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NovaGold Resources Inc. announced today that the mine, which began production in mid-September, had "unanticipated mechanical problems" including an electrical failure in its mill, and that "extreme arctic weather" had compounded the mine's troubles.
In its announcement, the company did not elaborate on several key issues, including: How many employees will be laid off; how it planned to manage the gold mine during the suspension; and how long it expected the suspension to last.
The company said federal and state regulators notified it that the mine has not met conditions in its permits. If Rock Creek didn't fix those problems, fines and additional regulatory requirements could have resulted, the company said.
"Though this has been a difficult decision with Rock Creek, based on the current economic conditions, and the challenges associated with meeting environmental requirements compounded by working through the arctic winter, we believe these actions are in the best interest of the company at this time," said Rick Van Nieuwenhuyse, NovaGold's president.
Rock Creek had been expected to produce about 100,000 ounces of gold annually and generate $25 million to $35 million in annual cash flow to NovaGold, company officials said in September.
Van Nieuwenhuyse said today that NovaGold will now focus its efforts on its Donlin Creek exploration project while attempting to seek additional cash and reduce costs. Donlin is a huge gold-mine prospect in Western Alaska.
The company will not have enough cash to meet its financial obligations if it isn't able to obtain additional financing in next month.
The company said it will pay $3.9 million due this week on its Donlin Creek project, a joint venture with Barrick Gold, the world's largest gold mining company.
But NovaGold said it does not plan to pay $1.9 million due today on its Galore Creek mine exploration venture with Teck Cominco, in Canada but near the Southeast Alaska town of Wrangell.
Find Elizabeth Bluemink online at adn.com/contact/ebluemink or call 257-4317.
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