NOVAGOLD RESOURCES INC. (“NOVAGOLD” or “the
Company”) (NYSE American, TSX: NG) today released its 2020 third
quarter financial results and an update on its flagship Donlin Gold
project, a Tier One1 gold development project located in Alaska, a
mining-friendly jurisdiction, which NOVAGOLD owns equally with
Barrick.
Details of the financial results for the quarter
ended August 31, 2020 are presented in the consolidated financial
statements and quarterly report filed September 30, 2020 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 resource and reserve estimates are shown on a 100%
project basis.
Third Quarter Highlights
and
Updates:
- NOVAGOLD and Barrick
are advancing the 2020 drill program at Donlin Gold:
- With appropriate
COVID-19 protocols in place, the 2020 Donlin Gold drill program
advanced during the quarter utilizing four drill rigs and drilling
was completed in September.
- Initial assay
results were reported from 2,246 meters of drilling in a Donlin
Gold release issued jointly by NOVAGOLD and Barrick on August 6,
20202. Significant distinct high-grade intervals were intercepted
in multiple areas, including impressive intervals near surface.
Five of the top intervals identified so far include3:
- DC20-1871 intersected 41.91 m grading
11.61 g/t gold, starting at 30.35 m drilled depth;
- DC20-1866 intersected 45.91 m grading
5.03 g/t gold, starting at 35.39 m drilled depth; 23.36 m grading
4.15 g/t gold, starting at 108.30 m drilled depth; and 30.28 m
grading 4.20 g/t gold, starting at 226.53 m drilled depth;
and,
- DC20-1873 intersected 7.66 m grading
18.40 g/t gold, starting at 60.88 m drilled depth.
- Results from the
initial drilling support continued analysis of the updated
lithological model and controls of the higher grades. The initial
drill assays exceed the modeled grade-thickness with higher grades
observed over thinner intervals. Hole DC20-1871, highlighted above
and located in the ACMA deposit, is a good example of high-grade
mineralization near surface in an area of moderately dense drilling
that had seen other high-grade intercepts, but not of the magnitude
of this drill hole. This is an area that has been designated for
the early years of mine operation. The 2020 drilling was
successfully completed in mid-September, with a total of 85 core
holes and approximately 23,400 meters drilled in the ACMA and Lewis
deposit areas, exceeding the planned program. The Donlin Gold team
is wrapping-up site activities with the final drill core being
logged, sampled, and shipped.
- Assays have been
reported from approximately 10% of the planned program. Additional
assay results will be reported when they become available. The
objective of the program has been to validate recently developed
geologic and resource modeling concepts and to test potential
extensions of high-grade zones. The focus is on early-life mining
that has the potential to further enhance the project
economics.
- Enhanced COVID-19
health protocols remain in place at Donlin Gold:
- The objective of protecting the health
of Donlin Gold’s employees and contractors has been a top priority
for the owners and dedicated community partners in Alaska and the
Yukon-Kuskokwim (Y-K) region. In that regard, to reduce risk,
Donlin Gold employees in Anchorage have been provided opportunities
to work primarily from home, avoid all non-essential travel, adhere
to good hygiene practices, and, when they do go to the office,
engage in social distancing. NOVAGOLD’s Salt Lake City and
Vancouver office employees continue to work from home;
- A wide-ranging set of policies designed
to prevent the spread of COVID-19 are in place at the Anchorage
project office and at the site, including:
- Testing of all employees and
contractors;
- Utilizing charters to safely deliver
employees to and from camp to minimize in-region travel;
- Screening and social distancing
measures;
- More frequent sanitization practices;
and,
- Increased communication around hygiene
and sanitization practices, as well as identification of
symptoms.
- Community
Engagement:
- Donlin Gold
continued to work with Calista Corporation (Calista) and The
Kuskokwim Corporation (TKC), the owners of Donlin Gold’s mineral
and surface rights, respectively, to respond to urgent community
needs resulting from the COVID-19 pandemic. This work was done in
addition to the ongoing community engagement in environmental
management, safety, training, educational, health, and cultural
initiatives;
- Donlin Gold
continued its active engagement in the CleanUp GreenUp effort, an
annual initiative that includes community participation from more
than 32 Y-K villages to clean up the outdoor environment;
- Donlin Gold
partnered with the Association of Village Council Presidents (AVCP)
and Orutsararmiut Native Council (ONC) on the Backhaul Project to
remove household hazardous and electronic wastes from ten Y-K
villages. In addition, large appliances were removed from two
villages:
- Approximately 45,000 pounds of
material, including large appliances, were collected for safe
disposal;
- Volunteers received instruction about
proper waste handling and packaging techniques; and,
- Materials were
collected from communities along the river, removed by barge and
brought to the closest coastal village to be transported by Ryan
Air and Grant Air to proper disposal facilities.
- Permitting Update:
- Donlin Gold, working with its Native
Corporation partners, continues to support the State of Alaska to
advance other permits and certificates needed for the project.
- In April 2020, the Alaska Department of
Natural Resources’ (ADNR) Division of Oil and Gas agreed to
consider again its decision on the State Right-of-Way (ROW)
agreement and lease authorization for the buried natural gas
pipeline. Under the reconsideration, on September 10, 2020, the
ADNR issued for additional public comment a revised Consideration
of Comments document. This document further describes how ADNR is
considering previous public input that was solicited in the ROW
review, including how cumulative effects are addressed in the
decision. The comment period on the document ends on November 9,
2020. Donlin Gold supported the State’s decision to complete this
work and we expect the final ROW lease authorization offer to be
reissued by ADNR in early 2021.
President’s Message
A Banner Quarter for Donlin Gold
The third quarter of 2020 may one day be seen as a game-changer
in terms of the global recognition of the Donlin Gold project. From
receipt of encouraging early drill results to Donlin Gold’s rising
profile within Barrick’s project pipeline, we are extremely pleased
with this series of developments. The recent progress comes at a
time when appreciation of Donlin Gold’s attributes can only be
heightened by Berkshire Hathaway’s investment into Barrick itself —
and the increased scrutiny of Barrick’s portfolio that will ensue
as more and more generalists follow its lead —constitutes an
additional stroke of good fortune for NOVAGOLD.
Building that Brand from the Ground Up
In August 2020, NOVAGOLD and its Donlin Gold partner, Barrick,
reported on the initial set of assays from the planned 80-hole
22,000-meter 2020 drill program, the largest such program at Donlin
Gold in 12 years. The work was carried out safely despite the
COVID-19 pandemic which impacted activities on the ground and
affected communities in which we operate. Nevertheless, the
finalization of planned drilling in September, whereby we completed
a total of 85 core holes encompassing approximately 23,400 meters,
can only be viewed as a significant achievement for everyone
associated with the project. Since we were ahead of schedule with
equipment and crews available at site, additional holes were
completed to increase definition in an area of interest. As
COVID-19 positive cases rose in Alaska over the summer, Donlin
Gold’s strict adherence to stringent safety measures and
on-the-ground support systems allowed us to safely operate four
drill rigs throughout the quarter — making up for the two months of
pandemic-related downtime sustained earlier in the year. I commend
the Donlin Gold, NOVAGOLD and Barrick teams for completing this
work on schedule while adhering to extra stringent safety
protocols, a truly remarkable operational milestone.
Because of the COVID-19 pandemic, we had to pay particularly
close attention to health and safety procedures for all employees,
contractors, partners, as well as members of the community where we
operate. To reduce the risk of exposure to COVID-19, NOVAGOLD
implemented policies in its Vancouver and Salt Lake City offices
whereby employees work from home, avoid non-essential business
travel, adhere to rigorous hygiene practices and engage in social
distancing. Additionally, NOVAGOLD and its partner Barrick have
implemented health and safety policies aligned with the State of
Alaska Department of Health and Social Services recommendations at
Donlin Gold’s Anchorage office and imposed travel restrictions and
other COVID-19-related measures aimed at protecting the health and
safety of all project contractors, employees, and community
personnel. This protocol, which remains in place, includes
requesting all personnel to monitor their health and consult health
professionals if feeling any symptoms of illness; requires all
personnel to take a COVID-19 test with a negative result before
coming into the camp; implements more frequent sanitization
practices; and requires attendance at safety meetings designed to
reinforce sound hygiene and sanitization practices. Out-of-state
contractors and employees require two negative COVID-19 tests prior
to going to camp. Donlin Gold uses charter flights to transport
personnel to and from the site. Employees are screened for symptoms
and maintain a minimum of six feet of distance in eating areas and
living quarters. Should any individual exhibit symptoms of illness,
they would be evaluated and, if needed, isolated, and/or evacuated
from the camp.
Calista and TKC have been Donlin Gold’s Native Corporation
partners in the project since the early 1990s and, like Barrick,
share our vision of building value for the future generations of
stakeholders through education and critical skills development. The
Company seeks to bring tangible, long-lasting benefits to the
community in the form of training and employment opportunities,
service business contracts, and participation agreements as the
project advances toward development. Since approximately 80% of
Donlin Gold’s direct hires are Alaska Natives, prior to re-opening
the camp and re-mobilizing the drill rigs in late May, Donlin Gold
held numerous conversations with community and tribal leaders in
the Y-K region to ensure strict adherence to safety protocols at
Donlin Gold. With health and safety measures in place, employees
were particularly enthusiastic to return to work at Donlin Gold to
mitigate the economic strain caused by the pandemic.
Our initial drill results that were issued by Donlin Gold on
August 6, 2020 reflected that enthusiasm. As featured above in the
highlights’ section of the release, these significant distinct
high-grade intervals were intercepted in multiple areas, including
excellent intervals near surface5:
- DC20-1871
intersected 41.91 m grading 11.61 g/t gold, starting at 30.35 m
drilled depth;
- DC20-1866
intersected 45.91 m grading 5.03 g/t gold, starting at 35.39 m
drilled depth; 23.36 m grading 4.15 g/t gold, starting at 108.30 m
drilled depth; and 30.28 m grading 4.20 g/t gold, starting at
226.53 m drilled depth; and,
- DC20-1873
intersected 7.66 m grading 18.40 g/t gold, starting at 60.88 m
drilled depth.
Additional assay results will be reported once available. As
more drill results are received, our understanding of the orebody
and potential extensions of high-grade zones will improve. Once
core logging and assaying is complete, the newly obtained data
should lead the partners to determine the next steps to update the
Donlin Gold feasibility study and initiate the engineering work
necessary to advance the project design before reaching a
construction decision.
Drilling to Validate
Geologic and Resource Modeling Concepts
with Potential to Improve Underlying Economics
With more than 1,400 holes drilled historically at the project
and a robust and well-established resource, the 2020 drill program,
exclusively focused on the ACMA and Lewis deposit areas, could be
particularly important to unlock additional value for Donlin Gold.
The current campaign may complement results achieved in the 2017
program which yielded distinct and significant high-grade
intercepts within the reserve pit and identified high-grade areas
outside the planned pit boundaries6. This year’s drill results will
be combined with those completed in 2017 to provide additional
information for future advancement of the project.
These data points are particularly critical to NOVAGOLD and
Barrick as the partners work on establishing scenarios for staging
the project, reducing initial capital outlays, and improving the
overall economics for Donlin Gold. For example, the drill
results to-date would support the possibility that key high-grade
areas could improve cash flows early in the life of Donlin Gold.
This approach should facilitate project optimization, which, in
turn, could yield tangible value enhancement benefits for the
project.
A Tier One Asset in a Tier
One Jurisdiction7
The past decade has seen a huge shift in the size
and quality of the few large-scale, long-life development-stage
gold projects on the horizon. Once-great operating mines are
depleting at a time when average gold grades have dropped, and new
discoveries of substantial size are almost non-existent. In fact,
according to S&P Global Market Intelligence, no major
5-million-ounce-plus discoveries have been made in the past five
years. Since it now takes at least 15 years8 on average— and often
many more years than that — for a gold asset to go from discovery
to production, a large gold producer choosing to increase
production or simply replace reserves and resources will likely
find themselves only able to meet the demands of reserve
replacement through mergers or acquisitions. At the moment, the
mantra is “caution” and “capital discipline”. Shareholders across
the gold sector are still traumatized by the capital destruction
that the last run in gold helped trigger through ill-conceived
acquisitions and ill-conceived projects. In fact, this mantra is
also accentuated by the fact that it is an easier narrative for the
miners to present to investors. The reality is that the pipeline of
new projects that “move the needle” is growing thin. Seen in this
context, the Donlin Gold project opportunity is extraordinary, as
we believe there is no true comparable.
We believe that Donlin Gold is unique in its combination of
attributes, starting with size. At approximately 39,000,000 ounces
of gold in measured and indicated mineral resources9, it
dwarfs most comparable development projects today.10 Importantly,
Donlin Gold is Federally permitted to advance toward construction,
a particularly notable factor considering that today’s producers
are mining out their existing gold inventories much faster than
they can organically replace them. The size of the Donlin Gold
endowment should allow a future mine to operate for decades — a
mine life that is rare in today’s world. And, just as
critically, with stated resources contained in three
kilometers of an eight-kilometer mineralized belt, which
itself is located on less than 5% of Donlin Gold’s land position,
Donlin Gold could well emerge as a district-scale,
multi-generational gold mine.
No discussion about a gold deposit is complete without a
reference to grade, a central characteristic of any endowment. With
an average measured and indicated resource grade of 2.24 grams
per tonne8, the Donlin Gold project has more than twice the
industry average grade11. That fact alone is a critical positive
differentiator for the project’s economic viability as it provides
extraordinary resilience through multiple commodity cycles — a key
attribute to ensure the successful development and survivability of
any great mining operation, especially one blessed with the degree
of longevity expected at Donlin Gold.
Then there is the issue of heightened geo-political risk that
now dominates any discussion related to mine development in the
current environment. In an uncertain world, jurisdictional risk is
becoming even more prominent and represents a crucial investment
metric in evaluating mining projects and investment in mining
equities. Alaska continues to be a top mining jurisdiction where
the rule of law is well-established, while the list of high-risk
mining jurisdictions elsewhere grows. Military action, civil
unrest, nationalization — both stealth and brazen — and designation
of gold as a national strategic resource to be exchanged for local
currency are substantially impacting mining companies large and
small in these higher-risk jurisdictions. Political and economic
instability will only exacerbate growing discrepancies regarding
jurisdictional risk in the mining industry. Tremendous value — we
believe, a premium value — will be attached to NOVAGOLD for having
an asset in a mining-friendly jurisdiction like Alaska, where the
rule of law is well-established and where socially responsible and
environmentally sound mine development is welcome. Donlin Gold is
proud of its track record of time-tested partnerships with the
Native Corporations and engagement with Federal and State agencies.
Our hard-earned record of securing respect and support of all key
stakeholders in a Tier One jurisdiction is an important foundation
for the successful advancement of Donlin Gold up the value
chain.
Strong Stakeholder
Partnerships
Weather the
Pandemic
Among the many elements needed to move a mining project
successfully up the value chain are long-term dedication, patience,
technical expertise and strong partnerships. The Donlin Gold
project has the good fortune of enjoying these attributes and more.
Our multi-decade partnership with our Native Corporation partners
for the project — Calista and TKC — is mutually beneficial,
especially when faced with a crisis such as the COVID-19 pandemic.
All of these parties came together to provide urgent support and
much-needed help with supplies and goods in the Y-K
communities.
The COVID-19 pandemic created significant concern in the Y-K
region. Many villages implemented their own travel restrictions in
addition to mandated State restrictions, causing additional
difficulties in delivering aid to the local communities and moving
supplies between villages. When concerns emerged about the spread
of COVID-19 to Alaska, our Native Corporation partners immediately
engaged with the communities to determine urgent needs of small
villages in the region. In response, Donlin Gold coordinated with
Calista, TKC, and Tribal councils to offer help by delivering food
and supplies to communities now without regular air carrier service
after the regional airline went into bankruptcy. Furthermore, we
have partnered with key community organizations in environmental
management, safety, training, educational, health, and cultural
initiatives.
In addition, Donlin Gold partnered with the AVCP,
ONC and the Native Village of Napaimute for the Backhaul Hazardous
Waste Removal in the third quarter. A total of approximately 45,000
pounds of household hazardous materials, such as large appliances,
fluorescent tubes, lead acid batteries, and electronic waste was
collected and shipped out of the area for proper disposal.
Involving the local communities in all aspects of the project is
core to both NOVAGOLD’s and Barrick’s philosophy. Donlin Gold also
supported ongoing education and health initiatives, including
awarding Donlin Gold Scholarships to students selected by Calista
and TKC; conducting the Campfire Alaska Summer Program with support
staff in 23 Y-K communities to provide distanced activities and
meal programs for youth and elders; and working with TKC, the
State of Alaska and Alaska Native Tribal Health Consortium on
initiatives aimed at upgrading and improving the health and safety
standards of water and sewer services in the Middle Kuskokwim area
communities. An ongoing environmental commitment in the Y-K region
included the Clean Up Green Up initiative, funded in part by Donlin
Gold, which took place in 32 villages.
Permitting Update
During the third quarter, Donlin Gold and its Native Corporation
partners continued to support the State of Alaska to advance
permits and certificates needed for the project. While the field
work related to the issuance of the Alaska Dam Safety certificates
was temporarily paused to concentrate on the 2020 drill program,
the overall critical path for securing much of the state permitting
for Donlin Gold has not been affected by the pandemic. Key federal
permitting milestones completed include the Final Environmental
Impact Statement (EIS) and the first-ever Joint Record of Decision
(ROD) by the U.S. Army Corps of Engineers and Bureau of Land
Management. Notable State permits and approvals received to-date
include the Air Quality permit, the Alaska State Pollution
Discharge Elimination System permit, and the Reclamation Plan and
Waste Management permit. State Land Leases, Easements, and Land Use
permits, and material site authorizations for the proposed
transportation facilities including the access road, airstrip, and
upriver Jungjuk port as well as the easement for the fiber optic
cable on State lands were issued in early 2020.
ADNR’s Division of Oil and Gas issued the final ROW lease for
the buried natural gas pipeline on January 17, 2020. On March 19,
2020, Earthjustice, representing ONC, Chevak Native Village,
Chuloonawick Native Village, Native Village of Eek, and Cook
Inletkeeper, filed an appeal of the denial of the ROW lease
issuance reconsideration request in the Superior Court of the State
of Alaska at Anchorage (“Alaska Superior Court”). On April 30,
2020, ADNR agreed to reconsider the decision to issue the ROW lease
in accordance with the February 6, 2020 request made by Cook
Inletkeeper. The reconsideration is specifically addressing
additional analysis of cumulative effects. In response, the appeal
filed in the Alaska Superior Court was dismissed without prejudice
on May 20, 2020. ADNR issued a revised Consideration of Comments
document for further public comment on September 10, 2020. This
document specifically addresses in detail how cumulative effects
are considered in the ROW decision. The comment period ends on
November 9, 2020. Donlin Gold supported the State’s decision to
complete this work and we expect that the final ROW lease
authorization offer will be reissued by ADNR in early 2021.
A Strong Balance Sheet is a Foundation
for Advancement of Donlin Gold Up the Value Chain without Dilution
of Shareholder Value
In 2020, the Company continues to expect annual expenditures
totaling $31 million. As of August 31, 2020, NOVAGOLD had cash and
term deposits of $126.3 million with another $100 million of
receivables from Newmont Corp. within the next three years. With a
strong treasury, NOVAGOLD can focus on moving Donlin Gold up the
value chain through permitting and optimization without the need to
access additional capital until a construction decision is
made.
The challenges we have all experienced in 2020 have brought out
the best in our experienced team of professionals at
Donlin Gold, NOVAGOLD, Barrick, as well as our top-performing
drill crews and support teams at the project site. I would like to
thank them for their unwavering dedication to the task at hand and
for their prompt and effective response to the COVID-19
pandemic.
Our relationships and interdependencies form the backbone that
provides support and stability in the Y-K region. We are thankful
for our partners, Calista, TKC and Barrick, for their long-term
commitment to the project. The Company extends its gratitude to
Federal and Alaska State officials for their thoroughness in
advancing permitting for the project. I wish to thank NOVAGOLD’s
Board of Directors for their continued wise counsel and their
dedication to best practices in governance.
Our shareholders clearly understand and support NOVAGOLD’s
investment thesis and have shown remarkable steadfastness as we
continue to deliver on our strategy. Through the many challenges
the year has brought, we have kept the lines of communication open,
even if only virtually, and truly value every engagement
opportunity with our stakeholders. You continue to stand beside us
and support the Company while holding us to those high standards of
transparency that we not only share, but that also characterize
everything we are working to accomplish. The entire management team
extends its thanks to you all for your encouragement, engagement
and dedication to the Company’s long-term vision.
We pledge to remain true to our promise by continuing with our
partner Barrick to steadily advance Donlin Gold, further enhance
the project’s unique value proposition, adhere to our principles of
doing what is right and with the highest degree of professionalism,
and to make our shareholders and stakeholders proud. We wish you
all good health and safety.
Sincerely,
Gregory A. LangPresident & CEO
Financial Results
in thousands of U.S. dollars, except for per share
amounts
|
Three months ended August 31, |
|
Nine months ended August 31, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
General and administrative expense (1) |
4,745 |
|
4,075 |
|
13,846 |
|
12,630 |
|
Share of losses – Donlin Gold |
6,150 |
|
3,141 |
|
11,418 |
|
6,662 |
|
Total operating expenses |
10,895 |
|
7,216 |
|
25,264 |
|
19,292 |
|
|
|
|
|
|
Loss from operations |
(10,895) |
|
(7,216) |
|
(25,264) |
|
(19,292) |
|
Interest expense on promissory note |
(1,428) |
|
(1,887) |
|
(4,588) |
|
(5,546) |
|
Accretion of notes receivable |
835 |
|
805 |
|
2,483 |
|
2,396 |
|
Other income |
(982) |
|
501 |
|
1,599 |
|
3,520 |
|
Income tax expense |
(266) |
|
(259) |
|
(794) |
|
(972) |
|
Net loss |
(12,736) |
|
(8,056) |
|
(26,564) |
|
(19,894) |
|
|
|
|
|
|
Loss per share, basic and diluted |
(0.04) |
|
(0.02) |
|
(0.08) |
|
(0.06) |
|
|
|
|
|
|
|
|
|
At |
|
At |
|
|
|
|
Aug 31,
2020$ |
|
Nov 30, 2019$ |
|
Cash and term deposits |
|
|
126,348 |
|
148,549 |
|
Total assets |
|
|
228,994 |
|
245,835 |
|
Total liabilities |
|
|
113,266 |
|
107,881 |
|
(1) Includes share-based compensation expense of $1,783 and
$1,552 in the third quarter of 2020 and 2019, respectively, and
$5,259 and $4,625 in the first nine months of 2020 and 2019,
respectively.
For the third quarter ended August 31, 2020, loss
from operations increased from $7.2 million in 2019 to $10.9
million in 2020 due to higher general and administrative expense
and higher costs at Donlin Gold LLC. General and administrative
expense increased from $4.1 million in 2019 to $4.7 million in 2020
primarily due to higher legal and share-based compensation costs.
The equity loss in NOVAGOLD’s share of Donlin Gold increased from
$3.1 million in 2019 to $6.2 million in 2020 due to the 2020 drill
program.
Net loss increased from $8.0 million ($0.02 per share) in 2019
to $12.7 million ($0.04 per share) in 2020, primarily due to higher
operating losses, foreign exchange movements and lower interest
income, partially offset by lower interest expense on the
promissory note payable to Barrick.
For the first nine months ended August 31, 2020,
loss from operations increased from $19.3 million in 2019 to $25.3
million in 2020 due to higher general and administrative expense
and higher costs at Donlin Gold LLC. General and administrative
expense increased by $1.2 million primarily due to higher
share-based compensation, legal and regulatory costs. Our share of
Donlin Gold LLC expenses increased by $4.8 million due to the 2020
drill program.
Net loss increased from $19.9 million ($0.06 per
share) in 2019 to $26.6 million ($0.08 per share) in 2020,
primarily due to higher operating losses, lower interest income and
foreign exchange movements, partially offset by lower interest
expense on the promissory note payable to Barrick.
Liquidity and Capital
Resources
In the first nine months of 2020, total cash, cash equivalents
and term deposits decreased by $22.2 million of which $7.1 million
was used in operating activities for administrative costs and
working capital changes, $13.6 million was used to fund Donlin Gold
and $1.7 million related to withholding taxes paid on vested
performance share units (PSUs). Effects of exchange rate changes
also increased cash by $0.2 million. The term deposits are
denominated in U.S. dollars and are held at Canadian chartered
banks.
Net cash used in operating activities increased by $1.5 million,
due to lower interest income and higher general and administrative
expense, partially offset by changes in working capital. Net cash
provided from (used in) investing activities included a $2.9
million increase in Donlin Gold funding due to the 2020 drill
program. For the three-month period in 2019, term deposits
decreased by $40.0 million, with the proceeds deposited in
interest-bearing savings accounts.
Net cash used in operating activities increased by $1.9 million,
primarily due to lower interest income and higher general and
administrative expense, partially offset by changes in working
capital. Net cash provided from (used in) investing activities
included a $5.9 million increase in Donlin Gold funding due to the
2020 drill program. For the nine-month period in 2019, term
deposits decreased by $47.0 million, with the proceeds deposited in
interest-bearing savings accounts. Net cash used in financing
activities relates to withholding taxes paid on vested performance
share units.
NOVAGOLD had $126.3 million in cash and term
deposits as of August 31, 2020. The Company’s cash and term
deposits are believed to be sufficient to advance Donlin Gold and
meet our other financial obligations. Additional capital will be
necessary if a decision to commence engineering and construction is
reached for the Donlin Gold project.
2020
Outlook
We anticipate spending approximately $31 million in 2020, which
includes $20 million to fund our share of expenditures at the
Donlin Gold project, the majority earmarked for the drill program
with the balance for permitting and community engagement, and $11
million for general and administrative costs.
NOVAGOLD’s primary goals in 2020 are to continue to
advance the Donlin Gold project toward a construction/production
decision; maintain a healthy balance sheet; sustain an effective
corporate social responsibility program; and promote a strong
safety, sustainability, and environmental culture.
Conference Call & Webcast Details
NOVAGOLD’s conference call and webcast to discuss these results
will take place October 1, 2020 at 8:00 am PT (11:00 am ET). The
webcast and conference call-in details are provided below.
|
Webcast: |
|
Here |
|
|
North American callers: |
|
1-800-319-4610 |
|
|
International callers: |
|
1-604-638-5340 |
|
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),12 Donlin Gold is regarded to be one of
the largest, highest-grade, and most prospective known open pit
gold deposits in the world. The 2020 drill program with 85 holes
and 23,400 meters produced excellent initial results. The primary
objective of the program is to validate recent geological and
resource modeling concepts developed by the owners, NOVAGOLD and
Barrick. The other objective is to test potential extensions of
high-grade zones, most of which would be expected to be mined early
in the life of a future mine. The newly obtained data should also
enhance the understanding of the mineralized zones and lead the
partners to determine the next steps.
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 three kilometers of an approximately eight-kilometer long
gold-bearing trend. In addition to the drill program, 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”). 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 43101, has reviewed
and approved the information contained related to the Donlin Gold
drilling program and other scientific and technical information
related to the Donlin Gold project contained in this media
release.
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
anticipated benefits from the 2020 drill program including an
improved geological model for Donlin Gold; 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
the ROW lease offer for the project’s buried natural gas pipeline;
the statements under the heading “2020 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 the ROW 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 Investor Relations 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 Tier One asset is defined by Barrick
Gold as a mine with a stated life in excess of 10 years, annual
production of at least 500,000 ounces of gold and total cash costs
per ounce over the mine life that are in the lower half of the
industry cost curve, as per Barrick Gold’s Information Circular
dated May 5, 2020.2 See media release dated August 6, 2020, “Donlin
Gold Project Provides Update on Recent Drilling and Ongoing
Community Support in Alaska Amid COVID-19 Pandemic”.3 g/t = grams
per tonne; m = meters.4 See media release dated August 6,
2020, “Donlin Gold Project Provides Update on Recent Drilling and
Ongoing Community Support in Alaska Amid COVID-19
Pandemic”.5 See media release dated February 20, 2018
“NOVAGOLD’s Donlin Gold Project Reports Excellent Results from 2017
Drill Program,” for significant intervals and additional
information.6 Tier One jurisdictions are deemed “low risk” by the
Investment Attractiveness Index in the Fraser Institute Annual
Survey of Mining Companies, 2019.7 S&P Global Market
Intelligence research article “Top mines average time from
discovery to production: 16.9 years,” April, 7, 2020.8 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 and inclusive of mineral
reserves. Mineral resources have been estimated in accordance with
National Instrument 43-101 – Standards of Disclosure for Mineral
Projects (“NI 43-101”).9 Peer group data based on company
documents, public filings and websites as of September 10, 2020.
Comparison group of 13 projects based on large (2Moz Proven and
Probable Reserves cut off), North/South American gold-focused
development projects with >75% projected revenues from
gold. 10 Donlin Gold grade represents average grade of
measured and indicated mineral resources, inclusive of mineral
reserves, see note re: “Scientific and Technical Information”
below, compared to 2019 average grade of open-pit and underground
deposits with gold as primary commodity and over 1Moz in measured
and indicated resources, sourced from S&P Global Market
Intelligence.11 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 and inclusive of mineral reserves. Mineral resources have
been estimated in accordance with NI 43-101.
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