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A capex blow-out, which more than doubled the estimated project cost of NovaGold Resources' Galore Creek project, is the subject of a shareholder class action lawsuit filed Thursday against the Vancouver junior gold miner.

The lawsuit was filed in the U.S. District Court for the Southern District of New York on behalf of plaintiff Rudolph T. Textor and all purchasers of securities of NovaGold Resources from October 25, 2006, through November 23, 2007.

Named as defendant in the lawsuit were NovaGold Resources, NovaGold President and CEO Rick Van Nieuwenhuyse, Senior Vice President and CFO Don MacDonald, and NovaGold Senior Vice President and COO Peter W. Harris.

In a brief statement issued early Friday morning, NovaGold said, "The Company believes it has substantial and meritorious legal and factual defenses, which the Company intends to pursue vigorously."

Last November, construction at the Galore Creek copper and gold project in British Columbia was halted and the project put on a care-and-maintenance basis pending a further engineering study to determine a less costly construction plan after the estimated capex rose from $2.2 billion to $5 billion.  At least one billion dollars of that increase was attributed to the tailings dam and water diversion structures, which were originally underestimated in terms of time and labor.

Nevertheless, project joint venture partner Teck Cominco insists that Galore Creek is one of the largest undeveloped copper-gold projects in the world. Galore Creek was projected to produce 423 million pounds of copper, 341,000 ounces of gold and 4 million ounces of silver per year during the first five years of what is hoped to be a 20-year mine life.

However, attorneys for the law firms of Brodsky & Smith and Schifrin Barrowed Topaz & Kessler claimed that the defendants "falsely portrayed NovaGold as a rapidly growing company on the verge of moving from a mid-tier exploration and development company to a mid-tier gold and copper production company by issuing a series of false and misleading statements regarding the costs, progress and viability of its multi-billion Galore Creek project."

The plaintiffs noted that NovaGold issued a press release on October 25, 2006, "touting the results of a feasibility study performed by Hatch Ltd. that "purportedly ‘confirmed' the economic viability of the Galore Creek project. ...The Feasibility Study estimated the capital costs for Galore Creek to be Cdn$2.2 billion."

"The Hatch Feasibility Study allowed the company to successfully fend off a hostile takeover bid by mining giant Barrick Gold by maintaining the price of the company's shares above Barrick Gold's $16 per share tend offer," the plaintiffs claimed. "Moreover, the Hatch Feasibility Study allowed the company to raise hundreds of millions of dollars in an April 2007 secondary stock offering, thus providing the defendants to misrepresent the Hatch Feasibility Study as a bankable study. Throughout the Class Period, the company regularly and systematically assured the investing public that the construction of the Galore Creek project was on schedule and on budget."