility, Rhylin Bailie told Mining News that one of NovaGold's goals at each of its projects is to bring long-term sustainable benefits to the region. "We offer training opportunities and local employment, providing the opportunity for people to build skills and service-related businesses that can then be transferred to other projects when our mine eventually closes," she said. "Likewise, building a power line as opposed to relying on diesel generation means we leave behind the legacy of a long-term renewable power source. It's good for us, good for the region and much better for the environment than diesel power!"
When asked if NovaGold is working with the State of Alaska or other agencies on a power transmission project, Van Nieuwenhuyse said, "Power discussions are at a very early stage, but there is certainly a great deal of interest from local communities and state energy and rural-development authorities."
A mine plan for the project is targeted for completion in the second half of 2008, which will allow time to move forward to feasibility and permitting, NovaGold said.
Partners explore Galore Creek options
NovaGold said one of the challenges that Galore Creek developers face is how to manage water produced from the high amounts of precipitation at the copper-gold-silver project. Engineers are weighing alternative methods for diverting the water, such as using an underground tunnel.
The engineers are also studying the possibility of transporting ore to a much drier location on the opposite side of the mountain via either a conveyor system or a slurry line.
"We are committed to building this mine. We think this is a high-quality asset, we certainly have huge support from the Tahltan First Nations and the provincial government of British Columbia," Van Nieuwenhuyse said
Next generation gold prospects
In addition, NovaGold will work on scoping studies and drilling at its Ambler high-grade zinc-copper-gold project in Northwest Alaska this summer. The company has scheduled a 3,000-meter drill program to start in mid-June on the property.
NovaGold also said it will advance other current early stage exploration projects in Alaska and British Colombia as well as seek out new properties to "identify our next generation of gold projects."
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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