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NovaGold to pay nearly $900,000 fine for inactive Rock Creek mine

NovaGold will pay nearly $900,000 to federal regulators involving stormwater discharge violations which occurred at the Rock Creek minesite before the first ounce of gold was poured in October 2008.

Author: Dorothy Kosich
Posted: Wednesday , 13 May 2009

RENO, NV -

The U.S. Department of Justice announced Tuesday that NovaGold Resources and its subsidiary Alaska Gold, the owners and operators of the Rock Creek near Nome, Alaska, have agreed to pay an $883,628 civil penalty to resolve violations of a stormwater permit.

NovaGold could have been fined as much as $6.6 million for the violations, the Anchorage Daily News reported.

It is the latest setback in a series of events, which have plagued NovaGold, including financial woes which nearly broke the company last November.

The Rock Creek Mine was expected to yield about 100,000 ounces of gold annually. However, Alaska Gold was delayed from completing storm water facilities because of lawsuits filed by environmental special interest groups concerning mine construction permit and severe weather conditions in Nome in both 2007 and 2008.

Once the mine finally began operating, it was forced to close after only three months last November. At the time NovaGold said complications arose when trying to ensure compliance with a number of additional environmental and operational tasks required by regulators.

By November NovaGold said it had received a cash call related to its Galore Creek project and could not make the payment. At the time, the company said it cash position had dwindled due to cost overruns.

However in December, NovaGold announced it had entered into an agreement with Auramet Trading to extend the maturity date on any portion of the company's $20 million bridge loan to March 13, 2009. By January of this year, NovaGold said it had $75 million in private placement financing, and an agreement from Auramet to convert all the remaining balance of the bridge loan to NovaGold shares.

At the time NovaGold said it would complete care and maintenance activities on the Rock Creek mine, and if warranted, reactivate the mining operation.

In an interview with Reuters Tuesday, NovaGold Vice President for Strategic Development Greg Johnson said reopening the mine would require an investment ranging from $10 million to $20 million. "It's always an option to look at selling," he said.

Nevertheless, Johnson said, "We're likely looking at trying to position ourselves for start-up in spring or summer of 2010."

The Justice Department said that from April 2007 until September 2008 Alaska Gold and NovaGold "violated their permit on multiple occasions by discharging stormwater into Rock Cree, Lindblom Creek and Glacier Creek in violation of state water quality standards."

"The companies also failed to adequately prepare and update a storm water pollution prevention plan and failed to implement and maintain best management practices to control the discharge," the DOJ said.

The mine had not yet opened when the stormwater violations took place.

Michelle Pirzadeh, EPS's Acting Regional Administrator in Seattle, said, "The construction at the Rock Creek Mine resulted in virtually unchecked runoff of silt and sediment to important fish habitat. Companies taking on construction projects of this scale need to do so responsibly and in accordance with the law." The EPA has since determined that Rock Creek now complies with its applicable permits.

The Rock Creek mine and mill complex was built on Alaska Native and mining company land.

The stipulation of settlement and judgment filed Tuesday in the U.S. District Court for the District of Anchorage in Alaska is subject to a 30-day public comment period and federal court approval.