Mineral properties and development costs

9 Months Ended

Aug. 31, 2015

Mineral properties and development costs [Text Block]

5 Mineral properties and development costs

in thousands of US dollars
	November 30, 2014	Acquisition costs	August 31, 2015
	$	$	$
Alaska, USA
Ambler (a)	26,586	-	26,586
Bornite (b)	4,000	-	4,000
Antioquia, Colombia
Titiribi (c)	-	3,264	3,264
	30,586	3,264	33,850

(a)	Ambler
	On January 11, 2010, NovaGold, through a wholly-owned subsidiary, purchased 100% of the Ambler lands in Northwest Alaska, which contains the copper-zinc-lead-gold-silver Arctic Project and other mineralized targets within the volcanogenic massive sulfide belt. As consideration, NovaGold, issued 931,098 shares with a fair value of $5.0 million and agreed to make two cash payments to the vendor of $12.0 million each in January 2011 and January 2012, for total consideration of $29.0 million. The fair value of these cash payments were $21.4 million valued at the transaction date using a discount rate of approximately 8%. The January 2011 payment was made on January 7, 2011 and the January 2012 payment was made in advance on August 5, 2011. Total fair value of the consideration was $26.5 million, including transaction costs associated with the acquisition of $0.1 million. The vendor retained a 1% net smelter return royalty that the owner of the property can purchase at any time for a one-time payment of $10.0 million.
	Prior to the acquisition in 2010, NovaGold held an option to earn a 51% interest in the property which was terminated upon entering into the purchase and sale agreement.
	As discussed in note 1, the property was acquired on October 17, 2011 by NovaCopper US through a purchase and sale agreement with AGC.
(b)	Bornite
	On October 19, 2011, NovaCopper US acquired the exclusive right to explore and the non-exclusive right to access and enter on the Bornite lands and lands deeded to NANA through the ANCSA, located adjacent to the Ambler lands in Northwest Alaska. As consideration, NovaCopper US paid $4.0 million to acquire the right to explore and develop the combined Upper Kobuk Mineral Projects through an Exploration Agreement and Option to Lease with NANA. NANA also has the right to appoint a member to NovaCopper’s board of directors before April 2017. Upon a decision to proceed with construction of a mine on the lands, NANA maintains the right to purchase between a 16% - 25% ownership interest in the mine or retain a 15% net proceeds royalty which is payable after NovaCopper has recovered certain historical costs, capital and cost of capital. Should NANA elect to purchase an ownership interest, consideration will be payable equal to all historical costs incurred on the properties at the elected percentage purchased less $40 million, not to be less than zero. The parties would form a joint venture and be responsible for all future costs, including capital costs of the mine based on their pro-rata share.
	NANA would also be granted a net smelter return royalty of between 1% and 2.5% upon the execution of a mining lease or a surface use agreement, the percent which is determined by the classification of land from which production originates.
(c)	Titiribi
	On June 19, 2015, NovaCopper completed the arrangement with Sunward. As a result, the Company, through its wholly owned subsidiaries, Sunward BVI and its branch Sunward Resources Sucursal Colombia owns 100% of the Titiribi gold-copper exploration project located southwest of the city of Medellin, in Antioquia Department, Colombia.

(d)	Mineral properties expense
	The following table summarizes mineral properties expense for the three and nine months ended August 31, 2015 and 2014.

	in thousands of dollars
	Three months ended			Nine months ended
	August 31, 2015		August 31, 2014	August 31, 2015		August 31, 2014
	$		$	$		$
Alaska, USA
Community	26		35	75		69
Drilling	701		-	701		-
Engineering	254		5	271		107
Environmental	73		20	77		35
Geochemistry and geophysics	34		50	34		50
Land and permitting	95		92	291		281
Other income	(209	)	-	(209	)	-
Project support	1,098		221	1,185		367
Wages and benefits	699		424	964		1,007
	2,771		847	3,389		1,916
Antioquia, Colombia
Assaying	2		-	2		-
Land and permitting	6		-	6		-
Project support	45		-	45		-
Professional fees	26		-	26		-
Wages and benefits	62		-	62		-
	141		-	141		-
Mineral property expense	2,912		847	3,530		1,916

Mineral property expenses consist of direct drilling, personnel, community, resource reporting and other exploration expenses as outlined above, as well as indirect project support expenses such as fixed wing charters, helicopter support, fuel, and other camp operation costs. Cumulative mineral properties expense in Alaska from the initial earn-in agreement on the property in 2004 to August 31, 2015 is $57.2 million. Cumulative mineral properties expense in Colombia from the acquisition date to August 31, 2015 is $0.1 million.