NovaGold Year-End Financial Results and Project Update
February 11, 2010 - Vancouver, British Columbia - NovaGold Resources
Inc. (NYSE-AMEX, TSX: NG) today announced the results of
its fiscal year ended November 30, 2009 along with an update on the Company's
project development activities. Details of the Company's financial results are
described in the 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.
NovaGold will host a
conference call and webcast
Monday, February 15 at 12 pm PST (3 pm EST)
Toll-free 1-866-223-7781 or
webcast at www.novagold.net
NovaGold is a
growth-focused precious metals company engaged in the exploration and
development of mineral properties in Alaska, U.S.A. and British Columbia,
Canada. The Company conducts its operations through wholly-owned subsidiaries,
partnerships, limited liability companies and joint ventures. NovaGold's
corporate growth strategy has been to acquire or partner in advanced-stage
properties with an identified resource that has potential for further
expansion. Since 1998, the Company has assembled a portfolio of gold and base
metal properties, with 50% interests in Donlin Creek and Galore Creek, two of
the world's largest gold and copper-gold projects, respectively, 100% of the
Rock Creek gold mine, 100% of the Ambler copper-zinc-gold-silver project and
other exploration-stage properties. The Company is primarily focused on gold
properties, some of which also have significant copper, silver and zinc
resources.
Property Review
Donlin Creek
Donlin Creek is one of the world's largest known undeveloped gold deposits,
with a feasibility study completed and pre-permitting activities underway to
construct a mine estimated to produce more than one million ounces of gold
annually for more than 20 years. Donlin Creek is operated by the Donlin Creek
LLC, a limited liability company that is owned 50% by NovaGold and 50% by
Barrick Gold U.S. Inc. ("Barrick”), a subsidiary of Barrick Gold
Corporation. Located in Alaska, the 27,000 acre property hosts a gold deposit
currently estimated at 29.3 million ounces of proven and probable reserves
averaging 2.4 grams per tonne (g/t) gold, 6.0 million ounces of measured and
indicated resources and an additional 4.0 million ounces of inferred resources.
Life-of-mine production is estimated at an average of 1.25 million ounces of
gold annually, for total recovered gold of 26.2 million ounces. These
production levels would make Donlin Creek one of the world's largest
gold-producing mines. The Donlin Creek LLC continues to review the mine plan in
light of prevailing gold prices. Additional exploration potential remains in
the Donlin Creek district.
During 2009, expenditures
at the Donlin Creek project totaled approximately US$25.3 million, with 50%
contributed by NovaGold. Work focused on geotechnical drilling for the location
of mine facilities, environmental baseline data collection, pre-permitting
community advisory meetings and various optimization studies. For 2010, the
Donlin Creek LLC has approved a budget of approximately US$28 million, with 50%
contributed by NovaGold, which will focus on completing optimization studies,
including the potential to bring a source of natural gas to the project.
NovaGold expects that these studies will be completed by mid-2010, at which
point the Donlin Creek LLC will either file permit applications for the
original project design or, upon unanimous Donlin Creek LLC board approval,
approve a supplemental budget and proceed to revise the feasibility study to
include the natural gas option.
Galore Creek
Galore Creek, a large copper-gold-silver project located in northwestern
British Columbia, is held by a partnership in which NovaGold and Teck each own
a 50% interest. The project is managed by the Galore Creek Mining Corporation
("GCMC”), owned equally by NovaGold and Teck. The 321,800 acre property
holds a large and high-grade undeveloped porphyry-related copper-gold-silver
deposit. A resource estimate for the Galore Creek project totals measured and
indicated resources of 8.9 billion pounds of copper, 7.3 million ounces of gold
and 123 million ounces of silver, with additional inferred resources of 4.0
billion pounds of copper, 4.9 million ounces of gold and 80 million ounces of
silver. Construction was initiated in June 2007 and suspended in November 2007
in light of new studies indicating the possibility of increased capital costs
and a longer construction schedule than originally anticipated. Optimization
studies completed in 2008 and 2009 identified a number of modified approaches
to the project that show the potential for expansion of project throughput, a
shorter construction schedule and relocation of the process facilities along
the project access road to allow for easier construction and future expansion.
Work at the project in 2009
focused primarily on roadwork, establishing a road to Km 48 of the proposed
90-Km road. Given the continued strength of the copper market, GCMC is
considering a more aggressive program in 2010 to advance the project toward a
construction decision. NovaGold plans to release the results of an updated mine
plan in Q2-2010 that will use higher copper and gold prices than previous
studies and an optimized project design.In addition, GCMC expects to prepare a
pre-feasibility study to provide updated capital and operating cost estimates
with completion targeted for the first half of 2011. In addition, the Canadian
Federal Government recently announced plans to support construction of the 287
kV Northwest Transmission Line ("NTL”) in northwestern British Columbia.
If advanced, the NTL will bring a source of stable, renewable power to the
region, which would be good for local communities and also for the many mining
and renewable energy projects in the area, including Galore Creek.
During 2009, expenditures
at the Galore Creek project totaled approximately $13.6 million and the project
received $7.5 million from the sale of equipment. Under the terms of the Galore
Creek Partnership agreement, Teck is funding all costs for the project until it
completes its earn-in obligations, and NovaGold expects to have no near-term
funding obligations for the Galore Creek project. At November 30, 2009, the
Galore Creek Partnership had cash of $4.7 million and Teck had approximately
$25 million remaining in project contributions to earn its 50% interest in the
project. Certain road construction equipment and facilities are being recovered
and sold as the road progresses. The proceeds from the sales directly fund the
project's activities and do not reduce Teck's required contributions.
Rock Creek
NovaGold's Nome Operations comprises three properties: Rock Creek, Big Hurrah
and Nome Gold. The properties are located on the Seward Peninsula in Alaska, an
area with historical gold production and well-maintained roads and
infrastructure. The most advanced property is Rock Creek, which is 90%
constructed and designed to produce approximately 100,000 ounces of gold
annually, based on the existing 0.5 million ounces of probable gold reserves,
1.9 million ounces of measured and indicated resources and 0.3 million ounces
of inferred resources at the three properties. Construction on the Rock Creek
mine commenced in the summer of 2006, but was suspended in November 2008 as a
result of operating and market conditions and the Company's inability to
arrange bank financing at the time. The Company is completing a detailed review
process to evaluate start-up requirements for the Rock Creek project, but does
not currently plan to initiate start-up activities in 2010.
On July 2, 2009, AGC received a Notice of Violation ("NOV”) from
the Alaska Department of Environmental Conservation ("ADEC”). In the
NOV, ADEC alleged 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. On October 6,2009, AGC
entered into a Compliance Order by Consent ("COBC”) with ADEC resolving
the NOV. As a part of the COBC, AGC will treat, inject and apply water at an
increased rate to reduce water levels behind the mine's tailings storage facility
dam. If AGC does not comply with the requirements of the COBC, ADEC may assess
financial penalties; however, no financial penalties have been assessed at this
time. On August 5, 2009, AGC received a Compliance Order from the U.S.
Environmental Protection Agency ("EPA”) containing a Clean Water Act §
308 Information Request. The Information Request directed AGC to submit an
updated Stormwater Pollution Prevention Plan to EPA and ADEC to stabilize storm
water diversion structures at the mine and to provide other information
regarding construction of these features. On August 11, 2009, AGC responded to the Information Request
in writing, and requestedclarification of the request. On October 15, 2009, AGC
provided detailed responses to the request. Through conversations with EPA
regarding this request, AGC has agreed to update its existing Storm Water
Pollution PreventionPlan to include additional details regarding the timing of
construction of storm water measures.
On December 31, 2009, AGC
received a renewed Certificate of Approval to Operate a Dam ("COA”) from
the Alaska Department of Natural Resources ("ADNR”). The COA authorizes
AGC's continued operation of the mine's tailings storage facility dam. The
current term of the renewed COA expires on November 24, 2011. The renewed COA
contains conditions AGC must follow to ensure dam safety including, similar to
the COBC, the requirement to treat, inject and apply water at an increased rate
to reduce water levels behind the mine's tailings storage facility dam. The
renewed COA also requires that AGC notify ADNR of AGC's preliminary, future
intentions concerning the mine site by November 1,2010. The COA terminated an
NOV that had been issued in December 2008.
During 2009, expenditures
at the Rock Creek project totaled approximately $27.7 million. NovaGold worked
diligently in 2009 to improve the project's water management structures and
action plan to ensure the project remains in compliance with all environmental
regulations during the spring freshet, with the objective that the project have
no reportable environmental incidents in 2010.
Ambler
On January 7, 2010,
NovaGold purchased 100% of the Ambler project, which hosts the high-grade
copper-zinc-gold-silver Arctic deposit. Ambler is an exploration-stage property
located in Alaska comprising 90,614 acres of Federal patented and unpatented
mining claims and State of Alaska mining claims, covering a major portion of
the precious-metal-rich Ambler volcanogenic massive sulfide ("VMS”)
belt. A resource estimate for the Arctic deposit totals indicated resources of
2.2 billion pounds of zinc, 1.5 billion pounds of copper, 450,000 ounces of
gold, 32 million ounces of silver and 350 million pounds of lead, with
additional inferred resources of 1.3 billion pounds of zinc, 937 million pounds
of copper, 260,000 ounces of gold, 19 million ounces of silver and 210 million
pounds of lead.
During 2010, NovaGold will
continue its community engagement programs at Ambler and has appointed a
project team to plan exploration activities, advance environmental baseline
studies and conduct engineering and technical studies at the Ambler project,
with the goal of gaining a better understanding of the true size and potential
of the district as well as the continuity and mineability of the other deposits
in the Ambler VMS belt.
Other Properties
NovaGold holds a portfolio of earlier-stage exploration projects that have not
advanced to the resource definition stage. The Company also earns $1 to $3
million annually from the sale of sand, gravel and land and royalties from
placer gold production, largely from its holdings around Nome, Alaska.
Kevin Francis, P.Geo., Vice
President Technical Services and a qualified person as defined by National
Instrument 43-101, has reviewed and accepts responsibility for the technical
information contained within this press release. A complete breakdown of
reserve and resource estimates is attached as an Appendix to this press
release. The reserve/resource table and technical reports for each project are
also available at www.novagold.net.
Results of
operations
in thousands of Canadian dollars,
except for per share amounts
|
Year ended
November 30, 2009
$
|
Year ended
November 30, 2008
$
|
Project care and maintenance (Galore Creek)
|
14,072
|
13,421
|
Project care and maintenance (Rock Creek)
|
25,489
|
-
|
Exploration expense
|
17,916
|
49,593
|
Foreign exchange loss (gain)
|
(15,160)
|
28,699
|
General and administrative expenses
|
4,294
|
4,389
|
Interest and accretion
|
18,470
|
5,821
|
Asset impairment
|
-
|
160,883
|
Suspension cost recovery
|
(648)
|
(36,097)
|
Gain on disposal of investment
|
(125)
|
(47,271)
|
Loss for the year after taxes
|
73,364
|
194,972
|
Basic and diluted loss per share
|
0.42
|
1.84
|
For the year ended November
30, 2009, the Company reported a loss of $73.4 million (or $0.42 basic and
diluted loss per share) compared to a loss of $195.0 million (or $1.84 basic
and diluted loss per share) for the previous year.
In 2008, the Company incurred
an asset impairment charge of $160.9 million, made gains on disposal of
investments totaling $47.3 million and had a project suspension cost recovery
of $36.1million, with no material comparable amounts in 2009.
Other important variances are as follows: (a) the Company's project care
and maintenance charges in 2009 were $39.6 million compared to $13.4 million in
2008, due primarily to having both Rock Creek and Galore Creek on care and
maintenance in 2009, with just Galore Creek in 2008; (b)interest and accretion
expenses for the promissory note, convertible debt and bridge loan in 2009 were
$18.5 million compared with $5.8 million in 2008; (c) exploration costs were
reduced to $17.9 million in 2009 from $49.6 million in 2008, reflecting reduced
activity at Galore Creek and Rock Creek; and (d) a $15.2 million foreign
exchange gain occurred during 2009, compared to a loss of $28.7 million in
2008, due primarily to the effect on the Company's U.S. dollar-denominated
liabilities of the strengthening of the Canadian dollar against the U.S.
dollar.
Income from the Company's land and gravel sales, gold royalties and
other revenues were $1.2 million during 2009 compared with $2.2 million in 2008
due to decreased land sales in Nome, Alaska. Interest income decreased to $0.4
million in 2009 from $2.2 million in 2008 as the result of lower interest
rates.
Expenses for the year ended
November 30, 2009 were $85.8 million compared to $114.0 million in 2008. The
decrease is primarily due to the following:
· Lower exploration
expenditures of $17.9 million (mainly related to Donlin Creek) compared to
$49.6 million in 2008 ($16.3million Galore Creek, $25.3 million Donlin Creek
and $8.0 million Rock Creek).
· The Canadian dollar
strengthened against the U.S. dollar during the year ended November30,2009,
resulting in substantial foreign exchange gain of $15.2 million compared to
$28.7 million of foreign exchange loss in 2008.
· An increase in project
care and maintenance activities in 2009 compared to 2008, as the Company had
two projects on care and maintenance compared with one project in 2008. This
resulted in $39.6 million of care and maintenance in 2009 compared to $13.4
million in 2008.
In 2009, the Company completed the sale of 100% of its interest in five
Alaskan base-metal exploration-stage properties totaling approximately 397,680
acres of Alaska State mining claims, resulting in a $1.6 million gain on
disposal. Also during the year, the disposal of equipment by the Galore Creek
Partnership for net proceeds of $7.5 million resulted in a loss of $9.7
million. In 2008, the
Company incurred an asset impairment charge of $160.9 million with no
comparable amount in 2009.
Outlook
At November 30, 2009, the
Company had cash and cash equivalents of $38.2 million and working capital of
$26.6 million. At November 30, 2008, the Company had cash and cash equivalents
of $12.2 million and a working capital deficiency of $19.2million.
The Company's material
projects are Donlin Creek and Galore Creek. The Company's share of the Donlin
Creek 2010 budget is approximately US$14 million, part of which will be
incurred for permitting activities at the project. The budget for care and
maintenance and optimization studies at the Galore Creek project for 2010 is $8
million; however, under the revised partnership agreement Teck is funding 100%
of these costs and NovaGold is not required to fund its share of project costs
until Teck has completed its financial earn-in at the project. The Rock Creek
project is in care and maintenance with a 2010 budget of approximately
US$17million. The Company has budgeted US$1.5 million for environmental and
engineering studies at its Ambler project.
Based on anticipated but
not committed expenditures on its projects, the Company will require financing
within 12 months to meet its expected ongoing requirements, which include
funding for work at Donlin Creek, general and administrative expenses, and care
and maintenance expenditures at Rock Creek. Under the terms of the revised
partnership agreement with Teck, the Company has no near-term funding
obligations at Galore Creek. The Company also expects to require significant
financing in future years to meet its share of development costs on the Donlin
Creek and Galore Creek projects. The Company intends to fund its plan of
operations from working capital and the proceeds of financings. Future
financings are expected to be obtained through joint ventures, debt financing,
convertible debt, exercise of warrants and options, equity financing,
production-sharing arrangements or other means. However, there is no assurance
that these initiatives will be successful.
About NovaGold
NovaGold is a precious
metals company engaged in the exploration and development of mineral properties
in North America. The Company has a portfolio of mineral properties located in
Alaska, USA, and British Columbia, Canada. The Company's largest projects are
being advanced with major mining companies. The Donlin Creek project is held by
a limited liability company owned equally by NovaGold and Barrick Gold U.S.
Inc. The Galore Creek project is held by a partnership owned equally by
NovaGold and Teck Resources Limited. 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.
# # #
NovaGold Contacts
Don MacDonald
Senior Vice President & CFO
Greg Johnson
Vice President Strategic Development
Rhylin Bailie
Manager, Corporate & 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, plans for and intentions with respect to
the company's use of proceeds from the sale of Securities 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 Resources in the
exploration and development of the Donlin Creek and Galore Creek properties;
uncertainty as to the completion of the purchase of a 100% interest in the
Ambler 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;
fluctuations in metal prices and currency exchange rates; the outcome of
litigation pending against the company; and other risk 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 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 and Metallurgy Classification System. 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.
info@novagold.net Toll
free: 1-866-669-6227 http://www.novagold.net/