Mineral properties and development costs

6 Months Ended

May 31, 2016

Mineral properties and development costs [Text Block]

4 Mineral properties and development costs

			in thousands of dollars
	November 30, 2015	Acquisition costs	May 31, 2016
	$	$	$
Alaska, USA
Ambler (a)	26,586	-	26,586
Bornite (b)	4,000	-	4,000
Antioquia, Colombia
Titiribi (c)	3,264	-	3,264
	33,850	-	33,850

			in thousands of dollars
	November 30, 2014	Acquisition costs	November 30, 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 AGC, 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. The fair value of these cash payments were $11.1 million and $10.3 million, respectively, at the transaction date valued using a discount rate of approximately 8%. The January 2011 payment was made by NovaGold on January 7, 2011 and the January 2012 payment was made by NovaGold, in advance, on August 5, 2011. Total fair value of the consideration was $26.6 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 (currently, NovaCopper US) 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 by NovaCopper US on October 17, 2011 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 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. NANA has not exercised their right to appoint a board member at this time. 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, including 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 amount of which is determined by the classification of land from which production originates.

(c) Titiribi

On June 19, 2015, NovaCopper completed the acquisition of Sunward. As a result, the Company, through 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 six months ended May 31, 2016 and 2015.

			in thousands of dollars
	Three months ended			Six months ended
	May 31, 2016	May 31, 2015	May 31, 2016	May 31, 2015
	$	$	$	$
Alaska, USA
Community	67	52	122	110
Engineering	46	13	219	17
Environmental	15	4	23	4
Geochemistry and geophysics	1	-	13	-
Land and permitting	111	69	209	135
Project support	67	38	106	87
Wages and benefits	150	115	298	265
	457	291	990	618
Antioquia, Colombia
Assaying	5	-	6	-
Land and permitting	8	-	14	-
Project support	49	-	99	-
Professional fees	28	-	48	-
Wages and benefits	64	-	121	-
	154	-	288	-
Mineral property expense	611	291	1,278	618

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 May 31, 2016 is $58.9 million and cumulative acquisition costs are $30.6 million totaling $89.5 million spent to date. Cumulative mineral properties expense in Colombia from the acquisition date of June 19, 2015 to May 31, 2016 is $0.6 million. During 2016, the Company classified certain lobbyist expenses previously recorded as land and permitting to community resulting in a reclassification adjustment of $0.03 million and $0.06 million respectively for the three and six months ended May 31, 2015 on the table above summarizing the mineral properties expense.