Rock Creek shaping up for NovaGold (August 13, 2003)

Vancouver — Novagold Resources (NRI-T) has tabled a positive scoping study of the Rock Creek project, near Nome, Alaska.

Early this year, NovaGold accelerated its evaluation of the project after Placer Dome assumed operatorship of the company’s 70%-owned Donlin Creek project, in the same state.

Norwest, an independent engineering services company, performed the economic assessment, which indicates Rock Creek is capable of producing 100,000 oz. gold per year at the daily rate of 5,000 tonnes. Total cash costs are pegged at US$197.18 per oz. gold; total production costs, at US$257.56 per oz. The mine would operate for six years and recover 673,900 oz. gold. The stripping ratio is estimated at 4.4-to-1, and initial capital costs would be about US$39.2 million.

These estimates are based on a cutoff grade of 1 gram gold per tonne, a gold price of US$325 per oz., and an in-pit resource of 10.7 million tonnes averaging 2.03 grams gold per tonne. Total measured and indicated resources stand at 6.4 million tonnes averaging 2.69 grams gold (555,000 contained ounces) plus an inferred resource of 2.9 million tonnes averaging 3.25 grams gold per tonne (303,000 contained ounces).

About 30% of the resources used in the study were classified as inferred, and further exploration is expected to upgrade them to the measured-and-indicated category. As a result, the company is in the midst of an 8,000-metre program of infill drilling to define the resources in preparation for a feasibility study next year. So far, 2,556 metres have been drilled since the program began in the spring. To date, a total of 18,900 metres in 217 holes have been drilled on the project.

“The favourable results of this study support advancing the project toward an investment decision,” says NovaGold President Rick Van Nieuwenhuyse. “Developing Rock Creek is an important step toward positioning ourselves as a mid-tier gold producer.”

At a gold price of US$325 per oz., the project would yield an after-tax internal rate of return of 16.2% and an after-tax net present value of US$16 million, based on a 5% discount rate. The payback period would be four years.

An “upside scenario,” which assumes a larger resource of 16.8 million tonnes grading 2.03 grams gold, would result in 1.06 million oz. gold over a mine life of 9.5 years. The after-tax IRR changes to 21.7%, and the after-tax NPV, to US$34.5 million, again based on a 5% discount rate. The payback period remains the same: four years, while total cash and production costs change to US$199.95 and US$239.48 per oz., respectively.

“The study demonstrates the potential at the Rock Creek gold project,” says Ken Kuchling, project manager for Norwest. “There remain opportunities to enhance the economics of the project by improving overall operating and capital costs.”

Norwest relied on a block model supplied by NovaGold for its mine plan, and the project economics are based on the purchase of an all-new mining equipment and construction of a gravity/flotation mill.

The treatment method used in the scoping study entails grinding followed by gravity concentration and flotation of the gravity tails. The gravity concentrate retains almost 79% of the total gold. Flotation of the gravity tails captured an additional 17% into a concentrate for an overall recovery of 96.3% of contained gold.

Gold dor would be poured on-site from the gravity concentrate, and the flotation concentrate would be shipped for further processing. Additional metallurgical tests are planned.

NovaGold expects construction at Rock Creek to begin by late 2005, with startup envisaged for early 2006.

Baseline environmental studies, including air and water quality sampling, are under way in anticipation of permitting, and NovaGold is conducting geotechnical studies for open-pit design work.