The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
After selling non-core assets, NovaGold explores "strategic alternatives" to advance Galore and Donlin; Rock Creek begins production
NovaGold Resources Inc. experienced more than a 30 percent drop in stock value when the Vancouver B.C.-based junior reported it is selling more than 485,000 acres of its non-core mining assets in Alaska, and that sale of the entire company is one of the options managers are considering as a "strategic alternative to maximize shareholder value."
"We just wanted to signal to the market that we think we are really undervalued here. These assets are high-quality assets in a low geopolitical risk location, and so we want to maximize shareholder value, so we are going to look at a number of different opportunities here," NovaGold President and CEO, Rick Van Nieuwenhuyse told Mining News Sept. 19. "We are executing our strategic plan, which is to focus on gold, focus on our three core assets; Nome operations, Donlin Creek and Galore Creek, and looking at ways to enhance shareholder value."
With the sale of NovaGreenPower in July, the spin-out of its non-core Alaska properties to Mantra Mining Inc., and the Sept. 18 startup of operations at the Rock Creek gold mine in Northwest Alaska - the junior miner is now investigating the best way to advance its other two huge projects, the Donlin Creek gold project in Alaska and the Galore Creek copper-gold project in British Columbia.
Two feasibility studies expected in '09
NovaGold and joint venture partner Teck Cominco expect to release a new operation plan for the Galore Creek project by the end of the month. Development of the project was suspended after a review indicated that capital costs had increased to around $5 billion.
The NovaGold CEO also gave a preview of what to expect in the new Galore Creek operation plan. He said the new plan calls for a longer tunnel and shorter road. The tunnel would be used to move the crushed ore to a processing facility located outside Galore Creek Valley.
Nieuwenhuyse explained that by processing the ore outside the valley that receives large amounts of rain, the Galore Creek partners can prevent building a large and very expensive water retention dam that would have been needed to process ore inside the valley.
Teck funded the C$30 million operation plan and also will pay for a feasibility study expected out in late 2009.
Meanwhile, NovaGold expects to complete a feasibility study for Donlin Creek during the first quarter of 2009. NovaGold and joint venture partner Barrick Gold U.S. Inc said the preferred design includes processing about 50,000 metric tons of ore per day using onsite diesel and wind cogeneration for power. Using this design, Donlin Creek would operate for 25 to 30 years and could produce 1 million to 1.5 million ounces of gold annually. Permitting is scheduled to start in early 2009 with construction targeted for 2012.
All options are on the table
In an environment of increasing capital costs and a stock market that is not friendly to junior mining companies, NovaGold is investigating all of its options to advance these two mammoth projects.
"We still have these two great big projects. Do we look at selling one to pay for the other? Do we look at reducing our interest in them? Do we look at M&A (merger and acquisition) opportunities? Those are all the things that we are looking at," Nieuwenhuyse said.
The company, which has been approached by several groups, is also considering strategic investments.
"There is a lot of money floating around China, Russia, (and) the Middle East looking for a home." Nieuwenhuyse told Mining News. "We are knocking on a lot of doors, and our door is being knocked on as well"
Hard road to production
NovaGold made the highly-anticipated transition from explorer to miner on Sept. 18, when production began at its Rock Creek gold mine on the outskirts of Nome.
Nieuwenhuyse described reaching production at Rock Creek as "a hard, hard road." The final bumps in the road were due to problems with the storm-water drainage plan for the facility, pointed out by Mother Nature when last winter's record accumulations of snowfall melted.
When the U.S. 9th Circuit Court of Appeals ruled Jan. 3 in favor of a permit originally issued in August 2006 by the U.S. Army Corps of Engineers, NovaGold hoped to be producing gold by April.
Significant adverse weather conditions combined with weather damage to the water recycle pond and extra work relating to storm-water pollution prevention requirements (compounded by unusually high snowfall) resulted in extended delays starting up production at Rock Creek.
The complications associated with the site's storm-water pollution plan prompted Alaska regulators to issue a Notice of Violation related to Rock Creek's lack of preventative measures for storm-water discharges from its construction site.
Crews worked throughout the summer repairing damage caused by spring run-off and addressing the water management concerns of regulators. Regulators approved the start of production at Rock Creek.
Explorer becomes producer
Ink had not dried on the final approvals from regulators when crews at the mine began feeding ore through the mill. The nearly 450,000 metric tons of stockpiled ore is enough to feed the plant for three months at full capacity.
NovaGold is targeting a three-month ramp-up to full capacity production at the mill, which has nameplate operating capacity of 6,500 metric tons per day. Crews will start feeding the mill at 25 percent, increasing to 50 percent by the end of the first month, 75 percent by the end of the second month, and reaching 100 percent by the end of the year.
Once full production is reached the operation is expected to turn out 100,000 ounces of gold per year. The main pit at Rock Creek has a measured resource of 500,000 ounces.
NovaGold's CEO said the company's objective over the next year is to add an additional 500,000 ounces to that resource, providing 1 million ounces to the junior miner during the next 10 years.
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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