Q4 2020 NovaGold Resources Inc Earnings Call
Thank you for standing by this is the conference operator, welcome to the Nova Cold fourth quarter and year end financial results conference call and webcast. As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation there'll be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you May signal, 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 Eric Good morning, everyone. We are pleased you joined us and other Gold's 2020, you're on financial results and update on methodical.
On today's call, we hopped on from Thomas Catherine Mueller Co Chairman, Greg Lang, <unk>, President and CEO.
And David on the well known for both sides of that.
Yes.
On the left.
We will take questions both by quality and bypass.
I would like to remind our west la.
And Paul part, but as stated on slide three and they stay.
And that's made today may contain forward looking information such as projections and goals, which are likely to involve risks and from our various.
Thanks Peter.
And on forward looking disclaimer.
On the publication.
Are there do you have the pleasure of it.
Greg Lang right.
Thank you Melanie and good morning, everyone.
Our Donlin Gold project is in the western part of the Great State of Alaska as shown on slide four.
This project is a 50 50 partnership with Barrick gold.
My name is an important part of the Alaskan economy, and becoming even more important to state revenues and employ.
As shown on the map.
Six producing mines and numerous exploration and development projects and the state.
In terms of scale quality and exploration potential and.
Donlin Gold's attribute.
All exceed any other gold development project on the horizon.
When combined with the company's excellent partnerships with the native corporations and co owner Barrick and.
And natural leverage to a rising gold price and strong cash position and key federal and state permits in hand, and experienced management team and board as well as long term supportive shareholders.
No for gold and a league of its own.
Slide five highlights our strategic focus for the year.
As COVID-19 positive cases rose and Alaska over the summer Donlin Gold's stringent safety measures and on the ground support.
Cloud is to safely operate four drill rigs and making up for the two months.
Pandemic related shutdowns and sustained early in the year.
Careful collaboration with our Native Corporation partners Jewish day, and Teekay fee as well as other tribal groups and the region, where T to a safe and successful drill program.
In August October and January 2021, Nova Gold and our partner Barrick reported updates on the assay results from the 2020 program.
The largest drove program and over 12 years.
The work was carried out safely and ahead of schedule. Despite the impacts of COVID-19 on our activities.
Okay.
With a long history of mining and a skilled workforce and and state.
Donlin offerings, the opportunity of the future with good paying jobs and training for young people, who can move close to home and continue our subsea and its way of life and that includes hunting and gathering and fishy.
We are proud that greater than 80% of our local workforce.
Our Alaska natives and net we had no lost time accidents.
The image on slide six shows for 'twenty and 'twenty drill program core hole locations with reported assays and Orange and remaining assays to reported and black.
A total of almost 17000 meters are over 70%.
And the length drilled have now been reported.
Final assays from the 2020 drill program are expected to be reported in the coming months.
We are proud to say that the program was safely and successfully completed in September with a total of 85 holes are over 23000 meters drilled.
The results exceeded modeled expectations with higher <unk>.
Oh, great fitness.
And predicted by previous modeling.
The program to date, not only improves geologic interpretation. It also provides encouragement for additional high grade drill targets.
All of this was done with zero Covid cases at the project site.
Our plans for 2021 include debt the partners will report the final assays from the drill program.
And we'll be integrating the results into the geologic model and evaluating the timing to update the feasibility study followed by engineering, which forms the basis of our execution plan and ultimately leads us to a construction decision.
To complete the model additional confirmation and extension drilling our plan for 'twenty and 'twenty one.
Focusing on the continuity and structural controls of the high grade mineralization, we encountered.
No other gold engaged would Canada, formerly a Mac to perform a detailed review of the costs used and the Donlin Gold feasibility study 43 101 technical report that was prepared by a Mac in 2011 to meet the company's report.
<unk> requirements and qualified person and sign off.
Based on that cost per view when determined that updating the donlin gold and feasibility study using 2020 cost and gold price guidance.
And no material change to the mineral resources and reserves.
Therefore, the Donlin gold project feasibility.
Feasibility study is considered current and supportive of all of our scientific and technical data included in our public materials.
One is currently updating all sections of the report.
As generated by the Donlin Gold project since 2011.
<unk> intends to file the updated technical report on Edgar and SEDAR and 2021.
The updated Donlin gold study does not incorporate the latest donlin Gold's optimization work on the geologic model.
Our other optimization work given that these assessments are still underway.
On slide seven we highlight federal and state permits received to date.
<unk> Foundation.
And from which to build on.
And early 2020, the Alaska Department of natural resources issued final authorizations.
The easements land leases land use permits and site authorizations for the proposed transportation and facilities and easements for the fiber optic cable located on state land.
They also denied and appeal and affirm and division of mining land and water as original approval of the Donlin gold reclamation plan and accompany permits.
Okay.
There are three primary permits that remain outstanding and all of which are not on the critical path.
The state right away and agreement and leash authorization for the buried natural gas pipeline is under reconsideration.
The comment period on the document closed in November and we are.
Anticipate that Alaska will re issue and the right away agreement and leash authorizations and the first half of this year.
With respect to the water rights permits last November.
Alaska published on public notice for a comment on Donlin and 12 applications for water rights associated with the mine site and transportation and facilities.
The comment period closed in December and we anticipate that Alaska will issue the final authorizations and the first half of this year.
The dam safety certification is a multiyear commitment for which activities commenced in 2019, but pause to focus on the 2020 drill program.
The COVID-19 pandemic created significant concern.
And the Y K region due to the interdependence of communities and frequent travel within the region.
As shown on slide eight Donlin gold partnered with Teekay, <unk> and tribal councils to coordinate food collection and delivery of supplies to the eight middle Kuskokwim villages.
When we took the precaution to pause to 'twenty and 'twenty drill program Donlin gold donated thousands of pounds of food from our Tampa and collaborated with any act.
Our regional hub to.
And to distribute food and supplies to residents homebound due to health issues and quarantine requirements.
Donlin Gold also recognize we need and Beth on the largest town and the region and supported the Bethel Community Services Foundation, Covid response fund and the Battle Community Services Foundation to help vulnerable years.
As noted on slide nine Donlin.
Donlin gold worked with the Alaska Native partners journalistic and Teekay C and other key representatives of the communities and the region responding to the needs arising from the pandemic as well as you and other areas such as environmental management.
Training education and cultural initiatives.
The Donlin gold and backhaul hazardous waste removal project and late summer was a collaboration with 28 community partners that resulted in the removal of over 45000 pounds and hazardous materials.
In the past three years, almost 200000 pounds of waste has been removed from the region.
We are also proud of the ongoing community and engagement efforts and growing and collaboration with Donlin gold on the shining on six branches to agreements in 2020 with key communities from the project region.
These agreements and further expand on the long term relationships already established with these communities and address specific needs such as water sewer and landfill projects.
The ice road that connects to remote villages and the Y K region Salmon studies.
And suicide prevention are among these many programs.
And <unk> and PKC had been partners and the Donlin project and from $19 95, Donlin has life of mine agreements with both partners, who have been deeply involved and supportive from the start.
We are thankful for their long term support and commitment.
So the project and its continued success.
We support their mandate through the Alaska Native claims settlement Act.
As highlighted on slide 10 and to help them develop their land for the economic benefit of the region.
And all stakeholders involved.
These owners have and interest in seeing the project developed.
Over the past 25 years Donlin Gold has worked closely with the Alaska Native partners along with other key representatives of the communities and the Y K region.
To effectively respond to needs ranging from environmental management true.
Training education and cultural initiatives.
Our commitment to healthy communities was evident as we've seen with the cooperative response to the global pandemic.
These partnerships.
And the activities and programs. We undertake together are illustrative of our commitment to the sustainable and responsible development of the Donlin Gold project for all stakeholders.
On slide 11.
We highlight a few quotes.
From <unk> and Teekay.
Okay.
And with that I'll turn the call over to our Chief Financial Officer.
David Ottawa.
Dave.
Thank you Greg.
On slide 12 highlights our operating performance.
We reported a $33 6 million net loss in 2020 and increase of $5 8 million from the prior year.
Primarily due to the drill program at Donlin and higher G&A expense.
Lower interest rates led to lower interest income earned on cash and term deposits.
And lower interest expense incurred on the Barrick notes.
Regarding income taxes, we have elected to file consolidated return for our U S subsidiaries.
This allows us to use operating losses against our income, resulting in a reversal of income tax expense in 2020.
Slide 13 highlights our 2020 cash flows for.
For the year, we spent $26 6 million $8 1 million higher than the prior year.
This was due again to the increased dominant funding along with higher G&A spending and lower interest income.
Don and funding was lower than our original outlook of $20 million, primarily due to better than planned drill productivity and lower permitting and administrative and community engagement costs.
Our corporate G&A spending was higher than our original outlook of $11 million due to higher legal and regulatory costs.
On slide 14, we note a robust treasury.
We ended the year with cash and term deposits of nearly $122 million.
We also have $75 million due from Newmont and July.
And an additional $25 million due two years later.
A further contingent payment of $75 million becomes due from newmont, if the Galore Creek owners approve the projects construction.
We anticipate spending 31% to $35 million and 2021, including 18% to $22 million.
To fund our share of drilling permitting and community engagement at Donlin.
And $13 million per our corporate G&A costs.
Slide 15 presents the life of mine diagram for Donlin gold and one of the world's largest open pit mining development projects.
The time invested upfront to build a solid foundation from which to grow responsibly and sustainably has been critical to the project's success to date.
And as Greg discussed in 2021, we expect Donlin gold to report the final assay results from the 2020 drill program and integrate them into the geologic model.
Complete additional drilling focused on the continuity and structural controls and the high grade mineralization.
And evaluate the timing for the next steps.
On new Donlin golf feasibility study and engineering, which form the basis of and execution plan and ultimately a construction decision.
I will now turn the presentation over to Dr. Tom Kaplan Tom.
Tom.
Thank you very much Dave Thank you Greg.
Certain things bear repetition.
When I speak about Donlin Gold's two investors I often asked the question.
What other bold development.
Development stage asset in the gold mining industry compares and a combination of the following.
Number one enormous size and number two we all know that grade is king and what we're talking about here is very high grade four and open pit large open pit mine with the concomitant and fact that youre going to have low production cost.
The exploration potential is.
And is extraordinary and we're finding it simply and the infill drilling.
But when you realize that.
The existing resources are only on three out of and eight kilometer mineralized.
L three kilometers out of eight kilometers and net that eight kilometers itself is less than 5% of the total land package you realize that the blue sky and the exploration potential at Donlin is arguably.
Better than any other gold mining projects certainly in a safe jurisdiction.
The production profile of Donlin would make it in either one or two stages.
Either the first or second largest producing.
Gold producing.
Mine and the world and by bold, producing I mean purely goals without base metals.
Only comp would be the Sukhoi log project and that one is being developed in Russia.
A mine life measured in decades.
That's the basis, that's the foundation of all great mining companies and it means that you do not have to continue outside of your own backyard in order to be able to sustain and very possibly add to growth or.
Our local and industry partnerships are superb.
We are on land as Greg referred to which is already designated legally.
And by law for mining.
And of course, we're partners with Great Native Corporation.
Organizations, plus one of the leading gold producers and the World Barrick Gold.
And last but as far as I'm concerned really the gating factor for investing in precious metals mining today.
We have the safety of being and one of the world's premier mining jurisdictions and even if there were other gold deposits not very many of them would be able to combine several of the attributes that I just discussed to combine all of them and yet be in a jurisdiction that is the second largest gold producer.
In the United States after Nevada. This to US is why we call donlin to the benefit of our shareholders and also those and Barrick the Holy Grail.
Next slide please.
Okay.
Let's talk about some of the backdrop.
On my background as you know Greg is and engineer.
He is one of the Premier mine builders and operators and the space He and our project manager Richard Williams, and they know how to really build great minds.
That's not my Forte mine is being able to anticipate.
<unk> supply demand imbalances and try to get ahead of the curve what we see in the gold space is that even without any of the absolutely numerous.
Macro factors that favor gold if you are only going to look at it in terms of the industry fundamentals themselves. You would have to say this is a time when you want to pick the next generation of winners.
After the nuclear winter that the gold space went into before.
And if you find those stocks, which will be the go to stocks that is those that have great assets.
And in safe jurisdictions, and Youre going to have the opportunity to make a real killing.
And the fact is that.
Within the gold industry itself, there's been a decline and discoveries and grade as global production has peaked.
Barrick is calling for a 5% and you will decrease in gold production for years.
<unk> mines are being depleted and grades are declining simultaneously.
And with very few if any new discoveries being made to replace from certainly nothing that we would consider to be substantial.
And when you consider that it now take on average between 15 and 25 years to develop a new mine the horses really left the barn.
In terms of the existing mine production 26 of the world's largest miners are forecasting that existing mine production is going to decline, 13% by 2022 and 47% by 'twenty 'twenty seven.
$130 billion and cumulative capex forecast to sustain current bold output to 2026 and the truth is the gold supply from stable jurisdictions represents a small percentage of that total production.
Many of which.
In terms of those outside of the jurisdictions that we believe and.
I actually believe we're going to be subjected to far greater.
Nationalization and confiscation, whether it be de facto or DRA.
Next slide please.
Okay.
This underinvestment impedes output growth in 2012 mining companies began implementing aggressive cost cutting measures and curtailing expansion plans and their effort to protect margin as their shareholders, who were quite set up with misallocation of resources.
And in growth in favor of maximizing returns from existing operations.
Perfectly sensible thing to do for a short period of time.
The results however, its net exploration budgets for gold fell by 65% from a peak in 2012 to a 10 year low in 2016, according to S&P global.
Exploration budget increased in 2017 and 18, the current gold exploration budget remains 50% net of the 2012 level.
Now remember I have to continue repeating this because it's shocking even if you found multiple mines, which could move the needle and with all due respect to donlin and Sukhoi log, we're really not going to move the needle all that much impairments of the bigger bolt supply balance.
On the truth is that the shift to lower reward late stage and mine site exploration programs.
It means that it's going to take anywhere from 15 to 25 years for other projects further and the pipeline of new discoveries to be able to get to market.
Over the past 10 years, only 25 major new deposits have been identified containing 153 million ounces of gold, which represents only 7% of the gold discovered over the past 30 years no major discoveries have been made in the past three years.
<unk> are curious things hi.
High quality assets in.
In fact, our very few of 135 assets not yet and production only 30 have greater than 10 million ounces of gold and reserves and resources only nine of these assets have a grade of one gram per tonne or greater.
Next slide please.
So in terms of size Donlin is already a category killer there are only a couple of projects and the world hours and Alaska Sukhoi.
Log in Russia, which obviously is part of the similar geology, Alaska ones, having been part of Russia itself.
But I don't believe that there's ever been a gold mine, which has begun with 40 plus million ounces of gold and once again and that's only on 5% of the land package. When we know that at least double the endowment.
Is is mineralized in terms of the kilometers. So this is a great asset in terms of size, but price isn't everything please continue.
Okay.
Let's get back to grade with great means is quality. So when you have quantity. That's a box that you can check but in today's world greatest team and when you are sitting on a grade which could very well be higher than this and that remains to be seen but when you're already sitting on a grade of two and a quarter.
<unk> grams per tonne and net.
Over twice the industry average at a time when grades are falling and will fall through one gram per tonne.
And enormous advantage and the reality is that when you are talking about cost structures. If you've got two grams of gold and someone else has one gram of gold Kenteris Paradise, all things being equal your cost of production per ounce of gold is going to be half that is a great different.
<unk> when it is not just something thats going to be around for four or five or six or eight years, but something that could be around per 40, or 50 or 80 years.
You have a category killer project.
Next.
Nope that gold is.
Very privileged to be able to share with barrick.
One of the only mines, which will be producing over 1 million ounces of gold a year and hopefully just in the first phase.
It could get considerably larger than net.
Is.
This is really a unique proposition if you considered that barrick holds that a tier one asset is one that produces half a million ounces annually.
You can obviously understand that the scarcity value of one that produces twice that.
And at a grade that is.
Double the industry average and located in a jurisdiction, where when you wake up in the morning, whatever you thought you owned the evening before you still own.
And you've really got a wonderful wonderful story and you have the makings of.
A go to stock for.
And for smart money and as we've been permitting and taking this company up the value chain.
Something that will be the premier gold development story.
When gold.
Embarks upon the next leg of what we expect will be a.
A continuation of a rip Roaring Bull market next.
Okay.
You know.
Those of you who know me.
No that.
I made my fortune.
In the developing world.
Starting in South America, and Bolivia, and and Africa in Zimbabwe, South Africa Congo.
At one time I was the largest holder of mineral rights throughout the entire Islamic world from Mauritania Route to Pakistan.
A number of years ago.
I decided that as much as I gained from this experience and hopefully was able to create opportunity for a lot of people on the <unk>.
<unk> not just investors, but other stakeholders.
I believe that that era is over for investors. If I didn't I never would have withdrawn from these other countries because I had the experience to be comfortable there.
And I, just unfortunately believes that.
On the rule of law.
Is key and that institutional investors.
When presented with World class asset and World Class management teams are going to be asking the brokers, who introduce them that's great and really interested to meet them, but just tell me one question where in the world RSA.
Because I think that mining has become like real estate.
On location location location and you want to be in a place where if you have a great asset that's going to give you leverage to an underlying theme.
You are one day going to be able to ring, the cash register and reap the fruits of that leverage if I'm right on where gold is going if I'm right.
On the macros and.
And the importance.
<unk> is going to play in.
The coming very soon and world order of the currencies.
And I think that youre going to see more and more of that gold and to a certain extent silver will be declared strategic assets. If you ever believed that there will be a significant recession again and then my level of certainty in that respect will probably rise to that of metaphysical certitude right now I'm, hoping it's not the case.
I think that we're in a situation, where if gold does well.
Everyone should be able to do well, but if other things happen in the world Fortunately I see unfolding.
On both maybe one of the only things that does well and if that's the case the change that bold minds will be untouched in parts of the world where the rule of law is and novelty I think are.
Very unlikely.
Net.
The bottom line to that argument.
In fact, the bottom lines of a series of arguments that I've just made about the significance of having an asset that moves the needle and size the significant grade and what that does to the attractiveness of an asset and the cost structure of an asset and of course, the significance of jurisdictional risk.
What that means is that not all ounces are the same not all ounces are created equal and if.
<unk> got great ounces, and assuming you do have great ounces in a place where.
Curious diction is challenging it's not the same as if you are in Nevada.
Or if you're in Australia or of course.
If you're in Alaska.
And this is something that I learned a long time ago.
I'm always attracted two assets, which have optionality value.
And there were days and the past where I found that in many different parts of the world.
If I'm right on how the world is developing that optionality value is a femoral and it goes by the time it becomes something that can be realized.
And somebody will have made you and offer from the government that you really cant refuse because at the end of the day.
Mining companies arent in a position where they can move from.
And a safe place to a new place and not like textile companies that can move their factories to lower wage jurisdictions semiconductor companies that can move to places where they are given land and subsidies. What you have with the mine is you have a hold on the ground and you'd better be sure that the people who are your hosts.
And are very very happy and contractually obliged to live by the agreements that they've made with you.
There really aren't that many jurisdictions.
And which you can make that characterization nik.
Net.
I've, obviously spoken about exploration before but I have to tell you that.
When you have the ability to be able to deliver.
Great exploration results.
Comes a time when the kind of results that we've been issuing with Barrick.
And would make our stock double or triple.
That era is coming.
And it's not just simply because retail investors.
Seemed to have suspended their disbelief over certain.
<unk>.
Momentum plays.
As the gold Bull market.
Takes off and as people do realize that exploration is.
Is something that very few companies really have easy access to and certainly not the kind of drill results that we are almost taking for granted.
You have to recognize that those things will add kerosene and two the fire when stocks are delivering great results.
We believe it's yet to be seen the ultimate forward looking statement that considering that only 5% of the donlin property has been explored and that's really a function of the historical.
And blow back from Barrick sales takeover attempt and 2006.
We now have and exploration.
At the helm of Barrick and great one and the geologist for that matter who's been out to see the site.
On <unk>.
I think that we're going to be able to have.
<unk> to be able to show that we're really just scratching the surface in terms of the potential at donlin.
We call it the new Nevada, with a new Carlin and.
And.
To be able to be a 50% owner.
And with a great company like bad correct on the new Nevada.
And is an enormous privilege some people obviously.
We will choose to get that exposure to barrick.
They're big they're diversified extremely well managed.
Others will choose to be able to have a pure play on.
On.
Donlin is the next Nevada and in a safe place that is the second largest gold producer in the United States After Nevada and.
And then there will be others I hope.
Who will see the opportunity and want to own a piece of both companies because the leverage to gold and a place where you can keep it.
Simply extraordinary there on.
And that many.
Gold discoveries of 6 million ounces.
Over the last few years.
And we have 6 million ounces that can inferred adjacent to the pit.
On this thing has got.
Real octane going for it and as someone.
Who's made his money through the drill bit and surrounded himself with some of the greatest geologists and the world.
One of them and act was the one who said he thought the next donlin would be at Donlin.
And.
We're extremely happy with what the future holds for us and this district.
Net.
In terms of gold itself.
Having been cold Gold's evangelists on many occasions and I see no reason to change our outlook to the contrary.
Comments, which might have raised eyebrows, a couple of years ago about the inevitability of the revaluation of gold no longer do I'm using the quotation of Mohammed El <unk> as they are a very good example of this because I know Mohammed and in addition to being really really fine.
Men.
He is not by any stretch of the imagination.
Someone given to them.
Unfounded.
And then he is a very thoughtful person and speaks only after he is really felt some come through and I think he's right gold is evolving into a must have asset investors went from treating gold as a short term momentum trade and if they were willing to invest and gold at all.
<unk> of course to seeing it more as a legitimate standalone option and long term portfolios well, if he's right and I do believe he is the reality is there just isn't enough gold to go around if you would to get even a 1% allocation.
And by family offices and institutions into gold.
And for its value as the stores.
Value and other.
The fact that debt.
We hold dear.
Net.
Over the past year, or so I've pointed out that it's no longer the case that if you were to go on CNBC for example, and say that Youre constructive on gold that people will throw things that you're either literally or figuratively and.
You can talk about gold constructively and really have a conversation.
That is a prerequisite for a long term enduring bull market, we are nowhere near.
Gold being a.
Yes.
And investment that is a crowded trade not remotely.
We are in and investment, which is attractive and smart money and some smart money observations.
I'd like to mention a few quotes that we've added to.
To this grouping over the last while.
And here's Ray Deleo.
And Ray has been.
Instructive on gold for quite a while now around the time of the bottomed and started to speak about it.
More openly and a world of ongoing pressure for policymakers across the globe to print and spend zero interest rates tectonic shift and where global power lives by the way that's a nice very elegant code word for the rise of China.
And conflict gold has a unique role in protecting portfolios. It's wise to hold some of what central banks can't create more of I would add that it's wise to hold on something that central Bank do regard as a currency.
Even if it is demonetize.
They're comfortable with it and of course central banks have been adding to their gold reserves, we had a phenomenal.
In fact, several weeks ago, where Russia was revealed to have more gold and its reserves then.
On.
Treasuries this is extraordinary.
Zero doubt that the Chinese are also working very possibly income suite with the Russians on ways to be able to use gold too.
Chip away at.
And the dollar as being the world's reserves currency.
And then more sanguine that theyre going to be able to do that over the passage of time from.
Many years ago.
And long ago long dollar.
I would say what China.
China is internationalize and the renminbi and China is also the largest producer of gold they have a vested interest and gold remaining interesting as does Russia, which now has overtaken Australia is the second largest producer of gold.
I'd like to highlight a comment by the man, who I regard as the Dean of gold mining investment John Hathaway.
Who said recently, a cursory inspection of the U S fiscal situation and suggest that the U S dollar deserves to rank high on the endangered species list.
Beautiful turn of phrase we believe that now is the time to start layering in gold exposure not when the rest of the world tries to do so.
Very right there will come a time when the asset that people adhere to for love to hate and hate to love will become extremely sought after any of you want to see what could happen to gold and watch some of the on.
Believable anomalies that are taking place in and.
The U S stock market today, and truth I think that what we're seeing is a global phenomenon and I think it points to a very very bullish sign.
Scenario with regard to the revaluation.
Of bold and I would also say silver.
Okay.
I meant by Paul singer.
Also from the past year. This is a perfect environment for gold to take center stage, he wrote and spot gold traded.
And at around and today's prices little bit less fair value to the metal to fund believes gold is literally where should be literally multiples of its current price I agree with him.
Next slide please.
Yeah.
For all of the reasons, which I've cited that make knowable so attractive.
The truth is that if you just look at what's going on from a macro and micro standpoint.
And we're dealing with a perfect storm for gold.
As an asset diversify or you really have to own it the safe Haven, and appeal makes more sense than ever before.
Currency debasement.
And which obviously has been used as the.
The primary factor for those who are bullish on bitcoin.
And is now a global phenomenon the central bank purchasing means that central banks will be competing with private investors.
And for that gold, which can be acquired at certain levels gold provide inflation deflation protection and emerging market demand and our view.
It's only going to go up Meanwhile, for the reasons I cited dwindling recovery rates inadequate exploration decreasing ore grades rising production costs jurisdictional risk, which mean that mine that people thought might come on line probably won't all of these supply pressures.
And which are leading to a decrease and mine supply at a time when you have demand drivers, arguing for higher prices. This.
This is a beautiful picture next.
Okay.
Perhaps it's not surprising that with all of the attributes that we.
We have going for us at Donlin.
Our institutional shareholder.
Support.
<unk> has been excellent management has been increasing its share ownership and the company our 10 largest shareholders. Some of the smartest money in the world represent 62 plus percent of shares issued and outstanding net number may actually be higher now, but we will.
C.
Meanwhile, our named Executive officers share ownership has increased to $2 7 million shares since joining the company <unk>.
Obviously my family holding company, which is my family plus some employee capital and.
And the capital of two of the world's largest sovereign wealth funds as well as a very large prominent.
Private family office.
As the largest shareholder.
And then followed by Fidelity, John Paulson, Paulson and company Blackrock and now.
On the Saudi public investment fund.
Extremely proud that at a time when and Saudi Arabia.
Was monetizing it.
Profit from having invested.
Greenlee astutely.
During the crash earlier last year.
And we were the only.
Stock in the third quarter.
They were actually revealing holdings Corp.
And we welcome the public investment fund.
And look forward to having a wonderful alliance with them going forward, but.
But when we look at our other shareholders Van Eck first Eagle, who are to our minds and one of the smartest investors in the gold mining space Vanguard ex or on morale Jets, Joan in Europe broad asset management.
It's a great shareholder base and we are very proud.
To be serving you and I'm often called the owner who lives above the store.
And I am.
And I'm very glad to be a servant.
To such great Smart and loyal shareholders next.
So summarizing the Nova Gold story Donlin is a tier one asset and a tier one jurisdiction and we are a pure play on this new Nevada. The asset we believe in terms of the degradation of superlatives.
<unk> is unique.
And with very strong investor friendly attributes you, even just heard the chairman referred to himself and.
As a servant of the shareholders and that's because that's the way I view myself, that's the way management views stem cells.
We believe that we're one of the most transparent and signaling our strategy in the gold mining space. We believe that we have delivered on all of our promises.
In the eight years.
And and <unk> nine years almost and.
Greg Lang, and I became CEO and chairman, respectively. So here the attributes the size enormous degrade extraordinary the exploration potential.
We believe the best in the gold space certainly in a jurisdiction, where you can sleep easily at night and indeed, Alaska is a premier mining jurisdiction with respect for socially and environmentally responsible mine development our partners from native corporations really couldnt be.
Greater and more supportive of what we're all trying to do and of course Barrick.
<unk> enjoys many many superlatives and its own right.
And our leverage is enormous.
Just with the existing endowment.
We believe that it's worth tens of billions of dollars and half of which is to our credit and half of which donlin, we have a balance sheet with $122 million.
When you take into accounts and notes receivable.
Including $75 million in the third quarter that we expect from Newmont and we're going to be one of the only gold mining companies.
With a stronger balance sheet at the end of the year than where we started without having to have had recourse to shareholders.
Our key federal and state permits are in place.
The management and board have a successful track record building and operating mines.
And to our shareholders I can't thank you enough.
The French have and expression gratitude as the memory of the heart.
And you certainly all have mine and Greg.
And all of the board and management.
For your steadfastness.
Thank you.
We will now begin.
Right.
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 acknowledging your request. If you are using a speakerphone. Please pick up your handset before pressing any keys to withdraw. Your question. Please press Star then two we will pause for a moment as callers join.
Q.
Our first question comes from David Losinski, a private Investor. Please go ahead.
Good morning, gentlemen.
Before I start and other questions I had.
Just wanted to take note that the.
The S.
And so V.
And what's normally trades, let's the silver Etfs and.
Normally trades about 26 million shares.
A day.
Well it traded 53 million shares.
And 45 minutes this morning, which means.
And it's ready crowd.
Obviously the.
And the share position with J P Morgan on silver and gold.
And we all know debt.
The Comex has been dictating the price of the G. L D and the asphalt for 30 years.
Now if the S. O V is a cumulated I'd be the first time in history that the comex was going to have to follow the ETF.
So we reverse roles and I find that and expanding and interesting.
And because of stuff like this that's happening and the changes that are happening I.
I think golf going on and a lot higher and.
And I also would love to see Mark Grizzly on Jeff.
We're going to start.
On foundation construction or anything to start getting ready because it's coming from them.
And really anxious to see this mine.
From construction start.
Now the other question I had was is it Wendy and going on.
At the Dol and gold mine and so a lot of win because I was thinking about the possibility of windmills for energy.
I was up and Florida.
Yeah, I'll take that question first.
First off thank you for joining our call this volume.
Over the years, we have looked at.
Different energy sources, including wind and we found net and I think the case is still true with current gas prices.
Natural gas is the most cost effective means of generating power at the Donlin site.
I think as we move into updating our feasibility study and it's always appropriate to revisit and challenge any of the earlier assumptions and I think we will do the same with wind and other energy sources as you noted.
Okay.
The.
The one.
Caveat to starting some semblance of construction and this is mark Bristow and what's been said youre stuck with jump I would say foggy talks and a day on that.
Just just just that simple statement.
And the other thing is.
I want to point out you know theres a lot of talk about Brentwood too.
Meda and bulk crystal and the guard.
And.
If something like that was going to take place and all the G. 20 leaders were sitting around on the table I think the first question I ask would be what other gold holdings and I think I've got caught China finally disclose that day.
25.
<unk> thousand tons, 20, 25000 tons and instead of 1900 tonnes like the publicly say.
And that'll be the time that.
It will come out.
I thought I'd just start with a Chinese for 40 years, and I know, how they buy and sell.
Sell them product and in doing so so actually what's pay per well sell them.
And they are the market when they when they come in and buy.
For a period of time and drive the price up and they back away to drive the costs down and then they come back in and when pricing power and it doesn't and same thing with golf and they're not going to announce their holdings.
And if they were announced today.
20000 tons go and build a thousand bucks today.
It's just crazy, what's going on but.
I'm just just.
So anxious to see this project and loose.
Of course and from that guidance.
Let's get going on.
Anyway, that's about all and thank you you have any comment.
Thank you very much David for your store, which supports.
And I think it's fair to say that we're all on the same page about what we're going to see happening.
And the gold market.
The silver market indeed.
And also at Donlin.
And when.
Time comes and we're obviously moving in the right direction.
And the geology is allowing us to be able to say hand on heart Donlin is clearly a gift that keeps on giving.
And I think it will be and the right place.
Exactly the right time.
Thank you David.
Moving to the next call and we really need to move on we really need to move on and I don't want to lose people, but I'm certainly happy to answer any additional questions. You have when there are no more questions. If that's okay with you.
Once again, if you have a question. Please press Star then one our next question comes from Lucas pipes of B Riley FBR Securities.
Hey, good day everybody.
Thanks for taking my question.
I have a few for Greg and one for Tom and.
First Greg.
You had additional drill results out recently can you can you maybe just kind.
And kind of give us your quick impressions from this latest batch and then what.
And we look forward to in terms of the timeline from here too.
<unk> mine plan and such so that.
Okay.
Some of the earlier comments regarding development.
You know that.
We can tick tick those boxes. So really appreciate your thoughts and color on this thank you.
Okay.
Sure Lucas and thank you for joining our call. This morning.
Drill results.
And I am very pleased with them whenever you.
Embark on a drill program and your take on and element of risk and I would say.
Across the board.
Encountered.
Great thicknesses that exceed what we expected and the model and that's always a very comforting feeling and.
Across the board and we're seeing slightly and are.
And our intervals, but it's significantly higher grades and certainly will will take the grade any day. So we're really pleased with the results we've gotten to date.
And we never take those kind of results for granted and Murray.
You should have.
And the last of the assays and and the next month or so and look forward to.
Providing an update that.
For the next year.
And our assay turnaround has been slow this year because of Covid, but will be as we get the assays and we update the model and once all that drove our results are and will work with Barrick to.
Update our understanding of the impact on the resources and reserves.
This drill program attack, so that will take us well into the second quarter of this year and I think that's true.
At the time were and I think we're going to have a small follow up program to and somebody.
Some of these really intriguing intercepts of 10% and 20 grams that are somewhat unexpected we're going to do a little bit of follow up drilling on those and I think that should wrap up all of the drilling the owners feel we need to prepare and modeled it.
Worthy to take forward with an updated version of the feasibility study.
And the second half I think we'll be working with our partner too.
And conclude the last and the tradeoff studies, we need and I look forward to updating everybody as those studies are completed.
Yeah, and Spider to cover and I think we will have some pretty good news from key milestones coming out.
Throughout the first half of this year.
Terrific terrific very helpful. Appreciate that additional color on and look forward to all of that.
Tommy.
And your comment commented a little bit on.
And what we're seeing and the market more broadly I think you call that.
A global event or.
And so it's not something along those lines, but can you.
You've seen a lot of cycles, you've seen a lot of interesting markets.
And made a lot of money.
Anticipating.
And on.
Unusual events, and clearly where we're and some some.
Unchartered territory here, so wondering if you could maybe.
Elaborate on on what you're seeing here and what this might be a symptom often and.
And you touched on what this might mean for silver and gold and and just wanted to ask.
Ask you if you could share a few more thoughts on that thank you.
Yeah.
Well you.
You know me.
And I could I.
And I could dwell on this for a long time suffice to say that Europe.
You're pretty much spot on when you said, we're in unchartered waters.
Ara incognita.
But not only.
In terms of obviously, the health crisis, which could develop and many many different ways. If it becomes endemic.
The social displacement.
Particularly in the west.
The development.
Development of January six and I think one day will be seen as being as important in terms of its implications for.
Americas power and therefore.
The ryzen power of other countries and it's expense as December 7th was and a different way.
We have.
And the situation, where the Chinese are the only country, which has come out of 2020 actually growing.
And you.
You actually heard me say once before when you ask me to predict a scenario that wasn't on the horizon, but from a historical standpoint and.
And I mentioned that people forget that the great depression.
And the political and military consequences of that.
Actually pretty much began and $19 29, with the American stock market crash.
But lo and behold.
A decade and a half later America itself emerged as the global hedge them on as a consequence of something that started in the United States now.
Americans do this intentionally horseman.
Well.
My thought was that we were going to see and economic crisis come out of China.
That would.
Have a cascade effect on the west.
And because the Chinese and has any great power rising.
Going to have multiple boom bust cycles, which they can survive politically.
On the Chinese would emerge actually stronger from it, whereas the west which as we can see.
Has a very fragile.
Political system at the moment.
And would be weaker and I use the 19 and 29 1945 analogy of the United States, So whether or not and you believe the Chinese get any of this by volition and I don't on a conspiracy theorist.
When you look at who benefits from it.
Theyre benefiting from this displacement that was caused as a result of some really really really.
And.
Poorly chosen dietary habits with regards to bat and Penguins.
And there are emerging as a as.
The winter to the extent that you can actually use that expression and such a horrible year.
But we're just looking at it analytically.
I did state as far weaker.
And now than it was four years ago.
And so as Britain.
France is muddling its way through.
But you have China stronger.
You have Russia.
Russia, which has been pushing at the periphery.
Turkey.
Iran.
It's a very dangerous world and.
And normally I'd like to be long accidents, but I don't like to be long crises and the opportunity for curious prices to emerge extremely quickly and many many different parts of the world from the South China Sea to the Baltic.
You have a war taking place in the middle East already.
The Israelis and the Iranians.
Thousands of.
Is there and these sorties against uranium and Syria, and Iraq and taken place. That's award this work going on and Yemen.
Between Saudi Arabia, and effectively and are running and proxy.
You have a lot of wars going on.
And the prospect for escalation is there now I'm not saying that that's the reason to own goals I've never been a believer that.
You have to own gold as catastrophe insurance.
Believer in economics, 101, and the truth is that if you superimpose the multiplicity of black Swans that exist economically geopolitically militarily on too.
The incredible.
Incredible disequilibrium between supply and demand the mining industry and jurisdictional risk.
You really are looking at and accident that's already happened.
It's and.
And implosion of the industry in certain respects, which is very bullish for gold and bullish for those companies that can profit from these factors it's happening in plain sight.
And so you really.
And.
You want to be long, great assets and safe places, but.
It's not the most important thing we have kids, we have people that we love and the world is a far more dangerous place now than it was before.
And.
I do not see.
Anything on the horizon.
Which is going to reverse that trend.
And I.
Really appreciate your thoughts.
Very insightful I did I did I answer your question fully Lucas.
Yes, yes.
And as such.
As you said at the outset this is something.
Net.
We we could discuss for many hours, but I really appreciate your thoughts and.
And.
Okay.
It's a it's uncharted waters and I really appreciate your <unk>.
<unk> seen this and you have.
Studied history and so your perspective is and valuable.
Well, if I would leave you with this I would say that.
You know obviously there are lots of questions about where the dollar will go I made a number of comments about what I think the Chinese are thinking and.
And.
If I were they I would be doing the same.
The world's powers and important thing, China is not and emerging country. Its a country that submerged for a brief period and is coming back.
You see on pro American.
And.
I'm not someone who is looking at the Chinese model, and saying that you'd be emulated, but I also just have to be very objective.
They have a model.
They are a larger trading partner to more countries than the United States.
They've certainly exercise.
And not just because they are intelligent and hardworking.
But they are competent.
More competent and we appear to have been in a crisis and I think they are taking note of that I think the Russians are taking note of all of this and I don't see and and insight pivoting now to the economics.
Fear I don't see and and insights to money printing I think that the concept of money itself is being reevaluated.
And one of our previous caller, David referred to a second Bretton Woods.
People forget that John Maynard Keynes sexually share we have to income goals Bretton woods, because whatever I may think of it and people do see it a store of value and it has a place and the global financial system and I do believe that the Chinese already on more gold officially than the United States. They just haven't.
Revealed it.
And.
And I do believe that they have a vested interest and a rising gold price as do the Russians and.
And that both of them.
Have designs on dollar hegemony because dollar hegemony is.
Crucial to America's ability to.
To be able to project power.
Power is not simply aircraft carriers by the way, Inc, and probably now these days.
But power is economic and the shift to the east is palpable.
And if anything we're seeing it accelerated not just the rise or the ascendancy of China.
The decline in absolute terms of the United States.
That's a challenge that is a challenge it can be reversed.
It requires a lot of civic virtue, which.
Something may trigger on.
Unfortunately, those kinds of things that usually triggered by.
Dire consequences up until December 7th $19 41, and the vast majority of the American public did not want to get involved in the second World War.
So the greatest generation and begin the greatest generation because Pearl Harbor.
I hope that we do not see such a thing happening.
But.
Unfortunately this is.
This is the way of the world and.
And if I'm right, then China is with Dean Martin and use to save Frank Sinatra, He used to say and Frank's World, We're just living and it well. Unfortunately I think that's.
And what's happening.
Now on the geopolitical stage and.
And.
And should count our blessings suffice to say.
By the way you know me you know that I'm, not a pessimist by nature and the only someone known was optimistic positive and.
If anything irrationally exuberant wood.
I would look at the 1000 to one odds are 10000 to one odds for a drill program and shape that is.
All they got.
So I don't.
I'm not I'm, not someone who shies away from those things I don't.
I don't own gold because of any of those factors island gold because.
And then not finding more and they're burning through reserves and the greatest collapsing.
And so.
That's good enough for me, but and somebody who is trying to prepare.
And for my children and future.
I'm watching what's going on around the world.
Very very closely and I think that people, who should not be complacent.
They better think about.
The world is going to look like what money is going to look like obviously, that's not the most important thing most important thing to teach your kids as ethics and honor.
And doing so in a world which is transactional.
That to me is the most most disturbing aspect of the unchartered waters and which sailing.
Thank you very much com and really really appreciate and thank you Lucas.
Take care and take care and feel free to reach out anytime you on if you want to if you want to continue this you might you might bring a bourbon with you. However by the time I'm done.
Okay.
This concludes the question and answer session I would like to turn the conference back over to Greg Lang for any closing remarks.
Okay.
Well everyone. Thank you for joining our call. This morning, and we look forward to updating you on our progress and are coming months Stacey. Thank.
Thank you.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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