NovaGold rebuffs Barrick and extends bid for Pioneer

Vancouver – NovaGold Resources (NG-T, NG-X) has filed a lawsuit alleging that Barrick Gold (ABX-T, ABX-N) “misused confidential information” while making a competing bid for Pioneer Metals (PSM-T). At the same time, the company extended its bid for Pioneer, and also urged its shareholders to reject Barrick’s recent cash offer to buy 100% of its outstanding shares for US$14.50 per share.

NovaGold appointed a special committee of independent directors to review Barrick’s hostile bid valued at US$1.29 billion, or US$1.53 billion on a fully diluted basis. The company and its financial and legal advisors concluded the offer “undervalues NovaGold’s world-class gold and copper projects,” as well as its growth potential. The company’s core assets are the Galore Creek copper-gold deposit in northwestern British Columbia, and the Donlin Creek gold deposit in Alaska. Both advanced projects are the subject of feasibility studies.

Based on several valuation metrics, and excluding any value for its copper resources, NovaGold concluded that Barrick’s offer amounted to “only US$33 per oz.” for its gold resources, “which is significantly below the average of more than US$100 per oz. paid [by the company] in the four most recent comparable gold transactions.”

NovaGold also described Barrick’s bid as “far below” the average control premium paid in similar transactions globally and within Canada. The company says the offer fails to recognize its “proven track record of resource growth,” and was motivated by “concern” that Barrick would be unable to meet conditions that would allow it to boost its interest in Donlin Creek to 70% from 30% by Nov. 2007.

NovaGold is pursuing discussions with a number of third parties, “including some of the world’s largest mining companies,” and is also considering a range of strategic alternatives to generate greater value for its shareholders.

So far at least, Barrick is sticking to its offer, which includes a 24% premium over the pre-announcement closing price. The company appears to have the upper hand in the battle for Pioneer now that a shareholder/management group has agreed to tender 40% of the company’s outstanding shares under a lock-up agreement. Barrick offered $1 per share in cash (for a premium of 54%), which is almost double NovaGold’s cash offer to buy 100% of Pioneer’s shares for $0.57 per share.

A successful bid for both NovaGold and Pioneer will give Barrick 100% of the Galore Creek deposit situated about 75 km east of its Eskay Creek mine in northwestern B.C. The advanced project hosts measured and indicated resources of 6 million oz. gold, 75.4 million oz. silver, 6.8 billion lbs of copper, along with additional inferred resources.

NovaGold is earning 60% of Pioneer’s Grace claims adjacent to Galore Creek, albeit under protest from Pioneer, which filed a lawsuit last year alleging that instead of conducting “legitimate exploration activities,” NovaGold was conducting condemnation drilling to identify tailings and waste disposal sites for a proposed mine at Galore Creek.

In the recent lawsuit filed against Barrick, NovaGold claims that it shared “confidential information” about Galore Creek while both parties were discussing a possible joint venture for the project. The company is seeking a court order that any shares Barrick acquires “be held under a constructive trust for the benefit of NovaGold.”

NovaGold also states that it does not consider Barrick’s competing bid for Pioneer as an impediment to development of Galore Creek because the B.C. government, as owner of the surface rights, has the power to grant the company a surface lease for the Grace claims, “with or without Pioneer’s approval.”