NovaGold lines up US$95 million to recharge treasury

Vancouver – After recently pulling the plug on a planned $130-million private placement due to “pricing conditions”, NovaGold Resources (NG-T, NG-X) has now lined up a US$95 million convertible note offering to recharge its treasury.

NovaGold has enlisted J.P. Morgan Securities as underwriter for the offering of US$95 million aggregate principal amount of convertible senior notes due May 1, 2015, including an option for the broker to purchase an additional US$14 million for any over-allotments. Notes have a semi-annual cash interest coupon of 5.5% and are convertible into NovaGold common shares on the ratio of 94.2418 common shares per US$1,000 principal amount about US$10.61 per share.

In early March the company announced a planned share offering to raise roughly $130 million but quickly nixed the idea the following day citing what likely must have been a share price it found unacceptable.

NovaGold says it was planning to earmark proceeds from the offering to repay funds it has drawn down under a $30-million credit facility entered into earlier this year; plus ongoing exploration and development on its mineral projects.

The company is in the process of advancing its Rock Creek gold mine (part of its Nome operations) in west-central Alaska into operation this year. The planned 7,000 tonne-per-day open-pit mine is expected to produce about 111,000 oz. gold annually with estimated total cash costs of US$467 per oz.

Rock Creek is expected to generate about $25-$30 million annually in free cash flow for the company over its 4-year mine-life.

NovaGold is also working with 50-50 project partner Barrick Gold (ABX-T, ABX-N) on moving its Donlin Creek gold project in western Alaska to feasibility stage. The joint venture partners recently updated the deposit’s resource tally to 371.7 million measured and indicated tonnes grading 2.46 grams gold per tonne for about 29.4 million contained oz. gold.

Along with partner Teck Cominco (TCK.B-T, TCK-N), NovaGold is also evaluating alternative development strategies for its Galore Creek copper-gold project in northwestern B.C. Last Fall the duo shelved plans for development of the planned open pit operation citing major cost overruns.

Shares of NovaGold have recently slid from the $10-$11 range to trade at the $7.60 level. Given its 105-million shares outstanding the company posts an $800-million market capitalization. The stock has a 52-week trading range of $5.90-$20.44.