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NovaGold faces hostile takeover bid(Alaska Journal of Commerce (Anchorage) (KRT) Via Thomson Dialog NewsEdge) Aug. 6--Things are not going well in the Donlin Creek joint-venture between Barrick Gold Corp. and NovaGold Resources Inc. Barrick, one of the world's largest gold companies, has made a surprise offer to shareholders of NovaGold to buy the smaller company. The two companies are working together to develop a major gold mine at Donlin Creek, on the Kuskokwim River, in the western portion of the state. The offer appears to stem from problems in meeting the schedule for development of Donlin Creek. With gold resources estimated at 28.5 million ounces, Donlin Creek is one of the largest undeveloped gold resources in the world. It is on land owned by Calista Corp. and the TKC Corp., two Alaska Native corporations in the region. Rick Van Nieuwenhuyse, president of NovaGold, called Barrick's offer "opportunistic and unwelcome," and said the company's management is taking steps to make sure share values are maximized. Barrick offered to buy all shares of NovaGold at $14.50 per share July 24. NovaGold's stock jumped on the news July 24, closing at $15.50 on volumes of 17 million shares. On Friday, July 21, stock closed at $11.67 on volumes of less than 300,000 shares. Barrick said the purpose of the offer was to consolidate the company's interest in the Donlin Creek project and to obtain 100 percent of Galore Creek, a minerals project in British Columbia that is solely owned by NovaGold. NovaGold is also developing Rock Creek, a medium-sized gold mine near Nome, and is engaged in exploration in the Ambler mining district in the Brooks Range. Van Nieuwenhuyse said the only information available on the Barrick offer is from the company's July 24 press release. When a formal offer from Barrick to NovaGold shareholders is received, more details will be available, he said. NovaGold shareholders will have 35 days to respond to the offer, and Van Nieuwenhuyse said there are procedures where that might be extended another 30 days. Barrick appears to be on a takeover roll, having acquired Placer Dome Inc., which was originally NovaGold's partner in Donlin Creek. Van Nieuwenhuyse, however, said the offer to NovaGold appears to have stemmed from problems Barrick is having in meeting its contract obligations with NovaGold at Donlin Creek. In a July 25 press release in response to Barrick, NovaGold said, "NovaGold management believes that it will not be possible for Barrick to meet all the terms and conditions of an earn-in agreement to obtain an additional 40 percent interest in the Donlin Creek project. These terms and conditions include Barrick completing a bankable feasibility study and receiving approval of its board of directors to construct a mine by November 2007." In an interview, Van Nieuwenhuyse said Barrick, and previously Placer Dome, has not been making the progress needed to achieve the timeline set out in the agreement with NovaGold. The deadline is a year and three months away, and a great deal of engineering and environmental work, plus the securing of federal and state permits, needs to be done before a feasibility study and decision to proceed with mine development can be done. However, Barrick spokesman Vincent Borg said the company is fully confident it can meet the November 2007 deadline for completing a bankable feasibility study and making a board decision to proceed with the project. "Barrick has a long, established track record of bringing large mines into production," Borg said. The company does not have to complete a federal environmental impact statement before making the board decision, Borg said. He said the company doesn't see the EIS as an obstacle and cited Barrick's recent large mine in Chile, where environmental permits were fast-tracked. However, Van Nieuwenhuyse said Barrick will need to spend at least two, and possibly three, years on an EIS. It does appear that Placer and Barrick have expended $32 million in their work at Donlin Creek, as the agreement with Placer provided, Van Nieuwenhuyse said. But Barrick would probably have to spend another $70 million or more to complete the engineering and environmental work to do a feasibility study that would be acceptable to the financial community. At the time Barrick made its offer for NovaGold shares, the two companies had been discussing changes in their contractual relationship that would have adjusted the schedule, Van Nieuwenhuyse said. In its press release, NovaGold said the Barrick offer significantly undervalues the worth of the company's shares, essentially valuing the company's existing gold resources at about $35 per ounce, and gives no credit for NovaGold's holdings in copper resources at its Galore Creek project in British Columbia. "Recent takeover valuations in the gold sector have been significantly at higher per-ounce multiples than those implied in the Barrick offer," the press release said. Donlin Creek has estimated gold resources of 28.5 million ounces, including measured and indicated as well as inferred resources. That estimate was made in October 2005. Exploration is continuing at the mine this year with an 80,000-meter drilling program, Van Nieuwenhuyse said. The main objective of the program, which is being managed by NovaGold, is to move more of the resources from the inferred category into the measured and indicated classification, meaning that they were determined by more intensive drilling, granting greater confidence in the estimate. |