MINING NEWS: Expanding British Columbia’s Galore Creek

Three drill rigs working on NovaGold’s remote gold-silver-copper project; scoping study expected later in July

Patricia Liles

Mining News Editor

Already a giant-sized deposit containing lots of gold, silver and copper, Galore Creek’s allure is in its undefined expansion potential, according to the property’s developer.

NovaGold Resources and its Canadian subsidiary, SpectrumGold, have started drilling work this summer to find out how much more of those precious metals remain to be discovered. Three drill rigs are currently turning at the remote Galore Creek, a gold-silver-copper porphyry deposit optioned by the Vancouver, British Columbia, junior last year.

Last fall, the company took its first geological stab at Galore Creek, completing about 10,000 feet of drilling on the property. This summer, the company plans to complete about 60,000 feet, said Greg Johnson, NovaGold’s vice president of corporate development.

“We drilled eight new holes on the edges of the deposit to see how open the main deposit was,” Johnson said, in a telephone interview July 5, referring to last fall’s drilling. “That work resulted in a 15 percent increase in the resource.

“We have a good idea that the system is open and that there is good expansion potential.”

Galore Creek, about 36 miles west of the Cassiar Highway and about 56 miles east of Wrangell, Alaska, is one of the company’s high profile exploration projects in 2004.

NovaGold and SpectrumGold optioned last summer the large-scale, well-defined mineralized deposit called Galore Creek, previously worked by Kennecott. The company plans to spend C$8 million on it this year, which includes engineering work, drilling, airborne and ground-based geophysical surveys and environmental baseline data collection.

Three goals for drilling work

“We’re also finalizing our improvements to our camp facilities,” he said. “Right now we have over 50 people in camp and we’re expanding its capacity to support about 70 people.”

Goals for this year’s drilling program are threefold, Johnson said. They include upgrading the existing inferred mineralization to the measured and indicated category, drilling the edges of the deposit in an attempt to find new mineralization and testing satellite deposits for new, nearby resources.

For example, one of the three drill rigs currently working is at the Copper Canyon prospect, about three miles southeast of the main Galore Creek mineralized zone.

Another targeted satellite area that will receive some prospecting attention this summer is the North Junction Zone, Johnson said.

The company will also take a look this summer at the Grace claims, which were optioned this spring from Pioneer Metals.

“There’s not a defined zone of mineralization there, but the potential exists,” Johnson said. “Historically, some drilling hit gold mineralization there, but we’re going to take a comprehensive look for all three (metals).”

Geophysics also planned

The work, in particular the airborne surveys, will cover much of the 75,000 acres of land now part of the Galore Creek project held by NovaGold and SpectrumGold.

In addition to the Grace claims, the holdings include other prospective land nearby called the Jack and Spaler Creek claims, optioned from Silver Standard.

The existing main zone of mineralization at Galore Creek is roughly four kilometers long, by one kilometer wide, Johnson said. Mineralization begins at surface and is fairly continuous down to about 300 meters or 1,000 feet.

Scoping study work almost complete

That document, which offers an engineering and economic assessment of the known deposit, should be released later this month, Johnson said.

Part of that report will look at logistical needs to develop the remote project, currently a fly-in operation. Two road routes are being considered, Johnson said, and economic factors relating to each will be included in the scoping study.

One route would connect Galore Creek to the Cassiar Highway community of Bob Quinn, roughly a 36-mile route through mountainous terrain. The second would connect to an existing road used by another mine project, a 100-mile stretch that would be at lower elevation.

In addition to economic factors, NovaGold and SpectrumGold will consider input from the Tahltan First Nations, the Native tribe in that region, Johnson said. “We’ll be looking at the best approach for the region.”

The company has already met with Canadian agencies to discuss the permitting and regulatory process, and have had discussions with U.S. agencies about the potential mine project. “We want to make sure early on that we engage the U.S. agencies in this situation,” Johnson said. “Full oversight will come from the Canadian regulatory agencies, but we’ve had two meetings in Juneau with all the Alaska and federal U.S. regulatory agencies to keep them updated.”

Resource updated for Galore Creek

The indicated resource contains 4 million ounces of gold, 52.2 million ounces of silver and 4.6 billion pounds of copper. Mineralization contained in the inferred category includes 1.2 million ounces of gold, 17.2 million ounces of silver and 1.3 billion pounds of copper. Both categories use a 0.5 percent copper equivalent cut-off grade.

NovaGold and SpectrumGold released their updated resource numbers this spring, which showed an increase of 15 percent for gold and 14 percent for copper compared to historical geological estimates.

Prepping Rock Creek for production

Patricia Liles

Mining News editor

The company has begun its $5 million spending this year to develop the Nome, Alaska-area hard rock deposit into a producing mine, hopefully in 2006. Crews have mobilized one drill rig to the site, according to Greg Johnson, NovaGold’s vice president of corporate development. A second drill rig is expected soon, he said on July 5.

“It’s not our biggest project and it doesn’t get much attention from the markets, but it would be our first operation with production, other than our sand and gravel business,” Johnson said.

A combination of core and rotary drilling work, which will make up about $2 million of the 2004 Rock Creek budget, will gather “additional test work and convert part of the resource to reserves,” Johnson said.

Crews have been on-site this spring, completing engineering and environmental work needed for the company to make a development decision. In addition, NovaGold is waiting to complete a full year of environmental baseline data gathering before submitting official permit applications.

“We’ve been speaking with the regulatory agencies and getting guidance,” Johnson said.

The company will complete a year’s worth of groundwater data collection in early September, according to Doug Nicholson, NovaGold’s vice president and general manager for Rock Creek. Air quality data collection will surpass that year’s anniversary at the end of 2004, he said in a telephone interview on July 6.

Permitting is “more defendable” with a year of baseline data collection prior to the start of the regulatory process, Nicholson added.

An environmental assessment for Rock Creek is due to be released in October, and NovaGold will likely submit its actual permit applications to regulatory agencies after that, Nicholson said.

The company hopes to have confidence of regulatory approval so that managers can order equipment to be delivered to Nome during the next summer’s shipping season, Johnson said.

A preliminary economic assessment study of Rock Creek has identified a potential gold mine that would produce more than 100,000 ounces per year with a total cash cost of about $200 per ounce of gold. A final feasibility study is expected to be released later this year, as work is continuing to support that, as well as an updated resource and reserve number for Rock Creek.

NovaGold anticipates a year-round mine and milling operation, processing about 5,000 tons of material a day, with a 4:1 strip ratio. Overall recovery with a gravity floatation plant is projected at 96 percent.

Past exploration has identified a gold resource containing more than 1 million ounces of gold at Rock Creek and the adjacent Saddle deposit. Both deposits are open along strike and down dip; further drilling will likely increase the size of both deposits, the company said on its website.