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Gold Summary for Jan. 25, 2024
2024-01-25 18:21 ET - Market Summary
by Stockwatch Business Reporter
New York spot gold gained $1.80 to $2,015.20 on Thursday. The TSX Venture Exchange was unchanged at 550.17 while the TSX gold index rose 2.82 points to 262.56. Most Canadian gold miners moved higher with bullion today. McEwen Mining Inc. (MUX) did so with enthusiasm, adding 15 cents to $9.13 on 51,000 shares. So did Lundin Gold Inc. (LUG), which rose 74 cents to $15.92 on 629,000 shares.
And then there was Gregory Lang's Novagold Resources Inc. (NG), which fell 44 cents yesterday in anticipation of its 2023 results, slid 24 cents more today following the news after yesterday's close, ending the day at $4.01 on 631,000 shares. Most of Novagold's news pertained to the big Donlin gold project in Alaska that the company shares with Barrick Gold Corp. (ABX), which rose one cent to $21.03 on 4.63 million shares.
The two companies are "driving the Donlin gold project toward development through unwavering commitment and persistent work," glows Mr. Lang, Novagold's president and chief executive officer -- fortunate since his shareholders have been wavering considerably since Novagold's stock hit $18 in the spring of 2020. The wavering has been the result of bureaucratic, environmental and aboriginal dithering about the mining plan over the past several years.
There is no doubt about the gold -- Donlin's current resource lists a whopping 541 million tonnes measured and indicated at 2.24 grams of gold per tonne and 92 million tonnes inferred at 2.02 grams per tonne, a total of 45 million ounces of gold -- half attributable to each of the two co-venturers. That rock is largely deemed a reserve -- 505 million tonnes at 2.09 grams per tonne -- providing nearly 34 million ounces of gold to a mine plan.
And what a plan it is -- and therein lies the environmental rub. There is a feasibility study for Donlin, but it is now well into its second year of life. The two companies did update the cost estimates and other data about 10 years onward, but even that update is now approaching its third birthday. The capital costs grew to an eye-popping $7.4-billion (U.S.) for a 25-year mine, one that would have to run for over seven years just to pay back the capital investment.
Yes, a Donlin mine would be a prolific gold producer -- 1.3 million ounces yearly over its life -- but the hefty costs gnaw deeply into the projected profits. While the bottom line at $1,500-an-ounce gold shows a discounted net present value of $3.04-billion (U.S.) after taxes, the internal rate of return comes in at just 9.2 per cent. Gold is higher today, of course, but to reach a rate of return topping 15 per cent requires gold to top $2,200 per ounce. Further, it will require the Donlin opponents to acquiesce to the mammoth construction project -- or at least for Novagold and Barrick's lawyers to push acquiescence upon them.