Canada's Novagold Resources expects capital costs at Alaska-based Donlin Gold project to rise by $2.5 billion from its previous estimate, partly due to the addition of a gas-run power generation facility.

The company, which co-owns the project with Barrick Gold , now expects capital cost to be $6 billion with an additional $1 billion for the 500-kilometre natural gas pipeline from the Cook Inlet to the mine.

In 2009, company had estimated capital costs for the project at $4.5 billion.

Utilizing natural gas is expected to lower power generation costs and reduce operating risk, the company said in a statement.

The company expects to release the feasibility study of the project, including the finalized capital cost estimate, before the end of this year.

The Donlin Gold project has proven and probable mineral reserves of 33.6 million ounces, measured and indicated mineral resources of 4.3 million ounces and inferred mineral resources of 4.4 million ounces.

The companies expect to start permitting process in early 2012.

Shares of NovaGold closed at C$11.10 on Tuesday on the Toronto Stock Exchange.