Rock Creek: gold at Nome: NovaGold hopes to start construction on this hardrock gold development in two years.

• Author: Jones, Patricia
• Position: Norwest Corp. - Novagold Resources Inc.

NovaGold Resources Inc. made headlines within the minerals industry a year ago, with the company's announcement of a new resource at the remote Donlin Creek gold deposit in Southwest Alaska. The recently formed junior exploration company increased the geological estimate of that gold deposit by more than 100 percent, from 13 million ounces to nearly 28 million ounces, in just two summer drilling seasons.

Now that the company's partner in Donlin Creek--Placer Dome--has taken over operatorship and that giant-sized project's next spending phase, NovaGold can focus on its new goal of becoming a major gold producer in Alaska.

The company's 1 million ounce Rock Creek gold property, located just 7 miles from Nome, provides NovaGold and the state of Alaska with the most immediate promise for putting a new hardrock gold deposit into production in less than three years.

"We could be starting to build in late 2005, with the first production in 2006 ... that is an optimistic but a doable schedule," said Greg Johnson, vice president of corporate development. "This could be the first step to becoming a gold producer."

According to an independently produced economic study released this summer for the Rock Creek project, the deposit can be mined profitably at gold prices of $325 per ounce of gold.

Norwest Corp., an independent engineering services company, completed an economic assessment study or scoping study for Rock Creek, estimating an after-tax rate of return ranging from 16 percent to 21 percent.

The study's base case scenario calculates mining costs and capital expenditures for an open-pit mine and mill complex capable of producing 100,000 ounces of gold per year. With an average grade of a little more than two grams per ton of rock for nearly 700,000 ounces of gold, total cash costs are estimated at $197.18 per ounce. Total production costs, which include about $40 million in capital expenditures to build the facility, bump up to $257.56 per ounce, still profitable at current gold prices.

Norwest also calculated estimated costs and potential rates of return, based on higher market prices and the addition of other gold resources believed to be geologically reasonable that could be defined with additional exploration work, according to NovaGold's press release on the study.

At $350 per ounce gold prices, Rock Creek could operate at a 22 percent to 27 percent rate of return.

"There remain opportunities to further enhance the economics of the project...