NovaGold Resources Q2 2023 Earnings Call Transcript

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Provided by Quartr
June 28, 2023

There are 5 speakers on the call.

Operator

You for standing by. This is the conference operator. Welcome to the NOVAGOLD 2023 Second Quarter Financial Results Conference Call and Webcast. As a reminder, all participants are in listen only mode. The conference is being recorded.

Operator

After the presentation, there will be an opportunity to ask Questions. Webcast viewers may submit questions through the text box in the lower right corner of the webcast frame. I would now like to turn the conference over to Melanie Hennessey, Vice President, Corporate Communications. Please go ahead.

Speaker 1

Thank you, Ashia. Good morning, everyone. We are pleased that you've joined us for NOVAGOLD's 2nd quarter financial results and for an update on the Donlin Gold project. On today's call, we have Greg Lang, NOVAGOLD's President and CEO And David Ottewell, NOVAGOLD's Vice President and CFO. At the end of the webcast, we will take questions by phone.

Speaker 1

Additionally, we will respond to questions received by e mail. I would like to remind you as stated on Slide 3, any statements made today may contain forward looking information such as projections and goals, which are likely to involve risks detailed in our various EDGAR and SEDAR filings and forward looking disclaimers included in this presentation. I now have the pleasure of turning the presentation over to our President and CEO, Greg Line. Greg?

Speaker 2

Thank you, Melanie. Before we go into the Q2 results, I wanted to start today's call by giving you A quick look at the reasons why we and our shareholders are invested in the company. Over time and by keeping our promises to stakeholders, our management team has diligently protected Our resources, both the mineral endowment and our treasury. We've substantially derisked Donlin Gold. With a commitment to responsible mining, we have dedicated both time and effort to build trust and transparency And continuously found ways to improve and enhance the project while building a legacy.

Speaker 2

It is our belief that Diamond Gold is among the rarest of gold development assets, a Tier 1 asset in a Tier 1 jurisdiction. To touch on Donlin's attributes, as currently envisioned, with approximately 39,000,000 ounces, It hosts 1 of the largest and highest grade undeveloped gold endowments in the world that would average over 1,000,000 ounces per year of gold production for 27 years. While looking at the other gold development projects in the Americas, as shown on Slide 6, It's by far the largest. And with global production continuing to decline, It's clear that the industry needs projects with scale, grade and longevity to ride out multiple gold cycles. With a grade of more than twice The industry average for an open pit project at 2.25 grams as shown on Slide 7, this advantage is expected to put Donlin Gold as one of the lowest cost producers in the space.

Speaker 2

This in turn enables Donlin Gold Excellent exploration potential exists beyond the defined resources located in the ACMA and Lewis Deposits as shown on the diagram. This area occupies only 3 kilometers of an 8 kilometer mineralized belt. It represents less than 5% of the total land package. As highlighted on Slide 8, Incredible upside exists to potentially increase ounces and extend the mine life, Given that the majority of the land is not yet thoroughly explored, As the premier gold development project in Alaska, itself the 2nd largest gold producing state In one of the world's safest jurisdictions, our project benefits from a well established tradition of responsible mining. On the map included on Slide 9, we feature the top 3 gold producing operations in the world And the 6 largest gold development projects.

Speaker 2

Turning to Slide 10. Donlin offers unique leverage to gold in a place where one can keep the fruits of that leverage. The after tax NPV at $1700 per ounce and a 5% discount rate was estimated at almost $5,000,000,000 raising substantially if undiscounted And then another 50% increase at $2,000 per ounce. Clearly, we have tremendous leverage to rising gold prices. As private landowners, Both Calista and TKC are dedicated to developing Gonland Gold in a way that remains consistent With the Elders' vision of responsible development while creating jobs and economic benefits for the surrounding communities as well as protecting the local culture.

Speaker 2

A few quotes are provided from the leaders of both Alaska Native Corporations on Slide 11. Sharista and TK's knowledge and guidance have been critical over the years of permitting, Sustainability and Community Engagement Initiatives. We immensely appreciate Their meaningful input regarding their land and the significant economic needs required to sustain healthy living for their communities. Our partners' continued and time tested collaboration, project support and full engagement are extremely valuable in ensuring responsible and sustainable economic development throughout all phases of the Donlin project. With the combination of these attributes, Donlin Gold has the potential to form a cornerstone of genuine and sustainable Economic Development in the YK region for many decades to come.

Speaker 2

I will now touch on some of the milestones that were achieved in the 2nd quarter and the ongoing activities at Donlin Gold. Turning to Slide 13. Activities advanced in 5 key areas during the 2nd quarter. First, we updated the geologic and resource models with the data from the drilling we've done over the last few years. Secondly, we have reviewed all key project assumptions, inputs and design components for optimization, including Engineering, Metallurgy, Hydrology and Infrastructure.

Speaker 2

Thirdly, We advanced the field work and geotechnical drilling to collect the data for the Alaska Dam Safety Certificates required for construction And hydrologic drilling to define the depth and flow of groundwater in areas through the planned open pit. 4th, on the project's permits, we maintained existing federal and state permits in good standing, Provided support to the agencies in the defense of these permits and to date all appeals have been unsuccessful, often on multiple occasions and we have full confidence in the process. But we never take this for granted. Our project leadership and litigation teams have always prepared and organized themselves for potential challenges that inevitably come. And 5th, we have built long term value through ongoing engagement with our partners and stakeholders while expanding project support.

Speaker 2

For example, visits were made to Washington, D. C. To pursue bipartisan outreach to the Biden administration and the U. S. Congress.

Speaker 2

In early May, traditional Tribal Council from Crooked Creek Company Cholista and Donlin on a visit with the administration and congressional staff to highlight the thoroughness of the project and the partnerships that exist with Native Alaskans that own the land. The successful execution of these activities would not have been possible without a dedicated team in Anchorage and a committed workforce at our camp, 63% are local hires. They have safely advanced Site work and maintained open and transparent communications with all stakeholders. Thanks to their hard work. The 2023 field program at Donlin Gold is anticipated to be completed in July.

Speaker 2

The comprehensive work will provide valuable information for the Donlin Gold Board and its owners to consider with respect to an updated feasibility study decision. For NOVAGOLD, Community and social responsibility represents a wide ranging essential activity That is core to all we do at Donlin and in the communities of the region. It has been our consistent Practicing philosophy for over 20 years, Donlin continues to work with Calista and TKC In all aspects of outreach and engagement in the areas of education, health and safety, Cultural traditions, environmental initiatives, we are committed to meaningful tribal inclusion throughout all project stages. This in region investments and partnerships continue to expand, which further demonstrate the commitment to advancing this exceptional project up the value chain. As shown on Slide 14, numerous activities and initiatives were funded in the 2nd quarter.

Speaker 2

For example, Donlin was recognized for their support to the village of Crooked Creek following a major flood in the spring. The Donlin staff are on-site to provide support, supplies and transportation to those affected. In addition, the project team has partnered with Covenant House in Alaska and the Bethel Community for services to address chronic youth shelter and food security issues in the Waiakea region. Education is a key component of Donlin Gold's community engagement efforts where Calista shareholders and descendant scholarships were funded through the Charista Education and Culture Initiative. In the Q2, Donlin signed additional shared value statements with 2 villages in the region, Bringing the total to 14.

Speaker 2

These documents formalize current engagement with the local communities and expand upon the long term relationships already established with them and address specific community needs. Lastly, Donlin Gold held the 1st Informal Subsystems Communications Advisory Committee meeting in Antioch. All members who completed an application to join the committee Having various perspectives on the project, as part of the commitment between Donlin Gold, Calista and TKC, The committee was established to maintain a well defined process for communications, dialogue, In May, we launched our 2022 Sustainability Report, NOVAGOLD's 3rd Annual Standalone Sustainability Report, which features a comprehensive review of the company's performance in areas of environmental stewardship, health, safety and Social Community Engagements and Corporate Governance. During 2022, our achievements Pictures on the right of Slide 15 included an excellent health and safety record with 0 lost time accidents Spanning over 10 years, a project site workforce comprised of more than 80% Alaska Native employees and an increase in engagements and investment throughout the region. Formal corporate climate change and biodiversity policies were developed in 2022.

Speaker 2

Throughout 2023, we will continue to monitor, reflect on and refine our environmental, social and governance performance, including maintaining strong records of environmental and health and safety data At the Donlin Gold Project site, partnering with people and communities of the region and working to enhance Our governance practices, including the implementation of our updated human rights and new diversity, equity and inclusion policies. With that, I will now turn the call over to Dave Bodottawell to review the 2023 Second Quarter Financial Results. Dave?

Speaker 3

Thank you, Greg. Slide 17 highlights our operating performance. We reported a net loss of $14,600,000 in the 2nd quarter, a slight decrease from the prior year quarter for corporate G and A and $1,000,000 for working capital. I will now turn the presentation back to Greg. Greg?

Speaker 2

Thank you, Dave. As shown on Slide 20, activities this year are focused on updating the geologic and Resource Models fieldwork to collect geotechnical and hydrologic information to complete the design requirements The Alaska Dam Safety Certificates, an ongoing review of key project assumptions and inputs through the regulatory processes and support the agencies in defending the existing permits. We will also continue to engage, maintain and grow support for our project in the YK region and with government entities. Ultimately, the comprehensive work being completed will provide valuable information for the Donlin Gold Board and its owners to consider with respect to an updated feasibility study decision. I wish to thank each And every one of our shareholders for choosing to invest with NOVAGOLD as well as for their engagement, patience invaluable insight over the years.

Speaker 2

We look forward to continuing to deliver on our promises and to keeping an open line of communications between us while we strive to reach further milestones together in 2023. With that, operator, We will open the lines for questions.

Operator

Thank you. We will now begin the question and answer session. The first question comes from Lucas Pipes with B. Riley Securities. Please go ahead.

Speaker 4

Thank you, operator. Good morning, everyone. This is Nick Giles asking a question on behalf of Lucas. Of the components you outlined for optimization, what areas would you say you've seen the most improvement or maybe expect to see the most improvement. Thank you so much for your perspective.

Speaker 2

All right. Well, the optimization has been really touched on every discipline throughout the project, whether it be mining engineering or Metallurgy. And I think we've seen a lot of very constructive fine tuning on the metallurgical side. And this is no step changes, but optimizing the grind size, controlling the pH to get a few percent Additional recovery. So I think the optimizations have all added value to the project as well as Particularly for our partner, increase the depth of their understanding of the project and the work that has been done to date.

Speaker 4

Thank you, Greg. I appreciate that color. And Just one more on my end. In the Fiscal Responsibility Act of 2023, I believe there were some favorable permitting reforms. And I was hoping to maybe get your view on these and if they may benefit Donlin in any way despite having federal permitting completed.

Speaker 4

Thank you very much.

Speaker 2

All right. Well, it's a very astute observation. There have been, I would say positive developments on trying to streamline the permitting process for Not just mining projects, but any natural resource projects in the U. S. It's good to see those initiatives.

Speaker 2

As far as the impact on Donlin, I would describe it as pretty minor or insignificant and that's Yes, largely because our permits are already in place. So there's nothing to be streamlined from our point of view now that We've gotten our federal permits have been in hand for several years and we're continuing to advance the Remaining state permit, which is the tailings dam and dam certificate. So minimal impact on us at this stage.

Speaker 4

Makes sense. Well, Greg, thank you so much for the color and to you and the team, continued best of luck.

Speaker 2

Thank you.

Speaker 1

We have a question that was submitted by e mail from David White, who is a long Thanks, shareholder, and thanks to you for the review of the 2nd quarter results. You wanted to know why do you think Barrick will deviate from its 15% IRR at $1300 gold price mandate to develop Donlin given that it won't meet the criteria with the updated FS.

Speaker 2

Well, thank you. Thank you for the question. Clearly, I don't speak for Barrick on their Economic criteria regarding gold price. But I do know that we as we looked at investments For generational assets such as Donlin, the IRR is only one aspect that Both owners would consider when we get to that stage where we're in a position to make an investment decision. And I think that's a ways out for us.

Speaker 2

I mean the immediate issues in front of the owners are wrapping up all of the trade off studies and

Speaker 1

That's all the questions, operator.

Operator

Sorry, Greg, go ahead.

Speaker 2

Okay. Everybody, thank you for joining our call this morning and getting an update on NOVAGOLD. Take care.

Operator

Thank you. This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

Speaker 2

Thank you.

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Key Takeaways

  • CEO highlighted Donlin Gold as a Tier 1 gold development asset in a Tier 1 jurisdiction with approximately 39 Moz at 2.25 g/t, a 27-year mine life and potential for over 1 Moz/year production.
  • Second-quarter work included updating geological and resource models, optimizing key assumptions across engineering, metallurgy and hydrology, and conducting geotechnical drilling to support Alaska Dam Safety Certificates.
  • All federal and state permits were maintained in good standing with successful defense of appeals, while outreach in Washington, D.C. and with Alaska Native partners strengthened project support.
  • Community and ESG initiatives saw local hires exceed 63%, support for flood relief and education scholarships, and the launch of the 2022 Sustainability Report highlighting over 10 years of zero lost-time accidents.
  • The company reported a $14.6 million net loss in Q2 driven by corporate G&A and remains focused on completing the field program and advancing an updated feasibility study decision.
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Earnings Conference Call
NovaGold Resources Q2 2023
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