NovaGold and Pioneer battle over merit of Grace

Vancouver An ongoing dispute over the merit of the Grace claims has not deterred NovaGold Resources (NG-T, NG-X) from sticking to its original offer to purchase 100% of the common shares of Pioneer Metals (PSM-T) for $0.57 per share in cash.

A 2004 option agreement gave NovaGold rights to earn 60% of Pioneer’s Grace claims by spending $5 million on exploration and subscribing for 3.9 million units valued at about $1 million. The claims are adjacent to NovaGold’s advanced Galore Creek copper-gold deposit situated in a remote region of northwestern British Columbia.

The partnership soured in the fall of 2005 after Pioneer filed a lawsuit alleging that instead of conducting “legitimate exploration activities” on the Grace claims, NovaGold was carrying out condemnation drilling to identify tailings and waste disposal sites for a proposed mine at Galore Creek. Pioneer seeks to have the option agreement rescinded, along with damages for alleged “misrepresentation” and “breach of fiduciary duty.”

NovaGold’s subsequent takeover bid was also rebuffed by Pioneer, which described the terms as “woefully inadequate.” The company has urged its shareholders to reject the unsolicited offer, which expires on July 25th.

Pioneer also refutes NovaGold’s assertion that the Grace claims do not host economic mineralization. The company cites “significant” drill results from NovaGold’s previous exploration campaigns, notably 1.16 grams gold per tonne over 21 metres, from a depth of 136 metres to 157 metres, along with an assay of 4.78 grams gold in the bottom two metres of a separate 207-metre drill-hole.

NovaGold countered by releasing results from 16 holes drilled during its 2004 and 2005 campaigns. Fifteen of the holes returned trace mineralization, with one hole returning 21 metre of 0.22% copper and 1.16 grams gold, within a broader interval of 228.6 metres grading 0.04% copper and 0.2 gram gold. The company notes that this hole is located outside the perimeter of the proposed tailings facility.

NovaGold recently completed a condemnation drilling program in the area of the proposed tailings site, with six additional holes drilled to between 250 and 500 metres in depth, for a total of 1,785 metres. While no assays were released, the company stated that the results continued to confirm the presence of pervasive propylitic alteration “without any visual evidence of copper mineralization noted in the core.” The company also noted that the “potassic alteration assemblage at Galore Creek is associated with readily visible copper mineralization in the core.”

At last report, measured and indicated resources at Galore Creek stood at 516.7 million tonnes grading 0.59% copper, 0.36 gram gold, and 4.54 grams silver per tonne, or 0.8% copper-equivalent, based on a 0.35% copper-equivalent cutoff grade. Inferred resources add another 578.3 million tonnes at similar grades.