Teck Joins NovaGold at Galore Creek

Fresh from warding off a hostile bid from Barrick Gold (abx-t, abx-n), NovaGold Resources (NG-T, NG-X) has struck a deal with Teck Cominco (TCK.B-T, TCK-N) to develop on a 50-50 basis the junior’s massive, wholly owned Galore Creek copper-gold deposit in remote, northwestern British Columbia.

To earn a half interest in the new Galore Creek partnership, Teck must fund the next US$478 million ($520 million) in construction costs, with each company responsible for its pro rata share of funding thereafter.

For its part, NovaGold will contribute the Galore Creek assets to a new, jointly controlled operating company named Galore Creek Mining Corp. that will direct all aspects of project construction and operation. NovaGold will also second its existing Galore Creek project and construction team to the new operating company in their existing roles.

Building the mine should cost about $2 billion in total, making it one of the largest mining investments in the province’s history.

Representatives of NovaGold, Teck, the Tahltan First Nation (who live near the project) and the B.C. government gathered in downtown Vancouver on May 23 to publicly announce the deal.

“We’re very pleased to find a partner that’s also a next-door neighbour, who understands B.C., and understands the challenges associated with building a project like Galore,” said Rick Van Nieuwenhuyse, NovaGold’s president and CEO. “NovaGold’s success has largely been predicated on its ability to forge strong partnerships. . . (especially with) the Tahltan Nation and the B.C. government.”

He said that in three years of exploration at Galore Creek, NovaGold has more than tripled the size of the resource, and the company “fully expects to continue that” with further exploration.

“We have now demonstrated and established the Galore Creek copper-gold district as one the world’s largest and most exciting exploration and development stories,” Van Nieuwenhuyse said.

Teck Cominco started looking seriously at Galore Creek about six months ago, not long after it abandoned its brash attempt at a hostile takeover of Inco.

Speaking of the new Galore Creek partnership, Don Lindsay, president and CEO of Teck Cominco, commented that “it’s a delight to be able to invest in a world-class project right here in our own backyard,” adding that “our investment today is a major endorsement of the quality of the work that the NovaGold team has been doing on the project.”

Native land claim issues are always on the front burner in B.C., but NovaGold officially brought on board the local Tahltan First Nation in February 2006 with a comprehensive and innovative impacts and benefits agreement that will be fully honoured by the new NovaGold-Teck partnership.

The elected chairman of the Tahltan central council, Chief Curtis Rattray, said that his group’s participation agreement with NovaGold at Galore Creek “sets a new bar for aboriginal rights and title issues, and sets a new bar for corporate, social, economic and environmental responsibility. We welcome Teck Cominco to this relationship and partnership.”

B.C. Premier Gordon Campbell lauded the new NovaGold-Teck partnership and said, “in the northwest of the province, there will be a great deal of excitement about the potential for Galore Creek going ahead. It’s literally hundreds of jobs on an ongoing basis and probably up to a thousand jobs during construction. . . Those are very positive words to those who live in the northwest of our province, and underlines the increasing importance of mining to British Columbia.”

Campbell noted that Galore Creek will be one of the first large metal mines opened in B.C. in almost 10 years.

“It is a very important signal to the world, and to our mining industry itself, that we’re doing business differently in British Columbia, and we’re doing business openly,” said Campbell. “We’re going to work with the federal government. . . and most critically we’re going to work with the First Nations to make sure all British Columbians and First Nations benefit from the opportunities that we have been given.”

While it already has some $250 million in the till, NovaGold management said it believes the company can raise its own $500-million portion of future development costs at Galore Creek by issuing debt, probably sometime in 2009.

“We think the project can bear quite a fair amount of debt,” Van Nieuwenhuyse said, noting that the company would also look at selling a portion of its byproduct silver stream, which could raise in the neighbourhood of $200 million.

“We started out this venture four years ago as a very fairly junior exploration company,” Van Nieuwenhuyse said. “The company has grown a huge amount in that time and we have morphed, if you will, so that we (are now) in position where we feel we can pull our weight as a 50-50 partner with Teck.”

Galore Creek is located in the historic Stikine gold belt, about 70 km west of Highway 37 and 150 km northeast of Stewart, B.C.

Under a feasibility study completed last year, Galore Creek looks capable of producing at a 65,000-tonne-per-day rate from open pits for a bare minimum of 20 years, annually cranking out 432 million lbs. copper, 341,000 oz. gold and 4 million oz. silver for the first five years of production.

Total life-of-mine cash costs are projected at US62 per lb. copper, net of gold and silver credits.

The resulting concentrate would be shipped through the p15

ort of Stewart, B.C., to third-party smelters and refiners.

Miners will tap into more than 540 million tonnes of reserves containing 6.6 billion lbs. copper, 5.3 million oz. gold and 92.6 million oz. silver, plus another 1 billion tonnes of resources.

The next two years of activity will be consumed with driving a road into Galore Creek Valley, plus building a tunnel, bridges, concentrate and diesel pipelines and a power-transmission line from Bob Quinn on Highway 37 into the mine site.

NovaGold opened a field office in Smithers, B.C., a month ago and roadwork should begin as soon as the area’s unusually heavy winter snowfall melts.

NovaGold said the project has received all required provincial permits during the last month, and federal permit approvals, particularly for bridge construction, are still pending but are “anticipated to be received shortly to allow for the construction of several key bridges this season.”

The second phase of activity, set to begin in mid-2009, will focus on mine facilities and earthworks, including construction of mine infrastructure, a tailings dam, open pit stripping and process plant facilities.

The partners are maintaining NovaGold’s previous goal of attaining first production by mid-2012, and both partners remain committed to significantly expanding the district’s reserve base with continued aggressive exploration.

Meanwhile in Alaska, NovaGold has its advanced Nome, Donlin Creek and Ambler projects.