Gargantuan gold
Perennial precious metals explorer NovaGold Resources (TSX:NG) has unveiled another whopper of a mine project.
Earlier this month, the Vancouver-based company, which is known for its trove of high-value resource projects, published an updated feasibility study for its massive Donlin Gold project in Alaska.
The updated project is expected to cost some US$6 billion, including US$1 billion for a 500-kilometre-long natural gas pipeline from Cook Inlet to the mine site.
NovaGold president and CEO Rick Van Nieuwenhuyse said although the project costs more than the 2009 US$4.5 billion estimated cost, that project estimate didn’t include the natural gas pipeline.
Van Nieuwenhuyse said the revised price tag for the project, which is a partnership between NovaGold and Barrick Gold (TSX:ABX), is in line with today’s capital costs.
“The increase in the projected capital cost represents a fraction of the increase in the intrinsic value of the gold endowment at Donlin,” he said.
The company said the project contains 38 million ounces of gold.
In July, NovaGold released an updated pre-feasibility study for its Galore Creek copper-gold project, envisioning a mine that would cost $5.16 billion. At press time, NovaGold’s shares were valued at $8.48.
Resource nationalism tops mining risks: Ernst & Young
Resource nationalism is now the top risk for the mining industry, according to Ernst & Young’s annual report, Business Risks Facing Mining and Metals 2011-2012.
Tom Whelan, leader of Ernst & Young’s national mining and metals practice, said the growing risk isn’t from countries nationalizing their resources but from governments looking for a return through taxes and royalties.
“Just in the last four or five months, there have been over 25 countries that have announced intentions to increase their government royalties or taxes,” he said.
Examples of this activity include South Africa’s new royalty regime and Ghana’s plans to double royalties.
The trend, Whelan said, is being driven by cash-strapped governments viewing the mining industry’s recent success.
In descending order, the top 10 risks the report identifies for mining for 2011-2012 are: resource nationalism, skills shortage, infrastructure access, social licence to operate, capital project execution, price and currency volatility, capital allocation, cost management, interruptions to supply, and fraud and corruption.
Ironclad
Alderon Resource Corp. (TSX-V:ADV) said earlier this month its Kami iron ore project would cost US$989 million to build.
The junior company, which is based in Vancouver, issued the results from a preliminary economic assessment (PEA) September 8, outlining a mine that would produce eight million tonnes of iron ore per year at a 65.5% grade.
The company said production of the mine would commence in 2015 and last more than 15 years.
Alderon said the current net present value (NPV) of the project tops US$3 billion.
“We are very excited to see such a high NPV, especially since this PEA is only based on the Rose Central zone of the Kami property. There is significant upside once we include North Rose and Mills Lake,” said Tayfun Eldem, Alderon’s president and CEO.
The company expects to have a full feasibility study completed by the third quarter of 2012.
At press time, Alderon’s shares were valued at $3.32. •
