Donlin Gold Project Costs: Decreased due to lower project costs and increased interest income, partially offset by higher interest expense and G&A expenses.
General & Administrative Expenses: Increased due to corporate staff additions and salary increases.
Cash and Cash Equivalents: Decreased by $8.2 million, primarily to fund Donlin Gold share and corporate G&A expenses.
Treasury Position: Approximately $38 million in cash and cash equivalents and $80 million in term deposits.
Annual Spending Forecast: Approximately $14 million for Donlin Gold and $17 million for corporate G&A.
2024 Budget Approval: $28.5 million for resource modeling, mine planning, and other project-related activities.
Donlin Gold is considered a Tier 1 asset with approximately 39 million ounces of gold and a projected mine life exceeding 27 years.
The project is situated on private land in Alaska, a jurisdiction known for responsible mining practices and a favorable regulatory environment.
Donlin Gold has the potential to be a low-cost open pit million ounce a year producer due to its high-grade resource.
The project has excellent exploration potential, with the current resource area covering less than 5% of the land.
Novagold Resources Inc has a strong commitment to environmental stewardship, health and safety, and community engagement.
Negative Points
The company reported a net loss of $10.3 million in the first quarter, although this was a slight decrease from the prior quarter.
There are ongoing legal challenges and appeals against Donlin permits, although all appeals have been unsuccessful to date.
The project requires significant infrastructure development, including a natural gas pipeline for energy supply, which involves coordination with third parties.
The timeline for a bankable feasibility study and potential construction decision is still uncertain, with an 18 to 24-month duration for the study itself.
The share price has been under pressure due to market conditions, despite the company's strong fundamentals and project potential.
Q & A Highlights
Q: Greg, I wanted to ask about the potential to maybe speed up a revised feasibility study in the context of a sharply rising gold price. Obviously, pretty remarkable what has happened here over the last few weeks. In my sense, there's investor appetite for an accelerated development period, so I wondered how you think about that. Thank you very much. A: Good morning, Lucas, and thank you for taking the time to join our call. As I noted in my presentation, we're working with Barrick to determine the optimal time to commence on a new feasibility study. And I think you're absolutely right. The company is well positioned. We've got a lot of cash. We're in certainly a very rising price environment. And I think from our perspective, the time is right to move this project forward. And I think bear in mind, the feasibility study will take us 18 to 24 months. And I think by the time it's done, we expect prices will be higher, and we want to position this company to make a construction decision when the time is right. And we think that time is honest now. We're working with our partner to advance these things.
Q: Based on what you know today -- and I understand you'll have to study this. But based on what you know today, what gold price makes the construction decision a no brainer? Is it 2,300? Is it maybe slightly higher than that? I'm curious how you think about that. Thank you. A: I think at the risk of sounding flip that's why we want to undertake a new feasibility study. But to answer your question, my sense is we're past the price point we need to really feel good about this project. And I think as we look forward to updating the feasibility study, I think we'll understand that, yes, there's been inflationary pressures. But across the board, I think we'll determine that the margins have expanded at a much greater rate than inflation. And all of these issues would be thoroughly addressed in the context of a bankable feasibility study.
Q: And what would the third-party participation look like? Can you expand on that a bit? A: Early days of the conversations, certainly, there's interest from several native corporations to participating in the building of the pipeline, as well as interest from the State of Alaska and other private entities. So I think there's broad interest in the pipeline. Remember, rural Alaska, the energy costs are unbelievably expensive. Because one, it's difficult to get energy there, and two, the demand is relatively low. So a big consumer of power like the Donlin mine could really anchor the infrastructure coming into a very, very underserved part of the country. And I think it's -- there's money available to help these underserved regions through the federal government. So we're working with a lot of people that are very interested and supportive of seeing something that brings energy into the region. So we continue to work on that.
Q: Let's consider that the bankable feasibility study is complete. I mean, maybe that will be a year, maybe longer. All partners agree it's completed. And it already reaches a favorable goal forward decision to build the mine. So what would be the next steps then? A: All right. Well, let me break that into pieces, Don. I think I would first address the permitting. We've received a federal permit, and then as highlighted in our materials, we've essentially completed the state permitting process. We only have one state permit left, a major one, and that's the Dam Safety certification. And we're working on that now. And that one has never been on the critical path. The federal permits authorize you to disturb the land, and the state has regulatory oversight of tailings dam structures, hence the additional layer of approval. And it's never been on the critical path, and we expect to have that wrapped up, certainly, concurrent with any feasibility study update.
Q: Are there plans over the next year or so with potentially moving the term deposit around into cash or other forms on your balance sheet? A: We've been -- as we manage our cash right now, we really look to optimize the interest we earn on that money. A couple of years ago, that was virtually impossible. But in today's world, we seek out good, safe ways to invest our treasury. And our budgets are pretty well defined. And we certainly free up cash as we need to fund our ongoing activities. Dave, is there anything you'd want to add to that? No. We will likely just continue on the same course that we've been on. And we'll have part of it in cash that earns interest and also in term deposits. And it's just that we just take advantage of the rates at the time that they come due.
Q: Can you speak a bit about permitting, particularly as it relates to your experience in permitting in the US and the appeals process and the ability for Donlin to proceed with development in light of permitting in these appeals? A: All right. I'll address that question and just really take a step back. I've been working in mining, particularly gold mining, in the United States for almost 40 years. And back in the early days, permits, you could get a mine permitted in less than six months, and appeals were virtually unheard of. Over time, the process has certainly gotten more rigorous and more inclusive. And frankly, the changes, I support them. I mean, when you set out to permit a project in Alaska or anywhere in the US, you know what you're getting into. It's a very defined, very rigorous process. And that's what we've experienced with Donlin. And you can't hurry these things, you've got to be methodical and careful. The other aspect about permitting in the United States is, invariably, there will be a challenge. And I've seen that for probably the last 15 years. I haven't been around a project that did not get challenged. But every project that I've been involved with got challenged that did not get slowed down. Challenges are certainly a part of the process. We expected it from the beginning, and we had competent counsel with us every step of the way, and we've got a couple of permits that are under appeal. Every ruling to-date has supported the process, and I think that will continue. So permitting, yes, it is complicated, but it's certainly doable. And once you have those permits, you're good.
Q: Would you consider buying back shares, and if not, why? A: Right now, we are very focused on using our treasury to advance the Donlin Gold project. That would be our inclination right now. But then again, we watch the markets, we think the current prices, our shares