Item 1. Financial Statements
NOVAGOLD RESOURCES INC.
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
(Unaudited, US dollars in thousands)
|
|
As of
February 28,
2021
|
|
|
As of
November 30,
2020
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
63,193
|
|
|
$
|
60,906
|
|
Term deposits
|
|
|
51,000
|
|
|
|
61,000
|
|
Notes receivable (Note 4)
|
|
|
73,914
|
|
|
|
72,611
|
|
Other assets (Note 6)
|
|
|
1,136
|
|
|
|
1,869
|
|
Current assets
|
|
|
189,243
|
|
|
|
196,386
|
|
Notes receivable (Note 4)
|
|
|
22,956
|
|
|
|
23,405
|
|
Investment in Donlin Gold (Note 5)
|
|
|
3,592
|
|
|
|
2,614
|
|
Other assets (Note 6)
|
|
|
2,249
|
|
|
|
2,036
|
|
Total assets
|
|
$
|
218,040
|
|
|
$
|
224,441
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
Accounts payable and accrued liabilities
|
|
$
|
563
|
|
|
$
|
900
|
|
Accrued payroll and related benefits
|
|
|
627
|
|
|
|
2,215
|
|
Lease obligations
|
|
|
213
|
|
|
|
207
|
|
Other liabilities
|
|
|
187
|
|
|
|
187
|
|
Current liabilities
|
|
|
1,590
|
|
|
|
3,509
|
|
Promissory note (Note 7)
|
|
|
111,235
|
|
|
|
109,801
|
|
Lease obligations
|
|
|
355
|
|
|
|
404
|
|
Total liabilities
|
|
|
113,180
|
|
|
|
113,714
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
Common shares
|
|
|
1,974,266
|
|
|
|
1,972,029
|
|
Contributed surplus
|
|
|
80,277
|
|
|
|
81,203
|
|
Accumulated deficit
|
|
|
(1,926,585
|
)
|
|
|
(1,918,629
|
)
|
Accumulated other comprehensive loss
|
|
|
(23,098
|
)
|
|
|
(23,876
|
)
|
Total equity
|
|
|
104,860
|
|
|
|
110,727
|
|
Total liabilities and equity
|
|
$
|
218,040
|
|
|
$
|
224,441
|
|
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 March 31, 2021. They are signed on the Company’s behalf by:
/s/ Gregory A. Lang
|
/s/ Anthony P. Walsh
|
NOVAGOLD RESOURCES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Unaudited, US dollars in thousands except per share amounts)
|
|
Three months ended
|
|
|
|
February 28,
|
|
|
February 29,
|
|
|
|
2021
|
|
|
2020
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
General and administrative (Note 9)
|
|
$
|
5,329
|
|
|
$
|
4,714
|
|
Equity loss – Donlin Gold (Note 5)
|
|
|
1,968
|
|
|
|
1,568
|
|
|
|
|
7,297
|
|
|
|
6,282
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(7,297
|
)
|
|
|
(6,282
|
)
|
Interest expense on promissory note
|
|
|
(1,434
|
)
|
|
|
(1,760
|
)
|
Accretion of notes receivable
|
|
|
854
|
|
|
|
824
|
|
Other income (expense), net (Note 10)
|
|
|
(79
|
)
|
|
|
887
|
|
Loss before income taxes and other items
|
|
|
(7,956
|
)
|
|
|
(6,331
|
)
|
Income tax expense
|
|
|
—
|
|
|
|
(264
|
)
|
Net loss
|
|
|
(7,956
|
)
|
|
|
(6,595
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
778
|
|
|
|
(455
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(7,178
|
)
|
|
$
|
(7,050
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per common share – basic and diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
Basic and diluted (thousands)
|
|
|
331,295
|
|
|
|
328,286
|
|
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
|
|
|
|
February 28,
|
|
|
February 29,
|
|
|
|
2021
|
|
|
2020
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,956
|
)
|
|
$
|
(6,595
|
)
|
Adjustments:
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
2,042
|
|
|
|
1,761
|
|
Interest expense on promissory note
|
|
|
1,434
|
|
|
|
1,760
|
|
Equity loss – Donlin Gold
|
|
|
1,968
|
|
|
|
1,568
|
|
Accretion of notes receivable
|
|
|
(854
|
)
|
|
|
(824
|
)
|
Foreign exchange (gain) loss
|
|
|
483
|
|
|
|
(378
|
)
|
Change in fair value of marketable securities
|
|
|
(226
|
)
|
|
|
8
|
|
Deferred income tax expense
|
|
|
—
|
|
|
|
173
|
|
Other operating adjustments
|
|
|
2
|
|
|
|
4
|
|
Net change in operating assets and liabilities (Note 12)
|
|
|
(1,179
|
)
|
|
|
(974
|
)
|
Net cash used in operating activities
|
|
|
(4,286
|
)
|
|
|
(3,497
|
)
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
Proceeds from term deposits
|
|
|
35,000
|
|
|
|
35,000
|
|
Purchases of term deposits
|
|
|
(25,000
|
)
|
|
|
(35,000
|
)
|
Funding of Donlin Gold
|
|
|
(2,946
|
)
|
|
|
(2,600
|
)
|
Net cash provided by (used in) investing activities
|
|
|
7,054
|
|
|
|
(2,600
|
)
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
Withholding tax on share-based compensation
|
|
|
(731
|
)
|
|
|
(1,652
|
)
|
Net cash used in financing activities
|
|
|
(731
|
)
|
|
|
(1,652
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
250
|
|
|
|
(101
|
)
|
Net change in cash and cash equivalents
|
|
|
2,287
|
|
|
|
(7,850
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
60,906
|
|
|
|
67,549
|
|
Cash and cash equivalents at end of period
|
|
$
|
63,193
|
|
|
$
|
59,699
|
|
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)
|
|
Common shares
|
|
|
Contributed
|
|
|
Accumulated
|
|
|
|
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
surplus
|
|
|
deficit
|
|
|
AOCL*
|
|
|
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2019
|
|
|
327,630
|
|
|
$
|
1,965,573
|
|
|
$
|
82,254
|
|
|
$
|
(1,885,065
|
)
|
|
$
|
(24,808
|
)
|
|
$
|
137,954
|
|
Share-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,761
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,761
|
|
Performance share units (PSUs) settled in shares
|
|
|
410
|
|
|
|
1,026
|
|
|
|
(1,026
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Stock options exercised
|
|
|
560
|
|
|
|
1,618
|
|
|
|
(1,618
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Withholding tax on PSUs
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,652
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,652
|
)
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,595
|
)
|
|
|
—
|
|
|
|
(6,595
|
)
|
Other comprehensive income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(455
|
)
|
|
|
(455
|
)
|
February 29, 2020
|
|
|
328,600
|
|
|
$
|
1,968,217
|
|
|
$
|
79,719
|
|
|
$
|
(1,891,660
|
)
|
|
$
|
(25,263
|
)
|
|
$
|
131,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2020
|
|
|
330,412
|
|
|
$
|
1,972,029
|
|
|
$
|
81,203
|
|
|
$
|
(1,918,629
|
)
|
|
$
|
(23,876
|
)
|
|
$
|
110,727
|
|
Share-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
2,042
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,042
|
|
PSUs settled in shares
|
|
|
574
|
|
|
|
1,460
|
|
|
|
(1,460
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Stock options exercised
|
|
|
345
|
|
|
|
777
|
|
|
|
(777
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Withholding tax on PSUs
|
|
|
—
|
|
|
|
—
|
|
|
|
(731
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(731
|
)
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,956
|
)
|
|
|
—
|
|
|
|
(7,956
|
)
|
Other comprehensive income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
778
|
|
|
|
778
|
|
February 28, 2021
|
|
|
331,331
|
|
|
$
|
1,974,266
|
|
|
$
|
80,277
|
|
|
$
|
(1,926,585
|
)
|
|
$
|
(23,098
|
)
|
|
$
|
104,860
|
|
* 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”).
The Condensed Consolidated Interim Financial Statements (“interim 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, 2020. 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 United States dollar. References in these Condensed Consolidated Interim 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
In August 2018, Accounting Standards Update (“ASU”) No. 2018-13 was issued to modify and enhance the disclosure requirements for fair value measurements. The Company adopted this standard on December 1, 2020. Adoption of this guidance did not impact the Company’s note 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 with a single segment considering the performance of our investment in the Donlin Gold project in Alaska, USA (Note 5).
NOTE 4 – 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. As of February 28, 2021, the carrying value of the notes receivable was $96,870 including $8,472 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 February 28, 2021.
NOTE 5 – 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 NOVAGOLD and Barrick 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.
NOVAGOLD RESOURCES INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited, US dollars in thousands except per share amounts)
Changes in the Company’s Investment in Donlin Gold are summarized as follows:
|
|
Three months ended
|
|
|
|
February 28,
|
|
|
February 29,
|
|
|
|
2021
|
|
|
2020
|
|
Balance – beginning of period
|
|
$
|
2,614
|
|
|
$
|
1,840
|
|
Share of losses
|
|
|
|
|
|
|
|
|
Mineral property expenditures
|
|
|
(1,901
|
)
|
|
|
(1,543
|
)
|
Depreciation
|
|
|
(67
|
)
|
|
|
(25
|
)
|
|
|
|
(1,968
|
)
|
|
|
(1,568
|
)
|
Funding
|
|
|
2,946
|
|
|
|
2,600
|
|
Balance – end of period
|
|
$
|
3,592
|
|
|
$
|
2,872
|
|
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.
|
|
As of
February 28,
|
|
|
As of
November 30,
|
|
|
|
2021
|
|
|
2020
|
|
Current assets: Cash, prepaid expenses and other receivables
|
|
$
|
3,672
|
|
|
$
|
2,654
|
|
Non-current assets: Property and equipment
|
|
|
1,320
|
|
|
|
1,339
|
|
Non-current assets: Mineral property
|
|
|
32,615
|
|
|
|
32,615
|
|
Current liabilities: Accounts payable and accrued liabilities
|
|
|
(1,307
|
)
|
|
|
(1,271
|
)
|
Non-current liabilities: Reclamation and lease obligations
|
|
|
(708
|
)
|
|
|
(723
|
)
|
Net assets
|
|
$
|
35,592
|
|
|
$
|
34,614
|
|
NOTE 6 – OTHER ASSETS
|
|
As of
February 28,
2021
|
|
|
As of
November 30,
2020
|
|
Other current assets:
|
|
|
|
|
|
|
|
|
Accounts and interest receivable
|
|
$
|
98
|
|
|
$
|
577
|
|
Prepaid expenses
|
|
|
1,038
|
|
|
|
1,292
|
|
|
|
$
|
1,136
|
|
|
$
|
1,869
|
|
|
|
|
|
|
|
|
|
|
Other long-term assets:
|
|
|
|
|
|
|
|
|
Marketable equity securities
|
|
$
|
1,661
|
|
|
$
|
1,402
|
|
Right-of-use assets
|
|
|
556
|
|
|
|
600
|
|
Office equipment
|
|
|
32
|
|
|
|
34
|
|
|
|
$
|
2,249
|
|
|
$
|
2,036
|
|
NOTE 7 – PROMISSORY NOTE
The Company has a promissory note payable to Barrick of $111,235, comprised of $51,576 in principal, and $59,659 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 $1,661 at February 28, 2021 ($1,402 at November 30, 2020), 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 EXPENSE
|
|
Three months ended
|
|
|
|
February 28,
|
|
|
February 29,
|
|
|
|
2021
|
|
|
2020
|
|
Share-based compensation (Note 11)
|
|
$
|
2,042
|
|
|
$
|
1,761
|
|
Salaries and benefits
|
|
|
1,768
|
|
|
|
1,634
|
|
Office expense
|
|
|
589
|
|
|
|
620
|
|
Corporate communications and regulatory
|
|
|
309
|
|
|
|
402
|
|
Professional fees
|
|
|
619
|
|
|
|
295
|
|
Depreciation
|
|
|
2
|
|
|
|
2
|
|
|
|
$
|
5,329
|
|
|
$
|
4,714
|
|
NOTE 10 – OTHER INCOME (EXPENSE), NET
|
|
Three months ended
|
|
|
|
February 28,
|
|
|
February 29,
|
|
|
|
2021
|
|
|
2020
|
|
Interest income
|
|
$
|
178
|
|
|
$
|
517
|
|
Foreign exchange gain (loss)
|
|
|
(483
|
)
|
|
|
378
|
|
Change in fair market value of marketable securities
|
|
|
226
|
|
|
|
(8
|
)
|
|
|
$
|
(79
|
)
|
|
$
|
887
|
|
NOTE 11 – SHARE-BASED COMPENSATION
|
|
Three months ended
|
|
|
|
February 28,
|
|
|
February 29,
|
|
|
|
2021
|
|
|
2020
|
|
Stock options
|
|
$
|
1,193
|
|
|
$
|
1,068
|
|
Performance share unit plan
|
|
|
796
|
|
|
|
644
|
|
Deferred share unit plan
|
|
|
53
|
|
|
|
49
|
|
|
|
$
|
2,042
|
|
|
$
|
1,761
|
|
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 and activity during the three months ended February 28, 2021 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, 2020
|
|
|
10,403
|
|
|
$
|
4.59
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,218
|
|
|
|
9.96
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(557
|
)
|
|
|
3.90
|
|
|
|
|
|
|
|
|
|
February 28, 2021
|
|
|
11,064
|
|
|
$
|
5.23
|
|
|
|
2.43
|
|
|
$
|
36,884
|
|
Vested and exercisable as of February 28, 2021
|
|
|
7,620
|
|
|
$
|
4.31
|
|
|
|
1.80
|
|
|
$
|
30,818
|
|
The following table summarizes other stock option-related information:
|
|
Three months ended
|
|
|
|
February 28,
|
|
|
February 29,
|
|
|
|
2021
|
|
|
2020
|
|
Weighted-average assumptions used to value stock option awards:
|
|
|
|
|
|
|
|
|
Expected volatility
|
|
|
47.3
|
%
|
|
|
46.0
|
%
|
Expected term of options (years)
|
|
|
4
|
|
|
|
4
|
|
Expected dividend rate
|
|
|
—
|
|
|
|
—
|
|
Risk-free interest rate
|
|
|
0.3
|
%
|
|
|
1.6
|
%
|
Expected forfeiture rate
|
|
|
3.0
|
%
|
|
|
3.1
|
%
|
Weighted-average grant-date fair value
|
|
$
|
3.66
|
|
|
$
|
2.60
|
|
Intrinsic value of options exercised
|
|
$
|
3,505
|
|
|
$
|
4,879
|
|
Cash received from options exercised
|
|
$
|
—
|
|
|
$
|
—
|
|
As of February 28, 2021, the Company had $6,022 of unrecognized compensation cost related to 3,444,000 non-vested stock options expected to be recognized and vest over a period of approximately 2.75 years.
Performance share units
A summary of PSU awards outstanding and activity during the three months ended February 28, 2021 are as follows:
|
|
Number of
PSU awards
(thousands)
|
|
|
Weighted-
average
grant day
fair value
per award
|
|
|
Aggregate
intrinsic
value
|
|
November 30, 2020
|
|
|
1,684
|
|
|
$
|
4.59
|
|
|
|
|
|
Granted
|
|
|
331
|
|
|
|
10.07
|
|
|
|
|
|
Vested
|
|
|
(648
|
)
|
|
|
3.85
|
|
|
|
|
|
Performance adjustment
|
|
|
216
|
|
|
|
3.85
|
|
|
|
|
|
February 28, 2021
|
|
|
1,583
|
|
|
$
|
5.94
|
|
|
$
|
16,906
|
|
As of February 28, 2021, the Company had $5,820 of unrecognized compensation cost related to 1,583,100 non-vested PSU awards expected to be recognized and vest over a period of approximately 2.75 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:
|
|
Three months ended
|
|
|
|
February 28,
|
|
|
February 29,
|
|
|
|
2021
|
|
|
2020
|
|
Performance multiplier on PSUs vested
|
|
|
150
|
%
|
|
|
150
|
%
|
Common shares issued (thousands)
|
|
|
574
|
|
|
|
410
|
|
Total fair value of common shares issued
|
|
$
|
5,723
|
|
|
$
|
2,855
|
|
Withholding tax paid on PSUs vested
|
|
$
|
731
|
|
|
$
|
1,652
|
|
NOTE 12 – NET CHANGE IN OPERATING ASSETS AND LIABILITIES
|
|
Three months ended
|
|
|
|
February 28,
|
|
|
February 29,
|
|
|
|
2021
|
|
|
2020
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Other assets
|
|
$
|
768
|
|
|
$
|
772
|
|
Accounts payable and accrued liabilities
|
|
|
(355
|
)
|
|
|
(288
|
)
|
Accrued payroll and related benefits
|
|
|
(1,592
|
)
|
|
|
(1,458
|
)
|
|
|
$
|
(1,179
|
)
|
|
$
|
(974
|
)
|
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-month periods ended February 28, 2021 and February 29, 2020. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto contained elsewhere in this report and our Annual Report on Form 10-K for the year ended November 30, 2020, 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, economic and legal objectives, obtaining necessary permits, completion of feasibility studies, preparation of engineering designs and the financing to fund these objectives.
Our goals for 2021 include:
|
●
|
Continue to advance the Donlin Gold project toward a construction decision.
|
|
●
|
Maintain/increase support for Donlin Gold among native entities and other stakeholders.
|
|
●
|
Promote a strong safety, sustainability and environmental culture.
|
|
●
|
Maintain a favorable reputation of the Company, its governance practices, and its project among shareholders.
|
|
●
|
Manage the Company treasury effectively and efficiently, including streamlining the corporate structure.
|
First quarter highlights
COVID-19 response
The Company has implemented policies at its offices in Salt Lake City and Vancouver designed to ensure the safety and well-being of all employees and the people associated with them. In that regard, to reduce risk, our employees have been asked to work remotely, avoid all non-essential travel, adhere to good hygiene practices, and engage in physical distancing. Donlin Gold continues to provide COVID relief support in collaboration with The Kuskokwim Corporation (TKC), Calista Corporation (“Calista”) and many tribal governments.
Continuation of the COVID-19 pandemic in 2021 could impact employee health, workforce productivity, insurance premiums, ability to travel, the availability of industry experts and personnel, restrictions or delays to field work and studies, and other factors that will depend on future developments that may be beyond our control.
Community engagement
To date, Donlin Gold LLC has signed six Friendship Agreements with villages in the Yukon-Kuskokwim (Y-K) region (Akiak, Sleetmute, Napaimute, Crooked Creek, Napaskiak, and Nikolai) that formalize current engagement with key local communities. These agreements with Donlin Gold expand upon the long-term relationships already established with these communities and address specific community needs such as water, sewer, and landfill projects; the ice road that connects remote villages in the Yukon-Kuskokwim (Y-K) region; salmon studies; and suicide prevention programs.
As a neighbor to others in the Y-K region and as a team largely made up of people from the area, Donlin Gold strives to aid communities with support and resources, particularly when health and safety are of concern. Donlin Gold is committed to support the needs of its community partners. In January 2021, the village of Tuluksak’s water purification plant was destroyed by fire, creating a health and safety crisis for the community. Donlin Gold, and several other community organizations, companies, and individuals stepped in to assist, providing drinking water, equipment, and other health supplies.
In partnership with TKC, the Village of Crooked Creek, and Napaimute Tribe, Donlin Gold was again the lead sponsor of a project to construct and maintain the upper portions of an ice road on the Kuskokwim River. Donlin Gold also provided technical data to assist the roadbuilder, including aerial photographs and ice measurements along the river. The road greatly improved safety and access to nearby communities for residents in remote locations. At its completion in February 2021, the Kuskokwim ice road was approximately 200 miles long.
Permitting
In April 2020, the Alaska Department of Natural Resources’ (ADNR) Division of Oil and Gas agreed to reconsider its decision on the State Right-of-Way (ROW) agreement and lease authorization for the buried natural gas pipeline. Under the reconsideration, on September 10, 2020, the ADNR issued for additional public comment a revised Consideration of Comments document. This document further describes how the ADNR is considering previous public input that was solicited in the ROW review, including how cumulative effects are addressed in the decision. The comment period on the document ended on November 9, 2020 and we expect the ADNR to re-issue the ROW agreement and lease authorization in the first half of 2021.
The State’s Clean Water Act (CWA) Section 401 certification of the Federal CWA Section 404 permit was formally appealed to the Commissioner of the Alaska Department of Environmental Conservation in June 2020. The appeal focuses on three narrow issues related to compliance with the State’s water quality standards near the proposed mine site. Donlin Gold and its litigation team are actively involved in the process and are working with the State to respond to the appeal issues. We expect that the Commissioner will issue his decision on the appeal in the first half of 2021.
In November 2020, the ADNR published an initial public notice for comment on Donlin Gold’s 12 applications for water rights for the mine site and transportation facilities, which closed on December 15, 2020. Water rights are for local surface water sources and groundwater to be used for process water, dust control, fire protection, and potable water. In March 2021, the ADNR introduced a second two-week public notice period, which closed on March 26, 2021. We anticipate the ADNR will issue final decisions on the water rights applications in the first half of 2021.
Donlin Gold, working with its Native Corporation partners, continues to support the State of Alaska to advance other permits and certificates needed for the project. The field work related to the issuance of the Alaska Dam Safety certificates was temporarily paused to concentrate on the 2020 drill program.
Donlin Gold is fortunate to have time-tested partnerships with Calista and TKC, owners of the mineral and surface rights, respectively. The project’s location on private land specially designated for mining activities through the 1971 Alaska Native Claims Settlement Act, is a key attribute that distinguishes it from most other mining assets in Alaska. Our commitment to meaningful tribal consultation throughout project development and permitting has been tested over decades of reliable and dependable engagement with the community. We are proud to provide significant economic and social benefits to the Y-K region.
Donlin Gold project
Additional confirmation and extension drilling are being planned for 2021 focusing on further testing, orebody continuity, structural control, and geotechnical and geometallurgical data collection and analysis. The drilling program specifics will be finalized once all assay results for the 2020 drill program have been integrated into an interim model update. The newly obtained data will be incorporated into the geologic and resource model and should lead the owners to determine updated mining schedules and life of mine business plans. Ultimately, the information should assist in determining the next steps to update the Donlin Gold feasibility study and initiate the engineering work necessary to advance the project design before reaching a construction decision. The owners will advance the Donlin Gold project in a financially disciplined manner with a strong focus on engineering excellence, environmental stewardship, a strong safety culture and continued community engagement.
Our share of funding for the Donlin Gold project in the first quarter of 2021 was $2.9 million. In 2021, we continue to expect our share of Donlin Gold LLC funding to be $18 to $22 million, including: $11 million for follow-up drilling, camp improvements and studies; $7 million for permitting, community engagement and administration; and an additional $4 million for other studies contingent upon mid-year approval by both owners.
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 all required 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. Among other reasons, project delays could occur as a result of public opposition, litigation challenging permit decisions, requests for additional information or analysis, limitations in agency staff resources during regulatory review and permitting, project changes made by Donlin Gold LLC, or any impact on operations from COVID-19.
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.
Outlook
We do not currently generate operating cash flows. As of February 28, 2021, we had cash and cash equivalents of $63.2 million and term deposits of $51.0 million. In July 2021, we expect to receive $75 million from the first note receivable from Newmont resulting from the sale of our 50% interest in the Galore Creek project in 2018. Our anticipated expenditures in 2021 are $31 to $35 million, including $18 to $22 million to fund the Donlin Gold project and $13 million for corporate general and administrative costs. At present, we believe we have sufficient working capital available for the next twelve-month period to cover anticipated funding of the Donlin Gold project and corporate general and administrative costs.
Additional capital will be necessary if a decision to commence engineering and construction is reached for the Donlin Gold project. Future financings to fund construction are anticipated through debt, equity, project specific debt, and/or other means. Our continued operations are dependent on our ability to obtain additional financing or to generate future cash flows. However, there can be no assurance that we will be successful in our efforts to raise additional capital on terms favorable to us, or at all. For further information, see the risk factors in our Annual Report on Form 10-K for the year ended November 30, 2020, as filed with the SEC and the Canadian Securities Regulators on January 29, 2021.
Summary of Consolidated Financial Performance
|
|
Three months ended
|
|
|
|
February 28,
|
|
|
February 29,
|
|
($ thousands, except per share)
|
|
2021
|
|
|
2020
|
|
General and administrative
|
|
$
|
(5,329
|
)
|
|
$
|
(4,714
|
)
|
Equity loss - Donlin Gold
|
|
|
(1,968
|
)
|
|
|
(1,568
|
)
|
Loss from operations
|
|
$
|
(7,297
|
)
|
|
$
|
(6,282
|
)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,956
|
)
|
|
$
|
(6,595
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per common share – basic and diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
Results of Operations
First quarter 2021 compared to 2020
General and administrative expense increased from $4.7 million in 2020 to $5.3 million in 2021 primarily due to higher share-based compensation costs, salaries, and legal fees. Equity loss – Donlin Gold increased from $1.6 million in 2020 to $1.9 million in 2021 due to the completion of the 2020 drill program assays in the first quarter of 2021.
Liquidity, Capital Resources and Capital Requirements
|
|
As of
|
|
|
As of
|
|
|
|
|
|
($ thousands)
|
|
February 28,
2021
|
|
|
November 30,
2020
|
|
|
Change
|
|
Cash and cash equivalents
|
|
$
|
63,193
|
|
|
$
|
60,906
|
|
|
$
|
2,287
|
|
Term deposits
|
|
|
51,000
|
|
|
|
61,000
|
|
|
|
(10,000
|
)
|
|
|
$
|
114,193
|
|
|
$
|
121,906
|
|
|
$
|
(7,713
|
)
|
In the first three months of 2021, total Cash, cash equivalents and Term deposits decreased by $7.7 million of which $4.3 million was used in operating activities for administrative costs and working capital changes, $2.9 million was used to fund Donlin Gold and $0.7 million related to withholding taxes paid on vested performance share units (PSUs). Effects of exchange rate changes on cash held in Canadian dollars increased cash by $0.3 million. The term deposits are denominated in U.S. dollars and are held at Canadian chartered banks.
|
|
Three months ended
|
|
|
|
February 28,
|
|
|
February 29,
|
|
($ thousands, except per share)
|
|
2021
|
|
|
2020
|
|
Net cash (used in) provided from:
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
(4,286
|
)
|
|
$
|
(3,497
|
)
|
Funding of Donlin Gold
|
|
$
|
(2,946
|
)
|
|
$
|
(2,600
|
)
|
Withholding tax on share-based compensation
|
|
$
|
(731
|
)
|
|
$
|
(1,652
|
)
|
First quarter 2021 compared to 2020
Net cash used in operating activities of continuing operations increased by $0.8 million, due to lower interest income and higher general and administrative costs. Net cash provided from (used in) investing activities included a $0.3 million increase in Donlin Gold funding due to the work in completing the 2020 drill program assays. In the first quarter of 2021, term deposits were reduced by $10 million, with the proceeds deposited in interest-bearing savings accounts.
Outstanding share data
As of March 24, 2021, the Company had 331,331,184 common shares issued and outstanding. Also, as of March 24, 2021, the Company had: i) a total of 11,064,437 stock options outstanding; 9,538,839 with a weighted-average exercise price of $5.22 and the remaining 1,525,598 of those stock options with a weighted-average exercise price of C$6.80; and ii) 1,583,100 PSUs and 291,647 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 13,730,734 common shares.