The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Explorer eyes multimillion-ounce mega-deposits of gold at Galore, Donlin projects
Over the past 13 years NovaGold Resources Inc. has grown its resource base from 500,000 ounces of gold to more than 17 million ounces of gold reserves, 14 million ounces of gold resources, plus 150 million ounces of silver and 9 billion pounds of copper. While the company intends to continue to add to its stores of metals in the ground, its primary objective is to begin extracting these reserves at Donlin Creek and Galore Creek.
"We continue to believe that advancing our assets toward production will bring the greatest return to NovaGold shareholders," NovaGold President Rick Van Nieuwenhuyse said. "NovaGold's share of production from Donlin Creek alone would make the company one of the largest mid-cap gold producers. With the additional gold and copper production potential from our Galore Creek project and the exploration potential at our Ambler copper-zinc-gold-silver project, we offer superior leverage to the gold and copper markets."
Both of these colossal projects are on track to enter the permitting phase in the second half of 2011.
Optimizing Donlin
Though the Donlin Creek project in Southwest Alaska is rife with exploration upside, NovaGold said the deposit's massive reserves contain more than enough gold-rich ore to keep the mine operating for two decades.
An updated resource released in March estimates reserves of 33.6 million ounces of gold at Donlin Creek. Additionally, the gold deposit contains 4.3 million ounces of measured and indicated resources and 4.4 million ounces of inferred resources, according to the updated estimate.
"The rest of the district is certainly open to exploration potential. We have another 6 kilometers (3.7 miles) along strike to explore that we see surface indications of mineralization," Van Nieuwenhuyse said. "We have a 25-year mine-life in our current mine-plan, so exploration is not the focus right now."
Though NovaGold and 50 percent joint venture partner Barrick Gold Corp. are not growing the deposit through exploration, the escalating price of gold is expected to increase the reserves at Donlin.
"As the gold price goes up, your cutoff grade come down," the NovaGold CEO explained. "It tends to open the pit up more - you get more reserves."
Crews have been conducting geotechnical drilling in anticipation of this expansion.
The partners' primary focus in 2010 is on optimizing a feasibility study prepared for Donlin Creek in 2009 so they can begin permitting the project in 2011.
"We are currently evaluating the project to use (natural) gas as the source of power generation. Gas would be about half as expensive to produce a kilowatt of power and power costs make up about 25 percent of our overall operating costs. So if we are successful in demonstrating that the gas pipeline works, then we expect to have our operating costs be between 10-to-15 percent lower," the NovaGold President said.
A feasibility study prepared in April 2009, which put a US$4.48 billion price tag on construction of a mine at the remote Southwest Alaska gold project, envisioned using diesel and wind to generate the 127 megawatts of electricity needed to power the mine.
The partners said the capital cost of building the 320-mile, or 515-kilometer, gas line would be partially offset by cost savings from elimination of a wind cogeneration facility, a shorter access road and a significant reduction in requirements for diesel storage proposed in the original study.
The potential impact of the pipeline option on capital and operating costs will be addressed in a revision to the project feasibility study, which is scheduled for completion in mid-2011. Whether natural gas or diesel is chosen as the fuel of choice, the Donlin Creek partners plan to file permit applications to construct the mine later in 2011.
"We will make a decision on either the diesel or gas scenarios. The economics on this has to make sense, but currently it is very favorable to gas," Van Nieuwenhuyse said.
In order to complete the environmental and engineering studies needed to update the feasibility study the partners boosted the 2010 Donlin Creek budget by US$18.7 million, bringing the total spent this year on the gold project to US$47 million.
"This year's program is really focused on the collection of the information and then next year's program will be focused on integrating that information into the overall feasibility study - the feasibility study for the pipeline and then how that integrates with the overall project," Van Nieuwenhuyse said.
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.
Galore production expected first
Though Galore Creek is still in prefeasibility, due to a shorter permitting process in Canada, NovaGold anticipates the copper-gold project in northwest British Columbia could be in production ahead of Donlin Creek.
"We expect permitting to be about an 18 month process; significantly shorter than in the United States jurisdiction," Van Nieuwenhuyse said.
Teck Resources Ltd., NovaGold's 50 percent partner at Galore Creek, plans to complete the prefeasibility for the copper-gold project by mid-2011 and begin permitting later in the year.
The partners have optimized the project by moving the concentrator and tailings disposal located outside the Galore Valley. The new configuration has shortened the access road from Highway 37, but will require a 13-kilometer-, or 8-mile-, long tunnel between the mill and the concentrator.
The optimization study also proposes increasing the mill throughput at Galore to around 90,000 metric tons per day.
Work in 2010 involved continuing construction on the access road and conducting geotechnical drilling at the tunnel, mill and tailings sites.
NovaGold and Teck also completed infill drilling to augment some of the inferred resources.
"As the long-term copper prices increase there are more parts of the orebody that become ore, and parts of those were under-drilled in the past. We are rounding that out with additional drilling so that it can become part of the new reserve-base with the completion of the prefeasibility study," Van Nieuwenhuyse told Mining News.
Galore Creek has a measured and indicated resource of 786 million metric tons of ore containing 8.9 billion pounds of copper and 7.3 million ounces of gold, plus an inferred resource of 523 million metric tons with 3.5 billion pounds of copper and 3.3 million ounces of gold.
Gold mine for sale
The Rock Creek gold mine near Nome in western Alaska is much smaller than the company's two other advanced projects, but has the potential for near-term production.
The 7,000-metric-ton-per-day mill at Rock Creek is designed to produce about 100,000 ounces of gold annually at an estimated US$500 an ounce. At US$1,200 per ounce, gold production at Rock Creek could put about US$70 million per year back into NovaGold's coffers.
"Rock Creek is smaller but certainly has the potential to bring value to the company," NovaGold adviser Gil Leathley told Mining News.
NovaGold put the mine into limited operation in 2008 but mechanical issues and lack of funds forced it to place the operation on care-and-maintenance after about three months of testing.
After the shutdown, unexpected volumes of water built up behind the tailings dam, a situation the company has since been able to resolve.
In October NovaGold announced it plans to sell Rock Creek.
"To achieve the objective of advancing our core properties, we are soliciting offers to sell our Rock Creek project to provide more information to NovaGold's Board of Directors and maximize value from this asset. While the project could bring good value in the right portfolio, Rock Creek is no longer the right fit for our business model," Van Nieuwenhuyse said.
Realizing value at Ambler
In January, NovaGold cut a deal with Rio Tinto subsidiary Kennecott Exploration Co. to purchase 100 percent interest in the precious-metal-rich Ambler copper-zinc property in Northwest Alaska. The outright purchase overrides a 2004 joint venture agreement on the 36,670-hectare, or 90,614-acre property.
"NovaGold is really going back to its roots by acquiring Ambler. We have a solid record in identifying opportunities, expanding resources and advancing those resources to reserves," the NovaGold CEO said upon purchasing the project.
The nearly 45-mile-, or 70-kilometer-, long Ambler property provides NovaGold multiple prospects to explore including the high-grade Arctic volcanic massive sulfide deposit.
A resource estimate completed for the company in 2008 outlined an indicated resource at Arctic of 16.8 million metric tons containing 4.1 percent copper, 6 percent zinc, 0.83 grams per metric ton gold 59.6 g/t silver and 0.94 percent lead. The estimate includes an additional inferred resource of 11.9 million metric tons with an average of 3.6 percent copper, 5 percent zinc, 0.67 g/t gold, 48.4 g/t silver and 0.8 percent lead.
"The Arctic deposit ranks among the largest and richest known VMS deposits in the world, based on both total contained metal and value per metric ton. And considerable opportunity exists to identify similar deposits in the region," Van Nieuwenhuyse said.
In 2010 NovaGold focused on conducting the environmental baseline, engineering and metallurgical studies needed complete a prefeasibility study to assess Ambler's economics.
The company also is evaluating underground development at Arctic and establishing some 10 miles of road that links the property to Bornite area, where a camp and a 5,000-foot airstrip is already established. As part of this study, the company conducted geotechnical drilling in and around the ore-body and along the proposed route.
While Ambler is an exciting venture in its own right, it is currently overshadowed by NovaGold's two mega-projects. The company is currently assessing how to realize the greatest value out of the high-grade VMS asset.
"We want to realize value out of it. I see it as an opportunity to pay some of the costs to developing Galore and Donlin - Galore likely first, and then at a later date, Donlin Creek," the NovaGold President said.
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.
Reader Comments(0)