NovaGold sees potential resource boost at Donlin Creek

NovaGold Resources (NG-T, NG-X) shares fell nearly 10% today as the company released the final drill results from the last two years of work at its Donlin Creek project in Alaska.

NovaGold shares were down 71 to $6.32 on a trading volume of 1.4 million shares while Donlin Creek 50%-owner Barrick Gold (ABX-T, ABX-N) rose 1% or 36 to $38.03.

More than 70,000 metres of drilling has been done at Donlin Creek over the last year to expand and upgrade resources, with new numbers coming out in the first half of 2008.

The resource will be used in the final feasibility study, which will be finished before the end of next year.

During the first half of the year, optimizing studies for power, logistics, processing and production levels will be analyzed and incorporated into the feasibility study.

The companies’ plan is to build an open pit mine that will produce at least 1 million oz. gold per year.

Capital costs to build the gold mine could reach US$4 billion, about twice as much as NovaGold originally estimated.

Donlin Creek has a measured and indicated resource of 16.6 million oz. gold and in inferred resource of 17.1 million oz. gold.

Assay results from 2007 and 2006 (82,000 metres) returned 67 metres grading 3.61 grams gold per tonne on average.

Of the most notable, hole DH-1144 at the Acma East target intersected 198 metres grading 3.65 grams gold per tonne, extending well beyond the pit limit at depth and to the east of the main deposit.

The two best intersections were hole DH-1556 with 299 metres grading 5.26 grams gold per tonne and DH-1564 with 308 metres grading 4.6 grams gold per tonne, which both extend beyond the current pit model boundaries as well.

The company says they represent potential to expand the pit model to the southeast, as mineralization remains open laterally and at depth.

NovaGold and Barrick ended a bitter, year-long battle in November when the two companies agreed to advance the project as equal partners.

NovaGold fought off a hostile takeover bid from Barrick for nine months and then filed a lawsuit against Barrick for claiming it was on track to earning a 70% interest in the project when it hadn’t met the requirements.