The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
New mine reports first gold pour Oct. 1; sale of NovaGreenPower contributes to record third-quarter earnings for junior miner
NovaGold Resources Inc. reports that the startup of its first mining operation at Rock Creek near Nome is going smoothly.
Production levels at Rock Creek have been higher than the company anticipated, averaging about 50 percent of design capacity during the first month of operation, NovaGold said in its third-quarter financial report.
The gold mine's gravity circuits ran at about 80 percent availability and the carbon-in-leach system is in the process of being charged and commissioned.
Carl Gragnier, NovaGold's vice president of operations, told Resource Development Council members Oct. 2 that the company expects the Rock Creek mine to be running at its full 7,000-metric ton-per-day capacity some time in November.
Gragnier also said crews at the mine had completed the first gold pour Oct. 1.
NovaGold expects to recover 20,000 ounces of gold at Rock Creek before the end of 2008. Once in full production, the mine is projected to produce about 100,000 ounces of gold per year with life-of-mine cash costs estimated at about $500 per ounce. At current metal prices, Rock Creek should generate more than $25 million in cash-flow for the junior in 2009.
The Nome operations, including the Rock Creek and Big Hurrah deposits, have proven and probable reserves of 510,000 ounces of gold; NovaGold plans to double those reserves within the next year.
With 1.81 million ounces in measured and indicated resources and an inferred resource of 330,000 ounces of gold, the Nome operations have the potential for expanded production and a mine life beyond 10 years.
Sale proceeds boost third quarter
NovaGold reported a record C$16.7 million in earnings for the third quarter of 2008, giving the junior NovaGold C$36.7 million in profits for the first nine months of the year. This compares with a loss of C$4.2 million for the same three months a year ago and a loss of C$12.2 million for the first three quarters of 2007.
The company attributes the record earnings primarily to a gain of C$33.5 million on the sale of NovaGreenPower, which was partly offset by a foreign exchange loss of C$7 million due to the devaluation of the Canadian dollar during the quarter. The junior spent C$5.4 million in care and maintenance costs at the Galore Creek project, and C$5.4 million in write-downs of certain mineral properties held by the company.
The Vancouver B.C.-based junior generated revenue of C$1.5 million in the third quarter, down 32 percent from C$2.2 million during the same period a year ago. NovaGold blamed the decrease on lower interest income accrued on smaller average cash balances. Revenues for the year also fell 34 percent to C$3.5 million from C$5.3 million last year.
NovaGold's expenses for the third quarter totaled C$20.8 million, compared with C$7.6 million for the same period in 2007. The company charged C$5.4 million for care and maintenance of the infrastructure at its Galore Creek project in northwestern British Columbia and $5.4 million in charges against earnings for the Khotol, Shiko Lake, Ambler, Baird and Kugruk properties, with no comparable items during the same period in 2007.
Looking ahead
The Vancouver B.C.-based miner said it has set aside C$11.6 million of the C$21.4 million it had on hand Aug. 31 for suspension-related expenses at the Galore Creek copper-gold-silver project in Northwest British Columbia.
NovaGold said it currently plans to fund its activities over the next 12 months from cash, relying on cash flow from the Rock Creek Mine, revenue from land and gravel sales and gains from the sale of non-core and liquid assets. Management is still reviewing strategic alternatives to maximize shareholder value, the company said.
Since the end of the quarter NovaGold has sold the Ambler project and other non-core Alaska assets to Mantra Mining Inc. for C$20 million in common shares of Mantra. The company also borrowed $18.8 million in a bridge loan from Auramet Trading, LLC. The junior raised another C$15.3 million from 2.31 million purchase warrants exercised Oct. 1.
NovaGold said Donlin Creek LLC, a 50/50 partnership between NovaGold and Barrick Gold Corp. to develop the huge Donlin Creek gold deposit in southwestern Alaska, will complete a feasibility study on the venture early next year.
The junior and its partner in the Galore Creek project, Teck Resources Ltd., is planning to complete an optimization study for Galore Creek by year's end.
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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