Novagold Resources Q2 2024 Earnings Report

Novagold Resources EPS Results

• Actual EPS: -$0.04
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Novagold Resources Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Novagold Resources Announcement Details

• Quarter: Q2 2024
• Date: 6/26/2024
• Time: N/A
• Conference Call Date: Thursday, June 27, 2024
• Conference Call Time: 11:00AM ET

Novagold Resources (NYSEAMERICAN:NG) is a mineral exploration and development company headquartered in Vancouver, British Columbia. The firm is focused on advancing large-scale precious metals projects through disciplined project management, environmental stewardship and community engagement. Novagold maintains a lean corporate structure while leveraging partnerships and industry expertise to advance its projects toward production.

The company’s flagship asset is the Donlin Gold project in Alaska, a 50/50 joint venture with Barrick Gold Corporation. Donlin Gold is regarded as one of the largest undeveloped gold deposits globally, with a high-grade resource hosted in favorable geology near existing infrastructure. Novagold and its partner have completed extensive technical studies, environmental baseline work and community consultation programs as part of the permitting process.

In addition to Donlin Gold, Novagold has previously held interests in the Galore Creek copper-gold-silver project in northwestern British Columbia in partnership with Teck Resources. While that project is currently on hold pending market conditions, the company continues to evaluate other high-quality exploration opportunities that align with its focus on long-lived, large-scale deposits.

Founded in 1984, Novagold is led by President and CEO Gregory A. Lang, supported by a board of directors with deep experience in mining finance, project development and environmental management. The company seeks to build value through strategic partnerships, rigorous technical analysis and a commitment to sustainable development practices in the regions where it operates.

Novagold Resources Q2 2024 Earnings Call Transcript

Key Takeaways

• Donlin Gold is affirmed as a Tier 1 asset with nearly 40,000,000 ounces at >2 g/t grade, targeting ~1,000,000 ounces annual production at low cost over a 30-year mine life.
• All federal permits and most state permits are secured, and dam safety certification applications were submitted with approval expected in approximately 2–2.5 years.
• Q2 technical milestones include advancing resource modeling, completing metallurgical pilot plant tests, and updating hydrology and geochemistry work to support an updated feasibility study.
• NOVAGOLD highlights robust community and ESG engagement, including 10 years without a lost-time incident, 17 shared‐value statements, salmon monitoring initiatives, and bipartisan political support.
• The company reported a Q2 net loss of $13.7 million and YTD spending in line with its $31 million full-year budget, backed by a strong treasury of ~$113 million in cash and term deposits.

Presentation

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the NovaGold's 2024 second quarter financial results conference call and webcast. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad.

[Operator]

Should you need assistance during the conference call, you may signal an operator by pressing star then zero. Webcast viewers may submit questions through the text box in the lower right corner of the webcast frame. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Mélanie Hennessey, Vice President, Corporate Communications. Please go ahead.

[Mélanie Hennessey, VP of Corporate Communications at NovaGold Resources Inc]

Good morning, Aisha. We are pleased that you have joined us for NovaGold's second quarter financial results, and also for an update on the Donlin Gold project. On today's call, we have NovaGold's President and CEO, Greg Lang, and David Ottewell, NovaGold's Vice President and CFO. At the end of the webcast, we will take questions by phone. Additionally, we will respond to questions received by email.

[Mélanie Hennessey, VP of Corporate Communications at NovaGold Resources Inc]

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 will now turn the presentation over to our President and CEO, Greg Lang. Greg?

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Thank you, Mélanie, and good morning, everyone. Let's begin today's call by highlighting why both we and our shareholders regard Donlin Gold as a Tier 1 asset. I want to emphasize our investment thesis and why assets such as Donlin are increasingly vital to the industry. Let's discuss the impressive attributes of the Donlin Gold project, as shown on Slide 5. First, the project boasts almost 40 million ounces of gold at a grade of over 2 g per tonne, which is more than double the industry average. The projected mine life is almost three decades, based only on our current resources. This ensures a long-term, stable operation. Moreover, Donlin Gold is set to produce around 1 million ounces a year at a low cost, solidifying its position as one of the top producers in the industry, with land holdings that offer significant exploration potential for future growth.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Supported by an experienced management team with a strong track record in mine development across the Americas, Donlin Gold has secured all federal permits required for the development and the majority of the state permits, demonstrating our readiness for successful advancement. Situated on privately designated land in Alaska, the project benefits from the state's supportive mining regulations provide a stable regulatory environment.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Our long-standing partnerships with Calista and the Kuskokwim Corporation further strengthen our social license to operate. These factors collectively position Donlin Gold as a cornerstone project with robust potential and significant long-term value. It's essential to outline Donlin Gold's journey from the early 1900s as its origins are shown on Slide 6, to the strategic reorganization initiated over a decade ago under the leadership of Dr. Thomas Kaplan, our chairman, and myself.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Since NovaGold's restructuring, our primary objective has been crystal clear: to advance Donlin's development, our prized asset in Alaska, to its fullest potential. We have maintained a steadfast commitment to the pursuit of this mission. The next logical and critical step for the project is to update the feasibility study with the goal of positioning Donlin favorably for a construction decision when the market conditions align.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Our dedication to advancing this flagship project underscores our unwavering loyalty to our stakeholders, long-term shareholders, ensuring their trust and investment are met with tangible progress and value creation. On Slide 7, we emphasize the crucial role of Calista and TKC as private landowners in the development of Donlin Gold. Their commitment aligns closely with the elders' vision of responsible growth, contributing to job creation and economic prosperity, and the preservation of cultural heritage within the local communities.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

With land designated for mining activities over 50 years ago, their stewardship demonstrates a steadfast dedication to sustainable development. Throughout the permitting process, sustainability initiatives, community engagements, and Calista and TKC have offered invaluable expertise and guidance, leveraging their deep understanding of the land and its economic significance to bolster community well-being.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Their enduring partnerships and steadfast support are critical to ensuring the responsible and progressive development of Donlin Gold across all phases. These collaborative efforts underscore Donlin Gold's potential to become a cornerstone of lasting and responsible economic development in the Yukon-Kuskokwim region to serve future generations. Looking at Slide 8, Alaska is established as a world-leading mining jurisdiction, ranked third out of 120 global jurisdictions, and only one of 12 to achieve a AA rating in the World Risk Report by Mining Journal Intelligence.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

It is renowned for its robust and secure environment, particularly in mining, and stands out globally for its safety and its well-defined permitting processes. As the second largest gold producer in the United States, Alaska has facilitated the success of numerous companies, underpinned by a government that actively supports and recognizes the importance of responsible natural resource development.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Turning to one of Donlin Gold's distinctive qualities, as currently envisioned, it ranks among the world's largest and highest grade undeveloped open-pit gold reserves when compared with other development projects in the Americas, as shown on Slide 9. As global gold production trends downward, the industry faces a scarcity of high-quality development stage projects. The demands for projects characterized by scale, grade, and longevity becomes increasingly critical for navigating multiple gold cycles effectively.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Moreover, with the grade of almost 2.25 g per tonne, easily exceeding the industry average for open-pit projects, as indicated on slide 10, Donlin is positioned to emerge as one of the most cost-effective producers in the industry. Turning to Slide 11, the bar chart illustrates Donlin Gold's post-tax net present value across various gold price scenarios. Today's gold price is positioning toward the higher end of the chart, indicating a potential value exceeding $25 billion with no discount rate applied, or approximately $15 billion at a 5% discount rate. Significant exploration opportunities exist beyond the defined resources in the ACMA and Lewis deposits, as shown on the graphic in the upper right-hand corner of Slide 12.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

With the current resources covering only 3 km of an 8 km belt, there is substantial potential to expand the reserves and extend the mine life through further exploration of the land. Slide 13 highlights NovaGold's 2023 achievements across environmental stewardship, health and safety, social engagement, and corporate governance. Our latest sustainability report, published in April, thoroughly assesses NovaGold's ESG performance in all of these critical areas. We extend our sincere appreciation to Donlin Gold, our Alaska Native Corporation partners, and local community stakeholders for their excellent collaboration in shaping and achieving our ESG objectives. Their invaluable contributions have been pivotal in the planning, execution, and success of these initiatives.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

The safety and well-being of our workforce remain of the utmost importance, exemplified by our decade-long record without a lost time incident at the Donlin Gold site, where a significant proportion of our team comprises of local hires. Together, these efforts reinforce our pledge to uphold the highest standards of sustainability and responsibility as we advance toward our future goals.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

I will now discuss some of the milestones achieved at the Donlin Gold project in the second quarter, as well as our ongoing activities. Moving to Slide 13, the significant progress we've made in the Donlin Gold project is easily demonstrated. With the strong backing from the owners and the Donlin Gold board, we've made notable advancements. Our resource model is being actively enhanced and updated through efforts led by an independent third party.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Significant progress has also been made in our metallurgical test work at a pilot plant in Ontario, Canada. This work aims to validate optimizations to the flow sheet, which we expect to complete later this year. We have been updating our groundwater and surface water models, incorporating the latest field data from geoscience, hydrology, and continuing to collect data to update the geochemical characteristics for future mine closure planning.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Moreover, our efforts to support regional infrastructure have continued, focusing on narrowing the scope of work and advancing regional energy opportunities. These ongoing technical endeavors are all geared towards positioning Donlin Gold favorably for future development. Turning to Slide 16, our ongoing collaboration with Calista, TKC, and local leaders in education, health, cultural preservation, and environmental stewardship continued in the second quarter across 62 YK communities with the goal to build strong relationships.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Donlin Gold signed its 17th Shared Value Statement, emphasizing our agreement and engagement with local communities to address their specific needs. The third Subsistence Community Advisory Committee meeting was held in Aniak in the second quarter, fostering a structural platform for communication, dialogue, problem-solving, and gathering community input on substantive issues. The project team has been actively monitoring the salmon fisheries in the Kuskokwim and Yukon River watersheds, and with local tribes, have identified opportunities to enhance salmon populations' health with Alaska Native corporations to plan and launch a juvenile salmon monitoring initiative in the George River, a significant tributary to the Kuskokwim River. Additionally, educational initiatives, including sponsoring the Lower Kuskokwim School District's annual college and career fair, remain key for the project.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Furthermore, Donlin Gold traveled with the Crooked Creek Traditional Council to Washington, D.C. to advocate for the Donlin Gold project, directly engaging with the U.S. Department of Justice and the Alaska Congressional Delegation. In April, U.S. Senators Lisa Murkowski and Dan Sullivan, along with U.S. Representative Mary Peltola, submitted a joint amicus brief in the federal court, referring to Donlin as one of Alaska's most important and necessary economic development projects in one of the most impoverished regions in the state.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

These efforts underscore the importance of engagement and preparedness throughout the rigorous permitting process, supported by a bipartisan outreach and the U.S. Department of Justice. Donlin Gold is a federally permitted project situated on private land, designated for mining activities under the Alaska Native Claims Settlement Act over forty years ago. This is a distinct feature, setting Donlin apart from many other mining ventures in Alaska.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Slide 17 details all the federal and state permits and certificates obtained to date. We recognize the critical importance of jurisdictional safety, particularly amongst global variations in permitting standards. Alaska stands as one of the world's safest environments for free enterprise, both politically and socially stable, offering investors peace of mind. This eventually underscores our commitment to navigating the complexity of today's world with diligence and foresight.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Looking at slide 18, in the second quarter, the dam safety certification preliminary design packages were submitted to the Alaska Department of Natural Resources on June 17. In federal litigation on the joint record of decision, including the 404 permit, opening briefs were submitted in February. Donlin Gold, Calista, and the State of Alaska filed their intervenor briefs on April 16th. Amicus briefs supporting the project were filed by the Village of Crooked Creek and the Alaska Congressional Delegation.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Oral arguments were held on June 24th, and a decision is anticipated in early 2025. We recognize the importance of meticulous preparation and organization in navigating the rigorous permitting processes in both the United States and in Alaska. Our dedication remains steadfast as we continue to collaborate closely with federal and state agencies to navigate this comprehensive project. We highly value the bipartisan support and engagement for the Donlin Gold project, both in Alaska and in Washington, D.C. With that, I will turn the call over to David Ottewell, to review our second quarter financial results. Dave?

[David Ottewell, VP and CFO at NovaGold Resources Inc]

Thank you, Greg. Slide 20 highlights our operating performance. We reported a net loss of $13.7 million in the second quarter, a $0.9 million decrease from the prior year quarter, primarily due to lower Donlin Gold project costs, with no field program this year, partially offset by increased interest expense on the promissory note, and increased general and administrative costs due to promotions and hiring of additional staff, along with professional and consulting fees related to our evaluation of options to advance the Donlin Gold project. Cash flows are highlighted on Slide 21. In the second quarter, cash and term deposits decreased by $4.9 million, primarily for corporate administrative expenses and our share of Donlin Gold funding, partially offset by interest income and working capital changes.

[David Ottewell, VP and CFO at NovaGold Resources Inc]

Our net use of cash and term deposits was $2.3 million lower than the prior year quarter due to lower Donlin Gold funding requirements, partially offset by increased administrative costs. On Slide 22, we note our strong treasury. Our financial position includes cash and cash equivalents of nearly $53 million, term deposits of $60 million. For the year to date, Donlin Gold funding and corporate G&A are in line with our budget. For the full year, we expect to spend approximately $31 million, including $17 million for corporate G&A and $14 million for Donlin Gold. I will now turn the presentation back over to Greg.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Thank you, Dave. I'm sure as most people saw the announcement, Dave has been our CFO for 12 years, and he's moving on to the next stage in life and retiring. We want to thank Dave for being a valued member of the team at NovaGold for over 12 years, and we are deeply grateful for his many contributions to NovaGold during his tenure. Last December, the Donlin Gold Board approved a $28 million budget for the year, as shown on Slide 23. This budget includes ongoing resource modeling, mine planning, metallurgical test work, regional infrastructure support, hydrology work, closure planning, and importantly, the advancement of dam safety certificate applications, as well as ongoing support for pending litigation, government affairs, community engagements, and our various sponsorships.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Discussions with Barrick are ongoing to continue advancing Donlin Gold up the value chain as we remain fully committed to its development. Additionally, on behalf of the NovaGold team, I would like to extend again our sincere appreciation to David Ottewell as he moves on to retirement. We would also like to welcome and congratulate Peter Adamek, who will assume the role of CFO in July.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

With resolute confidence, NovaGold views the Donlin Gold project as a prime investment in the gold market that epitomizes an exceptional opportunity for leveraging scarce and high-quality assets in safe jurisdictions. Appreciative of our shareholders' staunch support and valuable guidance, we remain committed to enhancing shareholder and stakeholder value, responsibly acknowledging their crucial presence and long-term interests. Their decision to invest in our company and their continued solidarity and engagement are deeply valued.As custodians of the company, we are focused on executing our strategy and advancing the value of the Donlin Gold project in a safe and responsible manner to yield substantial progress and create value. Operator, we are now prepared to take questions.

[Operator]

Thank you. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any key. To withdraw your question, please press star, then two. The first question comes from Lucas Pipes at B. Riley Securities. Please go ahead.

[Fedor Shabalin, Equity Research Analyst at B. Riley Securities]

Thank you very much, operator, and good morning, everyone. This is actually Fedor Shabalin asking question on behalf of Lucas Pipes. And just, I want to touch on permitting. So where state level permitting stays now, and when you would expect to receive a decision? And when do you expect the decision regarding dam safety certification, which you submitted just 10 days ago? Thank you.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

All right. Well, thank you for the question. Yeah, as noted in our materials, the only significant state permit that we do not have in hand is the dam safety certificates. This is for the tailings dam, as well as several water retention structures. And, you know, to be clear, the federal permits and the 404 certificate authorizes Donlin to disturb work at the site, and that includes the tailings dam. But in Alaska, the structures such as the tailings dam and water retention structures are, you know, they're administered by the state. And one of the aspects of the permit application is that you have to have a fully designed and engineered drawing to support your applications.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

We started the geotechnical work necessary to do that last season, and this year we've been finalizing our dam design, and that, as we noted, the preliminary package has been submitted to the state. You know, I think the process is pretty well-defined, and it's moving along fine, and we would anticipate the, you know, roughly two, 2.5-year approval process, which would be done concurrently when the owners make the decision to move forward with the feasibility study. So at any rate, the tailings dam approval permits are not on a critical path item, but we are steadily advancing them.

[Fedor Shabalin, Equity Research Analyst at B. Riley Securities]

Thank you very much, Greg. And my second one is on CapEx. So $14 million is the remaining CapEx in 2024. But maybe can you provide what level of capital spending you would expect in 2025? Thank you.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Well, you know, at this stage, we have not guided on our expenditures planned for the new year. And of course, a lot of that will depend on when we make the decision to initiate the new feasibility study. You know, we typically prepare our budgets, you know, later in the third quarter and fourth quarter, and we'll, you know, at that time, be in a position to guide the marketplace on our future expenditures.

[Fedor Shabalin, Equity Research Analyst at B. Riley Securities]

Thank you very much. This is helpful, and wish you best of luck. Thank you.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Thank you for your questions.

[Mélanie Hennessey, VP of Corporate Communications at NovaGold Resources Inc]

We have a shareholder question coming from the web, from Joe Joe Pridmore. With gold at an all-time high, what are the other key market conditions required to commence operations?

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Well, I think, you know, as, as you noted, gold is at an all-time high, and I think that is, you know, certainly one of the key factors that will drive, ultimately, the investment decision at Donlin. You know, other factors include market conditions, how the equities are viewed, how the debt markets are, and you know, how we would finance the project. But certainly the key driver in the value of Donlin Gold, and really any gold mining project, is the price of gold. And, you know, we have the view that gold prices are pretty good right now, but we think there's, you know, substantial room to see them run higher in the coming years. So that, yeah, I would anticipate that when we finish our feasibility study, gold prices will be significantly higher than what we see today, positioning the owners to make a construction decision.

[Operator]

This concludes the question and answer session. I would like to turn the conference back over to Greg for any closing remarks.

[Gregory Lang, President and CEO at NovaGold Resources Inc]

Well, everyone, thank you for taking the time to get an update on NovaGold, and we look forward to updating you as we continue to advance the Donlin project. Good day.

Participants

Analysts

• David Ottewell, VP and CFO at NovaGold Resources Inc
• Fedor Shabalin, Equity Research Analyst at B. Riley Securities
• Gregory Lang, President and CEO at NovaGold Resources Inc
• Mélanie Hennessey, VP of Corporate Communications at NovaGold Resources Inc