Q3 2021 NovaGold Resources Inc Earnings Call
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 Greg.
Thank you Melanie and good morning, everyone.
For those of you are new to Lenovo 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 Barrick gold.
Mining is an important part of the Alaska economy.
A special note this quarter is the receipt of $75 million.
With respect to payments from Newmont from the sale of our Galore Creek project in 2018.
This has boosted 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 attributes.
Our exceed any other global development stage projects.
When combined with our long standing Native Corporation partnerships, the exponential leverage to rising gold prices and.
An experienced management team and board long term supportive shareholders and key state and federal permits in hand Novo.
<unk> is not just rare it is on crackle.
In September.
I had the pleasure of visiting Anchorage in the Donlin gold site with members of <unk> Senior leadership team, including CEO, Dr. Mark Bristow.
We had an intensive technical review 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 was the approval of additional funding by the Donlin Gold Board to lay the foundation for a new feasibility study.
With donlin steadily moving up the value chain and becoming a late stage project.
Barrick Novo gold Donlin gold <unk> and PKC have closely collaborated and all government affairs activities.
Donlin gold worked alongside to Arista and PKC during the federal permitting process, culminating in the granting of the federal record of decision.
In 2018.
Partners continue to work to ensure that the project receives the attention it deserves and Alaska and with senior binding administration officials in Washington DC.
One key distinction about the Donlin gold project that it is on private land, where the minerals are owned by Alaska Native corporations, who have no mandate to provide economic and social benefits.
Or their stakeholders.
During a recent trip to Alaska, we met with Senator Murkowski, who are pictured on the top right in slide six.
We have been fortunate have zero Covid cases at the Donlin camp during this latest field season.
When cases started derived 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.
Our workforce remains healthy.
Careful collaboration with <unk> and Teekay.
As well as other tribal groups from the Y K region has been key to restrict SaaS.
Restrictions are in place for the Donlin Gold Anchorage office. Following two positive cases, and all Donlin gold players, who may have been exposed or tested and quarantining in accordance with our Covid mitigation protocol.
Slide eight you can see a quote from Mark Bristow from our September 2nd joint release with the initial assays from our 2021 drill program.
Again, Greg and Port 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 for a total of approximately 700.7500 meters of drilling.
The drilling was completed in late September we had 79 holes totaling a little over 24000 meters.
The program revealed significant high grade drill hole intercepts.
Clearly in the eczema area and the divide which lies between the ackman Lewis deposits.
Examples of high grade intervals.
Include Covid 1970, with 92 meters at eight grams.
<unk> <unk> 1963, with 40 meters at 10 grams very 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 two deposits.
The 21 program is yielding great results in both the asthma and Louis area, and we're particularly encouraged by the results and the sparsely drilled.
Drilled divide area between the two deposits.
Over the past decade.
Ownership, the Donlin Gold project.
<unk> brought the project up the value chain and now have with federal and most of the key state permits in hand.
Currently three permits are under appeal.
First fund the clean water Act or 401 certification was appealed in Alaska Supreme Court set.
Second in June the project received our water rights permits and they were appealed by an mgo, we anticipate a decision on this appeal next year and third the commissioner upheld the state right away agreements for the natural gas pipeline.
And this was an NGO requested an administrative review of this permit.
Yes, Unfortunately litigation.
As part of the permitting process, many ngls as opposed resource development.
Any time and there has 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 records and.
And we believe the project is in a strong position to defend any legal actions.
Donlin gold is committed to support the needs of its community partners.
Slide 12.
It includes some of the third quarter community engagement highlights.
In August.
Donlin gold was a major sponsor of the in it for the long haul with the association of village Council, President and other regional partners on the fourth and largest ever backhaul project to remove hazardous.
And electronic waste from 'twenty six villages in the <unk> region.
By removing and properly disposing of these waste it keeps them out of the village landfill and protects the natural resources in the area.
When the agreement signed with the upper castigated during the third quarter Donlin Gold now has signed eight shared value statements with villages in the region that formalized current engagement with key local communities.
These agreements expand on the long term relationships already established with these communities and address specific local needs such as water sewer landfill projects.
Salmon studies in.
Metro health programs.
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 Barrick, North America, who is chairman this year I hold that position.
Another question. We are often asked is where it is dominant fit in the <unk> portfolio and.
And dominant as they are only Greenfield project located in North America.
Donlin gold is on private land that were specifically selected for its mineral development potential under the 1971, Alaska Native claims settlement Act.
As shown 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 pack supporting indigenous population going to last year.
As landowners to Arista and PKC are committed to developing a mining operation consistent with their elders vision of responsible development that creates jobs and economic benefits, while safeguarding 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.
<unk> has approached the disclosure of our environment, social and governance performance pragmatically as a development stage company disclosing benchmarks that we believe are most relevant measurements of our performance.
We produced our first inaugural sustainability summary report early this year.
And have regular interactions provide updated information.
To various groups as well as investors and other stakeholders.
Our selection of the performance measurements, we used in 2020 can be found on slide 15.
<unk> is committed to responsible mining 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 while benefiting from economic activity.
As one of the largest gold development projects in its category.
We recognize the donlin scale is remarkable.
With approximately 39 million ounces of gold in the measured and indicated categories and a mine life measured in decades.
When compared to 2014 large scale gold projects in the Americas as shown on slide 16.
Donlin is five times bigger.
And the average.
The scale of Donlin combined with its grade at two in a quarter grams as shown on slide 17 is twice.
The global average for open pit deposits.
As currently envisioned 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.
At Global Gold production continues to decline for most of the major reasons.
It's clear the industry needs projects with scale.
Jade and longevity.
All of which Donlin offers.
And in a favorable jurisdiction.
Only three of these operations produced more than 1 million ounces in 2020 as shown.
On slide 19.
You can see the Donlin gold project in Alaska.
Our five largest development stage gold projects are in dark blue.
Three of these are in North America, and if you've combined all three.
They are still smaller than the Donlin gold project.
Whether in production or in development Donlin Gold was ranked among the top operations globally.
We're producing today.
Looking globally. There is only one development project that has both scale and a desirable mining locations.
And that's predominant gold project.
While we are focused on the 2000.
'twenty, one drill program permitting and modeling work, we have not lost sight of one of the projects most important attributes found.
Donlin Gold's truly exceptional exploration potential.
The projects and download is contained with only within three kilometers of an eight kilometer mineralized belt.
As shown by the Act and.
<unk> and Lewis pits in 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.
This is a solid foundation on which to advance this rare and unique project.
We feel the time invested upfront to 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.
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.
Decreases of <unk> 9 million from the prior year quarter, primarily 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.
Of marketable securities.
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 other was $4.0 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.
<unk> $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 the slide number 25, we talk about Nova gold 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>.
<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 a place on the cost curve the mine life and ultimately the existential attribute of jurisdictional safety rendered that.
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 South 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 Nova gold, 60% 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.
Cities.
Then to the benefit of our shareholders not having to have been diluted.
And the sale to new month, 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 drilling campaigns.
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 is of course, our 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 shared interests, but shared values.
The culture of mutual respect between Novo Donlin gold and the people in remote villages and throughout Alaska is absolutely for us our state grid bond, we have well established partnerships with native corporations, we engage with them in activities to enhance employee.
<unk> 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 federal governments.
Onto slide 26.
We're in a bull market in gold.
Bold has a tendency to do what <unk> expected to do.
And what <unk> seen 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 <unk>.
We 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 have dwindled the exploration budgets are inadequate the ore grades.
<unk> to full production costs as a consequence of those falling grades.
Are rising.
The central banks considered and it continued to be buyers not sellers and last but in my mind as someone who has visited 110 countries give or take one or two and has been.
<unk> been involved in resource development 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 youre 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 group it hasnt been taken over by resource nationalism.
Yes.
The local communities have not withdrawn their social license.
You are 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.
It's a currency that can't be printed if anything the printing of that currency by those who missed it.
<unk> is in decline.
<unk> gold as something that provides you with inflation protection and deflation protection and it has a multi millennial provenance that no other asset class of its kind 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 stability 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 a museum has in its collection.
That is 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 <unk>.
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.
There really are very few large boat projects 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.
Being turned from a prospect all the way through the value chain of exploration of studies of permitting.
Construction you are 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 coal.
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 acquisitions. The top 19, both producing companies rizza.
<unk> 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.
Current gold exploration budgets are 55% below peak levels, we understand this.
So both companies engaged in quite a lot of capital destruction, primarily because of the sub par in nature of the assets that they were developing.
But the industry depends on grassroots and early stage exploration for significant discoveries, if it's 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.
Covered 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.
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 of you who know me you know that as they say I made my bones in places like Bolivia, South Africa.
And Bob way.
Congo.
I was.
Instrumental in the sale of Kibali to Barrick.
I am not unfamiliar with jurisdiction I'm, a historian by background I understand cycles. Those cycles took me away from the developing markets for a very simple reason.
Truly believe that the name of the game has changed from seeking out assets that gives you great leverage to an underlying theme to seeking out those assets, which gives you great leverage to an underlying theme in it.
Jurisdiction that will allow you to keep the fruits of the leverage resource nationalism is rising budget deficits in the developing world are rising.
I'd.
That one will be able to keep what you thought you had.
Is akin to an ace 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.
A 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 handled.
That was before the unchartered waters that we're in with regard 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 theres 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 is 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 provides to our shareholders.
We take this up to $2500 gold I don't believe $2500 would be a real number but what you can see from the increase to 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 projects 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 rates, because thats, where we were before the go where the gold is mantra took hold in the 19 in the in the 19 nineties.
When newmont went to on a codeshare.
That's what started the whole.
<unk> frontier spirit of the space I think it's.
Poetic unfortunate, but poetic that 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 of counterculture.
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 are in the right location, you will get the maximum fruits of the leverage that you seek from a gold bull market our preferred place and if we didn't think that was the case, we sell it and pivot to something else is donlin 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 ourselves not only as 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 XR 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 <unk> is a must own asset if you want to get octane in the space and get full value.
To leverage in North America.
I should say as well we are extremely grateful to their fidelity no pun intended although.
Let's March 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.
With people of first Eagle made <unk> their first development story in their portfolio that was a huge huge vote of confidence as well as X or the <unk> families 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 considered.
Make donlin for 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 doubled 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 jurisdictions with respect for socially and environmentally responsible mindset or.
Our 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 have strong time-tested support from Premier institutional investors, who share our vision for building one day when the time is right.
Premier gold asset in the world today.
Thank you ill turn the.
Back to.
The floor. Thank you.
Thank you operator, we will now open the line for questions.
Thank you.
We will now begin the question and answer session.
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.
Yes.
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 at play the price action today, it feels extremely kind of puzzling.
Also have inflation rate endpoint and sort of a 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 prices lagging the excellent fundamentals.
Well first of all as I actually began the presentation. It's the nature of gold that it will befuddle Yo It will do what you least expect it to do.
The good news is that one day.
Do believe that will wake up and see gold up $125.0, or $100 probably unknown use.
When the financial crisis came in over eight or nine.
Gold 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 short to wash 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 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 leg.
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 statements 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 the 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 that 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 Thats the way, we positioned ourselves I have the freedom to be able to invest in any asset class I want.
But 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 very helpful and just one more for me.
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.
What are some of the aspects of this new document that you're fundamentally rethinking and as you've kind of draft. The new the new study. Thank you.
Sure happy to speak to that.
<unk> approved.
Proved additional funding.
Advanced the project at our last board meeting and I think a little bit of context would be helpful for that.
At Donlin.
Focus for many years has been twofold.
We keep a lean staff at Donlin.
Had robust community relations teams and permitting staff and.
In recent years with our drilling.
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.
Gear up our staffing levels, we have.
We are going to be adding geologists engineers and so on and just laying the foundation for when the owners ultimately make the decision to go forward and I think that's something we'll be 90.
Not in a position to comment on today, but we will be guiding 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.
Yes. Thank you.
Greg I just wanted to follow up also.
<unk>.
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 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 <unk> at all neglected in terms of your focus.
But at the same time.
Companies are becoming very very focused on minimizing our there.
Their footprints and 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.
Well Trevor let me, let me break that down into a cup.
A couple of cases per year and 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 it's.
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.
Yes.
Donlin frankly.
Frankly, it benefits a lot from the work that they've already done so 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 and will certainly incorporate it into the projects that we ultimately.
<unk> tried to take forward.
Yes, just.
Was wondering.
<unk> already looked at at different forms of energy in terms 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 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.
The size of the operation.
I think Trevor water management air quality, all aspects of the project.
Being a.
Reviewed.
And really as we speak I think particularly.
This has been a benefit to us as well.
Barrick comes into the project now with new people, new set of eyes, and we've just really gone back through every aspect of the project water management tailings deposition and air 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.
The learnings from our partner, we're obviously not an operating company. So that's an area that.
We appreciate it happened now.
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 of of time is that we've seen so many new technologies emerge and efficiencies and 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.
Okay.
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.
Simple assumption.
Simple assumption.
So barrick 25% of.
50%.
And does that paid for the rest of your obligations.
Essentially how 25% of the project, but you're actually in a better place now holding as much cash as you hold.
Same thing of all the different ways you can add your share of the project consumption.
Project capital.
A few ownership points.
Growing our revenue royalties selling a stream.
<unk> equity.
Project debt.
If you are correct that.
Could you rank, which one of you. Thank you.
Sure.
As you like better or rule out any of those you would consider.
So John you're right.
Natural model.
That's an interesting and somewhat philosophical question, describing our ladder lateral outlook to 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's 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.
Participants 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 already of decades.
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.
<unk>.
And 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.
To add tens of millions more ounces, we see that.
We're not looking.
The rest of the eight kilometers of strike.
But mine life gives you advantages in being able to finance that are very different if you've got an asset of a few million ounces, which is actually as you well know that's.
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 <unk>.
910, 12 years, its not bad that's normal.
We're talking about something that could be producing potentially.
Ounces a year for decades.
There's not very much out there that's like that the only comparable but we've been able to find.
Is the Sukhoi log project with <unk> in Siberia, and not surprisingly it's on the other side of the bearings straights 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.
<unk>.
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.
I'm a 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 on <unk>.
70, 80% project financing and Thats 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.
Sure.
In many respects I consider this is my home region and it is not for economic purposes for a lot of other reasons of.
Longstanding relationships suffice to say.
That the interest in Donlin and I can tell you that the sovereign wealth funds have been out there to visit it. So they know this assets extremely well when the time comes to finance this asset.
We have a lot of friends and not just those that you know.
We already are in business with him who have known us and who have seen us fulfill all of our promises, but we have a lot of people, who would love to be able to participate in the financing of the.
The Premier Gold mine in the Premier jurisdiction.
And so I don't think that we need to look at Amy mechanisms that would require us having to in any way dilute our stake in the asset and also there is another factor here in today's market. What do you think would be the interest rate for project going on.
Truthfully.
Hi.
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 am 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.
Right.
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 sites to the mining industry.
If you believe as we do that Donlin is an asset that in its 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 is that it keeps everybody honest, but if you're a shareholder of the company and you know damned well that there is going to that theyre going to be a lot of M&A interest in half of what we think could be the new Nevada, you want to make sure that you preserve the absolute into.
<unk> of the value proposition there is no mining company in the world.
Which would find itself.
In any way feeling diminished or compromised by having a 50.50 joint venture relationship with Barrick $100.0, it changes the dynamic.
I mean I.
Would 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 you are going to see all kinds of dislocation in the developing world. All the focus will be on safe jurisdictions, and youre seeing that by the way within the last week.
To us Donlin is catnip.
As a pure play on.
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 Novo's will have multiplied.
I think the share price of 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 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 growth was small, but very low cost project in Mexico.
So about $100 million.
Build their project, a few months ago around 10% including fees.
If we were sort of work on the assumption so you're you're bigger than you got better friends.
On your project or.
8%.
Yeah.
Then we would be working.
The rate of 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.
Mid teens rate of return.
Just hoping that the construction.
It doesn't flow its branch out in rest of the Capex and opex by more than 10 or 20%.
Okay.
I believe that we'll be able to do better than that excuse I think in terms of building financial models.
Just trying to simulate returns excuse me for being very.
Boring mundane questions.
Theyre 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.
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 two.
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, it's not actually true.
In 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 are willing to sell forward a little <unk>.
Percentage of.
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 gold 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 ours.
<unk> 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 final.
Ensing, 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 have this discussion I'm not saying that this is a discussion that we're having now but I'm just using reason in la.
Roger if we sold forward some gold at 2200.
The <unk> hundred dollars 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 20 to 30, what have you and we'll be able to do our equity component of.
Our 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 metal.
But just bear with us the good news is we stopped 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 as 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 far.
Steel 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.
And then we're doing the right thing for shareholders and I think over the last 10 years.
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 am grateful and truth.
And no we didn't set this up.
Perfect.
Our next question is from David Lozinski private Investor. Please go ahead.
Good morning.
Okay.
I just wanted to reflect back to the first caller.
Luke.
<unk> Luke Larson President.
Because it's about the fact that the gold price was.
It's not.
Reacting or behavior and Mark people.
Our insured or people furniture.
And I think.
Tom and Greg.
I think you have to use discretion, how you answer pressures.
But as an American citizen.
I just wanted to say its stability on banks.
<unk> on behalf of the Federal reserve.
It takes guts to sorry, but nobody.
And I firmly believe and I think Tom there are 100% right, one that youre going to wake up and going is going to be a $500.
Pick up three pounds overnight.
Doesn't want to I don't want that the current enterprise is going to say what's wrong.
And.
So as you can see I'm very passionate about that.
I'm not sure on the shrink.
Thank you David.
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.
Library and at times philosophical discussion and we look forward to updating everyone with our Renaissance on the ongoing drill program.
Yes.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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