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 October 1, 2019. They are signed on the Company’s behalf by:
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
August 31,
|
|
|
Nine months ended
August 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(8,056
|
)
|
|
$
|
(88,625
|
)
|
|
$
|
(19,894
|
)
|
|
$
|
(106,471
|
)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from discontinued operations, net of tax
|
|
|
—
|
|
|
|
80,582
|
|
|
|
—
|
|
|
|
81,229
|
|
Equity loss – Donlin Gold
|
|
|
3,141
|
|
|
|
2,514
|
|
|
|
6,662
|
|
|
|
7,260
|
|
Share-based compensation
|
|
|
1,552
|
|
|
|
1,920
|
|
|
|
4,625
|
|
|
|
5,811
|
|
Interest expense on promissory note
|
|
|
1,887
|
|
|
|
1,657
|
|
|
|
5,546
|
|
|
|
4,744
|
|
Foreign exchange loss
|
|
|
782
|
|
|
|
205
|
|
|
|
(41
|
)
|
|
|
323
|
|
Deferred income tax expense (recovery)
|
|
|
169
|
|
|
|
(6
|
)
|
|
|
503
|
|
|
|
(41
|
)
|
Accretion of notes receivable
|
|
|
(805
|
)
|
|
|
(265
|
)
|
|
|
(2,396
|
)
|
|
|
(265
|
)
|
Other
|
|
|
(186
|
)
|
|
|
(302
|
)
|
|
|
(237
|
)
|
|
|
(285
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
225
|
|
|
|
235
|
|
|
|
603
|
|
|
|
297
|
|
Accounts payable and accrued liabilities
|
|
|
(29
|
)
|
|
|
(33
|
)
|
|
|
(273
|
)
|
|
|
(5
|
)
|
Accrued payroll and related benefits
|
|
|
947
|
|
|
|
656
|
|
|
|
(382
|
)
|
|
|
(551
|
)
|
Net cash used in operating activities of continuing operations
|
|
|
(373
|
)
|
|
|
(1,462
|
)
|
|
|
(5,284
|
)
|
|
|
(7,954
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from term deposits
|
|
|
40,000
|
|
|
|
20,000
|
|
|
|
166,000
|
|
|
|
56,000
|
|
Purchases of term deposits
|
|
|
—
|
|
|
|
(120,000
|
)
|
|
|
(119,000
|
)
|
|
|
(152,000
|
)
|
Funding of Donlin Gold
|
|
|
(3,840
|
)
|
|
|
(2,332
|
)
|
|
|
(7,646
|
)
|
|
|
(7,802
|
)
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(13
|
)
|
Net cash provided from (used in) investing activities of continuing operations
|
|
|
36,160
|
|
|
|
(102,332
|
)
|
|
|
39,354
|
|
|
|
(103,815
|
)
|
Net cash provided from investing activities of discontinued operations (Note 4)
|
|
|
—
|
|
|
|
99,279
|
|
|
|
—
|
|
|
|
97,804
|
|
Net cash provided from (used in) investing activities
|
|
|
36,160
|
|
|
|
(3,053
|
)
|
|
|
39,354
|
|
|
|
(6,011
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
108
|
|
|
|
(6
|
)
|
|
|
4
|
|
|
|
(33
|
)
|
Decrease in cash and cash equivalents
|
|
|
35,895
|
|
|
|
(4,521
|
)
|
|
|
32,877
|
|
|
|
(13,998
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
17,986
|
|
|
|
18,477
|
|
|
|
21,004
|
|
|
|
27,954
|
|
Cash and cash equivalents at end of period
|
|
$
|
53,881
|
|
|
$
|
13,956
|
|
|
$
|
53,881
|
|
|
$
|
13,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes receivable from the sale of Galore Creek (Note 5)
|
|
$
|
—
|
|
|
$
|
88,398
|
|
|
$
|
—
|
|
|
$
|
88,398
|
|
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)
|
|
Nine months ended August 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
|
|
Share-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,552
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,552
|
|
DSUs settled in shares
|
|
|
32
|
|
|
|
120
|
|
|
|
(120
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Stock options exercised
|
|
|
1,447
|
|
|
|
3,251
|
|
|
|
(3,251
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,056
|
)
|
|
|
—
|
|
|
|
(8,056
|
)
|
Other comprehensive income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
900
|
|
|
|
900
|
|
August 31, 2019
|
|
|
326,788
|
|
|
$
|
1,964,304
|
|
|
$
|
81,972
|
|
|
$
|
(1,877,198
|
)
|
|
$
|
(24,834
|
)
|
|
$
|
144,244
|
|
|
|
Nine months ended August 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
|
|
Share-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,920
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,920
|
|
DSUs settled in shares
|
|
|
61
|
|
|
|
293
|
|
|
|
(293
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Stock options exercised
|
|
|
146
|
|
|
|
389
|
|
|
|
(389
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(88,625
|
)
|
|
|
—
|
|
|
|
(88,625
|
)
|
Other comprehensive loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(16,250
|
)
|
|
|
(16,250
|
)
|
August 31, 2018
|
|
|
322,533
|
|
|
$
|
1,953,305
|
|
|
$
|
87,627
|
|
|
$
|
(1,851,388
|
)
|
|
$
|
(24,021
|
)
|
|
$
|
165,523
|
|
* 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, USA. 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.
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.
NOVAGOLD RESOURCES INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited, US dollars in thousands except per share amounts)
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. 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:
|
|
Nine months
ended August 31,
2018
|
|
Net income (loss) from discontinued operations, net of tax:
|
|
|
|
|
Equity loss – GCP
|
|
$
|
(1,203
|
)
|
Gain (loss) on sale of Galore Creek, net of tax
|
|
|
(80,026
|
)
|
|
|
$
|
(81,229
|
)
|
|
|
|
|
|
Net cash provided from (used in) investing activities of discontinued operations:
|
|
|
|
|
Funding of GCP
|
|
$
|
(1,475
|
)
|
Net cash proceeds received
|
|
|
99,279
|
|
|
|
$
|
97,804
|
|
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 values of the notes receivable are being accreted to $75,000 and $25,000 over three and five years, respectively. At August 31, 2019, the carrying value of the notes receivable was $91,855 including $3,457 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 August 31, 2019.
NOVAGOLD RESOURCES INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited, US dollars in thousands except per share amounts)
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 members, with two members selected by Barrick and two members 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 August 31,
|
|
|
Nine months ended August 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Balance – beginning of period
|
|
$
|
1,494
|
|
|
$
|
1,824
|
|
|
$
|
1,209
|
|
|
$
|
1,100
|
|
Share of losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral property expenditures
|
|
|
(3,125
|
)
|
|
|
(2,513
|
)
|
|
|
(6,629
|
)
|
|
|
(7,249
|
)
|
Depreciation
|
|
|
(16
|
)
|
|
|
(1
|
)
|
|
|
(33
|
)
|
|
|
(11
|
)
|
|
|
|
(3,141
|
)
|
|
|
(2,514
|
)
|
|
|
(6,662
|
)
|
|
|
(7,260
|
)
|
Funding
|
|
|
3,840
|
|
|
|
2,332
|
|
|
|
7,646
|
|
|
|
7,802
|
|
Balance – end of period
|
|
$
|
2,193
|
|
|
$
|
1,642
|
|
|
$
|
2,193
|
|
|
$
|
1,642
|
|
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
August 31,
2019
|
|
|
At
November 30,
2018
|
|
Current assets: Cash, prepaid expenses and other receivables
|
|
$
|
2,616
|
|
|
$
|
1,872
|
|
Non-current assets: Property and equipment
|
|
|
399
|
|
|
|
10
|
|
Non-current assets: Mineral property
|
|
|
32,692
|
|
|
|
32,692
|
|
Current liabilities: Accounts payable and accrued liabilities
|
|
|
(822
|
)
|
|
|
(673
|
)
|
Non-current liabilities: Reclamation obligation
|
|
|
(692
|
)
|
|
|
(692
|
)
|
Net assets
|
|
$
|
34,193
|
|
|
$
|
33,209
|
|
NOTE 7 – PROMISSORY NOTE
The Company has a promissory note payable to Barrick of $102,047, comprised of $51,576 in principal, and $50,471 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.
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:
NOVAGOLD RESOURCES INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited, US dollars in tho
usands except per share amounts)
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 $1,087 at August 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 August 31,
|
|
|
Nine months ended August 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Salaries and benefits
|
|
$
|
1,562
|
|
|
$
|
1,610
|
|
|
$
|
4,724
|
|
|
$
|
4,923
|
|
Share-based compensation (note 10)
|
|
|
1,552
|
|
|
|
1,920
|
|
|
|
4,625
|
|
|
|
5,811
|
|
Office expense
|
|
|
526
|
|
|
|
671
|
|
|
|
1,748
|
|
|
|
1,787
|
|
Professional fees
|
|
|
193
|
|
|
|
162
|
|
|
|
783
|
|
|
|
577
|
|
Corporate communications and regulatory
|
|
|
238
|
|
|
|
40
|
|
|
|
739
|
|
|
|
875
|
|
Depreciation
|
|
|
4
|
|
|
|
5
|
|
|
|
11
|
|
|
|
16
|
|
|
|
$
|
4,075
|
|
|
$
|
4,408
|
|
|
$
|
12,630
|
|
|
$
|
13,989
|
|
NOTE 10 – SHARE-BASED COMPENSATION
|
|
Three months ended August 31,
|
|
|
Nine months ended August 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Stock options
|
|
$
|
928
|
|
|
$
|
941
|
|
|
$
|
2,765
|
|
|
$
|
2,827
|
|
Performance share unit plan
|
|
|
585
|
|
|
|
939
|
|
|
|
1,738
|
|
|
|
2,848
|
|
Deferred share unit plan
|
|
|
39
|
|
|
|
40
|
|
|
|
122
|
|
|
|
136
|
|
|
|
$
|
1,552
|
|
|
$
|
1,920
|
|
|
$
|
4,625
|
|
|
$
|
5,811
|
|
Stock options
A summary of stock options outstanding as of August 31, 2019 and activity during the nine months ended August 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
|
|
|
(6,668
|
)
|
|
|
2.49
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(231
|
)
|
|
|
3.87
|
|
|
|
|
|
|
|
|
|
August 31, 2019
|
|
|
13,844
|
|
|
$
|
3.83
|
|
|
|
2.45
|
|
|
$
|
69,851
|
|
Vested and exercisable as of August 31, 2019
|
|
|
8,961
|
|
|
$
|
3.86
|
|
|
|
1.70
|
|
|
$
|
41,380
|
|
NOVAGOLD RESOURCES INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited, US dollars in thousands except per share amounts)
The following table summarizes other stock option-related information:
|
|
Nine months ended August 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 August 31, 2019, the Company had $3,163 of unrecognized compensation cost related to 4,883,000 non-vested stock options expected to be recognized and vest over a period of approximately 2.25 years. During the nine months ended August 31, 2019, the intrinsic value of stock options exercised was $14,872 and no cash was received.
Performance share units
A summary of PSU awards outstanding as of August 31, 2019 and activity during the nine months ended August 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
|
|
|
|
|
|
August 31, 2019
|
|
|
1,664
|
|
|
$
|
3.76
|
|
|
$
|
18,700
|
|
As of August 31, 2019, the Company had $3,097 of unrecognized compensation cost related to 1,664,000 non-vested PSU awards expected to be recognized and vest over a period of approximately 2.25 years.
The following table summarizes other PSU-related information:
|
|
Nine months ended August 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
|
|
|
$
|
—
|
|
NOVAGOLD RESOURCES INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited, US dollars in thousands except per share amounts)
NOTE 11 – OTHER INCOME (EXPENSE)
|
|
Three months ended August 31,
|
|
|
Nine months ended August 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Interest income
|
|
$
|
1,001
|
|
|
$
|
485
|
|
|
$
|
3,139
|
|
|
$
|
963
|
|
Accretion of notes receivable
|
|
|
805
|
|
|
|
265
|
|
|
|
2,396
|
|
|
|
265
|
|
Change in fair market value of marketable securities
|
|
|
190
|
|
|
|
—
|
|
|
|
248
|
|
|
|
—
|
|
Interest expense on promissory note
|
|
|
(1,887
|
)
|
|
|
(1,657
|
)
|
|
|
(5,546
|
)
|
|
|
(4,744
|
)
|
Foreign exchange gain (loss)
|
|
|
(782
|
)
|
|
|
(205
|
)
|
|
|
41
|
|
|
|
(323
|
)
|
Other income
|
|
|
92
|
|
|
|
—
|
|
|
|
92
|
|
|
|
—
|
|
|
|
$
|
(581
|
)
|
|
$
|
(1,112
|
)
|
|
$
|
370
|
|
|
$
|
(3,839
|
)
|
NOTE 12 – RELATED PARTY TRANSACTIONS
The Company provided technical services to Donlin Gold LLC for $nil during the nine months ended August 31, 2019 ($181 in 2018). As of August 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 2025. Future minimum annual lease payments are $56 in 2019, $302 in 2020, $337 in 2021, $345 in 2022, $155 in 2023, and $162 thereafter, totaling $1,357.