NOVAGOLD RESOURCES INC. (TSX:NG)(NYSE MKT:NG) announced results for
its first quarter ended February 28, 2013 and gave an update on the
permitting process for its flagship Donlin Gold project in Alaska.
With approximately US$300 million in cash and cash equivalents at
the end of the first quarter, NOVAGOLD has a strong balance sheet
and more than sufficient cash to fulfill all of its current
financial obligations as well as fund the advancement of the Donlin
Gold project through the permitting process and support ongoing
activities at its Galore Creek project in British Columbia.
Details of the Company's financial results are described in the
Unaudited Interim Condensed Consolidated Financial Statements and
Management's Discussion and Analysis (MDA) which, together with
further details on each of the Company's projects, including
resource and reserve estimates, will be available on the Company's
website at www.novagold.com, on SEDAR at www.sedar.com, and on
EDGAR at www.sec.gov. All amounts are in Canadian dollars unless
otherwise stated and all resource and reserve estimates are shown
on a 100% project basis.
During the First Quarter in 2013, NOVAGOLD:
-- Transitioned from the public scoping period into the Preliminary Draft
Environmental Impact Statement (PDEIS) phase of permitting at Donlin
Gold, having received positive and constructive reviews in all the
public scoping meetings held in Alaska
-- Reported the discovery of the new Legacy zone at Galore Creek, a 700-
meter long mineralized zone, that remains open in all directions and is
located adjacent to the main Central Pit
-- Released significant intercepts from its 27,900-meter Galore Creek
drilling program, expected to result in an increased resource endowment
and improved future mine design
-- Received $54.0 million in cash proceeds from the exercise of all
remaining warrants
-- Strengthened the management team with the appointment of Richard
Williams to the position of Vice President Engineering and Development;
Mr. Williams came to NOVAGOLD from Barrick Gold where he most recently
led the successful design, construction and start-up of the Pueblo Viejo
mine in the Dominican Republic
President's Message
NOVAGOLD is off to a great start in 2013, with key deliverables
achieved to further de-risk our flagship Donlin Gold project in
Alaska and advance our Galore Creek project in British Columbia.
After the first quarter, Donlin Gold is on track with its
permitting activities with the recently completed public scoping
phase of the process as per the schedule issued by the Army Corps
of Engineers (the "Corps"), the lead permitting agency. The
permitting process, which is expected to take 3-4 years to
complete, is now well at hand and the Company can launch the PDEIS
process. Important meetings were held in 13 villages and in
Anchorage. During these well attended gatherings, local
constituents directed constructive comments towards the Corps as
part of the EIS process. This healthy atmosphere is a testament to
the excellent work combined with an extensive community outreach
that has been conducted by the Donlin Gold team over the last 16
years. Donlin Gold continues to enjoy the strong support of its
principal stakeholders, including the Alaska Native Corporations -
Calista Corporation and The Kuskokwim Corporation - the holders of
the mineral and surface rights. Having completed several projects
in the United States similar in size and scale to Donlin Gold, I am
very pleased with where we are in terms of permitting at this
stage.
During the last quarter, we reported excellent drill results
from our 2012 campaign at Galore Creek and announced the discovery
of the new Legacy zone, a 700-meter long zone adjacent to the main
Central Pit and which remains open in all directions. This
discovery should allow us to extend the known mineralization well
beyond the currently defined resources. With these positive drill
results, we are well positioned to update Galore Creek's resource
endowment and further improve the overall economics of this project
as we pursue the sale of our 50% share of this exceptional asset.
If developed as envisioned in the Pre-Feasibility Study, Galore
Creek is expected to become the largest and lowest-cost copper mine
in Canada. This factor is particularly important considering the
critical challenges copper miners face today in jurisdictions such
as the Democratic Republic of Congo, Indonesia, Argentina,
Mongolia, Chile and Peru.
During the quarter, we further strengthened the balance sheet
with the receipt of $54 million in proceeds from the exercise of
the remaining warrants. With approximately US$300 million in cash
and cash equivalents at the end of the first quarter, NOVAGOLD has
a strong balance sheet and more than sufficient cash to fulfill all
of its current financial obligations as well as fund the
advancement of the Donlin Gold project through the permitting
process and support ongoing activities at its Galore Creek project
in British Columbia.
Recently, we announced the appointment of Richard Williams as
Vice President Engineering and Development. Richard will be
responsible for all aspects related to the engineering and
technical advancement of Donlin Gold and Galore Creek. In his
30-year career with Barrick Gold, he has developed and operated
several major mines, with a particular focus on the design,
construction and implementation of autoclave technology planned to
be used to process ores at Donlin Gold. Most recently, he served as
Project Director of the Pueblo Viejo operation in the Dominican
Republic where he played a key role in designing and constructing
four of the largest state-of-the-art autoclaves in the world.
Our accomplishments in the first quarter of 2013 came against a
backdrop of tumultuous markets, especially among mining equities.
Companies in our space remain under siege in many mining
jurisdictions. In that context, NOVAGOLD is one of very few mine
developers with assets located in two of the safest geo-political
jurisdictions in the world. As investors become more focused on
jurisdictional safety and stability, we expect NOVAGOLD to be
recognized as an investment of choice among institutions seeking
"premium valuation" among gold equities with projects characterized
by superior grades of long-life ore bodies with substantial future
production profile and significant exploration potential.
NOVAGOLD's Donlin Gold project offers all of those qualities:
size, superior grades, exploration potential and jurisdictional
safety. With approximately 39 million ounces of gold in the
Measured and Indicated resource categories and with a grade of 2.2
grams per tonne, Donlin Gold is the world's largest known
high-grade undeveloped open-pit gold deposit. Once in operation, it
is expected to produce approximately 1,500,000 ounces of gold per
year in the first five full years of production. Assuming no future
expansions, it is expected to average well over 1,000,000 ounces
per year over its present 27-year life. With these statistics,
Donlin Gold is one of only six of the world's gold mines producing
or which have the potential to produce in excess of a million gold
ounces per year and it is located in North America. This is further
magnified by the fact that Donlin Gold's currently delineated ore
body covers only a three-kilometer portion of an eight-kilometer
ore-bearing strike length. Our project's exploration potential is
truly remarkable.
In conclusion, I would like to extend my sincere appreciation to
our shareholders and stakeholders for their incredible support and
trust; our Board of Directors for its guidance and its
shareholder-friendly and value-focused vision; our project teams
for their hard work, dedication and expertise in the excellent
management of our quality assets; the Governments and Native
Corporations of the jurisdictions where we operate, who give us the
foundation of support without which we could not develop our
projects; and finally, our employees whose dedication and hard work
help us deliver on our objectives laying out the foundation for
maximizing the value of our assets for the benefit of our
stakeholders.
Results of Operations
in thousands of Canadian dollars, except for per share amounts
---------------------------------------------------------------------------
Three months Three months
ended ended
February 28, February 29,
2013 2012
$ $
---------------------------------------------------------------------------
Expenses(1) 3,474 5,866
Share-based payments 5,526 10,088
Finance costs, net 3,911 3,176
Foreign exchange gain (loss) 7,883 1,411
Gain (loss) on embedded derivative (840) 27,778
Gain (loss) on derivative (2,455) 18,543
Income (loss) for the period (13,782) 16,769
Basic income (loss) per share (0.05) 0.07
Diluted income (loss) per share (0.05) (0.01)
Cash and cash equivalents 309,345 342,576
---------------------------------------------------------------------------
(1)General and administrative, salaries and severance, professional fees,
and corporate and development expenses.
Financial Results
For the first quarter ended February 28, 2013, the Company
reported a net loss of $13.8 million (or $0.05 basic and diluted
loss per share), compared to net income of $16.8 million (or $0.07
per share, basic and a loss of $0.01 per share, diluted) for the
corresponding period in 2012. The variance in the first quarter was
primarily due to the non-cash losses on embedded derivative and
derivative liabilities related to U.S. dollar denominated
convertible notes and common share warrants totaling $3.3 million
compared to non-cash gains of $46.3 million in the first quarter
2012. The fair value of the embedded derivative and derivative
liabilities vary with changes in the Company's share price and
changes in the U.S. dollar exchange rate. The Company's operating
loss decreased to $6.6 million in the first quarter of 2013 from
$27.4 million in the first quarter of 2012 due to significantly
lower expenses related to salaries, severance, share-based payments
and administrative costs as a result of the corporate
reorganization completed in 2012. Project maintenance, mineral
property and decommissioning expenses were eliminated in the first
quarter of 2013 compared to expenses of $5.1 million in the first
quarter last year as a result of the 2012 spin-out of NovaCopper
Inc. and the Ambler project, as well as the sale of the Rock Creek
project. The Company's combined share of project expenses at Donlin
Gold and Galore Creek decreased to $5.5 million in the first
quarter of 2013 from $7.7 million in the first quarter of 2012.
Foreign exchange gains increased by $6.5 million in the first
quarter of 2013 as the Company's U.S. dollar holdings increased on
a Canadian dollar basis. Net financing costs increased $0.7 million
due to lower accretion from notes receivable and higher accretion
on the convertible notes.
Liquidity and Capital Resource
Cash and cash equivalents was $309.3 million at February 28,
2013, an increase of $56.3 million from $253.0 million at November
30, 2012. The increase in cash during the first quarter of 2013 is
primarily related to the receipt of $54.0 million in net proceeds
from the exercise of all remaining warrants and foreign exchange
gains of $11.6 million resulting from the strengthening of the U.S.
dollar, partially offset by $9.3 million used in operating
activities during the period. The Company has sufficient cash and
cash equivalents available to repay US$95.0 million of outstanding
convertible notes due in 2015 and to advance Donlin Gold through
the expected three-to-four years of permitting. Holders of the
convertible notes have the option to require the Company to
repurchase the convertible notes on May 1, 2013. The Company
currently expects that it will be required to repurchase all
outstanding notes.
Cash used in operating activities was $9.3 million in the first
quarter of 2013, a decrease of $15.3 million from the $24.6 million
used in the first quarter of 2012. The decrease resulted from the
successful reorganization of the Company in 2012 encompassingthe
spin-out of NovaCopper Inc., the sale of Alaska Gold Corporation
which included Rock Creek, as well as a reduction in corporate
overhead and administrative costs. The Company used $3.2 million to
fund its share of expenditures at the Donlin Gold and Galore Creek
projects in the first quarter of 2013, compared to $5.0 million in
the first quarter of 2012.
Outlook
NOVAGOLD remains on target with the previously released 2013
total project budget of US$30 million (of which the Company is
responsible for 50%) to fund permitting, engineering, environmental
and community development activities, as well as general and
administrative expenses. Throughout the balance of the year, Donlin
Gold anticipates that the Corps will draft the PDEIS, receive
comments from the Federal and State agencies on the PDEIS in
preparation for issuance of the draft EIS in 2014. In addition,
Donlin Gold LLC will continue to optimize the project and evaluate
third-party owner-operator agreements to reduce the up-front
project capital costs. Sharing up-front costs with third-party
operators and further optimizing the project design and layout are
avenues that can significantly reduce initial capital costs. As the
anticipated operating margins of the project are already robust,
this emphasis could potentially have a significant impact on
project returns.
At the Galore Creek project, GCMC also remains on target with
the previously approved and released budget of $16 million (of
which the Company is responsible for 50%) to fund work in updating
the resource model with the latest 2012 drill results; test
additional targets on the Legacy zone with approximately 10,000
meters of planned drilling ; and potentially increase resources.
NOVAGOLD continues to evaluate opportunities to monetize the value
of Galore Creek.
Conference Call & Webcast Details
The conference call and webcast, to discuss these results, will
take place April 11, 2013 at 8:00 am PDT (11:00 am EDT). The
webcast and conference call-in details are provided below.
Webcast: http://www.novagold.com/
North American callers: 1-877-546-5021
International callers: 1-857-244-7553
Participant Passcode: 28327147
The webcast will be archived on NOVAGOLD's website for one year
and the conference call replay will be available for 14 days. To
access the conference call replay please dial 1-888-286-8010 (North
America), or 1-617-801-6888 (International), followed by your
Access PIN: 14294618. For a transcript of the call please email
info@novagold.com.
About NOVAGOLD
NOVAGOLD is a well-financed precious metals company engaged in
the exploration and development of mineral properties in North
America. Its flagship asset is the 50%-owned Donlin Gold project in
Alaska, one of the safest jurisdictions in the world. With a total
of approximately 34 million ounces(1) of gold in the Proven and
Probable reserve categories (505 million tonnes at an average grade
of approximately 2.1 grams per tonne), Donlin Gold is regarded to
be one of the largest, and most prospective known gold deposits in
the world. According to the updated Feasibility Study, once in
production, Donlin Gold should average approximately 1.5 million
ounces of gold per year for the first five years, followed by
decades of more than one million ounces of gold per year on a 100%
basis. The Donlin Gold project has substantial exploration
potential beyond the designed footprint which currently covers only
three kilometers of an approximately eight-kilometer strike length
of the property. Permitting is underway for the Donlin Gold
project, a clearly defined process expected to take 3-4 years.
NOVAGOLD also owns 50% of the Galore Creek copper-gold-silver
project located in northern British Columbia. According to the 2011
Pre-Feasibility Study, Galore Creek is expected to be the largest
copper mine in Canada, a tier-one jurisdiction, when it is put into
production. NOVAGOLD is currently evaluating opportunities to sell
all or a portion of its interest in Galore Creek and would apply
the proceeds toward the development of Donlin Gold. NOVAGOLD has a
strong track record of forging collaborative partnerships, both
with local communities and with major mining companies.
(1) Proven and Probable reserves of 0.57 million ounces and
33.28 million ounces respectively (504.8 million tonnes at an
average grade of approximately 2.09 grams per tonne) which are
included in Measured and Indicated resources of 0.63 million ounces
and 38.38 million ounces respectively (541 million tonnes at an
average grade of approximately 2.2 grams per tonne).
Please note: As part of the rebranding, the company has
converted its primary domain to .com from .net, therefore, our
website can now be accessed at www.novagold.com and all email
formats within NOVAGOLD are now firstname.lastname@novagold.com.
Please update your contacts accordingly.
Scientific and Technical Information
Scientific and technical information contained herein with
respect to Donlin Gold is derived from the "Donlin Creek Gold
Project Alaska, USA NI 43-101 Technical Report on Second Updated
Feasibility Study" compiled by AMEC. Kirk Hanson, P.E., Technical
Director, Open Pit Mining, North America, (AMEC, Reno), Gordon
Seibel, R.M. SME, Principal Geologist, (AMEC, Reno), Tony Lipiec,
P.Eng. Manager Process Engineering (AMEC, Vancouver) are the
Qualified Persons responsible for the preparation of the
independent Feasibility Study, each of whom are independent
"qualified persons" as defined by NI 43-101.
Cautionary Note Regarding Forward-Looking Statements
This press release includes certain "forward-looking
information" and "forward-looking statements" (collectively
"forward-looking statements") within the meaning of applicable
securities legislation, including the United States Private
Securities Litigation Reform Act of 1995. All statements, other
than statements of historical fact, included herein including,
without limitation, the timing of permitting and potential
development of the project, statements relating to NOVAGOLD's
future operating and financial performance, outlook, and the
potential sale of all or part of NOVAGOLD's interest in Galore
Creek are forward-looking statements. Forward-looking statements
are frequently, but not always, identified by words such as
"expects", "anticipates", "believes", "intends", "estimates",
"potential", "possible", and similar expressions, or statements
that events, conditions, or results "will", "may", "could", or
"should" occur or be achieved. These forward-looking statements may
include statements regarding perceived merit of properties;
exploration results and budgets; mineral reserves and resource
estimates; work programs; capital expenditures; timelines;
strategic plans; completion of transactions; market prices for
precious and base metals; intended use of proceeds; or other
statements that are not statements of fact. Forward-looking
statements involve various risks and uncertainties.
There can be no assurance that such statements will prove to be
accurate, and actual results and future events could differ
materially from those anticipated in such statements. Important
factors that could cause actual results to differ materially from
NOVAGOLD's expectations include the uncertainties involving the
need for additional financing to explore and develop properties and
availability of financing in the debt and capital markets;
uncertainties involved in the interpretation of drilling results
and geological tests and the estimation of reserves and resources;
the need for continued cooperation with Barrick Gold Corporation
and Teck Resources Limited for the continued exploration and
development of the Donlin Gold and Galore Creek properties; the
need for cooperation of government agencies and native groups in
the development and operation of properties; the need to obtain
permits and governmental approvals; risks of construction and
mining projects such as accidents, equipment breakdowns, bad
weather, non-compliance with environmental and permit requirements,
unanticipated variation in geological structures, ore grades or
recovery rates; unexpected cost increases, which could include
significant increases in estimated capital and operating costs;
fluctuations in metal prices and currency exchange rates; and other
risk and uncertainties disclosed in NOVAGOLD's Annual Information
Form for the year-ended November 30, 2011, filed with the Canadian
securities regulatory authorities, and NOVAGOLD's annual report on
Form 40-F filed with the United States Securities and Exchange
Commission and in other NOVAGOLD reports and documents filed with
applicable securities regulatory authorities from time to time.
NOVAGOLD's forward-looking statements reflect the beliefs, opinions
and projections on the date the statements are made. NOVAGOLD
assumes no obligation to update the forward-looking statements of
beliefs, opinions, projections, or other factors, should they
change, except as required by law.
Contacts: NOVAGOLD RESOURCES INC. Melanie Hennessey Vice
President, Corporate Communications 604-669-6227 or 1-866-669-6227
NOVAGOLD RESOURCES INC. Erin O'Toole Analyst, Investor Relations
604-669-6227 or 1-866-669-6227 www.novagold.com
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