NovaGold Second Quarter Financial Results
July 15, 2009 - Vancouver, British Columbia - NovaGold Resources Inc. (NYSE-AMEX,
TSX: NG,) today announced the results of its second quarter ended May 31, 2009.
Details of the Company’s financial results are described in the unaudited
consolidated financial statements and Management’s Discussion and Analysis
which, together with further details on each of the Company’s projects,
including resource estimates, will be available on the Company’s website at
www.novagold.net and on SEDAR at www.sedar.com. All amounts are in Canadian
dollars unless otherwise stated.
Results of Operations
For the three-month period ended May 31, 2009, the Company reported a
net loss of $4.8 million (or $0.03 basic and diluted loss per share) compared
to net loss of $23.2 million (or $0.22 basic and diluted loss per share) for
the corresponding period in 2008. The $18.4 million reduction in losses when
comparing the second quarters of 2009 and 2008 is primarily due to the
following:
- The
Company focused its exploration efforts mainly on the Donlin Creek project
and had $4.4 million of exploration expense compared to $16.9 million
which relates to exploration activities in the Donlin Creek, Galore Creek,
and Rock Creek projects in the same period in 2008.
- A $16.1
foreign exchange gain in the second quarter of 2009 compared to a loss of
$0.7 million in the same period of 2008 due primarily to the effect on the
Company’s US dollar denominated liabilities of the strengthening of the
Canadian dollar against the US dollar.
- The
reduction was offset by a $4.2 million increase in non-cash stock-based compensation
using the Black-Scholes option pricing model compared to 2008.
For the six-month period ended May 31, 2009, the Company reported a net
loss of $33.3 million (or $0.21 basic and diluted loss per share) compared to
net earnings of $1.0 million (or $0.01 basic and diluted earnings per share)
for the corresponding period in 2008. The $31.3 million increase in losses is
primarily due to the following:
- In 2008
there were two significant recoveries with no comparables in 2009: a $16.3
million suspension cost recovery at Galore Creek, net of related non
controlling interest, and a $15.3 million gain on disposal of shares of US
Gold Corporation;
- A $12.4
million interest and accretion expense for the convertible debt and bridge
loan in 2009 with no comparable charge in 2008;
- A $15.5
million charge for project care and maintenance was for the Galore Creek
and Rock Creek projects in 2009 compared with $3.8 million in 2008 for the
Galore Creek project. The increase is due to the inclusion of the Rock
Creek project in care and maintenance since late November 2008; and
- The
increase in expenses was offset by a $11.4
million increase in foreign exchange gain compared to 2008.
Revenues for the three-month period ended May 31, 2009 were $0.4 million
compared to $0.3 million in the corresponding period in 2008. The Company
generates modest revenues from land and gravel sales and gold royalties.
Revenues for the six-month period ended May 31, 2009 were $0.8 million
compared to $2.0 million in the corresponding period in 2008. The decrease was
due to higher revenue from land sales and higher interest income for the six
months in 2008.
Net expenses and other items for the three-month period ended May 31,
2009 were $9.1 million compared to $25.6 million for the same period in 2008. During
the quarter, the Company recorded a foreign exchange gain of $16.1 million
compared to a foreign exchange loss of $0.7 million for the same period in
2008. The gain in 2009 is mainly a result of the strengthening Canadian dollar
against the US dollar during the second quarter of 2009 on US dollar
denominated convertible notes and the Donlin Creek promissory note. The Company
expended $4.4 million on exploration activities during the quarter compared to
$16.9 million for the same period in 2008. The Company also expended $6.9
million on care and maintenance activities at the Rock Creek and Galore Creek
projects during the quarter compared to $3.8 million in 2008. Operations at the
Rock Creek project were suspended in 2008 and placed into care and maintenance
with all costs being expensed as incurred. The Company recorded an expense of
$6.0 million and $1.8 million for stock-based compensation during the same
period in 2009 and 2008, respectively. During the second quarter of 2009, the
Company granted 4,543,750 options to employees, consultants and directors.
Net expenses and other items for the six-month period ended May 31, 2009
were $40.9 million compared to $2.2 million for the same period in 2008. During
the six months, the Company had lower exploration expenditures of $10.8 million
compared to $20.8 million in 2008, and recorded a foreign exchange gain of
$11.6 million compared to a gain of $0.2 million in 2008. The offsets were the
increase in interest and accretion and project care and maintenance, totaling
$27.9 million in the first six months in 2009 compared to $3.8 million in 2008.
The interest and accretion relates to the convertible notes and bridge loan and
the care and maintenance relates to the Rock Creek and Galore Creek projects. A
significant factor to the net gain recorded in 2008 is the $16.3 million
suspension cost recovery at Galore Creek, net of related non-controlling
interest at the Galore Creek project. During the corresponding six months
period of 2008, some of the costs estimated at the November 30, 2007 year end
for suspension at Galore Creek were reversed as the Galore Creek Mining
Corporation (“GCMC”) was able to negotiate a favorable purchase of
contractor’s equipment remaining at the construction site, the costs of which
were capitalized.
For the three-month period ended May 31, 2009 the Company recorded a
future income tax (“FIT”) recovery of $1.2 million, which resulted mainly
from additional losses from exploration expenditures incurred in Canada and the
benefit of an income tax reduction on long-term tax rates in British Columbia.
Outlook
At May 31, 2009, the Company had cash and cash equivalents of $56.1
million and working capital of $48.9 million. At November 30, 2008, the Company
had cash and cash equivalents of $12.2 million and a working capital deficiency
of $20.2 million.
During the six-month period ended May 31, 2009, the Company completed
private placements totaling US$75 million by issuing 57,692,308 Units at a
price of US$1.30 per Unit. Each Unit consisted of one common share and one
common share purchase warrant exercisable into one share of the Company at a
price of US$1.50 prior to the fourth anniversary of the closing date. In
addition, the Company’s US$20 million bridge loan was converted into
15,762,565 shares at a rate of $1.53 per share and 1,615,000 warrants at $1.53
per share were exercised for net proceeds of $2.5 million. The Company also
sold its holdings in Alexco for net proceeds of $3.8 million.
The Company’s remaining share of the 2009 budget to be funded at the
Donlin Creek project is approximately US$7 million, the majority of which is
planned to be used for permitting activities at the project. The Rock Creek
project is in care and maintenance, pending a review of whether to recommence
start-up at the project. The current remaining care and maintenance budget at
Rock Creek for the balance of 2009 is approximately US$7 million. The budget
for care and maintenance and optimization activities at the Galore Creek
project for 2009 is $16 million, however, NovaGold is
not required under its revised agreement with Teck to fund any of those costs.
The Company’s wholly owned subsidiary, Alaska Gold Company (“AGC”)
has entered into a settlement agreement with the U.S. Environmental Protection
Agency (“EPA”) to resolve alleged violations of the Clean Water Act
(“CWA”) at the Rock Creek mine during the period from April 2007 to
September 2008. EPA alleged that during the period between April 2007 and
September 2008, AGC’s stormwater discharges at the Rock Creek mine exceeded
CWA turbidity standards (i.e., cloudiness of water) on several occasions in
streams near the mine. The EPA and AGC settlement agreement resolves this
matter. As a part of the agreement with EPA, AGC has agreed to pay the federal
government US$883,628. Payment of the settlement amount will likely occur in
August 2009.
On July 2, 2009, AGC received a Notice of Violation (“NOV”) from the
Alaska Department of Environmental Conservation (“ADEC”). In the NOV, ADEC
alleges that AGC violated the terms of its Waste Management Permit at the Rock
Creek mine by failing to comply with the water treatment and injection
requirements of the mine’s Temporary Closure Plan. The NOV requires that AGC
submit a plan to ADEC by July 15, 2009, detailing how AGC intends to comply
with the requirements of its Temporary Closure Plan. AGC is currently in
ongoing dialogue with ADEC and intends to meet this deadline. If AGC cannot
comply with the requirements of the Temporary Closure Plan, financial penalties
may be assessed.
The Company does not plan to commence development or construction at its
Donlin Creek and Galore Creek projects in 2009, nor does it currently plan to
recommence the start-up process at the Rock Creek project. However, the Company
will need external financing to develop and construct its properties and to
fund the exploration and development of its other mineral properties in future
years. Sources of external financing may include bank borrowings and future
debt and equity offerings. There can be no assurance that financing will be
available on acceptable terms, or at all. The failure to obtain financing could
have a material adverse effect on the Company’s growth strategy and/or
results of operations and financial condition. The mineral properties that the
Company is likely to develop are expected to require significant capital
expenditures. There can be no assurance that the Company will be able to secure
the financing necessary to retain its rights to, or to begin or sustain
production at, any of its mineral properties.
About NovaGold
NovaGold is a precious metals company engaged in the exploration of
mineral properties in North America. The
Company has a portfolio of mineral properties located in Alaska,
USA, and British
Columbia, Canada.
The Donlin Creek project is held by a limited liability company owned equally
by NovaGold and Barrick Gold U.S. Inc. (Barrick). The Galore Creek project is
held by a partnership owned equally by NovaGold and Teck Resources Limited
(Teck). NovaGold owns a 100% interest in the Rock Creek, Big Hurrah and Nome
Gold deposits in Nome, Alaska. NovaGold has one of the largest
resource bases of any junior or mid-tier level producing gold company, and
trades on the TSX and NYSE-AMEX under the symbol NG. More information is
available online at www.novagold.net or by e-mail at info@novagold.net.
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NovaGold Contacts
Don MacDonald
Senior Vice President & CFO
Greg Johnson
Vice President Strategic Development
604-669-6227 or 1-866-669-6227
Cautionary Note Regarding Forward-Looking Statements
This press release includes certain “forward-looking
statements” within the meaning of the United States Private Securities
Litigation Reform Act of 1995. All statements, other than statements of
historical fact, included herein including, without limitation, plans
for and intentions with respect to the company’s properties, statements
regarding intentions with respect to obligations due for various projects,
strategic alternatives, timing of permitting, construction and production and
other milestones, and NovaGold’s future operating or financial performance
are forward-looking statements. Forward-looking statements involve various
risks and uncertainties. There can be no assurance that such statements will
prove to be accurate, and actual results and future events could differ
materially from those anticipated in such statements. Important factors that
could cause actual results to differ materially from NovaGold’s expectations
include the uncertainties involving the need for additional financing to
explore and develop properties and availability of financing in the debt and
capital markets; uncertainties involved in the interpretation of drilling
results and geological tests and the estimation of reserves and resources; the
need for continued cooperation with Barrick Gold and Teck Cominco in the
exploration and development of the Donlin Creek and Galore Creek properties;
the need for cooperation of government agencies and native groups in the
development and operation of properties; the need to obtain permits and governmental
approvals; risks of construction and mining projects such as accidents,
equipment breakdowns, bad weather, non-compliance with environmental and permit
requirements, unanticipated variation in geological structures, ore grades or
recovery rates; unexpected cost increases; fluctuations in metal prices and
currency exchange rates, and other risks and uncertainties disclosed in
NovaGold’s Annual Information Form for the year ended November 30, 2008,
filed with the Canadian securities regulatory authorities, and NovaGold’s
annual report on Form 40-F filed with the United States Securities and Exchange
Commission and in other NovaGold reports and documents filed with applicable
securities regulatory authorities from time to time. NovaGold’s forward
looking statements reflect the beliefs, opinions and projections on the date
the statements are made. NovaGold assumes no obligation to update the forward
looking statements of management beliefs, opinions, projections, or other
factors should they change.
info@novagold.net
Toll free: 866-669-6227 http://www.novagold.net/