Q3 2020 NovaGold Resources Inc Earnings Call
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Yeah.
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No.
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Thank you for standing by this is the conference operator welcome.
Welcome to the Novagold third quarter financial results Conference call.
As a reminder, all parties it does I mean listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask questions did you.
To join the question queue you May Press Star then one on your telephone keypad.
You didn't need assistance during the conference call you may see that on an operator by pressing star and easier.
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 a novel 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 David Ottewell, Nichols, Vice President and CFO.
At the end of the web cafe questions, both by phone and by truck.
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 present.
Station.
With that I have the pleasure of introducing Greg Lang.
Greg.
Good morning, and thank you Melanie.
The Donlin Gold project is in the western part of the great sort of Alaska are shown on slide four and get some.
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.
Good day sales revenues and the unemployment numbers there.
He says declines.
As shown on the map.
Yeah sure, it's producing mines numerous exploration and development projects in the script.
In terms of scale quality and exploration for cancer.
Donlin golds 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, a strong cash position and key federal permits in hand.
Global goal is you know leap.
Okay. So.
Likewise highly strategic focus for the year.
That's cool good night, Tiv pauses cases rose in Alaska over the summer.
And gold stringent safety measures and on the ground support.
I was to operate for grade throughout the quarter, making up to the time, we lost with the pandemic related shutdown earlier here.
In August no gold and our partner bear recorded the initial sort of ounces from the planned 80 hold 22000 new program.
The largest program and over 12 years.
Work was carried out safely and finished ahead of schedule.
Despite the gold at Nike's, Gonna, gentlemen, which impacted activities on the ground.
And affected the communities in which we operate.
Other resources screen has been experiencing low or no growth in Alaska.
The impact of colder 19 on the cruise ship another tourism industry may take years to recover.
With a long history of mining skilled workforce in Alaska Donlin gold offers the opportunity of a future with good crazy year round jobs and training for young people to live closer to home and to you our traditional way of life.
We are proud regimen, 80%.
Of our local workforce where needed alaskans.
In slide six.
We outlined the protocol for the health and safety during the coldest from government.
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.
Well in conjunction with Burke at the Donlin Gold office in Anchorage.
I expect these precautions will remain in place for the foreseeable future.
The scope and 19 them down like Green.
Great its African concerning the Y K region due to the interdependence of communities and frequent travel within the region.
Hi, Brian.
The girl good 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 partnered with pre Casey tribal councils to coordinate boot collection and delivery of supplies.
The eight middle Cust condolences.
We took the precautions that pause to 2020 program.
When we get this donlin gold donated thousands a bomb the crude at the camp and corrugated with local tribal administrators to deliver these various goods such as food and masters communities.
Donlin Gold also provides support because a clean up green up initiative a program that we have funded for many years.
The 2020 drill program.
As shown on slide eight with the asthma and Louis deposits.
Reparations for the Girl program started in February with mobilization of the rigs.
The site.
In March.
All before temporarily pausing activities as it precautionary measure due to colder.
The drill program, we mobilized in late May.
And we had good productivity and get all four rigs running throughout the summer.
The original plan was for April.
The largest at donlin in many many years.
Yeah.
The image on slide nine.
So the 2020 program core hole location highlighted in black.
With the initial assay results that were published in the joint release with Barrick on August six highlighted in yellow.
The intercepts reported already encouraged and similar to the drill results reported for the 2017 16 hole drill program or charge.
We're also encountered higher than anticipated grades.
<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 crews going additional holes were completed.
As a result, the scope of 19 the assay labs.
Were understaffed and the girl results are coming in slower than expected.
Yeah, I think the level seems to be returning to normal and U.S.A. results are starting to come into yet.
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 that property.
As shown on slide 10.
A significant high grade intervals were intercepted in multiple areas with several of them occur year service.
As more results are received our understanding of the ore body and the potential extensions of the high grade zones would occur.
Once called logging and asking is complete.
The newly obtained data should lead to partners to determine the next steps.
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.
Head of schedule and we're.
And without any Colgate cases, with the Donlin mine site.
Yes.
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 the.
An additional key state permits and approvals have also been uptick.
In early 2020, the department of natural resources issued final authorization Appeasements right embraces land use permits material site authorizations for the proposed transportation facilities.
There are other state permits that remain outstanding and they're not on the critical path and we will continue to invest them.
Yes.
The partnership of noble gold bearing interest has responded well to the cold at 19, you can pass on the health of our communities.
These longstanding relationships have been strengthened over the last year as we remain United in the common goal of bringing the Donlin gold project up the value chain.
We focused our culture of safety.
Social responsibility.
Corporate governance practices.
Hi, engaging our stakeholders through regular contact interacting with our investors.
And engaging in meaningful ways to promote the health and safety of our people on site.
And on the river to all the seasons.
Actually now donlin brought much needed support to the local communities.
We continue to provide assistance in their education and partners to improve the environment always recognized the importance.
Preserving traditional lifestyles.
In the third quarter.
Conlon delivered on the supportive community partnerships.
And the Y K region as shown on slide 30.
Health and safety, our core values for us as such Donlin is working with Teekay see the state of Alaska, and the Alaska Native try though help consortium in our initiative to upgrade as well as improved health and safety standards of water and sewer services.
On the cost of putting area communities.
Our other initiatives include Donlin gold scholarships, which.
Which are granted the students selected by our Native Corporation partners to benefit you education in the region.
As well the clean up Green up initiative continues 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 has been delivered to the health of communities along the river.
As shown on slide 14, the project established Donlin gold doctoral program and.
In association with other native partners.
It was a very successful program.
And a total of 45000 pounds of household hazardous material.
Were collected and shipped out.
The proper disposal.
Yes.
Bye.
15 presents the life of mine diagram for the Donlin Gold project, because one of the largest open pit mining development undertake.
The time invested upfront to build a salad foundation from which to grow and sustain has been critical to the project success.
Or maybe is a long undertaking and not the most interesting segment.
The life of the mine Rick.
Requires tremendous effort and brokers.
But it does play a strong foundation.
A typical gold buying project now exceeds 15 years from discovery.
Development.
Project catalysts for the coming months are complete the drill program.
Relates to AD sales results and incorporate all of this data.
The latest geologic model and this will help determine.
The next steps to partners will choose to make sure that the Donlin Gold project.
The next few slides highlight the EPS due to government that led me to join note to go after a great almost 30 year career with Barrick and its predecessor company.
We saw earlier in the presentation.
Okay.
Local grade continues to decline.
And that mine production is expected to continue this year.
Decreased by 2022.
Most major producers have focused on his secure extensions of mine life. This.
This sets up the supply crunch scenarios that the gold industry has never experienced historically.
The sharp under investment.
In exploration and discovery, particularly since 2012 as relative to where we are today.
Over the past 10 years, only 25, new deposits have been down outside it.
Sustaining.
Only 150 million ounces of gold, which represents only 7%.
What has been discovered over 30 years.
There have been no major discoveries in the last few years.
Projects like though Tom and are becoming increasingly valuable.
Not to expand further on Donlins attributes as the largest go.
Gold development project in its category.
The Bar chart on slide 18.
Those 13 other development stage project illustrates a truly unique gong in years when compared to its peer group.
Based on the group average of 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 Don.
It is king and is shown on slide 19.
It's more than twice the global average or large scale open pit deposits.
Not only is the global gold production decreasing for most of the major producers.
The average grades continue to decline.
Great alone is a positive differentiator for the project's economic viability as it provides extraordinary resilience.
Through multiple commodity cycles and is a key attribute to ensure the successful development of any great mining operation, especially one last with longevity Donlin gold.
Producing more than a million ounces annually your own only three operating mines in the world today at these levels Donlin.
I'm going to be a rare company.
As currently envisioned the project could Abbott curing averaged 1.1 million ounces over its life.
There is a long term investor there is additional value that comes with a multi decade lifespan from the start.
And it's a jurisdiction where the rule of law is well established.
To extend teekay see if that our partners since 1995, and we have lived through my agreements with both of them. 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 be Alaska Native claim settlement Act as highlighted on slide 21 to help them develop their land for their economic.
Sales to termination.
With all the complexities in many jurisdictions around the world, it's great to be on.
On private land with native partners.
I'll now turn the call over to David Ottewell, Our Chief Financial Officer.
Okay.
Thank you, Greg and good morning, everyone.
My 22 highlights our operating performance.
The third quarter, we reported a net loss of 12.7 million 4.6 million higher than the prior year quarter.
The net loss increased primarily due to the drilling program at Donlin gold.
With higher corporate general and administrative expenses and foreign exchange. There was also contributing to the increase.
The reduction in interest rates also resulted in lower interest income on term deposits has.
And the lower interest expense on the promissory note payable to bear.
Third quarter 22, when 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 return 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 nearly two years later as a result of our sales are sharing the Galore Creek project Newmont.
I prepare contingency payment of 75 million coverages, if the u.
If the owners approved construction of the Galore Creek project.
We continue to anticipate spending approximately 31 92020, which includes 20 million to fund our share of expenditures are the Donlin gold project for the drilling program permitting and community engagement.
And $11 million for corporate general and administrative costs.
With that I will now turn the call over Dr. Kaplan, who will give us insight into goal.
Thank you thank you Dave.
Actually I'm going to spend a little bit of time today on explaining why at 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 is that no for gold.
<unk> will become one of the very few go to stock in that space and has the potential to multiply many times in value from this year.
I know, where I see 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 a great asset pick them up the value chain.
Some of those assets were absolutely category killer some of the best in the world, but none of them could I'd describe as being ruling.
Unique.
Now what does it mean for me to say that I believe that the other one.
Excuse me.
I often ask the question other investors and analysts.
The following what.
What other gold development stage assets in the gold industry today compares in combination.
[noise] enormous size you've heard Greg described it I don't think there's ever been a both deposited Dan production with 40 plus million ounces.
Hi, Great for an open pit gold mine when I first got into the envoy in 2008 2009.
Industry grade was almost double where it is today so for a large scale open pit operation Donlins grade of what two to three grams of gold.
Oh, it's absolutely extraordinary and what that means is that.
Catterick paragraph if you've got one mine producing at a gram of gold another mine producing two.
Two grams of gold.
All other things being equal the past calls per out it's going to be have a higher grade mine, that's pure simple arithmetic.
The exploration potential on Donlin is absolutely extraordinary I think that there are very few.
Gold deposits in the world, where ounces can be added to resources.
Immediately adjacent to the pit.
Which holds the 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 Don one has the potential to be perhaps the second most famous quote for.
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 optimizations end up working in both prices and all those other things.
Potentially see large ship.
Sure gold producing mine in the world.
For those of us who likes to be able to focus on what we call the monetary metals gold and silver as opposed to the base metals.
It's a huge distinction would already be one of the largest.
Mine in the World.
Its copper we're at it touches the at Grasberg, but this would be pure gold.
The mine life will be measured in decades.
That means that it is not just.
Hi, I'm, a tier one assets, but it is a company making assets.
Sure absolutely great companies are burnt out is assets that can last through multiple cycles.
Hi, Len, even if we never added another Alan.
Would already be going on for decades.
[noise] jurisdiction well the mantra of you want to be in places or with that said if you break leverage in jurisdictions that will allow you to keep the fruits of that leverage anyone is its been a shareholder of Novagold anyone who follows me since 2000.
From 12 point, 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 will understand that for us.
So I'm really represent the Holy Grail. It represented the best in breed in terms of size, great exploration potential production profile mine life, but more than that.
Paid it in a place that when you go to sleep at night, you know that when you wake up in the morning, What's your thoughts your own still out there I know insurgents you have been saying salami strategy into losing your assets in fact go or through do Yuri nationalization of which I think we're going to see much.
Much more in the precious metal space.
So what we have if we have what we believe to be perhaps the greatest spoke.
The greatest full development story in the world and lets Barrick shareholders, they've got the other half, but more than that it's not just that it's a tier one a potential asset is in a tier one jurisdiction.
So let's continue with it.
I see it right that's important.
[laughter].
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 storing or land prices are soaring you can go to a lower wage jurisdiction or a place where they give you subsidy.
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 think I made my first fortune in Bolivia.
The 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 am I holding that used to spend everywhere from Peru.
A route to Pakistan or Mauritania to Mongolia 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 the top 10 gold producing operation.
In the world of those top 10 owning three operations produced greater than a million ounces.
One of those is in North America in Nevada, but.
The next one we believe it's going to be in Alaska, maybe super 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 that when you talk about a tier one assets. If you could talk about a category killer.
That said there's no question that we are in that league and more importantly, we're in the right place can make money and keep it.
The next slide is one that I'm going to dwell on a little bit longer because.
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 has played a role.
Unintentionally on his part I'm sure in my career and that when I took my first company public and 1997 and 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 he benefit at some of the people who were out there building silver companies like myself like Ross 80.
Bob quarter, I mean, it was a boost to us and ever since then silver has to consider to be an investable institutional quality assets.
Well, that's not picked up by a reporter for business inside and out there on a really nice guy and he called me up he covers Warren Buffett you said could you tell me more about the story I said, you think it's interesting and he said, yes, I told him to store and he wrote a very lovely piece and business insider, where I basically have knowledge that.
I owed a lot to Warren Buffett and I've had the opportunity several years later to saying.
Warren personally I'm not that he had any idea, but I explained to him what did happen either you know being the charming guy that he is he said well you know 60, you that's great, but when I was interviewed there and 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 both and I said, well, that's like being really strike twice maybe but.
I just have to assume that you want because oh invested in the idea that gold to quote Ajay.
John Maynard came to the Barber a threat like it makes no sense to him.
And I've heard this from Bill gates, when he and I talk about those years later and I said that it would be wonderful if he did well lo and behold.
Last quarter, one of the only stocks I think they'd be only stock that Warren Buffett thought with Barrick.
And this was obviously, great kudos to Mark Bristow and in its mission to make Barrick Eightys stock for generalist you couldn't have better validation. The funny part was as I spoke to the journalist again, a common denominator in both of those.
Story, what's actually me and between the silver when I went public and Warren Buffett buying it at the same time and.
Warren Buffett always lieutenants, most likely passing a spotlight on Barrett.
Yes, as I told the reporter with likely going to make even more money.
Because the local then what happened with the silver.
That being.
There are more people look at Barrick portfolio, the more that people examine the assets the more focused theories 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 generalist.
If you 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 danieli or Blackrock.
Or.
First eagle I'm going to give them a call and find out, let's say things and I do believe they will be cold as far as we're concerned donlin.
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 you want to be able to be in multiple jurisdictions with operating the mine and brake CEO. There's also mark Bristow and Barrick as well and my attitude is always been whatever.
Good for Mark is an old friend really good friend whatever is good for Barrick is going to be good for Novagold. After all I know because it goes up in the marketplace. Barrick is now in a position to tell all the analysts that follow its look we've got the same thing as you know for both 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 quick for Barrick if on the other hand people invest in barrick with or without investing an overcoat. It just gets more positive reinforcement, it's called a virtuous circle.
But one of the things I realize when we speak to investors, it's more and more because there's so much more interest and we're getting new investors looking at the story. They ask the question can you explain the relationship with Barrick from where you can talk about it to where we are today.
And when I answered that question a couple of times I realize you know what it's sort of like the buffet anecdotes, there's a lot of Uh huh.
Great.
Yeah for.
For our <unk>.
Investors, whether they've been with us for a long time and maybe not hurt the story for new investors, who clearly are coming into the local 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. It's we do you need a higher gold price, but if someone wants growth it's tough 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 buckled, then mark right so coming into the Barrick story, what decides if 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.
Alan and I think it's fair to say he likes 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 assets and.
On a night.
The new growth opportunity well, if it's part of last quarter's wonderful sea change and events, we had great drill results medically only 10%. So we'll see what the others have to bring forward, we had barrick, putting a light on ER optic 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 there's any reason why I can't speak about things that barrick used to tell us and pipe. It. So at least you will understand the context.
Why I believe that the reserves sort 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 even.
Mark will acknowledge that prior to his coming into the Barrick story, we've turned donlin into a global brand that is deliberate we.
We are building a global brand and on one but we do believe that it has the potential to be on par with the Nevada if.
If more work is done on it.
So, let's let's let's let's go back to the beginning.
I watch.
No because you go from a 50 cents stock around the turn of the century to 15 $16. When it was the object.
A hostile takeover attempt by Barrick.
I did not own a share of stock on the way up badly I watched the shareholders of Nomura go up which obviously I wasn't one rejected that takeover offer and the stock pop into the Twentys afterwards extraordinary story.
Then as a consequence of some self inflicted wounds and you had super imposed on to that the financial crisis and the 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 gold we hit.
We get sold our energy company in 2007, which was the fastest growing privately held natural gas producer in order to pivot into goals and to re enter silver when.
Well no vertical may this trip and I had kabi 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 object that got an equal 11 Cole our president said to me I think you should repeat.
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 things.
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 sales. There's a lot of resentment about said once you 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 they fold in which.
In which case you have nothing so.
So better to save the company, which is 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 since zero percent because it's okay to be greedy, but not ridiculous like me that with great advice for which I am forever instead.
To to equal or for having that are sensitive sensibility.
We bought it and the stock really.
Really was something the institutional investors could not have thought they had no balance sheet.
They had no credibility on the street.
On the street, they had environmental issues on an asset called Rock Creek, they probably no one's ever heard of by now we got rid of it.
We got rid of it.
I'm a shareholder lawsuits all kinds of stuff.
Manage management was very unlucky needless to say, but we thought it and we turned all of those things around and talk multiply.
Now.
Around that time.
I reached out to Barrick I had no bad luck with direct to the contrary any experience I've ever had with Barrick.
When Randall Oliphant was there was a very very pleasant and professional and I asked them, whether we could have a meeting.
And they said sure.
They had expectations of what the meeting was about I.
I had different expectations now let me take one step back when we did the deal with no vehicles.
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 a company that was like catching a falling knife, which my team basically said that's not really possible.
And I said, you're seeing an allergy, which I'd like to give you.
Our two guys walking in the woods.
They encounter repair.
One of those starts to run and the other one.
Leans over changes its hiking boots into tennis shoes and.
The Guy Who's running looked back and said why are 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 fair I have taught run you I said I don't care, what Novagold has to say about done one I just care about sorry, Barrick doesn't lie and if that basically is confirming that donlin, Israel I said that the old 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 renowned geologists two visits down one and basically what I said twice. After the fact, just tell me do you think it's fair.
They say that on Monday came 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 is it 40 million ounces and he said no I said difficult there he said yes.
And I pick them, what's what's it about it and he said I see 80 to 100 million ounces kept up.
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 lets see that as it may.
When I went to when I when I heard that I just cited.
I'll go to Paris, and try to buy the other half.
When I went to visit Barrick I met with her in the region.
Cook along with me a decide to pick a former ambassador also happens to be a lawyer and I met with Aaron and someone else, whose name I will not mention because I havent just start talking about this anecdotal he's a very nice guy and we subsequently done very nice business together, but for reasons, which you'll understand I'm not going to face name in any event.
When we sat down from each other.
Aaron who is a true gentleman and amount of incredible character and integrity and also with that absolutely delightful personality fit well you know what can we do for you.
And I said look I know this is really bad blood between Barrick and no vertical you hate to CEO never want to say anything nice about it because you resent. The fact that you lost the hostile takeover bid.
So you won't 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 pickles and you don't want to give novagold.
An opportunity to hit you over the head and say you see we were right. If 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.
That.
I got you know basically he said I didn't see that one coming I thought you were coming to sell the other half of Donlin Twox 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 tells them agreeing that he wants to buy them out.
And most bring it basically says you want.
You want to buy me out I thought you out and then the language gets greenlit colorful and I love to do that but I don't think I should do that on a conference call the point being that Alan who had not been there during the hostile takeover days wasn't as converts and on the bad luck with Barrick, but the other person was.
And that you don't buy.
Alex we buy.
You out.
Why wouldn't we tell 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 am I. My basic response was I take it that you are rejecting the offer 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'd never survive at Barrick because the culture at Barrick is sort of like.
Click feel a need.
Albert Anastasia on a good day very very for Korean culture, and not the kind of thing for someone with a arentz integrity be that as it may relations 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 here.
Gold mining in that era, with what is very active paid an extra buck and thought no buckles well.
These are called counterfactual.
Pure speculation, obviously, but it's interesting because it's entirely possible I know that they would've put 10 drill rates 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 say.
They would've drilled over the property because if we stay in the mining industry, if you're going out in search of elephants. So.
So two elements country.
Certainly worked for me in Philadelphia in Africa in Texas, 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 Merit.
Eric It Didnt win the big 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 vehicle had app.
Half or 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 aquinox they might not want me to talk to pull on my end direct which was the only AAA.
Rated company in the gold industry at that time certainly of any size.
I would be very very different place. It's it was such a high quality story that they could afford to make one monumental screw up.
But to was just about to too much and still they managed to survive it that is insurance and saying ability.
Suffice to say that its things moved on and we became more friendly I met Greg Lang rake Whats the press it into 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 sets or companies that had been acquired by Barrick. So this was not someone who we jokingly say its promiscuous and would jump from company to company. We found a very very common bond.
In terms of how we both use donlin he as an engineer and a man who's been in mining projects all over the world.
And that 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 I agreed to become chairman.
Next to Aaron as 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 if whatever great decides to do we honor his decision and make that bandwidth.
Okay.
Break and I came on board no proposed and we set about changing the entire company selling all the problem assets.
Spinning off things that were not related to donlin.
Actually repairing the balance sheet et cetera, et cetera, and it's my comments that we made.
We can.
Oh no.
As time passes and unfortunately, my prediction regarding heron proved to be true and Aaron was out there in true Roman fashion and replaced by Jimmy Celski. 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.
Be exerting capital discipline in the Pascua Lama here was basically to throw donlin under the bus.
That does not mean that they weren't going to continue taking the thing along the value chain, Eric never ever slowed anything down but it takes time to permit. So we continued meandering along we called it the tortoise and the Hare because other projects that people sick 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 Kratz cheering.
In any event, we decided license long, we're not going to make an issue Eric's got bigger problems than we do and we decided it would be good partners and just take a step up or less.
Eventually.
Jamie which replaced John Thornton became the chairman of Barrick and the Cohu Ceos co presidents with Jim Gowans and Kelvin Dushnisky.
Around this time, we started to hear from analysts that barrick in their talks to 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 have 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 donlin, something we should know and John look good Jim Gowans and he said look when I came into the picture I asked him. If we were going to grow well likely grow what do we have that.
Some things that you know, we can really sick, our teeth into and Jim Gowans sick 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 improve 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>.
Yeah, so in the Dominican Republic.
A number of people who gave nicely who were expiring. So we have a lot we still do a lot of Barrick DNA and that was really really helpful.
Now.
The mutual respect extended all the way until Mark Bristow came into the story as I said I call Mark White Swan and it's not 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 build opportunity.
Eric and the Novatel teams work, absolutely beautifully and you know for me my experience with Mark going back to African platinum when I asked him to join the board and he did going back to the Kibali transaction and just the fact that we're friends. It's it's a really really.
Wonderful thing, but the most important thing is that Mark. This approach Mark has a very very linear Cartesian view on how you take the geology turned it into the right geometry make the perfect mine plan and the like.
Thats what were doing now we.
We've got everybody's attention and we're doing it steady leap, but surely I never.
I never asking when are we going to go into production and I know that it sounds you know it sounds funny, but I know that well if you're a bull on gold and you want to be able to have a producer.
Producers that will go on for decades.
I'm going to get the best story in the World I look alone go Ergo lead 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 reserve is only three kilometers of what we already know is an eight kilometer mineralized trend, hence Larry if you can comment which means they 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 direct control.
When I say the nixonland could be at Donlin, it's because there is the entire possibility.
Conjecture.
That we could deal with the district, even if it didn't turn out to be a district and there was no. Other donlin there you are.
Still dealing with something that has the potential to have enough high grade reserves really to be on par.
With the with Nevada, and that would be good enough for me.
For me and.
And so with that we can go to the next slide.
I think I've covered this point, but the truth is that for all of the reasons, which I've outlined.
The.
At the end of Warren Buffett.
19, Barrick and the spot like that that will put on barrick's assets has got to be a very very good thing for us.
But whats also so important for everyone to understand.
Is that one got fixed coming into the gold stories as effectively detoxified gold easily say for anyone interested in gold to be looking at the the old narrative now we've been talking about this for a long time and I've been calling.
One thing that one of the beautiful things about gold and we can go to the next slide is that whether its rate the alley show or whether it is Jeff Dunn lock or pull tutor Jones or 10 wrote off for a mark Mobiuss you have so many different boldface names coming.
Into what is still one of the most under owned financial trade in the World. We haven't even we're not barely in the first inning of what we can see if I'm right. The soldiers going to embark with some volatility shake out the weekend, that's what it's supposed to do.
On another decade long lake in secular bull market.
But here, we are with people like Warren Buffett people life rate data you're looking at these things for the first time and looking at them with fresh eyes next flight and.
And incredible example, if there was the piece that was written by Mohammed El Aryan why no. It was on the front page of the New York Times and he basically described how he was so surprised the goal is evolving into a must have asset.
And it 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 allocation in general 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 goals.
With the gold market, if I'm right oldies hedges too.
And at least three to $5000 as an equilibrium level and as I've said before but I don't like to discredit myself by being a two out there I truly do believe that the charge for gold will one day look very similar to the charts that the down after that outlook.
3000 in the early 19 eighties.
And no 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.
Or so numerous vast its accuracy imagination from asset diversification God knows that that has been reinforced invalidated or this year.
This year, a safe Haven appealed ditto currency Debasement protection Ghetto Central Bank purchasing data shows they are the ultimate insider 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 key lead means that they want to be able to own the asset that they know.
As you know counterparty 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 responds very well to both and you've got emerging market. The man, who better than 10 wrote off remark mobiuss to know about the emerging markets and from arc Mobiuss sales.
She's been saying for hundreds and hundreds of dollars cycled 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 costs go higher the jurisdictional risk it's 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 goals and if they don't now they ultimately will well here's the thing even a 1% allocation of gold he's going to lead to gold multiply.
Because most of the gold in the world, It's an extremely sticky hands, who have had nothing but positive reinforcement.
For owning it and protecting their livelihoods, whether Indian or whether its Chinese these are very much gold and silver cultures. They understand it they will continue to tie it over the long term at a time when the west is seeing it as an asset.
Flat 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 it's 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.
Give it going away at a few hundred bucks, but when it got to over 10000 people were talking about each yes, welcome to that curiosity of the financial World, which is that if something gets more extensive it starts to look more beautiful than desirable Tonight.
In other areas.
Connect.
For me and for our investors, we wants to leverage to that higher gold price.
But we want to get into 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 bite donlin for us and for back it's absolutely gorgeous I do believe that a 2000 dollar sold.
The $20 billion asset.
You haven't even spoken about optimization this is not adding potentially more reserves or any other upside that.
Just merely a function of the fact that I think that very very scarce north American assets of high quality sites 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 it's for exploration potential than that then donlin.
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 and 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 could be 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 the you know all the other financings 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 I cease 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 looked 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 it's 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 incidence with shorts 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 are.
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.
Next.
And so with that I don't need to cover all of these things but.
The simple part about it is that as an investor in this space I cannot find anything that gives me the attributes in combination.
That.
No vehicle it's me.
And that's because the access.
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 analyst space and all other ways that will allow us to achieve the objectives that we set out for us.
Thank you very much.
Yeah.
We will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad.
You will hear a tone and knowledge in your request.
If you are using a speakerphone please pick up your handset before pressing any key.
To withdraw your question. Please press Star then too.
We will pause for a moment as callers join the queue.
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 clearly description, it's obviously interesting to hear the history.
This truly unique asset so same reshaped that oh.
I wanted to ask a little bit more about the initial assays and and you made it in the presentation that they exceeded my expectations. This.
Multiple significant distinct high grade intervals and I wanted to ask you could you maybe same.
The <unk> exceptional.
Elsewhere in what areas, specifically on what metrics that they exceed your expectations. Thank you.
Good morning, Lucas I'll take that as well.
Question, You know you don't drill program has two objectives. This year one validate the new model that's about half of the holes and the other is to look for extensions to be known high grade mineralization, we you're buying.
Subjects life.
And you know a couple of those holes, where the grade came in relatively shallow around 30 40 years I think that was that was exactly what we were looking for extensions to the high grade intrusive structures.
Carrier grade come up like a like a series of dangers to the sentiment or walk around.
And as a modeling.
Focused on the intrusion or high grade nature, Yeah, we really saw the opportunity that Ah hey, with smaller equipment used in Miami's discreetly and selectively enhance degree change.
The to answer your question no we have the model.
Model and as results come in we compare them 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.
Yeah, there will be a release of the next set of results.
Later this month.
We continue to be really encouraged by what we see in that you know there is here.
Opportunity for us to add value by drilling.
Thank you, Greg and I heard you right that you said additional results should be forthcoming later this month.
Yes that is correct you know half day turnaround times, it's been a slow this year related to staffing issues. The laboratories caused by cold It but you know we're working our way through that are starting to get more trimming and every day.
Well of course, I think yeah.
An update later in the month.
And with that.
You'd be able to share what not.
Send us the drilling program would be at least at that point.
You know Lucas was getting asked me again.
All the time that the initial results new release were about 10% of that program.
We anticipate maybe a net.
Next up 20% in the drilling with the balance to follow later in the year.
Very helpful thing Thank you Greg.
Then when you grew up.
Question.
For me today.
Can you speak a little bit about the alignment between Barrick and multiple at this time and you could see the development cost on that and.
Yes for example that there.
Like to go for the Saddam and develop and but no the gold isn't a nice for us.
I would appreciate any any thoughts on that fame.
Framework.
Yeah, Greg you want me to take it.
Well why don't you start Tom and I'll get any gaps.
[laughter].
Sure.
From a from an operational standpoint, Greg will provide his answer.
From the you know the very birds eye view <unk>.
We have never been more aligned with barrick than we are today.
The fab.
The fact that we've just.
To complete it and if you could 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 a proof its drill program.
You know Mark has taken the attitude like I said he has described it as a key act that a a a nice clean gold opportunity you opportunity all of these things art extremely.
Heartwarming and they indicate that we are where it's 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 work on being able to get the geometry town just right on the deposit in order to plan the optimal throughput.
And therefore to be able to tell us and everyone else.
What's the Capex will be this is exactly the way.
Mark prudent operators take what will be the largest gold mine pure gold 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] battery.
Barrick has more need to in effect for production as a large scale gold producer and when they decide that the it 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 the 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 is that it's really is a game changing event for us and 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 that the asset.
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 map, it's going to be it's going to be transformative let.
Let them do it right.
They are taking ownership of the story you know after their merger I as far as were concerned it couldn't be going better Rick.
All right. Thank you for that but look about okay great.
Great well results are exciting and any company and I think that's especially true.
With the geologic focused company and see you know 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.
Yeah, it's really sad she gets to them. So there's a lot.
And so there's a lot to the party in Mount Vernon and Catherine Raw is their senior executive with responsibility for North American operations is Ah Yeah, the chairman of Donlin Gold this year and he's also.
So yeah, I would say that there is a problem.
Probably this is great news involvement as they've had the preparation of feasibility study back in 2010 and 11, yeah nice to she's very capable people there.
Right Great comment Greg very helpful comments, I I really appreciate the perspectives and continued.
Thank you.
Thank you Lucas.
We have one more question coming online and I'll just start reading out is it fair to say that at the current price and GE stock isn't that funny future rise in nickel price and additional exploration potential at donlin.
Short answer Tom you want to know.
Yeah.
The short at the short answer is no the longer answer is Hell no. That's the thing I picked up in Texas.
The reality is that we few or no fickle as substantially undervalued in the marketplace.
We don't have any doubt that there were 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 if it's the victim of a securities fraud.
Then I think we would have seen the stock already in the high teens 20.
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 thing 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 that 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 reserves.
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 four handle that we see ourselves going into the twentys and considerably beyond that.
Everything that's happened since we made.
Since we made the EUR eight minutes, obviously forward looking but since we made those statements. We've only had a great reaffirmation of the reasons why we made those statements and so you know that's the long answer of saying we are not.
Oh it was the stock with the stock price does not reflect the day, where we think it really should be higher gold prices, obviously and the more exploration.
That's all the going to only the icing on the cake.
Yes.
Yeah.
Thank you Tom there are no further questions.
So I hand, the call back over to Frank for closing remarks.
Well. Thank you Melanie good sites already being a fairly nice because so thank you everyone for joining us this morning Shacey sorry.
Right.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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Wow.
Yeah.
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