NovaGold Resources Inc.
Q2 2024 Earnings Call Transcript

Published: 27 Jun 2024

[Operator:]

Thank you for standing by. This is the conference operator. Welcome to the NOVAGOLD 2024 Second Quarter Financial Results Conference Call and Webcast. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Melanie Hennessey, Vice President, Corporate Communications. Please go ahead.

[Melanie Hennessey:]

Good morning, Ashia. We are pleased that you have joined us for NOVAGOLD's second quarter financial results and also for an update on the Donlin Gold project. On today's call, we have NOVAGOLD's President and CEO, Greg Lang; and David Ottewell, NOVAGOLD's Vice President and CFO. At the end of the webcast, we will take questions by phone. Additionally, we will respond to questions received by e-mail. I would like to remind you, as stated on Slide 3, any statements made today may contain forward-looking information, such as projections and goals, which are likely to involve risks detailed in our various EDGAR and SEDAR filings and forward-looking disclaimers included in this presentation. I will now turn the presentation over to our President and CEO, Greg Lang. Greg?

[Greg Lang:]

Thank you, Melanie, and good morning, everyone. Let's begin today's call by highlighting why both we and our shareholders regard Donlin Gold as a Tier 1 asset. I want to emphasize our investment thesis and why assets, such as Donlin, are increasingly vital to the industry. Let's discuss the impressive attributes of the Donlin Gold project, as shown on Slide 5. First, the project boasts almost 40 million ounces of gold and a grade of over 2 grams per tonne, which is more than double the industry average. The projected mine life is almost three decades based on -- only on our current resources. This ensures a long-term, stable operation. Moreover, Donlin Gold is set to produce around 1 million ounces a year at a low cost, solidifying its position as one of the top producers in the industry with landholdings that offer significant exploration potential for future growth. Supported by an experienced management team with a strong track record in mine development across the Americas, Donlin Gold has secured all federal permits required for the development and the majority of the state permits, demonstrating our readiness for successful advancement. Situated on privately designated land in Alaska, the project benefits from the state's supportive mining regulations provide a stable regulatory environment. Our long-standing partnerships with Calista and The Kuskokwim Corporation further strengthened our social license to operate. These factors collectively position Donlin Gold as a cornerstone project with robust potential and significant long-term value. It's essential to outline Donlin Gold's journey from the early 1900s as it origins, as shown on Slide 6, to the strategic reorganization initiated over a decade ago under the leadership of Dr. Thomas Kaplan, our Chairman, and myself. Since NOVAGOLD's restructuring, our primary objective has been crystal clear

[David Ottewell:]

Thank you, Greg. Slide 20 highlights our operating performance. We reported a net loss of $13.7 million in the second quarter, a $0.9 million decrease from the prior-year quarter, primarily due to lower Donlin Gold project costs with no field program this year, partially offset by increased interest expense on the promissory note and increased general and administrative costs due to promotions and hiring additional staff along with professional and consulting fees related to our evaluation of options to advance the Donlin Gold project. Cash flows are highlighted on Slide 21. In the second quarter, cash and term deposits decreased by $4.9 million, primarily for corporate administrative expenses and our share in Donlin Gold funding, partially offset by interest income and working capital changes. Our net use of cash and term deposits was $2.3 million lower than the prior-year quarter due to lower Donlin Gold funding requirements, partially offset by increased administrative costs. On Slide 22, we note our strong treasury. Our financial position includes cash and cash equivalents of nearly $53 million and term deposits of $60 million. For the year-to-date, Donlin Gold funding and corporate G&A are in line with our budget. For the full year, we expect to spend approximately $31 million, including $17 million for corporate G&A and $14 million for Donlin Gold. I will now turn the presentation back over to Greg.

[Greg Lang:]

Thank you, Dave. And I'm sure as most people saw the announcement, Dave has been our CFO for 12 years, and he's moving on to the next stage in life and retiring. And we want to thank Dave for being a valued member of the team at NOVAGOLD for over 12 years, and we are deeply grateful for his many contributions to NOVAGOLD during his tenure. Last December, the Donlin Gold Board approved a $28 million budget for the year, as shown on Slide 23. This budget includes ongoing resource modeling, mine planning, metallurgical test work, regional infrastructure support, hydrology work, closure planning, and importantly, the advancement of dam safety certificate applications, as well as ongoing support for pending litigation, government affairs, community engagements and our various sponsorships. Discussions with Barrick are ongoing to continue advancing Donlin Gold up the value chain as we remain fully committed to its development. Additionally, on behalf of the NOVAGOLD team, I would like to extend again our sincere appreciation to Dave Ottewell as he moves on to retirement. We would also like to welcome and congratulate Peter Adamek, who will assume the role of CFO in July. With resolute confidence, NOVAGOLD views the Donlin Gold project as a prime investment in the gold market that epitomizes an exceptional opportunity for leveraging scarce and high-quality assets in safe jurisdictions. Appreciative of our shareholders' staunch support and valuable guidance, we remain committed to enhancing shareholder and stakeholder value, responsibly acknowledging their crucial presence and long-term interests. Their decision to invest in our company and their continued solidarity and engagement are deeply valued. As custodians of the company, we are focused on executing our strategy and advancing the value of the Donlin Gold project in a safe and responsible manner to yield substantial progress and create value. Operator, we are now prepared to take questions.

[Operator:]

Thank you. [Operator Instructions] The first question comes from Lucas Pipes with B. Riley Securities.

[Fedor Shabalin:]

Thank you very much, operator, and good morning, everyone. This is actually Fedor Shabalin asking question on behalf of Lucas Pipes. And just I want to touch on permitting. So, where state-level permitting stage now and when you would expect to receive a decision? And when do you expect the decision regarding dam safety certification, which you submitted just 10 days ago? Thank you.

[Greg Lang:]

All right. Well, thank you for the question. As noted in our materials, the only significant state permit that we do not have in hand is the dam safety certificates. This is for the tailings dam as well as several water retention structures. And to be clear, the federal permits and the 404 certificate authorizes Donlin to disturb work at the site, and that includes the tailings dam. But in Alaska, the structures such as the tailings dam and water retention study structures are -- they're administered by the state. And one of the aspects of the permit application is that you have to have a fully designed and engineered drawing to support your applications. And we started the geotechnical work necessary to do that last season. And this year, we've been finalizing our dam design and that, as we noted, the preliminary package has been submitted to the state. I think the process is pretty well defined, and it's moving along fine. And we would anticipate the roughly two, two-and-a-half year approval process, which would be done concurrently when the owners make the decision to move forward with the feasibility study. So, at any rate, the tailings dam approval permits are not on a critical path item, but we are steadily advancing them.

[Fedor Shabalin:]

Thank you very much. And my second one is on CapEx. So, $14 million is the remaining CapEx in 2024. But maybe can you provide what level of capital spending you would expect in 2025? Thank you.

[Greg Lang:]

Well, at this stage, we have not guided on our expenditures plan for the new year. And of course, a lot of that will depend on when we make the decision to initiate the new feasibility study. We typically prepare our budgets later in the third quarter and fourth quarter, and we'll, at that time, be in a position to guide the marketplace on our future expenditures.

[Fedor Shabalin:]

Thank you very much. This is helpful, and wish you best of luck. Thank you.

[Greg Lang:]

Thank you for your questions.

[Melanie Hennessey:]

We have a shareholder question coming from the web from [Joe Primamore] (ph). With gold at an all-time high, what are the other key market conditions required to commence operations?

[Greg Lang:]

Well, I think, as you noted, gold is at an all-time high. And I think that is, certainly, one of the key factors that will drive the -- ultimately the investment decision at Donlin. Other factors include market conditions, how the equities are viewed, how the debt markets are and how we would finance the project. But certainly, the key driver in the value of Donlin Gold and really any gold mining project is the price of gold. And we have the view that gold prices are pretty good right now, but we think there's substantial room to see them run higher in the coming years. So that -- yes, I would anticipate that when we finish our feasibility study, gold prices will be significantly higher than what we see today, positioning the owners to make a construction decision.

[Operator:]

This concludes the question-and-answer session. I would like to turn the conference back over to Greg for any closing remarks.

[Greg Lang:]

Well, everyone, thank you for taking the time to get an update on NOVAGOLD. And we look forward to updating you as we continue to advance the Donlin project. Good day.

[Operator:]

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.