Q2 2020 NovaGold Resources Inc Earnings Call
[music].
Thank you for standing by this is the conference operator, welcome to the know how cold second quarter financial results Conference call.
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 joined the question Q humans Press Star then one on your telephone keypad.
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I would now like to turn the conference over to Melanie Hennessey, Vice President Corporate Communications. Please go ahead.
Thank you very lean and good morning, everyone. We are pleased that you have joined us for Nova gold 2022nd quarter financial results for an update on the Donlin Gold project.
On today's call, we have Dr., Thomas capping Novagolds, Chairman, Greg Lang, Novagolds, President and CEO, when David Ottewell, Novagolds, Vice President CFO.
At the end of the webcast, we will take questions both by phone and <unk>.
I would like to remind our webcast in call participants that I've stated on slide three 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 disclaimer included in this presentation with that.
I had the pleasure of introducing Greg like Greg.
Thank you Melanie and good morning, everyone.
Before I provide an overview of the second quarter results I wanted to address the ongoing pandemic.
In order to minimize the risk posed by Copel 19 noble gold.
He is maintaining a wide ranging set of policies at its offices in Salt Lake City.
Vancouver and in conjunction with Burke after Donlin Gold office in Anchorage, as well as implementing an enhanced safety plan at the projects right.
All of this is designed to ensure the safety and well being of all personnel.
No Gold's most important objective right now is for health and safety epics employees partners and contractors.
To that end as shown on slide for the company has put in place measures to protect its personnel both in an office setting.
And in the field.
Donlin gold is regulatory conducting safety meetings to address.
Hygiene and sanitation practices, we request all in place to monitor their health and consult with health professionals, you're feeling any symptoms. We are committed to providing an environment, which all of our people make at home safe and healthy every day.
Slide five.
Highlights the steady progress in the first half of the year for novel golds operational activities, even with the temporary pause in the drill program during the first quarter.
The year started strong with the receipt of state permits followed by preparation of the drill program and mobilization of drill rigs to the site in early March.
All before temporarily pausing activities as a precautionary measure as result of covert 19.
The drill program re mobilized in late May and we currently have four rigs operating.
The multiyear side investigation that commenced in mid 2019 as part of the projects Dan Damn safety certification has been paused due to the prioritization of the ongoing drilling.
It's not on the critical path and our focus is on completing the drilling right now.
I will elaborate further on external affairs activities and community engagement later in the presentation.
Tom and progressed nicely on its optimization efforts and established a solid plan for 2020 that would allow the owners to have a greater understanding of the recent geologic model and high grade mineralization controls.
All of which have the potential to benefit the project and will ultimately serve as a basis for an updated study.
Looking at this year's drill program in more detail on slide six we have completed about 20 holes. So far this year.
Certainly no further interruptions.
As anticipated that make the majority of the 2020 drill program, which consist of about 80 to 80 holes totaling over 20000 meters has centered on the act and Louis areas will be completed.
The objective of this drill campaign, which is the largest in 12 years is to validate the recent geologic and resource modeling concepts developed by Barrick and Novagold and to protests detest potential extensions of high grade zones, which would be expected to be mine.
Early in the life of Donlin.
The results of the 2020 program.
Provide the necessary data for novel Gold and Barrick.
Considered the next steps for the project.
The pandemic has created significant concern in the Y K region due to the elders memory of the toll taken by the Spanish flu early in the century, when Alaska Native American suffered some of the highest casualty rates in North America.
Donlin gold and our Native Corporation partners immediately engaged with the community to assist the needs of the small villages in the region.
As shown on slide seven Donlin partnered with Teekay C and tribal councils to coordinate food collection and delivery of supplies.
The eight middle cost Quim River villages.
Don There and also coordinated with tribal administrators to identify community members to make face masks for elders and people sceptical to kobin.
In addition to the work focused on lending I had during the cobot pandemic Donlin also supported the cleanup greenup initiatives a program we have participated in for many years.
As can be seen on slide eight with the temporary closure of the Donlin gold cap, we donated thousands of pounds of food to homeless shelters and various food banks.
Compounding the urgency of the covered response, many communities have been cut off from winter transportation when the regional airline declared bankruptcy.
Donlin gold continues to coordinate deliveries of food and supplies to communities, who still do not have regular air service, which along with river travel is the primary means of transportation in Western Alaska.
I'll now turn the call over to David Ottewell, Our Chief Financial Officer.
Dave.
Thank you thank you Greg.
Slide nine highlights our operating performance.
The second quarter, we reported a 7.2 million dollar net loss 1.7 million higher than the prior year quarter.
The net loss increased primarily due to the 2020 drilling program at Donlin gold.
Also lower interest income higher share based compensation costs, partially offset by lower interest expense.
On promissory note payable to Barrick and foreign exchange movements.
Second quarter 2020 cash flows are highlighted on slide 10.
In the second quarter, we spent 6.4 million.
1.6 million higher than the prior year quarter.
Total spending increased primarily due to the 2020 drilling program at Donlin gold.
Interest income decreased due to lower interest rates.
We ended the quarter with cash and term deposits of 134.3 million.
Back to you.
Thank you Dave.
The Donlin gold project.
In the western part of the Great State of Alaska as shown on slide 11.
As a 50 50 joint venture partnership with Barrick Gold.
My name is an important part of the Alaskan economy.
And becoming even more important to the state as revenues and employment decline in other sectors.
There are six producing mines in the state and numerous exploration and development projects that are advancing as shown on the map.
Other industries, there haven't been experiencing low or no growth in Alaska.
And the impact of the covert 19.
Crisis on the cruise ship and tourist industries may take many years to recover.
With the long history of mining and a skilled workforce in the state Donlin gold offers the opportunity of a future with good paying year round careers and training for young people to live close to home and maintain a subsistence way of life.
Donlin Gold is largest gold development project in its category as you can see by looking at comparable development stage projects.
It's truly unique in that it's federally permitted and starts with an endowment of almost 40 million ounces as shown on slide 12.
And it turned their jurisdiction, where the rule of law is not a novelty.
And it has strong long term partnerships with the native corporations CIT list at and T. Casey.
If you look at the peer group average Donlins resources over five times the other projects.
People in mining will tell you the greatest King as shown on slide 13 at two in a quarter grams Donlin gold has twice.
The global average grade for large open pit deposits.
As we will see not only is the global production of gold decreasing but the average grades.
Continued to decline.
Last year, they decreased 5.05 gram per tonne and this trend is irreversible.
Why is that important.
Compared to projects, one with two grams per ton and the other with one gram per tonne with all other factors being equal.
The one Gram mine would need the resources in plant capacity and energy consumption has twice that.
I've a project like gone.
Given its scale and grade if donlin gold was built today it would be one of the largest gold producing mines in the industry.
For the long term investor there's additional value that comes with a mine that has a multi decade lifespan from it start.
Almost 30 years of production.
Just the current resource.
As currently envisioned.
Donlen would averaged 1.1 million ounces a year over its entire life.
There are few mines in the world existing or proposed with that level of production.
In fact, only three mines globally produced demand ounces of gold last year.
Looking at comparable scale mining operations around the globe Donlin would rank among the top operations if it was producing today.
Slide 15 shows the top 10 largest producing operations globally.
You will notice the gold SEC gold color on the map, indicating the world's most desirable mining jurisdictions as ranked in the annual Frazier Institute Survey published earlier this year.
The three operations producing more than 1 million ounces per year, one of them as a joint venture in Nevada between Barrick and Newmont.
Nevada is ranked third in Alaska is ranked fourth as the best mining jurisdictions in the world.
Two other mines, which produced more than a million ounces last year, or even whose Pakistan and Russia.
They were not even ranked due to the lack of industry response.
A report from Wood Mackenzie.
Released last week and based on a study of 260 gold projects found that to maintain current production levels. The gold industry must invest $37 billion on greenfield expansion projects over the next five years.
They estimate the industry will need to commission 8 million ounces from projects by 2025. This equates to roughly 44 new mines.
This report emphasizes that jurisdictional risk is tied to production declines.
The authors note that social and governance considerations are dissuading, the exploration of certain jurisdictions and the progression of identified deposits.
As well organic growth is waning miners are looking to buy go through mergers and acquisitions to secure their future.
This is failed to significantly increase production.
To avoid a perpetual decline in gold supply the industry must see a rise in project development.
Prior to the Cobot pandemic peak gold supply was already becoming a real possibility.
Now it seems almost certain.
Donlin gold is getting the right place.
At the right time.
Another differentiating differentiating factor for the Donlin Gold project is its location on private land that was designated for mining.
It's rare in mining projects today that both the mineral and the surface rights to the project are privately held in our case by our long term partners journalist at and T.K. see who identified the mineral potential have the property and invited mining companies to explore.
The act and Louis deposits can be seen on slide 17.
The pot topography at Donlin is clearly very favorable for development.
As shown on slide 18, the act and Louis deposits contain a 39 million ounce resource, but occupy only three kilometers of an eight kilometer gold bearing trend.
We have done extensive drilling.
Over 1400 holes totaling 340000 meters and our focus is on continuing to optimize the project.
Based on previous work done in the area.
There are a future opportunities for substantial exploration.
And the expansion of the known resource.
When the time is right we will resume drilling.
So, let's say on T.K. see had been partners in the Donlin gold projects since 1995.
Donlin has life of mine agreements with both partners, who have been deeply involved and supported from the start.
We're thankful for their long term sport and their commitment to the project.
We support their mandate, we read the Alaska Native claim settlement Act as highlighted on slide 19 to help them develop their land for the economic benefit of the region and all stakeholders involved.
They have an owner's entrust and seeing the project go forward.
Well, we are all experiencing order responding to co bid and its impact.
On the health of our communities. We also gain comfort from the long standing relationships that night at United in the common go bringing donlin gold up to value chain.
We focus our culture of safety, social responsibility and corporate governance practices.
We do this by engaging our stakeholders through regular contact interacting with our investors and engaging and meaningful waste to promote the health and safety of our people onsite.
Especially now Donlin gold.
Brings much needed support local communities.
We are better together.
On slide 21.
We note our healthy treasury.
We continue to anticipate spending about $31 million this year, which includes $20 million to fund our share of expenditures at the Donlin Gold project.
At Donlin gold $11 million is planned for the drill program and the remaining $9 million for permitting and community engagement.
In addition, as the result of the sale of our Galore Creek project to Newmont, the receipt of $75 million is due in 2021 and a further $25 million in 2023.
The contingency payment of $75 million.
When the owners make a construction decision.
With that I will now turn the call over to Dr. Kaplan.
Who will give us his insights into gold.
Thank you very much Greg I'm going to take the opportunity today to be able to reacquaint, our existing shareholders and the many new potential shareholders. A that have been attracted to our stock of late in order to be able to high.
Hi light why it is that we believe that Donlin is the greatest gold development story in the world today and that Nova gold as a pure play on Donlen, which we consider to be the next carlin its a great wait to be able to play. It. In addition of course for those who are.
Shareholders. It gives me an opportunity to be able to explain.
Why there are probably dollars of value in Barrick shares as well as a consequence of the progress which has been made and what Mark Bristow refers to as the global brand that is now donlin.
[noise] when we looked at the first page the titles with our annual report today. It really does say it all the expression to tier one assets. It's been most popularized of course by Mark Bristow.
Our.
Codicil to this is that what we haven't donlin is a tier one asset in a tier one jurisdiction. The superlatives that can be attached at donlin make it in the combination of attributes something that's not just the best in the space, but also unique the reserve.
Right size the grade the fact that it will be in one or two phases, the largest pure gold producing mine in the safest jurisdiction and the mine running over decades, and multiple gold cycles, and obviously because of its superior grade at a lower cash costs.
Cost than other mines.
But the story gets even better.
[noise]. This is our stock chart over the last year I could've put up a two year chart I could've put up a five year chart I could've put up an eight year chart, when Greg and I joined together as the chairman and CEO of Nova Gold.
But this chart tells a very big story about what came next and I think it's worth highlighting Nova bold has been an outperformer there have been multiple catalysts over the years that have rendered it.
Deserving of its space as a really one of the go to stops in the gold development space.
It's very likely that this chart explains the focus that was placed upon novagold share price by those who were short the stock.
And the fact that we were approaching 10 year highs.
This is not something that a short seller wants to see this is a bad chart. If you are short stopped and you've come to the conclusion that gold and gold shares maybe in a bull market.
Next slide.
This is what's happened until I guess yesterday and shows the impact of the report by J capital I'm not going to go into the details of that report I think the line by line analysis as well as the color, which I provided in my own.
Press release pretty much goes to the point that we regard this as not a report, but as a character assassination defamation certainly the fact that it took us over a week and were able to go through this line by line and.
Joe.
The errors in fact, a the full suits the distortions the rest we will leave to the lawyers, but the point, which I'd like to make about this chart is that in light of the fact that the J capital report its not really a report we're not really dealing with analysts I believe there.
Last long on mining was Mongolia mining, which went down 99% and they also if I remember correctly argued just short fortescue, and Australia, which multiplied in value I'm not aware of other mining things that they've done suffice to say.
That when you have a team such as Greg Lang.
And you compare that and a track record of integrity of promise is fulfilled keeping faced with all stakeholders shareholders native corporations and our partner Barrick I have no doubt that when you look at this chart you should say well.
If that's all true then this is a great by we're able to get pure play on Donlin at a third or so off I would urge you to take a look at the attributes of Novagold end of Donlen in order to.
Be able to see whether what I'm, saying makes sense to you let's go to the next slide.
When I meet with investors when I speak about Donlen I often ask this question.
Please tell me because 99% of the time I sit on the side of investors I do not have to be invested in the gold space I do not have to be invested in Nova gold I have a free hand to be able to invest in anything that I want to I've chosen to have.
A big portion of our balance sheet on Nov gold over the last 12 years simply because I believe they did is the single best opportunity in the gold space and I believe that gold is a generational trade.
I've made 100 times my money before in various commodities be they silver platinum and hydrocarbons.
I believe that that's exactly what's going to happen in Nova gold and the reason is because I've been blessed with having a career over the last 27 years in which my teams of either made discoveries are taking control of assets that have been category killers.
But I've never been in a situation, where it's fidelity says as the quote unquote owner I sit above the shop.
Have a half interest in an asset that's not just a category killer, but has a unique combination of attributes that is perfectly but perfectly suited for the environment in which we are about to embark so I asked the question.
Because if somebody can give me an answer I'm, a buyer I have more capital to deploy and <unk> to deploy and the precious metal space, what other gold development stage asset in the industry compares in its combination.
Have enormous size.
There has to our knowledge never been a gold mine, which started out with 40 to 50 million ounces of.
Measured indicated resources.
It's a high grade operation the grade at Donlin is where the industry was a decade ago [noise].
The average grade of gold mines has fallen upwards of 50%.
That decade.
Which has obviously a very important aspect in terms of operating costs, and where we would stand on that scale, because kenteris paribus, all things being equal if you've got something which is producing a two grams a ton and someone else has one gram a tonne your cost of production is high.
Yes, there's fights to say that we have size and we have grade we have quantity and we have quality that would be accretive by any metric for any major mining company the exploration potential, which Greg highlighted really has to be seen for a very interested.
Prism.
Going into 2006 I wasn't the shareholder then wouldn't Barrick made it's a failed hostile takeover attempt on donlin and I wasn't one of the shareholders, who rejected that takeover attempt and novagold went into the Twentys.
East Barrick had succeeded in that bid I think the history of the gold mining industry could actually have been altered at least the turn of the screw of that history would have been changed I think you would've seen 10 drill rigs on donlin and instead of the.
40 to 50 million ounces on three kilometers of an eight kilometer trend, which has drill holes in it.
I think that you would see a multiple of what we presently have and I believe that in due course, we have a very good shop. There no guarantees that we will see a multiple of what we have now now take into consideration that that eight kilometers represents about 5% of the total land package at.
On land, which has never been properly explored because of the legacy of the failed takeover attempt and the assumption that Barrick had for many years that if they didn't prove that the management of Nova Gold was right in 2006 that there was a lot more there and give them a stick with which to be Eric.
Over the head with maybe Nova gold will fall into their lapped. It all most did but on December 30, Onest 2008, My team. The Electrum group effectively took control of Nova Golden prevented from going into bankruptcy.
Fixed all of the issues that it was facing at that time. It had a class action lawsuits environmental liabilities discredited management no balance sheet, and we took that company from a dollar and a half $2 to $15 about a year or so later.
Our with the help bless them of John Polson, and the Soros funds the production profile of Donlin.
Couldn't be better.
In one or two phases donlin will be the largest single pure gold producing mine in the world I'm ambivalent about base metals, we have some states in what we consider very high quality high grade base metals, but in the world that I see I really want to be able to have full exposure to the monetary metals gold.
And silver Donlin will be again, the largest pure gold producing mine in the world whether it's the first phase and the feasibility study, we would start with a million and a half ounces or in two phases. I believe that's where we will be the mine life will be measured in decades, assuming no reserve expansion.
Plus we have great partnerships the relationship with Barrick couldn't be better my relationship with Mark Bristow goes back 20 years, if anyone wants to know Woodmark thinks of me as a professional in the space, whose integrity. He has seen exhibited men.
He times over the last couple of decades.
I'm up asking my best reference are the people who are my partners and my shareholders you want to know who I am I'm.
Im sure, John Paulson, and fidelity and the any L.A.'s.
Or mark Bristow or our Native Corporation partners will serve as our best references and there's a reason for it we have a great management team with great credibility and that management team is focused on what they believe will be the single greatest gold mine in the world When Richard Williams, who was the project manager at Pueblo Viejo, who joined.
Greg Lang in this story I remember John poll since analyst asking why did you leave Barrick to post to Novagold. He said because I'm going to build the greatest gold mine.
In the world.
And he joined with Greg Lang, who had never left Barrick, where its predecessors after a 30 year career.
Because Greg had been part of the team that tried the hostile takeover on Novagold and his attitude was very similar to mine. This is going to be the greatest gold mine in the world, but also as we both agreed it's in the right placed in the world.
Greg.
Had worked all over the world as a minor I had invested all over the world as an investor I made my first fortune in Bolivia, My second in Zimbabwe in South Africa, I sold the Kibali mine to Mark Bristow, because you wanted it and I preferred him to the other better so I.
I can tell you I know, what's going on in the developing world.
From the Investor standpoint.
Made my bones, there and I love, it and I wish that it weren't what I'm about to say.
So does Greg Greg Rang in mines, all over the World for Americans its predecessors suffice to say that our view is that the key to making money in this business going forward the place where investors will be channel like salmon moving upstream.
He's in the great assets that are located in safe places Donlin will be the largest pure gold producing mine in the world One day, but most importantly, located in the best jurisdiction in the World you heard it Nevada's number three.
Last because number for Alaska's already the second largest gold producing state in the United States, They understand mining and of course, they understand infrastructure and they understand making sure that there's access to it it's not a big deal get over it.
Those are lives that are meant to scare people nothing more.
Move on.
The point does this so when I ask people can you give me and asset which has that combination of size grade mine life operating cost exploration potential.
Production profile and in a safe place, where you can actually keep all of those things all of that leverage to gold.
I never get pushed back ever.
If I can't find a challenge to the assertion and donlin gold must be unique.
At that point, it's a rhetorical question.
<unk>.
Now I can't stress this issue enough normally in our conference calls I tend to talk about two things in particular, because I think that there is so important to gold investors and yes, we do since in our mission something of the evangelist.
But I, usually focus on gold, which I'm not focusing on today because to me. The arguments are now very very clear and God knows all of my existing shareholders have heard them, but I do welcome any who do want to hear my views on gold to feel free to pose that question and the issue isn't getting me to talk about at the issue is getting.
Me to shut up about it but let me go into another aspect, which I really think people have to understand if they're going to invest in this space.
As I said from my own experience from Greg's experience. Our belief is that the go where the gold is mentality that took me to South America Africa Asia et cetera, same for Greg our belief is that that Europe is over.
And that the key is not just being able to acquire category killer assets that give the greatest leverage to the underlying investment thesis, which was my mantra for.
15 plus years.
Until I added the corollary in jurisdictions that will allow wanting to keep the fruits of that leverage I.
I don't want to dwell on this more than I, usually do but the reality is even since our E. G. M. When I spoke about this last you now have countries, which are practically using my language as they confiscate gold's ambient now refers to gold as a strategic asset the artisanal miners have to give the.
Gold to the Central Bank in exchange for local currency, which is basically confiscation.
We've effectively seen Woodbury refers to as Nationalisation in New Guinea yesterday, they announced that they're going to be laying off people. It was a very very important a statement, which was made by the prime Minister of New Guinea after effectively nationalizing Barry.
Okay, and Chinese assets, such as Barrick, but when when do you have the guts to nationalized the Chinese.
You really know that this isn't an extra bold trend, but the way that he described it was he said look.
These companies have shareholders, but I have 8 million shareholders, while I have to answer to.
That's a very very very pregnant comment.
A bad bad omen for the mining industry mining is coming down to the existential issue.
And that is it's not do you have a world class assets, but were in the world is located.
Think about it for a moment put yourself in the position of an institutional investor if you're not already won.
Broker calls you up and says I've got a great management team with World class assets.
You're going to say HM, Okay, well I've seen a lot of wealth destruction that build industry, but a lot of balance sheets being cleaned up things are looking better I'm bullish on gold.
But I think the first question is at the Investor is going to ask is I don't want waste anyone's time, where in the world is it because if it's not in a place where I can go gambling.
Will take my kids like Las Vegas, Okay, admittedly when the pandemic passes or go swimming in the great barrier reef, and Australia or go whale watching salmon fishing and Alaska.
I really think I want to make a career risk I don't want to ever have to answer to my I see why we got overrun by guerrillas or we were subjected to defacto, where do your ray outright nationalisation as we're seeing in so many places around the world I don't want to list them because I don't wish this upon any of my colleagues and the gold industry, even if it is happening.
To them so.
So the real question is if you take as the existential factor wearing the world are you in order to be the gating issue there aren't that many assets to choose from and we're going to be one of those go to stocks, whether you bias it eight or nine or 18 or 19 twin.
<unk> with 29, I do believe you're going to own us because as Mark Bristow is set and he travels all over the world He said Tom.
On land is now a global brand.
And if you don't think that one day, Eric is not going to conclude.
Or start to talk about Donlin, the way I do and by the way.
Feel free to ask Mark everything, which I say about donlin. He agrees with we're now in a process as Greg.
Put it where we are working on and optimized geological model. Our geological model is already two or three times the industry average.
In Barrick CGM, they referenced that we're working on a model that could actually enhanced economics, which is as Greg referenced focusing on some of the higher grade zones, which materialize from a very successful, albeit very limited my you. It was a different barrick at that time drill program in 2017 I made my.
Fortune through the drill bit in mining and energy I loved to drill Mark knows that anything he proposes I proposed double we have a geologists as the CEO of Barrick a great geologist one of the greatest Ceos in the history of gold mining he's been to Donlin.
For CEO and 12 years, he's met with the Governor He's met with our local partners. He knows that Alaska is a great place to do business very different from some of the other jurisdictions that he has managed so ably.
But he sees Alaska is a place where responsible mining has a home.
So if you really want to know what Barrick thinks about this feel free to talk to Mark.
You'll be talking about it eventually, but he's a stickler for wanting to make sure that everything that we've been modeling the new model. His team had a big handing it we're all very excited.
Even if it didn't pan out I have no idea will see after the drill program, we're still dealing with a grade that will give superior returns in a bull market in gold without a shadow of doubt next.
Does that kind of leverage that we see is extraordinary now you can look at donlin and you can attach discount rates.
I'm going to tell you I've been in this business for 27 years I got into it when you s. assets were valued using zero percent discount rates. If they had any exploration potential whatsoever, because they were considered the safe jurisdictions. They were arbitrage against what we considered the.
Ski jurisdictions to which South Africa.
Australia and Canada.
Times really changed in 1990 to 90 93 Newmont went to Yanacocha and then you had a flipping around of the assumptions about valuation and it became you go where the gold is it's the frontier spirit and before you knew it people we're in.
Argentina, and whose Pakistan, and China, and Russia et cetera that eras over.
We're now coming back home and I see that as somebody who once was apparently one of the largest holders of mineral rights in the entire world from West Africa, where we had rights and eight countries all the way through to Pakistan. The eras over you've got to be in a place where the rule of law is not enough.
<unk>.
That's not even if.
So I predict gold is declared in most jurisdictions a strategic asset because in most jurisdictions, where gold is produce those currencies are not readily convertible into hard currencies were seeing already liquidity trap throughout the developing world. The examples I gave us.
EMEA requiring conversion to local currency, you're going to see a hell of a lot more of it and really you know something there's nothing worse than being an investor and having the right thesis I eating bullish on gold and losing your money because you were in the wrong place.
Unfortunately.
That's going to happen.
So regardless of whether you buy novagold, regardless of whether you buy my thesis just.
He just warning.
If you are not in a place where you know that where you wake up in the morning.
You are going to own the same thing that you own the night before and not have to a walk abashedly into your IC and explain why you invested in a place where you wouldn't be able to take your family on vacation don't say you weren't warned the leverage that novagold provides here needs to be.
He needs to be qualified.
This is only on the 40 or 45 million ounces.
As a hell of a lot more there.
Much more.
My guess is that the new Barrick, one, which as as it's a practitioners and executives people who've made a lot of money through the drill bit I think they're going to be allies on our side. When the time comes for them to revisit where do they want to be and where do they want to put exploration.
Dollars, but you know what as I've always said to Mark you know what Mark take your time.
Do it you're way because once you start.
I'm talking about Donlin, the way I do and as I said, he agrees with that already when you're ready for that.
I could pretty much retire because I may be evangelical about donlin, but I don't have every analyst weighting for my every word like Barrick does they are the 800 pound gorilla and <unk> odds that mark is not going to insist.
At the valuation attached to Novagold, when we're back at $4 billion $5 billion $10 billion isn't attached to barrick, because it's apples to apples other than the quarter of a billion dollars in cashing receivables, we have I would say those odds it's zero.
He is not a wallflower what he wants to get the value for that and as I tell analysts who are talking to us about coverage I say you want to ingratiate yourself to Mark Bristow just make sure that if you choose to give US coverage you give him the same valuation because he's going to appreciate.
It it's one thing that I appreciate something it's another thing that Barrick does so I'm looking forward to a lot of good catalysts ahead of us because we've got an asset that gives you leverage.
A place where you can keep it and that is the Holy Grail next.
When it comes to investing in the gold mining space I don't have to tell experienced or veteran investors that it has been a very very frustrating period and one of the reasons is admittedly that they're very few management teams, which have it here.
Year to a disciplined.
Where they have not as Peter Lynch used to call. It de worst certified because they bought than investment bankers thesis that you have to go into production I think our stock chart going into a a this month pretty much showed that that's a miss the keys to be able to have a great asset and not squander that asset on in fear.
We are assets, but for that you have to have a management team, which is committed to being focused on what it considers to be the best of the best.
Does that in a nutshell.
Describes the management team that was created by Greg Lang.
Period every promise.
That this company has made since he came onboard as CEO and as when I came on board as chairman in the beginning of 2012, when we raised $330 million. We told the investors that we would take donlin up to value chain. When we bake began permitting there were a lot.
Out of people, who said you can't permit a mine in Alaska well.
You know we've got our federal permits the first time ever that the U.S. Army Corps of Engineers, and the Bureau of land management, where the co authors of the federal permits they actually asked us to have a ceremony to mark that occasion.
We did it we did it with the full throated cooperation of officials in Alaska and most importantly, we see full support of our Native Corporation partners. It's been a wonderful experience and we look forward to being able to change the economy of.
People would not recognize when they saw it is really one of the least developed and by that I see euphemism for poorest parts of the United States. We look forward to being part of Alaska and part of this wonderful story of being able to in the most environmentally social.
Julien culturally sensitive way possible being able to bring a better life to our partners and our stakeholders.
In terms of the advancements of Donlin gold.
It's been an uninterrupted series of successes from the 2011 second updated feasibility study the 2012 commencement of permitting the 2017 targeted drill campaign, which delivered some of the best drill results in the mining industry the to say.
I was an 18 receipt different the record of decision that the major federal permits and of course, the receipt of key state permits over the last two years.
Meanwhile, we spun off and asset that didn't exist before in our valuation the Arctic and born night deposits into a company called Nova copper and now known as trilogy, which is now worth several hundred million dollars and it is in a very lucrative joint venture, which south 32.
And we hope you know for even better things to come and at a time when people were saying, we wouldn't get more than $50 million for galore. We held on did it right didn't cut corners and made an agreement that would give us 200 million potentially $275 million.
For that asset so that we could fulfill our pledge to be a pure play on the greatest school development story in the world and to be able to.
I have a treasury that meant that we have not had to raise capital since 2012 and have no need to raise capital and God knows we did our last round at nine and a half and we'd never do it down round, but we don't have to raise money until there's a construction decision we're sitting on a quarter of a.
Billion dollars 230, $40 million in cash and bankable receivables.
And finally, we have what I believe it's going to be a wonderful catalysts.
For Nova Gold.
If gold prices continued there.
Our tire and as all of you know I believe the gold will multiply from here, we have in the advent of [noise], Mark Bristow and the Randgold team, what I called the White Swan event.
As I've said I truly believe that we have a partner who gets it.
We have a partner who.
We'll see and I believe does already see that this is a tier one asset in a great place and wants to be able to have this thing framed within the Randgold slash Barrick paradigm and we're all for it.
[noise] next.
So what is the novagold opportunity and why should you be looking for it, especially now when a company that's been outperforming the indexes and whatnot Cherry picking we could have just made at newmont and ER and Barrick because of those high quality.
James but you're able to get it at a discount now and what are you getting.
What you're getting is a company that has shown that it is faithful to it stakeholders to its shareholders to its partners a company that has a management team that is honorable that is I believe one of the most transparent in the entire mining industry.
Anyone who has gone through our annual reports will see from the Q in a that we go out of our way to insert QNX that people have asked us over the years, whether investors at fault of them or not so that we know that we have an educated shareholder base.
Understands our strategy, who understands that we value our shares more than even the metal itself.
We have a balance sheet that allows us to be able to continue on our path of development with barrick without having to access capital markets until our share price is much much higher gold prices are higher and the partners are thinking about a construction decision and a timeline the asset.
Itself, it's beyond tier one it's a category killer the production profile as I've said, one of the largest going into production ultimately the largest pure gold producing mine in the world. If we do it in two phases.
A leadership team that has been they're done that built minds on budget built mines in difficult places.
And has a stellar track record of keeping the faced with our shareholders and most importantly, we're in a jurisdiction that all of our shareholders know they can trust.
They know that whatever it is that they own they're going to continue to own because we have the asset that is the right asset for an industry starved for a great assets.
But especially great assets in Great Places next.
It's not an accident that we have the kind of shareholder base that we do I can assure you that in the events of the last several weeks. None of these people have asked us any questions about the issues that were brought up in the short ER and distort camp.
Pain they understood in fact, I would say the majority of them began their conversations with us, saying well you're a victim of your own success, Mark Bristow actually said, Tom Congratulations you are grown up but don't they know who they're dealing with because you are probably the straight its guy in the entire industry in terms of saying what you're going to do.
The fidelity no pun intended well maybe slightly of our shareholder base. They know who we are they've been with us they continue to be with us and I hope that the opportunity that's presented by the what I hope to be temporary downdraft in our share price. It comes when people say lies and.
Yeah, you just have to deal with the sucker punched in move on I hope that we're going to have a number of new shareholders. I can tell you I'm getting more inquiries now than ever before people, saying. If this is a EUR 30 or 40% off sale on potentially the best gold assets.
[music], Nevada, then we're interested tell us more.
And with that I will conclude and see if there any questions for Greg Good day for myself.
Thank you well now begin the question answer session to join the question Q You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request if you're using a speakerphone. Please pick up your handset before passing any keys to withdraw your question. Please press Star then too.
Yeah.
Our first question is from David Lesinski, a private investor that Mr. Lesinski. Your line is open.
Thank you appreciate it.
Hello Fellows.
Bonnie.
Real [laughter].
So it's the if someone like.
Mark this ore from bar [laughter], what's to come out.
And so yeah, we're going to expedite the.
Alan Carr George.
And.
That's true.
Or make it one of our priorities you would see those short sellers run through the hills in a decade.
The big or.
I don't think shareholders fully realized where the public children are real offices.
That 100 dollar in crudes in the person girls.
Quite so most of total market cap.
The goal.
Sure when you take into account proven and probable.
Resorts.
Me I firmly believe that January living hit two trials you won't go.
I think well into 2021 will be a 2500 to 3000.
When you're talking about two trillion dollar dumping suits.
The year after year through your no.
Got it gets.
And it will happen.
And just taking into account.
Someone like Sean.
China internally mines.
400.
Tongue.
Girl down.
And it's all sold.
And belongs to the Chinese job.
Well, you're going to last 10 years such.
4000 subs.
I'm trying to publicly traded mix.
But there isn't Terje 1900, 2000, <unk> one of the spots in terms of them on 4000 not to mention role to go over there barring around the world.
[noise] I think there's going to come the deck.
The trying to we'll announce.
<unk> said that will be when there was a dollar crisis when that day huh.
In China announces that they have 20000 tons of gold.
It would be a whole different matter when it comes to Bretton Woods number two.
Yeah, I'm walking or so I'm talking to I'm sorry.
The other corridor only I believe one question.
And that question is.
It's bad allowed to increase.
The percentage that the younger to project well they love to buy more.
More starch.
Are they restricted or just the 50%.
Anybody can actually huh.
[noise], Greg shall I go ahead I'll take.
Well go ahead.
No no no you get you go ahead.
All right.
Donlin gold LLC, which holds the Donlin gold project.
50% owns by Burke and 50% owned by no gold you know the the Donlin Gold Board has to representatives from each company.
The chairmanship alternates every year this year Catherine Raw Berke senior executive for North America is the chairman of Donlin Gold next year I will be the chairman, but it's a true 50 50.
Ownership structure in every sense or the where neither party has raised the other does not have.
Okay. Thank you Carlos.
Sure. It your hard work <unk> I'm sure I'm sure turn call. This morning.
Thank you very much and by the way your comment about the China, one day announcing they're real gold reserves.
You hit the nail on the head and it's going to be I'm, a very very important moment, probably done during a dollar crisis or some other inflection point and it's going to only enhance their financial standing.
When they do it but they're waiting there waiting for the right time and that's not a conspiracy theory. It's just smart you don't Telegraph you doing until you're ready to expose your position.
Hey, who owns the girl banks the rules period. Thank you so absolutely. Thank you.
Thank you.
The next question and then Lucas pipes of B. Riley SBR Lucas pipes. Your line is open.
Thank you so much and good afternoon, everybody hope you, all doing well and staying safe and thank you for the detail ended prepared remarks.
Greg I wanted to follow up a little bit on the on the drilling program for this year.
No one of your base case, what what did you are looking for what would constitute a positive surprise. Thank you very much.
All right Lucas, where a lot you know to answer the question on the drill program I want to go back a little bit in time, you know as we've been working our way through the permitting process. We've Oh challenge. The overall project. How it was conceived and you know challenged ourselves to take a fresh look and one of the things that week.
Came up with where you say well, let's build it in phases and if you do could utilize a smaller equipment minimize the dilution and enhance the grade to the mill, particularly in the early years.
So a couple of years ago, we had a fairly small program about 16 holes to test the hypothesis, if the high grade intrusive structures were contiguous enough to be mind, a discreetly and you know those results are on our web page and frankly, there their stellar results you know good pick interest.
EPS of five and six grams in the intrusive. So yeah, we satisfied ourselves that the hypothesis about higher grade with smaller equipment less dilution was was valid.
And then a barrick went through a their merger with ran which really reinvigorated the company in my view and Yeah. Mark was up at site last summer with us and he and his team went through the new geology concepts that would put forward and I think suffice it to say they were in tree.
So the purpose of this program right now is a you know what's the best people, we've created a new model and the purpose of this program is twofold about half of the 80 holes will validate the new model, which focuses on the intrusive structures. The other half our test for.
Or high grade.
Mineralized structures that will be mind early in the life you know both of these could certainly enhance the rate of return on the project you know in where it really excited by the results. We've got about 20 holes drilled you know we lost a couple of months because of <unk>, but you know the drilling is going very well right now we're exceeding.
Our per day targets for meters and if we don't get it all down will be yeah pretty close to it before winter sets in.
No I'm, yeah, whenever we drilled at Donlin.
Always Ah you don't want to drill more because it keeps getting better with each program and each fresh look and we've enjoyed a the input of mark and his team of geologists.
Very helpful. I greatly appreciate the color and I believe you said it earlier, but just kind of wanted to circle back on that kind of from here, what's the what's the timeline.
Drilling program. This year, then when should we expect these results and when would they couldn't daily to kind of a revised mine plan et cetera.
Well, we're you know we're drilling now and you know with the two months, we lost due to their travel restrictions and covert impacts or your that might push the completion date from September into October.
And that's a yeah, we'll get as much diners, we safely can this year and then we'll probably take a couple of months to a incorporate the drill results into the model and a you know worked update that so you know even with the set back I would think that somewhere early in the next year the owners will be in a position to.
You know make a decision on where where two from here.
Hi, This is great news much much sooner than I expected I really appreciate the update then to keep up the good work. Thank you.
Thank you Lucas.
Thank you Lucas.
The next question is from John Tumazos, like John Tumazos, very independent research jumped my sense. Your line is open.
Thank you.
Looking at the website I notice the.
Feasibility study for the reserve and resource is November 2011.
[noise] and frankly I haven't read the short so a report.
And I'm not interested in reading it.
And I'd like to say something nice about.
Donlen Creek.
I sort of feel as though there are no facts that hand, because the feasibility study has been updated for eight years.
What are you going up to feasibility study.
It is there a couple of key points of the changes in parameters that you could call our attention too.
Sure John I'll I'll be happy to speak to the feasibility study the study Oh, yeah. It is.
David right now, but yeah, a couple of things you really need to remember about.
Particularly as it pertains to permitting once you start permitting in the United States you in essence freeze. Your project you know you cannot if you change the project in any way once you start permitting any basically reset the clock and have to start over so it made from our point of view.
We didn't want to do that we permitted a big project and if we decide to build it in stages are as long as we stay within the footprint of what has been permeated, which is now approved you know any changes would be simple administrative actions you're had we done a feasibility studies that have.
Really different then we would have set back our permitting timeline.
The other I think important aspect about that from from my perspective, you know a proper feasibility study at Donlin is you know tens of millions of dollars to each owner.
And.
I see no reason to do that until the owners believed that there in a position to go forward with the project you know as gold prices move up and our understanding of the geology crystallizes you know we're approaching that time and I think we'll be there early next year, but we've always.
Taking a view spend no money before we need to the feasibility study was done by.
Blue Chip engineering firms, yeah things, if some things have changed since the study was done but a lot of things have moved in our favor energy being a big part of it feasibility study was done at $85 a barrel oil and were half that with a seems pretty unlikely to me, we're gonna see $85 oil again.
Yeah. Other inputs are heavy equipment is certainly more of a buyers market than a sellers market background. So you know there's been pluses and minuses, but we track those indices and don't see.
Any major movements. So I think the study are certainly any prudent operator and that would very clearly describe rustenburg would not go forward with the study. It's a somewhat dated so we would a refresh the study when the time and environment is.
Right.
So you're saying the study is fair an accurate, even though to nine years old.
John I think this study is still a pretty reasonable expectation of what it will cost to build and operate this mine. The capital was $6.7 billion, there's been some pluses and minuses along the way you know we've engaged with.
Outside parties on partnering on the gas pipelines. So that's got to take a billion dollars. After that so there's got to study is dated but you know it's not been a particularly inflationary time and even up in Alaska wages with Oh, the layoffs in the petroleum industry wages or not.
Going up if anything they've turned in a turned the corner in our going down. So I think I wouldn't expect any material differences and fuel don't don't underestimate.
The impact or $40 oil on an open pit mine you know fuel is a big part of your operating costs and that's clearly been cut in half. So I think when when we're in a position to update the study I think particularly if we look at this stage development approach as I don't think Ah I wouldn't expect.
Anything materially different.
[laughter].
[noise], how much more do you think that cost to operate.
In terms of mining and milling cost per ton.
Because you have a remote camp in Alaska.
Supposed to say, Nevada.
Do you think the factors to Alex.
Or one point fivex or two point fivex.
Hi, John are you know when we did the feasibility study an estimated the operating costs. The biggest issue of operating remote is getting your both materials to the mine site.
And we looked at barging, we look to pipelines are both both viable options. If I was sitting on the back of the customer today, I see barges delivering fuel and supplies going all up and down the river. So either one of those are certainly a viable options to deliver materials to the side and.
That's the biggest difference in the operating cost is just getting the materials to the site and in our feasibility study, we envision to everything would be put on a ocean going barges, probably from a port like Seattle or Vancouver on the Western Seaboard, and then barged.
Up to coast transfer delivering barges and then transported to the site. So that's a one of the principal differences. If you look that you know a mine in Nevada My mind for dollar 50 at times. So in that side by side comparison, we would estimate somewhere around 250 a ton.
You know just to get the materials there so the remote nature of the side has been certainly factored into all of our operating costs.
And you know, it's a remote sites. So its fly in fly out you know that's a that describes a lot of the workforce up in Alaska and throughout many of the gold and Diamond mines in Canada as north.
Northern provinces, so, it's all pretty well understood and operating a mine fly in fly out is Ah, yes. It happens all over the industry and Weve.
Certainly benchmarked our costs against other sites that are operating in similar conditions and against many of the bearer properties that operate in a something far flung places.
Thank you.
Thank you Greg we also have some question coming through the chance and now when can the furthest could you speak a bit more extensively to the pipeline feasibility in car.
Okay.
Sure you know the gas pipeline or what we envisioned is a 14 inch pipeline that runs from the Cook inlet to the Donlin side you know it was in vision to be a 14 and steal it was designed and costed by CH too.
M. Hill. They are one of the biggest pipeline design and construction companies operating in Alaska, They've got a proven track record up in the state and it's a you know transmitting.
Gas is a whole lot simpler than trance portraying liquid and this study was done by.
Accompany that that's that's their bread and butter is building pipelines in the Arctic and ER I think the work is a particularly as we permitted and applied for permits such as our FEMSA special use permit for the pipeline the design and all aspects of it were reviewed in conjunction with that.
Can I think it's a it's still remains a viable means of delivering fuel to the site.
Current oil prices will take a hard look at back when we update feasibility study, but it's certainly a there's pipelines like it throughout the Alaska and the colder climates.
How long that paper the gap.
How long does it take.
It would take about a.
Three seasons to build the pipeline.
Which would be done concurrently with a building or out the donlin gold side.
Great. Thank you Greg. The next question it is around our the short seller at Port in our response.
Oh, Yeah, I don't want to dwell a lot on the short seller report, but I, but I will speak to it that win in industry for many years and ER have read some analysts reports it where you had some mistakes are somewhat sloppy, but now that that's now.
What we're dealing with here and other reports analysts said presented to us have.
Generally been they ask management to review for accuracy. The reports and obviously that did not happen with Uh huh.
With J capital and.
Yes, I it really wasn't an analyst report top of the waves a couple of things about that report our capital cost is $6.7 billion any junior analyst with any standing knows the difference between initial capital and sustaining capital.
I think that really is.
The fact that nobody tried to verify anything in that report a you know speaks to the integrity.
The people behind it.
Type lines in barging, that's very common up in Alaska. So.
So you can't build in permafrost to crush account management or ownership and the company has steadily increased not decreased as noted in the report so.
You know, it's when you've got a 20 page report with literally hundreds of misstatements misrepresentations. It takes a great deal with time to speak to that and I would draw everybody's attention to the fact matrix. That's on our website that no really just sets.
The record straight if you will.
But.
Thank you think drags that that's in your set on that please if you have any lingering doubts about that report I would encourage you to review the fact matrix that we presented and to read our chairman's letter on how he looks at the company and actions like this.
Great. Thank you Greg asked that question and looking for our current status update and the lack of department of natural resources permitting or that is that that is currently underway in any other and they permitting weighted activity.
Well the permitting is very definitely in the home stretch you know we're the pipeline right away. The state had issued the permit and then because of a request for additional information to review the cumulative impacts of the pipeline rather than a fight.
With it the state rescinded the permit and they're now a addressing the question raised we think that'll take another six months ago reissue the pipeline right away.
But the permitting or you know the federal permitting as has long since been completed and we're wrapping up the remaining state permits.
Great. Thank you then the last question that I have here is for Dr. capline or what is the dilution risk for existing shareholders with respect to a capital raise construction start.
Well rest assured that the issue of dilution is my top priority about a year ago. When we had our AG M. I think the stock was with a three handle maybe a four handle and I was asked the question.
About how are we going to deal with financing a this project and I said my guess is that when gold gets a little bit of a tailwind will go up to the nine and a half dollar area, where we did our last round of financing in 2012, I personally think that anyone who.
Has not sold I'm in the intervening good eight years or seven years, probably a was no longer there, but in any event and that we would move from there to the all time highs of the last decade, which is 16.
And as gold continued to move we would move into the Twentys and depending on whether there was a construction decision to be made at that time, that's where we would raise the equity for a you know for for a construction a decision and.
I stand by that with the exception that I believe that time is really very much on our side more now than even a year ago and that if I had to guess once we get see our shares back on track.
We don't need money until we have a construction decision and it's likely that our share price in my opinion, it's completely forward looking statement discount that as you will it would be higher than in the twentys. When we do our next raised but that has always been my long standing target just simply by.
Based on the fact that it's our stock and trade that when we raise money I'm for a company when we do a round of capital, we not only or try to raise enough to be able to take us to a milestone, but also to be able to hang around until the market catches up to our point of view our point of view is that donlins unique.
Our point of view is that we have no doubt that it's going to be built.
If gold falls to 1200 or a thousand personally I don't believe it should be built but then again I don't believe any gold mine should be built unless you're in a bull market and the reason for that specifically is the ER. The reason for why this question was asked.
At a certain point in the development of and asset.
If it's a really really really extraordinary asset at least a category killer, maybe not even unique like donlin.
The shares become more valuable than the metal itself.
And for me job one is that this story.
Will become.
For many people a pure play on the next Carlin.
Now Barrick and Newmont dominate the Nevada story, there isn't a pure play on it I wish there was.
But barrick has a half interest in what we believe can be the next carlin and even mark understands that when he stepped into this story and the comments and the questions that these getting about donlen that it is now a quote global brand and that.
Novagold represents as even Mark said, a unique investment proposition on a global brand now. This is characteristic of the relationship that Mark and I have and our attitude on a rising share price for Novagold is that that's good for Barrick.
And he agrees.
Our attitude is that if people want to buy barrick, because it's bigger it's got the market cap and diversified production and also a great management team superb whatever is good for Barrick is good for us and whatever is good for us. It's good for Barrick, It's a truly virtuous circle back.
But if you're thinking about dilution just imagine this gold is going up.
[noise] Barrick is feeling okay comfortable whenever that will be it could be tomorrow. It could be a year from now it could be six months from now I mean, you've got the timeline on how we're dealing with things.
The megaphone that will be given to donlen by Barrick, he's going to be extraordinary it will be a game changer I've been in this for 12 years I still cannot find a better story than ever before we do not need to give away our shares shareholders do not need to worry about dilution the last round we.
It was at nine and a half as all my shareholders My Big shareholders No I don't do down rounds period, and the last thing I'm Gonna do is it down around when we have a 230 $240 million in cash and visible bankable receivables.
With a $30 million you know annual spend we're not worried.
And you shouldn't be either because.
As fidelity says when they talk about me the owner lives above the store and I regard each and every novagold share and shareholder as being extremely precious I don't know of a better way to play Gold then no for gold I don't know of a better gold development asset than Dublin.
If I did and I've said it many times I would pivot towards that other thing I don't know of it those unique combination of attributes are are unique and when you have something like that you don't give it away at a discount.
This concludes the question answer session I'd now like to turn the back conference back over to Greg Lang for closing remarks.
Well everyone. Thank you for joining our call. This morning, and if you have any further questions. Please feel free to reach out tomorrow and myself and we'll be happy to answer them for your everybody stay safe and healthy.
Sure.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
[noise].