Donlin Gold checks off more milestones

Novagold Resources Inc. June 27 reported that the permitting to develop a mine at Donlin Gold project is nearly complete but the timing of the final go-ahead decision on whether to develop a world-class mine at this 39-million-ounce gold deposit in Southwest Alaska remains open.

Novagold owns a 50 percent interest in Donlin Gold LLC, the company created to permit and eventually develop this enormous gold deposit, global gold miner Barrick Gold Corp. owns the other half.

Since the United States Army Corps of Engineers completed the final Environmental Impact Statement for Donlin Gold at the end of April, the partners are continuing to gain approvals for the more than 100 permits required to develop a mine there.

"Progress has been made on other federal permits with the issuance of the special permit for the natural gas pipeline on June 5," Novagold President and CEO Greg Lang said during a June 29 conference call.

This permit, issued by the U.S. Pipeline and Hazardous Materials Safety Administration, provides Donlin Gold LLC the authorization to build a roughly 315-mile natural gas pipeline from the Cook Inlet region of Southcentral Alaska to the Kuskokwim region of Southwest Alaska were the mine would be located.

Currently the natural gas delivered to Donlin will be used to fuel a power plant that will deliver the roughly 157 megawatts of electricity needed to power the operation, an average load that is roughly equivalent to the residential power consumption of around 120,000 homes in the U.S.

The Donlin Gold partners are also looking into the potential of using liquified natural gas to fuel the massive earth hauling trucks at the mine.

The technology needed to make LNG fuel a viable alternative for Donlin, however, is relatively young and has only recently been put into commercial use on a limited basis.

With a nearly US$1 billion price tag, building the pipeline to deliver this energy to Donlin is a major infrastructure project. Lang said Novagold and Barrick are considering bringing in a partner to build and operate the pipeline.

This could be good news for the region, as it would be easier for a dedicated utility to distribute either natural gas or electricity to surrounding communities with high power costs.

In addition to the pipeline permit, Donlin Gold received the Alaska Pollutant Discharge Elimination System wastewater discharge permit, a key authorization needed to move forward with Donlin.

The next major milestone is for the Corps to complete a Record of Decision, which will reveal the preferred mine development alternative for Donlin and explain why this is the most environmentally sound, yet feasible, plan for advancing a globally significant mine at this gold deposit.

According to a newsletter published by the Corps in August, this decision is expected in August.

Novagold anticipates that the remaining key state and federal permits and approvals to be finalized around the same time as the Corps' ROD.

As the end of the permitting process nears, Novagold and Barrick are finishing up optimization work aimed at enhancing Donlin Gold's project execution plan while maintaining upside potential and collecting the information that will be needed to update the feasibility completed for the project in 2011.

This study details a 53,500-metric-ton-per-day operation that is estimated to average roughly 1.1 million oz gold annually over a projected 27-year mine-life.

This is based on the 504.8 million metric tons of proven and probable reserves averaging 2.09 grams per metric ton (33.85 million oz) gold currently slated for mining at Donlin.

As part of the optimization studies, Barrick and Novagold carried out a 16-hole drill program at Donlin last year.

Highlights from the 16 holes drilled include: 130.5 meters grading 5.93 g/t gold; 39 meters of 9.34 g/t gold; 43.9 meters of 7.6 g/t gold; 64 meters of 5.09 g/t gold; and 30.4 meters of 10.3 g/t gold.

With a better understanding of the mineralization and structures within the targeted zones, Novagold and Barrick said the new data will provide valuable inputs to advance optimization work.

"One of the opportunities being studied is the ability to mine more selectively, which could improve feed grade," said Lang.

The Novagold CEO said "innovative technologies in logistics and automation, and modular construction techniques to improve efficiencies," are other optimization ideas the Donlin Gold partners are looking into.

"Barrick and Novagold will take all this work into account before reaching a construction decision and remain committed to advancing the Donlin Gold project in a financially disciplined manner with a strong focus on environmental stewardship and social responsibility," Lang added.

As to the timing of a go-ahead decision for Donlin Gold, the Novagold CEO was hesitant to set a firm date, only saying that after Corps' record of decision and the optimization studies are complete the partners will "assess where the markets are and go from there."

–SHANE LASLEY