NovaGold lines up US$95M note offering

VANCOUVER — After recently pulling the plug on a planned $130- million private placement due to “pricing conditions,” NovaGold Resources (NG-T, NG-X) has now lined up a US$95-million convertible note offering to recharge its treasury.

NovaGold has enlisted J. P. Morgan Securities as underwriter for the offering of US$95 million in convertible senior notes due May 1, 2015, with an option for the broker to purchase an additional US$14 million for any overallotments. Notes have a semi-annual cash interest coupon of 5.5% and are convertible into NovaGold shares at a ratio of 94.2418 shares per US$1,000 principal amount — about US$10.61 per share.

In early March the company announced a planned share offering to raise roughly $130 million, but nixed the idea the following day, likely because of a share price it found unacceptable.

NovaGold says it was planning to earmark proceeds from the offering to repay funds it has drawn down under a $30-million loan from earlier this year, plus ongoing exploration and development on its mineral projects.

The company is advancing its Rock Creek gold mine (part of its Nome operations) in west-central Alaska. The planned 7,000-tonne-per- day open-pit mine, scheduled to open later this year, is expected to produce about 111,000 oz. gold annually with estimated total cash costs of US$467 per oz.

Rock Creek is expected to generate about $25-30 million annually in free cash flow for the company over its 4-year mine life.

NovaGold is also working with 50-50 project partner Barrick Gold (ABX-T, ABX-N) on moving its Donlin Creek gold project in western Alaska to the feasibility stage. The joint-venture partners recently updated the deposit’s resource tally to 371.7 million measured and indicated tonnes grading 2.46 grams gold per tonne for about 29.4 million contained ounces gold.

Along with partner Teck Cominco (TCK. B-T, TCK-N), NovaGold is also evaluating alternative development strategies for its Galore Creek copper-gold project in northwestern B. C. Last fall, the duo shelved plans for development of the planned open-pit operation citing major cost overruns.

NovaGold shares have recently slid from the $10-11 range to around $7.60. Given its 105 million shares outstanding, the company posts an $800-million market capitalization. The stock has traded in a 52-week range of $5.90-20.44.