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The Associated Press December 6, 2011, 9:10AM ET

Southwest Alaska gold project moving ahead

NovaGold Resources Inc. announced Monday that a gold prospect in southwest Alaska is ready to advance to permitting.

The Canada-based company said an updated feasibility study shows that the total cost of the project is roughly $300 million less than an earlier projection, at about $6.7 billion. The report also underscored the benefit of using natural gas instead of diesel for power generation, the company said. A pipeline would cost about $834 million.

Pending board approval, which could come next week, the permitting process could be initiated for the Donlin Gold project by April. Donlin Gold LLC, which holds the project, is owned by subsidiaries of NovaGold and Canada-based Barrick Gold Corp.

NovaGold President and CEO Rick Van Nieuwenhuyse told The Associated Press that the mine would average 1.5 million ounces of gold a year during its first five years of operation, and an average 1.1 million ounces over its projected 27-year life. Average cash-cost during the first five years would be $409 an ounce, and an average $585 an ounce over the life of the project, NovaGold said.

The price of gold has been over $1,700 an ounce.

NovaGold said there are proven and probable reserves of 33.8 million ounces at the Alaska site. The company expressed confidence that more discoveries will be made, which could add to the mine's life or lead to expanded production.

The project, expected to be an open-pit mine, is about 155 miles northeast of Bethel, or 280 miles west of Anchorage. The mine site is on private Alaska Native corporation-owned land, Van Nieuwenhuyse said.

The project is operated under a mining lease with the Alaska Native corporation Calista Corp., and NovaGold said a lease agreement provides Calista with payments, royalties and economic development rights. Donlin Gold is negotiating a restructuring of a surface use agreement with Kuskokwim Corp., NovaGold said.

Van Nieuwenhuyse said it could take up to four years for the permitting process to be completed. The project would provide about 2,000 jobs during construction and between 500 and 800 long-term, a figure that doesn't include contractors.

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