Development work continues at Donlin: NovaGold and Barrick resolve conflicts and form partnership to advance gold deposit in Southwestern Alaska.

• Author: Liles, Patricia

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Drill rigs began turning in February at the remote Donlin Creek gold project, located in the upper Kuskokwim River valley in Southwestern Alaska, kicking off 2008's phased program with up to $30 million budgeted for the first six months of work and a spending plan that could total $75 million for 2008.

Although activity and spending at Donlin Creek will be comparable to 2007, what is new is the management structure now overseeing the long-explored gold deposit.

In a negotiated settlement to resolve contractual disputes and related lawsuits, NovaGold Resources Inc. and Barrick Gold Corp. announced in November that they were forming Donlin Creek LLC, a new business entity to own and operate the gold deposit and its exploration and development activity. NovaGold and Barrick each own 50 percent of the new limited liability company, a partnership in a sense if not in actual business terms.

Additionally, the two mining companies will continue to work with the Calista Corp. and The Kuskokwim Corp., the regional and local Alaska Native corporations that hold surface and subsurface land rights in the area.

"It makes sense as a settlement ... both companies compromised. We see it as a win/win, especially for our shareholders as we see the project moving forward," said Rick Van Nieuwenhuyse, president and CEO of NovaGold Resources, in a recent telephone interview.

A Vancouver, B.C.-based exploration company, NovaGold, is on the cusp of becoming a gold producer in Alaska. The company built the open-pit hard-rock gold mine near Nome called Rock Creek, expected to start commercial production this year.

DONLIN'S HISTORY

While Rock Creek will transform NovaGold into producer status, Donlin Creek put the company on the mining industry's radar earlier this decade. In 2001 near the low of the gold market, NovaGold negotiated an exploration agreement for the gold property with then claimholder Placer Dome.

In less than two years, NovaGold earned a 70 percent interest in Donlin, spending $10 million to do so. More significantly, NovaGold's exploration work doubled the estimated amount of gold contained in the underground resource.

Placer Dome and NovaGold then negotiated a new five-year agreement in which Placer, a major mining company, could regain a 70 percent interest in Donlin by making certain expenditures on the property and taking it to a construction decision.

The major player changed in 2006, as Barrick Gold acquired Placer Dome...