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Message: Donlin Creek Feasibility Study Adds 14.7 Mozs to NovaGold's Reserves
| April 28, 2009 | ||||
| Donlin Creek Feasibility Study Adds 14.7 Mozs to NovaGold's Reserves | ||||
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VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 28, 2009) - NovaGold Resources Inc. (TSX:NG)(NYSE Alternext US:NG)(NYSE Amex:NG.A) - NovaGold is pleased to announce the results of a feasibility study completed for its Donlin Creek project. The Donlin Creek project is owned equally by NovaGold and Barrick Gold U.S. Inc. and operated by Donlin Creek LLC, a jointly owned limited liability company. The property is under lease from two Native Alaskan Corporations, Calista Corporation (subsurface rights) and The Kuskokwim Corporation (surface rights). The Donlin Creek mine, once built, is expected to be one of only a handful of gold mines worldwide that is capable of producing over one million ounces of gold annually. All amounts are in US$ unless otherwise stated. Highlights (100% Project Basis) - Proven and Probable Reserves estimated at 29.3 million ounces of contained gold - 21-year life of mine at 53,500 tonnes per day throughput - First 5 full years of production -- Average of 1.6 million ounces of annual gold production -- Total cash costs of $394/oz of gold -- Average annual after-tax cash flow of $779 million at $900/oz gold - Average annual gold production: 1.5 million ounces first 12 full years; 1.25 million ounces life of mine - At current $900/oz gold, pre-tax NCF is $5.9 billion, NPV 5% is $1.5 billion with an IRR of 9.4% - At $1,000/oz gold, pre-tax NCF is $8.4 billion, NPV 5% is $2.7 billion with an IRR of 12.3% - 3.6 million ounce increase in P&P Reserve plus M&I Resource over the previous M&I Resource estimate Donlin Creek Project Feasibility Study Results NovaGold commissioned AMEC Americas Limited ("AMEC") to provide an independent Qualified Person's Review and Technical Report ("Technical Report") for the Donlin Creek gold project located in Alaska, USA, based on information contained in a feasibility study prepared for Donlin Creek LLC. NovaGold expects the feasibility study to be accepted by the Donlin Creek LLC Board of Directors shortly. The Technical Report will be filed within 45 days on SEDAR at www.sedar.com. This Technical Report is based on Q3 and Q4 2008 costs discounted where applicable to Q4 2008. NovaGold believes that capital costs have reduced since Q4-2008. Based on the feasibility study, the Donlin Creek mine has been designed as a year-round, open-pit operation with plant start-up anticipated for 2015. With the current 29.3 million ounce gold reserve base, the anticipated life of mine of 21 years with a mill throughput of 53,500 tonnes per day. During the first 5 full years production averages 1.6 million ounces with an average total cash cost of $394/oz. The lowest 25th percentile for current global industry total cash costs is approximately $400/oz. Gold production for the first 12 full years is expected to average nearly 1.5 million ounces annually at an average total cash cost of $444/oz. Life of mine production is estimated at an average of 1.25 million ounces of gold annually, for total recovered gold of 26.2 million ounces. These production levels would make Donlin Creek one of the world's largest gold producing mines. It is expected that the Donlin Creek ores will be processed by crushing and milling followed by flotation, pressure oxidation and CIL recovery. Total gold recovery is expected to average 89.5%, based on the combined life-of-mine average recovery of 92.6% from flotation and 96.6% from pressure oxidation of the concentrate. The process plant design uses the most current technology for both the process systems and equipment selection. Particular attention was paid to incorporating state-of-the-art technology for safety and environmental protection. The Donlin Creek mine is expected to draw an average of 127 MW of electrical power sourced from a combination of on-site combined cycle gas turbine generators and wind co-generation. In an effort to optimize energy costs and reduce environmental impact, an average of 7.5% of annual energy requirements is expected to come from 14 wind turbine generators. Key infrastructure for the mine includes a port on the Kuskokwim River, an access road connecting the port to the mine site, an airstrip, camp accommodations, the mine and plant site area, the tailings facility, and supporting turbine generator and wind power facilities. Cargo and supplies would be shipped on ocean barges to a port on the Kuskokwim River, barged up river and then transported via truck along the 123-kilometer (76 mile) access road to the mine site. Donlin Creek Summary Statistics 100% Project Basis(1)
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Mine Parameters
Unit Life of Mine
Total Mined tonnes (M) 2,567.7
Ore Milled tonnes (M) 383.8
Strip Ratio (waste:ore) tonne:tonne 5.69
Gold Grade grams per tonne 2.37
Contained Gold ounces (M) 29.3
Average Gold Recovery % 89.5
Recovered Gold ounces (M) 26.2
Mine Life Years 21
Oil Price $/barrel 75
$/tonne Milled $/tonne Mined $/ounce
Mining Cost 13.62 2.08 200
Process Cost 14.76 2.26 216
G&A 1.54 0.24 23
Refining 0.11 0.02 2
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Operating Cost 30.03 4.60 440(2)
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Average Annual Gold Production Unit
First Full 5 years ounces 1.6 million
First Full 10 Years ounces 1.5 million
Life of Mine ounces 1.25 million
Total Start-Up Capital(3) $ 4,481 million
Total Sustaining Capital(3) $ 803 million
Unit $725/oz $900/oz $1,000/oz
Average Annual Cash Flow(4)
First Full 5 years $ (M) 521 790 944
First Full 10 years $ (M) 415 663 805
Average Total Cash Costs
First Full 5 years $ per ounce Au 394 398 400
First Full 10 years $ per ounce Au 442 448 451
Life of Mine $ per ounce Au 467 473 477
Financial Results
Undiscounted Cumulative Net
Cash Flow After-Tax (NCF)(5) $ (M) 1,103 4,166 5,876
IRR Pre-tax % 3.0 9.4 12.3
IRR After-tax % 2.3 7.7 10.2
Payback Year years 15 7 5
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Note: NPV equals Net Present Value of Cumulative Cash Flow; IRR equals
Internal Rate of Return. NPV and IRR figures are discounted to January 1,
2009.
(1) Numbers shown on 100% project basis. NovaGold and Barrick Gold U.S.
Inc. each own 50% of the Donlin Creek project subject to a 5 to 15%
back-in right by Calista Corporation.
(2) Rounding of data equals $440
(3) Does not include sunk costs, closure costs or credit for salvage values.
(4) Total Revenues minus total operating costs and royalties before
interest, taxes, depreciation and amortization.
(5) Net of initial and sustaining capital and operating costs.
Industry wide capital costs saw significant increases over the past two years and peaked in the latter half of 2008, which is when Donlin Creek LLC was estimating costs for the project. The total estimated cost to design and build the Donlin Creek Project is $4,481 million, including an owner-provided mining fleet and self-performed pre-development costs. This represents an approximate 10% increase in the total estimated capital costs over the studies conducted in 2007 using a similar approach to the project with on-site power generation. Sustaining capital requirements total $803 million over the 21-year mine life. All costs are expressed in Q4-2008 US dollars with no allowances for interest during construction, taxes or duties. Recognizing the recent decrease in costs for construction inputs such as steel, concrete, diesel and labor, Donlin Creek LLC is reviewing the capital cost estimates for the project and consequently NovaGold may release updated economics later in 2009. To provide an indication of the sensitivity of the project to decreased capital costs, NovaGold has illustrated the resulting economic outcomes with a 15% across the board decrease in capital costs in the table below. Life-of-mine operating costs, including allocations for mining, processing, administration and refining are estimated at $30.03/t milled, $4.60/t mined. The operating cost estimates have been assembled by area and component, based on estimated staffing levels, consumables and expenditures, according to the mine plan and process design. The project is expected to generate positive net cash flow at the base case gold price assumption of $725/oz used for the reserve estimate. At the current gold price of $900/oz the project would generate $5.9 billion in pre-tax cash flow and has a pre-tax NPV (5%) of $1.5 billion with a pre-tax IRR of 9.4%. At a gold price of $1,000/oz the project would generate $8.4 billion in pre-tax cash flow and has a pre-tax NPV (5%) of $2.7 billion with a pre-tax IRR of 12.3%. Donlin Creek Project Economics 100% Project Basis(1)
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Return on Investment (millions of dollars)
Gold Price ($/oz) $725 $900 $1,000
Undiscounted Cumulative Net Cash Flow Pre-tax $1,504 $5,915 $8,435
Undiscounted Cumulative Net Cash Flow After-tax $1,103 $4,166 $5,876
NPV (5%) Pre-tax -$592 $1,525 $2,735
NPV (5%) After-tax -$733 $829 $1,674
IRR Pre-tax 3.0 9.4 12.3
IRR After-tax 2.3 7.7 10.2
Payback 15 years 7 years 5 years
Return on Investment with 15% Reduction in
Capital Costs(2)(3) (millions of dollars)
Undiscounted Cumulative Net Cash Flow Pre-tax $2,297 $6,707 $9,227
Undiscounted Cumulative Net Cash Flow After-tax $1,895 $4,958 $6,669
NPV (5%) Pre-tax $4 $2,121 $3,331
NPV (5%) After-tax -$138 $1,425 $2,270
IRR Pre-tax 5.0 11.8 14.9
IRR After-tax 4.4 10.2 12.8
Payback 11 years 5 years 4 years
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Note: NPV equals Net Present Value of Cumulative Cash Flow; IRR equals
Internal Rate of Return. NPV and IRR figures are discounted to January 1,
2009.
(1) Numbers shown on 100% project basis. NovaGold and Barrick Gold U.S. Inc.
each own 50% of the Donlin Creek project subject to a 5 to 15% back-in
right by Calista Corporation.
(2) Lower confidence limit of AACE Class 3 Capital Cost Estimate.
(3) Prepared by Kevin Francis P.Geo., QP, Technical Services Manager of
NovaGold and not included in the NI 43-101 Technical Report or 2009
Feasibility Study Report.
Baseline environmental studies commenced in 1996, comprising water quality studies, meteorology, aquatic studies in the main drainages, wetlands delineation in the areas of the mineral resource estimates and some waste rock characterization. The baseline program was expanded during 2003 to include ambient air monitoring, terrestrial wildlife and avian surveys, groundwater monitoring, detailed aquatic studies, cultural site surveys, detailed waste rock characterization and additional wetlands delineation. Over the nearly 13 years since exploration and environmental baseline data collection began, considerable effort has been spent developing support for the project by fostering local relationships, developing a strong local workforce, educating stakeholders about the project and mining in general and providing stakeholders with regular project updates and site visits. In particular, local hiring and training programs have resulted in 90% local hire from the region. This enabled Donlin Creek LLC to better understand and address the perspectives and concerns of the project stakeholders and has resulted in broad public support for the project in the region. This support has taken the form of resolutions from tribal councils and organizations, participation by individuals, tribal groups and Alaska Native corporations in various project-related forums, and permissions granted to conduct environmental baseline studies on tribal lands. Donlin Creek LLC will continue to focus on community and stakeholder relations as it moves through the permitting process and works with regulators to complete an Environmental Impact Statement for the project. Work at the Donlin Creek project will now focus on obtaining required permits. The Donlin Creek mine is a large-scale project and will require a considerable number of permits and authorizations from both federal and state agencies, to enable a construction decision. Donlin Creek Mineral Reserve and Mineral Resource Estimates The Report estimates Proven and Probable Mineral Reserves for the Donlin Creek project as of April 1, 2009, as summarized below. Donlin Creek Mineral Reserve Estimate(1)(2)
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Tonnes Gold Contained Gold
Class (Millions) (g/t) (M ozs)
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Proven 8.4 2.59 0.70
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Probable 375.4 2.37 28.57
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Total 383.8 2.37 29.27
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(1) Mineral reserves are reported to a gold price of $725/oz.
(2) Mineral reserves are reported on a 100% basis. NovaGold and Barrick
Gold U.S. Inc. each own 50% of the Donlin Creek project subject to a 5
to 15% back-in right by Calista Corporation.
The combined Proven and Probable Mineral Reserve plus Measured and Indicated Mineral Resource at Donlin Creek of 35.28 million ounces shows a 3.6 million ounce increase over the previously disclosed Measured and Indicated Resource of 31.67 million ounces announced on June 10, 2008. Donlin Creek Measured, Indicated and Inferred Mineral Resource
Estimate(1)(2)(3)
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Tonnes Gold Contained Gold
Resource Category (Millions) (g/t) (M ozs)
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Measured 1.2 2.19 0.08
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Indicated 93.4 1.97 5.92
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Measured + Indicated 94.6 1.98 6.01
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Inferred 54.5 2.29 4.02
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(1) Measured and indicated resources are exclusive of proven and probable
reserves and are reported on a 100% basis. NovaGold and Barrick Gold
U.S. Inc. each own 50% of the Donlin Creek project subject to a 5 to
15% back-in right by Calista Corporation.
(2) Mineral resources that are not mineral reserves do not have demonstrated
economic viability. See "Cautionary Note Regarding Reserve and Resource
Estimates".
(3) Mineral resources are reported to a gold price of $850/oz.
The project remains open to expansion along the Donlin trend and the potential for underground mineable targets has yet to be evaluated. NovaGold believes that the discovery potential along the remaining 6-km geologic trend is high. An integrated exploration program, including mapping, geochemical characterization, geophysics and drilling would be required to test known targets and pit area extensions and potential underground targets, and to identify new targets within the Donlin trend. Feasibility Project Management and Contributions The independent technical report and resource/reserve estimates, have been prepared in accordance with the Standards of Disclosure for Mineral Projects as defined by National Instrument 43-101 of the Canadian Securities Administrators. Proven and probable mineral reserves have been estimated as of April 1, 2009, using a gold price of $725/oz within an engineered pit using an NSR cut-off. Kirk Hanson, P.E., Principal Mining Engineer, (AMEC, Reno), Gordon Seibel, M.AusIMM, Principal Geologist, (AMEC, Reno) Gregory Wortman, P.Eng. Technical Director, Process (AMEC, Santiago), Alexandra Kozak P.Eng., Manager, Process Engineering (AMEC, Vancouver) and Simon Allard, P.Eng., Financial Analyst (AMEC, Vancouver) are the Qualified Persons responsible for preparation of the independent technical report, and have verified that the data from their technical report is fairly and accurately disclosed in this news release. Readers are cautioned that the conclusions, projections and estimates set out in this press release are subject to important qualifications, assumptions and exclusions, all of which are detailed in the Report. To fully understand the summary information set out above, the Report that will be filed on SEDAR and on the U.S. Securities and Exchange Commission EDGAR databases should be read in its entirety. About NovaGold NovaGold is a precious metals company engaged in the exploration and development of mineral properties in North America. The Company has a portfolio of mineral properties located in Alaska, USA, and British Columbia, Canada. The Company's largest projects are being advanced in partnership with major mining companies. The Donlin Creek project is held by a limited liability company owned equally by NovaGold and Barrick Gold U.S. Inc. The Galore Creek project is held by the Galore Creek Mining Company, a partnership owned equally by NovaGold and Teck Cominco Limited (Teck). NovaGold owns a 100% interest in the Rock Creek, Big Hurrah and Nome Gold deposits in Nome, Alaska. NovaGold has one of the largest resource bases compared to any junior or mid-tier level producing gold company, and trades on the TSX and NYSE-AMEX under the symbol NG. More information is available online at www.novagold.net or by e-mail at info@novagold.net. |
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