NovaGold Second Quarter Financial Results and Projects Update
7/13/2010 4:23:18 PM - Market Wire

At the Galore Creek project, the Galore Creek Mining Corporation ("GCMC") has selected reputable engineering firms to assist with the completion of the pre-feasibility study for the Galore Creek copper-gold-silver project. GCMC has reviewed a number of optimization scenarios for the Galore Creek project with the objective of maximizing effective throughput and relocating project facilities to simplify construction and allow for potential future expansion. Based on these studies, GCMC has identified a preferred project design and has targeted completion of the pre-feasibility study for the first half of 2011. The pre-feasibility study will provide capital cost estimates, economic analysis using higher copper and gold prices than used in previous studies, as well as permitting, construction and production timelines.

Galore Creek

Galore Creek, a large copper-gold-silver project located in northwestern British Columbia, is held by a partnership in which NovaGold and Teck Resources Limited ("Teck") each own a 50% interest and is managed by GCMC. The 298,840 acre (118,900 hectare) property holds a large and good-grade undeveloped porphyry-related copper-gold-silver deposit. A resource estimate for the Galore Creek project totals measured and indicated resources of 8.9 billion pounds of copper, 7.3 million ounces of gold and 123 million ounces of silver, with additional inferred resources of 3.5 billion pounds of copper, 3.3 million ounces of gold and 61 million ounces of silver. GCMC has initiated a pre-feasibility study to provide updated capital and operating cost estimates based on an optimized mine plan and using higher copper and gold prices than in previous studies, with completion targeted for the first half of 2011.

The Canadian Federal and British Columbia Provincial Governments have pledged to build a high-capacity 287 kV transmission line ("NTL") in northwestern British Columbia. The NTL has completed its public comment period with an overwhelmingly positive response, including support from the Tahltan First Nation. Based on the British Columbia Transmission Corporation website, construction of the NTL is expected to start in late 2010 with completion targeted for 2013. The NTL will provide a secure interconnection point for clean generation projects, reduce greenhouse gas emissions by enabling communities now relying on diesel generation to connect to the grid and supply clean electricity to support industrial and resource projects in the area, including the Galore Creek project.

GCMC has budgeted $20 million for 2010, with $3.5 million spent year to date. During the second quarter of 2010, expenditures at the Galore Creek project totaled approximately $2.1 million. Under the terms of the Galore Creek Partnership agreement, Teck is funding all costs for the project until it completes its earn-in obligations, and NovaGold expects to have no near-term funding obligations for the Galore Creek project. At May 31, 2010, the Galore Creek Partnership had cash of $1.8 million and Teck had approximately $25 million remaining in project contributions to earn its 50% interest in the project. Certain road construction equipment and facilities are being recovered and sold as the road progresses. The proceeds from the sales directly fund the project's activities and do not reduce Teck's required contributions.

Due to accounting rules under AcG-15 for Variable Interest Entity accounting, NovaGold continues to consolidate 100% of the activities of GCMC on the income statement and the Galore Creek asset and a non-controlling interest for Teck's contributions on the balance sheet.

Outlook

At May 31, 2010, the Company had consolidated cash and cash equivalents of $175.5 million and working capital of $158 million. Of this cash amount, $1.8 million was held by GCMC for Galore Creek related activities.

The Company's material projects are Donlin Creek and Galore Creek. The Company's share of the Donlin Creek 2010 budget is approximately US$14 million, part of which will be incurred for permitting activities at the project. During the second quarter of 2010, Donlin Creek approved a supplemental budget of US$18.7 million (the Company's share: US$ 9.4 million) to complete the majority of the environmental and engineering studies required to review the natural gas pipeline option. The budget for care and maintenance and optimization studies for 2010 at the Galore Creek project is $8 million, with a supplementary 2010 budget of $12 million for the pre-feasibility study. Under the partnership agreement, Teck is funding 100% of these costs and the Company is not required to fund any project costs until Teck has completed its financial earn-in at the project. The Rock Creek project is in care and maintenance with a 2010 budget of approximately US$19.1 million. The Company is completing a detailed review process to evaluate the best way to bring value from this project. The Company has also budgeted US$1.5 million in 2010 for environmental and engineering studies at its Ambler project.