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or Name
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NovaGold Resources Inc (2)
Symbol NG
Shares Issued 317,861,632
Close 2015-03-30 C$ 3.69
Market Cap C$ 1,172,909,422
Recent Sedar Documents

NovaGold loses $9.29-million (U.S.) in fiscal Q1 2015

2015-03-31 16:46 ET - News Release

Ms. Melanie Hennessey reports

NOVAGOLD REPORTS EXCELLENT PROGRESS IN PERMITTING DONLIN GOLD WITH A 2015 YEAR-END TARGET DATE TO FILE DRAFT EIS WHILE MAINTAINING A ROBUST FINANCIAL POSITION

NovaGold Resources Inc. has released its first quarter financial results, and provided updates for its flagship 50-per-cent-owned Donlin gold project in Alaska and its 50-per-cent-owned Galore Creek copper-gold-silver project in British Columbia.

Details of the financial results for the three months ended Feb. 28, 2015, are presented in the consolidated financial statements and quarterly report filed on Form 10-Q with the United States Securities and Exchange Commission that will be available on the company's website, on SEDAR, and on EDGAR. All amounts are in U.S. dollars unless otherwise stated, and all resource and reserve estimates are shown on a 100-per-cent project basis.

In the first quarter of 2015, NovaGold achieved the following:

  • Donlin Gold permitting advanced further with the submission of six co-operating agencies' comments on the initial draft environmental impact statement to the lead agency, the U.S. Army Corps of Engineers, which continue to anticipate publishing the draft EIS by year-end 2015;
  • Advanced other Donlin Gold major permit applications with state and federal permitting agencies, such as air quality, water discharge and usage, pipeline plan of development, wetlands, and dam safety;
  • Continued to sponsor, volunteer and participate in local community activities in Alaska and Northern B.C.;
    • Iditarod trail international sled dog race, covering more than 1,000 miles from Fairbanks to Nome, Alaska, taking place on a national historic trail with ties to mining;
    • Supporting Tahltan educational and healthy living initiatives;
  • Released the opening segment of a four-part video series on the way of life in Alaska -- Yup'ik language and culture -- taking a look into the remote communities based in the Yukon-Kuskokwim region, where the Donlin gold project is located, and the importance of subsistence living and traditional lifestyles;
  • Advanced the Galore Creek technical studies in project mine planning and design with its partner, Teck Resources Ltd., to further improve its value and marketability.

President's message:

"I am very pleased with the progress we have achieved permitting Donlin Gold to date. Considering that we and our partners have been advancing steadily, surely and without interruption, what is clearly the most important gold development project in the world, unique in its combined quality and magnitude, the process has been exceptionally smooth. This is a testament both to the quality of the asset as well as to the Donlin Gold team's management of the project over the years, as it has been taken up the value chain for the benefit of our stakeholders.

"Donlin Gold is indeed remarkable. Over three decades of building and operating some of the greatest mines in the gold space, I have seen and worked on a select few assets that ultimately have grown to the size of Donlin Gold. This is the first time however, that I am involved with an asset that actually begins with an endowment of 39 million ounces of gold and a nearly three-decade mine life ... yet also enjoys the very real potential to expand significantly larger still. As a very rare million-ounce-plus-per-year potential gold producer located in a premier jurisdiction, Donlin Gold is on track to deliver great economic benefits to the state, the region, the local communities and the partners' shareholders for a long time to come.

"The permitting process in the U.S. is rigorous, and rightly so. It is the very reasonable price we pay for having security of tenure in one of the world's safest jurisdictions. As managers of a rich piece of real estate with a massive mineral endowment, we are the most supportive advocates for the government agencies that are our counterparts in this process. We know that the more comprehensive and transparent the work that is done on the front end, the better the outcome for all those who are stakeholders in Donlin Gold. We support the thorough and professional approach taken by the Army Corps in preparation of the EIS, and are encouraged by our joint progress in providing all agencies and the public with ample time and opportunity to thoroughly review, as well as to provide a meaningful input into, the permitting process.

"In the first quarter, the Army Corps received comments on initial drafts of the environmental consequences sections of the EIS from six co-operating agencies, including Environmental Protection Agency, Bureau of Land Management, the State of Alaska and native organizations. This early input into the EIS is very important, as it ensures that the draft EIS meets the expectations and the needs of all of the agencies involved in permitting and reviewing Donlin Gold. The Army Corps and Aecom Technology Corp., the Army Corps' contractor for the preparation of the EIS, are considering the agencies' comments and will address them in the draft EIS, which is expected to be published as planned by the end of 2015. Recently, the Army Corps determined that once the draft EIS is published, the public comment period should take approximately five months. Appropriate modifications were made to the original permitting schedule, and the confirmed timeline, published by the Army Corps, envisages the issuance of the final EIS in early 2017. We welcome this development, as it provides ample time for all the stakeholders to become informed and comment on the EIS, and gives full respect to the cultural practices of the Yukon-Kuskokwim region. Investing this time now will help ensure a prosperous future for Donlin Gold.

"This view is shared by both NovaGold and Barrick, both of whom are equally committed to working together to take full advantage of Donlin Gold's unique scale and optionality. To do that, we are advancing Donlin Gold through permitting and, at the same time, evaluating alternatives to reduce initial owner capital through third party owner-operator agreements and optimized development scenarios. Prior to making a construction decision, we also expect to bring up to date capital and operating costs, and other input parameters for the project, since the feasibility study was published several years ago. Neither party in the Donlin Gold partnership is interested in building this attractive project without proper regard for the macroeconomic environment or the price of gold. To the contrary. Our chairman, Thomas Kaplan, recently observed that both companies are happy to take a sober and constructive view. We do not want to subsidize the world's consumption of gold by squandering the treasures that mother nature has given us, and we are happy to wait for the higher gold prices that will make the project's economics sing. Most recently, Barrick revised its own disclosure on Donlin Gold, which bears repeating in its entirety because we and our partners find ourselves so beautifully aligned in our objectives and strategy:

'The 50-per-cent-owned Donlin Gold project located in Alaska is one of the largest undeveloped gold deposits in the world. In terms of size, grade and jurisdictional safety, Donlin Gold is an excellent asset in Barrick's portfolio with significant leverage to the price of gold.

'The Donlin gold project has approximately 39 million ounces of contained gold (100-per-cent basis) in the measured and indicated resource categories (approximately eight million tonnes grading 2.52 grams per tonne (measured) and 533 million tonnes grading 2.24 grams per tonne (indicated)). In addition to its already large mineral endowment, the project also has exploration potential which could expand the current open-pit resource.

'Under our disciplined capital allocation framework, we have continued to work with our partner, NovaGold Resources, to advance the Donlin gold project. Current activities, by which we maintain and enhance the option value of this project at a modest cost, are focused on permitting, community outreach and work force development. In 2014, Donlin Gold secured long-term surface use rights and significantly advanced the permitting of the Donlin gold project, which is now about halfway complete.

'Barrick is working closely with its partner on alternatives designed to minimize initial capital outlay. The outcome of that effort may include engagement of third party operators and exploring possibilities for third party financing of some capital-intensive infrastructure. Collectively, we are also investing about $3-million (100-per-cent basis) on technical studies to identify potential design and execution enhancements. Donlin Gold has substantial leverage to gold prices, and has the potential to add significant value to Barrick and its future growth pipeline in a higher gold price environment. Any decision to proceed with development, either as currently envisaged or in an optimized scenario, will depend on the project meeting Barrick's minimum hurdle rate, which will depend in large part on the prevailing gold prices and market conditions.'

"Time is on the stakeholders' side. The recent pause in the secular bull market in gold resulted in some projects in our industry being shelved due to suboptimal quality and some outright cancelled due to jurisdictional risk. Donlin Gold, on the other hand, continues to retain all its important, fundamentally positive attributes. With the stated 39 million ounces of gold in resources in the measured and indicated category, it is one of the largest undeveloped gold deposits in the world. It has an average grade of 2.2 grams per tonne, among the highest in the industry. It is expected to produce annually over one million ounces of gold for 27 years, and likely beyond considering Donlin Gold's excellent exploration potential. In addition to quantity and quality, it is located in one of the most mining-friendly jurisdictions in the world, the U.S., a country where the rule of law is not a novelty, and where one is allowed to keep the fruits of our project's exceptional leverage to the higher price of gold. These and other attributes of Donlin Gold make NovaGold a truly institutional-quality investment that we expect to be the go-to stock in our space.

"At Galore Creek, a world-class asset in its own right, we continue to make progress in mine planning and design, waste rock and water management, environmental monitoring, community commitments, and site care and maintenance. We anticipate that, when the copper markets turn, this effort will further enhance the value and marketability of this major project.

"NovaGold, through its investments in Donlin Gold and Galore Creek, is actively engaged in the lives of the communities where it operates. For example, we were proud sponsors of the 43rd Iditarod trail international sled dog race, which was recently completed in Nome, Alaska. Some of the mushers are from the Yukon-Kuskokwim region, where Donlin Gold is located. These individuals are excellent role models for the youth in the region. Additionally, in the first quarter of 2015, we released the first segment of a four-part video series featuring the heritage and way of life of people in remote communities in Alaska. The film, entitled Yup'ik language and culture, explores the importance of subsistence living and traditional lifestyles in the remote communities in the Yukon-Kuskokwim region, where Donlin Gold is located.

"We are thankful for the capital that has been entrusted to us by our shareholders more than three years ago, and continue to carefully manage our balance sheet with the shareholders' interest always uppermost in our minds. We know and appreciate the competitive advantage we have by not needing to raise additional capital for many years if we choose not to do so. With $157-million in cash and term deposits at the end of the first quarter, we have sufficient capital to complete the permitting of the Donlin gold project, complete the Galore Creek studies and further enhance its value prior to a sale, repay the $16-million in outstanding notes next quarter ... and still have plenty of cash to spare if gold prices need more time to resume their uptrend.

"We are grateful for the tremendous support of our stakeholders -- shareholders, native corporations and the government agencies of the jurisdictions in which our assets are located. Additionally, we are very thankful for the guidance from our board of directors, and for the commitment and perseverance of our employees and project teams in advancing, derisking, and enhancing the value of both the Donlin Gold and Galore Creek projects."

                         FINANCIAL RESULTS
       (in thousands of U.S. dollars except per-share amounts)

                                              Three months      Three months
                                                     ended             ended
                                                   Feb. 28,          Feb. 28,
                                                      2015              2014

General and administrative expense (1)             $ 8,502           $ 7,702
Share of (losses) -- Donlin Gold                     2,496             2,855
Share of (losses) -- Galore Creek                      126               766
Exploration and evaluation                             153                --
Depreciation                                             9                10
Total operating expenses                            11,286            11,333
(Loss) from operations                             (11,286)          (11,333)
Other income (expense)                               1,997               592
(Loss) for the period                               (9,299)          (10,691)
(Loss) per share, basic and diluted                  (0.03)            (0.03)
                                                                      
(1) Includes share-based compensation expense of $5,329 and $4,658 in the   
first quarters of 2015 and 2014, respectively.

Loss from operations was unchanged at $11.3-million in 2014 and 2015. Increased general and administrative expense was offset by decreased losses in equity investments in the Donlin gold and Galore Creek projects. General and administrative expense increased by $800,000, primarily due to higher share-based compensation costs as a result of the company's higher share price compared with the prior year. The company's share of losses at the Donlin gold project decreased by $400,000, as 2015 activities continued to focus primarily on permitting. At the Galore Creek project, the company's share of losses decreased by $600,000 due to severance costs incurred in the prior-year period.

Net loss decreased from $10.7-million (three cents per share) in 2014 to $9.3-million (three cents per share) in 2015, primarily due to an increase in foreign exchange gains. The U.S. dollar significantly strengthened in relation to the Canadian dollar during the first quarter of 2015, and foreign exchange gains were realized by the Canadian parent company on its cash denominated in U.S. dollars, partially offset by foreign exchange losses on convertible note debt.

Liquidity and capital resources

NovaGold's cash and term deposits decreased by $8.4-million in the first quarter. The decrease resulted from $5.6-million used in operating activities for administrative costs, including reductions in accounts payable, $2.4-million to finance Donlin Gold, $200,000 to finance Galore Creek and a $200,000 foreign exchange impact on cash held in Canadian dollars. The term deposits are denominated in U.S. dollars and are held at two Canadian chartered banks. No cash was used in financing activities in the first quarter of 2015 or 2014.

Outlook for 2015

In 2015, the company continues to expect to spend approximately $45-million, which includes $16-million to repay the principal on the remaining convertibles notes, $13-million to finance its share of expenditures at the Donlin gold project, $1.6-million to finance its share of expenditures at the Galore Creek project, $1.5-million for joint Donlin Gold studies with Barrick, and $13-million for general administrative costs, interest, working capital and other corporate purposes.

NovaGold will focus on five key areas throughout the year: first, to advance the Donlin gold project toward a construction/production decision; second, uphold strong relationships with all stakeholders; third, advance Galore Creek mine planning and project design; fourth, evaluate opportunities to monetize the value of Galore Creek; and fifth, maintain a healthy balance sheet.

Conference call and webcast details

NovaGold's conference call and webcast to discuss the first quarter results will take place on April 1, 2015, at 8 a.m. Pacific Time (11 a.m. Eastern Time). The webcast and conference call-in details are provided below.

Webcast:  On the company website

North American callers:   1-800-299-8538

International callers:  1-617-786-2902

Participant passcode:  98119556

The webcast will be archived on NovaGold's website for one year. For a transcript of the call please e-mail the company.

Scientific and technical information

Scientific and technical information contained herein with respect to Donlin Gold is derived from the "Donlin Creek Gold Project Alaska, USA NI 43-101 Technical Report on Second Updated Feasibility Study," compiled by AMEC with an effective date of Nov. 18, 2011, as amended Jan. 20, 2012. Kirk Hanson, PE, technical director, open-pit mining, North America, (AMEC, Reno), and Gordon Seibel, RM, 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 National Instrument 43-101.

Certain scientific and technical information contained herein with respect to Galore Creek is derived from the technical report entitled "Galore Creek Project British Columbia NI 43-101 Technical Report on Pre-Feasibility Study," dated effective July 27, 2011. The qualified persons responsible for the preparation of the independent technical report are Greg Kulla, PGeo, principal geologist (AMEC Americas Ltd.), and Jay Melnyk, PEng (AMEC Americas), each of whom are independent qualified persons as defined by NI 43-101.

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