Q1 2021 NovaGold Resources Inc Earnings Call
Thank you for standing by this is the conference operator, welcome to the Nova Cold first quarter 2021 financial results conference call and webcast.
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Zero I would now like to turn the conference over to Melanie Hennessey, Vice President Corporate Communications. Please go ahead.
Thank you all.
Good morning, everyone.
And all the Gulf one from the workforce.
Quarter financial result, and current update.
Hello.
On today's call we have.
Well the growth chairman and.
Greg Lang, <unk>, President and CEO, and David Ottawa level, Vice President and CFO.
And at the end of the webcast and well take questions both by phone and by plant.
I would like to Illinois, and their webcast from all parts of.
I'll speak about five three.
Statements made today may contain forward looking information.
And as a result with a lot less the cash.
Okay.
And our final and forward looking disclaimers included.
Okay.
And now have the pleasure of moving onto the presentations, our president and CEO Greg.
Correct.
Thank you Melanie and good morning, everyone.
Our Donlin Gold project is in the western part.
And with Alaska as shown on slide four.
The online is a 50 50 partnership.
With Barrick gold.
Finally, he has always been and important part of the Alaskan economy.
And it is becoming even more important to state revenues with the decline in oil prices and tourism.
As shown on the map there.
And there are six producing mines and numerous exploration and development projects and the state.
In terms of scale quality and exploration potential.
And gold attribute far exceed any other goals.
And development project on the horizon.
When combined with our long standing Native Corporation partnership.
Exponential leverage to rising gold.
Strong cash position.
Key federal and state permits in hand and and.
And experienced management team and board.
And as well as supportive long term shareholders, Nova goal is and illegal Bureau.
Slide five.
Highlights the 2021 achievement.
Nova Gold and Barrick jointly released.
Leased the remaining assay drill results in March from the 85 hole program, we completed last year.
Which yielded higher drilled grade thicknesses and predicted by previous modeling and the hedge improved interpretation of gold mineralization.
<unk> and controls.
These results has bolstered our confidence and the recent geologic modeling concept.
And confirmed multiple high grade extension.
And both the interest share and sentimentality racks and very.
Accordingly.
Many of this near surface.
For permitting and November 'twenty, and 'twenty, Alaska published an edition and National public notice comment period for the water rights applications or the mine site and transportation per show.
This closed in December.
2020.
Water rights or for local surface water sources and groundwater to be used for processed water dust.
Fire control and other mining activities and.
And March 'twenty, 'twenty, one where donlin Gold's support Alaska introduced our second public notice period, which closed.
On March 26.
We anticipate the department of natural resources will issue final decision on the water rates applications and the first half 2021.
Donlin gold working with its native partners continues to support the state of Alaska.
And to advance other permits and certificates needed for the project.
Yes.
Okay.
The image on slide six shows the top.
And intervals from the 2020 drill program with core hole locations and both the.
<unk> and Lewis deposits.
With Barrick, we jointly issued the final set of assay results last week.
The program totaled over 23000 meters and successfully increased our confidence and the modeling concept.
And was the largest program at Donlin.
And for 12 years.
Results exceeded the.
Expectations with higher grades over narrower intervals, primarily and the sedimentary rocks.
The program has improved our geologic interpretations.
Additional confirmation and high.
And your extension drilling our plan for 2020 one.
To further test the ore body continuity structural controls and gathered geotechnical and geologic geo metallurgical data for analysis.
Okay.
High growth on slide seven federal permits are in hand, and additional key state permits and approvals have also been obtained while we continue to progress on the remaining state permits.
There are three primary state permitting out areas that are outstanding and none of which are on.
It's now called path for the projects development.
The division of oil and gas has reconsidered its decision for the state right away agreement and lease authorization for the gas pipeline.
Under the reconsideration, Alaska issued a revised.
The critic comment document for additional public input.
The document further describes how Alaska is considering previous public input that we're soliciting and the ride away review, primarily on how cumulative impacts are addressed and that decision.
The comment period ended.
Remember 2020, and we expect Alaska to reissue the ride away agreement and leash authorizations and the first half of 2021.
Additionally.
Alaska published.
And initial notice period for comments on the water right applications and transfer.
And novation facilities.
Water rights are key for the mining activities.
<unk> introduced a second public notice period, which closed last week, we anticipate they will issue final decisions on the water rate applications and the first half of 2021.
The dam safety certifications process is a multiyear commitment to gather additional geologic information to advance the final engineering work on the tailings facilities and water retention structures from a feasibility level to a final construction package, which is required.
Wired for the projects dam safety certifications.
This field work will resume.
Later this year.
We are proud to say that the 2020 drill program was safely and successfully completed and and.
This achieved.
Was done with no Covid cases at the project site.
And <unk>.
For the past year.
[noise] policies were implemented to reduce risk and ensure the safety and wellbeing of all employees and contractors.
Alaska is a leader.
<unk> and states and COVID-19 vaccine Asian availability with Governor Dan Levy announcing earlier in March that vaccinations are now available to everyone and 16 and older.
Much of the success from the vaccination program.
And the y K.
Region can be credited and a large part and the leadership of the Yukon Kuskokwim Health Corporation.
And native Health partners, who made home visits and remote unities use the extensive medical clinics and even offered vaccinations outside of grocery stores.
Donlin gold stringent safety measures and on the ground support allowed us to safely operate four rigs last summer.
The program with careful collaboration with our native partners as well as travel groups and the Y K region were key to a successful field season.
<unk> protocol, we established last year will be followed for the 2021 field season.
Final and gold is committed to support the needs of community partners and first quarter community engagement highlights can be seen on slide nine.
And partnership with Teekay C and <unk>.
Village of Crooked Creek.
And then and pioneer tribe Donlin was again the lead sponsor of our project to construct and maintain the upper sections of and ice road on the Kuskokwim River.
Don and also provided technical data to exist.
The road builder, including aerial photographs and ice measurements.
It improves safety and access to nearby communities for the residents and these remote locations.
And its completion and February the.
The ice road was almost 200 miles long.
And January.
The village of <unk> water purification Plaid was destroyed by fire, creating a health and safety crisis for the community.
Donlin worked closely with their driver administrator and tribal Council.
To assess how dominant to best help.
And coordinated efforts.
Donlin is relative several other community organizations and companies stepped in to assist with much needed water and supplies.
To date Donlin has signed friendship agreements with six villages and the Y K region that formalized the current.
And engagement practices with local communities.
These agreements expand upon our long term relations already well established with these communities and address specific community needs such as water Shaw.
Sure landfill projects as well as other social.
Programs.
We support our native partners, Calista, and <unk> and their mandates established through the 1971 and Alaska Native claims Act.
As highlighted on slide 10.
We are helping them develop their land from the economic benefit of the region and all of their stakeholders.
Donlin is fortunate to have time tested partnerships with tourists and teekay see the owners of the mineral and surface rights.
The project's location on private land.
Specifically designated for mining activities is a key attribute that distinguish it from other mining assets and Alaska.
With a long history of mining and a skilled workforce and Alaska.
Donlin gold offers the opportunity of our future with good paying year round.
Round jobs.
And training for young people.
And they can move closer to home.
About 80% of our local workforce from the drill program, where Alaska natives and we're proud to provide significant economic and social benefits to the Y K region.
And are thankful for the long term support and commitment to the project and.
And its continued success.
Over the past 25 years Donlin gold has worked closely with tourists and PKC along with other.
Percentage of communities to effectively respond to their needs and concerns.
On Slide 11, you can see quotes from the leadership of our Native Corporation partners.
These partnerships.
And the activities and programs and we undertake together.
Our investor day of our commitment to the sustainable and responsible development of the Donlin Gold project for the benefit of all stakeholders.
And with that I'll turn the call over to our Chief Financial Officer, David Ottawa.
Dave.
Representing to you Greg.
Slide 12 highlights our first quarter operating performance.
We reported a net loss of $8 million and increase of $1 4 million from the prior year quarter, primarily due to higher G&A expense and completion of assets from the 2020 drill program at Donlin.
Lower interest rates led to lower interest income earned on cash and term deposits and.
And lower interest expense incurred on the Barrick note.
First quarter cash flows are highlighted on slide 13.
We spent $7 $7 million and the first quarter slightly lower and the prior year quarter.
Higher G&A spending and dominant funding was offset by a reduction and withholding taxes paid on vested psus.
The company elected to not pay the withholding taxes and shares issued to the CEO and CFO to conserve cash.
On slide 14.
We note a robust treasury.
We ended the first quarter with cash and term deposits of $114 2 million.
And we also have $75 million due from newmont.
In July this year, and an additional $25 million and July 2023.
We continue to anticipate spending.
And 31% to $35 million, and 2021, including 18 and $22 million to fund our share and dominance and.
$13 million per our corporate G&A costs.
And with that I'll turn the call back over to Greg.
Thank you Dave.
As shown on the chart on slide 15.
When you look at the resources at Donlin compared with 15 other large gold projects from the Americas.
Donlin is the largest and its category with the reserves that is almost four times greater.
And then the average.
And federally permitted project, Scott almost 40 million ounces of gold just to begin with.
And a jurisdiction where the rule of law is not and novelty is almost unheard of.
Great stands out.
And as another central characteristic of any mineral deposit.
Deposit with higher grades provides resilience through multiple commodity cycles, a key attribute to ensure the successful development of any great mining operation.
As shown on slide 16 at two and a quarter grams Donlin has twice the global average grade for large open pit deposits.
Not only is global gold production decreasing for most of the majors.
For the average grades continue decline.
Over the past decade.
There are only a few mines and the world.
That produced greater than 1 million ounces.
And 2020.
Donlin would be and rare company as currently envisioned the project would average.
$1 1 million ounces per year over its entire life as shown on slide 17.
For the long term investor there is additional value that comes from my mind with a multiple decade lifespan.
Looking at other comparable mining operations around the globe, both and production and then development Donlin would rank among the top operations that we're producing today.
Slide 18.
Some of the largest producing mines globally.
And the largest development stage projects.
Only one development project is both global scale.
And a desirable mining jurisdiction.
And only a few operations produced 1 million ounces further illustrating that projects like donlin are scarce.
And are needed to replenish the industry's diminishing reserves.
As shown on slide 19.
Acme and Louis Pips occupy only three kilometers of an eight kilometer mineralized belt.
When the time.
And right based on the known areas of mineralization, there is future exploration potential to significantly expand the current resource along strike and at depth.
Slide 28 represents.
And the life of mine diagram for a project like Donlin is one of the largest open pit development projects.
After years of exploration and resource enhancement technical studies environmental studies.
And the receipt of our federal record of decision and key state permits.
Donlin gold has been substantially de risked and methodically and carefully brought up the value chain.
The solid foundation from which to advance this unique deposit.
The time upfront.
Invested to develop and respond.
Assembly sustainably move forward is critical to the project's success.
And I believe investors patience will be rewarded.
And 2021, we will integrate.
The drill program results and in the.
Response model.
We will undertake additional confirmation and extension drilling to expand upon the recently obtained information and to the continuity and structural controls of the higher grade mineralization that we encountered.
We will then shift our focus.
<unk> working with our partner to update the feasibility study subject to formal approval by the Donlin Gold Board.
No for gold is thankful for their continued support and engagement with our shareholders and.
Clearly paulson.
And company for.
Modality Blackrock.
New shareholders decided public investment fund first Eagle XOR and van <unk> as noted on slide 21.
This is especially noteworthy during a global pandemic the.
The strong relationships that.
We enjoy with every from everyone from our retail shareholders.
Our institutional shareholders.
Has been deepened and we are greatly appreciative.
In summary.
<unk>, 50% ownership at Donlin.
Tier one asset.
Tier one jurisdiction and a pure gold play on a unique project debt.
We believe when seen for its rare comp information of the attributes in terms of size grade potential and partnerships.
Win win scenario.
For all of our stakeholders.
Additionally, as a transparent company that has consistently delivered on its strategy with a strong treasury and getting stronger with additional funds from Newmont and July.
We will provide sufficient funding.
And till we.
As a construction decision on donlin.
Our key federal permits and state permits are in place and advancing and we have a successful record of building and operating large mines.
Thank you for your attention today, operator, we will now.
And make open it up for questions from the attendees.
Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad and you will hear a tone acknowledging your request.
If you are using a speakerphone please pick up your handset before pressing.
To withdraw your question. Please press Star then two we will pause for a moment as callers join the queue.
Our first question comes from Lucas pipes of B Riley Securities. Please go ahead.
Hey, good morning, everyone.
And he keeps.
But I wanted to ask a little bit more about and updated.
Feasibility study and specifically would it be possible at this point here too.
Provide.
Maybe some color around timing and and then from there to have maybe one.
I'll follow up thank you.
Alright, and then Lucas good morning, and thank you for joining our call.
Yes.
Timing over the next few months, we will be obviously, incorporating the assays into our geologic model and we're planning a.
One or two more follow up program and some of the real high grade zones, we encountered where channel frankly.
Exceptional results share will be conducting the drill program and the next few months Youre at the same time, we will be reviewing many aspects of the project with our partner from tailings management.
Small sheets water controls and so on so this technical work will provide the basis for the owners to lay out the criteria of the projects that we are taking forward in terms of scale throughput and share.
Sure So that's going to work per.
And the tradeoff studies will take us through.
Flow September at which time, we would.
And make the decision to embark on a new feasibility study and Thats a process that we think will take about a year.
Very very helpful.
And I really appreciate that debt.
<unk> and then.
And two maybe its a.
A bit premature.
And you touched on it.
A little bit just now, but but in terms of debt.
The key points that would be revisit it and and and updated feasibility study and what would you say.
The market be looking for some from.
And really key updates.
And you.
Hi, Thank you.
The real key update that we'll be providing.
When we embark on the feasibility study is the general approach to the project.
As most people are aware, we've been evaluating various staged.
And we have meant scenarios to reduce the upfront capital growth so far.
Part of the day studies that will be undertaking and the next few months as the geologic models are updated is what is the final throughput that we want to target for stage, one and other significant parts of the project and the <unk>.
<unk> pipeline.
<unk> line third party participation and so on so we wanted to get all of those.
Issues really laid to rest and then we will embark on a new study.
That's very helpful.
Greg and team are really appreciate all the detail a continued best of luck I'll turn it over.
Pipeline alright, Thank you Lucas.
Our next question comes from John Tumazos of John Tumazos, very independent research. Please go ahead.
Thank you very much.
When will the 2020 drill program.
Be completed and all of the results and.
And.
Are the results and.
Interesting enough.
And that there might be and additional drill program to follow up on those results.
Prior to the updated.
Feasibility study.
Alright.
Good morning, John.
Working with Barrick, we have released all of the assay results from the 85 holes that we completed last year.
And so I'm really really compelling.
Results from <unk>.
You'll note and our results we had areas and are 10, plus grams that came in from three meters below the surface. So a lot of the work that we're planning. This year is obviously to follow up on those near surface high grade intervals.
Would be mined early and the projects.
So that will be the big focus of the program and I would.
Last year, we drilled 85 holes I don't think it will be that extensive of a program. This year.
Working with debt to finalize the drill hall locations and were.
<unk> to start sometime later in April and we've got.
GAAP camp open now and we are mobilizing.
Food and supplies raid and drilling.
Do you think that the priority on and updating the feasibility study is such that even if you get some great new results there won't be.
Sir.
Third drill campaign and Youll, just stopped and do the feasibility study or is it too early to make that call.
John and I think.
The program the drilling and we did last year, which were towards the most extensive and over 12 years and the drilling that we're contemplating this year I think that.
We will conclude the drill programs in and around the ackman and Lewis deposits and that will position us into.
Yes, moving forward with a new feasibility study and then.
It'll be additional drilling required such as Jyoti.
And the geotechnical drilling hydrological water warehouse and and so on.
But drilling to define the ore body I expect that to be largely wrapped up this season.
Thank you and good luck.
Thank you John.
We have a question and by far.
And I will.
Moving out.
Yes.
Non of gathering a bottom and what move and latest.
And what's available.
Okay.
Okay.
And I think that's.
There has been a lot of drilling at donlin over the years I think we're now approaching.
From 500 holes, primarily core holes.
And the new results go back a few years to our appreciation that as we looked at this stage development with smaller equipment.
<unk>.
Advanced the hypothesis with the higher grade intrusive structures, which.
Kerry.
The lion's share of the gold that these structures were thick enough and continuous enough to be mined separately.
So that the.
The goal of this program is to have a smaller higher grade project and the initial stage and correlation.
Still the results and our multiple intercepts of 10, plus grams $30 40 grams.
And good thick intervals is really support our view that we can separately mine the high grade and enhanced the mill feed and have a smaller project with still a very significant production profile.
Some of them.
Once again, if you have a question. Please press Star then one.
Our next question comes from David Lesinski, a private Investor. Please go ahead.
Good morning, gentlemen, and ladies.
Just a couple of questions.
The debt.
The fact that the drilling has been completed for 2020 debt.
And our assay program.
Do you expect to raise.
Proven reserves as a result.
Of that drilling.
Yeah.
Hi, David.
You know clearly the results exceeded our expectations and we're incorporating the data into the geologic model.
And I never like to get ahead of and a modeling efforts and let the work speak for itself.
I'm very positive.
And the outcome of this.
Really based on net.
Across the board, we encountered higher grade, although thinner higher grade intervals.
And for an overall increase and the great thickness of the what we had previously modeled.
Currently a very positive how how much of that.
<unk> ultimately into reserves, we don't know and that's why we're doing the update but yes, certainly some share.
Great results that can only help our understanding of the ore body.
And the final question and so if any of the royalty trust.
<unk> shown interest and.
<unk> financing and a few true like Franco, Nevada, or silver Wheaton and companies like that.
Certainly a lot of.
There is interest.
The streaming and royalty companies and they follow our activities I think we are.
Focus right now is wrapping up the new geological model and.
Proceeding with.
The feasibility study as far as financing options. There there are many out there to be considered a streaming is on the list.
Personal preferences do as much of.
And our financing as we can with debt or other.
Non open ended instruments.
The Big focus right now is the feasibility study and will as we get further advanced with that we will turn our attention to the financing options.
Well, just just a personal opinion and I think that the longer you wait the better off.
The five day in terms of royalty trust because.
I'm anticipating by the end of the year 2500.
Colored robe and by the end of next year, a 3000 dollar growth. So just.
Just my personal opinion and.
Thank you.
For answering my questions.
We are also.
<unk> yogurt.
I share your view and we are bullish on the growth price ourselves.
This concludes the question and answer session I would like to turn the conference back over to Greg Lang for any closing remarks.
Hello, everyone.
Also thank you for <unk>.
And in time to get an update on our activities.
Dr Kaplan and have you any closing remarks.
Thank you Greg.
Are you able to hear me all right.
I would conclude simply.
Fleet by saying that the results speak for themselves.
The assays from the time, we started to deliver upon them to the final 30% from tip to tail they exceeded our expectations and.
And somebody who has been in the mining business now for almost three decades.
I can't count on one hand the.
The <unk>.
Times that the.
The most expensive and aggressive drill program undertaken in the last.
10, or 12 years of any project.
And has yielded the kind of upside.
Delight is that the donlin drilling delivered for Barrick and for ourselves and I think that one.
What youre seeing is that donlin is as we've often said.
And the gift that keeps on giving.
To highlight the fact that we.
We're only.
Focused right now on that gold, which would be in the mine plan. The first phase of the mine plan.
The three kilometers.
<unk> that's been drilled are only three out of eight kilometers of mineralization.
There are deep target deep high grade targets.
<unk> across the entirety of.
And the mineralized belt and that eight kilometers itself represent.
Presents only 5% of the land package.
<unk>.
It's a forward looking statement take it for what it is but those of you who know me know that.
And my track record and has been built.
Through the drill bit and I've never had.
And if drill rigs arent moving somewhere.
But what I can say is this I feel very strongly and this has only been a feeling thats been reinforced over the last year.
Is that the next donlin could very well be at Donlin.
And it's my expectation.
Patients that youre going to see enormous value unlocked for barrick shareholders as well as <unk> shareholders from Donlin.
In my mind is the new Nevada, It is the new Carlin.
And like Nevada.
And it's located in the safest jurisdiction and the world, which is at a premium donlin is really something that checks the boxes on so many levels in an era of asset scarcity Donlin is right up there with the very best in the world.
But it's just located.
In the best part of the World and that to me is the definition of a wait and make a killing in mining.
So.
My comments, which is why I.
And just stood aside to see if anyone wants to talk about the macros, but my comments are simply that.
Net.
With people who are participating in the Donlin story have seen that over the decades, and Greg came onboard as CEO and I joined him as chairman every single promise that we have made.
<unk> has been fulfilled.
Every.
Every pack has been capped.
And we've done it without compromising we've done it without cutting corners.
Done it in a way that is only made the company more friends.
Both in the industrial sphere and at least as importantly.
More importantly, with our Native Corporation partners.
And our shareholders I think have a lot to be proud of I have been and the story for 12 years and.
And I can tell you that I'm more excited now than I've ever been.
Feelings that.
I get when I see those drill results are.
The absolute opposite of deal fatigue.
I had my way I would permanently have.
And five to 10 drill rigs on this target as I do with other privately owned assets, we will get there I have a feeling that.
As jurisdictional risk rises.
And to the four as gold prices rise and shareholders want to see things that are being built.
<unk> will be at the top of everybody's list I have zero doubt zero doubt that and a bull market in gold.
Nova gold as a pure play on the new Nevada.
<unk>.
We'll achieve absolutely record highs I have no doubt about this I also have no doubt that.
As barrick shareholders understand that within the Barrick portfolio without having to make.
Expensive acquisitions they.
They have and opportunity to have a tier one asset and.
And one or two phases will be producing over 1 million ounces, a year theres nothing like that and the world other than potentially polyester.
Sukhoi log.
Which I jokingly call the analog because it separated by the Straits.
We think we're on the right side of those states.
But the reality is that mother nature has given us and donlin and <unk>.
Jordan Larry story, and it is located in a place where a shareholders. If you want to go visit it you can incorporate whale watching or fishing into.
And to the equation.
And more importantly, it falls into that category.
<unk> called the getting a good night's sleep.
Story, which is to say that when you go to sleep at night when you wake up in the morning, what you thought you owned <unk>.
Alone and so here you have a federal.
The permitted.
And massive deposit.
The negative surprises that usually come in and mining.
And then.
With Donlin and.
And as some of our shareholders who've been with us for a long time will know we've called this the store.
Federal and the tortoise and the Hare.
People would say.
Well, that's going to take years and our attitude was you know what this is is up stable and.
And we will win the race I can't tell you.
How many projects that people thought were going to be built.
Either fell.
Story of waste side, because of technical issues or social issues or simply political risk.
We have none of them.
Technically we're getting better and better socially we have the best possible partners.
And from the standpoint.
And by the legal risks.
Okay.
I know the developing world as well as anyone in the mining industry and I'm, telling you you want to be and a place where the rule of law is not and novelty and where property rights means something and.
Blair.
You have exploration upside and leverage and a jurisdiction, where when you want to ring the cash register and Youll be allowed to keep the fruits of your leverage and that's really the name of the game and if I'm right and if I weren't right I put <unk> into play and pivot to something that.
And with me.
More joy in terms of the leverage or the safety whatever it just doesn't exist.
Donlin is unique when you look at the attributes of the size the grade.
The production profile of the mine life, the cost structure because of the grade.
That would be it.
Exploration potential which is arguably the best in the gold space, maybe sukhoi log I don't know.
But I can tell you those drill results would have been the best drill results in any major mining company.
Any major mining company and.
And so I.
No doubt that when silver and gold per.
Perked up again.
<unk> will be seen as the go to stock in the development space and we've just added a high grade exclamation Mark.
To this thesis so.
From and investors.
And someone who is.
90%, 95% on the investors institutional investors side of the table.
This really is as good as it gets and I love Cats and Mr. Catnip.
The other Greg back to you my friend.
<unk> tab and everyone. Thank you again for joining our call.
And we'll keep you updated and look forward to the next quarter total.
Everyone stay safe.
Thank you.
This concludes today's conference call you may disconnect your lines.
You for participating and have a pleasant.
Thank you.
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