The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Barrick, NovaGold agree Donlin is feasible; permitting scheduled to begin late '09
The US$4.48 billion price tag to build a mine at the Donlin Creek gold project did not invoke sticker shock for Barrick Gold Corp. and NovaGold Resources Inc., co-owners of the enormous gold project.
After reviewing the feasibility study for the Donlin Creek project in late April, the partners decided to move ahead with permitting a mine at the 40-million-ounce gold deposit located in the Kuskokwim Region of Southwest Alaska.
NovaGold President Rick Van Nieuwenhuyse said the money spent to build the mine doesn't look so bad when you consider the magnitude of the gold contained in the orebody at Donlin Creek.
"Despite the fact that you are looking at a very large capital number to build this mine, when you amortize this capital out over 40 million ounces it actually doesn't look so out of phase," Nieuwenhuyse said at the Denver Gold Forum in September.
Feasibility of Donlin
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.
While the feasibility study provides a framework for the upcoming permitting process, the true cost for building the mine will probably not be known until the partners have permits in-hand. The permitting process is expected to begin later this year and be complete in 2012.
"We have several years of permitting work before we know what the final project we are going to build is," Greg Johnson, NovaGold vice president of strategic development, told Mining News. "Who knows, in two or three years, what the costs of labor, concrete, steel and things are going to be, but they are certainly less today than they were in 2008 when we priced these things in the study."
Drilling for permits
Though the 27,000-acre, or 11,203-hectare, Donlin Creek property has multiple exploration targets, including expansion of the pit outlined in the feasibility study, these prospects are not expected to be explored in the near term. Instead, the partners will focus any immediate drilling on optimizing the current resource.
"We know we can expand the pit at depth and along strike, but there is no sense in adding more ounces than year 20," Nieuwenhuyse explained.
The NovaGold leader said that identifying lower strip-ratio areas and mineralization amenable to leaching, and seeking higher-grade gold mineralization are ways that pit drilling could add cheaper ounces early in the mine-life.
While it may not be adding more or cheaper ounces of gold, Donlin Creek LLC explained to stakeholders the importance of the geotechnical drilling program that the partnership started in August.
In a newsletter designed to keep local residents informed on what is happening with the gold mine, the company said the geotechnical drilling is focused on areas around the proposed plant site and the proposed location of one of the water storage dams in American Creek.
Optimization moves timeline
The majority of the work at Donlin Creek in 2009 was focused on taking on streamlining the project before entering the permitting process.
"Recent increases in the price of gold have been more than matched by cost increases in fuel, construction materials and heavy equipment - all essential components of any mine that might be built at Donlin Creek," Doug Nicholson, president and general manager of Donlin Creek LLC wrote in July.
"Donlin Creek, if built, is expected to be one of only a handful of gold mines worldwide that is capable of producing over 1 million ounces of gold annually, but the upfront cost of building that mine is very large and has increased steadily over the years.
This cost, coupled with the uncertainty in global financial markets, means that a decision to proceed with construction is a complex and difficult decision to make."
Because of the re-optimization studies, the company has pushed back its timeline a few months in order to digest the new information.
"Donlin Creek has just completed a study to determine the feasibility of the project. We are now re-examining its assumptions and cost projections in light of the new pricing dynamics of 2009 brought about by the current worldwide financial situation," Nicholson explained. "To achieve our goals we have adjusted our timeline. We will have completed our second round of optimization studies and will be prepared to submit permit applications at year-end of 2009."
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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