REGIONAL NEWS - U.S. & CANADA

Engineering and Mining Journal, Jan/Feb 2007

Shell Canada Files Peace River Regulatory Application

Shell Canada has filed a regulatory application for development of a 100,000-bbl/d in situ oil sands project at its Peace River complex in northern Alberta. The Peace River complex has been in production since 1979 and is 100% owned by Shell Canada. It is currently licensed to produce 12,000 bbl/d of bitumen.

"This filing is an important step in our longer-term goal of developing in situ production of 150,000 bbl/d," Brian Straub, Shell Canada senior VP-Oil Sands said. "We plan to take a phased approach to growth that allows us to take advantage of cold production's cost benefits in the shorter term, following with thermal recovery to maximize recovery efficiency. This combination of recovery techniques will ensure optimal development of this huge resource base."

The oil sands beneath the Peace River leases contain several billion barrels of bitumen. The deposits are too deep to be mined and too thick to flow to surface using conventional oil production technology. Shell uses enhanced oil recovery techniques involving steam-generated heat and pressure to warm the bitumen to allow it to flow to surface. Production rates from the wells gradually decline as the reservoir cools. Steam is then injected into the reservoir again, and the cycle continues.

In recent years Shell has successfully used new, horizontal, cyclic steam well technology to increase the efficiency of Peace River bitumen production. This technology makes use of multiple horizontal legs from each well to provide maximum access to the reservoir.

Shell also announced in December 2006 that the Alberta Energy and Utilities Board and the government of Canada have approved a fully integrated, 100,000-bbl/d expansion at its 60%-owned Muskeg River oil sands mine. The mine currently has capacity to produce 155,000 bbl/d. The new project has two components: an expansion at the Muskeg River mine 75 km north of Fort McMurray, Alberta, and an expansion of the Scotford Upgrader north of Fort Saskatchewan, Alberta.

The oil sands leases at Muskeg River contain more than 5 billion bbl of mineable bitumen. The oil sands are close to the surface and contain a high concentration of oil, making them ideally suited to conventional truck-and-shovel mining.

Chevron Canada, 20%, and Western Oil Sands, 20%, are Shell's partners in the project.

NovaGold Looking Ahead After Hostile Barrick Bid Fails

Following expiration of Barrick Gold's unsolicited, $16/share takeover bid, NovaGold Resources announced on Dec. 7, 2006, that it would once again focus all of its efforts on advancing its projects and generating long-term shareholder value. At the expiration of the bid, Barrick had acquired only 12.7% of NovaGold.

"NovaGold received outstanding support from its shareholders throughout this prolonged takeover attempt," NovaGold President and CEO Rick Van Nieuwenhuyse said. "Our shareholders were the 'white knights' in this process, and NovaGold is committed to building this company into a high-quality North American mid-tier gold and copper producer."

NovaGold and Barrick continue as partners in the Donlin Creek gold project in southwestern Alaska. NovaGold owns 70% of the project. Barrick owns the remaining 30%, which it inherited when it took over Placer Dome in March 2006. Barrick has the right to earn up to a 70% interest in the project by completing a feasibility study in 2007. NovaGold has argued that Barrick cannot meet the deadline. Barrick says it can.

In October 2006, NovaGold received a final feasibility study from Hatch Ltd. for its Galore Creek copper-gold-silver project in northwestern British Columbia. The study forecasts Galore Creek production at more than 432 million lb/y of copper, 341,000 oz/y of gold, and 4 million oz/y of silver during its first five years of production at a nominal 65,000-mt/d mill throughput. Total cash costs are forecast at $0.38/lb of copper, net of precious metals credits. The study estimates the project's base case, after-tax net present value at discount rates of 0% and 5% at $1.7 billion and $599 million, respectively, with a payback of capital costs in four years. The project's proven and probable reserves are estimated at 540.7 million mt, containing 6.6 billion lb of copper, 5.3 million oz of gold, and 92.6 million oz of silver.

The Galore Creek feasibility study assumes long-term metals prices of $1.50/lb for copper, $525/oz for gold, and $8/02 for silver. Total capital cost to develop the project is estimated at $1.8 billion. NovaGold is in discussions with prospective partners and anticipates that a joint venture partner will purchase up to a 40% interest in the project and that the partner will fund, at a minimum, its proportionate share of equity financing requirements during construction.

FNX Reopens Levack Mine

FNX Mining returned its 100%-owned Levack mine to production in the Sudbury Basin district of Ontario in December 2006, following an extensive two-year surface and shaft rehabilitation and mine development program. The first Levack mine ore to be produced since the mine was closed in 1999 was hoisted to surface through the rehabilitated Levack No. 2 shaft.