NovaGold looks to grab hydroelectric developer

Vancouver – Development aspirations for its large Galore Creek copper-gold project, in northwestern British Columbia, has prompted NovaGold Resources (NG-T, NG-X) to launch a takeover bid for hydroelectric developer Coast Mountain Power (MW-V).

The $40 million deal will see NovaGold issue shares for all the issued capital of Coast Mountain at a ratio based on its trading price and a $2.00 per share value for the hydro-electric producer, subject to shareholder and regulatory approvals. The valuation represents a 42% premium to Coast Mountain’s one-month weighted average trading price.

Coast Mountain is developing its Forrest Kerr run-of-river hydroelectric generating facility located on the Iskut River, southeast of the Galore Creek deposit. The planned 115 MW facility is designed to feed the provincial BC Hydro electric grid, located about 180 km to the southeast at the Meziadine substation, commencing by about mid-2008. The project is accessed by an 8 km road recently constructed off of the Eskay Creek mine access road that connects with Highway 37.

Full permits and approvals are in hand for Forrest Kerr, which will also see construction of 178 km of transmission line along the Highway 37 corridor. Coast Mountain has secured Tahltan First Nation support for the project that will include development of a 3.2-km power tunnel and an underground powerhouse containing 3 turbines. The 115 MW plant will have annual production capability projected at about 606 GWh, with 555 GWh being delivered to BC Hydro under a commitment agreement.

Coast Mountain has two other proposed hydroelectric projects, the 60-70 MW More Creek and the 55-60 MW Mclymont Creek generating facilities, on tributaries to the Iskut River.

NovaGold’s Galore Creek porphyry project contains measured and indicated resources of 516.7 million tonnes grading 0.36 gram gold per tonne, 4.5 grams silver per tonne and 0.6% copper using a 0.35% copper equivalent cut-off grade. Additionally, Eagle Plains Resources’ (EPL-V, EGPLF-O) adjacent Copper Canyon property, in which NovaGold can earn up to 80%, hosts an inferred resource of 164.8 million tonnes grading 0.54 gram gold, 7.2 grams silver and 0.35% copper.

NovaGold’s latest mine model is based on four distinct pits using a 65,000-tonne-per-day planned milling rate. Production over the initial five years is estimated at 174,000 tonnes (384 million pounds) of copper and 318,000 oz. gold annually. Much of NovaGold’s focus is now directed at delineating near-surface, higher-grade copper and gold resources in the vicinity of the Central, Southwest, Junction and West Fork zones to develop potential “starter pits”.

Situated in a remote area, about 70 km west of Highway 37, proposed development has reviewed construction of a 125-km road running west from Bob Quinn, along the More and Sphaler Creek valleys, to the planned mine site. A final 4-km tunnel would access the Galore Creek valley. Road construction would be single lane, with pullouts, and include a parallel concentrate slurry pipeline and power line. Concentrate dewatering, storage and load out facilities are planned next to Highway 37, with truck haulage to the Port of Stewart.

NovaGold is earning a 100% interest in the project from subsidiaries of Rio Tinto (RTP-N) and Anglo American (AAUK-Q).

Following NovaGold’s announcement, shares of Coast Mountain Power surged on the offer to trade up 30% at the $1.90 level.