NovaGold Thwarted in Attempt to Block Barrick Bid

Vancouver — NovaGold Resources (NG-T, NG-X) was dealt a blow recently, when the U.S. District Court of Alaska declined to grant a preliminary injunction that would temporarily suspend Barrick Gold’s (ABX-T, ABX-N) hostile takeover bid for the company.

NovaGold also sought to fast-track a judgment clarifying the conditions Barrick must satify, under the joint-venture agreement, to acquire an additional 40% interest in the Donlin Creek gold project in western Alaska. Although the court has recognized a “genuine dispute” between the two parties over the project, it refused to issue the order to expedite proceedings.

In late August, NovaGold filed its lawsuit alleging Barrick violated U.S. securities laws by misstating its ownership of Donlin Creek. Barrick has repeatedly stated it will earn a 70% interest in the project by meeting contractual back-in requirements (spending US$32 million, completing a bankable feasibility study and a decision to begin mine construction) by Nov. 12, 2007, thereby reducing NovaGold’s interest to 30%. The lawsuit also requested a temporary restraining order to block Barrick’s bid.

Barrick indicated it planned to file an application for a B.C. Securities Commission hearing to remove NovaGold’s shareholders’ rights plan, citing that the company has had two months to table an alternate proposal since enacting its poison pill. Subsequently, NovaGold waived its shareholders’ rights plan, confident the US$14.50 per share offer — extended by Barrick to Sept. 29 — would be rejected by a majority of its shareholders.

NovaGold currently holds a 70% interest in Donlin Creek with Barrick holding 30% through its subsidiary Placer Dome U.S. The deposit hosts a measured and indicated resource of 215 million tonnes grading 2.4 grams gold per tonne for a contained inventory of about 16.6 million oz. gold (using US$500-per-oz. gold, US$8.30-per-oz. silver and a 0.76-gram gold cutoff grade). A further 227 million tonnes of inferred resource averaging 2.34 grams gold was also tabled, containing 17.1 million oz. gold.

A recent independent preliminary economic assessment for Donlin Creek estimates gold production of 1.38 million oz. annually over 22 years with cash costs of US$276 per oz. based on a 60,000-tonne-per-day processing rate. Output in its first seven years of operation is expected to be about 1.9 million oz. annually at cash costs of US$223 per oz.

Shares of NovaGold continue to trade at a slight premium above the hostile bid price with market anticipation of a possible sweetened offer by the major.