NovaGold, Teck Cominco to Partner on $2B Galore Creek Project Development


The Galore Creek property, located in northwest British Columbia, contains an estimated 540 million mt
of reserves and 1 billion mt of resources containing copper, gold and silver mineralization.
NovaGold Resources Inc. and Teck Cominco Limited announced the formation of a partnership that will invest $2 billion to build the Galore Creek copper-gold mine in northwestern British Columbia (See E&MJ, April 2007, p. 8, “Galore Creek Receives Environmental Certificate.”) On closing of the transaction, NovaGold and Teck Cominco will each hold a 50% interest in the partnership.

To earn its 50% interest in the Galore Creek partnership, Teck Cominco will fund approximately $478 million in construction costs, with each company responsible for its pro rata share of funding thereafter. In addition, NovaGold will receive up to $50 million of preferential distributions once Galore Creek is fully operational, if the project exceeds certain agreed-upon minimum revenues in the first year of commercial production.

Galore Creek is expected to produce 432 million lb of copper, 341,000 oz of gold and 4 million oz of silver annually for the first five years of production, transitioning NovaGold to a mid-tier producer and significantly increasing Teck Cominco’s annual copper and gold production. With more than 540 million metric tons (mt) of reserves and approximately 1 billion mt of resources, there remains considerable potential to increase annual production and extend the mine life beyond 20 years.

In a press release, the two companies noted that Teck Cominco’s investment of $478 million is equal to NovaGold’s expected $128 million in construction and pre-construction expenditures incurred up to the effective date of the agreement plus S$350 million of anticipated project expenditures. NovaGold will contribute all of the Galore Creek project assets to the partnership and NovaGold and Teck Cominco will establish a jointly controlled operating company—Galore Creek Mining Corporation (GCMC)—to handle all aspects of project construction and operation.

Additional terms of the agreement call for:
• Joint management, finance and technical committees to provide decisionmaking, oversight and control of the partnership.
• NovaGold to second its existing Galore Creek project and construction team to GCMC in their existing roles.
• Teck Cominco to second construction and operating staff and provide marketing expertise and other resources to GCMC to support the project.
• Teck Cominco to cooperate in arranging NovaGold’s $500 million of project debt financing during 2008.
• All commitments and obligations under the Tahltan Participation Agreement to be honored by the partnership. In February 2006, NovaGold entered into a comprehensive agreement with the Tahltan First Nation to support development of the Galore Creek project. The agreement supports the Tahltan Nation’s principles of environmental stewardship, economic sustainability and self-determination, and ensures collaboration throughout the Environmental Assessment review and the permitting process.

An aggressive program of exploration and technical studies during construction will be aimed at increasing the value of the Galore Creek project by optimizing the additional approximately 1 billion mt mineral resource in the Galore Creek Valley that is not currently included in the Galore Creek Feasibility Study completed by Hatch Ltd. in October 2006.

Galore Creek construction will continue in accordance with NovaGold’s previously announced timelines and budgets to achieve production by mid-2012.

NovaGold has completed significant pre-construction activities at Galore Creek, including mobilization of personnel and equipment, establishment of the staging and laydown areas and the necessary infrastructure to support the construction effort and initial construction camps that will support road and access construction activities. According to NovaGold, the project has received all required Provincial permits during the last month, which include the Special Use Permit and an offer for a Surface Lease for the area to be occupied by the tailings facility and other mine-related infrastructure. Federal permit approvals are pending but are anticipated to be received shortly to allow for the construction of several key bridges this season.


Mineralized zones at Galore Creek.
Galore Creek construction has been planned in two phases. Phase 1 construction will focus on providing road access to the Galore Creek Valley. Significant activities during Phase 1 include the construction of the mine access road and tunnel, bridges, concentrate and diesel pipelines and a power transmission line from Bob Quinn on Highway 37 to the Galore Creek Valley. Phase 1 construction is anticipated to take 24 months, with access to the Galore Creek Valley in the second half of 2009. Phase 2 construction will focus on mine facilities and earthworks, including construction of mine infrastructure, a tailings dam, open pit stripping and process plant facilities. Mine production start-up is anticipated to begin in mid-2012 after three months of commissioning.

The Galore Creek deposit will be developed as an open-pit mine with a 65,000-mt/d processing rate over a minimum 20-year mine life. The project is expected to create up to 1,000 jobs during the construction phase and approximately 500 full-time jobs during operation. The Feasibility Study estimated construction costs at $2 billion.

NovaGold initiated the British Columbia environmental assessment process in February 2004 and worked closely with regulators to complete the baseline studies and detailed project description required to define the terms of reference for the environmental assessment application. After a complete public and government review process, NovaGold received the Provincial Environmental Assessment Certificate for Galore Creek in February 2007.

NovaGold has an option agreement with Copper Canyon Resources Ltd. on the adjoining Copper Canyon property. Recently, Copper Canyon Resources and Romios Gold Resources executed a Letter of Intent to merge the companies in order to “maximize shareholder value in the Galore Creek Project in northwestern British Columbia.”

The merged entity would conduct business under the name of Romios Gold Resources with headquarters in Toronto, Ontario.