Junior explorer graduates to producer status: NovaGold starts gold production at Rock Creek, initiates pre-permitting activities at Donlin Creek.

• Author: Liles, Patricia
• Position: MINING

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With 165 people now on its payroll at the Rock Creek gold mine near Nome, NovaGold Resources finally earned its producer status, announcing Sept. 19 the receipt of the final regulatory go-ahead to start gold processing in the recently constructed hard rock gold mill.

"We started the mill after we got the State authorization Thursday afternoon, which was after the market closed. We ran overnight and have been running ever since," said Rick Van Nieuwenhuyse, president and CEO of NovaGold, an exploration firm based in Vancouver, B.C., with significant projects in Alaska and northwestern British Columbia.

"Basically we'll be about two weeks in this startup commissioning phase before we actually start pouring gold," he said. "We previously commissioned the furnace so we've already done a gold pour."

Expected to begin producing much earlier this year, Rock Creek's startup was delayed due to an unexpected lengthy construction period for the mine's tailing disposal facility and storm-water drainage system.

But now, the junior exploration firm will be transformed into producer status 11 years after Van Nieuwenhuyse put NovaGold together with two other geologists and co-workers from a global mining giant.

COMPANY WENT FOR THE GOLD

From the start, Van Nieuwenhuyse focused NovaGold's attention on Alaska, acquiring key assets that included 14,000 acres of patented mining land with a hard-rock exploration target called Rock Creek, located 7 miles north of Nome. The company drilled the near-surface gold prospect, working to produce a resource that could be mined in a low-cost manner.

Meanwhile, Van Nieuwenhuyse and his team of former Placer Dome geologists set their sights on another Alaska gold property they had worked on in the 1990s located on Native-owned land in the remote region of Southwest Alaska called Donlin Creek.

In a sweetheart deal negotiated close to the bottom of the gold market in 2001, NovaGold optioned Donlin Creek from Placer Dome, with terms that would allow the junior to acquire a 70 percent interest in the property by spending $10 million over 10 years.

NovaGold completed its contractual requirements in less than two years, and more importantly, the exploration work doubled the size of the gold resource at Donlin to more than 26 million ounces.

NovaGold and Placer Dome went back to the negotiating table in November 2003, signing a five-year agreement, in which Placer Dome would regain a 70 percent share in the property by bringing the property to a mine construction decision. But a new player, global mining giant Barrick Gold Corp., entered into the Donlin Creek project through its merger with Placer Dome.

After a rocky start to the new business relationship that involved contractual disputes...