March 23, 2020 - Vancouver, British Columbia – NOVAGOLD RESOURCES INC. (“NOVAGOLD” or “the Company”) (NYSE American, TSX: NG) today released the following statement from its Chairman and largest shareholder, Dr. Thomas S. Kaplan, and President and CEO Gregory Lang regarding the strategy adopted by NOVAGOLD in response to the COVID-19 global health crisis.
Along with many of our peers in the mining industry, we feel that it is important to share with all our stakeholders the specific actions that we have taken to meet the challenge posed by the COVID-19 outbreak.
Physical Health and Minimizing Risk of COVID-19 Exposure
NOVAGOLD’s most important objective during this period is to secure the health and safety of its employees, partners, and contractors. As so many other companies have done, in recognition of the major threat posed by COVID-19, NOVAGOLD has implemented a wide-ranging set of policies at its offices in Salt Lake City and Vancouver, as well as at the Donlin Gold LLC office in Anchorage and Donlin Gold site, designed to ensure the safety and well-being of all employees and the people associated with them. In that regard, to reduce risk, our office employees have been asked to work from home, avoid all non-essential travel, adhere to good hygiene practices, and, if they must visit the office, engage in social distancing.
NOVAGOLD and its partner Barrick Gold through Donlin Gold LLC have implemented a wide-ranging set of policies consistent with the State of Alaska’s requirements, recommendations, and precautions for State activities and aimed at achieving the same objectives at the Donlin Gold project site:
? Screening all employees and contractors visiting the Donlin Gold project site prior to their departure for site and periodically during their stay. Should any individual exhibit any symptoms of illness, they will be evaluated to determine if they need to be isolated and evacuated from site;
? Increased housekeeping staff and implementing more frequent sanitization practices;
? Regularly conducting safety meetings designed to address sound hygiene and sanitization practices; and
? Requesting all employees to monitor their health and consult the site medic if feeling any symptoms of illness.
In addition, Donlin Gold LLC has reached out to Calista Corporation (Calista) and The Kuskokwim Corporation (TKC), Donlin Gold’s Native Corporation partners and owners of the project’s subsurface and surface rights, respectively, to offer help and assistance with COVID-19 related issues at this time of great need.
While the 2020 drill program continues at this date, NOVAGOLD recognizes that the crisis is fluid and is monitoring the State of Alaska health recommendations and will make the necessary adjustments including pushing back the timeline for the remainder of the program.
As befits a company whose corporate strategy is focused on maintaining the full integrity as well as enhancing the durability of its option value for shareholders, it should also be mentioned that, as the challenges posed by COVID-19 go beyond the physical health of a corporation’s staff, we wish to assure our shareholders that the Company’s financial health remains exceptionally robust to weather the current crisis.
A unique feature and benefit of being a NOVAGOLD shareholder is not only owning a piece of one of the rarest gold assets in the world but also a Company with a strong balance sheet and projected expenses that are comfortably within its means. NOVAGOLD has not needed to go back to the market in more than eight years to raise funds and is conservatively managed to avoid any need to seek financing in the near term. In 2020, we are projecting expenses of $31 million. With $148.5 million in cash and term deposits as of November 30, 2019, the management team can focus entirely on moving Donlin Gold forward while addressing the safety and health of our employees, contractors, partners and communities in which we operate without the distraction of needing to raise additional capital. We have a strong balance sheet, which does not include an additional $75 million expected to come from Newmont Mining next year, and $25 million more in 2023, or a further $75 million contingent payment on top of that which we could receive if and when the Galore Creek project owners approve a construction plan.
Based on these commitments and projected needs, the Company believes it has sufficient funds to advance Donlin Gold without the need to raise capital until markets, and indeed the rest of the world, are considerably healthier and a construction decision is made.
NOVAGOLD’s Overall Approach to Risk
The composition as well as nature of much of the Company’s ownership base is reflective of much of NOVAGOLD’s philosophy. First and foremost is our recognition that, while the upside of NOVAGOLD is clearly extraordinary, little of that would matter were its management not attuned to the many risks that characterize today’s world. In the Chairman’s Q&A section of our 2019 Annual Report, which was written around the New Year and hence did not reference the COVID-19 pandemic, we address NOVAGOLD’s positioning in terms of its downside protections. The following excerpt should re-assure our employees, shareholders, contractors, partners and communities of the economic security of the Company as we focus on responding to the COVID-19 global health crisis:
14. Do you still see NOVAGOLD as well-positioned in terms of its downside protections, or is the gold market past the need for that?
One should never be past thinking in terms of downside protection. Indeed, as a seasoned player in the natural resources space who strongly believes in the notion that if an investor has covered the downside the upside will take care of itself, let me actually highlight the downside protections we’ve put in place for NOVAGOLD’s owners in order to ensure that your company, effectively an unexpiring warrant without time decay, is positioned to prosper.
As a pure play on a federally permitted mining project – on Native Corporation land already designated for mining – we believe Donlin Gold will constitute the largest single pure gold mine in the world, in one of the few parts of the world where mining is welcomed and the rule of law isn’t a novelty. The project has tremendous support at the local, state, and federal levels.
And we have a well-managed, tier-one partner in Barrick Gold. Moreover, as of fiscal year-end 2019, NOVAGOLD had a balance sheet that, between cash on hand and receivables, was approximately $248 million, with maybe more to come. With federal permitting behind us, and Galore Creek monetized, NOVAGOLD’s current obligated burn rate is nominal at a time when we are flush with cash.
What this means is that, were the gold price to go down before they revive in full, and should we face challenging times, we simply could not go out of business under any reasonable scenario. While I don’t believe that the fundamentals of gold, or the industry, require a washout to set the stage for gold’s next big move higher, these head fakes do happen. Shakeouts before a blistering move upward are classic chart patterns. Think of a V-bottom and you may recall a few. This is assuredly not a scenario our shareholders should fear – the Electrum team having been in that movie several times over the years and knowing well from firsthand experience how to position our portfolio companies in order to identify opportunity in market displacements.
We have thus deliberately positioned NOVAGOLD in such a manner that we likely would not need to raise capital, even if the resumption of the gold bull market is delayed by a temporary downturn in gold price – including a sharp one. If anything, under certain circumstances, the company might determine that its shares are worth more than the metal itself and buy some back. Put differently, an investor can expect that, when gold is acknowledged to have put in its bottom, we will not have diluted our fully intact optionality on our reserve base. For an investor, these robust downside protections provide a true differentiator.
For complete access to NOVAGOLD’s 2019 Annual Report, you can use the following link: https://bit.ly/32Sr1vz.
To conclude, all our stakeholders should know that there is absolutely nothing more important to us than their health and safety, and that of their families and our partners. We are committed to maintaining maximum vigilance as we monitor this crisis, and to follow the guidelines set out by the relevant authorities as well as the best practices standards of our peers in the industry.
On behalf of the NOVAGOLD management and board of directors, we wish you, your families and loved ones good health, strength, and courage.
Dr. Thomas S. Kaplan Chairman
Gregory A. Lang President & CEO