NG 10-K
Novagold Resources Inc (NG)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For the Fiscal Year Ended
OR
For the Transition Period from to
Commission File Number:
(Exact Name of Registrant as Specified in Its Charter)
|
|
N/A |
|
(State or Other Jurisdiction of |
(I.R.S. Employer |
|
|
|
|
(Address of Principal Executive Offices) |
(Zip Code) |
| ( |
| (Registrant’s Telephone Number, Including Area Code) |
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
|
|
|
Toronto Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)
|
|
Accelerated filer ☐ |
Non-accelerated filer ☐ |
|
Smaller reporting company |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Based on the last sale price on the NYSE American LLC (“NYSE American”) of the registrant’s common shares on May 31, 2024 (the last business day of the registrant’s most recently completed second fiscal quarter) of $3.93 per share, the aggregate market value of the voting common shares held by non-affiliates was approximately $
As of January 13, 2025, the registrant had
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than April 1, 2025, in connection with the registrant’s fiscal year 2024 annual meeting of shareholders, are incorporated by reference into Part III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
Unless the context otherwise requires, the words “we,” “us,” “our,” the “Company” and “NOVAGOLD” refer to NOVAGOLD RESOURCES INC., a British Columbia corporation, and its subsidiaries as of November 30, 2024.
CURRENCY
References in this report to $ refer to United States currency and C$ to Canadian currency.
See the “Glossary of Technical Terms” for more information regarding some of the terms used in this report.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements or information within the meaning of Canadian securities laws and the United States Private Securities Litigation Reform Act of 1995 concerning anticipated results and developments in our operations in future periods, planned exploration activities, the adequacy of our financial resources and other events or conditions that may occur in the future. These forward-looking statements may include statements regarding perceived merit of properties, exploration results and budgets, mineral reserves and resource estimates, work programs, anticipated timing of updated reports and/or studies, capital expenditures, operating costs, cash flow estimates, production estimates and similar statements relating to the economic viability of a project, anticipated timing and impact of certain judicial and/or administrative decisions, continued support of the state and federal permitting process, future capital raising activities and their related dilutive effects, sufficiency of working capital, timelines, strategic plans, including our plans and expectations relating to the Donlin Gold project, permitting and the timing thereof, the Company’s market price, market prices for precious metals, or other statements that are not statements of fact. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. Statements concerning mineral resource estimates may also be deemed to constitute “forward-looking statements” to the extent that they involve estimates of the mineralization that will be encountered if the property is developed.
Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as “expects”, “is expected”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “potential”, “possible” or variations thereof or stating that certain actions, events, conditions or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements.
Forward-looking statements are based on a number of material assumptions, including those listed below, which could prove to be significantly incorrect:
|
● |
our ability to achieve production at the Donlin Gold project; |
|
● |
dependence on cooperation of co-owner in exploration and development of the Donlin Gold project; |
|
● |
estimated capital costs, operating costs, production and economic returns; |
|
● |
estimated metal pricing, metallurgy, mineability, marketability and operating and capital costs, together with other assumptions underlying our resource and reserve estimates; |
|
● |
our expected ability to develop adequate infrastructure and that the cost of doing so will be reasonable; |
|
● |
assumptions that all necessary permits and governmental approvals will be obtained and retained, and the timing of such approvals; |
|
● |
assumptions made in the interpretation of drill results, the geology, grade and continuity of our mineral deposits; |
|
● |
our expectations regarding demand for equipment, skilled labor and services needed for the Donlin Gold project; |
|
● |
our activities will not be adversely disrupted or impeded by development, operating or regulatory risks; and |
|
● |
our expectations regarding the timing and outcome of the appeals to: (i) the federal Joint Record of Decision (“JROD”) and permits issued by the U.S. Army Corps of Engineers (“Corps”) and U.S. Bureau of Land Management (“BLM”), (ii) the State Clean Water Act Section 401 Certification (as defined below), (iii) the state pipeline right-of-way (“ROW”) agreement and lease (as defined below), and (iv) the application for water rights (as defined below). |
Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation:
|
● |
uncertainty of whether there will ever be production at the Donlin Gold project; |
|
● |
risks related to co-owner on which we depend for Donlin Gold project activities; |
|
● |
risks related to proceeding with a feasibility study for the Donlin Gold project without the participation of the co-owner; |
|
● |
our history of losses and expectation of future losses; our limited property portfolio; |
|
● |
risks related to our ability to finance the development of the Donlin Gold project through external financing, strategic alliances, the sale of property interests or otherwise; |
|
● |
uncertainty of estimates of capital costs, operating costs, production and economic returns, including the impact of inflation thereon; |
|
● |
commodity price fluctuations; |
|
● |
risks related to market events and general economic conditions; |
|
● |
risks related to opposition to our operations at our mineral exploration and development properties from non-governmental organizations (“NGOs”) or civil society; |
|
● |
the risk that permits and governmental approvals necessary to develop and operate the Donlin Gold project will not be available on a timely basis, subject to reasonable conditions, or at all; |
|
● |
uncertainties relating to the assumptions underlying our resource and reserve estimates, such as metal pricing, metallurgy, mineability, marketability and operating and capital costs; |
|
● |
risks related to the inability to develop or access the infrastructure required to construct and operate the Donlin Gold project; |
|
● |
uncertainty related to title to the Donlin Gold project; |
|
● |
risks related to our largest shareholder; |
|
● |
risks related to conflicts of interests of some of the directors and officers of the Company; |
|
● |
risks related to the need for reclamation activities on our properties and uncertainty of cost estimates related thereto; |
|
● |
credit, liquidity, interest rate and currency risks; |
|
● |
mining and development risks, including risks related to infrastructure, accidents, equipment breakdowns, labor disputes or other unanticipated difficulties with, or interruptions in, development, construction or production; |
|
● |
risks related to governmental regulation, including uncertainties resulting from the change in the U.S. federal administration; |
|
● |
uncertainties relating to the stability of pre-existing tax regimes, including the potential introduction of tariffs, as a result of the change in the U.S. federal administration; |
|
● |
risks related to environmental laws and regulations; |
|
● |
risks related to our insurance; |
|
● |
risks related to title and other rights to our mineral properties; |
|
● |
risks related to increases in demand for equipment, skilled labor and services needed for exploration and development of the Donlin Gold project, and related cost increases; |
|
● |
our need to attract and retain qualified management and technical personnel; |
|
● |
uncertainty as to the outcome of potential litigation; |
|
● |
risks related to the effects of global climate change on the Donlin Gold project; |
|
● |
risks related to information technology systems; |
|
● |
risks related to cybersecurity attacks and breaches; and |
|
● |
risks related to the Company’s status as a “passive foreign investment company” in the United States. |
This list is not exhaustive of the factors that may affect any of our forward-looking statements. Forward-looking statements are statements about the future and are inherently uncertain, and our actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to in this Annual Report on Form 10-K under the heading “Risk Factors” and elsewhere.
Our forward-looking statements contained in this Annual Report on Form 10-K are based on the beliefs, expectations and opinions of management as of the date of this report. We do not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations or opinions should change, except as required by law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.
Technical Information
Paul Chilson, P.E., a Qualified Person and an employee of the Company reviewed and approved the scientific and technical information contained in this Annual Report on Form 10-K.
GLOSSARY OF TECHNICAL TERMS
The following technical terms defined in this section are used throughout this Annual Report on Form 10-K.
|
alluvial |
A placer formed by the action of running water, as in a stream channel or alluvial fan; also said of the valuable mineral (e.g. gold or diamond) associated with an alluvial placer. |
|
arsenopyrite |
An arsenic iron sulfide mineral. |
|
assay |
A metallurgical analysis used to determine the quantity (or grade) of various metals in a sample. |
|
concentrate |
A clean product recovered in flotation, which has been upgraded sufficiently for downstream processing or sale. |
|
cut-off grade |
The grade (i.e., the concentration of metal or mineral in rock) that determines the destination of the material during mining. For purposes of establishing “prospects of economic extraction”, the cut-off grade is the grade that distinguishes material deemed to have no economic value (it will not be mined in underground mining or if mined in surface mining, its destination will be the waste dump) from material deemed to have economic value (its ultimate destination during mining will be a processing facility). Other terms used in similar fashion as cut-off grade include net smelter return, pay limit, and break-even stripping ratio. |
|
cyanidation |
A metallurgical technique, using a dilute cyanide solution, for extracting gold from ore by dissolving the gold into solution. |
|
dike |
A tabular igneous intrusion that cuts across the bedding of the host rock. |
|
doré |
A semi-pure alloy of gold and silver. |
|
electrowinning |
The deposition of gold from solution to cathodes by passing electric current from anodes through gold-bearing solution. |
|
flotation |
A process used for the concentration of minerals, especially within base metal systems. |
|
geotechnical |
Said of tasks or analysis that provide representative data of the geological rock quality in a known volume. |
|
grade |
Quantity of metal or mineral per unit weight of host rock. |
|
greywacke |
A variety of sandstone generally characterized by its hardness, dark color, and poorly sorted angular grains of quartz, feldspar, and small rock fragments set in a compact, clay-fine matrix. |
|
host rock |
A body of rock serving as a host for other rocks or for mineral deposits. |
|
hydrothermal |
Pertaining to hot aqueous solutions of magmatic origin which may transport metals and minerals in solution. |
|
intrusive |
Said of igneous rock formed by the consolidation of magma intruded into other rocks. |
|
mafic |
Igneous rocks composed mostly of dark, iron- and magnesium-rich minerals. |
|
massive |
Said of a mineral deposit, especially of sulfides, characterized by a great concentration of mineralization in one place, as opposed to a disseminated or vein-like deposit. |
|
mineral |
A naturally formed chemical element or compound having a definite chemical composition and, usually, a characteristic crystal form. |
|
mineral deposit |
A mineralized body which has been physically delineated by sufficient drilling, trenching, and/or underground work, and found to contain a sufficient average grade of metal or metals to warrant further exploration and/or development expenditures. |
|
mineralization |
A natural occurrence in rocks or soil of one or more yielding minerals or metals. |
|
net present value (NPV) |
The sum of the value on a given date of a series of future cash payments and receipts, discounted to reflect the time value of money and other factors such as investment risk. |
|
ore |
Rock containing metallic or non-metallic materials that can be extracted at a profit. |
|
placer |
An alluvial deposit of sand and gravel, which may contain valuable metals. |
|
porphyry |
An igneous rock of any composition that contains conspicuous phenocrysts (large crystals or mineral grains) in a fine-grained groundmass. |
|
pyrite |
An iron sulfide mineral (FeS2), the most common naturally occurring sulfide mineral. |
|
pyrrhotite |
An unusual, generally weakly magnetic, iron sulfide mineral with varying iron content (Fe1-xS (x=0 to 0.2)). |
|
reverse circulation (RC) |
A type of drilling using dual-walled drill pipe in which the material drilled, water and mud are circulated up the center pipe while air is blown down the outside pipe. |
|
realgar |
An arsenic sulfide mineral (As4S4). |
|
reclamation |
Restoration of mined land to original contour, use, or condition where possible. |
|
rhyodacite |
A volcanic, high-silica rock composed of mostly quartz and feldspar. |
|
sedimentary |
Said of rock formed at the Earth’s surface from solid particles, whether mineral or organic, which have been moved from their position of origin and re-deposited, or chemically precipitated. |
|
shale |
A fine-grained detrital (transported by wind, water, or ice) sedimentary rock, formed by the consolidation of clay, silt, or mud. |
|
sill |
An intrusive sheet of igneous rock of roughly uniform thickness that has been forced between the bedding planes of existing rock. |
|
stibnite |
An antimony sulfide mineral (Sb2S3). |
|
strike |
The direction, or bearing from true north, of a vein or rock formation measured on a horizontal surface. |
|
sulfide |
A compound of sulfur and some other metallic element. |
|
syngenetic |
Relating to or denoting a mineral deposit or formation produced at the same time as the host rock. |
|
tailings |
Uneconomic material produced by a mineral processing plant which is disposed of in a manner meeting government regulation and which may involve a permanent impoundment facility or which may involve the discharge of material to the environment in a manner regulated by the government authority. |
|
vein |
A thin, sheet-like crosscutting body of hydrothermal mineralization, principally quartz. |
|
waste rock |
Barren or submarginal rock that has been mined but is not of sufficient value to warrant treatment and is therefore removed ahead of the milling processes. |
|
Business |
Overview
We operate in the gold mining industry, primarily focused on advancing the Donlin Gold project in Alaska. The Donlin Gold project is held by Donlin Gold LLC (“Donlin Gold”), a limited liability company owned equally by wholly-owned subsidiaries of NOVAGOLD and Barrick Gold Corporation (“Barrick”).
We do not produce gold or any other minerals, and do not currently generate operating earnings. Funding to explore our mineral properties and to operate the Company was acquired primarily through previous equity financings consisting of public offerings of our common shares and warrants and through debt financing consisting of convertible notes, and the sale of assets. We expect to continue to raise capital through additional equity and/or debt financings, through the exercise of stock options, and other such means.
We were incorporated by memorandum of association on December 5, 1984, under the Companies Act (Nova Scotia) as 1562756 Nova Scotia Limited. On January 14, 1985, we changed our name to NovaCan Mining Resources (1985) Limited and on March 20, 1987, we changed our name to NOVAGOLD RESOURCES INC. On May 29, 2013, our shareholders approved the continuance of the corporation into British Columbia. Subsequently, we filed the necessary documents in Nova Scotia and British Columbia, and we continued under the Business Corporations Act (British Columbia) effective as of June 10, 2013. The current addresses, telephone and facsimile numbers of our offices are:
|
Executive office |
Corporate office |
|
201 South Main Street, Suite 400 |
400 Burrard Street, Suite 1860 |
|
Salt Lake City, UT, USA 84111 |
Vancouver, BC, Canada V6C 3A6 |
|
Telephone (801) 639-0511 |
Toll free (866) 669-6227 |
|
Facsimile (385) 342-4620 |
Facsimile (604) 669-6272 |
Corporate Structure
As of November 30, 2024, we had the following material, direct and indirect, wholly-owned subsidiaries: NOVAGOLD Resources Alaska, Inc., NOVAGOLD US Holdings Inc., NOVAGOLD USA, Inc., AGC Resources Inc, NOVAGOLD (Bermuda) Alaska Limited and NOVAGOLD Resources (Bermuda) Limited. On December 1, 2024, NOVAGOLD (Bermuda) Alaska Limited, NOVAGOLD Resources (Bermuda) Limited and NOVAGOLD Argentina Inc. were amalgamated with NOVAGOLD RESOURCES INC.
The following chart depicts the corporate structure of the Company together with the jurisdiction of incorporation of each of our material subsidiaries and related holding companies as of November 30, 2024. All ownership is 100% unless otherwise indicated.
Human Capital Resources
On November 30, 2024, we had 14 full-time employees, of which four are located in Canada and ten are located in the United States. We also use consultants with specific skills to assist with various aspects of project evaluation, engineering, and corporate governance.
Company Values
Our company culture is the cornerstone of all our human capital programs. Empowering every employee to be their best, affording every employee the opportunity to make a difference, and giving every employee a chance to be heard are among the Company’s values. Our values extend to the communities in which we work. We have adopted a Human Rights Policy focused on our commitment to having a positive influence in the communities where we operate which includes ensuring that we respect human rights.
Diversity
As of the end of fiscal year 2024, 50% of our total workforce were women. Selection of individuals for executive and other positions with the Company is guided by the Company’s policy which “prohibits discrimination in any aspect of employment based on race, color, religion, sex, national origin, disability or age.” Our board of directors (the “Board”) and management acknowledge the importance of all aspects of diversity including gender, ethnic origin, business skills and experience, because it is right to do so and because it is good for our business. When considering candidates for executive positions, the Board’s evaluation considers the broadest possible assessment of each candidate’s skills and background with the overriding objective of ensuring that we have the appropriate balance of skills, experience, and capacity that the Company needs to be successful. In the context of this overriding objective, we have determined not to set targets for the percentage of women, or other aspects of diversity, in executive officer positions.
NOVAGOLD is committed to fostering, cultivating, and preserving a culture of diversity, equity and inclusion. Our employees are one of the most valuable assets we have. The collective sum of the individual differences, life experiences, knowledge, inventiveness, innovation, self-expression, unique capabilities, and talent that our employees invest in their work represents a significant part of our culture, reputation, and NOVAGOLD’s achievements.
NOVAGOLD is dedicated to creating an inclusive work environment for everyone. We embrace and celebrate the unique experiences, perspectives, and cultural backgrounds that each employee brings to our workplace. NOVAGOLD strives to foster an environment where our employees feel respected, valued, and empowered, and our team members are at the forefront in helping us promote and sustain an inclusive workplace.
NOVAGOLD’s diversity initiatives are applicable—but not limited—to our practices and policies on recruitment and selection; compensation and benefits; professional development and training; promotions; and the ongoing development of a work environment built on the premise of gender and diversity equity. To that end, we seek out qualified diverse candidates and encourage them to apply for open positions, either from within or outside of the Company. We also seek out opportunities to develop a pipeline of qualified diverse candidates in a particular profession when we are unable to find them ourselves. For example, in 2021 the Company established and continues to fund the NOVAGOLD Mining and Geological Engineering Scholarship at the University of Alaska to help support and encourage undergraduate students seeking bachelor’s degrees in mining or geological engineering, with a focus on supporting underrepresented students.
We encourage:
|
● |
Respectful communication and cooperation among all employees. |
|
● |
Teamwork and employee participation, fostering the representation of all employee perspectives. |
|
● |
Work/life balance through flexible work schedules to accommodate employees’ varying needs. |
|
● |
Learning about and, where appropriate, aiding the communities near NOVAGOLD’s projects to promote a greater understanding and respect for diversity in those communities. |
Safety and Health
NOVAGOLD’s primary objective is to ensure the health and safety of its employees, partners, and contractors, and is reflected in its Health and Safety Policy. Our focus on safety is also reflected at Donlin Gold where a wide-ranging set of policies are implemented at the project site and in the Anchorage office. In 2024, neither Donlin Gold nor NOVAGOLD had any recordable injuries or lost time incidents (“LTIs”). Also see section Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, below
Recent Developments
Donlin Gold project
Donlin Gold advanced key activities in 2024 to position the project to update technical work and cost estimates. Some of these activities wrapped up in December 2024, such as the completion of metallurgical test work (pilot plant) in Ontario, Canada to confirm proposed optimizations to the flowsheet; advanced work to update the Donlin Gold resource model; and the submittal of the preliminary design packages for Dam Safety Certification to the Alaska Department of Natural Resources (“ADNR”). Comments from the ADNR on the Dam Safety Certification preliminary design packages are anticipated in 2025.
NOVAGOLD and Barrick held a Donlin Gold workshop in Alaska in September 2024 to review the important work completed to date, as well as to discuss next steps for the Donlin Gold project and related activities for 2025. Subsequently, Donlin Gold’s board approved a path forward with a 2025 budget of $43 million on a 100% basis. Camp operations will resume in the coming months to complete grid drilling to refine mine planning assumptions. Efforts will continue to advance key workstreams and 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, steadfast support of pending litigation, and ongoing community relations and government affairs activities. NOVAGOLD will continue to employ concerted and inclusive efforts to advance the Donlin Gold project for the benefit of all our shareholders and Donlin Gold stakeholders.
In 2024, Donlin Gold, Calista Corporation (“Calista”) and The Kuskokwim Corporations (“TKC”) held public open houses in three locations in Anchorage, Bethel, and Crooked Creek, the closest community to the project, as well as two Subsistence Community Advisory Committee (“SCAC”) meetings, the first in Aniak during the second quarter and the second in Anchorage in December. Donlin Gold also established three additional Shared Values Statements, for a total of 18. Donlin Gold’s numerous partnerships in the Y-K region and statewide, aimed at supporting ecological projects, education, summer youth employment programs, and cultural awareness efforts, continue to grow. Together these efforts underscore Donlin Gold’s ongoing engagement with and commitment to local communities, reinforcing existing long-term relationships and addressing specific community needs.
For further information, see section Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, below.
Reclamation
We will generally be required to mitigate long-term environmental impacts by stabilizing, contouring, re-sloping and re-vegetating various portions of a site after mining and mineral processing operations are completed. These reclamation efforts will be conducted in accordance with detailed plans, which are approved by the appropriate regulatory agencies. In addition, financial assurance acceptable to the regulatory authority with jurisdiction over reclamation must be provided in an amount and form that is determined to be sufficient by the authority to implement the approved reclamation plan in the event that the project owners fail to complete the work as provided in the plan.
Government and Environmental Regulations
Our exploration and development activities are subject to various national, state, and local laws and regulations in the United States, which govern prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, protection of the environment, mine safety, hazardous substances, disclosure requirements and other matters. We have obtained or have pending applications for those licenses, permits or other authorizations currently required to conduct our exploration and development programs. We believe that we are in compliance in all material respects with applicable mining, health, safety and environmental statutes and regulations in the United States. There are no existing orders or directions relating to our current activities with respect to the foregoing laws and regulations. For a more detailed discussion of the various government laws and regulations applicable to our operations and potential negative effects of these laws and regulations, see section Item 1A, Risk Factors, below.
Competition
We compete with other mineral resource exploration and development companies for financing, technical expertise, and the acquisition of mineral properties. Many of the companies with whom we compete have greater financial and technical resources. Accordingly, these competitors may be able to spend greater amounts on the acquisition, exploration, and development of mineral properties. This competition could adversely impact our ability to finance further exploration and to obtain the financing necessary for us to develop the Donlin Gold project.
Availability of Raw Materials and Skilled Employees
Most aspects of our business require specialized skills and knowledge. Such skills and knowledge include the areas of geology, drilling, resource estimating, metallurgy, mine planning, logistical planning, preparation of pre-feasibility and feasibility studies, permitting, engineering, construction and operation of a mine, financing, legal, human resources, accounting, investor relations, and community relations. Historically, we have found that we can locate and retain appropriate employees and consultants and we believe we will continue to be able to do so.
The raw materials we require to carry on our business are readily available through normal supply or business contracting channels in the United States and Canada. Historically, we have been able to secure the appropriate equipment and supplies required to conduct our contemplated programs. As a result, we do not believe that we will experience any shortages of required equipment or supplies in the foreseeable future.
Seasonality
Our business can be seasonal as our mineral exploration and development activities take place in southwestern Alaska. Due to the northern climate, work on the Donlin Gold project can be limited due to excessive snow cover and cold temperatures. In general, surface work often is limited to late spring through early fall, although work in some locations is more readily and efficiently completed during the winter months when the ground is frozen.
Gold Price History
The price of gold is volatile and is affected by numerous factors, all of which are beyond our control, such as the sale or purchase of gold by various central banks and financial institutions, inflation, recession, fluctuation in the relative values of the U.S. dollar and foreign currencies, changes in global and regional gold demand, in addition to international and national political and economic conditions.
The following table presents the annual high, low and average daily afternoon London Bullion Market Association (“LBMA”) Gold Price over the past five calendar years on the London Bullion Market ($/ounce):
|
Year |
High |
Low |
Average |
|||||||||
|
2020 |
$ | 2,067 | $ | 1,474 | $ | 1,770 | ||||||
|
2021 |
$ | 1,943 | $ | 1,684 | $ | 1,799 | ||||||
|
2022 |
$ | 2,039 | $ | 1,628 | $ | 1,800 | ||||||
|
2023 |
$ | 2,078 | $ | 1,811 | $ | 1,941 | ||||||
|
2024 |
$ | 2,784 | $ | 1,985 | $ | 2,387 | ||||||
|
2025 (through January 13) |
$ | 2,687 | $ | 2,632 | $ | 2,658 | ||||||
On January 13, 2025, the afternoon LBMA gold price was $2,670 per ounce.
Data Source: lbma.org.uk
Available Information
We maintain a website at www.novagold.com and make available, through the Investors section of the website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Section 16 filings and all amendments to those reports, as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission (“SEC”). These reports are also available at the SEC website at www.sec.gov. Certain other information, including but not limited to the Company’s Corporate Governance Guidelines, the charters of key committees of its Board of Directors and its Code of Business Conduct and Ethics are also available on the website. Our website and the information contained therein or connected thereto are not intended to be, and are not incorporated into this Annual Report on Form 10-K.
|
Risk Factors |
You should carefully consider the following risk factors in addition to the other information included in this Annual Report on Form 10-K. Each of these risk factors could adversely affect our business, operating results and financial condition, as well as adversely affect the value of an investment in our common shares. The risks described below are not the only ones facing the Company. Additional risks that we are not presently aware of, or that we currently believe are immaterial, may also adversely affect our business, operating results and financial condition. We cannot assure you that we will successfully address these risks and caution that other unknown risks may exist or may arise that may affect our business.
An investment in our securities is speculative and involves a high degree of risk due to the nature of our business and the present stage of exploration and development of our mineral properties. The following risk factors, as well as risks not currently known to us, could materially adversely affect our future business, operations and financial condition and could cause them to differ materially from the estimates described in the forward-looking statements relating to us.
Risks Related to Our Business
We have no history of commercially producing precious metals from our mineral exploration properties and there can be no assurance that we will successfully establish mining operations or profitably produce precious metals.
The Donlin Gold project is not in production or currently under construction, and we have no ongoing mining operations or revenue from mining operations. Mineral exploration and development has a high degree of risk and few properties that are explored are ultimately developed into producing mines. The future development of the Donlin Gold project will require obtaining permits and financing the construction and operation of mines, processing plants and related infrastructure. As a result, we are subject to all of the risks associated with establishing new mining operations and business enterprises, including:
|
● |
the need to obtain and maintain necessary environmental and other governmental approvals and permits, and the timing and conditions of those approvals and permits; |
|
● |
the availability and cost of funds to finance construction and development activities; |
|
● |
the timing and cost, which can be considerable, of the construction of mining and processing facilities as well as related infrastructure; |
|
● |
potential opposition from NGOs, environmental groups or local groups which may delay or prevent development activities; |
|
● |
potential increases in construction and operating costs due to changes in the cost of labor, fuel, power, materials and supplies, services, and foreign exchange rates; |
|
● |
the availability and cost of skilled labor and mining equipment; and |
|
● |
the availability and cost of appropriate smelting and/or refining arrangements. |
The costs, timing and complexities of mine construction and development are increased by the remote location of our mineral properties, with additional challenges related thereto, including access, water and power supply, and other support infrastructure. Cost estimates may increase significantly as more detailed engineering work and studies are completed on a project. New mining operations commonly experience unexpected costs, problems and delays during development, construction, and mine start-up. In addition, delays in the commencement of mineral production often occur. Accordingly, there are no assurances that our activities will result in profitable mining operations, or that we will successfully establish mining operations, or profitably produce precious metals at the Donlin Gold project.
In addition, there is no assurance that our mineral exploration activities will result in any discoveries of new ore bodies. If further mineralization is discovered there is also no assurance that the mineralized material would be economical for commercial production. Discovery of mineral deposits is dependent upon a number of factors and significantly influenced by the technical skill of the exploration personnel involved. The commercial viability of a mineral deposit is also dependent upon a number of factors which are beyond our control, including the attributes of the deposit, commodity prices, government policies and regulation, and environmental protection requirements.
We are dependent on the cooperation of a third party in the exploration and development of our Donlin Gold project.
Our success with respect to the Donlin Gold project depends on the cooperation of a third party with whom we have an agreement; we hold a 50% interest and the remaining 50% interest is held by the third party that is not under our control or direction. We are dependent on the cooperation of a third party for the progress and development of the Donlin Gold project. The third party may have different priorities which could impact the timing and cost of development of the Donlin Gold project. If the third party defaults on its agreement with us, with or without our knowledge, it may put the mineral property and related assets at risk. The existence or occurrence of one or more of the following circumstances and events could have a material adverse impact on our ability to achieve our business plan, profitability, or the viability of our interests held with the third party, which could have a material adverse impact on our business, future cash flows, earnings, results of operations and financial condition: (i) disagreement with the third party on how to develop and operate the Donlin Gold project efficiently; (ii) inability to exert influence over certain strategic decisions made in respect of the jointly-held Donlin Gold project; (iii) inability of the third party to meet its obligations to the joint business or other parties; and (iv) litigation with the third party regarding joint business matters.
We may choose to proceed with a feasibility study for the Donlin Gold project without the participation of the co-owner, which would require significant management time and additional capital resources.
Although proposed by NOVAGOLD, currently the owners have not agreed to commence an updated feasibility study. The Company may choose to proceed with a feasibility study for the Donlin Gold project on its own without the participation of the co-owner, although the Company has not yet made a determination to do so. Embarking on a feasibility study is an endeavor requiring significant funding and staffing. We expect a feasibility study would take approximately two years to complete once commenced and would require significant management time and attention. In addition, if the Company ultimately decides to proceed with its own feasibility study for the Donlin Gold project, the Company will be required to raise additional capital through means such as equity and/or debt financing to successfully complete the feasibility study. There can be no assurance that the Company could raise the required capital on terms favorable to it, or at all.
We have a history of net losses and expect losses to continue for the foreseeable future.
The Donlin Gold project has not advanced to the commercial production stage and we have no history of earnings or cash flow from operations. We expect to continue to incur net losses unless and until such time the Donlin Gold project commences commercial production and generates sufficient revenues to fund continuing operations. The development of our mineral properties to achieve production will require the commitment of substantial financial resources. The amount and timing of expenditures will depend on a number of factors, including the progress of ongoing exploration and development, the results of consultants’ analyses and recommendations, the rate at which operating losses are incurred, the process of obtaining required government permits and approvals, the availability and cost of financing, the participation of our partners, and the execution of any sale or joint venture agreements with strategic partners. These factors, and others, are beyond our control. There is no assurance that we will be profitable in the future.
We have a limited property portfolio.
At present, our only material mineral property is the interest that we hold in the Donlin Gold project. Unless we acquire or develop additional mineral properties, we will be solely dependent upon this property. If no additional mineral properties are acquired by us, any adverse development affecting our operations and further development at the Donlin Gold project may have a material adverse effect on our financial condition and results of operations.
Our ability to continue the exploration, permitting, development, and construction of the Donlin Gold project, and to continue as a going concern, will depend in part on our ability to obtain suitable financing.
We have limited financial resources. We will need external financing to develop and construct the Donlin Gold project. According to the S-K 1300 Report (as defined below), the total initial capital cost estimate for the Donlin Gold project is approximately $7,402 million which includes the costs related to the natural gas pipeline (100% basis). These cost estimates may change materially as our studies are updated. Our failure to obtain sufficient financing could result in the delay or indefinite postponement of exploration, development, construction, or production at the Donlin Gold project. The cost and terms of such financing may significantly reduce the expected benefits from development of the Donlin Gold project and/or render such development uneconomic. There can be no assurance that additional capital or other types of financing will be available when needed or that, if available, the terms of such financing will be favorable. Our failure to obtain financing could have a material adverse effect on our growth strategy and results of operations and financial condition.
We intend to fund our near-term business plan from working capital. Longer term, our ability to continue future exploration, permitting, development, and construction activities, if any, will depend in part on our ability to obtain suitable equity, debt, or other forms of financing. If we raise additional funding by issuing additional equity securities or other securities that are convertible into equity securities, such financing may substantially dilute the interest of existing or future shareholders. Sales or issuances of a substantial number of securities, or the perception that such sales could occur, may adversely affect the prevailing market price for our common shares. With any additional sale or issuance of equity securities, investors will suffer dilution of their voting power and may experience dilution in earnings per share.
There can be no assurance that we will commence production at the Donlin Gold project or generate sufficient revenues to meet our obligations as they become due or obtain necessary financing on acceptable terms, if at all. Our failure to meet our ongoing obligations on a timely basis could result in the loss or substantial dilution of our interests (as existing or as proposed to be acquired) in the Donlin Gold project. In addition, should we incur significant losses in future periods, we may be unable to continue as a going concern, and realization of assets and settlement of liabilities in other than the normal course of business may be at amounts materially different than our estimates.
Actual capital costs, operating costs, production and economic returns may differ significantly from those we have anticipated and there are no assurances that any future development activities will result in profitable mining operations.
The capital costs to take the Donlin Gold project into production may be significantly higher than anticipated. As a result of the content updates included in the 2021 Technical Report (as defined below) and S-K 1300 Report, the total initial capital cost estimate for the Donlin Gold project is $7,402 million and the total sustaining capital estimate is $1,723 million.
We do not have an operating history upon which we can base estimates of future operating costs. Decisions about the development of the Donlin Gold project will ultimately be based upon feasibility studies. Feasibility studies derive estimates of cash operating costs based upon, among other things:
|
● |
anticipated tonnage, grades and metallurgical characteristics of the ore to be mined and processed; |
|
● |
anticipated recovery rates of gold and other precious metals from the ore; |
|
● |
cash operating costs of comparable facilities and equipment; and |
|
● |
anticipated climatic conditions. |
Capital costs, operating costs, production and economic returns, and other estimates contained in studies or estimates prepared by or for us may differ significantly from those anticipated by our current or future studies and estimates, and there can be no assurance that the initial capital costs incurred to construct, and the sustaining capital and operating costs incurred in operating the Donlin Gold project will not be higher than currently anticipated.
Changes in the market price of gold, which in the past has fluctuated widely, affect our financial condition.
Our profitability and long-term viability will depend, in large part, upon the market price of gold that may be produced from our Donlin Gold project. The market price of gold is volatile and is impacted by numerous factors beyond our control, including:
|
● |
global or regional consumption patterns; |
|
● |
expectations with respect to the rate of inflation; |
|
● |
the relative strength of the U.S. dollar and certain other currencies; |
|
● |
interest rates; |
|
● |
global or regional political or economic conditions, including interest rates and currency values; |
|
● |
supply and demand for jewelry and industrial products containing gold; and |
|
● |
sales or purchases by central banks and other holders, speculators, and producers of gold in response to any of the above factors. |
We cannot predict the effect of these factors on the price of gold. A decrease in the market price of gold could affect our ability to finance the development of the Donlin Gold project, which would have a material adverse effect on our financial condition and results of operations. There can be no assurance that the market price of gold will remain at current levels or that such prices will improve. An increase in worldwide supply, and consequent downward pressure on prices, may result over the longer term from increased production from the development of new or expansion of existing mines. There is no assurance that if commercial quantities of gold are discovered, that a profitable market may exist or continue to exist for a production decision to be made or for the ultimate sale of gold.
General economic conditions may adversely affect our growth, future profitability and ability to finance.
Some key impacts which can contribute to financial market turmoil potentially impacting the mining industry include contraction in credit markets resulting in a widening of credit risk, imposition of trade tariffs among various countries, devaluations, high volatility in global equity, commodity, foreign exchange and precious metal markets and a lack of market liquidity. The prices of gold and gold mining company equities have experienced significant volatility over the past few years.
A decrease in the price of gold or tightening of credit in the financial markets or other economic conditions, including but not limited to, consumer spending, employment rates, business conditions, inflation, fuel and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates and tax rates, may adversely affect our ability to finance development and construction of the Donlin Gold project. Specifically:
|
● |
global economic conditions could make other investment sectors more attractive, thereby affecting the cost and availability of financing to us and our ability to achieve our business plan; |
|
● |
the imposition of protectionist or retaliatory trade tariffs by countries may impact our ability to import materials needed to construct our projects or conduct our operations, or to export our products, at prices that are economically feasible for our operations, or at all; |
|
● |
the volatility of metal prices would impact the economic viability of the Donlin Gold project and any future revenues, profits, losses and cash flow; |
|
● |
negative economic pressures could adversely impact demand for future production from the Donlin Gold project; |
|
● |
construction related costs could increase and adversely affect the economics of the Donlin Gold project; |
|
● |
volatile energy, commodity and consumables prices and currency exchange rates would impact our future production costs; and |
|
● |
the devaluation and volatility of global stock markets would impact the valuation of our equity and other securities. |
Opposition to our operations from local stakeholders or NGOs could have a material adverse effect on us.
There is ongoing public concern relating to the effect of mining production on its surroundings, communities, and environment. Local communities and NGOs, some of which oppose resource development, are often vocal critics of the mining industry. While we seek to operate in a socially responsible manner, opposition to extractive industries or our operations specifically or adverse publicity generated by local communities or NGOs related to extractive industries, or our operations specifically, could have an adverse effect on our reputation and financial condition or our relationships with the communities in which we operate. As a result of such opposition or adverse publicity, we may be unable to obtain permits necessary for our operations or to continue our operations as planned or at all. See “Recent Developments” above.
We require various permits to conduct our current and anticipated future operations, and delays or a failure to obtain such permits, or a failure to comply with the terms of any such permits that we have obtained, could have a material adverse impact on us.
Our current and anticipated future operations, including further exploration and development activities and commencement of production on the Donlin Gold project, require permits from various United States federal, state, and local governmental authorities. There can be no assurance that all permits that we require for the construction of mining facilities and to conduct mining operations will be obtainable on reasonable terms, or at all. Delays or a failure to obtain such permits, or a failure to comply with the terms of any such permits that we have obtained, could have a material adverse impact on us.
The duration and success of efforts to obtain and renew permits are contingent upon many variables not within our control. Shortage of qualified and experienced personnel in the various levels of government could result in delays or inefficiencies. Backlog within the permitting agencies could affect the permitting timeline of the various projects. Other factors that could affect the permitting timeline include (i) the number of other large-scale projects currently in a more advanced stage of development which could slow down the review process and (ii) significant public response regarding a specific project. Also, it can be difficult to assess what specific permitting requirements will ultimately apply to the Donlin Gold project.
The quantities for our mineral resources and mineral reserves are estimates based on interpretation and assumptions and may yield less mineral production under actual conditions than is currently estimated.
Unless otherwise indicated, mineralization quantities presented in this Annual Report on Form 10-K and in our other filings with securities regulatory authorities, press releases and other public statements that may be made from time to time are based upon estimates made by our personnel and independent professionals. In addition, these estimates are imprecise and depend upon geologic interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be unreliable. There can be no assurance that:
|
● |
these estimates will be accurate; |
|
● |
mineral reserve, mineral resource or other mineralization figures will be accurate; or |
|
● |
this mineralization could be mined, processed, or sold profitably. |
Because we have not commenced commercial production at the Donlin Gold project, mineralization estimates may require adjustments, including potential downward revisions based upon further exploration or development work, actual production experience, or changes in the price of gold. In addition, the grade of ore ultimately mined, if any, may differ from that indicated by drilling results. There can be no assurance that the percentage of minerals recovered in small-scale tests will be duplicated in large-scale tests under on-site conditions or at production scale.
Mineral resource estimates for mineral properties that have not commenced production are based, in many instances, on limited and widely spaced drill hole information, which is not necessarily indicative of the conditions between and around drill holes. Accordingly, such mineral resource estimates may require revision as more drilling information becomes available or as actual production experience is gained. No assurance can be given that any part or all of our mineral resources constitute or will be converted into reserves.
The estimating of mineral reserves and mineral resources is a subjective process that relies on the judgment and experience of the persons preparing the estimates. The process relies on the quantity and quality of available data and is based on knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. By their nature, mineral resource and reserve estimates are imprecise and depend, to a certain extent, upon analysis of drilling results and statistical inferences that may ultimately prove to be inaccurate. There can be no assurances that actual results will meet the estimates contained in studies.
Estimated mineral reserves or mineral resources may have to be recalculated based on changes in metal prices, further exploration or development activity, or actual production experience. In addition, if production costs increase, recovery rates decrease, if applicable laws and regulations are adversely changed, there is no assurance that the anticipated level of recovery will be realized or that mineral reserves or mineral resources as currently reported can be mined or processed profitably. This could materially and adversely affect estimates of the volume or grade of mineralization, estimated recovery rates or other important factors that influence mineral reserve or mineral resource estimates. The extent to which mineral resources may ultimately be reclassified as mineral reserves is dependent upon the demonstration of their profitable recovery. Any material changes in mineral resource estimates and grades of mineralization will affect the economic viability of placing a mineral property into production and a mineral property’s return on capital. We cannot provide assurance that mineralization identified at the Donlin Gold project can or will be mined or processed profitably.
The mineral resource and mineral reserve estimates contained in this Annual Report on Form 10-K have been determined and valued based on assumed future prices, cut-off grades and operating costs that may prove to be inaccurate. Extended declines in market prices for gold may render portions of our mineralization uneconomic and result in reduced reported mineralization. Any material reductions in estimates of mineralization, or of our ability to extract this mineralization, could have a material adverse effect on our ability to implement our business strategy, the results of operations or our financial condition.
We have established the presence of proven and probable mineral reserves at the Donlin Gold project in accordance with the disclosure definition and standards contained in S-K 1300 (as defined below) and in National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”). There can be no assurance that additional mineral resources will ultimately be reclassified as mineral reserves. The failure to increase mineral reserves could restrict our ability to successfully implement our strategies for long-term growth and could impact future cash flows, earnings, results of operation and financial condition.
Lack of infrastructure could delay or prevent us from developing the Donlin Gold project.
Completion of the development of the Donlin Gold project is subject to various requirements, including the availability and timing of acceptable arrangements for power, water, transportation, access, and facilities. The lack of availability on acceptable terms or the delay in the availability of any one or more of these items could prevent or delay development of the project. There can be no assurance that adequate infrastructure, including access and power supply, will be built, that it will be built in a timely manner or that the cost of such infrastructure will be reasonable or that it will be sufficient to satisfy the requirements of the project. If adequate infrastructure is not available in a timely manner, there can be no assurance that:
|
● |
the development of the Donlin Gold project will be commenced or completed on a timely basis, if at all; |
|
● |
the resulting operations will achieve the anticipated production volume; or |
|
● |
the construction costs and ongoing operating costs associated with the development of the Donlin Gold project will not be higher than anticipated. |
Access to the Donlin Gold project is limited and there is no infrastructure that serves the project area. An approximately 507-kilometer natural gas pipeline is needed to supply fuel to the proposed on-site generating plant to provide power for the Donlin Gold project. The proposed pipeline would traverse generally undeveloped areas in Alaska that are difficult to access. Transportation of most of the supplies needed to construct and operate the Donlin Gold project would be accomplished by barging materials on the Kuskokwim River during the annual shipping season which typically occurs from late April to mid-October. Two ports would be needed on the Kuskokwim River, the first located in Bethel, Alaska, where ocean barges would transition materials to river barges; and the second located approximately 320 kilometers upriver from Bethel. A 48-kilometer access road from the upriver port to the project site is needed to deliver the materials. Additionally, a 1,500-meter airstrip would be built to provide year-round access to the project. Terrain, geologic conditions, ground conditions, steep slopes, river levels, ice breakup, weather, climate change impacts and other natural conditions that are beyond our control along the pipeline and transportation routes present design, permitting, construction, and operational challenges for the project. Cost and schedule estimates may increase significantly as more detailed engineering work, geotechnical and geological studies are completed.
Title and other rights to our mineral properties are subject to agreements with other parties.
The subsurface mineral and surface rights at the Donlin Gold project are owned by Calista and TKC, respectively, two Native corporations. Donlin Gold operates on these lands pursuant to a Mining Lease with Calista (“Calista Lease”) and a Surface Use Agreement (“SUA”) with TKC. The ability of Donlin Gold to continue to explore and develop the Donlin Gold project depends upon its continued compliance with the terms and conditions of the Calista Lease and SUA. Furthermore, our ability to continue to explore and develop other mineral properties may be subject to agreements with other third parties, including agreements with Native corporations, for instance.
Our largest shareholder has significant influence on us and may also affect the market price and liquidity of our securities.
Electrum Strategic Resources L.P. (“Electrum”) and its affiliate GRAT Holdings LLC hold in the aggregate 25.4% of our issued and outstanding common shares as of January 13, 2025. Accordingly, Electrum and its affiliates will have significant influence in determining the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations, and the sale of all or substantially all of our assets and other significant corporate actions. Unless full participation of all shareholders takes place in such shareholder meetings, Electrum and its affiliates may be able to approve such matters itself. The concentration of ownership of the common shares by Electrum and its affiliates may: (i) delay or deter a change of control of the Company; (ii) deprive shareholders of an opportunity to receive a premium for their common shares as part of a sale of the Company; and (iii) affect the market price and liquidity of the common shares. In conjunction with the January 22, 2009 financing, we provided Electrum with the right to designate an observer at all meetings of the Board and any committee thereof so long as Electrum and its affiliates hold not less than 15% of our common shares. In November 2011, Dr. Thomas S. Kaplan, was appointed Chairman of our Board. Dr. Kaplan is also the Chairman, Chief Executive Officer, and Chief Investment Officer of The Electrum Group LLC. As long as Electrum and its affiliates maintain its shareholdings in the Company, Electrum will have significant influence in determining the members of the Board. Without the consent of Electrum, we could be prevented from entering into transactions that are otherwise beneficial to us. The interests of Electrum and its affiliates may differ from or be adverse to the interests of our other shareholders. The effect of these rights and Electrum’s influence may impact the price that investors are willing to pay for our shares. If Electrum or its affiliates sell a substantial number of our common shares in the public market, the market price of the common shares could be adversely impacted. The perception among the public that these sales will occur could also contribute to a decline in the market price of our common shares.
Some of the directors and officers have conflicts of interest as a result of their involvement with other natural resource companies.
Certain of our directors and officers also serve as directors, or have significant shareholdings in, other companies involved in natural resource exploration and development or mining-related activities. To the extent that such other companies may participate in ventures in which we may participate in or in ventures which we may seek to participate in, the directors and officers may have a conflict of interest. In all cases where the directors or officers have an interest in other companies, such other companies may also compete with us for the acquisition of mineral property investments. Any decision made by any of these directors and officers involving the Company will be made in accordance with their duties and obligations to deal fairly and in good faith with a view to the best interests of the Company. In addition, each of the directors is required to declare and refrain from voting on any matter in which these directors may have a conflict of interest in accordance with the procedures set forth in the Business Corporations Act (British Columbia) and other applicable laws. In appropriate cases, the Company will establish a special committee of independent directors to review a matter in which several directors, or management, may have a conflict. Nonetheless, as a result of these conflicts of interest, the Company may not have an opportunity to participate in certain transactions, which may have a material adverse effect on the Company’s business, profitability, financial condition, results of operation, and prospects.
We have ongoing reclamation on some of our mineral properties and may be required to fund additional work that could have a material adverse effect on our financial position.
Land reclamation requirements are generally imposed on mineral exploration companies (as well as companies with mining operations) to minimize long term effects of land disturbance. Reclamation may include requirements to:
|
● |
treat ground and surface water to applicable water standards; |
|
● |
control dispersion of potentially deleterious effluents; |
|
● |
reasonably re-establish pre-disturbance landforms and vegetation; and |
|
● |
provide adequate financial assurance to ensure required reclamation of land affected by our activities. |
Exploration and other activities at the Donlin Gold project site have created disturbance that must be reclaimed. Financial resources spent on reclamation might otherwise be spent on further exploration and development programs. In addition, regulatory changes could increase our obligations to perform reclamation and mine closure activities. There can be no assurance that we will not be required to fund additional reclamation work at the site that could have a material adverse effect on our financial position.
We are exposed to credit, liquidity, and interest rate risk.
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. Our cash equivalents and term deposit investments are held through large Canadian chartered banks with high investment-grade ratings. These investments mature at various dates over the current operating period. A portion of the proceeds from the sale of our Galore Creek assets include notes receivable from a subsidiary of Newmont Corporation (“Newmont”), a publicly traded company with investment-grade credit ratings. The notes receivable included a $75 million note receivable of which payment was received on July 27, 2021 and included a $25 million note receivable of which payment was received on July 27, 2023. An additional $75 million will be receivable if and when a Galore Creek project construction plan is approved by the owner(s). No value was assigned to the final $75 million contingent note receivable due to the uncertainty with regards to the approval of a Galore Creek project construction plan. The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents our maximum exposure to credit risk.
Liquidity risk is the risk that we will not be able to meet our financial obligations as they come due. We manage liquidity risk through regular cash flow forecasts to assess our current and future financial position as well as maintaining a prudent capital structure. Accounts payable and accrued liabilities are due within one year from the balance sheet date.
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The risk that we will realize a loss as a result of a decline in the fair value of the term deposit investments is limited because these investments have an original term of less than one year and are generally held to maturity. The promissory note owed to Barrick is variable with the U.S. prime rate. Based on the amount owing on the promissory note as of November 30, 2024, and assuming all other variables remain constant, a 1% change in the U.S. prime rate would result in an increase/decrease of approximately $1.5 million in the interest accrued on the promissory note per annum. For more detail with respect to the promissory note, see section Item 2, Properties – Donlin Gold Project, Alaska, below.
Risks Related to Our Industry
Mining is inherently risky and subject to conditions or events some of which are beyond our control, and which could have a material adverse effect on our business.
Mining involves various types of risks, including:
|
● |
environmental hazards; |
|
● |
industrial accidents; |
|
● |
metallurgical and other processing problems; |
|
● |
unusual or unexpected geologic formations and conditions; |
|
● |
structural cave-ins or slides; |
|
● |
flooding; |
|
● |
fires; |
|
● |
power outages; |
|
● |
labor disruptions; |
|
● |
explosions; |
|
● |
landslides and avalanches; |
|
● |
mechanical equipment and facility performance problems; |
|
● |
availability of materials and equipment; |
|
● |
metals losses; and |
|
● |
periodic interruptions due to inclement or hazardous weather conditions. |
These risks could result in damage to, or destruction of, mineral properties, production facilities or other properties; personal injury or death, including to employees; environmental damage; delays in construction or mining operations; increased production costs; asset write downs; monetary losses; and possible legal liability. We may not be able to obtain insurance to cover these risks at economically feasible premiums or at all. Insurance against certain environmental risks, including potential liability for pollution or other hazards as a result of the disposal of waste products occurring from mineral production, is not generally available to us or to other companies within the mining industry. We may suffer a material adverse impact on our business if we incur losses related to any significant events that are not covered by our insurance policies.
Exploration, construction, and production activities may be limited or delayed by inclement weather and shortened exploration, construction and operating seasons. For example, Donlin Gold proposes to transport the bulk of the supplies required to operate the Donlin Gold project to the site from ports in the United States and Canada. This would require the supplies to be transported by barge on the Kuskokwim River which is free of ice and open for barge traffic for a limited period each year. Delays in the ice breakup or early freeze-up, low flow levels and water depths, or other conditions affecting the Kuskokwim River could delay or prevent Donlin Gold from transporting supplies to the site. Any such interference with the delivery of needed supplies to the Donlin Gold project could adversely affect the construction or operation of the project and/or the costs associated with these activities which, in turn, would adversely affect our business.
We are subject to significant governmental regulation.
Our operations, exploration and development activities in the United States, are subject to extensive federal, state and local laws and regulations governing various matters, including:
|
● |
environmental protection; |
|
● |
management and use of toxic substances and explosives; |
|
● |
management of tailings and other wastes generated by our operations; |
|
● |
management of natural resources; |
|
● |
exploration and development of mines, production and post-closure reclamation; |
|
● |
exports; |
|
● |
price controls; |
|
● |
taxation, tariffs and mining royalties; |
|
● |
regulations concerning business dealings with indigenous groups; |
|
● |
availability and use of water resources; |
|
● |
labor standards and occupational health and safety, including mine safety; and |
|
● |
preservation of historic and cultural resources. |
Failure to comply with applicable laws and regulations may result in civil or criminal fines or penalties or enforcement actions, including orders issued by regulatory or judicial authorities enjoining, curtailing or closing operations or requiring corrective measures, installation of additional equipment or remedial actions, any of which could result in us incurring significant expenditures. We may also be required to compensate private parties suffering loss or damage by reason of a breach of such laws, regulations or permitting requirements. It is also possible that future laws and regulations, or a more stringent enforcement of current laws and regulations by governmental authorities, could cause additional expense, capital expenditures, restrictions on or suspensions of our operations and delays in the exploration and development of our mineral properties.
Our activities are subject to environmental laws and regulations that may increase our costs of doing business and restrict our operations.
Our exploration, potential development and production activities in the United States are subject to regulation by governmental agencies under various environmental laws. To the extent that we conduct exploration activities or undertake new mining activities in other foreign countries, we will also be subject to environmental laws and regulations in those jurisdictions. These laws address emissions into the air, discharges into water, management of waste, management of hazardous substances, use of water, protection of natural resources, antiquities and endangered species, and reclamation of lands disturbed by mining operations. Environmental legislation and regulations continue to evolve, and the trend has been toward stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and increasing responsibility for companies and their officers, directors and employees. Compliance with environmental laws and regulations may require significant capital outlays on our behalf and may cause material changes or delays in our intended activities. There can be no assurance that future changes in environmental regulations will not adversely affect our business, and it is possible that future changes in these laws or regulations could have a significant adverse impact on some portion of our business, causing us to re-evaluate those activities at that time.
Environmental hazards may exist on our mineral properties that are unknown to us at the present time, and that have been caused by previous owners or operators or that may have occurred naturally. We may be liable for remediating such damage.
Failure to comply with applicable environmental laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities, causing operations to cease or to be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions.
Our insurance will not cover all of the potential risks associated with mining operations.
Our business is subject to a number of risks and hazards generally including adverse environmental conditions, industrial accidents, labor disputes, unusual or unexpected geological conditions, ground or slope failures, cave-ins, changes in the regulatory environment and natural phenomena, such as inclement weather conditions, floods, hurricanes and earthquakes. Such occurrences could result in damage to mineral properties or production facilities, personal injury or death, environmental damage to our properties or the property of others, delays in construction or mining, monetary losses, and possible legal liability.
Although we maintain insurance to protect against certain risks in such amounts as we consider reasonable, our insurance will not cover all the potential risks associated with a mining company’s operations. We may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurance against risks such as loss of title to mineral property, environmental pollution, or other hazards, as a result of exploration and production is not generally available to us or to other companies in the mining industry on acceptable terms. We might also become subject to liability for pollution or other hazards which may not be insured against or which we may elect not to insure against because of premium costs or other reasons. Losses from these events may cause us to incur significant costs that could have a material adverse effect on our financial performance and results of operations.
Title and other rights to our mineral properties cannot be guaranteed and may be subject to prior unregistered agreements, transfers or claims and other defects.
We cannot guarantee that title to our mineral properties will not be challenged. We may not have, or may not be able to obtain, all necessary surface rights to develop a mineral property. Title insurance is generally not available for mineral properties and our ability to ensure that we have obtained secure claim to individual mineral properties or mining concessions may be severely constrained. Our mineral properties may be subject to prior unregistered agreements, transfers or claims, and title may be affected by, among other things, undetected defects. We have not conducted surveys of all the mineral properties in which we hold direct or indirect interests. A successful challenge to the precise area and location of these mineral properties could result in us being unable to operate on our mineral properties as permitted or being unable to enforce our rights with respect to our mineral properties. This could result in us not being compensated for our prior investment relating to the mineral property.
Rising metal prices encourage mining exploration, development, and construction activity, which in the past has increased demand for and cost of contract mining services and equipment.
Increases in metal prices tend to encourage increases in mining exploration, development, and construction activities. During past expansions, demand for and the cost of contract exploration, development and construction services and equipment have increased as well. Increased demand for and cost of services and equipment could cause project costs to increase materially, resulting in delays if services or equipment cannot be obtained in a timely manner due to inadequate availability, and increased potential for scheduling difficulties and cost increases due to the need to coordinate the availability of services or equipment, any of which could materially increase project exploration, development, or construction costs, result in project delays, or both. There can be no assurance that increased costs may not adversely affect our development of our mineral properties in the future.
We may experience difficulty attracting and retaining qualified management and technical personnel to meet our business objectives, and the failure to manage our business effectively could have a material adverse effect on our business and financial condition.
We are dependent on the services of key executives including our President and Chief Executive Officer and other highly skilled and experienced executives and personnel focused on managing our interests and the advancement of the Donlin Gold project, in addition to the identification of new opportunities for growth and funding. Due to our relatively small size, the loss of these persons or our inability to attract and retain additional highly skilled employees required for the development of our activities may have a material adverse effect on our business or future operations.
We may be subject to legal proceedings.
Due to the nature of our business, we may be subject to a variety of regulatory investigations, claims, lawsuits, and other proceedings in the ordinary course of our business. The results of these legal proceedings cannot be predicted with certainty due to the uncertainty inherent in litigation, including the effects of discovery of new evidence or advancement of new legal theories, the difficulty of predicting decisions of judges and juries and the possibility that decisions may be reversed on appeal. There can be no assurances that these matters will not have a material adverse effect on our business.
General Risk Factors
Global climate change is an international concern and could impact our ability to conduct future operations.
Global climate change is an international issue and receives an enormous amount of publicity. We would expect that the imposition of international treaties or U.S. or Canadian federal, state, provincial, or local laws or regulations pertaining to mandatory reductions in energy consumption or emissions of greenhouse gasses could affect the feasibility of mining projects and increase operating costs.
The Donlin Gold project is not directly threatened by current predictions of sea level rise as it is located inland at elevations 150 meters to 640 meters above sea level. However, changes in sea levels could affect ocean and river transportation and shipping facilities, which would be used to transport supplies, equipment and personnel to the Donlin Gold project and products from the project to world markets. The Donlin Gold project proposes to deliver the vast majority of construction and operations equipment, supplies, consumables, and other required materials to the project site via the Kuskokwim River when it is ice-free. Historically, the Kuskokwim River has been ice-free from late April until mid-October and models based on historic weather and river flow records predict that there would be sufficient flow in the river to allow the transportation of the required materials to the project site annually. If climate changes alter the ice-free season or flow patterns of the Kuskokwim River, the current supply logistics plan for the project may need to be modified.
Climate changes also could affect the availability of water required to sustain operations at the Donlin Gold project. Also, management of water is an essential component of the project’s operating plans. Climate change could require modifications to the project’s water management plan, which may require additional capital investments or increase operating costs, if precipitation increases or decreases relative to historic records.
Extreme weather events (such as increased frequency or intensity of storms, increased snowpack, prolonged drought, and associated fire danger) have the potential to disrupt operations. Where appropriate the Donlin Gold project has developed contingency plans for managing extreme weather conditions; however, extended disruptions to supply lines due to extreme weather could result in interruption of activities at the project site, delay or increase the cost of construction of the project, or otherwise adversely affect our business.
The Company is dependent upon information technology systems, which are susceptible to disruption, damage, failure, and risks associated with implementation and integration.
The Company’s information technology systems used in its operations are subject to disruption, damage, or failure from a variety of sources, including, without limitation, computer viruses, security breaches, cyberattacks, natural disasters and defects in design. Cybersecurity incidents are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data or machines and equipment, and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information, the corruption of data or the disabling, misuse or malfunction of machines and equipment. Various measures have been implemented to manage the Company’s risks related to information technology systems and network disruptions. However, given the unpredictability of the timing, nature and scope of information or operational technology disruptions, the Company could potentially be subject to the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems and networks or financial losses from remedial actions, any of which could have a material adverse effect on cash flows, financial condition or results of operations.
The Company could also be adversely affected by system or network disruptions if new or upgraded information technology systems are defective, not installed properly or not properly integrated into operations. Various measures have been implemented to manage the risks related to the system implementation and modification, but system modification failures could have a material adverse effect on the Company’s business, financial position, and results of operations.
The Company believes it was a passive foreign investment company (“PFIC”) in 2024 which could have negative tax consequences for U.S. investors.
U.S. Holders (as defined below under Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities “Certain United States Federal Income Tax Considerations for U.S. Holders – U.S. Holders”) should be aware that the Company believes that it was a PFIC for the fiscal year ended November 30, 2024, and based on current business plans and financial expectations, may be a PFIC in the current tax year and future tax years. If the Company is a PFIC for any year during a U.S. Holder’s holding period, then such U.S. Holder generally will be required to treat any gain realized upon a disposition of common shares and any so-called “excess distribution” received on its common shares as ordinary income, and to pay an interest charge on a portion of such gain or distributions, unless the U.S. Holder makes a timely and effective QEF Election or a Mark-to-Market Election (each as defined below under Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities “Certain United States Federal Income Tax Considerations for U.S. Holders – Default PFIC Rules under Section 1291 of the Code”). A U.S. Holder who makes a QEF Election generally must report on a current basis its share of the Company’s net capital gain and ordinary earnings for any year in which the Company is a PFIC, whether or not the Company distributes any amounts to its shareholders. A U.S. Holder who makes the Mark-to-Market Election generally must include as ordinary income each year the excess of the fair market value of the common shares over the U.S. Holder’s tax basis therein. This paragraph is qualified in its entirety by the discussion below under Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities “Certain United States Federal Income Tax Considerations for U.S. Holders.” Each U.S. Holder should consult its own tax advisor regarding the PFIC rules and the U.S. federal income tax consequences of the acquisition, ownership, and disposition of common shares.
|
Unresolved Staff Comments |
None.
|
Cybersecurity |
Risk Management and Strategy
The Company utilizes a sophisticated network monitoring service as a first line of defense to identify, assess, manage, mitigate and respond to cybersecurity threats, which is supplemented by employee training to ensure rapid internal responsiveness should an incident be detected. The Company regularly assesses the threat landscape and takes a holistic view of cybersecurity risks, with a layered cybersecurity strategy based on prevention, detection and mitigation.
Recognizing the complexity and evolving nature of cybersecurity threats, we have partnered with a third-party cybersecurity company to leverage specialized knowledge and insights, ensuring our cybersecurity strategies and processes remain at the forefront of industry best practices. Our cybersecurity partner works to continuously scan and monitor our networks for threats and vulnerabilities, alert management in real-time with high-risk cybersecurity incidents, provide quarterly management updates summarizing recent cybersecurity activity and provide access to a 24/7 incident response team. This partnership is actively managed by the Chief Financial Officer (“CFO”) to ensure effective implementation.
We recognize the importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our data. As a result, we have integrated cybersecurity risk management into our broader risk management framework to promote a holistic approach toward assessing, identifying, and managing material risks associated with cybersecurity threats. This integration ensures that cybersecurity considerations are an integral part of the decision-making processes throughout our organization.
As of the date of this Annual Report, we have not identified risks from cybersecurity threats, including threats from any previous cybersecurity incidents, that have or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. While we continually work to safeguard the information systems we use, and the proprietary, confidential and personal information residing therein, and mitigate potential risks, there can be no assurance that such actions will be sufficient to prevent cybersecurity incidents or mitigate all potential risks to such systems, networks and data or those of our third-party providers. For additional information, refer to Item 1A, “Risk Factors – The Company is dependent upon information technology systems, which are susceptible to disruption, damage, failure, and risks associated with implementation and/or integration”, above.
The Audit Committee has been delegated, by and on behalf of the Board, direct and primary oversight of the Company’s cybersecurity risk exposures and the steps taken by management to monitor, mitigate and manage/respond to cybersecurity risks and incidents. The CFO is responsible for overseeing NovaGold’s cybersecurity program and other IT activities. No less than annually, the CFO briefs the Audit Committee on the effectiveness of the Company’s cyber risk management program on a wide range of topics, including recent developments, vulnerability assessments, the threat environment, technological trends and information security considerations arising with respect to the Company. The Board and the Audit Committee receive prompt and timely information regarding any cybersecurity incident that meets the SEC, Canadian Securities Administrators and stock exchange-established reporting thresholds, as well as ongoing updates and follow-up disclosures regarding any such incident until it has been wholly addressed and remediated.
Governance
Cybersecurity is an important part of our risk management processes and an area of focus for our Board and management team. Our Audit Committee is responsible for the Board-level oversight of risks from cybersecurity threats. Members of our Audit Committee receive updates from the CFO at least annually and more frequently if warranted, regarding Company practices, programs, and other developments related to cybersecurity, cyber threats and our cybersecurity risk management and strategy program. Our Audit Committee is comprised of Board members with diverse and relevant expertise in risk management and strategy, sufficient to oversee cybersecurity risks effectively.
We maintain a cybersecurity incident response team composed of professionals across various functions, including information technology, legal, finance, accounting, and risk. This team is trained in managing cybersecurity incidents and leverages the information technology expertise of our third-party cybersecurity partner.
|
Properties |
The Company has adopted the mining disclosure standards of Subpart 229.1300 of Regulation S-K – Disclosure by Registrants Engaged in Mining Operations (“S-K 1300”). The Company is subject to and required to disclose mineral resources and mineral reserves in accordance with S-K 1300. While the S-K 1300 rules are similar to NI 43-101 rules in Canada, they are not identical and therefore two reports have been produced for the Donlin Gold project. The information in Item 2, Properties, below is common to both reports and contains pertinent information required under S-K 1300.
Donlin Gold Technical Report (NI 43-101)
The Company retained Wood Canada Limited (“Wood”), an unaffiliated third-party firm comprising mining experts, to update content in its previously filed “Donlin Creek Gold Project, Alaska, USA, NI 43-101 Technical Report on the Second Updated Feasibility Study,” effective November 18, 2011, and amended January 20, 2012 (“2011 Mining Study”). Wood’s Qualified Persons (“QPs”) completed an exercise to verify which content in the 2011 Mining Study remains current, and what was required to update the report content with the latest information. Updated content includes operating costs, capital costs, tax rates, long term gold price, and the economic analysis. Additionally, work done on the property since 2011 with respect to exploration, drilling, permitting, and minor mine design changes as a result of recent permitting activities are summarized in the updated content. A data verification exercise was completed by each Wood QP co-authoring the report. This included a September 2020 site visit by two of the report QPs; review of the geologic data, geologic model, and resource model; review of metallurgical test work; review of designs for mining, processing, and infrastructure, including minor design updates; update of capital and operating cost estimates utilizing a combination of cost indices and vendor quotations; and an updated economic analysis. Canadian NI 43-101 Definitions and CIM Definition Standards for Mineral Resources and Mineral Reserves (“CIM Definition Standards”), adopted by CIM Council on May 10, 2014 apply for this exercise.
The Wood review determined that the report updating exercise resulted in no material change to the Mineral Resources or Mineral Reserves. On August 31, 2021, the Company voluntarily filed an updated NI 43-101 technical report for the Donlin Gold project in Alaska, USA, and titled “NI 43-101 Technical Report on the Donlin Gold Project, Alaska, USA,” with an effective date of June 1, 2021 (“2021 Technical Report”) reflecting the results of the above exercise. The 2021 Technical Report was prepared by Wood. The 2021 Technical Report is available on the Company’s website, on EDGAR at www.sec.gov and on SEDAR+ at www.sedarplus.ca.
Donlin Gold Technical Report Summary (S-K 1300 Report)
The Company is a registrant with the SEC and is reporting its exploration results, Mineral Resources, and Mineral Reserves using the mining disclosure standards of S-K 1300. The Company requested that Wood prepare a Technical Report Summary of the Donlin Gold project, Alaska, USA using the standards of S-K 1300 and it is titled “S-K 1300 Technical Report Summary on the Donlin Gold Project, Alaska, USA” (“S-K 1300 Report”), current as of November 30, 2021, with a report date of November 30, 2021. Wood prepared the S-K 1300 Report from the 2011 Mining Study of the Donlin deposits that was completed to at least pre-feasibility level, as defined by S-K 1300, at the time of the study. Material aspects of the 2011 Mining Study were updated by Wood in 2020 and made current. As part of the update process, Wood’s subject matter experts completed an exercise to verify and update the content of the 2011 Mining Study with the latest information under the supervision of Wood’s independent QP co-authors of the S-K 1300 Report. Updated content includes operating costs, capital costs, taxes, forecast long term gold price and the economic analysis. Additionally, work done since 2011 on the property with respect to exploration, drilling, permitting and minor project design changes as a result of recent permitting activities are summarized in the S-K 1300 Report. A data verification exercise was completed by each Wood QP co-authoring the S-K 1300 Report. Wood QPs verified that the updated content of the 2011 Mining Study met at least pre-feasibility level of study as defined in S-K 1300, and it supports the disclosure of exploration results, Mineral Resources, and Mineral Reserves using S-K 1300 standards. The S-K 1300 Report is available on the Company’s website and on EDGAR at www.sec.gov.
Results of the Donlin Gold Technical Report (NI 43-101) and Donlin Gold Technical Report Summary (S-K 1300 Report)
Wood reviewed the geologic and resource models that supported the 2011 Mining Study, including comparing them to data from recent drilling programs, and determined that they continue to be adequate and suitable to be used for a Mineral Resource estimation. Using updated cost inputs from the first calendar quarter of 2020, a gold price of $1,500 per ounce, and the geologic and resource models utilized in support of the 2011 Mining Study, the contents within an updated optimized pit shell did not show a material change to the Mineral Resources stated in the 2011 Mining Study. Therefore, the Mineral Resources were considered current as of November 30, 2021 and are unchanged as of November 30, 2024. They continue to have an effective date of July 11, 2011.
Similarly, using updated cost inputs, a gold price of $1,200 per ounce, and the geologic and resource models utilized in support of the 2011 Mining Study with appropriate modifying factors applied for Mineral Reserve estimation, the previous Mineral Reserve ultimate pit was contained within an updated optimized pit shell. Therefore, the Mineral Reserves remained current as of November 30, 2021 and are unchanged. Because the Mineral Reserves are supported by an updated economic analysis they have an effective date of April 27, 2021.
Outside of verifying the Mineral Resource and Mineral Reserve estimates, the primary efforts in the 2021 Technical Report and the S-K 1300 Report were financial and permitting updates. This includes updates to estimated capital costs, operating costs, reclamation and closure costs, royalties, taxes, and economic analysis, as well as current status of the permits. Updated capital costs are based on first calendar quarter 2020 pricing (cost indices and current commodity pricing and equipment quotes) applied to the engineering designs and material take-offs from the 2011 Mining Study, except for minor changes made during permitting in the operations water treatment plant and the natural gas pipeline. As a result of the content updates, the total initial capital cost estimate is $7,402 million, which is an increase of 10.8% or $723 million compared to the 2011 Mining Study total initial capital cost estimate. Likewise, the total sustaining capital estimate is $1,723 million, which is an increase of 14.6% or $219 million compared to the 2011 Mining Study total sustaining capital estimate. The 2011 Mining Study operating costs were updated to first calendar quarter 2020 by updating key cost drivers like energy, labor, consumables, and freight. No material changes to project designs, schedules, or productivities were made; consequently, the manning schedules and consumables remain unchanged. The updated estimated Life of Mine (“LOM”) operating costs total $19,289 million, which is $5.90/t mined, $38.21/t processed, or $635/oz gold sold.
The economic evaluation of the Donlin Gold project in both the 2021 Technical Report and the S-K 1300 Report was updated using the following inputs:
|
● |
A production plan based on the 2011 Mining Study of 53,500 t/d open pit gold mine with ore processing by means of flotation, pressure oxidation, and cyanidation. The pit designs and Mineral Reserves were based on the Measured and Indicated Mineral Resource estimates that were verified as remaining current. Annual LOM gold production averages 1.13 million ounces per year over a production life of 27 years, including 1.46 million ounces per year for the first five full years of production. |
|
● |
$1,500/oz gold price |
|
● |
Current land and royalty agreements |
|
● |
Initial and sustaining capital costs, and operating costs updated to first calendar quarter 2020 |
|
● |
Tax payments in accordance with the Tax Cuts and Jobs Act enacted in December 2017 and effective January 1, 2018 |
|
● |
$292 million LOM contributions for reclamation, closure, and financial assurance |
|
● |
Financing has been assumed on a 100%, all equity, stand-alone basis |
|
● |
Escalation/inflation has been excluded |
|
● |
No salvage is assumed at the end of operations |
Based on the economic evaluation, the Donlin Gold project generates positive before and after-tax economic results. Total after-tax cash flow is $13,145 million, after-tax NPV at a 5% discount rate is $3,040 million, and the after-tax internal rate of return is 9.2%. After-tax payback is achieved 7.3 years following the start of production.
The following descriptions summarize selected information about the Company’s 50% interest in the Donlin Gold project located in Alaska, USA. Except for subsequent events or as otherwise noted, the disclosure in this Annual Report on Form 10-K of a scientific or technical nature for the Donlin Gold project is based on both the 2021 Technical Report and S-K 1300 Report, as of November 30, 2021. The S-K 1300 Report meets at least a pre-feasibility level. The 2021 Technical Report and the S-K 1300 Report do not incorporate the latest Donlin Gold optimization work on the geologic modeling concepts or other optimization work since these assessments are still underway.
The 2021 Technical Report was filed on EDGAR and SEDAR+ on August 31, 2021. The S-K 1300 Report was filed on EDGAR on January 26, 2022. The 2021 Technical Report and S-K 1300 Report were prepared by Wood.
The 2021 Technical Report has been filed with securities regulatory authorities in each province of Canada and the S-K 1300 Report has been filed with the SEC. Portions of the following information are based on assumptions, qualifications and procedures that are not fully described herein. Reference should be made to the full text of the 2021 Technical Report which is available for review on SEDAR+ at www.sedarplus.ca and the S-K 1300 Report which is available for review on EDGAR at www.sec.gov.
Paul Chilson, P.E., a Qualified Person and an employee of the Company, has approved the mineral reserves and mineral resources included in this Annual Report on Form 10-K as of November 30, 2024 and reviewed the reserves and resources in the S-K 1300 Report and confirmed that the reserves and resources remain current as of November 30, 2024.
Donlin Gold Project, Alaska, USA
The Donlin Gold project is a development-stage gold project held by Donlin Gold, a limited liability company that is owned 50% by the Company’s wholly-owned subsidiary, NOVAGOLD Resources Alaska Inc., and 50% by Barrick’s wholly-owned subsidiary, Barrick Gold U.S. Inc. The Company’s book value of its investment in the Donlin Gold project is $2.7 million as of November 30, 2024.
The Company entered into the limited liability company agreement with Barrick (“LLC Agreement”) dated December 1, 2007, which provided for the creation of Donlin Gold, that is jointly owned by the Company and Barrick on a 50/50 basis. Pursuant to the LLC Agreement, the Company agreed to reimburse Barrick out of future mine production cash flow for a portion of Barrick’s prior expenditures on the Donlin Gold project. As of November 30, 2024, the promissory note, including accrued interest, amounted to approximately $151.5 million. Funding for the project is currently shared by both parties on a 50/50 basis.
Except for events subsequent to the reports, or as otherwise stated or implied, the scientific and technical information regarding the Donlin Gold project in this Annual Report on Form 10-K is based on both the 2021 Technical Report and the S-K 1300 Report.
Property Description and Location
The Donlin Gold deposits are situated approximately 62°North latitude and 158°West longitude, which is 450 km west of Anchorage and 250 km northeast of Bethel up the Kuskokwim River. The closest village is the community of Crooked Creek, approximately 20 km to the south, on the Kuskokwim River.
The resource areas are within T. 23 N., R. 49. W., Seward Meridian, Kuskokwim and Mt. McKinley Recording Districts, Crooked Creek Mining District, Iditarod A-5 USGS 1:63,360 topography map. The mineralization is centered on approximately 540222.50 east and 6878534.36 north, using the NAD 83 datum.
The Donlin Gold property is located in the Kuskokwim region of southwestern Alaska on private, Alaska Native-owned mineral and surface land and Alaska state mining claims. The property is under the Calista Lease for subsurface rights and some surface rights from Calista and SUA from TKC, two Alaska Native corporations. Calista is one of 13 regional Alaska Native corporations established as part of the Alaska Native Claims Settlement Act of 1971 (“ANCSA”) and under ANCSA has title to the subsurface estate and some surface rights in the region. TKC was formed in 1977 when the ANCSA village corporations of Lower Kalskag, Upper Kalskag, Aniak, Chuathbaluk, Napaimute, Crooked Creek, Red Devil, Georgetown, Sleetmute and Stony River, which are located along the middle region of the Kuskokwim River, merged. Under ANCSA, TKC has title to extensive surface estate in the region, including most of the project lands. The property hosts a gold deposit currently estimated at 33.8 million ounces of proven and probable mineral reserves averaging 2.09 grams per tonne. The Company believes that significant exploration potential remains in the Donlin Gold district, with prospects to increase mine life and/or justify future production expansions. See Mineral Reserve and Mineral Resource Estimate, below.
Other lands required for offsite infrastructure, such as the Jungjuk port site, the road from the port site to the mine site, and natural gas pipeline are categorized as Native, State of Alaska conveyed, or BLM lands. Rights-of-way are required from other Alaska Native corporations, the State of Alaska and BLM for the road and pipeline alignments that cross Native corporation, state, and federal lands.
Permits
Donlin Gold obtained the necessary permits and certifications that allowed for the exploration, environmental monitoring, and Environmental Impact Study (“EIS”) baseline data collection efforts. The current status of these permits is in line with the termination of the baseline data collection effort, temporary closure of the camp in May 2015, and the seasonal reopening of the site for the geological drill program from July to November 2017, the geotechnical drill program in 2019 and 2023 for the Alaska Dam Safety certificate applications, and the latest geological drill programs in 2020, 2021, and 2022. The active permits include ADNR temporary use of water; ADNR Application for Permit to Mine in Alaska (approval for the 2020, 2021, 2022, and 2023 drill programs), the Corps individual 404 and nationwide 26 permits; Alaska Department of Environmental Conservation (“ADEC”) authorizations (landfill, septic system, multisector stormwater general permit – sector G, air permit); and Federal Aviation Administration approval. Other permits were either put on hold, closed, or allowed to expire.
On August 7, 2012, we announced that Donlin Gold commenced permitting of the project by submitting a draft Plan of Operations and Section 404 Clean Water Act (“CWA”) draft permit application to federal and state regulators. The Section 404 permit application initiated the environmental review process under the National Environmental Policy Act (“NEPA”) which involves preparation of an EIS. The Corps selected AECOM, formerly URS, an independent contractor, to prepare the EIS. The Notice of Intent for the EIS was published in the Federal Register on December 14, 2012, and the NEPA public scoping process was completed on March 29, 2013. During the remainder of 2013 and through 2014 and 2015, Donlin Gold worked to address the remaining data needs for the draft EIS. Donlin Gold also continued to provide application materials and maintained ongoing dialogue with the key permitting agencies. The Corps addressed the cooperating agency comments on the preliminary draft and filed the Notice of Availability for public release of the draft EIS in the Federal Register in November 2015. After the filing of the draft EIS, the Corps issued a schedule for public meetings on the Donlin Gold draft EIS in the Yukon-Kuskokwim (Y-K) region and Anchorage, Alaska. The Corps conducted, and at the end of May 2016 completed, a six-month public comment period for the draft EIS, including 17 public comment meetings in communities across the Y-K region and in Anchorage. The Corps received comments from federal and state agencies, local and tribal governments, Alaska Native organizations, businesses, special interest groups/NGOs, and individuals.
On April 27, 2018, the Notice of Availability of the Donlin Gold final EIS was published in the Federal Register. On August 13, 2018, the Corps and the BLM issued a joint Federal Record of Decision (“ROD”) for the Donlin Gold project. Along with the ROD, the Corps issued a combined permit under CWA Section 404 and Section 10 of the Rivers and Harbors Act. Additionally, the BLM issued the Offer to Lease for the ROW for those portions of the natural gas pipeline that would cross federal lands. The Pipeline and Hazardous Materials Safety Administration previously issued a special permit for the natural gas pipeline on June 5, 2018.
Several major State of Alaska permits were also issued and advanced during 2018 through 2023. After a public notice and comment period, ADEC issued a Certificate of Reasonable Assurance under CWA Section 401 on August 10, 2018, indicating that the CWA 404 permit complies with the state’s water quality standards. The Alaska Pollutant Discharge Elimination System (APDES) water discharge permit was issued by ADEC on May 24, 2018 and became effective on July 1, 2018. Donlin Gold submitted its application to ADEC for the regularly scheduled re-issuance of its APDES permit, which originally was to expire in January 2024, but has been administratively extended pending renewal. The State of Alaska Department of Fish and Game (“ADFG”) issued Title 16 Fish Habitat permits for the mine area and transportation corridor on August 30, 2018. The new air quality permit was issued by ADEC on July 1, 2023. The final approvals of the Donlin Gold Reclamation Plan and the Waste Management Permit were issued by ADNR and ADEC, respectively on January 18, 2019. On September 18, 2023, Donlin Gold submitted timely applications to ADEC and ADNR for renewal of the approval and permit. On October 17, 2023, ADEC administratively extended the Waste Management Permit pending renewal. The Reclamation Plan approval, which was also to expire in January 2024, has been administratively extended to January 2026. ADNR issued the easement, land leases, land use permits, and material site authorizations for the proposed transportation facilities, and easement for the fiber optic cable on state lands on January 2, 2020. On January 17, 2020, ADNR’s State Pipeline Coordinator Services issued the final state ROW authorization for the natural gas pipeline. On June 29, 2021, ADNR’s Division of Mining Land and Water issued 12 final Water Rights for the mine site and transportation corridor. On November 1, 2021, ADFG issued two Special Area Permits required for pipeline facilities located within the Susitna Flats State Game Refuge (“Refuge”). One permit authorizes the compressor station, and the other permit authorizes the section of the pipeline ROW in the Refuge. On November 1, 2022, ADNR finalized approval of the proposed re-location plan for public easements in the mine site and transportation facility areas.
The preliminary design packages for the Alaska Dam Safety certificate applications were submitted to the ADNR in December 2024. Issuance of the certificates is anticipated in 2026.
Thirteen of the 56 village councils in the Calista Region (Native Village of Kasigluk, ONC, Native Village of Eek, Tuluksak Native Community, Tununak Council, Native Village of Nunapitchuk, Chuloonawick Tribal Council, Native Village of Kwigillingok, Native Village of Kongiganak, Chefornak Traditional Council, Chevak Native Village, Native Village of Napakiak and Quinhagak) have adopted resolutions opposing development of the Donlin Gold project.
Mineral Tenure
The Calista Lease between Calista and Donlin Gold, includes subsurface (mineral) rights leased from Calista. Calista also owns the corresponding surface estate on a portion of these lands, the rights to which are also included in the Calista Lease. The Calista Lease provides Donlin Gold with rights to approximately 19,988 hectares of Calista-owned land. The Calista Lease was restated on February 11, 2011, to reflect all assignments and amendments made between its original execution on May 1, 1995 and February 11, 2011. The Calista Lease was amended once again effective June 6, 2014 (the “2014 Amendment”). The 2014 Amendment did not affect the lands subject to the Calista Lease as restated on February 11, 2011.
On June 9, 2014, the Company announced that Donlin Gold and TKC reached an updated long-term SUA for the Donlin Gold project. The SUA with TKC grants non-exclusive surface use rights to Donlin Gold for mining activities. TKC owns and contributed to the SUA the corresponding surface estate over most of Calista’s subsurface estate included in the Calista Lease as well as some additional surface estate. The SUA with TKC provides Donlin Gold with rights to approximately 16,923 hectares of TKC-owned land.
Lyman Resources in Alaska, Inc. (“Lyman Resources”) has an existing placer mining lease covering approximately 1,040 hectares (partially covering six sections) within the Calista Lease area. The Lyman family also has title to approximately 5.7 hectares of surface estate within the Snow Gulch area. The Calista Lease grants priority to extraction of the lode mineralization in the event of a conflict of use between lode and placer mining operations, provided that a two-year notice period is provided to Lyman Resources. Lyman Resources, the Lyman family, and Donlin Gold executed a Surface Lease and Assignment of Mining Lease effective May 9, 2012, leasing the Lyman surface estate and assigning the Lyman placer lease within the Calista Lease area to Donlin for Project mining use (the “Lyman Lease”).
In addition to the leased land, Donlin Gold holds 493 State of Alaska mining claims comprising approximately 29,008 hectares in the Kuskokwim and Mt. McKinley Recording Districts. The mining claims abut and largely surround northern and western boundaries of the lands subject to the Calista Lease and TKC SUA. The mining claims are located on lands that are owned by the State of Alaska (409) and on state-selected lands from the BLM (84). All claims are approximately either 16.2 hectares or 64.8 hectares in size.
The terms for the Calista Lease and TKC SUA include various royalty and other payment provisions and considerations such as shareholder employment and contracting opportunities. The Lyman Lease provides for rent and certain other payments.
Royalty Terms of the Calista Lease include:
|
● |
Annual advance minimum royalty (variable) to 2030; |
|
● |
All advance minimum payments are recoverable as a credit against the net smelter return royalty and net proceeds payment; |
|
● |
Net smelter return of 1.5% for the earlier of the first five years following commencement of commercial production or until initial capital payback; |
|
● |
Conversion to a 4.5% net smelter return after the earlier of five years or initial capital payback; and |
|
● |
Net proceeds royalty of 8% of the net proceeds realized by Donlin Gold LLC commencing with the first quarter in which net proceeds are first realized. |
Payment Terms of the TKC SUA include:
|
● |
Annual advance minimum payment (variable per milestones); |
|
● |
All advance minimum payments are recoverable as a credit against the milled tonnage fee and net proceeds payment; |
|
● |
Milled tonnage fee of $0.40 per tonne processed for the first 10 years of production; |
|
● |
Conversion of the milled tonnage fee to $0.50 per tonne processed for all production after 10 years; |
|
● |
Net proceeds payment of 3% of the net proceeds realized by Donlin Gold LLC commencing with the first quarter in which net proceeds are first realized. |
The term of the Calista Lease is to April 30, 2031 and extends automatically year to year thereafter, so long as either mining or processing operations are carried out on or with respect to the property in good faith on a continuous basis in such year, or Donlin Gold pays to Calista an advanced minimum royalty of $3.0 million (subject to adjustment for increases in the Consumer Price Index) for such year. The TKC SUA remains in effect through April 30, 2031, and on a year-to-year basis thereafter, so long as the Calista Mining Lease remains in effect. The Lyman Lease has an initial term of 20 years but shall be extended while Donlin Gold conducts operations on the property.
Additional estimated costs associated with various landowner and lease agreements, not already covered in initial capital or G&A operating costs, average approximately $8.6 million per year during the six pre-production years and $2.5 million per year during the 27 operating years. Annual rent, labor expenditures and filings are required to maintain Alaska State mining claims on state land. Mining license tax payments may also apply.
Accessibility and Climate
The Kuskokwim River is a regional transportation route and is serviced by commercial barge lines. A 25-kilometer winter road, designated as an Alaska State Highway route and transportation corridor, accesses the property from the barge landing at the village of Crooked Creek. The Donlin Gold project currently has an all-season, soft-sided camp. An adjacent 1,500-meter airstrip is capable of handling aircraft as large as L-100 Hercules (approximate cargo capacity of 19,050 kilograms), allowing efficient shipment of personnel, some heavy equipment, and supplies. The Donlin Gold project can be reached directly by charter air facilities out of Anchorage and Aniak, 80 kilometers to the west.
The project area is one of low topographic relief on the western flank of the Kuskokwim Mountains. Elevations range from 150 meters to 640 meters. Ridges are well rounded and easily accessible by all-terrain vehicle. Hillsides are forested with black spruce, tamarack, alder, birch and larch. Soft muskeg and discontinuous permafrost are common in poorly drained areas at lower elevations. The area has a relatively dry interior continental climate with typically less than 500 millimeters total annual precipitation. Summer temperatures are relatively warm and may exceed 30°C. Minimum temperatures may fall to well below -42°C during the cold winter months.
Exploration History
Approximately 1,678 exploration and development drill holes totaling 367,886 meters, were completed from 1988 through 2007 in at least six separately managed campaigns. Another 108 core holes totaling 33,425 meters were added in 2008 to explore near-pit expansions and satellite deposits, and for facility-related condemnation and geotechnical studies. In 2010, six core holes totaling 2,090 meters were drilled for additional pit slope geotechnical drilling. In 2017, 16 core holes totaling 7,040 meters were drilled; in 2020, 85 core holes totaling 23,361 meters were drilled; in 2021, 79 core holes totaling 24,264 meters were drilled; and in 2022, 141 core holes totaling 42,331 meters were drilled; and in 2023, 42 core holes totaling 1,840 meters for geotechnical and permafrost studies and 13 RC holes totaling 1,279 meters were drilled for pump tests and the installation of ground water monitoring instrumentation.
Approximately 1,396 holes, totaling 339,733 meters, supported the resource model used in the 2011 Mining Study. The remaining holes were either drilled after the completion of the 2011 Mining Study (2017, 2020, 2021, and 2022 drill programs) or were utilized for other purposes, such as district exploration, carbonate resource, facilities condemnation, hydrology, geotechnical, and infrastructure engineering.
|
Year |
Company |
Work Performed |
Results |
|
1909 to 1956 |
Various prospectors and placer miners |
Gold discovered in 1909. Placer mining by hand, underground, and hydraulic methods. |
Total placer gold production of approximately 30,000 ounces. |
|
1970s to 2015 |
Robert Lyman and heirs |
Resumed sluice mining in Donlin Gold area and placer mined Snow Gulch. |
First year of mining Snow Gulch produced best results, with 800 ounces of gold recovered. Donlin Gold has obtained an agreement with the Lyman family to consolidate the land package around the proposed mine. |
|
1974, 1975 |
Resource Associates of Alaska |
Regional mineral potential evaluation for Calista. Soil grid and three bulldozer trenches dug in Snow Gulch area. |
Soil, rock, and vein samples have anomalous gold values. Trench rock sample results range from 2 to 20 grams per tonne gold. |
|
1984 to 1987 |
Calista Corporation |
Minor work. Geologists from various mining companies, including Cominco and Kennecott, visit the property. |
|
Year |
Company |
Work Performed |
Results |
|
1986 |
Lyman Resources |
Auger drilling for placer evaluation finds abundant gray, sulfide rich clay near Quartz Gulch. |
Assays of cuttings average over 7 grams per tonne gold. Initial discovery of Far Side (“Carolyn”) prospect. |
|
1987 |
Calista Corporation |
Rock sampling of ridge tops and auger drill sampling of Far Side prospect. |
Anomalous gold values from auger holes: best result = 9.7 grams per tonne gold. |
|
1988 to 1989 |
Western Gold Exploration and Mining Co. |
Airborne geophysics, geological mapping, and soil sampling over most of the project area. Total of 13,525 meters of D9 Cat trenching at all prospects. Over 15,000 soil, rock chip, and auger samples collected. Drilling included 3,106 feet of AX core drilling, 404 meters in 239 auger holes, and 10,423 meters of RC drilling (125 holes). First metallurgical tests and petrographic work. |
Initial work identified eight prospects with encouraging geology (Snow, Dome, Quartz, Carolyn, Queen, Upper Lewis, Lower Lewis, and Rochelieu). Drilling at most of these prospects led to identification of the Lewis areas as having the best bulk-mineable potential. Mineral resource estimate completed. |
|
1993 |
Teck Exploration Ltd. |
D-9 Cat trenching (1,400 meters) and two 500-meter soil lines in the Lewis areas. Petrographic, fluid inclusion, and metallurgical work. |
Identified new mineralized areas, updated Mineral resource estimate. |
|
1995 to 2000 |
Placer Dome |
87,383 meters of core, 11,909 meters of RC drilling and 8,493 meters of trenching. Environmental monitoring and assessment. |
Drilled the American Creek magnetic anomaly (“ACMA”), discovered the ACMA deposit. Numerous mineral resource estimation iterations. |
|
2001 to 2002 |
Donlin Creek Joint Venture (Placer Dome /NOVAGOLD) |
46,495 meters of core, 38,022 meters of RC drilling, 89.5 meters of geotechnical drilling, and 268 meters of water monitoring holes. |
Filed a preliminary assessment report on the project. Updated resource estimate. |
|
2003 to 2005 |
Donlin Creek Joint Venture (Barrick/NOVAGOLD) |
25,448 meters of core and 5,979 meters of RC drilling. Calcium carbonate exploration drilling; IP lines for facility condemnation studies. |
Infill drilled throughout the resource area. Discovered a calcium carbonate resource. Poor quality IP data. |
|
2006 |
Donlin Creek Joint Venture |
92,804 meters of core drilling to support mineral resource classification conversion, slope stability, metallurgy, waste rock, carbonate exploration, facilities and port road studies. |
Geological model and mineral resource update. |
|
2007 |
Donlin Gold Joint Venture |
Core drilling totaled 75,257 meters and included resource delineation, geotechnical and engineering, and carbonate exploration. 13 RC holes for monitor wells and pit pump tests totaled 1,043 meters. |
Improved pit slope parameters, positive hydrogeological results. Carbonate exploration was negative. Updated mineral resource estimate. Completed feasibility study with positive results. |
|
Year |
Company |
Work Performed |
Results |
|
2008 |
Donlin Gold LLC |
108 core holes totaling 33,425 meters for exploration and facility related geotechnical and condemnation studies. Updated resource models. Metallurgical test work: flotation variability and CN leach. 54 test pits and 37 auger holes were also completed for overburden characterization. |
Resource expansion indicated for East ACMA. CN leach resource potential indicated for the main resource area, Snow, and Dome prospects. Facility sites successfully condemned. Updated resource estimates utilizing applicable data through 2007. |
|
2009 |
Donlin Gold LLC |
19 geotechnical core holes totaling 950 meters in facility sites and to address hydrology. |
|
|
2010 |
Donlin Gold LLC |
Six geotechnical core holes totaling 2,090 meters to evaluate slope stability of expanded pit. Also drilled 90 auger holes totaling 585 meters and dug 59 test pits to further evaluate overburden conditions and gravel supplies within the Tailings Storage Facility (“TSF”) area. |
Pit slope stability of new pit design remained acceptable. Construction suitability of surficial materials in TSF is evaluated. |
|
2017 |
Donlin Gold LLC |
16 core holes totaling 7,040 meters to test targeted mineralized zones, collect structural data related to mineralization, and collect geotechnical data. |
Results not included in resource model used in the 2011 Mining Study |
|
2019 |
Donlin Gold LLC |
30 geotechnical core holes totaling 1,060 meters were drilled as part of a site investigation program in support of detailed dam design. |
Results not included in resource model used in the 2011 Mining Study |
|
2020 |
Donlin Gold LLC |
85 core holes totaling 23,361 meters in both the ACMA and Lewis deposits to validate recent geologic modeling concepts and test for extensions of high-grade zones. |
Results not included in resource model used in the 2011 Mining Study |
|
2021 |
Donlin Gold LLC |
79 core holes totaling 24,264 meters in both the ACMA and Lewis deposits to validate recent geologic modeling concepts and test for extensions of high-grade zones. |
Results not included in resource model used in the 2011 Mining Study |
|
2022 |
Donlin Gold LLC |
141 core holes totaling 42,331 meters in both the ACMA and Lewis deposits and in the Divide domain overlapping ACMA and Lewis. |
Results not included in resource model used in the 2011 Mining Study |
|
2023 |
Donlin Gold LLC |
42 core holes totaling 1,840 meters and 13 RC holes totaling 1,279 meters were drilled as part of a site investigation program in support of detailed dam design and hydrogeologic studies. |
Results not included in resource model used in the 2011 Mining Study |
Geology
Regional Geology
The Kuskokwim region of southwestern Alaska is predominately underlain by rocks of the Upper Cretaceous Kuskokwim Group that filled a subsided northeast-trending strike-slip basin between a series of amalgamated terranes. Intermediate composition volcano-plutonic complexes intrude and overlie Kuskokwim Group rocks throughout the region.
Local Geology
The Donlin Gold deposits lie between two regional, northeast-trending, right lateral fault systems: the Denali-Farewell fault system to the south and the Iditarod-Nixon Fork fault system to the north. Undivided Kuskokwim Group sedimentary rocks and granite porphyry complexes are the main rock units.
Property Geology
Greywacke is dominant in the northern part of the area (“northern resource area” comprising Lewis, Queen, Rochelieu, and Akivik), while shale-rich units are common in the southern part of the area (“southern resource area” comprising South Lewis and ACMA).
Gold deposits are associated with an extensive Late Cretaceous–Early Tertiary gold–arsenic–antimony–mercury hydrothermal system. Gold-bearing zones exhibit strong structural and host rock control along north–northeast-trending fracture zones and are best developed where those zones intersect relatively competent host rocks. Mineralized material is most abundant in intrusive dikes and sills, but sedimentary rocks are also mineralized within strong fracture zones.
Geotechnical and Hydrology
A number of geotechnical and hydrological studies have been completed in support of at least pre-feasibility and environmental reports for Donlin Gold.
Rowland Engineering Consultants performed the geotechnical assessments for the engineering to support design of the port site, airstrip, plant site and interconnecting roads. BGC, Inc (“BGC”). performed geotechnical analyses for the design of the pit, waste rock facility (“WRF”), and TSF.
The site-wide surface water and groundwater models developed by BGC, are based on extensive drill data and climatic information for the area. The groundwater model is currently being updated based on the field work completed in 2023. BGC, CEMI, Hatch Ltd., and SRK, Inc. provided hydrologic studies, design criteria and associated test work for the water treatment plant requirements during construction, operations, and closure. Lorax Environmental performed water quality modeling for the post closure pit lake.
Exploration Potential
The mineral resource defined in the S-K 1300 Report is confined to a portion of the property. We believe there is considerable potential to increase the mineral resources at the Donlin Gold project. Numerous other targets have been identified along the 8-kilometer mineralized gold trend and are defined by surface sampling and various historical drill holes containing significant gold values.
Exploration potential in the vicinity of the open pit design in the S-K 1300 Report includes extensions along strike to the East ACMA, Lewis, and Crooked Creek areas. Mineralization remains open at depth under the current pit limits. Mineralization also remains open to the north of the planned pit and has been tested by shallow trenching and soil sampling, with limited drilling undertaken to date.
Exploration potential at the Donlin Gold project also exists outside the areas that have been the subject of the mine design in the S-K 1300 Report. Gold mineralization is associated with an overall north–northeasterly-trending high level dike/sill complex that has been outlined in the regional aero-magnetics as a magnetic low. The zone, approximately 8 kilometers long, and 4 kilometers wide, consists of a northern, dike-dominated area, and a southern, more sill-dominated area.
Mineralization
Southeast-dipping north-northeast-oriented fracture zones are the primary control on gold-bearing vein distribution within the north-northeast mineralized corridors. Composite vein zones or mineralized corridors range up to 30 meters in width and extend for hundreds of meters along strike. Intrusive rocks and to a lesser extent competent massive greywacke are the most favored host rocks, and act as a secondary control on the mineralization. Gold distribution in the deposit closely mimics the intrusive rocks, which contain about 74% of the mineral resource identified in the S-K 1300 Report. Structural zones in competent sedimentary units account for the remaining 26%.
Gold-bearing sulfides occur in both veins and disseminated zones in mafic igneous bodies, rhyodacite dikes and sills, and sedimentary rocks. Quartz-carbonate-sulfide (pyrite, stibnite, and arsenopyrite) veins are the primary mineralized features, but gold also occurs in thin, discontinuous sulfide fracture fillings.
Minor Elements and Deleterious Materials
The most abundant minor elements associated with gold-bearing material are iron, arsenic, antimony, and sulfur. They are contained primarily in the mineral suite associated with hydrothermal deposition of gold, including pyrite, arsenopyrite, realgar, native arsenic, and stibnite. Minor hydrothermal pyrrhotite, marcasite and syngenetic or sedimentary pyrite, also account for some of the iron and sulfur.
Three elements that have processing significance are mercury, chlorine, and fluorine. Graphitic carbon and carbonate minerals also would negatively affect the metallurgical process.
Metallurgy
Sufficient metallurgical test work was completed under the direction of Barrick personnel to support the S-K 1300 Report. Gold is mainly carried by arsenopyrite. Variation is observed in processing behavior between intrusive rocks and sedimentary rocks, but less so between the geographical sources.
Process testing generated development of the following conceptual flowsheet:
|
● |
conventional crushing and grinding; |
|
● |
concentration by flotation; |
|
● |
pressure oxidation of the concentrate in an autoclave; |
|
● |
carbon-in-leach (“CIL”) cyanidation of the oxidized concentrate; |
|
● |
carbon strip and regeneration circuits; |
|
● |
gold electrowinning; and |
|
● |
refining and production of doré bars. |
This processing concept incorporates proven commercial unit operations.
Mineral Reserve and Mineral Resource Estimates
The mineral reserves for the Donlin Gold project were classified using criteria appropriate under the mining disclosure definitions and standards of NI 43-101 and S-K 1300 with an effective date of April 27, 2021 and are current as of November 30, 2024. Paul Chilson, P.E., a Qualified Person and an employee of the Company, has reviewed the mineral reserves and mineral resources and material assumptions included in this Annual Report on Form 10-K and confirmed that they remain current as of November 30, 2024. The mineral reserves are summarized in the table below.
Proven and Probable Mineral Reserve Estimate, Effective Date April 27, 2021 and remain current as of November 30, 2024, based on $1,200 per ounce gold price
|
Tonnes (thousands) |
Contained Gold (thousands of ounces) |
|||||||||||||||||||
|
Reserve Category |
100% |
Attributable to NOVAGOLD 50% |
Gold Grade (grams/tonne) |
100% |
Attributable to NOVAGOLD 50% |
|||||||||||||||
|
Proven |
7,683 | 3,842 | 2.32 | 573 | 287 | |||||||||||||||
|
Probable |
497,128 | 248,564 | 2.08 | 33,276 | 16,638 | |||||||||||||||
|
Proven and probable |
504,811 | 252,406 | 2.09 | 33,849 | 16,925 | |||||||||||||||
Notes:
|
(1) |
Mineral reserves are reported within the pre-feasibility pit designs, and supported by a mine schedule, featuring variable throughput rates, stockpiling and cut-off optimization. The point of reference for Mineral Reserves estimates is where the reserves are delivered to the mill. The pit designs are contained within an optimized pit shell based on the following economic and technical parameters: Metal price for gold of $1,200 per ounce; reference mining cost of $2.16 per tonne incremented $0.0033 per tonne per meter with depth from the 220 meter elevation (equates to an average mining cost of $2.64 per tonne), fixed processing cost of $13.78/t processed; sustaining capital of $1.54/t processed; general and administrative cost of $3.66/t processed; stockpile rehandle costs of $0.24/t processed assuming that 45% of mill feed is rehandled; variable metallurgical recoveries by rock type, ranging from 86.7% in shale to 94.2% in intrusive rocks in the Akivik domain; refining and freight charges of $1.21/oz Au; royalty considerations of 4.5% NSR and $0.50/t processed; and variable pit slope angles, ranging from 23° to 43°. See “Section 12: Mineral Reserve Estimates” of the S-K 1300 Report. |
|
(2) |
Mineral reserves are reported using an optimized block value (“BV”) based on the following equation: BV = Gold grade * Recovery – royalties & refining costs – process operating costs – G&A cost reported in $ per tonne processed. Assuming an average gold recovery of 89.5% the marginal gold cut-off grade would be approximately 0.57 grams per tonne, or the gold grade that would equate to a $0.001 BV cut-off at these same values. |
|
(3) |
The life of mine strip ratio is 5.48:1. The assumed life-of-mine throughput rate is 53,500 tonnes per day. |
|
(4) |
Rounding may result in apparent summation differences between tonnes, grade and contained metal content. |
|
(5) |
Mineral reserves are reported on a 100% ownership basis and a 50% ownership basis. The 50% basis is attributable to NOVAGOLD through their 50% ownership interest in the joint venture that owns the mineral rights and manages the Donlin Gold project. Tonnage and grade measurements are in metric units. Contained gold ounces are reported as troy ounces. |
Mineral reserves and resources have been estimated using a life-of-mine long-term gold price assumption of $1,200 per ounce. Mineral resources are based on a Whittle™ pit optimized for all measured, indicated, and inferred blocks assuming a gold selling price of $1,200 per ounce. Operating and capital costs are estimated over the life-of-mine.
Mineral resources were classified using criteria appropriate under the mining disclosure standards of S-K 1300 by application of the NSR-based cut-off that incorporated mining and recovery parameters, and constraint of the mineral resources to a pit shell based on commodity prices. The mineral resources (exclusive of mineral reserves) are summarized in the table below.
Mineral Resources Estimate (exclusive of reserves), Effective Date July 11, 2011 and remain current as of November 30, 2024, based on $1,200 per ounce gold price
|
Tonnes (thousands) |
Contained Gold (thousands of ounces) |
|||||||||||||||||||
|
Resource Category |
100% |
Attributable to NOVAGOLD 50% |
Gold Grade (grams/tonne) |
100% |
Attributable to NOVAGOLD 50% |
|||||||||||||||
|
Measured |
869 | 435 | 2.23 | 62 | 31 | |||||||||||||||
|
Indicated |
69,402 | 34,701 | 2.44 | 5,435 | 2,718 | |||||||||||||||
|
Measured and indicated |
70,271 | 35,136 | 2.43 | 5,497 | 2,749 | |||||||||||||||
|
Inferred |
92,216 | 46,108 | 2.02 | 5,993 | 2,997 | |||||||||||||||
Notes:
|
(1) |
Mineral resources are reported exclusive of mineral reserves. Mineral resources are reported on a 100% ownership basis and a 50% ownership basis. The 50% basis is attributable to NOVAGOLD through their 50% ownership interest in the joint venture that owns the mineral rights and manages the Donlin Gold project property. |
|
(2) |
Mineral resources that are not mineral reserves do not have demonstrated economic viability. |
|
(3) |
The cut-off date for the sample database used in the resource estimate is November 1, 2009. However, more recent drilling data was used to validate the resource model as remaining current. |
|
(4) |
Mineral resources are reported in-place (point of reference) and contained within a conceptual measured, indicated and inferred optimized pit shell using the following assumptions: gold price of $1,200 per ounce; variable process cost based on 2.1874 * (sulfur grade) + 10.65; administration cost of $2.29 per tonne processed; refining, freight & marketing (selling costs) of $1.85 per ounce recovered; stockpile re-handle costs of $0.20 per tonne processed assuming that 45% of mill feed is re-handled; variable royalty rate, based on royalty of 4.5% * (Gold price – selling cost), and a variable metallurgical recovery depending on the host rock type ranging from 86 to 94%. Assuming an average recovery of 89.5% and average sulfur grade of 1.07%, the marginal gold cut-off grade is 0.47 g/t. These technical and economic parameters are those that were used in the 2011 Mining Study to establish reasonable prospects of eventual economic extraction. Based on the QP’s review of the estimate, there would be no material change to the Mineral Resources if a gold price of $1,500/oz was used and other economic parameters were updated to the 2020 parameters used in the Mineral Reserve estimate. Therefore the 2011 Mineral Resource statement is considered current and is presented unchanged. See “Section 11: Mineral Resource Estimates” of the S-K 1300 Report. |
|
(5) |
Rounding may result in apparent summation differences between tonnes, grade and contained metal content. |
|
(6) |
Tonnage and grade measurements are in metric units. Contained gold ounces are reported as troy ounces. |
Financial model parameters
The estimated mine life is 27 years based on a nominal processing rate of 53,500 tonnes per day. Annual gold production over the projected mine life averages 1.13 million ounces per year, including 1.46 million ounces per year for the first five full years of production. The total initial capital cost estimate is approximately $7,402 million. The project’s estimated after-tax net present value at a 5% discount rate (“NPV 5%”) is $3,040 million using the base case gold price of $1,500 per ounce. The internal rate of return (“IRR”) at the same gold price is 9.2%.
Base Case Project Sensitivity to Gold Price
|
Gold price |
After-tax cash flow |
After-tax NPV 5% |
After-tax IRR |
Payback (years) |
|||||||||||||
| 1,200 | 6,556 | 202 | 5.3 | 10.3 | |||||||||||||
| 1,300 | 8,773 | 1,161 | 6.8 | 9.2 | |||||||||||||
| 1,400 | 10,974 | 2,109 | 8.1 | 8.1 | |||||||||||||
| 1,500 | 13,145 | 3,040 | 9.2 | 7.3 | |||||||||||||
| 1,600 | 15,308 | 3,967 | 10.4 | 6.7 | |||||||||||||
| 1,700 | 17,455 | 4,887 | 11.4 | 6.2 | |||||||||||||
| 1,800 | 19,125 | 5,696 | 12.4 | 5.9 | |||||||||||||
Summary of Key Evaluation Metrics (Base Case at $1,500 per ounce gold)
|
Total tonnes mined (million) |
3,270 | |||
|
Ore tonnes treated (million) |
505 | |||
|
Strip ratio (waste tonnes per ore tonne) |
5.5 to 1 | |||
|
Gold ounces recovered (million) |
30.4 | |||
|
Gold recovery (%) |
89.8 | % | ||
|
$ million |
||||
|
Net revenue |
45,519 | |||
|
Total operating costs |
(19,289 | ) | ||
|
Operating cash flow before tax |
26,230 | |||
|
Income and mining taxes |
(3,668 | ) | ||
|
Operating cash flow after tax |
22,562 | |||
|
Initial capital |
(7,402 | ) | ||
|
Sustaining capital |
(1,723 | ) | ||
|
Closure costs - trust fund |
(292 | ) | ||
|
Total costs |
(32,374 | ) | ||
|
Net after-tax cash flow |
13,145 | |||
|
Payback period (years) |
7.3 | |||
|
Operation life (years) |
27 | |||
|
After-tax NPV 5% ($ million) |
3,040 | |||
|
After-tax IRR |
9.2 | % | ||
Operating Cost Estimates1
|
$ million |
$ per tonne processed |
$ per tonne mined |
$ per gold ounce sold |
|||||||||||||
|
Mine operations |
8,430 | 16.70 | 2.59 | 278 | ||||||||||||
|
Processing operations |
6,916 | 13.70 | 2.12 | 228 | ||||||||||||
|
Administration |
1,762 | 3.49 | 0.54 | 58 | ||||||||||||
|
Land and royalty payments |
2,182 | 4.32 | 0.67 | 72 | ||||||||||||
| 19,289 | 38.21 | 5.90 | 635 | |||||||||||||
Notes:
|
(1) |
Column totals may not total correctly due to rounding. |
Capital Cost Estimates
Initial capital costs are estimated at $7,402 million and sustaining capital costs are estimated at $1,723 million over the LOM.
Planned Mining Operations
The Donlin Gold project will be mined by a conventional truck-and-shovel operation. Initial pioneering and pit development will be undertaken to remove overburden, develop mine access roads suitable for large mining equipment, and “face-up” the initial pit for the large shovel and mining equipment.
Primary loading units for both bulk and selective mining in ore and waste will be large electric-hydraulic shovels, with large front-end loaders as secondary units. Large 360 tonne capacity haul trucks will be used for transporting both ore and waste out of the pit.
Blast hole drilling will be performed by medium-sized rotary and down-the-hole hammer drills with various hole diameters depending on bench height and desired mining selectivity. Reverse circulation (“RC”) drilling is planned for detailed geologic definition and grade control.
Support equipment will be used for road, bench, dump maintenance, and miscellaneous projects.
Planned Processing Operations
The Donlin Gold project ore will be processed by crushing and grinding, sulfide flotation concentration, concentrate treatment by pressure oxidation (“POX”) in an autoclave, CIL cyanide leaching of the oxidized concentrate, electrowinning, and refining to produce doré bars on site.
Due to gold being associated with sulfide mineralization, primarily arsenopyrite and pyrite, the ore is considered refractory and requires POX pre-treatment to liberate the gold prior to CIL leaching. Sulfide flotation concentration is required prior to POX to concentrate the sulfide content to a level sufficient to fuel the POX operation.
Concentrate is recovered from the primary rougher flotation followed by regrinding of the tailings prior to secondary rougher flotation. The secondary rougher concentrate is processed through a cleaner scavenger circuit producing a concentrate which is combined with the primary rougher concentrate for treatment by POX. The final tailings from the secondary rougher flotation tailings is thickened, and due to their neutralizing potential, is then utilized to modify the pH of the POX discharge solution prior to being transported to the TSF.
The oxidized concentrate from the POX operation would then be cyanide leached in a conventional CIL circuit to produce a pregnant (gold-bearing) solution. Gold from the solution is absorbed onto activated carbon, which is later stripped (gold desorbed from carbon) in an elution circuit. The pregnant solution after elution is fed through electrowinning (“EW”) cells, where cathodes are plated with gold-bearing materials, which are periodically removed, dried in a retort, and melted in an induction furnace to produce doré bars.
Tailings from the CIL circuit would be treated in a cyanide detoxification process using SO2/air technology prior to being recombined with the flotation tailings and transported to the TSF.
Mercury naturally occurs in the Donlin Gold project ores and mercury abatement controls will be installed in six areas of the process facilities including POX, hot cure, EW, retort, refinery furnace, and carbon regeneration kiln. In these control systems, mercury will be collected for off-site shipment and management. Chemicals will be added to tailings to limit the potential for mercury releases from the TSF.
Proposed Production Plan and Schedule
Based on the S-K 1300 Report, the operating mine life is estimated to be 27 years with the nominal processing rate of 53,500 tonnes per day. Commercial gold production is expected after a period of approximately 6 years for basic and detailed engineering, and construction. In addition, the Donlin Gold board must approve a construction program and budget before construction of the Donlin Gold project can begin. The timing of the initiation of the required engineering work, of the Donlin Gold board’s approval of a construction program and budget, market conditions, and receipt of all required governmental permits and approvals will determine whether and when construction of the Donlin Gold project will begin.
Preproduction covers the first 15 months of the mine plan, when mining activities will focus on providing sufficient ore exposure for plant start-up. Ore mined during preproduction will be stockpiled and rehandled to the process during operations. Average mine production increases progressively in the initial years until the peak rate of 425,000 tonnes per day is reached in Year 6.
Proposed Waste Rock Facility (WRF)
Waste rock from open pit mining will be placed in an ex-pit WRF in the American Creek Valley, east of the pit area, or in a backfill dump in the ACMA pit. The ultimate footprint of the WRF covers an area of approximately 9 square kilometers. Approximately 2,232 million tonnes of waste rock and overburden will be placed in the WRF, and 425 million tonnes will be placed in the ACMA pit backfill dump. Approximately 91 million tonnes of waste rock will be used for construction purposes, and 17 million tonnes of overburden will be stockpiled and used later for reclamation purposes.
The potential magnitude of flow in the American Creek drainage, as well as discharge from springs in the valley floors, warrants the construction of an engineered rock drain system below the waste rock facility, including connecting secondary rock (finger) drains in the smaller contributing drainages.
Waste rock will be characterized by its potential for acid generation and assigned reactivity categories. Non-acid-generating rock will be placed directly in the WRF, along with less reactive potentially acid-generating (“PAG”) rock, PAG5. Some of the more reactive PAG rock, PAG6, will be encapsulated in cells in the WRF to prevent water infiltration through them. The most reactive PAG rock, PAG7, will be backfilled in the ACMA pit beneath the ultimate pit lake water level.
Concurrent reclamation of the waste rock facility will be undertaken during operations.
Proposed Tailings Storage Facility (TSF)
The TSF in the Anaconda Creek basin will be a fully lined impoundment with a cross valley dam downstream (“main dam”) in the valley. The tailings dam will be constructed of compacted rock fill using the downstream method with a composite liner on the upstream face. The tailings impoundment footprint will be lined with a linear low-density polyethylene liner over a layer of broadly graded silty sand and gravel acting as low permeability bedding material and providing secondary containment. Material for construction will be sourced from the plant site and fuel farm during initial construction and from the open pit for the later raises during operations.
Water Diversion Dams
Water dams are required during the construction period and initial years of operation to protect the lined upstream face of the tailings-starter dam from a significant flood event, to provide a reliable source of fresh water during operation of the process plant, and to minimize runoff into the TSF.
Current and Planned On-Site Infrastructure
Current site infrastructure comprises an all-season, soft-sided camp with facilities consisting of kitchen, living quarters, equipment shop, drill shack and other buildings required for support of year-round exploration activities.
There is sufficient area within the project area to host an open pit mining operation, including the proposed open pit, waste rock facility, TSF and process facilities (primary and pebble crushers, coarse ore conveyor and coarse ore stockpile, concentrator, flotation, water treatment plants, POX, oxygen plant, boiler house, utility corridors, leach, refinery, cyanide destruct, and access walkways). Other planned site infrastructure is comprised of access roads, airstrip, accommodation camp, fuel tank farm, dual-fueled power plant, truck shop, truck wash, workshops and vehicle repair facilities, assay laboratory, administration facilities and change rooms. Donlin Gold has secured the surface rights for the areas that may host these facilities.
In nearby villages, Crooked Creek has approximately 105 residents and Aniak has a population of approximately 500. The workforce for the project would be sourced from the local area, from Alaskan regional centers and from other sources as required.
The project is a greenfield site. The on-site infrastructure for the project includes three main development sites in remote locations: the mine and plant site area (including the power plant), the permanent camp, and the airstrip. The plant site, power plant and fuel tank farm will be on a ridge above the proposed TSF. The layout of the plant site was designed to take maximum advantage of the natural topography. The layout also provides for efficient movement of equipment and material products around the site.
Planned Off-site Infrastructure
The off-site infrastructure for the project includes three main development sites in remote locations: the Jungjuk port site and mine access road, the natural gas pipeline, and the Bethel port facilities. The Jungjuk port site is situated upriver from Bethel on the Kuskokwim River near the mouth of Jungjuk creek. A port-to-mine access road (Jungjuk road), approximately 48 kilometers long, will traverse varied terrain from the Jungjuk port site to the mine site. A spur road, approximately 4.8 kilometers long, will serve the proposed project airstrip. The primary purpose of the Jungjuk road is to transport freight and diesel from the Jungjuk port site to the mine site, mostly by conventional highway tractors, tankers, and trailers. The natural gas pipeline is described under the “Power” heading below. The proposed Bethel port will be situated near the town of Bethel, a community of approximately 6,080 residents, that is the main existing port on the Kuskokwim River and is an administrative and transportation hub for the 56 villages in the Y-K region. The existing Bethel port is the northernmost medium-draft port in the United States and is served by ocean-going barges. The proposed port would serve as a trans-shipment point from ocean barges to river barges to supply the project during the summer ice-free period.
Power
Natural gas will be delivered to site by an approximately 507-kilometer, 356-millimeter diameter pipeline to supply an on-site power generation facility. The S-K 1300 Report contemplates that the electric power for the site will be generated from a dual-fueled (natural gas and diesel), reciprocating engine power plant with a steam turbine utilizing waste heat recovery from the engines. The power plant consists of two equal halves, each consisting of six reciprocating engines, and a separate steam turbine. The total generation facility is nominally rated at 182 MW initially and will increase to 215 MW after four years with the addition of two more generators (one in each half) to allow for N+2 redundancy, thus allowing planned maintenance and predicted outages without cutting back production.
Operating costs are based on importing liquefied natural gas (LNG) by ship to Anchorage and total delivery cost to site which includes regasification of the LNG and delivery from Anchorage to the Donlin Gold project via the pipeline.
The pipeline would commence at the west end of the Beluga Gas Field, approximately 48 kilometers northwest of Anchorage at a tie-in near Beluga located in the Matanuska-Susitna Borough and would run to the mine site. The pipeline would receive booster compression supplied by one compressor station. No additional compression along the pipeline route would be required. The pipeline would have capacity to transport approximately 2 million cubic meters per day of natural gas.
Water
Water requirements for the proposed project have been summarized in a Water Resources Management Plan, which has been subject to review by state and federal agencies. Water primarily will be sourced from the two drainages (American and Anaconda Creeks) within the mine footprint and pit dewatering. In some years, the water supply from these sources may not be able to meet the makeup water requirements for the plant. In these circumstances, additional water will be obtained primarily from a proposed reservoir in Snow Gulch.
The source of water supply for the construction camp and, later, the plant site potable water systems is an array of eight deep wells south of Omega Gulch, near Crooked Creek. Water supply will be pumped to freshwater storage tanks and will be treated prior to consumption.
Markets
The marketing plan is for the owners of Donlin Gold to take in-kind their respective shares of the gold production, which they can then sell for their own benefit. Under the LLC Agreement, the manager shall give the members prompt notice in advance of the delivery date upon which their respective shares of gold production will be available.
Since there are many available gold purchasers, the members should not be dependent upon the sale of gold to any one customer. Gold can be sold to various gold bullion dealers or smelters on a competitive basis at spot prices.
It is expected that selling contracts for NOVAGOLD’s share of gold production will be typical of, and consistent with, standard industry practice, and be similar to contracts for the supply of doré elsewhere in the world.
Taxation
The S-K 1300 Report contemplates that the following taxes may be levied on the project:
|
● |
Federal income tax – 21%. |
|
● |
Alaska state income tax – 9.4% of net income. |
|
● |
Alaska state mining license tax – 7% of taxable mining income. There is a tax holiday applied for the first 3.5 years from the start of production. |
Income tax becomes payable after deductions for capital allowances.
Financial results
The total initial capital cost estimate for the Donlin Gold project is approximately $7,402 million. The project’s estimated after-tax NPV at a 5% discount rate is $3,040 million with an IRR after-tax at 9.2% using the base case gold price of $1,500 per ounce. The undiscounted break-even gold price is $930 per ounce and at a 5% discount rate is $1,180 per ounce. In the S-K 1300 Report, the overall economic viability of the project was evaluated by both discounted and undiscounted cash flow analyses, based on the engineering studies and cost estimates discussed in the S-K 1300 Report.
Assumptions in the model comprised:
|
● |
Costs prior to project Year 6, the start of basic and detailed engineering, are considered sunk. For discounted cash flow (or NPV) purposes, the model commences in Year 6. Estimates were prepared for all the individual elements of cash revenue and cash expenditures for ongoing operations. |
|
● |
Estimated cash flows from revenue are based on a gold price of $1,500 per ounce. The pit has been optimized at a gold price of $1,200 per ounce. |
|
● |
Gold recovery is estimated to average 89.8% over the LOM based on work and testing performed for at least pre-feasibility study purposes. |
|
● |
Doré refining and shipping charges were estimated at $1.21 per ounce based on escalating to 2020 the actual refining charges for Barrick’s Goldstrike operations and a quotation for transportation and insurance costs from the Donlin Gold project site to a U.S.-based refinery utilized in 2011. In addition, 0.1% of gold produced from the mine is deducted as a cost of refining. |
|
● |
The current hydrometallurgical process selection renders any contained silver into a greater refractory state, which provides less than 10% silver recovery through standard metal leaching. As a consequence, silver is not included in the Mineral Resource and Mineral Reserve estimates, and no silver credit has been applied to the Donlin Gold project. |
|
● |
To fund the $1,361 million reclamation and closure costs, the Donlin Gold project provides $412 million at closure by contributing to a Trust Fund commencing in Year -5 and continuing through the end of operations with annual contributions of $7.8 million. In addition to the Trust Fund, financial assurance in the form of letters of credit and/or surety bonds is required to construct and operate the mine. Per the Donlin Gold Project Reclamation Plan Approval from ADNR, financial assurance in the amount of approximately $322 million must be submitted in a form and substance approved by ADNR. The cost to maintain this financial assurance is assumed to be 0.4% of the total assured amount, annually. This equates to approximately $1.3 million per year, paid from the start of construction through the end of operations. |
|
● |
No salvage is assumed at the end of operations. |
Current Activities
For information on current activities, see section Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, below.
Change in Mineral Resources and Reserves from 2023 to 2024
There were no changes in reported mineral resources and reserves reported for the years ended November 30, 2024 and 2023. Paul Chilson, P.E., a Qualified Person and an employee of the Company, has reviewed the mineral reserves and mineral resources and material assumptions included in this Annual Report on Form 10-K and confirmed that they remain current as of November 30, 2024.
Mineral Resource and Reserve Internal Controls
The Company has internal controls for reviewing and documenting the information supporting the mineral resource and mineral reserve estimates, describing the methods used, and ensuring the validity of the estimates. These internal control processes were not materially impacted by the adoption of S-K 1300 in 2021. Information that is used in the mineral resource and mineral reserve estimation process was reviewed and approved by appropriate qualified persons that prepared the content of the NI 43-101 and S-K 1300 reports for the Donlin Gold project. The mineral resources and mineral reserves are subject to our internal review process on an annual basis, which includes review by NOVAGOLD’s Qualified Person based in our corporate office in Salt Lake City, Utah, USA.
Sample collection, preparation, analysis and security for all Donlin Gold core drill programs are in line with industry-standard methods for gold deposits.
|
● |
Drill programs included insertion of blank, duplicate and SRM samples. |
|
● |
Quality Assurance/Quality Control program results do not indicate any problems with the analytical programs. |
|
● |
Data is subject to validation, which includes checks on surveys, collar coordinates, lithology data, and assay data. The checks are appropriate, and consistent with industry standards. |
|
● |
Independent data audits have been conducted and indicate that the sample collection and database entry procedures are acceptable. |
|
● |
All core has been catalogued and stored in designated areas. |
Mineral resources and mineral reserves are estimates that are imprecise and depend upon geologic interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be unreliable. See Risk Factors – “The quantities for our mineral resources and mineral reserves are estimates based on interpretation and assumptions and may yield less mineral production under actual conditions than is currently estimated.”
|
Legal Proceedings |
Periodically, we are a party to or otherwise involved in legal proceedings arising in the normal course of business. Management does not believe that there is any pending or threatened proceeding against the Company which, if determined adversely, would have a material adverse effect on our financial position, liquidity or results of operations. There are no material proceedings pursuant to which any of our directors, officers or affiliates or any owner of record or beneficial owner of more than 5% of our securities or any associate of any such director, officer or securityholder is a party adverse to us or has a material interest adverse to us.
|
Mine Safety Disclosures |
Pursuant to Section 1503(a) of the Dodd-Frank Act, issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose specified information about mine health and safety in their periodic reports. These reporting requirements are based on the safety and health requirements applicable to mines under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”) which is administered by the U.S. Department of Labor’s Mine Safety and Health Administration (“MSHA”). During the fiscal year ended November 30, 2024, the Company and its subsidiaries were not subject to regulation by MSHA under the Mine Act and thus no disclosure is required under Section 1503(a) of the Dodd-Frank Act. Donlin Gold LLC is the operator of the Donlin Gold project. Donlin Gold LLC is not a “subsidiary” of the Company for purposes of Section 1503(a) of the Dodd-Frank Act because the Company does not control Donlin Gold LLC.
|
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities |
Market Information
Our common shares trade on the NYSE American and on the Toronto Stock Exchange (“TSX”) under the symbol “NG.” On January 13, 2025, there were 545 holders of record of our shares, which does not include shareholders for which shares are held in nominee or street name. The Company believes that more than half of our common shares are beneficially owned by investors in the United States.
Dividends
We have never declared or paid dividends on our common shares and our current business plan requires that, for the foreseeable future, any future earnings be reinvested to finance growth and development of our business. We will pay dividends on our common shares only if and when declared by our Board. In determining whether to declare dividends, the Board will consider our financial condition, results of operations, working capital requirements, future prospects, and other factors it considers relevant.
Certain Canadian Federal Income Tax Considerations for U.S. Residents
The following generally summarizes certain Canadian federal income tax consequences generally applicable under the Income Tax Act (Canada) and the regulations enacted thereunder (collectively, the “Canadian Tax Act”) and the Canada-United States Income Tax Convention (1980) (the “Convention”) to the holding and disposition of our common shares.
Comment is restricted to holders of common shares each of whom, at all material times for the purposes of the Canadian Tax Act and the Convention, (i) is resident solely in the United States for tax purposes, (ii) is a “qualifying person” under and entitled to the benefits of the Convention, (iii) holds all common shares as capital property, (iv) deals at arm’s length with and is not affiliated with NOVAGOLD, (v) does not and is not deemed to use or hold any common shares in a business carried on in Canada, (vi) is not an insurer that carries on business in Canada and elsewhere and (vii) is not an “authorized foreign bank” (as defined in the Canadian Tax Act) (each such holder, a “U.S. Resident Holder”).
Certain U.S.-resident entities that are fiscally transparent for United States federal income tax purposes (including certain limited liability companies) may not in all circumstances be entitled to the benefits of the Convention. Members of or holders of an interest in such an entity that holds common shares should consult their own tax advisers regarding the extent, if any, to which the benefits of the Convention will apply to the entity in respect of its common shares. This summary does not deal with special situations such as the particular circumstances of traders or dealers in securities or holders who have entered into a “derivative forward agreement”, “synthetic equity arrangement” or “synthetic disposition arrangement” (each as defined in the Canadian Tax Act) in respect of the common shares. Such holders should consult their own tax advisors.
Generally, a U.S. Resident Holder’s common shares will be considered to be capital property of such Holder provided that the U.S. Resident Holder is not a trader or dealer in securities, did not acquire, hold, or dispose of the common shares in one or more transactions considered to be an adventure or concern in the nature of trade (i.e. speculation) and does not hold the common shares in the course of carrying on a business.
This summary is based on the information contained in this Form 10-K, the current provisions of the Canadian Tax Act and the Convention in effect as of the date prior to the date hereof, all specific proposals to amend the Canadian Tax Act and Convention publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (“Proposed Amendments”), and the administrative policies and assessing practices of the Canada Revenue Agency (the “CRA”) published in writing by the CRA prior to the date hereof. This summary assumes that the Proposed Amendments will be enacted in the form proposed, although no assurance can be given that the Proposed Amendments will be enacted or otherwise implemented in their current form, if at all. Other than the Proposed Amendments, this summary does not take into account nor anticipate any changes in law or in the CRA’s administrative policies or assessing practices, whether by way of judicial, legislative, governmental, or administrative decision or action, although no assurance can be given in these respects. Except as otherwise expressly provided, this summary does not take into account any provincial, territorial or foreign tax considerations, which may differ materially from those set out herein.
This summary is of a general nature only, is not exhaustive of all possible Canadian federal income tax considerations, and is not intended to be and should not be construed as legal or tax advice to any particular U.S. Resident Holder. U.S. Resident Holders are urged to consult their own tax advisers for advice with respect to their particular circumstances. The discussion below is qualified accordingly.
Currency conversion
Generally, for the purposes of the Canadian Tax Act, all amounts relating to the acquisition, holding or disposition of common shares (including dividends, adjusted cost base and proceeds of disposition) must be converted into Canadian dollars based on the relevant exchange rate as determined in accordance with the Canadian Tax Act.
Dividends on common shares
A U.S. Resident Holder to whom NOVAGOLD pays or credits or is deemed to pay or credit a dividend on such holder’s common shares will generally be subject to Canadian withholding tax, and NOVAGOLD will be required to withhold the tax from the dividend and remit it to the CRA for the holder’s account. The rate of withholding tax under the Canadian Tax Act is 25% of the gross amount of the dividend, but should generally be reduced under the Convention to 15% (or, if the U.S. Resident Holder is a company which is the beneficial owner of at least 10% of the voting stock of NOVAGOLD, 5%) of the gross amount of the dividend. For this purpose, a company that is a resident of the United States for purposes of the Canadian Tax Act and the Convention and is entitled to the benefits of the Convention shall be considered to own the voting stock of NOVAGOLD owned by an entity that is considered fiscally transparent under the laws of the United States and that is not a resident of Canada, in proportion to such company’s ownership interest in that entity.
Disposition of common shares
A U.S. Resident Holder who disposes or is deemed to dispose of one or more common shares generally should not incur any liability for Canadian federal income tax in respect of any capital gain arising as a consequence of the disposition, unless the common shares constitute “taxable Canadian property” (as defined in the Canadian Tax Act) of the U.S. Resident Holder at the time of disposition and the U.S. Resident Holder is not entitled to relief under the Convention.
Generally, a U.S. Resident Holder’s common shares will not constitute “taxable Canadian property” of such holder at a particular time at which the common shares are listed on a “designated stock exchange” (as defined in the Canadian Tax Act) (which currently includes the TSX and NYSE American) unless both of the following conditions are concurrently met:
|
(i) |
at any time during the 60‑month period that ends at the particular time, 25% or more of the issued shares of any class or series of the capital stock of NOVAGOLD were owned by or belonged to one or any combination of: |
|
a. |
the U.S. Resident Holder, |
|
b. |
persons with whom the U.S. Resident Holder did not deal at arm’s length, and |
|
c. |
partnerships in which the U.S. Resident Holder or a person referred to in clause b. holds a membership interest directly or indirectly through one or more partnerships, and |
|
(ii) |
at any time during the 60-month period that ends at the particular time, more than 50% of the fair market value of the common shares was derived, directly or indirectly, from one or any combination of, real or immovable property situated in Canada, “Canadian resource properties” (as defined in the Canadian Tax Act), “timber resource properties” (as defined in the Canadian Tax Act), or options in respect of, interests in, or, for civil law, rights in, such properties, whether or not the property exists. |
In certain circumstances, a common share may also be deemed to be “taxable Canadian property” for purposes of the Canadian Tax Act.
Even if the common shares constitute “taxable Canadian property” to a U.S. Resident Holder, under the Convention, such a U.S. Resident Holder will not be subject to tax under the Canadian Tax Act on any capital gain realized by such holder on a disposition of such common shares, provided the value of such common shares is not derived principally from real property situated in Canada (within the meaning of the Convention).
U.S. Resident Holders whose shares are or may be taxable Canadian property should consult their own tax advisors.
Certain United States Federal Income Tax Considerations for U.S. Holders
The following is a general summary of certain anticipated U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from and relating to the acquisition, ownership and disposition of common shares.
This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations that may apply to a U.S. Holder as a result of the acquisition, ownership and disposition of common shares. Furthermore, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax considerations applicable to such U.S. Holder. Except as specified below, this summary does not discuss applicable tax reporting requirements. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any U.S. Holder. U.S. Holders should consult their own tax advisors regarding the U.S. federal, U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of common shares.
No ruling from the U.S. Internal Revenue Service (the “IRS”) or legal opinion from legal counsel has been requested, or will be obtained, regarding the potential U.S. federal income tax considerations applicable to U.S. Holders as discussed in this summary. This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in this summary. In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the positions taken in this summary.
Scope of this Summary
Authorities
This summary is based on the U.S. Internal Revenue Code of 1986, as amended (“Code”), regulations promulgated by the U.S. Department of the Treasury (whether final, temporary or proposed) (“Treasury Regulations”), U.S. court decisions, published rulings and administrative positions of the IRS, and the Convention, that are applicable and, in each case, in effect as of the date of this document. Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive or prospective basis, which could affect the U.S. federal income tax considerations described in this summary. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on a retroactive or prospective basis.
U.S. Holders
For purposes of this section, a “U.S. Holder” is a beneficial owner of common shares that, for U.S. federal income tax purposes, is (a) a citizen or individual resident of the United States for U.S. federal income tax purposes; (b) a corporation, or other entity classified as a corporation for U.S. federal income tax purposes, that is created or organized in or under the laws of the United States or any state in the United States, including the District of Columbia; (c) an estate if the income of such estate is subject to U.S. federal income tax regardless of the source of such income; or (d) a trust if (i) such trust has validly elected to be treated as a U.S. person for U.S. federal income tax purposes, or (ii) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of such trust.
Non-U.S. Holders
For purposes of this summary, a “Non-U.S. Holder” is a beneficial owner of common shares that is neither a U.S. Holder nor a U.S. partnership (or other “pass-through” entity). This summary does not address the U.S. federal income tax considerations applicable to Non-U.S. Holders relating to the acquisition, ownership and disposition of common shares. Accordingly, Non-U.S. Holders should consult their own tax advisors regarding the U.S. federal, U.S. state and local, and non-U.S. tax consequences (including the potential application of and operation of any tax treaties) relating to the acquisition, ownership, and disposition of common shares.
U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed
This summary does not address the U.S. federal income tax considerations applicable to U.S. Holders that are subject to special provisions under the Code, including U.S. Holders that: (a) are tax-exempt organizations, qualified retirement plans, individual retirement accounts or other tax-deferred accounts; (b) are financial institutions, underwriters, insurance companies, real estate investment trusts or regulated investment companies or that are broker-dealers, dealers, or traders in securities or currencies that elect to apply a mark-to-market accounting method; (c) have a “functional currency” other than the U.S. dollar; (d) own common shares as part of a straddle, hedging transaction, conversion transaction, constructive sale or other integrated transaction; (e) acquired common shares in connection with the exercise of employee stock options or otherwise as compensation for services; (f) hold common shares other than as a capital asset (generally property held for investment purposes) within the meaning of Section 1221 of the Code; (g) are subject to special tax accounting rules with respect to their common shares; (h) own, directly, indirectly or by attribution, 10% or more, by voting power or value, of the outstanding shares of the Company; (i) are partnerships and other pass-through entities (and investors in such partnerships and entities); (j) are S corporations (and shareholders therein); (k) are subject to the alternative minimum tax; (k) are U.S. expatriates or former long term residents of the United States; or (l) hold common shares in connection with a trade or business, permanent establishment, or fixed base outside the United States. U.S. Holders that are subject to special provisions under the Code, including U.S. Holders described immediately above, should consult their own tax advisors regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal net investment income, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of common shares.
If an entity or other arrangement that is classified as a partnership (or other “pass-through” entity) for U.S. federal income tax purposes holds common shares, the U.S. federal income tax consequences applicable to such partnership (or “pass-through” entity) and the partners of such partnership (or owners of such “pass-through” entity) generally will depend on the activities of the partnership (or “pass-through” entity) and the status of such partners (or owners). Partners of entities that are classified as partnerships (and owners of “pass-through” entities) for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences relating to the acquisition, ownership and disposition of common shares.
Tax Consequences Other than U.S. Federal Income Tax Consequences Not Addressed
This summary does not address the U.S. state and local, U.S. estate and gift, U.S. federal net investment income, U.S. alternative minimum tax, or non-U.S. tax consequences to U.S. Holders relating to the acquisition, ownership, and disposition of common shares. Each U.S. Holder should consult its own tax advisor regarding the U.S. state and local, U.S. estate and gift, U.S. federal net investment income, U.S. federal alternative minimum tax and non-U.S. tax consequences relating to the acquisition, ownership, and disposition of common shares.
U.S. Federal Income Tax Consequences of the Acquisition, Ownership and Disposition of Common Shares
Distributions on Common Shares
Subject to the PFIC rules discussed below, a U.S. Holder that receives a distribution, including a constructive distribution, with respect to a common share will be required to include the amount of such distribution in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of the current or accumulated “earnings and profits” of the Company, as computed for U.S. federal income tax purposes. To the extent that a distribution exceeds the current and accumulated “earnings and profits” of the Company, such distribution will be treated first as a tax-free return of capital to the extent of a U.S. Holder’s tax basis in the common shares and thereafter as a gain from the sale or exchange of such common shares (see “Sale or Other Taxable Disposition of Common Shares” below). However, the Company does not intend to maintain the calculations of earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder should therefore assume that any distribution by the Company with respect to the common shares will constitute ordinary dividend income. Subject to applicable limitations, dividends paid by the Company to non-corporate U.S. Holders, including individuals, generally will be eligible for the preferential tax rates applicable to long-term capital gains for dividends, provided certain holding period and other conditions are satisfied, including that the Company not be classified as a PFIC (as discussed below) in the tax year of distribution or in the preceding tax year. Dividends received on common shares by corporate U.S. Holders will not be eligible for the “dividends received deduction”. The dividend rules are complex, and each U.S. Holder should consult its own tax advisor regarding the application of such rules.
Sale or Other Taxable Disposition of Common Shares
Subject to the PFIC rules discussed below, upon the sale or other taxable disposition of common shares, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between (a) the amount of cash plus the fair market value of any property received and (b) its tax basis in such common shares sold or otherwise disposed of. Such gain generally will be treated as “U.S. source” for purposes of applying the U.S. foreign tax credit rules unless the gain is subject to tax in Canada and is re-sourced as “foreign source” under the Convention and such U.S. Holder elects to treat such gain or loss as “foreign source” (see a more detailed discussion at “Foreign Tax Credit” below). Any such gain or loss generally will be capital gain or loss, which will be long-term capital gain or loss if, at the time of the sale or other disposition, such common shares are held for more than one year. Preferential tax rates apply to long-term capital gains of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential tax rates for long-term capital gains of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations under the Code.
Passive Foreign Investment Company Rules
If the Company is considered a PFIC within the meaning of Section 1297 of the Code at any time during a U.S. Holder’s holding period, then certain different and potentially adverse tax consequences would apply to such U.S. Holder’s acquisition, ownership and disposition of common shares.
PFIC Status of the Company
The Company generally will be a PFIC if, for a given tax year, (a) 75% or more of the gross income of the Company for such tax year is passive income or (b) 50% or more of the assets held by the Company either produce passive income or are held for the production of passive income, based on the fair market value of such assets. “Gross income” generally includes all revenues less the cost of goods sold plus income from investments and from incidental or outside operations or sources, and “passive income” includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions. Active business gains arising from the sale of commodities generally are excluded from passive income if substantially all of a foreign corporation’s commodities are stock in trade or inventory, depreciable property used in a trade or business, or supplies regularly used or consumed in a trade or business, and certain other requirements are satisfied.
For purposes of the PFIC income test and asset test described above, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, the Company will be treated as if it (a) held a proportionate share of the assets of such other corporation and (b) received directly a proportionate share of the income of such other corporation. In addition, for purposes of the PFIC income test and asset test described above, “passive income” does not include any interest, dividends, rents or royalties that are received or accrued by the Company from a “related person” (as defined in Section 954(d)(3) of the Code), to the extent such items are properly allocable to the income of such related person that is not passive income.
Under certain attribution rules, if the Company is a PFIC, U.S. Holders will be deemed to own their proportionate share of any subsidiary of the Company which is also a PFIC (a “Subsidiary PFIC”), and will be subject to U.S. federal income tax on (a) a distribution on the shares of a Subsidiary PFIC and (b) a disposition of shares of a Subsidiary PFIC, both as if the U.S. Holder directly held the shares of such Subsidiary PFIC.
The Company believes that it was a PFIC for the fiscal year ended November 30, 2024, and based on current business plans and financial expectations, may be a PFIC in the current tax year and future tax years. No opinion of legal counsel or ruling from the IRS concerning the status of the Company as a PFIC has been obtained or is currently planned to be requested. The determination of whether the Company (or a subsidiary of the Company) was, or will be, a PFIC for a tax year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. In addition, whether the Company (or subsidiary) will be a PFIC for any tax year depends on the assets and income of the Company (and each such subsidiary) over the course of each such tax year and, as a result, cannot be predicted with certainty as of the date of this document. Accordingly, there can be no assurance that the IRS will not challenge any determination made by the Company (or subsidiary) concerning its PFIC status or that the Company (and any subsidiary) was not, or will not be, a PFIC for any tax year. U.S. Holders should consult their own tax advisors regarding the PFIC status of the Company and any subsidiary of the Company.
Default PFIC Rules under Section 1291 of the Code
If the Company is a PFIC, the U.S. federal income tax consequences to a U.S. Holder of the acquisition, ownership and disposition of common shares will depend on whether such U.S. Holder makes a QEF election (a “QEF Election”) or makes a mark-to-market election under Section 1296 of the Code (a “Mark-to-Market Election”) with respect to its common shares. A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a “Non-Electing U.S. Holder”.
A Non-Electing U.S. Holder will be subject to the rules of Section 1291 of the Code with respect to (a) any gain recognized on the sale or other taxable disposition of the common shares and (b) any excess distribution paid on the common shares. A distribution generally will be an “excess distribution” to the extent that such distribution (together with all other distributions received in the current tax year) exceeds 125% of the average distributions received during the three preceding tax years (or during a U.S. Holder’s holding period for the common shares, if shorter).
If the Company is a PFIC, under Section 1291 of the Code any gain recognized on the sale or other taxable disposition of common shares (including an indirect disposition of shares of a Subsidiary PFIC), and any excess distribution paid on the common shares (or a distribution by a Subsidiary PFIC to its shareholder that is deemed to be received by a U.S. Holder) must be ratably allocated to each day of a Non-Electing U.S. Holder’s holding period for the common shares. The amount of any such gain or excess distribution allocated to the tax year of disposition or excess distribution and to years before the Company became a PFIC, if any, would be taxed as ordinary income. The amounts allocated to any other tax year would be subject to U.S. federal income tax at the highest tax applicable to ordinary income in each such year, and an interest charge would be imposed on the tax liability for each such year, calculated as if such tax liability had been due in each such year. A Non-Electing U.S. Holder that is not a corporation must treat any such interest paid as “personal interest”, which is not deductible.
If the Company is a PFIC for any tax year during which a Non-Electing U.S. Holder holds common shares, the Company will continue to be treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of whether the Company ceases to be a PFIC in one or more subsequent years. If the Company ceases to be a PFIC, a Non-Electing U.S. Holder may terminate this deemed PFIC status with respect to the common shares by electing to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above) as if such common shares were sold on the last day of the last tax year for which the Company was a PFIC.
QEF Election
In the event the Company is a PFIC and a U.S. Holder makes a QEF Election for the first tax year in which its holding period of its common shares begins, such U.S. Holder generally will not be subject to the rules of Section 1291 of the Code discussed above with respect to its common shares. However, a U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such U.S. Holder’s pro rata share of (a) the net capital gain of the Company, which will be taxed as long-term capital gain to such U.S. Holder, and (b) the ordinary earnings of the Company, which will be taxed as ordinary income to such U.S. Holder. Generally, “net capital gain” is the excess of (a) net long-term capital gain over (b) net short-term capital gain, and “ordinary earnings” are the excess of (a) “earnings and profits” over (b) net capital gain. A U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such amounts for each tax year in which the Company is a PFIC, regardless of whether such amounts are actually distributed to such U.S. Holder by the Company. However, a U.S. Holder that makes a QEF Election may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a corporation, any such interest paid will be treated as “personal interest”, which is not deductible.
A U.S. Holder that makes a QEF Election generally (a) may receive a tax-free distribution from the Company to the extent that such distribution represents “earnings and profits” of the Company that were previously included in income by the U.S. Holder because of such QEF Election and (b) will adjust such U.S. Holder’s tax basis in the common shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election. In addition, a U.S. Holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of common shares.
The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will depend on whether such QEF Election is timely. A QEF Election will be treated as “timely” if it is made for the first year in the U.S. Holder’s holding period for the common shares in which the Company was a PFIC. A U.S. Holder may make a timely QEF Election by filing the appropriate QEF Election documents at the time such U.S. Holder files a U.S. federal income tax return for such year.
A QEF Election will apply to the tax year for which such QEF Election is made and to all subsequent tax years, unless such QEF Election is invalidated or terminated or the IRS consents to revocation of such QEF Election. If a U.S. Holder makes a QEF Election and, in a subsequent tax year, the Company ceases to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those tax years in which the Company is not a PFIC. Accordingly, if the Company becomes a PFIC in a subsequent tax year, the QEF Election will be effective, and the U.S. Holder will be subject to the QEF rules described above during a subsequent tax year in which the Company qualifies as a PFIC.
The Company will make available to U.S. Holders, upon their written request, all information and documentation that a U.S. Holder making a QEF Election with respect to the Company is required to obtain for U.S. federal income tax purposes. Such information may be included on the Company’s website. However, U.S. Holders should be aware that the Company can provide no assurances that it will provide any such information relating to any Subsidiary PFIC. Because the Company may own shares in one or more Subsidiary PFICs and may acquire shares in one or more Subsidiary PFICs in the future, U.S. Holders will continue to be subject to the rules discussed above with respect to the taxation of gains and excess distributions with respect to any Subsidiary PFIC for which the U.S. Holders do not obtain the required information to file a QEF Election. U.S. Holders should consult their own tax advisor regarding the availability of, and procedure for making, a QEF Election with respect to the Company and any Subsidiary PFIC.
Mark-to-Market Election
A U.S. Holder may make a Mark-to-Market Election only if the common shares are marketable stock. The common shares generally will be “marketable stock” if they are regularly traded on (a) a national securities exchange that is registered with the SEC; (b) the national market system established pursuant to section 11A of the Securities and Exchange Act of 1934; or (c) a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located, provided that (i) such foreign exchange has trading volume, listing, financial disclosure and other requirements and the laws of the country in which such foreign exchange is located, together with the rules of such foreign exchange, ensure that such requirements are actually enforced; and (ii) the rules of such foreign exchange ensure active trading of listed stocks. If such stock is traded on such a qualified exchange or other market, such stock generally will be “regularly traded” for any calendar year during which such stock is traded, other than in de minimus quantities, on at least 15 days during each calendar quarter. Each U.S. Holder should consult its own tax advisor regarding whether the common shares constitute marketable stock.
A U.S. Holder that makes a Mark-to-Market Election with respect to its common shares generally will not be subject to the rules of Section 1291 of the Code discussed above. However, if a U.S. Holder does not make a Mark-to-Market Election beginning in the first tax year of such U.S. Holder’s holding period for common shares or such U.S. Holder has not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to certain dispositions of, and distributions on, the common shares.
A U.S. Holder that makes a Mark-to-Market Election will include in ordinary income, for each tax year in which the Company is a PFIC, an amount equal to the excess, if any, of (a) the fair market value of the common shares, as of the close of such tax year over (b) such U.S. Holder’s tax basis in such common shares. A U.S. Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the excess, if any, of (i) such U.S. Holder’s adjusted tax basis in the common shares over (ii) the fair market value of such common shares (but only to the extent of the net amount of previously included income as a result of the Mark-to-Market Election for prior tax years).
U.S. Holders that make a Mark-to-Market Election generally also will adjust their tax basis in the common shares to reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market Election. In addition, upon a sale or other taxable disposition of common shares, a U.S. Holder that makes a Mark-to-Market Election will recognize ordinary income or loss (not to exceed the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior tax years over (b) the amount allowed as a deduction because of such Mark-to-Market Election for prior tax years).
A Mark-to-Market Election applies to the tax year in which such Mark-to-Market Election is made and to each subsequent tax year, unless the common shares cease to be “marketable stock” or the IRS consents to revocation of such election. U.S. Holders should consult their own tax advisors regarding the availability of, and procedure for making, a Mark-to-Market Election.
Although a U.S. Holder may be eligible to make a Mark-to-Market Election with respect to common shares, no such election may be made with respect to the stock of any Subsidiary PFIC that a U.S. Holder is treated as owning because such stock is not marketable. Hence, the Mark-to-Market Election will not be effective to eliminate the interest charge described above with respect to deemed dispositions of Subsidiary PFIC stock or distributions from a Subsidiary PFIC.
Other PFIC Rules
Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder that had not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of common shares that would otherwise be tax-deferred (e.g., gifts and exchanges pursuant to corporate reorganizations) in the event the Company is a PFIC during such U.S. Holder’s holding period for the relevant shares. However, the specific U.S. federal income tax consequences to a U.S. Holder may vary based on the manner in which common shares are transferred.
Certain additional adverse rules will apply with respect to a U.S. Holder if the Company is a PFIC, regardless of whether such U.S. Holder makes a QEF Election. For example, under Section 1298(b)(6) of the Code, a U.S. Holder that uses common shares as security for a loan will, except as may be provided in Treasury Regulations, be treated as having made a taxable disposition of such common shares.
In any year in which the Company is classified as a PFIC, a U.S. Holder will be required to file an annual report with the IRS containing such information as Treasury Regulations and/or other IRS guidance may require. U.S. Holders should consult their own tax advisors regarding the requirements of filing such information returns under these rules, including the requirement to file an IRS Form 8621.
In addition, a U.S. Holder who acquires common shares from a decedent will not receive a “step up” in tax basis of such common shares to fair market value unless such decedent had a timely and effective QEF Election in place.
Special rules also apply to the amount of foreign tax credit that a U.S. Holder may claim on a distribution from a PFIC.
The PFIC rules are complex, and U.S. Holders should consult their own tax advisors regarding the PFIC rules and how they may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of common shares in the event the Company is a PFIC at any time during such holding period for such common shares.
Additional Considerations
Receipt of Foreign Currency
The amount of any distribution paid in foreign currency to a U.S. Holder in connection with the ownership of common shares, or on the sale, exchange or other taxable disposition of common shares, generally will be equal to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt or, if applicable, the date of settlement if the common shares are traded on an established securities market (regardless of whether such foreign currency is converted into U.S. dollars at that time). If the foreign currency received is not converted into U.S. dollars on the date of receipt, a U.S. Holder will have a basis in the foreign currency equal to its U.S. dollar value on the date of receipt. A U.S. Holder that receives foreign currency and converts such foreign currency into U.S. dollars at a conversion rate other than the rate in effect on the date of receipt may have a foreign currency exchange gain or loss, which generally would be treated as U.S. source ordinary income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method of tax accounting. U.S. Holders should consult their own U.S. tax advisors regarding the U.S. federal income tax consequences of receiving, owning and disposing of foreign currency.
Foreign Tax Credit
Dividends paid on the common shares will be treated as foreign-source income, and generally will be treated as “passive category income” or “general category income” for U.S. foreign tax credit purposes. Any gain or loss recognized on a sale or other disposition of common shares generally will be United States source gain or loss. Certain U.S. Holders that are eligible for the benefits of Convention may elect to treat such gain or loss as Canadian source gain or loss for U.S. foreign tax credit purposes. The Code applies various complex limitations on the amount of foreign taxes that may be claimed as a credit by U.S. taxpayers. In addition, Treasury Regulations that apply to foreign taxes paid or accrued (the “Foreign Tax Credit Regulations”) impose additional requirements for Canadian withholding taxes to be eligible for a foreign tax credit, and there can be no assurance that those requirements will be satisfied. The Treasury Department has recently released guidance temporarily pausing the application of certain of the Foreign Tax Credit Regulations.
Subject to the PFIC rules and the Foreign Tax Credit Regulations, each as discussed above, a U.S. Holder that pays (whether directly or through withholding) Canadian income tax with respect to dividends paid on the common shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such Canadian income tax. Generally, a credit will reduce a U.S. Holder's U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder's income that is subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year. The foreign tax credit rules are complex and involve the application of rules that depend on a U.S. Holder’s particular circumstances. Accordingly, each U.S. Holder should consult its own U.S. tax advisor regarding the foreign tax credit rules.
Information Reporting, Backup Withholding Tax
Under U.S. federal income tax law and Treasury Regulations, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation. For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals who are U.S. Holders that hold certain specified foreign financial assets in excess of certain threshold amounts. The definition of specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person and any interest in a non-U.S. entity. U.S. Holders may be subject to these reporting requirements unless their common shares are held in an account at certain financial institutions. Penalties for failure to file certain of these information returns are substantial. U.S. Holders should consult their own tax advisors regarding the requirements of filing information returns, including the requirement to file an IRS Form 8938.
Payments made within the U.S. or by a U.S. payor or U.S. middleman, of dividends on, and proceeds arising from the sale or other taxable disposition of common shares will generally be subject to information reporting and backup withholding tax if a U.S. Holder (a) fails to furnish such U.S. Holder’s correct U.S. taxpayer identification number (generally on IRS Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding tax. However, certain exempt persons generally are excluded from these information reporting and backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS in a timely manner.
The discussion of reporting requirements set forth above is not intended to constitute a complete description of all reporting requirements that may apply to a U.S. Holder. A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess a tax, and under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting requirement. Each U.S. Holder should consult its own tax advisors regarding the information reporting and backup withholding rules.
THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE ACQUISITION, OWNERSHIP AND DISPOSITION OF COMMON SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
Unregistered Sales of Equity Securities
None.
Repurchase of Securities
None.
|
[Reserved] |
Not applicable.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations (U.S. dollars in thousands, except per share amounts) |
The following Management’s Discussion and Analysis (“MD&A”) provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of NOVAGOLD RESOURCES INC., incorporated in British Columbia, Canada, and its subsidiaries (collectively, “NOVAGOLD,” the “Company,” “our” and “we”). This item should be read in conjunction with our Consolidated Financial Statements and the notes thereto included in this annual report.
The following MD&A generally discusses our consolidated financial condition and results of operations for 2024 and year-over-year comparisons between 2024 and 2023. Discussions of our consolidated financial condition and results of operations for 2023 and year-over-year comparisons between 2023 and 2022 are included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2023, filed with the Securities and Exchange Commission on January 24, 2024, are incorporated by reference into this MD&A.
Overview
We operate in the gold mining industry, primarily focused on advancing the Donlin Gold project in Alaska. The Donlin Gold project is held by Donlin Gold LLC (“Donlin Gold”), a limited liability company owned equally by wholly-owned subsidiaries of NOVAGOLD and Barrick. We record our interest in the Donlin Gold project as an equity investment, which results in our 50% share of Donlin Gold’s expenses being recorded in the income statement as an operating loss. The investment amount recorded on the balance sheet primarily represents unused funds advanced to Donlin Gold.
Our corporate goals include continuing to advance the Donlin Gold project toward a construction decision; maintaining support for Donlin Gold among the project’s stakeholders; promoting a strong safety, sustainability, and environmental culture; maintaining a favorable reputation of NOVAGOLD; and preserving a healthy balance sheet. Our operations primarily relate to the delivery of project milestones, including the achievement of various technical, environmental, sustainable development, economic and legal objectives, obtaining necessary permits, completion of feasibility studies, preparation of engineering designs and the financing to fund these objectives.
Donlin Gold project
Donlin Gold advanced key activities in 2024 to position the project to update technical work and cost estimates. Principal activities included the substantial completion of metallurgical test work at a pilot plant in Ontario, Canada to confirm proposed optimizations to the flowsheet, field and geochemical data collection to continue updating source characteristics for groundwater 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 twelve months will serve as inputs into updated feasibility work.
The Donlin Gold board must approve an updated feasibility study, construction program and budget before the Donlin Gold project can be developed. The timing of the required engineering work and the Donlin Gold board’s approval of an updated feasibility study, construction program and budget, the receipt of all required governmental permits and approvals, and the availability of financing, commodity price fluctuations, risks related to market events and general economic conditions among other factors, will affect the timing of and whether to develop the Donlin Gold project. Among other reasons, project delays could occur due to public opposition, litigation challenging permit decisions, requests for additional information or analysis, limitations in agency staff resources during regulatory review and permitting, or project changes made by Donlin Gold.
Stakeholder and government engagement
In collaboration with Calista and TKC, Donlin Gold actively engages stakeholders and governments in the Y-K region, Alaska and Washington, D.C. The project’s location on private lands selected under the 1971 Alaska Native Claims Settlement Act is a significant feature, setting it apart from most other mining assets in Alaska and guiding our outreach efforts. Donlin Gold’s enduring partnerships with Calista and TKC are pivotal in facilitating comprehensive outreach throughout the Y-K region.
Our outreach in Alaska, particularly in the Y-K region, and in Washington, D.C., has strengthened community engagement and reinforces the project’s social license. The Company appreciates the diligent contributions of the Donlin Gold team, partners, and stakeholders, and remains dedicated to developing the project to its full potential. In collaboration with Calista and TKC, the mineral and surface rights holders, Donlin Gold LLC has made significant strides in local community and government engagement across the Y-K region, Alaska, and Washington, D.C., including advancing the project’s development and permitting efforts. Over decades, our commitment to engaging with the 62 stakeholder communities in the Y-K region has built meaningful relationships, enhanced investment, and reinforced our social license. This longstanding dedication underscores the approach of the Donlin Gold project and its partners, Calista and TKC, to foster robust relationships with both local communities and governmental entities built on trust, transparency, respect and partnership.
To that end, Donlin Gold led numerous projects and activities in 2024. Calista, TKC, and Donlin Gold hosted public Open Houses in Anchorage, Bethel, and Crooked Creek providing Alaskans and local residents with the opportunity to learn more about the project and to engage in open and transparent discussions. Donlin Gold hosted a project site tour for a group of residents from Crooked Creek and Georgetown which are the project’s closest neighboring villages.
NOVAGOLD remains committed to stakeholder engagement and community development working closely with Tribal communities and Alaska Native Corporations to identify needs and collaboratively develop solutions that enhance and uplift communities, fostering sustainable growth and shared prosperity for future generations. To that end, NOVAGOLD representatives were on the ground in Alaska providing extensive support to the Donlin Gold team in their outreach efforts. Donlin Gold established three additional Shared Values Statements for a total of 18, which formalize Donlin Gold’s ongoing engagement with local communities, reinforce existing long-term relationships, and address specific community needs. In 2024, over 12,000 direct engagements were conducted with key stakeholders.
Donlin Gold, Calista, and TKC held two Subsistence Community Advisory Committee ("SCAC") meetings in 2024, the first in Aniak and second in Anchorage. This committee, which is composed of people from the Y-K region, reflects the ongoing commitment to establishing a structured process for communication, dialogue, problem-solving, and gathering input from the broader community on subsistence matters throughout the life of the project. The SCAC committee provides a forum for sharing information, questions and ideas from the communities in the Y-K region with Donlin Gold, Calista and TKC, as well as bringing information about the project back to their respective communities.
Environment and social investments
Recognizing the importance of ecological stewardship in the Y-K region, since mid-2023, Donlin Gold has intensified efforts with our Alaska Native Corporation partners to monitor, survey and engage in the dialogue on salmon fisheries in the Kuskokwim and Yukon River watersheds. In 2024, Donlin Gold launched a salmon smolt monitoring program on the George River, a tributary of the Kuskokwim River, in partnership with the Native Village of Napaimute to assess smolt health and migration patterns — an initiative that will continue into 2025. Restoration of a portion of the historic Lyman placer site, which included significant stream and pond habitat creation, including aquatic life access and use, was completed in 2024. Aquatic restoration work on a reach of Snow Gulch previously disturbed by historic mining will start in 2025.
In addition, Donlin Gold’s “In It for The Long Haul” Backhaul Program, a long-standing initiative to collect and safely dispose of hazardous household electronic waste, including appliances, from Y-K villages, recycled approximately 140,000 pounds of material in 2024, for an impressive total of approximately 803,000 pounds of hazardous materials removed from the Y-K region since the program began in 2018.
Donlin Gold’s partnership with the Crooked Creek Traditional Council has supported the Summer Youth Employment program, providing local youth with hands-on experience in various work environments while also assisting Elders. The Donlin Gold project continued sponsoring the RurAL CAP Elder Mentor Program, which connects youth with Elders to foster intergenerational knowledge and support academic engagement and school readiness across the State. Donlin Gold also shipped dictionaries to all school districts in the Y-K region for third graders as part of The Dictionary Project, a national effort to promote literacy and creative thinkers, a project they have participated in annually since 2012.
Donlin Gold has also reaffirmed its commitment to the Alaska School Activities Association, supporting high school-level athletic, academic, and fine arts programs statewide. Donlin Gold’s ongoing financial contributions highlight our steadfast dedication to enhancing educational and extracurricular opportunities for students throughout Alaska.
Permitting
The preliminary design packages for Dam Safety Certification were submitted to the ADNR in 2024. Comments from the ADNR on the Dam Safety Certification preliminary design packages are anticipated in 2025 with potential issuance of the Certification in 2026/2027.
The Alaska Pollutant Discharge Elimination System permit, which was originally set to expire in 2023, as well as the Waste Management Permit, which was set to expire in January 2024, are administratively extended by the Alaska Department of Environmental Conservation until renewed. The Reclamation Plan, which was also set to expire in 2024, is administratively extended until 2027.
Donlin Gold applied for and received an 18-month extension of the construction deadline on its air quality permit through July 2026.
In September 2022, thirteen tribes sent letters to the Corps and the EPA. The letter to the Corps requests that it consider requiring an EIS on the Donlin Gold project and revoke the Clean Water Act Section 404 permit (the “404 permit”) in light of what the tribes consider “new information” since the final EIS was issued in 2018. Additionally, the EPA letter requested that it initiate a Clean Water Act Section 404(c) veto process for the Donlin Gold project. In early January 2023, Donlin Gold and Calista both submitted responses to the Corps on why the requests to prepare a supplemental EIS or revoke the 404 permit should not be granted. In January 2023, Donlin Gold also provided a response to the EPA describing why the agency should not initiate a 404(c) process. To date, neither the Corps nor EPA has responded to the tribes’ letters.
Litigation
On June 28, 2021, Earthjustice representing Orutsararmiut Native Council (“ONC”) filed an appeal of the ADEC Commissioner’s decision upholding the ADEC’s Clean Water Act Section 401 water quality certification in Alaska Superior Court. In December 2021, at the request of the State of Alaska and Donlin Gold, the Alaska Superior Court suspended the case and remanded it to ADEC to allow for consideration of additional technical materials on mercury and temperature. After an administrative process, the Commissioner reaffirmed ADEC’s issuance of the 401 Certification on August 18, 2023. The suspension of the previously filed Alaska Superior Court case was then lifted and Earthjustice filed its opening brief with the Alaska Superior Court in January 2024. Briefing is complete and oral arguments were held on August 30, 2024. A decision is anticipated from the Alaska Superior Court in 2025.
On September 20, 2021, Earthjustice, representing ONC, Cook Inletkeeper, and three Y-K villages, filed an appeal of the State pipeline ROW authorization in Alaska Superior Court. On April 12, 2023, the Alaska Superior Court affirmed ADNR’s issuance of the ROW lease in the Earthjustice case. Earthjustice appealed the Superior Court’s decision to the Alaska Supreme Court. On May 25, 2022, Earthjustice, representing ONC and five Y-K villages, filed an appeal of ADNR’s issuance of certain water rights permits to Donlin Gold in Alaska Superior Court. After briefing and oral argument, on September 1, 2023, the Alaska Superior Court affirmed ADNR’s decision on Donlin Gold’s water rights permits. On October 2, 2023, Earthjustice appealed the Superior Court’s decision to the Alaska Supreme Court. Earthjustice’s opening brief was submitted to the Alaska Supreme Court on January 4, 2024. Response briefs from the State of Alaska and Donlin Gold were completed in April 2024, and Earthjustice subsequently filed their reply brief in May 2024. Briefing on Earthjustice’s appeal of the Alaska Superior Court affirmation of ADNR’s issuance of the State pipeline ROW lease to the Alaska Supreme Court was completed in February 2024. Oral arguments for both the water rights permits and the State pipeline ROW were held November 12, 2024, and a decision is anticipated in 2025.
On April 5, 2023, Earthjustice representing ONC and six Y-K villages filed suit against the U.S. government in Anchorage Federal District Court (the “Federal District Court”) asking the Federal District Court to invalidate the Donlin Gold Joint Record of Decision, which included the U.S. Army Corps’ of Engineers’ issuance of the 404 permit and the Department of Interior, Bureau of Land Management’s issuance of the ROW lease for the portions of the pipeline on Federal lands. The U.S. Department of Justice (“DOJ”) is defending the issuance of the permits by those Federal agencies. The State of Alaska, Donlin Gold, and Calista were granted intervenor status in this case. The DOJ filed their brief supporting the issuance of the JROD and the sufficiency of the environmental analysis in the Final Environmental Impact Statement on April 2, 2024. Amicus briefs supporting the project were filed by the village of Crooked Creek and the Alaska federal Congressional delegation. Oral arguments were held on June 24, 2024, and the Federal District Court issued a decision on September 30, 2024. The decision rejected the plaintiffs’ arguments on two of the three issues raised in the litigation but agreed with plaintiffs that the federal agencies took too narrow of a view in analyzing the impact of a theoretical release from the TSF. The Federal District Court requested supplemental briefing on the appropriate remedy for addressing this issue. On October 7, 2024, the plaintiffs filed a request for reconsideration on one of the issues on which the Federal District Court had ruled against the plaintiffs and, at DOJ’s request, the Federal District Court suspended the schedule for briefing on the appropriate remedy until after the Federal District Court ruled on plaintiffs’ motion for reconsideration. On December 23, 2024, the Federal District Court denied plaintiffs’ request for reconsideration. The Court reestablished the remedy briefing schedule with initial briefs from all parties now due on January 31, 2025, and response briefs from all parties due on February 14, 2025.
To date, all permits and approvals granted to Donlin Gold by federal and state agencies remain issued and in place while the legal challenges described above proceed. We recognize the importance of preparedness and organization in these matters. With the unwavering support of Donlin Gold and its owners, we will continue to back the state and federal agencies in defending their thorough and diligent permitting processes and are committed to working with the federal agencies and all stakeholders on an appropriate remedy to address the Federal District Court’s decision.
Other remediation
During 2024, $157 in remediation expenditures were incurred for fieldwork at the historic former New Gold House property in Nome, Alaska, including re-seeding. Monitoring, sampling and maintenance work (as needed, based on monitoring results) is planned for the 2025 field season.
Consolidated Financial Results
The details of our Net loss are set forth below:
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
Change |
||||||||||
|
Net loss |
$ | (45,621 | ) | $ | (46,803 | ) | $ | (1,182 | ) | |||
|
Net loss per common share, basic and diluted |
$ | (0.14 | ) | $ | (0.14 | ) | $ | 0.00 | ||||
Net loss decreased by $1,182 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 promissory note, lower interest income on cash and term deposits and other income related to a gain in 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. Donlin Gold expenses were lower with reduced site activity in 2024, compared to fieldwork and geotechnical drilling for the Alaska Dam Safety certificates and hydrological drilling to support mine planning and design in 2023. General and administrative costs increased primarily due to higher professional fees and employee compensation partially offset by lower stock-based compensation expense related to forfeiture of options and performance share units due to the departure of certain former employees.
Professional fees increased due to consulting fees primarily related to ongoing efforts to enhance the value of the Donlin Gold project by evaluating alternatives to further advance the project. Salaries and benefits increased primarily due to hiring of additional staff. Income tax expense relates to passive income taxable in Canada on a portion of interest income earned by U.S. subsidiaries, and for withholding taxes on the sale proceeds received during the first quarter of 2024 related to the 2021 sale of the Company’s interest in the San Roque mineral property in Argentina.
Liquidity and Capital Resources
Liquidity overview
With total cash and term deposits of $101,224, the Company has sufficient working capital available to cover anticipated funding of the Donlin Gold project and corporate general and administrative costs for at least the next two years at current spending levels. Additional capital may be required to complete an updated Donlin Gold feasibility study. Considerable additional capital will be required if a decision to commence engineering and construction is reached by Donlin Gold. Future financing to fund construction is anticipated through debt and equity offerings, project specific debt, and/or other means. Our continued operations are dependent on our ability to obtain additional funding or to generate future cash flows. However, there is no assurance that we will be successful in our efforts to raise additional capital on terms favorable to us, or at all. For further information, see section Item 1A, Risk Factors – Our ability to continue the exploration, permitting, development, and construction of the Donlin Gold project, and to continue as a going concern, will depend in part on our ability to obtain suitable financing.
Our anticipated expenditures in fiscal year 2025 are approximately $37,500, including $21,500 to fund the Donlin Gold project, and $16,000 for corporate general and administrative costs.
Our financial position includes the following as of November 30, 2024:
|
● |
Cash and cash equivalents of $42,224, primarily held at three large Canadian chartered banks with investment grade credit ratings. |
|
● |
Term deposits of $59,000 held at two large Canadian chartered banks with investment grade credit ratings with maturities of less than one year. |
|
● |
Promissory note payable to Barrick of $151,522, including accrued interest at U.S. prime plus 2%, compounded semi-annually. The promissory note and accrued interest are payable from 85% of the Company’s share of revenue from future Donlin Gold project production or from any net proceeds resulting from a reduction of the Company’s interest in Donlin Gold. At the current interest rate of 9.5%, interest on the note in fiscal year 2025 will total approximately $14,942. |
Cash flows
In 2024, cash and cash equivalents decreased by $3,525, mainly to fund our share of Donlin Gold, corporate administrative expenses partially offset by a net reduction of term deposits held.
Spending on operating activities in 2024 increased by $4,856 compared to the prior year primarily due to increased corporate general and administrative expenses, lower interest income on cash and term deposits and higher income tax withholding related to passive income taxable in Canada on a portion of interest income earned by U.S. subsidiaries. Cash provided from investing activities in 2024 increased by $19,683 compared to the prior year primarily due to a net reduction of term deposits held in 2024 and lower Donlin Gold funding requirements. Financing activities reflect $174 of withholding tax on PSUs (as defined below) that vested at 100% during the year and settled with the issuance of net common shares. The PSU awards that matured and vested in December 2024 at 25% of the grant amount were also settled with the issuance of net common shares.
Outstanding share data
As of January 13, 2025, the Company had 334,646,571 common shares issued and outstanding. Also, as of January 13, 2025, the Company had: i) a total of 8,838,001 stock options outstanding; 7,816,967 of those stock options with a weighted-average exercise price of $6.21 and the remaining 1,021,034 with a weighted-average exercise price of C$7.62; and ii) 1,225,100 performance shares units (“PSUs”) and 284,378 deferred share units (“DSUs”) outstanding. Upon exercise of the foregoing convertible securities, the Company would be required to issue a maximum of 10,960,029 common shares.
Related party transactions
As of November 30, 2024, the Company has accounts receivable from Donlin Gold of $212 (November 30, 2023: $203) included in Other current assets for third party study costs contracted for by the Company on behalf of Donlin Gold.
Fourth quarter results
During the fourth quarter of 2024 we incurred a net loss of $10,860 compared to a net loss of $10,421 in the fourth quarter of 2023. The increase in net loss primarily resulted from higher corporate general and administrative expenses, increased interest on the promissory note, lower interest income, partially offset by reduced activity at Donlin Gold.
Critical Accounting Policies
We believe the following accounting policies are critical to our financial statements due to the degree of uncertainty regarding the judgements or assumptions involved and/or the magnitude of the asset, liability, or expense being reported.
Contingent note receivable
A portion of the proceeds on the sale of the Company’s 50% interest in the Galore Creek project to Newmont, included a contingent note for $75,000 receivable upon the approval of a Galore Creek project construction plan by the owner(s). The Company has assigned no value to the contingent note receivable as management determined that approval of Galore Creek project construction was not probable as of the closing of the Galore Creek sale, and management’s assessment did not change as of November 30, 2024. The contingent note will be recognized only when, in management’s judgement, payment is probable, and the amount recorded will not reverse in future periods.
Investment in affiliates
Investments in unconsolidated ventures over which the Company can exercise significant influence, but does not control, are accounted for under the equity method and include the Company’s investment in the Donlin Gold project. Donlin Gold LLC is a non-publicly traded equity investee holding the Donlin Gold project. We identified Donlin Gold as a Variable Interest Entity (“VIE”) as the entity is dependent on funding from its owners. All funding, ownership, voting rights and power to exercise control is shared equally on a 50/50 basis between the owners of the VIE. Therefore, the Company has determined that it is not the primary beneficiary of the VIE.
The Company’s maximum exposure to loss is its investment in Donlin Gold of $2,597 as of November 30, 2024. The Company reviews and evaluates its investment in the Donlin Gold project for other than temporary impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Events that could indicate impairment of an investment in an affiliate include a significant decrease in long-term expected gold price, a significant increase in expected operating or capital costs, unfavorable exploration results or technical studies, a significant decrease in reserves, a loss of significant mineral claims, or a change in the development plan or strategy for the project. Management reviewed potential impairment indicators and determined that there were none as of November 30, 2024.
Share-based compensation
We grant share-based compensation awards in exchange for employee services, including a stock option plan and a PSU plan. The fair value of awards granted under the plans are recognized in the Consolidated Statements of Loss over the related service period. The fair values of stock options are estimated at the time of each grant using a Black‐Scholes option pricing model, and the fair values of PSUs are measured at each grant date using a Monte Carlo valuation model. The fair value estimates may be impacted by certain variables including, but not limited to, stock price volatility, employee stock option exercise behaviors, additional stock option and PSU grants, estimates of forfeitures, the Company’s performance, and the Company’s performance in relation to its peers.
We grant members of the Board DSUs whereby each DSU entitles the directors to receive one common share of the Company or the market value thereof in cash, at the Company’s option, when they retire from service with the Company. The fair value of the DSUs is measured at the date of the grant in amounts ranging from 50% to 100% of directors’ annual retainers at the election of the directors. The fair value is recognized in the Consolidated Statements of Loss over the related service period.
In 2024, we incurred $7,237 in share-based compensation costs, a decrease of $1,494 over the prior year primarily due to the forfeiture of options and performance share units following the departure of the former Chief Financial Officer and other personnel during the year.
During 2024, we had 149,000 PSU awards that vested at 100% and 47,000 DSU awards that vested and were settled with the issuance of common shares. As of November 30, 2024, we had $2,348 of unrecognized compensation cost related to 4,361,486 non-vested stock options expected to be expensed and vest over a period of approximately two years. Also, as of November 30, 2024, we had 1,633,500 non-vested PSU awards outstanding of which 408,400 were fully expensed and vested in December 2024 at 25% of the grant amount, which were subsequently settled with the issuance of common shares. The remaining 1,225,100 non-vested PSU awards with $3,715] of unrecognized compensation cost will be expensed over a period of approximately two years.
|
Quantitative and Qualitative Disclosures about Market Risk |
Our financial instruments are exposed to certain financial risks, including credit and interest rate risks.
Credit risk
Concentration of credit risk exists with respect to our cash and cash equivalents, and term deposit investments. All term deposits are held at two Canadian chartered banks with investment grade credit ratings and have maturities of less than one year.
Interest rate risk
The interest rate on the promissory note owed to Barrick is variable with the U.S. prime rate. Based on the amount owing on the promissory note as of November 30, 2024, and assuming all other variables remain constant, a 1% change in the U.S. prime rate would result in an increase/decrease of approximately $1.5 million in the interest accrued on the promissory note per annum. The promissory note and accrued interest are payable from 85% of the Company’s share of revenue from future mine production or from any net proceeds resulting from a reduction of the Company’s interest in Donlin Gold.
|
Financial Statements and Supplementary Data |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of NOVAGOLD RESOURCES INC.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of NOVAGOLD RESOURCES INC. and its subsidiaries (the Company) as of November 30, 2024 and 2023, and the related consolidated statements of loss and comprehensive loss, equity (deficit) and cash flows for each of the three years in the period ended November 30, 2024, including the related notes (collectively referred to as the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of November 30, 2024, based on criteria established in Internal Control ‒ Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of November 30, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended November 30, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of November 30, 2024, based on criteria established in Internal Control ‒ Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Report of Management on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Recognition of the contingent note receivable
As described in Notes 2 and 4 to the consolidated financial statements, on July 27, 2018, the Company sold its interest in the Galore Creek project (the sale). As part of the consideration for the sale, the Company received a $75 million note (the contingent note receivable), which is contingent upon the approval of a Galore Creek project construction plan by the owner(s). The Company has not assigned a value to the contingent note receivable as management determined that Galore Creek project construction approval was not probable as the closing of the Galore Creek sale or in subsequent periods. Management’s assessment did not change as of November 30, 2024. The contingent note will be recognized when, in management’s judgment, it is probable that the payment will occur, and that the amount recorded will not reverse in future periods.
The principal considerations for our determination that performing procedures relating to the recognition of the contingent note receivable is a critical audit matter are the judgment by management when determining if recognition was required, which in turn led to a high degree of auditor judgment and subjectivity in performing procedures and evaluating management’s assessment of the probability of whether a Galore Creek project construction plan will be approved.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s assessment of the basis for recognizing the contingent note receivable. These procedures also included, among others, evaluating the reasonableness of management’s assessment regarding the probability of the owner(s) of the project approving the Galore Creek project construction plan. This included considering both publicly available information and the latest annual progress report provided by the owners of the project to the Company under the terms of the sale agreement.
/s/
Chartered Professional Accountants
|
January 22, 2025 |
We have served as the Company’s auditor since 1984.
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
|
As of November 30, |
||||||||
|
2024 |
2023 |
|||||||
|
ASSETS |
||||||||
|
Cash and cash equivalents |
$ | $ | ||||||
|
Term deposits |
||||||||
|
Other assets (Note 6) |
||||||||
|
Current assets |
||||||||
|
Investment in Donlin Gold (Note 5) |
||||||||
|
Other assets (Note 6) |
||||||||
|
Total assets |
$ | |||||||
|
LIABILITIES |
||||||||
|
Accounts payable and accrued liabilities |
$ | |||||||
|
Accrued payroll and related benefits |
||||||||
|
Income taxes payable |
||||||||
|
Other liabilities (Note 9) |
||||||||
|
Current liabilities |
||||||||
|
Promissory note (Note 7) |
||||||||
|
Other liabilities (Note 9) |
||||||||
|
Total liabilities |
||||||||
|
Commitments and contingencies (Notes 7, 8 and 9) |
|
|
||||||
|
EQUITY (DEFICIT) |
||||||||
|
Common shares |
||||||||
|
Authorized – |
||||||||
|
Issued and outstanding – |
||||||||
|
Contributed surplus |
||||||||
|
Accumulated deficit |
( |
) | ( |
) | ||||
|
Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
|
Total equity (deficit) |
( |
) | ( |
) | ||||
|
Total liabilities and equity |
$ | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
Approved by the Board of Directors
/s/ Gregory A. Lang /s/ Hume Kyle
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(U.S. dollars in thousands except per share amounts)
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Operating expenses: |
||||||||||||
|
General and administrative (Note 12) |
$ | $ | $ | |||||||||
|
Equity loss - Donlin Gold (Note 5) |
||||||||||||
|
Loss from operations |
( |
) | ( |
) | ( |
) | ||||||
|
Interest expense on promissory note (Note 7) |
( |
) | ( |
) | ( |
) | ||||||
|
Interest and dividend income |
||||||||||||
|
Accretion of notes receivable (Note 4) |
||||||||||||
|
Remediation expense |
( |
) | ( |
) | ( |
) | ||||||
|
Other income (expense), net (Note 14) |
||||||||||||
|
Loss before income taxes |
( |
) | ( |
) | ( |
) | ||||||
|
Income tax recovery (expense) (Note 15) |
( |
) | ( |
) | ||||||||
|
Net loss |
( |
) | ( |
) | ( |
) | ||||||
|
Other comprehensive income (loss): |
||||||||||||
|
Foreign currency translation adjustments |
( |
) | ( |
) | ( |
) | ||||||
| ( |
) | ( |
) | ( |
) | |||||||
|
Comprehensive loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
|
Net loss per common share – basic and diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
|
Weighted average shares outstanding |
||||||||||||
|
Basic and diluted (thousands) |
||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Operating activities: |
||||||||||||
|
Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
|
Adjustments: |
||||||||||||
|
Equity loss – Donlin Gold |
||||||||||||
|
Interest expense on promissory note |
||||||||||||
|
Share-based compensation |
||||||||||||
|
Remediation expense |
||||||||||||
|
Foreign exchange (gain) loss |
( |
) | ( |
) | ||||||||
|
Accretion of notes receivable |
( |
) | ( |
) | ||||||||
|
Change in fair value of marketable securities |
( |
) | ( |
) | ( |
) | ||||||
|
Gain on sale of mineral property |
( |
) | ( |
) | ||||||||
|
Other operating adjustments |
( |
) | ||||||||||
|
Net change in operating assets and liabilities (Note 17) |
( |
) | ( |
) | ||||||||
|
Net cash used in operating activities |
( |
) | ( |
) | ( |
) | ||||||
|
Investing activities: |
||||||||||||
|
Proceeds from term deposits |
||||||||||||
|
Purchases of term deposits |
( |
) | ( |
) | ( |
) | ||||||
|
Funding of Donlin Gold |
( |
) | ( |
) | ( |
) | ||||||
|
Proceeds from notes receivable |
||||||||||||
|
Proceeds from sale of mineral property |
||||||||||||
|
Other |
( |
) | ||||||||||
|
Net cash provided from investing activities |
( |
) | ( |
) | ||||||||
|
Financing activities: |
||||||||||||
|
Withholding tax on share-based compensation |
( |
) | ( |
) | ||||||||
|
Net cash used in financing activities |
( |
) | ( |
) | ||||||||
|
Effect of exchange rate changes on cash and cash equivalents |
( |
) | ( |
) | ( |
) | ||||||
|
Net change in cash and cash equivalents |
( |
) | ( |
) | ( |
) | ||||||
|
Cash and cash equivalents at beginning of year |
||||||||||||
|
Cash and cash equivalents at end of year |
$ | $ | $ | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)
(U.S. dollars and shares in thousands)
|
Common shares |
Contributed |
|
Accumulated |
|
Total equity |
|||||||||||||||||||
|
Shares |
Amount |
|
surplus |
|
deficit |
|
AOCL* |
|
(deficit) |
|||||||||||||||
|
November 30, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
|
Share-based compensation |
— | |||||||||||||||||||||||
|
Performance share units (PSUs) settled in shares |
( |
) | ||||||||||||||||||||||
|
Deferred share units (DSUs) settled in shares |
( |
) | ||||||||||||||||||||||
|
Stock options exercised |
( |
) | ||||||||||||||||||||||
|
Withholding tax on PSUs |
— | ( |
) | ( |
) | |||||||||||||||||||
|
Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||
|
Other comprehensive loss |
— | ( |
) | ( |
) | |||||||||||||||||||
|
November 30, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
|
Share-based compensation |
||||||||||||||||||||||||
|
DSUs settled in shares |
( |
) | ||||||||||||||||||||||
|
Stock options exercised |
( |
) | ||||||||||||||||||||||
|
Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||
|
Other comprehensive income |
— | ( |
) | ( |
) | |||||||||||||||||||
|
November 30, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||
|
Share-based compensation |
— | |||||||||||||||||||||||
|
PSUs settled in shares |
( |
) | ||||||||||||||||||||||
|
DSUs settled in shares |
( |
) | ||||||||||||||||||||||
|
Stock options exercised |
( |
) | ||||||||||||||||||||||
|
Withholding tax on PSUs |
— | ( |
) | ( |
) | |||||||||||||||||||
|
Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||
|
Other comprehensive loss |
— | ( |
) | ( |
) | |||||||||||||||||||
|
November 30, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||
* Accumulated other comprehensive loss
The accompanying notes are an integral part of these consolidated financial statements.
NOTE 1 – THE COMPANY
NOVAGOLD RESOURCES INC. and its affiliates and subsidiaries (collectively, “NOVAGOLD” or the “Company”) operate in the mining industry, focused on the exploration for and development of gold mineral properties. The Company has t realized revenues from its principal asset. The Company’s principal asset is a
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Presentation
The Consolidated Financial Statements include the accounts of NOVAGOLD RESOURCES INC. and its wholly-owned subsidiaries including NOVAGOLD U.S. Holdings Inc., NOVAGOLD Resources Alaska Inc., NOVAGOLD USA, Inc., and AGC Resources Inc. All inter-company transactions and balances are eliminated on consolidation.
The Consolidated Financial Statements are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States (US GAAP). The preparation of the Company’s Consolidated Financial Statements in accordance with US GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of expenses during the reporting period. The Company bases its estimates and assumptions on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from the amounts recorded in these Consolidated Financial Statements.
References in these Consolidated Financial Statements and Notes to $ refer to United States (U.S.) dollars and C$ to Canadian dollars. Dollar amounts are in thousands, except for per share amounts.
Foreign currency
The functional currency for NOVAGOLD RESOURCES INC. is the Canadian dollar and the functional currency for the Company’s U.S. operations is the U.S. dollar. Therefore, gains and losses on U.S. dollar denominated transactions and the effect of translating U.S. dollar denominated balances of Canadian operations are recorded in net loss. The effects of translating the Company’s Canadian operations from the Canadian dollar to the U.S. dollar are recorded in Other comprehensive income (loss).
Cash and cash equivalents
Cash and cash equivalents consist of cash balances and highly liquid investments with original maturities of three months or less, that are cash equivalents. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.
Term deposits
The Company’s term deposits are classified as held to maturity and recorded at cost. Term deposits are held at Chartered Canadian banks with original maturities of 12 months or less. The term deposits are not traded in an active market.
Contingent note receivable
A portion of the proceeds related to the sale of Galore Creek to Newmont includes a $
Investment in affiliates
Investments in unconsolidated ventures over which the Company has the ability to exercise significant influence, but does not control, are accounted for under the equity method and include the Company’s investment in the Donlin Gold project. The Company identified Donlin Gold as a Variable Interest Entity (VIE) as the entity is dependent on funding from its owners. All funding, ownership, voting rights, and power to exercise control is shared equally on a 50/50 basis between the owners of the VIE. Therefore, the Company has determined that it is not the primary beneficiary of the VIE. The Company’s maximum exposure to loss is its equity investment in Donlin Gold.
The equity method is a basis of accounting for investments whereby the investment is initially recorded at cost and the carrying value is adjusted thereafter to include the investor’s pro rata share of post-acquisition earnings or losses of the investee, as computed by the consolidation method. Cash funding increases the carrying value of the investment. Profit distributions received or receivable from an investee reduce the carrying value of the investment.
Donlin Gold is a non-publicly traded equity investee owning an exploration and development project. Therefore, the Company assesses whether there has been a potential triggering event for other-than-temporary impairment by assessing the underlying assets of the equity investee for recoverability and assessing whether there has been a change in the development plan or strategy for the project. If the underlying assets are not recoverable, the Company will record an impairment charge equal to the difference between the carrying amount of the investee and its fair value.
Income taxes
The Company accounts for income taxes using the liability method, recognizing certain temporary differences between the financial reporting basis of the Company’s liabilities and assets and the related income tax basis for such liabilities and assets. This method generates deferred income tax liabilities and assets for the Company, as measured by the statutory tax rates in effect. The Company derives its deferred income tax charge or benefit by recording the change in deferred income tax liabilities and asset balances for the year.
The Company’s deferred income tax assets include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax assets will not be realized.
Share-based payments
The Company records share-based compensation awards exchanged for employee services at fair value on the date of the grant and expenses the awards in the Consolidated Statements of Loss over the requisite employee service period. The fair values of stock options are determined using a Black-Scholes option pricing model. The fair values of PSUs are determined using a Monte Carlo valuation model. The fair values of PSU retention incentive awards are based on their grant date market prices. The Company’s estimates may be impacted by certain variables including, but not limited to, stock price volatility, employee stock option exercise behaviors, additional stock option grants, estimates of forfeitures, the Company’s performance, and the Company’s performance in relation to its peers.
Net income (loss) per common share
Basic and diluted income (loss) per share are presented for Net income (loss). Basic income (loss) per share is computed by dividing Net income (loss) by the weighted-average number of outstanding common shares for the period. Diluted income per share reflects the potential dilution that could occur if securities or other contracts that may require the issuance of common shares in the future were converted. Diluted income per share is computed by increasing the weighted-average number of outstanding common shares to include the additional common shares that would be outstanding after conversion and adjusting net income for changes that would result from the conversion. Only those securities or other contracts that result in a reduction in earnings per share are included in the calculation.
Recently Issued Accounting Pronouncements and Securities and Exchange Commission Rules
Updates to Reportable Segment Disclosures
In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss and interim disclosures of a reportable segment’s profit or loss and assets. The standard is effective for the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2025, and subsequent interim periods, with early adoption permitted. The Company does not expect the adoption to have a material impact on the consolidated financial statements or disclosures.
Updates to Income Tax Disclosure
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09 "Income Taxes (Topic 470): Improvements to Income Tax Disclosures." ASU 2023-09 enhances the transparency and decision usefulness of income tax disclosures through changes to the rate reconciliation and income taxes paid information. The standard is effective beginning with the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 2025, and subsequent interim periods, with early adoption permitted. The Company is currently evaluating the impact of the guidance on the consolidated financial statements.
SEC Final Climate Rule
In March 2024, the SEC issued a final rule that requires registrants to disclose climate-related information in their annual reports and in registration statements. In April 2024, the SEC chose to stay the newly adopted rulemaking pending judicial review of related consolidated Eighth Circuit petitions. If the stay is lifted, certain disclosures may be required in annual reports for the year ending November 30, 2026, filed in 2027. The Company is currently monitoring the outcome of political and legal developments surrounding the new rules and in the meantime is evaluating the impact of the rules on its consolidated financial statements.
NOTE 3 – SEGMENTED INFORMATION
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing the performance of the operating segments, has been identified as the Chief Executive Officer. The Chief Executive Officer considers the business from a geographic perspective considering the performance of our investment in the Donlin Gold project in Alaska, USA (Note 5).
NOTE 4 – NOTES RECEIVABLE
Changes in the Company’s Notes receivable are summarized as follows:
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Balance – beginning of period |
$ | $ | $ | |||||||||
|
Accretion of notes receivable |
||||||||||||
|
Payment received |
( |
) | ||||||||||
|
Balance – end of period |
$ | $ | $ | |||||||||
Galore Creek
On July 27, 2018, the Company sold its interest in the Galore Creek project to a subsidiary of Newmont Corporation (“Newmont”) for cash proceeds of $
No value was assigned to the final $
Minas San Roque
On November 3, 2021, the Company sold its
NOTE 5 – INVESTMENT IN DONLIN GOLD
The Donlin Gold project is owned and operated by Donlin Gold, a limited liability company in which wholly-owned subsidiaries of NOVAGOLD and Barrick each own a
Changes in the Company’s Investment in Donlin Gold are summarized as follows:
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Balance – beginning of period |
$ | $ | $ | |||||||||
|
Share of losses: |
||||||||||||
|
Mineral property expenditures |
( |
) | ( |
) | ( |
) | ||||||
|
Depreciation |
( |
) | ( |
) | ( |
) | ||||||
|
Accretion |
( |
) | ( |
) | ( |
) | ||||||
| ( |
) | ( |
) | ( |
) | |||||||
|
Funding |
||||||||||||
|
Balance – end of period |
$ | $ | $ | |||||||||
The following amounts represent the Company’s 50% share of the assets and liabilities of Donlin Gold. Donlin Gold capitalized the initial contribution of the Donlin Gold property as Non-current assets: Mineral property with a carrying value of $
|
As of November 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Current assets: Cash, prepaid expenses, and other receivables |
$ | $ | ||||||
|
Non-current assets: Right-of-use assets, property and equipment |
||||||||
|
Non-current assets: Mineral property |
||||||||
|
Current liabilities: Accounts payable, accrued liabilities and lease obligations |
( |
) | ( |
) | ||||
|
Non-current liabilities: Reclamation and lease obligations |
( |
) | ( |
) | ||||
|
Net assets |
$ | $ | ||||||
NOTE 6 – OTHER ASSETS
|
As of November 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Other current assets: |
||||||||
|
Accounts receivable |
$ | $ | ||||||
|
Interest receivable |
||||||||
| Receivable from Donlin Gold | ||||||||
|
Prepaid expenses |
||||||||
| $ | $ | |||||||
|
Other long-term assets: |
||||||||
|
Marketable equity securities |
$ | $ | ||||||
|
Office equipment |
||||||||
| $ | $ | |||||||
NOTE 7 – PROMISSORY NOTE
The Company has a promissory note payable to Barrick of $
Changes in the Company’s Promissory Note is summarized as follows:
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Balance – beginning of period |
$ | $ | $ | |||||||||
|
Interest expense on promissory note |
||||||||||||
|
Balance – end of period |
$ | $ | $ | |||||||||
NOTE 8 – LEASES
The Company leases office space under non-cancelable operating leases with original lease terms of years. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases also include renewal options at the election of the Company to renew or extend the lease for an additional years. These optional periods have not been considered in the determination of Right-of-Use (“ROU”) assets or lease liabilities associated with these leases as management did not consider it reasonably certain it would exercise the options. Certain of our leases include payments that vary based on the Company’s level of usage and operations. These variable payments are not included within ROU assets and lease liabilities in the Consolidated Balance Sheets. Additionally, short-term leases, which have an initial term of 12 months or less, are not recorded in the Consolidated Balance Sheets.
Lease expenses are included in General and administrative expense – Office expense on the Consolidated Statements of Loss and include the following components:
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Operating lease cost |
$ | $ | $ | |||||||||
|
Variable lease cost |
||||||||||||
|
Short-term lease cost |
||||||||||||
| $ | $ | $ | ||||||||||
Future minimum lease payments under non-cancellable operating leases as of November 30, 2024, were as follows:
|
2025 |
$ | |||
|
2026 |
||||
|
2027 |
||||
|
2028 |
||||
|
2029 |
||||
|
Thereafter |
||||
|
Total future minimum payments |
||||
|
Less: imputed interest |
( |
) | ||
| $ |
Other information regarding leases includes the following:
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Cash paid for operating leases |
$ | $ | $ | |||||||||
|
Variable lease cost |
||||||||||||
|
Short-term lease cost |
||||||||||||
| $ | $ | $ | ||||||||||
|
ROU assets obtained in exchange for lease liabilities |
$ | $ | $ | |||||||||
|
Weighted average: |
||||||||||||
|
Remaining lease term (years) – operating leases |
||||||||||||
|
Discount rate – operating leases |
% | % | % | |||||||||
NOTE 9 – OTHER LIABILITIES
|
As of November 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Other current liabilities: |
||||||||
|
Remediation liabilities |
$ | $ | ||||||
|
Lease obligations |
||||||||
| $ | $ | |||||||
|
Other long-term liabilities: |
||||||||
|
Remediation liabilities |
$ | $ | ||||||
|
Lease obligations |
||||||||
| $ | $ | |||||||
NOTE 10 – SHARE CAPITAL
Common shares
The Company is authorized to issue
Preferred shares
Pursuant to the Company’s Notice of Articles filed under the Business Corporations Act (British Columbia), the Company is authorized to issue
NOTE 11 – FAIR VALUE ACCOUNTING
Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the significance of the inputs used in making the measurement. The three levels of the fair value hierarchy are as follows:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
The Company’s financial instruments consist of cash and cash equivalents, term deposits, accounts receivable, receivable from Donlin Gold, accounts payable and accrued liabilities, and promissory note. The fair value of the promissory note approximates its carrying value based on accrued interest at U.S. prime plus
NOTE 12 – GENERAL AND ADMINISTRATIVE
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Share-based compensation (Note 13) |
$ | $ | $ | |||||||||
|
Salaries and benefits |
||||||||||||
|
Office expense |
||||||||||||
|
Professional fees |
||||||||||||
|
Corporate communications and regulatory |
||||||||||||
|
Depreciation |
||||||||||||
| $ | $ | $ | ||||||||||
NOTE 13 – SHARE-BASED COMPENSATION
Share incentive awards include a stock option plan for directors, executives, employees and eligible consultants, a PSU plan for executives, employees, and eligible consultants and a DSU plan for non-executive directors of the Company. As of November 30, 2024,
The following table shows the recognized share-based compensation expense (see Note 12 - General and administrative) by award type:
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Stock options |
$ | $ | $ | |||||||||
|
Performance share unit plan |
||||||||||||
|
Deferred share unit plan |
||||||||||||
| $ | $ | $ | ||||||||||
Stock options
Stock options granted under the Company’s share-based incentive plans generally expire years after the date of grant and vest in annual increments beginning on the first anniversary of the date of grant. The value of each option award is estimated at the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the input of subjective assumptions, including the expected term of the option award and share price volatility. The expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination experience. The expected volatility is based on the historical volatility of the Company’s shares at the date of grant over the same length of term. These estimates involve inherent uncertainties and the application of management’s judgment.
A summary of stock options outstanding as of November 30, 2024, and activity during the year ended November 30, 2024 are as follows:
|
Number of stock options |
Weighted- average exercise price per share |
Weighted- average remaining contractual term (years) |
Aggregate intrinsic value |
|||||||||||||
|
November 30, 2023 |
$ | |||||||||||||||
|
Granted |
||||||||||||||||
|
Exercised |
( |
) | ||||||||||||||
|
Forfeited |
( |
) | ||||||||||||||
|
Expired |
( |
) | ||||||||||||||
|
November 30, 2024 |
$ | $ | ||||||||||||||
|
Vested and exercisable as of November 30, 2024 |
$ | $ | ||||||||||||||
The following table summarizes key stock option valuation inputs:
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Weighted-average assumptions used to value stock option awards: |
||||||||||||
|
Expected volatility |
% | % | % | |||||||||
|
Expected term of options (years) |
||||||||||||
|
Expected dividend rate |
||||||||||||
|
Risk-free interest rate |
% | % | % | |||||||||
|
Weighted-average grant-date fair value |
$ | $ | $ | |||||||||
|
Intrinsic value of options exercised |
$ | $ | $ | |||||||||
|
Cash received from options exercised |
$ | $ | $ | |||||||||
As of November 30, 2024, the Company had $
Performance share units
The Company has a PSU plan that provides for the issuance of PSUs in amounts as approved by the Company’s Compensation Committee. Each PSU award entitles the participant to receive common share of the Company at the end of a specified period. The Compensation Committee may adjust the number of common shares for the achievement of certain performance and vesting criteria established at the time of grant. The actual performance against each of these criteria generates a multiplier that varies from
The value of each PSU granted is estimated at the grant date using a Monte Carlo simulation model. The Monte Carlo simulation model requires the input of subjective assumptions, including the share price volatility of the Company’s stock, as well as a comparator index and the correlation of returns between the comparator index and the Company’s shares. Expected volatility is based on the historical volatility of the Company’s shares and the comparator index at the grant date. As new PSUs and stock options are generally granted on the same date, many of the key valuation input assumptions are the same for both share incentive award types.
A summary of PSU awards outstanding as of November 30, 2024, and activity during the year ended November 30, 2024 are as follows:
|
Number of PSU awards |
Weighted- average grant day fair value per award |
Aggregate intrinsic value |
||||||||||
|
November 30, 2023 |
$ | |||||||||||
|
Granted |
||||||||||||
|
Retention awards vested |
( |
) | ||||||||||
|
Expired |
( |
) | ||||||||||
|
Forfeited |
( |
) | ||||||||||
|
Vested/Matured |
( |
) | ||||||||||
|
November 30, 2024 |
$ | $ | ||||||||||
The following table summarizes key PSU valuation inputs:
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Weighted-average assumptions used to value PSU awards: |
||||||||||||
|
Expected volatility of Company shares |
% | % | % | |||||||||
|
Expected volatility of TSX index |
% | % | % | |||||||||
|
Expected correlation between Company shares and TSX |
% | % | % | |||||||||
|
Expected term of PSUs (years) |
||||||||||||
|
Risk-free interest rate |
% | % | % | |||||||||
|
Number of PSUs granted |
||||||||||||
|
Weighted-average grant-date fair value |
$ | $ | $ | |||||||||
As of November 30, 2024, the Company had
The following table summarizes other PSU-related vesting information:
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Performance multiplier on PSUs vested |
% | % | % | |||||||||
|
Common shares issued |
||||||||||||
|
Total fair value of common shares issued |
$ | $ | $ | |||||||||
|
Withholding tax paid on PSUs vested |
$ | $ | $ | |||||||||
Deferred share units
The Company has a DSU plan that provides for the issuance of DSUs in amounts where the directors receive half of their annual retainer in DSUs and have the option to elect to receive all or a portion of the other half of their annual retainer in DSUs. Each DSU entitles the directors to receive one common share or the market value thereof in cash, at the Company’s option, when they retire from the Company. The Company granted
NOTE 14– OTHER INCOME (EXPENSE), NET
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Gain on sale of mineral property |
$ | $ | $ | |||||||||
|
Change in fair market value of marketable securities |
||||||||||||
|
Foreign exchange gain (loss) |
( |
) | ||||||||||
| $ | $ | $ | ||||||||||
NOTE 15 – INCOME TAXES
The Company’s statutory tax rate is
The Company’s Income tax expense (recovery) consisted of:
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Current: |
||||||||||||
|
Canada |
$ | $ | $ | |||||||||
|
Foreign |
( |
) | ||||||||||
| ( |
) | |||||||||||
|
Deferred: |
||||||||||||
|
Canada |
||||||||||||
|
Foreign |
||||||||||||
|
Income tax (recovery) expense |
$ | $ | ( |
) | ||||||||
The Company’s Loss before income taxes consisted of:
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Canada |
$ | $ | ( |
) | $ | ( |
) | |||||
|
Foreign |
( |
) | ( |
) | ( |
) | ||||||
| $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
The Company’s Income tax (recovery) expense differed from the amounts computed by applying the Canadian statutory corporate income tax rates for the following reasons:
|
Years ended November 30, |
||||||||||||||||||||||||
|
2024 |
2023 |
2022 |
||||||||||||||||||||||
|
Loss before income taxes |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||||
|
Federal Income Tax Rate |
% | % | % | |||||||||||||||||||||
|
British Columbia Income Tax Rate |
% | % | % | |||||||||||||||||||||
|
Statutory income tax rate |
% | % | % | |||||||||||||||||||||
|
Combined federal and provincial statutory tax rate |
% | ( |
) | % | ( |
) | % | ( |
) | |||||||||||||||
|
Reconciling items: |
||||||||||||||||||||||||
|
Non-deductible expenditures |
- |
% | - |
% | - |
% | ||||||||||||||||||
|
Foreign accrual property income |
- |
% | - |
% | - |
% | ||||||||||||||||||
|
Effect of different statutory tax rates on earnings or losses of subsidiaries |
% | ( |
) | % | ( |
) | % | ( |
) | |||||||||||||||
|
Withholding taxes |
- |
% | ||||||||||||||||||||||
|
Change in valuation allowance on deferred tax assets |
- |
% | - |
% | - |
% | ||||||||||||||||||
|
Other |
- |
% | % | ( |
) | |||||||||||||||||||
|
Income tax (recovery) expense |
- |
% | $ | - |
% | $ | % | $ | ( |
) | ||||||||||||||
Components of the Company’s deferred income tax assets (liabilities) are as follows:
|
As of November 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Deferred tax income assets: |
||||||||
|
Net operating loss carry forwards |
$ | $ | ||||||
|
Capital loss carry forwards |
||||||||
|
Mineral properties |
||||||||
|
Intangible assets |
||||||||
|
Property and equipment |
||||||||
|
Investment in affiliates |
||||||||
|
Unpaid interest expense |
||||||||
|
Unrealized loss on investments |
||||||||
|
Asset retirement obligation |
||||||||
|
Other |
||||||||
|
Valuation allowances |
( |
) | ( |
) | ||||
|
Deferred income tax liabilities: |
||||||||
|
Notes receivable |
||||||||
|
Capitalized assets and other |
( |
) | ( |
) | ||||
| ( |
) | ( |
) | |||||
|
Net deferred income tax assets (liabilities) |
$ | $ | ||||||
Net operating losses available to offset future taxable income are as follows:
|
Year of Expiry |
U.S. |
Canada |
||||||
|
2025 |
$ | $ | ||||||
|
2026 |
||||||||
|
2027 |
||||||||
|
2028 |
||||||||
|
2029 |
||||||||
|
2030 |
||||||||
|
2031 |
||||||||
|
2032 |
||||||||
|
2033 |
||||||||
|
2034 |
||||||||
|
2035 |
||||||||
|
2036 |
||||||||
|
2037 |
||||||||
|
2038 |
||||||||
|
2039 |
||||||||
|
2040 |
||||||||
|
2041 |
||||||||
|
2042 |
||||||||
| 2043 | ||||||||
|
2044 |
||||||||
|
Indefinite |
||||||||
| $ | $ | |||||||
U.S. net operating losses arising in tax years ending after December 31, 2017 can be carried over to each taxable year following the tax year of loss (indefinitely). The Company has capital loss carry-forwards of approximately $
Future use of U.S. loss carry-forwards is subject to certain limitations under provisions of the Internal Revenue Code including limitations subject to Section 382, which relates to a 50% change in control over a three-year period and are further dependent upon the Company attaining profitable operations. Ownership changes occurred on January 22, 2009 and on December 31, 2012 and the U.S. tax losses related to NOVAGOLD Resources Alaska Inc. and its investment in Donlin Gold for the three-year periods prior to the change in control may be subject to limitation under Section 382. Accordingly, the Company’s ability to use these losses may be limited or they may expire un-utilized. Losses incurred to date may be further limited if a subsequent change in control occurs.
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax asset. Significant pieces of objective negative evidence evaluated include the cumulative loss incurred as of November 30, 2024. Such objective evidence limits the ability to consider other subjective evidence such as management’s projections for future growth. On the basis of this evaluation, as of November 30, 2024, a valuation allowance of $
Uncertain tax position
There were uncertain tax positions as of November 30, 2024, 2023 and 2022. The Company recognizes interest and penalties related to uncertain tax positions, if any, as income tax expense. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheet. As of November 30, 2024, 2023 and 2022, there were no accrued interest and penalties related to uncertain tax positions. The Company is subject to income taxes in Canada and the United States. With few exceptions, the tax years that remain subject to examination as of November 30, 2024, are 2018 to 2024 in Canada and 2019 to 2024 in the United States.
NOTE 16 – RELATED PARTY TRANSACTIONS
The Company provided management and administrative services to Donlin Gold for $
NOTE 17 – NET CHANGE IN OPERATING ASSETS AND LIABILITIES
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Changes in operating assets and liabilities: |
||||||||||||
|
Other assets |
$ | ( |
) | $ | $ | ( |
) | |||||
|
Accounts payable and accrued liabilities |
( |
) | ||||||||||
|
Accrued payroll and related benefits |
( |
) | ( |
) | ||||||||
| Income taxes payable | ||||||||||||
|
Remediation liability |
( |
) | ( |
) | ( |
) | ||||||
| $ | $ | ( |
) | $ | ( |
) | ||||||
NOTE 18 – SUPPLEMENTAL CASH FLOW INFORMATION
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Interest and dividends received |
$ | $ | $ | |||||||||
|
Income taxes refunded |
$ | $ | ||||||||||
|
Income taxes paid |
$ | $ | $ | |||||||||
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None.
|
Controls and Procedures |
An evaluation was performed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K. Based on the foregoing, our management concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
There was no change in our internal control over financial reporting that occurred during the year ended November 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of our assets are made in accordance with management’s authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
Management conducted its evaluation of the effectiveness of our internal controls over financial reporting based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of November 30, 2024.
The effectiveness of our assessment of internal control over financial reporting as of November 30, 2024 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
|
Other Information |
.
|
Directors, Executive Officers and Corporate Governance |
The information in our definitive Proxy Statement, filed pursuant to Regulation 14A promulgated under the Exchange Act for the 2024 Annual Meeting of Shareholders (the “2024 Proxy Statement”) regarding directors and executive officers and Section 16 reporting information appearing under the headings “Election of Directors” “Information Concerning the Board of Directors And Executive Officers” and “Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.” is incorporated by reference in this section. Finally, the information in our 2024 Proxy Statement regarding the Audit Committee under the heading “Statement of Corporate Governance Practices” is incorporated herein by reference.
We have adopted a Code of Business Conduct and Ethics that applies to our Chief Executive Officer, Chief Financial Officer and Corporate Controller or persons performing similar functions. This Code of Business Conduct and Ethics is posted on our website (www.novagold.com). We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on our website, at the address specified above.
Our Code of Business Conduct and Ethics, and charters for each committee of our Board are also available on our website. The Code of Business Conduct and Ethics and charters are also available in print to any shareholder who submits a request to: Corporate Secretary, NOVAGOLD RESOURCES INC., 201 South Main Street, Suite 400, Salt Lake City, UT, USA 84111.
Information on our website is not deemed to be incorporated by reference into this Annual Report on Form 10-K.
|
Executive Compensation |
The information appearing in our 2024 Proxy Statement under the headings “Compensation Committee Interlocks and Insider Participation”, “Compensation Discussion & Analysis”, “Tabular Disclosure of Executive Compensation”, “Non-Executive Director Compensation” and “Compensation Committee Report” is incorporated by reference in this section.
|
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters |
The information appearing in our 2024 Proxy Statement under the heading “Security Ownership Of Certain Beneficial Owners And Management And Related Shareholder Matters” is incorporated herein by reference.
Equity Compensation Plan Information as of November 30, 2024
|
Plan Category |
Number of securities to (a) |
Weighted average (b) |
Number of securities in column (a)) (c) |
|||||||||
|
Equity compensation plans approved by security holders |
||||||||||||
|
Stock Award Plan |
8,849,535 | (1) |
C$7.62/$6.21 (2) |
17,915,839 | (3) | |||||||
|
PSU |
1,633,500 | (4) | n/a | 8,403,515 | (5) | |||||||
|
DSU |
314,714 | (6) | n/a | 3,030,957 | (7) | |||||||
|
Equity compensation plans not approved by security holders |
— | — | — | |||||||||
|
Total |
10,797,749 | 29,350,311 | ||||||||||
|
(1) |
The options issued and outstanding represent approximately 2.65% of the Company’s common shares issued and outstanding as of November 30, 2024. |
|
(2) |
Of the 8,849,535 options issued and outstanding, 1,021,034 have a weighted average exercise price of C$7.62 and 7,828,501 have a weighted average exercise price of $6.21. |
|
(3) |
The number of options available for future issuance is a number equal to eight percent of the issued and outstanding common shares from time to time, less the number of outstanding options. The 17,915,839 options available for future issuance represent 5.35% of the Company’s issued and outstanding common shares as of November 30, 2024. |
|
(4) |
Assumes vesting at 100% of PSU grant amount. PSUs can vest anywhere from 0% to 150% of the PSU grant amount depending upon performance against established quantitative performance criteria. The PSUs issued and outstanding represent approximately 0.49% of the Company’s common shares issued and outstanding as of November 30, 2024. |
|
(5) |
The number of PSUs available for future issuance is a number equal to three percent of the issued and outstanding common shares from time to time, less the number of outstanding PSUs. The 8,403,515 PSUs available for future issuance represent 2.51% of the Company’s issued and outstanding common shares as of November 30, 2024. |
|
(6) |
The DSUs issued and outstanding represent approximately 0.09% of the Company’s common shares issued and outstanding as of November 30, 2024. |
|
(7) |
The number of DSUs available for future issuance is a number equal to one percent of the issued and outstanding common shares from time to time, less the number of outstanding DSUs. The 3,030,957 DSUs available for future issuance represent 0.91% of the Company’s issued and outstanding common shares as of November 30, 2024. |
|
Certain Relationships and Related Transactions, and Director Independence |
The information appearing in our 2024 Proxy Statement under the headings “Interest Of Informed Persons In Material Transactions”, “Board of Directors” and “Statement of Corporate Governance Practices” is incorporated herein by reference.
|
Principal Accountant Fees and Services |
The information appearing in our 2024 Proxy Statement regarding Audit Fees, Audit Related Fees, Tax Fees, All Other Fees and Audit Committee Pre-Approval Policies and Procedures under the subheading “Appointment of Auditors” is incorporated herein by reference.
|
Exhibits and Financial Statement Schedules |
(a)(1) Financial Statements
|
Page |
|
|
Reports of Independent Registered Public Accounting Firm (PCAOB ID 271) |
|
(a)(2) Financial Statement Schedules
Schedule A – The Financial Statements of Donlin Gold LLC as of November 30, 2024 and 2023 and for the years ended November 30, 2024, 2023 and 2022.
No other financial statement schedules are filed as part of this report because such schedules are not applicable or the required information is shown in the Consolidated Financial Statements or Notes thereto. See section Item 8. Financial Statements and Supplementary Data.
(a)(3) Executive Compensation Plans and Arrangements
Employment Agreement between the Registrant and Gregory A. Lang, dated January 9, 2012, identified in exhibit list below.
Employment Agreement between NOVAGOLD Resources Alaska, Inc. (a wholly-owned subsidiary of the Registrant) and Gregory A. Lang dated January 9, 2012, identified in exhibit list below.
Employment Agreement between NOVAGOLD USA, Inc. and David Ottewell, dated September 10, 2012, identified in exhibit list below.
Employment Agreement between NovaGold USA, Inc. and Richard A. Williams dated January 8, 2013, identified in exhibit list below.
Employment Agreement between NovaGold USA, Inc. and Peter Adamek dated July 25, 2024, identified in exhibit list below.
2004 Stock Award Plan of NOVAGOLD Resources Inc. (as amended) identified in exhibit list below.
NOVAGOLD Resources Inc. Employee Share Purchase Plan identified in exhibit list below.
NOVAGOLD Resources Inc. 2009 Performance Share Unit Plan identified in exhibit list below.
NOVAGOLD Resources Inc. 2009 Non-Employee Directors Deferred Share Unit Plan identified in exhibit list below.
(b) Exhibits
|
Exhibit |
Description |
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
||
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
||
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
||
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
||
|
101 |
The following materials are filed herewith: (i) Inline XBRL Instance, (ii) Inline XBRL Taxonomy Extension Schema, (iii) Inline XBRL Taxonomy Extension Calculation, (iv) XBRL Taxonomy Extension Labels, (v) XBRL Taxonomy Extension Presentation, and (vi) Inline XBRL Taxonomy Extension Definition. |
|
|
104 |
Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
* |
Confidential treatment has been granted for certain portions of this Exhibit pursuant to Rule 24b-2 of the Exchange Act, which portions have been omitted and filed separately with the SEC |
|
Form 10-K Summary |
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NOVAGOLD RESOURCES INC. | |||
| By: | /s/ Gregory A. Lang | ||
| Name: Gregory A. Lang | |||
| Title: President and Chief Executive Officer | |||
Date: January 23, 2025
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
|
Signature |
Title |
Date |
|
/s/ Gregory A. Lang |
President, Chief Executive Officer and Director (Principal Executive Officer) |
January 23, 2025 |
|
/s/ Peter Adamek |
Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
January 23, 2025 |
|
/s/ Thomas S. Kaplan |
Board Chair |
January 23, 2025 |
|
/s/ Elaine Dorward-King |
Director |
January 23, 2025 |
|
/s/ Diane Garrett |
Director |
January 23, 2025 |
|
/s/ Hume Kyle |
Director |
January 23, 2025 |
|
/s/ Kalidas Madhavpeddi |
Director |
January 23, 2025 |
|
/s/ Kevin McArthur |
Director |
January 23, 2025 |
|
/s/ Daniel Muñiz Quintanilla |
Director |
January 23, 2025 |
|
/s/ Ethan Schutt |
Director |
January 23, 2025 |
|
/s/ Dawn Whittaker |
Director |
January 23, 2025 |
Item 15.(a)(2) Schedule A
Report of Independent Registered Public Accounting Firm
To the Board of Directors of Donlin Gold LLC
Opinion
We have audited the accompanying financial statements of Donlin Gold LLC (the “Company”), which comprise the balance sheets as of November 30, 2024 and November 30, 2023, and the related statements of loss and comprehensive loss, equity, and cash flows for each of the three years in the period ended November 30, 2024, including the related notes (collectively referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2024 and November 30, 2023, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (“US GAAS”). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date the financial statements are available to be issued.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with US GAAS, we:
|
● |
Exercise professional judgment and maintain professional skepticism throughout the audit. |
|
● |
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. |
|
● |
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed. |
|
● |
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. |
|
● |
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
/s/ PricewaterhouseCoopers LLP
Vancouver, Canada
January 21, 2025
DONLIN GOLD LLC
BALANCE SHEETS
(U.S. dollars in thousands)
|
At November 30, |
||||||||
|
2024 |
2023 |
|||||||
|
ASSETS |
||||||||
|
Cash |
$ | 6,590 | $ | 5,907 | ||||
|
Inventory |
190 | 244 | ||||||
|
Accounts receivable |
417 | 285 | ||||||
|
Prepaid expenses |
293 | 385 | ||||||
|
Current assets |
7,490 | 6,821 | ||||||
|
Plant and equipment (note 4) |
1,932 | 2,910 | ||||||
|
Mineral property (note 5) |
65,308 | 65,230 | ||||||
|
Total assets |
$ | 74,730 | $ | 74,961 | ||||
|
LIABILITIES |
||||||||
|
Accounts payable and accrued liabilities |
$ | 3,667 | $ | 2,620 | ||||
|
Due to related parties (note 6) |
228 | 716 | ||||||
|
Current liabilities |
3,895 | 3,336 | ||||||
|
Reclamation and remediation (note 7) |
1,640 | 1,482 | ||||||
|
Total liabilities |
5,535 | 4,818 | ||||||
|
Commitments and contingencies (notes 3 and 8) |
||||||||
|
EQUITY |
||||||||
|
Partners’ contributions |
597,998 | 573,104 | ||||||
|
Accumulated deficit |
(528,803 | ) | (502,961 | ) | ||||
|
Total equity |
69,195 | 70,143 | ||||||
|
Total liabilities and equity |
$ | 74,730 | $ | 74,961 | ||||
DONLIN GOLD LLC
STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(U.S. dollars in thousands)
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Operating expenses: |
||||||||||||
|
Drilling, studies and engineering |
$ | 7,277 | $ | 20,576 | $ | 37,914 | ||||||
|
General and administrative |
5,993 | 5,498 | 5,976 | |||||||||
|
Permitting and environmental |
4,745 | 3,470 | 4,816 | |||||||||
|
Mineral property leases |
3,421 | 3,234 | 3,605 | |||||||||
|
Community relations |
3,266 | 3,057 | 3,066 | |||||||||
|
Depreciation |
1,060 | 1,143 | 856 | |||||||||
|
Accretion |
80 | 79 | 93 | |||||||||
| 25,842 | 37,057 | 56,326 | ||||||||||
|
Loss from operations |
$ | (25,842 | ) | $ | (37,057 | ) | $ | (56,326 | ) | |||
DONLIN GOLD LLC
STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
|
Years ended November 30, |
||||||||||||
|
2024 |
2023 |
2022 |
||||||||||
|
Operating activities: |
||||||||||||
|
Net loss |
$ | (25,842 | ) | $ | (37,057 | ) | $ | (56,326 | ) | |||
|
Adjustments: |
||||||||||||
|
Depreciation |
1,060 | 1,143 | 856 | |||||||||
|
Other adjustments (Accretion and leases) |
80 | 73 | 75 | |||||||||
|
Changes in operating assets and liabilities: |
||||||||||||
|
Prepaid expenses |
92 | (4 | ) | 51 | ||||||||
|
Inventory |
54 | 88 | (30 | ) | ||||||||
|
Accounts receivable |
(132 | ) | (92 | ) | (51 | ) | ||||||
|
Accounts payable and accrued liabilities |
559 | (1,225 | ) | 1,481 | ||||||||
|
Net cash used in operations |
(24,129 | ) | (37,074 | ) | (53,944 | ) | ||||||
|
Investing activities: |
||||||||||||
|
Capital expenditures - plant and equipment |
(82 | ) | (58 | ) | (2,145 | ) | ||||||
|
Net cash used in investing |
(82 | ) | (58 | ) | (2,145 | ) | ||||||
|
Financing activities: |
||||||||||||
|
Partners’ contributions |
24,894 | 35,504 | 56,870 | |||||||||
|
Net cash provided from financing activities |
24,894 | 35,504 | 56,870 | |||||||||
|
Increase/(Decrease) in cash during the year |
683 | (1,628 | ) | 781 | ||||||||
|
Cash at beginning of year |
5,907 | 7,535 | 6,754 | |||||||||
|
Cash at end of year |
$ | 6,590 | $ | 5,907 | $ | 7,535 | ||||||
DONLIN GOLD LLC
STATEMENTS OF EQUITY
(U.S. dollars in thousands)
|
Barrick contributions |
NOVAGOLD contributions |
Accumulated deficit |
Total equity |
|||||||||||||
|
December 1, 2021 |
$ | 240,365 | $ | 240,365 | $ | (409,578 | ) | $ | 71,152 | |||||||
|
Partners’ cash contribution |
28,435 | 28,435 | — | 56,870 | ||||||||||||
|
Net loss |
— | — | (56,326 | ) | (56,326 | ) | ||||||||||
|
November 30, 2022 |
$ | 268,800 | $ | 268,800 | $ | (465,904 | ) | $ | 71,696 | |||||||
|
Partners’ cash contribution |
17,752 | 17,752 | — | 35,504 | ||||||||||||
|
Net loss |
— | — | (37,057 | ) | (37,057 | ) | ||||||||||
|
November 30, 2023 |
$ | 286,552 | $ | 286,552 | $ | (502,961 | ) | $ | 70,143 | |||||||
|
Partners’ cash contribution |
12,447 | 12,447 | — | 24,894 | ||||||||||||
|
Net loss |
— | — | (25,842 | ) | (25,842 | ) | ||||||||||
|
November 30, 2024 |
$ | 298,999 | $ | 298,999 | $ | (528,803 | ) | $ | 69,195 | |||||||
DONLIN GOLD LLC
NOTES TO FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 1 – NATURE OF OPERATIONS AND ECONOMIC DEPENDANCE
On December 1, 2007, Barrick Gold U.S. Inc. (“Barrick”) and NOVAGOLD Resources Alaska, Inc. (“NOVAGOLD”), formed Donlin Gold LLC, a Delaware limited liability corporation, (the “Company”) to advance the Donlin Gold Project in Alaska. Barrick and NOVAGOLD each own a 50% interest in the Company. Donlin Gold LLC has a board of four directors, with two nominees selected by each company. All significant decisions related to Donlin Gold LLC require the approval of both companies. The Company currently depends on Barrick and NOVAGOLD for all of its funding and has received commitments from its shareholders that they will fund the Company for the next twelve months from the date of the financial statement. These financial statements have been prepared pursuant to Rule 3-09 of SEC Regulation S-X for inclusion in NOVAGOLD Resources Inc.’s 10-K, as the Company is an equity investee of NOVAGOLD Resources Alaska, Inc., a wholly owned subsidiary of NOVAGOLD Resources Inc.
The Company’s Board of Directors approved the Project's Updated Feasibility Study in July 2012. The Company subsequently initiated the permitting process. The U.S. Army Corps of Engineers (the “Corps”) issued the final Environmental Impact Statement (EIS) on April 27, 2018. On August 13, 2018, the Corps and the Bureau of Land Management (BLM) issued a joint Federal Record of Decision (ROD) for the Donlin Gold Project along with their respective federal permit authorizations. Several major State of Alaska authorizations have also been issued, including the approval of the Donlin Gold Reclamation and Closure Plan, Waste Management Permit, Water Discharge Permit, Permit to Appropriate Water, Title 16 Fish Habitat Permits for the mine area and right of way agreements with the State and BLM. At the end of 2024, four appeals remained active in both the State of Alaska and U.S. Federal courts concerning permits granted for the project. These include: the appeal of the Alaska Department of Environmental Conservation (ADEC) Clean Water Act Section 401 Certificate of Reasonable Assurance at the State Superior Court level; appeals regarding the state pipeline right-of-way and the water rights in the State’s Supreme Court; and one appeal concerning the EIS, ROD, and associated federal permits in the U.S. Federal Court.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Presentation
These financial statements are presented in United States dollars ($) and have been prepared in accordance with accounting principles generally accepted in the United States (GAAP).
Use of estimates
The preparation of the Company’s financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting period. The significant area requiring the use of management estimates and assumptions relates to environmental, reclamation and closure obligations. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results will differ from amounts estimated in these financial statements.
Plant and equipment
On initial recognition, plant and equipment are recorded at cost subject to a ten-thousand-dollar threshold for capitalization. Plant and equipment are subsequently measured at cost less accumulated depreciation. Depreciation is recorded over the estimated useful life of the assets at the following annual rates:
Computer equipment – 5 years straight-line;
Computer software – 5 years straight-line;
Furniture and equipment – 5 years straight-line; and
Leasehold improvements – straight-line over the lease term.
Depreciation methods, useful lives and residual values are reviewed in each financial year and adjusted if appropriate.
DONLIN GOLD LLC
NOTES TO FINANCIAL STATEMENTS
(U.S. dollars in thousands)
Leases
The Company reviews all contracts and determines if the arrangement represents or contains a lease, at inception. Operating leases would be included in Right of use assets and Lease obligations (current and long-term) in the Balance Sheets. The Company does not have any finance leases.
Operating lease ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments. The operating lease ROU asset also includes any upfront lease payments made and excludes lease incentives and initial direct costs incurred. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with a term of 12 months or less are not recorded on the balance sheet. The Company’s lease agreements do not contain any residual value guarantees.
Mineral properties
All direct costs related to the acquisition of mineral property interests are capitalized. Mineral property exploration expenditures are expensed when incurred. When it has been established that a mineral deposit is commercially mineable, an economic analysis has been completed and permits are obtained, the costs subsequently incurred to develop a mine on the property prior to the start of mining operations are capitalized. Capitalized costs will be amortized following commencement of commercial production using the unit of production method over the estimated life of proven and probable reserves.
Asset retirement obligations
The Company records a liability based on the best estimate of costs for site closure and reclamation activities that the Company is legally or contractually required to undertake. The liability is estimated using expected discounted cash flows based on engineering and environmental reports and accreted to full value over time through periodic charges to income. Adjustments to the reclamation obligation arising from changes in estimates are recorded as a component of the mineral property.
Income taxes
The Company is not a taxable entity for income tax purposes. Accordingly, no recognition is given to income taxes for financial reporting purposes. Tax on the net income (loss) of the Company is borne by the owners through the allocation of taxable income (loss). Net income for financial statement purposes may differ significantly from taxable income for the owners as a result of differences between the tax basis and financial reporting basis of assets and liabilities and the taxable income allocation requirements under the shareholders agreement.
Impairment of long-lived assets
Management assesses the possibility of impairment in the carrying value of its long-lived assets whenever events or circumstances indicate that the carrying amounts of the asset or assets group may not be recoverable. Management calculates the estimated undiscounted future net cash flows relating to the asset or assets. When the carrying value of an asset exceeds the related undiscounted cash flows, the asset is written down to its estimated fair value, which is usually determined using discounted future cash flows. Management’s estimates of mineral prices, mineral reserves, foreign exchange rates, production levels and operating, capital and reclamation costs are subject to risk and uncertainties that may affect the determination of the recoverability of the long-lived asset. It is possible that material changes could occur that may adversely affect management’s estimates.
DONLIN GOLD LLC
NOTES TO FINANCIAL STATEMENTS
(U.S. dollars in thousands)
Cash and cash equivalents
Cash and cash equivalents consist of cash held at a single financial institution. The fair value of the Company’s financial assets, which includes cash, approximates their carrying values due to their short-term nature.
Trade payables
The fair value of the Company’s financial liabilities, such as accounts payable and accrued liabilities approximates their carrying values due to their short-term nature.
Due to related parties
The amounts due to Barrick and NOVAGOLD are non-interest bearing, unsecured and are due on demand.
NOTE 3 – LEASES
The Company currently leases office space under a short-term operating lease with a lease term of one year. The lease requires monthly lease payments during that year.
The Company performed evaluations of its contracts and determined its identified leases are operating and short-term leases. No variable leases with non-cancelable terms greater than one month were identified.
Operating lease expenses are included on the Statements of Loss in General and administrative expense and Mineral property leases and include the following components for the year ended November 30, 2024:
|
At November 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Operating lease cost |
— | 75 | ||||||
|
Variable lease cost |
— | — | ||||||
|
Short-term lease cost |
944 | 671 | ||||||
| $ | 944 | $ | 746 | |||||
There are no future minimum lease payments under non-cancellable operating leases as of November 30, 2024.
Other information regarding leases for the year ended November 30, 2024, includes the following:
|
At November 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Cash paid for operating leases |
$ | — | $ | 87 | ||||
|
Right-of-use assets obtained in exchange for lease liabilities |
$ | — | $ | — |
|
|||
NOTE 4 – PLANT AND EQUIPMENT
|
At November 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Plant and equipment |
$ | 8,378 | $ | 8,296 | ||||
|
Accumulated depreciation |
(6,446 | ) | (5,386 | ) | ||||
| $ | 1,932 | $ | 2,910 | |||||
DONLIN GOLD LLC
NOTES TO FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 5 – MINERAL PROPERTY
|
At November 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Acquisition cost |
64,000 | 64,000 | ||||||
|
Asset retirement cost |
1,308 | 1,230 | ||||||
| $ | 65,308 | $ | 65,230 | |||||
The Donlin Gold Project is located in the Kuskokwim region of southwestern Alaska on private, Alaska Native-owned mineral and surface land and Alaska state mining claims. The property is under lease for subsurface mineral rights from Calista Corporation and surface land rights from The Kuskokwim Corporation, two Alaska Native corporations. The mineral property was jointly owned by Barrick and NOVAGOLD through an unincorporated joint venture prior to the formation of the Company. Upon formation of the Company, the mineral property contributed was recorded based on the predecessor accounting values of Barrick and NOVAGOLD. As such, mineral property includes the historic acquisition cost as the partners’ initial contribution to the Company.
NOTE 6 – RELATED PARTY TRANSACTIONS
The Company received management, administrative services, and third party contracted services on behalf of the Company from Barrick for $452 in 2024, $332 in 2023, and $1,288 in 2022, and received from NOVAGOLD third party contracted services on behalf of the Company for $815 in 2024, $923 in 2023, and $681 in 2022. Both Barrick and NOVAGOLD amounts are included in General and Administrative, and drilling, studies and engineering expense.
The Company has accounts payable to Barrick at November 30, 2024 of $84 (2023: $474) for reimbursement of management, administrative services, and third party contracted services on behalf of the Company and to NOVAGOLD of $144 (2023: $243) for reimbursement of third party contracted services on behalf of the Company.
NOTE 7 – RECLAMATION AND REMEDIATION
Significant reclamation and closure activities include rehabilitation and decommissioning of the camp and drill sites. Although the ultimate amount or timing of reclamation costs cannot be predicted with certainty, the estimated discounted cash flows required to settle the Company’s obligations for work undertaken at the site to date is $1,640.
|
At November 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Reclamation and Remediation |
1,482 | 1,403 | ||||||
|
Changes in estimated costs and timing |
78 | — | ||||||
|
Accretion |
80 | 79 | ||||||
| $ | 1,640 | $ | 1,482 | |||||
During the year, the discounted reclamation cost estimate was accreted resulting in a change in the measurement of the liability of $80 with a revised estimate of timing and amount resulting in an adjustment of $78. The estimated cash flows are assumed to commence in five years from the balance sheet date.
NOTE 8 – MINERAL PROPERTY LEASES
The Company leases certain assets, such as mineral property leases, that are an exception to applying lease accounting under ASC 842. These mineral property leases coincide with the currently projected Donlin Gold mine life, with provisions for a further extension, should production continue beyond that. Future minimum annual mineral property lease payments are $3,567 in 2025, $3,567 in 2026, $3,567 in 2027, $3,567 in 2028, and $3,567 in 2029 totaling $17,835.