NovaGold and Barrick agree to work together at Donlin Creek

Vancouver – After long legal disputes and numerous nasty words, NovaGold Resources (NG-T, NG-X) and Barrick Gold (ABX-T, ABX-N) have decided to bury the hatchet and work together to advance the large scale, low grade Donlin Creek gold project in Alaska.

The agreement calls for a new limited liability company, jointly owned by NovaGold and Barrick on a 50/50 basis, to develop the mega gold project. The companies have agreed to drop all lawsuits against each other. And the Grace claims, which lie adjacent to Galore Creek and are currently held by Barrick, will be sold to Galore Creek Mining.

We are very excited to se the project move forward, says NovaGold president and CEO Rick Van Nieuwenhuyse. It was obviously in the best interests of both companies to find a win-win situation, so we negotiated an agreement that allows both companies to play an active role in developing one of the worlds largest undeveloped gold deposits.

The Donlin Creek deposit, which sits in the Kuskokwin gold belt in southwestern Alaska, hosts 16.6 million oz. gold in the measured and indicated categories, as well as 17.1 million oz. gold as inferred resources. A preliminary study by SRK consultants predicted Donlin could produce 1.4 million oz. gold annually for 22 years, at a cash cost of US$276 per oz., if measured, indicated, and inferred resource are mined and the deposit is mined at a rate of 60,000 tonnes per day.

The Donlin Creek agreement marks the end to a year-long battle between the companies that saw NovaGold fight off a nine-month long hostile takeover bid from Barrick, and then launch a lawsuit against the company for claiming to be on track to earn-in a 70% interest in Donlin Creek when NovaGold perceived Barrick as far behind schedule.

NovaGold inked an earn-in deal with Placer Dome, whose obligations Barrick acquired when it took over Placer in 2006, that included a timeline requiring Placer to make good on work commitments including an environmental impact statement, a final feasibility study, and a production decision, all before Nov. 12, 2007. In August 2006, in the middle of an ultimately unsuccessful takeover bid from Barrick, NovaGold launched a lawsuit alleging breach of contract and breach of fiduciary duty as well as false disclosure by Barrick.

Barrick viewed the bid as another move by NovaGolds board to delay the takeover attempt. From NovaGolds perspective, Barricks takeover bid was motivated by the fact that the company was not going to be able to complete its contractual obligations by the Nov. 12th deadline but still wanted control over Donlin Creek.

To further complicate things, Barrick bought out Pioneer Metals, the junior that holds the Grace claims adjacent to Galore Creek. Galore Creek Mining, a company held jointly by Teck Cominco (TCK.A, TCK.B-T, TCK-N) and NovaGold, is developing the mega copper-gold project. The Grace claims cover land viewed as the best site for the proposed tailings and waste storage facility for Galore Creek.

The dispute boiled over at last years Denver Gold Forum, where Nieuwenhuyse used his speaking time to sell the merits of Donlin Creek and to slam Barricks ability to make good on its project commitments, while also pointing out that Barricks takeover offer undervalued the project and that a Barrick takeover would almost certainly mean decreased share appreciation for NovaGold shareholders.

Barricks president and CEO Greg Wilkins spoke the next day and used his time to take shots at Van Nieuwenhuyse and to downplay the merits of Donlin Creek. He also made it clear that, despite NovaGolds claims to the contrary, Barrick was on track to deliver the Donlin Creek feasibility study on time.

When Barrick finally lost its drawn-out takeover attempt early this year, the gold major sold all of its shares in NovaGold. Mid-April saw Barrick sell off 13.5 million shares of NovaGold, which constituted some 15% of the junior.

Then in July NovaGold lost its lawsuit. The court ruled that it could not predict the future: Barrick could either perform on the deadlines, fail to perform, or choose not to perform, but until the deadline arrived Barrick could not be found guilty of failing to act.

The stalemate lasted almost until that deadline. Less than a week before Nov. 12, the companies announced their agreement to advance the project as an equally-held joint venture. NovaGold has agreed to reimburse Barrick over time for roughly US$63.5 million, representing 50% of Barricks expenditures at Donlin Creek since April 2006. To make the payment, NovaGold will fund the next US$12.7 million of Barrick’s share of the projects costs, and the remaining amount owing will be paid out of future mine production cash flow. After NovaGolds initial contribution, all project costs will be shared by both parties on an even basis.

A four-person board of directors will have two members nominated from each company, and Barrick has approved NovaGolds nomination of Doug Nicholson as the general manager of the project until the end of 2009.

Nieuwenhuyse says NovaGold and Barrick will work together to finalize the feasibility study in the next few months. Our goal is to begin the permitting and environmental process in mid-2008, he says. The companies also plan to release the remaining drill results from this summers campaign before year end, and to complete an updated resource estimate early next year.

The Donlin Creek property sits on land under lease from Calista and Kuskokwim, two Alaska Native corporations. The agreement states that the new Donlin Creek company is committed to continuing to work closely with the Native corporations to develop the project.

The current mine scenario initially focuses on near-surface ore zones that would be amenable to open-pit mining and flotation. In terms of logistics, the project is remote. There is a commercial barge port 19 km south on the Kuskokwim River, near the community of Crooked Creek. SRKs preliminary economic assessment examined the cost and time to permit and construct a powerline for the project that would connect to the Anchorage-Fairbanks power grid.