NovaGold tables Donlin Creek study

An independent scoping study of the Donlin Creek gold deposit in Alaska has prompted NovaGold Resources (NRI-T) to budget another $8 million for in-fill and delineation drilling.

Consultant MRDI Canada has determined that Donlin Creek could support an annual production rate of 1 million ounces with a capital investment of $602.1 million. The estimate includes just under $80 million for contingencies, and the payback period would be just over 5 years.

Based on the report, an open-pit operation would extract 20,000 million tonnes of material in each of 14 years at an average stripping ratio of 5.9-to-1. Grades and recovery rates are higher in the first five years to yield just over 10 million ounces over the life of the mine.

Life-of-mine cash costs are projected at US$166.57 per oz. and total production costs at US$241.87 per oz.

At a gold price of US$300 per oz., the operation generates a pre-tax rate of return of 15.6%, or 10.7% after taxes. The net present value rings in at $164.7 million, using a 5% discount rate.

All of the operating and economic projections are based on near-surface resources of 166.4 million tonnes averaging 3.6 grams per tonne. The resource, in turn, is based on a cutoff grade of 2 grams and includes material in the measured (3% of the total), indicated (41%) and inferred (56%) categories.

So far, over 100,000 metres have been drilled into the deposit and another 21,337 metres of its surface expression trenched. About a quarter of the 478 holes that were sunk were done using the reverse-circulation technique.

Metallurgical tests suggest that nearly all of the gold at Donlin Creek is tied up in fine-grained arsenopyrite. Nevertheless, over 90% of the yellow metal can be recovered using conventional flotation, pressure oxidation and carbon-in-leach cyanidation.

Future tests will focus on the flowsheet design in hopes of increasing the recovery rate. Also, bio-oxidation column tests will be carried out on mineralized material grading between 0.5 and 2 grams gold.

Based on the preliminary review, NovaGold plans to upgrade the inferred portion of the resource into the more reliable indicated and measured categories. The junior will also attempt to expand a high-grade core, as operating and economic projections improve when 21.5 million tonnes of material exceeding 5 grams is assumed in the calculations.

NovaGold can earn a 70% interest in the Donlin Creek property by spending US$10 million on exploration and development. The junior expects to fulfill its obligations by year-end, after which then-minority partner Placer Dome (PDG-T) has three months in which to exercise a back-in right or remain at the 30%-level. If the option is exercised, the major must three times the amount spent by NovaGold and completing a feasibility study that justifies a production rate of not less than 600,000 ounces annually.