By Patricia Liles
For the Journal

Vancouver, B.C.-based NovaGold Resources Inc., announced Sept. 19 that the company's open pit hard rock gold mine near Nome, called Rock Creek, has begun gold production after receiving regulatory authorization from the state.

Additionally, NovaGold said on Sept. 2 that the company was selling its interest in the Ambler copper-zinc polymetallic project in Northwest Alaska, along with its other early-stage base metal properties in Alaska, for $20 million in common shares of Mantra Mining Inc., an exploration start-up.

“Ambler is a great asset and we're pleased to be Mantra's largest shareholder,” said Rick Van Nieuwenhuyse, president and CEO of NovaGold. “Mantra can advance the project, given that a lot of the same people will be involved.”

NovaGold completed a modest drilling program at Ambler this year, spending about $2 million on the project. As part of the deal, Mantra will reimburse NovaGold for its exploration spending in 2008 at Ambler.

The start of gold production at Rock Creek has been long anticipated, as construction of the mine and mill complex, located seven miles north of Nome, was completed late last year except for the tailing storage facility, which was finished this spring. The delay in the tailings storage construction came from an environmental challenge to the company's wetlands permits initially issued by the U.S. Army Corps of Engineers in fall 2006.

“It delayed us from building the tailings facility in the summer, which is the best time, and forced us to build it in the winter, which is the worst time from a cost standpoint,” said Van Nieuwenhuyse. “When you delay a schedule, there's more than just the direct cost of delaying the schedule by four monthsÉthere's more indirect effects on costs.”

Construction crews worked through the winter and this spring on the tailings storage facility, progress that was impacted by a heavy snow year.

“Significant adverse weather conditions combined with weather damage to the water recycle pond and extra work relating to storm water pollution prevention requirements (compounded by unusually high snowfall) have led to extended delays to the commencement of start-up at Rock Creek,” NovaGold said in its second quarter report released in mid-July.

NovaGold also received two notice of violations from state regulators this spring, relating to preventative measures for stormwater discharges from the construction site, according to the second-quarter report. In July, NovaGold received a draft compliance order by consent from the state. Water discharge in question concerned the total suspended solids, or the turbidity, of the water, Van Nieuwenhuyse said.

“The Rock Creek construction and operations crews have worked closely with state and federal regulators to assure that the project will meet its environmental guidelines even during challenging weather conditions,” Van Nieuwenhuyse said, in the September release announcing the start of production. “We believe that the extra time dedicated to commissioning and testing of the mill should facilitate a smooth Rock Creek mine ramp up to full production.”

Crews have been mining and stockpiling ore during the commissioning process this summer. About 450,000 tonnes of ore are ready, equal to about two months of full throughput of the mill, which is designed to process 7,000 tonnes per day.

The construction delays required an additional $25 million to the fiscal year 2008 construction budget of $42 million, the company reported in July. NovaGold also announced in July plans to acquire additional mining equipment, expand the tailings storage facility and complete additional storm water prevention measures, moves anticipated to total $19 million.

Total construction costs for Rock Creek, since work began in 2006, are now $200 million, Van Nieuwenhuyse said. “It's just what it is costing to build these mines these days, and it's double what it was two years ago,” he said.

The company budgeted $7 million in 2008 for exploration around Rock Creek and the nearby Saddle deposit, with the goal of doubling the mine life of Rock Creek, to a total of 10 years.

As of mid-July, the exploration team drilled 4,265 feet of the planned 29,527 feet for the season, the company said in its second quarter report. “We're very pleased with the preliminary results and are comfortable that we will be able to had a half-million ounces of resources overall between Saddle and exploration right around Rock Creek.”

Van Nieuwenhuyse also said NovaGold is working this year on permitting a satellite gold deposit, located about 50 miles from Rock Creek, southeast of Nome off the Council Highway. Called Big Hurrah, the gold deposit contains a higher grade of gold than at Rock Creek, allowing ore to be mined and trucked to the mill site. Plans call for the completion of permitting next year, allowing crews to incorporate Big Hurrah into the mine plan in 2009, Van Nieuwenhuyse said.