Q3 2021 NovaGold Resources Inc Earnings Call
Thank you for standing by this is the conference operator, welcome to the Nova Golda third quarter 2021 financial results conference call.
As a reminder, all participants I didn't listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask questions.
She joined the question queue you May Press Star then one on your telephone keypad.
Should you need assistance during the conference call you may see Golan, an operator by pressing star and zero.
I would now like to turn the conference over to Melanie Hennessey, Vice President Corporate Communications. Please go ahead.
Thank you Claudia good morning, everyone. We are pleased that you have joined us for Nova Gold's 2021 third quarter financial results and for an update on the Donlin Gold project.
On today's call, we have Doctor Thomas capsule, <unk>, Chairman, Greg Lang, <unk>, President and CEO.
And David Ottawa, Nova Gold's, Vice President and CFO at the end of the webcast, we will take questions both by phone and bypass. Additionally, we will respond to questions received by email.
Before we begin the presentation Novo gold would like to recognize that today the inaugural National day for truth and reconciliation in Canada.
As a long term partner with indigenous communities in North America, we acknowledged the history of the land we operate on and reiterate our support partnership among all people to build a better stronger and more inclusive society, where all people achieve their full potential and snow prosperity.
Thank you and Quintana.
I would like to remind our webcast and call participants, but 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 that are included in this presentation.
I now have the pleasure of turning the presentation over to our president and CEO, Greg Lang right.
Thank you Melanie and good morning, everyone.
For those of you who took a novel Gold story. The Donlin Gold project is located in the western part of the Great State of Alaska as shown on slide four.
And as a 50.50 partnership with Bell.
Our goal.
Mining is an important part.
Alaska Com.
A special note. This quarter is the receipt of $75 million as expected payments from newmont from the sale of Galore Creek project in 2018.
This is most of our cash position to $173 million at the end of this quarter.
In terms of scale quality and exploration potential and jurisdictional stability Donlin Gold's attribute.
Are you seeing any other global.
Valid had stage project.
When combined with our long standing Native Corporation partnership.
Financial leverage to rising gold prices.
Various management team and board long term supportive shareholders and G safety federal permits in hand.
Although golar is not just where it is right.
In September.
I had the pleasure of visiting Anchorage in the Donlin gold strike with memories of Barrick's senior leadership team.
Including CEO, Dr. Mark Bristow.
We had an intensive technical abuse session and a thorough site visit.
As well as meetings with key stakeholders.
A few of the photos from the site visit with Mark and his team.
Can be seen on slide five.
As a result of the visit once the approval of additional funding by the Donlin Gold Board to lay the foundation.
So a new feasibility.
With donlin steadily moving up the value chain and becoming a late stage project.
Our novel Gold Donlin gold jewelry spirit and Teekay C have closely collaborated in all government affairs activity.
Donlin gold worked alongside to Arista and T. J C. During the federal permitting process.
Culminating in the granting of the federal record of decision.
Allison H P.
Partners continue to work to ensure that the project receives the attention it deserves and Alaska and we're seeing your binding administration officials in Washington D C.
One key distinction about the Donlin Gold project is on private land, where the minerals are owned by Alaska Native corporations.
We have the mandate to provide economic.
Social benefits.
All of our stakeholders.
During a recent trip to Alaska, we met with several of them with Pasty Lewis.
On the top right.
Slide six.
We have unfortunately had zero COVID-19 cases at the Donlin camp Gradings latest field season.
When cases, starting to derive from Alaska again, this summer, we enhanced our community and workforce protection plan.
With an outline of some details on slide seven.
We wanted to ensure safe operations could continue.
And our workforce remains healthy.
Careful collaboration with Jewish too and Teekay C as well as other tribal groups in the Y K region has been key to this success.
Restrictions are in place for the Donlin Gold Anchorage offers following two positive cases, and all Donlin gold players who may have been posed are tested and quantity in accordance with our COVID-19 mitigation protocols.
Slide eight you can see a quote for Mark Bristow from our September expected joint release with the initial assay from our 2021 drill program.
Again, we have import reported some pretty impressive numbers for an open pit project.
Great initial assay results from the 2021 drill program.
Were achieved and some of the best of these intercepts are highlighted on slide nine.
We reported assays from 29 holes.
A total of approximately 700.7500 meters of drilling.
The drilling was completed in late September with 79 holes totaling a little over 24000 meters.
To date the program will be a significant high grade drill hole intercepts Bridget.
In the eczema area and the Dubai Jug, which lies between the ackman Lewis deposits.
Examples of high grade intervals.
Include Covid 1970, with 92 meters at acre.
And who were 1963 with 40 meters at 10 grams.
The impressive results.
Additional assays will be released to the market in the coming months.
On Slide 10, you can see a longitudinal section of the <unk> deposits.
21 program is yielding great results in both the Acura <unk>.
Lewis area.
We're particularly encouraged by the results and the sparsely drilled.
Dubai area between the two deposits.
Over the past decade, the ownership the Donlin Gold project.
Have brought the project up the value chain now have the federal and most of the key state permits in hand.
Currently three permits are under appeal.
Our response to the clean water Act or 401 certification was appealed in Alaska Supreme Court.
Second in June the project received our water rights permits and they were appealed by an NGO We anticipate a decision on this appeal next year and third.
Commissioner upheld the state right away agreements for the natural gas pipeline and.
And this was an NGO requested an administrative review this term.
Unfortunately litigation.
As part of the permitting process, many Ngos opposed resource development and anytime you see it's been a regular course of business in the U S. It's something we anticipated and built into our planning since the start of Permian.
We are not surprised by these appeals and are building a comprehensive science based record.
<unk> believes the project is in a strong position to defend.
Any legal action.
Donlin gold is committed to support the needs of its community partners.
Slide 12.
Include some of the third quarter community engagement highlights.
In August.
Donlin gold was a major sponsor of they're in it for the long haul with the association of village chapter pricing.
Other regional partners on the fourth and largest ever backhaul project to remove hazardous.
Electronic waste from 26 villages in the Y K region.
By removing and properly disposing of these waste it keeps them out of the village landfill and protect.
The natural resources in the area.
Yeah.
We'd make agreement signed with the upper casualty gains during the third quarter Donlin Gold's now has signed eight shared value statement with villages in the region.
<unk> current engagement with key local to you.
These agreements expand in the long term relationships already established with these communities and address specific local needs such as water sewer landfill projects.
Salmon studies.
Okay.
Okay.
As you can see on slide 13, we are often asked about the structure.
Of our partnership.
It is a true 50.50 project overseen by two appointed directors from each company and mature alternates annually between the companies.
Last year, Catherine Raw, Chief operating officer for Bat, North America, Who's Chairman this year I hold that position.
Another question. We are often asked is where it is dominant fit in the portfolio.
And if you're only Greenfield project located in North America.
Donlin gold is on private land.
Were specifically selected for its mineral development potential under the 1971, Alaska Native claims settlement.
On slide 14.
This is a key distinguishing factor from other mining assets in Alaska and the U S.
This is the 50th anniversary of the landmark supporting indigenous populations go out.
As landowners to Arista and T. J C are committed to developing a mining operation consistent with their algorithms vision of responsible development that creates jobs and economic benefits.
You're guiding the environment and their culture.
We are thankful for their long term support and commitment to the project.
Play a key role in its continued success.
No Don has approached the disclosure of our environment, social and governance performance pragmatically as a development stage company.
Explosion benchmark that we believe are most relevant measurement of our performance.
We produced our first inaugural sustainability Summer summary report early this year.
We have regular interactions provide updated information.
Various groups.
Well as investors and other stakeholders.
Our selection of the performance measurements, we used in 2020.
Found on slide 15.
Noverco August committed to responsible binding stewardship of the environment and adding value to the communities in which we operate.
We believe that mines can be developed in collaboration with people who have the local knowledge to help minimize environmental impact.
Benefiting from economic activity.
It's one of the largest gold development projects in each category, we recognize the dominant scale is remarkable.
With approximately 39 million ounces of gold at a measured and indicated category and a mine life measured in decades.
When compared to the 14 large scale gold project in the Americas as shown on slide 16.
One is five times bigger.
And the average.
The scale of Donlin combined with the grade at two in a quarter grams as shown on slide 17.
Is twice.
The global average for open pit deposits.
As currently envisioned the Donlin Gold project, we average over 1 million ounces a year throughout the life of the mine as shown on slide 18.
Donlin golds annual production profile far exceeds the average of north and South American peers.
If global gold production continues to decline for most of the major.
It's clear the industry needs projects with scale.
And longevity.
All of which Dom and offers.
And then a favorable jurisdiction.
Only three of these operations produced more than a million ounces in 2020 as shown.
On slide 19.
You can see the Donlin gold project in Alaska.
The top five largest development stage gold projects are in dark blue three.
Three are in Asia, and North America.
You've combined all three there.
They are still smaller than the Donlin gold project.
Whether in production or in development Donlin gold would rank among the top operations globally.
We're producing today.
Lifting globally Theres only one development project that has both scale and a desirable mining locations.
And that's the Donlin Gold project.
While we are focused on the 2000.2021 drill program permitting and modeling work, we have not lost sight of one of the projects most important attribute.
Donlin Gold's truly exceptional exploration potential.
The projects Donlin is contained with only within three kilometers of an eight kilometer mineralized belt as shown by the act and Lewis chips any goals on slide 20.
This mineralized belt represents only 5% of our total land package.
As shown on slide 21, there are several catalysts in the coming months with the approval of Donlin budget increase.
We will advance studies and increased staffing.
Also this fall investors can expect to see additional assay results from the 21 drill program to add to the results that we distributed earlier this month.
The balance of the year will follow in 2022, along with the work program for next year.
As a solid foundation on which to advance this rare and unique project.
We feel the time invested upfront.
Develop responsibly and sustainably is critical to the project's success.
With that I will now turn the call over to David <unk>, Our CFO to review the third quarter financial results.
Dave Thanks.
Thank you Greg.
Our third quarter operating performance as highlighted on slide 22.
We reported a net loss of $19.0 million in the quarter, a decrease of 0.99 from the prior year quarter.
Similarly, due to foreign exchange movements.
Partially offset by higher permitting and legal costs at Donlin lower interest income and changes in the fair market value.
Of marketable securities.
Okay.
Third quarter cash flows are shown on slide 23, as Greg mentioned, we received $75 million from newmont related to the sale of our interest in Galore Creek.
Donlin gold and G&A spending more consistent with the prior year quarter.
Working capital interest and now there was $1.3 million lower than the prior year quarter.
Primarily due to lower interest income earned on cash and term deposits.
On slide 24, we note a robust treasury.
We ended the quarter with cash and term deposits of $173 million.
An additional $25 million is due from newmont in July 2023.
For the full year, we now anticipate spending $32 million.
Including $19 million to fund our share of Donlin and $13 million for our corporate G&A costs.
I will now turn the call back over to our Chairman Thomas Kaplan.
Thank you very much Dave and thank you very much Greg.
On slide number 25, we talk about Nova Gold's as having been a company that keeps its promises and enjoys excellent partnerships when Greg Lang and I became both the CEO and chairman respectively of Nova.
<unk> 10 years ago, this coming quarter, we made certain promises to investors.
We promised them that we would become a pure play on what we considered to be the Premier Gold development project in the world today.
Our attitude, which we conveyed to investors was that in terms of the scale and the quality the exploration potential the potential place on the cost curve the mine life and ultimately the existential attribute of jurisdictional safety.
Rendered the Donlin project simply so much the best in class that we would ask the question unless there's something better it's actually unique.
To achieve the aim of being able to have a pure play on this extraordinary asset one, which we considered to be potentially the new Nevada.
We promised that we would spin out the 100% owned Ambler project and we did so in 2012 to create Nova copper now trilogy metals, it's turned out to be an excellent story in and of itself and isn't in a fine partnership with shell 32.
We also promised that as part of our program of becoming a pure play that we would monetize the Galore Creek project. We did this in 2018 with the sale of <unk>, 50% interest to new month for up to $275 million.
As you can see by the fact that our treasury is as robust as it is the combination of the capital raising which we did in 2012 and I hasten to add have not had to do.
Steve.
And then did the benefit of our shareholders not having to have been diluted and the sale to newmont, we've kept to our promises and put ourselves in the position, where we have one of the strongest balance sheets in the space.
Meanwhile, we also promised that we would be able to take the Donlin project in partnership with Barrick up the value chain. After the 2011 Technical report we commenced permitting in 2012, there were a lot of people who said this is going to be a challenge we said.
We do not see challenges to our project and in fact, we were able to take this all the way through in 2018 to the receipt of a record of decision in our major federal permits.
Along the way we had successful drill campaign, which continued to show the extraordinary potential of Donlin geology, and we also received our key state permits.
We've been aligned on project strategy and timeline with Barrick Gold Barrick, which of course are equal partner at Donlin, We have a 14 year history of building value together with an unwavering focus on stakeholder wealth creation technical excellence environmental steward.
Chip and social responsibility, we have a constructive and positive relationship with Barrick, we respect their corporate objectives, we respect their financial discipline and we respect tremendously their focus on geology and excellence. These are not only <unk>.
Third interest but shared values.
Yeah.
The culture of mutual respect between Novo Donlin gold and the people in remote villages and throughout Alaska is absolutely for us a shake grid bond, we have well established partnerships with native corporations, we engage with them in activities to enhance employment scholarship.
Workforce development and environmental programs in the region. These are resources that need to be developed for the benefit of all stakeholders and we are absolutely delighted that we are as aligned as we are with everyone from the local communities through to the state and.
Governments.
Onto slide 26.
We're in a bull market in gold.
Gold has a tendency to do what you would be expected to do.
And what you see with gold is that we are right now within a consolidation period within a long term uptrend that we think has really only begun if you look at the price chart on slide 26, what.
You will see is an absolutely beautiful example of vertical market looks like but put aside the chart for a moment all of the factors that have given us the feeling and the very strong conviction that gold is going to multiply from here are still there in fact.
They're even stronger the supply pressures have been extraordinary if you look at barrick's owned projections. Both production is due to decline for years. The discovery rates has dwindled the exploration budgets are inadequate the ore grades.
Can you to full production costs as a consequence of those falling grades.
Our rising.
The Central Bank consider continue to be buyers not sellers and left but in my mind as someone who has visited 110 countries give or take one or two and has been involved in resource to develop.
In many of them.
The jurisdictional risk is now existential.
I think it's fair to say that.
Location location location is the name of the game, if you're not in a place where when you go to sleep at night, you can wake up in the morning, knowing that whatever you thought you own you still own it hasnt been overrun by al-qaeda affiliated groups. It hasnt been taken over by resource nationalism.
The local communities have not withdrawn their social license.
If youre not in the right place it doesn't matter what you found you're not going to be able to keep it. The rule of law is a novelty in most places.
And as a function of a number of different factors, including the budgetary pressures brought on by Covid and other geopolitical considerations, it's not getting any better it's only going to get worse once again location location location.
Meanwhile, in addition to these supply issues you have the demand drivers asset diversification gold is historic Safe Haven asset.
Currency that can't be printed if anything the printing of that currency by those who meet it.
Is in decline.
You have gold at something that provides you with inflation protection and deflation protection and it has a multi millennial provenance that no other asset class of its time can provide and then theres the emerging market demand all of which is pointing towards higher gold prices.
If we go to slide 27, you can see that those who are in the know the central banks, who are the most keenly aware of how precarious is the monetary submit stability brought on by currency debasement they have.
Continued to be net buyers of gold, it's often said that sometimes art is defined by quote that which museum has units collection.
That's a debatable subject, but what I would say is for sure. The fact that central banks are buyers is a very very bullish sign they are the ultimate insiders. We know that they are not likely to tell us just how bad currency debasement is likely to be and so by buying.
So they are voting with their feet.
The next slide on slide 28 shows something which really does point to the excitement that we have about donlin because it really does meet all the challenges that the industry is facing.
They really are very few large gold project that are poised for development, even with the increased exploration spending in the last decade, let's not forget this if a donlin were discovered today, where a large gold deposit anywhere were discovered today the likelihood of it.
It being turned from a prospect all the way through the value chain of exploration of studies of permitting.
Construction, you're talking now on average a couple of decades with gold production in decline with discoveries fewer and far between the horse has already left the barn, what counts now are those things, which are big and high quality.
<unk>.
When you look at Donlin, what you see is absolutely the answer to that call.
Existing mines are being depleted the grades are declining few discoveries are there to replace some reserve growth between 2010, and 2019 averaged 52, 7% mainly as a result of major acquisition.
Top 19 gold producing companies reserves have decreased an average of six years between 4029.
Over the last decade growth stories were abandoned in favor of maximizing returns from existing operations.
<unk> bold exploration budget to 55% below peak levels, we understand this.
So both companies engaged in quite a lot of capital destruction, primarily because of the subpart nature of the assets that they were developing.
But the industry depends on grass roots in early stage exploration for significant discoveries.
Actually going to survive as relevant over the past 10 years, only 29 major new deposits have been identified containing 208 million ounces of gold, which represents only 8% of the gold discovered over the past 30 years.
No major discoveries have been made in the past four years.
Between location location location and ownership possession being nine tenths of the law.
This is really where the story is.
If you go to the next slide you then superimposed on to the industry's challenges what I have long held to be the gating factor for whether one wants to have an investment in a mining asset at all and that is jurisdictional safety once again for those.
Have you who know me you know that as they say I made my bones in places like Bolivia, South Africa, Zimbabwe Congo.
<unk>.
Instrumental in the sale of Kibali to Barrick.
I am not unfamiliar with jurisdiction I'm, a historian by background I understand cycle.
Those cycles took me away from the developing markets for a very simple reason I truly believe that the name of the game has changed from seeking out asset that gives you great leverage to an underlying theme to seeking out those assets, which gives us great leverage to an underlying theme.
The restriction that will allow you to keep the fruits of the leverage resource nationalism is rising budget deficit in the developing world are rising the idea that one will be able to keep what you thought you had.
He is akin to an eighth marriage, it's the victory of hope over experience simply put it's not going to happen not all ounces are the same look at these charts and what you can see is that the.
Best and highest rated ounces are those where you know that youre going to have certainty of ownership and ultimately as a shareholders certainty of transaction.
On page 30.
Lot of questions as to what is the ultimate objective for gold my long term target.
Has been three to 5000 that was before the financial crisis of 2008, nine when gold had a 600 handle.
That was before the unchartered waters that we're in with regards to.
Covid and modern monetary theory, which I referred to in our annual report as modern monetary theology.
Sure.
My target is still 3% to 5000 simply because I do believe it can go significantly higher than that but its still got to get there on its way. So there is no reason for me to stretch credulity.
If you look at some of the very interesting work done by incremental.
Which we highlight on slide 30.
You will notice that their probability weighted peak 4800 ish.
I think they're going to prove to be right and by the way. It's a very interesting report, which they pulled out I learned a few things.
Now if you go to the next slide if you believe as I do that gold is in a multi decade bull market.
Then you can see the leverage that Donlin Gold's provides to our shareholders.
We take this up to $2500 gold I don't believe $2500 will be a real number but what you can see from the increased donlin Gold's NPV at NPV five and also NPV zero.
Is absolutely extraordinary leverage now if you ask what.
We would be doing with NPV zero.
That is where I believe most certainly.
Greenfields project with great exploration potential in North America are going to yield as we believe that for reasons, which Greg highlighted the exploration potential at Donlin is second to none in North America.
It's very clear to us that the blue sky associated with that combined.
Combined with the jurisdictional safety is going to take the valuation matrices.
Back to the lowest end of the range in terms of.
Zero percent discount rate, because that's where we were before the go where the gold is mantra took hold in the 19 in the 19 nineties.
When newmont went to on a codeshare.
That's what started the whole.
Frontier spirit of the space I think it's.
Poetic unfortunate, but poetic did yesterday.
Peru, the home of you on our culture.
After having put the kibosh on the Minas Conga project of Newmont and Buenaventura the owners if Monica Chen.
Pretty much said that Tia Maria is a no go for southern Peru copper.
The country that started that whole frontier spirit has now gone socialists, but the truth is so have a lot of others.
Again, if you're in the right location, you will get the maximum fruits of the leverage that you seek from a gold bull market our preferred play and if we didn't think that was the case, we sell it and pivot to something else is tomlin because it has all the attributes that were looking for.
On slide 32, what you see is that we have a very strong coterie of those who feel very similarly to our cells not only is electrum.
Which is my family owned business in which we also enjoyed the support of several sovereign wealth funds the largest shareholder in the company.
But were followed by fidelity Paulson Blackrock, the Saudi public investment fund.
Van Eck first Eagle XOR Vanguard Coker. Nick This is all very very smart money. They know that theyre looking at the world. The way that we are and when they look at that they see that noble is a must own asset if you want to get octane in the space and get full value.
You to leverage in North America.
I should say as well we are extremely grateful to their fidelity no pun intended although.
But mark that especially but we are extremely grateful to the shareholders, who have been with us for so long not just fidelity, John Paulson, Blackrock and new shareholders who've joined us like the Saudi investment fund.
The people of first Eagle made Nova gold there first development story in their portfolio that was a huge huge vote of confidence as well as XOR Daniela Sam Leeds vehicle, adding us to their portfolio, we're grateful to all of you.
So once again.
To wrap up on slide 33.
Donlin gold is the definition of a tier one asset but more than that it's a tier one asset in a tier one jurisdiction. We don't have to explain what it's like to be working in Alaska.
Because it really is considered to be one of the finest jurisdictions in the world today, but let's summarize the attributes that in the aggregate we consider.
Make donlin to the benefit of our shareholders as well as those of Barrick a unique story.
It starts with 39 million ounces of gold contained in the measured and indicated resource category. The grade at two in a quarter grams is more than double the world average for a large scale open pit the exploration potential well those existing.
Resources are contained within three kilometers of an eight kilometer mineralized trend, which itself is located on less than 5% of donlin golds land position.
Alaska as I mentioned is a premier mining jurisdiction with respect for socially and environmentally responsible mine development or partnerships are time tested both with our Native Corporation allies as well as our 50% joint venture owner Barrick gold.
The leverage speaks for itself, our balance sheet with almost well over $170 million as of August 30, <unk> and another $25 million due in 2000.32023 from Newmont and no short term debt.
This is something we can boast about.
We've got our key permits the management and the board have a successful track record of building and operating mines.
And lastly, once again, we had strong time-tested support from Premier institutional investors, who share our vision for building one day when the time is right.
The Premier gold asset in the world today.
Thank you.
Turn the.
Chair back to.
The floor. Thank you.
Thank you operator, we will now open the line for questions.
Thank you we.
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.
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Our first question is from Lucas pipes with B Riley Securities. Please go ahead.
Hi, Good morning, everyone. This is actually Matt key asking a question for Lucas today.
In your prepared comments you provided some excellent color on the gold markets and the various drivers.
Given the excellent supply demand dynamics that play the price action today. It feels extremely kind of puzzling. We also have inflation rate in supporting structural issue years, while nominal rates have continued to lag I would think this would be an ideal environment, where gold can make new highs and I was wondering if you could kind of square this about kind of why is gold pricing.
Lagging the kind of the excellent fundamentals.
Well first of all as I actually began the presentation. It's the nature of gold that it will befuddle. It will do what you least expect it to do.
The good news is that one day I do believe that will wake up and see gold up $125.0 or $100 probably on no news.
When the financial crisis came in eight or nine.
<unk> was 600.700 and people were saying this is such an incredible environment for gold why can't it go up why doesn't it go up well.
One day it started to go up and reached a peak of almost $1900.
That's the way gold behaves it make sure to watch every one out at the bottom. It is absolutely classic what you are seeing today is a correction.
Within what we look to be a new wave of the gold Bull market. The first wave took us from the early two thousands to that 1900 dollar peak. We then had a correction down to the $60.0 1100, Mark We then had.
That next leg.
Which we expect to be a 10 year lag.
Take us to the 2000 area, we are within a correction. The next time. It goes through 2000 and it is my belief to forward looking statement that it will slice right through it and those who sold.
At the bottom will be paralysed less they find themselves in a situation that they are scared that they will see another correction and get washed out the time to buy gold the time to buy any currency.
And commodity I would add with gold as a currency.
Is when you have pessimism when you are questioning the underlying fundamentals of your thesis for all the reasons that I highlighted the supply pressures the demand pressures all the fundamentals are there for bold when it's ready and that.
Could be at any moment to begin the next leg of.
This long wave bull market and I believe that that will take us to the three to $5000 range.
I'm not saying this because I'm playing to my audience are talking my book.
I Act according to the way I feel and my view is that the place to be.
Is with gold and silver and that's the way we positioned ourselves I have the freedom to be able to invest in any asset class I want.
When it comes to wealth preservation and also wealth creation I believe that the great story of the coming years are the precious metals and that what we're seeing now is absolutely consistent with.
With that overall view.
Got it okay. Thank you that's that's very helpful and just one more for me.
Was wondering if you guys could remind us about the timing of the updated feasibility study do you see this as more of a new document or a continuation and update of the prior feasibility study.
And what are some of the fundamental or what are the what are some of the aspects of this new document that you're fundamentally rethinking as you've kind of draft of the new the new study. Thank you.
Sure happy to speak to that.
We've approved additional funding to it.
That's the projects at our last board meeting and I think a little bit of context would be helpful for that.
At Donlin.
Yes ill focus for many years has been twofold.
We keep a lean staff.
So we've had robust community relations teams and permitting staff.
In recent years with our drilling we've largely relied on the expertise of the owner companies.
Primarily <unk>, because we don't have any geologists and now that we're advancing the project one of the first things we need to do is geared.
Europe, our staffing levels, we have.
So we're gonna be adding geologists engineers and foreign interest laying the foundation for what your owners ultimately make the decision to go forward and I think that's something that will be.
Not in a position to comment on today, but we will be guiding that as we develop our work programs for the new year.
Got it very helpful. Thanks, Thanks for taking my questions and best of luck moving forward.
Thank you. Thank you please give our best to Lucas.
I will do that.
Our next question is from Trevor Turnbull with Scotiabank. Please go ahead.
Yeah. Thank you.
Greg I just wanted to follow up also on the.
The potential to do a new study.
Obviously youre going to be looking at a number of.
Aspects to the project in terms of.
The scale and and and things of that nature and obviously incorporate.
All the new geologic information into your modeling and how that May impact the mine again scale and mine scheduling.
But one of the other things that has really seem to have changed very rapidly in the last couple of years and certainly since the timing of the last study is the emphasis on ESG.
And it's not something that you've at all neglected in terms of your focus.
But at the same time.
Companies are becoming very very focused on minimizing our their footprints and their their impacts and I just wondered.
What types of ESG things might you be focusing on in the new feasibility study in terms of of how how investors are definitely focusing on that more than say they were 10 years ago. When the when the study was originally conceived.
Trevor Let me, let me break that down into a couple.
A couple of pages.
Thank you I appreciate that you recognize that.
No.
Community involvement has been that's been key for the Donlin project for for over 20 years, and I think hips, and we will continue to be key to our future.
Yes, I think we're we're very fortunate.
We share those values with our partner Barrick.
<unk>.
Donlin frankly.
Frankly, it benefits a lot from the work that they've already done so yes. Some of the work that Derek has talked about from climate change initiatives.
Other aspects of minimizing the environmental impact of the mine.
Very mindful of that and we will certainly incorporate it into the projects that we ultimately.
<unk> decided to take forward.
Yeah, I just I was wondering.
You've already looked at different forms of energy in terms of of the power and I think that probably equates well with with some of the ESG initiatives.
The scale of the project, obviously involves a lot of.
Other environmental aspects.
One of which is water management and I wondered is that something that youre looking at as well in terms of ways to perhaps have have less.
Less water to deal with over the course of the mine are there things that you can do in terms of the design that would address that or is that unfortunately, just an artifact of the size of the operation.
Alright, I think Trevor Yeah water management air quality, all aspects of the project.
During our.
Reviewed.
And really as we speak I think particularly.
This has been a benefit to us is that.
Barrick comes into the project now with new people, new set of eyes, and we're just really gone back through every aspect of the project water management tailings deposition, Eric quality management.
Mercury to management, so every aspect of the project.
We've been steadily working our way through it to make sure that we are.
Youre incorporating the best available technology.
Yes, I was learning curve for our partner, we're obviously not an operating company. So that's an area that.
We appreciate it happen.
People that are pretty well versed in these things on the other side of the table.
Yeah, and I guess, that's the benefit to us of time is that we've seen so many new technologies emerge inefficiencies in new technologies emerge.
Since the last time this was done so that theres a lot more to avail yourself of them before certainly look forward to seeing win when you make the decisions on the study and what it brings forth. Thank you.
Thank you Trevor.
Our next question is from John Tumazos with John Tumazos very independent research. Please go ahead.
Thank you and congratulations on all the progress.
As we get closer and closer to the project actually.
Being permitted.
And ready to break ground.
Financing I guess is closer.
578 years ago, when I would write a report on Barrick I would just make a simple assumption.
You sold Barrick, 25% of the fifth.
The 50%.
And does that paid for the rest of your obligations.
Yeah, essentially we had 25% of the project free, but you're actually in a better place now holding as much cash as you hold.
Thinking of all the different ways, you might finance sure sure the project consumption drop a project capital selling a few ownership points.
Selling our revenue royalties selling a stream.
Selling equity.
Project debt.
JV or direct debt.
Could you rank, which way you. Thank you.
Sure.
Those you like better or rule out any of those you would consider.
Yes, we try to build a full Josh.
Okay.
Interesting and somewhat philosophical question. So I think our ladder lateral that went through our chairman.
Thank you very much John.
I'm not saying this to flatter you, but I love the question because.
It allows me to be able to expand a little bit philosophically.
And I think that's extremely important.
We have no intention of selling one percentage point or any fraction thereof of the project.
And this should come as a great relief to our shareholders not that anyone has ever met me I think things that we would ever have done otherwise.
If it is advantageous to look at other kinds of royalties and streaming will look at it but I find that thats, probably not the area, where the road that we would go down because if youre really a bull market.
Participant you want to be able to have uncapped.
And full exposure to the bull market.
Now remember we've got a few attributes that most mining assets don't have which will assist us in the financing.
First of all.
It has a mine life.
<unk> of decades, and we believe that the resource is much much bigger.
Then what has already been identified we can see it.
Put aside the fact that it's.
You know.
And then in the tire and entire property package in which only 5%.
Has really been scratched in on that 5%, we already have 35 to 45 million ounces, depending on how you want to look at it.
We can see just in the immediate vicinity and to depth the potential.
To add tens of millions more ounces, we see that.
We're not.
Looking at the.
The rest of the eight kilometers of strike.
But mine life gives you advantages in being able to finance.
Is that are very different if you've got an asset a few million ounces, which is actually as you well know that.
Pretty meaningful in today's market, we won't look at it because it's too small, but if you've got an asset of X millions of ounces with a mine life of 910.12 years.
But that's normal.
We're talking about something that could be producing potentially.
1 million ounces a year for a decade.
There is not very much out there that's like that the only comparable that we have been able to find.
Is the Sukhoi log projected polio in Siberia, and not surprisingly on the other side of the bearings stripes from where we are.
But again, it's in Russia, and I have no doubt that if gold is engaged in a bull market in their economic turbulence in Russia that gold will be declared to be a strategic asset.
That's the end of that I think that in most jurisdictions gold will be considered to be a strategic asset.
Nationalized, but if you've got an asset that can go on for decades.
Why not project finance it.
Why not say you know what it's not a 90.10 12 year story.
We can get project financing for it we financed a project in Mexico, The Electrum group.
And we got.
70, 80% project financing and that's without having had.
Barrick as a tier one partner.
If we project finance. It then you can say to yourself well, who is interested in that kind of thing. So the electrum group is my family's holding company all we do is mining.
The only outside partners that we have are sovereign wealth funds from Abu Dhabi.
Kuwait.
And as a large shareholder in Nova gold as you've noticed the public investment fund of Saudi Arabia.
In many respects I consider this is my home region and it is not for economic purposes for a lot of other reasons.
Longstanding relationships suffice to say.
That the interest inbound Lynne and I can tell you the sovereign wealth funds have been out there to visit it. So they know this asset extremely well when the time comes to finance this asset.
We have a lot of friends and not just those.
You know we already are in business with and who have known us into Chinas fulfilled all of our promises, but we have a lot of people, who would love to be able to participate in the financing.
Of.
The Premier Gold mine in the Premier jurisdiction.
And so I don't think that we need to look at any mechanisms that would require us having to in any way dilute our stake in the asset and also there is another market where do you think would be the interest rate for project debt on dawn.
Truthfully.
If I have.
If I have conviction on something.
I think it's pretty clear I am pretty passionate about it I don't know the answer to that question, because it's a little bit too early.
Once we're done with the feasibility study and if we see that.
The price of gold is right and very importantly, our share price is right.
Then the shareholders of Barrick and <unk>, we'll look at moving forward, we've always considered that at a certain point the shares become more valuable than the gold itself and we think thats. The case here. So I'm not avoiding the question I'm just not simply I don't want to be flippant with you.
But I do believe very strongly that we've already identified those would love to put significant capital to work in financing at least our share of the project. When the time comes when Barrick is ready to move we'll be ready to move when we're both ready to move there are a number of partners who want to participate.
<unk> in.
In the gold space, but John there is one other aspect to this that youre going to appreciate.
And why we would never sell a share.
We're not.
Neil fight to the mining industry.
If you believe as we do that Donlin is an assay that in a tad attributes, including the jurisdictional part.
It is extraordinary to the point of being unique the last thing that you want to do is to dilute the 50% interest the 50% interest we have with Barrick is absolutely.
Parry pursue they.
They do not have one single right more than we do.
Now the importance of that does that it keeps everybody honest, but if you're a shareholder of the company and you know damned, well that theres going that theyre going to be a lot of M&A interest in half of what we think to be the new Nevada, you want to make sure that you preserve the absolute Intel.
Rudy of the value proposition there is no mining company in the world.
Would find itself.
In any way feeling diminished or compromised by having a 50.50 joint venture relationship with Barrick 50, 149, it changes the dynamic.
I mean.
I'd love to buy more percentage points from Barrick.
But I have zero doubt that we will be able to come up with with our part of the money.
And my job is to make sure that we do that with minimal dilution to the shareholders. If you look back at the last 10 years I think that Youll see we've kept every promise.
I have massive conviction about our ability to fulfill that if gold prices are higher youre going to see all kinds of dislocation in the developing world all of the focus will be on safe jurisdictions, and youre seeing that by the way within the last week.
Donlin is catnip.
A pure play on the.
The best exploration and development story in a safe jurisdiction.
You can ask for more than that but having that 50.50 means that anyone else should they ever want to step into our shoes, they will know that.
They are not in any way subordinate to anybody and as you can imagine there will come a time when big Premier will be paid for tier one premium assets and.
And we want to do everything that we can to ensure that that we've done nothing to diminish that.
That prospect.
Does that does that sound right to you I'm perfectly happy to continue because I'm actually grateful that you asked the question because I think it's important to know that we're very confident in our ability to finance when when the price is right that we want to go ahead and our strategy will be to minimize the dilution my personal belief is that by the time.
We're really looking at financing the price of Nova bold will have multiplied.
I think the share price and Barrick, hopefully will be doing well.
But we've got what people need a pure play on a great asset, giving us leverage in a place where you can keep it.
And I.
I don't think theres any lack of financing for that and as a consequence, I think we'll be able to finance on favorable terms, but also with really really great. Investors. That's also important we will not have to scramble, we'll be making a few telephone calls and.
I think you'd see a consortium for project financing emerged rather quickly.
So a company called Silvercrest with a small but very low cost project in Mexico.
Raised about $100 million.
To build their project, a few months ago around 10% including fees.
If we were to sort of work on the assumption so you're you're bigger than you got better friends and your project or 8%.
Yeah.
Then we would be looking at.
If return in the feasibility study assumed gold price, it's often conservative.
So then from a risk standpoint, what should we be comparing say something like an 8% cost of debt.
To a mid teens rate of return.
And just hoping that the construction.
It doesn't flow its branch out in most of the Capex and opex by more than 10 or 20%.
I believe that we'll be able to.
Building financial models, and just trying to SME or returns or excuse me for being very boring.
Boring mundane questions.
Well no they're not mundane.
When the time is right.
They will be.
The key the key questions.
We're a little bit far away from that so I would just ask your indulgence in letting us play this out.
A little bit longer, but I'm significantly more sanguine about what the cost of capital would be.
If we're dealing with the scenarios that we anticipate for wanting to go forward higher gold prices higher equity prices, we have a strategy we've never never taken the attitude.
We want to build in any price of never understood that model.
And candidly those who build.
At the lower end of the range in the gold market I think are missing the point.
Sometimes people will say well you risk not capturing the move.
If gold moves up before you're in production.
But that's not actually true that's true in some industries, that's not actually true.
The precious metals, certainly and also in some of the base metals, if you've got a long life mine you can dramatically reduce your cost of capital debt as well as equity if you're willing to sell forward a little.
Percentage of our of the of the story.
You can't do that with a short life mine, but a long life mine with huge exploration potential.
You know as well as I do if you are willing to sell forward a little bit of gold then youll get a much lower cost of capital now game that out would I be willing to sell forward bolt at these levels no, but I also wouldn't want to build at these levels, if I'm a gold bull and all my shareholders share our bill.
Leaf that what we want is the optionality to a higher gold price. Once we've reached the point, where theres been a construction decision and we can go into the financing mode from that point on the gold price even before we go into construction becomes extremely important because as part of the finance.
If we sell forward some gold at let's just say.
2000, 2000, whatever it changes the entire model that you're working on because right now you're working on a theoretical model of the gold price everyone has to but if I'm, telling you wait a minute let's.
Let's have this discussion I'm not saying that this is a discussion that we're having now but I'm just using reason and logic. If we sold forward some gold at 2200.
The $1200 benchmark for a project right of return is actually no longer.
Applicable, it's a moot point because you have to factor in that which was sold at a higher level now let me make this extremely clear we may not choose to sell forward at all we may be in a position, which is I think.
Very likely that when gold prices are higher our equity will be in the twenties for <unk>, what have you and we'll be able to do our equity component of <unk>.
Highly in demand piece of paper for project financing.
But if we add selling forward a few percentage points of gold for X period of time with the ability to buy it back and all of the bells and whistles that.
That you can see the cost of capital the cost of the interest rate goes down dramatically.
Our attitude is whatever we can do to mitigate share dilution, we should do because we're not dealing with a short mine life. We are dealing with something that is already measured in decades and could be measured for many many many more decades. So it's incumbent upon us.
To treat the shares is even more valuable than the metals.
But just bear with us the good news is we've got the kind of asset that can allow us to have this kind of open conversation.
With people such as yourself and I'm perfectly willing so its Greg if you've got ideas.
Like Youre doing now please.
One of the one of the best attributes of having smart shareholders is that youre not only when you meet them, you're not only telling them what youre doing.
You are saying is there anything that you think we can be doing better and certainly we've got a lot of smart financial talent.
Behind some of the largest shareholdings in the in the company so.
Feel free to reach out at any time and share ideas.
We are nothing if not open minded so long as it's going to give the highest return to shareholders and we're not doing anything to diminish the value of the asset so that it can achieve.
The best valuation if it is the object of an M&A story.
Then we're doing the right thing for shareholders and I think over the last 10 years I Hope you would agree that every promise we've ever made we fulfilled and we havent cut any corners, along the way to do that.
Thank you.
Thank you John and thank you for the questions I'm I'm I'm grateful in truth and no. We didn't set this up.
Our next question is from David Lozinski, a private Investor. Please go ahead.
Good morning.
I just wanted to reflect back to the first caller.
Luke good settlement for Oklahoma bring afterwards, Luke who wasn't present.
It's about the fact that the gold price was.
Flat and its not.
Reacting are behaving like he thought insured or people for Richard.
And I think.
Tom and Greg.
I think you have to use discretion, how you answer questions like that but as an American citizen.
I just wanted to say, it's the bully on banks with.
Suppress the price of gold.
After the federal reserve and I think Scott, sorry, but nobody says.
That's what I firmly believe and I think Tom there are 100% right one day youre going to wake up and go it's going to be at $500.
Pick up three pounds overnight.
With the fed doesn't want that and I don't want that because then everybody is going to say what's wrong.
And.
As you can see I'm very passionate about that.
And that's really all I had thank you.
Thank you David Thank.
Thank you David.
This concludes the question and answer session I would now like to turn the conference back over to Greg Lang for any closing remarks.
Well everyone. Thank you for joining our call this morning.
Our library and at times philosophical discussion and we look forward to updating everyone with our relationships on the ongoing drill program. Thank you.
Yes.
This concludes today's conference call you may disconnect.
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