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Vol. 12, No. 43 Week of October 28, 2007
Providing coverage of Alaska and Northwest Canada's mineral industry

MINING NEWS: Judge supports Rock Creek project

9th Circuit Court of Appeals will determine future of NovaGold’s first mine after U.S. District Court upheld wetlands permit

Sarah Hurst

For Mining News

Vancouver, B.C.-based NovaGold Resources is progressing rapidly with its Rock Creek and Galore Creek projects — and it looks like the company might get some support from an unexpected quarter. The 9th Circuit Court of Appeals held a hearing Sept. 26 in a lawsuit brought by a Nome citizens’ group against the U.S. Army Corps of Engineers and a permit it issued for Rock Creek, and at least one of the three judges was adamantly in favor of the mine.

Judge Andrew Kleinfeld repeatedly interrupted attorney Brian Litmans, who with Trustees for Alaska, is representing Bering Strait Citizens for Responsible Resource Development, the plaintiffs in the case. Kleinfeld pointed out that there was historic placer mining all over the Snake River area, where Rock Creek gold mine is being constructed, and that placer miners at the time didn’t have to post any reclamation bonds, whereas NovaGold will have to reclaim its mine and even create a better fish habitat than what was there in the first place.

“Usually small-scale leaves a big mess because they can’t afford to reclaim and the big mines reclaim and you get something other than tailings,” Kleinfeld lectured Litmans. “In this case, as I understand it, the impact is to less than 1 percent of the Snake River drainage and two ten-thousandths of 1 percent of the Alaska wetlands,” he continued, noting that all of Alaska’s tundra is considered wetlands.

The U.S. Corps of Engineers should have recommended a less environmentally damaging alternative to the current mine plan, such as an uphill dump, located away from the tundra, Litmans argued.

“I was thinking what a colossal danger to anyone running a piece of heavy equipment downhill, vibrations might cause the dump to tumble down the hill,” Kleinfeld countered. “Why should they have given more consideration than they did to that possibility?”

“We contend that the Corps has not evaluated any of these potential alternatives to either determine safety aspects, but more importantly with respect to the Corps’ obligations under the Clean Water Act, whether these alternatives are in fact, one, less environmentally damaging, and two, practicable,” Litmans said. He added that dry stack tailings would have been the least environmentally damaging alternative.

A different three-judge panel at the 9th Circuit ruled recently that the Corps should not have issued a 404 permit to Idaho-based Coeur d’Alene Mines for its Kensington gold mine in southeast Alaska because the permit enabled the company to dump tailings into a lake, in violation of the Clean Water Act. The environmentalists who brought that lawsuit also demanded a dry stack tailings plan. Coeur d’Alene argued that this would be uneconomical.

Attorney Ryan Nelson, representing the Corps of Engineers, said the Corps held nearly 60 meetings before it issued Rock Creek’s 404 permit, and that construction of the mine is at a stage where 81 percent of the wetlands at issue have already been disturbed, and what remains to be done is the mitigation measures. Judge Betty Fletcher asked whether dry stack tailings had become a more practicable option in light of the Kensington case and the high price of gold.

“This isn’t so much a technological problem as it is a terrain problem,” Nelson replied. “What was adopted here, the paste tailings, is almost the same as dry tailings. It’s 75-percent non-water, whereas dry stacking, I think, is 82 percent ... there’s a very marginal benefit.” If the tailings are too dry there is a possibility that the wind could blow them, Nelson added. The Corps looked at the alternative and didn’t think that the additional $8 million expense was worth it, he said. In total the Corps considered 24 separate alternatives.

Why no EIS?

Judge Ronald Gould asked attorney Michael Grisham, representing NovaGold’s subsidiary, Alaska Gold, why an Environmental Impact Statement wasn’t done.

This is another bone of contention for the plaintiffs: They said the Environmental Assessment document wasn’t adequate and the public did not have sufficient opportunity to comment.

“We’re not dealing here with some sort of slapdash job that the Army Corps of Engineers put out at the end of a very brief process,” Grisham replied. “There’s a 16-volume environmental information document that was prepared over the course of three years by Alaska Gold and its environmental consultants.”

Grisham asked the court to consider the context of the project, which is taking place in an area where massive industrial dredges used to operate. “There are areas on that peninsula that are just covered with dead equipment, even old railroad trains tumbled over in the tundra, barrels of who knows what ... and piles of tailings,” Judge Kleinfeld confirmed. He spoke again during Litmans’ brief rebuttal, asking, “What if the impact is positive instead of negative?”

Work continues at Rock Creek

While the judges deliberate, construction at Rock Creek is continuing. In a release Oct. 2, NovaGold announced that it has started testing the crushing circuit at the mine.

“We have achieved significant progress at Rock Creek this summer,” said Doug Nicholson, Alaska Gold’s general manager. “We continue to develop the open pit and stockpile ore, with waste rock being used for construction of the tailings facility, roads and other facilities. The mill buildings are enclosed, all of our equipment is in place and we have begun testing of the processing circuits, focusing initially on the crushing system.”

Around 100,000 tons of ore from the open pit at Rock Creek have already been stockpiled, NovaGold’s chief operating officer, Peter Harris, said in a conference call Oct. 17. The first ore feed to the mill and production of gold is expected to take place before the end of this year, he added.

Power partnership at Galore Creek

The Galore Creek project in British Columbia also received a boost, with the announcement Oct. 1 that NovaGold is entering a partnership with the British Columbia government for a proposed high-capacity 287-kV Northwest Transmission Line. The line will deliver power from Terrace to Bob Quinn Lake, near the Galore Creek copper-gold project.

The deal will protect NovaGold from cost escalation, the company’s investor relations manager, Rhylin Bailie, told Mining News. It also means that the government will provide the workers to build the power line.

The first 100 days of construction at Galore Creek have been exciting, NovaGold’s president and CEO, Rick Van Nieuwenhuyse, told the Denver Gold Forum Sept. 25. The project, which is now a joint venture between NovaGold and Vancouver-based Teck Cominco, has been using about 15 helicopters, including the world’s largest, the Russian Mi-26, which can lift 20 tons. “We’ve mobilized over 36 million pounds of equipment, it’s been written up as the largest airlift in Canada,” Van Nieuwenhuyse said.

NovaGold has established all its construction camps along the 130-kilometer road site and currently has 700 people working on the project, which will increase to more than 1,200 by 2009, when the road is due to be completed and construction of the mill should begin. “We had very high water this year. ... They had a huge amount of rain and a huge amount of snowfall, so this was a tough year to get started; we certainly learned a lot of lessons,” Van Nieuwenhuyse said.

NovaGold posts bigger loss

For the three months ended Aug. 31, NovaGold reported a loss of $4.2 million, compared to a loss of $2.6 million for the same period in 2006, the company announced in its third-quarter results Oct. 15. NovaGold attributed the higher losses to the same period last year including a $3.5 million future income tax recovery while this year’s comparable future income tax recovery totaled only $1.2 million.

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