NovaGold tables Donlin study

An independent scoping study of the Donlin Creek gold deposit in Alaska has convinced NovaGold Resources (nri-t) to spend an additional $8 million on infill and delineation drilling.

NovaGold can earn a 70% interest in the project by spending US$10 million over 10 years; however, it expects to fulfil that obligation by year-end. Once it does so, Placer Dome (pdg-t) has three months in which to exercise a back-in right for 70%, remain at the 30% level or convert its interest into a 5% net profits interest.

The study, conducted by MRDI Canada, suggests Donlin Creek can support an annual production rate of 1 million oz. with a capital investment of $602.1 million. The cost includes just under $80 million for contingencies. The payback period would be just over five years.

The mine plan envisages an open-pit operation capable of extracting 20,000 tonnes per day of mineralized material in each of 14 years at an average stripping ratio of 5.9-to-1. Headgrades 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.

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

At a gold price of US$300 per oz., the operation would generate a pretax 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 totalling 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.

Based on the preliminary review, NovaGold plans to infill-drill the inferred portion of the resource to bump it up to the indicated and measured categories. The company will also direct several holes at a high-grade core, as operating and economic projections improve when 21.5 million tonnes of material exceeding 5 grams are inserted into the model.

So far, more than 100,000 metres of drilling and 21,337 metres of trenching have been completed. About a quarter of the 478 holes completed were reverse-circulation.

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.

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

Future tests will attempt to improve the flowsheet so that more gold can be recovered. Also, bio-oxidation column tests will be carried out on mineralized material grading between 0.5 and 2 grams gold per tonne.