NovaGold Resources (NG.TO: Quote) said on Tuesday that its 50 percent owned Donlin Creek gold project in Alaska holds reserves of 29.3 million ounces and should produce an average of 1.6 million ounces of gold a year over the first five years after it starts production in 2015.

In a feasibility study, the Canadian company said the project -- a joint venture with Barrick Gold (ABX.TO: Quote) -- should cost about $4.5 billion to build and produce gold at a cash cost of $398 an ounce over the first five years.

The production level -- which should average 1.25 million ounces a year over the mine's 21-year life -- would make the gold mine one of the world's most productive.

Novagold said the mine should initially produce average annual after-tax cash flow of $779 million at $900-an-ounce gold.

Spot gold was at $890 an ounce on Tuesday.

NovaGold has struggled with tight credit conditions over the past year. The company faced a cash crunch in December, but managed to refinance a $20 million bridge loan, and then win $60 million in financing from privately held Electrum Strategic Resources.

The company also suspended its Rock Creek mine in November and is dealing with ballooning costs at the Galore Creek copper/gold project in British Columbia, which is a 50/50 joint venture with Teck Resources (TCKb.TO: Quote).

NovaGold's shares were down 9 Canadian cents at C$3.15 on the Toronto Stock Exchange on Tuesday morning.

($1=$1.22 Canadian) (Reporting by Cameron French; editing by Peter Galloway)

© Thomson Reuters 2009 All rights reserved