Shares of NovaGold Resources Inc. (TSX:NG) gained 24 per cent Wednesday after announcing plans to focus on developing its Donlin gold project in Alaska and spin off or sell its other major assets.
The company said it will look to sell its stake in the Galore Creek project in B.C. that it is developing with Teck Resources (TSX:TCK.B) and spin off its Ambler project in Alaska into a new company to be led by NovaGold’s current president and chief executive.
“These important changes are the culmination of the earlier announced strategy of the board of directors to unlock the value of NovaGold’s substantial assets for the benefit of all shareholders,” said outgoing chairman Gerry McConnell.
Shares in the company were up $2.16 or 24 per cent to close at $11.13 Wednesday on the Toronto Stock Exchange.
National Bank Financial analyst Paolo Lostritto noted the restructuring to focus on Donlin may lead to a renewed takeover attempt by Barrick, which tried and failed to buy NovaGold in 2006.
“It could happen,” said Lostritto, who noted that there was still much work to be done at the Donlin project before any gold is mined.
Get weekly money news
Under the restructuring, Rick Van Nieuwenhuyse will leave NovaGold to head NovaCopper Inc., which will be spun off to NovaGold shareholders in a plan that will be voted on by shareholders in January.
NovaCopper will own the Ambler project and any mining project in the recently consolidated 180,000-hectare property located in the Ambler district of northwestern Alaska.
Gregory Lang, most recently president of Barrick Gold’s (TSX:ABX) North American subsidiary, will become president of NovaGold, effective in January.
While at Barrick, Lang was responsible for the gold miner’s operations in the United States, Canada and the Dominican Republic, including its 50 per cent stake in the Donlin project.
“His extensive background in developing mines for the largest gold producer in the world, combined with his leadership ability, makes him the right person at the right time to take the helm at NovaGold as it enters its next phase of development to become a significant North American gold producer,” Van Nieuwenhuyse said.
In 2007, Teck Resources (TSX:TCK.B) acquired a 50 per cent stake in Galore Creek from NovaGold by agreeing to pay C$520 million in construction costs with each company responsible for its share of the costs after that. However work was suspended at the project amid rising costs in 2007.
Last month, NovaGold said it hoped a new plan for the mine would soon be completed, with the partners to decide before the end of the year whether or not to proceed with a feasibility study and obtain the required permits.
A pre-feasibility report earlier this year put the cost at building the mine at $5.2 billion.
Teck said Wednesday that work was continuing to evaluate the project but declined comment on the possibility of it acquiring NovaGold’s stake in Galore Creek.
Vancouver-based Teck has a 90-day right of first refusal for NovaGold’s stake in the project.
Lostritto said the spin off of the Ambler project frees Van Nieuwenhuyse to do what he does best, finding and adding resources through exploration and drilling.
“By creating this new vehicle, he’s able to do that,” Lostritto said of NovaCopper.
“It also alleviates some of the financing concerns regarding Donlin Creek by spinning off the Galore Creek asset to help pay for the Donlin Creek construction.
NovaGold also announced that Thomas Kaplan, chairman and chief executive of the Electrum Group, a privately held resource investment firm, and NovaGold chief operating officer Gil Leathley have joined the firm’s board.
Kaplan was also named NovaGold chairman.
Comments
Want to discuss? Please read our Commenting Policy first.