NOVAGOLD RESOURCES INC. (NYSE American, TSX: NG) today released its
2019 second quarter financial results and updates for its flagship
Donlin Gold project in Alaska, which NOVAGOLD owns equally with
Barrick.
Details of the financial results for the second quarter ended
May 31, 2019 are presented in the consolidated financial statements
and quarterly report filed 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.
In the second quarter 2019, NOVAGOLD achieved the
following milestones:
- After the receipt of federal and several key state permits
required for commencement of site activities in 2018, Donlin Gold
LLC (“Donlin Gold”) continued to advance other major State permits:
- The Alaska Department of Natural Resources (ADNR) Division of
Mining, Land, and Water (DMLW) issued preliminary land use
decisions on January 28, 2019 for the project’s transportation
corridor, including the access road and related material sites,
airstrip, and upriver Jungjuk Port. The public comment period
for these decisions closed on March 29, 2019. Final approvals
are anticipated by the end of 2019.
- ADNR’s Division of Oil and Gas (DOG), State Pipeline
Coordinator’s Section issued a preliminary decision to authorize
the sections of the pipeline on State lands on January 28,
2019. The public comment period for this decision
closed on March 22, 2019. Final approval is anticipated by the end
of 2019.
- Initiated safety training and camp preparations in May for the
geotechnical field program required to support ADNR’s approval of
the Alaska Dam Safety certificates for the tailings storage
facility and water retention dams.
- Donlin Gold and NOVAGOLD continued local community outreach in
Alaska with the following activities:
- With the assistance of 500 local residents, removed a total of
35,000 pounds of household hazardous waste from eight
Yukon-Kuskokwim (Y-K) villages in partnership with Donlin Gold and
the Delta Backhaul Company.
- Financially supported and volunteered at the 2019 Iditarod
Trail Sled Dog Race, which was won by Y-K region resident Peter
Kaiser, who Donlin Gold has sponsored for the past decade.
- Attended and participated in the EXCEL Alaska Academic
Decathlon in Aniak, a non-profit event benefiting 140 youth in the
Y-K region.
- Supported the Skiku program that sends volunteer coaches to
remote villages in Alaska to teach children the basic techniques of
cross-country skiing.
- Worked with Y-K region residents to conduct annual Kuskokwim
River smelt surveys.
President’s Message
With its half ownership of a district-scale gold project located
in North America, NOVAGOLD continues to be extremely well
positioned to deliver what we believe will be positive returns to
shareholders as gold embarks upon what we anticipate to be the next
leg of its multi-decade secular bull market. Guided by a very
experienced management team with a strong track record of expert
execution, we can take our time and do it right.
That being said, we enjoyed a very productive second quarter. We
continued to support the Alaska State agencies in advancing permits
for the Donlin Gold project. In addition, we conducted safety
training and camp preparations in advance of the Donlin Gold
geotechnical field program and with our Native Corporation
partners, Calista Corporation (“Calista”) and The Kuskokwim
Corporation (TKC), engaged in various community initiatives
throughout the Y-K region. Importantly, together with our partner
Barrick, we continued work on several aspects of the technical
review for the project.
While the project has been granted a Federal Record of Decision
(ROD) approving the Final Environmental Impact Statement (EIS),
along with the Clean Water Act Section 404 and Rivers and Harbors
Act Section 10 permits, we continue the process of securing all the
requisite State permits. With that in mind, during the second
quarter of 2019, we advanced two key permits: the ADNR DMLW land
use decisions for the project’s transportation corridor, including
the access road and related material sites, airstrip and port, and
the ADNR DOG’s authorization for construction of the sections of
the pipeline on State lands. Final approvals for both
authorizations are expected by the end of 2019.
The Alaska Dam Safety certificates require delivery of final
construction packages to the State. To that end we need to carry
out an extensive field program which will include a site
investigation to collect additional geotechnical information. This
work will consist of drilling and field testing with installation
of monitoring instruments, a pumping test program at the tailings
storage facility, excavation of test pits, geophysical surveys, and
laboratory testing. This work will allow us to continue to
advance the engineering from feasibility level to the final
construction packages. Safety training and camp preparations
commenced in May, with drilling and site work scheduled to start in
July. The site investigation information will initially support
preliminary design packages, followed by detailed design packages
and ultimately the final construction packages, each of which will
be submitted to ADNR for issuance of the certificates.
With key permitting activities largely complete, our focus is
also on integrating scoping-level optimization analyses into a
study that should serve as the basis for an updated project
development plan. In this regard, NOVAGOLD is collaborating with
Barrick’s new management and technical team to advance the project
in a financially disciplined manner with a strong focus on
furthering our geological understanding, engineering excellence,
environmental stewardship and safety.
Considering its size, scale, grade, exploration potential and
stage of advancement, we believe Donlin Gold is truly unique. With
approximately 39,000,000 ounces of gold in measured and indicated
mineral resources grading 2.24 grams per tonne1, Donlin Gold is
more than five times the size of the peer group average2, and
double the world average grade3. When built, Donlin Gold is
expected to have a mine life measured in decades, particularly
considering that the project’s already robust endowment is
contained within only three kilometers of an eight-kilometer
mineralized trend. We believe that as Donlin Gold is located on
private land designated for mining in Alaska, the second largest
gold-producing State recognized for its strong time-tested support
for responsible mining, it makes this project particularly valuable
for all its stakeholders.
External Affairs & Stakeholder Engagement
Maintaining an active presence in the Y-K region continues to be
important to NOVAGOLD. With the help of the Donlin Gold team, we
cover an incredible amount of ground in terms of community
engagement, local outreach and sponsorship of educational,
environmental and sporting events. The work in these important
spheres is ongoing. In the second quarter, for example, with the
help of 500 residents, we removed a total of 35,000 pounds of
household hazardous waste from eight Y-K villages, in a partnership
with the Delta Backhaul Company and the Native Village of
Napaimute. During the quarter we also sponsored the Iditarod Trail
Sled Dog Race and Peter Kaiser, who is from the Y-K region and won
the world-renowned event. Congratulations to Pete and his team of
incredible sled dogs.
Our second quarter activities also included participating in the
EXCEL Alaska Academic Decathlon in Aniak, a non-profit event
benefiting 140 youth from the Y-K region; supporting the Skiku
program which sends volunteer coaches to remote villages in Alaska
to teach children the basic techniques of cross-country skiing;
conducting our annual rainbow smelt spawning surveys in the
Kuskokwim River; continuing outreach with our Native Corporation
partner, Calista, to meet with local tribal councils; co-hosting
with Calista the Women in Resources legislative reception in
Juneau; and several other initiatives designed to establish Donlin
Gold as a catalyst for sustainable improvement in the quality of
life in communities affected by years of poverty and lack of
opportunities for young people living in the area. Our objective is
to help improve the standard of living in the Y-K region without
compromising the rich traditional way of life of its
inhabitants.
Balance Sheet
NOVAGOLD enjoys a robust balance sheet, with approximately $157
million in cash and term deposits as of May 31, 2019. This does not
include an additional $100 million expected to come from Newmont
within the next five years, with another $75 million contingent
payment4 we could receive if the Galore Creek project approves a
construction plan. NOVAGOLD believes it has sufficient financial
resources to advance Donlin Gold up the value chain without the
need to raise capital until a construction decision is made.
In conclusion, I’d like to express a few words of gratitude.
Nothing happens without great teamwork. The Donlin Gold team has
certainly been superb in shepherding the permitting and community
engagement programs. Our sincerest appreciation goes to Calista and
TKC, our Native Corporation partners, and to Barrick, our joint
venture partner. We are also very grateful for the diligent and
thorough efforts rendered by the government agencies involved in
the various aspects of the permitting process. They have
demonstrated a model adherence to the rigorous regulations they are
tasked to enforce, industry best practices and incredible
professionalism. And finally, I wish to express many thanks to our
dedicated Board, management and employees for their hard work and
unwavering commitment to excellence.
Gregory A. Lang President & CEO
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|
Financial Results |
in thousands of U.S. dollars, except for per share amounts |
|
Three monthsendedMay 31,
2019$ |
|
Three monthsendedMay 31,
2018$ |
|
Six monthsendedMay 31,
2019$ |
|
Six monthsendedMay 31,
2018$ |
|
General and administrative expense (1) |
4,215 |
|
4,896 |
|
8,555 |
|
9,581 |
|
Share of losses – Donlin Gold |
2,198 |
|
2,905 |
|
3,521 |
|
4,746 |
|
Total operating expenses |
6,413 |
|
7,801 |
|
12,076 |
|
14,327 |
|
|
|
|
|
|
|
|
|
|
Loss from operations |
(6,413) |
|
(7,801) |
|
(12,076) |
|
(14,327) |
|
Other expense |
1,254 |
|
(1,357) |
|
951 |
|
(2,727) |
|
Income tax expense |
(356) |
|
(79) |
|
(713) |
|
(145) |
|
Loss from continuing operations |
(5,515) |
|
(9,237) |
|
(11,838) |
|
(17,199) |
|
Loss from discontinued operations |
— |
|
(394) |
|
— |
|
(647) |
|
Net loss |
(5,515) |
|
(9,631) |
|
(11,838) |
|
(17,846) |
|
|
|
|
|
|
|
|
|
|
Loss per share, basic and diluted |
|
|
|
|
|
|
|
|
Continuing operations |
(0.02) |
|
(0.03) |
|
(0.04) |
|
(0.06) |
|
Discontinued operations |
— |
|
— |
|
— |
|
— |
|
|
(0.02) |
|
(0.03) |
|
(0.04) |
|
(0.06) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At |
|
At |
|
|
|
|
|
|
May 31, 2019$ |
|
Nov 30, 2018$ |
|
Cash and term deposits |
|
|
|
|
156,986 |
|
167,004 |
|
Total assets |
|
|
|
|
252,497 |
|
260,929 |
|
Total liabilities |
|
|
|
|
102,649 |
|
100,241 |
|
(1) Includes
share-based compensation expense of $1,542 and $1,942 in the second
quarter of 2019 and 2018, respectively, and $3,073 and $3,891 in
the first six months of 2019 and 2018, respectively. |
For the second quarter ended May 31, 2019, loss from operations
decreased from $7.8 million in 2018 to $6.4 million in 2019 due to
lower general and administrative expense and lower costs at Donlin
Gold LLC. General and administrative expense decreased by $0.6
million primarily due to lower share-based compensation costs. At
Donlin Gold expenses decreased by $0.7 million resulting from a
reduction in permitting activities.
Net loss from continuing operations decreased from
$9.2 million ($0.03 per share) in 2018 to $5.5 million ($0.02 per
share) in 2019, primarily due to lower operating losses, higher
interest income, accretion of notes receivable, and foreign
exchange movements, offset by higher interest expense on the
promissory note payable to Barrick.
Net loss from discontinued operations, net of
tax of $0.4 million ($0.00 per share) in 2018 resulted from our
share of expenses at the Galore Creek project. On July 27, 2018, we
completed the sale of our 50% interest in the Galore Creek
Partnership.
For the first six months ended May 31, 2019, the
loss from operations decreased from $14.3 million in 2018 to $12.1
million in 2019 due to lower general and administrative expense and
lower costs at Donlin Gold LLC. General and administrative expense
decreased by $1.0 million primarily due to lower share-based
compensation costs. At Donlin Gold expenses decreased by $1.2
million resulting from a reduction in permitting activities.
Net loss from continuing operations decreased from
$17.2 million ($0.06 per share) in 2018 to $11.8 million ($0.04 per
share) in 2019, primarily due to lower operating losses, higher
interest income, accretion of notes receivable, and foreign
exchange movements, offset by higher interest expense on the
promissory note payable to Barrick.
Net loss from discontinued operations, net of tax
of $0.6 million ($0.00 per share) in 2018 resulted from our share
of expenses at the Galore Creek project.
Liquidity and Capital Resources
In the second quarter 2019 compared to 2018, cash
used in operating activities of continuing operations decreased by
$0.1 million, due to higher interest income, partially offset by
changes in working capital. Net cash provided from investing
activities of continuing operations in the second quarter of 2019
included a $0.8 million decrease in Donlin Gold funding due to
lower permitting and optimization activities.
For the first six months of fiscal year 2019
compared to 2018, cash used in operating activities of continuing
operations decreased by $1.6 million, primarily due to higher
interest income. Net cash provided from investing activities of
continuing operations included a $1.7 million decrease in Donlin
Gold funding due to lower permitting and optimization activities.
For the six-month period, term deposits decreased by $7.0 million
in 2019 and $4.0 million in 2018. Net cash used in financing
activities of continuing operations related to withholding taxes
paid on vested performance share units.
It’s our belief that NOVAGOLD’s cash and term
deposits are sufficient to advance Donlin Gold, as well as 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. The term deposits are denominated in
U.S. dollars and are held at Canadian chartered banks.
2019 Outlook
We continue to anticipate spending approximately $24 million in
2019, $13 million to fund our share of expenditures at the Donlin
Gold project and $11 million for general and administrative
costs.
NOVAGOLD remains focused on four primary goals
in 2019: Continue to advance the Donlin Gold project toward a
construction/production decision; maintain an effective corporate
social responsibility program; promote a strong safety culture by
maintaining a zero lost time accident record; and safeguard the
company’s treasury.
Conference Call & Webcast Details
NOVAGOLD’s conference call and webcast to
discuss these results will take place June 27, 2019 at 8:00 am PT
(11:00 am ET). The webcast and conference call-in details are
provided below.
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Webcast: |
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www.novagold.com/investors/events/ |
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North American callers: |
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1-800-319-4610 |
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International callers: |
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1-604-638-5340 |
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About NOVAGOLD
NOVAGOLD is a well-financed precious metals company focused on
the development of its 50%-owned Donlin Gold project in Alaska, one
of the safest mining jurisdictions in the world. With approximately
39 million ounces of gold in the measured and indicated mineral
resource categories, inclusive of proven and probable mineral
reserves (541 million tonnes at an average grade of approximately
2.24 grams per tonne in the measured and indicated resource
categories on a 100% basis),5 Donlin Gold is regarded to be one of
the largest, highest-grade, and most prospective known open pit
gold deposits in the world. According to the 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. 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 43-101, has approved and
verified the scientific and technical information related to the
Donlin Gold project contained in this press release.
NOVAGOLD Contacts:Mélanie Hennessey Vice
President, Corporate Communications
Jason Mercier Manager, Investor Relations
604-669-6227 or 1-866-669-6227
Cautionary Note Regarding
Forward-Looking Statements
This press release includes certain “forward-looking
information” and “forward-looking statements” (collectively
“forward-looking statements”) within the meaning of applicable
securities legislation, including the United States Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are frequently, but not always, identified by words such
as “expects”, “anticipates”, “believes”, “intends”, “estimates”,
“potential”, “possible”, and similar expressions, or statements
that events, conditions, or results “will”, “may”, “could”, “would”
or “should” occur or be achieved. Forward-looking statements are
necessarily based on several opinions, estimates and assumptions
that management of NOVAGOLD considered appropriate and reasonable
as of the date such statements are made, are subject to known and
unknown risks, uncertainties, assumptions and other factors that
may cause the actual results, activity, performance or achievements
to be materially different from those expressed or implied by such
forward-looking statements. All statements, other than statements
of historical fact, included herein are forward-looking
statements. These forward-looking statements include
statements regarding the 2019 Outlook; the potential development
and construction of Donlin Gold; perceived merit of properties; the
advancement of optimization studies at Donlin Gold; potential
opportunities to enhance or maximize the value of Donlin Gold; the
timing and likelihood of permits; opportunities to reduce capital
outlays and improve project economics; the potential completion of
an updated feasibility study on the project; mine life and
production estimates at Donlin Gold; mineral reserve and resource
estimates; work programs; capital expenditures; timelines;
strategic plans; benefits of the Donlin Gold project and market
prices for precious metals. 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; the need for additional financing to explore and develop
properties and availability of financing in the debt and capital
markets; uncertainties involved in the interpretation of drilling
results and geological tests and the estimation of reserves and
resources; the need for continued cooperation between NOVAGOLD
and Barrick 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, 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; and other
risks and uncertainties disclosed in reports and documents filed by
NOVAGOLD with applicable securities regulatory authorities from
time to time. 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
This press 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 press 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 Donlin Gold project estimates as
per the Second Updated Feasibility Study (as defined herein).
Represents 100% of measured and indicated mineral resources, of
which NOVAGOLD’s share represents 50%. Measured and indicated
resources are inclusive of proven and probable mineral reserves.
Measured resources total 8M tonnes grading 2.52 g/t Au and
indicated resources total 534M tonnes grading 2.24 g/t Au. Proven
reserves total 8M tonnes grading 2.32 g/t Au, and probable reserves
total 497M tonnes grading 2.08 g/t Au. See “Cautionary Note
Concerning Reserve & Resource Estimates” and “Reserve/Resource
Table” at www.novagold.com
2 Comparison peer group of 16 projects based on
large (2Moz P&P cut off), North/South American gold-focused
development projects using data from public filings, company
documents and corporate websites.
3 2018 average grade of open-pit and underground
deposits with gold as primary commodity and over 1 Moz in measured
and indicated resources, sourced from S&P Global Market
Intelligence.
4 Deferred compensation on sale of Galore Creek totals $100M:
including $75M on earlier of PFS or no later than July 27, 2021 and
$25M on earlier of FS or no later than July 27, 2023. An additional
$75M is receivable upon approval of a Galore Creek construction
plan by the owner(s).
5 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. Mineral resources have been estimated in accordance with
National Instrument 43-101 – Standards of Disclosure for Mineral
Projects (“NI 43-101”).
Grafico Azioni Novagold Resources (AMEX:NG)
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