NovaGold 3Q16 Earnings Call Notes

NovaGold Resources’ (NG) CEO Greg Lang on Q3 2016 Results

Just a matter of time before we secure necessary permit

“There is a still a lot of work ahead prior to making a construction decision. But we can all see that it is just a matter of time before we can expect to have secured the necessary permit for Donlin Gold. This is a major achievement and an important step of project derisking as we work to unlock Donlin Gold’s ability to become a significant cash flow generator for many decades to come.”

We are getting close to the finish line

“We are getting close to the finish line.”

Few new issues ahead of final EIS

“Carefully reviewing the draft EIS comments is an important part of preparing a final EIS, and ensures that all technical issues are thoroughly considered and addressed in the analysis. Overall, few new issues were raised during the public comment period and most matters had already been addressed in the draft EIS. The Corps is working to release the target date for the final EIS, which will bring forward a record of decision on Donlin Gold’s Clean Water Act Section 404 (wetland) permit.

40m ounces of gold reserves

“‘ll briefly recap the attributes that makes the Donlin Gold project unique. We’ve got reserve and resources of almost 40 million ounces of gold and addition of 6 million ounces inferred material. Turning to Slide 12, when you compare Donlin to the other development stage projects throughout the industry, it is far and away the largest. When you look at the production profile of these emerging producers, Donlin Gold is better than twice the closest competitor. It will produce 1.5 million ounces a year at first five years followed by a life mine average of 1 million ounces a year.”

Final EIS should be in the next 10-16 months

“John, the corps of engineers is updating the work plan to get to the final EIS. Could be 10 months, could be 16 somewhere in that range. At this stage, we are not overly concerned about a month or two either way but will certainly update everyone when the corps publishes their final schedule.”

Construction decision will be made next year

“right now we are working with our partner on developing the plan of action for next year. That will really drive the schedule to a construction decision. And I’d expect we will provide you detail on that with our yearend news release.”

Novagold 3Q15 Earnings Call Notes

Everyone is retrenching now, but we’re two years away from a construction decision

” Donlin is one of the largest undeveloped gold deposits in the industry. Right now, everybody is focused on hunkering down and cutting costs and no new investment. We are two years away from a construction decision and when sentiment changes, mines like Donlin will be needed to sustain the gold industry.”

Gold exploration down and no major discovery in four years

On slide 15, we look at what’s been happening in the gold industry. Exploration spending is significantly down and there hasn’t been a major discovery in over four years. Gold production has peaked and it will continue to decline in the coming years. Without major gold deposits like Donlin, the industry cannot sustain itself.”

Pleased with positive comments from agencies. Confident that permitting will be completed

“We have been really pleased with how constructive all the agency comments have been and that gives both owners confidence that we will get the permitting successfully completed in about two years. And while we are working on the permitting, we are also looking at what makes the most sense for the scale of the operation.”

Feasibility study will probably come in 2016

“I think the scenario that’s very likely is that as we are wrapping up the permitting in 2016, the owners will update the feasibility study. By then it will be about five years old and a lots changed since then, both in terms of inputs and energy costs. So little over a year from now we will update that and the owners of the site which path makes the most sense.”

Gold price will determine development speed

“And that could be anywhere from, if prices are strong, building it as big as you can and as fast as you can. If the markets are weak, we will go slowly. So I think there is so much at play with the gold price that both owners want to keep all of their options open.”

We’ve got plenty of cash

“If you move the clock forward two years from now and if our burn rate remain the same, we have a permitted project in somewhere between $90 million and $100 million cash. And that’s assuming we don’t sell Galore. Once we get the permitting completed, the demands on our cash would drop even further. So I think we could sit there and maintain ourselves for seven, eight years without substantially changing the structure of this company.”

We’re not going to raise equity below $9.50. Our shareholders are patient.

“philosophically, we don’t do down rounds. We will not raise equity at a share price less than our last offer in the $9.50. So we are patient people. Our major shareholders look at us as an unexpiring warrant on an ounce of gold and they take a very long-term view.”

Novagold FY 2Q15 Earnings Call Notes

18 years to permit an average mine

Although it may seem lengthy a permitting timeline of about five years is reasonable for an asset that will produce for over three decades in one of the world’s safest jurisdictions. The reality of today’s environment is that mining projects now take an average of 18 years to reach production after discovery. We have invested time and resources into this process, which will pay dividends as we near the home stretch in the permitting of Donlin Gold.

Many pieces of the permitting puzzle have come together

many pieces in the puzzle in permitting Donlin have come together in the last quarter. The corps of engineers were primarily focused on the preliminary draft to EIS which is a key driver in the permitting schedule. The Corp has addressed comments from the cooperating agencies, the State of Alaska and the native corporations and issued a preliminary draft to EIS for inter-agency review. The release of the preliminary draft to EIS is a major step in the process leading to the publication of the draft EIS for public comment.

Expect to spend 14m this year to fund projects

We spent $3.9 million to fund our share of Donlin Gold and Galore Creek in the second quarter. For the full year, we expect to spend a total of $14.2 million on our projects.

Unexpiring option on 39m ounces of gold

Our largest shareholders view NOVAGOLD as one of the best ways to get exposure to the richest gold deposit in the industry, an unexpiring option on 39 million ounces of gold.

We’ve been progressing like the tortoise and the hare. In two years’ time we’ll be able to make a decision

Reminiscent of the tortoise and the hare we and our partners have been advancing Donlin Gold steadily and without interruption. In less than two years’ time, market and gold price dependent, the owners will be in a position to make a decision on one of the gold industry’s most vital assets in the next generation of mines.

Two years left in permitting

we’ve still got two years left in permitting, so we’re really not in a position to make any adjustments to the current project that we’re working so hard to get over the line.

It’s a big undertaking. We want everyone to be informed

the EIS is approaching 3,000 pages now. Yeah we’re permitting a mine, two ports [ph], the gas pipeline and a power plant. So it’s really a massive undertaking. And there have been numerous in-depth studies along the way on every aspect of the impacts of the project, from barging on the river, quality and so on. So it’s a very well scrutinized project which is, what we want. We want the project to be fully understood by all of our stakeholders. And I think with an undertaking like this, yes it does take time.

No one likes to see their share price drop but that’s not our concern

Nobody likes to see their share price drop. But we’re not really concerned by that. I mean the main decision for NOVAGOLD is two years out into the future, that’s a lifetime in the gold industry, particularly as tumultuous as its been the last four months

NovaGold 1Q15 Earnings Call Notes

$157 m in cash, expect to have $120 m at year end

“Turning to our cash flow on Slide 8, our total cash and term deposits decreased by $8.3 million as planned and similar to the prior year quarter. We ended the quarter with cash and term deposits totaling $157 million.

We expect to spend $45 million for the full year including the repayment of the remaining $15.8 million of convertible notes on May 1. We should end the year with approximately $120 million in cash and term deposits.”

39m ounces of gold at Dolin

“Our flagship Donlin Gold as shown on Slide 9 continues to retain all its important fundamentally positive attributes. With 39 million ounces of gold in resources at an average grade of 2.2 grams is one of the largest and highest grade undeveloped gold deposits in the world.’

Exploration upside

” Tremendous exploration upside exists at Donlin with multiple targets and areas that have not yet been fully explored.”

Unexpiring warrant

“One of the qualities most sought out by our investors is Donlin Gold excellent leverage as shown on Slide 13. They look at NovaGold, enhance Donlin Gold as an un-expiring warrant on an ounce of gold.”

In the US

“In addition to quantity and quality, Donlin Gold’s in the United States is a great location to be in. When we meet with investors and talk about the project, we say that the U.S. had a defined and rigorous permitting process. It’s a place where rural law is not a novelty. Once you get trick, you get to keep the fruits of your labor.

As shown on Slide 14, jurisdiction is an important issue in the resources sector. One of the key questions that investors will be asking in mining companies is where in the world are your assets located? You wouldn’t take your family there on vacation? Why would you want to invest there?

In recent months, we’ve seen coups, kidnappings, instability and changing geopolitics. The emerging markets are slowly deteriorating and have altered how investors look at opportunities. Investing in these regions carries risks well beyond what you find in North America.’

Permitting process in US is rightly rigorous

“The permitting process in the United States is rigorous and rightly so. It is the very reasonable price we pay for having security of tenure in one of the world’s safest jurisdictions. As mangers of a rich piece of real estate with a massive mineral endowment, we’re advocates for the government agencies for our counterparts in this process.”

NovaGold Resources 2Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Over the last few months there has been a lot of discussion about the current downturn in the price of gold. As management of a company which is developing an asset whose life is expected to be measured in decades and potential value in billions of dollars, we view the current phenomena as a short term swing and a well-established secular gold market. Great mines easily absorb these swings during their long lives of operation. They benefit from price upswings, with projected life of mine costs of less than $600 an ounce. Donlin is in a unique category of assets, positioned to deliver substantial value for many years to come.”

“In these turbulent times the most important thing we can do is focus on the things we can control. Everybody at Donlin is completely focused on the permitting and advancing the project.”

“I wouldn’t say there’s any one key asset or aspect of the environmental impact study that’s more important than others. Some of the scoping comments are what we would have anticipated such as the impacts on barge traffic on the Kuskokwim River. Air quality, air emissions is always scrutinized thoroughly throughout the process. I think we were pleased with how it went…it’s a big operation and many important issues will be studied. Those issues include the socioeconomic benefits and the impact to stakeholders.”