NEW YORK ( TheStreet ) -- Intentionally or not, Barrick Gold ( ABX) has played a significant role in making its business partner NovaGold ( NG) seem a little weaker and, perhaps, a cheaper acquisition target.

At the core of the allegations are capital expenditure costs of an unreleased feasibility study for Donlin Creek, which is co-owned by NovaGold and Barrick. Barrick said it would be addressing Donlin's rising capital expenditure costs at its investor day on September 7th, which forced NovaGold to preannounce a portion of the study.

Costs at Donlin grew from $4.5 billion to $7 billion, to be split evenly between the two companies. Now NovaGold, a $1.67 billion company, will have to fork over $3.5 billion over the next 5 plus years.

It was the timing that was suspicious. A full updated feasibility study is scheduled to be released by the end of the year. Not only would the study have had the rising capex but the margin expansion as well.

"You've only seen one side of the numbers," says NovaGold CEO, Rick van Nieuwenhuyse, "you've only seen the capital numbers, you haven't seen the margin expansion." The previous feasibility study used a $750 gold price and van Nieuwenhuyse says that the new study will probably use a $1,200 long term gold price.

Since its last feasibility study, capital has gone up 30% but the gold price has risen 100%. Although the mine will cost more to build, the gold in the ground will now be worth more. "Unfortunately Barrick put out those numbers, in our opinion, prematurely but they were put out," says van Nieuwenhuyse. "I am sure they had their reasons ... Maybe they have an agenda, maybe not. Maybe they just think it is the way they need to be to do business ... think that Barrick would argue it's not material to them but it is very material to us."

NovaGold's stock cratered on the news, down 20% in a week. Shares have continued to free fall another 34.6% in the past month. Two industry insiders said this move by Barrick could have been deliberate, to drag NovaGold's stock down to a price where Barrick could buy it cheaply.

In 2006, Barrick made an offer for NovaGold at $14.50 a share when the stock was trading at between $15-$17. NovaGold rejected the offer on the basis that shares weren't adequately valued. Not only could Barrick currently get the company for half its offer price but it would also be a bit of sweet revenge for having been burned before.

When Barrick was asked about its intentions, Andy Llyod, senior manager, communications at the company wrote, "We provided updates on all our major projects during investor day, and Donlin was included in that."

Donlin has the potential to produce 1.3 million ounces of gold annually, split between the two companies, at around $400 an ounce. Cash costs will be even less now as Barrick and NovaGold build out a natural gas pipeline -- making this project, one of the world's largest undeveloped gold mines, invaluable to both parties.

Analysts and industry experts don't think that Barrick's intentions were sinister but that a hostile takeover bid could very much be a reality for NovaGold with shares down 50% for the year.

Paolo Lostritto, equity research analyst at National Bank Financial thinks that Barrick was being honest but that the lower NovaGold's stock sinks, the less options they have. "The key for NovaGold is having the data reviewed by a third party to keep Barrick honest."

Imaru Casanova, equity research analyst at MLV & Co, believes that Barrick's motivations were not meant to harm NovaGold, and if anything highlighting Donlin in its investor day presentation actually beefed up the visibility of the project. " That gave me a lot of confidence that this thing is actually going to happen."

Casanova does think, however, that NovaGold might have to fend off a bidder at some point. "At this price the stock is ridiculously cheap ... it's a good opportunity for a lot of consolidation in the sector." Casanova estimates that NovaGold has until mid-2012 until it has to raise cash. The company currently has cash and cash equivalents of $108.6 million and working capital of $105 million.

MLV has a buy rating on NovaGold.

"Come mid next year they are going to have to be looking at what their options are and how they are going to raise the money." Issuing shares is an option as is selling parts of their other projects, Ambler and Galore, or selling streams to royalty companies, or contending with a hostile takeover.

Jeb Handwerger, editor of, who also follows NovaGold says that not only is the company in need of cash but Barrick is in need of gold. "Barrick is good for a few years but then they start falling off a cliff come 2016, 2017," which is why they need Donlin. "If Barrick is thinking about 100% of Donlin, they are going to look at the opportunities in the market place ... to valuations not seen in these miners for years ... and think about hostile takeover bids."

Van Nieuwenhuyse, however, is adamantly against selling the company at a "discount" price, saying that a handful of shareholders own 50% of the stock, including legendary investor John Paulson, and will be unwilling to budge if the price is wrong. "When you have a strong group of shareholders who believe in higher gold prices and they own one of the largest and best gold deposits in the world in a safe jurisdiction you outta pay a fair price for that."

Whether or not Barrick has purposely tried to pressure NovaGold's share price, at $7 a share NovaGold needs to watch its back.

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-- Written by Alix Steel in New York.

>To contact the writer of this article, click here: Alix Steel.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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