NovaGold wins Rock Creek lawsuit

NovaGold Resources(NG-T, NG-X) is in the clear to bring the Rock Creek gold project near Nome, Alaska, into production after a favourable ruling by a United States appeals court, sending shares up 14%.

The U.S. Ninth Circuit Court of Appeals found that the agency that granted permits for Rock Creek did not violate any environmental acts in doing so, as a local lobby group had contested. The appeals court upheld a June 2007 decision by the U.S. District Court for Alaska.

The news sent NovaGold shares up $1.47 to $11.80 apiece on a trading volume of nearly 1.8 million shares.

The company plans to produce 100,000 oz. gold a year for four to five years at Rock Creek with initial production slated for the end of the first quarter.

The project includes two openpit gold mines at separate locations. Fill from the mines will be dumped in wetlands covering about 1.4 sq. km.

The legal action against the project — asking the court for a temporary restraining order and a preliminary injunction — was filed by the Bering Strait Citizens for Responsible Resource Development.

The group argued that the Appellee Army Corps of Engineers violated the Clean Water Act and the National Environmental Policy Act by granting the Rock Creek permits.

It’s the Army Corp’s job to issue permits for the discharge of dredged or fill material into navigable waters in the U.S.

NovaGold investor relations manager, Rhylin Bailie, says the original lawsuit delayed the project by about three months.

NovaGold’s permits for Rock Creek were revoked at the end of 2006 while the case was first being reviewed.

“It meant that we couldn’t work in areas that were previously undisturbed,” Bailie says.

The company got the permits reinstated last March, and since then there’s been no real impact.

“It’s more just been the uncertainty,” Bailie says. “I think it may have affected staffing to a certain extent that people were reluctant to come and join because they didn’t know what was going to happen with the project.”

Bailie says now that there’s no threat to the mine permits, the company can move forward.

Not everyone feels the issue has been resolved.

Vicki Clark, a lawyer with Trustees for Alaska, which represented the Bering Strait Citizens lobby group, says the ruling was dis-appointing.

“The federal law failed the public process,” Clark says.

Clark says there was not enough time or effort put into informing the local citizens about the open-pit project.

“It was highly technical,” she says of the report. “There are two open pits — people haven’t seen that in Nome before — it’s a placer mining town.”

Sue Steinacher of the Bering Strait group says the group isn’t anti-mining, but the members fear the impact of cyanide on the local environment, especially the watershed.

She says the area where Rock Creek is being built was a pristine area, but that it was portrayed as having been already destroyed by historical mining.

“We have areas in Nome that are devastated from mining,” Steinacher says. “This wasn’t a heavily mined site.”

She says the Bering Strait group will monitor Rock Creek with hopes that its impact is minimal.

Rock Creek gives NovaGold investors a glimmer of hope. The company’s stock lost half its value in November when it announced the suspension of development at its Galore Creek copper-gold project in northwestern B.C. due to skyrocketing costs. The company had spent more than $400 million, while partnerTeck Cominco(TCK.B-T, TCK-N) invested about $263 million.

Meanwhile, development costs for the Donlin Creek gold project in Alaska could reach more than US$4 billion — about twice as much as NovaGold originally estimated. The company, along with 50% partnerBarrick Gold,plans to build an open-pit mine that will produce at least 1 million oz. gold per year.