NovaGold wins round in battle over Grace

Vancouver The British Columbia Ministry of Energy, Mines and Petroleum Resources has concluded that three years of drilling by NovaGold Resources (NG-T, NG-X) was sufficient to confirm that the Grace claims contain no economic mineralization and are therefore suitable for a tailings and waste disposal facility for the Galore Creek project in northwestern B.C.

A 2004 option agreement gave NovaGold rights to earn 60% of the Grace claims from Pioneer Metals (PSM-T) by spending $5 million on exploration and subscribing for shares and warrants valued at about $1 million. The claims are directly adjacent to NovaGold’s advanced Galore Creek copper-gold-silver deposit.

The partners had differing views about the potential of the Grace claims, culminating in a lawsuit filed by Pioneer in 2005. The company alleged that instead of conducting “legitimate exploration activities,” NovaGold was carrying out condemnation drilling to identify tailings and waste disposal sites for a proposed mine at Galore Creek.

NovaGold subsequently made a bid to acquire all the shares of Pioneer Metals, only to be trumped by Barrick Gold (ABX-T, ABX-N), which acquired Pioneer through a friendly takeover bid. Barrick also launched a hostile bid for NovaGold, which has been extended to October 12. NovaGold has urged its shareholders to reject the offer.

With the favorable government ruling in hand, NovaGold says “neither Pioneer nor Barrick pose a serious threat” to its goal to advance the Galore Creek project to production. The government upheld its position that the Grace claims contain no economic mineralization after reviewing recent exploration and geotechnical drilling on the claims.

NovaGold expects to have a feasibility study and updated resource estimate for Galore Creek late this year. Based on the positive results of a pre-feasibility study, the company envisions an open-pit mine processing 65,000 tonnes per day over at least a 20-year mine life.