NovaGold and Teck Cominco form partnership to build Galore Creek mine

NovaGold Resources and Teck Cominco have formed a partnership that will invest $2 billion to build the Galore Creek copper-gold mine in northwestern British Columbia. On closing of the transaction, NovaGold and Teck Cominco will each hold a 50% interest in the partnership. To earn its 50% interest, 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 192,000 t of copper, 341,000 oz of gold and 4 Moz of silver annually for the first five years of production. With over 540 Mt of reserves and approximately 1,000 Mt of resources, there remains considerable potential to increase annual production and extend the mine life beyond 20 years.

Rick Van Nieuwenhuyse, NovaGold’s President and CEO: “This partnership is another key milestone for NovaGold and great news for the people of British Columbia.  NovaGold chose Teck Cominco as its partner not just because of Teck’s size and expertise, but also because of its corporate culture and a shared commitment to responsible mining. Together, we are ensuring Galore Creek will be developed as a world-class mine that will bring outstanding benefits to the Tahltan Nation, local communities and the shareholders of both NovaGold and Teck Cominco for decades to come.” 

Don Lindsay, President and Chief Executive Officer of Teck Cominco: “Teck Cominco is pleased to be working with NovaGold, in consultation with the Tahltan Nation, to develop one of the world’s largest mining assets right here in British Columbia.  Our investment in the Galore Creek partnership is aligned with our growth strategy and will significantly expand our copper and gold resources and production to create long-term value for our shareholders.” 

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 $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 joint operating company, Galore Creek Mining Corp (GCMC), to direct all aspects of project construction and operation.

Joint management, finance and technical committees will provide decision-making, oversight and control of the partnership. NovaGold will second its existing Galore Creek project and construction team to GCMC in their existing roles. Teck Cominco will second construction and operating staff and provide marketing expertize and other resources to GCMC to support the project. Teck Cominco will co-operate in arranging NovaGold’s $500 million of project debt financing during 2008.

An aggressive programme of exploration and technical studies during construction will be aimed at increasing the value of the Galore Creek project by optimizing the additional approximately 1,000 Mt mineral resource in the Galore Creek Valley that is not currently included in the Galore Creek Feasibility Study completed by Hatch 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 in anticipation of receiving key provincial and federal permits and authorizations. These pre-construction activities include 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. The project has received all required Provincial permits during the last month, which now 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, particularly for bridge construction, are still pending but are anticipated to be received shortly to allow for the construction of several key bridges this season.

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.

Located in northwestern British Columbia, Galore Creek is one of the largest undeveloped copper-gold projects in the world. As envisioned, the Galore Creek deposit would be developed as an open-pit mine at a 65,000 t/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 has an option agreement with Copper Canyon Resources on the adjoining Copper Canyon property, under which the company is earning up to an 80% interest. NovaGold also has an option on the adjoining Grace properties with Pioneer Metals, under which the company is earning a 60% interest. This option agreement is currently the subject of litigation between NovaGold and Pioneer.