Newmont Mining (NYSE: NEM) has acquired NovaGold Resources’ (TSX: NG; NYSE-AM: NG) 50% stake in the Galore Creek copper-gold project in B.C. for staged payments of up to US$275 million.
Teck Resources (TSX: TECK.B; NYSE: TECK) owns the other 50% stake in the project, which is one of the largest undeveloped copper-gold-silver deposits in the world.
Galore Creek, 150 km northwest of Stewart, B.C., is on care and maintenance.
A 2011 prefeasibility study on the large-tonnage project forecasted production over 18 years of 6.2 billion lb. copper, 4 million oz. gold and 65.8 million oz. silver.
Teck and Newmont have each agreed to spend US$10 million to US$15 million annually to update the prefeasibility study over the next four years.
Teck has held 50% of the project since May 2007, and Newmont president and CEO Gary Goldberg said he looked forward to working with the diversified, Vancouver-based miner.
“Partnering with Teck allows us to bring both organizations’ considerable technical, financial and sustainability strengths to bear in evaluating and refining development plans for Galore Creek, and to build on the strong relationships Teck has established with the Tahltan First Nation and British Columbia,” Goldberg said in a news release, noting that the project is in a favourable mining jurisdiction and has the “potential to support decades of profitable copper and gold production.”
Selling Galore Creek means NovaGold can concentrate on its flagship Donlin gold project in Alaska, a joint venture with Barrick Gold (TSX: ABX; NYSE: ABX).
Donlin Gold has 39 million oz. gold in the measured and indicated category at a grade of 2.24 grams gold per tonne and is described by NovaGold’s president and CEO Greg Lang as “one of the most valuable projects in our industry today.”
Under the agreement, US$100 million is payable upon closing the transaction and another US$75 million is payable within three years after completing a prefeasibility study. A further US$25 million is due within five years or after a feasibility study is completed. A final US$75 million is payable upon construction approval.
NovaGold’s chairman, Thomas Kaplan, describes the deal as a “win-win for all parties,” and says it is the “continuation of a laser-focused strategy of unlocking the value of its assets and transforming the company into a pure play on Donlin Gold, which we believe is the most important gold-development story in the industry.”
NovaGold, he added, could close the year with more than US$150 million in cash, and another US$100 million of guaranteed payments to follow over five years.
“The owners of our shares should be delighted by the fact that, to implement its business strategy, our company does not expect to raise more money until a construction decision is made on Donlin Gold … this latest news should be seen for what it is: a very rare case of a mining company continuing every day, month and year to honour its promises to do the right thing for its shareholders.”