October 13, 2011 - Vancouver, British Columbia -
NovaGold Resources Inc. (the "Company�� or
"NovaGold") (NYSE-AMEX, TSX: NG) today announced the results of its
third quarter ended August 31, 2011. 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, on SEDAR at www.sedar.com and on
EDGAR at www.sec.gov. All amounts are in Canadian dollars unless otherwise
stated.
NovaGold will
host a conference call and webcast
Monday, October 17 at 7:30am PDT (10:30am EDT)
Webcast: www.novagold.net
North American callers: 1-866-212-4491
International callers: 1-416-800-1066
President's message
In the third 2011 quarter, NovaGold achieved
significant milestones as the Company advanced all three of its major projects:
the 50%-owned Donlin Gold and Galore Creek projects; and the 100%-owned Ambler
project.
During the third quarter, Donlin Gold LLC (50% owned
by a subsidiary of NovaGold and 50% owned by a subsidiary of Barrick Gold
Corporation) continued to make significant progress in advancing an updated
Feasibility Study, expected to be completed before the end of 2011. The Donlin
Gold Feasibility Study update will incorporate a 315-mile natural gas pipeline
which should reduce power generation costs and serve as a more socially and
environmentally responsible alternative for the project than the original
diesel option. Based on the existing feasibility study, once in production,
Donlin Gold would produce an average of 1.3 million ounces of gold per year
over a 25 year mine life, making it one of the largest North American gold
operations.
The Company advanced its Galore Creek project by
completing a NI 43-101 Prefeasibility Study ("PFS��) technical report. The PFS confirmed the economic viability of Galore
Creek. Prior to the end of the year, further work is being completed on the
project's Enhanced Plan including an assessment of an increased production
profile and potential extension of the mine life as well as a possible
reduction of initial capital cost. The Enhanced Plan will provide the basis for
NovaGold and its partner Teck Resources Limited to consider proceeding to
feasibility study and permitting. If developed on the basis outlined in the
PFS, Galore Creek would become one of the largest and lowest-cost copper
producers in North America based on industry reports.
During the third quarter, two drill rigs were
operating at the Ambler project where we completed 7,100 meters of drilling.
The focus was on infill and geotechnical drilling on the existing Arctic deposit and exploration drilling at the Bornite target. Together with Bornite,
the district represents one of the most significant and prospective high-grade
copper exploration projects in the world. NovaGold is working with NANA
Regional Corporation, an Alaska Native Corporation, to negotiate an agreement
on future development and exploration in the Ambler region. NovaGold and NANA
are working together with the State of Alaska to develop a strategy and funding
mechanism for construction of a road to the Ambler district which would bring
economic development to the Upper Kobuk region and this highly prospective
district.
In the
current environment that is marked by an acute scarcity of significant precious
and base metals projects around the world, coupled with increasing resource
nationalism in emerging countries, NovaGold continues to offer investors
unprecedented access to significant and advanced precious and base metals
projects located in the world's most secure and developed mining jurisdictions.
The Company is well positioned and on track to advance its high quality, North
American assets along the value chain for the benefit of all of its
stakeholders. Results of operations
in thousands
of Canadian dollars,
except for per share amounts
|
Three
months ended
August 31, 2011
$
|
Three
months ended
August 31, 2010
$
|
Nine
months ended
August 31, 2011
$
|
Nine
months ended
August 31, 2010
$
|
Asset impairment
|
|
|
|
|
Impairment - Rock Creek
|
-
|
116,231
|
-
|
116,231
|
Impairment - Power transmission rights
|
-
|
-
|
52,668
|
-
|
Loss
attributable to non-controlling interest
|
-
|
-
|
(13,779)
|
-
|
Future income tax recovery
|
-
|
-
|
(9,722)
|
-
|
Asset reclamation obligation
|
20,572
|
-
|
20,572
|
-
|
Equity loss
|
6,589
|
7,898
|
16,772
|
14,689
|
Foreign exchange (gain) loss
|
(998)
|
134
|
(1,827)
|
(3,043)
|
General and administrative
|
1,254
|
1,086
|
3,628
|
3,225
|
Gain on
disposition of alluvial gold properties
|
-
|
-
|
(16,110)
|
-
|
Interest and accretion
|
4,017
|
3,912
|
11,309
|
11,341
|
Inventory write down
|
6,933
|
7,537
|
6,933
|
7,537
|
Mineral properties expense
|
15,507
|
5,776
|
22,648
|
6,930
|
Project
care and maintenance (Galore Creek)
|
1,258
|
2,539
|
7,776
|
5,270
|
Project
care and maintenance (Rock Creek)
|
3,830
|
3,967
|
8,705
|
14,595
|
Salaries,
severance and payroll taxes
|
2,442
|
1,282
|
6,986
|
5,483
|
Salaries
– stock-based compensation
|
1,295
|
688
|
6,347
|
3,829
|
Loss for the period
|
(56,527)
|
(147,599)
|
(115,054)
|
(182,068)
|
Basic
and diluted loss per share attributable to the shareholders of the Company
|
(0.24)
|
(0.66)
|
(0.49)
|
(0.87)
|
Financial
Results
For the three-month period ended August 31, 2011, the
Company reported a net loss of $56.5 million (or $0.24 basic and diluted loss
per share) compared to a net loss of $147.6 million (or $0.66 basic and diluted
loss per share) for the corresponding period in 2010. This variance was mainly
due to a 2010 non-cash asset impairment charge on the Rock Creek project for
$116.2 million with no comparable amount in 2011. On the three-months ended
August 31, 2011, the Company recorded an asset reclamation obligation
adjustment of $20.6 million to reflect anticipated increased cost estimate for
the closure activities of the Rock Creek project. In addition the Company
recorded an inventory write down of $6.9 million during the three-months ended
August 31, 2011 as a result of the Rock Creek project closure decision.
For the nine-month period ended August 31, 2011, the
Company reported a net loss of $115.1 million (or $0.49 basic and diluted loss
per share) compared to a net loss of $182.1 million (or $0.87 basic and diluted
loss per share) for the corresponding period in 2010. This variance was mainly
due to the non-cash asset impairment of the Rock Creek project for $116.2
million in 2010 compared to the non-cash asset impairment of the power
transmission rights for $52.7 million in 2011, of which $13.8 million was
attributable to non-controlling interest and $9.7 million to future income tax
recovery partially offset by the gain on disposition of alluvial gold
properties of $16.1 million.
Expenses for the three-month period ended August 31,
2011 were $36.8 million compared to $28.2 million for the same period in 2010.
This increase was primarily due to an increased exploration expense of $15.5
million compared to $5.8 million for the same period in 2010 as the result of
an increased level of activity for the Galore Creek prefeasibility study and
exploration work at the Ambler project.
Expenses for the nine-month period ended August 31,
2011 were $86.1 million compared to $65.0 million for the same period in 2010.
This was primarily due to the increased level of activity for the Galore Creek
prefeasibility study and exploration work at the Ambler project which resulted
in the increase of mineral property expenses to $22.6 million compared with
$6.9 million in 2010. The Company also recorded expense of $6.3 million
compared with $3.8 million for stock-based compensation during the same periods
in 2011 and 2010, respectively; the increase is due to higher valuations for
the stock option and performance share units ("PSU��) issued as a result of the higher stock price. During the first nine
months of 2011, the Company granted 1,244,700 stock options and 244,000 PSUs to
employees and directors. These increases were offset by the reduction of care
and maintenance expenditures at Rock Creek, as the Company recorded $8.7
million in the first nine months in 2011 compared with $14.6 million in 2010.
This was due to the decreased level of activity in 2011 compared to 2010, when
the Company was improving the tailings pond infrastructure and water treatment
processes at Rock Creek. The Company also recorded $7.8 million of Galore Creek
project care and maintenance expenses in 2011 compared with $5.3 million in
2010, mainly due to the increased level of activity in 2011 compared to 2010 as
the project progresses by strengthening the existing access areas and upgrading
its environmental program.
Outlook
At August 31, 2011, the Company had cash and cash
equivalents of $91.6 million.
The Donlin Gold project's approved 2011 budget is
US$43.5 million of which US$30.8 million has been spent as at August 31, 2011.
The 2011 work program focuses on completing the feasibility revision to
incorporate the natural gas pipeline and preparing permit applications. During
2011, Donlin Gold has continued to consult with stakeholders and solicit
feedback from local communities and its Alaskan Native partners as well as
State and Federal regulatory agencies. Donlin Gold has budgeted to spend US$8.8
million in the fourthquarter, of which the Company's 50% share is approximately
US$4.4 million, on community engagement, environmental studies and feasibility
revision activities. The feasibility revision is expected to be completed in
the fourth quarter of 2011, at which point Donlin Gold may, subject to approval
by NovaGold and Barrick, proceed to prepare and file permit applications for
the project in the first half of 2012.
At the Galore Creek project, GCMC spent approximately
$23.1 million in the nine month period ended August 31, 2011 on care and
maintenance, community engagement and completing the PFS. Teck was the sole
funding partner until June 22, 2011, when it completed its $373.3 million
earn-in obligation. NovaGold expects to fund $6.7 million in the fourthquarter
at the Galore Creek project for resource and geotechnical drilling and
additional environmental and advanced engineering work to prepare for
integration into the Enhanced Plan and routine care and maintenance activities.
At the Ambler project, NovaGold has budgeted
approximately US$10.0 million for 2011 for exploration and geotechnical
drilling at site and for additional studies to determine the environmental and
engineering aspects of developing the Arctic deposit, with US$7.6 million spent
at the end of the third quarter. The Company continues to work with NANA
Corporation to establish an agreement for collaborative development of the
Ambler region, including district consolidation and infrastructure development
that would benefit both the project and local communities. Management has been
working actively with the State of Alaska in discussions regarding the Ambler
Mining District Transportation Access. The Company expects to spend US$2.9
million in the fourth quarter on exploration activities as well as
environmental and engineering studies.
At the Rock Creek project, the decision was made
during the third quarter to proceed with mine closure for the project. The
Company expects to spend US$3.9 million in the fourth quarter and is working
closely with the State Regulatory authorities and the local community on
obtaining agreement for an approved closure plan. The Company revised the
closure cost estimates for the required closure activities and recorded an
expense for the revision of its asset reclamation obligation of $20.6 million
in the third quarter of 2011 for a total retirement obligation of $27.9
million. Once a closure plan is approved, additional bonding may be required.
The Company has no material off-balance sheet
arrangements.
About
NovaGold
NovaGold is a precious metals company engaged in the
exploration and development of mineral properties located principally in
Alaska, U.S.A. and British Columbia, Canada. The Company is focused on
advancing its two core properties, Donlin Gold and Galore Creek, with the
objective of becoming a low-cost, million-ounce-a-year gold producer, and
offers superior leverage to gold and copper with one of the largest mineral
reserve and mineral resource bases of any junior or mid-tier gold company.
NovaGold has a strong track record of expanding deposits through exploration
success and forging collaborative partnerships, both with local communities and
with major mining companies. The Donlin Gold project in Alaska, one of the
world's largest undeveloped gold deposits, is held by a limited liability company
owned equally by wholly-owned subsidiaries of NovaGold and Barrick Gold
Corporation. The Galore Creek project in British Columbia, a large
copper-gold-silver deposit, is held by a partnership owned equally by
wholly-owned subsidiaries of NovaGold and Teck Resources Limited. NovaGold also
owns a 100% interest in the high-grade Ambler copper-zinc-lead-gold-silver
deposit in northern Alaska and has other earlier-stage exploration properties.
NovaGold trades on the TSX and NYSE-AMEX under the symbol NG. More information
is available at www.novagold.net or by emailing info@novagold.net.
NovaGold Contact
Neil MacRae
Director, Investor Relations
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, statements relating to NovaGold's
future operating or financial performance, are forward-looking statements.
Specifically the information included under President's Message and Outlook in
this news release contain forward-looking information. Forward-looking
statements are frequently, but not always, identified by words such as
"expects��, "anticipates��, "believes��, "intends��, "estimates��, "potential��, "possible��, and similar expressions, or statements that events, conditions, or
results "will��, "may��, "could��, or "should�� occur or be achieved. These forward-looking statements may include
statements regarding perceived merit of properties; exploration results and
budgets; mineral reserves and resource estimates; work programs; capital
expenditures; timelines; strategic plans; completion of transactions; market
prices for precious and base metals; or other statements that are not
statements of fact. 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 Teck Resources and the Tahltan Nation for
development of the Galore Creek property; 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, which could include significant increases in the
capital and operating costs estimated in the prefeasibility study; fluctuations
in metal prices and currency exchange rates; uncertainties and risks regarding
the cost estimates and completion schedule for the proposed access tunnel and
other risk and uncertainties disclosed in NovaGold's Annual Information Form
for the year-ended November 30, 2010, 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 beliefs, opinions,
projections, or other factors, should they change.
Cautionary Note Regarding Reserve and Resource
Estimates
This press release has been prepared in accordance
with the requirements of the securities laws in effect in Canada, which differ
from the requirements of U.S. securities laws. Unless otherwise indicated, all
resource and reserve estimates included in this press release have been
prepared in accordance with National Instrument 43-101 Standards of Disclosure
for Mineral Projects ("NI 43-101��) and the Canadian Institute of Mining, Metallurgy, and Petroleum Definition
Standards on Mineral Resources and Mineral Reserves. NI 43-101 is a rule
developed by the Canadian Securities Administrators which establishes standards
for all public disclosure an issuer makes of scientific and technical
information concerning mineral projects. Canadian standards, including NI
43-101, differ significantly from the requirements of the United States
Securities and Exchange Commission ("SEC��), and resource and reserve information contained herein may not be
comparable to similar information disclosed by U.S. companies. In particular,
and without limiting the generality of the foregoing, the term "resource�� does not equate to the term "reserves��. Under U.S. standards, mineralization may not be classified as a
"reserve�� unless the determination has been made that the mineralization could be
economically and legally produced or extracted at the time the reserve
determination is made. The SEC's disclosure standards normally do not permit
the inclusion of information concerning "measured mineral resources��, "indicated mineral resources�� or "inferred mineral resources�� or other descriptions of the amount of mineralization in mineral
deposits that do not constitute "reserves�� by U.S. standards in documents filed with the SEC. U.S. investors
should also understand that "inferred mineral resources�� have a great amount of uncertainty as to their existence and great
uncertainty as to their economic and legal feasibility. It cannot be assumed
that all or any part of an "inferred mineral resource�� will ever be upgraded to a higher category. Under Canadian rules,
estimated "inferred mineral resources�� may not form the basis of feasibility or pre-feasibility studies except
in rare cases. Investors are cautioned not to assume that all or any part of an
"inferred mineral resource�� exists or is economically or legally mineable. Disclosure of
"contained ounces�� in a resource is
permitted disclosure under Canadian regulations; however, the SEC normally only
permits issuers to report mineralization that does not constitute
"reserves�� by SEC standards as in-place tonnage and grade without reference to
unit measures. The requirements of NI 43-101 for identification of
"reserves�� are also not the same as those of the SEC, and reserves reported by the
Company in compliance with NI 43-101 may not qualify as "reserves�� under SEC standards. Accordingly, information concerning mineral
deposits set forth herein may not be comparable with information made public by
companies that report in accordance with U.S. standards.