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Galore Creek: A Company-Making Asset
Q A
What’s the potential for Galore Creek?
Due to our focus on Donlin Gold, Galore Creek has often been given too cursory a glance. It’s a great asset, which is why each owner has invested greater than $300 million in the project. Like Donlin Gold, Galore Creek enjoys tremendous size and grade. A signi cant copper- gold-silver asset, it has the potential to be one of the largest, highest- quality, lowest-cost copper producers in Canada – one of the world’s safest jurisdictions.
O ering tremendous upside potential with higher copper prices, the project has positive returns that increase signi cantly with rising copper prices, making it a very valuable asset to a potential developer; a high-quality company-maker in its own right. Although we continue to evaluate opportunities to monetize our interest in the Galore Creek project to support development of Donlin Gold, we are fortunate to have the exibility to continue to enhance the value of the asset with minimal spending.
Since our focus remains on advancing Donlin Gold, we remain committed to selling all or part of our 50% interest in the Galore Creek Partnership. Our partner, Teck, has a right of rst refusal with respect to a sale by NOVAGOLD of its interest. Ultimately, we believe that Galore Creek will realize material value for our shareholders.
What copper price would you need before market participants take interest in the project?
The 2011 Galore Creek pre-feasibility study envisions a facility operating at a nominal 95,000 tonne-per day capacity – and forecasts production of more than 6 billion pounds of copper, nearly 4 million ounces of gold, and almost 66 million ounces of silver over an approximate 18-year mine life. Cash costs are forecast to average approximately C$0.80 per pound of payable copper, net of byproduct credits (at metal price assumptions of US$2.65/lb. copper, US$1,100/oz. gold, and US$18.50/oz. silver).
With Teck, we continue to work on technical studies in
project mine planning and design, as well as waste rock and water management. We expect these e orts to further improve the value and marketability of the project. In today’s higher copper price environment, there is renewed interest in Galore Creek, a project
that is now receiving the attention that it deserves as an incredibly valuable polymetallic deposit in British Columbia with the potential to be a core asset for any mining company. Our shareholders will bene t from improved copper market conditions, as the value realized from disposition of all or part of our 50% interest in Galore Creek will help strengthen our cash position and contribute toward the development of Donlin Gold.
Galore Creek’s upside potential with higher copper prices.
Net Present Value (NPV) (US$ in billions)
NPV at 5%
NPV at 7%
Q A
$4.00
$3.75 $3.50 $3.25 $3.00 $2.75 $2.65
3.5B
1.1B 0.9B
2.1B 1.6B
3.1B 2.6B
$3.0
$1.0 $2.0
$4.0
Galore Creek estimates as per the pre-feasibility study effective September 12, 2011. All dollar figures are in USD, represent 100% of the project of which NOVAGOLD’s share is 50%, and reflect after-tax net present value (at a 7% and 5% discount rates) of the Galore Creek project using a foreign exchange rate of 0.90 USD/CAD and assuming gold at US$1,100/oz, silver at US$18.50/oz. At a 7% discount rate, the net present value is: $124M @ $2.65 copper; $285M @ $2.75 copper; $679M @ $3.00 copper; $1,067M @ $3.25 copper; $1,452M @ $3.50 copper;
$1,837M @ $3.75 copper; $2,217M @ $4.00 copper.
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Copper Price US$/lb