NovaGold eyes $10 million, cuts more gold

Banking on its continuing exploration success in Alaska, NovaGold Resources (NRI-T) will attempt to raise over $10 million by privately placing 2 million units at $5.10 apiece.

Some of the proceeds are earmarked for the Donlin Creek project, where an US$8-million pre-feasibility study is well under way.

A unit consists of one share plus half a share purchase warrant. One full warrant entitles the holder to buy another share within 18 months of the deal’s closing, at $6.50.

The financing, which is subject to regulatory approval, is being brokered by Salman Partners. In return, the firm gets a 5.25% commission on the gross proceeds and an option to buy up to 147,059 shares under the same terms as everyone else.

NovaGold also has agreed to an over-subscription allotment of up to 50%. The bonus could add nearly $5 million more to its coffers.

The current round of drilling at Donlin Creek began last April and should wrap up in early October. To date, NovaGold has sunk over 27,000 metres in 215 holes. Another 24 core holes and 46 rotary holes, for 9,000 metres in all, need to be drilled before the program ends.

At that time, NovaGold will have earned a 70% stake in the property, giving Placer Dome (PDG-T) 90 days to decide its future role. The major has three choices: retain a 30% interest and participate as a minority partner; covert to a 5% net profits interest; or exercise a back-in right for a 70% stake by spending three times as much as NovaGold, completing a feasibility study and starting to mine at a rate not less than 600,000 oz. per year over five years.

Highlights from recent drilling include: 9.23 grams over 14 metres in hole DC02-740; 7.89 grams over 20 metres in hole 741; and 6.6 grams over 19 metres, 7.3 grams over 13 metres and 4.62 grams over 32.7 metres in hole 855. All came from the newly discovered Aurora or 400 zones, which sit outside the known resource.

Situated 1 km west of the main Acma zone, Aurora was discovered earlier in the summer, when a stepout hole returned 68 metres of 3.57 grams, including 5.21 grams over 31.5 metres. It extends the known strike length of mineralization at Donlin Creek to over 3 km.

The 400 zone, which also is relatively new, sits between Aurora and Acma. Recent infill drilling suggests the three are connected.

Follow-up drilling between the Acma and Akivik zones continues to cut high-grade mineralization. The first of several holes collared on two fences cut 4.9 metres grading 17.1 grams and 7 metres grading 3.7 grams — similar to those obtained in two earlier holes (T.N.M., July 22/02).

Collared over 500 metres to the west of Akivik, rotary hole 796 yielded 3.4 grams over 32 metres, hole 85 returned 4.3 grams over 9.1 metres and hole 806 averaged 3.97 grams over 13.7 metres. Over 300 metres north of Akivik, hole 816 cut 16.8 metres grading 4.25 grams as hole 752 cut 18.3 metres running 6.4 grams. Results are pending for several other holes.

Stepout drilling towards the Acma deposit suggests mineralization is continuous and near the surface. Thus, Akivik also is expected to augment the known resource.

Meanwhile, infill drilling in the proposed pit may result in a lower stripping ratio. Five rotary holes were drilled on 100-by-100-metre centres directly east of the Acma deposit, in an area that had previously been labelled as waste.

Rotary hole 823 returned 13.7 metres grading 10.4 grams, starting 15 metres down. Results are pending for the other four holes.

At last count, measured resources at Donlin Creek stood at 5 million tonnes grading 3.84 grams gold per tonne and indicated resources at 68.9 million tonnes grading 3.49 grams gold. Another 92.4 million tonnes of inferred material runs 3.66 grams gold.

Each estimate is based on a cutoff grade of 2 grams gold per tonne.

When the cutoff is pumped to 3.5 grams gold, the measured and indicated resource deflates to 26.9 million tonnes grading 5.06 grams gold. The inferred portion weighs in at 36.8 million tonnes and grades 5.22 grams gold.

Most of Donlin Creek’s resources are hosted by dykes and sills, plus high-grade stockworks in surrounding sedimentary rocks. Gold mineralization is structurally controlled and occurs as disseminations and veinlets in association with fine-grained arsenopyrite. NovaGold has determined that low-angle, north-dipping thrust faults help control the distribution of mineralization in the region and also add to its complexity. Once drilling stops, resources will be updated.

The Donlin Creek property sits 480 km west of Anchorage, and about 19 km north of a commercial barge site on the Kuskokwim River. The property has an all-season, 100-man-capacity exploration camp, as well as a 1,500-metre runway that can handle aircraft as large as the C-130 Hercules freighter.