NOVAGOLD RESOURCES INC. (“NOVAGOLD” or the “Company”) (NYSE
American, TSX: NG) today released a statement issued by Dr. Thomas
S. Kaplan, Chairman of NOVAGOLD, who also represents the largest
shareholder of the Company. Dr. Kaplan addresses a blatantly
misleading report issued on the Company by short seller J Capital
Research (JCAP) on May 28, 2020. In that report, the Company
believes that JCAP, masquerading as a research firm, is
perpetrating, what is known as a short-and-distort scheme designed
to nefariously inject the market with misleading and false negative
information about the Company to drive the price of its security
down in order to allow those with short positions to quickly cover
them at an artificially low price and, in doing so, derive a quick
profit on the backs of unsuspecting shareholders.
The Company provided a separate detailed response to this
attack. This response highlighted, line-by-line, a myriad of JCAP’s
falsehoods and outright lies and scrupulously juxtaposed them
against corresponding facts in a multipage document, linked to a
separate press release which can be viewed
here: https://www.novagold.com/investors/news/index.php?content_id=2354.
“With lies you may get ahead in the world – but you can
never go back.”
On Thursday morning 10 days ago, I was enjoying a particularly
sweet moment, savoring a fine cup of Nespresso’s (now discontinued)
Ethiopian Yirgacheffe-origin coffee – my favorite. For myself, as
for many of you, the coffee drinking ritual is an important one,
especially these days, when home and office are now more than ever
one and the same. It was another day under lockdown in our New York
City apartment, yet I felt blessed to have a family and loved ones
mostly safe from our common foe, and in as reasonable spirits as
one can be when profoundly aware that tragedy and trauma surround
us all. The mood was actually upbeat as my older son had narrowly
avoided a ruptured appendix a couple of mornings before and,
benefitting from the combination of his precocious self-diagnosis
of appendicitis, the laser-like focus of our family’s physician,
and the surgical staff at New York-Presbyterian/Columbia Hospital,
he was operated on and back at home in his own bed the very same
day. This constituted the first “outing” either of us had in quite
some time and was thus memorable in more ways than one. Witnessing
my boy up and about after one day of bed rest only was astonishing,
and as gratifying a moment as one could ask for as a parent.
My tranquility was suddenly broken by a flurry of e-mails from
friends and colleagues. Had I seen the “hit piece” on NOVAGOLD? I
had not. When I read JCAP’s report, my first reaction was to
chuckle because the piece was clearly so fallacious that I
initially assumed it had been written by a child – cooped up kids
have far too much time on their hands these days – or, more likely,
a disgruntled short seller. The long winter that had witnessed the
cratering of the gold industry over the past decade had in fact
decimated many actors in the space. Some had simply gone by the
wayside, much like the proverbial hare in Aesop’s fable, the
victims of fatal flaws that can best be described in broad strokes
as follows: self-inflicted wounds, jurisdictional reckoning, or
plain bad luck. Other than a hiccup of collateral damage when our
partner Barrick went through one of its periodic praetorian blood
lettings back in 2013, NOVAGOLD had suffered from none of these
afflictions and, tortoise-like, had marched steadily up the value
chain and was now trading at multi-year highs.
It therefore made no sense to me that one would go out of their
way to short our stock. And, as Mark Bristow and I shared a laugh
with each other last week, who in their right mind would short a
great gold story in a growing bull market in gold? Be that as it
may, the hunters in this case were cunning in their larceny and
caught us unawares, as those who throw a sucker punch (or, as the
Aussies call it, a “coward punch”) know in advance that it will.
Conspicuously manipulative in their conflation of events and
personalities, we could immediately see the obvious intent of the
document and assumed everyone else would do too. When our largest
shareholders expressed not only solidarity, but also genuine
outrage at JCAP’s obvious falsehoods and underhanded ways, we
learned that while the experience may well be new to us, it was not
to others.
With little experience in dealing with nefarious actors, we
chose the path familiar to us: we would ignore the defamatory
aspects of the piece, and tackle the challenge as if it were a
traditional shareholder enquiry. After all, we pride ourselves on
being unusually transparent in our communications and reporting, as
evidenced by a previous exercise in which we invited real analysts
to submit any questions they wished to ask of
management. True, the two situations were apples and oranges –
yet their contrast proves to be rather insightful. The enquiry that
followed came from a veteran, industry-leading analyst (John
Bridges, who retired last year), who worked at a legitimate firm
(J.P. Morgan) and was honest, fair, and well-meaning in all his
research coverage – and, I should add, bullish on the NOVAGOLD
story. He submitted many questions – we answered them all in
writing, and he published them. We translated that success into a
regular model of writing in-depth Q&A sections in our Annual
Reports that communicate to our shareholders, or prospective
shareholders, the most frequently asked questions of us, so they
can see for themselves not only the answers to what they want to
know, but also answers to questions that others have thought of and
that may have escaped them. Believing that an educated consumer is
the best and most steadfast customer, we have often been cited – by
true experts like John Hathaway and discerning investors like John
Paulson and Will Danoff – as being a model of transparency and
shareholder alignment in our industry.
I am truly proud of the fact that being held to account is
something we welcome – and in fact always will. We just love it. In
this instance with JCAP, we knew better than anyone that the
contentions at hand did not reflect sincere, constructive
examinations or questions. As to their disgraceful endeavor to
paint our management team as the same one that had crippled
NOVAGOLD – long before we entered the scene and began fixing it in
2009 as a white knight, and turned the Company completely around
after taking over management in 2012 – it was downright libelous.
In other words, knowing full well that the claims were mendacious,
it became clear that this exercise constituted a deliberate, if
utterly shameless, attempt to manipulate our share price for
financial gain.
To that extent, as I saw the volumes spike and our stock slump,
the hatchet job was working. Was this even legal, I wondered? At
first, we weren’t sure, but it seemed it shouldn’t be as the
misstatements were so blatant as to suggest defamation or worse. I
confess that I am not in the business of trading, and certainly not
short-selling, so the whole phenomenon was completely alien to me.
One can easily imagine the shock to our management team. It was
hard for us to even find an analogy. A “sucker punch”? It sure
qualified, but these can happen even among friends in a moment of
weakness. So that did not seem strong enough. A Clockwork
Orange-inspired, financial adaptation of the so-called “knockout
game”? Perhaps equal in savagery, but also senseless. A “snatch and
grab”? Getting closer. Might it typify a “mugging”? Closer still,
as a mugging definitely constitutes a theft, yet can also be both
physically and psychologically scarring. In actual fact, as I
googled the singular incident I felt we were experiencing, I found
the precise definition of what had befallen us: a
“short-and-distort” campaign.
We are, unfortunately, not the first to fall victim to such a
campaign. Indeed, articles have been written about these schemes,
describing some common patterns of how they have been carried out:
first, a person or firm purporting to be a financial analyst
publishes statements alleging that the company has acted
fraudulently or is otherwise in financial trouble; then investors
with long positions react to the published statements by selling
their long positions; then the company’s share price drops,
resulting in a loss of market capitalization, and perhaps worse, a
tarnished reputation; finally, those who have taken short positions
on the company cash in on this series of events. One such article
can be found here:
https://www.dlapiper.com/~/media/files/people/weiner-perrie/weinerweberhsu.pdf
We will not stand idly by as a “short and distort” campaign is
waged against NOVAGOLD. The statements made by JCAP about NOVAGOLD
are false, misleading, ultimately defamatory, and illegal in many
respects. NOVAGOLD intends to pursue the legal action available to
it so that these wrongs can be redressed. Understanding the breadth
of these “short-and-distort” schemes also helps explain why it has
taken NOVAGOLD’s management some time to assemble a comprehensive
rebuttal to a succession of perfidies so voluminous and twisted as
to require an army of readers and literally a line-by-line
response.
“As the vilest writer hath his readers, so the greatest
liar hath his believers: and it often happens, that if a lie be
believed only for an hour, it hath done its work.”
Suffice to say, I unequivocally believe that anyone reading our
Company’s response to this catalogue of errors – of both commission
and omission – will conclude that JCAP’s agenda was to manipulate
NOVAGOLD’s stock and profit from an unwarranted and unjustified
sneak attack on an organization that has been “doing it right” for
at least the past 8 years that Greg Lang and I have been in charge.
As reflected in Jonathan Swift’s rather apt observation about the
utility of falsehood, highlighted above, it is the nature of the
beast that the perpetrators make their ill-gotten gains from
unsuspecting shareholders who are duped out of their money after
such an assault. For their report is not so much populated by
“contentions”, as outright mendacities of different complexions.
Even so, our rebuttal will prove devastating to them – an outfit
about whose reputation and tactics we have now learned a very great
deal indeed. And the good news, as one reading the above-mentioned
article will gather, is that they can no longer “go back” – redress
now exists against their unjustified acts. Our shareholders should
be confident in knowing that we plan to do everything that we are
allowed to do within the law to get redress for JCAP’s falsehoods,
in whatever jurisdictions apply the rule of law, and that we plan
to do so to the fullest extent of that law. To quote Mario Draghi,
albeit in different circumstances, “We will do whatever it takes.”
More prosaically, to those who aided and abetted this pathetic
exercise – we know some of who you are, and the rest we will learn
who you are.
Pathetic Doesn’t Begin to Describe It
As one can observe from the Company’s formal response, which
itemizes literally hundreds of falsehoods, lies, errors of fact,
and other objects of distortion, JCAP has a lot to answer for.
Tops of the Waves
Let me touch on a few subjects briefly, so as to put them to bed
right away. First is the laughable positioning of the author and
his anonymous “experts” as duly qualified to opine on building
pipelines in Alaska. On the one side is Tim Murray, who has no
known experience in the space and cites unnamed experts. On the
other is CH2M HILL (CH2M) – real experts that have been serving oil
and gas clients in some of the Arctic’s harshest conditions,
including the North Slope, for over 40 years, and a firm that in
2013 represented the 6th largest employer in Alaska and the
second-largest employer in the State’s oil and gas industry. In
2017, CH2M was ranked #22 on Fortune’s 2017 list of “Top 50
Companies that Change the World” for making a positive impact on
society. That same year, CH2M was acquired by Jacobs Engineering
Group. One of the deal drivers, as cited in the media, was CH2M’s
infrastructure business. Management definitely stands by the work
completed by the CH2M-led group for Barrick and NOVAGOLD, and the
work performed to price the pipeline out inch-by-inch,
mile-by-mile.
The Donlin Gold project (the “project”) that was evaluated in
the 2011 Second Updated Feasibility Study (FSU2), as defined below,
and Federal and State permitting includes the gas pipeline that is
obviously based on a sound design, completed by highly experienced
pipeline engineers. Throughout NOVAGOLD’s detailed response, the
Company refutes every one of JCAP’s comments about the feasibility
of the pipeline’s plan. And management continues to look at ways to
optimize development of the pipeline, including a range of
partnership and financing options. NOVAGOLD, along with our Native
Corporation partners, also recognize the great benefits of bringing
gas to the region. However, the reality is that a pipeline is not
the only option available to the project. The original feasibility
study was also predicated on a barging alternative that remains
viable if it is best for all those concerned.
Perhaps it is the libel of the so-called insider selling. The
bottom line here is that none of the Company’s insiders have sold
stock other than to exercise options – and in fact have been
increasing their shareholdings. It should be apparent to anyone
that stock options do not have any value unless the share price
appreciates from the date of grant, which means that, by
definition, non-insiders must also be benefitting from similar
conditions. Take it from me. I have heard from plenty of
institutional investors who acknowledge their gratitude to
NOVAGOLD’s management for work well done.
Perhaps it would be JCAP’s utter ignorance about the difference
between initial and sustaining capital. Or their failure to
understand that it is not advisable to conduct exploration drilling
outside the footprint of the mine being permitted during the
permitting process…hence the gap in drilling between 2011 and now.
It is worth noting that this explicit hiatus ended after receipt of
the Federal permits, which is why, in light of the excellent
high-grade results of 2017, the partners renewed drilling with an
increasingly robust program in 2020. Why not? The 2017 results were
great, and formally presented in the press release, “NOVAGOLD’s
Donlin Gold Project Reports Excellent Results from the 2017 Drill
Program,” dated February 20, 2018. Kelvin Dushnisky, then President
of Barrick, declared on that occasion:
“We are very encouraged by the latest drill results at Donlin
Gold, some of which encompassed areas where relatively little
drilling had been previously done. The results are further evidence
of the significant potential of this deposit. We look forward to
continuing to collaborate closely with our partner, NOVAGOLD, to
advance optimization work and permitting at this unique
project.”
We actually love to drill, and see huge opportunity to expand
the resource – most immediately along strike of the existing
deposit, which comprises only 3 km of an 8 km mineralized belt and
which, in its entirety, represents less than 5% of the total land
package. Now under the watch of Mark Bristow, a brilliant
geologist, the drill rigs are active as I write this. Few people
know better than Mark what drilling can do to unlock and enhance
value, as evidenced by his signal successes in doing so at
Randgold. Considering that my own personal wealth was primarily
created through the drill bit, being able to drill at Donlin Gold
is for me a dream come true – and we could not be more thrilled to
have a partner that shares our enthusiasm.
Were I to continue and enumerate all of the falsehoods contained
in the JCAP report here, I would merely duplicate the hundreds of
comments provided in the Company’s excellent matrix. And to what
end, anyway? The JCAP assault was never meant to be an “analysis”,
but a profit-motivated scare tactic. Still, I feel compelled to
focus on a few things to help those who are witnesses to the event
fully understand what they saw happen…and will see unfold in short
order.
The Art of the Steal
The “Original Sin” of the libel can be found in the first
incendiary sentences:
“The deposit that will never be mined… For the last 15 years,
NovaGold’s management team has systematically misled
investors…”
Let us pause right here. The report essentially opens with a
conscious attempt to mislead unsuspecting investors by inferring
that the present “management team” has been leading the Company for
15 years – a deliberate conflation of two distinct eras of
completely different management teams into one. This sentence is
written, knowingly and with malice, to make that investor stop what
they are doing, reach for their stockbroker’s telephone number, or
perhaps their trading room if the investor is institutional, and
order that person to sell immediately. It is the equivalent of
yelling fire in a crowded theatre, hoping that people will trample
over one another for the exits without even taking a moment to
assess the situation. For some investors, they might feel “why even
wait: there’s a problem, get me out!” Those who create the “crisis”
know that the sentences are fraudulent. Thus in the inaugural
sentence of the JCAP report lies the first fruit of the poisonous
tree of willful “distortion”, defined herein as “to give a
misleading or false account or impression of”.
From this moment forward, as has been conveyed to us by major
shareholders, they understood that they were witnessing a willful
and calculated manipulation. Due to our well-known reputation for
extraordinary transparency in our communications and reporting,
these knowledgeable investors are unusually well-educated in Donlin
Gold. Hence the outrage that has characterized the response from
our institutional shareholder base to this report. But perhaps it
was not the intention of JCAP to address their shameful maneuver to
educated investors in the first instance. It was solely meant to
dupe less informed participants to sell shares without a legitimate
basis for doing so. One of the easiest ways to frighten existing
shareholders, or encourage others previously uninvolved in the
company to sell shares short, is to imply that the company has been
engaged in wrongdoing. As such, the lowest hanging fruit is to
attack “bad” management.
The inference to the uninitiated audience that the management
team that ran the Company 15 years ago is the same management team
running the Company now is clearly false. Moreover, the caliber of
the managements during those two eras is, in effect, apples and
oranges. To put it in another way, and most vividly: when speaking
of the Chicago Bulls pre and post the entry of Michael Jordan into
the mix, MJ is not held accountable for the state of the Bulls
franchise before he arrived and turned their fortunes. To me, as
one of the owners of our team, Greg Lang might as well be Michael
Jordan.
Just look at the language. It is not only logical but standard
practice in discussing “management teams” to draw clear
distinctions between the eras or tenures of the different teams.
This is particularly true – and important – when the core of the
discussion centers around the dichotomy between the respective
performances of those teams. In simple terms, the team that is
recruited to turnaround a business that was crippled under the
leadership of its predecessors is never conflated by objective,
well-intentioned and professional analysts, with the team that was
removed after the business had been sunk under their watch in the
first place. That seems obvious. Particularly as doing so to impugn
the incumbent management constitutes a deliberate distortion.
Yet throughout the JCAP report, there is a deliberate use of the
word “Management” to attack the incumbent management that has run
the Company most successfully, and to the great benefit of
NOVAGOLD’s shareholders. The smear inherent in this distortive
conflation of “Management” appears no fewer than 13 times in the
report, while “CEO” appears with a similarly abusive 8 times. The
adjective “disingenuous” does not begin to reflect the severity of
this deception. It is in fact a willful disregard for the
objectivity that should allow the reader any confidence in the
agenda of the analyst who publishes such obfuscations. It is,
however, perfectly understandable that a firm engaged in nothing
more than a cynical and illegal exercise in market manipulation
would employ such a subterfuge.
It is axiomatic that the present management cannot be held
responsible, directly or tangentially, for actions that took place
prior to their assuming leadership of the Company and which they
then effectively fixed. The present management team has been
leading NOVAGOLD for eight years – not 15 – during which time it
has not misled investors in any fashion. To the contrary, their
tenure coincides with an era of complete transparency in their
corporate communications, as well as uninterrupted management
successes in working with their partner Barrick Gold to take the
Donlin Gold project up the value chain and in addition to unlocking
for shareholders the considerable value of the copper assets they
inherited.
This issue bears some elaboration, for within NOVAGOLD’s Annual
Reports one can find a clear and open discussion of the “before and
after” events that led to the transition from one management team
to another. Indeed, in light of the opaque and dissembling nature
of JCAP’s attempt to obfuscate key facts, let us challenge their
assertions with statements of facts drawn from a publicly filed
document – namely, the Company’s 2018 Annual Report. Here was my
direct answer to a question from a shareholder:
“How did you acquire your interest in NOVAGOLD and has your
investment thesis changed?
One of the best examples of the buona fortuna that I believe
emanates from this precept was the fruit that fell into my lap in
December 2008 when, with the wise counsel of The Electrum Group’s
President (and fellow NOVAGOLD Director) Igor Levental, we entered
the NOVAGOLD saga as something of a white knight, purchasing the
Company’s shares for the very first time in order to save it from
existential challenges across an extraordinarily broad front.
Putting aside the fact that the economic environment at that time
was not particularly permissive of any investment at all, our
intervention appeared – even to our closest friends – as akin to
catching a falling knife. The news on NOVAGOLD was littered with
fires that desperately needed to be put out: debt coming due;
class-action lawsuits; environmental disputes with the EPA
(regarding a modest gold property that was remediated and divested
many years ago); loss of credibility with investors and analysts;
and hostility from at least one of its key partners. I could go on.
But being that we were not irrational by nature – and that it’s
much more fun to speak to what transpired afterward – we reached
the conclusion that taking control of the Company would prove to be
worth it.
As a bit of background, I had long coveted exposure to the
Donlin story. Watching from a distance from the early 2000s, I felt
that I had missed the chance as NOVAGOLD’s shares rose from pennies
to several dollars on the back of drilling that produced what were
clearly among the best exploration results in the gold industry. I
wasn’t the only one who saw this potential; Barrick not only shared
my view, but also tried to buy the Company in 2006. The failure of
their takeover attempt was to have enormous implications for both
companies. While it was separate Company-specific and financial
crisis-related factors that crippled NOVAGOLD and led to our
intervention, what was never in dispute was that Donlin Gold
constituted a rare combination of both jewel and elephant.
I often tell the story about how I gave my team 48 hours to
perform the due diligence on NOVAGOLD before pulling the trigger on
the deal – a time frame that should appear to be reckless any time
geology is involved. My reasoning was redolent of the joke about
the two hikers who run into a bear in the woods: One hiker starts
to run, while the other calmly kneels and starts to put on his
running shoes. The man already running shouts to his companion and
asks what he’s doing. The one tying his laces answers, “Sorry, but
I reckon I don’t have to outrun the bear, I just have to outrun
you.” Similarly, I said to my team, “We don’t have to believe
NOVAGOLD about Donlin; we just have to believe Barrick.” Barrick
being a first-rate company, the due diligence from public sources
was remarkably straightforward. Only after we had made our
investment in NOVAGOLD did we send our chief geologist, Dr. Larry
Buchanan, to walk the property and share his impressions. “Is the
deposit what we thought at Donlin?” I asked upon his return. “Oh
no,” said Larry. Mercifully, he quickly added, “With an 8km strike
being 5 or so percent of the property package, the next Donlin
could be at Donlin. Congratulations.”
The problems the Company faced nonetheless were real and rather
daunting. It took some doing to clean up those burdens that made
our exercise appear death-defying. But the Company was turned
around, we raised capital with allies – especially the Paulson and
Soros funds – and NOVAGOLD’s shares, having been priced for
bankruptcy, returned by 2010 to the level at which Barrick had made
its 2006 bid.
In 2011, not long after Barrick and NOVAGOLD announced the
results of the feasibility study on Donlin, I was introduced to
Greg Lang, a 25-year veteran of Barrick and its predecessor
companies. Greg’s career had been marked by both escalating
promotions and successive wins. After running Barrick’s Australian
operations, he had been given responsibility for much of the
Western Hemisphere where, by the time we had met, he had served 8
years as president of Barrick Gold North America. His experience in
overseeing the permitting and building of large mines – including
the Cortez Hills Mine in Nevada, which impressively came in within
budget and on time – epitomized what I was looking for. Having
concluded that the Donlin deposit displayed all the makings of the
Holy Grail for a gold investor, I sought a CEO who could take
Donlin through permitting. When Igor Levental and Gil Leathley
spoke about Greg, it seemed fated. His Homestake pedigree, one he
shared with Igor and Gil, was an added plus. Indeed, I have always
found that most everyone who worked well with the legendary Harry
Conger possessed that subtle combination of intelligence and
character that I seek in my colleagues.
As it happened, my appetite coincided with Greg Lang’s desire to
be engaged with a pure play on the asset he thought could be the
greatest gold mine in the world. He was an educated consumer,
having sat on the Barrick side of the table during the hostile
takeover attempt, and then as a Barrick representative on the
Donlin Gold LLC board. We had an immediate meeting of the minds,
nodding to each other as we ticked off the attributes that rendered
Donlin not just a great development-stage asset, but also possibly
the best. Never before, said Greg, had a gold mine started with
nearly 40 million ounces in measured and indicated resources1.
Some, including Goldstrike, would eventually reach that. But
started there? And there was probably more gold, we agreed. For an
engineer, of course, for whom grade is king, the high grades and
consistency of the orebody, as well as the site’s gentle
topography, moderate climate, and the excellent community relations
that Rick Van Nieuwenhuyse had nurtured, all made Greg feel that
this would be not just a mine, but possibly one of the finest of
the dozens he had visited around the world throughout his career.
Once in production, we calculated, it could potentially represent
the largest pure gold producer in the world.”
Reading this anew, and remembering fondly what has followed, I
must admit that Aristotle was right: a friendship is a partnership.
I am proud to call Greg my friend and, like all NOVAGOLD
shareholders, sincerely appreciate what his leadership and team
have done for us.
The NOVAGOLD Advantage
One of the more glaringly positive differentiators of our
Company is that management has done nothing about which it isn’t
quite proud since Greg Lang and I took the helm in late 2011.
Simple virtues, like not cutting corners and “doing it right” – our
shared mantras from technical work to the environmental and social
license we value so highly – have served our shareholders well and
given us considerable credibility. Part of that ethos is that we
both feel deeply that honor – yes, honor – matters. Thus, the vows
that we have made to our shareholders, stakeholders, and partners
have been kept and, as a result, our Company has since enjoyed a
coterie of exceptionally well-informed, savvy, and satisfied
shareholders. There are clearly attributes that John Paulson, who
added 3 million more shares in the last quarter after 10 years as a
shareholder, sees in our story. And Fidelity. And First Eagle. And
John Hathaway. And Jacob Rothschild and the Agnellis. You get the
point. I could go on, but a key reason is, basically, because
NOVAGOLD is a pure play on an asset that we regard as “The Next
Nevada”. There is no pure play on the Barrick-Newmont joint venture
in Nevada. I wish there were. There is, however, a pure play on the
Barrick-NOVAGOLD joint venture in Alaska – which already ranks,
incidentally, as the second-largest gold producing State in the
Union, after Nevada.
By “doing it right”, let us start with what we have not
done…what I would call successes of omission. First and foremost,
we have never been tempted to use our cash or equity to do
something foolish. Sadly for the fortunes of our industry, using
common sense has proven to be a differentiator in and of itself. As
Voltaire professed, “Common sense is not so common.” If, by every
metric, one believes one owns one of the best assets on the planet,
one simply does not “deworsify,” as the famed Peter Lynch put it so
well. Deal junkies we are not. My family has achieved a spectacular
rate of return in the natural resources space over the past 27
years because of a few, strict principles. One of them, of course,
is trying hard to focus on only large, extraordinary assets. Having
achieved 100x multiples in each of silver, platinum, and natural
gas – without the use of leverage and just being long “category
killer” assets – I adore NOVAGOLD’s business model as a pure play
on the supreme category-killer, Donlin Gold. While focusing on
great assets, even in an era of asset scarcity, can be like
watching paint dry – as evidenced by the last soporific decade in
the gold mining space – that era is likely over for good. We are
more confident than ever that it is NOVAGOLD’s time to shine anew,
and we feel privileged to have it as our flagship in the gold
space.
Then, there are the successes of commission – those things we
promised to do, and meticulously did. Accordingly, before we were
approached with the offer to do a capital raising the last time
around, in January 2012, the newly minted CEO and Chairman of
NOVAGOLD laid out a clear roadmap for our investors:
- We promised to spin-off our Alaskan copper assets. That
company, spun-off as NovaCopper and now trading under the name
Trilogy Metals to reflect its polymetallic attributes, has
performed very well – sporting a market capitalization of hundreds
of millions of dollars;
- In order to make NOVAGOLD the only “pure play” on Donlin Gold
in the marketplace, we promised to sell Galore Creek – a beautiful
asset, but “a project too far” for a development-stage Company with
a flagship as ambitious as Donlin Gold. We could have let Galore go
in a fire sale. We didn’t. We sold it for real money in a market
where win-win monetization has been the exception, not the rule.
The cash position we find ourselves in, with more guaranteed and
potential payments to come, is the envy of our space;
- We declared that, if given an opportunity to show the
flexibility of the deposit, we would take it. The drill results
Donlin Gold delivered earlier in 2017 blew through even our own
expectations. Who gets 130 meters of 6 grams, and 64 meters of 5
grams2? We reckon that these constituted some of the best drill
results reported by any project for quite a while;
- Lastly, we stated that this project would be permitted. When
anyone pushed back, assuming permitting in Alaska would be a
struggle, we just shrugged our shoulders. The facts pointed to the
opposite. All we had ever heard from our local stakeholders and
partners, the Calista Corporation and The Kuskokwim Corporation
(TKC), were strong indications of support. And, after a thorough
search online and in the public records, we could not find any
signs of opposition. In fact, the only references to the project in
2012, from a media standpoint, were positive. Six years later, we
received the first-ever joint Federal record of decision –
delivered in a formal ceremony in the presence of the lead
agencies, the U.S. Army Corps of Engineers and the Bureau of Land
Management (BLM) – that included extensive input from those who
held the reasonable concerns that any big project would bring. For
those who know the industry, this represents an amazing occurrence
practically anywhere in the world.
We also promised to build a first-rate management team to take
the Company to the next level. Let’s dispense with the petty lies.
JCAP makes a puerile assertion that management has been “awarding
themselves base salaries that rival those of the CEOs at Newmont
and Barrick”. This is not true. Greg’s compensation is roughly half
of theirs. And it is obviously not management but rather NOVAGOLD’s
highly qualified Board of Directors that awards compensation,
following a comprehensive review of the facts. But this kind of
nonsense is par for the course in JCAP’s “analysis”.
As to the quality of the team, we really lucked out. For in
truth they could run a Major mining company. Again, think pre and
post Michael Jordan, for that analogy regarding Greg and his team
has real merit for stockholders. Since the Board of Directors
reorganized the Company in early 2012 to focus on Donlin Gold,
NOVAGOLD was determined to recruit top talent with demonstrated
track records in large-scale mine permitting, development and
operation, with a particular focus on North America experience.
Knowing that a world-class asset warrants world-class
professionals, the Company set out to attract the very best people
in their respective specialties. And it did. NOVAGOLD’s current
management, which has been in place for the past eight years, is,
as one shareholder put it, ‘straight out of central casting’.
Starting with Greg Lang, NOVAGOLD’s President and CEO, who has over
40 years of diverse experience in mine operations, project
development and evaluations, including eight years as President of
Barrick Gold North America, a wholly owned subsidiary of Barrick
Gold Corporation. Greg held progressively increasing operating and
project development responsibilities over his 10-year tenure with
Barrick and, prior to that, with Homestake Mining Company and
International Corona Corporation – both of which are now part of
Barrick. Major mines that now represent the foundation of Barrick,
such as Cortez Hills, were built under Mr. Lang’s leadership.
Richard Williams, NOVAGOLD’s Vice President Engineering and
Development – responsible for all aspects related to the
engineering and technical advancement of Donlin Gold – is yet
another star. Richard spent over 30 years with Barrick Gold
developing and operating major mines. He is one of the most highly
regarded and experienced leaders in the autoclave technology that
is planned to be used to process ores at Donlin Gold. Importantly,
he served as Project Director of the Pueblo Viejo project in the
Dominican Republic, now one of the most successful mines in
Barrick’s portfolio of assets. Richard’s seven-year tenure at
Pueblo Viejo capped a career where he progressively held top
operating roles that included the design, construction, and
operation of mineral processing facilities of major mines, such as
Goldstrike in Nevada and Mercur in Utah.
David Ottewell is Vice President and Chief Financial Officer of
NOVAGOLD, responsible for all aspects of the Company’s financial
management. Dave is a highly accomplished financial executive, with
over 25 years of mining industry experience. Prior to joining
NOVAGOLD, he served as Vice President and Controller for Newmont,
the largest gold mining company in the world. Other members of the
NOVAGOLD team are equally accomplished in their respective areas of
expertise. In order to attract this caliber of professionals, the
Company has to compete to recruit and retain top talent in the
industry. And we did so beautifully.
This remarkable series of kept promises certainly goes a long
way in explaining why NOVAGOLD was so successful in executing on
its value-building strategy, with achievements shown in
Figure 1 from our presentation at our Annual
Meeting of Shareholders dated May 14, 2020.
Figure
1: https://www.globenewswire.com/NewsRoom/AttachmentNg/f92b010c-c402-4b23-b804-2fcd96688efb
Moreover, we kept to a brilliantly simple script. For those who
remember back to 2012, after we raised $330 million though Royal
Bank of Canada and J.P. Morgan, we laid out a very precise
strategy. It would appear that management more than kept its
promises as shown in Figure 2.
Figure
2: https://www.globenewswire.com/NewsRoom/AttachmentNg/19037e09-28db-440b-9c2c-8f452183253c
Yet one would not see anything of the sort acknowledged in
JCAP’s hit piece. To the contrary, the report engages, almost
sentence by sentence, in a devious smear of our present management
by indicating that it was they who made the unfulfilled promises
and committed the several blunders that caused NOVAGOLD’s stock to
drop over 90% in 2007/2008 – and incidentally gave The Electrum
Group our first entry point into the Company, as a white knight on
New Year’s Eve of 2009. I say first entry point, for not only did
none of NOVAGOLD’s present senior management team have any
engagement with the Company prior to 2012, but The Electrum Group
had never owned – let alone shorted – a single share of the Company
before we effectively rescued it. Simply put, JCAP’s attempt to
conflate our team with the previous management is deliberately and
hugely misleading. Altogether, it is meant to confuse those
uninitiated in the story by lumping two completely different
management groups with distinctly different track records of
performance into one indistinguishable category of “management”.
Nor does JCAP mention that it was our team that devised and
executed the successful series of bold strokes that transpired
afterwards, resulting in one of the most celebrated turnaround
campaigns in the space. Who does that, other than those engaged in
premeditated deception?
The results are there for all to see. Simply take a look at how
NOVAGOLD has performed relative to the GDXJ and GDX indexes since
Greg and I took the helm in late 2011 as shown in Figure
3. This isn’t cherry picking.
Figure
3: https://www.globenewswire.com/NewsRoom/AttachmentNg/0106b386-7b49-42ca-a610-343f6847156a
Let us also assess how we performed versus Barrick and Newmont
as shown in Figure 4, the fine companies against
whom JCAP compared – completely falsely, I might add – Greg Lang’s
compensation.
Figure
4: https://www.globenewswire.com/NewsRoom/AttachmentNg/03532454-b0b6-495b-856a-43c3a0b37ed2
Doing Well by Doing Good
For the multiple reasons cited in NOVAGOLD’s rebuttal, and
dozens of other triggers actually, JCAP has pulled on the wrong
tiger’s tail – forcing me to lead the Company into a fight. One of
the reasons I shall do so is that, quite frankly, I and we should
do so. If good companies and honest managements can be impugned in
such ways as we are experiencing, not by legitimate activists but
by stock manipulators, then we have something of a moral, or at
least civic, responsibility to do unto them as they would do unto
us (and others) – a dictum more commonly known, perhaps ironically
in this case, as the Golden Rule. The other reason is that we can.
And we will. I don’t bluff. Those who read our Annual Report from
2018 may recall the title of my Chairman’s Letter: “Papa Doesn't
Play Poker”.
I have always felt that the NOVAGOLD story is so special that my
only regret has been that more people didn’t know of it. It has
been my firm belief from the start that we are the single best
vehicle in the gold development space and, as I have said many
times, if I found something better I’d sell NOVAGOLD and pivot to
that other thing. The point is this: when I speak about Donlin
Gold, I often ask this question of my audience: what other gold
development-stage asset in the industry compares in its combination
of enormous size, high-grade for an open pit (and hence low all-in
cash costs), truly superb exploration upside, a production profile
of potentially the biggest pure-gold mine in the world, a mine life
measured in decades, excellent local and industry partnerships, and
the safety of being located in the world’s premier jurisdiction?
I’ve never heard pushback with that one. If one cannot challenge
the assertion, then Donlin Gold must be unique.
For more on the Case for NOVAGOLD, I urge you to go to our
website, and to review the latest presentation from our AGM, one of
the rare gold mining AGMs that actually gets quoted in generalist
media:
https://www.novagold.com/investors/presentations/
Donlin Gold is also fortunate, admittedly, to be advancing at a
time when, by reasonable objective analysis from, inter alia, Ray
Dalio, Jeff Gundlach, Paul Tudor Jones, Paul Singer, Mark Mobius,
John Hathaway, and other seasoned professionals, gold’s
attractiveness as a financial asset is being broadly reaffirmed. In
plotting our long-term vision for value maximization, we have long
argued that gold will be resuming its secular bull market and has
the potential to reach a price level that is a multiple of the
current levels. I laid out such a case for gold on television to
David Rubenstein, a year or so ago, for his “Peer-to-Peer
Conversations” series on Bloomberg:
https://www.bloomberg.com/news/videos/2019-05-29/david-rubenstein-show-tom-kaplan-the-electrum-group-chairman-video
All the factors that I cite in my conversation with David, and
many more factors for that matter, point to the reality that we and
our shareholders intend to build Donlin Gold. The question is when.
In light of the renewal of the bull market in gold, combined with
Donlin Gold’s success in securing necessary permits for the
project, NOVAGOLD and Barrick are fully aligned in carefully
monitoring developments to advance Donlin Gold towards
construction, at a time when both partners conclude that they can
achieve maximum benefits for all stakeholders, including our
shareholders. Given the industry’s suffering from both asset
scarcity and the ravages of rising jurisdictional risk, we believe
that having equal ownership in a Tier 1 asset located in a Tier 1
jurisdiction suggests that time is clearly on our side. This, in
turn, will give our shareholders “maximum leverage in the perfect
jurisdiction to keep the fruits of that leverage.” For more on that
angle, one can watch my interview with Dan Tapiero, in which we
talk gold and, yes, Donlin Gold.
https://www.realvision.com/the-kaplan-doctrine-conservation-preservation-and-value
Without doubt, NOVAGOLD is becoming a “go-to” stock in the
space, especially as the sentiment in this sector improves and
interest is steadily but surely finding a channel into scarce
“category killer” North American assets. There are myriad good
reasons for this. For while I hate to say it, there won’t be very
many players left in the gold space. Collapsing grades, the paucity
of new discoveries, the churning through of reserves at existing
mines by the Majors, all but confirm that we have already reached
Peak Gold. Let me remind the reader that gold is not like
hydrocarbons, with vast reservoirs or resources ready to be
switched on quickly if prices rise, or unlocked simply by new
technologies like horizontal drilling for fracking. The mining
industry doesn’t have 3-D Seismic, and deposits can take decades to
go from prospect to mine. Peak Gold really is Peak Gold. Barrick
recently estimated that gold production will decline by 5% a year
for years. I believe that’s about right. If anything, it will
likely prove to be a conservative forecast as jurisdictions once
thought investible no longer are so, and declining grades mean
higher costs with less output.
As such, assets like Donlin Gold, with metrics that are
accretive on practically every dimension, are essentially unicorns.
When I survey the landscape, I am reminded of the carnage that was
visited on the tech space after the late 1990s bubble burst. If one
had the presence of mind to sift through the wreckage and have the
wits to pick a winner or two – an Amazon or Apple, for example –
one made a generational trade. Similarly, I believe that those few
gold companies that have great assets in great places will
constitute generational opportunities. That NOVAGOLD will stand
among those precious few is, for me, indisputable. Am I comparing
NOVAGOLD to Amazon or Apple? Yes. Not in that it will achieve a
trillion-dollar market cap, of course. But at least in that I
believe it will be one of the biggest winners in what is likely to
become a very hot space now that it has risen from the ashes.
Candidly, helping this particular scenario come along is our
objective. As the great wit Talleyrand put it, “the art of
statesmanship is to foresee the inevitable and to expedite its
occurrence.” We’re open about it. I’m open about it. We at Electrum
consider Donlin Gold to be the Holy Grail and want it to be valued
for the “category killer” we and our shareholders see it to be.
Electrum will only make money to the extent that our co-investors
will. That the owners “live above the store” is viewed favorably,
and our co-investors are exceptionally well-educated about our
narrative. For those new to the story, I am encouraging the reader
to go through NOVAGOLD’s most recent annual reports. The 2018 and
2019 editions can be found here:
https://www.novagold.com/_resources/NG_2018-AR.pdf
https://www.novagold.com/_resources/NG_2019-AR.pdf
I do urge you to read them precisely because they are
considered, by our investors, to be The Gold Standard of
transparency and intellectual coherence in the gold development
space.
The White Swan
A few words about the relationship with Barrick, and Barrick’s
engagement with Donlin – so distorted by JCAP. As I wrote the
following in the Chairman’s Letter of NOVAGOLD’s 2019 Annual
Report:
“There’s no doubt in my mind that the posture of Barrick toward
Donlin has been growing warmer and warmer as the Randgold team has
come up to speed on the asset and become more intimately acquainted
with what they own. The optimization process is going well, and the
geological model is shaping up nicely. As the Barrick/NOVAGOLD
teams work on testing the geometry of the deposit to establish a
future mine’s optimal throughput, the camaraderie has only been
accentuated. In truth, we are thrilled with the engagement from the
“new Barrick.” It is very much worth noting that, despite Barrick’s
always maintaining its commitment to the permitting process, in
fact we hit a delightful milestone of sorts last summer when Mark
Bristow became the first Barrick CEO in a decade to actually visit
the property! Mark is a professional’s professional, and anyone who
is familiar with his management style will know that he is hands-on
– and that such an approach should be no surprise.
But still, seeing the white swan – or the peregrine, as I have
taken to calling Mark more recently – on site at Donlin was a truly
welcome occasion for all concerned. Mark met our Native corporation
partners and senior state officials. Being a geologist, he
experienced the deposit firsthand in a way that one really has to
in order to fully appreciate what an ideal place it is to build a
first-class mine. Suffice to say that he clearly gets what makes
Donlin, in his words, “one of the best options on the gold price in
the world.” More than that, he now speaks of Donlin to analysts and
investors pretty much as I do, and often goes out of his way to
remark on how our teams – and he and I personally – are working so
well together.”
Mark and I see perfectly eye to eye on Donlin…perfectly, and
happily so. He and I tend to enjoy a bit of Saint Julien when we’re
together, and we both know that “no wine before its time” is always
the right approach. And that “do it right” is indeed the “right
approach”. We also know that Donlin Gold is maturing nicely, and
represents a unique investment proposition for both our companies
when the time is also right. As he has said publicly: Donlin Gold
“offers a huge optionality to the gold price across multiple gold
price cycles in an excellent jurisdiction.” Meanwhile, as he puts
it, “Donlin is becoming a global brand”. As this is what I have
been trying to accomplish from the outset – Mark will attest from
his various experiences with me that, when I enunciate a strategy,
I keep the faith with the project and the people all the way
through – this is really quite splendid for our shareholders. To
me, all roads lead to Donlin Gold as the perfect asset for the
times and, as I titled my Chairman’s Letter in this year’s Annual
Report, “The Winds of Change” are upon us.
I have always believed in giving back, and not so much in
“getting even”. While I am not a pacifist and always fight back
when my friends and allies are attacked, getting even as a way to
spend one’s time is usually a waste of valuable emotional energy.
Given how lucky I am, it would also be counter-productive. There
are too many great things in my life to strive for in the
non-profit world (not to mention the for-profit world) that, on
balance, seeking retribution for life’s inevitable disappointments
is simply pointless. Doing so would not give me more time with my
wife and children, or any of the myriad other pursuits that give my
life both purpose and joy. And, in any event, the world needs more
kindness, not less.
Some may feel that my response to this present matter must
surely indicate some frustration. Disabuse yourselves of that
notion. While I strongly believe in such quaint things as honor,
reason for me trumps all. And yet…I will confess that this time
feels a bit different.
“With lies you may get ahead in the world – but you can
never go back.”
While it is true that we have tried not to take JCAP’s
defamatory statements to heart because they form such a sad
tapestry of lies, as highlighted by the Russian proverb cited
above, one particular comment in the JCAP piece needs to be
underscored. It was but one of the many gross distortions, but a
rather special one. As page 14 reads, in reference to Galore
Creek:
“The $275 mln consideration included $75 mln contingent on
production, which is so unlikely that NG is not accounting for it”
and “Newmont quietly shut the project down on April 28, 2020.”
It’s not the first part of the sentence that stunned me, for it
was clear that finding anything that was actually true in the JCAP
piece was the real challenge. For accounting purposes, contingent
assets require a higher level of certainty to be recognized than
for contingent liabilities to be recognized. The contingent note
hereby mentioned will be recognized when, in management’s judgment,
it is probable that the payment will occur, and that the amount
recorded will not reverse in future periods. We provide the
information and let investors assess the recoverability for
themselves. That’s called conservative accounting and any real
analyst would acknowledge that it is best practice.
It was in fact the last 10 words that stunned me. The
implication being that the project will not be built and had been
killed. In reality, Galore, which is equally owned by Teck
Corporation and Newmont Corp., delayed fieldwork and PFS-related
activities in 2020 due to COVID-19, much like many other operations
around the world during this pandemic. JCAP actually refers to a
press release which, when read fully and with integrity,
states:
“(…) due to the COVID-19 pandemic and the resulting economic
uncertainties faced by the mining industry, expenditures on the
Galore Creek project have been reduced in 2020, deferring the start
of the planned Prefeasibility Study. A core team and funding are in
place to meet current permit, environment and community
obligations.”
Choosing to portray a COVID-related slowdown as an indication of
Newmont “quietly shutting the project down” epitomizes JCAP’s
indecency and intentionally warped interpretation of facts. That,
in this instance, the jab would be designed to injure not only
shareholders of NOVAGOLD, but also investors in Newmont and Teck,
is especially damning. Candidly, there must be a special place in
hell for people so depraved that they would so casually utilize one
of the most devastating public health crises in modern times to
smear a target – for financial gain. Anyone who even consorts with
such people should be ashamed of themselves for the sordid way in
which they make money.
For me, business is clearly personal. And, particularly in this
moment, decency truly matters. This, however, would not be a new
sentiment that I am expressing to our shareholders for the first
time. Let me thus conclude with an excerpt from our 2018 Annual
Report:
“We know that reputation is hard won and easily lost. My
children know that I feel this way, as do my colleagues and
partners. If I say that I’m going to do something, I’ll do it. It
makes life simpler and allows me to feel, and perhaps actually be,
virtuous. It’s also good business. Quaint as that may sound in our
increasingly transactional world, this code stems from a deep
philosophical attachment to a values-based and purpose-driven life.
It also comes from being, as the French would say, bien élevé
(“well brought up”) in business by partners who taught me in my
youth that your word should be your bond – because it’s the right
thing to do. It also gives you the reputation that is, after all,
the coin of the realm in life. Through leading by example, these
mentors gave me the greatest gift of all: namely, understanding the
art of practicing integrity. I use the word “practicing” here
because we all know that, being human, we make mistakes for which
we should blush. Moreover, it is well-nigh impossible to avoid
trade-offs and negotiations. And what is negotiating, other than
socially acceptable – indeed institutionalized – dissembling? With
that being said, within the realm of common sense, we can attest to
the notion that, by and large, codes of conduct really do work.
There are nonetheless multiple perils embedded in this
philosophy. First and foremost, it lends itself to being taken
advantage of – and occasionally mugged – by those who don’t share
similar ethical precepts. It also makes being competitive harder at
times. For reasons that I perceive better now than in my youth,
however, a more philosophical posture – especially when
stress-tested in reality – has proven to be a key determinant of
success. This approach certainly has not prevented me from being
extraordinarily lucky in exploration – the riskiest part of a risky
business – or in the fortuitous timing of our more intrepid
acquisitions. Such susceptibility for lucky breaks has given my
team at Electrum a comparative advantage that we’ve pressed on
numerous occasions over the past 25 years. Our track record can
attest to the fact that the fruits have much, much more outweighed
any limitations presumably imposed by my personal ethos, summed up
by Electrum’s corporate motto: Intelligence is a commodity;
Character is a currency.”
While I deeply regret this inconvenience to our shareholders, we
will endeavor to seek redress for the damages done by people who
exhibit neither intelligence nor character. Meanwhile, I am wishing
you all safety, good health, and great peace of mind.
ABOUT NOVAGOLD
NOVAGOLD is a well-financed precious metals company focused on
the development of its 50%-owned Donlin Gold project in Alaska, one
of the safest mining jurisdictions in the world. With approximately
39 million ounces of gold in the measured and indicated mineral
resource categories, inclusive of proven and probable mineral
reserves (541 million tonnes at an average grade of approximately
2.24 grams per tonne in the measured and indicated resource
categories on a 100% basis),3 Donlin Gold is regarded to be one of
the largest, highest-grade, and most prospective known open pit
gold deposits in the world. According to the Second Updated
Feasibility Study (as defined below), once in production, Donlin
Gold is expected to produce an average of more than one million
ounces per year over a 27-year mine life on a 100% basis. The
Donlin Gold project has substantial exploration potential beyond
the designed footprint which currently covers 1.9 miles (3 km) of
an approximately five-mile (8 km) long gold-bearing trend. Current
activities at Donlin Gold are focused on State permitting,
optimization work, community outreach and workforce development in
preparation for the construction and operation of this project.
With a strong balance sheet, NOVAGOLD is well-positioned to fund
its share of permitting and optimization advancement efforts at the
Donlin Gold project.
Scientific and Technical Information
Some scientific and technical information contained herein with
respect to the Donlin Gold project is derived from the “Donlin
Creek Gold Project Alaska, USA NI 43-101 Technical Report on Second
Updated Feasibility Study” prepared by AMEC with an effective date
of November 18, 2011, as amended January 20, 2012 (the “Second
Updated Feasibility Study” or “FSU2”). Kirk Hanson, P.E., Technical
Director, Open Pit Mining, North America, (AMEC, Reno), and Gordon
Seibel, R.M. SME, Principal Geologist, (AMEC, Reno) are the
Qualified Persons responsible for the preparation of the
independent technical report, each of whom are independent
“qualified persons” as defined by NI 43-101.
Clifford Krall, P.E., who is the Mine Engineering Manager for
NOVAGOLD and a “qualified person” under NI 43-101, has approved and
verified the scientific and technical information related to the
Donlin Gold project contained in this press release.
NOVAGOLD Contacts:Mélanie Hennessey Vice
President, Corporate Communications
Jason Mercier Manager, Investor Relations
604-669-6227 or 1-866-669-6227
Cautionary Note Regarding
Forward-Looking Statements
This press release includes certain “forward-looking
information” and “forward-looking statements” (collectively
“forward-looking statements”) within the meaning of applicable
securities legislation, including the United States Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are frequently, but not always, identified by words such
as “expects”, “anticipates”, “believes”, “intends”, “estimates”,
“potential”, “possible”, and similar expressions, or statements
that events, conditions, or results “will”, “may”, “could”, “would”
or “should” occur or be achieved. Forward-looking statements are
necessarily based on several opinions, estimates and assumptions
that management of NOVAGOLD considered appropriate and reasonable
as of the date such statements are made, are subject to known and
unknown risks, uncertainties, assumptions and other factors that
may cause the actual results, activity, performance or achievements
to be materially different from those expressed or implied by such
forward-looking statements. All statements, other than statements
of historical fact, included herein are forward-looking statements.
These forward-looking statements include statements regarding the
potential development and construction of Donlin Gold; perceived
merit of properties; the advancement of optimization studies at
Donlin Gold; potential opportunities to enhance or maximize the
value of Donlin Gold; the timing and likelihood of permits; mineral
reserve and resource estimates; work programs; capital
expenditures; timelines; strategic plans; and benefits of the
Donlin Gold project and market prices for precious metals, and
potential actions against or redress from JCAP. In addition, any
statements that refer to expectations, intentions, projections or
other characterizations of future events or circumstances are
forward-looking statements. Forward-looking statements are not
historical facts but instead represent NOVAGOLD’s management
expectations, estimates and projections regarding future events or
circumstances on the date the statements are made.
Important factors that could cause actual results to differ
materially from expectations include the need to obtain additional
permits and governmental approvals; the timing and likelihood of
permits; the need for additional financing to explore and develop
properties and availability of financing in the debt and capital
markets; the outbreak of the coronavirus global pandemic
(COVID-19); uncertainties involved in the interpretation of
drilling results and geological tests and the estimation of
reserves and resources; the need for continued cooperation between
NOVAGOLD and Barrick Gold Corp. for the continued exploration,
development and eventual construction of the Donlin Gold property;
the need for cooperation of government agencies and native groups
in the development and operation of properties; risks of
construction and mining projects such as accidents, equipment
breakdowns, bad weather, natural disasters, climate change,
non-compliance with environmental and permit requirements,
unanticipated variation in geological structures, ore grades or
recovery rates; unexpected cost increases, which could include
significant increases in estimated capital and operating costs;
fluctuations in metal prices and currency exchange rates; whether a
positive construction decision will be made regarding Donlin Gold;
continuing legal review of statements by JCAP; and other risks and
uncertainties disclosed in reports and documents filed by NOVAGOLD
with applicable securities regulatory authorities from time to
time. The forward-looking statements contained herein reflect the
beliefs, opinions and projections of NOVAGOLD on the date the
statements are made. NOVAGOLD assumes no obligation to update the
forward-looking statements of beliefs, opinions, projections, or
other factors, should they change, except as required by law.
Cautionary Note to United States Investors
This press release has been prepared in accordance with the
requirements of the securities laws in effect in Canada, which
differ from the requirements of U.S. securities laws. Unless
otherwise indicated, all resource and reserve estimates included in
this press release have been prepared in accordance with Canadian
National Instrument 43-101 Standards of Disclosure for Mineral
Projects (“NI 43-101”) and the Canadian Institute of Mining,
Metallurgy and Petroleum (CIM)—CIM Definition Standards on Mineral
Resources and Mineral Reserves, adopted by the CIM Council, as
amended (“CIM Definition Standards”). NI 43-101 is a rule developed
by the Canadian Securities Administrators which establishes
standards for all public disclosure an issuer makes of scientific
and technical information concerning mineral projects. Canadian
standards, including NI 43-101, differ significantly from the
requirements of the United States Securities and Exchange
Commission (SEC) Industry Guide 7 (“SEC Industry Guide 7”), and
resource and reserve information contained herein may not be
comparable to similar information disclosed by U.S. companies.
NOVAGOLD’s disclosure concerning Reserve & Resources Estimates
remains consistent with NI 43-101. Under SEC Industry Guide 7,
mineralization may not be classified as a "reserve” unless the
determination has been made that the mineralization could be
economically and legally produced or extracted at the time the
reserve determination is made. SEC Industry Guide 7 normally does
not permit the inclusion of information concerning "measured
mineral resources”, "indicated mineral resources” or "inferred
mineral resources” or other descriptions of the amount of
mineralization in mineral deposits that do not constitute
"reserves” under SEC Industry Guide 7 in documents filed with the
SEC. Investors should also understand that "inferred mineral
resources” have a great amount of uncertainty as to their existence
and great uncertainty as to their economic and legal feasibility.
Under Canadian rules, estimated "inferred mineral resources” may
not form the basis of feasibility or pre-feasibility studies except
in rare cases. Disclosure of "contained ounces” in a resource is
permitted disclosure under Canadian regulations; however, the SEC
normally only permits issuers to report mineralization that does
not constitute "reserves” under SEC Industry Guide 7 as in-place
tonnage and grade without reference to unit measures. The
requirements of NI 43-101 for identification of "reserves” are also
not the same as those of SEC Industry Guide 7, and reserves
reported by NOVAGOLD in compliance with NI 43-101 may not qualify
as "reserves” under SEC Industry Guide 7. Donlin Gold does not have
known reserves, as defined under SEC Industry Guide 7. Accordingly,
information concerning mineral deposits set forth herein may not be
comparable with information made public by companies that report in
accordance with SEC Industry Guide 7.
On October 31, 2018, the SEC adopted a final rule (“New Final
Rule”) that will replace SEC Industry Guide 7 with new disclosure
requirements that are more closely aligned with current industry
and global regulatory practices and standards, including NI 43-101.
Companies must comply with the New Final Rule for the Company’s
first fiscal year beginning on or after January 1, 2021, which for
NOVAGOLD would be the fiscal year beginning December 1, 2021. The
New Final Rule provides that SEC Industry Guide 7 will remain
effective until all registrants are required to comply with the New
Final Rule, at which time SEC Industry Guide 7 will be rescinded.
While early voluntary compliance with the New Final Rule is
permitted, NOVAGOLD has not elected to comply with the New Final
Rule at this time.
_______________________
1 Donlin Gold data as per the Second Updated
Feasibility Study (as defined herein). Donlin Gold measured
resources of approximately 8 Mt grading 2.52 g/t and indicated
resources of approximately 534 Mt grading 2.24 g/t, each on a 100%
basis. Mineral resources have been estimated in accordance with NI
43-101. See “Cautionary Note Concerning Reserve &
Resource Estimates” and “Mineral Reserve and Mineral Resource”
table on the Company’s website.
2 These represent the two of the top five
significant intervals from the 2017 Donlin Gold drill program.
Refer to the press release dated February 20, 2018 titled
“NOVAGOLD’s Donlin Gold Project Reports Excellent Results from 2017
Drill Program,” for remaining significant intervals and additional
information.
3 Donlin Gold data as per the Second Updated
Feasibility Study (as defined herein). Donlin Gold measured
resources of approximately 8 Mt grading 2.52 g/t and indicated
resources of approximately 534 Mt grading 2.24 g/t, each on a 100%
basis. Mineral resources have been estimated in accordance with NI
43-101. See “Cautionary Note Concerning Reserve &
Resource Estimates” and “Mineral Reserve and Mineral Resource”
table on the Company’s website.
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