Beleaguered NovaGold finds a major investor

Posted: January 02, 2009, 11:45 AM by Peter Koven

Almost nothing has gone right lately for NovaGold Resources Inc.

After rejecting a hostile US$1.7-billion takeover from Barrick Gold Corp. in late 2006, the company's stock price has tumbled off a cliff for a number of reasons. Those include huge cost overruns at its Galore Creek project in British Columbia, and the suspension of its Rock Creek mine in Alaska due to operating and environmental problems.

On Friday, the company finally offered investors some good news: a major strategic investment. A New York-based company called Electrum Strategic Resources LLC has agreed to buy about 30% of NovaGold in a US$60-million private placement. The deal will help NovaGold pay off a key bridge loan and advance its projects.

Electrum chief executive William Natbony noted in a statement that NovaGold is "exceptionally well positioned to advance its operations along the value chain and maximize the returns for all shareholders." It is an opinion that many other investors have not shared for a long time, as they worry about any junior mining company's ability to finance multi-billion-dollar developments such as NovaGold's Galore Creek and Donlin Creek projects.