Paulson, Soros hedge funds complete NovaGold investment

Despite years of struggling, NovaGold has struck gold with the financial backing of two of the world's best known hedge fund managers, John Paulson and George Soros.

RENO, NV - 

Two major hedge funds belonging to uber investor George Soros and renowned fund manager John Paulson have placed their bets on troubled gold junior NovaGold Resources.

NovaGold has announced it closed its offering of 18,181,818 shares of the company at a price of US$5.50 per share gross proceeds of US$100 million with several investment funds management by Paulson & Co.

John Paulson is the subject of the book, The Greatest Trade Ever, the story of Paulson's anticipation of the fall of the subprime mortgage market, earning billions. Paulson founded a gold fund which began trading earlier this year.

Meanwhile, NovaGold has also closed another deal to issue 16,636,364 shares at $5 per share or a gross of $75 million to Quantum Partners, an investment fund belonging to Soros Fund Management.

NovaGold intends to use the net proceeds from these financings to fund general exploration and development on advance properties including Alaska's Donlin Creek, British Columbia's Galore Creek and Rock Creek.

A joint venture with Barrick Gold, Donlin Creek is believed to have a reserve base of 29.3 million ounces of gold. Life of mine gold production is expected to be 20 years with an average of 1.3 million ounces annually.

However, analysts suggest NovaGold and its joint venture partner Teck Resources are more likely to develop the Galore Creek project, which is believed to have 8.9 billion pounds of copper and 7.3 million ounces of gold on a measured and indicated basis. Construction costs are estimated at $4 billion.

However, in a blog published Thursday in the Wall Street Journal, James Altucher, managing partner of Formula Capital, described NovaGold as a "junior Canadian miner with a troubled past... NovaGold has negligible revenue and cumulative negative cash flow from operations of $291 million in the past five years."

"Despite burning a substantial amount of cash, the company is no closer to having a single operating mine than it was in 2004," he said. "NovaGold was sued by investors for securities-law violations...and forced to settle the lawsuits for $28 million."

"So why are Soros and Paulson...plunging into this potential quicksand?" Altucher asked. "My only guess is they have so much money to put to work (Paulson raised a $5 billion fund just for gold, and Soros is managing over $15 billion) that it is hard to put the money to work and they are putting it everywhere they can."

"...I would recommend staying as far as possible from NovaGold," he concluded.

However, the publication Market Folly suggested, "The terms of the deal were definitely favorable for the hedge funds, as they're always sitting on a nice paper gain given shares are trading much higher than the offering price."

NovaGold CEO Rick Van Nieuwenhuyse said, "These groups have been following NovaGold for some time, recognizing both the near term and long-term strategic value of our world-class gold and copper -gold assets."

"With the $175 million raised through these financings, we have fulfilled our current equity objectives and are exceptionally well positioned to advance and maximize the value of our projects for the benefit of all NovaGold shareholders," he added.

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responses to this article

Smart money doesn't throw darts... I can't imagine George Soros AND John Paulson throwing 175million at a company that isn't going to deliver a return. What a short sighted comment by the WSJ Blogger! Also this investment will have secondary effects to companies like Teck and . .more especially Romios Gold. . .less by ZR on March 12 2010, 08:53 Find this comment inappropriate? Report it

Shocking New George Soros Video Shocking New George Soros Video: http://www.youtube.com/watch?v=K6s6G1cL2Yc by CommieBlaster on March 12 2010, 14:38 Find this comment inappropriate? Report it

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