Q3 2022 NovaGold Resources Inc Earnings Call

Yes.

Thank you for standing by this is the conference operator.

Welcome to the Nova Gold third quarter 2022 financial results conference call and webcast.

As a reminder, all participants are in listen only mode and the conference is being recorded.

After the presentation, there will be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad.

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I would now like to turn the conference over to Melanie Hennessey, Vice President Corporate Communications. Please go ahead.

Thank you Gary and good morning, everyone. We are pleased that you've joined US for another goal 2022 third quarter financial results and also for an update on the Donlin Gold project on.

On today's call, we have Greg Lang, <unk>, President and CEO , and David Ottawa, and overdose, Vice President and CFO at the end of the webcast, we will take questions on the phone and respond to questions.

During the webcast and also by E Mail.

I would like to remind participants that 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 looking forward forward looking disclaimers included in this call.

Vacation.

I now have the pleasure of turning the presentation over to our president and CEO , Greg Lang Greg.

Thank you Melanie.

We continue to be encouraged by the outstanding results in the asthma and Lewis deposits that have returned significant high grade intercepts and demonstrated good great continuity.

These results further support the global resource estimate.

Recent modeling concepts.

And strategic mine planning work.

We have included some examples of high grade intercepts on slide four.

Which include hold 2020 with over 52 meters grading almost 15 grams per tonne.

Another segment in that same hole intersected over 18 meters and almost 11 grams per tonne.

And drill hole 2056, with 74 meters at over four grams per tonne.

For a more extensive description of recent drill results. Please refer to the joint release from Nova Gold Barrick and Donlin Gold dated July 28 2022.

Okay.

Additionally, the Donlin Gold Board approved an increase from 34000 meters to 42000 meters in the third quarter.

The drilling site recently wrapped up with the total of 141 holes.

To date, the Donlin Gold project reported assay results for approximately 9870 meters with additional assays are expected to be released in the coming weeks.

The final results will be available in early 2023.

Donlin Gold's 2022 expenditures are estimated to be about $64 million.

Of which <unk> share is 50%.

As shown on slide five the drill program included tight spaced grid drilling and structural domains.

In pit.

And below pit exploration in sparsely drilled areas.

Platform mapping to confirm mineralization continuity and key geologic controls in several areas with deposit.

Waste rock facility condemnation drilling.

13, geotechnical drill holes for the Alaska Dam safety certificates.

Okay.

The expenditures also support the advancement of project planning and field work as well as numerous environmental community and external affairs initiatives.

After decades of engagement, we continue with our proactive bipartisan outreach in Alaska, and Washington D C with our partner <unk> to.

To highlight the thoroughness of the project's environmental review and permitting processes as shown on slide six.

Alaska is U S Senators Lisa Murkowski.

And Senator Diane Sullivan have consistently expressed their long term support for the Donlin Gold project.

Donlin gold provides support to the state of Alaska as various agencies advance permits and certifications required for the project.

Okay.

Permitting in Alaska has represented a substantial undertaking over many years.

And in fact, a tremendous achievement to ensure a diligent thorough transparent and all inclusive product SaaS for everyone involved.

The inherent value of having a federally permitted project on private land designated by law for mining.

Should not be overlooked.

Slide seven.

Resolve with federal and state permits and certificates received to date.

As with our mining projects in the developed world, we have always prepared and organized ourselves for challenges.

Our management team is intimately familiar with these processes that needed to be followed.

Donlin gold and its owners.

Alongside the steadfast advocacy of <unk> and Teekay C <unk>.

Continued to support the state and its defense of what constitutes an exceptionally thorough and diligent permitting process.

Okay.

Ongoing donlin gold permitting activities are included in slide eight.

We continue to support the department of environmental quality and its efforts on the state's clean Water Act 401 certification.

On July 14th the Commissioner granted the request for Tori.

Tori peering related to potential water temperature effects to Cripple Creek.

The briefing is underway and should be completed in the next six months.

The right away lease for portions of our natural gas pipeline on state land, where separately appeal and Alaska Superior court by two parties.

Legal briefings are being prepared by the parties.

And we anticipate a decision in 2023.

Yeah.

The state of Alaska's issuance of water rights for the mine and transportation Michelle News was also appealed.

The administrative record.

We filed on September 12, 2022, with both parties preparing their initial briefs.

A decision is expected next year.

It should be noted that all of the appeals challenging donlin gold permits to date have been unsuccessful, often multiple times and we have confidence in the process.

Nonetheless, objecting to objecting to mining is part of the business in itself.

With respect to the reinsurance or granting of new permits we are working on the following.

Our new air quality permit.

Which is expected to be in place in mid 2023.

This is required in order to ascertain that the emission controls reflect best available technology and that air quality standards will be met.

Yeah.

And updated Alaska pollutant discharge elimination system application for a regular rescheduled renewal is coming up and we anticipate a decision by mid 2023.

Relocating easements and public right of ways in the project area.

The agency issued the proposed relocation plan for public comment in the summer of 2022.

And a final decision is expected by year end.

Lastly, the field work related to the issuance of the Alaska Dam safety certificates resumed during the third quarter.

<unk> and Donlin gold continued to work with <unk> and Teekay C and all aspects of outreach and engagement throughout the Y K region.

We're involved in the areas education.

<unk> safety cultural traditions and.

And environmental initiatives.

Including creating a subsequence committee comprised of independent regional stakeholders, reflecting diverse views on development initiatives among other activities.

The success of our drill program and project activities in the third quarter and for the first nine months of the year is due to the exceptional dedication of the Donlin gold team in Alaska at the site and then the Anchorage office.

The majority of our employees, where local hires from 24 different communities in the Y K region as shown on slide 10.

They all share the goal of protecting the health and safety of their colleagues.

Donlin Gold has not had a lost time incident.

And over a decade with millions of man hours worked safely.

That goal both.

Both at Novo gold and Donlin gold is indeed, our top priority.

As shown on slide 11.

Sustained efforts, we're also underway in the third quarter to promote youth education and healthy activities in the Y K region through programs, such as Alaska, Excel, which provides life changing educational and professional opportunities for rural Alaska and students and young adults.

Yes.

Other important initiatives included sponsoring the Alaska Native Heritage Center, which encourages cultural awareness across the Alaska.

And our partnership with the vessel community Services Foundation, which is dedicated to development growth.

The continuance and enhancement of community based programs and services.

Two additional shared value statements were signed in the third quarter with villages in the Y K region for a total now of 11.

These agreements.

<unk> current engagement with local communities.

Expand upon the long term relationships already established with them.

And address their specific community needs.

Donlin gold and Novo gold contributed to <unk>.

And partnered.

In the fifth in it for the long haul backhaul project over the summer months to collect remove and safely dispose of household hazards and electronic ways from 30 remote villages throughout the region.

Several photos of this project are shown on slide 11.

Over the past five years, nearly 400000 pounds of waste was removed.

That otherwise would have ended up in landfills and waterways.

David Underwhelm Novo Gold's, Vice President and Chief Financial Officer.

We will now give an update on our third quarter financials.

Dave.

Thanks, Greg.

Slide 14 highlights our third quarter operating performance.

Reported a net loss of $16 1 million in the third quarter.

An increase of $4 two nine from the prior year quarter of which $2 7 million was due to the expanded donlin gold work program.

And $1 $6 million from an increase in other expenses, including.

Increased interest expense on the back note.

The decrease in the fair value of marketable securities.

Foreign exchange movements.

And lowering accretion income due to the maturity and the $75 million.

You might note last year.

Third quarter cash flows are highlighted on slide 15.

Cash and term deposits.

By $10 4 million, primarily to fund our share of Donlin gold at the corporate administrative expenses.

Compared to the prior year quarter the increase in spending was due to the expanded work program at Donlin.

<unk> offset by higher interest income.

On slide 16, we note our strong treasury.

Our financial position includes cash and cash equivalents of $62 million.

Turning deposits of $70 million.

And $25 million due from Newmont in July 2023.

So the per year, we expect to spend $48 million, including $32 million of Donlin.

13, nine for corporate G&A and $3 million for withholding taxes on share based compensation and working capital.

I will now turn the presentation back over to Greg.

Okay.

Thank you Dave.

Donlin gold merits all of the attention it receives because of its unique.

<unk> attributes.

As shown on slide 17, the <unk>.

Reason for such a status.

Beyond providing investors with pure leverage to gold.

Isn't the projects' key attributes.

Starting with its size of almost 40 million ounces in.

MNI.

It's scale as it is expected to be 1 million ounce a year producer.

High grade at two in a quarter grams per ton and as a result is anticipated to be among the lowest cost producers.

There is excellent exploration potential beyond.

The already planned almost three decades of production.

Located in Alaska, the second largest gold producing state in the U S with a well established tradition of responsible mining and provide sustainable longevity for an operation like Donlin.

We're also on private land.

Designated for mining with <unk> and Teekay see as our partners who are dedicated to responsibly advancing this project.

As shown on the Bar chart on slide 18.

With almost 40 million ounces of resources Donlin gold.

Is by far the largest among the development projects.

No other gold mine has started with this size.

Anticipated to be 1 million ounce producer per year.

<unk> not only provides scale, but longevity over a period of 27 years of production.

As shown on slide 19, with looking at the select group of gold development projects, North and South America.

Donlin is by far the largest.

With exceptional grade at two in a quarter grammy's or twice the industry average for an open pit project as shown on slide 20.

This advantage enables donlin to be predicted to be one of the lowest cost producers in the gold space.

The exploration potential is another exceptionally attractive attribute.

Whereby the open pit resource.

This is only three kilometers of an eight kilometer mineralized belt, which is less than 5% of.

Of the total land package of Donlin.

As highlighted on slide 21 incredible upside exist to increase ounces.

And expanding the mine life beyond three decades at Donlin gold.

Location is truly teeth, and having great leverage in a place where you can keep the fruits of your leverage is worth the investment in time and resources.

On the map included on slide 22.

We feature.

Three gold producing operations in the world and the five largest gold development projects.

<unk> defines what we consider to be the hallmark of a great natural resource investment.

As stated on many occasions, our chairman and largest shareholder Dr. Thomas Kaplan.

Seasoned investor with over three decades of experience in this space.

His investment thesis centers on establishing a stake and great assets that provide enormous leverage to an underlying theme.

And that are located in a safe jurisdiction.

That will allow one to keep the fruits of that leverage.

In light of its many outstanding and differentiate attributes Donlin gold is tailor made to feel.

A real vacuum.

High quality projects in the gold industry pipeline.

Donlin gold is fortunate to enjoy time tested partnerships with <unk> and Teekay see owners of the mineral and surface rights.

Donlin Gold's location on privately land specifically dedicated for mining activities. Following the 1971, Alaska Native claims settlement Act.

Represents a differentially differ.

Differentiating factor.

For most other mining assets in Alaska as per slide 23.

We deeply appreciate the critical value of having engaged Native Corporation partners and meaningful travel input that provides valuable insights about their lab and supports efforts for responsible and sustainable economic development too.

Every phase of the Donlin Gold project.

For all these reasons and many more we believe that Donlin gold stand in a league of its own as a premier gold deposit.

Once developed.

Project has the potential to form a major source.

Responsible economic development.

In the Y K region.

For many decades to come.

Our efforts.

Simply would not be successful about without the unwavering support of our steam shareholders. Some of which are included on slide 24.

We remain gratified to those who chose to invest in our company as well as for their continued interest and engagement.

As a shareholder myself I take that responsibility very seriously and with the support of our management team will continue to work diligently to advance the company and the Donlin Gold project.

<unk> management team's commitment to Donlin gold project has been unwavering for more than 10 years.

Because we and all of our stakeholders.

And guys the unique potential of this future operation as shown by the attributes on slide 25.

The expansions and cumulative work invested in the Donlin Gold project has substantially enhanced its value to alaskans as well as our shareholders.

It has also been consistently validated the attractiveness of continuing to responsibly advance this excellent asset up the value chain.

This year alone the combination of an ambitious drill program with our geologic modeling and interpretation work for the updated resource model advancing and updating engineering studies environmental activities and vast community relief.

<unk> and government affairs efforts with our native partners have all contributed.

To multiple achievements to date.

Yes.

With that operator, we will now open the line for questions.

Okay.

Thank you.

We will now begin the question and answer session.

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Okay.

Our first question is from Lucas pipes with B Riley Securities. Please go ahead.

Hey, good morning, everyone.

Yes.

Thanks for taking my question My first.

Question is around the 2022 drill program and if I thought there was a modest modest increase.

And I wondered if this inflation Mary driven or is it an expanded scope of the drill program. Thank you very much.

Hello, Lucas. Thank you for your question that the increase in that the drilling we're strictly an expanded scope of the project. We added about 8000 meters to the approved program and we were.

Even with the additional meters, we expect to come in underneath our drill budget and thats, because we achieved great productivity.

Up in Alaska, one of the biggest cost of drilling is the fixed component of opening in Macau. So the increased drilling had a very positive effect on our unit cost to drill and we were able to increase the meters without incurring significantly greater cost.

I'd like to hear that that's that's very helpful. Thank you and then you have a comment in the press release about it.

Your treasury today and the additional funds expected I think next year $25 million from Newmont and how this is sufficient to carry you through a construction decision. So I'm wondering if you could maybe provide just a little bit more granting.

Granularity on on those comments when would you expect the construction decision and what are some of the big ticket item.

In terms of cost between now and that point really appreciate the color. Thank you.

Sure Lucas Thanks for the question, Matt Yes.

This year's budget at Donlin was.

The largest in well over 10 years.

As I look to the future a lot of the significantly.

Expenditures over the last few years had been drilling related.

<unk> is our <unk>.

Our knowledge of your body increases and we're getting more satisfied with our understanding of the structural controls.

The expenditures for drilling tapering off and those will be replaced by the various engineering related studies that will ultimately support a new feasibility study decision.

So I think when I looked at the company's burn rate. This.

This year is probably a high watermark and we'll finish the year with stellar substantial treasury and as you noted we've got.

$25 million more coming in from Newmont next year.

I still think we're in great shape to continue to move the project activated.

Okay.

Okay.

And in terms of order of magnitude as you move into.

Updated feasibility.

Studying and engineering work.

What's the order of magnitude we should.

Think about on that 12 month basis, or so as you currently dose.

Yes.

We typically provide that level of detail with our 2023 budgets, which should occur later in the year, but in a general sense I would think that this year is the.

The expenditures going forward I do not expect them to exceed what we spent this year.

Alright, great really appreciate the color. Thank you and best of luck.

Thank you Lucas.

Yeah.

Once again, if you have a question. Please press Star then one we will pause once again for a moment is two callers join the queue.

Showing no further questions. This concludes our question and answer session.

I would like to turn the conference back over to Craig for any closing remarks.

Well again, thank you everybody for taking the time this morning to get an update on the Donlin Gold project on.

And on Nova Cold take care.

Thank you. This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

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