Novagold Resources Inc (NG) Q3 2020 Earnings Call Transcript

Thank you for your patience. This is the conference operator. Welcome to the NovaGold Third Quarter Financial Results Conference Call. All participants are in listen-only mode and the conference is being recorded. After the presentation, there will be a chance to ask questions. I will now hand the call over to Melanie Hennessey, Vice President of Corporate Communications. Please proceed.

Thank you, Claudia. Good morning, everyone. We are pleased that you have joined us for NovaGold's third quarter financial results and also for an update on the Donlin Gold project. On today’s call, we have Dr. Thomas Kaplan, NovaGold's Chairman; Greg Lang, NovaGold's President and CEO; and David Ottewell, NovaGold's Vice President and CFO. At the end of the webcast, we will take questions both by phone and by text. I would like to remind our webcast and call participants that, as stated on slide three, 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. With that, I have the pleasure of introducing Greg Lang. Greg?

Good morning and thank you, Melanie. The Donlin Gold project is located in the western part of the State of Alaska as shown on slide four. It’s a 50/50 joint venture with Barrick Gold. Mining is an important part of the Alaskan economy and is becoming even more important as revenues and employment in other businesses decline. As shown on the map, there are six producing mines and numerous exploration and development projects in the state. In terms of scale, quality, and exploration potential, Donlin Gold's attributes far exceed any other gold development projects on the horizon. When combined with the company's excellent partnership with major corporations and co-owner Barrick, the exceptional leverage to a rising gold price, strong cash position, and key federal permits obtained, NovaGold stands out. Slide five highlights our strategic focus for the year. As COVID-19 positive cases rose in Alaska over the summer, Donlin Gold's stringent safety measures and on-the-ground support allowed us to operate at full capacity throughout the quarter, making up for the time lost due to pandemic-related shutdowns earlier in the year. In August, NovaGold and our partner Barrick recorded the initial set of assays from the planned 80-hole, 22,000-meter program, which is the largest program in over 12 years. The work was carried out safely and finished ahead of schedule despite the COVID-19 pandemic, which impacted activities on the ground and affected the communities where we operate. Other resource industries have been experiencing low or no growth in Alaska and the impact of COVID-19 on the cruise ship and tourism industries may take years to recover. With the long history of mining and a skilled workforce in Alaska, Donlin Gold offers the opportunity of a future with good pay, year-round jobs, and training for young people to live closer to home and continue a traditional way of life. We are proud to employ 80% of our local workforce from native Alaskans. In slide six, we outline the protocols for health and safety during the COVID pandemic. NovaGold continued to adhere to a comprehensive set of policies designed to ensure the safety and well-being of its employees and contractors in its offices in Salt Lake City and Vancouver, as well as in conjunction with Barrick at the Donlin Gold office in Anchorage. I expect these precautions will remain in place for the foreseeable future. The COVID-19 pandemic created significant concern in the Y-K region due to the interdependence of communities and frequent travel within the region. By the time COVID reached Alaska, our native corporation partners had already engaged with the community to assist with their needs. Shown on slide seven, Donlin Gold partnered with TKC and tribal councils to coordinate food collection and delivery of supplies to eight middle Kuskokwim villages. As a precaution, we paused the 2020 program, during which Donlin Gold donated thousands of pounds of food and coordinated with local tribal administrators to deliver goods such as food and masks to the communities. Donlin Gold also provided support to the CleanUp, GreenUp Initiative, a program that we have funded for many years. The 2020 Drill Program is shown on slide eight with the ACMA and Lewis deposits. Preparations for the Drill Program began in February with mobilization to the site in March, prior to temporarily pausing activities due to COVID. The Drill Program remobilized in late May, and we achieved good productivity with all four rigs running throughout the summer. The original plan called for 80 holes, the largest drilling at Donlin in many years. The image on slide nine shows the location of the 2020 core hole, highlighted in black. The initial assay results that were published in a joint release with Barrick on August 6th are encouraging and similar to the drill results from the 2017, 16-hole drill program, which also encountered higher than anticipated grades. The Donlin team completed drilling in September with a total of 85 core holes over about 23,000 meters, exceeding our plans. Since we had the time and crews available, additional holes were completed. As a consequence of COVID-19, the assay labs were understaffed, and the drill results are coming in slower than expected. Staffing levels seem to be returning to normal, and new assay results are starting to come in again. Additional results will be reported by Donlin and the joint owners when they become available. The initial results that were issued by Donlin Gold in the third quarter reflect the enthusiasm we have every time we drill on the property. As shown on slide 10, significant high-grade intervals were intercepted in multiple areas, with several occurring near the surface. As more results arrive, our understanding of the ore body and the potential extensions of the high-grade zones will expand. Once core logging and assaying is complete, the newly obtained data should allow partners to determine the next steps to move forward with updating the Donlin Gold feasibility study. It was truly a remarkable operational milestone that we were able to complete this work ahead of schedule and without any COVID cases at the Donlin mine site. Donlin Gold is working with its native corporation partners and continues to support the State of Alaska to advance other permits and certificates needed for the project. As you can see on slide 11, federal permits are in hand, and additional key state permits and approvals have also been obtained. In early 2020, the Department of Natural Resources issued final authorization of easements, land leases, land use permits, and material site authorizations for the proposed transportation facilities. There are other state permits that remain outstanding, and they are not on the critical path. We will continue advancing them. The partnership of NovaGold, Barrick, and Calista has responded well to COVID-19 and its impacts on the health of our communities. These long-standing relationships have strengthened over the last year as we remain united in the common goal of bringing the Donlin Gold project up the value chain. We focus on a culture of safety and social responsibility and corporate governance practices. By engaging our stakeholders through regular contact, interacting with our investors, and engaging in meaningful ways to promote the health and safety of our people on-site and on the rivers through all seasons, especially now, Donlin has brought much-needed support to local communities. We continue to provide assistance to youth education and partner with organizations to improve the environment, always recognizing the importance of preserving traditional lifestyles. In the third quarter, Donlin delivered on supported community partnerships in the Y-K region as shown on slide 13. Health and safety are core values for us, and as such, Donlin is working with TKC, the State of Alaska, and the Alaska Native Tribal Health Consortium in our initiative to upgrade and improve health and safety standards for water and sewer services in the communities. Our other initiatives include the Donlin Gold Scholarships, which are granted to students selected by our native corporation partners to benefit youth education in the region. Additionally, the CleanUp GreenUp Initiative continued and included 32 villages working together to clean up their local environment. Over the past few years, our efforts to remove household hazardous waste have contributed to the health of communities along the river. As shown on slide 14, the project established the Donlin Gold Backhaul program in association with our native partners. It was a very successful program, resulting in a total of 45,000 pounds of household hazardous material being collected and shipped out for proper disposal. Slide 15 presents the life of mine diagram for the Donlin Gold project, which is one of the largest open-pit mining developments undertaken. The time invested upfront to build a solid foundation for growth and sustainability has been critical to the project's success. Permitting is a long process and not the most engaging segment in the life of the mine but requires tremendous effort and focus. A typical gold mining project now exceeds 15 years from discovery to development. Project catalysts for the coming months include completing the drill program to release assay results and incorporating all of this data into the latest geological model. This will help determine the next steps that the partners will choose to take to advance the Donlin Gold project. The next few slides highlight the attributes of Donlin that led me to join NovaGold after almost a 30-year career with Barrick and its predecessor company. We noted earlier in the presentation that global grades continue to decline, and mine production is expected to decrease by 2022. Most major producers have focused on in situ extensions in mine life. This sets up a supply crunch scenario that the gold industry has never experienced historically. The sharp underinvestment in exploration and discovery, particularly since 2012, has led us to early setbacks. Over the past 10 years, only 25 million deposits have been identified, containing only 150 million ounces of gold, which represents only 7% of what has been discovered in the last 30 years. There have been no major discoveries in the last few years, but Donlin is becoming increasingly valuable. Now to expand further on Donlin's attributes. As the largest gold development project in its category, the bar chart on slide 18 shows 13 other development phase projects, illustrating how truly unique Donlin is when compared to its peer group. Based on the group average of 7.7 million ounces, Donlin's resource is five times greater on average. It's also by far a standout in its category. The grade is shown on slide 19; it is more than twice the global average for large-scale open-pit deposits. Not only is global gold production decreasing for most major producers, but as average grades also continue to decline. Grade alone is a positive differentiator for the project's economic viability, as it provides extraordinary resilience through multiple commodity cycles, which is a key attribute for successful mining operations like Donlin Gold, producing more than a million assays annually. There are only three operating mines in the world today at these levels. Donlin could be a rare company able to envision the project with an average annual output of 1.1 million ounces. For long-term investors, additional value comes with a multi-decade lifespan from its start in a jurisdiction where the rule of law is well-established. We have been partners since 1995, and we have life of mine agreements with both Barrick and Calista. They have been deeply supportive and involved since the beginning, and we are thankful for their long-term support and commitment. We support their mandate through The Alaska Native Claims Settlement Act, as highlighted on slide 21, to help them develop their land for greater economic self-determination. With all the complexities in various jurisdictions around the world, it’s great to be on private land with native partners. I'll now turn the call over to David Ottewell, our Chief Financial Officer. Dave?

Thank you, Greg, and good morning everyone. Slide 22 highlights our operating performance. For the third quarter, we reported a net loss of $12.7 million, which is $0.6 million higher than the prior year quarter. The net loss increased primarily due to the drilling program at Donlin Gold, with higher corporate, general, and administrative expenses and foreign exchange movements also contributing to the increase. The reduction in interest rates also resulted in lower interest income on term deposits and lower interest expense on the promissory note payable to Barrick. Third-quarter 2020 cash flows are highlighted on slide 23. In the third quarter, we spent $8 million, $3.9 million higher than in the prior year quarter. Again, the net increase in spending was primarily due to the drilling program at Donlin Gold, alongside lower interest income and higher general and administrative costs. We ended the quarter with cash and term deposits of $126.3 million. On slide 24, we noted our robust treasury. In addition to our cash and term deposits of $126 million, we have $75 million due next summer and an additional $25 million two years later as a result of our sale of our share in the Galore Creek Project. This payment of $75 million becomes due if the owners approve the construction of the Galore Creek Project. We continue to anticipate spending approximately $31 million in 2020, which includes $20 million to fund our share of expenditures for the Donlin Gold project related to the drilling program, permitting, and community engagement, and $11 million for corporate general and administrative costs. With that, I will now turn the call over to Dr. Kaplan, who will give us his insight into gold. Tom?

Thank you. Thank you, Dave. Actually, I'm going to spend a little bit of time today explaining why, as someone who is 99% of the time on the side of the investors on this conference call, I believe that NovaGold will become one of the very few go-to stocks in this space and has the potential to multiply many times in value from here. I know where I speak. I have had multiple occasions where I've been fortunate enough to make 100 times my money. The common denominator in all those cases was being able to ride great assets and pick them up the value chain. Some of those assets were absolute category killers, some of the best in the world, but none of them could I describe as being truly unique. Now, what does it mean for me to say that I believe that Donlin is unique? I often ask the question of investors and analysts, what other gold development stage assets in the gold industry today compares in its combination of enormous size? You've heard Greg describe it; I don't think there's ever been a gold deposit that began production with over 40 million ounces. The high grade for an open-pit gold mine is extraordinary. When I first got into Donlin, in 2008-2009, the industry grade was almost double where it is today. For a large-scale open-pit operation, Donlin's grade of over two to three grams of gold is absolutely extraordinary. And what that means is that if you've got one mine producing at a gram of gold and another mine producing two grams of gold, all other things being equal, the cash cost per ounce is going to be half for the higher-grade mine. That's just simple arithmetic. The exploration potential at Donlin is absolutely extraordinary. I think that very few gold deposits in the world allow for ounces to be added to resources immediately adjacent to the pit, which holds reserves so cheaply and readily. But we'll get to that in a few minutes because I do want to take some time talking about why we believe that Donlin has the potential to be perhaps the second most famous gold producing area in the United States today after Nevada. The production profile you have also seen means that Donlin will either be in one or two phases, depending on how the optimizations end up working, with gold prices and all those other factors potentially seeing the largest gold producing mine in the world. For those of us who like to focus on what we call the monetary metals, gold and silver, as opposed to base metals, this is a huge distinction; it would already be one of the largest gold mines in the world even if copper were added, such as in Grasberg, but this would be pure gold. The mine life will be measured in decades. That means that it is not just a Tier-1 asset; it is a company-making asset. Historically, great companies emerge from assets that can last through multiple cycles. Even if we never add another ounce, Donlin would be noteworthy for the jurisdiction it is in. Well, the mantra has always been you want to be in places with assets that give you great leverage in jurisdictions that allow you to keep the fruits of that leverage. Anyone who has been a shareholder of NovaGold, anyone who has followed me since 2012 when I effectively abandoned most of the developing world to focus on jurisdictions where I could sleep well at night, will understand that for us, Donlin represents the Holy Grail. It represents the best in breed in terms of size, grade, exploration, potential production profile, mine life, and importantly, it is located in a place yet when you go to sleep at night, you know that when you wake up in the morning, what you thought you owned, you still own. There are no insurgents; you haven't been salami sliced into losing your assets. I know whereof I speak; I made my first fortune in Bolivia, my second fortune in Zimbabwe and South Africa in platinum, and I sold the Kibali mine or project to Mark Bristow in Congo. So, I am very, very familiar with these places. And my holdings used to span everywhere from Peru to Pakistan, from Mauritania to Mongolia. In 2012, I told my team we go only to those places where the rule of law is not a novelty item. And that has primarily led us to North America and more recently to Australia. But here's the thing: Among the top 10 gold-producing operations in the world, of those top 10, only three operations produce greater than a million ounces. One of those is in North America, in Nevada. But the next one, we believe, will be Alaska, maybe Supremacy in Russia. But I don't think that many of the people on this call are going to be rushing to Russia anytime soon. The fact is that when you talk about a Tier-1 asset, we are speaking about a category killer asset, and there's no question that we are in that league. More importantly, we are in the right place to be profitable. The next slide is one I want to focus on longer because I realized two quarters ago that I made a passing comment in our conference call with investors, where I mentioned that Warren Buffett has played an unintentional role in my career. When I took my first company public in 1997, it wasn't a great time for mining companies. But the week that I went public, I got really lucky; the week that I went public, Warren Buffett was revealed to have purchased approximately 130 million ounces of silver. In one stroke, Warren Buffett detoxified silver in a way that allowed it to be safe for institutional investors to re-enter the waters. And in doing so, he benefited some of the people out there building silver companies like myself. Ever since then, silver has been considered an investable, institutional-quality asset. Well, that got picked up by a reporter for Business Insider, named Peron; he’s really a nice guy and called me up. He covers Warren Buffett, and he said, could you tell me more about the story? I said, do you find it interesting? He said yes. I told him the story. He wrote a lovely piece in Business Insider, wherein I acknowledged that I owe a lot to Warren Buffett. I've had the opportunity several years later to thank Warren personally, and being the charming guy he is, he said, well, 50 years, that’s great. But when I was interviewed, that same reporter asked me again, what do you think it would mean if Warren Buffett entered the gold market? And I said, well, does that mean that lightning really strikes twice? Maybe I just have to assume he won’t because he is so invested in the idea that gold, to quote John Maynard Keynes, is a “barbarous relic,” it makes no sense to him and I’ve had this conversation with Bill Gates. But it would be wonderful if he did. Well, lo and behold, last quarter, one of the only stocks—and I think it is the only stock—Warren Buffett bought is Barrick, and this was obviously great kudos to Mark Bristow and his mission to make Barrick a key stock for generalists. You couldn’t get better validation than that. The funny part was, as I spoke to that journalist again, the common denominator in both of those stories was actually me. And between the silver when I went public and Warren Buffett buying Barrick, this, as I told the reporter, was likely to make me even more money because of NovaGold than what happened with silver. The idea being that the more people look at Barrick’s portfolio, the more they examine the asset, the more focus there is on what we believe to be one of the greatest gold assets in the world, that being, of course, Donlin. And I firmly believe that as investors, more generalists look at Barrick that a number of them will also take a look at NovaGold and some of them will say, wow, I wonder what that’s all about, and they will look us up. They will see our shareholder base and say, wow, I know John Paulson or Will Danoff or Jacob Rothschild or the Agnellis or BlackRock or First Eagle, I’m going to give them a call and find out what they think. And I do believe that they will be told that, as far as we’re concerned, Donlin is probably the best gold development story in the world today. There are two ways to invest, a pure play through NovaGold, and also if one wants to be involved in multiple jurisdictions with operating mines and a great CEO, there’s Mark Bristow and Barrick as well. My attitude has always been, whatever is good for Mark is good for NovaGold. After all, as NovaGold increases in value, Barrick is now in a position to tell all analysts who follow it, look, we are offering the same thing as NovaGold; they have a little cash, but other than that, it’s all about Donlin and we should be able to get that added to our NAV. So if we increase, it is advantageous to Barrick, and if, on the other hand, people invest in Barrick with or without investing in NovaGold, it reinforces our position, creating a virtuous circle. One of the things I’ve realized when we speak to investors is more and more new investors are asking the question, can you explain the relationship with Barrick? Where did we come from to where we are today? Because this is extremely important—everybody always asks, what about Barrick? Our attitude has always been Barrick will come around to seeing things our way; they just need a higher gold price. But if someone wants growth, they need to look at Donlin. If you want bullish sentiment for us, nothing has been more positive at NovaGold than Mark Bristow entering the Barrick story. Leaving aside that he’s an old friend, Mark is an incredibly accomplished and talented operator. He’s also a phenomenal geologist, and, importantly, very, very hands-on. So for the first time since 2009, when I got into the story, a CEO from Barrick has gone to visit Donlin. I think it’s fair to say he liked what he saw, and the truth is that we now see Barrick speaking more about Donlin and even describing it—again, I don’t want to cherry-pick, but you can always refer back to the transcript—as a key asset and nice new gold opportunity. This is part of last quarter’s wonderful sea change; we had fantastic drill results, admittedly only preliminary findings. We had Barrick shining a light on Donlin, and we had Barrick willing to speak about it in ways they have not done so publicly before. Now, this is why the next part of the story is interesting. I don’t think there’s any reason not to speak about things Barrick used to tell us in private, so at least you will understand the context of why I believe that the reserves or resources at Donlin can grow much larger and why I believe that Donlin will be perceived by investors as a go-to stock—the new Nevada or the new Carlin. Even Mark will agree that prior to his joining Barrick, we turned Donlin into a global brand deliberately. We are building a global brand around Donlin and believe it has the potential to be on par with Nevada if more work is done on it. So let's go back to the beginning. I watched NovaGold rise from a $0.50 stock at the turn of the century to $15, $16 when it was the target of a hostile takeover attempt by Barrick. I did not own shares of the stock during that rise. I watched shareholders of NovaGold, of which obviously I wasn't one, reject that takeover offer, and the stock surged into the $20s as a result. This was an extraordinary story. Unfortunately, following self-inflicted wounds and layering over that the financial crisis, the stock returned to $0.50, $1. When we entered the story through The Electrum Group, my family’s holding company, I was bullish only on gold. We sold our energy company in 2007, which was the fastest-growing privately held natural gas producer, to pivot into gold and re-enter silver. When NovaGold fell to $.50, I had coveted Donlin for years and decided to invest in the company. Fortunately, one of my key lieutenants, who has been with me ever since, Igor Leventhal—the male part of the power couple in mining, along with Jessica—said, I think you should reconsider, boss. You’re not going to get away with it. I asked why. He said, look, you may be able to buy it at $2, but Barrick is really, really upset that they lost this, there’s a lot of resentment about this. Once they get over the shock of what’s happening, they will have every opportunity to drive up your share price dollar by dollar and potentially fold, at which point you will end up with nothing. Therefore, it is better to save the company, which is about to go into bankruptcy, and become the largest shareholder rather than risk owning a mere 40% of something fabulous. It’s okay to be greedy, but not ridiculously greedy. That was sound advice for which I am forever indebted to Igor for having that sensibility. We purchased it, and it turned out to be something institutional investors couldn’t buy; they had no balance sheet, no credibility on the street, environmental issues on an asset called Rock Creek that you probably have never heard of now because we got rid of it—lawsuits from shareholders, all kinds of problems. Management was very unloved. We acquired it and turned the company around by selling off problem assets, spinning off unrelated projects, repairing the balance sheet, and every promise we made, we upheld. As things progressed, I reached out to Barrick. I had no bad blood with Barrick to the contrary; any experience I had with Barrick under Randall Oliphant was very pleasant and professional. I asked if we could meet, and they agreed, but they had expectations for the meeting, and so did I. When we did the deal, I was worried we wouldn’t have enough time to close the deal, and I assigned my team a tight 48-hour timeline for due diligence on a company that was like trying to catch a falling knife. My team said that this was not feasible. So I asked them to consider this analogy: two men are walking in the woods when they encounter a bear. One runs away; the other spokesman takes off his hiking boots for tennis shoes. The runner asks the other why he isn’t running. The second man replies, I don’t have to outrun the bear; I just have to outrun you. I said I don’t care what NovaGold says about Donlin; I only care about Barrick. Barrick doesn’t lie, and if Barrick confirms that Donlin is genuine, that’s all I need to know, and I am willing to take the risk. Subsequent to our intervention, I sent my chief geologist, Dr. Larry Buchanan, a renowned geologist, to visit Donlin. I asked him—after the fact—to tell me if it’s there. He returned from Donlin; I asked him the critical questions, 'Is it 40 million ounces?' He said, 'No.' I followed up with, 'Is there gold there?' He said, 'Yes.' Finally, I asked, 'What's it about?' He responded, 'I see 80 to 100 million ounces extending along strike.' This was a pivotal moment for me because Larry discovered the biggest silver find of our generation in Bolivia. To this day, his credibility is immense, and it continues today. When I heard that I decided to travel to Paris to acquire the other half of the project. During my meeting with Barrick executives, I accompanied a sidekick who happened to be a former ambassador and lawyer. I met with Aaron Regent, who is a gentleman of incredible character and integrity with a delightful personality. When we sat down, Aaron asked how he could assist. I suggested they consider selling me the other half of Donlin. Aaron did not see that coming, thought I was coming to sell them the other half. I countered that I was not interested in selling my half; I wanted to buy them out. The other person in the room reacted strongly. The best analogy might be from 'The Godfather' when Michael Corleone approaches Moe Greene. Aaron, perhaps unaware of the tension from earlier days, was cordial and said that he hadn’t anticipated such a proposal. I clarified that I now wanted to acquire the other half, and he made it clear that Barrick was not inclined to sell their half of Donlin because they recognized that merely drilling would add further value to their position. The bottom line was that relations started to improve because Aaron Regent is a genuinely decent guy. Relations improved over time, and we eventually became friends. I found myself pondering a speculative question: What if Barrick had succeeded in acquiring NovaGold? It’s fascinating to consider that they might have put 10 drill rigs on-site and potentially discovered nine-figure gold resources if they had followed this route. They may have actively explored the property, but they did not win the bid. To grow as they wished, they opted to pursue Pascua-Lama, which many argue should never have been attempted. To secure more copper, they sought Equinox. It's worth noting that at that time, NovaGold held a significant share in what would one day become one of Canada’s largest and lowest-cost copper producers. Barrick didn't need Equinox; if they had focused solely on Donlin, it would have fundamentally changed their position. As time went on and relations improved, I met Greg Lang, then President of Barrick North America. Greg was responsible for more gold production than Gold Corp during his tenure. This presented an opportunity for us to forge a common bond on how we would utilize Donlin. He, an engineer, and I, as an investor, both reached the conclusion that this would be the greatest new gold mine in the world. After we came on board with NovaGold, we set about transforming the entire company. We sold problem assets, spun off unrelated items, and focused on building a solid reputation in the industry. Unfortunately, my expectation regarding Aaron proved accurate, and soon he fell ill. Barrick’s culture resembled a hybrid of Caligula meets Albert Anastasia during good times—traditional and demanding of its employees, but not suited for someone with Aaron’s integrity. Despite that, we navigated challenges and worked hard to build bridges with the new leadership at Barrick. At some point Barrick’s leadership team recognized that within their portfolio was Donlin, an asset with unrealized potential. John Thornton became Barrick’s chairman, and co-CEOs Jim Gowans and Kelvin Dushnisky reinforced the project’s importance. I reached out to Greg and informed them that Stark evidence indicated considerable renewed interest spurred by analysts discussing Donlin—a first for us. I scheduled meetings with Thornton to understand their perspective. At the time, Barrick was refreshing their understanding of Donlin as an exceptional gold project. Now with Mark Bristow’s arrival, we are viewed as a key asset; he sees it as an excellent new opportunity for Barrick. Mark’s and our teams cooperate exceptionally well. I firmly believe that our collaboration will continue to produce tangible results. On the horizon is a path toward production; if you’re bullish on gold and want to be part of a significant producer, Donlin is the best story around. I have faith in its prospects, and when I mention the next big discovery, I hypothesize it could be Donlin itself—this is significant. With only a limited exploration area exposed, just 3 kilometers of known mineralized trend implies enormous potential. Only about 5% of the entire land package is explored, which maintains possibilities of discovery. In summary, our unique position lends itself to growth, especially given Warren Buffett’s endorsement of Barrick. Investors are beginning to see the gold narrative as increasingly valid with notable figures such as Warren Buffett, Ray Dalio, Jeff Gundlach, and others expressing opinions that reinforce this asset class. The supply pressures, particularly related to declining recovery rates, along with targeting higher grades—there’s a perfect storm coalescing around gold. For this reason, an investor ought to incorporate gold assets, as they inevitably will realize that %1 allocation in gold will significantly increase the value potential. The majority of gold ownership remains stable with culturally cemented practices among populations in emerging markets which merely assures further price growth. That said, we aim to leverage higher gold prices as there are many opportunities around. To reiterate, NovaGold stands apart from other investments due to our access to high-quality assets in favorable jurisdictions that present ample opportunities to investors. I’m looking forward to beginning to see the uptick in our stock full performance, and I believe we’ll naturally rise and reclaim stock prices that accurately reflect our unique attributes. Thank you very much.

We will now begin the question-and-answer session. Our first question is from Lucas Pipes with B. Riley Securities. Please go ahead.

Hey, good afternoon, everybody. And thank you Tom for the description. It's always really interesting to hear the history of this truly unique asset. So, appreciate that. I wanted to ask a little bit more about the initial drill assays you noted in the presentation, but they exceeded model expectations with multiple significant high-grade intervals. Could you frame the exceptional results there? And in what areas—specifically on what metrics did they exceed your expectations? Thank you.

Good morning. I'll take that question. Our drill program has two objectives this year: first, to validate the new model based on approximately half the holes and, second, to look for extensions to the known high-grade mineralization we would mine early in the project's life. A couple of those holes had the grade positioned relatively shallow around 30 to 40 meters. That was exactly what we were looking for—extensions to the high grade. The intrusive structures that carry the grade rise like a series of fingers through the sedimentary rock. Our modeling focused on the intrusives and their high-grade nature and we really saw the opportunity that, with smaller equipment, we can mine these discretely, selectively, and enhance the grade. To answer your question, we have a model, and as results come in, we compare them to anticipated intervals. Across the board, we’re seeing less thickness, but it’s substantially higher grade, which is exactly what we were hoping to find through this program. We’re due to release further results later this month and continue to be encouraged by what we observe. There is a very real opportunity for added value through drilling.

Thank you. I heard you mention additional results should be forthcoming later this month. Can you clarify what percentage of the drill program would be released at that point?

That is correct. Assay turnaround times have been slower this year related to staffing issues at the laboratories caused by COVID. However, we are working through that and starting to receive results every day. Look for an update later in the month.

Great. Can you talk about the alignment between Barrick and NovaGold at this time regarding the development of Donlin? What risk exists, for example, that either side may want to proceed with development but not the other? I would appreciate insights on that.

From an operational standpoint, Greg will provide his answer. But from a high-level view, we have never been more aligned with Barrick than we are today. Completing the largest drill program in 12 years—a very big statement—combined with Mark’s approval of the drill program, showcases that we're on similar pages. Mark has taken the position of describing Donlin as a key asset, a nice clean gold opportunity. All these factors are encouraging and indicate that Donlin is viewed distinctly compared to how it was considered 12 years ago. The way that the Barrick team meticulously works to achieve the right geological formations in order to optimize throughput, which will let us determine the CapEx—this is exactly how prudent operators take great assets up the value chain. And when it goes into production, it takes two to tango. But I believe Barrick has a greater need for production as a large-scale gold producer. When they decide it’s optimal for their shareholders to take it forward, we have no doubt that we will have access to the capital we need to meet our needs. The only question is timing. We have complete confidence that we will be in sync when the time comes. Everything we’ve seen since Randgold and Barrick’s merge confirms that this is a game-changing event for us. We now have individuals in charge who genuinely want to build great projects and know how to carry out successful strategies. When the time comes, I doubt there will be any stronger proponents of the project than they are. We are one voice—Barrick is the 800-pound gorilla in mining, and when they put Donlin on the map, it will be transformative.

Thank you for that response, Tom. I'll add that it’s very exciting to see the solid drill results we’re achieving in any company, but especially with a geology-focused operation such as ours. Interactions with Barrick’s geologists and technical teams during this time are frequent. It’s encouraging to see that their involvement is the highest it's been since they prepared the feasibility study back in 2010 and 2011.

Great comments; thank you both for your insights. Continued best of luck.

We have one more question coming online. I will read it out: Is it fair to say that at the current price, NovaGold stock is simply a bet on a future rise in the gold price and additional exploration potential at Donlin?

Short answer: No. Longer answer: Absolutely not. We believe that we have a uniquely undervalued stock in the marketplace, and we are confident that we will reclaim the premium rating we previously held. Our stock should be in the high teens or low twenties at this point if we had not been targeted by securities fraud. Our performance on the market has seen us outperform indexes, and so by that measure, we are catching up, and indeed, once we rebuild that premium rating, it will be bolstered by adding reserves and an increased gold price. But I have always said, even when shares were priced in the $3s or $4s, that I expect our shares to go into the 20s and beyond. Despite our current struggles, we continue to witness validation of why we made those statements and remain optimistic about what is coming next.

Thank you, Tom. There are no further questions, so I will hand the call back to Greg for closing remarks.

Thank you, Melanie. This has been a lengthy call, so thank you everyone for joining us this morning. Stay safe. Bye.

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