Q3 2020 NovaGold Resources Inc Earnings Call
Thank you for standing by this is the conference operator.
Welcome to the no buckled up third quarter financial results Conference call.
As a reminder, all parties if I only send only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask questions did.
To join the question queue you May Press Star then one on your telephone keypad.
She didn't need assistance during the conference call you May see got an operator by pressing star and zero.
I would now like to turn the conference over to Melanie Hennessey, Vice President Corporate Communications. Please go ahead.
Thank you Claudia good morning, everyone. We are pleased that you have joined us for an uncle <unk> third quarter financial results and also for an update on the Donlin Gold project.
On today's call, we have Dr. Thomas Kaplan Novagolds chairman.
Greg Lang, Novagolds, President and CEO and.
And David Ottewell, Novagolds, Vice President and CFO.
At the end of the webcast questions, both by phone and by tax.
I would like to remind our webcast and call participants that's as 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 disclaimers included in this presentation.
With that I have the pleasure of introducing Greg Lang.
Greg.
Sure.
Good morning, Thank you Melanie.
The Donlin Gold project is in the Western part is a great sales Alaska as shown on slide four.
And it's a 50 50 joint venture with Barrick gold.
My name is an important part of the Alaskan economy.
Becoming even more important.
At this stage as revenue there's no unemployment.
[laughter] decline.
As shown on the map.
Our six producing mines numerous exploration and development projects in the script.
In terms of scale quality and exploration potential.
Donlin Gold attributes guard see any other gold development projects on the horizon.
When combined with the company's excellent partnership with the native corporations and co owner bear.
Exceptional leverage to rising gold price strong job creation and key federal permits in hand.
No gold is in a league.
So.
Why why I made the strategic focus for the year.
As Colin like Jean positive traces rose in Alaska over the summer.
Donlin golds stringent safety measures and on the ground support allowed us to operate for grade.
The quarter, making up to the time, we lost with the pandemic related shutdown earlier.
In August Nope gold and our partner Bear reported the initial set of assets from the planned 80, all 22000 new program.
The largest program over 12 years.
The work was carried out safely.
Finished ahead of schedule.
Despite the cold at 19.
Which impacted activities on the ground.
Affected the communities in which we operate.
Other resource industry has been experiencing low or no growth in Alaska.
And the impact of colder than last year on a cruise ship another tourism industry may take years to recover.
With a long history of money skilled workforce in Alaska Donlin gold offers the opportunity of a future with good grade year round jobs and training for young people to live closer to home to you a traditional way of life.
We are proud regimen.
Uh huh.
About local workforce where needed a wash.
In slide six.
We outlined the protocol for the <unk>.
Health and safety during the cold it's probably.
No gold continued to abide by a comprehensive set of policies designed to ensure the safety and well being of its employees and contractors and its offices in Salt Lake City and Vancouver.
As well in conjunction with benchmark.
On the go office Tonight.
I expect these precautions will remain in place for the foreseeable future.
The Golden 19 pandemic.
Great its significant concern in the Y K region due to the inter dependence EPS amenities and frequent travel within the region.
By the time.
The Colgate reached Alaska, our native are gone.
Corp. partners had already engaged with the community to assist the needs of the area.
As shown on slide seven Donlin Gold card peak Casey tribal councils to coordinate good collection and.
And delivery of supply.
The eight middle class congratulations.
We took the precautions and caused 2020 program.
When do we get this donlin gold donated thousands of problems Oh.
Cam and coordinated with local tribal administrators to deliver these various goods such as food and mass to the communities.
Donlin gold also providing support to the Queen <unk> growing up and we should.
A program that we have funded for many years.
<unk>.
The 2020 drill program.
As shown on slide eight would be asthma and Louis deposits.
Preparations for the grille program started to do so.
With mobilization of the rigs.
The site.
In March.
All before temporarily pausing activities as a precautionary measure due to coal.
The drill program, we mobilized in late May.
And we've had good quoting activity and get all four rigs running throughout the summer.
The original plan was for 80.
The largest at donlin in many many years.
The image on slide nine.
Shows that 2020 program core hole location highlighted in blue.
With the initial assay was also published a giant release with Barrick on August six highlighted in yellow.
Aerostructures reported are encouraged and similar to the drill results reported on 2017 16 hold real quick.
Well, it's also encountered higher than anticipated greg's.
<unk> Donnelley team completed the drilling in September with a total of 85 core holes and about 23000 meters.
Exceeding our plans.
Since we had the time and the Gors go any additional holes were completed.
As a result could go but my team yesterday labs.
Were understaffed and the girl results are coming in slower than expected.
Staffing levels seems to be returning to normal and new assay results are starting to come in.
Additional results will be reported by Donlin and the joint older owners when they become available.
The initial results that were issued by Donlin gold in the third quarter.
Reflect the enthusiasm we have every time, we drill on the property.
As shown on slide 10 days.
Any significant high grade intervals were intercepted in multiple areas with several of them occurring near surface.
As more results are received our understanding of the ore body and the potential the extensions of the high grade zones, what would occur.
Once called lobbying you're now saying is complete.
The newly up 10 gig that should lead to partners to determine the next step to move.
To move forward with updating the donlin gold feasibility study.
It was truly a remarkable operational milestones.
That we were able to complete this work.
Ahead of schedule and.
And without any colder cases at the Donlin mine site.
[noise] Donlin gold is working with its Native Corporation partners and continues to support the state of Alaska to advance other permits and certificates needed for the project.
As you can see on slide 11 federal permits are in hand, and then.
An additional she state permits and approvals have also been.
In early 2020, the department of natural resources issued final authorization of easements land leases land use comics material side authorizations for the proposed transportation facilities.
There are other state permits that remain outstanding not on the critical path and we will continue to invest.
[noise] partnership of no gold Barrick Angeles has responded well to the Coke at 19 and its impact on health about to use.
These longstanding relationships have been strengthened over the last year as we remain United in the common goal, bringing the donlin gold project up the value chain.
We focused our culture of safety and.
And social responsibility.
Corporate.
Good governance practices.
By engaging all stakeholders through regular contact interacting with our investors.
And engaging in meaningful ways to promote the health and safety about people onsite and.
And on the river through all the seasons, especially.
Especially now donlin brought much needed support to the local communities we can.
We continue to provide you with assistance in their education and partner to improve the environment always recognizing the importance of.
Preserving traditional lifestyles.
In the third quarter.
Alan delivered on the supportive community partnerships.
The Y K region as shown on slide 30.
Health and safety, our core values for us as such Donlin is working with T.K.C. the state of Alaska, and the Alaska Native tribal health consortium in our initiative to upgrade as well as improved health and safety standards of water and sewer services.
In the custom equipment area communities.
Our other initiatives include Donlin gold scholarships, which.
Which are granted the student selected by our Native Corporation partners. The benefit you education in the league.
As well the cleanup Greenup initiative continued and included 32 villages, who came together to clean up their loans.
Their local environment.
Over the past few years back all efforts to remove household hazardous waste have been delivered to the health of communities along the river.
As shown on slide 14, the project established Donlin Gold bar called go ground.
In association with other major partners.
It was a very successful program.
I told about 45000 pounds how.
Household hazardous material work.
Were collected and shipped out.
For profit disposal.
<unk>.
Slide.
Good game presents the life of mine diagram for the.
Donlin Gold project is one of the largest open pit mining development undertakings.
The time invested upfront build a salad foundation from which to grow and sustain has been critical to the project success.
Or maybe it was a long undertaking not the most interesting segment.
The life of the mine right.
Requires tremendous effort and focus.
But it does say a strong foundation.
A typical gold buying project now exceeds 15 years from discovery.
The development.
Project catalysts for the coming months are complete the drill program.
Released AD sales results and incorporate all of this data into the latest geologic model and this will help determine.
The next steps good partners would choose to make to advance the Donlin Gold project.
The next few slides highlight the attributes of God that led me to join they'll go after a great almost 30 year career with Barrick and its predecessor company.
We saw earlier in the presentation.
Okay.
Global grade continues to decline.
And that mine production is expected to continue this big.
<unk> increased by 2022.
Most major producers have focused on instinct, you extension of the mine life. This.
This sets up the supply crunch scenario that the gold industry has never experienced historically.
The sharp under investment.
In exploration and discovery, particularly since 2012 has led us to where we are today.
Over the past 10 years, only 25, new deposits have been identified.
Family.
Only 150 million ounces of gold, which represents only 7%.
What has been discovered over 30 years and there.
And there have been no major discoveries in the last few years.
Projects like Donlin are becoming increasingly valuable.
[noise] not to expand further on Donlins acts as the larger.
As the largest.
Gold development project in its category the bar.
The Bar chart on slide 18.
Those 13 other development stage projects illustrates a truly unique gong in years when compared to its peer group.
Based on the group average at 7.7 million ounces Donlins resource is five times greater on average.
Great. It's also by far a category that stands out.
As a characteristic of dawn.
Ladies King and is shown on slide 19.
It's more than twice the global average.
Large scale open pit classes.
Not only is the global gold production decreasing for most of the major producers.
But average grades continue to decline.
Great alone is a positive differentiator projects economic viability as it provides extraordinary resilience.
Through multiple commodity cycles, and it's a key attribute to ensure the successful development of any great mining operation, especially one.
First with longevity Donlin gold.
'cause isn't more than a million ounces annually your own only three operating mines in the world today. These levels donlin would be at rare compass.
As currently envisioned the project would average should average 1.1 million ounces over its life.
Who is a long term investor there's additional value that comes with a multi decade lifespan permits dark.
It's a jurisdiction where the rule of law is well established.
So, let's turn to Casey had been our partners since 1995, and we have life of mine agreements with both.
They have been deeply supportive and involved from the start we are thankful for their long term support and commitment.
We support their mandate to the Alaskan Native claims settlement Act.
As highlighted on slide 21 to help them develop their land for their economics.
Self determination.
With all the complexities in many jurisdictions around the world, it's great to be.
On private land with NATO partners.
Now I'll turn the call over to David Ottewell, Our Chief Financial Officer.
Okay.
Thank you, Greg and good morning, everyone.
Slide 22 highlights our operating performance for the third quarter, we reported a net loss of 12.7 million four point.
4.6 million higher than the prior year quarter.
The net loss increased primarily due to the drilling program at Donlin gold.
It's higher corporate general and administrative expenses and foreign exchange movements.
Also contributing to the increase.
[noise] a reduction in interest rates also resulted in lower interest income on term deposits and.
And and lower interest expense on the promissory note payable to bear.
Third quarter 2020 cash flows are highlighted on slide 23 in.
The third quarter, we spent 8 million 3.9 million higher than the prior year quarter.
Again, the net increase in spending was primarily due to the drilling program at Donlin gold.
Along with lower interest income and higher general and administrative costs.
We ended the quarter with cash and turned deposits of 126.3 million.
On slide 24, we note our robust treasury.
In addition to our cash and term deposits of 126 million we have.
We have $75 million due next summer and an additional 25 million two years later as a result of our sales our share of the Galore Creek project Newmont.
A further contingency payment of 75 million becomes do if the owners approved construction of the Galore Creek project.
We continue to anticipate spending approximately 31 million in 2020, which.
Which includes 20 million to fund our share of expenditures and the Donlin Gold project for the drilling program permitting and community engagement and.
And 11 million for corporate general and administrative costs.
With that I will now turn the call over Dr., Heflin, who will give us insight into gold.
Oh. Thank you thank you Dave.
Actually I'm going to spend a little bit of time today on explaining why as someone who 99% of the time is on the side of the table of the investors on this conference call why it is that I believe that nope Oh.
<unk> will become one of the very you go to stock in this space and has the potential to multiply many times in value from here.
I know were up like <unk> I have had multiple occasions, where I've been able to be lucky enough to make 100 times my money. The common denominator in all those cases with being able to write great assets take them up the value chain.
Some of those assets were up so this category killer some of the best in the world, but none of them could I'd describe it as being really.
Unique.
Now what does it mean for me to say that I believe everyone.
It's unique.
I often ask the question of investors and analysts.
The following what.
What other gold development stage assets in the gold industry today compares and it's a combination.
[noise] enormous size you heard Greg described it I don't think there's ever been a gold deposits its Dan production with 40 plus million ounces.
Hi, Great for an open pit gold mine when I first got into Dawn late in 2008 2009.
Industry grade with almost double where it is today so for a large scale open pit operation Donlins grade of plus two to three gram.
The goal is absolutely extraordinary and what that means.
Is that.
Terrorists paribus, if you've got one mine producing at a gram of gold another mine producing to grow.
Two grams of gold all other things being equal the past calls per out it's going to have a higher grade mine. That's good simple arithmetic.
The exploration potential on Donlin is absolutely extraordinary I think that they are very you.
Gold deposits in the world, where ounces can be added to resources immediately adjacent to the pit.
Which holds reserves, so cheaply and so readily but we'll get to that in a few minutes because I do want to spend some time talking about why we believe that donlin has the potential to be perhaps the second most famous culprit.
Gold producing area in the United States today after Nevada.
The production profile as you've also seen mean donlin will be in either one or two phases, depending on how the optimization and then working at both prices and all those other things.
Potentially be large ship.
Youre gold producing mine in the world.
Those of Us who.
Who likes to be able to focus on what we called the monetary metals gold and silver as opposed to base metal.
It's a huge distinction it would already be one of the largest.
Mine in the World.
Copper were added such as at Grasberg [laughter] pure gold.
Mine life will be measured in decades.
That means that it is not oh.
Eight tier one asset, but it is a company making assets.
Doric leap great companies are burnt out of assets.
That can last through multiple cycles.
Len evenly we never added another round.
We've already been going on for decades.
Good [laughter] well the monitor Oh, you want to be in places or with that said if you great leverage.
In jurisdictions that will allow you to keep the fruits of that leverage any one it's been a shareholder of note. The gold anyone who follows me since 2012, when basically I announced that I was sleeping almost the entirety of the developing world in order to focus on jurisdictions, where I could sleep well at night.
I understand that for dogs.
Donlin represent the Holy Grail. It represents the best in breed in terms of size, great exploration potential production profile mine life, but more than that low pay.
Located in a place that when you go to sleep at night, you know that when you wake up in the morning, what you thought you owned it still out there I know insurgents you haven't been salami strategy into losing your assets de facto or through do Yuri Nationalisation of which I think we're going to see.
Not too much more in the precious metal sales.
So what we have is we have what we believe to be happy.
The greatest school development story in the World and lets Barrick shareholders, they've got the other half, but more than that it's not just the tier one a potential asset it is in a tier one jurisdiction.
So, let's continue with [laughter] I see.
I see.
[laughter] importance.
[noise] [noise] sadly the mining industry is one in which location location location is ultimately the existential factor we're not in the business, where if you find out that wages are soaring or land prices are soaring you can go to a lower wage jurisdiction.
And or a place where they give you subsidies what.
What you have is what you've got and what you've got is a hole in the ground, where you live by the generosity of strangers, who essentially compel you to leave at any time or.
Maybe more softly encourage you to leave or give up more of the assets.
I know, we're up I speak I made my first fortune in Bolivia second Fortune in Zimbabwe in South Africa in platinum I sold the Kibali mine or project to Mark Bristow in Congo, So I'm very very familiar with these places.
And my holdings used to spend everywhere from <unk>.
<unk> route to Pakistan or Mauritania among go live in 2012, I told my team out there. We go to only those places where the rule of law is not a novelty item and that led us primarily in North America.
And more recently as well to Australia, but here's the thing that top 10 gold producing operation in.
In the world of those top 10, only three operations produced greater than a million ounces.
One of those is in North America, and Nevada, but the next one we believe it's going to be in Alaska, maybe still quite loud in Russia, but I don't think that many of the people on this call are going to be running into Russia. So quickly. The fact is.
When you talk about the tier one asset or you talk about a category killer asset. There's no question that we are in that league and more importantly, we're in the right place to make money and [laughter] pick.
The next slide is one that I'm going to dwell on a little bit longer because I realize two quarters ago I sort of made a passing comment in our conference call with investors, where I mentioned that Warren Buffett I had played a role.
Oh unintentionally on his part I'm sure in my career and that when I took my first company public and 1997.
It wasn't a great time for mining companies, but the weeks that I went to public.
I got really lucky not for the first time Warren Buffett was revealed to have purchase.
I believe about 130 million ounces of silver.
Silver.
Anyone it's true.
Warren Buffett Detoxified silver in a way that allows it to be safe for institutional investors to go back into the water and in so doing you benefit at some of the people who were out there building silver companies like myself like Ross 80, Popcorn I mean, it was a boost to us.
And ever since then silver has been considered to be an investable institutional quality assets.
Well, that's not picked up by a reporter for business inside their names there on a really nice guy and he called me up he covers weren't thought that you said could you tell me more about the story I said you think it's interesting and he said, yes, I told him the story and he wrote a very lovely piece and business insider, where I basically acknowledge that.
I owe a lot to Warren Buffett and I've had the opportunity several years later to sales.
Warren personally I'm not going to get any idea, but I explained to him what did happen you know being the charming guy that he is he said well you know you that's great, but when I was interviewed they're on ask me again. He said what do you think that Warren Buffett or what do you think the chances are that he'll go into <unk>.
Oh, and I said, well, that's lightning really strike twice maybe.
I just have to assume that he won't because oh invested in the idea that gold to quote a John Maynard came to the barber throughout like it makes no sense to hand, and I've heard this from Bill gates, when he and I talked about gold years later, and I said it would be wonderful if he did well low.
Wouldn't be hold.
Last quarter, one of the only stocks I think maybe the only stock that Warren Buffett bought with Barrick.
And this was obviously, great kudos to Mark Bristow and in its mission to make Barrick keep stock for generalist you couldn't have better validation. The funny part was that I spoke to the journalist again, a common denominator in both.
Those stories, what's actually.
Me.
And between the silver and when I went public a and Warren Buffett buying it at the same time and.
Warren Buffett always lieutenants, most likely testing a spotlight on Barrett.
Yes, as I told the reporter was likely going to make me, even more money [laughter] because it no vehicles and what happened with the silver Nike it being.
The more that people look at Barrick portfolio, the more that people examine the asset the more focus there is on what we believe to be one of the greatest gold assets in the world that being of course, Donlin and I firmly believe that as investors and more generally.
Look at Barrick that a number of them well also take a look at novagold and some of them will say well you know I wonder what that's all about and they'll look us up they'll take a look at our shareholder base and they'll say Wow I know John Paulson or will then offer Jacob <unk> child, or the N. YELIVA or Blackrock.
Or first Eagle I'm going to give them a call and find out what they think and I do believe that they will be told as far as we're concerned.
Donlen is probably the best School development story in the World today, there are two ways to buy as a pure play through Novagold and also and if he wants to be able to be in multiple jurisdictions with operating mine and great. CEO, There's also mark Bristow and Barrick as well.
And my attitude, it's always been whatever is good for Marquees, an old friend really good friend whatever is good for Barrick is going to be good for nope adult after all.
No because it goes up in the marketplace.
Eric is now in a position to tell all the analysts that follow it look we've got the same thing as no vehicle they have little cash, but other than that it's about donlin, we should be able to get that added to our navy. So if we go up it's good for Barrick on the other hand people invest in Paris.
With or without investing an overcoat. It just gets more positive reinforcement, it's called a virtuous circle.
One of the things I realize when we speak to investors, it's more and more because there's so much more interest than we're getting new investors looking at the story. They ask the question can you explain the relationship with Barrick.
Where you can talk about it to where we are today.
And when I answered that question a couple of times I realized you know what it's sort of like the profit anecdote, there's a lot of.
Great.
Oh for.
For our <unk>.
Investor, whether they've been with us for a long time, and maybe not heard the story, where new investors, who clearly are coming into the notebook old story, how we got from where we are or where we were with barrick to where we are today. Because this is extremely important everybody always that what about barrick and our attitude.
As always and Barrick will come around to seeing things that we do you need a higher gold price, but if someone wants to grow they've got to look at donlin.
Now it's true that there's not been any phenomenon I'm as bullish for us as a company is no but gold then mark right so coming into the Barrick story, well decide that he's an old friend of mine Mark there's an unbelievably accomplished and talented.
Operator, he is also a phenomenal geologists.
And more importantly, he is a very very hands on kind of guy. So for the first time since 2009, when I got into the story a CEO from Barrick has gone to visit Donlin and I think it's fair to say you liked what he saw and the truth is that we now see barrick.
I'm speaking more about donlin, and even describing it I don't want to Cherry pick, but you can always go back into the transcript as a key asset and a nice.
New gold opportunity well, it's it's part of last quarter's wonderful teaching and events, we had great <unk>, though admittedly only 10%. So we'll see what the others have to do to bring forward, we had barrick, putting a light on oh or profit putting a light on barrick.
And we had barrick being willing to speak about donlin in a way that they haven't in public.
Now this is why I think the next part of the story, it's interesting because I don't think Theres any reason why I can't speak about things that Barrick used to tell you in.
Yeah, Hi that so at least you will understand the context.
Oh, why I believe that the reserves towards the resources at Donlin can gross oh, much bigger and why I believe that donlin will be perceived by investor, which will make it a go to stock as the new Nevada or the new Carlin you wouldn't.
Mark will acknowledge that prior to its coming into the Barrick story, we've turned donlin into a global brand that is deliberate.
We are building a global Brendan Don one we do believe that it has the potential to be on par with the Nevada.
If more work is done on it.
So with that let's go back to the beginning.
I watch.
No the gold to go from a 50 cents stock around the turn of the century.
To 15 $16 when it was the object.
Uh-huh bio takeover attempt by Barrick.
I did not own a share of stock on the way up badly I watched the shareholders of no, but go up which obviously I wasn't one rejected that takeover offer and the stock popped into the Twentys afterwards ordinary story.
Then as a consequence of some self inflicted wounds and you had super imposed on to that the financial crisis.
Stock did a complete round trip and it went back down to 50 cents a dollar and that's when we came into the story actually Electrum group, which is my family holding company.
At that time I was bullish on only go we get.
We get sold our energy company in 2007, which was the fastest growing privately held natural gas producer in order to get it into gold and to re enter silver when.
When Novagold made this trip and I had coveted donlan from for years and years and years I decided to buy the company.
Fortunately one of my key lieutenants who's been with me ever since and hopefully will outlive me equal 11 call that would be the mail part of the power a couple in mining of Jessica an equal 11 tell our President said to me I think you should read since.
Sit or boss.
You're not going to get away with it and I said why couple of hundred million dollars I have it. It was December of 2007, the world was not really buying thing.
To December 2008, excuse me and he said well look.
[noise], you may be able to buy at a $2.
But sorry, it's really really really pissed off that they lost that there's a lot of resentment about that once they get over the shell shock of what's going on they'll have plenty of time to be able to walk you up dollar for dollar and at some point you fold in which.
In which case you have nothing no.
No better [laughter] saved the company, which was about to go into bankruptcy and become the largest shareholder of the company.
And take it from there better to own 40%, if something fabulous and zero percent because it's okay to be greedy, but not ridiculous leak rate that was great advice, which I am forever indebted to equal or for having that are sensitive sensibility.
We bought it and the stock really was something the institutional investors could not have bought they had no balance sheet.
They had no credibility on the stay.
On the street, they had environmental issues on assets called Rock Creek that probably no one's ever heard of a buy now could we got rid of it I'm a shareholder lawsuits all kinds of stuff.
Manage management was very unlucky needless to say, but we bought it and we turned all of those things around and talk multiplied.
No.
[noise] around that time, [laughter] I reached out to Barrick I had no bad luck with direct to the contrary any experience I'd ever had with Barrick. One Randall Oliphant was there was a very very pleasant and professional.
And I ask them.
Whether we could have a meeting.
And they said sure.
They had expectations of what the meeting was about I had different expectations now let me take one step back when we did the deal with no vehicle.
I was afraid that we wouldn't have enough time to get the deal done and I gave my team 48 hours to do the due diligence on the company that was like catching a falling knife, which my team basically said that's not really possible.
And I'd say, here's the analogy, which I'd like to give you there too.
There are two guys walking in the woods.
They encounter repair.
One of the starts to run and the other one means.
Means over changes its hiking boots into tennis shoes, and the Guy who is.
The Guy Who's running looked back and said why aren't you running any goes I don't think you understand I don't have to out run you.
You are not trying to run the the bear I have taught run you I said I don't care, what Novagold has to say about Donlen I just care about Sarah Barrick doesn't lie.
That basically is confirming that donlin is real I said, that's all that I need to know and I'm willing to take the risk.
Subsequent to the to our intervention I sent my Chief geologist Dr., Larry Buchanan, a very very very famous and right now and geologists to visit Donlin and basically what I said twice after the fact, how many do you think there.
Visit at Donlin became back.
And I asked him I actually wrote this couple of years ago, and the annual report, but it bears repeating for what's going to happen next and I asked him I said, so other 40 I said it did 40 million ounces and he said no I said its the goal there. He said, yes, and I sit them, what's what's it about and he said I see 80 to 100 million.
It's just a.
Just along strike.
And this was after we already owned it so that was obviously a very very big moment for me because Larry.
Larry had discovered the most important silver discovery of our generation in Bolivia for me and so Larrys credibility was enormous and it continues to the present day. He may have found something you know almost that take in a in Mexico again, but feedback.
It may.
When I went to when I when I heard that I decided.
I'll go to Paris, and try to buy the other half.
When I went to visit Barrick I met with her in region I took along with me a at the site kick a former ambassador also happens to be a lawyer and I met with Heron and someone else, whose name I will not mention because I haven't to start talking about this anecdotal he's a very nice guy and we subsequently done very nice business together, but for reasons, which your line.
Understand I'm not going to say sales in any event when.
When we sat down from each other.
Aaron who is a true gen four men and the amount of incredible.
Character and integrity and also with that absolutely delightful personality said well you know what can we do for you and.
And I said look I know that there is really bad blood between Barrick and Novagold you hate to see you show you never want to say anything nice about it because you resent. The fact that you lost the hostile takeover bid.
So you will you won't do anything to promote the asset.
Basically only do what the minimum you have to do to advance the project because I still can't forget no, but gold and you don't want to give no vehicle or an opportunity to hit you over the head and say you see we were right. We didn't sell it to you because it's so much bigger I said why don't you just let me buy it from you.
Well.
Erin.
Being a gentleman.
It that you know basically he said I didn't see that one coming I thought you were coming to sell the other half of donlin to us and I said no I don't want to sell the other half I want to buy you out okay.
The fellow next to him.
Nearly lunged across the table and the best analogy for that is the godfather.
If any of you will recall when Michael Corleone goes to Vegas, and tell smoke green that he wants to buy them out.
And most green basically says you want.
You want to buy me out I buy you out and then the language gets really colorful and I love to do that but I don't think I should do that on a conference call the point being that Aaron who had not been there during the hostile takeover days wasn't as converts and on the fat lots with Barrick, but the other person was.
And that you don't buy.
Alex we buy.
You out.
Why wouldn't we sell the other half of Donlin, when we know that all we have to do is to continue drilling there and that just that drilling alone would give us another kinross.
So this was.
Well I My basic response was I take it that you are rejecting the opera, but I have to say that I am going to leave feeling even more convinced that we get the right thing.
And the bottom line was relations started to improve because they're in the region.
It's a really really decent guy smart.
And nature, which is why I told him as we subsequently became friends that you've never survive at Barrick because the culture at Barrick is sort of like a.
Collect Gil a neat.
Alberta Anastasia on a good day, very very praetorian culture, and not the kind of thing or someone with a arentz integrity be that as it may relationships improve.
Now.
One of the things that I've always wondered in my mind, because I'm a historian by background I'm not an engineer I'm not a geologist is the great. What you have gold mining in that era with what is Patrick it paid an extra Buck and bought no pickled well.
Either cold counterfactual.
Pure speculation obviously, but.
It's interesting because it's entirely possible I know that they would've put 10 drill rigs on the property and I personally believe that the they might very well have you know nine digit gold ounces. There if they done that I also think they would've drilled over the property because if we stay in touch.
Mining industry, if you're going out in search your elephants. So.
So two elements country.
Certainly worked for me and build it yeah.
In Africa in pet this basically everywhere, where I've ever gone we found district, that's what we were looking on or looking for now.
Now in the case of sorry.
Eric They didn't win the bid and in order to be able to grow as fast as they wanted to they decided to build pascua Lama.
Rich.
A lot of people would say should never have been attempted.
And in order to be able to get more copper. They went after aquinox I should mention at that time, no buckle had half.
Staff are 70% I don't remember what will I believe one day be the largest and lowest cost producer of copper in Canada. So.
So they might not have needed equinox, they might not have needed pascua Lama and Barrick, which was the only AAA.
Rated company in the gold industry at that time, certainly of any size would be a very very different place. It's it was such a high quality story that they could afford to make one monumental screw up but two was just about too much and still they managed to survive.
That is insurance and saying ability.
I'd say the things moved on and we became more friendly I met Greg Lang rank whats the President is Barrick North America.
Break at that time was responsible for more production of gold then goldcorp and.
And he was president for eight years and the entirety of his career had been with Barrick or predict that's or companies that had been acquired by Barrick. So this was not someone who we jokingly say its promiscuous and we jumped from company to company. We found a very very common bond a in terms of how we.
Thank you.
Donlin, he as an engineer and a man who's been in mining projects all over the world.
And had come to the conclusion that this would be the greatest gold mine you gold mine in the world.
I saw it the same way as an investor and.
And he agreed to become CEO of the company.
The company I agreed to become chairman.
Thanks to Alan and Aaron called me up and said that he was going to try to keep Greg and I said why don't we just agree that where it whatever Greg decides to do we honor his decision and make the best bandwidth, Okay, Greg and I came on board Nope gold and.
We set about changing the entire company selling all the problem assets spinning off things that were not related to donlin ugly.
Actually repairing the balance sheet et cetera, et cetera, and every promise that we made we kept.
No.
As time passed and Unfortunately, my prediction regarding Aaron proved to be true and Aaron was out did in true Roman fashion and replaced by Jamie. So kalowski. Another very very nice Guy Eric was going through a lot of trials and tribulations and one of the things that they did was in order to show that they would be.
Exerting capital discipline in the Pascua Lama era was basically to throw donlin under the bus no that does not mean that they weren't going to continue taking the thing along the value chain, Eric never ever slowed anything down.
It takes time to permit and so we continued meandering along we called it the tortoise and the Hare because other projects that people said would be ahead of the line with us.
Actually fell by the wayside for jurisdictional risk or for technical issues and now it looks like the tortoise at some point in the future when the owners decide its going to cross the finish line and in a very big Big dramatic way with crowds cheering.
In any event, we decided license long, we're not going to make any issue Barrick got bigger problems than we do and we decided it would be good partners and just take a stiff upper lip.
Actually.
Jamie was replaced John Thornton became the chairman of Barrick and the Cotwo Ceos co presidents with Jim Gowans and Kelvin Dushnisky.
Oh Wow. This time, we started to hear from analysts that barrick in their talks to our analysts were talking about donlin.
This was a first for us and we were surprised.
I reached out to John Thornton, and I said can Greg and I come to Toronto to see you.
And so Greg and I made our way to Toronto, we sat down with the with John and we said we've heard youve been saying very nice things about Donlen, something we should know and John look to Jim Gowans and he said look when I came into the picture I asked him if we were going to grow well.
We grow what do we have that.
Something that you know, we can really sick, our teeth into and Jim Cowan said I think donlin is one of the best Gold project in the World and John said, Wow, I Didnt realize that John and I got along really well and relations with Barrick improved markedly.
I'm not just because of that but also the fact that we had so much Patrick DNA and our management team Greg Lang of course, Richard Williams, who built <unk>, but look you know in the Dominican Republic, a number of people who gave nicely.
Who were expiring so we had a lot we still do a lot of Barrick DNA and that was really really helpful.
Now the.
The mutual respect extended all the way until Mark Bristow came into the story as I said I call Mark the White Swan and it's about just because he says.
Things that I think are not just nice, but also accurate I do believe that donlin is a key asset for Barrick I love. The fact that they see it as a new gold opportunity or the parents and the Novatel teams work absolutely beautifully and you know for me my experience with Mark going back.
Next to African platinum when I ask him to join the board and he did going back to the Kibali transaction and just the fact that we're friends. This is a really really wonderful thing, but the most important thing is that Mark is a pro mark has a very very.
Linear Cartesian view on how you take or the geology turned it into the right geometry make the perfect mine plan and the like and that's what we are doing now weve.
We've got everybody's attention and we're doing it steady leap, but surely.
I never ask him when are we going to go into production and I know that it sounds you know it sounds funny, but I know that it well if you're a bull on gold and you want to be able to have a producer a big producers that will go on for decades.
Donlin is the best story in the World I belong gold Ergo need it's just a function of when the gold prices higher when people want growth where are they going to turn it very likely it's going to be in the United States or Canada, or Australia, and we've got Ah.
Tiger by the tail. It really is a holy Grail and so when I talk about the next big discovery being potentially at Donlin, It's twofold number one the donlin gold deposit.
Where we have the reserves is only three kilometers of what we already know is an eight kilometer mineralized trend pence, Larry if you can comment, which we may or may not ever come to pass. It's the ultimate forward looking statement, but I believe he is right.
But more than that that eight kilometers only represent 5% of the total land package that we and Barrick.
Oh.
When I say the next donlin could be at Donlin, it's because there is the entire possibility its conjecture.
That we could deal with its history, even if it didn't turn out to be a district and there was no other donlin there.
Still dealing with something that has the potential to have enough high grade reserves relate to be on par.
With the with Nevada, and that would be good enough for me.
So with that we can go to the next slide.
I think I've covered just point, but the truth is that for all of the reasons, which I've outlined.
The.
The.
Advent of Warren Buffett.
Annoying thing Barrick and the spot like that that will put on barrick's that's it.
Got to be a very very good thing for us.
But whats also so important for everyone to understand.
Is that Warren Buffett coming into the gold story has effectively detoxified gold he's made it safe for anyone interested in gold to be looking at the old narrative now we've been talking about this for a long time and I've.
Been commenting that one of the beautiful things about gold and we can go to the next slide is that whether its rate dally Io or whether it is Jeff Dunn lock or pull tutor Jones or can rope all for a mark mobiuss.
You have so many different boldface names coming into what is still one of the most under own financial trade in.
In the World, we haven't even we're not we're barely in the first inning of what we can see if I'm right that gold is going to embark with some volatility shake out the weekend. That's what it's supposed to do on another decade long leg in its secular bull market.
But here, we are with people like Warren Buffett people like radio looking at these things for the first time.
And looking at them with fresh eyes next flight and then.
An incredible example, if that was the piece that was written by Mohammed El Rey on why no. It was on the front page of the New York Times and you basically described how he was so surprised the goal is evolving into a must have asset.
And gives all the reasons why different people are looking to fold for different reasons basically putting.
Putting into those where it's what I've said for a long time is that is that investors will have a buffet from which to choose how they wish to justify their investment committee, adding an eye location in gold suffice to say that I'm happy to answer questions on where the gold market is but I think I've been doing that long enough with our shareholder.
That you really do understand that we think we do understand what's going on with the gold market. If I'm right old is headed to.
At least three to $5000, that's an equilibrium level and as I've said before but I don't like to just credit myself by being a two out there I truly do believe that the charge for gold will one day looks very similar to the chart with the Doe after the doubt broke through.
Thousands in the early 19 eighties.
And you know draw any conclusion that you wish from that are very forward looking statement.
Next slide.
Suffice to say that we are in a long term bull market for gold the demand drivers.
Our so numerous that it staggers the imagination from asset diversification God knows that that has been reinforced and validated or this year, a safe Haven appeal ditto currency Debasement protection Ghetto Central Bank purchasing you know they are the ultimate end.
Cider buyers they pulled back a little bit because prices are higher my guess is they will start to go back and again I'm as more Q, we mean that they want to be able to own the asset that they know has no counter party risk.
There are people, who are buying gold to protect against a depression. There are people who are buying gold to protect against runaway inflation. There are some who say you need one or the other the reality is the old respond very well to both then you've got emerging market the man who better than 10 wrote off from Mark Mobiuss to know about the emerging markets in for Mark Mobiuss sales.
She's been saying for hundreds and hundreds of dollars by gold at any price and obviously correctly, then you'll have to supply pressures the recovery rates collapsing X.
Exploration not yielding anything decreasing ore grades the majors are burning through their reserves faster than they can replace them as rates go down the production posco hire the jurisdictional risk is meant to things that people thought might be developed wont be developed.
For all of these reasons you are seeing a perfect storm in gold that means that a prudent man has to have some gold and if they don't know they ultimately will well here's the thing even a 1% allocation of gold is going to be two gold multiply.
Because most of the gold in the world, It's an extremely sticky hands, who have had nothing but positive reinforcement.
Or owning it and protecting their livelihoods, whether its indians or whether its Chinese these are very much gold and silver cultures. They understand it they will continue to to buy it over the long term at a time when the west you seeing it as an asset.
Class again that has been revalidated.
Not only by the macro circumstances, but by really smart money that has given the really really big money out there the opportunity to take a look at gold and as we know they're really really really big money really starts to look at things after they've gone up dramatically in price at that point. It starts to look interesting you couldn't.
Good point away at a few hundred bucks, but when it got to over 10000 people were talking about EPS welcome to back curiosity of the financial World, which is that if something gets more expensive. It starts to look more beautiful than desirable and that's what happened with other areas of life.
Well connect.
For me and for our investors, we want to leverage to that higher gold price, but we wanted in a place that will allow us to keep it that won't turn around and say, hey, you're making a windfall we want part of that the leverage provided by Novagold and.
Donlin for us and for Barrick, It's absolutely gorgeous I do believe that a 2000 dollar sold this is a $20 billion asset.
I haven't even spoken about optimization. This is not adding potentially more reserves or any other upsides that just merely a function of the fact that I think that very very scarce north American assets of high quality size that moves the needle will be valued using zero percent.
Discount rates, especially if they have any exploration potential and I don't believe anyone that's where exploration potential than that then gone one.
Nick.
One of the beautiful things as I mentioned about Novagold is that in addition to having a lot of cash where we don't need to raise more money.
We have a really really really interesting and smart.
Investor base and as more people are asking for brokers to give them exposure to assets.
Which are located in places that potentially that you willing to take their kids, Alaska with whale watching and salmon fishing falls into that category, Australia. The great barrier reef, Nevada, you've got gambling, you've got to you know all the other fun things for the family in different places.
You'd be surprised but the premium rating will be given for those assets, which are in places where investors Icees would say if you're going to go on a mine too or are you willing to go there.
And definitely Donlin falls within that category, but more than that when they look at our shareholder base, what they're going to see it's very very smart money and some of those new investors already starting to call up these people and say hey can you tell us more about that and pretty much.
What they're hearing is that donlin is unique and this is a pure play on what will be hopefully the largest pure gold mine in the world over the course of time.
Next.
Well as all of you know, we had a and instead and with short the selling earlier in the year up until that time, we were outperforming by a wide margin the GDX the GDX J not to mention other large individual.
Companies, we've put that share performance behind us I mean or where the the down draft behind us.
And indeed, what we do believe is in the not too distant future.
We're going to start seeing no, but gold reap the fruits of the great quarters that we've had and continue to trade at a premium I can certainly tell you that the management team and I are absolutely dedicated and committed to making that happen. We believe we should.
Trade at a premium and we believe that the market will reward us for all of the factors that go into making donlin unique next.
And so with that I don't need to cover all of these things but.
The simple part about it is this as an investor in that space I cannot find any thing that gives me the attributes in combination.
That.
No buckled gives me.
And that's because of the asset.
So I didn't find it I can't take credit for it but the fact is it is a brilliant assets in the best part of the World and I do believe that you will see us reap the rewards from our Investor base analysts space and all other ways that will allow us to achieve the objectives that we set out for us.
Thank you very much.
[noise], we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad.
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Our first question is from Lucas pipes have with B. Riley Securities. Please go ahead.
Hey, good afternoon, everybody and thank you Tom.
Thank you Tom for core the description that so obviously interesting to hear the history.
This truly unique asset so so appreciate that Oh.
I wanted to ask a little bit more about a the initial drill assays and and you noted in the presentation that they exceeded model expectations with.
Multiple significant distinct high grade intervals and I wanted to ask you could you maybe frame.
The <unk> exceptional results there in what areas specifically on what metrics that they exceed your expectations. Thank you.
Good morning, Lucas I'll take that.
No you know our drill program has two objectives. This year one validate the new model that's about half the holes and the other is to look for extensions to the known high grade mineralization that we wouldn't mind early into projects lives and you know a couple of those holes where the good grade came in.
Relatively shallow around 30 40 meters I think that was that was exactly what we were looking for was extensions to the high grade.
The intrusive structures that carried a grade come up like a like a series of fingers to the sentiment a walk around and.
Hey, I'm modeling.
Focused on the interest is in their high grade nature, Yeah, we really saw the opportunity that Ah hey, with smaller equipment, you can miami's discreetly and selectively and enhanced the grade. So the to answer your question no. We have a model and as results come in we too.
Pared down to anticipated or you know bowls and across the board or what I'd say, we're seeing is.
Yes, yes, yes, but it's substantially higher grade, which is exactly what we were hoping to find through this program and you know where do the release of the next set of results.
Later this month and we continue to be really encouraged by what we see in that you know there is a very real opportunity for us to add value by doing.
Thank you. Thank you Bracken I heard you right. There you said additional results should be forthcoming later this month.
That is correct I say turnaround times, it's been a slow this year related to staffing issues at the laboratory caused by cold It but yeah were working our way through that are you starting to get more coming in every day.
So look for US I think you know an update later in the month.
And would you like that you'd be able to share what that person often.
Percentof the drill program would be released at that point.
Ah you know Lucas were getting asked changes yet.
All the time that the initial results. We released were about 10% of that program, we anticipate maybe.
Next up 20% in the drilling with the balance to follow later in the year.
Very helpful thing, Thank you, Greg, but and then when you are welcome.
Question.
Me today or can you speak a little bit about the alignment between Barrick and knows the goal at this time in regards to the development of Donlin and what is the risk for example that Eric would like to go forward with Saddam and develop men, but oh, the gold isn't or vice versa.
I would appreciate any any thoughts on that framework.
Sure Greg you want me to take it.
Well why don't you start Tom and often any gaps that needed.
Sure.
From a from an operational standpoint, Greg will provide his answer from the you know the very birds eye view, we have.
We have never been more aligned with Barrick than we are today the fab.
The fact that we've just.
The completed because drill program and the 12 years in which I've been in the company.
Or in it as an investor in the company is a very big statement. The fact that market's been out there and then approve this drill program.
You know Mark has taken the attitude as I said he has described it as a key at that a a nice clean gold opportunity new opportunity all of these things art extremely.
Heartwarming and they indicate that we are where it gone when its being viewed.
You know for a lot of good reasons, the permits and everything else as being in a very different class than it was 12 years ago.
The.
The methodical way in which Randgold works on being able to get the geometry down just right on the deposit in order to plan the optimal throughput.
And therefore to be able to tell us and everyone else.
What the Capex will be [laughter] exactly the way.
Mark prudent operators.
Take what will be the largest gold mine trickle of mine in the world ultimately up the value chain, there is complete and utter alignment as to when it goes into production.
You know it takes two to tango our attitude is.
[noise] better.
Barrick has more need to in effect for production as a large scale gold producer and when they decide that the fits falls into that category and wants to take it forward. We have zeroed out that we have access to whatever capital we need to meet our needs and.
You know I think it's inevitable I'm. The only question is when and that will be done when Ah mark views it as being optimal for his shareholders and when we do four hours.
I have no doubt that we will be in sync at that time everything that we've seen since the Randgold Barrick merger has confirmed that it's really is a game changing event for us we have people in charge who.
Really love to build great project, they know how to do it right and candidly when the time comes I don't think there'll be any stronger promoters of the assets. Then they are you know, we're one boy, but barrick is the 800 pound gorilla in the a in the mining industry.
And when they put donlin on the math, it's going to be it's going to be transformative.
Let them do it right.
You know, they're taking ownership of the story you know after their merger I as far as we're concerned it couldn't be going better Greg.
All right well thank you for that.
Okay great.
Great well results are exciting in any company and I think that's especially true with.
With a geologic focused company and C O like Mark.
But to answer your question you know day to day interactions are very common right now with the geologists and the technical people is the results come in.
Yeah, It's really excited she gets the thing so there's a lot to the party and that were done in Jackson and Rockies their senior executive with responsibility for North American operations as you know the chairman of Donlin Gold. This year and she is also very involved so yeah I would say that there is a problem.
Hey, This is great news involvement is they've had since the preparation of the feasibility study back in 2010, and 11 nice to see very capable people there.
Right Great comment Greg very helpful comments, I I really appreciate the perspective and continued best Thank you.
Thank you Lucas.
We have one more question coming online and I'll just start read out is it fair to say that at the current price and de stocking at that on a future rise in the gold price and additional exploration potential at Donlin.
Short answer is no.
Yeah I'm sure that the short answer is no the longer answer is Hell no. That's the thing I picked up in Texas and the reality is that we you know for gold as a substantially undervalued in the market.
Yes.
We don't have any doubt that we're going to regain the premium rating that we had but you know if you. If you look at what where we should be in our view. If we had not been the result or is it the victim of the securities fraud.
Then I think we would have seen the stock already in the high teens 20 or.
Maybe pulling back a bit with the rest of the industry, but our our history over the last year, certainly and you know since the permitting and all of those good things is that we outperformed the indexes and so by that measure catching up and in fact now surpassing.
Where we were when the short report came out it's an indication that that's being put behind us because candidly there was no merit to it but we want to see that the stock regained the premium rating that it should have a adding reserve.
And higher gold price that we'll just put fuel on the fire, but I've always said, even when the stock was with a three handle or a four handle that we see ourselves going into the twentys and considerably beyond that.
Everything that's happened since we made the the statements obviously forward looking but since we made those statements. We've only had a good reaffirmation of the reasons why we made those statements and so you know that's a long answer of saying.
We are not Oh, it was the stock with the stock price does not reflect today, where we think it really should be higher gold prices, obviously and Ah more exploration.
That's all the going to only the icing on the cake.
<unk>.
Thank you Tom there are no further questions.
So I hand, the call back over to Greg for closing remarks.
Well. Thank you Melanie insights already been a fairly nice because so thank you everyone for joining us this morning stay safe.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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