NovaGold Resources ups resources at Donlin Creek

Vancouver — NovaGold Resources (NRI-T) and joint venture partner Placer Dome have increased the measured and indicated resources at the Donlin Creek deposit in Alaska as the partners remain on track to complete a pre-feasibility study by the fourth quarter.

The Donlin Creek joint venture (NovaGold 70% and Placer Dome 30%) now reports a measured and indicated resource that weighs in at 117.5 million tonnes averaging 3.0 grams gold per tonne, or 11.1 million contained ounces. In addition the deposit hosts an inferred resource of 142.2 million tonnes averaging 3.1 grams gold, or 14.3 million contained ounces. A 1.5 grams gold per tonne economic cut-off grade is being used for the project based on an assumed 20,000 to 30,000 tonne-per-day mill processing rate.

The new resource estimate used an updated 3D geologic and mineralization model that integrates 58,000 metres of drilling that was performed by NovaGold in 2001 and 2002 and 93,000 metres of drilling previously completed by Placer Dome. The model contains a total of 85,760 assays from 172,000 metres of drilling and trenching.

When a cut off grade of 3.5 grams gold is used the measured and indicated resource is pegged at 4.7 million ounces grading 5.1 grams gold per tonne of measured and indicated material and an additional inferred resource of 6.8 million ounces grading 5.5 grams gold.

NovaGold states that 99% of the measured and indicated resource and 90% of the inferred resource can be contained within an open pit model. Additional mineralization that is located outside of the pit model could eventually be included in future estimates as the pit model deepens and expands along strike with further drilling.

The pre-feasibility study is being conducted by AMEC E&C Services. Some of the work that is currently underway includes: detailed pit designs, mill process work, site facilities layout and on-going environmental monitoring in anticipation of future mine permitting.

In order to earn an additional 40% interest in the project, Placer Dome must spend in excess of US$30 million, complete a bankable feasibility study and make a decision to construct a mine producing at least 600,000 ounces of gold annually before November 14, 2007.

According to an preliminary economic assessment report, performed by AMEC and released in March last year, 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.

This study was based on a measured and indicated resource of 73.97 million tonnes averaging 3.11 grams gold, or 8.3 million contained ounces, using a 2.0 gram per tonne cut off grade.

The scoping study, also performed by AMEC, suggests Donlin Creek can support annual production of 1 million oz. with a capital investment of US$602.1 million. The cost includes US$79.6 million for contingencies. The payback period would be just over five years. Cash operating costs were pegged at US$166.57 per oz. and total production costs were pegged at US$241.87 per oz.

The pre-tax rate of return for the base case was estimated at 15.6% based on a gold p rice of US$300 per oz. At US$350 per oz. the pre-tax rate of return jumps to 25.3%. The after tax return ranges from 10.7% to 17.9% based on gold prices of US$300 and US$350, respectively.

The study assumes that the project access road, power supply and fuel storage are provided by third parties, namely the Calista Corporation and the state and federal governments. Power was estimated at a cost of US$0.05 per KWh.

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.

Results form metallurgical test work indicate that 95%-to-98% of the gold is contained in fine grained arsenopyrite mineralization. The gold can be recovered through conventional sulphide flotation, concentration, pressure-oxidation and carbon-in-leach cyanidation. Placer Dome’s test work indicates an average gold recovery of 89% and up to 92% with process optimization.