Kennecott, NovaGold form joint venture on Sewell Brook

Kennecott Canada, the recently revived exploration arm of Kennecott, is planning to make a substantial investment in the Plaster Rock area of New Brunswick.

As part of a recent agreement, Kennecott will buy 320,000 shares of NovaGold Resources (TSE) at $1.25 per share. Each share will include a warrant, exercisable within 24 months, to purchase an additional common share at $1.75.

By spending $3 million over the next four years, Kennecott can also earn a 50% interest in NovaGold’s Sewell Brook and Sears Lake base metal properties in northern New Brunswick. An additional $2 million would allow the major to increase its interest to 60%.

NovaGold gained 10 cents to close at 60 cents the day the agreement was announced.

Last fall, Halifax-based NovaGold and partner Costigan Gold (CDN) sparked off a staking rush in the Plaster Rock area when they discovered high-grade lead-zinc mineralization on the Sewell Brook claims. To protect the discovery, NovaGold staked 162 contiguous claims before competitors entered the area.

Since then, an additional 83 claims were staked, eight kilometres southeast of the discovery. NovaGold also optioned the 27-claim Sears Lake property about 25 km to the east.

Costigan has agreed to exchange its right to earn a 40% interest in Sewell Brook in exchange for a 5% carried interest in both Sears Lake and Sewell Brook.

The agreement between NovaGold and Kennecott coincides with Kennecott’s decision to sell its interest in the North and South Kemess copper-gold properties in north-central British Columbia. Kennecott will sell its investment in the area to El Condor Resources (VSE) and Covenant Resources (VSE) for $3.5 million.

NovaGold will remain operator on the New Brunswick properties until Kennecott becomes a fully vested 50% partner. To date, NovaGold’s exploration efforts have been restricted to one claim.

Sewell Brook, which is hosted by a package of Devonian volcanics and sediments, represents the first massive sulphide discovery in New Brunswick in the last decade.