NOVAGOLD RESOURCES INC. (NYSE American: NG) (TSX: NG) received a US$25 million payment from Newmont Corporation (NYSE: NEM) (TSX: NGT) for the acquisition of its 50 per cent stake in a British Columbia copper-gold mine.
NOVAGOLD announced receiving the payment Thursday for its previously held interest in the Galore Creek project in northwestern B.C. The mining operation is a 50/50 joint venture (JV) between Newmont and Teck Resources Limited (TSX: TECK.A and TECK.B) (NYSE: TECK).
The company agreed to sell its stake in the project to Newmont in 2018 and will be receiving up to US$275 million for it, US$200 million of which has now been paid.
As a result of the payment, NOVAGOLD now has a cash position of US$134 million and plans to use the new funds to help advance its Donlin gold project in Alaska — the company’s primary focus. The project is a JV with Barrick Gold Corp. (TSX: ABX) (NYSE: GOLD).
The Galore Creek project, located in the territory of the Tahltan First Nation, is estimated to contain 9 billion pounds of copper and 8 million ounces of gold. Newmont and Teck believe it to be one of the world’s largest undeveloped copper-gold projects.
Teck and Newmont collectively budgeted US$20-$30 million annually for the project in 2018.
“Galore Creek holds the potential to support decades of profitable copper and gold production in a favorable mining jurisdiction,” said Newmont’s President and CEO Gary Goldberg when the company acquired its stake.
NOVAGOLD’s losses from its operations dropped by 5.3 per cent year-over-year (YoY) at the end of Q2 to approximately US$13.08 million.
Newmont announced earlier this month that it had received clearance from the Canadian Competition Bureau for its US$19.2 billion acquisition of Newcrest Mining Limited (ASX: NCM) (TSX: NCM), a transaction expected to close in Q4 this year.
Teck’s revenue and gross profits dropped significantly at the end of Q2 this year. The company observed a 36 per cent drop in revenue YoY to approximately $3.5 million and a 55 per cent drop in gross profits to $1.41 million.
NOVAGOLD shares rose by 1.42 per cent Friday to $5.73 on the Toronto Stock Exchange but have dropped by over 30 per cent since the beginning of this year. Newmont stock rose by 0.61 per cent to $56.11 on the TSX.
rowan@mugglehead.com
