NovaGold Resources Inc. (AMEX:NG) Q1 2023 Earnings Call Transcript

NovaGold Resources Inc. (AMEX:NG) Q1 2023 Earnings Call Transcript April 5, 2023

Operator: Thank you for standing by. This is the conference operator. Welcome to the NovaGold 2023 First Quarter Financial Results Conference Call and Webcast. . I would now like to turn the conference over to Melanie Hennessey, Vice President, Corporate Communications. Please go ahead.

Melanie Hennessey: Thank you, and good morning, everyone. We are pleased that you’ve joined us for NovaGold’s 2023 First quarter financial results and also for an update on the NovaGold’s project. On today’s call, we have Dr. Thomas Kaplan, NovaGold’s Chairman; Greg Lang, NovaGold’s President and CEO; and David Ottewell, NovaGold Vice President and CFO. At the end of the webcast, we will take questions by phone. and by e-mail. Additionally, we will respond to other questions received subsequent to the call by e-mail. I would like to remind our webcast and call participants that, as stated on Slide 3, 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 included in this presentation. I now have the pleasure of turning the presentation over to our President and CEO, Greg Lang. Greg?

Gregory Lang: Thank you, Melanie, and good morning, everyone. All of us at NovaGold take great pride in the fact that we have been laser-focused and very successful on executing the strategy set forth by our Chairman and myself over a decade ago, mainly to unlock NovaGold’s high-quality assets for our shareholders and got to take our energy to create the maximum leverage from a pure role play and a unique endowment that is the Donlin Gold project. This has been a foundation of our investment thesis. As shown on Slide 5, we have been steadily advancing Donlin Gold up the value chain in various areas over the past decade. These areas include the completion of the 43-101 technical report and the update to the second feasibility study.

We received a joint record of decision from the iCore engineers and the Bureau of brand management as well as other major federal permits. And most recently, we completed the largest drill program in Donlin Gold in over 15 years. We believe that the Donlin Gold project is truly best-in-class in its combination of attributes, which are shown on Slide 6, possessing the unique combination of industry-leading science, grade and excellent exploration potential, which we move viewing our gold industry. And all of this in a safe and time-tested jurisdiction. Alaska is a great location to develop, build and operate a mine for many generations to come. In my view, it really is the ultimate company maker. As currently envisioned, Donlin, we averaged over 1 million ounces per year of production in 27 years.

When looking at the other developer groups, as shown on Slide 7, Donlin is by far and away, the largest gold production continuing to decline for most of the top producers. It is clear the industry needs projects with scale, grade and longevity to sustain us. As shown on Slide 8, the twice the industry average rate for help to pit once in production, Donlin would be one of the lowest cost producers in the gold industry. Turning to Slide 9. The leverage to a higher gold price is exceptional at Donlin. The after-tax NPV at today’s gold price is over $7 billion and a 5% discount rate or $22 million on discount. The great exploration potential is another remarkable attribute. ACMA and Lewis deposits as shown on Slide 10, and occupy less than half of the 8-kilometer mineralized building bill, which itself is located on less than 5% of Donlin’s land position.

A testament to the excellent exploration potential were the results from last year’s program. As shown on Slide 11, the top 20 intersects, returning some of the best assay results seem to be at Donlin and among the best reporting in the entire industry last year. For example, for 2068, the buyer group returned $42 million and over 30 grams, including a subinterval of 23 meters at 54 grams. As highlighted on Slide 11, incredible upside exists to increase houses and expand mining. Location is truly keen, having great leverage in a place where you compete the fruits of your leverage is worth the investment and time any resources. On the map included on Slide 12, we feature some of the top 3 gold producing operations in the world, and 5 largest gold development mine rigs.

As private landowners, both Calista and TKC are dedicated to developing domino in a way that remains consistent with the owner’s vision of responsible development of creating jobs and economic benefits for the surrounding communities as well as protecting the local culture. A few of the quotes are provided on Slide 13 from the leaders of both Alaska Native corporations, their knowledge, guidance and engagement are extremely valuable in ensuring a responsible and sustainable economic development throughout all phases. I’ll now touch on some of the my volumes that we’re achieving and the key activities of the first quarter — the Bolongo 2023 field program commenced earlier in the year to complete the necessary fill work and geotechnical drilling required for the Elastagen safety series applications.

Additional work included on-site hydrological drilling to further define, flow groundwater in the areas that the plan got and pick and surrounding infrastructure to support mine planning and design. Donlin Gold prioritizes local hiring and invests in supporting the communities throughout the IT region. During the first quarter of our 2023 field program, we had a total workforce of 44 direct hire employees, most of which are from the project region. This is a continuation of the success in Donlin’s local hiring program, which was initiated very early on during the exploration phase, our focus of site is 4 key areas, as shown on Slide 16. First, my optimization. We are finalizing the update of geologic and resource models with the drill results through the last 2 years, and we are incorporating those into the key project assumptions, inputs and design components for optimization.

Ultimately, this supports the decision to proceed with an updated feasibility setting even the engagement is also very active area of ours, working alongside with our Alaska native corporation partners. Finally, we continue to advance our permits for the region card process and supporting the state in maintaining the existing permits. We’re also very active with bipartisan outreach to the biden administration, members of the U.S. conference and the administration nothing all has. Assisting and partnering with local communities and region has been a constant focus of one working in concert with Jalista and TKC providing critical support. As shown on Slide 17, Donlin was premier Sponsor of the in Dollar race and is part of the Alaska SafeRiders program.

Also, in collaboration with company house and vessel community services, Donlin developing an action plan to help address the client an ongoing youth in security housing and other issues, just to name a few. In partnership with the Alaska Native Tribal Health Consortium, Donlin is advancing efforts to improve the overall health and safety standards of water and sewer services in real . In collaboration with TKC and Village at Crooked Creek, Donlin provided financial support through the construction and maintenance and ice variables to a winter travel between remote communities. On average, a total of 300 miles of ice road is constructed and maintained, thanks to this program. Advancing indicational opportunity in Alaska. This is another priority for the company.

We recently awarded the first local scholarship at the University of Alaska to an undergraduate student — studying geological engineering and also support the Alaska XL program, nonprofit, providing educational support to growing youth across the region. In March of this year, we released our 2020 annual report, which features a special confrontation between Dr. Kaplan and Daniela Cambon, ever at large in host of the Mail Kanbanchi on Stansted research and shown on Slide 18. Their discussion covers a broad range of topics, including geopolitics, history, markets, and opportunities in the gold space and central banks and the largest piles of gold impressively and historically and the corresponding upside from the premier no extremes. Those reviews was recorded at the New York Stock Exchange and a full transcript is available in our annual report.

Those interested watching the video can access the interview on other insto.com. With that, I will now turn the call over to our CFO, David Ottewell.

David Ottewell: Thank you, Greg. Slide 20 highlights our first quarter operating performance. We reported a net loss of $10.7 million in the quarter, a $0.7 million increase due to increased interest expense on the promissory note, higher Donlin permitting costs, higher corporate and legal expenses, partially offset by increased interest income and income from the 2021 sale of our interest in the San Roca mineral property. First quarter cash flows are highlighted on Slide 21. Cash decreased by $9.7 million, primarily to fund our share of Donlin and for corporate administrative expenses. The decrease in cash used in the first quarter of 2023 compared to 2022 was due to the timing of corporate liability insurance payments in 2022, withholding tax paid on share-based compensation in 2022 and proceeds received in 2023 for the sale of .

No shares were issued in the first quarter of 2023 for the PSUs granted in December 2019 as the company’s share performance over the 3-year period was below the minimum performance criteria relative to the Global Gold Index. On Slide 22, we note our strong treasury. Our financial position includes cash of $54 million term deposits of $62 million and $25 million due from Newmont in July 2023. For the full year, we continue to expect to spend $31 million, including $17 million at Donlin, $13 million for corporate G&A and $1 million for working capital. I’ll now turn the presentation back over to Greg. Greg?

Gregory Lang: Thank you, Dave. Turning to Slide 23. The focus of our activities this year will be, one, updating the geologic and resource models, continuing field work, collecting geotechnical and hydrological information to support advanced applications reviewing key project assumptions and inputs and design components for optimization and mine engineering and infrastructure, we will continue to advance current permits through regulatory process and support the state in depending on the existing permits. Lastly, we will continue to engage, maintain and grow support through project in the region. Donlin Gold has been blessed with modern and supportive shareholders, comprising many of the most respected names in the investment who’s presence and counsel have been invaluable.

Some of these are listed on Slide 24. We are grateful for their decision to invest with the company and for their continued interest and engagement. We have firm to all of them and as stewards of the company, we continue to be focused on delivering on our strategy in enhancing the value of Donlin Gold project, increasing both shareholder and state code as well in the safe, socially responsible merit. And we positioned the company to enjoy the fruits of this unique leverage and what we believe is one of the best positioned gold development stories in the marketplace, I look forward to continuing to deliver on our promises and keeping an open eye of communication between us as we reach even more milestones in 2023. I will now turn the call over to the operator and open it up for questions.

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Q&A Session

Operator: . The first question comes from Mike Parkin from National Bank.

Michael Parkin: It might be a bit early to speak on this, but I’m just wondering like what some of the higher-level trade-off studies might be considering if you’re — as you move forward in 2023, just looking for some sense of some of the bigger kind of delta items that you’re looking at for the project.

Gregory Lang: Right, Mike. I’ll take that question. Thank you for your interest, Mike. So the trade-off studies have been primarily focused on infrastructure, but we’re also focused on the gas pipeline and just other of the big key cash components for capital. But in addition to the infrastructure, we’ve done some fine-tuning or looking at options on quotation and a lot of deligation work back on sheet end parameters and the project. But we’re also looking at the ones optimizing the mining based on the great drill results we’ve had this year. specifically what opportunities are out there to enhance the grid by more selective smaller mining crew. Clearly, we’ve demonstrated that the high grades really do exist the demand on Donlin. And we look forward to updating everybody on the study since we stumble on the conclusion.

Melanie Hennessey: Great. I have some questions that I’ve committed by e-mail. The first one will be for you, Greg. When would you expect the investment decision will be made on the Donlin project?

Gregory Lang: Let me give you the time line on this study, and we’re wrapping up the various trade out studies now while it’s to move geologic model. All of these studies and some models will be presented to the Donlin Gold board or the almost in the next couple of months. I think that’s — we’ll be in a position then to a bit more specifically on the

Melanie Hennessey: The other question was with the Allmand loss per ounce at the Donlin Gold project. That one is directly towards you, Greg.

Gregory Lang: All right. First, your question was on the RM cost and are most recent refresh in the 43 mild mile ride. Mine would average about $630 an ounce. We would expect them to be a little bit more competitive and lower in the first 2 years of the mine life compared in to higher mining early. But lowest end of.

Melanie Hennessey: Before we proceed to the final question, we use Operator? The next question comes from Lucas Pipes from B. Riley Securities.

Lucas Pipes: So I wanted to ask about reserves and resources in the context of the updated feasibility study. Would you expect changes to those measures? And then would you anticipate any changes in the cutoff grade ?

Gregory Lang: All right. With the — we operate at a couple of basis that is. The drilling has that really delivered some nice rates. I think if anything, we will slightly enhance the grade the overall value and gold deposit. Most of this is really dealing our partners in diligence. Donlin’s been the company to know the goals for many years. we know the asset very intimately and the tiling trade-off studies that we’ve been conducting, and they’ve really been empowered our partners in diligence. And I think we do the trade-off studies and the drilling of the insight, I would say it’s more validated than changed our view of the project. I think basically from the mobile go point of view, we’ve been a story partner. We’ve answered their geographic and due diligence curiosity. I think certainly from my perspective, a Next logical step for the owners to receive the new feasibility stand. And that would be any number later this year.

Melanie Hennessey: So we have two more questions from the line of is for Greg. You mentioned outreach to government in your comments. Do you detect any changes to the attitude of Washington to the resource sector as the world has changed since Biden was named President?