By Brian Truscott

Of DOW JONES NEWSWIRES

VANCOUVER (Dow Jones)--NovaGold Resources Inc. (NG) appears to epitomize the dramatically changing face of the Canadian resource sector as credit- and cash-strapped companies jump through sometimes onerous hoops to remain a going concern.

For this particular Vancouver-based company, the circumstances couldn't be further removed from its position just three years ago. That's when Barrick Gold Corp. (ABX) submitted a US$1.7 billion hostile bid for an exploration company sitting on two world-class ore deposits - the Donlin Creek gold project in Alaska and the Galore Creek copper-gold-silver project in northwestern B.C.

The company also had Alaskan-based Rock Creek, its one gold-producing operation.

Barrick said at the time it believed that, among other things, "Donlin Creek is a challenging project which will require a company of Barrick's size, financial strength and development expertise to compete on an economic basis."

Barrick's bid was rejected out of hand by NovaGold and its shareholders.

Times have changed. Clearly.

Since the bid, NovaGold has suspended the Galore Creek project (with partner Teck Cominco Ltd. (TCK)), thanks to a review showing prohibitive capital costs and a longer construction schedule than originally anticipated.

Rock Creek is now on care-and-maintenance.

Donlin Creek awaits a feasibility study at the end of the first quarter of 2009 before decisions on permitting and development will be made.

And, in late-November 2008, NovaGold came out with news it wouldn't have cash to meet loan obligations related to a US$20 million bridge loan from Auramet Trading LLc due Dec. 29, 2008.

Not surprisingly, NovaGold's shares fell to C$0.54 in mid-December 2008 from more than C$20 a share in early 2007.

What happened this past month will no doubt determine what happens to NovaGold over the next two to three years.

The gold miner announced Jan. 2 a US$60 million private placement with privately-held Electrum Strategic Resources LLC, part of a larger group that invests in the global mining sector. Electrum now controls 30% of NovaGold with an option to exercise warrants, which could ramp up its stake to more than 42% or so.

"We're a private company (and) our objective is to find and potentially develop...gold resources around the world," said Igor Levental, vice-president, corporate development, Electrum USA Ltd. "NovaGold was a very compelling opportunity - not a well-kept secret as it has one of the largest endowments of gold (and) extremely dynamic management. It made a lot of sense for us to step in and form a strategic partnership."

And, as one analyst said, Electrum paid US$60 million for an asset that had been on the market for almost US$2 billion.

"Never take your eye off that and, if you're a company that has the cash and time, invest in an asset that could seriously turn around in a cyclical market," he said.

New Partner, New Future?

The Electrum funds - to be used to pay down debt and bankroll exploration and development - were also used to extract an additional US$15 million from other institutional investors.

So, let's have NovaGold President and Chief Executive Rick Van Nieuwenhuyse explain the ramifications: "We needed a long-term strategic investor here; mining is not a quarter-to-quarter business, especially when you have big projects that take time to advance and develop. We now have a new lease on life and we're going to run with it."

He said the influx of funds have helped boost NovaGold shares, which are now trading above US$2.20 each. The outstanding US$20 bridge loan will be paid down and the priority is now all about Donlin Creek.

"We've got a 2009 budget there of US$14 million (Barrick's share of the budget is also US$14 million)," he said. "Galore Creek will have a minimal budget; I'm not even sure there will be anything there. And Rock Creek as care-and-maintenance is another chunk."

He said there will be a resource update for Rock Creek, thanks to last year's drilling program. And there are some water and dam issues that have to be resolved, before "we decide what to do - to sell (it) or put it back into production."

Likewise for Galore Creek, he said.

"We'll be looking at various options for Galore; we'd prefer not to sell these large assets. Donlin, of course, is not being considered for sale - it's the company flagship and there's a lot of value there," he said. "Things like Galore don't come along every day; we've certainly been approached, but it's one of the larger silver-gold-copper deposits out there. At the moment, it's an inexpensive call option on copper so I don't expect a lot of activity on Galore this year and, obviously, Teck Cominco has its own issues."

As for Donlin, he said the next few years are all about obtaining various permits, once the expected updated feasibility study on the proposed multi-billion-dollar project is released in or around April.

A Barrick spokesman said the updated feasibility study will focus on how to reduce what are projected to be onerous capital costs, especially at a time when the senior miner - replete with new chief executive - is looking at a number of other capital projects. That includes billions of dollars already committed to three advanced projects - Buzwagi in Tanzania, the Cortez Hills gold mine in Nevada and the expensive Pueblo Viejo operation in the Dominican Republic. There is also Pascua-Lama, a complex Argentinian/Chilean project.

"We're not about to rush into such a capital intensive process (at Donlin) without carefully looking at an updated feasibility study," said Barrick spokesman Vince Borg. "Hypothetically, we may get to this feasibility study and say, 'We haven't cracked this nut (yet)'...the road to Donlin construction isn't going to be that straight-forward."

The upshot? Barrick is a 'have' kind of company, one with time on its hands. NovaGold looks much more like a 'have-not' company. That means it could be years before a capital cost decision is ever officially made on Donlin Creek. And years away means money and the prospect - as already seen by its corporate machinations - that NovaGold's current incarnation may change dramatically before sod is ever turned at Donlin Creek.

And while many analysts have taken a no-comment or wait-and-see aproach to the future of a now radically-reduced-valuation/future for NovaGold, there's widespread speculation about how Donlin Creek will eventually play out. And, frankly, where NovaGold fits in that speculative landscape.

"No one knows how (NovaGold's) assets will be sliced and diced, but, ultimately, the Donlin project economics will be presented and then a deal will be struck, whereby Barrick will have the right to earn in, say, 60% or 70% or 80% by carrying most if not all the capital costs. And NovaGold will have a carrying interest of less than 30%," said one analyst. "Will the team, as you see it, at NovaGold still be there at the end of the day? Roll the dice."

Company website: http://www.novagold.com

http://www.barrick.com

-Brian Truscott, Dow Jones Newswires; 604-669-1595; brian.truscott@dowjones.com

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01-26-09 1209ET