NovaGold Resources Inc. (NG/TSX) and Barrick Gold Corp. (ABX/TSX) have resolved their disputes, making a deal that will see them form a 50-50 joint venture to develop the Donlin Creek gold project in Alaska. This is good news for both companies, as it avoids a potential court battle.
With NovaGold’s stake rising from an expected 30%, and factoring in US$63.5-million worth of reimbursements to Barrick, NovaGold’s net asset value for its stake in the project has increased from $11.27 to $17.31 per share, according to RBC Capital Markets analyst Stephen Walker. This is equivalent to US$118 per resource ounce.
As a result, the analyst has hiked his price target on NovaGold to $21 from $18.50, while maintaining a “sector perform” rating.
Donlin Creek has 33 million ounces of gold resources, making it one of the world’s largest deposits, and Mr. Walker says it could produce more than 1.5 million ounces a year. He expects production to begin in 2013, with an estimated US$2.6-billion to be spent on development.
So with this contentious chapter closed, Barrick and NovaGold must now focus on the difficult issue of power supply. But for investors, drilling data will be closely watched, with feasibility details expected in early 2008, according to Citigroup’s John Hill.
The analyst calls the two companies “book-ends to the gold portfolio.” Barrick as the “clear leader” among large-cap names, and NovaGold as Citigroup’s favourite developer of mines.
He rates Barrick a “buy” with a US$48 price target and NovaGold a “buy” with a US$23 target.
Blackmont Capital’s Richard Gray boosted his price target for Barrick by a dollar to S45 per share on the news. While acknowledging that Donlin Creek will take years to develop, he thinks the deal bodes well for the project. (canada)
With NovaGold’s stake rising from an expected 30%, and factoring in US$63.5-million worth of reimbursements to Barrick, NovaGold’s net asset value for its stake in the project has increased from $11.27 to $17.31 per share, according to RBC Capital Markets analyst Stephen Walker. This is equivalent to US$118 per resource ounce.
As a result, the analyst has hiked his price target on NovaGold to $21 from $18.50, while maintaining a “sector perform” rating.
Donlin Creek has 33 million ounces of gold resources, making it one of the world’s largest deposits, and Mr. Walker says it could produce more than 1.5 million ounces a year. He expects production to begin in 2013, with an estimated US$2.6-billion to be spent on development.
So with this contentious chapter closed, Barrick and NovaGold must now focus on the difficult issue of power supply. But for investors, drilling data will be closely watched, with feasibility details expected in early 2008, according to Citigroup’s John Hill.
The analyst calls the two companies “book-ends to the gold portfolio.” Barrick as the “clear leader” among large-cap names, and NovaGold as Citigroup’s favourite developer of mines.
He rates Barrick a “buy” with a US$48 price target and NovaGold a “buy” with a US$23 target.
Blackmont Capital’s Richard Gray boosted his price target for Barrick by a dollar to S45 per share on the news. While acknowledging that Donlin Creek will take years to develop, he thinks the deal bodes well for the project. (canada)
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