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Providing coverage of Alaska and Northwest Canada's mineral industry
August 2006

Vol. 11, No. 35 Week of August 27, 2006

MINING NEWS: NovaGold fights Barrick bid on all fronts

Vancouver-based junior has projects in Alaska and British Columbia that the world’s number one gold producer would like to own

By Sarah Hurst

For Mining News

The board of directors of Vancouver-based NovaGold Resources has unanimously recommended that shareholders reject the unsolicited takeover bid by Toronto-based Barrick Gold. At the same time, in mid-August, NovaGold filed a lawsuit against Barrick in the Supreme Court of British Columbia. The lawsuit claims that in making a competing bid for Pioneer Metals, Barrick misused confidential information belonging to NovaGold.

NovaGold was already entangled in a lawsuit brought by Vancouver-based Pioneer over the Grace property adjacent to NovaGold’s Galore Creek project in British Columbia. Pioneer owns the subsurface mineral rights to the Grace property and is unhappy that NovaGold hasn’t found any economic value there and wants to use the area as part of its tailings facility. In response to the lawsuit, NovaGold made a takeover bid for Pioneer, which the latter company resisted. When Barrick made its takeover bid for NovaGold in July, the major also offered to buy Pioneer, an offer which Pioneer’s management immediately accepted.

Barrick’s offer of US$14.50 per NovaGold share “falls significantly short of providing fair value to NovaGold’s shareholders and would deprive them of significant upside potential,” said Gerald McConnell, chairman of the special committee of NovaGold’s Board of Directors which has been established to deal with the takeover bid. “Our special committee and the full board of directors unanimously determined that the Barrick offer is inadequate and significantly undervalues NovaGold’s world-class gold and copper projects and the company’s growth potential. There is no rationale for accepting the Barrick bid and many reasons to reject it,” McConnell added.

Barrick acquired Placer Dome in '05

NovaGold and Barrick became partners in the Donlin Creek gold project in Alaska last year when Barrick acquired NovaGold’s former partner, Placer Dome. Barrick’s offer does not reflect the value of NovaGold’s 70 percent ownership of Donlin Creek and “the likelihood that Barrick will fail to meet the conditions that would allow it to earn an additional 40 percent interest in the project,” NovaGold said in a release Aug. 14. One of the conditions is that Barrick must produce a bankable feasibility study for Donlin Creek by November 2007.

“The offer is an attempt by Barrick to salvage its ability to earn an additional 40 percent interest in the Donlin Creek project at the expense of NovaGold’s current shareholders,” McConnell said. “We were surprised that Barrick launched its hostile offer for NovaGold, given that our management team had been in active discussions with Barrick for several months in an effort to find an amicable solution to Barrick’s concern with the conditions in the Donlin Creek Joint Venture Agreement, and to negotiate a possible joint venture for the Galore Creek project. NovaGold shared with Barrick confidential information about the Galore Creek project, including non-public exploration information and plans.”

NovaGold: other companies interested

NovaGold has been solicited by and has initiated contact with some of the world’s largest mining companies, who have expressed an interest in considering alternative transactions, the company said. It advised shareholders not to tender their shares to Barrick until the board of directors of NovaGold has a chance to fully explore options that may be financially superior to the Barrick offer.

Barrick responded that the lawsuit filed against it by NovaGold was “unfounded”, according to a release Aug. 17. The company denies that it used confidential information belonging to NovaGold. “The lawsuit appears to be a defensive tactic and should NovaGold actually try to advance the case, Barrick will vigorously defend this proceeding,” said Greg Wilkins, Barrick’s president and CEO.

“Despite NovaGold’s protestations to the contrary, Barrick is the operator of the (Donlin Creek) joint venture and is actively managing the project to ensure it remains on track in order to meet the terms and milestones as required by the joint venture agreement,” Wilkins added. “In the event that any party deems it advisable to contest our interest, we will not hesitate to protect our legal rights.”






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