EXPLORATION ’93 — NovaGold brings high-tech approach to

In a demonstration of just what a mining junior can do if it tries hard, NovaGold (TSE) survived for three years on revenue from a small gold-producing property in northern New Brunswick.

But that’s not the only unusual thing about NovaGold; it weathered five difficult years by investing in high technology that has paid dividends. NovaGold is headed by Gerry McConnell, a sometimes mining visionary and the “father” of indoor vat leach cyanidation. McConnell is a former labor lawyer, who often took the union side representing District 25 mineworkers in Cape Breton. His first mine promotion was in 1982 with a consortium attempting to open the rich Acadia coal seam near New Glasgow, now operated by Pioneer Mining.

McConnell’s sunny corner office has sparkling samples of visible gold jostling for space with pictures of his family and Restigouche salmon lodge. Color computer printouts adorn the walls, illustrating the complex geology of areas

of New Brunswick where NovaGold is drilling for base metals. McConnell is a casually dressed man in his mid-40s who stays relaxed by jogging 12 miles a week. He politely responds to harsh questions with candor and well reasoned responses.

He has seen both the upside and downside of the industry. In its heyday during the latter half of the 1980s, when the economy was booming, NovaGold stock was selling for $6; it was recently trading in the 30 cents range. From 1989 to 1991, the Murray Brook mill in northern New Brunswick recovered 45,000 oz. gold and 325,000 oz. silver by vat leaching. The relatively high gold production cost of US$290 per oz. was attributed partly to a custom milling contract with another company.

But something wasn’t quite right. The company began to accumulate debt when shares and property options were traded for necessary cash. Dilution further weakened the stock; the company currently has 32 million shares outstanding. Fortunately, there’s an upside to this story. Whereas many mining companies rely on approaches little modified in 50 years, NovaGold is already in the 21st century, with a technological edge should gold prices rise or environmental regulations tighten on giant smelters.

NovaGold’s indoor vat leaching mill extracted gold from mill grade of only 0.05 oz. per ton, one-quarter the minimum for some conventional mills. Ferric chloride leaching is an indoor process that totally bypasses smelting for base metals recovery. Another process, bio-heap leach, removes copper with biological agents. NovaGold has worked closely with CANMET, a government research agency, in developing these processes.

Copper production is scheduled to begin at Murray Brook in June from an open-pit adjacent to the mined-out gold operation. NovaGold is managing the project with joint venture partners Arimetco International (TSE) and Breakwater

Resources (TSE). Already, 100,000 tons of ore are on the newly constructed leach pad, while another 500,000 tons will be trucked to the nearby Caribou mill.

NovaGold’s 1990 lead-zinc discovery at Sewell Brook marked the first major base metal find for 12 years in New Brunswick, when aerial remote sensing revealed a rich deposit the majors missed. Soil testing was used at another property at nearby Sears Lake, which was recently drilled, with results expected next month.

The Pine Cove gold property in Newfoundland received easy environmental approval and NovaGold is negotiating financing to allow production by late this year. Proven minable reserves are estimated by Peak Engineering to be 2.8 million tons averaging 0.081 oz. (mill grade). NovaGold estimates costs of US$210 per oz. based on the higher ore grade and Murray Brook results. As well as an experienced mine operator, NovaGold has an ability to pinpoint valuable new mineral deposits. McConnell credits careful compilation of data and solid technical staff, commending exploration geologist Don Burton and others. After Pine Cove is in production, NovaGold may form an R&D subsidiary to patent and license some of the processing technology.

This mix of expertise and properties suggests significant intrinsic value for a company trading in the penny-stock range. Among the converted is Ian MacAvity, mining analyst and author of the gold investment newsletter Deliberations, who sits on NovaGold’s board.

NovaGold’s exploration success suggests a promising future for Canadian mining as new mineral deposits are discovered by companies adopting modern techniques.

— Ian Booth is a Nova Scotia journalist who is writing a book about Seabright Resources.