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Donlin Creek News 2004
vo lo-\ v 'Donlin Creek narrows power options By Patricia Liles For the Journal Placer Dome Inc.,working on a pre-feasibility study for the large Donlin Creek gold mine project,has narrowed its consideration of electric power options from 11 to three,according to project manager Gregg Bush. Near Crooked Creek village on the Kuskokwim River,about 250 miles west of Anchorage,Donlin Creek has an estimated 28 million ounces of potential gold resources. A requirement for 70 megawatts of power is a big challenge facing the project,however.The three options selected by Placer Dome include two off- site power sources,both of which would require transmission lines to the project,Bush said.One involves connecting Donlin Creek to the existing Railbelt power grid,probably at Nenana. The other involves building a coal-fired plant at Bethel and erecting a 191- mile transmission line up the Kuskokwim River,a plan proposed by Calista Corp.,the regional Native corporation that owns the mineral rights where the mine could be developed. Placer Dome is also considering an on-site power supply of either diesel or LPG-powered generators to provide the power needed for the planned large open-pit gold mine and mill,Bush said. The company selected these three options after requesting "expressions of interest"from local and international energy companies to provide power to the remote project.Now,the mining company has asked for specific cost details for the top three considerations,Bush said.The information is requested by mid-September to be included in the company's pre-feasibility study. The Alaska Energy Authority,a sister state development corporation to the Alaska Industrial Development and Export Authority,is helping coordinate studies of various power supply options to the mine and communities in the region. Becky Gay,spokeswoman for the AEA,said development of the Donlin Creek gold deposit located in the upper Kuskokwim River Valley presents a fairly typical scenario for expansion plans considered by Alaska's electric power utilities. "It's not really unique,"she said."Every remote mine site in Alaska has to deal with this.The biggest hurdle to get over is how to get power to the project." http://www.alaskajournal.com/cgi-bin/printme.pl Page 1 of 2 6/28/2004 Uncertainty of the project's development and the timing remain key issues, Gay said. "The mine needs the power,but the power people (the regional electric utilities)need the mine to make it work.The mine has to be going before the load is there,"she said. "Government is looking for the mine to make a decision,then we'll do a lot more work on this.No one wants to spend a lot more money if there is not going to be a mine." Capacity for Donlin Creek exists on the Railbelt power grid on its northern end at the now shuttered Healy Clean Coal Project.Capacity also exists at some military coal-fired plants in the Interior,Gay said."They've already got the Healy coal mine and there is a lot of capacity there that is very readily available,"Gay said. Building a 400-mile transmission line connecting with Donlin Creek might be the more difficult hurdle to overcome. "Bringing power off the grid makes sense,if people can swallow the cost of a transmission line,"she added. Steve Haagenson,president and CEO of Golden Valley Electric Association, Interior Alaska's electric provider,said his utility would probably have to add generation capacity to accommodate Donlin Creek's demand. Calista's proposal of building a coal fired plant in Bethel also comes with some public policy obstacles,primarily the corporation's choice of British Columbia coal as the cheapest source of fuel. "Where the coal comes from can be a non-starter in a lot of Alaskan minds," Gay said."To import coal in some scenarios might make economic sense,but not political sense." Click here to return to story: http://www.alaskajournal.com/stories/062104/loc__20040621001.shtml ©The Alaska Journal of Commerce Online http://www.alaskajournal.com/cgi-bin/printme.pl Page 2 of 2 6/28/2004 ,Anchorage Daily News|Cana _firm eyes Donlin gold Page 1 of 2 b-\ p aumaeg Fisherman'Ss aoareAnchoragemeePTsaeiei."907-770-1660 ad rn :co mi | Print Page |Close Window Anchorage Daily News Canadian firm eyes Donlin gold PLACER DOME:Permits and power are stumbling blocks. By PAULA DOBBYN Anchorage Daily News (Published:February 21,2003) Plans to develop Donlin Creek,Alaska's largest known gold deposit,got a big boost recently when a major mining company announced plans to become majority owner and inject tens of millions of dollars into the project. Placer Dome,a mining giant,exercised an option to acquire a 70 percent interest in Donlin Creek from NovaGold,a junior mining company based in Vancouver,British Columbia.Under the agreement,Placer Dome will invest $30 million,conduct a feasibility study and commit to turning the Western Alaska prospect into a working gold mine by 2007,producing no fewer than 600,000 ounces a year. British Columbia-based Placer Dome currently has a 30 percent stake in Donlin Creek,with NovaGold owning the rest.The joint venture's ownership structure would flip-flop after Placer Dome meets the conditions of the agreement. The massive Donlin Creek deposit contains at least 28 million ounces of gold.It ranks as the 16th largest gold deposit in the world,said Rick Van Nieuwenhuyse,NovaGold president. "It's a huge,huge resource,"Van Nieuwenhuyse told participants Thursday at the Pac Com conference in Anchorage. But Donlin Creek needs to clear a slew of hurdles before production can begin and "there are plenty of places to trip and fall,"Van Nieuwenhuyse said. Permits and power are two main obstacles. The mammoth open-pit mine needs a stack of state and federal permits.Even if the state streamlines the permitting process as it is expected to do under Gov.Frank Murkowski,Donlin Creek must comply with the National Environmental Policy Act and clearing NEPA can take several years,he said: "It's an ugly reality." A power source is the other big mountain that needs to be moved.Donlin Creek is located on the tundra expanses of Western Alaska,far from any electrical lines. Two Native firms,Calista Corp.and the Kuskokwim Corp.,which own the mineral rights and land at Donlin,are trying to find a way to power the mine and bring cheaper electricity to their http://www.adn.com/business/v-printer/story/2655107p-2697454c.html 2/21/2003 Anchorage Daily News |CanaQ yim eyes Donlin gold 0G .Page 2 of 2 rural shareholders.A subsidiary of Calista,the Bethel-based corporation for the vast Yukon- Kuskokwim region,has hired an energy consultant who said Thursday that a coal-fired plant in Bethel looks like the cheapest option. The plant would run on a yearly supply of some 400,000 tons of coal shipped to Bethel from British Columbia,said Frank Bettine,the consultant.A transmission line would bring the power to the mine., Using Alaska's huge storehouse of coal to power Donlin isn't a possibility in the short term because of cost,said Bettine. A transmission line from Nenana is also under consideration.But one of the attractive features of a Bethel coal plant would be the estimated 240 jobs it would directly and indirectly create,he said. Also,if Bethel had a coal plant,power lines would snake between it and dozens of villages in the Y-K region that would lower the staggering electricity bills residents now pay,he said. But convincing potential state lenders,such as the Alaska Industrial Export and Development Authority or the Denali Commission,to invest in a power plant that uses foreign coal could be a tough sell,Van Nieuwenhuyse acknowledged. "I can't imagine a state (agency)funding a Canadian coal project,"he said,adding that NovaGold and Placer Dome are also studying how to best power the mine. Despite the permitting hurdles and the unknowns about energy,the prospect of 1 million ounces of gold a year waiting to be dug from the earth makes Donlin Creek entirely viable,Van Nieuwenhuyse said. "The story is just beginning here." Daily News reporter Paula Dobbyn can be reached at pdobbyn@adn.com or 257-4317. Print Page |!Close Window'| Copyright ©2003 The Anchorage Daily News (www.adn.com) http://www.adn.com/business/v-printer/story/2655107p-2697454c.html 2/21/2003 Page 14 ©March 16,2003 ¢Alaska Journal of Commerce Lyle Dah.CA#euie March estimates for Donlin Creek gold expected to grow By Tim Bradner Alaska Journal of Commerce New gold resource estimates for the large Donlin Creek gold project near the Kuskokwim River will be released by the end of March by NovaGold Resources Inc.and Placer Dome U.S.Inc. The new estimate,being developed by both Placer and NovaGold,will include results from exploration drilling in po MININGS November and December and is expected to result in an increase in the gold resources measured and indicated by exploration drilling,according to NovaGold president Rick Van Nieuwenhuyse. Development of the Donlin Creek gold project is being watched closely.Although the s project faces big challenges because of its remote location and the need for large amounts of power,it is the 16th largest gold discovery ever made,according to Curt Freeman,president of Avalon Development Corp.,a Fairbanks- based minerals consulting firm. The Journal of Commerce reported incorrectly March 2 that the project will require long-term gold prices of $350 per ounce.Van Nieuwenhuyse said the project is profitable at $300 per ounce. The Journal also reported incorrectly that the two develop- ment scenarios being considered by Placer and NovaGold are a mine producing 30,000 tons per day or 60,000 tons per day.Van Nieuwenhuyse said the two sce- narios involve production of either 20,000 tons per day or 30,000 tons "THE REALESTATE CORNER reat hore pore ceersBrandDNewOffice/Retail Development To be built spring of 2003 QO Abbott Road directly across from the new Fred Meyer Q First Floor -Professional Office or Retail 1800-3600 SF Q Second Floor -Professional Office or Medical Office 2100-8400 SF Chambers Commercial Real Estate Bruce A.Chambers-Owner/Broker 907-565-5665 bachambers@gci.net per day. Placer now has rights to acquire 70 percent of the gold project if it meets terms of its agreement with NovaGold,which include funding a mine feasibility study and making a decision to develop the mine in 2007,Van Nieuwenhuyse said. Earlier estimates of the gold resource at Donlin Creek have included results from drilling only through September,2002, Van Nieuwenhuyse said.The new estimate will include all drilling to date. As a U.S.-registered company, Placer is required to release only resources that are measured and indicated,a category estimated on the basis of drill holes spaced 25 meters to 50 meters apart. NovaGold,as a Canadian company,is permitted to include an additional category of "inferred”resources in its estimates,which are resources measured in drill holes spaced up to 100 meters apart. Most of the gold resource esti- mated at Donlin Creek,which now exceeds 20 million ounces,is in the inferred category.Recent drilling,however,has been in a grid spaced more tightly and is aimed at confirming estimates made earlier by drill holes spaced more widely. The result will be that some of the gold resource now labeled as inferred will be reclassified as measured and indicated,Van Nieuwenhuyse said.That means there will be greater confidence in the estimate,he said. february 2003 volume 21 number 3 TKC Land Policies Revamped after Grueling Work SessionThetaskofcreatinga policy that consistently applies to nearly a million acres is a complex one,especially considering the diversity and bounty of TKC land.Recently, TKC Board of Directors and Staff tackled that task and have revised and updated our Land Policies.It is crucial that our shareholders are aware of these policy changes.Ina huge team effort that involved hours voicing concerns and prioritizing needs regarding land ;management.Maver Carey,Vice President,says "It gave everyone achance to air their beefs”.After any point was agreed on she had to yell "Stop!Iam going to write that down!”Virtually every concern that was addressed was placed either directly in the Business Plan,or directly in the Land Policies. After another land session on several grueling and tedious work sessions,TKC Board June 13 and 14%2002 the changes to the Land and Staff have revised a beneficial set of policies that will Policies were approved by the Board in the October be reviewed annually.meeting.In a nutshell,the policy emphasizes The first review session took place in April 2002;shareholder benefits and land managementTKChiredafacilitatortosmooththeprogressoftheresponsibilities.A brief synapses of the changes inmeeting,and Staff and the Board of Directors spent eight the land policies are on page 9.continued on page 9 TKC is Online! WWW.kuskokwim.com Check out TKC's new website! www.kuskokwim.com We can be found on the internet now and are up to the mark in the new millenium.Pam Birch of GeoNorth,Inc.worked closely with Vice President Maver Carey to create a fantastic website for the Kuskokwim Corporation.The site is a great resource for shareholders because forms and applications can be downloaded.There is information on dividends,calendar of events, information on the permit program,pictures and bios of the Board and staff,as well as forms for shareholder records and transactions. Take a look at it and let us know what you think. page 1 a, cohen wits Each year TKC prepares a business plan to guide us in achieving our vision and mission. The plan is made up of hundreds of items input from staff members and the Board of Directors. This plan is reviewed by staff regularly (often weekly),and by the Board each quarter. Implementing the business plan in the year 2002 gave us the following gratifying benefits: :Arevised and clearer set of land policies. :A staff that is better trained to manage TKC's land and resources. :A Board of Directors that is actively involved in TKC as well as other regional and Native issues and organizations. -Better informed shareholders that receive educational opportunities. -Investments in assets that are more diversified and have improved performance. There were many accomplishments in 2002;work was done this past year that will be the basis for surveying the remainder of our land selections in 2003 and 2004.Preliminary meetings were held with the Traditional Councils of Upper Kalskag and Napaimute that can lead to finalizing 14(C)(3) distributions in those villages.Land in Chuathbaluk was sold to the Department of Transportation at an opportune time allowing the State of Alaska to start construction on a new and safer airport. TKC participated in many meetings to discuss the obstacles and opportunities regarding the development of a gold mine at Donlin Creek. Also,new generations of shareholders continue to be enrolled and educated. As most everyone knows,not everything was positive in 2002.An unprecedented third year decline in the stock market offset the gains in our other investments.The losses in our stock portfolio caused the corporation to incur a loss of income for the year.However,the stock market decline should not overshadow the corporations many accomplishments during the year. TKC remains a strong and growing company that has reached many goals and is fulfilling its vision and mission. "The Kuskokwim Drift SCHEDULE FOR 2003 February: 1-10 Moose Season March: Week One-Nominating Petitions in Mail for Potential Board Applicants April 15-Board Mtg in Fairbanks 18-Deadline to submit nominating petitions to TKC May May 1-Date of record for the annual meeting May 14-Proxy packets in mail to shareholders June 4-Early Bird Prize Deadline!Proxies due by 5:00pm. 26-Proxy Deadline.Proxies due to proxy tabulators of fice by 5:00pm to be counted for the election 28-Annual Meeting in Lower Kalskag 1:00 pmJuly Enjoy Fish Camp! August- Fall patrol begins September Moose Season begins October 22-Board Meeting in Anchorage November December January 2004- 21-Board Meeting in Aniak Campsite Applications due page 2 wwe moe Tohn &. Daecnie S The Kuskokwim Drift fe Gold will not be required to contribute any additional funding up to the $30 million and at NovaGold's decision Placer Dome will help NovaGold arrange financing for NovaGold's share of the contruction costs. The Donlin Creek Joint Venture will develop plans that address the project's road ”This is great news for the project, for the Calista and Kuskokwim Native Corportations,and for the State of Alaska.”?Rick Van Niewenhuyse President /CEO of NovaGold needs as a part of the "Pre-Feasibility”study that is currently underway.All of the conditions must be met within 5 years of November 13,2002 for Placer Dome to earn their incremental interest.This includes completing a Feasibility Study,spending the Placer Dome will address the project's needs for infrastructure $30 mil towards project development,and making a decision to construct a mine that produces not less than 600,000 ounces of gold per year.) Rick Van Nieuwenhuyse,President and CEO of NovaGold Resources Inc.says "This is great news for the project,for the Calista and Kuskokwim Native Corporations,and for the State of Alaska...We are very pleased that Placer has shown their support for the project...”. NovaGold completed its 70%earn-in in just 16 months.This was an accelerated timeframe for their exploration program they had in agreement with Placer Dome. The Donlin Creek Project could potentially produce over 1 million ounces of gold a year.This would entail a 20,000 to 30,000 tonne per day operation. page 3 Me:W/Tha £-) The Kuskokwim Drift Shareholders Must Inform TKC of Change of Address Unfortunately,there are 34 Class B applications in our pending file because we have not received certified birth certificates or other important documents to complete the enrollment process. These children will not be enrolled and will not be eligible for any future dividends if their paperwork is not sent in.Balassa Doughty,Shareholder Relations Assistant,has been sending notices out to families requesting this information,so please return the items requested as soon as possible. The Shareholder Relations Department continues to process stock transfers for those shareholders holding Class A stock who have passed away.We follow specific procedures and it requires the assistance of family members.When you receive the paperwork in the mail regarding your relatives'stock transfers please take the time to fill out the information and send it back to Shareholder Relations Asstistant Ballasa Doughty our office.In addition,having a current will on file precisely tells us who you want your stock to go to.If you would like a current will form,please contact our office. It's probably one of the last things on your mind,but Balassa states,"It's really important that you let TKC know when you move so we can send dividends and any other shareholder information to the correct address.”Please also update us when you have changed your name for any reason. We appreciate your help in keeping our shareholder records updated.Included is a change of address form to use to update your records.If you have any other questions please call Balassa Doughty at 1-800-478-2171 (within Alaska,outside of Anchorage)or (907)243-2944 ext. 100. The Kuskokwim Drift is published by The Kuskokwim Corporation for distribution to TKC shareholders.Corporate offices arelocatedat4300BStreet,Suite 207,Anchorage,Alaska 99503.Telephone (907)243-2944 (within Anchorage,outside Alaska)or within Alaska 1-800-478-2171,Facsimile (907)243-2984. The Kuskokwim Corporation Board of Directors are:Leo Morgan,Chairman,Wassilie Kameroff ,Vice Chairman,Cynthia Bender, Secretary/Treasurer,Members:Glenn Fredericks,Angela Morgan,Kathleen Hoffman,Annie Morgan,Iyana Gusty,Ruth Vaska- Birky,Mona Morrow,Herman Morgan,and Hanna Alexie-Bennis. Staff include:President/CEO Bob Ballow,Vice President Maver Carey,Accountant/Bookkeeper Heather Anderson,Shareholder Relations Assistant Balassa Doughty,and Land Manager Rachel Klein. i ADDRESS CHANGE FORM Name: Date of Birth: Old Address: New Address: Telephone Number:Email: Message Number: Full Name(s)of family members whose address changes with yours: Please Send To TKC Shareholder Relations 4300 B St.Ste 207,Anchorage,AK 99503 page 4 , The Kuskokwim Drift - CONDOLENCES... Our thoughts with thefriends andfamilies of those shareholders who have passed away recently: Agnes E.Charles Iftukim Evan Wassilie Evan Sharon L.Goodwin Rosie J.Heckman Stanley R.Kameroff Ellen D.Kong Raphael Kupanoak Jr. Mary J.Newman Fred W.Nicoli Sinka Williams Sr. Agnes Charles 1914-2003 Our sympathy and regrets go out to the many shareholders that are experiencing the loss of the late Agnes Charles.The matriarch of the Hoffman-Lind family passed away on December 29,2002 at the Holy Family Assisted Living Home in Anchorage. Agnes was a "plain,no- nonsense elder known and respected by everyone up and down the Kuskokwim”.She was a loving mother,grandmother,and great-grandmother.She leaves behind seven children;Delores Matter,Elizabeth Murphy,Bertha Kristovich,Agnes Beans,Mary Frances Charles,William Charles, and Thomas Charles.She also leaves 23 grandchildren,21 great- grandchildren,three great-great grandchildren,and numerous nieces and nephews. 12/29/02 7/01/02 11/17/02 11/15/02 02/04/03 10/05/02 7/24/02 10/09/02 11/14/02 7/01/02 7/20/02 Agnes spent 92 years on the Kuskokwim.She was the Postmaster at Napaimute for a number of years,then worked as a supervisor at the Alaska Native Hospital in Bethel.After she retired,Agnes and her late husband,Benjamin Charles, returned to her beloved riverbank page 5 home in Napaimute.They lived a happy subsistence lifestyle until Benjamin's death in 1982. Agnes made a powerful impact on many lives during her 92 years and will be greatly missed.She leaves behind a legacy of strong will,solid faith,and loving family. « The Kuskokwim Drift Campsite Permits are Renewed Annually For Shareholders Even though the ground is covered ,in -snow, the river is frozen,and long summer days at fish camp seem far away,it is time to think about Shareholder Campsites.Campsite permits must be renewed now for the year 2003.The permits are TKC's way of allowing shareholders the benefit of TKC land for personal-use and enjoyment. Recently all prior campsite holders were mailed a form for renewal along with an envelope to mail back the form.It is very important that these are sent back to the Anchorage office. Thanks to those of you that have already turned them in!Campsites must be renewed annually;once renewed they are valid until the 31**of December of 2003. If you would like to change the location or discontinue use of your campsite you must contact Rachel Klein,Land Manager,in Anchorage at 1-800- 478-2171 X102.If you no longer wish to use your campsite you are required to remove any improvements and reasonably restore the campsite to its previous condition.This includes treating and covering outhouse pits. Please remember that. Campsites are on Corporation land.Permits are non- transferable and cannot be leased,subleased,or assigned by the permit holder.Permanent structures shall not be built. Whether you are out snowmachining or running your dogs right now,or just fantasizing about the warmer sweet days of summer ahead,please renew your permit as soon as possible so you can enjoy your Campsite! Alexie,Sakar Astbury Jr.,Steven Bobby,Judy Burns,Maifa Derendy,Jesse J.Ill Fredericks,Albert Fredericks,Barry Fredericks,Genee Fredericks,Tracy Gregory,Josephine L. Ignatti,Ignatti Janasik,Alina M John,Robert G Jr. Kameroff,Joe F Jr Laraux,Nancy Lopez,Marina Mapel,Paul B McKindy,Gregory Nick,Rose Notti,Frederick A Overton,Samuel J Passamika,James Paul,Wassillie Pitka Jr.,Stanley Shriner,Valerie T. Simpson,Dawn ITF Daniel Dick-Simpson Standiey,John C. Stanyer,Kurt D Steeves,Ray D Stoner,Glenn L Tom,Phillip Turner,Everet Wasky,Wassillie Wolf,Jr.Richard A If your name is on this list--TKC OWES YOU MONEY!This is a list of shareholders with outstanding dividends.If your name is on the list, please contact Heather Anderson at (907)243-2944, ext.107,or toll-free inside Alaska at (800)478-2171, ext.107.She will update your shareholder record and start the process of getting you a check. Page 6. The Kuskokwim Drift TKC Shareholder Records Department does not have addresses for the following shareholders.If your name is on the list,please contact Balassa Doughty at 907-243-2944,or 1-800-478-2171 (toll free in Alaska only),Ext.100,to update your address. Sakar Alexie Steven Astbury,Jr. Judy Bobby Maria Cook Jesse J.Derendy Ill Tracy Fredericks Josephine L.Gregory Judy A.Gregory William J.Gregory Martha John Edward Leppala Peter Levi Marina K.Lopez Golga Luke Gregory McKindy Rose Nick Dana Notti Samuel J.Overton Travis J.Peterson Stanley Pitka,Jr. Riley Rice Marcie Sherer Valerie T.Shriner Dawn Simpson John C.Standley Glenn L.Stoner Phillip Tom Thomas Tom Everett Turner Albert K.Vanderpool Wassilie Wasky Bobby R.Zaukar Can you imagine receiving a check for $3,175.18 that you never knew you had coming? Recently,TKC found a LOST shareholder that had never received her Jackson;she currently resides in Gretna, Louisiana. As an infant in 1971,non-shareholder parents adopted Christina.Her parents had the foresight to enroll Christina as a TKC shareholder.Unfortunately, her parents moved without updating the Corporation with their address;and as a result TKC lost track of Christina.TKC set aside her dividends hoping to find her someday. Recently,Christina's mother had her to write to Calista,to update their shareholder records.By chance,Balassa Doughty,our TKC Shareholder Relations Assistant,called Calista and received an updated address for Christina.Christina was very surprised when TKC called her and told her she had dividends from the years 1980 to 2002,totaling $3,175.18.She said,"Wow!I can pay off my car!” The Corporation also sent her Class B applications for her children. .Christina's story is an excellent example of why TKC needs to make sure that we have updated information.Please notify us when you move,change your name,or have children. If shareholders do not have an updated address,they willnotreceivevaluableinformationTKCsends!The annual report and proxies will be mailed in the near future.If any of your information is not current with TKC,NOW is a good time to update it. The necessary forms to update your information can be obtained off of the TKC website www.kuskokwim.com,by calling (907) 243-2944 or toll-free in Alaska at (800)478-2171,or by writing us at 4300 B Street,Suite 207,Anchorage,AK 99503. Thank you to all shareholders that have kept their information current. page 7 dividend check.Her name is Christina The Kuskokwim Drift New Staff:Rachel Klein hired by TKC as Land Manager Rachel Klein was hired on December Ist,2002 as Land Manager.She will be responsible for a variety of land related duties and assisting management with maintaining over 950,000 acres of The Kuskokwim Corporation's surface estate lands. Rachel has a familiarity with the Kuskokwim region;she has worked with the Alaska Department of Fish &Game Subsistence Division out of Bethel seasonally for the past six years. Rachel has _traveled independently to over 30 villages on the Kuskokwim River collecting subsistence and commercial fisheries data.She also has experience in land-use,permitting, environmental issues,and The Kuskokwim Corporation is currently hiring an Office Manager for the Aniak office. This position manages a variety of general office activities and assists the land manager in land related activities. This person will assist with such duties as administering TKC's permits program,act as a e liaison with the public for land and>shareholder issues,manage the communicating with State and federal entities.She has spent time working directly with community residents,tribal councils,elders,city managers and school districts as well as working remotely at various field camps. Rachel Klein is born and raised in Alaska.After attending high school in Anchorage,she graduated with a Resource Economics degree from the Colorado College in 1995.Since then she has worked in many places all over Alaska;Bethel, Dutch Harbor,King Salmon, Dillingham,Homer,St.Paul,and Togiak. She is currently building a home in Girdwood,AK.She spends her spare time downhill skiing and enjoying the outdoors. Rachel can be reached at the Anchorage office at 907-243-2944 X102 Aniak office building,and assistwithKuskokwimEducational Foundation (KEF)functions.Skills needed are general office and clerical skills,ability to read and interpret maps,and the ability to take minutes for the Board of Director meetings in Aniak. Computer skills needed include Microsoft Word and Excel. Must be highly organized and have excellent writing skills;including page 8 experience with writing articles, reports and general correspondence. Must be able to work independently with minimum beingsupervisionwhile responsible and punctual. For more details or for an application,please contact TKC's Anchorage office at (907)243- 2944 or 1-800-478-2171. The Kuskokwim Drift View of the Chugach Range from TKC's Anchorage Office The Kuskokwim Corporation's Land Policy Changes: continued from page 1 e An additional area of Communications was added to the 12 main sections of land priority.This involves a greater effort to communicate with shareholders,surrounding landowners,and government agencies.TKC 's Land e An area for research of potential opportunities for economic developmentPolieywasadded,with emphasis on considering social impacts.Chang:es ;e A section was added to establish a Land Information System to track and .ere monitor our natural resources.Accepted By e A policy was added that focuses on minimizing environmental risk to TKCtheBoardofland-by partnering with DEC or related agencies and monitoring projectsrocorrs2onadjacentlands.000 er 22,e A section was emphasisied to take a stand to protect resources. e Apolicy was set that there will be no sale of TKC land without Board approval. e Anarea was added emphasizing that TKC will work with Traditional Councils on 14(c)(3)land issues;be sure there is a written agreement in place,be sure actions are beneficial to community. e Anew policy was added that states there will be no trapping on TKC land by non-shareholders.No grandfather rights. e Noguidirg by non-shareholders.No grandfather rights.TKC guides can only take non-shareholder clients on TKC land if they have proper permits. e Apolicy was added in the area of Water to monitor other owners on Kuskokwim. e Anarea was added that states trespass will be pursued aggressively e Steps will be taken to assure fire prevention e TKC will work closely with parties involved in mining efforts.We will promote shareholder hire and planning responsibility for effected villages. e Artifacts that are uncovered or found must be reported immediately to TKC office.. A detailed description of these objectives is listed in the Land Policy documents.If any shareholder would like a copy of TKC's land policies,contact Rachel Klein,Land Manager,at 1-800-478-2171. page 9 4 The Kuskokwim Drift There are four (4)Board seats up for election at the 2003 Annual Shareholders'Meeting.These are At- Large seats,meaning there are no residency requirements for Board members.These four Board seat terms expire in the year 2006.According to the Corporation's bylaws,to be eligible for a Board seat,you must be: 1.18 years of age or older at the time of the next election of Directors (by June 28,2003);and 2.An Alaska Native shareholder of the corporation entitled to vote,holding Class A or Class B stock. Four (4)Board seats are up for election this year (2002):Seat I,Seat J,Seat K,and Seat L.i Board Members who currently serve on the seats that are up for election Include: Seat I:Glenn Fredericks Seat J:Leo Morgan Seat K:Ruth Vaska-Birky Seat L:Annle S.Morgan Please keep in mind it is up to each of those individuals if they are going to run in this election.Nominating petitions will be mailed on March 10 to all shareholders over the age of 18.Eligible shareholders interested in running for the Board of Directors must fill out the nominating petition and mail it to TKC by 5:00 p.m.April 18, 2003.placa aD a a DD i a a ee ie aed deedatestoremember ANNUAL MEETING el,determining @ quorum and voting at an annualSaturday,June 28,2003 meeting.In obtaining this record the Board of Lower Kalskag,AK <Directors closes the shareholder record books for ©a stated period.This date is fixed in advance as the date of record for determination ofMarch10,2003 -Nominating petitions in the mail to all shareholders interested in running 2 shareholders. for TKC's Board of Directors May 14,2003 -Proxy packages mailed to all eligible shareholders over the age of 18.This package contains the notice of the Annual April 18,2003 -Deadline to submit nominating petitions.All candidates interested in running for TKC's Board of Directors must submit this petition.Meeting,Annual Report,Proxy Statement, Proxy and other important information relating to the annual shareholders'meeting.May 1,2003 Annual Meeting Date of Record June 4,2003 Early Bird Prize Drawing Deadline!To be eligible for this prize,proxies May 1,2003 :must be in the tabulators office by 5:00 p.m. Many occasions necessitate a precise record of - how many shareholders TKC has and who these -June 26,2003 -Proxy deadline.Proxies individuals are.This record is used for many must be in the proxy tabulators office by 5:00 purposes such as,notification of shareholders,p.m.to be counted for the election. _page 10 The Kuskokwim Drift Vice President Maver Carey Voted One of Top 40 Under 40 Interested In running for the Board? If you are interested in running for The Kuskokwim Corporation's Board of Directors,nominating petitions will be in the mail the first part of March.Eligible shareholders interested in running must fill out --- the nominating petition and mail it back to TKC by April 18*. Soreegee "Se Se ke .'eatin::So te an sssgesoren +8 ae - Pe ehetn DoNtiyPw : page 11 THE KUSKOKWIM CORPORATION 4300B STREET,SUITE 207 ANCHORAGE,AK 99503 AIDEA Ron Miller 813 W.Northern Lights Blvd. Anchorage,AK 99503 PRESORTED STD US POSTAGE PAID PERMIT 500 ANCHORAGE,AK VOLUME 21 number 3 page 12 MHR-IU-eUUSCIHU IO0:ef Plarer Dome (FRX)9072 73020)P.002/00e &PLACER DOME US.INC. Doniin Craek Joint Vanture 730 |Street,Sulte 100 Anchorage,Alaska Uniled States 99501 FOR IMMEDIATE RELEASE March 3,2005 Anchorage,Alaska -Placer Dome yesterday announced that Stan Foo has been appointed to the position of Project Manager,Alaska effective March 14,2005,In this role,Stan will represent Placer Dome in Alaska and be tha Project Manager for the Donlin Creek Project.The Donlin Creek project Is a joint venture between Placer Dame U.S.Inc.,a subsidiary of Placer Dome Inc.,and NovaGold Resources Alaska,{nc.,a subsidiary of NovaGold Resources Inc.Placer Dome U.S.Inc.is the|manager of the Joint venture._Stan will report to George Paspalas,Senior Vice-President,Projects, Technical,Placer Dome Inc.,and will also support the Donlin Creek Management Committee. Stan Is retuming to Placer Dome where he spent 15 years of his career working for the company.He started In 1984 as a Geologist at the Cortez mine in Nevada.In the role of Chief Geologist,Stan helped Identify numerous gold occurrences Including the Cortez Pipeline discovery.Stan was promoted to General Superintendent at Cortez before he moved to the Bald Mountaln mina to take on the role of Mine and Maintenance Superintendent in 1996.A year later he moved to Alaska,where ha served as Alaska State Manager for Placer Dome for two years before leaving to become an independent mineral resource consultant.Stan has spent the past four years working as the Mining Section Chief at the Alaska Department of Natural Resources. Placer Dome toak the opportunity to thank James Fueg and Lesiie Jensen for thelr ongoing efforts atDonlinCreek.In particular,they acknowledged James for his superior work In the role of Acting Project Manager over the last six months.The Company looks forward to his ongoing contributians as a keymemberoftheprojectteamasworkprogressesatDonilnCreek. For further infermation please contact: Corporate Relations:Jim Chavis (303)740-0263 Head Office Sulte 1600,Bentall IV 1055 Dunsmuir Street (PO Box 49330, Bentall Postal Station) Vancouver,British Columbia Canada V7X 1P1 Tel:(604)682-7082 Fax:(G04)682-7092 (La \\"™ Donlin Creek mine may turn wind to gold Publication Date:01/31/05 'Placer Dome opts for on-site power for potential mine,researches potential for wind power By Patricia Liles For the Journal After spending the last two years working on logistical mine development scenarios for the remote Donlin Creek gold deposit in Southwest Alaska, Placer Dome has decided to investigate using wind generators as an additional alternative electric power source. Part of the company's $11 million budget in 2005 for Donlin Creek will include collecting wind data at the hard rock gold deposit,a relatively low- grade,large mineralized area located about 12 miles from the upper Kuskokwim River village of Crooked Creek,roughly 175 miles northeast of Bethel. "We think there is the potential for wind energy resource,"said James Fueg, acting project manager for Placer Dome,a major mining company that has been working since early 2003 to resolve the power supply issue as well as other infrastructure needs at Donlin Creek. After first considering 11 options,then narrowing those to three scenarios for power generation,Placer Dome has identified its preferred alternative:on-site electrical generation,Fueg said. "The concept is we install 100 percent generation capacity from thermal sources,"he said,referring to the use of diesel or liquid propane gas."We would also install enough wind generation capacity to run the mine when the wind blows." Current mine development scenarios will require between 75 to 80 megawatts of electric power,Fueg said. Donlin Creek is a sulfide deposit,so extraction of the estimated 25 million ounces of gold would likely require an autoclave process,which adds oxygen and heat to crushed ore,increasing a mine's power demand. Resolving that remote power requirement has been a key hurdle for advancement of Donlin Creek.Two other options Placer Dome considered included connection to Alaska's Railbelt power grid,which would require a transmission line several hundred miles across remote land,or construction of a coal-fired power plant near Bethel,which would also require a 191-mile transmission line.A subsidiary of Calista,the Alaska Native regional http://www.alaskajournal.com/cgi-bin/printme.p] Page 1 of 3 2/1/2005 corporation in Southwest Alaska,proposed construction and operation of that coal-fired power plant. Economic and reliability factors caused those off-site options to be ruled out, Fueg said. "For permitting and environmental reasons,they were not as attractive,"he added."Wind has a lot of benefits,economically and from an environmental view.If it could be made to work out there,it will be an attractive option." Fueg stressed that the company has yet to complete its due diligence in reviewing the potential use of wind generation.That will include collecting a year's worth of wind data from the site."We're actively working to pursue this concept,"he said. Placer Dome recently made the decision to explore wind as an alternative power source,Fueg added."What you're seeing is a reflection of the advancement in wind generation technology." The company is working with consultants to further advance the wind generation scenario,he said.Should Placer Dome select wind generation as a power option,it could be a first for the mining industry.Fueg said he is not aware of any operating mine that utilizes wind as a power source. Wind studies are just a part of the company's work plan at Donlin Creek for2005., A large portion of the $11 million budget will go to drilling contractors to complete additional infill drill work.More than 60,000 feet of drilling is planned at Donlin Creek.Fueg said work is scheduled to start in mid to late March and to run throughout the summer. He expects on-site crews to peak between 40 to 50 workers,with multiple core rigs working on-site.The goal of the additional drilling is to convert some of the inferred resource to measured and indicated resources,a more certain geological estimate of the amount of gold in the hard-rock deposits. Donlin Creek hosts a measured and indicated resource of 11 million ounces and an additional inferred resource of 14 million ounces of gold,making it one of the largest undeveloped gold deposits in North America,according to joint venture partner NovaGold Resources. Also in 2005,Placer Dome will complete additional metallurgical work, continue baseline environmental activities,refine design concepts and complete more geotechnical work."The object is that we're trying to complete a bankable pre-feasibility study by the end of the year,"Fueg said. Late in 2004,the company completed an internal scoping study,shared with partner NovaGold.Fueg declined to reveal specific results of that document. http://www.alaskajournal.com/cgi-bin/printme.pl Page 2 of3 2/1/2005 "There was enough encouragement that we are willing to invest this amount of money to do additional drilling ...and to be moving other options forward,"he said."Donlin Creek is still not and is never going to be very, very profitable.It's a low-grade sulfide deposit,but it's extremely large. "With some technology and the work we've done,we think the economics warrant further investigation,"Fueg said. In its agreement with NovaGold,Placer Dome has until 2007 to bring the property to a mine construction decision,earning a 70 percent interest in the project.To do so,Placer Dome must spend $30 million on the property, including producing a feasibility plan and acquiring necessary permits to operate a large-scale mine and mill. Placer Dome began exploring Donlin Creek in the mid-1990s,spending some five years and more than $30 million to define a 13 million ounce gold resource. Despite the size,record-low gold prices and substantial infrastructure hurdles deemed it uneconomic.Pulled out of Alaska in 2001 and Placer Dome optioned the property to NovaGold Resources. A Vancouver,British Columbia-based junior exploration company with other Alaska properties,including the Nome-area Rock Creek gold project currently in the permitting stage,NovaGold earned its 70 percent interest in Donlin Creek in late 2002.NovaGold did so by completing a $10 million exploration program in 16 months.That drilling doubled the size of the estimated gold deposit. Placer Dome's "internal study encouraged them enough,and they had success in a lot of areas they wanted to work on,"said Greg Johnson,NovaGold's vice president of corporate communications and strategic development. "We're very pleased to see them commit one-third of their non-minesite global exploration budget on this development.It's staying right on track." Potentially using "green energy"via wind generators at Donlin Creek is another plus,he said. It's a remote electric generation option that NovaGold will research this year at its Ambler property in Northwestern Alaska,Johnson said."Wind projects are being built all over the world ...we like the idea of green power and low impact." Click here to return to story: http://www.alaskajournal.com/stories/013105/loc_20050131003.shtml ©The Alaska Journal of Commerce Online http://www.alaskajournal.com/cgi-bin/printme.p1 Page 3 of 3 2/1/2005 Oo © Karl Reiche From:bsmith@aidea.org Sent:Monday,June 21,2004 3:22 PM To:Karl Reiche Subject:Alaskajournal.com Story You have received a story from alaskajournal.com Bernie <bsmith@aidea.org>has sent you an article kkekkkkkkekkkkkekkkkkkkkkkkkkkkkkkkkkkekkkkkekkkkk DONLIN CREEK NARROWS POWER OPTIONS The American Creek Camp in Western Alaska has been home to crews working at the Donlin Creek gold deposit.Getting power to the project has been a challenge for the mine's developers. FILE Photo/AJOCc Placer Dome Inc.,working on a pre-feasibility study for the large Donlin Creek gold mine project,has narrowed its consideration of electric power options from 11 to three, according to project manager Gregg Bush. Near Crooked Creek village on the Kuskokwim River,about 250 miles west of Anchorage, Donlin Creek has an estimated 28 million ounces of potential gold resources. A requirement for 70 megawatts of power is a big challenge facing the project,however. The three options selected by Placer Dome include two off-site power sources,both of which would require transmission lines to the project,Bush said.One involves connecting Donlin Creek to the existing Railbelt power grid,probably at Nenana. Len Click here to continue reading this story: http://www.alaskajournal.com/stories/062104/loc_20040621001.shtml kaekkkkkkkkkkkkekkkkkkkkkkekkkkkkkkkkkkkkkkkkkkkk http://alaskajournal.com McGrath plays host to "Kotlik tops AniakMini-Iditarod for third in state hoops Page3 |Kuskokwim Page 11 Corp.picks |new director By Alex DeMarban "Tundra Drums Maver Carey's first week as acting chief executive officer of the Kuskokwim Corp.was a big one,Seven days after donning the new™ hat,Carey had signed an agreement with two other companies,including one of the nation's largest engineer-. ing firms,to create a construction sub- sidiary named Suluutaq. Meaning gold or golden in Yup'ik, Suluutaq is eligible for unlimited and sole-source federal contracts under the Small Business Administration's 8(a) program,which sets aside contracts for disadvantaged or minority-owned businesses. "We are really excited about this,”. Careysaid... ;'Carey became acting CEO on March 25 with the resignation of CEO Trevor Smee.She would not comment on Smee's departure. Smee,reached at home in Anchorage,said he left after only eight months with the company because he accomplished his mission:to take the company to the next level.That meant a systemic change in operations that would allows the company to tap into the lucrative government set-aside market.; "I had come in as a change agent to a.saw CUpany because he accomplished his mission:to take the company to the next level.That meant - a systemic change in operations that would allows the company to tap into the lucrative government set-aside. market.Lo, "I had come in as a change agent to accomplish a specific set of tasks,” said Smee,a former employee with Science Applications International Corp.,a $7 billion defense-engineer- ing firm headquartered in San Diego."My task was to make change,make ithappenandteachpeoplehowtomake it happen.” Smee said he also wanted to see a thareholder manage the company. "Kuskokwin Corp alized its:4 'first positiveincomE year since1999.The corporation had a netFrompage1.°income of $577,688 and com- _prehensive _income of"I think Nativeeorporations $1,754,869.Theincome came".'should be self-managed .and2.Maver has the 'skill to do thatandallIhadtodowascreateatemplate,”he said.During 2003, :Native corporation 'paid'out$268,900in dividendsin 2003.|the:We are looking forward to ifrom the stock:'portfolio and --:real estate-investments.'The another great year in 2004. Kuskokwim Corp.,whic represents more than 2,40 shareholders in the middl Kuskokwim River region,wil also continue to work with are. villages,Calista Corp.,and min ing giant Placer Dome to devel op the Donlin Creek gold min: near Crooked Creek,Care}said. "We hope to keep that rela- tionship open to the benefit o! our shareholders and of getting the mine up and going,”she said.-The Kuskokwim Corp.is also working on a plan to ensure thatannualdividendscontinueto grow,Carey said. She hopes the new sub- sidiary,Suluutaq,pronounced soo-lit-dock,will pay off in shareholder jobs.Suluutaq's partners include Nugget,-an Alaska Native-owned company with 30 years of rural construc- tion experience,and URS,one of the largest engineering firmsinthecountry. Suluutaq will hit the ground running. "We expect to have projects within a matter of weeks,”shesaid. Suluutaq's initial work will be Outside,but Carey hopes it will soon employ shareholders on rural Alaska projects. Carey,who's filled every posi- tion at the seven-person compa- ny but one,said she'!l consider being the Big Boss if and when the question comes up. "Right now,I'm just here -looking out for the best interests of my corporation and the shareholders,”she said. The Beat of the Yukon-Kuskokwim Delta nline 'at www.kusko:net Happy Birthday,Dr.Seuss Page9 ac Tey,te: R.A.Dillon/Tundra DrumsMosesPaukanofSt.Mary's asks a question during the final day of the Regional Economic Summit in Bethel.The March 2-4 summit was co-sponsored by the Calista Corp.and the Association of Village Council Presidents. Economic summit considers creation of regional entity a Donlin Creek seen as tax base for possible Southwest borough ByR.A.Dillon Tundra Drums Village leaders from across Southwest Alaska gathered in Bethel last week to discuss the possibility of 'ating an economic development cor- ition to spur industry growth in the region.- The proposed corporation would be a region-wide entity tasked with maxi- -Mizing economic opportunities in the Yukon-Kuskokwim Delta,said Frank Charles,director of shareholder rela- 'tions for Calista Corp.The development corporation would serve all 56 villages in the region. The Yukon-Kuskokwim Delta is the poorest region in the state.Almost 30 percent of the population lives below the federal poverty line,and unemployment in the region is 23 percent compared with 9 percent for Alaska as a whole, according to the state. Turning those statistics around and developing a sustainable economy in the region was the focus of a three-day sum- mit March 2-4 in Bethel.The Association of Village Council Presidents and Calista sponsored the summit. "We're taking stock of where we are See Summit,page 10 Thursday,March 11,2004 The Tundra Drum Summit... From pagel and what needs to be done,” Charles said."We still need to create a vision for future development in the region.” Organizers of the summit led a call for collaboration between the region's varied city and tribal governments and for-profit village corpora- tions.Competition among organizations in the past has hampered efforts to develop a cohesive economic policy for the region,said Myron Naneng,president of AVCP.A total of 15 regional economic plans have been developed by individual organizations,but the plans have rarely been shared with other entities in the region,he said. A regional economic devel- opment corporation would bring all of those plans togeth- erin an effort to raise the stan- dard of livine for evervone. Photos by 8.A.Dillon/Tundra DrumsMosesPaukanofSt.Mary's asks a question during the final day of the Regional Economic Summit in Bethel.The March 2-4 summit was co-sponsored by the Calista Corp.and the Association of Village CouncilPresidents.. Naneng said. "We need to strategize how to deal with development in the region,”he said."We've got to protect our resources so that we're sure to be the direct beneficiaries of their develop- ment.” Organizers from Calista and AVCP want to establish a board of directors and have the development corporation up and running by May.The next step is to take the information delivered at the summit to the villages to gather their input. "We're going to have to trav- el out to the villages and share this with the rest of the region,”Calista President Matthew Nicolai said. "Hopefully with enough infor- mation,they'll be able to sup- port these issues.” The urgency in creating the development corporation has been prompted by efforts in the Legislature to mandate the for- mation of borough govern-ments,and moves by Sen.Ted Stevens to consolidate federal funding to Alaska's tribes. oe ae Paul John,left,of Toksook Bay and other village leaders worked together to develop a sustainable ecc nomic plan for the Yukon-Kuskokwim Delta at last week's Regional Economic Summit in Bethel. Calista Corp.President Matthew Nicolai explains the difference between a state-mandated borough amfederalregionalization,two options that could be forced on Southwest Alaska in the future.Clori: Simeon of Bethel is also pictured. Organizers of the summit told attendees it was important to stay one step ahead of federal and state attempts to force regionalization on the area. While not advocating for the formation of a borough, Nicolai said it might be the best way to keep local control of development in the region. Previous discussions about forming a borough have been hampered by the lack of an available tax base to fund bor- ough government.That could change if the Donlin Creck gold mine,near Crooked Creek,is opened. While some voiced skepti- cism about the feasibility of forming a borough,there was support among those who attended the summit. "Developments in Washington,D.C.,anc Juneau have compelled us t unite,”said Harold Napoleot of Hooper Bay."I think wi need to be united under on government,such as a bor ough or make ourselves int: one tribe with one tribal gov ernment.We have a commor history and a common lan guage and we should unite a: one tribe.” Technology 1 Small fuel cell produces assifieds big results for Fairbanks Natural Gas eoeesevccecsses PAQGEAD |Business Profile Deborah Naybor inspires local women|in construction with tales from Africa ee ee ee eeenesncePageBI been ene eenececsecccssressesPageG1 ALASKA Alaska J ournal Of Commerce iwan utility repsoutAlaskacoal By the Journal of Commerce 'aiwanese utility and steel com- y officials were in Alaska March 6 ugh March 12 talking with own- of coal deposits in the state. ,oal prices in Pacific Rim mar- sare increasing,and importers in wfacturing nations like Taiwan looking for alternative supplies. {uei-Ming Chen,vice president of dower,Taiwan's government- ied power utility,said his compa- imports 24 million tons of coal rly and would like to buy Alaska 1 if the price terms are right. [aipower is now the largest single ]purchaser in Asia,he said. Jhine-Jine Hsiao,purchasing nager for China Steel,said his npany buys eigt lion tons of 1 yearly.He is }ularly inter- Web site:www.alaskajournal.com Alaska's Paper ot Record «Established 1977 ¢Journal of Aiaska Business Week of March 21,2004 @ Vol.28,No.12 saniadian ca By Tim Bradner Alaska Journal of Commerce A draft feasibility study is due out this month for a proposed $369.5 million,100 megawatt coal-fired power plant in Bethel, which could supply power to the Donlin Creek gold project on a 191-mile electric intertie. However,a proposal to use coal imported from British Colum- bia rather than Alaska coal has emerged as an issue.Consultants to Nuvista Light &Power Co.,a regional electric utility that is supporting the study,say the imported coal is cheaper. Nuvista is a nonprofit subsidiary of Calista Corporation,the regional Alaska Native corporation for the Yukon-Kuskowkim area. Bob Charles,Calista's vice president for public affairs,told the Alaska Energy Policy Task Force March 9 that the project studies are being done in two phases. The first was a Calista region energy needs study completed in mid-2002,he said.The second is a feasibility study for a power plant that would serve the Donlin Creek mine as well as local communities,The second study is about to be released,Charles said.Placer Dome U.S.,a major U.S.mining company,i slopingthemine.Placer said 75 megawatts of power are ni to run al may power mine coal yearly.He is particularly inter- ested in Alaska as a source of coking coal,which is used in steel-making. The delegation was hosted by state of Alaska officials,who handled introductions to Alaska firms.Margy Johnson,head of the state Office of International Trade,coordinated the visit by the delegation. Bob Stiles,president of PacCom Coal,a company formed to market coal from Alaska to Asia,credited the mine.Placer sald '(D>Megawatts OI power are tleeueu vw run the mine. The cost of power for the mine could be a key factor in whether it is economically viable,according to Frank Bettine,a consultant to Nuvista on the power plant project. Charles and Bettine briefed the state energy task force on major conclusions of the study. "Placer Dome is looking at several options for power,and what we don't know is whether they will select this ferred alternative,”Bettine told the task force. Bettine's studies show the coal plant at Bethel could supply project as their pre- power to the mine over the long-distance intertie for about 10 Continued on Page A12ContinuedonPageA12 SECTION A e Movers &Shakers A3 e Viewpoint A4 e Fish Factor A4 e Calendar AD5 ¢Bulletin Board AQ ¢Around the World All SECTION B ¢Wealthbuilders B1 e Oil &Gas Reporter B4 ¢The List B7 SECTION C ¢Legal Notices C3 nf FILE PHOTO/AJOC While coal at the Usibelll mine Is abundant,it may not be of high enough quality to be economically feasible for a proposed coal plant in Bethel. state may target corporate tax income By Tim Bradner Alaska Journal of Commerce If state legislators in Juneau get serious about resolving the state's fiscal gap and start hunting for new revenues,a tempting target will be changes in state corporate income taxes. Changes in how the state taxes corporate income could bring up to an additional $75.6 million to state coffers. In a review of revenue options the House Special Ways and Means Committee has come across what amounts to a loophole in corpo- rate income tax laws. Corporations organized under Subchapter S of the U.S.Internal Revenue Code,as well as partnerships and many LLCs,or Limited Liability Companies,pay no state business income taxes, Under federal IRS rules they are allowed to pass tax liability to shareholders as indi- viduals,rather than having the corporation pay an income tax,according to Chuck Har- lamert,a senior auditor in the Division of Taxation. Because Alaska has no individual income tax,the income is not taxed,Harlamert told the House Ways and Means Committee in a briefing. The policy behind the IRS rules is that the federal government doesn't want the same income taxed twice,once at the corporate level and again after dividend distributions to shareholders.The IRS allows corporations with 75 or fewer shareholders to organize under Subchapter S and pass income to shareholders.This same treatment is allowed for income earned by partnerships and LLCs which choose to report their taxes under Sub- chapter S or as a partnership. That way the income is taxed only once by the federal government,when the sharehold- ers file their tax returns,Harlamert told the legislators in a March 3 briefing. Alaska's laws mirror the federal law.It allows Subchapter S corporations,partner- ships and Limited Liability Companies to pass their taxable income through to share Continued on Page A12 $36,35.42 © $31 North Slope oil price per barrel,week of March 8,2004 Alaska Permanent Fund is) $30.00 F Billionsof$3 310 ou State Department of Revenue $20.00 daily unaudited position +12 katy RECEIVED MAR 2 2 2004 yy ZOVYOHINY MERE 'ed ZEgZT=EOSES ,ig 2 S2327)0 Fer 32 se S ¥gusyt!bzSOURCE:Alaska Permanent Fund Coi are info:www apfc.org INT 20otefMaMYomon Page A12 ©March 21,2004 ¢Alaska Journal of Commerce Alaska coal deemed "uneconomic”for proposed plant Continued from Page Al cents per kilowatt-hour.The cost could be lowered to about 9 cents per kwh if federal and state grants can be obtained,he said. The concern is whether the mine can afford those costs."If the cost of power gets too high, the mine may not be economic,” Bettine told the task force. However,Bettine's studies show that 9 cents per kwh is about the same that it would cost to generate power at the mine using diesel fuel. The difference is that the coal plant would also provide power to Bethel and villages in the area at wholesale costs of about 8 cents per kwh,Charles said. Bettine told the task force that alternative ways of getting power to the mine don't look any better. Generating power at the mine would require large amounts of ALASKA eRe "Mi Available At These FollowingEstablishments:wntow Hotel Captain Cook Sheraton Gi op Hilton Anck =e wrt diesel fuel to be shipped up the Kuskokwim or Yukon rivers and trucked to the mine. The Holitna Basin,about 50 miles northeast of Donlin Creek, has potential for natural gas but no exploration is currently under- way.If any discoveries were made a gas-fired power plant could not be built in time to meet require- ments of the mine,which could be operating in 2010,Bettine said. Long-distance interties from the state's Railbelt region is another possibility.Power could be purchased for about 4.5 cents per kwh from Chugach Electric Association in Anchorage or Gold- en Valley Electric Association in Fairbanks and moved overland to Donlin Creek over interties. But the interties would be 330 to 400 miles long,depending on the routes selected,and when the costs of those are added,the mine would wind up paying more for power than with either on-site gen- eration with diesel or a coal power plant in Bethel,Bettine said. 'Canadian coal at issue The rub with the coal plant is that to be economic it would have to use coal imported from British Columbia rather than coal mined in Alaska,he said. H.A."Red”Boucher,a former lieutenant governor who is a mem- ber of the task force,questioned whether that would be acceptable to many Alaskans. "You're talking about import- 'ing coal when our own Usibelli coal mine is trying to export more coal to South Korea?That's a political hot potato,”if Nuvista is looking for federal or state grants to help lower capital costs for the project. Bettine agreed,and said his group is hoping to work with Usi- belli on ways of using the sub-bitu- minous coal mined at Healy or higher grade coal mined in North- west Alaska on Jands owned by Arctic Slope Regional Corporation. The study is based on using higher-grade British Columbia bituminous coal,he said.If lower- grade subbituminous coal from Healy is used,greater volumes, would be required because the energy content of the coal is lower. Coal storage facilities and equip- ment in the power plant will have to be larger to accommodate the larg- er amounts of subbituminous coal and that would raise capi- tal costs,Bettine said. He said he hopes to work with Usibelli on ways Alaska coal might be used.For example,coal from Usibelli's mine at Healy might be mixed,or blended,with coal from Wishbone Hill,a smaller undeveloped bituminous coal deposit Usibelli owns near Palmer. The mixture might have a blended energy content high enough to use in the proposed Bethel power plant,he told the task force. Steve Denton,vice president for business development at Usi- belli Coal Mine Inc.,agreed that his company's coal has two-thirds of the heating value compared with the British Columbia coal and that more of it would be needed. He pointed out that there are advantages to having coal from a source closer than British Colum- bia,however.International ship- ping costs for coal are now rising and if the costs for shipping B.C. coal at today's rates were included in the study,imported coal would- "You're talking about importing coal when our own Usibelli coal mine is trying to export more coal to South Korea?That's a political hot potato.” -H.A."Red”Boucher -Alaska Energy Policy Task Force n't be economic. Another factor is that commu- nities in the Bethel region might think twice about having a $300 million local energy project that will largely depend on one large mine for most of its power sales, If gold prices went down and the mine suspended operations, even temporarily,or if the mine closed down after 20 years as many metals mines do,local resi- dents would be left having to sup- port a large power plant. The long-distance intertie from the railbelt might make more sense in the long run because it would expose people in the region to less risk,Denton said. LLCs,S-corps have taken advantage of no income tax Continued from Page Al holders Harlamert said. But because there is no person- al income tax in Alaska,no tax is probably low because the depart- ment lacks data to make a precise estimate. Legislators mus careful in considering chany._.)the tax "As soon as you tax S-corporations, everyone will switch gain another $29.6 million, according to the department's estimates. However,most sol are small businesse wietors d Har- The Tundra Dru (ep 2u.7o"4 Calista,AVCP schedule regional economic summit ByJon Grover Tundra Drums Calista Corp.and the Association of Village Council Presidents have planned a regional economic summit to address the stagnant economy of the Yukon-Kuskokwim Delta. The public conference is sched- uled for March 2-4 at Bethel's Yupiit Piciryarait Cultural Center.Summit organizers hope toaligntheeconomicgoalsof local businesses,service organi- zations,tribal governments, Native village and regional cor- porations,and nonprofit entities.'The summit will focus on how to devise a plan to better capture existing resources coming intotheregion,and how to improve the private-sector economy and .encourage more small business- es,said Fred Smith,director for planning and development forAVCP.The three-day gathering will feature speakers from AVCP, Calista,Placer Dome International mining company, the Alaska Native Policy Center, as well as school districts,ener- gy providers and village coun- cils from within the region.Gov. Frank Murkowski has been invited to attend,but it is not clear at this time whether he-willspeaktothosesegatheredatthe.Summmit.””eereThesummithasbeenin the works for many years,though planning for the initial meet- ing has picked up over the last several months. Representatives from Calista and AVCP sought to bring together current and potential major economic players of theregiontocomeupwithaclear and sustainable economic plan."We suffer from rusty bucketsyndrome.Morey comes in,butitflowsbackoutthroughallthe holes in our current system,” said Frank Charles,director of shareholder relations for Calista. The summit will focus on the Bethel and Wade-Hampton cen- sus areas,two of the most eco- nomically depressed regions inthecountry. More than $500 millionin federal and state funding flowed into the region in 2002,with the majority of the money going to urban and out-of-state contrac- tors.Summit organizers hope tokeepmoreofthatmoneyinthepocketsoflocalorganizationsandindividuals."Thereis very little resourcedevelopmentandlimitedinfra- structure.We have a huge dependency on federal and state services,”said Calista's Bob Charles."At present,there is no economic plan to bring the region together into a viable economic situation.” Although an economic plan will not be formalized during .the March 2-4 summit,orga- nizers hope to leave with a framework for future discus- sions and partnerships in -building a viable economy for Western Alaska.de..Next weeks'.meeting will bethefirstinwhatorganizershopewillbeaseriesofeconomicdis- cussions to develop further plan- ning and strategy for the needs of the region.A second summit is already scheduled for December. .include iin the gas pipeline fiscal contract. LegislativeDigestSupplement-No.174. A fewthings aabout taxx base haveechaiged iinnthe3 Upper Tanana"|Continuedfrom page 71)Presently the LBC,'based onthe model borough ::*studies of the early 1990s,and also based onmore recent scenarios requested -opbytheLegislature,has a stated preference for an Upper-Tanana borough thatincludesboththeDeltaregionandtheTokregiontothesoutheastclosertothe oes.Canadian border.There are a few new wrinkles here,however,since past sce-narios presumed that the Tok region would have little tax base unless broughtintoDelta,which for areawide purposes would have access to a pipeline valuetaxbase.However,the possibility of a gas line means the Tok Tegion mighthaveataxbase,or some sort of opportunities for state payments inlieu,de-.-pending on the municipal tax provisions of the so-called "fiscal contract”with .aea"whatever'gasconsortium,m.might end up the developer of a gasPipeline.a ;caeOnonehandthe:initiative of Fairbanks might make Delta willing to con-. -that courtship.Basically,Tokjust isn't interestedin government,and that's access to an oil pipeline tax base,plus the whatever municipal values might be 7 mS --Kuskokwim Port.Authority Lee tively.The bills create a quasi-independent state authority,similar to the Alaska In-dustrial Development and Export Authority (AIDEA),the Alaska Housing Finance| -Yukon-Kuskokwim Delta Native regional corporation,whichis the landownerin'.partnership with Placer Amex on the large Donlin Creek mining project.The Donlin Creek minene project iis located N orth of the Kuskokwim River,lacks”surface access,andis remote from energy sources.The authority could undertake a:variety ¢of projects to assist the Donlin development,but the mostSignificant iiss that of os |.an energy source.nm :eo a i CEng og SE Aa ON aes 7Zecm.ie 'SotON,Bees ,sider a marriage with Tok,althoughthe feeling iin Tok would hardly welcome,3 -| =about that!Thereis also the possibility,if folks get edgy about turf,of a that S .aens'protective”Yukon-Koyukuk borough to the North of Fairbanks,which have i "Two neatly identical bills havebeen filed,one by Sen:J ohn Cowdery,ReAnchor:a -:."age;anda second by Sen.Lyman Hoffman,D-Bethel,as SB-40 and SB-41 respec- Sf Corporation (AHFC),the Alaska Railroad,and others,designed to facilitate develop-esmentintheKuskokwimregion.This concept will require a lot of work,and would be votaalsobeanentityalsoinsearchofbasiccapital,meaning equity then used for leverag-ae_-°ing broader financing.The bill was reportedly requested by Calista Corporation,the »£ridSee?Feese'osafaya2ate easy oe ware Moravian Book Store fate up in air.© BS %aNane4HconBayiet'The Beat of the Yu kon-Kuskokwim Delta )Page 3ume?32,Number 30 HAWAII 75¢See online at www.kusko.: pakiak considers coal plant'PEER RISE SRM RR reteaieS:a de ned Napakiak's IRA Council President Jacob Black,d (left,sits with other J I })I )members of the council ' in the Napakiak School gym Friday,as residents,Results from.Oc.below,heard a presen-'.tation about placing a won't be finalizecoal-powered plant inthevillage.The Calista By Jon-Grover Corp.,regional Native Tundra Drums corporation for the Delta ;region,plans a pro-Voters Tuesday deposeddevelopmentofaCityCouncilfrom:gold mine at 'Doniin incumbents Mike O”:Creek.At full operation,tion officials figure ittheminewouldneedavotesarefinalized.70-megawatt power The Bethel City Cxload.Calista wants vil-night for their last melagesalongtheroutetoissuesbeforethenewbenefitfromtheprojectthroughjobsandlower-Council members SEcostelectricity.-called "dumpster ordi:seegein the business commuPleaseseestoryonwrittenbyViceMayopages8and9.ness in the city to have city was to provide bus oon owners a usage fee fo te °. opener i By Naomi Klouda Tundra Drums The Kuskokwim S_ agreed at the end of request a change in fishing of king salma The Orutsararmuit ask the state to chang tence fishing schedul three weeks in June. proposal. re % git 4m aw vale .aae,tmSPER a aoOhENE =oo REAL MTG DR eat OT ae aad°se ed eR tions for nearly three hours. Napakiak has asked Calista to con-"-sider locating the plant there as one of its options. Speaking in Yup'ik,Nicolai talked about the feasibility study completed by Nuvista Light & Power Co.,a nonprofit wholesale electrical utility formed by Calista, _which had two tasks.One was to find an energy source to run the Donlin Creek Gold Mine when it © comes on line in 2010.The other questions about the safety of locat- ing a power plant in their bend of the Kuskokwim River,which is 20 minutes from Bethel by boat and five minutes by plane.All five species of salmon pass by en route to spawning grounds. Nicolai,who was raised in near- by Kwethluk,said he,too,is con- cerned that the project has to be sensitive to the health of people in the region,to preserving salmonbedsandtotheenvironmentin A lengthy list of environmentalagencieswouldneedto.evaluatetheenvironmentalimpactstudies. once those are complete,Nicolai said.These include the Alaska Coastal Zone Management,the Environmental Protection Agency, USS.Fish and Wildlife,as well as conservation agencies charged with protecting bald eagle habitat - and fishing streams,as well as a cultural-historical site survey. Ata later stage,Napakiak would Pressurized BBeech 1900 airliner .7 Day sA.Week Direct Service"Bethel -Anchorage with connections to Dillingham &Fairbanks *plus taxes &fuel surcharge,total $207.87tUpto20ticketsmaybepurchasedbyoneperson,transferable,non-refundable,cash or credit card sales onlynotvalidforunaccompaniedminortravel,not valid for Frontier Flying frequent flyer program credit,travel must be completedbySel,2005mustbepurchasedbyNov4,2004,full rules available at a Frontier ticket counter or at www frontierflying.com :Anchorage(ANC)Bethel(BET)Dillingham(DLG)Fairbanks(FAI)' BETHEL ANCHORAGE Mon-Tue-Wed-Thu-Fri-Sat ANCHORAGE FAIRBANKS. Mon-Tue-Wed-Thu-Fri-Sat - 523 LvBET 3:30p ArANC 4:15p 522 LyANC 1:15p ArBET 'Sun- 599 LvANC 5:45p Ar.FAI Mon-Tue-Wed-Thu-Fri-Sun 7:00p 2:45p © 571 LvANC'8:30p ArFAI 9:40p 521 LyBET 2:45p ArANC 4:15p520LvANC12:30p Ar BET ANCHORAGE 'Mon-Tue-Wed-Thu-Fri-Sun DILLINGHAM 2:00 720 LvANC 4:45p ArDLG 6:00p.Reservations 1-800-478-6779InDillinghamandBethel,check-in at Grant/Frontier terminal. .In Fairbanks use Gate I at the Fairbanks International Airport. www frantiarflvina eam .From page 1 fuel bills and electricity costs,so that heis left with little money to buy.food.Members of the city council spoke about the need for jobs.The future looks grim for Napakiak,said Daniel Nelson, with few jobs and no end in sighttothehighcostoffuels.; "With the price of fuel going up, it's getting impossible for small "communities with very little -income and few jobs,”Nelson said."It's going to get impossible to keep up with light and fuel bills, especial if PCE (Power CostEqualization)is cut out.” For a partial solution,NapakiakMayorRichardJungcirculateda petition at the meeting asking the City of Bethel to drop the 5 per- cent electricity tax imposed on the sew owen Ue Pats,IWICUI WIthegroup."Thisis a first meeting and wewillhavemoreméétirigs,”said city councilman Daniel Nelson as the gathering came to a close. "There's a newspaper reporter here ...and she needs to go back . and tell people a coal-powered plant isn't (immediately)going to built up there or over there. -"This is just a first hearing,a lis- teming conversation to discuss whether there will be a power plant built here.And probably after the people go out (to tour othe coal plants)and all the question: are answers and if we see how many villages are interested in being connected,then it might become a reality,”Nelson said.© Fish... Technically,it's called a "request for schedule change” that may be taken up by AlaskaBoardofFishintheir2004- 2005 meeting schedule: Normally the board takes up Yukon-Kuskokwim issues on a three-year cycle,which is not .Scheduled for a new hearing. "until January 2007.If the Alaska Board agrees to take up thischangerequest,then the change could take effect before the 2005 fishing season. Working Group members came up with a compromise from three proposals submitted. One submitted by Akiak asked to remove all subsistence win- dows all summer and educate people about protecting the ear- See Fish,page 9 BERING SEA ANIMAL CLINIC _Bob Sept,D.V.M: will be in Bethel Tuesday --Saturday,Oct.5-9 Location:844 6th Avenue,Bethel. LW Cow oe eee tee 'ws Aonn” Page8October7,27,2004 phetantaaetiNapakiak weighs safety,jobs of coal power'plantByNaomiKlouda' Tundra Drums e people of Napakiak gath- the school gym Friday for a "listening conference”on what is at stake if they welcome a coal-fired power plant to their village. .A coal plant hasn't been built anywhere in Alaska,noted Michael Alexie,who serves on the Napakiak IRA Council.The IRAcouncil,the.city council and thevillagecorporationboardofdirec- tors formed a quorum at the meet- ing,though the.discussion involved no voting in this-first chance to discuss what all acknowledged would mean a bigimpactonNapakiak."Thisis big and it's new.We want to hear people's concerns because the idea hasn't been tested in our area.It hasn't been testedin this Delta.Noone in Alaska knows what this is like yet.We don't know what kind of hazards or benefits it might bring,”Alexie said as the meeting began. Calista Corp.president Matthew Nicolai gave a power-point pre-sentation,then village leaders..spoke their minds and asked ques-Mabiefoinicallvedicchours, was to benefit villages along the transmission route by supplying a cheaper source of electricity that could ultimately serve the region. That study concluded a coal-fired plant provided a better alter- native than diesel.Presently there is no utility in the region large enough to run the Donlin Creek mine,which will need a 70-| megawatt power load.Present diesel emissions account for more pollution in Alaska than would result from a coal-fired plant,giv- en today's latest means for con- trolling emissions,Nicolai said. Diesel also is more expensive and is expected to increase more thancoalpurchasedontheworldmar-ket. The proposed mine,14 miles north of Crooked Creek and 180 miles upriver from Bethel,is expected to be the single largest contributor to the cash economy in the region through employing up to 600 people during construc- tion and 400 once operating. Calista has said the mine would also give rise to numerous support industries. Village leaders asked several questions about the safety of locat-i.Ant *need to discuss possibly building aport,Nicolai told the group,show-ing the design needed for off-load-ing coal from a barge:-"'A port is one of our issues,with or without the coal plant,”said Daniel Nelson,Napakiak City Council member.Bethel,which remains under consideration, already has a port and that makes it more feasible to place the plant there.Billy McCann,'a member of the \/.corporation's board of directors, Photo by Nomi /Tundra Drums-Napakiak Mayor Richard Jungcirculatedapetitionthatmany villagers signed asking the City of Bethel to rescind its 5 percent)electricity tax.Napakiak suffers from one of the highest electri-cal costs in the nation at 66 cents per kilowatt hour.. general. "(Subsistence)is an importantpartofourwayourlife,and we are concerned about any potential impact.The design of the plant -would be conscious of that,”he said.©A lengthy list of enviromentalagencieswouldneedtoevaluate told the gathering,"This project may be very good for us,but there .are many pros and cons.We need to also look closely at the cons.”. Several spoke about how the vil- lage's fate suffers most from some of the highest electricity bills in the country.Even a small village home runs up $300 electricity bills per a month,at 66 cents per a kilo- watt hour.To illustrate that,elec- trician Albert Kernak said the school ran up a $1,339 electricity bill in two and half days when they were forced to hook directly into the village electrical plant during an outage Sept.19.Another elder told of his rising fuel bills and electricity costs,so that he is left with little money to village.Since the power is sold tc Napakiak wholesale,Jung rea soned,the tax isn't fair."Bethel doesn't charge sales tax on gro- ceries sold wholesale,”he said. Another problem that has plagued Napakiak is its eroding river banks,which caused the vil- lage to be moved twice in this cen- tury.The land in question for building the power plant,which will need at least a 10-acre space,| is located on solid ground in.the northern village edge,Jung said. "Tt sounds okay to me -it might be okay as long as (the plant)is clean and will help our residents 'with the price of electricity and jobs,”said Jacob Black,president of the IRA Council.But the decid- ing factor will only come after five Napakiak people tour coal pow- ered plants in Salt Lake City and Pittsburgh to see for themselves what kind of circumstances a coal -plant would create,he said. That trip should come within the year,with about 70 additional peo- ple chosen from other villages along the transmission route toalsotourtheplants,Nicolai told the group. (Tin Gan Gant emanation nad ----ih "(€)ISSN #1072-8139] RFP out soon on 100-mile slope road \ November 15,2003 No.21/03IN AIDEA/AEA :Rural road projects move into engineering The state administration's plan for rural resource roads is in high gear.A Request for Proposals for en- gineering and design of a bridge crossing the Colville River and a 102 mile,30-foot wide road from the Dalton Highway to the National Petroleum Reserve- Alaska will be out in mid-2004,sources in the admin- istration say.The bridge could cost $80 million to $120 million,and the road another $150 million.State trans- portation planners are now talking with construction companies about the best way to do the project.It is assumed that a 24-month federal Environmental Im- _pact Statement will be required,so in theory the road could be in construction sometime in 2006.However, where the money will come from for the project is not known,but the working assumption is that it will come from the petroleum industry one way or another. There's a chicken-and-egg problem,though:One ma- jor reason for the road is to make access easier for exploration in the southern North Slope foothills re- gion,where Arctic Slope Regional Corp.is a major landowner along with the state,but there are as yet no discoveries (or significant exploration)in this area. The foothills are also gas-prone,which means devel- opment of any gas discoveries will be tied to progress Continued on page 2 f-> In This Issue: ***Donlin Creek mine logistics ..Page 3 ***Construction income is up _..Page 4 ***New oil construction in 2005 ..Page 6 ***Interior wants timber sold ..Page 6 ***RFP for new Girdwood project ...Page 8 \_/ _Gas producers may want "Alaska”solution for pipeline Details of a new federal energy bill are emerging as we go to press.Alaskans appears to have lost much of what they hoped for in the complex,controversial measure.The bill will likely not include permission to explore the coastal plain of the Arctic National Wildlife Refuge (which has been known for some time)nor a controversial gas price-risk protection tax credit ConocoPhillips was pushing for the big gas pipeline project.It also appears a heavy oil tax-credit will not be included.That proposal could have been a major boost for viscous oil development on the North Slope.(Gov.Frank Murkowski has pinned hopes on increases in viscous oil production as evidence that his plan to grow the state's economy through resource development is working.)There will be now a period of uncertainty as the major North Slope producers think out their next steps.It will be particularly inter- Continued on page 2 Oo General Business: Resource road plan in high gear (Cont) (Continued from page 1)on a gas pipeline.No large oil and gas discoveries have yet been made in NPR-A either,although there are small discoveries.The state has ways to fund this construction without tapping fed- eral highway money (which would take money away from road projects in other parts of Alaska).One method is through the Alaska Industrial Development and Export Authority,which built and owns the port and 57-mile road for the Red Dog Mine.The "Red Dog Model”is for AIDEA to do debt-financing with a guarantee of repayment from industry anda toll-charge for use.The problem is how to get a guarantee and commitment for this project,because until there are oil and gas discoveries the particular companies in- volved may be reluctant to fork out or guarantee $250 million to $270 million for the project.This problem will require some serious thinking. ) Southwest Alaska regional roads Meanwhile,another regional resource road project being planned is a road from Crooked Creek on the Kuskokwim River to the Donlin Creek gold project. Engineering is now underway on this,financed with state funds.The road would be 12 or 14 miles and a 24-to-30 foot width is planned,with costs roughly es- timated at $15 million to $20 million.A barge dock will also need to be built at Crooked Creek.This road could be under construction in 2006,if progress is made_on the Donlin project.Meanwhile,CH2M Hill is due to complete studies of a lower Yukon River port and regional road network by the end of the year.A 60- mile road,also 24-to-30 feet in width,is planned east 'to Donlin Creek (creating a Kuskokwim-to-Yukon road),and a lower-cost road north to the Ophir and Iditarod gold districts will be part of the final plan. That's not all,either.Villagers in Kivalina,in north- west Alaska,are talking with the state about a road to the Red Dog port,which is also planned for expansion into a regional cargo port.Noatak villagers would also like a road link to the existing mine road,which would give them access to the port.The main impetus in both cases is the ability to truck fuel from the port. ak -O Petrofeurm: Final EIS in lower inlet lease sale The U.S.Minerals Management Service issued the Final Environmental Impact Statement for the planned lower Cook Inlet offshore oil and gas lease sale,and a formal announcement of the sale is expected in late November.Some tracts were deleted along the Kenai Peninsula from Kachemak Bay south. EK Oil and gas opponents in Homer are calling for a state "buyback”of coal-bed methane leases in the area.This is unlikely to happen.Gov.Frank Murkowski said it will be tough to "buy.”the leases since they are issued over-the-counter and applicantsdonotpayforthem. oe Energy bil,Alaska loses (Cont) |Continued from page I.esting what ConocoPhillips does.There may be:apro- posal for an "Alaska”solution,some form of state guarantee that would help offset loss of the federal risk-protection measure.This could get really sticky, because this idea,if it gains traction among the com- panies,could get mixed up in the industry's comingnegotiationsonastateStrandedGasActcontract, which are likely to be under way next spring.Of allthecompanies,Exxon Mobil is the one to watch.Old timers remember that in the late 1960s plans for the trans-Alaska oil pipeline didn't really gel until Exxon finally came aboard.History may repeat itself with the gas project.Also,Exxon has a gas-to-liquids al- ternative in its back pocket.The company is very ad- vanced in GTL research and sees the technology asa second option in commercializing its gas on the slope (the GTL fluids can be shipped through the existingoilpipeline). There are still some things in the energy bill that are extremely important for the gas pipeline,of course. The regulatory streamlining provisions.are consid- ered "must have”by all three of the major producers involved,and the accelerated depreciation and fed- eral loan guarantee will be of significant help to theproject.| 2K .Page 2 Alaska Economic Report No,21/03 Supply via Kuskokwim River may not be realistic Huge logistics effort needed for Donlin MineThelogisticsrequiredtoconstructalargegoldmineplannedforDonlinCreek,near the Kuskok-wim Riverin western Alaska,are truly mind-boggling.In presentations to the Alaska Miners Asso- ciation in Anchorage Nov.8,Placer Dome Joint Venture said the construction would require 140,000 tons of equipment,supplies and structural steel moved to the remote site in a two and a half year _construction window,and other 220,000 tons of aggregate material used on the project.The totals above include 5,879 tons of mining equipment,5,879 tons of structural steel,7,345 tons of rebar,_and 18,369 tons of cement. :Once the mine is built,the annual supply requirement will be 237,084 tons of material,which will include 160,000 tons of limestone and 20,000 tons of lime,which are needed for ore processing. The issue Placer faces is how to efficiency get all of this to the remote site.A road from Crooked Creek,on the Kuskokwim River,is now in the planning stages,but bringing all this up the Kuskok- wim River presents serious challenges (it would require two barges a day,"which is stretching the limits of what is practical,”the company says.)Another plan is to build a road from the Yukon River,from Railroad City,an old barge unloading site across the river from Holy Cross.Although the company would probably have some help from the state of Alaska in building these roads and a Yukon River port facility (see our lead article,page 1)it will be expected to pick up a major share of maintenance costs.Also,shipping via the Yukon River adds 550 miles to the shipping distance from Seattle compared with the Kuskokwim River.(The shipping distance on a Kuskokwim route is 2,568 miles compared with 3,118 miles to the lower Yukon.) Lime,limestone need may require a guany,anda supply of coal © Supplying the limestone and lime is a formidable challenge in itself.Placer Dome says there are two regional sources of limestone,one up the Kuskokwim River,near Sleetmute,and a second: downriver,near Aniak.A limestone quarry would be developed at one of the locations.The com- pany has estimated that it will cost about $10 a ton to mine limestone,and $75 a ton to buy lime,as an alternative.If limestone is mined in the region,it will cost an estimated $15/ton to move it by barge from Aniak to Crooked Creek (near the mine)and $19 per ton to move it from Sleetmute. Placer Dome said these costs would probably come down if barge companies can design custom- built barges for the middle and upper Kuskokwim.The numbers cited assume use of the 1,000-ton barges now used on the river.Added to this mix,however,is a requirement for about 18,500 tons of coal,which could also be mined locally,to be used in making lime from limestone. Supplying power to the mine is an entirely separate issue (see our previous reports on this).Basi- cally,80 Megawatts of power are needed.Generating power on site would require 55 million Continued on page 7 Page 3 Alaska Economic Report No.21/03 Alaska Business News Summaries Construction workforce growth slows,but income is up Construction employment growth is slowing in 2003 after more than a decade of vigorous growth,accord- ing to data released from the state Department of Labor and Workforce Development.The industry workforce grew 5.7 percent in 2001 and 6 percent in 2002,but was up 2.7 percent in the first half of 2003 compared with the same period of 2002.Growth has averaged 4 percent annually over the last decade,state labor analysts said.However,workers in construction are earning more.In August this year,Alaska con- struction workers earned $28.72 an hour,nearly two dollars per hour more than last year.Construction workers were also the second-highest paid professionals in Alaska 2002,earning an average of $50,729 a year.Oil and gas workers are the state's highest-paid,averaging $96,158in 2002.The statewide averagepayinallindustrieswas$37,101. DIVIDEND COULD FALL 18%NEXT YEAR:The amount available to fund next year's Permanent Fund dividend is projected to decrease by 18 percent from this year's payment.This could happen even though the fund made hundreds of millions of dollars in the first quarter of its fiscal year,which runs July 1,-. 2003,through June 30,2004.The dividend is based on the fund's profits averaged over five years and the bear market for stocks overlapped three of those years.The Alaska Permanent Fund Corporation said forthe2004dividend,$564 million will be divided among Alaskans who apply for the annual payment.That figure will be $127 million less than the $691 million paid out this fall.In 2001,the peak year,the stategaveout$1.17 billion as dividend.The $26 billion Permanent Fund reported a 3.2 percent return on itsinvestmentsduringthethirdquarter,its second straight quarter with a profit. MENTAL HEALTH LAND SALE COMPLETE:The 2003 state Mental Health Trust Land Office land sale was completed Oct.31,and of 77 parcels offered 48 were sold through sealed bids,according to the state Dept.of Natural Resources.The 48 parcels sold totaled about $2.2 million,about 27 percent aboveappraisedvalue.Proceeds from the sale are managed by the Alaska Mental Trust Authority to supportstatementalhealthprogram.Parcels not sold will be offeredin the next sale., . MEETINGS BOOST ANCHORAGE ECONOMY:Thirty state and regional meetings that took place in 'October in Anchorage brought more than 10,000 people to the city who spent an estimated $4.2 million, according to the Anchorage Convention and Visitors Bureau.While October did not set a record,officialswerestillpleasedwithresultsoftheAlaskaFederationofNativesconvention,the Alaska District ofYouthMinistriesStateYouthConventionandseveralothermeetings. STATE MANDATES LOWER CHUGACH'S RATING:Fitch Ratings of New York downgraded Chugach Electric Association's bond ratings from "A+”to "A”after state regulators ordered changes in the utility's _Yate structure.Fitch followed a similar move by Standard &Poor's when it downgraded the utility'sratingfrom"A-stable”to "A-.”.While the downgrade won't affect the interest payments Chugach makes On its current bonds,it couldincrease the cost of future borrowing.The Alaska Regulatory Authority_ordered Chugach to overhaul its rates.Wholesale rates will drop by 11.3.percent.Small businesses willseean8.9 percent rate cut;large businesses will see rates increase of a little more than a half percent,while home users in parts of Anchorage served by Chugach will get a rate hike of 1.4 percent.Smallbusinesseswillgeta8.9 percent rate cut. Page 4 Alaska Economic Report No,21/03 Resources Supplement November 15,2003 No.21/03Energybrief: Task force grapples with power issues More than anything,major resource development projects like mines need infrastruc- ture,particularly affordable power.Mining development is also serving to strengthen and diversify the state's existing power grid,which helps the entire state.One exampleis how Fort Knox Mine near Fairbanks helped lower power costs for all of Golden Valley Electric .Assoc.'s Interior customers.Now the new Pogo mine near Delta will join the GVEA grid with a 10 MW load demand.In Southeast Alaska,Greens Creek Mine may be the "an- chor”for an extension of the regional power grid from Juneau to small communities onAdmiraltyIsland. The legislatively-created state Energy Task Force has been meeting through the fall,trying to define a format for the group's required report to the Legislature.With a short time frame to work in prior to the convening of the Legislature Jan.11,the task force may need some sort of continued existence to maintain a focus on complex energy issues.Thefirstmission,as defined by the legislative resolution creating it,is a report on railbelt corridorissues,duein January.A report on issues external to the railbelt will followin - March.What the Legislature is looking for is a report that will provide a framework forconsideringfuturestatefunding.¢Utilities have serious issues between them,but as an industry theymust also maintainafriendlylegislativerelationship Ideally,lawmakers would like utilities to reach consensusWhatlawmakerswouldlikeisfortheindustrytocometosome consensus and speakwithonevoice.It perhaps should be no surprise that this may not be possible,at least not without some coaxing.A more likely outcome is that the group will be able to make _ progress in framing theissues that divide railbelt utilities,and secondarily put a menu ofpossibleactionsonthetableforlegislativeconsideration.. Continued on next page Ideas are now emerging for legislative initiatives for 2004Continuedfrompreviouspage¢There are also discussions of an update of the major railbelt energy study done by Black and Veatch in 1998,which was also subject to a peer review analysis by CH2M/Hill. Power "pooling”is more than just floating power over the intertie There are some specific ideas for legislation afoot.Matanuska Electric Association (MEA),one 'of the railbelt utilities,is pushing a proposal for power pooling.From a layperson's point of view, power pooling seems to mean putting all power into a railbelt-wide pool and redistributing it with guarantees to generation providers,including paying for so called "stranded”generation or distribu- tion investment (not being utilized or fully utilized).However,utilities other than MEA have prob-lems with power |pooling,and favor other approaches ¢A carrot is that pooling appears to offer built-in resolutions for things like the state-owned Healy coal plant,presently inactive,and providing return on other state investment. The players:Generators and consumersTherailbeltplayerscanbegenerallycategorized as generating utilities or consumers.The gen- erators are Chugach Electric Association (CEA),Golden Valley Electric Association (GVEA),and Anchorage Municipal Light and Power (ML&P).The big consumer systems,buyers of generation, are the Matanuska Electric Association (MEA)and Homer Electric Association.Also in this mix is the Copper Valley Electric Association,a generator/distributor utility that serves the Copper Valley, the Richardson highway,and Valdez,and which should not be left out of the railbelt equation. The legislative interest -energy efficiency,reliability,and a return on their money The legislative interest is ensuring long range energy planning,the lowest possible regional energy cost,the reliability of energy,defining the rationale for state investment,if such investment is to continue,and the fair allocation of benefits from state subsidy.The state is also a "system owner,”and doesn't necessarily want to be one,owning through the Alaska Industrial Development and Export Authority (AIDEA)pieces of the Fairbanks/Anchorage Intertie,Bradley Lake Hydro on the Kenai Peninsula,and by a whole lot of politics the Healy Clean Coal Plant.The state only re- cently divested itself of ownership interests in the so-called Four Dam Pool.Another interest of the state in pooling or another structure is creating something where it does not have to own facilities orearna"return”on investment. Continued on next page - Page 2 Alaska Economic Report Supplement No.21/03Ee: | | J Differences exist between the "railbelt”utilities Continued from previous page Generation utilities must look out for generation,interests differGeneratingutilitieshaveaninterest.in power pooling and moving wholesale energy throughout the grid.But they are also very concerned with aging of their plants and a strategy for investment and upgrade.Climate also deals a card.Systems like the Fairbanks-centered GVEA,due to the Interior's extreme temperatures,must be very concerned with maintaining generation within the tegion,and reliability.Systems like Copper Valley have a system with little core density and exten- sive rural distribution.The Kenai Peninsula is a mix of rural and urban,and also includes the Seward municipal utility system,which is not served by sufficient intertie capacity There are more immediate railbelt issues,like making the Anchorage/Fairbanks intertie a fully | reliable end-to-end upgraded system.Another issue is the elusive intertie with the Kenai Peninsula. the so-called Southern Intertie,to more firmly plug Bradley Lake hydro capacity into the railbelt - energy reliability system.The state,for its part,would like to find a way to get caught owning . _pieces of systems,like intertie segments,even if it invests in them.Nevertheless,the state is in the position of having to be a railbelt energy referee,and likely an investor,with its best case outcome being a non-owner earning some kind of return on investment.A side issue is the question ofpowerfortheDonlinCreekMine,an 80 megawatt need,and how that project might be served and its risksmanaged.. : One thing everyone agrees on!Thereis one thing everyone agrees on:Energyis the bottom line iin the economy.Itneeds to be aslowcostaspossibleiinthepresentandinthefuture.Bethel coal project now projected at 100 MegawattsEnergyconsultantFrankBettine,on contract with Nuvista Light &Power Co.,presented details of a plan for a 100 Megawatt coal-fired power plant in Bethel to the Alaska Miners Association convention in Anchorage Nov.9.Of the 100 MW capacity,70 MW is reserved for the big Donlin | Creek gold mine project and 30 MW is for villages in the Calista region that would eventually be served (the village load is 15 MW now,but it will likely double by 2020,Bettine said).Bettine completed a "Calista Region Energy Needs Study”in 2002 and is finishing the second phase,the "Donlin Creek Mining Feasibility Study,”in November.The draft of that report will be presented to the client,Nuvista,and will likely be available for public review in December,Bettine said. Bettine looked at a number of alternatives but settled on the coal power plant as the."base”case.It will require a 191-mile iintertie to the Donlin Creek mine,which would cost about $150 million.Continued on next page Page 3 Alaska Economic Report Supplement No.21/03 | ., ._YSS Is coal-fired power an answer for Donlin Creek mine? Continued from previous pageTheadvantageofthisisthat it would be able to immediately serve Bethel and nearby villages (and eventually the region)with a low-tech,lower-cost "single-wire”power transmission line technol- ogy,he said.Bethel now has 5,500 residents and could be served with a "district heating system” based on waste heat from the power plant,Bettine said.Other alternatives considered in the Bettine 'study included a diesel-fired power plant at the mine,which would require about 35 million to 40 'million gallons of fuel to be shipped either via the Kuskokwim or Yukon Rivers (the Kuskokwim option is really off the table,since with 1,000-ton barges limit on the upper Kuskokwim that volume of fuel would require two fuel barges a day moving up the river during the 120-day open-water season).During winter the river ice is too uncertainto support truck supply by ice road.A 300-mile gas pipeline from Cook Inlet's west side proposed by Veco Corp.,was considered,but the idea was |discounted becatise of projected gas supply shortfalls in the inlet area.The prospect of natural gas from the Holitna Basin,about 50 miles from Donlin Creek,was considered,but exploration is just starting there and until gas is found it is not a realistic option,Bettine said.(He acknowledged thathisviewwouldchangeifgasisdiscovered,however)._ Other options considered included a 290-mile intertie from a possible coal-fired power plant in the Beluga coal field west of Anchorage,but this was discounted because the route would have to traverse the northeast corner of the Lake Clark Wilderness Area,which would need congressional approval,which is unlikely.A second route from Beluga would have to cross Rainy Pass,a difficult, _Temote area prone to avalanches.The easiest long-distance intertie route would be a 385-mile path from Nenana,or a 400-mile route that would beentirely on state and private (Native)lands.Thelong-distance intertie options would be 230,000-volt lines.The Nenana route would cost about $350million,Bettine said. .Aside from the permitting issues of a large coal-fired power plant,it appeared to be the most '||cost-effective option although the initial capital cost was large,Bettine said.Generating power with ||coal priced at $53/ton could generate power for $2.15 per million British Thermal Units (mmBtu). Diesel,at $1.05 per gallon,would generate power for $8 per mmBtus.Propane,at $0.65 per gallon, would generate power for $7.65 per mmBtus.Although the initial capital cost of the coal plant is high,if a proposed $125 million federal grant pays down part of the capital expense,the attractive-ness of this prospect is enhanced.And if,after 20 years,the plant's capital investmentis depreci- ated,the cost of power in the region would be lowered to a bargain 4-4.5 cents per KwH,Bettine .said.The real killer in the coal plant,though,it that it is premised on using high-quality bituminous coal from British Columbia,not lower-quality Alaska coals.In our view that creates serious politi-cal problems for the idea,ifpublic funds are to be used. Page 4 Alaska Economic Report Supplement No.21/03 (Continued from left)Meanwhile,Chugach will begin making refunds.Chugach said it will make $4.8millionrefundstoitswholesalecustomers;small businesses will get refunds totalling $500,000.A state, judge put aside Chugach's request to postpone the refunds and rate changes. TAIWAN'S PRESIDENT,LARGE BUSINESS DELEGATION STOPS IN ANCHORAGE:Taiwan Presi- dent Chen Shu-bian was in Anchorage for a day Nov.5.About 100 Taiwanese businessmen came here to. meet him on his trip back from New York,and the event became an opportunity for Alaskan firms to meet potential trade partners.State of Alaska officials organized a special train to take the group,and Alaskan _businessmen,on a trip along Turnagain Arm with a stop at Alyeska Ski Resort. Anchorage Mayor Mark Begich and Anchorage Economic Development Corp.officials were in Seattle and San Francisco,meeting with business leaders and journalists to pitch new business investment in -Anchorage.The group pitched the global logistics hub idea and telecommunications investments. WASHINGTON D.C.THINK TANK GIVES ALASKA LOW PERFORMANCE RANK:The Washington, D.C.-based Corporation for Enterprise Development gave Alaska poor marks for economic performance, awarding a "D”'in categories like business vitality and capacity to grow.Gov.Frank Murkowski's termina-tion of the Alaska Science and Technology Foundation,as a source of public investment in technologyindustries,helped bring the Alaska score down.The score grades sustainability of states'economy as well _as factors like quality of life.The state also ranked lowin student proficiencyin math and reading,but high in access to computers,high school attainment and private lending for investment. IN UPSET ELECTION,TEAMSTER LEADER JERRY HOOD LOSES:In an upset union election,long- time labor leader Jerry Hood lost his bid for reelection to head Teamsters Local 959.Michael Kenny, former union business agent,was elected.The final vote was 1,107 for Kenny and 965 for Hood.TeamstersLocal959isoneofthestate's most influential unions,with 7,000 member.The union represents trucking, government,communication and health workers.Hood felt he lost votes because of his support for Gov. Frank Murkowski,a Republican,in the last election.Teamster rank-and-file normally support Democrats. Hood has held the union's top job since 1994. a oo Alaska Economic Report -33isyGrisandonee,arses oso"&Special Resource Supplement | (|)Billme(__)Check enclosed Annual Subscription:$370/yr.:or in process. Normal rate $245 and $125 for supplement -$370.00/total Name __Title Company Phone. Address,___Fax City/State __Zip |You may faxscribe at (907)522-1761 Since 1974 edioububiister . Page 5 Alaska Economic Report No,21/03 Petro/eum: New Alpine construction set for '04 A $60 million project to expand capacity of Alpine oil field processing facilities will be underway this winter and spring,and due for completion in late 2004, ConocoPhillips Alaska Inc.said.The expanded facil- ity will allow processing of another 5,000 barrels per day of oil.Alpine has been producing an average of 100,000 barrels/day over the last two years,well above its original estimate of 80,000 barrels per day.The field recently passed 100 million barrels of produc- tion.Total estimated recoverable reserves are set at 429 million barrels. aE Alpine satellites:Construction in '05 Construction on small "satellite”oil fields near Al- pine is expected to be underway in the 2004-2005 win- ter.A Draft Environmental Impact Statement cover- ing development of five smaller fields is due out in January,the U.S.Bureau of Land Management said. It will be followed by a final EIS and permits for the projects later in 2004.If final permits are cleared,con- struction would begin that winter. 36 ASRC will lead offshore ANWR test The state Division of Oil and Gas selected ASRC Energy Services as its first choice to draw up prelimi- nary plans for a stratigraphic test well offshore the Arctic National Wildlife Refuge 1002 area.If the deal is finalized,the ASRC company will pull together a plan for the test well.ASRC Energy will solicit com- mitments from others willing to participate in drilling . the well iin the Beaufort Sea during winter 2004-05.eK Three companies now firm on Bristol Bay _Three companies are firmly interested in the 3 mil- lion acres the state is offering for exploration in the Bristol Bay region,north of Naknek and east of Dillingham.One company has submitted an explora- tion license and two sent letters of intent to submit competing proposals,which are due Nov.25.Identi- ties of the companies have not been disclosed. 28K Alaska Economic Report No.21/03 posted on the Internet. Industry spends more than $1.5 billion Even as the oil industry is trying to reduce its costs, it spent more than $1.5 billion a year on goods an services purchased form Alaska businesses in 2002. ConocoPhillips Alaska Inc.,which operates.the |Kuparuk River unit,spent more than $600 million in 2002.BP Exploration,which operates the Prudhoe Bay unit,spent more than $900 million for goods and services.Exxon Mobil does not break out its spend- ing between in-state and out-of-state business,but it - contributes its share of unit costs.Conoco and BP both said that about 85 percent of their third-party spend- ing for Alaska operations goes to in-state businesses.The figures include operation,maintenance and capi- tal spending.- RR Marathon:New gas drilling on Kenai Marathon Oil Co.says it plans to have five gas wells producing soon from the new Ninilchik gas field.The company is also drilling a new development well in its Cannery Loop field near Kenai and plans one more well there this-year,as well as another well at Beaver Creek,near Kasilof.A new onshore exploration well,Kasilof South No.1,is now being drilled to an off- shore Cook Inlet target,searching for gas in the Tyonekformation. RK Timber,mber:Interior wants to market its timberInteriorforestersareworkingwitheconomic devel- opment officials to develop.a plan to market Interior timber.A four-member committee hopes to complete a detailed description of harvestable timber on both | and state and private lands,according to Regional For- ester Chris Maisch.The prospectus will be sent to in- terested companies,distributed at trade shows and EK Need information on the state economy or business trends?Give us a call:(907)522-0195,or e-mail tbradner@ gci.net.. .Page 6 Fisheries. More salmon,but worth less The 2003 salmon harvest of 173 million fish netted harvesters $195 million,but a similar harvest of 174 million salmon in 2001 brought $229 million in pay- ments,state harvest records indicate.Despite that,the data does indicate gains in income for harvesters of every species,in every region.There's hope the "bot- tom”of the industry's decline may have been reached. Fisheries writer Lanie Welch notes that the king salmon 'harvest was worth $13.3 million this year compared with $11 million last year;the sockeye harvest was worth $113.5 million compared with $75.8 million in 2002;silver salmon were worth $15.2 million com- pared with $13.6 million last year.Pink salmon har- vest values were $33.2 million,compared with $20 million in 2002.The only species to see a dip were chum salmon,with the catch valued $19.6 million this year compared with $20 million in 2002.While the overall market situation hasn't changeda lot,one good sign is that more people are exploring market niches and value-added products,state fisheries managers say.The health attributes of salmon and its eco-healthy "wild-caught”attributes are also helping marketers. sR _Minerals: Greens Creek Mine:Two more decades The U.S.Forest Service will allow Greens Creek Mining Co.to expand its tailing deposit area to ac- commodate two more decades of mining.The forest service will require Kennecott Minerals,the mine op- erator,to prevent metals from leaching into the ground by adding carbon to the tailings.That decision alters the mine's original proposal that did not include add- ing the carbon.The mine wants to expand the site to 61.3 acres,allowing enough room for 22 years worth of tailing storage if mining continues at the current pace.Greens Creek began production in 1989.The mine set records for silver production last spring.Gold and zinc are also produced at Greens Creek.© oF . Total value of Alaska's mining industry exceeded $1 billion in 2002,the state ofAlaska reported.Minerals values have been over $1 billion for several years ok Alaska Economic Report No.21/03. Page 7 Minerals: Red Dog does better;Pogo work starts The Red Dog Mine in northwest Alaska appears to be back in the black,at least on a operating basis.Zinc prices are gradually strengthening and operator Teck Cominco Alaska has trimmed costs enough.The mine experienced major operating losses over the last two years.Red Dog is on land owned by NANA Regional Corp.of Kotzebue. In another development,Teck Cominco and Sumitomo Metals have spent $84 million so far in exploration and development of the Pogo gold mine northeast of Delta.The companies appear set to fi- nally begin construction this winter on the new un- derground mine,which will cost $250 million to build. A winter road is the first order of business,followed bya start of facilities construction at the mine site and_a 50-mile all-year resource road and power line.The 'mine will require 10 Megawatt of power supply,which will be supplied by Golden Valley Electric Assoc.Pogo | is on state-owned lands. : +eka Donlin Creek:Huge logistics (Cont, (Continued from page 3)gallons of diesel a year, and shipping those volumes in by river is an option the company really doesn't want to consider.Coal- fired power is an option (see our Resources Supple- ment,this issue),but the company basically hopes that natural gas can be found in the Holitna Basin,about 50 miles away.This may be the best option for fuel. :.eK Alaska:$12.8 million revenue sharing The state received almost $12.8 million last fiscal year as its share of federal revenue collected by the U.S.Minerals Management Service.For the fiscal year that ended Sept.30,Alaska ranked 10th among the states in MMS revenue sharing,just behind Alabama with $13.7 million.Wyoming,which has oil,gas and coal production,led with more than $467 million. Payment to all states totaled more than $1 billion,up from $716 million the year before.Most Alaska oil fields are on state,not federal lands. ek O--O -f _Girdwood ski expansion:900 new jobs?-- The Municipality of Anchorage will issue a Request for Proposals next spring for development of the Glacier and Winner Creek areas near Girdwood,to seek a developer interested in taking on long-term development of the area near the existing Alyeska ski resort.Combined state and municipal lands are' involved.The expansion would open up more terrain suitable for beginner and intermediate skiers, something now lacking at Alyeska.One intermediate run would be five miles long.Anchorage Mayor Mark Begich said the project could bring more than $400 million in new investment,$74 million innewannualrevenuesand900newjobsinthearea.Private firms will be cautious in jumping into the project,preferring an incremental "grow your way into it”approach.The present Alyeska Resort has 1,000 acres suitable for skiing.The proposed expansion would add 3,151 acres.The addition would have 32 percent of its terrain suitable for beginning/intermediate skiers compared with 11 percent at Alyeska,another 58 percent intermediate compared with 52 percent at Alyeska,a 10 percent expert . compared with 37 percent at Alyeska. \a, STATE'S LARGEST LIQUOR STORE MIGHT LOCATE INTO_ANCHORAGE K MART SPACE:A new | 25,000-square-foot liquor store,Alaska's largest,may occupy part of the old K mart store in South Anchor-| age by next February.Goldrush Liquor outlet will be one of three stores now planned for the space,with a national pet supply chain,Petco,coming later in 2004.Sportsman Warehouse,specializing in camping, fishing and hunting gear,and guns opens in February at the site.However,the Goldrush Liquor deal is not a sure thing yet because of a state law that prohibits a wholesale distributor from also owning a retail )outlet.Meanwhile,Anchorage developer John Blomfield purchased the other K mart building in East Anchorage for an undisclosed amount and says the space would be used either for retail stores orr offices. NSF GRANT TO HELP ARCTIC VILLAGE SELL CRAFTS ON THE INTERNET:A $600,000 three-year grant from the National Science Foundation,and the talents of Philadelphia University professors,will help Arctic Village residents find a niche for arts and crafts on the Internet.The goal is for the 172 villagers - to generate cash and wean themselves from state and federal:aid.Computer and business training will be offered at the community high school.Villagers also hope the Internet presence might interest the hundreds of hikers,who go through the local airport each summer,to stop by the village and take an interest in what . is offered there. HAINES MIGHT LOSE FERRY RUN TO SKAGWAY:Haines tourism officials are happy that the state'snewfastferrywillservetheirtownbutarealsoconcernedaboutlosingtripstoneighboringSkagway.State transportation officials recently said the 235-foot Fairweather will sail from Juneau to Skagway and Haines five days a week next summer but will not make the trip between the two small cities.Haines wants a direct link with Skagway and says it is important in marketing the "Golden Circle”-Haines- Whitehorse-Skagway -tourism route.State ferry officials said the new vessel is designed for point-to- point,not multiple-stop runs because of the way it is loaded.They say a leased vessel could be used for runs between Haines and Skagway. Standard and Poor's upgraded Alaska Housing and Finance Corp.'s rating to AA.The rating agency cited legislation passed this year that protects AHFC's large reserves.Those reserves reassure credit markets that AHFC has the means to pay interest on and retire the bonds it sells to finance its programs. Page 8 Alaska Economic Report No.21/03 There is a lot of wealth to be gainedfromminesaroundthestate,butdevelopersneedtheinfrastructuretogetmineralstomarket. By SUSAN HARRINGTON Courtesy of the Department of Transportation and Public Facilities. Yukon River Port and Road Network Analysis oes ana plaaoc deposi locations gativag rah Alacho DrosrmentiatRaaevieoeLOGEonePLACERcaserages eake 1m Womens D cy Seateta hues This map shows a road link from the Yukon River over to the Donlin Creek mine,and a road link from Crooked Creek up to the mine,plus a road leading north from the Donlin Creek area toward McGrath and Ruby, uilding roads in Alaska encour- ages mining development by making exploration,develop- ment and production more financially feasible.Although Alaska has world- class mineral deposits,the road systems to these resources rival the Third World. In many areas of Alaska rich with re- sources,roads either do not exist or are unconnected fragments of relic roads. INFRASTRUCTURE To quote a line from the movie "FieldofDreams,”"build it and they will -come,”Alaska's vast undeveloped re- sources are a huge field of dreams. "The biggest impact of road devel- opment is creating infrastructure,”said Steve Borell,Alaska Miners Associ- ation executive director."Lack of in- frastructure is the biggest deterrent facing developers.” Mike McKinnon,senior planner for the Department of Transportation and Public Facilities Statewide Planning Division,said,"Developing infrastruc- ture does two things:lowers costs and improves efficiency.And that has a way of accelerating development because the opportunity to use an open road net- work to port sets in motion central de- velopment,then satellite development.” Mining operations are dependent on fuel and freight costs,and when the only transportation to the mine site is by air, costs can be prohibitive. HicH Costs "Many exploration companies prefer to work only within 20 miles of exist- ing transportation because of the costs involved in remote site operations,”said Dick Swainbank,mining and minerals development specialist for the Alaska Division of Community and Business Development."If all materials,such as rods or balls for grinding mills,have to be flown in,the costs can skyrocket.” Alaska Business.Monthlw ¢Novemher 2002 Neil MacKinnon of the Hyak Min- ing Co.in Juneau can attest to that. When he was developing the JualinMine,which was five miles from tide- water on the backside of a mountain, it was a helicopter operation for the first two years.He described this setup as expensive and limiting,until his com- pany built a road to the mine site. "Building the road totally changedtheoperation,”MacKinnon said."Itwasatrade-off-build the road or givethemoneytothehelicoptercompany. The road created flexibility,in and out. We could use larger equipment.Instead of a helicopter operation,it became a road operation,and we still have the road instead of a box of receipts.” The company was able to use big- ger equipment and expanded opera- tions as a result of the road. "Mining roads serve to get heavy' equipment and supplies in and mater- ial out,a vitally important two-way street,”MacKinnon said."With roads, it is possible to move personnel and freight fast,cheap and spontaneously.” Foot THE BILL Road building is often done in steps,beginning with pioneer roads.Fund- ing for industrial roads comes from fed- eral and state government funds,and in some cases,developers.The costs for gravel roads connecting mining areas to ports are high. "Pioneer roads,”McKinnon said, "for exploration and development,cost about a half million per mile.These are one-lane roads with turnouts,a 30-foot top,and include structures such as culverts and bridges.As a mine goes .into production,then two-lane roads with full structures are built,which cost $1 million to $2 million per mile.” "Toll roads,like the road to the Red Dog Mine where Teck-Cominco pays for use,are not a good model forroads,”Borell said."Government hasthepurposeofinfrastructure.It is not good to place the burden on the de- velopers for infrastructure.” MacKinnon said that the questionofwhopaysfortheroaddependson who will benefit,and in the case of Jualin Mine,Hyak Mining Co.paid.”That was our road for our own pur- 'poses,plus,we did it our way.”He saidthecostofthesenewroadscouldbe shared between the state and the de- velopers.The money the developerscontributetowardtheroadscansave in freight costs,creating a win-win sit-uation for the developers and the state. Economic ENGINES MacKinnon said roads being devel- oped enable mining to become eco- nomic engines for the whole area. "People in the area and the state will benefit.If you are going toward Bethel and can get freight closer,and connect to Anchorage,the whole area would ”© SitarOno Sakae og URES )Quality you can rely on Sag Font piatofe rs Wisma Svat oad ik CRAIGTAYLOREQUIPMENT.COM A pee er Want a heavyweight dozer with knockout performance when push comes to shove at your benefit.It would be an investment.” These economic engines are impor-tant for people in areas such as the Yukon-Kuskokwim region and the Alaska Peninsula,he said."Mining de-velopmentis the only thing that will pullthosepeopleoutoftheirabjectpoverty.Many places are worse than Third World.Mining becomes the very thing that pulls the whole engine with year-round work and high-paying jobs,plusitopenstheopportunityforoff-shoots.” For example,MacKinnon described how a machine shop built to service Fsr j Ce.aaa: mining or reclamation site?Then turn to the 228,000-pound-plus Komatsu D475A-3,a powerful 860-horsepower dozer that features the only automatic lock-up torque converter in its class.This exclusive Komatsu technology can provide you with major increases in cycle speed and power transmission on long pushes while reducing fuel consumption.Plus, the dual tilt dozer increases operator productivity,while the large capacities of the Semi-- U and U-blades can help you move more material with each push.And the superior K- Bogie undercarriage system improves traction and machine balance on the roughest terrain. These features and more -including optional giant or multi-shank rippers -put the Komatsu D475A-3 at the top of its class in productivity for dozing and ripping applications. To get hold of this heavyweight champion that beats the competition at every punch, call us or stop by today. KOMATSU Servin1g Alaska\1-800-279-5051 7 gx 907-276-5050ANCHORAGECTEFAIRBANKSSOLDOTNA"fg WASILLASALESPARTSRENTALS CRAIG:TAYLOR EOUIPMENT COMPSeducceens.”aay Seca :-wal "We Service What We Sell"J Alacka Rnuciness Moanthlw e November 2003 ru t jt 4g.pS §x age:insane On SELLesaIBIRES o (9071 563-7366 Toll Free (800)478-7494etwww.w-chugachelectric,co THEPOE! Simplify... Find all ofyour Architectual,Engineering,and Survey services in one place 1-800-668-8919 mail@designalaska.com www.designalaska.com :mine can become available to eve one in the area.It's those little thingstimesathousandthatgenerateaself-sustaining economy,”MacKinnon said. "You have to capitalize on what you've got naturally,and the natural resources are there.You need roads and power. Lots of power.There are not enough peo- ple to pay for a big power plant without the mines,but the people will be able to use the power generated from a big power plant.That creates a symbiotic relationship and everybody benefits-like remoras on a shark.”MacKinnon has seen socioeconomic benefits as a result of resource devel- opment in Alaska. "Mines need the people and the peo- ple need the mines,”MacKinnon said, "and when you start generating money, pretty soon it starts changing the wholeattitudeofaplace.I was in Hoonah be- fore logging,when people didn't get up until the liquor store opened,then they got up to go to the liquor store.Now you can see a purpose to their waking. Not the whole town-some people still whine and complain and don't get up until the liquor store opens.But,there are nice boats,cars and nice homes. The trade-off is some stumps and some clear-cut areas,but those are coming back.The trees are growing.” SELECTING ROADS DOT&PF has several road and port projects in the works as part of the In- dustrial Roads Program that is study- ing,planning and building roads toresources.Jobs are a big factor,andbuildingtheCrookedCreekRoadfor the Donlin Creek Mine is an example of how DOT&PF considers regional employment opportunities when se- lecting roads for development. "Road building provides training opportunities-journeyman truck dri- ving,then qualifies people for mining operations development,”McKin- non said."The same people who build the roads to the mine will then be al- ready trained for jobs in the mine.”He sees the same thing in Nome with the Glacier Creek Road,which he de- scribed as "an opportunity to enhance job opportunities.”Potential jobs are important,but the serious test is marine transportation. "Mining operators have to useAlaskaBusiness"Monthly «November 2003 marine transportation in order to c is difficult to maintain and gets blownpeteintheworldmarket,”McKinnon _shut in the winter.”said."Roads are needed from mining The Glacier Creek Road is a federal- sites to ports for this to be viable,and aid project in the Alaska Highway fuel is the big issue-energy is the System program.The project,which key-transportation is critical.Mostre-consists of replacement of 8 miles ofmoteoperationsusedieselfuelforroad,is expected to cost between $6powergeneration.Marine connections million and $8 million and will provide are needed to deliver large amounts access to the Rock Creek Mine and the of diesel and freight.”properties and subsistence uses beyond Size matters-and is another factor the mine site,according to a report is- DOT&PF uses to prioritize funding for sued by DOT&PF. road development."The lodes have to be world-class-only the highest cal-Crooked Creek Roap iber can compete with world markets,”"Next is the Crooked Creek Road that McKinnon said.will benefit Donlin Creek Mine,a gold mine,”Borell said. Giacien Creex RoaD == 'The Donlin Creek Mine tops Alas- Many planned roads are years away _ka's list of world-class lodes."Road de- from realization.There is oneroadthat velopment in that area is a way toisplannedforconstructionnextyear:accelerate development of the gold Glacier Creek Road.mine,”McKinnon said. "There are several roads in the Accordingto Donlin Creek Mine de-works that will benefit the mining in-velopers,NovaGold Resources Inc.and dustry in Alaska,”Borell said."Firstis Placer Dome U.S.Inc.,there are moretheGlacierCreekRoadnearNome_than 25.5 million recoverable ounces that will provide access to Rock Creek of gold.Native regional corporation and that area.Itis short butimportant Calista owns the subsurface mineralbecauseitbypassesalongroadthat_rights to the land. _report released earlier this yearbytheAlaskaMineralsCommission described Donlin Creek as "on the verge of becoming a major mine.This development has the potential to change the face of Southwest Alaska, bringing prosperity and promise to a depressed region desperate for alter- natives.Transportation infrastructureandenergydevelopmentarekey.” The Crooked Creek Road iis a 12- mile to 14-mile project from the vil- lage of Crooked Creek on the Kuskokwim River to the Donlin Creek Mine.DOT&PF has $4 million for de- sign and construction and estimates anadditional$15 million to $18 million will be needed before final construc- tion is complete.Initially,a pioneer road will be built.Completion of the .p "O) eycersVena oewa For nearly a decade,we've built our reputation on making one shipment our top priority:yours. When you have a special ayPALLem|mAsyoye1jitGa--a-_vayCallUs! Fairbanks Phone:(907)450-2300 Toll Free:(800)434-3488 Anchorage Phone:(907)243-0009 Toll Free:(866)242-0009 COT OVO CES GOLA OKA aVisqeys 6 e =DARKO Alaska Business Monthly ¢November 2003 Legendary Aircraft.Extraordinary Service. Find out why we're Anchorage's #1 Reprographic Center! Four Color Waterless Offset Printing + Letterhead «Envelopes *Business Cards ° Color and Black &White Copies and Prints + Fast Turnaround «Full Service Bindery « Free Pickup &Delivery «Oversize Prints in Color and Black &White *Scanning *Full Service Prepress and Design +Rack Cards « Reports +Posters +Tickets +Friendly & Courteous Staff »High-Quality,On-Time! PITTS ©SEAS ETONLYof(9 TAR646-120208)BAeahsapegee'icopycorpeomhaShOEAtyaSanedies, =DOWNTOWN LEGAL Copies,LLC Comprehensive Litigation Support Services! Free Pickup And Delivery *Fast Turnaround « Electronic Files &Email Database Processing For Document Production »*Demonstrative Exhibit Blow Ups with Foam Core Mounting «High Volume Document Imaging For Litigation Support *High Volume PDF Document Imaging For Adobe Acrobat +Optical Character Recognition (OCR)For Text Searching Image Files *Electronic Bates Numbering &Document Annotations *CDs And DVDs Of imaged Document Collections With Viewer Program On-board +Microfilm / Microfische Image File Processing And Printing «Audio And Video Files To Computer Supported Formats *Audio And Video Duplication « Litigation Software Sales,Training And Support « yrowledgeable Friendly And Helpful Staff WithYearsLocalLitigationExperience(907)277-8770 www.downtownlegal.com Wap Courtesyof NovaGold Resoitices irc Crooked Creek Road to Doniin. toad is expected to coincide with min- ing production activities,according to DOT&PF. Yukon-Kuskokwim Port AND Roap Network A big project in the works is the Yukon-Kuskokwim Port and Road Network. This begins with a barge port on the Yukon River.The project aims to build a 60-mile road east from the port to Donlin Creek Mine and a 100-mile road north toward McGrath to access both gold and limestone deposits.Eventu-ally,the network will connect Ruby to the road network.With funding,the port and road segment to Donlin Creek could be done in 4-8 years,while the restis expected to be complete by 2012, according to DOT&PF. WILLIAMSPORT-PILE Bay Roap "Another important road connects Cook Inlet to Pile Bay,Lake Iiamna,the village of Iliamna and Nondalton,” Borel]said.Improving the existing Williamsport-Pile Bay Road "will help potential mineral development of the Pebble copper project.” The Pebble deposit near Iliamna holds 6.8 billion pounds of copper and 13.2 million ounces of gold,according to developer Northern Dynasty Min- erals Ltd.There is a state-maintained road from Lake Iliamna to tidewater for this potential mine,according to the company's Web site. For years the primary use of the Williamsport-Pile Bay Road has been by commercial fishermen moving boats between Bristol Bay and Cook Inlet. DOT&PF has included this road in its Industrial Roads Program. The rehabilitation of the 15-mile Williamsport-Pile Bay Road will include bridge replacement,road resurfacing, and intermodal transfer and staging ar- eas.Money for the project comes from DOT&PF,the Denali Commission and private enterprise. Wilder Construction Co.was granted a permit earlier this year by the Kenai Peninsula Borough,and dredged the channels at Williamsport and Pile Bay so they could move equipment and sup- plies for their work on the Iliamna Airport Paving and Fencing Project. Improvements to this road have been a combined effort.One of the bridgeswasreplacedinatrainingexercisebytheAlaskaNationalGuardthisyear. A report by DOT&PF describes the _ project as providing "seven communi- 'ties with overland access:to tidewater- shipping”and claimsit will "significantlyreducecostsassociatedwiththeannual movement of commercial fishing ves- sels”and "provides a potential for ac- celerating mineral exploration and development in the corridor.” Roaps To RICHES This infrastructure of roads becomes the underlying foundation and basic framework for minerals development. The path to employment opportunitiesandeconomicgrowthcreatedbyroad development reduces costs and im-proves efficiency for developers.The development of roads in remote areasofAlaskawillimpactmineralsextrac- tion by connecting roads to riches.O ere _- -Alaska Rower Assocation The untfted voice of Alaska's electric industry , we APA Member Newsletter,October 2603 ° Options for powering the Donlin Creek Mine __Finding a way to deliver 70 to175megawattsofpowertoa remote site in Western Alaska is one of the major hurdles that must be overcome by those seeking to develop one of the world's largest gold resources. Estimates by the developers indicate the Donlin Creek area has more than 25 million ounces of gold and that a mine could operate for 20 years,em- This is an aerial view of the Donlin Creek project and 28 million-ounce gold deposit. Yould re-elected to CFC. Board of Directors At the Cooperative Finance Corporation's (CFC) District 9 meeting on September 10,Eric P.Yould poe y was te-elected to CFC's Board.-2 of Directors. ;oe)Yould,who fills the posi- i saat _{tion for manager of a mem- ;-ber system,is Executive Di- f rector of the Alaska Power {_J Association.District 9 en- >compasses Washington,Mon- tana,Idaho,Oregon,Nevada, California,Utah,Alaska,Ha- waii,and US.Pacific territo- ries. CFC's grassroots Board of Directors comprises 22 mem-poReeVEMedienmenzrass1gBieane.Eric Yould Continued on page 3 Graphic courtesyofNovaGold. Ploying 400-500 people year- round. The mine site,275 miles west of Anchorage,150 miles north of Bethel,and 12 miles from the small community of Crooked Creek,is being developed by Placer Gold in a joint venture with NovaGold.Placer Gold holds a 20-year lease,entered into in 1995,from Native corporations that own the land. The Kuskowkim Corporation (TKC)owns surface rights and Calista Corporation owns subsurface rights in the 108 square kilometer area.Calista would receive royalty payments if the mine is developed,and a portion of those royalty payments would be shared with other native re- gional corporations in Alaska as mandated by the Alaska Native Claims Settlement Act. Donlin Creek is a relatively new find in a large area that has been prospected through much of the past Continued on page 4 Watt's inside_ NRECA Region 9 meeting N@WS.......cesseseseee page 2 Donlin Creek project's power.page 4 POOPle.......scsccssssscsncscsceessesesessesessseresceesecsessseneeeseees page 6 State &national legislative news page 7 2 ¢Alaska Power Association eTEEahaitaTOWeARENiReaA,Maeno HEN beac elMAeathm Fie ber 2003 Archinect.Ware tien 2dea it EE anit RR aD ceta RN Cts mataaa RadelNewsfromtheNRECARegionIXMeeting Kodiak,Kotzebue &Naknek co-ops honored by NRECA for international contributions Darron Scott, Kodiak Electric Brad Reeve, Kotzebue Electric ads Aiayteietey 7 BepAaees, agghitlveas gs 2g"Alaska Power Associationis Alaska's electric<utility trade association.Most Alaskans receive electricity from one of our members.a"This newsletteris published monthly to inform-members about activities within andissues pertaining to electric and cooperative utilities.-4_in Alaska.Submissions are welcome and will be considered for publication.APA reserves the right ¢to edit submissions.Commentaries, Three Alaska consumer-owned elec- tric cooperatives received awards for their support of NRECA Interna- tional Foundation's programs that help people in developing nations build and maintain rural electric utility systems. The awards were presented before an assembly of more than 400 elec- tric cooperative officials from Alaska, Hawaii,California,Idaho,Montana, Nevada,Oregon,Utah and Washing- ton at the NRECA Region IX Meet- ing in Spokane,WA. Kodiak Electric Association and Kotzebue Electric Association each received a Donated Equipment Award.Naknek Electric Association received an International Apprecia- tion Award for its monetary contri- butions. When conferring the awards, NRECA Montana director Clarence 'news items and letters to the editor should be addressed to: _APA newsletter,703 West Tudor Road,#200,Anchorage,AK 99503 ,Phone:(907)561-6103,1-877-992-7322,Fax:(907)561-5547,E-mail:cenkvist@areca.org ._Eric PR.Yould,Executive Director :eyould@areca.org.Crystal Enkvist,Director of Member &Public Relations.cenkvist@areca.org APA Board of Directors:Dwight Nissen,President,Golden Valley Electric Association;Brad Reeve,Vice-President,Kotzebue Electric Association;Fred Williams,Secretary,Copper Valley Electric Association;Pat Jasper,Treasurer,Chugach Electric Association; :Bruce Passe,Alaska Electric Generation &Transmission Cooperative;Meera Kohler,Alaska Village Electric Cooperative;Jim Posey, (Fritz)Keller,said,"The donations of equipment,ma- terials,labor,money and knowledge are extremely valu- able and I want to add my personal thanks to all the Donna Vukich, Nakek Electric 35 million people. people who made good things happen. NRECA's International Foundation serves as a facilitator of the co-ops' work and helps pull resources together. But the work at the co-op is the real engine that drives the project.” Since 1962,NRECA members have placed more than 500 rural electric experts in overseas assignments,help- ing rural people organize more than 250 consumer-owned electric coop- eratives that bring power to more than Electric cooperatives can make direct contributions to this effort by donating funds,volunteer time,and equip- ment and materials to the NRECA International Foun- dation or by adopting an overseas co-op through the Sis- ter Cooperatives Program.i PARDEE SEG By a ALE Re oe AB Seen eS BOR ghELS ee Ae at ate SET ShiataeaeESEORwRbthGtee.Anchorage Municipal Light &Power;Ben Frantz,Barrow Utilities and Electric Cooperative;Patricia Jones,Cordova Electric Cooperative;':Marvin Yoder,City of Galena;Tom Lovas,Four Dam Pool Power Agency;Dave Carey,Homer Electric Association;Tinny Hedlund,INN i :Electric Cooperative;Robert Hatcher,Kodiak Electric Association;Ida Apokedak,Levelock Electric Cooperative;Ward Sattler,Middle *Kuskokwim Electric Cooperative;Dale Peters,Naknek Electric Association;John Handeland,Nome Joint Utility System;Jacob Kagak,| "North Slope Borough Power &Light;Henry Strub,Nushagak Cooperatives;Joe Nelson,Petersburg Municipal Power &Light;: *Dave Calvert,City of Seward;Charlie Walls,City of Sitka;Dennis Lewis,Thomas Bay Power Authority;Vernon Rauscher,Tlingit-HaidaRegionalElectricalAuthority:Robert Foote,Unalakleet Valley Electric Cooperative;and Scott Newlun,Yakutat Power.:jBevinTeaRaeattFRc!ao MoetBatons Sealed Fp aap AEA Me apt LaatEC pH RIGTART oie N RE iePokeAyBase SoA RTT wee Et Cob te,BIAa ERR ER LS Seite el tgnaeaPam epe ON BEES aoe snr «ie APA members achieve NRECA credentials Fifteen locally elected directors from electric cooperatives in Alaska received the Credentialed Cooperative Director and Board Leadership certification last month from the National Rural Electric Cooperative Association (NRECA). The directors were recognized at NRECA's Region [X meeting for their commitment to education and attainment of the certification before an audience of more than 900 electric cooperative officials from fourteen states. The NRECA Credentialed Cooperative Director (CCD)program requires attendance and demonstrated under- standing of the basic competencies contained in five core courses:Director Duties and Liabilities,Understanding the Electric Business,Board Roles and Relationships,Business Planning,and Understanding Financial Planning. The following directors recetved CCD certification:Charlie Curtis of Alaska Village Electric Cooperative,Chris Birch and Sam Cason of Chugach Electric Association,Dan Ureda of Copper Valley Electric Association, Joe Cook and Harold "Hap”Symmonds of Cordova Electric Association,William "Bill”Digan of Golden Valley Electric Association,Hugh Chumley and Debbie Debnam of Homer Electric Association,Michael Brechan of Kodiak Electric Association,Rae Belle Whitcomb of Nushagak Cooperative;and Wilbur Brown and Jim Cox of Tlingit-Haida Regional Electrical Authority. The NRECA Board Leadership certificate recognizes individuals who continue their professional development after becoming a Credentialed Cooperative Director.Directors who have attained the Board Leadership certificate have completed 10 credits in advanced,issues-oriented courses.Ruth Fitzpatrick and Roseleen "Snooks”Moore of Homer Electric Association received recognition at the NRECA Region IX meeting for achieving Board Lead- ership credentials. Alaska represented on CFC Board Continued from page | bers representing 11 geographically defined districts in 49 states.The board members set policies,estab- lish programs,and develop strategies for CFC.The financial institution has roughly $20 billion in assets. Each district is represented by one director of an ownet system and one manager of an owner system. They are elected for three-year terms,and cannot serve more than two consecutive three-year terms. Yould's term will expire in March 2007. The other Director from District 9,filling the slot for a director of an owner system,is Gale Rettkowski, Inland Power and Light Company,Spokane,Wash- ington. AVEC communications work honored by NRECA Alaska Village Electric Cooperative (AVEC)recently took honors in the 2003 "Spotlight on Excellence” awards ptogram,sponsored by the national Council of Rural Electric Communicators.AVEC received Awards of Excellence in the Best Photo Essay category,Best Advertising Program category,and Best Computer Graphic Design category;as well as an Award of Merit in the Best Photo Essay category.AVEC's Amy Murphy produced the award-winning work. The Council of Rural Electric Communicators pre- sented the awards at the 2003 National Rural Electric Cooperative Association (NRECA)Marketing,Member Services and Communication Conference during a rec- ognition luncheon in Reno,Nevada. Electric cooperative communicators and marketing professionals submitted 640 entries in the Spotlight on Excellence program,now in its 15"year.Entries were judged by faculty members of the University of Mis- souri School ofJournalism and Southwest Missouri State University. [4 °Alaska Power AssociationsUrtober2003 sha seal sabe |sane «wn tbls fica tatetngase Teonb A gaeTe oebKOptionsforsolvingDonlinCreek Continued from page | century.It sits a bit south of the Iditarod mining district, where a 1908 find sparked a gold rush,is southwest of mines in the McGrath area,and northeast of Nyac. The Donlin Creek find was made possible by assay techniques developed for the space program that allowed easy testing for minute,even microscopic quantities of gold.The U.S.Geological Survey discovered such gold in Donlin Creek in the 1970's.Since that time,Calista and other companies have continued prospecting the area, with Placer Dome and then NovaGold drilling core samples since the mid-1990's.News from drilling results in 2001 indicated a strong potential for development. But there's still a lot of work to be done and many ques- tions to re- solve before the mine will become a re- ality."We're still in a busi- ness design phase,”said Gregg Bush, Placer Dome's gen- eral manager for the Donlin Creek project.He said a prefeasibility study now under- way is expected to be complete by early 2004.The study will focus primarily on gaining a level of confidence in the available resource,he said. Big economic issues that must be resolved as feasibil- ity is considered,Bush said,include a source of power, transportation,and where the mine is going to get the quality limestone it needs to help process the ore."Power is probably the largest,”Bush said.Peak power demand may reach 75 megawatts,he added.That's a lot of power. By comparison,the Red Dog zinc mine near Kotzebue has about 32 megawatts of diesel generation capacity on-site. Bush said much of the power will be needed to run compressors associated with the oxidation portion of pro- cessing.The raw rock will be excavated from open pits, Pog .-Chuath ue Mee ay enna :Dontin 've oom Ee, .imy*ar meAsibectidhealcopeweitotasSe eg sd id. crushed,and oxidized so that gold will be available dur- ing the leaching process that finally recovers it from the rock. While the mining company could build its own power plant on-site,Bush calls that a worst-case scenario."It's hard to envision any scenario that would be economical that would be power on-site,”he said."Our preferred option is that someone provides us power at a price that is consistent with development of the project.”He said he's open to all proposals. There have been many ideas floated as to how to po- tentially serve the mine,among them: °Shipping in diesel fuel and building a plant on or near the site,either by barging it upriver on the Kuskokwim,or by shipping it to a point in the Yukon River and _|transporting it from there to the minefo2site,via a new road or pipeline.of :*Running a transmission intertiefbefromtheRailbelt,perhaps fromape..».around the Nenana area*Building a pipeline through the mountains to deliver Cook Inlet natural gas ¢Building a power plant in Bethel - and delivering power via a transmis- "sion intertie ¢Exploring for shallow natural gas nearby with the goal of using that to fuel a power source ”aFoonica d iRM a B,eeuog Graphic courtesy of NovaGol Some managers of Alaska Power Association member utilities have been involved in in- formal discussions with mining company officials over the past year though no utility member currently has any formal proposal or involvement with the project.Middle Kuskokwim Electric Cooperative (MKEC)attempted to have its service area expanded to include the mine site,but the Regulatory Commission of Alaska turned them down this summer,saying that they could revisit the issue when and if MKEC could show that there was an actual customer needing service and that the utility has the ability to serve that customer. Calista Corporation,through its subsidiary,Nuvista Power and Light,has been actively pursuing a solution to the power puzzle,with an interest in leveraging a sys- tem for serving the mine into a system for serving vil- lages in the region. L Alaska PowéFAssociation °October 2003 °5oe:'ees,aerateud Mine's power provider puzzle The company commissioned a study of power needs in the region which concluded that building a coal plant in Bethel,using coal shipped in from British Columbia, and running a transmission intertie to the mine would be the least-cost option. Calista is currently updating and revising its power study.It,and it seems all parties,are intrigued by a new option that has emerged since the original study was com- pleted.Holitna Energy,a new company started by Phil St.George,former Vice President of Exploration at NovaGold Resources,has applied for four shallow gas leases near Sleetmute,about 50 miles from the Donlin Creek project.Other options may also be simmering, Bob Charles,Calista's Vice President of Government and Corporate Relations,says Calista continues to ex- plore all options,but is focused on the combination a power plant in Bethel with a line to the mine."That has emerged as the lowest cost alternative for the time-be- ing,”he said.Charles also said it might be faster to de- velop than some of the other options being proposed and that the timeline is important.He said Calista is look- ing at a timeline that would have the mine in operation by 2010. Sen.Lisa Murkowski (R-Alaska)introduced legislation in Congress in July based on Calista's original plan that would authorize the Secretary of Energy to enter into an agreement with the Calista region to provide up to $100 million in grants and $50 million in loan guarantees to help fund the power project.Under the scenario outlined in a July 24 press release,the power system would be developed in stages,designed to deliver 25 megawatts of power to allow mine start-up,growing to up to 50 megawatts by 2012,and 80 megawatts by 2016. Bush said that staged power development won't work. The mine will need maximum power in place to begin, he said. Doyon,the regional Native corporation for Interior Alaska,also wants to help get the mine going.Jim Mery, the corporation's Vice President for Lands and Natural Resources,said Doyon is currently prospecting its hold- ings in the Flat area,just 20 miles from Donlin Creek. "Success for Donlin could potentially spill over to suc- cess for Doyon,”Mery said. He said Doyon has begun to explore the option of shipping fuel up the Yukon River to Holy Cross and then via road or pipeline to the mine.Construction of a road between the Yukon and the Kuskokwim rivers that passes by the mine site is being explored as a solution to the mine's transportation challenges. The Alaska Industrial Development and Export Au- thority (AIDEA)recently started organizing a study of the feasibility of an intertie between Bethel and Donlin Creek.The Denali Commission is funding the $1.5 mil- lion project.An intertie agreement management team consisting of representatives from the Placer Dome joint venture,Calista,TKC,and the Alaska Energy Author- ity has been formed to consider request for proposal lan- guage. Work on the study probably won't begin before 2004, said Mike Harper,AIDEA's Deputy Director for Rural Energy.At this point,the study represents AIDEA's only involvement in the mine project,he said,though that's not for lack of enthusiasm for mine development. Harper has a long history with the project.He negoti- ated TKC's original 1995 deal with Placer Dome when he headed the village corporation.Harper said gold prices ate good now and he's ready to see the mine developed. Governor Frank Murkowski's administration is also sup- porting the project,he said."Governor Frank would love to see something happen,”he said. But,he said,they need to see what Placer Dome con- cludes about the site's real economic potential and whether the company will move forward with develop- ment."The mining company is still in this very early scoping phase.We're not sure if they're going to move ahead and,if they do,where they are going to obtain financing.We're also not sure how much grant money might be used on this project,”Harper said. Placer Dome is under some pressure to solve the puzzle quickly.According to NovaGold,under the agree- ment between the joint venture companies,Placer Dome must accomplish several things by November 2007 in order to regain its right to 70 percent ownership of the project.It must invest $30 million,conduct a feasibility study and come up with a viable business plan commit- ting to development of a mine producing no fewer than 600,000 ounces a year. Bush faces a daunting task juggling the puzzle pieces into place.Often,a shift in one piece may change the shape of another."There are a lot of door 1,door 2, door 3,sorts of things,”Bush said. Bush said that there is one power option that inter- ests him more than others but can't say what that is right now.Still,he said he remains open to ideas from anyone on the best way to solve the puzzle."Obviously,what I'm looking for is to get the lowest cost power someone can supply me,”he said.By 6°Alaska Power Association °Wttober 2003 lekaean5 2 ee fat miner atehi om Se People Walker joins Kodiak Electric as Staff Assistant Katie Walker recently joined the Kodiak Electric Association team as Staff Assistant.Walker relocated to Kodiak from Kotzebue,Alaska.For the past two years,she taught high school computer courses for the Northwest Arctic Borough School District.Prior to that,she was a business/computer teacher for the Fairfax County Public Schools in Virginia.Walker has a B.S.in marketing management from VirginiaTech and a masters in education from the University of Virginia.Hi seaete tim are PEEaa Katie Walker KEA's Sweeney promoted to new role at co-op of Communication/Human Resource Specialist with Kodiak Electric Association.Sweeney has been the Executive Assistant at KEA for the past five years.She will continue with many of her former job responsibilities, with a focus on helping better communication and relations with the members and to facilitate the 4 cooperative's benefit administration.Sweeney has been with KEA since June 1998.She holds a BA in english from the University of Redlands and is an NRECA MIP graduate.-y en ]Nancy B.Sweeney was promoted to the new position 4 Nancy Sweeney CVEA hires Kauffman as Manager of Office Services Copper Valley Electric Association hired Janet Kauffman as Manager of Office Services.Kauffman will be replacing Linda Lanegan who will be retiring at the end of the year after 26 years of service. Kauffman holds an MBA and a bachelor of science degree in accounting. She has 14 years of experience with a G&T cooperative.Before joining the CVEA team,she did consulting work with utilities inArmenia and Kosovo, designing accounting systems. Kauffman and her husband Bob are from Colorado.& Stowe replaces Robb on CVEA Board The Copper Valley Electric Association Board of Directors appointed Dan Stowe to fill the Valdez director vacancy created by the resignation of Jackie Robb. Stowe,a graduate of the Montana College of Mineral Science and Technology,brings more than 33 years of experience in engineering and project management to the co-op's board. He will complete Robb's term,which expires in April 2004.& Northwest Public Power Association announced the winners of its annual Excellence in Communication Com- petition.A total of 311 entries were received.Winners were recognized at the Northwest Innovations &Com- munication Conference in Idaho. CUSTOMER NEWSLETTER Group C,Second place -Homer Electric Association Associations Second place -ARECA Insurance Exchange EMPLOYEE NEWSLETTER Group B,First place (tie)-Alaska Village Electric Cooperative;Alaska Village Electric Cooperative SPECIAL PAMPHLET Group B,Second place Alaska Village 'Electric Cooperative ANNUAL REPORT Group A,First place -Cordova Electric Association Group B,Second place -Alaska Village Electric Cooperative Group D,Second place -Chugach Electric Association TV SPOT .Group B,Second place -Alaska Village Electric Cooperative PRINT AD-IMAGE OR PUBLIC RELATIONS Group B,Second place -Alaska Village Electric Cooperative PRINT AD-PRODUCT MARKETING Group B,Third place -Alaska VillageElectricCooperative PRINT AD--MAGAZINE AD Group B,Third place -Alaska VillageElectricCooperative INTERNET HOME PAGE Group D,Second place -Chugach Electric Association WILD CARD Group B,First place -Alaska Village Electric Cooperative Second place -Alaska Village Electric Cooperative PHOTOGRAPHY Group B,Second place Alaska Village Electric Cooperative §§ i.ce aa thas A et ete tht ALAee toa nt ot $80 eenr Legislative AME ee hae Alaska PoWwersissociation ¢October 2003 +7_a AE le abs aLRA a a a il 20 Energy Bill update:NRECA opposes the McCain-Lieberman Climate Stewardship Act of 2003 and the substitute amendment McCain-Lieberman raises energy prices and accel- erates use of natural gas The McCain-Lieberman Climate Stewardship Act of 2003 (S.139)caps greenhouse gas emissions from the four most energy intensive U.S.industrial sectors-elec- tricity,transportation,industrial,and commercial-tais- ing energy prices and accelerating the use of natural gas, particularly by the electric power sector.The Energy Department projects that S.139 would raise natural gas prices 79 percent by 2025.Electricity costs will increase 46 percent and gasoline prices will increase 27 percent. Coal prices would rise 485 percent.This is the wrong approach for the Senate to take at the same time it is trying to pass legislation intended to improve our nation's energy policy and maintain fuel diversity. High energy prices will put a drag on the economy The US.economy still is struggling to recover from a recession.Nine million people are unemployed and em- ployers continue to announce layoffs.The manufactur- ing sector alone has lost 2.8 million jobs in the last three years.Higher energy costs will put an additional drag on the US.economy.Higher energy costs will reduce dis- posable income as Americans spend more on gasoline, home heating fuel,and electricity.With the current lack of cost-effective technologies to reduce emissions,the implementation costs of such a program and costs to consumers would be crippling, Dropping the second phase cap does not change the impact of this program Current S.139 provisions call for two phases of emis- sion reductions with the affected sectors required to re- duce their greenhouse gas emissions to year 2000 levels by 2010 and a second target in which the sectors cut greenhouse gas emissions to 1990 levels by 2016.US. Senators Joe Lieberman and John McCain have indicated that they will eliminate the second target date for reduc- tions of greenhouse gases in their substitute amendment. With increasing energy demands from a growing popula- tion and economy,the Energy Department projects that affected sectors would have to cut their emissions by 14 percent just to meet the first target. The Senate Energy Bill is the right approach to cli- mate change The Senate Energy Committee's proposal (S.14)and the Energy Tax Incentives Act of 2003 (8.597)include nu- merous provisions that promote clean,affordable energy, and longer-term responses such as research and devel- opment of clean coal and zero-emission technologies. These are responsible policies to address climate change within the context of a growing population and a healthy economy.Co-ops also support voluntary actions to re- duce the greenhouse gas intensity of their operations, and policies that provide them equal incentives for in- vestments in renewable energy and clean coal technolo- gies such as tradable tax credits. Alaska Power Association will continue to keep its members updated on the status of the Energy Bill and the issues NRECA is pursuing on behalf of its co-op members. APA members serve on Energy Task Force Alaska State House of Representatives Concurrent Reso- lution No.21 established the Alaska Energy Policy Task Force.The task force,which has been meeting for the last few months,is examining how electricity is gener- ated,transmitted and distributed in order to meet the state's existing and future electric needs.After complet- ing this research process,the group will develop a long- term energy plan that seeks to enhance the state's eco- nomic future. The Alaska Energy Task Force is comprised of the following leaders:Mike Barry,Board Chairman,AIDEA/ Alaska Energy Authority;Red Boucher,AK Wireless Technology and board member of Chugach Electric As- sociation;Tom Boutin,Deputy Commissioner,Alaska Department of Revenue;Dave Carlson,Intertie Coor- dinator,Southeast Conference;Wayne Carmony,Gen- eral Manager,Matanuska Electric Association;Rick Eckert,Interim General Manager,Homer Electric As- sociation;Steve Haagenson,President/CEO,Golden Valley Electric Association;Meera Kohler,President/ CEO,Alaska Village Electric Cooperative;and Robert Wilkinson,CEO,Copper Valley Electric Association. |8 ¢Alaska Power Association *\___bber 2003 Meetings &: events calendar | November 20-21,2003 APA/INWPPA Alaska Utility Conference Hotel Captain Cook Anchorage,AK December 3-4,2003 APA December Meeting Series. Anchorage,AK December 9-10,2003 CFC Board Meeting Herndon,VA January 19-23,2004 CFC Strategic Planning Retreat | Girdwood,Alaska March 23-25,2004 APA Legislative Conference Westmark Baranof Hotel Juneau,Alaska -| Cordova Electric profiled on Discovery Network Cordova Electric Cooperative (CEC)was the subject of a feature story on the "Quality of Life”television program that airs on cable's Discovery Net- work of channels. CEC General Manager Ken Gates said he was thrilled to learn that his utility had been selected for the show and wanted to share the opportunity with the community of Cordova."They (the producers)interviewed Mayor Tim Joyce and he got to talk about the city of Cordova and what makes it so special.He also mentioned all that CEC has done for the community,”Gates said. Gates was interviewed for the show along with CEC Executive Assistant Barbara Bailer and Journeyman Lineman Rick Mitchell.Bailer highlighted the co-op's Quality Improvement Council."She discussed what we are do- ing to try and improve the environments both inside and outside the work- place,”Gates said."Our employees look forward to coming to work and that's what we want.” The utility's nationally-recognized Power Creek Hydroelectric Project re- ceived prominent coverage in the show.The program focused on how the hydro project utilizes a renewable resource,enables the co-op to decrease its dependency on fossil fuels,and significantly lessens the amount of pol- lutants emitted into Cordova's airshed."They were also impressed with the Eyak site remediation,as well as the way we can easily transition loads between diesel and hydro,”Gates added. emteyraeg Anchorage,Alaska 99503 RETURN SERVICE REQUESTED PRSRT STD U.S.POSTAGE PAID >|EAGLE RIVER,AKER, |PERMIT NO.7POWER703WestTudorRd.,Suite 200 David Germer AIDEA 813 W.Northern Lights Anchorage,AK 99503-2407 EnergyPulse Article Page 1 of 3 ergENSIGN,Anarysig tend?y..Casnmontary on the Gloheld Power industry http://www.energypulse.net The History of Power Barges 8.5.03 David Nickerson,President,The Power Barge Corporation Article Viewed 890 Times 2 Comments SW 30LDS 1UShTW power barge and fuel Garge under dig tow Introduction to Power Barges Power barges have been generating electricity since the early 1940's with GE's power barge project for the War Production Board in 1942. They primarily perform in a variety of applications such as emergency and temporary power,re-locatable power or in power generation projects where local construction and payment risks.Power barges can also be permanently installed and will operate similarly to a land based plant for the same duration. Power barges are in demand for their short construction cycles,flexibility in deployment,minimal land requirements and unique maritime financing.Power barges utilize gas turbines.diesel and steam plants for power generation.The capital costs of constructing and operating power barges are very competitive with their land-based equivalents. Applications Power barges have been utilized in a wide range of geographic locations,from major North American cities such as New York City,with over 700 MWs of gas turbines operating since 1975 to Mangalore,India with 220 MWs of combined cycle gas turbines (world's largest power barge)built and delivered in 2000. In New York City,the fleet of eight simple cycle power barges (approximately 700 MWs)is used for both peaking power and distributed power generation serving at various substations around the city.In Mangalore,the 220MW combined cycle power barge is moored in a lagoon on a 12-year base load contract.In Thailand,there are two thermal (boiler/steam turbine)power barges generating 150 MWs of power.The largest diesel power barge is operating in the Dominican Republic generating 149 MWs with http://www.energypulse.net/centers/article/article_print.cfm?a_id=424 8/12/2003 EnergyPulse Article Page 2 of 3 medium speed diesels.The range of applications covers the full spectrum of power generation. Power Island Manufacturers In the gas turbine power barge market,there are no OEM's presently offering power barges. Westinghouse had a successful program that ended in the mid 1990s and sold over 500 MWs. GE,as a supplier has the most number of gas turbines installed on power barges with over 1500MWs.Gas turbine power barges nominally range from 30MWs to 220MWs although there are no technical issues to barge mounting F or G technology gas turbines. MAN B&W and Wartsila directly market power barges and dominate the diesel power barge market with medium speed,HFO fueled reciprocating engines.Wartsila had control of this market since the early 1990's but now is under heavy competition from MAN B&W with the delivery of two medium speed diesel power barges rated at 7OMW and 120MWs.Most diesel power barges operate in the Central American/Caribbean markets.Diesel power barges currently range from 40MWs up to 150MWs.See www.powerbargecorp.com for a complete listing of power barges. Foundations The single most frequently asked technical question about power barges is "what about deflection and vibration?”Gas turbines and diesels generate substantial amounts of vibration both during start-up and operations.The gas turbine generator coupling is very sensitive to alignment and therefore,controlling deflection is paramount.Foundation designs seek to either isolate the deck barge and the power island raft or to combine the structures of the power island and deck barge to gain the same structural rigidity. The difference is that the integrated structural approach yields a direct path for vibration,while the isolated structural approach seeks the rigidity in an independent foundation and utilizes spring mounts or other mat type vibration dampening. The deck barge will tend to exhibit thermal growth during the diurnal cycles as will and possible out-of- trim conditions referred to as hogging and sagging caused by changes in ballast or fuel.The power island design requires certain deflection limitations at the generator coupling and vibration dampening from start-up or out-of-phase operations,as well as significant trip loads mostly in the generator section..The power barge systems engineer must integrate power island engineering with naval architecture and marine engineering.The following is an overview of the two approaches to mounting power generation equipment on deck barges. Integrated Structural Steel The method of foundation design that most shipyards are comfortable with is the integrated foundation approach (described above).It requires a new deck barge construction or substantial under deck modifications to existing deck barges which can add up to 6 months or more to a project.The integrated . structural steel foundation combines an over deck extended foundation to tie in the gas turbine/diesel and the generator with an under deck bulkhead system to integrate the loads and gain rigidity from the box beam of the deck barge. Large medium and slow speed diesels developed in this manner due to their marine propulsion birthright. The structural!steel of the engine foundation is an integral part of the ship.The concept of mounting a large diesel on a deck barge was not so foreign and the use of integrated foundations prevails in most all diesel power barges.The diesel engines also incorporate shock and vibration dampening systems in the mounting of the diesel engine to the foundation. Independent Structural Steel The second foundation approach is the independent steel foundation.This concept originated at the Electric Boat Company from the rafting of nuclear power plant systems in submarines and was further refined by Westinghouse.The isolation provided both the structural rigidity as well as the dampening of vibration.This adapted floating foundation also provides for the deflection,vibration and trip load parameters of the power island and weights substantially less than the similar concrete foundation and is built off hull and in parallel operations.Depending on the longitudinal strength and deck load capacity of the barge,and the power island requirements,both of these foundations can either be mounted directly to the deck or floated either with a clevis pin or heavy springs.Both new and existing deck barges can be http://www.energypulse.net/centers/article/article_print.cfm?a_id=424 8/12/2003 EnergyPulse Article Page 3 of 3 used with this design.This approach provides for a fast track,parallel approach with the minimum of internal modifications.Some civil EPC contractors have used concrete foundations spring mounted to deck barges as well.Concrete is usually not directly mounted to the deck barge as it will fail under certain hogging or sagging conditions that may occur during transport.It also adds considerable weight to the power barge resulting in an increased draft possibly requiring dredging at the operating site. Copyright 2003 CyberTech,Inc.ana Want distribute or reprint this article or put this article on your web site?Click here for options! Readers Comments Date Comment Apolonio AS one who has been involved in the power barge business from 1992 when we at Enron installed the Baca frist diesel power barge in Guatemala and later in the DR,Nicaragua and Nigeria,I agree with all that 8.4.03 Dave Nickerson says.I will add that one of the major advantages of using a power barge versus a land based power plant is that one can do permitting simultaneously with the design and construction of the facility at an off site marine yard.This can save many months of project schedule time in the event the project is being used for emergency or fast track power. Curly Baca, Curly Baca &Associates,Inc.5213 Sagecircle St.North Houston,TX 77056-7075 713-629-7729 email:cbacal2@attglobal.net David please add the words.."are high"second paragraph first sentence.. Nickerson 8.4.03 also..Curly is the grandfather of the modern power barge and is well regarded by all of us... Copyright ©2002-2003,CyberTech,Inc.-All rights reserved.Read our Terms of Service. http://www.energypulse.net/centers/article/article_print.cfm?a_1d=424 8/12/2003 Page 1 of 1 Fairbanks Daily News-Miner Bill would pay for Kusko power plant Friday,July 25,2003 -News-Miner staff report WASHINGTON--Sen.Lisa Murkowski wants the federal government to pay for a power plant to supply a proposed gold mine and villages in southwestern Alaska. Murkowski introduced a bill Wednesday that would allow the Energy Department to grant Calista Corp.,the southwestern regional Nativecorporation,$100 million and guarantee another $50 million in loans for the project. Murkowski said the project would provide low-cost energy to help the region develop,as the Tennessee Valley Authority and Bonneville Power Administration did in the U.S.South and Northwest during the mid-20th century. The federal share of project costs would be limited to 80 percent,under the bill. Placer Dome,an international mining company,wants to develop the Donlin Creek gold deposit on land owned by Calista near the Kuskokwim River village of Crooked Creek. The mine needs 25 megawatts of power at start up,but no source is available in the region at present.Building a power plant could convince Placer Dome to develop the mine,Murkowski said in a news release. The proposed power plant would also supply villages along the Kuskokwim,including the 6,000-resident regional hub of Bethel.A smalier plant would still be advisable even if the mine is not developed,according to a study funded by Calista,Murkowski said. Electricity costs 50 cents per kilowatt hour in some Kuskokwim villages-five times the national average,Murkowski said.Power is produced with diesel generators. The plan is to replace them with coal-fired generators and wind turbines,the senator said. Cheaper power and jobs from the mine are badly needed in the impoverished region,Murkowski said.Commercial fishing incomes have dropped by 50 percent recently and almost half the money coming into the region is government assistance. "Congress should act to provide a sound economic opportunity for the Yupik Eskimo and other residents of the region to enjoy an improved quality of life by providing a year-round employment base,"according to the bill's preamble. Calista is the second-largest of the regional Native corporations created by the Alaska Native Claims Settlement Act in 1971. http://www.news-miner.com/cda/article/print/0,1674,113%7E7244%7E1532792,00.html 7/25/2003 TO:Officers,Directors,Mining Districts FROM:Steve Borell SUBJECT:Weekly HILITES 1.Roadless Rule -A judge in Wyoming has concluded that not only did Clinton/Dombeck violate NEPA in multiple ways, but they also violated the Wilderness Act by creating defacto wilderness via roadless rule.He has PERMANENTLY enjoined the rule!!Baring a successful appeal at 10"Circuit,the roadless rule may be totally dead. 2.SBA Ombudsman Public Meeting -Don Stevens represented AMA at the Small Business Administration's ombudsman public meeting on July 15".Specific problems noted by Don were the massive problems associated with the National Environmental Policy Act (NEPA)which requires EAs and EISs for any "major federal action”and the MSHA requirement for hearing testing.This is especially difficult for remote operators and greatly complicates the ability of hiring from local villages.One of the Washington,DC officials from the Department of Labor that attended the meeting was very interested in this item and asked for a follow-up letter describing the situation so we sent a letter to him this week doing just that. 3._GAO Study of Impacts on U.S.from Mineral Imports -We sent a letter to Senator Lisa Murkowski this week suggesting that the General Accounting Office (GAO)should do a study to evaluate and quantify the adverse impacts and exposure of importing minerals and mineral/metal products on the U.S.The evaluation of economic impacts should include: loss ofjobs in mineral exploration and production;loss of secondary processing jobs;loss of manufacturing jobs in industries that utilize the minerals;and loss of jobs and economic development ancillary to production,processing and manufacturing. The evaluation of national security impacts should include dependency on foreign governments,some of which are potential opponents in armed conflict.The national policy impacts should include the opportunity for foreign governments to use minerals to affect U.S.foreign policy and decisions. 4.S.:Calista Energy and Economic Revitalization Act -Senator Lisa Murkowski today introduced legislation to authorize up to $150 million in federal grants and loan guarantees to help the Calista region generate and distribute lower-cost power to spur economic development and improve the lives of local residents.The power plan is intended to produce cheaper coal-fired or wind-fueled turbine power for Bethel,local villages and for Donlin Creek.It will provide low-costenergytoaidtheregionmuchastheTennesseeValleyandBonnevillePowerprojectshelpedinthepast.The plan calls for the staged development of up to 80 megawatts of coal-fired power and 1.5 megawatts of coastal wind-generated turbine power,plus a large 138,000-volt transmission line to the mine,if the mineral development proceeds. 5.HR 2691,Interior Appropriations bill -The Senate committee language includes funding for MDIRA in FY04,though not for the hoped for $2.2M but for "$1,500,000 to complete funding for the Alaska Minerals at Risk program"It does not include language for anew AMRPAP program.Many bad amendments addressing all manner of other topics were defeated during the debate on the floor and others that had been threatened were not offered.Something was added regarding BLM use of the Recordable Disclaimer of Interest (RDI)for RS-2477s but I do not know exactly what happened. 6._H.R."The John Rishel Geothermal Steam Act Amendments of 2003,"to amend the Geothermal Steam Act of 1970 to promote the development and use of geothermal resources in the United States was introduced on Thu,7/17/03 by Congressman Jim Gibbons (R-NV).Gibbons announced this at the memorial gathering held in John's honor that afternoon in the House Resources Committee Hearing Room.John had worked with the folks in Nevada and elsewhere for a couple years to clean up the various statutes and this bill reflects his work. 7.While In Washington,DC -The memorial gathering to honor John Rishel was scheduled for last week because the state mining association Executive Directors would be in DC for our annual meeting at National Mining Association.Our meetings went well and we compared notes on what was happening in our respective states.Also,two fellows from the White House talked to us and we gave them an ear full about the need to correct the very bad "Millsite Opinion”written by former DOI Solicitor John Leshy.We also reminded them that they must not neglect "the one that brought them to the dance”as we approach the next election.Many feel that "Bush #1”folks tried all manner of appeasement tactics as the election approached to the detriment of their supports who brought them to office in the first place.Separately,I joined Meade Treadwell and Jamie Bessee of Drue Pearce's office and we met with DOI Assistant Secretary Lynn Scarlett to see if we could advance the AMRAP proposal. 8.Use Coal -NMA President Jack Gerard forwarded recommendations to Energy Secretary Abraham on the eve of the Secretary's natural gas summit in Washington back on June 26 which was a day-long public meeting in which natural gas professionals,other energy experts and the public discussed ways to increase gas supply and efficiency in gas use.NMA's recommendations were:1.Expedite revision of the New Source Review Standards;2.Moderate and temporarily defer present and pending regulatory requirements on nitrogen oxide;3.mercury MACT standard (regulation)that does not deter increases in coal-fired generation;4.Early resolution of transmission questions that prevent the priority wheeling of coal-based power between regions of the country;5.Expedite permitting for new coal-based generating plants;6.Encourage incentives rates in electric power to level demand;7.Early Congressional passage of Clear Skies Legislation to allow increased reliance on coal for power while lowering pollution;8.And early Congressional passage of a National Energy Policy Act that provides incentives for commercial use of advanced coal-based generating technologies,that funds demonstrations of even more advanced technologies and provides funding for ongoing coal research and development. 9.Bristol Bay Mineral Closing Order -DNR is closing the leaseable acreage in Bristol Bay to Shallow Gas Leasing to avoid conflicts.While the it titled a Mineral Closing Order because that is the way it reads in the statute,the order very specifically states that we are not closing the area to locatable minerals or leaseable minerals other than shallow gas. 10.Golden Days Parade -The Division of Mining,Land &Water and AMA had a float in the parade.The parade themewas"A Century of Golden Opportunities"and the float theme was past,present and future of mining.Thanks to all the hard work of Don Gray,Karl Gohlke,Linda Carter,Michelle Roller,and Kim Griffith.There was great response to this float and cheers for the mining industry for locally providing jobs to Fairbanks families.Sen.Lisa Murkouski stopped by and complimented the float and the message for Alaska's future.Thanks Fairbanks! 11.Nature Conservancy -The Nature Conservancy is being investigated for possible misuse of EPA grants by both the agency and the Senate Finance Committee.The investigations were prompted by a Washington Post expose'of the organization's sweetheart deals for its supporters and alleged possible tax fraud.Observations:TNC receives over $30 million in taxpayer money every year from the departments of Agriculture,Commerce,Defense,Energy,Interior and a variety of federal agencies.TNC with over $700 million in annual revenue and over $2.7 billion in assets should receive taxpayers! money at all. 12.Coal Age and E&MJ -Early last month,Primedia Business Magazines &Media announced that it was closing Coal Age and Engineering &Mining Journal.Coal Age,founded in 1912,was to publish its last issue in July.E&MJ,which printed its first issue in 1866,had apparently published its last in May.But Primedia Business received several offers for the publications and affiliated properties and Lobos Services Inc.a publisher of directories and producer of regional trade shows,made the winning bid and acquired the two publications to go along with its Longwall USA trade show,"Keystone Coal Industry Manual"and affiliated Web sites.Lobos will publish issues of each magazine in September. 13.UCM 60"Anniversary Open House -will be held this Sat,July 26,2003.All miners and their friends are invited. 14.Why Explore Alaska -7/11/2003 ABC Online Australia:Workplace Standards has ordered a Tasmanian mining company to cut back on its 56 hour-a-week roster.The Australian Workers Union (AWU)says Workplace Standards has made an historic 'intervention'in the Mt Lyell copper mine on Tasmania's west coast. 15.AngloGold -Don Ewigleben Vice President/General Counsel has been named President of AngloGold North America Inc.as of 7/15/03.Don was with AMAX Gold during its acquisition and development of Fort Knox. 16.AMA Office Move -takes place Mon-Tue,July28-29 so the phones,fax,e-mails,etc.will likely be out of order this next week.The only change will be the office number which has been #202 and will now be#105.Slo owl Page |of6 THIS SEARCH THIS DOCUMENT THIS CR ISSUE GO TO Next Hit Forward Next Document New CR Search Prev Hit Back Prev Document HomePage Hit List Best Sections Daily Digest Help Contents Display STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS --(Senate -July 23,2003) SAY 4S The Calista Corporation has selected as port of its land entitlement under ANCSA the Donlin Creek area of the Upper Kuskokwim region.As owner of the Donlin Creek area,Calista has made a discovery of international significance of gold and other minerals which will aid the country and the Yupik Eskimo people if that area is developed.I can assure you,that there is [Page:$9799]_GPO's PDF wide spread support among the local Yupik population that their lands be developed. The Donlin Creek area is currently isolated and unconnected by road or utility services to the rest of the State of Alaska and the Nation.It is fair and equitable that the Congress enacts legislation to aid and assist the Yupik Eskimo people,through the Calista Corporation,in developing this energy project referenced in my bill.The goal of this project is to provide reasonable and adequate utility service to the local people and to serve to the development of the minerals in the Donlin Creek area. The Upper Kuskokwim region contains rumerous Yupik Eskimo villages which are also isolated from the rest of the State and the Nation.According to government reports,the unemployment rate in the region is about 25 percent but the actual joblessness rate is much higher.The government reports stop counting people as unemployed after that have not had a job atter several years.There is currently little or no opportunity for year round nongovernmental employment in this region. For example,one of the few opportunities to participate in the cash economy available in the region comes from fishing,but fishing income has plunged by about 50 percent from nearly $12,000 to about $5,000 annually. Because of this drastic decline in fishing income and a general lack of available private sector jobs,Federal and State transfer payments make up 33 percent of income in the Bethel U.S.Census District area and nearly 45percentoftheWadeHamptonU.S.Census District in the Upper Kuskokwim region near the Donlin Creek site. Passage of this legislation will provide a sound economic opportunity for the Yupik Eskimo and other residents of the region and give them an opportunity to enjoy a better quality of life.Calista is committed to turning this project into the private sector engine for this part of Alaska.If successful,Federal transfer payments will be reduced and local residents will have the ability to support themselves and their families with solid,well paying private sector jobs. Utility costs are now more than 10 times the national average.By providing a year round employment base and more equitable and affordable access to utility services,this project will improve the lives of all residents of the region. I am excited about this bill and will work hard to achieve its passage.It is my hope to have a hearing on this bill very soon and seek its passage in the Energy and Natural Resources Committee and the full Senate before the end http://thomas.loc.gov/cgi-bin/query/F?r1 08 :2:./temp/ r1088ZfeOf:e38574:7/28/2003 . a Page 2 of6 of the year.I urge my colleagues to support this legislation. I ask unanimous consent that the text of the bill be printed in the Record. There being no objection,the bill was ordered to be printed in the Record,as follows: S .1448 Be it enacted by the Senate and House ofRepresentatives of the United States ofAmerica in Congress assembled, SECTION 1.SHORT TITLE. This Act may be cited as the "Calista Energy and Economic Revitalization Act". SEC.2.FINDINGS. Congress finds that-- (1)the Yupik Eskimo people have-- (A)inhabited the Upper Kuskokwim region for thousands of years;and (B)developed a unique lifestyle that allows the people to thrive in a harsh and formidable climate; (2)on December 18,1971,Congress enacted the Alaska Native Claims Settlement Act (43 U.S.C.1601 et seq.)in recognition and settlement of the aboriginal claims of the Yupik Eskimo people in the Upper Kuskokwim regions; (3)under that Act-- (A)the Calista Regional Corporation was formed by the Yupik Eskimo people to represent the needs and interests of the Yupik Eskimo people in implementing the Act;and . (B)the Corporation has selected as part of the land entitlement the Donlin Creek area of the Upper Kuskokwim region; (4)as owner of the Donlin Creek area,Calista Regional Corporation has made a discovery of international significance of gold and other minerals that would aid the Yupik Eskimo people if developed; (5)there is widespread support among the local Yupik population for development of the Donlin Creek area; (6)the Donlin Creek area is currently isolated and unconnected by road or utility services to the rest of the State of Alaska; (7)the Upper Kuskokwim region contains many Yupik Eskimo villages that are not connected to the rest of the State of Alaska; (8)the unemployment rate in the region is almost 25 percent,and there is currently little or no opportunity for year-round nongovernmental employment; http://thomas.loc.gov/cgi-bin/query/F?r1 08:2:./temp/ rl 088ZfeOf:e38574:7/28/2003 Page3of6 (9)it is fair and equitable that Congress enact legislation to aid and assist the Yupik Eskimo people,through the Calista Regional Corporation,in providing reasonable and adequate utility services to the area;and (10)Congress should act to provide a sound economic opportunity for the Yupik Eskimo and other residents of the region to enjoy an improved quality of life by providing a year round employment base. SEC.3.CALISTA ENERGY PROJECT AUTHORIZATION. (a)FINANCIAL ASSISTANCE.--The Secretary of Energy shall,subject to any terms and conditions that the Secretary determines to be appropriate,provide the Calista Regional Corporation grants and loan guarantees to assist in the construction of the Calista Energy Project as generally identified in the document entitled '*Calista Region Energy Needs Study"and dated July 1,2002. (b)FEDERAL SHARE.--The Federal share of the cost of construction of the Calista Energy Project shall be not more than 80 percent. (c)LIMITATION.--The total amount of financial assistance that the Secretary may provide under subsection (a)is-- (1)$100,000,000 for grants;and (2)$50,000,000 for loan guarantees. SEC.4.AUTHORIZATION OF APPROPRIATIONS. There are authorized to be appropriated such sums as are necessary to carry out this Act. By Mr.CRAPO (for himself and Mrs.LINCOLN): S.1449.A bill to improve the capacity of the Secretary of Agriculture and the Secretary of the Interior to prepare and conduct hazardous fuels reduction projects on National Forest System land and Bureau of Land Management land that are aimed at protecting communities,watersheds,and certain other at-risk land from catastrophic wildfire,to enhance efforts to protect watersheds and address threats to forest and rangeland health on public and private land,including catastrophic wildfire,to increase research on forest health and forest- damaging agents,and for other purposes;to the Committee on Agriculture,Nutrition,and Forestry. Mr.CRAPO.Mr.President,Idaho faces grim news this morning as the deaths of two young wildland firefighters are reported.They were killed late Tuesday afternoon while fighting the Cramer fire in the Salmon- Challis National Forest west of the town of Salmon near the confluence of the middle fork of the Salmon River and the main Salmon.These men are heroes of battle,just as the men and women fighting overseas.They fought a faceless,terrifying enemy with bravery,heroism,and selfless dedication to the families and communities of central Idaho.Their sacrifice will be remembered for years to come as their names are added to the list of those fallen in service to their country in the capacity of wildland firefighters.I pray that those who continue to fight fires in Idaho and across the West this summer remain out of harm's way as they perform their valiant and critical work to preserve homes,property,and life. The tragedy is that two more people have died.We hope it is not followed by more as we enter another fire season.The truth is that our forests are overgrown,dead and dying,and this kind of tragedy was inevitable. Legislation that I supported in the past would have made a difference.Had it been enacted last year or the year before,these senseless deaths could very well have been avoided.Idaho's wildfire season is just getting into its -http://thomas.loc.gov/cgi-bin/query/F?rl 08:2:./temp/ rl 088ZfeO f:e38574:7/28/2003 Art C. verity rvoog Mike Harper Sara Fisher-Goad Valorie Walker (next to last)Brenda Fuglestad (last) Web site:www.alaskajournal.com Alaska's Paper of Record «Established 1977 «Journal of Alaska Business Woon ur verve ,-003 *Vol.27,No.43 {Donlin Creek mine needs powerByTimBradner Alaska Journal of Commerce Placer Dome U.S.says it hopes to have a "short list”of options for the supply of large quantities of power to the Donlin Creek gold project by mid-2004,and to launch a federal Environmental Impact Statement for construction of the mine in early 2005. Gregg Bush,project manager for the Donlin Creek Joint Ven- ture,which Placer now manages,also said capital costs for the large gold mine are now estimated at between $700 million and $800 million.The latest plan is for an open-pit mine that would process about 30,000 tons per day of ore.Donlin Creek could be one of North America's largest gold mines Because of the type of gold ore found at Donlin Creek,a refrac- tory-type process,which requires large amounts of electricity,will be needed to extract gold from the rock.Ore processing will require,on average,about 61 Megawatts of F power but for peak demand the project will need a power plant of 80 Megawatts or long-distance access probably at Healy to gener-ating plants on the railbelt electric intertie,Bush told.the.AResourceDevelopmentCouncilinAnchorageOct.16.Donlin Creek,near Crooked Creek on the Kuskokwim River west of Anchorage,is one of the world's largest gold discoveries. Bush said Placer now estimates the deposit holds 11 million ounces of gold that have been measured and indicated by drilling, and another 14 million ounces that are "inferred,”or estimated based on more widely-spaced drill-holes.© The current mine plan is being designed based on the 11 mil- lion ounces of measured and indicated ounces but with an assumption that at least part of the inferred resources will also be profitable to mine,Bush told the RDC. Currently a mine at Donlin Creek is estimated to last 20 years, but there is potential for development of additional gold resources in the area,Bush said. Continued on Page 13 Puoro/courtesy Causta Corp,Kevin Levi,a Calista Corp.shareholder from Lower Kalskag,is a driller'sassistantonacorerigattheDonlinCreekgoldproject. New construction booms in mid-town By Christina Sessions Alaska Journal of Commerce Arctic Slope Regional Corp.'s new office building in midtown Anchorage won't be the newest structure in the neighborhood for long. TT.Pranarties Ine..who owns the ASRG corner of B Street and Tudor Road,according - to Jeff Thon,commercial broker for Pruden- tial Jack White. Many of the details of the design have yet to be solidified,said Thon.He estimated the building would be between 60,000 to 80,000 square feet.Prudential will occupy 40,000 sanare feet of the snace. company's new home will be on B Street near 36th Avenue.According to Chad Gra- ham,real estate agent with Realty Execu- tives,who is representing the investor, Re/Max will take up 20,000 square feet of the 32,000 square foot building.Abraham Gallo,investor for the project and owner of the contractor,Diamond Construction,had eaInfrastructure is focus at Donlin Creek Continued from Page 1 The leases held by Placer Dome and its partner,NovaGold Resources Inc.,cover a large area. The current exploration covers only a small area of the land with mineral potential under lease to the two companies,according to Jeff Foley,senior geologist with Calista Corp.,the Alaska Native regional corporation for Southwest Alaska that owns the land in which Placer and NovaGold are exploring. Gold has been known in Donlin Creek since the early part of the century,-but Calista promoted exploration after the Native corpo- ration selected lands in the area. 'Bush told the RDC that resi- dents of the local region,who are also shareholders of Calista Corp. and TKC,have made up a large percentage of the project work- force during the exploration work. Last year,50 percent of workers on the project consisted of Calista shareholders,and 65 percent of supervisors on the project are shareholders,Bush said.The exploration work is mostly season- al,but turnover has been very low, about 10 percent per year,he said. Calista Camp Services Inc.,a subsidiary of the regional corpora- tion,coordinates shareholder hire and other support work for the exploration,Bush said. The last two years have been an intensive drilling effort by NovaGold _to better define the gold resource at -.Donlin Creek,but work on the proj- ect has now shifted to the infra- structure challenges facing Donlin Creek development,Bush said. Chief among these is power sup- ply.Several ideas are being exam- ined,including a coal-fired region- al power plant at Bethel that could supply electricity to villages in the region as well as the mine,over a 150-mile intertie. Another option is an intertie connecting the mine with the existing railbelt electric grid.A northern route for this intertie would connect with the Fairbanks- Anchorage Intertie at Healy.An alternative is a southern route which would provide a connection with the large Beluga coal fields west of Anchorage,where a mine-- mouth power plant could be built. Either way,an intertie connec- tion to the railbelt for Donlin Creek would stimulate development of new electrical generation capacity for Southcentral and Interior Alas- ka because the existing generation capacity is aged and may be insufii- cient to meet projected new power demand,according to reports for the new state Energy Task Force. Donlin Creek is one of the world's largest undeveloped gold deposits,but exploration has had its starts and stops over the years.After discovering gold Calista brought in several mining companies to do fur- -ther exploration.For various rea- sons the companies backed out. Placer,one of the world's largest gold companies,signed a lease with Calista and began its work in 1996 with a significant drilling program. However,gold prices plummeted in 1999 and 2000 and Placer had to refocus priorities on its producing mines.NovaGold,a Vancouver-based exploration "junior”mining compa- ny,was brought it as a partner. NovaGold had the right to earn 70 percent ownership of the proj- ect if it spent $10 million in fur- ther exploration,Bush explained to the RDC.NovaGold did addi- tional drilling and added to the | identified gold resource,and met its investment obligation by late 2002,Bush said. Placer,whose ownership had declined to 30 percent,then exer- cised a "back-in”option to earn back 70 percent of the project if the company invested in feasibili- ty studies and continued develop- ment,and made a decision to develop the project within five years,Bush said.The company also resumed management of the project,he said. Placer still has rights to back out of the deal and keep a 30 per- cent retained working interest, which would leave NovaGold with 70 percent,Bush said. That would still obligate Placer to pay its share of development costs.Alternatively,the company can back away from any further obligation to invest and would still retain 5 percent of profits if a mine were developed. About $45 million has been spent so far on exploration at Don- lin Creek by all companies includ- ing Calista,Bush said.Most of the investment has been by Placer and NovaGold. Located ¢30 acre ¢50 acre ©145,001 ¢5 conc ©34'dee *Inclinec For sal WAS - ”Ship - 3rd | Rate Tena Serv payse#e@686For more Jeff Tho 3201 CS§ 762-751 Retail ca between 4 blocks approxir The Delta Discovery On the Soap Box by Ted Horner Make your commentson the Soap Box! Letters Policy Hitching a Senatorial Wagon to the Wrong Horse 8/20/03 Akleng.I'm feeling sad these days -sniff,sniff. Calista Corporation threw a week-long welcome tour (which observers have called a campaign trip)for Senator Lisa Murkowski acting as her host and chauffer and guess which local newspaper and radio station were kept out of the parade? So,if you were waiting to read a multi-page spread covering Senator Murkowski's boat trip to the villages in The Delta Discovery you'll be disappointed.They didn't tell us,so we won't tell you. However,it is a good thing we didn't go on this boat ride,which was orchestrated solely by Calista top management.Seems it didn't start off so well. Several sources reported to us that the first day's travel from Bethel to Nunapitchuk began with a Chinese fire drill where the Calista General Counsel ran the large Calista boat (nicknamed "My Dividend"by Buster Richardson a few years back)into the rocks by the Lomack Building and then gunned it in reverse hitting the other Calista-owned boat sending its passengers to the deck.I'll bet those Secret Service agents were impressed with the boat handling skills and sorry they didn't background check the driver a little better.Alocalobserveronthebeachadmitteditwastrulyanembarrassingsight. The flotilla finally got underway,and downriver near Oscarville,the smaller Calista boat died with a seized engine,apparently from lack of use.Must have grown cobwebs in the cylinders. Not long afterward,"My Dividend"got stuck on a sandbar at the mouth of the Johnson River.Fortunately for the senator,Myron Naneng was following behind in the AVCP skiff and rescued her and other passengers and took them on to Nunapitchuk. While all of this nonsense was going on,no one bothered to inform the large group of Bethel residents waiting for a promised town hall meeting that they were going to be late,even though the entourage was equipped with a satellite phone.I don't imagine those residents were none too impressed. Mercifully,the leaders of other regional organizations were asked to send a representative on the tour,but all declined so only the senator's entourage,Calista Board,executives and their local newspaperman were subjected to these antics. Honest Lisa,we aren't all like that out here.Too bad you picked the wrong crowd to show you the Delta. My advice to the attending Calista Board Members and Management:Come out to the Delta more often to maintain "My Dividend"and take a refresher course on how to operate and maintain your boats and get around the country.Better yet,move the headquarters to Bethel so you don't forget what you once knew.Save us all the embarrassment. My advice to the Senator:Next time you come to the Delta to campaign,arrange to have some real people take you around,not fancy pants ex-villagers trying to show off. Real people will get you there every time,on time. You also might want to start looking for someone else to give your $100 million dollar grant to develop a regional energy authority.If you can't trust Calista to run a boat,can you trust them with our light plant? Lastly,if you are looking for voters out here,be careful whom you get to endorse you.The one you have chosen might backfire on you. Akleng! (Akleng -poor thing!Yup'ik to express sympathy.-Yup'ik Dictionary) Daily Averages 20 tons of explosives used 20 tons of lime used 28 tons of grinding balls added8,800 gallons of diesel fuel consumed$38,000 in electric power used $11,000 in property taxes paid190,000,000 pounds of rock mined 90,000,000 pounds of rock milied 80 pounds of gold produced Start Up Project construction began in 1995 Construction costs exceeded $375 Million First Gold pour:December 1996 Work Force 364 Employees 91%Alasken Hires Fort Knox employees are among the highest paid workers in Fairbanks, among average wages paid in all other - major industries,with the exception of oil and gas industry Crushing/Conveying.Gyratory crusher,60 in by 102 inCrusherrunbyone600horsepower electrio motor Averago production:37,500 tons/day Conveyor,54 in wide by 4 mile Jong Stockpile,300,000 ton capacity Operating Period 24 hours per day 365 days per year mining and milling Projected mine life:another 6-8 years In 2002 Fairbanks Gold Mining Inc.will spend: $28 Million on labor $15 Million on energy $45 Million on supplies$4.4 Millionon property taxes Equipment | 2 Hydraulic shovels-23 yard 1 Loader-23 yard 10 Haul trucks-150 ton 4 Blast hole drills-45,000 ib pulldown class Support Equipment:Track dozers, rubber-tired dozers,motor graders, water trucks,backhoes Milling SAG mill:34 ft diameter by 15 ft long,driven by two 6,500 horsepower electric motors Balt mill:20 ft diameter by 30 ft long,each driven by a 7,000 horsepower electric motor High capacity thickener,110 ft diameter 7 leach tanks 6 Carbon-in-Pulp (CIP)tanks Electrical Requirements 35 megawatts supplied by Golden Valley Electric Association via a 2$- mile,138 kV powerline250millionkWh/yr consumption $1.3 Million spent on electricity per month The average resident saves $58 per year in electric bills due to Fort Knox, the average small commercial customer $187,and large commercial customers an average of $50,000 Glossary of Terms FGMI:Fairbanks Gold Mining Inc. Mining:Process of removing ore from the ground and transporting it to the mill.AtFortKnoxthisincludesdrilling,blasting,loading trucks and hauling to a primary crusher. Crusher:A machine that reduces material by compression.Consists of a moveableheadgyratingwithinaninvertedcone.Material is gravity fed through the crusher.Crusher can reduce material the size of a small car dawn to 6inchesinsize. Milling:Process of separating valuable material (gold)from non-valuable material.After milling,the non-valuable material is called tailing.Milling consists of crushing andgrindingtofreegold,which is then recovered through leaching er gravity circuit, Mill:1)Facility in which ore is treated for the recovery of precious material (gold).2) Piece of milling equipment consisting ofrevolving cylinder,for the fine grinding of ore as a preparation for leaching. SAG Mill:Large rotating cylinder that uses the ore itselfas a grinding medium.Therearealso5in.steel balls to help obtaintheproper amountofgrinding.|Ball Mill:A large rotating cylinder partially filled with 3 in.steel balls."mThobats grindoreintofineparticlesabouttheconsistencyofflour. Cyanide:A chemical compound of carbon and nitrogen used to dissolve gold. Typically,it is delivered dryin the form of sodium cyanide (NaCN)briquettes and dissolvedin water and caustic. Refinery;Portion of the millin which goldis purified by being melted with fluxesin afurnaceandisthenpouredintobarsforshipment. *NovaGold Resources Inc,.-News Releases -Wed Jul 17,2002 Page |of 5 PX Subscribe to our Email List [Your Email Subscribe | Search our Web Site Keyword(s) Search | G | OiTue Jul 16,2002 E11 Email This Page 52 foot 1 oz/ton Gold Intercept Joins Acma and New Al at Donlin Vancouver --NovaGold Resources Inc.is pleased to report results from tt Pre-Feasibility and exploration program at the Donlin Creek gold deposit. Highlights -Follow-up core holes at the new Akivik zone continue to intercept high-c mineralization.Highlights include:DCO2-723 with 16.0 meters grading 3: per tonne (g/t)(52.5 feet grading 0.96 ounces per ton (o0z/t));and hole [ 17.5 meters of 6.81 g/t (57.4 feet grading 0.20 oz/t). -Additional follow-up exploration drill holes have discovered a broad new zone at the Far East Target located 1/2 kilometer east of the Lewis depos are pending. -To date 17,800 meters (58,400 feet)have been drilled in 155 holes (71 reverse circulation).Assay results are complete for 105 core and rotary h program.Approximately 20,000 meters (65,600 feet)of additional drillinc completed for the Pre-Feasibility Study. -Environmental baseline work and geotechnical and mine engineering stt underway for the Preliminary Feasibility Study. Strong Results Continue On Donlin Creek Pre-Feasibility Drilling "We are very encouraged with the drill results to date from the 2002 Pre- program"says Rick Van Nieuwenhuyse,President of NovaGold,"The in-pi drilling is identifying new near surface high-grade zones as anticipated;a new target areas adjacent to the known resources at Acma and Lewis suc Akivik,Southern Lewis and the Far East Zones are all intersecting signific near-surface mineralization.Everything is on track to complete an update resource estimate and improved economic assessment study at the concl: drilling and engineering programs this fall." The 2002 drill program began in early-April with two diamond core drills z circulation rotary drill (RVC)working on the property.A multi-staged drill been designed to expand the gold resource as defined in the March 2002 http://www.novagold.net/s/NewsReleases.asp?ReportID=39550_7/17/2002 *NovaGold Resources Inc,.-News Releases -Wed Jul 17,2002 Page 2 of 5 to complete step-out drilling away from known mineralization within the r pit boundaries,and to upgrade inferred resources with in-fill drilling to th: indicated categories.An important focus for the current drill program is t« additional near-surface,higher-grade resources adjacent to and within th boundaries on a minimum 100 meter by 100 meter drill grid density.Suc completion of the program would reduce the overall strip ratio and increa resource at Donlin Creek.This work will be completed as a series of drill ; throughout the summer and early-fall. Since April 2002,a total of 17,800 meters (58,400 feet)have been drillec (71 core and 84 reverse circulation).Assay results have been finalized an 105 drill holes in the program.The majority of this drilling to date has foc out exploration drilling to test high-priority targets and define new near s potential in and around the existing resource areas.Significant mineralize intrusive porphyry and sedimentary rocks have been intercepted in all of exploration target areas.An additional 20,000 meters (65,600 feet)of dr: completed in the program for the Pre-Feasibility Study. High-grade Follow-up Drill Holes Expand New Akivik Zone Discove Additional follow-up drilling at the new Akivik discovery located north of t Acma zone has continued to intercept high-grade gold mineralization.Ney assay results from follow-up step-out drilling half way between the Acma new Akivik zone,include hole DCO2-723 with 16.0 meters grading 32.95 feet grading 0.96 02/t gold);and hole DC02-727 with 17.5 meters of 6.8: feet grading 0.20 02/t).The Akivik zone extends the known Acma gold m kilometer to the north which will add substantial new gold resources outsi resource blocks.Step-out drilling towards the Acma deposit shows this m be near surface and connected continuously to resources within the mode which will also decrease the overall strip ratio.Further assay results are 5 Exploration reverse circulation (RVC)drill holes,north of the Akivik area t returned high grades with hole DRO2-668 intersecting 4.6 meters grading DRO2-752 intersecting 9.1 meters containing 9.85 g/t gold.Additional ste will be necessary to define the extent of the new zone which remains ope directions.This new zone lies outside the existing resource area and will to the resource.Follow-up drilling in this area is a high priority as the Aki mineralization remains open to further expansion. Drilling east of the Akivik discovery also continues to return promising res step-out drill holes have intersected additional high-grade mineralization. located between the newly discovered Akivik zone and the Vortex zone in part of the Lewis deposit.Drill hole DCO2-697 intersected three intervals meters having an average grade of 5.0 g/t and DC02-698 intersected 15. 5.71 g/t gold.These step-out and in-fill drill holes targeted a mineralized one of the Vortex dykes and are designed to expand defined resources av mineralization and to upgrade inferred resources to the measured and inc categories. Follow-up Core Holes Confirm New Southern Lewis Zone Discover Step-out exploration drilling 1/2 kilometer south of the modeled Lewis pit intercepted significant mineralized intervals of intrusive porphyry.The firs testing targets on a 100 m by 100 m grid south of Lewis and east of Acm. complete with the first assays confirming visual mineralization discussed | htto://www.novagold.net/s/NewsReleases.asp?RevortID=39550 7/17/2002 *NovaGold Resources Inc,.-News Releases -Wed Jul 17,2002 Page 3 of 5 previous news release of June 5,2002.Initial follow-up drilling results inc 712,with three mineralized zones totaling 10.3 meters with an average g gold and DC02-722 with 10.0 meters grading 3.1 g/t and 12.3 meters gr gold.Additional assay results for this new zone are still pending. First Follow-up Drilling begins at the Far East Target The Far East Zone is located 1/2 kilometer east of the Lewis Deposit.This first discovered with a single drill hole that tested a coincident gold-in-soi geophysical target.That drill hole DC97-436 intersected 17.9 meters grac at a depth of 130 meters within strongly mineralized intrusive porphyry. this very encouraging drill hole and to test the extent of the mineralizatio target,11 RVC drill holes have been completed on the new mineralized zc holes intersected the east extension on the Lewis sills,a package of intru: located at surface,approximately 175 meters wide and extending east fo 1/2 kilometer.Assay results are still pending but several strongly mineral intrusive porphyry were logged.This area could add significant new,near resources and expand the extent of the modeled Lewis pit eastward.Follc this area is also a high priority. New Summary Drill Results and Sample Protocol The drill program and sampling protocol are managed by NovaGold with c provided by Qualified Person Phil St.George,Vice President of Exploration Manager for NovaGold Resources.All drill samples were analyzed by fire ; Chemex Labs in Vancouver,B.C. Donlin Creek New Drill Results Highlights Table DHID Interval Length Gold Length Gold :(m)(m)(g/t)(ft)(oz/t)Type Area Ok DCO2-708 60.0 to 65.0 5.0 5.70 16.4 0.17 Core S Lewis htto://www.novagold.net/s/NewsReleases.asp?7ReportID=39550 7/17/2002 *NovaGold Resources Inc,.-News Releases -Wed Jul 17,2002 Page 4 of 5 Drill hole location maps showing the Donlin Creek target areas are availal on the NovaGold website at the link below: Donlin Creek Project section of NovaGold's website: http://www.novagold.net/s/Projects.asp?PropertyInfoID=880 About NovaGold A diversified natural resource company,NovaGold acquires and develops deposits in North America.NovaGold has no debt,and has one of the larc resource bases of any junior mining company.The Company generates ci exploration and development from its construction aggregate,gold royalt development operations in Nome,Alaska.NovaGold was the top performi Toronto Stock Exchange (symbol NRI)in 2001.The Company's shares als US OTC (symbol NVGLF).Financial reports and other information,includir report from the recent Annual General Meeting,are available at www.nov For more information on NovaGold contact: Rick Van Nieuwenhuyse,President &CEO Los Gatos,California,USA (408)655-6766 E-mail:mailto:RickVann@NovaGold.net Greg Johnson,Vice President,Corporate Development http://www.novagold.net/s/NewsReleases.asp?ReportID=39550 7/17/2002 'NovaGold Resources Inc,.-News Releases -Wed Jul 17,2002 Page 5 of 5 Newcastle,Washington,USA (907)227-3963 E-mail:mailto:Greg.Johnson@NovaGold.net Tony Hayes,CFA,Investor Relations Toronto,Ontario,Canada (416)368-0882;Toll Free 1 (866)243-1059 E-mail:mailto:Tony.Hayes@NovaGold.net QOYou can view the Previous News Releases item:Wed Jun 5,2002,More in Two New Zones at Donlin You can return to the main News Releases page,or press the Back butt browser. Corporate Profile |Investment Hightlights |News &Reports |Projects |Gold Resources |Stock Quoi |QwikReport |Home Copyright ©2001 NovaGold Resources Inc.All Rights Reserved. httn:/Awww novacald net/s/NewsReleases asn?R enartIN=395450 7/17/2002 'NovaGold Resources Inc,.-P- ? cts -Wed Jul 17,2002 Page 1 of 5 highs eo The following summary figures of the Donlin Creek drilling are a updated with all results to date as of 16 July 2002.*** |p sacs 'aa To download a high resolution pdf version of these maps and thedrillsectionclickonthelinkbelow: Donlin Drilling Maps-July 16,2002 (PDF Format)[Beeanisei =In March 2002,AMEC E&C Services Limited of Vancouver (AMEC)|ght,-completed a preliminary independent economic assessment study of theponocial<=Mining,processing,metallurgical,and other economic factors necessaryIHEREonmaforthedevelopmentoftheDonlinCreekproject.This preliminarySSeconomicassessmentstudyestimatedthecapitalcost,operating cost parameters,and the optimal scale of operation.The study showed thatERwzRRtpwithfurtherexplorationanddevelopmentworkaconventionalopen-pit mining operation at a 2 g/t gold cut-off level should be economically viable at Donlin Creek. Subscribe to our Email List In April 2002,NovaGold initiated the next phase of development with a US$8 million Pre-Feasibility Study drill program and engaged AMEC,toYourEmail_.continue to provide additional engineering and design work for the Donlin,Subscribe |Creek gold deposit.The program will include approximately $US6 million J in drilling and $US2 million in engineering,environmental and other studies.It is anticipated that the company will expend a project total of $US10 million before the end of the year and thereby earn its 70% interest in the Donlin Creek Project. Search our Web Site _[Keyword(s)Figures 1-5. Search |Figure 1,below shows the location of all of the drilling completed to date in the Donlin Creek Main Resource Area.The higher-grade areas are shown on the image below in magenta (>200 gram-meters),red (>100 gram-meters),orange (>75 gram-meters),and yellow (>50 gram- meters).Holes shown in gray are pending assays.Core holes are shown as circles,RVC holes are shown as diamonds.RVC holes are used for shallow exploration to define prospective areas for follow-up core drilling. For easier comparison between intervals of different gold grades and widths,these intercepts are often expressed in terms of the gold grade times the width of the intercept called grade thickness.The grade thickness value can be calculated in feet and ounces (foot-ounces)or grams and meters (gram-meters)and represents the total contained gold http://www.novagold.net/s/Projects.asp?PropertyInfoID=880 7/17/2002 'NovaGold Resources Inc,.-P- ' cts -Wed Jul 17,2002 Page 2 of 5 in a particular drill intercept.An interval of 20 meters of 5 grams per tonne gives a grade thickness value of 100 gram-meters (66 feet at 0.15 ounces per ton or approximately 10 foot-ounces),as would 10 meters of 10 grams per tonne (33 feet at 0.30 ounces per ton).For reference,most operating gold mines have a high-grade core zone that is 100 gram- meters ( 10 foot-ounces)or more and in general an intercept of 10 gram-meters or more would be considered ore grade. (Click on Figure 1.Main Donlin Resource Area Drill Grade- Thickness Map below to Enlarge) ween,onlin Creek Main Resource Area Drilling >.we 4 see ehyettera"tree SONS:ey ot *'ome Aree.-o> Figure 2.below shows the gold in soils map and location of all of the drilling completed to date in the Donlin Creek Main Resource Area (Same area as figure 1 above).The map is shaded by concentration of gold in soils with the highest concentrations of gold denoted as the warmest colors.Areas in green represent >100 ppb gold,yellow >200 ppb,and red >1000 ppb gold.Gold in soil of 100 ppb or greater is an important indicator of significant gold mineralization in the bedrock below.Note the large areas of high gold in soil that have not yet been tested at the new Akivik discovery,north of Vortex,and south of the Lewis Area.Drilling in each of these areas is planned for the current Pre-feasibility program. (Click on Figure 2.Main Donlin Resource Area Gold in Soil and Drilling Map below to Enlarge) http://www.novagold.net/s/Projects.asp?Property InfoID=880 7/17/2002 'NovaGold Resources Inc,.-P- *-cts -Wed Jul 17,2002 Page 3 of 5 Figure 3.below is a map showing the 2002 Pre-Feasibility drilling progress to date.2002 holes are shown in red.Core holes are shown as circles,RVC holes are shown as diamonds. (Click on Figure 3.Pre-Feasibility Drilling Progress Map below to Enlarge) <2.2 @ 2002 Core tote Dontin Creek Main Resource Area Drilling 2S:ceS|MOOR VE ete ||2087 Oring Aa of:14 duty tOE2 |'TAS WA 'Abivih Target a anritawDiscoveryite,an ae ."oe,Vortex ">oa 1'ye Ce ice©QuineofSk0dink Gold.Modeled Pit Boungary*.oNCreekCampand Airstp 1650 foota7Donita Figure 4.below shows a more detailed view of the Acma high-grade pit area with the modeled $300/oz pit outline and the newly discovered Akivik gold zone.Note that the high-grade targets remain open. (Click on Figure 4.The Acma Target Area Drill Hole Grade- Thickness Map below to Enlarge) http://www.novagold.net/s/Projects.asp?Property InfoID=880 7/17/2002 "NovaGold Resources Inc,.-P- ? cts -Wed Jul 17,2002 Page 4 of 5 NewpGold Resources tne, ,SNovaGoidResourcesinc.) ,Dontin Creek Project |.Acma Target Area Oniling .iNew Discovery).LT| Figure 5.below shows a more detailed view of the Lewis high-grade pit area with the modeled $300/oz pit outline.Note that the high-grade targets remain open.Testing of gold-in-soil targets south of Lewis are in progress. (Click on Figure 5.The Lewis Area Drill Grade-Thickness Map below to Enlarge) Dontin Creek Project Ine,SONY oan Corporate Profile |Investment Hightlights |News &Reports |Projects |Gold Resources | Stock Quote &Chart |Contact Us |QwikReport |Home Copyright ©2001 NovaGold Resources Inc.All Rights Reserved. http://www.novagold.net/s/Projects.asp?PropertyInfoID=880 7/17/2002 *NovaGold Resources Inc,.-P-*«cts -Wed Jul 17,2002 Page 5 of 5 http://www.novagold.net/s/Projects.asp?PropertyInfoID=880 7/17/2002 Page 1 of 1 7 T LE NO@2002CoreHole|Donlin Creek Main Resource Area Drilling ''|«2002 RVC Hole |2002 Drilling-As of:16 July 2002 \*Pre-2002 Holes :| i ws |"-,ws :=, .__L. Akivik Target Me -fae-(New Discovery)*s5,CTS Af >"nt co Yaron,'CSG '- 0'atoe *pe { ae / A |500 meteDonlinCreekCampshsari![1650 fee=-NLiLW\Vo mw http://www.novagold.net/i/maps/nri-donlin-fig3 .gif 7/17/2002 x x = Drill Hole Grade ThickValuesinGoldGram-Meters(g-m ||NovaGold Resources Inc.@ 200 to 2,000 g-m Donlin Creek Project Lewis Area Drilling@100to200g-m As of:16 July 2002 @ 75ta 100 g-m 9 S0to 7S g-m @ 20 to 509-m ©10 to 20g-m Oto 10 gm ©Pending Results S a 4 a rei°...a200meters_ ayweenleeeeeee650 feet / . ff ;Pa : J °/:(Outline of $300/0z Gold Q- ;Modeled Pit Boundary - http://www.novagold.net/i/maps/nri-donlin-fig5.gif Page 1 of 1 7/17/2002 Page 1 of 1 NovaGold Resources Inc. Donlin Creek Project ( Acma Target Area Drilling ae 9 E o a ,C 'snnfleigee -_/°° °o f A :oa fo] ar e i 400 Area.« 'Sy :e ° 'i e'e NN Ms,.e e "Ze \4 ry A ie Outline of $300/oz Gold; Modeled Pit Boundary 200 meters 650 feet e @ | Acma Atea Drill Hole Grade Th Values in Gold Gram-M 200to2,000g@100to200g-r@75to100g-+CO 50to75g-m@20to50g-m©10 to 20 9-m0to10g-m ©Pending Resu °i?(New Discov: |NovaGold Resources Inc. http://www.novagold.net/i/maps/nri-donlin-fig4.gif 7/17/2002 August 200 ame ” ' S P [Steve]Cleary Peng 111 Dunsmuir Street Project Manager Suite 400 Mining &Metals Vancouver,British Columbia Canada VéB 5W3 Tel =(604)664-3273Fax(604)664-3057 stephen.cleary@amec.com www.amec.com NE ee ee owns a:aye ;ve-:"ade!am aed Peanoare?a |prefeasibility study of the Donlin Creek gold project in Alaska.This comes on the tail of our successful resource estimate and scoping study which finished earlier this year.The facilities covered by this study include the open-pit mine,process plant and ancillaries,onsite infrastructure,wharf and fuel storage facilities at the village of Crooked Creek;and a road linking Crooked Creek to the mine site.Steve Cleary is managing this study,and many of the staff who worked on its earlier phases are remaining on our team.These include Stephen Juras,Mark Pearson,William Colquhoun,Tom Higgs,Alistair Kent,Gary Bouwman,David Lee,Ron Pearce,Sue Brown and Wayne Moore.A number of E&E staff from Burnaby and Calgary are also involved inthework.The study is scheduled for completion in April 2003.8 NI ovaGold Resources recently awarded AMEC with the oO Or TTI TILL Po Ba See Annual Report 2001 le-| Creating Wealth Through Discovery (PITTIT Mar "sy:'Successful exploration for gold resources is5 the'best'path to:The renaissance of gold as a solid and forward-looking investment continued to gain strength'in2001.Gold-based mutual funds,for instance,are some of the top performers for the year,up 2 _ $300 per ounce level and the }'AU goldindex,hi eshedgedandunhedgedgoldcompanies,was up nearly 50%in4 on a1998 1989 2000 (Trading Symbol:NRD US Over-the-Counter (Trading Symbol:NVGLF)its other properties:in thecpaterrains,0 Website: http://www.novagold.net ws Achievements In 2001 Goals for 2002 e Named the top performing stock on the Toronto Stock e Complete the Preliminary Feasibility Study at Donlin Creek to Exchange in 2001.advance the project toward production. e Doubled the gold resource and increased the gold grade at e Substantially increase the near surface,high-grade gold Donlin Creek.resource at Donlin Creek. e Increased the Company's total gold resources to more than e Complete scoping studies on the Rock Creek and the Nome 17.8 million ounces.Gold/Gravel Projects. Increase year-over-year revenues from the Company'seContinuedtofunditsexplorationanddevelopmentinitiatives,Nome Operations to $8 million.through internal cash-flow from the Company's Nome »Operations with minimum dilution to shareholders.e Complete U.S.securities registration for listing on the e Became the largest producer of sand-and-gravel in western Alaska.American Stock Exchange (AMEX). Cover photo:NovaGold reconnaissance team prospecting for gold © In historical terms,2001 will be the year that NovaGold trans- formed into one of the brightest junior exploration companies on the horizon.It was a year marked by many milestones for the Company and its projects.Recognized as the top performing stock on the Toronto Stock Exchange in 2001,the Company saw a dramatic share price increase of more than 1,000%for the year.This new share value was largely driven by the tremen- dous exploration success at the Donlin Creek Project in Alaska. Turning experience and opportunity into gold Following the completion of the Donlin Creek joint venture agreement with Placer Dome in mid-2001,the Company designed an exploration program focused on defining higher- grade mineralization that could be economic even at today's historically low gold prices.The NovaGold technical team spent months re-evaluating the extensive exploration database and reviewed miles of drill core samples in the process. oaiegee"NovaGold SharePrices2tgUS, 4.00 3.50 HL Symbol TSE:NRI 671%Increase since 1998 1677%Increase since Dec 2000 3.05 2.50 2.00 1.59 1.09 0.50 0.00 2888 828888255 5 5 8Sif3BREEREE With the initiation of the Fall 2001 drill program,the Company set several important goals: ®To focus on the areas of the highest gold grades and demonstrate that the zones had consistency and continuity. ®To increase the density of drill data in the higher-grade zones and upgrade the confidence in the new mineralization model. *To continue exploring along the higher-grade gold zones and expand the extent of the mineralization where it remained open. NovaGeld Resources Inc.,(1fa NLD Results exceeded our expectations.The overall grade was signif- icantly improved and the total gold resource at a 1.5 g/t cut-off was doubled to more than 23 million ounces,making Donlin Creek one of the largest undeveloped gold deposits in the world. i Ay Rick Van Nieuwenhuyse and Phil St.George in the Kuskokwim Another milestone was the completion of a preliminary economic assessment study for Donlin Creek by independent engineering firm AMEC E&C Services Ltd.of Vancouver,a 40-year veteran of mine development in Alaska and the Canadian North.This study demonstrated that,with additional exploration and development work,the project may develop into a major new gold producer.Already,the next phase of work is underway on the project with new drilling which began in April -the first step toward completion of a preliminary feasibility study by the end of the year. On other exploration fronts,the Company continues to move forward on two of its other million-ounce gold deposits in Alaska:Rock Creek and the Shotgun project.As part of two new joint venture arrangements,TNR Resources Ltd.will invest funds to advance both of these promising projects toward production,while NovaGold remains focused on exploration at Donlin Creek. Exploration and growth without debt y, The Company also continues its focus on continually improwv- ing its financial and operating results.In 2000,an $8-milliva inter-corporate debt was eliminated with Etruscan Resources Inc. Annual Beport 2001 Cuniepamanims Biman,and in 2001,a convertible debt to Viceroy was retired.In early 2002,the Company reached agreement with Mueller Industries to settle the final royalty due for the purchase of the Alaska Gold Company.The Company is now debt-free with the elim- ination of all of its long-term debts. The acquisition of the Alaska Gold Company has given the Company a steady and growing revenue stream from its sand- and-gravel,gold royalties and land development operations in Nome,Alaska.Operating revenues this year roughly matched those from 2000 and we expect to significantly improve oper- ating performance in 2002.The Company continues to pursue its long-term objectives of expanding sand-and-gravel sales in western Alaska and to markets around the Pacific Rim,partic- ularly to the US west coast,Hawaii and Japan. Donlin Creek Exploration Camp and Main Resource Area A fundamental improvement in gold We believe the fundamentals for gold have seen dramatic improvements over the past year with increased investment demand for gold,decreased global production and reduced producer hedging.We think these trends are likely to continue for years ahead and bode well for increased gold prices. An indication that investors have noticed these fundamental changes is that for the first time in nearly two years,gold is sustaining a price above $300 per ounce and the major mining indexes have outperformed the general stock market. The extended bear market in gold has resulted in mine closures worldwide.Few gold deposits are economically viable at a gold NovaGold Resources Inc.é 2 © price below $275/oz and the squeeze on cash flow means companies have closed unprofitable operations and scaled back exploration.Unlike industries that can just expand production capacity by building bigger factories,gold mining has a long lag period between the discovery of a new gold deposit and the eventual production of gold.Typically it takes 10 years to bring new production on-line.Even with the rising price of gold and the renewed investment interest,it will be years before new gold deposits can begin to supply the higher demand. Companies with high-quality exploration assets will be highly sought after. Vision and experience for the future NovaGold's strength lies in its management team's proven record of success in exploration from grass roots discoveries to the completion of mine feasibility studies.This experience will position the Company well for what we believe will be an excit- ing period of rapid growth as we advance our portfolio of exceptional gold projects toward production while maintaining our focus on operational cash-flow and profitability.With this strategy we believe NovaGold will continue its leading per- formance in the industry as precious metal prices return to their long-term equilibrium levels and above. Thank you all for your continued support. On behalf of the Board of Directors, NovaGold Resources,Inc. el Rick Van Nieuwenhuyse President and CEO NovaGold trades on the TSE under the symbol "NRI"and the US OTC under symbol "NVGLF". Annual Report 2001 Recent exploration discoveries in Alaska and the Yukon have confirmed the region's wealth in gold.Past pro- duction and current resources now exceed 110 million ounces of gold, with 65 million ounces dis- covered in the past decade. These new discoveries are a strong indication of the region's future potential. NovaGold's three explorers, who combined have more than 60 years experience looking ©---han a ¢ Summary of Alaska and Yukon Properties The Shotgun Property NovaGold Resources Inc.(3 Annual Report 2001 for world-class ore deposits,were intimately involved in the y discovery of two of the largest gold deposits in "|Alaska:Donlin Creek and the Pebble Deposit.And their NovaGold has assembled an using experience, exceptional portfolio of properties located in three of the most strategic explo- in North Seward ration terrains America:the Peninsula,the Kuskokwim Mineral Belt,and the Alaska-Yukon Tintina Gold Belt. Shotgun Kuskokwim Mineral Belt The Kuskokwim Mineral Belt in southwestern Alaska is the arcuate extension of the Tintina gold belt and hosts more than 38 million ounces of new gold resources and past production. Deposits in the Kuskokwim are intrusive-related systems and include two of the largest gold deposits in North America: Donlin Creek (23 million ounce resource,a joint venture between NovaGold and Placer Dome)and the Pebble deposit (10 million ounce resource,joint venture with Northern Dynasty/Teck-Cominco).Also located in the Kuskokwim is the Shotgun deposit (1 million ounce resource,joint venture with NovaGold/TNR Resources).Each of these deposits is exposed at the surface,and well suited for low-cost,large-scale open-pit mining. Donlin Creek,NovaGold's most advanced project,is one of the largest undeveloped gold deposits in the world.The project is located in southwestern Alaska on 109 square kilometers (42 square miles)of private patented land under lease agreement from the Alaska native land owners:Calista Corporation and the Kuskokwim Corporation.The project is 19 kilometers (12 miles)north of a commercial barge site on the Kuskokwim River at the village of Crooked Creek,Alaska.A State of Alaska designated winter road connects the project to the barge site.The project has an all-season exploration camp for up to 75 people with an adjacent 1,500 meter (5,000 foot)runway that is directly serviced by commercial aircraft as large as the C-130 Hercules freighter. 2001 Exploration Program Accomplishments NovaGold's exploration program in 2001 was highly success- ful at expanding the extent of the known mineralized resource NovaGotd Resources Inc.;(4 Donlin Creek Exploration Camp and Runway at Donlin Creek.Of the 42 drill holes completed,all but one intersected high-grade gold mineralization over significant widths -a remarkable success ratio indicating the strength of the Donlin Creek gold system.Higher-grade gold mineraliza- tion currently defined in the Acma and Lewis deposits remain Annual Report 2001howd Donlin Creek continued open to expansion.Large mineralized areas surrounding the Acma and Lewis target areas remain to be drilled. Updated Resource Estimate In late 2001,NovaGold engaged independent engineering firm MRDI Canada,a division of AMEC E&C Services Limited of Vancouver (AMEC),to complete a new resource estimate and preliminary economic assessment study based on NovaGold's updated 3D geologic model including all exploration on the project through 2001.AMEC was contracted to complete these studies based its 40-plus years of experience in developing and building mines in Alaska and the Canadian North. The independent geological analysis completed in January 2002 doubled the previous estimates of the contained gold resource at Donlin Creek (Resource Note 1). Donlin Creek updated resource estimates are as follows: 2.0 g/t cut off grade used in AMEC Economic Assessment Study Resource Tonnes Grade Contained Category (Millions)Gold g/t Ounces Measured 5.054 3.84 623,000 Indicated 68.917 3.49 7,732,000 Total M&I:73.971 3.51 8,347,000 Inferred 92.433 3.66 10,877,000 3.5 g/t elevated cut off grade for first 5 years production schedule Resource Tonnes Grade Contained Category (Millions)Gold g/t Ounces Measured 2.225 5.36 383,000 Indicated 24.705 5.04 4,002,000 Total M&I:26.930 5.06 4,385,000 Inferred 36.806 5.22 6,183,000 Notes:(1)Tonnes and Contained Ounces are rounded to the nearest 1,000. Preliminary Economic Assessment Study In March 2002,AMEC completed the preliminary independent economic assessment study of the mining,processing, metallurgical,and other economic factors necessary for the EroferatfouractieliiegvanerimAmerlea development of the Donlin Creek project.The preliminary economic assessment -the first in a series of development studies for the project -indicates that a conventional open-pit mining operation is economically viable at Donlin Creek. AMEC based its estimates on the operating and capital costs of similar projects. ---Se ee ee i"-s a4 ,ams aoe7CadPoowe-a Lease Area 4 tee eTipeeNERG'cf :fi 2 Se.aeud a hsCGFetftee Donlin Creek Property Map A sensitivity analysis was also completed to determine the economic effects of changes to capital and operating costs and the price of gold.According to the Preliminary Economic Assessment that evaluated the capital costs,operating and pro- cessing costs,taxes and royalties for the project,Donlin Creek might generate a pre-tax rate of return in the range of 15.6%to 25.3%based on gold prices from $300 to $350.This dramatic improvement in the project's economics compared to previous studies is primarily due to the increased overall size and grade of the gold resource outlined by NovaGold's 2001 exploration program.A sensitivity analysis on the project shows that the rate of return is most sensitive to changes in the price of gold fol- lowed by changes to the operating costs and least sensitive to changes in capital costs. The current scenarios focus on developing Donlin Creek's shallower and higher-grade ore zones that would be amenable NovaGold Resources Inc.(5 Annual Report 2001thea? fthenemnsemnaneinsiiiaso:Donlin Creek continued to low-cost open pit mining methods.The gold ores would be crushed,finely ground,and then fed to a flotation circuit to sep- arate the gold bearing sulfide minerals from the rock.The high- grade sulfide concentrate would then be oxidized using pres- sure oxidation in an autoclave or with bio-oxidation.The gold would then be leached from the oxidized residue and the gold recovered with activated carbon.The current mining scenarios Drilling at the Acma Target suggest Donlin Creek would have at least 14 years of mine life with an average grade of approximately 5 g/t (0.15 oz/t)for the first five years.It would mine between 8,000 and 20,000 tonnes of ore per day and would produce between 743,000 to 1,100,000 ounces of gold annually.Potential remains to further improve the overall gold recoveries and costs through process optimization,which will be the focus of additional engineering work. Preliminary Feasibility Study and Future Work The completion of the engineering work by AMEC as part of the Preliminary Economic Assessment Report has helped define the capital and operating cost parameters and scale of the operation,and will direct the Preliminary Feasibility Study that will include additional detailed engineering work,permit- ting and further exploration drilling.The preliminary feasibil- ity exploration and engineering work began in April 2002 and will be complete by late 2002.The program will include some in-fill drilling to upgrade the Inferred resources to the Measured and Indicated categories,and will expand the current resource with a focus on developing additional near surface NovaGold Resources Inc.AO © high-grade +5 g/t gold resources.NovaGold plans to spend US$8 million on the upcoming program to complete the Preliminary Feasibility Study and earn its 70%interest in the project from Placer Dome by the end of 2002,subject to Placer Dome's right to re-acquire a 70%interest by taking the project to production (see Note 6 of Financial Statements). The southern two kilometers of the property has received the most exploration focus to date and currently hosts the multi- million-ounce gold resource that remains open at depth and along strike.Seven other potential resource areas also occur along the 10-kilometer gold trend that have significant high- grade drill results that are not included in the current resource estimates.Additional exploration upside exists on NovaGold's adjacent Donlin North Property,where the geolo- gy and mineralization indicate the potential for bonanza-grade mineralization at depth. In February,NovaGold signed a joint venture arrangement to advance its million-ounce Shotgun deposit,located south of the Donlin Creek property,with TNR Resources (symbol TRR on the CDNX).Under the agreement TNR can earn up to a 50%interest in Shotgun project by spending US$3 million dol- lars on exploration over the next four years to advance the proj- ect towards a production decision.TNR can earn a further 20% interest in the project by spending an additional US$6 million toward project development.NovaGold retains a back- in option to regain a 50%interest in the project. NovaGold previously completed a 3,100-meter diamond- drilling program on the Shotgun deposit and outlined an Inferred Resource of 980,000 ounces grading 0.93 g/t at a 0.5 g/t cut-off (Resource Note 3).The mineralization remains open to the north,west and at depth.Metallurgical tests indicate The Shotgun deposit is exposed at the surface,amenable to open pit mining excellent gold recovery in excess of 93%. with a very low strip ratio and has significant exploration upside potential.More than 10 priority exploration targets with similar geophysical signatures have been identified to date on the property,of which six have returned anomalous gold val- ues in reconnaissance soil sampling. Annual Report 2001 ExplorationActivitiesJnNerihAmerica) Seward Peninsula After Donlin Creek,NovaGold's next two most advanced gold projects are Rock Creek and the Nome Gold/Gravel Project, both of which are located on the Seward Peninsula in western Alaska.This historic mining district is the home of the famous Nome Goldfields discovered at the turn of the 20th Century during the Klondike Gold Rush -with past production and resources in excess of 7.8 million ounces.Surprisingly,this proven gold district has experienced little modern exploration and is poised for new world-class discoveries similar to deposits defined recently in the Kuskokwim and Tintina gold belts.The known deposits of the Seward Peninsula have favor- able metallurgy,favorable mining situations and some of the best infrastructure in the State of Alaska. Located seven miles by road from the city of Nome,the Rock Creek deposit is the most advanced lode-gold deposit in the Nome Mining District -an active mining area that has histori- cally produced more than 5.5 million ounces of gold from the nearby stream and beach placer deposits.In February, Indicated Resource of 555,000 ounces grading 2.74 g/t gold with an additional Inferred Resource of 563,000 ounces of gold grading 2.48 g/t using a 1 g/t cut-off grade. (Resource Note 2).The deposit is exposed at the surface and amenable to open-pit mining with a low strip ratio. NovaGold signed a letter of agreement with TNR Resources to advance its million-ounce : Rock Creek deposit.Under the agreement,TNR Resources can F earn a 49.9%interest in a joint venture on Rock Creek by a : investing US $10 million by December 2004 to put the project into production.The joint-venture partners intend to fast-track the exploration phase of the project,with the goal of bringing Rock Creek to production within the three-year option period. Based on work completed by NovaGold,Kennecott,Newmont and Placer Dome,Rock Creek has a total Measured and NovaGold Resources Inc.( Aerial view of Nome,Alaska Metallurgical test-work at Rock Creek has shown it to have "-|favorable metallurgy with ;greater than 86%of the gold -{recovered using a relatively J coarse grind (-65 mesh)and conventional and inexpensive gravity methods.Other nearby prospects have similar styles of mineralization with coarse free gold and are thought to have the same favorable metallurgy. The deposits remain open along strike and down dip,with the potential to significantly increase the gold resource with further drilling.Highly anomalous gold in soil samples extend from :(7 Annual Report 2001 iareeRock Creek continued the areas of known gold mineralization for over a kilometer and additional targets occur over a 10-kilometer trend. In addition to the resources at the Rock Creek and Saddle deposits,NovaGold owns a major property position of approx- imately 14,000 acres of patented mining claims within the his- toric Nome mining district and controls another 15,000 acres of surrounding native corporation lands through an exclusive exploration agreement with the Bering Straits Native Corporation.Between NovaGold's,wholly owned patented claims and the surrounding native corporation lands,NovaGold controls this exciting,newly emerging gold district. Nome Gold Project In addition to the Rock Creek lode deposit,the Company is cur- rently reviewing options to look at production of a combined gravel-and-gold operation on its patented mining claims near Nome.These patented mining claims historically produced more than 4 million ounces of gold,initially using hand mining methods and later bucketline dredging in shallow sand and gravel beach deposits.The Nome Gold Project currently con- tains a resource estimate of 1.2 million ounces of measured and indicated gold resources as well as 1.1 million ounces of inferred gold resource within a 295 million cubic-yard sand- and-gravel aggregate resource (Resource note 4).Outside of the defined gold resource area,an additional sand-and-gravel resource of 847 million tons has been identified,for a total sand-and-gravel resource in excess of 1 billion tons.This makes the Nome sand-and-gravel aggregate resource one of the largest coastal-based construction aggregate sources along the Pacific Rim. The current Nome Gold Project gold resource is defined by approximately 10,000 drill holes.NovaGold is currently com- puterizing data from the original drill logs to create a 3-D data- base to get a better view of the deposits for mine planning and exploration.Due to the continuous lateral extent of these ancient beach deposits along the Nome Coastal plain,signifi- cant exploration potential exists to greatly expand the resource in several directions beyond the existing drilling. NovaGold Resources Inc. ene Until 1998,these deposits were profitably mined solely as placer gold operations producing about 25,000 ounces of gold annually.NovaGold's current business plan for the Nome Gold Project,envisions a large-scale open pit mining operation with a conventional washing,screening and gravity separation plant to produce sand-and-gravel products and gold.This type Sto NsNone2'i *aa Gold-bearing Bering Sea Nome Gold in Gravel and Rock Creek Deposits of operation could be scaled to a 20,000 tonne-per-day opera- tion that could produce 100,000 ounces of gold and three mil- lion tonnes of sand-and-gravel products annually.The combi- nation of a large-scale,low-cost gold production facility inte- grated with a sand-and-gravel operation could result in very strong project economics at today's US$300 price of gold. An independent Preliminary Economic Assessment Study is planned to begin in 2002 for the Nome Gold/Gravel Project to help define the potential capital and operating cost,as well as transportation cost parameters for a large-scale aggregate and gold operation.The study will also include a detailed market assessment.With a sand-and-gravel aggregate resource in excess of one billion tons,the Company is looking to expand its sand-and-gravel business well beyond its existing western Alaska market.Discussions with the major North American construction aggregate companies indicate a significant market demand exists for sand-and-gravel construction material in the major west-coast markets and in Asia.The Company will con- tinue to pursue expansion into these major markets to further increase its revenue in the coming years. -f8 Annual Report 2001 é - ons Alaska-Yukon Tintina Gold Belt The Alaska-Yukon Tintina Gold Belt has resources and past production in excess of 28.2 million ounces.In just the last six years,the Fort Knox,True North,and Brewery Creek Mines have gone into production and four additional multi-million ounce deposits have been discovered within the Tintina Gold Belt.The +8 million ounce Fort Knox Mine owned by Kinross is expected to produce 440,000 ounces in 2002 at $220 per ounce from an intrusive-related deposit.The most recent dis- covery is the 5.6 million-ounce high-grade intrusive-related Pogo Deposit owned by Teck-Cominco/Sumotomo that is entering the final feasibility stage.The belt also includes meta- morphic-related deposits at Ryan Lode (2.4 million ounces, Kinross)and the True North Mine (2 million ounces,Kinross), deposits similar to Rock Creek and others in the Nome Mining District.Crossing over the border into the Yukon,the Tintina Gold belt continues to the south and east,including the Dublin Gulch (1.5 million ounces)and Brewery Creek (1.2 million ounces,Viceroy)deposits.The deposits of the Alaska-Yukon Tintina Gold Belt have good infrastructure with major highways and power-lines aiding mine development and operating costs. Soil sampling in the Tintina Gold belt NovaGold's five prospective Tintina Gold Belt properties are all intrusive-related deposits,with similar age intrusive rocks and similar characteristics to the Fort Knox and Pogo Deposits, the largest and highest-grade gold deposits of the Tintina Gold Belt.Each of NovaGold's Tintina Gold Belt properties has at least one exploration target that is more than one-kilometer across and that contains high-level gold in soil and rock sam- ples.This is comparable to the soil and rock anomalies found over the Pogo or Fort Knox deposits that were the primary NovaGold Resources Inc.f9 Oo | OOO Oa oe DOT GD S nw targets for the drilling that discovered these two multi-million- ounce deposits.The common characteristics between NovaGold's properties and known deposits are strong indica- tions that new multi-million-ounce deposits may be found at these properties. Summary Statement NovaGold's strength lies in the management team's strong background in exploration and mine development.The Company is focused on discovery,acquisition,and devel- opment of high-quality mineral resources in Alaska and the Yukon Territories -a region with a demonstrated world- class wealth in gold.Management is committed to lever- aging the Company's demonstrated cash flow from its Nome operations and to advance its outstanding portfolio of properties toward production,as well as,identifying new outstanding opportunities that will add value for our shareholders. Annual Report 2001 s The table on the facing page sets forth NovaGold's interest in the Measured,Indicated and Inferred gold mineral resources at each of its advanced stage properties in accordance with National Instrument 43-101,as required by Canadian securities regulatory authorities. These mineral resource figures have been carefully prepared and verified by experienced and independent qualified third parties.These figures are estimates,however,and no assurance can be given that the indicated quantities of gold will be produced.None of the Company's resources can currently be classified as a mineral reserve until the completion of at least a preliminary feasibility study. A MINERAL RESOURCE is a concentration or occurrence of natural,solid,inorganic or fossilized organic material in or on the Earth's crust in such form and quantity and of such a grade 1 or quality that it has reasonable prospects for economic extraction.The location, quantity,grade,geological characteris- tics and continuity of a mineral resource are known,estimated or interpreted 4 from specific geological evidence and a knowledge.Mineral resources are sub- #@ divided,in order of increasing geologi- i cal confidence,into inferred,indicated and measured categories: An inferred mineral resource is that part of a mineral resource for whichDrillingatDonlin quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed,but not verified,geological and grade continuity.The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as out- crops,trenches,pits,workings and drill holes. An indicated mineral resource is that part of a mineral resource for which quantity,grade or quality,densities,shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters,to support mine planning and evaluation of the economic viability of the deposit.The NovaGold Resources Inc. © estimate is based on detailed and reliable exploration and test- ing information gathered through appropriate techniques from locations such as outcrops,trenches,pits,workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed. A measured mineral resource is that part of a mineral resource for which quantity,grade or quality,densities,shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appro- priate application of technical and economic parameters,to support production planning and evaluation of the economic viability of the deposit.The estimate is based on detailed and reliable exploration,sampling and testing information gathered through appropriate techniques from locations such as out- crops,trenches,pits,workings and drill holes that are spaced closely enough to confirm both geological and grade continuity. A MINERAL RESERVE is the economically mineable part of a measured or indicated mineral resource demonstrated by at least a preliminary feasibility study.This study must include adequate information on mining,processing,metallurgical, economic and other relevant factors that demonstrate,at the time of reporting,that economic extraction can be justified.A mineral reserve includes diluting materials and allowances or losses that may occur when the material is mined.Mineral reserves are sub-divided in order of increasing confidence into probable mineral reserves and proven mineral reserves: A probable mineral reserve is the economically mineable part of an indicated,and in some circumstances,a measured miner- al resource demonstrated by at least a preliminary feasibility study.This study must include adequate information on mining, processing,metallurgical,economic and other relevant factors that demonstrate,at the time of reporting,that economic extrac- tion can be justified. A proven mineral reserve is the economically mineable part of a measured mineral resource demonstrated by at least a pre- liminary feasibility study.This study must include adequate information on mining,processing,metallurgical,economic and other relevant actors that demonstrate,at the time of report- ing,that economic extraction can be justified. {10 Annual Report 2001 "aerance © Mineral Resource Notes:These resource estimates have been prepared in accordance with National Instrument 43-101 and the Canadian Institute of Mining and Metallurgy Resource Classification System.For a more detailed description of the © www.sedar.com. Measured,Indicated and Inferred Gold Resource key assumptions,parameters and methods used in estimating resources,see NovaGold's most recent Annual Information Form on file with Canadian securities authorities at Ownership %Resource |Cut-Off |Tonnes Grade |Contained |Contained |NovaGoldCategory|Aug/t |{[000's)Aug/t |Milograms |Ozs{000's)|Ozs{000's) Dontin Creek (1)Eaming Measured |2.0 5,054 3.84 19,407 623 436 70%)Indicated |2.0 68,917 |3.49 240,520 7,732 5,412 Total Mal 73,971 3.51 259,638 8.347 5,843 Inferred 2.0 92.433 3.66 338.305 10.877 7.614 Rock Creek (2)100%(5)Measured 1.0 3,043 2.79 8,490 273 273 Indicated |1.0 3,374 2.69 9,076 282 282 Total Mal 6411 214 T1566 555 555 Inferred 1.0 2,944 2.78 8,184 303 303 Saddle Inferred 1.0 3,629 2.23 8,093 260 260 6573 248 16.271 563 563 Shotgun 3 |100%s)Inferred 0.5 32,765 0.93 30,471 980 980 32,165 0.93 30.471 980 980 Nome Gold 100%Measured 48,802 0.31 15,053 484 484 Gold Product Gravel &Gold «4)Indicated 90,259 0.24 21,397 688 688 Total Ma!139,061 0.26 36,450 1172 1172 Inferred 156,479 0.21 33,154 1,066 1,066 Total Mal Ounces 10,074 1510 Total Interred Ounces 13,486 10,223 Resource Footnotes 1.The Measured,Indicated and Inferred resource estimates at Donlin Creek were completed in January 2002 by independent engineering firm MRDI Canada,a division of AMEC E&C Services Limited of Vancouver (MRDI).The resources are estimated using a probability assisted method with a total of 122,231 meters (401,020 feet)of sampling.The sampling is comprised of 87,571 meters (287,306 feet)of core samples in 361 drill holes, 13,323 meters (43,711 feet)of reverse circulation samples in 117 drill holes and 21,337 meters (70,000 feet)of surface trench samples.Qualified Person,Dr.Stephen Juras P.Geo.,MRDI's Chief Geologist in Vancouver,supervised the data verification and resource estimate updates.A Preliminary Economic Assessment was completed for Donlin Creek under the direction of Stephen Hodgson,P.Eng.,technical director of mining for AMEC,using a2 g/t cut-off.A detailed Technical Report for this study is available for review at http://www.sedar.com. 2.The Measured,Indicated and Inferred resource estimate at Rock Creek and Saddle were completed in 2000 by qualified persons,Phil St.George and Robert Prevost,with NovaGold Resources Inc.The Measured,Indicated and Inferred resources from this estimation were disclosed by NovaGold Resources Inc.on March 14,2000,Press Release:NovaGold Advances Million Ounce Rock Creek Property Towards Feasibility. 3.The Inferred Resource estimate at Shotgun was completed in 1998 by qualified persons Phil St.George and Robert Prevost,with NovaGold Resources Inc.The inferred resource from this estimation was disclosed by NovaGold on October 21,1998,Press Release:Million Ounce Discovery at Shotgun. 4.The Measured,Indicated and Inferred resource estimate at the Nome Gold Project was completed in year 1999 by qualified person,Norm Johnson, with Alaska Gold Company.The Measured,Indicated and Inferred resources from this estimation were disclosed by NovaGold Resources Inc.on October 7,1999,Press Release:Two Million Ounce Alluvial Gold Resource at Nome. 5.Ownership subject to earn-in agreements on the Donlin Creek,Rock Creek,and Shotgun properties (see Note 6 on Financial Statements). NovaGold Resources Inc..Cn Annual Report 2001yMeN wreResults of Operation For the year ended November 30,2001 compared with the year ended November 30,2000 NovaGold Resources Inc.is a diversified natural resource Company focused on the exploration and development of gold and construction aggregates in North America.The Company's operations during the past few years have focused on explo- ration opportunities in Alaska and the Yukon. Once again in 2001,the Company is pleased to have funded a substantial portion of its exploration and development activities through positive cash-flow generated from the Company's sand-and-gravel operations,gold royalties and land sales in Nome,Alaska.In the current year,the Company's wholly owned subsidiary Alaska Gold Company (Alaska Gold)gener- ated revenues from land sales of $2,167,102 as compared to $2,213,551 in 2000.In 2001,Alaska Gold also generated grav- el sales of $259,816 as compared to $381,929 in 2000.Placer gold production and royalties increased to $115,271 from $79,131 in 2000.Other revenue including property leases and building rentals totaled $281,835 in 2001 as compared to $181,940 in the prior year. The Company had a net loss for the year ended November 30, 2001 of $494,388 or $0.02 per share as compared to a net income of $2,706,331 or $0.13 per share in 2000.The Company's net income in 2000 resulted primarily from a gain of $7,437,300 or $0.35 per share made on the settlement of an inter-corporate debt to Etruscan Resources Inc.(Etruscan).As part of the settlement of the debt in the amount of $8,000,539, the Company issued 2,000,000 common shares of NovaGold TR ee a ek=NS hetSV0 6ra!'pS |ay A eed RevaGeld Resources Inc. with an attributed value of $490,798 to Etruscan.The Company also transferred 1,880,209 common shares of Etruscan owned by the Company to an agent to be sold and the proceeds deliv- ered to Etruscan.The attributed value of this transaction was $911,362. The Company's general and administrative expenses increased to $1,254,261 in 2001 from $726,569 in 2000.This increase is largely attributable to the expanded exploration activities in Alaska at the Donlin Creek property,as well as an increase in corporate communications costs.The Company's interest on long-term debt,which is largely due to the interest accretion on convertible debt instruments,decreased from $666,649 to $323,775 in 2001.In 2001,the Company also recorded a gain of $231,031 on the write-off of accounts payable and con- tributed surplus of $266,694 associated with the repayment of the convertible debentures,partial repayment of the convertible royalty and the settlement of other commitments.As a result of the long-term debt settlement with Etruscan in 2000,there was no loan interest expense from Etruscan in 2001 compared to $298,378 in the prior year.Professional fees increased from $269,632 to $463,460.Wages and benefits increased slightly from $401,471 to $430,483.During 2001,the Company also incurred mine site maintenance expenditures of $144,821 at the reclaimed Murray Brook property in New Brunswick compared to $81,645 in 2000. In 2001,the Company has written-off the accumulated mineral property acquisition and related deferred exploration costs of $564,727,or $0.02 per share,associated with the Sewell Brook property in New Brunswick.In 2000,the Company recorded a write-down of the accumulated mineral property costs for the California Lake property in New Brunswick,the Sawtooth property in Nevada and the Summit property in Mexico,and adjusted the Pine Cove property to its estimated net realizable value based on the disposition of the property to New Island Resources Inc.The write-downs recorded in 2000 totaled $3,043,703 or $0.14 per share. ;(2 Annual Report 2001"itBiscicsinati Liquidity and Capital Resources For the year ended November 30,2001 compared with the year ended November 30,2000 During the past two years,the Company has financed its acqui- sition and exploration of mineral properties and its ongoing operating costs from cash flow generated by Alaska Gold and from private placement issuance of shares.During the current year,the Company generated revenue of $2,824,024 to finance its operations.In 2000,the Company generated revenue of $2,856,551.In 2001,the Company issued 3,986,700 common shares for cash proceeds of $3,662,894.To retire the Company's convertible debenture,2,468,220 common shares were issued at an ascribed value of $1,874,925 to Viceroy Resource Corporation (Viceroy)with the remaining balance of $690,000 paid with cash.The $2-million convertible debenture along with a $2-million bridge facility was arranged with Viceroy in 1999 for purposes of funding the acquisition of Alaska Gold.The bridge facility was retired in 2000 with pay- ments totaling $1,001,573.The Company's working capital position as at November 30,2001 was $(2,667,103)as com- pared to $(2,755,245)at the end of 2000. In 2001,the Company paid $185,158 against the production royalty held by Mueller Industries Inc (Mueller).Subsequent to year-end,the Company entered into an agreement with Mueller to settle the convertible royalty for US$750,000 by issuing 319,543 common shares of the Company.With this agreement, the Company is free of all long-term debt. The Company incurred expenditures on the acquisition and exploration of mineral properties of $3,535,544 in 2001 and $1,373,225 in 2000.In 2001,the primary focus was on the Donlin Creek property in Alaska with expenditures totaling $3,277,487.In 2000,the Company's exploration activities were focused on the Rock Creek property in Alaska with expendi- tures aggregating $591,805.Also in 2000,the Company incurred $403,694 on the Sprogge property in the Yukon.A sig- nificant portion of the Sprogge project costs were funded under an agreement with Kennecott Exploration. Subsequent to November 30,2001,the Company engaged Salman Partners Inc.to act as lead agent in a syndicate includ- ing BMO Nesbitt Burns and Griffiths McBurny Inc.to market by way of private placement up to $20 million worth of units at 'ef a price of $3.50 per unit.Each unit consists of one common share and one-half common share purchase warrant.Each full warrant entitles the holder to purchase one common share of the Company at a price of $4.50 for a period of 18 months.The closing of the private placement is anticipated to occur on or about April 18,2002.These funds are intended to accelerate the development of the Donlin Creek project and ensure the Company earns its 70%interest by the end of the year. The Company has also received subsequent to year-end,pro- ceeds from the exercise of stock options and warrants totaling $1,075,165. Outlook The Company is in advanced negotiations for the sale of a sig- nificant land package in conjunction with the expansion of the Nome airport.The Company also anticipates significant rev- enues to be generated in 2002 from on-going sand-and-gravel sales including for the airport expansion and the Nome seaport expansion.The Company will continue to fund its operations in the upcoming year from these proceeds and from the private placement proceeds. The Company plans to complete a Preliminary Feasibility Study on the Donlin Creek project by the end of 2002 and con- tinue with the permitting and engineering work that is neces- sary to adv ice the project to development.Upon completion of the preliminary feasibility the Company anticipates initiating a final Feasibility Study in 2003 to advance the project to a pro- duction decision.Also in 2002,the company expects to advance its million-ounce Shotgun property with the US$500,000 in required expenditures under an agreement with TNR Resources.Separately,TNR Resources will also fund a US$1,000,000 program in 2002 to advance the million-ounce Rock Creek project towards a development decision. MovaGold Resources Inc.:13°Annual Report 2001 NovaGold Resources Inc. an exploration stage company Consolidated Financial Statements November 30,2001 and 2000 Management's Responsibility for Financial Reporting To the Shareholders of NovaGold Resources Inc. (an exploration stage company) The accompanying consolidated financial statements of the com- pany have been prepared by management in accordance with accounting principles generally accepted in Canada,and within the framework of the summary of significant accounting policies in these consolidated financial statements.Management is responsi- ble for all information in the annual report.All financial and oper- ating data in the annual report is consistent,where appropriate, with that contained in the consolidated financial statements. A system of internal accounting control is maintained in order to provide reasonable assurance that assets are safeguarded and that transactions are properly recorded and executed in accordance with management's authorization.This system includes established poli- cies and procedures,the selection and training of qualified person- nel and an organization providing for appropriate delegation of authority and segregation of responsibilities. The Audit Committee of the Board of Directors has met with the company's independent auditors to review the scope and results of their annual audit and to review the consolidated financial state- ments and related financial reporting matters prior to submitting the consolidated financial statements to the Board of Directors for approval. The consolidated financial statements have been audited on behalf of the shareholders by the company's independent auditors, PricewaterhouseCoopers LLP,in accordance with Canadian gener- ally accepted auditing standards.The auditors'report outlines the scope of their audit and their opinion on the consolidated financial statements. el Rick Van Nieuwenhuys' President and Chief Executive Officer Glenn A.Holmes Secretary Treasurer April 8,2002 NovaGold Resources Inc. Auditors'Report To the Shareholders of NovaGold Resources Inc. We have audited the consolidated balance sheets of NovaGold Resources Inc.(an exploration stage company)as at November 30, 2001 and 2000 and the consolidated statements of operations and deficit and cash flows for the years then ended.These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial state- ments based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards.Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.An audit includes examining,on a test basis,evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statement presentation. In our opinion,these consolidated financial statements present fair- ly,in all material respects,the financial position of the company as at November 30,2001 and 2000 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles. Duenbtirbeuntorpey LLP Chartered Accountants Vancouver,B.C. Canada April 8,2002 (4 Annual Report 2001 e.Consolidated Balance Sheets ceagums '*,Ce Per ire Der nee oe EonaeCeti =ne FR oe pres As at November 30,2001 and 2000 Assets Current assets Cash and cash equivalents Amounts receivable Amounts receivable from related party (note 13(e)) Inventory Deposits and prepaid amounts Officer loan receivable (note 13(c)) Property,plant and equipment (note 3) Investments (note 4) Reclamation deposit Land and gravel resource (note 5) Mineral properties and related deferred costs (note 6) Liabilities Current liabilities Accounts payable and accrued liabilities Accounts payable to related party (note 13(f)) Loan payable (note 7) Convertible debt instruments (note 8) Provision for reclamation costs (note 9) Shareholders'Equity Capital stock (note 10) Contributed surplus Equity portion of convertible debt instruments (note 8) Deficit Nature of operations (note 1) Commitments and contingencies (note 12) Subsequent events (note 15) Approved by the Board of Directors owgDirector NovaGold Resources Inc.;(15 Annual Report 2001sep 2001 2000 $$ 421,803 416,040 521,658 139,709 200,000 - 11,372 91,103 126,630 42,130 1,281,463 688,982 241,005 253,691 174,461 232,246 44,876 4,876 105,098 101,361 1,761,175 1,910,904 14,352,291 11,627,847 17,960,369 14,819,907 3,678,432 3,244,227 70,134 - 200,000 200,000 3,948,566 3,444,227 1,217,156 3,144,636 1,496,215 1,583,687 6,661,937 8,172,550 74,393,683 69,099,614 266,694 - 484,700 900,000 (63,846,645)(63,352,257) 11,298,432 6,647,357 17,960,369 =14,819,907 -- Director tod Statements of=Operationsand Deficit= For the years ended November 30,2001 and 2000 2001 2000 $$ Revenue Land sales 2,167,102 2,213,551 Gravel sales 259,816 381,929 Gold production and royalties 115,271 79,131 Lease and rental revenue 144,083 114,112 Other 137,752 67,828 2,824,024 2,856,551 Land cost 74,729 1,804,086 Property tax 143,187 220,387 Amortization of gravel quarries 75,000 75,000 2,531,108 757,078 Expenses General and administrative 1,254,261 726,569 Interest on amount payable to Etruscan Resources Incorporated (note 13(b))°298,378 Interest on convertible debt instruments 323,775 666,649 Murray Brook mine site maintenance 144,821 81,645 Professional fees 463,460 269,632 Wages and benefits 430,483 401,471 Write-down of mineral properties and related deferred costs 564,727 3,043,703 3,181,527 5,488,047 (650,419)(4,730,969) Other income (expense) Write-off of accounts payable 231,031 = Write-down of investments (75,000)= Gain on debt settlement .6,598,379 Gain on disposition of investment -838,921 156,031 7,437,300 {Loss)net earnings for the year (note 14)(494,388)2,706,331 Deficit -Beginning of year (63,352,257)(66,058,588) Deficit -End of year (63,846,645)(63,352,257) (Loss)earnings per Share (note 1/) Basic (0.02)0.13 Diluted (0.02)0.09 NovaGold Resources Inc.é (16 Annual Report 2001 Cash provided by €used ini Operating activities (Loss)net earnings for the year Items not affecting cash Foreign exchange loss Amortization Charges from Etruscan Resources Incorporated Interest on reclamation deposit Interest on advances from Etruscan Resources Incorporated Write-down of mineral properties and related deferred costs Gain on debt settlement Gain on disposition of investment Write-down of investments Write-off of accounts payable Issue of shares for settlement of commitments Accretion of interest on convertible instruments al For the years ended November 30,2001 and 2000 Reclamation expenditures Net change in non-cash working capital (Increase)decrease in amounts receivable,deposits and prepaid amounts Decrease in inventory Increase in accounts payable and accrued liabilities Financing activities Repayment of convertible debenture Repayment of convertible royalty Directors loans Proceeds from issuance of common shares Proceeds from reclamation deposit Repayment of bridge financing -net Investing activities Acquisition of property,plant and equipment Expenditures on mineral properties and related deferred costs -net Increase in cash and cash equivalents during the year Cash and cash equivalents -Beginning of year Cash and cash equivalents -End of year 2001 2000 $$ (494,388)2,706,331 38,071 61,500 232,654 1,959,794 =133,211 (3,737)- -298,378 564,727 3,043,703 =(6,598,379) -(838,921) 75,000 - (231,031)- 123,544 = 222,396 508,636 527,236 1,274,253 (87,472)(1,272,305) (704,520)161,642 79,731 367,308 1,089,707 705,441 904,682 1,236,339 (690,030)- (185,158)- (270,000)- 3,662,894 1,400 >798,527 >(1,001,573) 2,517,706 (201,646) (12,454)(19,296) (3,404,171)(902,001) (3,416,625)(921,297) 5,763 113,396 416,040 302,644 421,803 416,040 Supplemental non-cash financing and investing activities (note 17) NovaGold Resources ne.pC Annual Report 2001 1.Nature of operations The company is in the process of exploring its mineral properties and has not yet determined whether these properties contain ore reserves that are economically recoverable.The amounts shown as mineral properties and related deferred costs represent costs net of recoveries to date,less amounts amortized and/or written off,and do not neces- sarily represent present or future values.The recoverability of amounts shown for mineral properties and related deferred costs is dependent upon the discovery of economically recoverable reserves, securing and maintaining title and beneficial interest in the properties, the ability of the company to obtain necessary financing to continue operations and to complete the development and upon future prof- itable production or proceeds from the disposition thereof. The company will periodically have to raise additional funds to com- plete exploration and development and,while it has been successful in doing so in the past,there can be no assurance that it will be able to do so in the future.Subsequent to year-end,the company engaged Salman Partners Inc.to act as lead agent in a syndicate to market,by way of private placement,up to $20 million of units at a price of $3.50 per unit (note 15(b)).The company has ongoing sand and gravel resource revenues,intends to develop and sell a significant amount of its land in the Nome,Alaska area and plans to fund its operations and activities in the upcoming year from these proceeds,and the proceeds of the private placement. 2.Accounting policies Basis of presentation These consolidated financial statements include the accounts of NovaGold Resources Inc.and its wholly-owned subsidiaries, NovaGold Resources (Bermuda)Limited,NovaGold (Bermuda) Alaska Limited,Alaska Gold Company,NovaGold Resources Alaska, Inc.,Pine Cove Resources Inc.,Murray Brook Resources Inc., NovaGold Resources Nevada Inc.,NovaGold Finance Corporation Inc.,and Nova-Venez Resources Inc. Revenue recognition and inventories Revenue from land sales is recognized when title passes to the pur- chaser.Gravel revenue is recognized upon shipment.Lease and rental revenue is recognized as services are rendered over time.Gold royal- ties and incidental gold production revenues earned from placer min- ing activities carried out on the company's land and gravel resource properties are recognized as revenue when the amounts are deter- minable and collectible and title to the gold,if sold by the company, has transferred. oe Pre-production revenues from mineral properties are applied to reduce the carrying cost of the related property.Other inventories are valued at the lower of average cost and net realizable value. Cash and cash equivalents Cash and cash equivalents consist of cash on deposit with banks and highly liquid short-term interest bearing investments with maturities of less than 90 days from the original date of acquisition. Property,plant and equipment Property,plant and equipment is recorded at cost.Amortization of heavy machinery and equipment and office furniture and equipment is calculated on a straight-line basis at annual rates of 30%and 20%, respectively. Investments The company accounts for its investments in shares of other resource companies as long-term investments.They are recorded at cost unless an other-than-temporary decline in value has been determined,in which case they are written down to market value. Land and gravel resource Land is recorded at cost and at the time of acquisition cost is allocat- ed to each of the identifiable parcels of land on a pro rata basis in accordance with that parcel's estimated value as a percentage of the value of the entire parcel acquired.Revenue is recorded upon transfer of title to the purchaser and cost of sales is determined on the basis of the allocated costs.The costs of the remaining unsold parcels of land are reviewed regularly to determine if impairment exists and if impair- ment is determined the costs would be written down to recoverable value.To date,there have been no charges for impairment.Property taxes are charged as a current expense rateably over the year. Gravel property is recorded at cost and is being amortized at the straight-line rate of 10%per year which is estimated to approximate the useful life. Mineral properties and related deferred costs Exploration and development costs relating to mineral properties are deferred until the properties are brought into production,at which time they are amortized on the units-of-production basis,or until the prop- erties are abandoned or sold or management determines that the min- eral property is not economically viable,at which time the deferred costs are written off.Any proceeds relating to these properties prior to commencement of production,including refundable mining taxes,are (18 Annual Report 2001 recorded as a reduction of the carrying value of the property when received,The units-of-production amortization is calculated based on proven and probable reserves following commencement of produc- tion.Costs applicable to properties abandoned or having no current value are charged to expense.The company has maintained title to certain properties that have been written off. Although the company has taken steps to verify title to mineral prop- erties in which it has an interest,according to the usual industry stan- dards for the stage of exploration of such properties,these procedures do not guarantee the company's title.Such properties may be subject to prior agreements or transfers and title may be affected by undetect- ed defects. Income taxes The company uses the liability method of accounting for income taxes. Under this method,current income taxes are recognized for the esti- mated income taxes payable for the current year.Future income tax assets and liabilities are recognized for temporary differences between the tax and accounting bases of assets and liabilities as well as for the benefit of losses available to be carried forward to future years for tax purposes.Future income tax assets are evaluated and if realization is not considered more likely than not,a valuation allowance is provided. Translation of foreign currencies Foreign operations are integrated with the parent company and,con- sequently,the financial statements of foreign subsidiaries are translat- ed into Canadian currency using the temporal method. Monetary assets and liabilities are translated at the exchange rate in effect at the balance sheet date and non-monetary assets and liabilities at the exchange rates in effect at the time of acquisition or issue. Revenues and expenses are translated at rates approximating exchange rates in effect at the time of the transactions.Exchange gains or loss- es arising in translation are included in income or loss for the year, except for unrealized gains or losses on debt,which are deferred and amortized over the estimated remaining life of the debt. Earnings per share The company has adopted the new accounting standard for the calcu- lation of earnings per share which follows the "treasury stock method" in the calculation of diluted earnings per share and requires the pres- entation of both basic and diluted earnings per share on the face of the consolidated statement of operations and deficit regardless of the materiality of the difference between them.The new standard has been applied on a retroactive basis which has resulted in the restatement of the prior year's diluted earnings per share. LOO OO TTCTOTOTSaSPIEELEMRPmTOEaa For the years ended November 30,2001 and 2000 Financial instruments The fair values of the company's cash and cash equivalents,amounts receivable,accounts payable and accrued liabilities approximate their carrying values.The fair value of the company's investments is dis- closed in note 4. Stock option plan The company has a stock option plan which is described in note 10(c). No compensation expense is recognized when stock options are issued as the exercise price equals the market price of the common stock at the time of grant.Consideration paid on the exercise of stock options or purchase of shares is credited to share capital. Use of estimates The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reported period.Significant estimates include the recoverable amounts of land and gravel resource,mineral proper- ties and the provision for reclamation costs.Actual results could dif- fer from those reported. 3.Property,plant and equipment 2001 Accumulated Cost amortization Net $$$ Heavy machinery and equipment 793,206 654,134 139,072 Office furniture and equipment 148,464 113,075 35,389 941,670 767,209 174,461 2000 Accumulated Cost amortization Net $$$ Heavy machinery and equipment 785,456 596,192 189,264 Office furniture and equipment 143,760 100,778 42,982 929,216 696,970 232,246 NovaGold Resources Inc.Cs Annual Report 2001 Notesto Consolidated StatementsoeTiteeeOWyAOUTTeReAoedeeDoretnee, For the years ended November 30,2001 and 2000 4.Investments 2001 2000 $$ 126,625 shares of Etruscan Resources Incorporated (Etruscan),at cost.Quoted market value -$43,053 (2000 -$41,786)4,875 4,875 1,000,000 shares of New Island Resources Inc.,received in exchange for the company's interest in the Pine Cove property. Quoted market value -$40,000 40,000 - 600,000 shares of Electra Mining Consolidated, recorded at nominal value 1 1 44,876 4,876 The Province of New Brunswick holds the company's shares of Etruscan pending the settlement of outstanding mining taxes aggregating $365,023 (2000 -$360,366). J.Land and gravel resource 2001 2000 $$ Land,Fairbanks,Alaska 51,576 $1,576 Land,Nome,Alaska 1,494,656 1,569,385 Gravel resource,net of accumulated amortization of $525,000 (2000 -$450,000)214,943 289,943 1,761,175 1,910,904 NovaGold Resources Inc.£(20 Annual Report 2001 sNotes to Consolidated Statements Pa tee tgs PM ee Fn eee ES ATE For the years ended November 30,2001 and 2000 6.Mineral properties and related deferred costs For the year ended November 30,2001: Recovery,(1) Balance -disposal (2)Balance - November 30,and November 30, 2000 Expenditures write-down (3)2001 $$$$ Alaska,USA Donlin Creek =3,277,487 -3,277,487 Shotgun 4,270,949 >-4,270,949 Rock Creek 3,296,790 78,036 -3,374,826 Caribou 669,315 65,892 >735,207 North Donlin 83,760 ->83,760 Nome Gold Project 32,272 13,708 -45,980 Yukon,Canada German Creek 177,998 -(101)(1)177,897 Harlan 697,911 1,705 (10,220)(1)689,396 McQuesten 726,823 91,814 (8,579)(1)810,058 Sprogge 887,763 2,075 (94,631)(1)795,207 Klondike 94,030 2,044 (5,314)(1)90,760 Other 509 2,783 (2,528)(1)764 Eastern Canada Pine Cove,Nfld.125,000 >(125,000)(2)= Sewell Brook,NB 564,727 =(564,727)(3) 11,627,847 3,535,544 (811,100)14,352,291 NovaGold Resources Inc.,(21 Annual Report 2001yma' Notes to Consolidated StatementsteieeealeBeLaSyeeeeeeneSSOodeeSeeeOa For the years ended November 30,2001 and 2000 6.Mineral properties and related deferred costs For the year ended November 30,2000: Balance -Recovery (1)Balance - November 30,and November 30, 1999 Expenditures write-down (2)2000 $$$$ Alaska,USA Shotgun 4,160,071 110,878 -4,270,949 Rock Creek 2,768,891 591,805 (63,906)(1)3,296,790 Caribou 576,918 92,397 -669,315 North Donlin 83,582 178 -83,760 Other Alaska properties 48,473 2,474 (18,675)(2)32,272 Yukon,Canada German Creek 180,176 460 (2,638)(1)177,998 Harlan 678,227 46,456 (26,772)(1)697,911 McQuesten ' 692,606 88,994 (54,777)(1)726,823 Sprogge 786,049 403,694 (301,980)(1)887,763 Klondike 90,875 24,154 (20,999)(1)94,030 Other Yukon properties 96,446 11,491 (107,428)(1)509 Eastern Canada Pine Cove,Nfld.1,943,639 -(1,818,639)(2)125,000 Sewell Brook,NB 564,727 --564,727 California Lake,NB 405,998 -(405,998)(2)- Other,NB 25,702 -(25,702)(2)- Other New Mexico and Nevada 667,169 244 (667,413)(2)- 13,769,549 1,373,225 (3,514,927)11,627,847 NovaGold Resources tne.(2 Annual Report 2001 Carrying value of mineral properties The company's recorded amount of its mineral properties is accu- mulated based upon costs incurred to date.This approach to recording mineral properties is consistent with industry standards and the company believes that this represents its best estimate of the appropriate carrying amount for each property.The econom- ic feasibility of each property is assessed regularly by manage- ment based upon current geological exploration and results thereof,independent geological reports,surrounding exploration and development activities,and the availability of funding.When a property is deemed economically unfeasible,the cost thereof is written off. Donlin Creek,Alaska On July 14,2001,the company signed an Agreement with Placer Dome U.S.Inc.(Placer Dome)to acquire a 70%interest in the Donlin Creek Gold Deposit located in southwestern Alaska. Under the terms of the Agreement,the company may earn a 70% interest in the project,by expending US$10,000,000 over a ten- year period from the date of the Agreement.The company will be the manager and operator.Upon vesting by the company,a joint venture between the company and Placer Dome would be estab- lished,and Placer Dome would have 90 days to decide on one of three options: i)to remain at 30%interest and participate as a minority partner; ii)to convert to a 5%net profits interest (NPI) iii)to exercise a back-in right to reacquire a majority interest in the project (70%Placer Dome/30%the company)by expending three times that expended by the company at the time the back-in is exercised,conduct a feasibility study, and make a decision to mine at a production rate of not less than 600,000 ounces of gold per year within a five-year peri- od from the exercise of the back-in.The company would contribute its share of costs after Placer Dome has expend- ed three times the company's initial earn-in expenditure. Shotgun,Alaska In 1998,the company acquired a 49%interest in the Shotgun group of claims and Sleitat group of claims located in Southwest Alaska at a cost of US$900,000.On July 2,1998,the company entered into a letter of agreement for a joint venture on the explo- ration and development of the Shotgun group of claims with Teck Cominco Limited (Teck Cominco),owner of a 51%interest in the claims.On June 21,2001,the company acquired a 100% interest in the Shotgun group of claims from Teck Cominco.Teck Cominco retains a 5%net proceeds interest in the Shotgun group of claims and received a 50%interest in the nearby Sleitat tin deposit subject to a 5%net proceeds interest to the company. For the years ended November 30,2001 and 2000 On February 18,2002,the company entered into a letter of agree- ment with TNR Resources (TNR)where TNR could earn up to a 50%interest in the Shotgun group of claims by spending US$3,000,000 on exploration by December 2005 to advance the project towards a production decision.TNR must complete exploration expenditures of US$500,000 in 2002,US$750,000 in 2003,US$750,000 in 2004,and US$1,000,000 in 2005 and issue 250,000 TNR shares to the company each year of the option. TNR can earn an additional 20%by expending an additional US$6,000,000 by December 2008 with a US$2,000,000 annual work commitment,at which time the company has a one-time back-in option to regain a 50%interest by agreeing to expend the next US$8,000,000 on project development within three years.If the company elects to exercise its one-time back-in option,TNR will issue an additional CAD$1,000,000 worth of shares to the company. Rock Creek,Alaska As part of its acquisition of Alaska Gold Company (Alaska Gold),the company acquired a 100%interest in patented miner- al claims surrounding the city of Nome,Alaska.By agreement dated July 13,1999 and superseded by agreement dated March 13,2002,the company increased its land position by entering into a five-year sublease from the Bering Straits Native Corporation,Golden Glacier Inc.The agreement calls for annual property payments ranging from US$15,000 to US$25,000 and annual work commitments ranging from US$50,000 to US$150,000.This land package contains two known areas of interest -Rock Creek and the Nome Gold Project. On February 18,2002,the company entered intoa letter of agree- ment with TNR where TNR could earn up to a 49.9%interest in a joint venture on the Rock Creek Project by investing US$10,000,000 by December 2004 to put the project into pro- duction (US$1,000,000 through December 2002,then US$3,000,000 by December 2003 and US$6,000,000 by December 2004).After the earn-in,the company and TNR would contribute to or dilute their percentage according to a straight- line formula.Upon signing of this agreement and regulatory approval,TNR will issue 500,000 shares to the company. Nome Gold Project The company owns a large area of the coastal plain adjacent to the city of Nome that is underlain by unconsolidated sand and gravel deposits containing alluvial gold. The company is currently reviewing options for a sand and grav- el aggregate operation producing co-product gold.An independ- ent preliminary assessment has been commissioned to study the potential capital,operating costs and transportation costs for pro- NovaGold Resources Inc.(a Annual Report 2001/aN 8) rn ba ge Las ee Notes to Consolidated Statements # oo oe *SEE POAT Ae st inte, For the years ended November 30,2001 and 2000 ducing sand and gravel products in Nome and shipping them to markets in Seattle,San Francisco,Los Angeles,San Diego, Hawaii and Japan, Caribou and North Donlin,Alaska Pursuant to Exploration and Development Option agreements dated December 1,1998 with Placer Dome US Inc.(PDUS),the company can earn a 100%interest in the North Donlin and cer- tain of the Caribou properties by expending total exploration and development costs of US$200,000 on each property prior to December t,2003.Upon earning its 100%interest in either of the properties,the company shall grant to PDUS a 5%net profits interest in the property. The company is then required to incur within 10 years an addi- tional US$5,000,000 in exploration and development costs on each property to maintain its 100%interest.In the event that the company incurs the additional expenditures of US$5,000,000, PDUS shall have a period of 90 days to elect to convert its 5% net profits interest to a 51%ownership interest by paying to the company an amount equal to the property expenditures incurred by the company in excess of the initial US$200,000. Yukon properties On April 26,1999,the company acquired from Viceroy Resources Corporation (Viceroy)title to certain Yukon mineral properties and assumed Viceroy's position on the option agree- ment on the McQuesten property and the option/joint venture agreement on the Sprogge property in exchange for the issuance of 3,400,000 common shares.The value attributed to these com- mon shares,based on the market value at the date of issue,is $2,200,000.This purchase price has been allocated,based on management estimates of relative values at the time of acquisi- tion,to the four primary properties acquired,being German Creek,Harlan,McQuesten and Sprogge. McQuesten,Yukon The company acquired Viceroy's 70%option in the McQuesten property as outlined in an option agreement with Eagle Plains Resources Ltd.and Miner River Resources Ltd.This agreement allows the company to earn a 70%interest in the property by expending $875,000 on the property,which the company has completed.The company is also required to make all annual property payments to the underlying property owner,which it has done,and to complete a 10,000 foot drilling program by October 1,2003.A 2%net smelter royalty has been granted on future pro- duction from the property.The company must make minimum annual royalty payments in the amount of $20,000 commencing in 2003. h) i) Sprogge,Yukon The company has assumed Viceroy's interest in a option/joint venture agreement with Battle Mountain Canada Ltd.(Battle Mountain).This agreement provides the company with a 60% interest in the property.Under the terms of the agreement,the company has been designated as the operator with respect to exploration programs for the property.The company's interest in the property increases as it funds the ongoing exploration and development expenditures.At November 30,2001,the compa- ny's interest in the property is 77.6%and Battle Mountain has a 22.4%interest. Klondike,Yukon On October 6,1999,the company acquired a 100%interest in the Klondike group of claims located in the Yukon Territory from Active Assets &Associates Inc.(formerly known as "Orinoco Gold Inc.")for 150,000 common shares of the company at a deemed price of $1.00 per share. Pine Cove,Newfoundland During the year ended November 31,2001,the company assigned its mineral property holdings at Pine Cove, Newfoundland to New Island Resources Inc.(New Island)in exchange for 1,000,000 common shares of New Island and $10,000 in cash.During the year ended November 30,2000,the company wrote down its Pine Cove mineral property holdings to estimated net realizable value,in anticipation of the assignment, based on the ten day average closing price of New Island shares at March 7,2001. NovaGolé Resources Inc.,{24 Annusi Report 2001hssei -or oe Notes to Consolidated Statements:Oe For the years ended November 30,2001 and 2000 7.Loan payable The loan is payable to the Province of New Brunswick and bears interest at a rate of 10.7%per annum.The loan was made to Murray Brook Resources Inc.and is guaranteed by the company.The loan was repayable in 1993;however no payments have been made on this loan.As at November 30,2001,the company has accrued $330,363 (2000 -$285,069)of interest payable in respect of this loan which is included in the balance of accounts payable and accrued liabilities. 8.Convertible debt instruments 2001 2000 Convertible Convertible Convertible royalty debenture royalty Net $$$$ Convertible debt instruments 1,386,085 2,000,000 1,536,000 3,536,000 Equity portion of convertible debt instruments 484,700 350,000 550,000 900,000 901,385 1,650,000 986,000 2,636,000 Interest accretion 315,771 279,617 229,019 508,636 Debt portion of convertible debt instruments 1,217,156 1,929,617 1,215,019 3,144,636 NovaGold Resources ine.(25 Annual Report 2001oct ath es to Consolldated Statements? For the years ended November 30,2001 and 2000 The liability component of the convertible debt is calculated as the present value of the principal,discounted at a rate approximating the interest rate that was estimated would have been applicable to non- convertible debt at the time the debt was issued.This portion of the convertible debt is accreted over its term to the full face value by charges to interest expense.The accretion is a non-cash transaction and has been excluded from the consolidated statement of cash flows. The equity element of the convertible debt comprises the value of the conversion option,being the difference between the face value of the convertible debt and the liability element already calculated. a)Convertible debenture The convertible debenture had an original maturity date of April 21,2001,bore interest at the Royal Bank of Canada prime rate, and was convertible into shares of the company at a price of $0.66 per share. The shares of Alaska Gold and a first charge against certain assets were pledged as security for the debt.During the year ended November 30,2001,the maturity date of the convertible deben- ture was extended to July 31,2001.On September 18,2001,the holder of the convertible debenture exercised its option to con- vert the convertible debenture plus accrued interest totalling $2,319,055. Accordingly,the company issued 2,468,220 common shares in settlement of $1,629,025 of the debt and paid the remaining $690,030 in cash.This transaction also resulted in the reclassifi- cation of $245,900 of the equity portion of the convertible debt to share capital and the recognition of $104,100 of contributed surplus.As a result,the common shares issued on conversion of the convertible debenture have an ascribed value of $1,874,925. b)Convertible royalty payable As part of the March 26,1999 purchase agreement to acquire Alaska Gold from Mueller Industries (Mueller),the company granted a 10%net proceeds royalty on all placer gold production to a maximum of US$1,000,000.The company also agreed to make minimum advance royalty payments of US$333,333 on the second,third and fourth anniversaries of the acquisition.Mueller has the right to convert the total unpaid balance of the net pro- ceeds royalty to free trading common shares at any time based upon the ten day average trading price immediately preceding the date that notice is given.The company has not made the mini- mum advance royalty payments required by the agreement. On May 18,2001,the agreement was amended to allow for post- ponement of any notice of default under the agreement in con- sideration that Mueller will receive,in cash,one-half of the pro- ceeds of each sale of Nome,Alaska real estate against the net pro- NovaGold Resources Inc.( ceeds royalty fee.For the year ended November 30,2001,the company has made cash payments totalling $185,158 (US$118,715)(2000 -$nil (USS$nil))to Mueller pursuant to the amended agreement.These cash payments have resulted in a $65,300 reduction of the equity portion of the convertible debt instrument and the recognition of $65,300 of contributed surplus (note 15(a)). 9.Provision for reclamation costs 2001 2000 $$ Murray Brook site 53,123 140,595 Alaska Gold Company 1,443,092 1,443,092 1,496,215 1,583,687 a)Murray Brook site During 2000,the company commenced its reclamation of the Murray Brook mine site.As at November 30,2001,the company has charged $1,359,779 of reclamation costs against the provi- sion.Portions of the company's reclamation expenditures were funded by its reclamation deposit with the Province of New Brunswick.As at November 30,2001,the company had recla- mation deposits with the Province totalling $105,098 (2000 - $101,361).It is management's estimation that the remaining pro- vision of $53,123 adequately provides for future reclamation costs of the site. b)Alaska Gold Company A provision in the amount $1,443,092 has been recorded for the future reclamation of the company's land holdings in the Nome and Fairbanks areas of Alaska.This amount has been recorded in the accounts of Alaska Gold prior to the company's acquisition of Alaska Gold.The provision was determined by internal cost esti- mates of the prior owners of Alaska Gold.It is management's esti- mation that any future liability for reclamation which would cur- rently be required has been fully provided for with this provision. c)Reclamation costs for other mineral properties In recent years,the company's activities have primarily focused on exploration directed toward the discovery of mineral resources and the evaluation phase relating to assessing the tech- nical feasibility and commercial viability of discovered mineral resources.When it is determined that a future reclamation cost is likely,and the amount can be reasonably estimated,the costs thereof will be accrued. 26 Annual Report 2001y638 ©ENotes to Consolidated Statements se For the years ended November 30,2001 and 2000 10.Canital stock Authorized 100,000,000 common shares without nominal or par value 10,000,000 preferred shares issuable in one or more series Issuance of common stock Number of shares Ascribed value $ Balance at November 30,1999 21,332,762 68,607,416 Issued in 2000 For cash pursuant to option agreements ((c)below)4,000 1,400 21,336,762 68,608,816 Issued pursuant to debt settlkement agreement (note 13(a))2,000,000 490,798 Balance at November 30,2000 23,336,762 69,099,614 Issued in 2001 For cash pursuant to private placements ((a)below)3,385,500 3,200,759 For cash pursuant to option agreements ((c)below)601,200 462,135 For conversion of debenture (note 8(a))2,468,220 1,874,925 In settlement of commitments ((d)below)175,000 26,250 Common stock pledged as loan security (note 13(d))-(270,000) Balance at November 30,2001 29,966,682 74,393,683 a)During the year ended November 30,2001,the company issued common stock pursuant to private placements as follows: i)On August 27,2001,the company issued 2,355,500 units at $0.80 per unit for proceeds of $1,874,759,net of share issuance costs of $9,641;each unit comprises one common share and one-half share purchase warrant.One full share purchase warrant entitles the holder to acquire one common share of the company at a price of $1.00 on or before August 27,2002. ii)On September 18,2001,the company issued 730,000 units at $1.20 per unit for proceeds of $876,000;each unit comprises one common share and one-half share purchase warrant. One full share purchase warrant entitles the holder to acquire one common share of the company at a price of $1.50 on or before September 18,2002. iii)On September 18,2001,the company issued 300,000 units at $1.50 per unit for proceeds of $450,000;each unit comprises one common share and one-half share purchase warrant. One full share purchase warrant entitles the holder to acquire one common share of the company at a price of $2.00 on or before September 18,2003. NovaGold Resources Inc..(u Annual Report 2001Aibtiwiticase. 0 _TTIOADATTOITIM rhcca2oreMEe0AFLandOCetaettER For the years ended November 30,2001 and 2000 b)Share purchase warrants A summary of the company's share purchase warrants at November 30,2001 and 2000,and the changes for the years then ended,is presented below: 2001 2000 Weighted Weighted Number of average Number of average warrants exercise price warrants exercise price $$ Balance outstanding - Beginning of year 629,028 0.90 3,310,269 1.29 Granted 1,692,750 1.20 -- Cancelled/expired (629,028)0.90 (2,681,241)1.38 Balance outstanding - End of year 1,692,750 1.20 629,028 0.90 Share purchase warrants outstanding at November 30,2001: Number of shares Exercise price Expiry date $ 1,177,750 1.00 August 27,2002 365,000 1.50 September 18,2002 150,000 2.00 September 18,2003 1,692,750 Subsequent to November 30,2001,300,000 share purchase warrants proceeds of $300,000 to the company. c)Stock options The company has a stock option plan providing for the issuance were exercised at $1.00 for of up to 4,500,000 options, whereby the company may grant options to its directors,officers,employees and service providers.The exercise price of each option cannot be lower than the market price of the shares at the date of grant of the option.The number of shares option ed to any optionee may not exceed 5%of the issued and outstanding shares at the date of grant.The options are exercis- able immediately for a ten-year period from the date of grant. NovaGold Resources Inc.28 Annual Report 2001ySe BO rea 4 Meg ta at oTbkokEVteRe For the years ended November 30,2001 and 2000 A summary of the company's stock option plan at November 30,2001 and 2000,and changes dur- ing the years ended on those dates,is as follows: 2001 2000 Weighted Weighted average average Number exercise price Number exercise price $$ Balance - Beginning of year 3,035,500 0.84 2,640,000 0.85 Granted during the year 1,460,000 0.74 405,000 0.73 Exercised during the year (601,200)0.77 (4,000)0.35 Cancelled during the year (131,500)0.98 (5,500)1.00 Balance -End of year 3,762,800 0.80 3,035,500 0.84 During the year ended November 30,2001,the company has also committed to issue 610,000 stock options,exercisable at $1.78 and expiring in ten years.The issuance of these stock options is sub- ject to regulatory and shareholder approval. The following table summarizes information about the stock options outstanding and exercisable at November 30,2001: Weighted Number average outstanding remaining Weighted and contractual average exercisable life exercise price Range of prices $(years)$ 0.35 -0.82 2,179,500 8.82 0.62 1.00 1,543,300 5.65 1.00 1.99 40,000 9.88 1.99 3,762,800 7.85 0.79 Subsequent to November 30,2001,1,137,800 stock options were exercised at prices ranging from $0.35 to $1.00 for proceeds of $775,165 to the company. d)Shares held by a subsidiary A wholly-owned subsidiary company holds 49,396 (2000 -224,396)of the common shares of the company which are valued at $0.15 per share.During the year,175,000 of the shares were transferred to a third party for the settlement of commitments totalling $123,544 resulting in the recognition of contributed surplus of $97,294.The balance of these shares is eliminated on consolidation. NovaGold Resources Inc.29°Annual Report 2001 Bwesnessds Notes to Consolidated Statements For the years ended November 30,2001 and 2000 11.(Loss)earnings per share Basic (loss)earnings per share is calculated on (loss)net earnings available to common sharehold- ers using the weighted average number of common shares outstanding during the period.Diluted earnings per share is calculated using the treasury stock method. 2001 2000 $$ Basic (Loss)net earning available to common shareholders (494,388)2,706,331 Weighted average number of shares 24,790,510 21,335,666 Basic (loss)earnings per share (0.02)0.13 Diluted Incremental shares -10,240,000 Adjusted weighted average number of shares 24,790,510 31,574,666 Diluted (loss)earnings per share (0.02)0.09 For the year ended November 30,2000,options,warrants and convertible instruments to purchase 6,932,631 common shares outstanding at year end were excluded from the computation of diluted earnings per share because the exercise price of the options was greater than the average market price of the common shares. For the year ended November 30,2001,diluted loss per share is the same as basic loss per share as the exercise of dilutive convertible securities would be anti-dilutive. NovaGold Resources Inc.¢(30 Annual Report 2001 12.Commitments and contingencies a)Legal actions i)During 1992,the Limited Partners of the Murray Brook Processing Limited Partnership commenced a legal action against the company and Murray Brook Resources Inc.seeking $881,627 plus interest and general damages.The company filed a counterclaim for damages.The trial commenced in November 2000 and was adjourned to allow the plaintiff to call an addition- al witness and to allow for the filing of post-trial written submis- sions.The company is of the opinion that this claim is without merit.The outcome of this claim is not determinable at this time and no provision has been recorded in the accounts of the com- pany. ii)The company's subsidiary Alaska Gold has been named in an action,initiated by K&K Recycling,relating to an alleged wrongful assignment of a contract to purchase and move a dredge,which was owned by Alaska Gold.K&K Recycling was awarded approximately US$68,000 for damages against Alaska Gold,and approximately US$117,000 against a co-defendant for which Alaska Gold may be liable.Alaska Gold is appealing this initial judgement to the Alaska Supreme Court and subsequent to the year end,posted a bond of US$105,000 with the Alaska Courts in connection with this appeal.The company believes it has made an appropriate accrual in the accounts for the resolution of this issue. NovaGold Resources tne. b) c) evs: Notes to Consolidated Statements = For the years ended November 30,2001 and 2000 Royalty agreements The company has royalty agreements on certain mineral proper- ties entitling the vendor of the property to a net smelter return royalty or net profits royalty,ranging from 3%to 7%commenc- ing when the properties enter commercial production. Executive employment arrangement The company has an employment arrangement with the President and Chief Executive Officer of the company which provides that in the event of a sale of substantially all the assets of the compa- ny or a change of control of the company by virtue of a takeover bid,as that term is defined in the Securities Act (Ontario),or in the event management's nominees to the Board of Directors are not elected,then such officer may elect to terminate his employ- ment with the company,in which event the company is required to pay to such officer a lump sum payment equal to three times his annual salary (note 13(c)). Annual Report 2001 'Motes to Consolidated Statements BE Ae OE BO EON.SPR ei 2AR ar!ROT Ee: For the years ended November 30,2001 and 2000 13.Related party transactions a)Debt settlement agreement with Etruscan During the year ended November 30,2000,the company entered a debt settlement agreement with Etruscan whereby the company agreed to issue 2,000,000 common shares and transfer 1,880,209 of the common shares of Etruscan held by the company to an agent of Etruscan in lieu of the payment of the intercompany debt in the amount of $8,000,539 owing by the company to Etruscan. The transaction has been accounted for as follows: $ Issuance of 2,000,000 common shares recorded at the three-month average closing price for the period ended November 30,2000 490,798 Transfer of 1,880,209 of its shares in Etruscan to an agent to be sold with the proceeds to be delivered to Etruscan.The disposal of shares has been recorded at the six-month average closing price for the period ended November 30,2000 911,362 Gain on debt settlement 6,598,379 8,000,539 The shares issued and transferred are non-cash transactions and have been excluded from the consolidated statement of cash flows. NovaGold Resources Inc. b) c) d) e) Interest on amount payable to Etruscan During the year,the company incurred interest expense of $nil (2000 -$298,378)on the amount payable to Etruscan. Officer loan receivable A loan receivable in the amount of $253,691 (US$165,454) (2000 -$266,377 (US$173,728))was granted in connection with an employment agreement and is due from an officer and direc- tor of the company.The loan is unsecured,non-interest bearing and forgiveable at the rate of $12,686 (US$8,274)per year. Accordingly,$12,686 (2000 -$12,686)representing the current portion of the loan has been included in amounts receivable. Amounts receivable from directors Amounts receivable from directors comprise $135,000 (2000 - $nil)due from each of two directors of the company,with inter- est calculated at Royal Bank of Canada prime rate plus 2%.The parties have agreed that the loans will each be collateralized by a pledge of 100,000 common shares of the company,and are payable on demand but not later than May 30,2002.As the amounts receivable are collateralized by common shares of the company,the receivable of $270,000 (2000 -$nil)has been shown as a reduction of the company's outstanding capital stock (note 10). Loan to Etruscan Etruscan has directors in common with the company.At November 30,2001,the company has $200,000 (2000 -$nil) owing from Etruscan bearing interest at Royal Bank of Canada prime plus 2%.The parties have agreed that the loan is to be col- lateralized by Etruscan's pledge of 100,000 shares of the compa- ny and is repayable on demand,but not later than May 30,2002. Accounts payable to related party Accounts payable to related party represents $70,134 (2000 - $nil)for management and other services provided to the compa- ny by Etruscan at market rates. (32 Annual Report 2001had 14.Income taxes During the year ended November 30,2001,the company had a net loss of $494,388 (2000 -net earnings of $2,706,331).The tax on the company's income for the year ended November 30,2000 was reduced to $nil primarily through the recognition of previously unrec- ognized loss carryforward benefits,resulting in no income taxes payable for the year ended November 30,2000. The company has non-capital loss carryforwards of approximately CAD$8,490,000 and US$54,091,000 that may be available for tax pur- poses.The losses are in the following countries and expire as follows: Expiry date Canada United States $US$ 2002 -4,202,000 2003 600,000 4,593,000 2004 2,300,000 3,804,000 2005 900,000 1,596,000 2006 2,500,000 1,685,000 2007 1,400,000 1,483,000 2008 790,000 1,532,000 Thereafter -35,196,000 8,490,000 54,091,000 In addition,the company has incurred resource expenditures of approximately $17,900,000 (2000 -$16,300,000)which may be car- ried forward indefinitely and used to reduce taxable income in future years. The potential tax benefits of these items have not been recognized as realization is not considered more likely than not. NovaGold Resources Inc. 15.Subsequent events a)Convertible royalty payable Subsequent to November 30,2001,the company entered into an agreement with Mueller to settle the convertible royalty payable for US$750,000 by issuance of 319,543 common shares of the company. b)Financing Subsequent to November 30,2001,the company engaged Salman Partners Inc.to act as lead agent in a syndicate including BMO Nesbitt Burns and Griffiths McBurny Inc.to market by way of private placement up to $20 million of units at a price of $3.50 per unit.Each unit consists of one common share and one- half common share purchase warrant.Each full warrant entitles the holder to purchase one common share of the company at a price of $4.50 for a period of 18 months.The closing of the pri- vate placement is planned to occur on or about April 18,2002. ,(33 Annual Report 2001 es to Consol(Ne ae egetDeLeengeee For the years ended November 30,2001 and 2000 16.Segmented information The company's operating segments include the exploitation of the company's land and gravel resources and the exploration and development of mineral resource properties.Segmented information for these operating segments is set out below. 2001 2000 Land and Land and Mineral gravel Mineral gravel properties operations Other Total properties operations Other Total $$$$$$$$ Revenue -|2,686,272 137,752 2,824,024 -2,788,723 67,828 2,856,551 Expenses 709,548 292,916 20,333 1,022,797 3,125,348 2,099,473 -5,224,821 Segment earnings (loss)(709,548)|2,393,356 117,419 1,801,227 (3,125,348)689,250 67,828 (2,368,270) Unallocated expenses (2,451,646)(2,362,699) Unallocated other income 156,031 7,437,300 (Loss)net earnings for the year (494,388)2,706,331 Segment assets 14,352,291 1,761,175 -16,113,466 11,627,847 1,910,904 -13,538,751 Unallocated assets 1,846,903 1,281,156 Total assets 17,960,369 14,819,907 Capital expenditures 3,547,998 --3,547,998 1,392,521 --1,392,521 NovaGold Resources Inc.34 Annual Report 2001 For the years ended November 30,2001 and 2000 The company's geographic segments are as follows: 2001 2000 Land and Land and gravel gravel quarries and quarries and mineral mineral Revenue properties Revenue properties $$$$ United States 2,807,292 13,549,384 2,850,454 10,263,990 Canada 16,732 2,564,082 6,097 3,274,761 2,824,024 16,113,466 2,856,551 13,538,751 17.Supplemental non-cash financing and investing activities 2001 2000 $$ Disposal of Pine Cove mineral property for shares of New Island Resources Inc.(115,000)° Issuance of capital stock on partial settlement of convertible debenture 1,874,925 - Issuance of capital stock pursuant to debt settlement agreement -490,798 Transfer of Etruscan shares pursuant to debt settlement agreement -911,362 NovaGold Resources Inc..(35 Annual Report 2001Miisiiianiis, Officers Rick Van Nieuwenhuyse,M.Sc. President &CEO Greg S.Johnson,B.Sc.Honors Vice President,Corporate Development Phil St.George,B.Sc. Vice President,Exploration Glenn Holmes,C.A. Secretary-Treasurer Pierre Besuchet Geneva,Switzerland George Brack Vancouver,British Columbia Angus Maclsaac Dartmouth,Nova Scotia Gerald McConnell Darmouth,Nova Scotia Cole McFarland San Diego,California Clynton Nauman Vancouver,British Columbia Rick Van Nieuwenhuyse Los Gatos,California Auditors PricewaterhouseCoopers LLP Vancouver,British Columbia Legal Counsel Patterson Palmer Halifax,Nova Scotia Registrar ahd Transfer Agent ComputerShare Trust Company Halifax,Nova Scotia The Toronto Dominion Bank Royal Bank of Canada Halifax,Nova Scotia NovaGold Resources Inc.; Stock Listing Toronto Stock Exchange (Trading Symbol:NRI US Over-the-Counter (Trading Symbol:NVGLF) Headquarters 127 Via de Tesoros Los Gatos,California USA 95030 Tel:(408)395 1169 Fax:(408)354 6252 info @novagold.net Website:http://www.novagold.net Toronto Office 12th Floor 20 Toronto Street Toronto,Ontario Canada MS5C 2B8 Tony Hayes,C.F.A.Investor Relations Tel:(416)368 0882 Fax:(416)367 3638 Tony.Hayes@NovaGold.net Toll-free within the United States and Canada 1 (866)243 1059 Nome Operations P.O.Box 640 Nome,Alaska 99762-0640 Mitch Erickson Lands and Operations Manager Tel:(907)443 5272 Fax:(907)443 5274 Mitch.Erickson@NovaGold.net (36 Annual Report 2001bani * >