Mineral properties and development costs

9 Months Ended

Aug. 31, 2016

Mineral properties and development costs [Text Block]

5 Mineral properties and development costs

			in thousands of dollars
	November 30, 2015	Acquisitioncosts	August 31, 2016
	$	$	$
Alaska, USA
Ambler (a)	26,586	-	26,586
Bornite (b)	4,000	-	4,000
	30,586	-	30,586

			in thousands of dollars
	November 30, 2014	Acquisitioncosts	November 30, 2015
	$	$	$
Alaska, USA
Ambler (a)	26,586	-	26,586
Bornite (b)	4,000	-	4,000
	30,586		30,586

(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 Trilogy’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 Trilogy 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) Mineral properties expense

The following table summarizes mineral properties expense for the three and nine months ended August 31, 2016 and 2015.

					in thousands of dollars
	Three months ended				Nine months ended
	August 31, 2016		August 31, 2015		August 31, 2016		August 31, 2015
	$		$		$		$
Alaska, USA
Community	63		56		184		165
Drilling	712		701		712		701
Engineering	191		254		410		271
Environmental	212		73		235		77
Geochemistry and geophysics	28		34		41		34
Land and permitting	113		65		322		201
Other income	(34	)	(209	)	(34	)	(209	)
Project support	1,030		1,098		1,136		1,185
Wages and benefits	762		699		1,061		964
	3,077		2,771		4,067		3,389

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, 2016 is $62.0 million and cumulative acquisition costs are $30.6 million totaling $92.6 million spent to date.