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.”

Barrick Gold 2Q15 Earnings Call Notes

Renewed focus on liquidity with the drop in gold price

“With the drop in the gold price below $1,100 an ounce, there’s a renewed focus on liquidity, which I’d like to address. As you can see, our near-term debt repayment schedule is quite modest, with less than $800 million due through 2017 currently, and that is improving. As Kelvin mentioned, we’ve already reduced our consolidated debt by approximately $250 million in the first half of 2015, and we also intend to redeem the outstanding $229 million principle amount of 2.9% notes due in 2016 with some of the proceeds from the sale of Cowal.”

Labor is biggest bucket of cash costs

“I won’t touch on all the components of our cash costs, but as you can see, labor is the biggest bucket. We’re reassessing and optimizing our mind-sight staffing levels to see where we can do more with less. Also at the site level, we are pleased to see some early improvements in productivity with some changes to the mining methods.”

Cash flow positive at $1100, have contingencies down to $900

“With the work we’ve already done to cut capital and align our spending on our 15% hurdle rate, all of our mines are free cash flow positive at $1,100 an ounce. Our mine general managers working with our technical services team have performed an analysis at prices down to $900 an ounce gold and developed specific plans to respond and maximize cash flow at the various levels.”

Set an aggressive debt reduction target and we’re hitting it

“In terms of debt reduction, we set an ambitious, aggressive target for 2015 which we thought was achievable, and as you indicated, we’re 90% there. We’ve also been clear that that’s not the end of the journey, and so we’ll continue that into 2016.”

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