Pioneer denies NovaGold access to Grace

Vancouver – While awaiting a trial date set for the fall of 2007, Pioneer Metals (PSM-T) has denied NovaGold Resources (NG-T, NG-X) permission to access the Grace property in northwestern B.C.

Pioneer’s Grace claims adjoin NovaGold’s Galore Creek gold-silver-copper project, a bulk-tonnage deposit poised for mine development in 2007. The legal dispute relates to 2004 option agreement allowing NovaGold to earn a 60% interest in the Grace claims by spending $5 million on exploration and by subscribing for 3.9 million units of Pioneer valued at about $1 million.

The partnership soured last fall after Pioneer alleged that instead of conducting “legitimate exploration activities” aimed at finding mineral deposits, NovaGold was carrying out environmental baseline studies and condemnation drilling on the Grace claims to test their suitability as a tailings and waste disposal site. The company filed an action to rescind the option agreement and to seek damages for alleged “misrepresentation” and “breach of fiduciary duty.”

NovaGold countered by stating that it had explored the property for two years, “with considerable input from Pioneer,” but no resource was found even after spending “significantly more” than what was required under the terms of the option agreement. The company described the suit as “without merit and baseless,” and added that it would “vigorously defend” its rights to continue to explore and develop the property. NovaGold also noted that the Pioneer option agreement relates to sub-surface rights only, as surface rights rest with the province.

NovaGold recently tendered a cheque in the amount of $686,274 to exercise outstanding share purchase warrants obtained as part of the option agreement. Pioneer returned the cheque and also demanded that NovaGold return shares issued in 2004 under the option agreement.

The initial document discovery phase of the litigation is under way, with a trial date set for Sept. 24, 2007.