Novagold Resources, Inc. (NG) Misses Q1 EPS by 1c

March 31, 2021 5:11 PM EDT
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Price: $9.46 --0%

Financial Fact:
Net income (loss): -7.38M

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MLI, PG, EDU, More
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Novagold Resources, Inc. (NYSE: NG) reported Q1 EPS of ($0.02), $0.01 worse than the analyst estimate of ($0.01).

President’s Message

Donlin Gold and Alaskan resilience

As spring arrives and many of us note the anniversary of the COVID-19 global pandemic, we all reflect on the past year and the challenges that affected our families, our communities, and our organizations. I am proud of the accomplishments of the NOVAGOLD, Barrick and Donlin Gold teams in executing the 2020 drill program while remaining ever-mindful of the risk posed by COVID-19 and adhering to the stricter health protocols put in place in our workplaces in response. By far, our most important objective in 2020 was to protect the health and safety of our workforce, contractors, and partners. Despite the added challenge of navigating a pandemic, all Donlin Gold 2020 drill program objectives were achieved and accomplished with zero COVID-19 cases on site and no Lost-Time Incidents.

By working closely with our partners at Barrick and our Alaska Native Corporation partners, Calista and TKC, we strengthened and deepened our relationships with local communities. The past year has reminded all of us at NOVAGOLD of the tenacity, resilience, and flexibility of our partners and our team. I extend my most sincere appreciation to Donlin Gold, its workforce, as well as Calista and TKC for their dedication to the highest standards of safety, social responsibility, and environmental stewardship.

The State of Alaska is a leader among the United States in COVID-19 vaccination availability, with Governor Dunleavy announcing in early March that vaccinations are now available to everyone aged 16 and older living and working in Alaska. The success of the vaccination campaign in the Y-K region can be credited in large part to the leadership of the Yukon-Kuskokwim Health Corporation (YKHC) and Native health partners, who made access to the vaccines at grocery stores possible without appointment, thereby removing a barrier for those who did not want to go to the hospital or did not have transportation. In addition, the YKHC made home visits to serve as an extension of the distribution network among village medical clinics. By February, the Y-K Delta became one of the Nation’s leaders in COVID-19 vaccination. This achievement bodes well for an eventual return to something close to normal life within the Y-K region where the Donlin Gold project is located.

Donlin Gold drill program and value

The hard work of the past year and first quarter of 2021 also yielded valuable results in the form of generating additional detailed information about the deposit. We are proud of the fact that, despite the global pandemic, we were able to carry out the largest drill program at Donlin Gold since 2008. We did so with extensive communication and application of strict health and safety protocols, resulting in zero COVID-19 cases at the project site and no Lost-Time Incidents. The knowledge we gained was enormous. We were gratified by the fact that drilled grade-thicknesses within both ACMA and Lewis deposits exceeded those predicted by previous modeling, with higher grades observed over narrower intervals, particularly in sedimentary rocks. These have bolstered our confidence in Donlin Gold’s recent geologic modeling concepts developed jointly by the Barrick and NOVAGOLD teams. We also encountered multiple high-grade extensions in both the intrusive (igneous) and sedimentary rocks, including near surface. One such near surface hit in drill hole DC20-1938 intersected 17.96 m grading 10.5 g/t gold. While impressive in its own right, this intercept included a sub-interval of 3.96 m grading 28.0 g/t gold starting at 1.83 m drilled depth5. The exceptional results Donlin Gold has received, from the outset right up to the latest set of results, is indicative of the extraordinary nature of this deposit.

Now, equipped with outstanding assay results from the 2020 drill program, we are well positioned to update our geologic model. and follow up on new targets. Additional confirmation and extension drilling is being planned for the 2021 field season after which it is anticipated that, on the completion of the updated geologic model and, subject to a formal decision by the Donlin Gold LLC Board, the focus will then shift to updating the feasibility study.

With approximately 39 million ounces of gold in measured and indicated mineral resources grading 2.24 grams per tonne6, Donlin Gold is indeed rare, particularly given that no new major gold discoveries have been made in the past four years. Furthermore, and perhaps more importantly, Donlin Gold’s grade, which is twice the industry average7, is simply incredible. Size and grade are not the only attributes that make Donlin Gold unique. The project has tremendous exploration potential, especially considering that its gold endowment is contained within only three kilometers of an eight-kilometer mineralized belt, itself limited to a mere five percent of the property.

Discussion of Donlin Gold’s unique status would not be complete without special recognition of the fact that it is located in Alaska, a Tier One jurisdiction8. In an environment in which governments can either physically or, through legislation or other means, effectively seize an asset, we are grateful that Donlin Gold is located in Alaska where there is a time-tested culture of support and respect for responsible and sustainable mine development. And in that regard, we are confident that NOVAGOLD’s seasoned management team, which has worked together since 2012, supported by its well-developed partnership with Barrick as well as Native Corporations, can advance this unique project up the value chain in a technically advanced, safe, as well as environmentally and socially responsible manner. Therefore, it is not surprising that NOVAGOLD has become a go-to investment for some of the wisest investors in the space.

Building better through community partnerships

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.

In the first quarter of 2021, Donlin Gold continued outreach activities in support of local communities. These were carried out in strict adherence to COVID-19 protocols. In partnership with TKC, the village of Crooked Creek, and Napaimute Tribe, Donlin Gold was the lead sponsor of a project to construct and maintain the upper portions of an ice road on the Kuskokwim River and provide technical data to assist the road builder, including aerial photographs and ice measurements along the river. The work done on the ice road has 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.

In mid-January, the village of Tuluksak with a population of about 370 in the Middle Kuskokwim region had its “washeteria” water purification plant destroyed by fire, creating a health and safety crisis for the community. As neighbors of the villages 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 worked closely with the Tuluksak Tribal Administrator and the tribal council to assess how Donlin Gold could best help and to coordinate support efforts. In the days following, Donlin Gold, together with several other community organizations, companies, and individuals, stepped in to assist – providing drinking water, buckets for carrying and storing water, sanitary wipes, diapers, and other health supplies. Donlin Gold team members traveled to Tuluksak via the ice road and delivered 100 five-gallon reusable containers of water to be distributed to each household in the community. They also backhauled a truck load of empty water bottles and brought them to Northern Air Cargo to be shipped to a recycling facility in Anchorage. Shortly after the fire, Donlin Gold worked with Alaska Commercial Company and Fox Air in Bethel to deliver to some 120 cases of water along with basic needs items, including paper towels, baby wipes, hand sanitizer as well as liquid and bar soap to the village as quickly as possible. Donlin Gold also arranged for DesertAir to donate a DC-3 flight directly from Anchorage to Tuluksak to bring a second delivery of water tanks, containers, and pumps, including hose assemblies, totes for washing and bathing, scrub brushes for cleaning, 50 more cases of water, and other supplies.

Six Friendship Agreements formalizing current engagement with key local Y-K region communities have been finalized to date (Akiak, Sleetmute, Napaimute, Crooked Creek, Napaskiak, and Nikolai). These agreements include educational, environmental, social and economic development initiatives to support the villages. Additionally, Donlin Gold continued its long-term support of a team from the Y-K region for the annual Iron Dog snowmobile race in February. Donlin Gold also worked with TKC, the State of Alaska and the Alaska Native Tribal Health Consortium in an initiative to upgrade – as well as improve the health and safety standards of – water and sewer services in Middle Kuskokwim area communities. These partnerships, activities, and programs demonstrate NOVAGOLD’s, as well as Barrick’s, commitment to sustainable and responsible development for the benefit of all stakeholders in the Y-K region.

Advancing permits and creating value

During the quarter, Donlin Gold continued to work with State agencies, in coordination with its Native Corporation partners, to advance remaining permits and approvals needed for the project. The ADNR published a 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 the first quarter, with Donlin Gold’s support, ADNR introduced a second two-week public notice period to address concerns about the legal language used in the previous public notice as well as concerns about the public’s ability to review the subject applications, which notice period closed on March 26. We anticipate ADNR will issue final decisions on the water rights applications in the first half of 2021.

In April 2020, the ADNR’s Division of Oil and Gas agreed to reconsider its decision on the State ROW agreement and lease authorization for the buried natural gas pipeline. Under the reconsideration, in September 2020, the ADNR issued for additional public comment a revised Consideration of Comments document. This document further illustrates 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 ended on November 9, 2020 and we anticipate ADNR will re-issue the ROW agreement and lease authorization in the first half of 2021.

My report would not be complete without a proper reference to NOVAGOLD’s strong financial position. As of February 28, 2021, we had $114.2 million in cash and term deposits. In July 2021, we expect to receive an additional $75 million from Newmont resulting from the sale of our 50% interest in the Galore Creek project in 2018. We expect our existing financial resources and future incoming payments to be sufficient for NOVAGOLD to carry out its business without resorting to raising more capital until a construction decision.

I wish to thank the experienced team of professionals at NOVAGOLD, Donlin Gold and Barrick – as well as the stellar 2020 drilling contractor teams. We are proud of your professionalism and unrelenting commitment to safety, especially at a time when COVID-19 presented us with major challenges. I would also like to recognize the importance of the great mutual support we have been experiencing with our Native Corporation partners, Calista and TKC, particularly during the ongoing pandemic.

As we move forward together, allow me once again to express sincere appreciation to my dedicated colleagues on the NOVAGOLD Board for their unwavering support, keen engagement, and commitment to best governance practices. It is a pleasure to serve with you. My gratitude also goes to the various State agencies for their diligent and professional work and adherence to well-established regulatory procedures, particularly during these challenging times.

Lastly, we are blessed to have a stellar group of long-term shareholders supporting the value of our strategy. To all of our shareholders, including Paulson & Co., Fidelity Investments, BlackRock, the Saudi Public Investment Fund, First Eagle, EXOR, and Van Eck, among others, NOVAGOLD is thankful for your continued dedication, engagement, and encouragement. This is especially noteworthy during a global pandemic – a result of our team’s flexibility and adaptability. The strong relationships that we enjoy with everyone from our retail shareholders to our institutional shareholders were deepened, and many have added to their positions in the past several months. NOVAGOLD will continue to apply its efforts to deliver on its strategy to increase shareholder wealth in a safe and socially responsible manner. Best of health and safety to all.


Gregory A. Lang, President & CEO

2021 Outlook

We continue to anticipate spending approximately $31 to $35 million in 2021, which includes $18 to $22 million to fund our share of expenditures at the Donlin Gold project ($11 million for the 2021 drilling program, 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) and $13 million for corporate general and administrative costs.

NOVAGOLD’s primary goals in 2021 are to continue to advance the Donlin Gold project toward a construction decision; maintain/increase support for Donlin Gold among the project’s stakeholders; promote a strong safety, sustainability, and environmental culture; maintain a favorable reputation of NOVAGOLD, its governance practices, and its project among shareholders; and manage the Company treasury effectively and efficiently, including streamlining the corporate structure. 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.

For earnings history and earnings-related data on Novagold Resources, Inc. (NG) click here.

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