NOVAGOLD Continues to Advance Donlin Gold as Planned and Maintains
a Strong Financial Position
- Permitting activities at Donlin Gold are advancing as
planned
- With over $182 million in the treasury and only $16 million in
convertible notes, NOVAGOLD enjoys an exceptionally robust balance
sheet
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Apr 7, 2014) -
NOVAGOLD RESOURCES INC. (TSX:NG)(NYSEMKT:NG) today released its
first quarter financial results and updates for its flagship
50%-owned Donlin Gold project in Alaska and its 50%-owned Galore
Creek copper-gold-silver project in British Columbia.
Details of the Company's financial results for the three-months
ended February 28, 2014 are presented in the consolidated financial
statements and quarterly report filed on Form 10-Q with the SEC
that 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 U.S. dollars unless otherwise
stated and all resource and reserve estimates are shown on a 100%
project basis.
In the first quarter 2014, NOVAGOLD:
- As a routine part of the Donlin Gold Environmental Impact
Statement (EIS) process, supported the alternatives analysis being
conducted for all major components of the project including the
mine, pipeline and transportation infrastructure
- Made progress in key Donlin Gold permitting areas, including
pipeline, water management, air quality, dam safety and
wetlands
- Commenced work on technical studies related to water and waste
management as well as site layout for future mining activities at
Galore Creek
President's Message
In the first quarter, we made significant progress in taking
Donlin Gold up the value chain by advancing our flagship project
through permitting. We also commenced the integration of results
from the last few years of drilling activity at Galore Creek into
an updated mine plan which we believe will add value to that asset.
Our reduced cash expenditures allowed us to maintain a healthy
treasury, sufficient to fund permitting activities at Donlin Gold
and meet other ongoing financial obligations. The Company is well
positioned to provide all of its stakeholders with an opportunity
to benefit from the orderly advancement of one of the world's most
significant development-stage gold projects. As ever before, we
remain committed to building shareholder value notwithstanding all
the challenges our industry has had to face over the last three
years. Our strategy and largest shareholders' investment thesis is
simple and remains the same: provide all of our stakeholders with
the greatest, and safest, asset with long-term leverage to
gold...in a jurisdiction where one can keep the fruits of that
leverage.
NOVAGOLD's activities are based on our strong conviction that
Donlin Gold is one of the gold industry's best projects. Its large
size, high grade, excellent exploration potential and a highly
favorable geo-political location, characterized by the rule of law,
put it in a unique category of institutional investor-quality
assets. Donlin Gold has all the key attributes required to build
one of the industry's most important mines: a 39-million-ounce
deposit (contained in Measured and Indicated resource categories);
an average grade of 2.2 grams per tonne, one of the highest in the
world among large projects under development; and a favorable
location in Alaska, the second largest gold producing state in the
United States, with its well-established track record of
permitting, building and operating major mines. As envisioned by
the updated feasibility study, Donlin Gold would be among the
industry's top gold producers with more than 1.1 million ounces of
projected average annual production over a mine-life that would
span nearly three decades and likely longer considering the
project's tremendous exploration potential.
In the first quarter of 2014, permitting activities at Donlin
Gold were mainly centered on the preliminary draft EIS expected to
be completed around year-end. This document is comprised of four
main sections. First, an outline of the purpose and the need for
the proposed mine. The management of Donlin Gold and its Native
Corporation partners, Calista and The Kuskokwim Corporation,
jointly contributed to the preparation of this section which
highlighted the need for the development of this important mine and
the benefit it would bring to its stakeholders. Second, the
preparation of the alternatives analysis to the proposed mine in
terms of local access to transportation and power. Third, the
preparation of an environmental analysis, which primarily consists
of the environmental baseline studies. This portion normally
constitutes the most extensive part of the EIS. The last section
will deal with potential mitigation measures that will be developed
later in the permitting process. In addition, Donlin Gold and the
appropriate permitting agencies are concurrently working on other
major permits, such as air quality, water discharge and usage, gas
pipeline, wetlands and dam safety. The EIS is the most
time-consuming part of permitting under the National Environmental
Policy Act (NEPA), the act that governs the process by which all
major projects in the United States are permitted. The EIS is also,
in large part, a determining factor in the overall permitting
timeline which, for Donlin Gold, commenced in 2012 and is
anticipated to take approximately four years to complete.
Beyond permitting, Donlin Gold is actively engaged in
sponsorship activities at the community level, supporting local
youth in leadership endeavors, visiting communities in the
Yukon-Kuskokwim area and executing on the workforce development
strategy in the region. More recently, Donlin Gold was one of the
main sponsors of the Iditarod Trail Sled Dog Race in Alaska, the
last great race, which in its 42nd year, keeps alive a tradition of
transporting goods to remote regions of Alaska and honors mushing's
greatest achievement, the 1925 serum run to Nome, also known as the
"Great Race of Mercy." The Iditarod is a true test of determination
and endurance. I would like to congratulate Yukon-Kuskokwim's
Richie Diehl, Pete Kaiser and Mike Williams, Jr. who competed in
and finished the race. They are great role-models for youth in the
region. For a number of years now, the Donlin Gold camp staff also
volunteered to support incoming mushers at a check-point in close
proximity to the Donlin Gold site. Overall, it was a great
experience to welcome some of the incoming mushers at the finish
line in Nome, Alaska.
In the first quarter of this year, we announced drill results of
Galore Creek's 2013 campaign which identified extensions to the
copper-gold mineralization into, as well as adjacent to, the
newly-discovered Legacy zone. This campaign also confirmed that
Galore Creek has significant exploration upside beyond its current
18-year mine life. These results should provide sufficient
information to arrive at an initial resource at the Legacy zone. We
have also commenced technical work to advance Galore Creek toward
the next level of mine planning and design and are encouraged by
the results completed to date. We expect that this effort will
further enhance the value and marketability of this important
project which we plan to monetize, in whole or in part, to
strengthen our treasury and focus principally on permitting our
flagship Donlin Gold project.
NOVAGOLD is strong financially. With more than $180 million in
the bank, we are able to concentrate on our business activities
without having to raise additional funds over the ensuing few
years. Following the 2012 reorganization of NOVAGOLD, we reviewed
our processes and streamlined our operations to improve
efficiencies. As a result, we have been able to continually reduce
our operating expenditures. In 2014, our budget has been set at $30
million, a 23% reduction from last year. Today NOVAGOLD is a much
simpler company and I'm encouraged by the results from the cost
reduction initiatives which allowed us to build and maintain a
sizable treasury.
In conclusion, I'm very thankful for the Board of Directors, my
colleagues and our stakeholders' commitment and shared enthusiasm
in advancing both projects up the value chain. Based on three
decades of experience in the mining sector and ever-increasing
political and jurisdictional challenges facing our industry,
NOVAGOLD has all the key attributes to be a successful mining
company. We are very grateful for the continued interest and
support of our shareholders, project teams, as well as governments,
Native Corporations and First Nations of the jurisdictions in which
we operate.
Financial Results
in thousands of U.S. dollars, except for per
share amounts |
|
Three months ended February 28, 2014 $ |
Three months ended February 28, 2013 $ |
General and administrative expense (1) |
7,702 |
|
9,016 |
|
Share of losses - Donlin Gold |
2,856 |
|
2,994 |
|
Share of losses - Galore Creek |
765 |
|
2,489 |
|
Depreciation |
10 |
|
10 |
|
Total operating expenses |
11,333 |
|
14,509 |
|
|
|
|
|
|
Loss from operations |
(11,333 |
) |
(14,509 |
) |
Other income (expense) |
592 |
|
733 |
|
|
|
|
|
|
Income (loss) for the period |
(10,691 |
) |
(13,776 |
) |
Income (loss) per share, basic and diluted |
(0.03 |
) |
(0.05 |
) |
|
|
|
|
|
Cash and term deposits |
182,322 |
|
191,262 |
|
Total assets |
554,243 |
|
578,686 |
|
Total liabilities |
112,042 |
|
113,037 |
|
(1) Includes share-based compensation expense of $4,658 and
$5,542 in the first quarter of 2014 and 2013, respectively. |
Loss from operations decreased by 22%, resulting from lower
general and administrative expense and lower losses from equity
investments in the Donlin Gold and Galore Creek projects. General
and administrative expense decreased 15% due to lower office rent,
professional fees and share-based compensation, partially offset by
higher salary costs due to personnel additions in the first half of
2013. Our share of losses at the Donlin Gold project decreased by
$0.1 million, as 2014 activities continued to focus primarily on
permitting. At the Galore Creek project, our share of losses
decreased by $1.7 million due to mobile equipment being fully
depreciated in 2013.
Net loss attributable to shareholders decreased by $3.1 million
($0.02 per share - basic and diluted) in 2014 compared to the same
period in 2013, principally resulting from the reduction in the
loss from operations discussed above. Lower interest expense and
loss on derivatives was offset by a lower foreign exchange gain in
2014 compared to 2013.
Liquidity and Capital Resources
As of February 28, 2014, NOVAGOLD had $182.3 million in cash and
term deposits compared to $191.3 million at the beginning of the
quarter. The decrease in cash resulted from $5.2 million used in
operating activities for administrative costs and reductions in
accounts payable and $3.6 million to fund Donlin Gold and Galore
Creek activities. We have sufficient working capital available to
repay the remaining $15.8 million of outstanding Notes due in May
2015, advance the Donlin Gold project through the expected
remaining permitting process, as well as fund the current
activities to further enhance the value of Galore Creek.
2014 Outlook
We continue to expect to spend approximately $12.0 million for
our share of funding at Donlin Gold, to further advance permitting
through the completion of the PDEIS in late 2014, for agency review
and in preparation for issuance of the draft EIS for public review
in 2015, and approximately $2.5 million at Galore Creek to advance
the project toward next-level mine planning and design, in addition
to $15 million for general and administrative expenses, interest on
the convertible notes and working capital.
Conference Call & Webcast Details
NOVAGOLD's conference call and webcast to discuss the first
quarter results, will take place April 8, 2014 at 8:00 am PT (11:00
am ET). The webcast and conference call-in details are provided
below.
Webcast: |
http://www.novagold.com/ |
North
American callers: |
1-800-299-9630 |
International callers: |
1-
617-786-2904 |
Participant Passcode: |
85442604 |
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: 63146274. For a transcript of the call please email
info@novagold.com.
Filing of Reports Under U.S. GAAP
Effective December 1, 2013, NOVAGOLD ceased to be a "foreign
private issuer" as defined in Rule 3b-4 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and became subject to
the rules and regulations under the Exchange Act applicable to U.S.
domestic issuers. As a result, the Company today filed its first
Form 10-Q. The Company filed its first Annual Report on Form 10-K
on February 11, 2014 for the year ended November 30, 2013 and, in
addition, furnished on a Form 8-K U.S. GAAP Financial Statements
for the first, second and third quarters of 2013. The Quarterly
Report on Form 10-Q and Annual Report on Form 10-K are available on
the Company's website at www.novagold.com, on SEDAR at
www.sedar.com, and on EDGAR at www.sec.gov. Shareholders may also
receive a hard copy of the Company's materials free of charge by
sending a request to info@NOVAGOLD.com or calling
1-866-669-6227.
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
approximately 39,000,000 ounces of gold in the measured and
indicated resource categories (541 million tonnes at an average
grade of approximately 2.2 grams per tonne), Donlin Gold is
regarded to be one of the largest, highest quality, and most
prospective known gold deposits in the world. According to the
Updated Feasibility Study (as defined below), once in production,
Donlin Gold should average approximately 1,500,000 ounces of gold
per year for the first five full 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 long gold bearing trend.
Current activities at Donlin Gold are focused on permitting,
community outreach and workforce development in preparation for the
construction and operation of this top tier asset. The Donlin Gold
project commenced permitting in 2012, a clearly defined process
expected to take approximately 4 years. NOVAGOLD also owns 50% of
the Galore Creek copper-gold-silver project located in northern
British Columbia. According to the 2011 PFS (as defined below),
once in production, Galore Creek is expected to be the largest
copper mine in Canada, a tier-one jurisdiction. 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 is well positioned to stay the
course and take Donlin Gold through permitting.
Scientific and Technical Information
Certain scientific and technical information contained herein
with respect to Galore Creek is derived from the technical report
entitled "Galore Creek Project British Columbia NI 43-101 Technical
Report on Pre-Feasibility Study" dated effective July 27, 2011 (the
"2011 PFS"). The Qualified Persons responsible for the preparation
of the independent technical report are Robert Gill, P.Eng.,
Principal Consultant and Study Manager (AMEC Americas Limited),
Greg Kulla, P. Geo., Principal Geologist (AMEC Americas Limited),
Gregory Wortman, P. Eng., Technical Director Process (AMEC Americas
Limited), Jay Melnyk, P. Eng. (AMEC Americas Limited), and Dana
Rogers, P.E., Principal Tunnelling Engineer (Lemley International),
each of whom are independent "qualified persons" as defined by NI
43-101.
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 with an effective date of
November 18, 2012 (the "Updated Feasibility Study"). 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 technical report, 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 Donlin Gold 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 Report filed
on Form 10-K for the year-ended November 30, 2013, 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.
Cautionary Note to United States Investors
This press release has been prepared in accordance with the
requirements of the securities laws in effect in Canada, which
differ from the requirements of U.S. securities laws. Unless
otherwise indicated, all resource and reserve estimates included in
this press release have been prepared in accordance with National
Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI
43-101") and the Canadian Institute of Mining, Metallurgy, and
Petroleum Definition Standards on Mineral Resources and Mineral
Reserves. NI 43-101 is a rule developed by the Canadian Securities
Administrators which establishes standards for all public
disclosure an issuer makes of scientific and technical information
concerning mineral projects. Canadian standards, including NI
43-101, differ significantly from the requirements of the United
States Securities and Exchange Commission ("SEC"), and resource and
reserve information contained herein may not be comparable to
similar information disclosed by U.S. companies. In particular, and
without limiting the generality of the foregoing, the term
"resource" does not equate to the term "reserves". Under U.S.
standards, mineralization may not be classified as a "reserve"
unless the determination has been made that the mineralization
could be economically and legally produced or extracted at the time
the reserve determination is made. Under SEC Industry Guide 7
standards, a "final" or "bankable" feasibility study is required to
report reserves. At this time, both the Donlin Gold and Galore
Creek projects are without known reserves, as defined under SEC
Industry Guide 7. The SEC's disclosure standards normally do not
permit the inclusion of information concerning "measured mineral
resources", "indicated mineral resources" or "inferred mineral
resources" or other descriptions of the amount of mineralization in
mineral deposits that do not constitute "reserves" by U.S.
standards in documents filed with the SEC. Investors are cautioned
not to assume that any part or all of mineral deposits in these
categories will ever be converted into reserves. U.S. investors
should also understand that "inferred mineral resources" have a
great amount of uncertainty as to their existence and great
uncertainty as to their economic and legal feasibility. It cannot
be assumed that all or any part of an "inferred mineral resource"
will ever be upgraded to a higher category. Under Canadian rules,
estimated "inferred mineral resources" may not form the basis of
feasibility or pre-feasibility studies except in rare cases.
Investors are cautioned not to assume that all or any part of an
"inferred mineral resource" exists or is economically or legally
mineable. Disclosure of "contained ounces" in a resource is
permitted disclosure under Canadian regulations; however, the SEC
normally only permits issuers to report mineralization that does
not constitute "reserves" by SEC standards as in-place tonnage and
grade without reference to unit measures. The requirements of NI
43-101 for identification of "reserves" are also not the same as
those of the SEC, and reserves reported by NOVAGOLD in compliance
with NI 43-101 may not qualify as "reserves" under SEC standards.
Accordingly, information concerning mineral deposits set forth
herein may not be comparable with information made public by
companies that report in accordance with U.S. standards.
NOVAGOLD Resources Inc.Melanie HennesseyVice President,
Corporate Communications604-669-6227 or 1-866-669-6227NOVAGOLD
Resources Inc.Erin O'TooleAnalyst, Investor Relations604-669-6227
or 1-866-669-6227www.novagold.com
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