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Thursday, January 8, 2009
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Northern B.C. miner finds itself cash-strapped |
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Written by GORDON HOEKSTRA
Citizen staff
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Monday, 24 November 2008 |
NovaGold Resources Inc. -- a partner in the proposed massive Galore Creek mine in northern B.. -- is experiencing financial problems.
The company's cash problems could impact its ownership in the Galore Creek project in northwest B.C., which is jointly owned by Teck Cominco.
NovaGold says if it is not able to raise additional cash in December, it will not have sufficient money to meet its financial obligations.
The company has to make a payment of $1.9 million on the Galore Creek project this week, and another $3.9 million on the Donlin project in Alaska.
If NovaGold does not make the payment on Galore Creek, its interest in the project could drop below 50 per cent.
The mine, which has received the green light from the provincial and federal governments, was put on hold in November 2007 after an engineering review showed costs had escalated to an estimated $5 billion from $2.2 billion. The company is trying to come up with a new mine plan.
The Galore Creek mine has been touted as having benefits -- including direct jobs and supply and servicing work -- throughout northern B.C., including in Prince George.
There were 800 people in seven camps working on the project when it was halted.
The project, which had been expected to be complete in 2012, was hailed by the B.C. mining community as a confidence booster as it was the first new, major metal mine to start construction in a decade in the province.
A key factor in NovaGold's cash flow problems has been its failure to get the Rock Creek mine in Alasks up and running. The company announced it has suspended development on the Rock Creek mine because of complications, including mechanical problems and failure to meet some permitting requirements.
The mine was hoped to provide cash flow in 2009 which NovaGold could use to help meet its financial obligations.
NovaGold spent $30 million US on the Rock Creek gold mine since the summer, $20 million over budget.
The company says as a result of the unbudgeted spending, its inability to arrange bank financing and other issues, its cash position has been reduced to $10 million.
NovaGold said it is continuing to review its alternatives, including raising more equity, debt financing and the sale of parts of the company.
“Though this has been a difficult decision with Rock Creek, based on the current economic conditions, and the challenges associated with meeting environmental requirements compounded by working through the arctic winter, we believe these actions are in the best interest of the Company at this time,” said NovaGold president and CEO Rick Van Nieuwenhuyse. “NovaGold will focus most of its resources and efforts on its Donlin Creek property while continuing to seek sources of cash and to take steps to reduce costs,” he said.
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Last Updated ( Monday, 24 November 2008 )
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