TORONTO(miningweekly.com) – Vancouver-based NovaGold Resources could restartoperations and complete commissioning at its Rock Creek mine, inAlaska, next year, corporate development vice-president Greg Johnson said on Thursday.
Thecompany began commissioning Rock Creek in 2008, but after higher costs,permitting difficulties and technical setbacks at the mine, combinedwith the crisis in the financial markets, the asset was placed oncare-and-maintenance within months of starting up.
The firm isnow in a stronger financial position and has worked through a lot ofthe issues at the mine, Johnson said in a presentation at a mining andmetals conference in New York.
“Basically, we are sitting herewith a project with average cash costs of about $500/oz, and we areready to relook at starting it up.”
The mine, which is 90%completed, could produce some 100 000 oz/y and potentially add around$40-million or more in operating cash flow at current prices, Johnsonsaid.
Besides Rock Creek, NovaGold owns 50% in two hugeprojects, the Donlin Creek asset in Alaska, where it has Barrick Goldas a partner, and Galore Creek in British Columbia, in which TeckResources owns the other 50%.
First production from either mine is likely about five or six years out, Johnson commented on Thursday.
“It'slikely that they will be sequential, not one on top of the other, andright now we are still working through the details to understand whichone is going to come first.”
In April, Barrick and NovaGold published a feasibility studyfor the Donlin Creek project. The mine is expected to cost$4,48-billion to design and build, and will produce an average of1,25-million ounces a year over a 21-year life, according to the study.
Atthe Galore Creek copper/gold project, NovaGold and partner Tecksuspended construction in November 2007, citing ballooning costs, andsaid they would work on a new development plan and complete a revisedfeasibility study, before making a production decision.
Work is under way on road construction and the companies continue to optimise the project plan.
“Significant progress” has been made already on the redesign and re-engineering of the project, Johnson said.
“We believe that we have made some major improvements in reducing construction time and lowering costs.”
Johnsonpointed out that Galore Creek, unlike Donlin, is already fullypermitted, which raises the possibility that it could jump ahead in thedevelopment schedule.
“The current guidance on Donlin Creek hasbeen 2015 for first production, but if we undertake a comprehensiveoptimisation programme perhaps that gets delayed a bit.
“AndGalore, within a year or two, could be in a position to potentiallylook at restart of construction of the mine, not just the road that wehave been building.”
Whichever mine starts construction andproduction first, cash flow from that asset could then be put towardsNovaGold's share of capital requirements for the second project, headded.
Of course, both assets will have to compete for cash with other large capital projects in Barrick and Teck's portfolios.
NovaGoldwent through something of a funding crisis late last year, after a lineof credit it had been counting on to replace a bridging loan was nolonger available after financial markets froze up in the second half of2008.
However, on January 2, the company announced it would sellshares and warrants to privately-held Electrum Strategic Resources,which took a 30% stake and helped financially restructure the company.
The bridging loan, on which NovaGold had already been granted an extension by that point, was converted to shares.
Shares in the company slid 0,53% on Thursday, to C$5,66 apiece by 16:10 in Toronto.
Edited by: Liezel Hill