Alaska’s next hardrock mine?

NovaGold starts final feasibility study for Rock Creek, coarse gold from being tested; “aggressively advancing” to June 2004 target date

Patricia Jones

Petroleum News Contributing Writer

Mineral exploration rigs at the Rock Creek deposit near Nome, Alaska, completed a 10,000-meter in-fill program in early October designed to prove up the 1 million ounce gold resource being developed by NovaGold Resources.

Now a reverse circulation drill rig is on site, completing about 2,200 meters of condemnation drilling that will help locate building sites for mine infrastructure, said Doug Nicholson, senior projects engineer at NovaGold.

The condemnation drilling is part of a final feasibility study initiated earlier in October. Other feasibility study work includes letting contracts for detailed geotechnical, hydrologic and metallurgical studies.

“It’s starting to become more of a reality. We staked out the pit and plant sites, so visually it’s exciting,” Nicholson told Petroleum News Oct. 28. “We’re aggressively advancing this to the June 2004 target date.”

That’s when the feasibility study should be complete, with permitting work planned to start later in 2004. “Based on consultation with the permit agencies, NovaGold anticipates permit approval in the summer of 2005 with construction to begin immediately thereafter,” the company said in an Oct. 9 press release.

With a simple milling process and a shallow deposit to tap, Rock Creek could be producing gold in early 2006, putting it near or at the top of the list for Alaska’s next producing hardrock gold mine.

“I like its chances very much,” Nicholson said. “I don’t know when Pogo will start, but we’ll certainly be before Donlin Creek.”

Assay method altered

Included in the new resource calculation will be data from a revised assay method, which essentially quadruples the amount of drill sample that geochemists process and evaluate, Nicholson said.

“It’s a much larger volume of sample, so it takes a long time to process,” he said. “We like to think that in the nuggety type of deposit like this, it gives a better chance to capture any volume of mineralization in the selected core drill.”

According to Nicholson and a company press release, initial results from the new testing method suggest the deposit may contain an overall higher grade of gold than previously estimated.

That’s because conventional assay methods may under report grades due to the coarse gold component.

The company’s scoping study completed earlier this year was based on a 2.03 gram per ton gold grade, a “fairly conservative” estimate, he said. “What we are seeing from the drilling and the assay procedure, we hope to upgrade the deposit.”

Profitable economics on project

Norwest Corp. evaluated capital costs, operating and processing costs, taxes and royalties for Rock Creek and outlined a scenario of a mine that would produce about 110,000 ounces of gold per year, with total cash costs less than $200 per ounce.

Economic evaluations were also developed for higher gold prices, ranging from $350 to $400 per ounce. At $375 per ounce gold prices, pre-tax returns range from 33 to 38 percent, and after-tax returns ranged from 28 to 32.6 percent.

“For every 10 percent increase in the price of gold, we get an 8 percent kick in the (rate of return),” Nicholson said.

The economic analysis also calculated return rates with an increase in gold grade.

“We think we’re going to get a double whammy” with potential increases in gold grades and higher gold prices, Nicholson said.

NovaGold, a junior exploration company with a number of gold properties in Alaska, is the sole operator of the Rock Creek deposit. The Bering Straits Native Corp. has a one-third share of the property, part of an exploration agreement for area lands.