St. LOUIS (ResourceInvestor.com) -- Barrick Gold Corp. [NYSE:ABX; TSX:ABX] sold its entire stake in NovaGold Resources Inc. [AMEX:NG; TSX:NG] after its $1.71 billion takeover bid failed in December, thus closing the book on Barrick's takeover attempt.
Barrick said on April 5 that it would consider selling all of its NovaGold shares after NovaGold investors rejected Barrick's $16-a-share cash offer. With 13.6 million shares, Barrick Gold was the largest NovaGold shareholder with a 14.8% stake.
Vince Borg, Senior Vice President of Corporate Communication for Barrick, told RI that the company assessed its holding and decided to dispose of the entire stake over the course of this week, with the bulk happening today.
"We have better uses of the capital," he added.
NovaGold shares hit a high of $18.20 in late August, largely in response to Barrick's bid, but are off nearly 6% so far this year. At today's share price of $16.15, Barrick would only make about 15 cents per share for the bulk of the holding.
Rick Van Nieuwenhuyse, President and CEO of NovaGold Resources, told RI that Barrick was never a shareholder that "shared our vision, so no great loss."
"Now we are free to execute on our business plan," he said. But "What I am most pleased about was being able to place over $500 million worth of stock around the world in a 24 hour period."
He said that Novagold is set to start construction at Galore Creek and in discussions with a number of potential joint venture partners.
Barrick had wanted to acquire NovaGold's Galore Creek copper-gold-silver project in northwestern British Columbia, where construction is expected to begin this spring at a projected cost of $1.8 billion. However, the offer failed when rejected the bid.
Galore Creek has Proven and Probable Reserves of 6.6 billion pounds of copper, 5.3 million ounces of gold and 92.6 million ounces of silver, Measured and Indicated Resources of 3.6 billion pounds of copper, 3.0 million ounces of gold and 49.2 million ounces of silver, with additional Inferred Resources of 3.2 billion pounds of copper, 2.5 million ounces of gold and 47.5 million ounces of silver.
Based on the Feasibility Study, annual production is forecast to average more than 432 million pounds of copper, 341,000 ounces of gold and 4 million ounces of silver for the first 5 years of production, with total cash costs of negative $889/oz of gold, net of copper and silver credits.
On February 23, 2007, NovaGold announced that it had received its B.C. Provincial Environmental Assessment Certificate for Galore Creek. NovaGold has applied to the B.C. government for a surface lease on the adjacent Grace property, under option to NovaGold for use as a tailings and waste rock storage facility. Pioneer Metals Corporation, which is now controlled by Barrick and holds subsurface rights in the property, is contesting the application.
According to NovaGold, the B.C. government is the owner of the surface rights and has the sole authority to issue a surface lease on the property. NovaGold anticipates that a surface lease for the tailings and waste facility approved by the government in the Environmental Assessment Certificate will be issued in a timely manner.
NovaGold recently announced a public offering of 12.5 million common shares in the United States and Canada at a price of $16.25 (C$18.33) per share to help fund the development of Galore Creek. Gross proceeds from the offering are expected to be approximately $203 million (C$229 million).
Barrick still owns 30% in NovaGold's Donlin Creek in Alaska, with a chance to earn an additional 40%, but must complete a bankable feasibility study and make a construction decision by the November 12, 2007 deadline. NovaGold does not believe Barrick will be able to fulfil its obligation prior to the deadline.
Nieuwenhuyse said Barrick still has a "huge problem" at Donlin since the company "can't make the back-in terms."
"If they are going to come back - then why did they sell? Negotiate a settlement? The more time goes by, the less inclined I am to negotiate. By selling the shares, they lost leverage," he said.
Donlin Creek contains a M&I resource estimate of 16.6 million ounces of gold and an Inferred resource estimate of 17.1 million ounces of gold. The prefeasibility study puts average production at 1.885 million ounces of gold per year for the first 7 years at a cash cost of $223/oz of gold, and average life of mine production at 1.4 million ounces of gold per year for 22 years at $276/oz.
Donlin is estimated to cost around $1.5 billion to develop. No significant funding is required by NovaGold at Donlin until start of construction currently estimated for 2010.
Barrick Gold gained 50 cents today to trade at $29.18 on New York Stock Exchange.
