|
Item 1.
|
Financial Statements
|
NOVAGOLD RESOURCES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, US dollars in thousands)
|
|
At
May 31,
2019
|
|
At
November 30,
2018
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
17,986
|
|
|
$
|
21,004
|
|
Term deposits
|
|
|
139,000
|
|
|
|
146,000
|
|
Other assets
|
|
|
2,054
|
|
|
|
2,379
|
|
Current assets
|
|
|
159,040
|
|
|
|
169,383
|
|
Notes receivable (Note 5)
|
|
|
91,050
|
|
|
|
89,459
|
|
Investment in Donlin Gold (Note 6)
|
|
|
1,494
|
|
|
|
1,209
|
|
Other assets
|
|
|
913
|
|
|
|
878
|
|
Total assets
|
|
$
|
252,497
|
|
|
$
|
260,929
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
489
|
|
|
$
|
710
|
|
Accrued payroll and related benefits
|
|
|
1,214
|
|
|
|
2,545
|
|
Income taxes payable
|
|
|
190
|
|
|
|
223
|
|
Other liabilities
|
|
|
182
|
|
|
|
182
|
|
Current liabilities
|
|
|
2,075
|
|
|
|
3,660
|
|
Promissory note (Note 7)
|
|
|
100,160
|
|
|
|
96,501
|
|
Deferred income taxes
|
|
|
414
|
|
|
|
80
|
|
Total liabilities
|
|
|
102,649
|
|
|
|
100,241
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
Common shares
|
|
|
1,960,933
|
|
|
|
1,954,861
|
|
Contributed surplus
|
|
|
83,791
|
|
|
|
87,987
|
|
Accumulated deficit
|
|
|
(1,869,142
|
)
|
|
|
(1,857,682
|
)
|
Accumulated other comprehensive loss
|
|
|
(25,734
|
)
|
|
|
(24,478
|
)
|
Total equity
|
|
|
149,848
|
|
|
|
160,688
|
|
Total liabilities and equity
|
|
$
|
252,497
|
|
|
$
|
260,929
|
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
These condensed consolidated interim financial statements are authorized for issue by the Board of Directors on June 26, 2019. They are signed on the Company’s behalf by:
/s/ Gregory A. Lang, Director
|
|
/s/ Anthony P. Walsh, Director
|
|
NOVAGOLD RESOURCES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS
OF LOSS
AND COMPREHENSIVE LOSS
(Unaudited, US dollars in thousands except per share amounts)
|
|
Three months ended
May 31,
|
|
Six months ended
May 31,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
Revised
1
|
|
|
|
Revised
1
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative (Note 9)
|
|
$
|
4,215
|
|
|
$
|
4,896
|
|
|
$
|
8,555
|
|
|
$
|
9,581
|
|
Equity loss – Donlin Gold (Note 6)
|
|
|
2,198
|
|
|
|
2,905
|
|
|
|
3,521
|
|
|
|
4,746
|
|
|
|
|
6,413
|
|
|
|
7,801
|
|
|
|
12,076
|
|
|
|
14,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(6,413
|
)
|
|
|
(7,801
|
)
|
|
|
(12,076
|
)
|
|
|
(14,327
|
)
|
Other income (expense) (Note 11)
|
|
|
1,254
|
|
|
|
(1,357
|
)
|
|
|
951
|
|
|
|
(2,727
|
)
|
Loss before income taxes and other items
|
|
|
(5,159
|
)
|
|
|
(9,158
|
)
|
|
|
(11,125
|
)
|
|
|
(17,054
|
)
|
Income tax expense
|
|
|
(356
|
)
|
|
|
(79
|
)
|
|
|
(713
|
)
|
|
|
(145
|
)
|
Net loss from continuing operations
|
|
|
(5,515
|
)
|
|
|
(9,237
|
)
|
|
|
(11,838
|
)
|
|
|
(17,199
|
)
|
Net loss from discontinued operations, net of tax (Note 4)
|
|
|
—
|
|
|
|
(394
|
)
|
|
|
—
|
|
|
|
(647
|
)
|
Net loss
|
|
$
|
(5,515
|
)
|
|
$
|
(9,631
|
)
|
|
$
|
(11,838
|
)
|
|
$
|
(17,846
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on marketable securities, net of $nil, $24, $nil, and $35 tax recovery, respectively
|
|
|
—
|
|
|
|
(165
|
)
|
|
|
—
|
|
|
|
(259
|
)
|
Foreign currency translation adjustments
|
|
|
(1,397
|
)
|
|
|
(3,205
|
)
|
|
|
(878
|
)
|
|
|
(1,337
|
)
|
|
|
|
(1,397
|
)
|
|
|
(3,370
|
)
|
|
|
(878
|
)
|
|
|
(1,596
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(6,912
|
)
|
|
$
|
(13,001
|
)
|
|
$
|
(12,716
|
)
|
|
$
|
(19,442
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share – basic and diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.02
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.06
|
)
|
Discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$
|
(0.02
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted (thousands)
|
|
|
325,245
|
|
|
|
322,305
|
|
|
|
325,000
|
|
|
|
322,298
|
|
1
See Note 4 – Discontinued operations
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
NOVAGOLD RESOURCES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS
OF CASH FLOWS
(Unaudited, US dollars in thousands)
|
|
Three months ended
May 31,
|
|
Six months ended
May 31,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
Revised
1
|
|
|
|
Revised
1
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,515
|
)
|
|
$
|
(9,631
|
)
|
|
$
|
(11,838
|
)
|
|
$
|
(17,846
|
)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity loss – Donlin Gold
|
|
|
2,198
|
|
|
|
2,905
|
|
|
|
3,521
|
|
|
|
4,746
|
|
Share-based compensation
|
|
|
1,542
|
|
|
|
1,942
|
|
|
|
3,073
|
|
|
|
3,891
|
|
Interest expense on promissory note
|
|
|
1,861
|
|
|
|
1,593
|
|
|
|
3,659
|
|
|
|
3,087
|
|
Foreign exchange (gain) loss
|
|
|
(1,209
|
)
|
|
|
2
|
|
|
|
(823
|
)
|
|
|
118
|
|
Deferred income tax expense
|
|
|
167
|
|
|
|
24
|
|
|
|
334
|
|
|
|
35
|
|
Accretion of notes receivable
|
|
|
(796
|
)
|
|
|
—
|
|
|
|
(1,591
|
)
|
|
|
—
|
|
Loss from discontinued operations, net of tax
|
|
|
—
|
|
|
|
394
|
|
|
|
—
|
|
|
|
647
|
|
Other
|
|
|
(11
|
)
|
|
|
(21
|
)
|
|
|
(51
|
)
|
|
|
(53
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
(396
|
)
|
|
|
73
|
|
|
|
378
|
|
|
|
62
|
|
Accounts payable and accrued liabilities
|
|
|
(203
|
)
|
|
|
222
|
|
|
|
(244
|
)
|
|
|
28
|
|
Accrued payroll and related benefits
|
|
|
601
|
|
|
|
647
|
|
|
|
(1,329
|
)
|
|
|
(1,207
|
)
|
Net cash used in operating activities of continuing operations
|
|
|
(1,761
|
)
|
|
|
(1,850
|
)
|
|
|
(4,911
|
)
|
|
|
(6,492
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from term deposits
|
|
|
11,000
|
|
|
|
21,000
|
|
|
|
126,000
|
|
|
|
36,000
|
|
Purchases of term deposits
|
|
|
(11,000
|
)
|
|
|
(17,000
|
)
|
|
|
(119,000
|
)
|
|
|
(32,000
|
)
|
Funding of Donlin Gold
|
|
|
(2,909
|
)
|
|
|
(3,736
|
)
|
|
|
(3,806
|
)
|
|
|
(5,470
|
)
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(13
|
)
|
Net cash provided from (used in) investing activities of continuing operations
|
|
|
(2,909
|
)
|
|
|
264
|
|
|
|
3,194
|
|
|
|
(1,483
|
)
|
Net cash used in investing activities of discontinued operations (note 4)
|
|
|
—
|
|
|
|
(832
|
)
|
|
|
—
|
|
|
|
(1,475
|
)
|
Net cash provided from (used in) investing activities
|
|
|
(2,909
|
)
|
|
|
(568
|
)
|
|
|
3,194
|
|
|
|
(2,958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Withholding tax on share-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,197
|
)
|
|
|
—
|
|
Net cash used in investing activities of continuing operations
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,197
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
(121
|
)
|
|
|
(36
|
)
|
|
|
(104
|
)
|
|
|
(27
|
)
|
Decrease in cash and cash equivalents
|
|
|
(4,791
|
)
|
|
|
(2,454
|
)
|
|
|
(3,018
|
)
|
|
|
(9,477
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
22,777
|
|
|
|
20,931
|
|
|
|
21,004
|
|
|
|
27,954
|
|
Cash and cash equivalents at end of period
|
|
$
|
17,986
|
|
|
$
|
18,477
|
|
|
$
|
17,986
|
|
|
$
|
18,477
|
|
1
See Note 4 – Discontinued operations
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
NOVAGOLD RESOURCES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF EQUITY
(Unaudited, US dollars and shares in thousands)
|
|
Six months ended May 31, 2019
|
|
|
Common shares
|
|
Contributed
|
|
Accumulated
|
|
|
|
Total
|
|
|
Shares
|
|
Amount
|
|
surplus
|
|
deficit
|
|
AOCL*
|
|
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2018
|
|
|
323,223
|
|
|
$
|
1,954,861
|
|
|
$
|
87,987
|
|
|
$
|
(1,857,682
|
)
|
|
$
|
(24,478
|
)
|
|
$
|
160,688
|
|
Cumulative-effect adjustment of adopting ASU No. 2016-01
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
378
|
|
|
|
(378
|
)
|
|
|
—
|
|
Share-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,531
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,531
|
|
PSUs settled in shares
|
|
|
438
|
|
|
|
2,737
|
|
|
|
(2,737
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Stock options exercised
|
|
|
1,443
|
|
|
|
2,867
|
|
|
|
(2,867
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Withholding tax on PSUs
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,197
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,197
|
)
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,323
|
)
|
|
|
—
|
|
|
|
(6,323
|
)
|
Other comprehensive income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
519
|
|
|
|
519
|
|
February 28, 2019
|
|
|
325,104
|
|
|
$
|
1,960,465
|
|
|
$
|
82,717
|
|
|
$
|
(1,863,627
|
)
|
|
$
|
(24,337
|
)
|
|
$
|
155,218
|
|
Share-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,542
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,542
|
|
Stock options exercised
|
|
|
205
|
|
|
|
468
|
|
|
|
(468
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,515
|
)
|
|
|
—
|
|
|
|
(5,515
|
)
|
Other comprehensive loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,397
|
)
|
|
|
(1,397
|
)
|
May 31, 2019
|
|
|
325,309
|
|
|
$
|
1,960,933
|
|
|
$
|
83,791
|
|
|
$
|
(1,869,142
|
)
|
|
$
|
(25,734
|
)
|
|
$
|
149,848
|
|
|
|
Six months ended May 31, 2018
|
|
|
Common shares
|
|
Contributed
|
|
Accumulated
|
|
|
|
Total
|
|
|
Shares
|
|
Amount
|
|
surplus
|
|
deficit
|
|
AOCL*
|
|
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2017
|
|
|
322,219
|
|
|
$
|
1,951,587
|
|
|
$
|
83,534
|
|
|
$
|
(1,744,917
|
)
|
|
$
|
(6,175
|
)
|
|
$
|
284,029
|
|
Share-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,949
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,949
|
|
Stock options exercised
|
|
|
83
|
|
|
|
977
|
|
|
|
(977
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,215
|
)
|
|
|
—
|
|
|
|
(8,215
|
)
|
Other comprehensive income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,774
|
|
|
|
1,774
|
|
February 28, 2018
|
|
|
322,302
|
|
|
$
|
1,952,564
|
|
|
$
|
84,506
|
|
|
$
|
(1,753,132
|
)
|
|
$
|
(4,401
|
)
|
|
$
|
279,537
|
|
Share-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,942
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,942
|
|
Stock options exercised
|
|
|
24
|
|
|
|
59
|
|
|
|
(59
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(9,631
|
)
|
|
|
—
|
|
|
|
(9,631
|
)
|
Other comprehensive loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,370
|
)
|
|
|
(3,370
|
)
|
May 31, 2018
|
|
|
322,326
|
|
|
$
|
1,952,623
|
|
|
$
|
86,389
|
|
|
$
|
(1,762,763
|
)
|
|
$
|
(7,771
|
)
|
|
$
|
268,478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Accumulated other comprehensive loss
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
NOVAGOLD RESOURCES INC.
|
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
|
(Unaudited, US dollars in thousands except per share amounts)
|
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION
NOVAGOLD RESOURCES INC. and its affiliates and
subsidiaries (collectively, “NOVAGOLD” or the “Company”) operate in the mining industry, focused on the
exploration for and development of gold mineral properties. The Company has no realized revenues from its planned principal business
purpose. The Company’s principal asset is a 50% interest in the Donlin Gold project in Alaska, U.S.A. The Donlin Gold project
is owned and operated by Donlin Gold LLC, a limited liability company that is owned equally by wholly-owned subsidiaries of NOVAGOLD
and Barrick Gold Corporation (“Barrick”).
On July 27, 2018, the Company completed the
sale of its 50% interest in the Galore Creek Partnership (GCP) and its 40% interest in the Copper Canyon mineral property in British
Columbia, Canada collectively referred to herein as “Galore Creek”). As a result, the Company presents Galore Creek
as a discontinued operation for all periods presented. Accordingly, the Consolidated Statements of Loss and Comprehensive Loss
and Cash Flows have been reclassified to present Galore Creek as a discontinued operation for all periods presented, and the amounts
presented in these notes relate only to continuing operations unless otherwise noted. For additional information regarding discontinued
operations, see Note 4.
The Condensed Consolidated Interim Financial
Statements of NOVAGOLD are unaudited. In the opinion of management, all adjustments and disclosures necessary for a fair presentation
of these interim statements have been included. The results reported in these interim statements are not necessarily indicative
of the results that may be reported for the entire year. These interim statements should be read in conjunction with NOVAGOLD’s
Consolidated Financial Statements for the year ended November 30, 2018. The year-end balance sheet data was derived from the audited
financial statements and certain information and footnote disclosures required by United States generally accepted accounting principles
(US GAAP) have been condensed or omitted.
The functional currency for the Company’s
Canadian operations is the Canadian dollar and the functional currency for the Company’s U.S. operations is the U.S. dollar.
References in these Condensed Consolidated Financial Statements and Notes to $ refer to United States dollars and C$ to Canadian
dollars. Dollar amounts are in thousands, except for per share amounts.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recently adopted accounting
pronouncements
Restricted Cash
In November 2016, ASU No. 2016-18 was issued
related to the inclusion of restricted cash in the statement of cash flows. The new guidance requires that a statement of cash
flows present the change during the period in the total of cash, cash equivalents and amounts generally described as restricted
cash or restricted cash equivalents. This update is effective in fiscal years, including interim periods, beginning after December
15, 2017 and early adoption is permitted. The Company retrospectively adopted this guidance as of December 1, 2018. The Company
did not have restricted cash or restricted cash equivalents for the periods presented and adoption of this standard did not have
any impact on the Consolidated Financial Statements or disclosures.
Statement of Cash Flows
In August 2016, ASU No. 2016-15 was issued related
to the statement of cash flows. The Company adopted this new guidance effective December 1, 2018 and made an accounting policy
election to classify distributions received from its equity method investee, Donlin Gold LLC, using a cumulative earnings approach.
Distributions received will be considered returns on investment and classified as cash inflows from operating activities, unless
the cumulative distributions received less distributions received in prior periods that were determined to be returns of investment
exceed cumulative equity in earnings recognized. When such an excess occurs, the current-period distribution up to this excess
will be considered a return of investment and classified as cash inflows from investing activities. Adoption of this standard did
not have any impact on the Consolidated Financial Statements or disclosures.
NOVAGOLD RESOURCES INC.
|
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
|
(Unaudited, US dollars in thousands except per share amounts)
|
Classification and Measurement of Financial Instruments
In January 2016, ASU No. 2016-01 was issued
to amend the guidance on the classification and measurement of financial instruments, which was further amended in February 2018
by ASU No. 2018-03. The new guidance requires entities to measure equity investments that do not result in consolidation and are
not accounted for under the equity method at fair value and recognize any changes in fair value in net income. The new guidance
also amends certain disclosure requirements for these investments. The Company adopted this standard as of December 1, 2018 and
reclassified $378 of unrealized holding gains and deferred income taxes related to investments in marketable equity securities
from
Accumulated other comprehensive loss
to
Accumulated deficit
in the Consolidated Balance Sheets.
Recently issued accounting
pronouncements
Leases
In February 2016, ASU No. 2016-02 was issued
related to leases, which was further amended in September 2017 by ASU No. 2017-13, in January 2018 by ASU No. 2018-01, in July
2018 by ASU No. 2018-11, in December 2018 by ASU No. 2018-20 and in March 2019 by ASU No. 2019-01. The new guidance modifies the
classification criteria and requires lessees to recognize the assets and liabilities arising from most leases on the balance sheet.
The new guidance is effective for the Company’s fiscal year beginning December 1, 2019 and early adoption is permitted. The
Company will adopt the new guidance effective December 1, 2019. Adoption of this guidance is not expected to materially increase
the Company’s assets and liabilities.
Fair Value Disclosure Requirements
In August 2018, ASU No. 2018-13 was issued to
modify and enhance the disclosure requirements for fair value measurements. This update is effective in fiscal years, including
interim periods, beginning after December 1, 2020, and early adoption is permitted. The Company is currently evaluating this guidance
and the impact on its Consolidated Financial Statements and disclosures.
NOTE 3 – SEGMENTED INFORMATION
Operating segments are reported in a manner
consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who
is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive
Officer. The Chief Executive Officer considers the business from a geographic perspective considering the performance of our investments
in the Donlin Gold project in Alaska, USA (Note 6) and, prior to its disposal on July 27, 2018, the Galore Creek project in British
Columbia, Canada (Note 4).
NOTE 4 – DISCONTINUED OPERATIONS
Galore Creek Transaction
On July 27, 2018, the Company completed the
sale of its 50% interest in Galore Creek to Newmont Goldcorp Corporation (“Newmont”). The Company received $100,000
on closing; a note for $75,000 receivable upon the earlier of the completion of a new Galore Creek project pre-feasibility study
or July 27, 2021; a note for $25,000 receivable upon the earlier of the completion of a Galore Creek project feasibility study
or July 27, 2023; and an additional note for $75,000 receivable upon the approval of a Galore Creek project construction plan
by the owner(s). The Company has no remaining interest in Galore Creek.
The Company’s share of its investment
in GCP included the following:
|
|
Six months ended May 31,
|
|
|
2019
|
|
2018
|
Net loss from discontinued operations, net of tax:
|
|
|
|
|
Equity loss – GCP
|
|
$
|
—
|
|
|
$
|
647
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities of discontinued operations:
|
|
|
|
|
|
|
|
|
Funding of GCP
|
|
$
|
—
|
|
|
$
|
1,475
|
|
NOVAGOLD RESOURCES INC.
|
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
|
(Unaudited, US dollars in thousands except per share amounts)
|
NOTE 5 – NOTES RECEIVABLE
The Company has notes receivable from Newmont
including a $75,000 note receivable upon the earlier of the completion of a new Galore Creek project pre-feasibility study or July
27, 2021, and a $25,000 note receivable upon the earlier of the completion of a Galore Creek project feasibility study or July
27, 2023. On closing of the Galore Creek sale, the Company estimated the fair value of the $75,000 and $25,000 notes receivable
at $88,398, assuming payments in three and five years, respectively, at a discount rate of 3.6% based on quoted market values for
Newmont debt with a similar term. The carrying value of the notes receivable are being accreted to $75,000 and $25,000 over three
and five years, respectively. At May 31, 2019, the carrying value of the notes receivable was $91,050 including $2,652 of accumulated
accretion. A contingent note for $75,000 is receivable upon approval of a Galore Creek project construction plan by the owner(s).
No value was assigned to the final $75,000 contingent note receivable. The Company determined that Galore Creek project construction
approval was not probable as of the closing of the Galore Creek sale. The Company’s assessment did not change as of May 31,
2019.
NOTE 6 – INVESTMENT IN DONLIN GOLD
The Donlin Gold project is owned and operated
by Donlin Gold LLC, a limited liability company in which wholly-owned subsidiaries of Barrick and NOVAGOLD each own a 50% interest.
Donlin Gold LLC has a board of four directors, with two directors selected by Barrick and two directors selected by the Company.
All significant decisions related to Donlin Gold LLC require the approval of at least a majority of the Donlin Gold LLC board members.
Changes in the Company’s investment in
Donlin Gold LLC are summarized as follows:
|
|
Three months ended May 31,
|
|
Six months ended May 31,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Balance – beginning of period
|
|
$
|
783
|
|
|
$
|
993
|
|
|
$
|
1,209
|
|
|
$
|
1,100
|
|
Share of losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral property expenditures
|
|
|
(2,194
|
)
|
|
|
(2,901
|
)
|
|
|
(3,504
|
)
|
|
|
(4,736
|
)
|
Depreciation
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
(17
|
)
|
|
|
(10
|
)
|
|
|
|
(2,198
|
)
|
|
|
(2,905
|
)
|
|
|
(3,521
|
)
|
|
|
(4,746
|
)
|
Funding
|
|
|
2,909
|
|
|
|
3,736
|
|
|
|
3,806
|
|
|
|
5,470
|
|
Balance – end of period
|
|
$
|
1,494
|
|
|
$
|
1,824
|
|
|
$
|
1,494
|
|
|
$
|
1,824
|
|
The following amounts represent the Company’s
50% share of the assets and liabilities of Donlin Gold LLC. Donlin Gold LLC capitalized the initial contribution of the Donlin
Gold property as
Non-current assets: Mineral property
with a carrying value of $64,000, resulting in a higher carrying value
of the mineral property for Donlin Gold LLC than that of the Company.
|
|
At
May 31,
2019
|
|
At
November 30,
2018
|
Current assets: Cash, prepaid expenses and other receivables
|
|
$
|
1,955
|
|
|
$
|
1,872
|
|
Non-current assets: Property and equipment
|
|
|
198
|
|
|
|
10
|
|
Non-current assets: Mineral property
|
|
|
32,692
|
|
|
|
32,692
|
|
Current liabilities: Accounts payable and accrued liabilities
|
|
|
(659
|
)
|
|
|
(673
|
)
|
Non-current liabilities: Reclamation obligation
|
|
|
(692
|
)
|
|
|
(692
|
)
|
Net assets
|
|
$
|
33,494
|
|
|
$
|
33,209
|
|
NOTE 7 – PROMISSORY NOTE
The Company has a promissory note payable to
Barrick of $100,160, comprised of $51,576 in principal, and $48,584 in accrued interest at U.S. prime plus 2%. The promissory note
resulted from the agreement that led to the formation of Donlin Gold LLC, where the Company agreed to reimburse Barrick for a portion
of their expenditures incurred from April 1, 2006 to November 30, 2007. The promissory note and accrued interest are payable from
85% of the Company’s share of revenue from future mine production or from any net proceeds resulting from a reduction of
the Company’s interest in Donlin Gold LLC. The carrying value of the promissory note approximates fair value.
NOVAGOLD RESOURCES INC.
|
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
|
(Unaudited, US dollars in thousands except per share amounts)
|
NOTE 8 – FAIR VALUE ACCOUNTING
Financial instruments measured at fair value
are classified into one of three levels in the fair value hierarchy according to the significance of the inputs used in making
the measurement. The three levels of the fair value hierarchy are as follows:
Level 1
— Unadjusted quoted
prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2
— Quoted prices
in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of
the asset or liability; and
Level 3
— Prices or valuation
techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or
no market activity).
The Company’s marketable equity securities
are valued using quoted market prices in active markets and as such are classified within Level 1 of the fair value hierarchy.
The fair value of the marketable equity securities was $881 at May 31, 2019 ($839 at November 30, 2018), calculated as the quoted
market price of the marketable equity security multiplied by the quantity of shares held by the Company.
NOTE 9 – GENERAL AND ADMINISTRATIVE EXPENSES
|
|
Three months ended May 31,
|
|
Six months ended May 31,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Salaries and benefits
|
|
$
|
1,498
|
|
|
$
|
1,634
|
|
|
$
|
3,162
|
|
|
$
|
3,313
|
|
Share-based compensation (note 10)
|
|
|
1,542
|
|
|
|
1,942
|
|
|
|
3,073
|
|
|
|
3,891
|
|
Office expense
|
|
|
551
|
|
|
|
550
|
|
|
|
1,222
|
|
|
|
1,116
|
|
Professional Fees
|
|
|
360
|
|
|
|
216
|
|
|
|
590
|
|
|
|
415
|
|
Corporate communications and regulatory
|
|
|
261
|
|
|
|
549
|
|
|
|
501
|
|
|
|
835
|
|
Depreciation
|
|
|
3
|
|
|
|
5
|
|
|
|
7
|
|
|
|
11
|
|
|
|
$
|
4,215
|
|
|
$
|
4,896
|
|
|
$
|
8,555
|
|
|
$
|
9,581
|
|
NOTE 10 – SHARE-BASED COMPENSATION
|
|
Three months ended May 31,
|
|
Six months ended May 31,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Stock options
|
|
$
|
915
|
|
|
$
|
938
|
|
|
$
|
1,837
|
|
|
$
|
1,886
|
|
Performance share unit plan
|
|
|
583
|
|
|
|
957
|
|
|
|
1,153
|
|
|
|
1,909
|
|
Deferred share unit plan
|
|
|
44
|
|
|
|
47
|
|
|
|
83
|
|
|
|
96
|
|
|
|
$
|
1,542
|
|
|
$
|
1,942
|
|
|
$
|
3,073
|
|
|
$
|
3,891
|
|
NOVAGOLD RESOURCES INC.
|
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
|
(Unaudited, US dollars in thousands except per share amounts)
|
Stock options
A summary of stock options outstanding as of
May 31, 2019 and activity during the six months ended May 31, 2019 are as follows:
|
|
Number of stock options
(thousands)
|
|
Weighted- average
exercise price per share
|
|
Weighted- average
remaining contractual term
(years)
|
|
Aggregate intrinsic value
|
November 30, 2018
|
|
|
17,883
|
|
|
$
|
3.36
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,860
|
|
|
|
3.68
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(3,738
|
)
|
|
$
|
2.18
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(231
|
)
|
|
|
3.87
|
|
|
|
|
|
|
|
|
|
May 31, 2019
|
|
|
16,774
|
|
|
$
|
3.63
|
|
|
|
2.38
|
|
|
$
|
8,005
|
|
Vested and exercisable as of May 31, 2019
|
|
|
11,891
|
|
|
$
|
3.58
|
|
|
|
1.69
|
|
|
$
|
7,348
|
|
The following table summarizes other stock option-related
information:
|
|
Six months ended May 31,
|
|
|
2019
|
|
2018
|
Weighted-average assumptions used to value stock option awards:
|
|
|
|
|
|
|
|
|
Expected volatility
|
|
|
46.9
|
%
|
|
|
50
|
%
|
Expected term of options (years)
|
|
|
4
|
|
|
|
3
|
|
Expected dividend rate
|
|
|
—
|
|
|
|
—
|
|
Risk-free interest rate
|
|
|
2.7
|
%
|
|
|
1.8
|
%
|
Expected forfeiture rate
|
|
|
3.1
|
%
|
|
|
2.3
|
%
|
Weighted-average grant-date fair value
|
|
$
|
1.46
|
|
|
$
|
1.35
|
|
As of May 31, 2019, the Company had $4,051 of
unrecognized compensation cost related to 4,883,000 non-vested stock options expected to be recognized and vest over a period of
approximately 2.75 years. During the six months ended May 31, 2019, the intrinsic value of stock options exercised was $3,335 and
no cash was received.
Performance share units
A summary of PSU awards outstanding as of May
31, 2019 and activity during the six months ended May 31, 2019 is as follows:
|
|
Number of PSU awards
(thousands)
|
|
Weighted- average
grant day fair value per award
|
|
Aggregate intrinsic value
|
November 30, 2018
|
|
|
1,797
|
|
|
$
|
4.39
|
|
|
|
|
|
Granted
|
|
|
803
|
|
|
|
3.67
|
|
|
|
|
|
Vested
|
|
|
(764
|
)
|
|
|
4.58
|
|
|
|
|
|
Performance adjustment
|
|
|
(167
|
)
|
|
|
4.58
|
|
|
|
|
|
Cancelled
|
|
|
(5
|
)
|
|
|
3.76
|
|
|
|
|
|
May 31, 2019
|
|
|
1,664
|
|
|
$
|
3.76
|
|
|
$
|
6,415
|
|
As of May 31, 2019, the Company had $3,619 of
unrecognized compensation cost related to 1,664,000 non-vested PSU awards expected to be recognized and vest over a period of approximately
2.5 years.
NOVAGOLD RESOURCES INC.
|
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
|
(Unaudited, US dollars in thousands except per share amounts)
|
The following table summarizes other PSU-related
information:
|
|
Six months ended May 31,
|
|
|
2019
|
|
2018
|
Performance multiplier on PSUs vested
|
|
|
82
|
%
|
|
|
—
|
%
|
Common shares issued (thousands)
|
|
|
438
|
|
|
|
—
|
|
Total fair value of common shares issued
|
|
$
|
1,607
|
|
|
$
|
—
|
|
Withholding tax paid on PSUs vested
|
|
$
|
1,197
|
|
|
$
|
—
|
|
NOTE 11 – OTHER INCOME (EXPENSE)
|
|
Three months ended May 31,
|
|
Six months ended May 31,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Interest income
|
|
$
|
1,096
|
|
|
$
|
238
|
|
|
$
|
2,138
|
|
|
$
|
478
|
|
Accretion of notes receivable
|
|
|
796
|
|
|
|
—
|
|
|
|
1,591
|
|
|
|
—
|
|
Interest expense on promissory note
|
|
|
(1,861
|
)
|
|
|
(1,593
|
)
|
|
|
(3,659
|
)
|
|
|
(3,087
|
)
|
Foreign exchange gain (loss)
|
|
|
1,209
|
|
|
|
(2
|
)
|
|
|
823
|
|
|
|
(118
|
)
|
Change in fair market value of marketable securities
|
|
|
14
|
|
|
|
—
|
|
|
|
58
|
|
|
|
—
|
|
|
|
$
|
1,254
|
|
|
$
|
(1,357
|
)
|
|
$
|
951
|
|
|
$
|
(2,727
|
)
|
NOTE 12 – RELATED PARTY TRANSACTIONS
The Company provided technical services to Donlin
Gold LLC for $nil during the six months ended May 31, 2019 ($181 in 2018). As of May 31, 2019, the Company has accounts receivable
from Donlin Gold LLC of $44 (November 30, 2018: $247).
NOTE 13 – COMMITMENTS AND CONTINGENCIES
General
Estimated losses from loss contingencies are
accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable
that a liability could be incurred, and the amount of the loss can be reasonably estimated. Legal expenses associated with the
contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency
and estimated range of loss, if determinable, is made in the financial statements when it is at least reasonably possible that
a material loss could be incurred.
Obligations under operating
leases
The Company leases certain assets, such as office
equipment and office facilities, under operating leases expiring at various dates through 2023. Future minimum annual lease payments
are $113 in 2019, $199 in 2020, $204 in 2021, $210 in 2022, and $18 in 2023, totaling $744.
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
In
Management’s Discussion and Analysis of Financial Condition and Results of Operations, “NOVAGOLD”, the
“Company”, “we,” “us” and “our” refer to NOVAGOLD RESOURCES INC. and its
consolidated subsidiaries. The following discussion and analysis of our financial condition and results of operations
constitutes management’s review of the factors that affected our financial and operating performance for the three and
six month periods ended May 31, 2019 and May 31, 2018. This discussion should be read in conjunction with the condensed
consolidated interim financial statements and notes thereto contained elsewhere in this report and our Annual Report on Form
10-K for the year ended November 30, 2018, as well as other information we file with the Securities and Exchange Commission
on EDGAR at www.sec.gov
and with Canadian Securities Administrators on SEDAR at www.sedar.com
.
References herein to $ refer to United States dollars and C$ to Canadian dollars.
Overview
Our operations
primarily relate to the delivery of project milestones, including the achievement of various technical, environmental, sustainable
development, external affairs/community engagement, economic, and legal objectives; obtaining necessary permits, completion of
feasibility studies, preparation of engineering designs and obtaining financing to fund these milestones.
Our
goals for 2019 include:
|
·
|
Advance the Donlin Gold project toward a construction/production decision.
|
|
·
|
Maintain an effective corporate social responsibility program.
|
|
·
|
Promote a strong safety culture; maintain a zero lost time accident record.
|
|
·
|
Safeguard the Company’s treasury.
|
Second quarter highlights
Donlin Gold project
During the second quarter, Donlin Gold continued
to support the Alaska Department of Natural Resources (ADNR) to advance permits and certificates for the project.
ADNR’s Division of Mining, Land, and Water
(DMLW) issued preliminary land use decisions for public comment proposing to authorize facilities associated with the project’s
transportation corridor, including the access road and related material sites, airstrip, and upriver Jungjuk Port on January 28,
2019. 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.
ADNR’s approval of the Alaska Dam Safety
certificates for the tailings storage facility and water retention and diversion structures requires a thorough stepwise process
to deliver a final construction package to ADNR. The next step in the process is a site investigation and collection of additional
geotechnical information for the advancement of the engineering from a feasibility level to the final construction package. The
site investigation information will support a preliminary design package, detailed design package and ultimately the final construction
package each of which will be submitted to ADNR for final approval and issuance of the certificates. The camp was re-opened in
May 2019 and on-site preparations are underway for the start of the drill program. Drilling and other site work is expected to
commence in July 2019. This program will consist of geotechnical core drilling, test pits, overburden drilling, packer tests,
hydrogeologic test well installation and pumping tests, and geophysical surveys.
The Donlin
Gold LLC board must approve a construction program and budget before the Donlin Gold project can be developed. The timing of the
required engineering work and the Donlin Gold LLC board’s approval of a construction program and budget, the receipt of the
remaining state governmental permits and approvals, and the availability of financing, commodity price fluctuations, risks related
to market events and general economic conditions among other factors, will affect the timing of and whether to develop the Donlin
Gold project.
During 2018, a group called the Yukon-Kuskokwim River Alliance (YKRA) was formed with the purpose of protecting
salmon habitat in the Yukon-Kuskokwim Delta. This organization along with 12 of the 56 village councils in the Calista Region (Native
Village of Kasigluk, Orutsararmiut Native Council (ONC), Native Village of Eek, Tuluksak Native Community, Tununak Council, Native
Village of Nunapitchuk, Chuloonawick Tribal Council, Native Village of Kwigillingok, Native Village of Kongiganak, Chefornak Traditional
Council, Chevak Native Village, and Native Village of Napakiak) have adopted resolutions opposing development of the Donlin Gold
project. Earthjustice, speaking on behalf of ONC, Akiak Native Community IRA Council, Organized Village of Kwethluk, Native Village
of Kwigillingok, Chuloonawick Tribal Council, and the YKRA, requested an informal review of the State of Alaska’s 401 certification
(the “Certification”) by the Director of the Division of Water in the Alaska Department of Environmental Conservation
(ADEC). In October 2018, the Director responded to the request by deciding to conduct the informal review and reissued the Certification
on April 4, 2019. On April 24, 2019, Earthjustice requested a second informal review of the Certification and the request was granted
by ADEC on May 4, 2019. A decision on the second informal review of the Certification is expected by the end of 2019.
On February 7, 2019, Earthjustice speaking on
behalf of ONC, Akiak Native Community, Chefornak Traditional Council, Chevak Traditional Council, Chuloonawick Native Village,
Native Village of Eek, Kasigluk Traditional Council, Kongiganak Traditional Council, Organized Village of Kwethluk, Native Village
of Kwigillingok, Native Village of Nightmute, Sleetmute Traditional Council, Tuluksak Native Community, and Native Village of Tununak,
filed an administrative appeal of the Reclamation and Closure Plan Approval. ADNR is expected to issue a decision on the appeal
by the end of 2019. Additionally, on February 7, 2019, Earthjustice speaking on behalf of the same tribal entities as their appeal
of the Reclamation and Closure Plan Approval, requested an informal review by the Director of ADEC’s Division of Water of
the Waste Management Permit issuance. The request for review was granted by ADEC on March 1, 2019 and a decision is expected by
the end of 2019.
Donlin
Gold LLC, with support from NOVAGOLD and Barrick, remains actively engaged in environmental sustainability projects and extensive
outreach efforts with local stakeholders, through multiple traditional village council meetings, regional tribal gatherings, events
and village visits across the Yukon-Kuskokwim (Y-K) region. Donlin Gold LLC collaborated with Calista and TKC (owners of the mineral
and surface rights, respectively) on grants, scholarships and community outreach efforts. During the second quarter, we successfully
collected, processed and removed about 35,000 pounds of household hazardous material from eight Y-K villages in partnership with
local residents.
The owners of the Donlin Gold project (Barrick
and NOVAGOLD) continue to study ways to further improve the project’s value and to reduce initial capital outlays through
enhanced project design and execution, engagement of third-party operators for certain activities, and potential for financing
of some capital-intensive infrastructure. To date, these additional studies have furthered our geological understanding and identified
opportunities that have the potential to benefit the project were the owners to decide to update the Donlin Gold feasibility study
and initiate the engineering work necessary to advance the project design from feasibility level to basic and then detailed engineering.
Barrick and NOVAGOLD will take all this work into account before reaching a construction decision and will advance the Donlin Gold
project in a financially disciplined manner with a strong focus on environmental stewardship and social responsibility.
Our share of funding for the Donlin Gold project
in the first six months of 2019 was $3.8 million for technical work, permitting and community engagement efforts. Our share of
the total 2019 work program and budget is $13 million to continue to advance the project. The Alaska Dam Safety certificates require
additional fieldwork and more detailed engineering over the next two years and Donlin Gold LLC will continue to maintain its engagement
with communities throughout the Y-K region. Donlin Gold LLC spending is expected to increase in the second half of the year with
the commencement of fieldwork.
We record our interest in the Donlin Gold project
as an equity investment, which results in our 50% share of Donlin Gold’s expenses being recorded in the income statement
as an operating loss. The investment amount recorded on the balance sheet primarily represents unused funds advanced to Donlin
Gold LLC.
Outlook
We do
not
currently generate operating cash flows. At May 31, 2019, we had cash and cash equivalents of $18.0 million and term
deposits of $139.0 million. At present, we believe that these balances are sufficient to cover anticipated funding of the Donlin
Gold project as well as corporate general and administrative costs. Additional capital will be necessary if a decision to commence
engineering and construction is reached for the Donlin Gold project. Future financings to fund construction are anticipated through
debt, equity, project specific debt, and/or other means. Our continued operations are dependent on our ability to obtain additional
financing or to generate future cash flows. However, there can be no assurance that we will be successful in our efforts to raise
additional capital on terms favorable to us, or at all.
For further information, see the
r
isk factors in our Annual Report on Form 10-K for the year ended November 30, 2018,
as
filed with the SEC and the Canadian Securities Regulators on January 23, 2019.
For the
full
year, we expect to spend approximately $24 million, including $13 million to fund our share of expenditures at the Donlin Gold
project and $11 million for general and administrative costs.
Summary of Consolidated Financial Performance
|
|
Three months ended May 31,
|
|
Six months ended May 31,
|
($ thousands, except per share)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Loss from operations
|
|
|
(6,413
|
)
|
|
|
(7,801
|
)
|
|
|
(12,076
|
)
|
|
|
(14,327
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
|
(5,515
|
)
|
|
|
(9,237
|
)
|
|
|
(11,838
|
)
|
|
|
(17,199
|
)
|
Net loss from discontinued operations
|
|
|
—
|
|
|
|
(394
|
)
|
|
|
—
|
|
|
|
(647
|
)
|
Net loss
|
|
$
|
(5,515
|
)
|
|
$
|
(9,631
|
)
|
|
$
|
(11,838
|
)
|
|
$
|
(17,846
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share – basic and diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.02
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.06
|
)
|
Discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$
|
(0.02
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.06
|
)
|
Results of Operations
Second quarter 2019 compared to 2018
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.
First six months 2019 compared to 2018
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 ($0.00 per share) in 2018 resulted from our share of expenses at the Galore Creek project.
Liquidity, Capital Resources and Capital Requirements
($ thousands)
|
|
At
May 31,
2019
|
|
At
November 30,
2018
|
|
Change
|
Cash and cash equivalents
|
|
$
|
17,986
|
|
|
$
|
21,004
|
|
|
$
|
(3,018
|
)
|
Term deposits
|
|
$
|
139,000
|
|
|
$
|
146,000
|
|
|
$
|
(7,000
|
)
|
In the first
six
months
of 2019, total
Cash, cash equivalents
and
Term deposits
decreased by $9.9 million of which $4.9 million
was used in operating activities for administrative costs and working capital changes, $3.8 million was used to fund Donlin Gold
and $1.2 million related to withholding taxes paid on vested performance share units. The term deposits are denominated in U.S.
dollars and are held at Canadian chartered banks.
|
|
Three months ended May 31,
|
|
Six months ended May 31,
|
($ thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net cash (used in) provided from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
(1,760
|
)
|
|
$
|
(1,850
|
)
|
|
$
|
(4,910
|
)
|
|
$
|
(6,492
|
)
|
Investing activities
|
|
$
|
(2,909
|
)
|
|
$
|
264
|
|
|
$
|
3,194
|
|
|
$
|
(1,483
|
)
|
Financing activities
|
|
|
—
|
|
|
|
—
|
|
|
$
|
(1,197
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities of discontinued operations
|
|
|
—
|
|
|
$
|
(832
|
)
|
|
|
—
|
|
|
$
|
(1,475
|
)
|
Second quarter 2019 compared to 2018
Net 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 (used in) investing activities of continuing operations
included a $0.8 million decrease in Donlin
Gold funding due to lower permitting and optimization activities. In the second quarter of 2018, term deposits were reduced by
$4.0 million.
First six months 2019 compared to 2018
Net cash used in operating activities of
continuing operations
decreased by $1.6 million, primarily due to higher interest income.
Net cash provided from (used in)
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.
Outstanding share data
As of June 19, 2019, the Company had 325,559,330
common shares issued and outstanding. Also, as of June 19, 2019, the Company had: i) a total of 16,214,036 stock options outstanding;
8,250,369 of those stock options with a weighted-average exercise price of C$4.47 and the remaining 7,963,667 with a weighted-average
exercise price of $4.07; and ii) 1,664,100 performance share units and 285,323 deferred share units outstanding. Upon exercise
or pay out, as applicable, of the foregoing convertible securities, the Company would be required to issue a maximum of 18,995,509
common shares.
Accounting Developments
For a discussion of Recently Issued Accounting
Pronouncements, see Note 2 to the Condensed Consolidated Interim Financial Statements.