NG (2024 - Q3)

Thank you for standing by. This is the Conference Operator. Welcome to the NOVAGOLD 2024 Third Quarter 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. [Operator Instructions] I would now like to turn the conference over to Melanie Hennessey, Vice President, Corporate Communications. Please go ahead. Melanie

Good morning, everyone, and thank you for joining us for NOVAGOLD's third quarter financial results and for an update on the Donlin Gold Project. On today's call, we have NOVAGOLD's President and CEO, Greg Lang; and Peter Adamek, NOVAGOLD's Vice President and CFO. At the end of the webcast, we will take questions by phone. Additionally, we will respond to questions received by e-mail. I would like to remind everyone, 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 will now turn the presentation over to our President and CEO, Greg Lang. Greg?

Thank you, Melanie, and good morning, everyone. To begin today's call, I want to highlight why Donlin Gold is viewed as a Tier 1 asset by us and our shareholders, especially given the scarcity of high-quality projects in safe jurisdictions and the recent surge in the price of gold. Let's examine the impressive features of the Donlin Gold Project as detailed on Slide 5. Donlin boasts 39 million ounces of gold at an average grade of 2.25 grams per tonne, more than double the industry average. With a projected mine life of nearly three decades based on our known resources, Donlin Gold promises a long-term, stable and low-cost operation that would be one of the leading producers in the industry with substantial exploration potential for future growth. Backed by an experienced management team with a proven track record in mine development across the Americas, Donlin Gold has secured the necessary federal permits and the majority of the state permits, demonstrating its readiness for successful advancement. Donlin is situated on private land designated for mining in one of the world's top jurisdictions. This reinforces our social license to operate through our long-standing partnerships with Calista and TKC. Together, these factors position Donlin Gold as a cornerstone project with significant long-term value and strong potential. One of the standout features of Donlin Gold is its ranking among the largest and highest grade undeveloped open pit reserves worldwide, particularly compared to other gold projects in the Americas, as depicted on Slide 6. As global gold production continues to decline, the industry faces a shortage of high-quality development stage projects. This creates a heightened demand for projects that are characterized by scale, grade and longevity. Qualities that are vital to successfully navigating various gold price cycles. Moreover, with a grade of 2.25 grams more than double the industry average for open pit projects, as illustrated on Slide 7, Donlin is poised to become one of the most cost-effective producers in the gold industry. Currently ranked third out of 120 global jurisdictions and only one of 12 to achieve a AAA rating in the World Risk Report by the Mining Journal, Alaska is renowned for its strong and secure environment, especially in the mining sector, as shown on Slide 8. This reputation not only boosts investor confidence, but aligns perfectly with the promising attributes of Donlin Gold. As the second largest gold producer in the United States, Alaska's robust regulatory framework and commitment to responsible development creates a supportive climate. On Slide 9, we highlight the significant contributions of Calista and TKC as private landowners and key Donlin partners. Their commitment closely aligns with the Elders vision of responsible growth, emphasizing job creation, economic prosperity and the preservation of cultural heritage within the local communities. With land designated for mining activities over 50 years ago, their stewardship exemplifies a strong dedication to sustainable development. Throughout the permitting process, sustainability initiatives and community engagement efforts, Calista and TKC have provided invaluable experience, leveraging their deep understanding of the land's economic importance to enhance community well-being. Their partnership is crucial for the responsible development of the Donlin Gold Project at every phase, reinforcing its potential as a cornerstone of lasting economic development in the Y-K region for future generations. Moving to Slide 10. We outlined Donlin's robust permitting status. With federal permits and most of the state permits in hand, we continue to support the agencies in maintaining permits in good standing and defending the permits against legal challenges, ensuring the project's ongoing approval. The permitting process in Alaska involves extensive shareholder engagement, particularly within the local communities. While navigating jurisdictional complexities can be demanding, Alaska's political and social stability provides a reassuring investment environment, reinforcing our commitment to managing the regulatory processes effectively. Turning to Slide 11. NOVAGOLD is backed by a veteran management team with proven track records in mine development throughout the Americas. Our team brings extensive experience with leading gold producers and possess deep knowledge in building and operating large scale open pit and underground mines. Significant exploration opportunities exist well beyond the defined resources in the ACMA and Lewis pits, as illustrated in the graphic on the corner of Slide 12, covering only 3-kilometers of an approximate 8-kilometer gold bearing trend. The resource underscores the substantial potential to increase ounces and extend the mine life through ongoing exploration. On Slide 13, the chart illustrates the post-tax net present value at various gold prices. With today's gold price approaching the upper end of the chart, this reflects the value of over $30 billion at a zero discount rate or approximately $11 billion at a 5% discount rate. This projection underscores Donlin's substantial economic potential in the current gold price environment. I will now discuss the third quarter milestones reached and the ongoing project activities. During the third quarter, we advanced several key activities as outlined on Slide 15. First, our resource model is actively being updated and nearing conclusion. We have made substantial advancements in our metallurgical testing at a pilot plant in Ontario, Canada aimed at validating optimization to the flow sheet, which we anticipate completing towards the end of this year. Additionally, our work on the Dam Safety certification is moving forward with most preliminary design packages already submitted to the Alaska Department of Natural Resources in June and expected to be finalized by year-end. We anticipate receiving feedback on these packages in 2025. Furthermore, we are updating our groundwater and surface water models by incorporating the latest field data from geoscience hydrology and gathering data to refine the geochemical characteristics for future operational planning. These technical activities and ongoing efforts have delivered highly valuable insights for the Donlin Board and its owners and will continue to contribute critical data to guide our strategy and advancing the project. As we move to Slide 16, I'd like to highlight our ongoing collaborations with Calista, TKC and local leaders in education, community health, cultural preparation and environmental stewardship across the 62 Yukon-Kuskokwim communities. Our enduring partnerships with Calista and TKC have been essential for advancing project development and permitting. Through our commitment to engaging with these communities, we have built meaningful relationships, enhanced investments and strengthened our social license. In July, we hosted a site tour for residents of Crooked Creek and the Native village of Georgetown. Along with Calista and TKC, we held a public Open House in Anchorage Alaska, providing local Alaskans the chance to learn more about the project and engage in open discussions. The Donlin team continues to actively monitor and survey salmon fisheries in the Yukon-Kuskokwim watersheds. Notably, during the third quarter, we partnered with the Village of Napaimute and launched a salmon smolt monitory program on the George River, which is a tributary of the Kuskokwim River to assess smolt health and migration patterns. We proudly supported the In It For The Long Haul backhaul program for the seventh year, removing and recycling over 140,000 pounds hazardous household materials and electronic waste for a total of almost 800,000 pounds since the program began in 2018. Turning to Slide 17. Progress on the Dam Safety certification continued in Q3, with the majority of the preliminary design packages submitted to the Alaska Department of Natural Resources in June. We anticipate completing this process by year-end. In terms of state litigation, regarding Donlin water rights permits and the state pipeline Right-of-Way lease, briefing has been completed and oral arguments have been issued and scheduled for November 12th. All other state cases have been fully briefed. In Federal litigation on the Joint Record of Decision, including the 404 permit and the Bureau of Land Management Right-of-Way subsequent to quarter-end on September 30th, the court issued a decision upholding the federal agencies analysis of two of the three issues raised in the litigation. However the court agreed with the plaintiffs that the federal agencies took too narrow a view in analyzing the impact of a theoretical release from the storage tailings facility. The court did not vacate the permits and ordered a supplemental briefing on the appropriate remedy, which is scheduled to be completed in early November. With a deep understanding of the regulatory landscape, Donlin and its partners are dedicated to supporting federal and state agencies in overcoming the various challenges to the project's permits. We recognize the importance of meticulous preparation and organization in navigating the rigorous permitting processes in both the United States and Alaska. Our steadfast commitment drives us to collaborate closely with these agencies. We greatly value the bipartisan support and engagement for the Donlin Gold Project both in Alaska and in Washington, D.C. With that, I will now turn the call over to Peter Adamek to review the Q3 financial results. Peter?

Thank you, Greg. Slide 19 highlights our operating performance. We reported a net loss of $10.7 million in the third quarter of 2024, a $0.4 million decrease from the comparative prior year quarter, primarily due to lower stock-based compensation expense related to forfeiture of options and performance share units and lower Donlin Gold Project costs with no field program this year. This was partially offset by increased interest expense on the promissory note, lower interest income on cash and term deposits and increased general and administrative costs due to hiring of additional staff along with higher professional and consulting fees. Slide 20 highlights our cash flows. In the third quarter of 2024, cash and term deposits decreased by $7 million, primarily due to corporate administrative expenses and our share of Donlin Gold funding, partially offset by interest income and changes in working capital. On Slide 21, we highlight our strong treasury. Our financial position includes cash and cash equivalents of $45.6 million and term deposits of $60 million. Year-to-date, NOVAGOLD's corporate G&A costs and Donlin Gold funding are in line with our 2024 budget. For the full year, we continue to expect to spend approximately $31 million including approximately $17 million for corporate G&A and $14 million for Donlin Gold. With that I will now turn the presentation back over to Greg.

Thank you, Peter. Subsequent to the quarter, Barrick and NOVAGOLD held their annual workshop in Alaska to review the work completed to date, discuss the related 2025 activities and look at the next steps for the project. We remain on budget focused on completing project-related activities and advancing the Donlin Gold Project to an updated feasibility study to be optimally positioned to maximize the benefits for all stakeholders and shareholders. With total confidence, NOVAGOLD views the Donlin Gold Project as a prime investment in the gold market, an exceptional opportunity to leverage scarce, high-quality assets in safe jurisdictions. We deeply appreciate the unwavering support and trust of our long-term shareholders whose commitments and guidance have been instrumental in the company's success. Their decision to invest in their ongoing engagement are invaluable to us. We remain focused on executing our strategy with the highest standards of safety and social responsibility, all while delivering progress to enhance shareholder and stakeholder value. Thank you. Operator, we are now prepared to take questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Lucas Pipes with B. Riley Securities. Please go ahead.

Thank you very much, operator. This is Fedor Shabalin asking question on behalf of Lucas Pipes. Greg, you mentioned that the final documents expected to be submitted by year-end and comments on Dam Safety anticipated in 2025. So is this the only major permit left for you? And if so do you have an estimate of when in 2025 you would expect to receive it? Thank you.

All right. Well, thank you for joining the call on behalf of Lucas. The tailings dam and related water retention structures are the last remaining permit that the project needs of all the major permits. And we have waited deliberately till this stage to do this permit because it's fairly costly undertaking with a lot of geotechnical drilling and it really is not on the critical path. So now that we're nearing decision points, we felt it appropriate to advance the Dam Safety Certifications. It's a pretty rigorous process in Alaska. We're filing all the preliminary design packages now that will be reviewed by the state. And we anticipate approval probably in 1 year, 1.5 years, well in advance of our decisions on the project. So the permits are in hand. We're moving forward and it's not on the critical path for development. Thank you.

Got you. Thanks a lot. And my second one is on your update on feasibility study in the future. So with current gold prices, with current high gold prices, would you consider reflecting this in the updated feasibility study?

Well, we've -- we're working, we just completed our annual workshop with our partner up in Alaska. Mark Bristow and I attended that. And that's the time of the year where we lay out the plans for 2025. And that will, certainly, the price of gold is intriguing right now and helps projects like Donlin move forward. So we will be guiding on our 2025 work plan toward the end of this year with our -- and in early next year with our ongoing budget presentation. So, yeah, expect more from us early in the new year or late this year on the 2025 planned activities.

Got you. Thank you so much. And the last one, if you allow me to squeeze, regarding 2025 on CapEx. So it's a clear picture for the rest of 2024, but what about 2025? And what's the current cash burn rate? And, yes, and when we would expect guidance for CapEx for the next year? Thank you very much.

All right. Well, as Peter highlighted in his presentation, our treasury is still very strong with over $100 million. Our burn rate, I would anticipate it going up next year with increased activity. This year, it was about $30 million. You might see that up a little higher next year. But at any rate, we have sufficient cash on hand to continue to advance the Donlin project.

Thanks, Greg. I appreciate all the details and continue. Best of luck.

Thank you.

We have one question coming from the webcast, Greg. And can you speak to the different studies that have been done and the staged approach for the advancement of Donlin?

Sure. Donlin as originally envisioned and as permitted was a large scale open pit project with a new rate of approximately 53,000 tonne a day. Over the years, we have considered various scenarios for Donlin, which including building the project in stages to minimize the upfront capital burden. We would look at it as a build it in two stages, maybe half now, half year. So we've considered many alternatives and we will continue to advance various alternatives to optimize our investment in the project when we go to update our feasibility study.

Great. No further questions from the webcast.

Well, everyone, thank you for taking the time to get an update on NOVAGOLD and we look forward to providing continued updates as the year progresses. Have a good day.

This brings to close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.