Item 1.01 Entry into a Material Definitive Agreement
On July 25, 2018, NOVAGOLD RESOURCES INC.
(the “Company”), Newmont Mining Corporation (“Newmont”) and Newmont Canada FN Holdings ULC (“Newmont
Canada”) entered into a share purchase agreement (the “SPA”) whereby the Company agreed to sell to Newmont Canada
(i) all of its interests in its directly wholly-owned subsidiary, NovaGold Canada Inc. (“NovaGold Canada”), (ii) all
of its interests in its directly and indirectly wholly-owned subsidiary Copper Canyon Resources Ltd. (“CCR”) and (iii)
an intercompany receivable owing from NovaGold Canada to the Company in aggregate principal amount of approximately CAD$356,000,000
bearing interest at a rate of 5%
per annum
, for aggregate consideration of up to $275,000,000, subject to the terms and
conditions of the SPA.
On July 27, 2018 (the “Closing Date”),
the parties closed the transactions contemplated by the SPA.
As of closing, the Company, through NovaGold
Canada, owned 50% of the interests in the Galore Creek Partnership (“GCP”), which indirectly owned the Galore Creek
project (the “Galore Creek Project”) and a partial interest in CCR. As of closing, the Company also directly owned
the rest of the interests in CCR, which held the Copper Canyon property through a joint venture with the GCP. Thus, under the SPA,
the Company agreed to sell all of its interests in the Galore Creek Project and the Copper Canyon property to Newmont Canada.
Pursuant to the SPA, the aggregate consideration
of $275,000,000 consisted of:
|
·
|
$100,000,000, which was
received at closing on the Closing Date;
|
|
·
|
a promissory note in
the amount of $75,000,000, payable upon the earlier of (i) completion of a pre-feasibility study in respect of the Galore Creek
Project by the GCP and (ii) three years from the Closing Date;
|
|
·
|
a promissory note in
the amount of $25,000,000, payable upon the earlier of (i) completion of a feasibility study in respect of the Galore Creek Project
by the GCP and (ii) five years from the Closing Date; and
|
|
·
|
a promissory note in
the amount of $75,000,000, payable upon the earlier of (i) a final decision by the GCP (or its successor) to develop the Galore
Creek Project and (ii) initiation by the owner(s) of the Galore Creek Project of construction of a mine, mill or any related infrastructure
for the Galore Creek Project.
|
Newmont also agreed to guarantee the obligations
of Newmont Canada pursuant to the terms, conditions and limitations set forth in the SPA.
In accordance with the SPA, at or prior
to closing, the Company received written confirmation from Teck Resources Limited (“Teck”), as successor in interest
to Teck Cominco Metals Ltd. (“Teck Cominco”) (i) regarding Teck’s waiver of its right of first refusal under
the Galore Creek Partnership General Partnership Agreement among the Company, NovaGold Canada, Teck Cominco, Galore Creek Mining
Corporation, and Teck Cominco Limited dated August 1, 2007, as amended from time to time (the “GCP GP Agreement”),
(ii) that each of the Company and NovaGold Canada is released from and has no additional or ongoing obligations under the contribution
agreement dated August 1, 2007 among the Company, NovaGold Canada, GCP, Teck Cominco, and Teck Cominco Limited, as amended from
time to time (the “Contribution Agreement”), (iii) no new cash call advances for the Galore Creek Project would be
made prior to closing, and (iv) it has no claims against the Company or NovaGold Canada under either the GCP GP Agreement or the
Contribution Agreement.
Additionally, in accordance with the SPA,
at or prior to closing, (i) Teck and Newmont Canada entered into an amended and restated general partnership agreement with respect
to the GCP, and (ii) Newmont or an affiliate assumed all obligations of the Company under the guarantees provided by the Company
pursuant to the GCP GP Agreement and (iii) Teck released the Company from all liability in connection with such obligations.
Each of the parties also made customary
representations, warranties, indemnities and covenants pursuant to the SPA.