NovaGold Resources Inc. May 5 said a feasibility study revision has been initiated at the Donlin Creek gold project in Alaska to consider the construction and operation of a natural gas pipeline to supply project power. Donlin Creek is owned and managed by Donlin Creek LLC, which is owned equally by NovaGold Resources Alaska, Inc. and Barrick Gold U.S. Inc. The 2009 project feasibility study estimated Donlin Creek's total cash costs for the first full 5 years of operation at US$394 per ounce of gold using a combination of diesel and wind as the source of on-site power generation.
Based on preliminary optimization studies, Donlin Creek LLC has determined that using natural gas to generate on-site power may result in a reduction of power costs, which represent approximately 25 percent of the projected total operating costs at Donlin Creek under a feasibility study completed in 2009.
The partners are considering the construction of an underground 12-inch pipeline about 525 kilometers (325 miles) Alaska’s Cook Inlet to the proposed mine site. Gas from the pipeline would be used to produce electricity at site. The capital cost of the pipeline is expected to be partially offset by cost savings from elimination of the wind cogeneration facility, the potential for a shorter access road and a significant reduction in requirements for diesel storage. The potential impact of the pipeline option on capital and operating costs will be addressed in a revision to the project feasibility study.
Donlin Creek LLC has approved a supplemental budget for 2010 of US$18.7 million, which will be shared equally by NovaGold and Barrick, bringing the total 2010 budget to US$47 million. The 2010 work program will complete the majority of the environmental and engineering studies required to review the pipeline option and revise the feasibility study and mine plan based on on-site power generation using gas. The pipeline studies and feasibility revision will take 12 to 18 months to complete. The partners will consult with stakeholders as these studies proceed and solicit feedback from local communities and its Alaskan Native partners as well as state and federal regulatory agencies. NovaGold anticipates that the partnership will file permit applications for the Donlin Creek project by the end of 2011.
"A natural gas pipeline has the potential to significantly improve operating costs and reduce operating risk,” said NovaGold President and CEO Rick Van Nieuwenhuyse. "We look forward to working with Barrick and our Alaskan Native partners to advance the Donlin Creek project through permitting and toward a construction decision.”
