The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
With permitting nearly complete, partners carry out optimization drilling
Greg Lang
If this year's US$8 million drill program is any indication, Barrick Gold Corp. and Novagold Resources Inc. are getting serious about building "the largest pure gold mine in the world" at their Donlin Gold project in Southwest Alaska.
"Donlin Gold's size, grade, production profile, exploration potential, mine life, community support and jurisdictional safety render it a unique asset in the gold industry," said Novagold President and CEO Greg Lang. "Both partners envision Donlin Gold to be a pacesetter in the mining sector and are completely aligned in their objectives to optimize the project."
This will be the first significant field program at the 40-million-ounce gold project since Donlin Gold LLC – equally owned by subsidiaries of Novagold Resources Inc. and Barrick Gold Corp. – completed a feasibility study in 2011 and submitted the project for permitting the following year.
Optimizing Donlin
The Donlin Gold mine project outlined in the feasibility study is projected to average roughly 1.5 million ounces annually during the first five years of operation and 1.1 million oz annually over a projected 27-year mine-life.
At US$1,200/oz. gold, the base case price used in the study, this operation is calculated to generate after-tax cash flow averaging US$949.5 million annually for the first five years and US$500.7 million annually over the life of the mine.
Under this scenario, the partners would be paid back the roughly US$6.7 billion needed to build the mine in 9.2 years.
While this project has been working its way through the permitting process, Barrick and Novagold have been studying ways to optimize the world-class gold project.
"The work focused on ways to capitalize on the flexibility inherent in Donlin Gold's unique characteristics, identifying opportunities such as employing modular construction, automation of certain mining activities and implementation of innovative ideas for infrastructure development and logistics, among others, which will continue to be thoroughly assessed," Lang informed shareholders on June 26.
The optimized execution plan resulting from this work is expected to push down the nearly US$7 billion in upfront capital needed to develop Donlin and potentially the operating costs.
"We are encouraged by the prospects to further optimize the Donlin Gold project, which has the potential to be the largest pure gold mine in the world – in one of the safest jurisdictions of the world," said Barrick President Kelvin Dushnisky.
Development decision
Following the 2017 field work, Barrick and Novagold will finalize an updated feasibility study for Donlin. With this information in-hand and the permitting nearly complete, a formal decision on developing a mine at the Alaska gold project will likely be made shortly thereafter.
This year's program, which will include both geological and geotechnical drilling, will collect information needed to inform and potentially implement the Donlin Gold upgrades.
"As permitting activities approach their conclusion, we believe that the approved field work will reaffirm Donlin Gold's status as the asset best positioned to capitalize on the resumption of the long-term bull market in gold," said Lang.
The environmental impact statement for Donlin, the key piece to the permitting process in the United States, is on pace to be finalized around March, 2018. It is expected that it will take the U.S. Army Corps of Engineers, the lead agency for the Donlin Gold EIS, another three or four months to write a record of decision.
All other permits needed for construction to begin are also expected to be issued by that time.
Donlin Gold also continues to advance permitting for a 312-mile pipeline to transport gas from Cook Inlet to the mine site. The partners are timing pipeline permits to coincide with the expected permits for mine development.
If all comes together according to plan, Donlin Gold LLC could be ready to begin developing the largest pure gold mine in the world by the end of next year.
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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