Barrick still a thorn in NovaGold's side
Dispute could continue to be costly and time-consuming for NovaGold as it fights to regain control of Donlin Creek project
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Last updated 4/29/2007 at Noon
The problem of bringing power to NovaGold's remote Donlin Creek project in southwest Alaska is one of the main bones of contention in the Vancouver-based junior's never-ending battle with its joint venture partner, Barrick Gold. Toronto-based Barrick, the operator at Donlin Creek, envisions a combination of diesel and wind power for the proposed gold mine. NovaGold's management believes the logistics of transporting huge quantities of diesel fuel upriver are too challenging and expensive, and wants to put in a power line from the existing Railbelt infrastructure at a cost of around $400 million.
NovaGold's president and CEO, Rick Van Nieuwenhuyse, reiterated his dissatisfaction with Barrick during a first-quarter results conference call April 25. Barrick, the world's largest gold producer, failed in a takeover bid for NovaGold last year. Within the past few weeks Barrick divested itself of the NovaGold shares it had purchased. Partly due to that, NovaGold's share price dipped, Nieuwenhuyse said, with at least one institutional investor concerned that Barrick might launch another takeover bid in the near future.
Project progress has been rapid
Meanwhile, progress on NovaGold's Rock Creek and Galore Creek projects has been rapid, with Rock Creek (near Nome) set to begin production of gold in the third quarter of this year and permits for Galore Creek (in northwest British Columbia) likely to be issued very soon. NovaGold expects Rock Creek to generate about $100 million in cash flow during its first five years of operations, which will coincide with the construction period for Galore Creek and help to finance that massive project.
A citizens group in Nome has just refiled a lawsuit against the U.S. Army Corps of Engineers, disputing the permit issued for Rock Creek's construction, but NovaGold expects this to be a "nuisance suit" that won't affect development of the mine, according to the company's chief operating officer, Peter Harris.
NovaGold reported a net loss of C$4.9 million for the quarter ended Feb. 28, 2007, compared with a net income of C$0.1 million for the same quarter in 2006. Revenues from the company's land and gravel sales and gold royalties decreased by C$0.7 million compared with the same period last year, mainly due to a large land sale near Nome that occurred in the first quarter of 2006. NovaGold's corporate development and communication costs increased by C$0.8 million, and its administrative fees and salaries increased by C$1.6 million due to the company's increased activities and expanded staff.
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