NovaGold Resources Inc. (AMEX:NG) Q4 2024 Earnings Call Transcript

NovaGold Resources Inc. (AMEX:NG) Q4 2024 Earnings Call Transcript January 23, 2025

NovaGold Resources Inc. misses on earnings expectations. Reported EPS is $-0.04106 EPS, expectations were $-0.02.

Operator: Thank you for standing by. This is the conference operator. Welcome to the NOVAGOLD 2024 Year-End 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 Hennessey: We are pleased that you have joined us for NOVAGOLD’s 2024 year-end webcast and conference call 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 email. 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?

Gregory Lang: 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 secure jurisdictions and the recent surge in the price of gold. Let’s examine the impressive features of the Donlin Gold project, as shown on Slide 5. With 39 million ounces at a grade of 2.25 grams per tonne, more than double the industry average and a projected mine life of nearly three decades, Donlin promises long-term, stable and low-cost operating conditions, positioning itself as one of the industry’s leading producers with exceptional exploration potential and future growth possibilities. Led by an experienced management team with a proven track record in mine development across the Americas, Donlin Gold has secured all the necessary federal permits in the majority of the state permits, demonstrating its readiness for successful advancement.

Located on private land that has been designated for mining in one of the world’s top mining jurisdictions, Donlin Gold’s strong partnerships with Calista and TKC further reinforce its social license. Collectively, these factors established Donlin Gold as a cornerstone project with exceptional long-term value and substantial growth potential. On Slide 6, we outlined the 2024 highlights, key activities and upcoming catalysts. Technical work advanced to position the project for an updated cost estimate, including advancing the resource model, field work and permitting work. Extensive collaboration with our Native Corporation partners across the region, reported ecological projects, education initiatives, youth employment and cultural awareness.

These efforts underscore Donlin’s commitment to the local communities, strengthening long-term relationships and addressing their key needs. This past year, we focused on increasing Donlin’s visibility and advancing activities that supports sustainable value creation, positioning the project as a unique opportunity to gain exposure to gold through one of the largest undeveloped gold assets globally located in Alaska’s stable Tier 1 mining jurisdiction. Donlin stands out as one of the largest and highest grade undeveloped open pit reserves globally, especially compared to the other projects in the Americas, as shown on Slide 7. This makes it a highly promising asset. With global gold production in decline, the industry is facing a scarcity of high-quality development stage projects, driving demand for assets like Donlin that possess the scale, grade and longevity needed to thrive through various gold cycles.

In addition, with the grade of 2.25 grams more than double the industry average for open pit projects, as shown on Slide 8, Donlin is set to become one of the most cost-effective producers in the gold industry. Currently, Alaska is ranked 13th out of 117 global jurisdictions and only one of 13 to achieve a AA rating in the World Risk Report published by the Mining Journal. Alaska is redound for its strong and secure environment, especially in the mining sector, as shown on Slide 9, as the second largest gold producer in the United States, Alaska’s robust regulatory framework and commitment to responsible development, create a supportive climate. A recent executive order signed by President Trump aims to further strengthen this by unlocking the state’s abundant natural resources, streamlining permitting and reducing restrictions that have hindered responsible growth.

This initiative is expected to create new opportunities for gold mining, job creation, and economic expansion, while also enhancing investor confidence, which align perfectly with the promising attributes of Donlin Gold. As highlighted on Slide 10, Calista and TKC as private landowners and key partners in Donlin Gold play a pivotal role in the project’s success. Their commitment to responsible growth closely aligns with the Elders vision, focusing on job creation, economic prosperity and the preservation of their cultural heritage within their local communities. On land designated for mining activities over 50 years ago, their stewardship reflects a strong dedication to sustainable development. Throughout the different stages of development, their invaluable expertise grounded in a deep understanding of the land’s economic significance has been essential in enhancing community well-being.

Their partnership is critical to the advancement of Donlin Gold reinforcing its potential as a cornerstone of long-term economic development for the Y-K region and future generations. Turning to Slide 11. We outlined Donlin Gold’s current permitting status with most federal and state permits secured we continue to support agencies in maintaining these permits and defending them against legal challenges, ensuring the project’s continued approval. The permitting process in Alaska requires extensive shareholder engagement, especially within the communities in the Y-K region. While managing jurisdictional complexities can be challenging. Alaska’s political and social stability offers a secure investment environment, reinforcing our commitment to effectively navigate the regulatory processes.

NOVAGOLD is backed by a veteran management team with long-term expertise in mining in the Americas, as shown on Slide 12. Our team brings extensive experience and leading gold producers and possess deep knowledge in building and operating large-scale open pit and underground mines. Donlin’s existing resource occupies just 5% of its land package with significant exploration potential beyond the ACMA and Lewis pits as shown in the graphic on Slide 13, covering only 3 kilometers above 8-kilometer gold-bearing trend. This highlights the opportunity to increase ounces and extend the mine’s life through further exploration. Slide 14 features a bar chart showing the post-tax net present value at different gold prices. With today’s gold price nearing the upper end of the chart, Donlin Gold’s value exceeds over $30 billion at a zero discount rate or approximately $11 billion at a 5% discount rate.

This projection highlights the significant economic potential in the current gold price environment. I’ll now turn to the year-end milestones reached and the ongoing project activities. Moving to Slide 16. Key activities in 2024 included the substantial completion of metallurgical test work and a pilot plant in Ontario, Canada, to confirm proposed optimizations to the flow sheet. Field and geotechnical data collection continue updating source characteristics for ground and surface water models for both operational and closure planning as well as advancement of the Donlin Gold resource model. Results derived from the considerable technical work performed over these past 12 months will serve as inputs into an updated feasibility study. At NOVAGOLD, we prioritize ecological stewardship in the Y-K region.

And since mid-2023, Donlin Gold has ramped up efforts to monitor, survey and engage the local salmon fisheries in the Kuskokwim and Yukon River watersheds. This includes the launch of the salmon smolt monitoring program on the George River in 2024 in partnership with the Native Village of Napaimute to assess health and migration patterns with the initiatives set to continue into 2025. Furthermore, restoration of a portion of the historic Lyman placer mining site, which included significant stream and pond habitat creation, including aquatic life access and use was completed in 2024, and aquatic restoration work on the rest of Snow Gulch previously disturbed by historic mining will start in 2025. Donlin Gold also continued its support for In It for the Long Haul backhaul program, a long-standing initiative to collect and safely dispose of hazardous household, electronic waste, from the Y-K villages.

This program recycled over 140,000 pounds of materials in 2024. Over 800,000 pounds of hazardous waste has been removed since the program began in 2018. Our outreach in Alaska especially the Y-K region and in Washington, D.C., has strengthened community involvement in partnership with Calista and TKC, advanced effort to engage local communities, governments and stakeholders. To that end, Donlin Gold led numerous projects and activities in 2024, including public open houses in Anchorage, Bethel and Crooked Creek in collaboration with Calista and TKC, providing Alaskans and local residents with the opportunity to learn more about the project, engage and open and transparent discussions. Moreover, Donlin Gold and Calista and TKC held two substitutes, community advisory committee meetings, the first in Aniak and the second in Anchorage.

This committee composed of members from the Y-K region demonstrates our ongoing commitment to fostering communication, dialogue and community input on subsistence matters throughout the project’s life. Beyond that, Donlin Gold established three shared value statements, which brings the total to 18. This formalizes Donlin’s ongoing engagement with local communities and reinforce existing long-term relationships that address specific community needs. Lastly, in 2024, the Donlin Gold project received continuous support from U.S. Senators, Lisa Murkowski, Dan Sullivan, and then U.S. Representative Mary Peltola, who submitted a joint amicus brief in the Federal Court, describing Donlin Gold as one of the state’s most important and necessary economic development projects in one of the most impoverished regions in Alaska.

The company appreciates the diligent contributions of the Donlin Gold team, our partners, stakeholders, and we remain dedicated to advancing the project to its full potential. Looking at Slide 17. Progress on the Dam Safety Certification continued with the submission of the preliminary design packages to the Alaska development of natural resources in 2024. Comments are expected in 2025 with the issuance of the certification in 2026 or early 2027. The Alaska Pollutant Discharge Elimination System permit and the Waste Management permit originally set to expire were extended. The Reclamation Plan was also administratively extended. In state litigation, we continue to support the agencies in defending Donlin Gold’s 401 Water Quality Certification, water rights and state pipeline Right-of-Way lease.

These cases have been fully briefed and argued and decisions are anticipated in 2025. The federal litigation on the joint Record of Decision, including the 404 permit, the court upheld the Federal Agency’s analysis on two of the three issues raised. The plaintiffs requested reconsideration on one of these issues, which the court subsequently denied. Briefing on the appropriate remedy is scheduled to be completed in early February. With the thorough understanding of the regulatory and legal landscape, Donlin Gold and its partners are committed to supporting the federal and state agencies in addressing the challenges related to the project’s permits. With that, I will now turn the call over to Peter, our CFO, to review the 2024 financial results.

Peter?

Peter Adamek: Thank you, Greg. Turning to Slide 19. As NOVAGOLD is a development-stage company with no production, the company reported a loss of $45.6 million and earnings per share of negative $0.14 for the 2024 fiscal year reflecting expenditures in line with budget for the year. Our net loss in 2024 decreased by $1.2 million from 2023, primarily due to lower field expenses at Donlin Gold partially offset by higher corporate, general and administrative expenses, increased interest expense on the Barrick promissory note. Lower interest income on cash and term deposits and other income related to a gain on the fair market value of marketable securities and proceeds received for the 2021 sale of the company’s interest in the San Roque mineral property.

Compared to prior year, Donlin Gold expenses were lower as there was no 2024 field program. Corporate G&A costs increased due to hiring of additional staff along with higher professional and consulting fees. On Slide 20, cash and term deposits decreased in 2024 by $24.5 million with corporate administrative costs and our share of Donlin expenditures, partially offset by interest income and working capital changes of $5.6 million. Moving to Slide 21. Our treasury remains strong with cash and term deposits totaling $101.2 million as of November 30th. Our 2024 cash expenditures were lower than our 2024 budget by $1.1 million due to lower-than-anticipated spending at Donlin Gold. And our anticipated expenditures for 2025 are approximately $37.5 million, including $21.5 million for Donlin and $16 million for corporate G&A.

And with that, I’ll turn the presentation back over to Greg.

Gregory Lang: Thank you, Peter. In September, NOVAGOLD, Barrick and Donlin Gold held their annual workshop in Alaska to review the work completed to date, and look at the next steps for the project. The Donlin Board approved a path forward with a 2025 budget of $43 million on a 100% basis. Cap operations will resume in the coming months to complete grid drilling aimed at refining mine planning assumptions and efforts — we’ll continue to advance key work streams in preparation for a cost update. Additional work will include project and mine planning, further advancement of the Dam Safety Certificate applications with work on the detailed design packages, continued support of the pending litigation and ongoing community relations and government affairs activities.

With a strong treasury of over $100 million, NOVAGOLD is well positioned to fund our share of activities for the next few years at current spending levels. The path ahead for Donlin Gold is clear, guided by the principles of patience, partnership, and an unrelenting focus on long-term value creation. We firmly believe that with one of the industry’s most attractive development gold asset NOVAGOLD is optimally positioned to deliver exceptional returns. Reflecting on 2024, NOVAGOLD remains resolute in its confidence that the Donlin Gold project represents a prime investment in the gold market, offering a unique opportunity to leverage high-quality assets in a safe well established jurisdiction. We deeply appreciate the unwavering support and trust of our long-term shareholders whose commitment and guidance has been integral to the company’s success.

Their decision to invest in continued engagement are invaluable to us. On special note, we would like to express our gratitude to Dr. Thomas Kaplan, our Chairman and largest shareholder for his active engagement with the Board and the company in driving toward its full potential. Moving forward, we remain focused on executing our strategy with the highest standards of safety and social responsibility, all are making tangible progress to advance shareholder and stakeholder value. With one of the industry’s most attractive development projects, we are confident that Donlin Gold is well positioned to deliver exceptional returns. Operator, we are now prepared to take questions.

Q&A Session

Operator: Thank you. We will now begin the question-and-answer session. The first question comes from Nick Giles with B. Riley Securities. Please go ahead.

Nick Giles: Thank you, operator and good morning, Greg and team. Thanks for the update here and congrats on recent progress. Greg, my first question, I wanted to get your view on project appetite among the majors more broadly. Do you think that concerns around cost overruns and inflation could be keeping anyone on the sidelines? And how could project appetite ultimately change under this new administration?

Gregory Lang: All right. Nick, well, first off, thank you for joining our call this morning. I think the project appetite I think it’s there, it’s real. I think people are certainly more mindful of the inflationary pressures. And I think that in itself, people are more diligent in their evaluation of projects. But that said, the industry still needs them. The inflationary pressures are starting to subside. And I think the appetite is real and people will continue to advance long-term projects like Donlin, but with the measured pace and certainly appropriate levels of financial discipline which we welcome. I think to your other question, we’ve obviously gone through a change of administration in the U.S. And I think from just about everyone’s perspective the changes are going to be good for the natural resource industry in the U.S. President Trump recently issued an executive order, reinforcing his commitment and support of responsible development in Alaska both in the hydrocarbons and in the mining sector.

So I think all of those are certainly positive developments which will, I think encourage investment in Alaska and in natural resource projects.

Nick Giles: Greg, I really appreciate your perspective on this. My next question and apologies if I missed this in the prepared remarks, but — could you break down the 2025 budget of the 43 million approved by the Board, maybe the allocations to updated mine planning, any geotechnical work? Any additional detail you could provide on just the 2025 budget?

Gregory Lang: Sure. The lion’s share of the budget, the budget is $43 million. And one of the largest single items in the budget is about $15 million for drilling and camp operations. And as I mentioned in my remarks that drilling is really very detailed, almost ore control type drilling to enhance the mine planning activities. So that’s the lion’s share of it. We’ve also allocated $5 million to lay the foundation to update the capital and operating costs for the project. We continue to engage with our various stakeholders in the community relations side. So that’s also a big piece of the budget. Defense of our permits is approximately $2 million. And as the project moves forward, our holding costs and payments to the native partners continued to increase and the normal wages of the people employed at Donlin and Alaska continue.

And the biggest increase year-over-year is really the drilling and the money for the cost estimate, all of which are activities that we think adds substantial value to the work we’re trying to accomplish with Barrick.

Nick Giles: Greg, I look forward to those drilling results and updated estimates. I appreciate all your color here this morning and to you and the team continued best of luck.

Gregory Lang: You’re quite welcome.

Melanie Hennessey: We have a question coming from the webcast from Mr. Kovacs [ph]. Have there been any recent discussions with Barrick leading to a decision toward construction?

Gregory Lang: The work that we’ve planned for the coming year lays the foundation for the company to make the decisions to advance the project. The work we’re doing now with the cost estimate, the detailed drilling, metallurgical pilot work really is all part of laying the foundation for a future feasibility study, which is the next major step in advancing the project toward a construction decision.

Melanie Hennessey: Great. And the final question coming from the webcast from Mr. Zahnfeld [ph]. What is the timeline looking at based on the current work in 2025 and to initial production?

Gregory Lang: Well, we have not provided guidance on a timeline to initial construction. I think if we look at the work that we’ve got planned for this year, that’s got very important work necessary for a future feasibility study. When this work is largely completed, we’ll be in a position to make that decision. The updating of the feasibility study is an undertaking that will be approximately 18 months, 24 months. I think that gives you a sense of the timing that it would take for the owners to reach a construction decision.

Operator: That concludes the question-and-answer session. I would like to turn the conference back over to Greg Lang for any closing remarks.

Gregory Lang: Well, thank you, everyone. I appreciate you taking the time this morning to get an update on the activities at Donlin and within NOVAGOLD. Good day.

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