Mining Explorers 2017: Novagold Resources Inc.

Novagold Resources Inc. is focused on the permitting and development of its 50 percent-owned Donlin Gold project in Southwest Alaska. This year, Novagold and Barrick Gold Corp., which owns the other half of Donlin, budgeted US$8 million for a drill program aimed at collecting geologic and geotechnical data to support ongoing optimization efforts for the 40-million-ounce gold project. This is the first significant field program since Donlin Gold LLC – equally owned by subsidiaries of Novagold and Barrick– completed a feasibility study in 2011 and submitted the project for permitting the following year. The 53,500-metric-ton-per-day operation envisioned in this study is estimated to average roughly 1.1 million oz gold annually over a projected 27-year mine-life. At US$1,200/oz. gold, the base case price used in the study, this operation is calculated to generate after-tax cash flow averaging US$949.5 million annually for the first five years and US$500.7 million annually over the life of the mine. Under the proposed scenario, the partners would be paid back the roughly US$6.7 billion needed to build the mine in 9.2 years. While the plan has been working its way through the permitting process, Barrick and Novagold have been studying ways to optimize the world-class gold project. Using the information collected during the 2017 field program, the partners aim to finalize an updated feasibility study for Donlin. The environmental impact statement for Donlin, the key piece to the permitting process in the United States, is on pace to be finalized around March 2018. It is expected that the U.S. Army Corps of Engineers, the lead agency for the Donlin Gold EIS, will take another three or four months to write a record of decision. All other permits needed for construction to begin also are expected to be issued by that time. Donlin Gold, meanwhile, continues to advance permitting for a 312-mile pipeline to transport gas from Cook Inlet to the mine site. The partners are timing pipeline permits to coincide with the expected permits for mine development. If all comes together according to plan, Donlin Gold LLC could be ready to begin developing the largest pure gold mine in the world by the end of 2018.

To help pay for its share of developing the mine, Novagold hopes to bolster its cash with the eventual sale of its 50 percent interest in Galore Creek. Teck Resources Ltd. owns the other half of this large copper-gold project in northwestern British Columbia. A feasibility study completed in 2011 envisioned a mine at Galore Creek producing 6.2 billion pounds of copper over an 18-year span, which would rank as the largest copper operation in Canada. Crediting the value of the 4 million oz of gold and 65.8 million oz of silver forecast to be recovered over that mine-life, Galore Creek also would be the lowest cost copper producer in the country.