NovaGold may consider restarting Rock Creek in 2010
miningweekly.com
By: Liezel Hill
20th November 2009
TORONTO (miningweekly.com) – Vancouver-based NovaGold Resources could restart operations and complete commissioning at its Rock Creek mine, in Alaska, next year, corporate development vice-president Greg Johnson said on Thursday.
The company began commissioning Rock Creek in 2008, but after higher costs, permitting difficulties and technical setbacks at the mine, combined with the crisis in the financial markets, the asset was placed on care-and-maintenance within months of starting up.
The firm is now in a stronger financial position and has worked through a lot of the issues at the mine, Johnson said in a presentation at a mining and metals conference in New York.
“Basically, we are sitting here with a project with average cash costs of about $500/oz, and we are ready 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, Johnson said.
Besides Rock Creek, NovaGold owns 50% in two huge projects, the Donlin Creek asset in Alaska, where it has Barrick Gold as a partner, and Galore Creek in British Columbia, in which Teck Resources owns the other 50%.
First production from either mine is likely about five or six years out, Johnson commented on Thursday.
“It's likely that they will be sequential, not one on top of the other, and right now we are still working through the details to understand which one is going to come first.”
In April, Barrick and NovaGold published a feasibility study for the Donlin Creek project. The mine is expected to cost $4,48-billion to design and build, and will produce an average of 1,25-million ounces a year over a 21-year life, according to the study.
At the Galore Creek copper/gold project, NovaGold and partner Teck suspended construction in November 2007, citing ballooning costs, and said they would work on a new development plan and complete a revised feasibility 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.”
Johnson pointed out that Galore Creek, unlike Donlin, is already fully permitted, which raises the possibility that it could jump ahead in the development schedule.
“The current guidance on Donlin Creek has been 2015 for first production, but if we undertake a comprehensive optimisation programme perhaps that gets delayed a bit.
“And Galore, within a year or two, could be in a position to potentially look at restart of construction of the mine, not just the road that we have been building.”
Whichever mine starts construction and production first, cash flow from that asset could then be put towards NovaGold's share of capital requirements for the second project, he added.
Of course, both assets will have to compete for cash with other large capital projects in Barrick and Teck's portfolios.
NovaGold went through something of a funding crisis late last year, after a line of credit it had been counting on to replace a bridging loan was no longer available after financial markets froze up in the second half of 2008.
However, on January 2, the company announced it would sell shares 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. |
