NovaGold Resources has new plan of attack for Galore Creek mine

After halting construction of its Galore Creek copper and gold mine in British Columbia last November when estimated costs more than doubled to $5 billion, NovaGold‘s (NG-T) chief executive Rick Van Nieuwenhuyse told analysts and investors at the Denver Gold Forum this week that the company now has a new plan for the mine that it will make public at the end of the month.

The new scheme calls for a longer tunnel that would convey ore to a mill and tailings facility situated on the opposite side of the mountain–outside the valley in which the deposit lies.

Under the original plan the mill and tailings facilities were to have been located near the mine in the valley itself. The main tailings pond would have been impounded by a dam built about 7 km downstream from the mill and central pit area.

“The valley is a very narrow valley with a lot of water in it so we were required to build a very costly facility there,” Van Nieuwenhuyse explained.

The new plan involves a traditional tailings facility that means “we don’t have to build a god-awful dam that was envisioned in the original study,” he told The Northern Miner on the sidelines of the conference.

The proposed dam accounted for the largest portion of the increased capital costs of the project and led to its suspension last year.

The higher costs were linked largely to the complex sequencing of activities necessary to build the tailings dam and water management structures, which extended the mine’s construction schedule by 18-24 months.

Van Nieuwenhuyse declined to say how much cheaper the new mine plan would be compared with the original cost estimates.

But he said NovaGold plans to start construction on the project as soon as it is fully re-permitted and will release a new feasibility study in the fourth quarter of 2009.

NovaGold’s joint-venture partner, Teck Cominco (TCKb-T), will pay for the feasibility study as part of its earn-in agreement and is forecast to spend about $30 million on “project optimization” this year, Van Nieuwenhuyse said.

“With the new plan that we expect to roll out at the start of next month we think we’ll start to see value in this project come back into the share price,” he told conference participants.

“This project of course was one of the sad victims of being one of the first big projects to recognize that capital costs have skyrocketed,” he said.

The decision to suspend the project last year hammered NovaGold’s share price.

The Vancouver-based company is currently trading at $4.98 per sharenear the very bottom of its 52-week range. Over the last year the company has traded at between $4.45-$19.99 per share.

NovaGold says it is committed to move Galore Creek, one of the world’s largest undeveloped copper-gold-silver resources, “back into the forefront of its development scheme.”

If all goes ahead smoothly, Galore Creek could come on-line as early as 2015, Van Nieuwenhuyse said.

In addition to Galore Creek, NovaGold owns a 50% share in the Donlin Creek joint venture with Barrick Gold (ABX-T). NovaGold expects to complete a feasibility study on that project in the first quarter of next year.

NovaGold has 105 million share outstanding, and about $43 million in cash and marketable securities as of mid-August.