NOVAGOLD RESOURCES INC. (“NOVAGOLD” or “the
Company”) (NYSE American, TSX: NG) today released its 2021 second
quarter financial results and an update on its Tier One1 gold
development project Donlin Gold (“Donlin Gold” or the “project”),
which NOVAGOLD owns equally with Barrick Gold Corporation
(“Barrick”).
Details of the financial results for the quarter ended May 31,
2021 are presented in the consolidated financial statements and
quarterly report filed June 29, 2021 on Form 10-Q with the SEC that
is available on the Company’s website at www.novagold.com, on SEDAR
at www.sedar.com, and on EDGAR at www.sec.gov. All amounts are in
U.S. dollars unless otherwise stated and all mineral resource and
mineral reserve estimates are shown on a 100% project basis.
Second Quarter Highlights and Updates:
- In order to minimize the risk posed by COVID-19, NOVAGOLD is
continuing to maintain a wide-ranging set of health and safety
policies at its offices in Salt Lake City and Vancouver, and, in
conjunction with Barrick, at the Donlin Gold office in Anchorage
and project site. These measures are designed to ensure the safety
and well-being of all employees, contractors, and people associated
with the Company.
- The Donlin Gold
project camp has been re-opened safely with four drills currently
operating.
- A total of 28 holes
(representing approximately 8,650 meters of length drilled) as of
June 26, 2021, out of the 64 planned for the 2021 program have been
drilled to date (representing a total of approximately 20,100
meters of length to be drilled). The program is expected to:
- Build upon a successful 2020 drill program that produced
results supporting updates to recent geologic modeling concepts,
validate mineralization continuity, and test for extensions of
high-grade zones in both intrusive (igneous) and sedimentary
rocks.
- Provide necessary information to
support a decision to move to the upcoming feasibility study,
subject to a formal decision by the Donlin Gold LLC Board, and
initiate the engineering work necessary to advance the project
design before reaching a construction decision.
- Numerous camp improvements were
completed: equipment purchased, kitchen facilities expanded, a new
recreation area furnished, electrical work upgraded, sleeper
capacity increased, camp facilities remodeled, a new warehouse
added, and core logging and cutting facilities and equipment were
upgraded.
- Donlin Gold,
together with its Native Corporation partners Calista and
TKC, carried out a wide range of community engagement and
support initiatives:
- Finalized Shared
Value Statements with two additional villages from the
Yukon-Kuskokwim (“Y-K”) region for a total of seven Shared Value
Statements (Akiak, Sleetmute, Napaimute, Crooked Creek, Napaskiak,
Nikolai, and Tuluksak) to date. These agreements include
educational, environmental, and social initiatives to help support
villages.
- Held the Lower
Kuskokwim School District’s annual College and Career fair where
more than 42 vendors and 100 students attended the virtual event
held in April 2021.
- Launched a
Subsistence Community Advisory Committee (“SCAC”) which will
strengthen the role of Donlin Gold in guiding subsistence
activities within the Kuskokwim River drainage.
- NOVAGOLD sponsored and participated in the Mining for Miracles
Pie Throw, an annual fundraising event in support of the BC
Children’s Hospital Cellular and Regenerative Medicine Centre.
- On May 27, 2021, the
Alaska Department of Environmental Conservation (“ADEC”)
Commissioner upheld the State of Alaska’s Section 401 Certification
under the Clean Water Act that had been granted to Donlin Gold in
2018 after a thorough, diligent and transparent review by State and
Federal agencies of the proposed project development plan and its
relationship with the surrounding environment. The Commissioner’s
decision was appealed in Alaska’s Superior Court on June 28, 2021,
by a San Francisco-based activist law firm, Earthjustice. Donlin
Gold strongly believes that the Commissioner’s decision to uphold
the 401 Certification validates the project’s stakeholders’
commitment to advance the Donlin Gold project in a safe and
environmentally responsible manner for the benefit of all
Alaskans.
President’s Message
Family and Safety First
Following a successful 2020 season with zero COVID-19 cases on
site, together with a renewed and sustained commitment to the
health and safety of our workforce members and local communities,
the Donlin Gold project camp was safely re-opened in March and four
drill rigs have been deployed.
Local community involvement in the project lies at the core of
both Barrick’s and NOVAGOLD’s philosophy. Approximately 70% of
Donlin Gold direct hires for this year’s drill program are Alaska
Natives and we are pleased to report that for the 2021 season,
Donlin Gold hired employees from 20 Y-K communities. In an area
marked by high unemployment and fewer job choices than in urban
environments, the work experience and skills training that Donlin
Gold provides is highly significant and appreciated. Of equal
importance, being that we share the objective of protecting the
health of all Alaskans, ahead of the camp re-opening in March,
Donlin Gold consulted with its partners Calista and TKC, as well as
the home communities of Donlin Gold employees regarding health and
safety – particularly in terms of disciplined adherence to
stringent COVID-19 protocols. Employees will again have mandatory
COVID-19 testing prior to traveling to the Donlin Gold project camp
and, upon arrival, will follow social distancing and other safety
protocols implemented in response to the pandemic. Moreover, all
workforce members have been required to continue following these
protocols upon return to their respective communities and are
encouraged to bring Donlin Gold’s safety practices into their home
villages.
Current Drilling Continues to Build Upon the Successful
2020 Program
There are four drill rigs operating at the project site in the
ACMA and Lewis deposit areas, with 28 holes drilled as of June 26,
representing approximately 47% of the planned 64-hole program. We
are excited to be building upon a successful 2020 drill program
which included significant higher-grade gold intersections
indicative of the impressive nature of this deposit. Ahead of the
2021 field season, Donlin Gold completed numerous camp
improvements, such as the purchase of heavy equipment, expanded the
kitchen facilities, furnished a new recreation area, upgraded
electrical work, increased sleeper capacity with sixteen new units,
expanded and remodeled camp facilities, added a large new
warehouse, and upgraded core logging and cutting facilities and
equipment. After the 2021 drill season, we anticipate that, on the
completion of the updated geologic model and, subject to a formal
decision by the Donlin Gold LLC Board, we will turn our attention
to the upcoming feasibility study with Barrick.
We all recognize that Donlin Gold already enjoys an incredible
foundation of attributes to build upon and that, as the project’s
expected mine life may already be measured in decades, we have a
great responsibility to all stakeholders to do things right from
the start and not cut any corners. With approximately 39 million
ounces of gold in measured and indicated mineral resources grading
2.24 grams per tonne2, Donlin Gold’s scale and grade, at twice the
industry average3, are simply exceptional. Donlin Gold is indeed
unique in the combination of its attributes, particularly given the
scarcity of new major gold discoveries over the past decade and the
safe jurisdiction in which it is located – Alaska, a Tier One
jurisdiction4. While we are focused on the drill program,
permitting, and modeling work, we have not lost sight of one of the
project’s most important attributes: Donlin Gold’s truly
exceptional exploration potential. It is notable that the project’s
gold endowment is contained within only three kilometers of an
eight-kilometer mineralized belt, and that even this only
represents five percent of the total property. And let’s not forget
that, in all the past drill programs at Donlin Gold, we have
encountered among the best assay results for an open-pit gold
project in the industry.
In 2020, NOVAGOLD engaged Wood Canada Limited (“Wood”) to
perform a review of the costs and other assumptions used in the
Donlin Gold 2011 Technical Report (as defined below) to meet the
Company’s reporting requirements. Based on that cost review, Wood
determined that updating the 2011 Technical Report using 2020 costs
and new gold price guidance results in no material change to the
mineral resources or mineral reserves. See below in “NI 43-101
Technical Report” for additional detail regarding the “Donlin Gold
Project, Alaska, USA, NI 43-101 Technical Report”, with an
effective date of June 1, 2021 (“2021 Technical Report”).
Note that the 2021 Technical Report utilizes the existing
mineral resources model and the same technical information from the
previous Donlin Gold 2011 Technical Report with 2020 costs and
adjusted gold price and is separate from the upcoming feasibility
study that is expected to commence, subject to Donlin Gold LLC
Board approval, once we have completed the 2021 drill program and
geologic model update incorporating all the latest drill data,
optimization work and trade off studies since 2011.
Deposits that boast Donlin Gold’s special combination of
incredible attributes are unusual and highly coveted. And not just
by investors. Given recent examples of governments around the world
either physically or, through legislation or other means,
effectively seizing assets, we are grateful that Donlin Gold is
located in Alaska where there is a time-tested culture of respect
for responsible and sustainable mine development and the rule of
law. We are confident that NOVAGOLD in partnership with Barrick,
Calista and TKC, will advance this unique project up the value
chain in a technically advanced, safe, environmentally sound, and
socially responsible manner.
Community Partnership is Integral to our
Culture
As a Company, we aspire to make a positive difference in the
Alaskan communities in the Y-K region. That’s why we give community
members a chance to be heard. Through that exchange of ideas and
approaches, we develop lasting solutions to improve the way of life
in the communities. For example, in March Donlin Gold, together
with Calista and TKC, hosted a water rights information call with
interested tribes in response to a request for additional
engagement on the topic, which is a regular practice for Donlin
Gold. A half-dozen tribes participated. Donlin Gold is fortunate to
enjoy deep-rooted partnerships with Calista and TKC, owners of the
mineral and surface rights, respectively. The project’s location on
private land, specially designated for mining activities, as
enshrined in the 1971 Alaska Native Claims Settlement Act
(“ANCSA”), represents a key attribute that distinguishes Donlin
Gold from most other mining assets. Our commitment to a meaningful
consultation with the local communities throughout the period of
project permitting and development has been affirmed over decades.
Donlin Gold has made progress in formalizing its community
relationships with Shared Value Statements to date covering seven
villages from the Y-K region (Akiak, Sleetmute, Napaimute, Crooked
Creek, Napaskiak, Nikolai, and Tuluksak). These agreements include
educational, environmental, and social initiatives to help provide
support for these villages, most of them remote, particularly at a
time of need.
In March 2021, the Thomas Lodge in Crooked Creek suffered a
major fire. Substantial damage occurred and Donlin Gold aided with
labor and materials to get the building back in order by May. The
Thomas Lodge is the only lodging facility in the village and in
proximity to the project site. NOVAGOLD and Donlin Gold provided
financial contributions to help fund repairs for this vital
community asset prior to the busy summer season.
Access to training and education are two of the important areas
in which we collaborate with our Native Corporation partners. The
Lower Kuskokwim School District’s annual College and Career fair
was held virtually in April, with a record number of vendors and
strong student participation. Donlin Gold also sponsored the annual
Best in the West Competition at the Kuskokwim Campus of the
University of Alaska to encourage and support the leaders of
tomorrow.
Furthermore, the first sub-committee of the Donlin Advisory
Technical Review and Oversight Committee (“DATROC”) was officially
launched in early May. The DATROC’s objective is to establish and
maintain a well-defined process for communication, dialogue and
problem-solving needed among the partners. Calista, TKC, and Donlin
Gold initiated planning to establish the DATROC in 2018. The SCAC,
a sub-committee under the DATROC, will receive and distribute
information on Donlin Gold’s plans, operations, and monitoring
activities. It will also communicate information regarding local
subsistence activities and traditional knowledge as it relates to
information shared by Donlin Gold. Lastly, it will serve as a forum
for stakeholders to discuss issues of concern related to the
potential impact of Donlin Gold’s plans, operations or monitoring
activities on subsistence activities, wildlife or habitat, as well
as assist them in developing and updating plans for land and waters
affected by the project. As part of the new SCAC, the “Let’s Talk
Donlin” website – hosted by Calista, TKC, and Donlin Gold – was
launched as a community information hub that also accepts feedback
on community issues and concerns. These partnerships, activities,
and programs demonstrate NOVAGOLD’s and Barrick’s longstanding and
deep-rooted commitment to sustainable and responsible development
for the benefit of all stakeholders in the Y-K region.
NOVAGOLD also sponsored and participated in the Mining for
Miracles Pie Throw in May, a fundraising event in support of the BC
Children’s Hospital located in Vancouver, British Columbia. Each
year, senior leaders from across the industry are paired up in a
friendly fundraising competition and whoever raises the most money
earns the right to toss a pie at the other person. I was happy to
participate in this event and help raise funds for the BC
Children’s Hospital Cellular and Regenerative Medicine Centre.
Advancing Permits Diligently and
Responsibly
During the second quarter, Donlin Gold, together with Calista
and TKC, continued to provide support to State agencies in their
efforts to advance remaining permits and approvals needed for the
project. Several key permit decisions were made in support of the
project in the quarter. The ADEC Commissioner released his decision
in late May to uphold the Donlin Gold 401 Certification that was
granted in 2018 after a lengthy, thorough, and diligent review of
the proposed project development plan and its relationship with the
surrounding environment by State and Federal agencies. The 401
Certification was formally appealed to the ADEC Commissioner in
June 2020, and the ADEC Commissioner referred the appeal to an
Administrative Law Judge (ALJ) for review. The ALJ opinion was
issued on April 12, 2021, ahead of the ADEC Commissioner’s decision
to uphold the 401 Certification of the Federal Clean Water Act
Section 404 permit. The Commissioner’s decision to uphold the 401
Certification, as expected, was appealed in Alaska’s Superior Court
on June 28, 2021, by a San Francisco-based activist law firm,
Earthjustice.
We believe the ADEC Commissioner’s decision to uphold the 401
Certification for the Donlin Gold project was the right outcome.
Donlin Gold strongly believes that the Commissioner’s decision to
uphold the 401 Certification validates the project stakeholders’
commitment to advance the Donlin Gold project in a safe and
environmentally responsible manner for the benefit of all Alaskans.
The scientific work done to date on the 401 Certification, in
parallel with the continuing collection of data and analysis, will
be verified through extensive, open and transparent monitoring as
required by State permits. Simply put, we will not operate the
Donlin Gold project without demonstrated compliance with the
State’s water quality standards. Throughout the multi-year
permitting process, Donlin Gold engaged with all relevant parties
to answer their questions and address their concerns. We look
forward to continuing that practice.
The ADNR published a public notice for comment on Donlin Gold’s
12 applications for water rights associated with the mine site and
transportation facilities. This notice for comment closed on
December 15, 2020. Water rights encompass local surface water
sources and groundwater to be used for process water, dust control,
fire protection, and potable water. In March 2021, the ADNR
introduced a second two-week public notice period, which closed on
March 26, 2021. The ADNR is expected to issue final decisions
granting the water rights applications in 2021.
In April 2020, the ADNR Division of Oil and Gas agreed to
reconsider its decision on the State ROW agreement and lease
authorization for the buried natural gas pipeline. Under the
reconsideration, ADNR issued a revised Consideration of Comments
document for additional public review on September 10, 2020. This
document describes how the ADNR considered public input that was
solicited in the ROW review, including how cumulative effects are
addressed in the decision. The comment period on that document
ended in November 2020. The ADNR is expected to re-issue the ROW
agreement and lease authorization in 2021. We look forward to
continuing our constructive engagement with all the appropriate
Federal and State agencies in Alaska.
Continual shareholder engagement has long been a hallmark of
NOVAGOLD’s approach to aligning company strategy with the input
from our shareholder base. During the 2021 proxy season, NOVAGOLD
placed calls to shareholders holding more than 90% of the Company’s
issued and outstanding common shares. Approximately 72% of the
Company’s issued and outstanding shares entitled to vote were
represented at the Annual and Special Meeting of Shareholders held
virtually on May 12. All proposals were approved, and all 10
director nominees re-elected.
NOVAGOLD’s strong financial position of approximately $108
million in cash and term deposits as of May 31, 2021, will soon be
enhanced by an additional $75 million to be received from Newmont
in July, resulting from the 2018 sale of our 50% interest in the
Galore Creek project. We expect our existing financial resources
and future incoming payments to be sufficient for NOVAGOLD to carry
out its business without resorting to raising more capital until a
construction decision is made.
For NOVAGOLD, the word “partnership” also implies a long-term,
trust-based relationship with its joint-venture partner, Barrick.
Barrick’s management team has been responsive and engaged in the
project for as long as they have been involved, and NOVAGOLD is
fortunate to have an experienced partner with whom to work
alongside as the Donlin Gold project builds momentum.
I wish to thank the project teams at NOVAGOLD, Donlin Gold, and
Barrick for their hard work, professionalism, expertise, and
perseverance in both safely and effectively meeting our goals on
all fronts as we work to overcome the numerous challenges of the
global pandemic. We also extend our sincere appreciation to the
various State agencies for their hard work and professionalism
throughout the permitting activities for the Donlin Gold
project.
I would also like to express my deep gratitude to our Native
Corporation partners, Calista and TKC, for their longstanding
support and unwavering commitment to our shared vision of advancing
the Donlin Gold project – one of the largest, highest-grade, and
most prospective open-pit gold deposits in the world.
Once again, I express genuine gratefulness to my colleagues on
the NOVAGOLD Board for their unwavering support and commitment to
upholding the best social, environmental, and governance practices.
I truly enjoy serving with all of you.
NOVAGOLD is thankful for the dedication, engagement, knowledge
sharing, and encouragement of our shareholders – many of whom have
been holders for a decade or more. We are appreciative and humbled
by the trust you put in our team, and we take this responsibility
very seriously. NOVAGOLD remains focused on maximizing returns for
its shareholders and stakeholders alike in a measured, safe, and
socially responsible manner. I wish you all the best of health.
Sincerely,
Gregory A. LangPresident & CEO
Financial Results
in thousands of U.S. dollars, except for per share
amounts
|
Three months endedMay 31,
2021$ |
|
Three months endedMay 31,
2020$ |
|
Six months endedMay 31,
2021$ |
|
Six months endedMay 31,
2020$ |
|
General and administrative expense (1) |
4,992 |
|
4,387 |
|
10,321 |
|
9,101 |
|
Share of losses – Donlin Gold |
4,198 |
|
3,700 |
|
6,166 |
|
5,268 |
|
Total operating expenses |
9,190 |
|
8,087 |
|
16,487 |
|
14,369 |
|
|
|
|
|
|
Loss from operations |
(9,190) |
|
(8,087) |
|
(16,487) |
|
(14,369) |
|
Interest expense on promissory note |
(1,480) |
|
(1,400) |
|
(2,914) |
|
(3,160) |
|
Accretion of notes receivable |
854 |
|
824 |
|
1,708 |
|
1,648 |
|
Other income |
(705) |
|
1,694 |
|
(784) |
|
2,581 |
|
Income tax expense |
|
(264) |
|
|
(528) |
|
Net loss |
(10,521) |
|
(7,233) |
|
(18,477) |
|
(13,828) |
|
|
|
|
|
|
Loss per share, basic and diluted |
(0.03) |
|
(0.02) |
|
(0.06) |
|
(0.04) |
|
|
|
|
|
|
|
|
|
At |
|
At |
|
|
|
|
May 31, 2021$ |
|
Nov 30, 2020$ |
|
Cash and term deposits |
|
|
107,587 |
|
121,906 |
|
Total assets |
|
|
213,296 |
|
224,441 |
|
Total liabilities |
|
|
115,168 |
|
113,714 |
|
(1) Includes share-based compensation expense of $2,095 and
$1,715 in the second quarter of 2021 and 2020, respectively, and
$4,137 and $3,476 in the first six months of 2021 and 2020,
respectively.
For the second quarter ended May 31, 2021,
NOVAGOLD’s share of Donlin Gold losses increased from
$3.7 million in 2020 to $4.2 million in 2021. In 2020, Donlin
Gold LLC temporarily paused the drill program for April through
mid-May as a precautionary COVID measure.
General and administrative expense increased from
$4.4 million in 2020 to $5.0 million in 2021 primarily due to
higher share-based compensation and legal costs.
In the first six months of 2021, total cash, cash
equivalents and term deposits decreased by $14.3 million of which
$6.3 million was used in operating activities for administrative
costs and working capital changes, $8.1 million was used to
fund Donlin Gold and $0.7 million related to withholding taxes paid
on vested performance share units (PSUs). Effects of exchange rate
changes increased cash by $0.8 million.
For the six-month period in 2021, net cash used in
operating activities of continuing operations increased by $0.9
million, primarily due to lower interest income and higher legal
costs, partially offset by changes in working capital. Net cash
used in investing activities included a $1.2 million increase in
Donlin Gold funding due to timing of the 2021 drill program. Term
deposits decreased by $5.2 million, with the proceeds deposited in
interest-bearing savings accounts. Net cash used in financing
activities related to withholding taxes paid on vested performance
share units.
As of May 31, 2021, we had cash and cash
equivalents of $51.8 million and term deposits of $55.8 million.
The term deposits are denominated in U.S. or Canadian dollars and
are held at Canadian chartered banks. In July 2021, we expect to
receive $75 million from the first note receivable from Newmont in
relation to the 2018 sale of our 50% interest in the Galore Creek
project. Additional capital will be necessary if a decision to
commence engineering and construction is reached for the Donlin
Gold project.
NI 43-101 Technical Report
In 2020, the Company retained Wood Canada Limited (“Wood”) to
update content in its previously filed “Donlin Creek Gold Project,
Alaska, USA, NI 43-101 Technical Report on the Second Updated
Feasibility Study,” effective November 18, 2011, and amended
January 20, 2012 (“2011 Technical Report”). The 2021 Technical
Report is an updated summary of the results of the 2011 Technical
Report in the form of a National Instrument (NI) 43-101 technical
report for the Donlin Gold project in Alaska, USA, and is titled
“Donlin Gold Project, Alaska, USA, NI 43-101 Technical Report”,
with an effective date of June 1, 2021. Wood completed an exercise
to verify which content in the 2011 Technical Report remains
current, and what was required to update the report content with
the latest information. Updated content includes operating costs,
capital costs, tax rates, long term gold price, and the economic
analysis. Additionally, work done on the property since 2011 with
respect to exploration, drilling, permitting, and minor mine design
changes as a result of recent permitting activities are summarized
in the 2021 Technical Report. A data verification exercise was
completed by each Wood Qualified Person (“QP”) co-authoring the
report. This included a September 2020 site visit by
two of the report QPs; review of the geologic data, geologic model,
and resource model; review of metallurgical test work; review of
designs for mining, processing, and infrastructure, including minor
design updates; update of capital and operating cost estimates
utilizing a combination of cost indices and vendor quotations; and
an updated economic analysis.
The Wood review exercise determined that the report updating
exercise resulted in no material change to the Mineral Resources or
Mineral Reserves, so the Company will be voluntarily filing the
2021 Technical Report on System for Electronic Document Analysis
and Retrieval (SEDAR) to update the scientific and technical
information on the property and to support NOVAGOLD’s disclosure on
the Donlin Gold project.
Wood reviewed the geologic and resource models that supported
the 2011 Technical Report, including comparing them to data from
recent drilling programs, and determined that they continue to be
adequate and suitable to be used for a Mineral Resource estimation.
Using updated cost inputs from the first calendar quarter of 2020,
a gold price of $1,500 per ounce, and the geologic and resource
models utilized in support of the 2011 Technical Report, the
contents within an updated optimized pit shell did not show a
material change to the Mineral Resources stated in the 2011
Technical Report. Therefore, the Mineral Resources are considered
current and are unchanged. They continue to have an effective date
of July 11, 2011.
Similarly, using updated cost inputs, a gold price of $1,200 per
ounce, and the geologic and resource models utilized in support of
the 2011 Technical Report with appropriate modifying factors
applied for Mineral Reserve estimation, the previous Mineral
Reserve ultimate pit was contained within an updated optimized pit
shell. Therefore, the Mineral Reserves remain current and are
unchanged. Because the Mineral Reserves are supported by an updated
economic analysis they have an effective date of April 27,
2021.
Outside of verifying the Mineral Resource and Mineral Reserve
estimates, the primary efforts in the 2021 Technical Report were
financial and permitting updates. This includes updates to
estimated capital costs, operating costs, reclamation and closure
costs, royalties, taxes, and economic analysis, as well as current
status of the permits.
Updated capital costs are based on first calendar quarter 2020
pricing (cost indices and current commodity pricing and equipment
quotes) applied to the engineering designs and material take-offs
from the 2011 Technical Report, except for minor changes made
during permitting in the operations water treatment plant and the
natural gas pipeline.
As a result of the content updates, the total initial capital
cost estimate is $7,402 million, which is an increase of
$723 million, a 10.8% increase, compared to the 2011 Technical
Report total initial capital cost estimate. Likewise, the total
sustaining capital estimate is $1,723 million, which is an
increase of $219 million, a 14.6% increase, compared to the
2011 Technical Report total sustaining capital estimate.
The 2011 Technical Report operating costs were updated to first
calendar quarter 2020 by updating key cost drivers like energy,
labour, consumables, and freight. No material changes to project
designs, schedules, or productivities were made; consequently, the
manning schedules and consumables remain unchanged. The updated
estimated life of mine (“LOM”) operating costs total $19,289
million, which is $5.90/t mined, $38.21/t processed, or $635/oz
gold sold.
The economic evaluation of the Donlin Gold
project was updated using the following inputs:
- A production plan based on the 2011
Technical Report of 53,500 t/d open pit gold mine with ore
processing by means of flotation, pressure oxidation, and
cyanidation. The pit designs and Mineral Reserves were based on the
Measured and Indicated Mineral Resource estimates that were
verified as remaining current. Annual LOM gold production averages
1.13 Moz per year over a production life of 27 years,
including 1.46 Moz per year for the first five full years of
production.
- $1,500/oz gold price
- Current land and royalty
agreements
- Operating and initial and sustaining
capital costs updated to first calendar quarter 2020
- Tax payments in accordance with the
Tax Cuts and Jobs Act (“TCJA”) enacted in December 2017 and
effective January 1, 2018
- $292 million LOM contributions for
reclamation, closure, and financial assurance
- Financing has been assumed on a
100%, all equity, stand-alone basis
- Escalation/inflation has been
excluded
- No salvage is assumed at the end of
operations
Based on the economic evaluation, the Donlin Gold project
generates positive before and after-tax economic results. Total
after-tax cash flow is $13,145 million, after-tax NPV5 is
$3,040 million, and the after-tax internal rate of return is
9.2%. After-tax payback is achieved 7.3 years following the start
of production.
The 2021 Technical Report will be filed on SEDAR in 2021. The
2021 Technical Report was prepared by Wood and the following
contributors, each of whom is a Qualified Person under National
Instrument 43-101 (“NI 43-101”): Henry Kim, P.Geo., Senior Resource
Geologist, Wood Canada Limited; Mike Woloschuk, P.Eng., VP Global
Business Development & Consulting, Wood Group USA, Inc.; and
Kirk Hanson, MBA, P.E., Technical Director, Open Pit Mining, Wood
Group USA, Inc.
2021 Outlook
We continue to anticipate spending approximately
$31 to $35 million in 2021, which includes $18 to $22 million
to fund our share of expenditures at the Donlin Gold project ($11
million for the 2021 drilling program, camp improvements and
studies; $7 million for permitting, community engagement and
administration; and an additional $4 million for other studies
contingent upon mid-year approval by both owners) and $13 million
for corporate general and administrative costs).
NOVAGOLD’s primary goals in 2021 are to continue to
advance the Donlin Gold project toward a construction decision;
maintain/increase support for Donlin Gold among the project’s
stakeholders; promote a strong safety, sustainability, and
environmental culture; maintain a favorable reputation of NOVAGOLD,
its governance practices, and its project among shareholders; and
manage the Company treasury effectively and efficiently, including
streamlining the corporate structure. Our operations primarily
relate to the delivery of project milestones, including the
achievement of various technical, environmental, sustainable
development, economic and legal objectives, obtaining necessary
permits, completion of feasibility studies, preparation of
engineering designs and the financing to fund these objectives.
Conference Call & Video Webcast Details
NOVAGOLD’s conference call and video webcast to discuss these
results will take place June 30, 2021 at 8:00 a.m. PT (11:00
a.m. ET). The video webcast and conference call-in details are
provided below.
Video Webcast: |
www.novagold.com/investors/events/ |
North American callers: |
1-800-319-4610 |
International callers: |
1-604-638-5340 |
Questions may be submitted prior to the call at
info@novagold.com. There will also be an opportunity to ask
questions during the webcast following the presentation.
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),5 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 2011 Technical Report, with content updated as
discussed under the heading “NI 43-101 Technical Report”, 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
three kilometers of an approximately eight-kilometer-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 eventual 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.
Donlin Gold is a committed partner to the Alaska Native
Communities both surrounding the project and within the State as a
whole. An important factor that distinguishes Donlin Gold from most
other mining assets in Alaska is that the project is located on
private land that was selected by Calista and TKC at the direction
of the Y-K region Elders and was designated for mining activities
five decades ago. Donlin Gold has entered into life-of-mine
agreements with Calista, which owns the subsurface mineral rights,
and TKC, a collection of 10 village corporations which owns the
surface land rights, and is committed to providing employment
opportunities, scholarships, and preferential contract
considerations to Calista and TKC shareholders. These agreements
include a revenue-sharing structure, established by ANCSA, which
resolved Alaska Native land claims, allotting 44 million acres of
land for use by Alaska Native Corporations. Additionally, our
long-term commitment to economic development is exemplified by
Donlin Gold’s support of TKC’s initiative to launch energy and
infrastructure projects in Middle Kuskokwim villages. These
partnerships, activities, and programs are illustrative of the
commitment to the sustainable and responsible development of the
Donlin Gold project for the benefit of all stakeholders.
Scientific and Technical Information
Certain scientific and technical information contained herein
with respect to the Donlin Gold project is derived from the 2011
Technical Report prepared by AMEC with an effective date of
November 18, 2011, as amended January 20, 2012. Kirk Hanson, P.E.,
Technical Director, Open Pit Mining, North America, (AMEC, Reno) is
the Qualified Person responsible for the preparation of the
independent technical report, and an independent “qualified person”
as defined by NI 43-101. As noted above, Wood Canada Limited
(“Wood” formerly AMEC Americas Limited) has updated the content in
the 2011 Technical Report with updated costs, economic assessment,
permitting information, and technical information related to
permitting, generated on the Donlin Gold project since 2011. The
Company anticipates voluntarily filing the 2021 Technical Report on
SEDAR in 2021.
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 2021 Donlin Gold drill program and 2021 Technical
Report contained in this media release. He has reviewed the
supporting documents that form the basis of the updated content in
the 2021 Technical Report.
NOVAGOLD Contacts:Mélanie HennesseyVice
President, Corporate Communications
Jason MercierManager, Investor Relations
604-669-6227 or 1-866-669-6227
Cautionary Note Regarding Forward-Looking
Statements
This media 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
work program for the 2021 field season, anticipated benefits from
the 2020 and 2021 drill programs including an improved geological
model for Donlin Gold; the timing of filing of the 2021 Technical
Report; ongoing support provided to key stakeholders including
Native Corporation partners; the potential impact of the COVID-19
pandemic on the development of Donlin Gold; the potential
development and construction of Donlin Gold; the sufficiency of
funds to continue to advance development of Donlin Gold; perceived
merit of properties; mineral reserve and resource estimates; the
timing and likelihood of permits, including but not limited to the
re-issuance of the ROW agreement and lease authorization for the
project’s buried natural gas pipeline and legal challenges to the
Company’s existing permits; the statements under the heading “2021
Outlook”; and future share price performance of NOVAGOLD. 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 including but not limited to the right-of-way lease offer
for the project’s buried natural gas pipeline; 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 drill results and
geological tests and the estimation of reserves and resources;
changes in mineral production performance, exploitation and
exploration successes; changes in national and local government
legislation, taxation, controls or regulations and/or changes in
the administration of laws, policies and practices, expropriation
or nationalization of property and political or economic
developments in the United States or Canada; the need for continued
cooperation between Barrick and NOVAGOLD for the continued
exploration, and 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, disease pandemics,
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;
and other risks and uncertainties disclosed in NOVAGOLD’s most
recent reports on Forms 10-K and 10-Q, particularly the "Risk
Factors" sections of those reports and other documents filed by
NOVAGOLD with applicable securities regulatory authorities from
time to time. Copies of these filings may be obtained by visiting
NOVAGOLD’s website at www.novagold.com, or the SEC's website at
www.sec.gov, or at www.sedar.com. 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
NOVAGOLD cautions that this media 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 media 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 NOVAGOLD defines a Tier One gold development project as one
with a projected production life of at least 10 years, annual
projected production of at least 500,000 ounces of gold, and
average projected operating costs over the production life that are
in the lower half of the industry cost curve.2 Donlin Gold data as
per the 2011 Technical Report (as defined herein), with content
updated as discussed under the heading “NI 43-101 Technical
Report”. 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 and inclusive of mineral
reserves. Mineral resources have been estimated in accordance with
NI 43-101.3 2020 average grade of open pit and underground deposits
with gold as primary commodity and over 1 Moz in measured and
indicated resources is 1.12 g/t, sourced from S&P Global Market
Intelligence.4 NOVAGOLD considers Tier One jurisdictions to be any
in the top 10 rank by the Investment Attractiveness Index in the
Fraser Institute Annual Survey of Mining Companies,
2020. Alaska is ranked number 5.5 Donlin Gold data as per the
2011 Technical Report, with content updated as discussed under the
heading “NI 43-101” Technical Report”. 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 and inclusive of mineral reserves. Mineral resources have
been estimated in accordance with NI 43-101.
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