The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Gold explorer sheds early-stage projects and focuses on mining its three key assets
The arrival of 2009 was a milestone for NovaGold Resources Inc. Emerging from a tumultuous 2008, the Vancouver, B.C.-based explorer raised badly needed capital and positioned itself to move its three advanced projects toward production.
"NovaGold weathered the considerable challenges of 2008 and has emerged well-positioned to take advantage of a rising gold market and build a premier growth-focused precious metals company," NovaGold President and CEO Rick Van Nieuwenhuyse told shareholders in a letter.
Wanting to focus on its advanced assets, NovaGold assigned its early stage exploration properties to Mantra Mining Inc. (now TintinaGold Resources Inc).
Though the company has dispensed its early stage properties, NovaGold, which has added an average of about 3 million ounces of gold to its resource base annually since 1998, believes there is plenty of exploration potential left at its advanced projects.
"We have had a very successful exploration story over the years, we plan to continue that track record. Van Nieuwenhuyse told Denver Gold Forum attendees in September. "We are working in districts where it is relatively easy to find new ounces."
Strategic partner
Early in the New Year, NovaGold unveiled an agreement with Electrum Strategic Resources LLC to sell the New York-based private company more than 46.15 million units for US$1.30 per unit, or US$60 million. Following the Electrum deal, NovaGold raised another US$15 million. Institutional investors purchased 11.5 million units in a deal with identical terms to the one that NovaGold inked with Electrum.
Electrum Strategic Resources is a member of the Electrum Group of Companies, which holds one of the largest and most diversified portfolios of precious metals exploration projects in the world, according to NovaGold.
The transaction gave Electrum a 30 percent interest in NovaGold, making it the Vancouver B.C.-based junior's largest shareholder. The New York-based company's ownership stake will jump to about 46 percent if Electrum exercises all of the warrants in the deal. This also would give the explorer another US$69 million in cash.
"Electrum's strategic investment substantially strengthened NovaGold's balance sheet, ensuring the ongoing advancement of our projects. With cash on hand and manageable expenditures at Donlin and Galore for the next few years, NovaGold is positioned to look at new opportunities that can provide future growth for the company," Van Nieuwenhuyse told shareholders.
Spin-out
NovaGold closed the deal to spin out its early stage exploration projects into TintinaGold in March. In exchange for its 397,680 acres of Alaska State mining claims, NovaGold received 3.125 million shares of Mantra's common stock, which, at the time, represented about 7 percent of the junior's issued and outstanding shares.
The deal includes NovaGold's two gold exploration claim groups in the Kuskokwim region (Tintina gold properties and the Colorado Creek gold project) and its three western Alaska base metal properties (Kugruk, Baird and Omilak.)
In addition to owning an interest in the junior, Nieuwenhuyse is the chairman of TintinaGold, and former NovaGold geologist Jerry Zieg is vice president of exploration for the spin-out vehicle.
The 35,000-acre, or 14,200-hectare, Ambler volcanic massive sulfide property in Northwest Alaska is NovaGold's one remaining early-stage exploration asset. No drilling was completed at the precious-metal-rich VMS property in 2009.
Partners decide to permit Donlin
The 40-million-ounce Donlin Creek gold project has been the center of NovaGold's attention in 2009. Donlin Creek LLC, which is co-owned by Barrick Gold Corp. and NovaGold, unveiled a feasibility study for the world-class gold deposit in late April.
After reviewing the Donlin Creek feasibility study, Barrick Gold and NovaGold have decided to initiate the permitting process for the enormous gold project located in the Kuskokwim Region of Southwest Alaska.
NovaGold's share of the 2009 budget at the Donlin Creek project is about US$14 million, part of which was used to complete the feasibility study and the remainder earmarked for permitting activities at the project. The partners agreed to cap the permitting budget for Donlin at US$100 million.
In the Denver Gold Forum presentation, Nieuwenhuyse said the permitting process for Donlin is expected to formally start sometime in 2010.
The only near-term exploration at Donlin Creek is to optimize the project by seeking ounces that could come earlier in the mine life, he said.
"We know we can expand the pit at depth and along strike, but there is no sense in adding more ounces than year 20," Van Nieuwenhuyse explained at the Denver Gold Forum.
The 53,500-metric-ton-per-day mine proposed in the feasibility study is expected to produce about 1.6 million ounces of gold per year over its first five years of operation. Based on current reserves, the mine should produce about 26.2 million ounces of gold, or an average of about 1.25 million ounces per year, over a 21-year mine life.
Optimizing Galore
NovaGold sees plenty of exploration potential in and around the 1 billion ton ore body at its Galore Creek project in northwestern British Columbia.
"Galore Creek has a lot of exploration upside, but we are really focused right now on re-optimizing this project," Van Nieuwenhuyse said.
NovaGold's 50-50 partner, Teck Resources Ltd, completed an optimization study for the Galore Creek project during the fourth quarter of 2008. The final configuration resulted in moving the permanent facilities associated with the concentrator and tailings disposal located outside the Galore Valley.
Teck funded the entire C$15.7 million budget for the copper-gold-silver project in 2009. The funds are primarily going toward maintaining the existing infrastructure and continuing to build a 90-kilometer-, or 55-mile-, long access road west from Highway 37 to the mine site.
Due to a deal struck between the partners, NovaGold is not expected to make any significant cash contributions at Galore Creek through 2012.
Galore Creek is on care-and-maintenance, but the partners are considering completing a prefeasibility study in 2010.
Decisions ahead at Rock Creek
Van Nieuwenhuyse said in September that NovaGold management is taking a look at putting the Rock Creek gold Mine in production.
"We are in the process of looking at a restart capital budget for (Rock Creek). It is probably going to be in the $20 million to $25 million range," he said. "Whether NovaGold puts this back into production or whether we monetize the value out of this, we haven't decided yet."
In September 2008 NovaGold began commissioning the 7,000-metric-ton-per-day mill on the outskirts of Nome, but mechanical issues and lack of funds forced the company to place the operation on care and maintenance after about three months of testing.
While the mill was out of commission, NovaGold put together a drill program to follow up on deeper mineralization discovered last year below the Rock Creek pit and to explore additional targets in the Nome operations area.
NovaGold Vice President of Strategic Development Greg Johnson told Mining News, "The good thing that has come out of needing to re-look at Rock Creek is it gave us a chance to take a breather and focus on some geology instead of just the mining aspects."
Drilling last year intersected 118 meters with an average grade of 1.4 grams per ton gold below the reserve pit outline at Rock Creek. Another hole to the east of the pit intersected 52 meters of deeper mineralization, averaging 2.3 g/t gold. Both holes bottomed out in mineralization.
"The district has produced about 5 million ounces of alluvial gold," Nieuwenhuyse said. "We certainly see potential for additional targets there."
Rock Creek has 500,000 ounces of gold in reserves with an additional 1.9 million ounces of measured and indicated resources. NovaGold said it is working on an updated mine plan that will include an updated gold reserve and resource calculation.
Once in full production, Rock Creek is expected to produce about 100,000 ounces per year at an operating cost of about US$500 per ounce.
By moving forward its three advanced projects, NovaGold hopes that by 2015 it will be realizing its 1 million-ounce-plus share of the gold produced annually at Donlin Creek, Galore Creek and Rock Creek.
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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