Anchorage, Alaska — With an US$8-million preliminary feasibility study under way,
Co-owner
“Its a tough deal for Placer,” says NovaGold President Van Nieuwenhuyse, who spoke to The Northern Miner on site. “We didn’t want to spend all the hard money during a low gold price and then have Placer just yank the thing away from us. We’ll probably have spent our US$10 million by the end of September, and Placer will have to make a decision after the Christmas holidays.”
NovaGold was the top-performing stock on the Toronto Stock Exchange last year, having rocketed by more than a thousand per cent. In April, the junior closed a US$11.7-million financing in order to finance the prefeasibility study.
“There’s a lot of upside left to this story,” Van Nieuwenhuyse says. “The company is really only starting to explore its Donlin Creek assets.”
NovaGold’s other assets include the Shotgun gold project, now joint-ventured with
The Donlin Creek property is in southwestern Alaska, 480 km west of Anchorage, and occupies 109 sq. km of private patented land. The project is 19 km north of a commercial barge site on the Kuskokwim River at the village of Crooked Creek. The property has an all-season, 100-man capacity exploration camp, together with a 1,500-metre runway that can handle aircraft as large as the C-130 Hercules freighter.
NovaGold kicked off its prefeasibility study in early April and budgeted US$6 million on drilling and US$2 million on engineering, environmental and other studies. Currently, two diamond drill rigs and one reverse-circulation (RC) rig are attempting to upgrade the inferred resources to the measured and indicated categories, as well as expand the overall resource.
So far, in the course of completing 8,100 metres in 71 holes of core and RC drilling, NovaGold has uncovered a new zone of mineralization 500 metres north of the high-grade Acma deposit. Dubbed Akivik (a Yupik term meaning “the place that holds valuables”), the zone was discovered when the company drill-tested a gold-in-soil geochemical anomaly. RC hole DR02-643 cut 6.1 metres grading 3.9 grams gold per tonne, 6.1 metres grading 2.4 grams gold, and 32 metres averaging 2.1 grams gold. The first follow-up hole, DC02-688, returned 17.9 metres grading 5.6 grams gold, starting at 66 metres down-hole, and this was followed by 19 metres grading 3.1 grams gold, starting at 96 metres down-hole.
Other results from the Akivik zone include the following:
o Hole DC-687 — 43.5 metres grading 3.6 grams gold per tonne;
o Hole DC-689 — 23.1 metres grading 2.3 grams gold;
o Hole DC-690 — 13.7 metres grading 2.7 grams gold, followed by 20.2 metres grading 2.1 grams gold;
o Hole DC-691 — 28.3 metres grading 3.1 grams gold;
o Hole DC-692 — 39.3 metres grading 2.7 grams gold;
o RC hole DC-644 — 24 metres grading 3.3 grams gold;
o RC hole DC-646 — 6.1 metres grading 2.8 grams gold;
o RC hole DC-647 — 4.6 metres grading 3.8 grams gold;
o RC hole DC-648 — 7.6 metres grading 3.8 grams gold.
Additional stepout drilling will try to define the extent of the new zone, which remains open in all directions.
Meanwhile, stepout drilling 500 metres south of the Lewis zone has intersected “significant” mineralized intervals of intrusive porphyry. The first holes drilled into the new target contain up to 44 metres of stockwork veining and abundant sulphide mineralization within the intrusive rocks. Follow-up drilling is under way, and assays are pending.
Infill drilling at the Acma zone also continues to provide the company with encouraging results. Hole DC02-679 intersected 90.6 metres grading 4.4 grams gold, starting from surface. Hole DC-683 cut a number of intersections: 31.3 metres grading 4.5 grams gold per tonne; 18.3 metres grading 3.7 grams gold: 33.4 metres grading 3.5 grams gold; and 5 metres grading 8.9 grams gold.
Highlights of other infill holes at Acma include the following:
o Hole DC-673 — 17.7 metres grading 8.8 grams gold;
o Hole DC-675 — 4 metres grading 3.1 grams gold, 44.9 metres of 3.7 grams, 57.9 metres of 4.9 grams, and 40 metres of 4.1 grams;
o Hole DC-677 — 12.5 metres grading 4.2 grams gold, 6 metres of 7.5 grams gold, 57.9 metres of 4.9 grams, and 45.7 metres of 6 grams gold.
Resource estimates
Late last year, NovaGold hired MRDI Canada, a division of AMEC E&C Services in Vancouver, to complete a new resource estimate and preliminary economic assessment based on all of the exploration performed through to the end of 2001. The results of the study indicated that NovaGold had doubled the previous resource estimate.
Based on a cutoff grade of 2 grams gold per tonne, the measured resource weighs in at 5 million tonnes grading 3.84 grams gold per tonne. or 623,000 contained ounces. The indicated portion of the resource is 68.9 million tonnes grading 3.49 grams gold, or 7.73 million contained ounces. The inferred category added 92.4 million tonnes grading 3.66 grams gold, or 10.87 million contained ounces.
When the cutoff is elevated to 3.5 grams gold, the measured and indicated resource changes to 26.9 million tonnes grading 5.06 grams gold, or 4.4 million contained ounces. The inferred portion weighs in at 36.8 million tonnes grading 5.22 grams gold, or 6.2 million contained ounces.
“At Donlin, we have 12 km of potential mineralization along strike,” says Van Nieuwenhuyse. “All the resource estimation to date has been on the southern two kilometres, where the sill package intersects the dyke swarm package.”
Most of Donlin Creek’s resources are hosted by intrusive dykes and sills, plus high-grade stockworks in surrounding sedimentary rocks. Gold mineralization is structurally controlled and occurs as disseminations and veinlets in association with fine-grained arsenopyrite. NovaGold has determined that low-angle, north-dipping thrust faults help control the distribution of mineralization in the region and also add to its complexity.
Metallurgy
Comprehensive metallurgical tests have been performed on Donlin ore since 1995. This work includes bench-scale flotation, pressure-oxidation, carbon-in-leach cyanidation, and pilot plant work.
“It’s pretty simple metallurgy,” said Van Nieuwenhuyse. “All the gold is in the arsenopyrite, and it floats well.” Results indicate that 95-98% of the gold is contained in the finer-grained arsenopyrite. The gold can be recovered through conventional sulphide flotation, concentration, pressure-oxidation and carbon-in-leach cyanidation.
“In terms of the sequence of recoveries, the Acma intrusives respond well with recoveries of about 95%,” says William Colquhoun, senior metallurgist for AMEC. “We get about an 88% recovery from the Lewis intrusives and about 78% from the sedimentary material at Lewis. If you take the weighted average of all the ore types, you arrive at a life-of-mine recovery of about 89%.” Colquhoun adds that there was not a lot of process optimization performed and that future tests will focus on improving overall recoveries. Also, bio-oxidation column tests will be carried out on mineralized material grading 0.5-2 grams gold per tonne.
Scoping study
The scoping study, also performed by AMEC E&C Services, suggests Donlin Creek can support annual production of 1 million oz. with a capital inves
tment of US$602.1 million. The cost includes US$79.6 million for contingencies. The payback period would be just over five years. The study assumes that power will be sourced from outside the mine.
The base-case mine plan envisages an open-pit operation capable of extracting 20,000 tonnes of mineralized material per day in each of 14 years at an average stripping ratio of 5.9-to-1. Head grades and recovery rates would be higher in the first five years, resulting in just over 10 million oz. of production over the life of the mine.
Stephen Hodgson, technical director of mining for AMEC, says “there remain significant opportunities to enhance the economics of the project with additional improvement in overall gold recovery, further expansion of near-surface, high-grade mineralization, pit-slope optimization, and the possible use of bio-oxidation heap leaching of in-pit, below-cut-off-grade mineralization.”
Life-of-mine cash costs at Donlin are projected at US$166.57 per oz.; total production costs, at US$241.87 per oz. At a gold price of US$300 per oz., the operation would generate a pretax rate of return of 15.6%, or 10.7% after taxes. The net present value rings in at US$164.7 million, based on a 5% discount rate.
All the operating and economic projections are based on near-surface measured indicated and inferred resource totalling 166.4 million tonnes averaging 3.6 grams per tonne using a cutoff grade of 2 grams gold per tonne.
Revitalization
NovaGold foresees no permitting problems and believes that the region is in need of economic revitalization.
“Our partners, the Calista Native Corporation and the TKC Village, who hold mineral and surface rights, very much support the project,” says Van Nieuwenhuyse. “The lion’s share of the people working here are local. This, of course, is really important from a long-term standpoint, since the project will have a huge impact on the local economy as it moves toward development and production.”
Calista can acquire a 15% participating interest once the feasibility study is completed. The native corporation is then required to participate on a pro rata basis.
“I believe that all mines in Alaska create national environmental attention, but this does not translate into opposition if there is a local group to partner with,” says Robert Loeffler, director of the Department of Natural Resources for Alaska’s Division of Mining, Land and Water. “We have not seen national groups taking on local native issues.”
NovaGold is unique among junior companies since it funds a substantial portion of its exploration and development activities through the cash flow it generates from sand and gravel operations plus gold royalties and land sales in Nome. Last year, the company generated operating revenue of US$2.8 million. During the first quarter of 2002, NovaGold reported revenue of US$494,426. The company has no debt and 43 million shares fully diluted.
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