NovaGold CEO chats progress, George Soros

NovaGold Resources (NG-T, NG-N) held its first live broadcast of the company’s annual general meeting of shareholders on May 25, with long-time Chief Executive Officer Rick Van Nieuwenhuyse providing a pleasing roundup of the company’s work this past year as well a detailed look at what is still to come. 

Shares of the company climbed from $6 in January 2010 to a high of $16.92 in December, though they have since slumped alongside many other equities in 2011, reaching a low of $9.78 this May.

Earlier in 2011, renowned investor and billionaire financier George Soros – who made international headlines in January by stating gold is “the ultimate asset bubble,” and liquidating most of his hedge fund’s US$800-million gold portfolio – sold 73% of the NovaGold shares held by the fund over the first quarter of 2011. It continues to hold approximately 3.5 million NovaGold shares, down from 12.9 million, according to U.S. Securities and Exchange Commission filings dated March 31.

Not surprisingly, NovaGold’s Van Nieuwenhuyse disagrees with Soros about where gold is headed. “Gold is not in a bubble,” declared the CEO in his opening remarks at the AGM. “It is in a definite uptrend. We’ve had a correction here of about 5% [recently], which is fairly normal.

“Equities have not performed so well this year, and NovaGold is no exception. In fact, we’re more leveraged to gold than the average member of the indices . . . [NovaGold] is a long-term story, and if you want leverage to gold, this is where you need to be.”

Few, if any, non-producing juniors have the kind of gold resources per dollar invested as does NovaGold, Van Nieuwenhuyse says. The company’s attributable reserve and resource base totals 16.8 million gold oz. in the proven and probable reserve categories, 11 million gold oz. measured, indicated and inferred (M&II), 152 million silver oz. (M&II) and 8.9 billion lbs. copper (M&II). And one of the best
parts, Van Nieuwenhuyse asserts, is that “these resources are all located in good-old North America.”

Looking ahead, NovaGold and equal joint venture partner Barrick Gold (ABX-T, ABX-N) expect to complete a revised feasibility study for their large Donlin Creek gold project in Alaska sometime in the second half of 2011. The proposed open-pit mine now boasts 33.6 million proven and probable gold oz. in a remarkable 468 million tonnes grading 2.23 grams gold per tonne, with the JV partners hoping to further improve project economics by incorporating a 525-km natural gas pipeline into the study to supply power to the project.

At the smaller but still extremely large Galore Creek copper-gold project in northern British Columbia, an equal joint venture with Teck Resources (TCK-T, TCK-N), NovaGold expects to complete a prefeasibility study by the end of June. The board will then decide whether or not to advance the project to feasibility, as well as undertake additional environmental and engineering work. 

The JV partners originally completed a feasibility study for Galore Creek in 2006, starting construction a year later, but had to suspend the program in November 2007 when capital costs rose sharply. Many prices have changed, however, and with NovaGold’s successful acquisition of Copper Canyon Resources for its adjoining Copper Canyon copper-gold-silver project, Galore Creek’s measured and indicated resources now stand at 8.9 billion lbs. copper, 7.3 million oz. gold and 123 million oz. silver, with additional inferred resources of 3.5 billion lbs. copper, 3.3 million oz. gold and 61 million oz. silver (785.7 million tonnes M&I grading 0.52% copper, 0.29 gram gold and 4.87 gram silver). 

Lastly, NovaGold has begun 10,000 metres of exploration drilling this year at its Ambler volcanogenic massive sulphide (VMS) project in northern Alaska. The company has also negotiated a letter of intent with a large Alaskan Native partner, NANA Regional, to jointly explore and develop the district. Already billed by Van Nieuwenhuyse at this early stage as being “one of the highest-grade VMS deposits in the world,” Ambler currently has measured and indicated resources of 16.8 million tonnes grading 4.14% copper, 0.83 gram gold per tonne and 59.62 grams silver per tonne, containing 1.5 billion lbs. copper, 450,000 oz. gold and 32 million oz. silver. The project has almost the same tonnage of inferred resources at slightly lower grades. 

NovaGold is still trying to sell its Rock Creek gold project near Nome, Alaska, which it unsuccessfully tried to put into production in 2008. Unexpected “water management challenges” arose when record high levels of rain flooded certain areas of the project and resulted in storm water and waste water discharges into local creeks. The sale seems to be stuck in limbo for now, and NovaGold plans on closing down the mine shortly should it fail to find a buyer.

Another solid year of advancement is in store for 2011, even as the heavy weights of North American bureaucracy and environmental responsibility slow down development. Initial production from any of the projects is not expected until around 2016.

At presstime on May 27, NovaGold’s shares were trading up 14¢ to $11.24 on the TSX.