NovaGold Resources raises $25 million

Vancouver — NovaGold Resources (NRI-T) has inked a financing deal to raise $25 million by issuing common shares and share purchase warrants.

The company has entered into an agreement with underwriters consisting of Salman Partners, Canaccord Capital, BMO Nesbit Burns and First Associates, to sell five million units at $5 each. The units consist of one common share of the company and one-half of a common share purchase warrant. Each whole warrant will entitle the holder to acquire a NovaGold share for $7 for five years after the deal closes. The underwriters have the option to purchase up to an additional 2 million units at the issue price up to 48 hours prior to closing the offering which is scheduled for October 1st.

The money will be used to develop its the Rock Creek and Nome gold properties as well as for general corporate purposes.

Norwest, an independent engineering services company, performed an economic assessment which indicated Rock Creek is capable of producing 100,000 oz. gold per year at the daily rate of 5,000 tonnes. Total cash costs are pegged at US$197.18 per oz. gold; total production costs, at US$257.56 per oz. The mine would operate for six years and recover 673,900 oz. gold. The stripping ratio is estimated at 4.4-to-1, and initial capital costs would be about US$39.2 million.

These estimates are based on a cutoff grade of 1 gram gold per tonne, a gold price of US$325 per oz., and an in-pit resource of 10.7 million tonnes averaging 2.03 grams gold per tonne. Total measured and indicated resources stand at 6.4 million tonnes averaging 2.69 grams gold (555,000 contained ounces) plus an inferred resource of 2.9 million tonnes averaging 3.25 grams gold per tonne (303,000 contained ounces).

About 30% of the resources used in the study were classified as inferred, and further exploration is expected to upgrade them to the measured-and-indicated category. As a result, the company is in the midst of an 8,000-metre program of infill drilling to define the resources in preparation for a feasibility study next year.