LandKeepers News Archive
NovaGold will raise $60M to repay debt, fund projects
January 02 2009 | News Articles | Mining Weekly
NovaGold will raise $60m to repay debt, fund projects
By: Liezel Hill
2nd January 2009
TORONTO (miningweekly.com) – Vancouver-based NovaGold Resources will keep its head above water, after agreeing to sell shares and warrants to privately-held Electrum Strategic Resources, to raise $60-million, the firm announced on Friday morning.
NovaGold shares jumped 11.9% on the news, to C$1.98 apiece by 10:25 in Toronto.
The companies have entered into a definitive agreement for the sale of about 46-million units at $1.30 apiece. Each unit will comprise one NovaGold share and one share purchase warrant.
“This investment substantially strengthens NovaGold’s balance sheet and provides funding for the company’s on-going commitments to advance our key projects toward development,” said president and CEO Rick Van Nieuwenhuyse.
“This source of funding will also allow the company to look at new opportunities that can provide future growth for the company.”
NovaGold has 50% stakes in two large North American projects – owned with mining majors Barrick Gold and Teck Cominco respectively – but suspended operations last year at its sole producing mine, the Rock Creek operation, in Alaska, after suffering operational setbacks, extreme weather conditions and permitting difficulties.
NovaGold also requested and was granted an extension on the maturity of a bridge loan from Auramet Trading that was to have been due on December 29, and warned last month that, unless it could raise additional funds, it would not meet its obligations.
The private placement will give New York-based Electrum a holding of about 30% in NovaGold, making it the company’s biggest shareholder, and the interest will increase to about 46% if all the warrants are fully exercised.
NovaGold will use the net proceeds of the placement – about $59-million – to repay outstanding principal and interest payments on the $20-million bridge loan from Auramet, to finance continuing exploration and development activities at its projects and “to further examine, develop and, if warranted, re-activate the Rock Creek mine”, the company said.
NovaGold and partner Barrick are scheduled to complete a feasibility study on the Donlin Creek project, in Alaska, by the end of March, and the company also has ongoing financial commitments to the Galore Creek project, in British Columbia, which it owns with Teck Cominco.
The two companies announced in November 2007 that they were calling off construction of the copper/gold mine because of ballooning costs and are now studying alternative development plans for the mine.
NovaGold also said on Friday that it has had discussions with a number of other investors about placing shares on the same terms as the Electrum deal for an additional $15-million. However, no binding commitments have been entered into.
NovaGold’s shares closed at C$1.77 (about $1.45) each in Toronto on December 31, the last trading day before the New Year’s day holiday.
http://www.miningweekly.com/article.php?a_id=150120
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