NovaGold
Year-End Financial Results
February 22,
2012 - Vancouver, British Columbia - NovaGold Resources Inc. (TSX, NYSE-AMEX:
NG) ("NovaGold” or "the Company”) today announced the results of
its fiscal year ended November 30, 2011 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 ("MDA”) which, together with further details on each of the
Company's projects, including resource estimates, will be available on the
Company's website at http://www.novagold.net/,
on SEDAR and http://www.sedar.com/ and on
EDGAR at http://www.sec.gov/. All amounts are
in Canadian dollars unless otherwise stated.
NovaGold will host a conference call and
webcast
Thursday, February 23 at
8.30 am PST (11.30 am EST)
Webcast: http://www.meetview.com/novagold/ or http://www.novagold.net/
North American callers:
1-866-212-4491
International callers:
1-416-800-1066
President's
message
The fourth quarter represented, on multiple levels, a true turning
point for our company. On November 16, 2011, NovaGold announced major changes
to its leadership and corporate structure. I, Greg Lang, accepted the position
of President and Chief Executive Officer of NovaGold effective January 2012.
Having come to the Company directly from my position as the President of
Barrick Gold North America, I had the privilege of being responsible for
Barrick Gold's nine operations in the United States, Canada and the Dominican
Republic. My responsibilities included representing Barrick's interest in the
Donlin Gold project, which is equally owned by wholly-owned subsidiaries of
NovaGold and Barrick. As such, I was intimately familiar with all aspects of
the Donlin project and what I believe to be its uniquely attractive attributes.
The prospect of being able to lead NovaGold into the ranks of North America's
most important gold producers represented an extremely compelling opportunity
for me personally, in as much as the Donlin project represents an extremely
compelling opportunity for all of our shareholders to gain a direct exposure
to, and leverage from, what is in my opinion the most important and exciting
gold development project in the world today.
Having
decided to focus NovaGold as a pure play on its flagship Donlin Gold project,
the Board announced two further decisions on November 16, 2011 which underlined
a clear vision for unlocking the value of the Company's significant
copper-dominant assets. The first announcement was that NovaGold was embarking
upon a process to sell all or part of its 50% share of
the Galore Creek project, which it is developing with its partner, Teck
Resources. The second decision was to create a newly formed subsidiary,
NovaCopper, whose shares would be distributed 100% to the shareholders of
NovaGold by way of a Plan of Arrangement. To lead this new company, NovaGold's
founder, Rick Van Nieuwenhuyse, has stepped down from his previous position as
President and CEO of NovaGold in order to assume the new position of President
and CEO of NovaCopper Inc.
I believe
both of NovaGold's copper-dominant assets are exceptional. If put in
production, as envisioned in the Pre-Feasibility Study results released on July
27, 2011, Galore would be the largest copper mine in the tier-one jurisdiction
of Canada, as well as one of the lowest cost from an operating cost
perspective. At the same time, the Ambler district in Northwestern Alaska which
is held by NovaCopper hosts one of the richest known volcanogenic massive
sulfide ("VMS”) copper-zinc-lead-gold-silver deposits in the world and
is home to a series of additional deposits which comprise one of the most
exciting group of copper exploration targets located anywhere, an attribute
only accentuated by its North American address. These positive factors are
further enhanced by our having first-rate local partners. On October 20, 2011,
NovaGold signed a cooperative, long-term agreement with NANA Regional
Corporation, Inc. ("NANA”), the owners of the Red Dog mine, on the
development of our respective resources interests in the Ambler mining
district. The agreement ratified the cooperation that will be so valuable in
furthering the successful development of the district's mineral deposits. With
Rick Van Nieuwenhuyse, a proven, award-winning exploration geologist at the
helm of NovaCopper, the prospects look very promising for Ambler. Indeed, on
November 10, 2011, new drill results were produced from the Bornite deposit
which showed multiple significant intersections including perhaps one of the
best copper drill holes in the industry: a mineralized interval of 178 meters
grading 4.0% copper, including a high-grade intersection of 34.7 meters of
12.0% copper [1]. These outstanding results reaffirm our belief that Ambler is
one of the most significant copper districts in the world and that NovaCopper's
(and hence NovaGold's) shareholders can look forward to much additional news
flow in the months and years to come.
I would like
to thank Rick Van Nieuwenhuyse for his significant contributions to NovaGold
over the past 13 years. His identification of the true potential of Donlin was
a remarkable achievement and, on a personal level, as a new Board member of
NovaCopper as well as NovaGold, I look forward to seeing the same exploration
success replicated at Ambler and wish him and all of us the best of good
fortune with this truly exciting new copper investment.
Regarding
Galore Creek itself, NovaGold and our bankers at Royal Bank of Canada and J.P.
Morgan have begun the process of engaging with potential suitors for our
portion of the project. We anticipate that this process will occur through the
2012 calendar year and that, when completed, the proceeds of any sale will be
added to NovaGold's treasury.
These proceeds
will top up an already robust balance sheet. With the recent US$332 million
capital raising, NovaGold is now fully funded through the permitting phase and
indeed to a construction decision on Donlin Gold. This is a strategic advantage
that substantially enhances our view of shareholder value. Having de-risked the
Donlin asset through the successful conclusion of a comprehensive Feasibility
Study that drew on the in-depth technical expertise of both Owners, our strong
balance sheet complements a premier asset base which, when combined with the
safety of our North American address, renders us one of the rare "go-to,
institutional-quality" gold developers. These are not merely aspirations.
The success of our stock offering in January, which was upsized due to
substantial over-subscription by institutional investors in the United States,
Canada and Europe, only reinforced our conviction that we are poised to provide
significant value to our shareholders.
At the Board
level, it was announced that Thomas Kaplan joined the Board of Directors of
NovaGold and succeeded Gerry McConnell to become the new Chairman of the
Company. We thank Gerry for his gracious leadership and fine service to the
Company and look forward to his continued role with us through his participation
on the Boards of both NovaGold and NovaCopper. His successor, Thomas Kaplan, is
widely regarded as one of the natural resource industry's most successful
entrepreneurs and is among the precious metals sector's most-prominent
advocates. Dr. Kaplan's commitment to NovaGold and his expertise in maximizing
shareholder returns will surely provide a much larger stage in terms of
awareness for NovaGold and its investment attributes going forward. I very much
look forward to working closely with him as we advance NovaGold along the value
chain for the benefit of all shareholders.
Subsequent
to these announcements, on December 5, 2011, NovaGold released the results of a
positive conclusion to the Feasibility Study update for Donlin Gold[2]. This study confirmed that if put into production,
Donlin Gold would be among the world's most significant low-operating-cost and
long-lived gold mines. The mine would average 1.5 million ounces of gold per
year in its first five years of operations at an average cash cost of
US$409/oz, and on a life-of-mine basis it would average 1.1 million ounces of
gold per year at an average cash cost of US$585/oz. The proven and probable
mineral reserves are 33.8 million ounces of gold, which are encompassed within a resource base (including measured and indicated resources)
of almost 40 million ounces. This figure does not include additional inferred
resources within the vicinity of the pit.
These are
extraordinary numbers, placing Donlin well within the top 1% of global gold
deposits in terms of size. Nonetheless, what is singular in my professional
experience is that this is not where the ore body will end its life, but where
it will start. We can see that there is excellent exploration upside with the
potential to expand the current open pit resources along strike and at depth;
moreover, there is additional upside beyond this, as reflected by the fact that
the current pit is only part of a three-kilometer portion of a mineralized
corridor that runs for at least eight kilometers. Donlin's mine life, already
measured in decades, is likely to be much greater than now anticipated, if
indeed the production rate is not one day expanded. When one considers that
this is at a consistent grade of 2.2 grams, very high grade for a large-scale open
pit operation, and that it will be a plus-one-million-ounce annual producer,
the merits of Donlin are self-evident. The capital cost, estimated at US$6.7
billion, was meant to be eminently defensible and open to optimizations, such
as turning over key infrastructure items to owner/operators. In this regard, it
reflects a favorable decision to build a natural gas pipeline, always held out
to be an upside case for the project, and a robust US$1.0 billion in
contingencies. Looking at the capital on a unit basis of approximately US$160
per ounce, Donlin compares favorably to other major gold development projects
globally.
Finally, it
should be remembered as we embark upon permitting that Alaska is a highly
attractive jurisdiction if one has a well situated project, which we do. Donlin
is indeed in a remote part of the state, which means we will be bringing
vitally needed infrastructure to people who need it. And there are no
particular red flags environmentally. Not surprisingly, therefore, Donlin has
broad local support. Of major importance, Donlin is on private land already
designated for mining, where the native corporations are stakeholders. These
social factors are naturally a big plus for the project. In sum, the study
confirmed what we can now acknowledge to be the case: that in terms of size,
grade, production rates, and exploration potential, Donlin is in a league of
its own. If one superimposes on top of that the increasingly
"existential" element of jurisdictional safety because of its US
address -- an attribute that is so rare in this era of pronounced asset
scarcity and resource nationalism -- then it becomes clear why we are so
bullish on our future.
These are
indeed exciting times at NovaGold. The assets are excellent and the management
is enthusiastic. With the substantial de-risking of our asset base over the
past year, a healthy balance sheet, and a renewed focus on a unique and pure
gold flagship property at Donlin at a time when we and our shareholders' share
a strongly-held long term view of the both the gold market as well as the
market for scarce great gold assets, we believe that we are exceptionally
well-positioned to continue to build great value for all our stakeholders.
Results
of operations
in
thousands of Canadian dollars,
except for per share amounts
|
Year
ended
November30,
2011
$
|
Year
ended
November 30, 2010
$
|
Asset impairment – power transmission
|
52,668
|
116,370
|
Asset impairment – equipment
|
8,343
|
-
|
Asset retirement obligation
|
20,415
|
-
|
Equity loss
|
21,352
|
20,873
|
Foreign exchange loss (gain)
|
1,111
|
(3,158)
|
Gain on disposal of mineral properties
|
-
|
(1,440)
|
General and administrative expenses
|
4,771
|
3,656
|
Interest and accretion
|
15,025
|
15,187
|
Inventory write down
|
6,933
|
7,537
|
Mineral properties expense
|
39,842
|
12,727
|
Project care and maintenance (Galore
Creek)
|
8,822
|
7,383
|
Project care and maintenance (Rock
Creek)
|
12,471
|
18,405
|
Salaries, severance and payroll taxes
|
10,591
|
6,788
|
Gain on disposal of property, plant and
equipment
|
1,875
|
-
|
Loss for the year after taxes
attributable to the shareholders
|
153,153
|
203,549
|
Basic and diluted loss per share
|
0.65
|
0.95
|
Financial
Results
For the year
ended November 30, 2011, the Company reported a loss
attributable to the shareholder of $153.2 million (or $0.65 basic and diluted
loss per share) compared to a loss of $203.5 million (or $0.95 basic and
diluted loss per share) for the previous year. This variance was mainly due to
the non-cash asset impairment of the Rock Creek project for $116.4 million in
2010 compared to the non-cash asset impairment of the power transmission rights
for $52.7 million and the equipment for $8.3 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. Another factor that contributed to this variance
was the Company's additions in closure cost estimates for the required closure
activities at the Rock Creek project, which the Company recorded an expense of
$20.4 million for the revision of its asset reclamation obligation in 2011,
with no comparable amount in 2010.
Income from
the Company's land and gravel sales, gold royalties and other revenues were
$0.4 million during 2011 compared with $0.6 million in 2010 due to decreased
land sales in Nome, Alaska. Interest income decreased to $0.4 million in 2011
from $0.6 million in 2010 as the result of the decrease in cash holdings during
the year.
Expenses for
the year ended November 30,2011 were $107.9 million compared to $70.3 million
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 $39.6 million
compared with $12.7 million in 2010. The Company also recorded expense of $7.7
million in 2011 compared with $5.0 million in 2010 for stock-based
compensation; the increase is due to higher valuations for the stock option and
performance share units ("PSU”) issued as a result of higher stock
prices. During 2011, the Company granted 1.3 million stock options and 0.2
million PSUs to its employees.
These
increases were offset by the reduction of care and maintenance expenditures at
Rock Creek, as the Company recorded $12.5 million in 2011 compared with $18.4
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 management and treatment systems at Rock Creek. The
Company also recorded $8.8 million of Galore Creek project care and maintenance
expenses in 2011 compared with $7.4 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 November
30, 2011, the Company had cash and cash equivalents of $66.8 million and
working capital of $37.3 million. The 2012 budget for Rock Creek closure is
discussed below.
The Company
is focused on advancing the Donlin Gold project. Donlin Gold LLC has
conditionally approved a 2012 budget of approximately US$37.2 million of which
the Company's 50% share is approximately US$18.7 million. The 2012 work program
includes funds for permitting activities, community development and planning
for future development. Project permitting is expected to commence in the first
half of 2012 following approval by the Donlin Gold LLC Board of Directors.
At the
Ambler project, held by NovaCopper, NovaGold has approved a US$4.0 million
interim budget to support exploration and development activities in advance of
the completion of the proposed Plan of Arrangement in regard to the
distribution of the shares of NovaCopper. Should the Plan of Arrangements not
be completed before the field drilling season commencing in May 2012, further
funding by NovaGold may be required.
At the
Galore Creek project, GCMC has an approved 2012 budget of approximately $35.4
million of which the Company's 50% share is approximately $17.7 million to fund
the 2012 infill drilling program, additional engineering studies and site care
and maintenance costs. The portion of this budget funded by NovaGold is
contingent on the timing and success of its divestment process. The Company has
recently commenced a formal process to investigate opportunities to sell all or
part of its interest in the Galore Creek Partnership.
The Company
has a budget of approximately $30.0 million for completion of closure
activities at Rock Creek and an additional $7.0 million for site care and
maintenance. The majority of Closure activities are expected to take place
during 2012 with certain activities carrying over to 2013. A majority of the
closure activities have been accounted for in the working capital as part of
the current portion of the asset retirement obligation. Subsequent to the year
end, the Company has increased its reclamation bond with the State of Alaska by
US$13.4 million for a total bond of $20.3 million. Funds are expected to be
returned to the Company once closure activities are completed. Also the Company
is considering a corporate general and administrative budget at approximately
$21.9 million in 2012. On February7, 2012, the Company issued by way of a
bought deal equity financing 35,000,000 common shares
at US$9.50 per common shares for net proceeds of approximately US$318 million
after deducting underwriters' fees and issuance expenses.
Scientific
and technical information not directly summarized from the contents of the
technical report was reviewed and approved by Kevin Francis, SME Registered
Member, VP, Resources for NovaGold and a Qualified Person as defined by NI
43-101.
About
NovaGold
NovaGold is
a precious metals company engaged in the exploration and development of mineral
properties primarily in Alaska, U.S.A. and British Columbia, Canada. The
Company is focused on advancing its flagship property, Donlin Gold and
offers superior leverage to gold with one of the largest reserve/resource bases
of any junior or mid-tier gold exploration company. The Company is also
committed to maximizing the value of its non-core assets, including its
interest in the Galore Creek copper-gold-silver project. 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 known 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, through its wholly-owned subsidiary,
NovaCopper Inc., which it plans to spin-out to shareholders, owns a 100%
interest in the high-grade Ambler copper-zinc-gold-silver deposit in northern
Alaska. The Company also owns other earlier-stage exploration properties.
NovaGold trades on the TSX and NYSE-AMEX under the symbol NG.
NovaGold
Contact
Neil MacRae
Director, Investor Relations
Ariadna D.
Peretz
Analyst, Investor Relations
604-669-6227
or 1-866-669-6227
# # #
Cautionary
Note Regarding Forward-Looking Statements
This press
releaseincludes certain "forward-looking information” and
"forward-looking statements” (collectively "forward-looking
statements”) within the meaning of applicable securities legislation,
including 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 and financial performance, the potential spin-out of NovaCopper and
the potential sale of all or part of NovaGold's interest in Galore Creek are
forward-looking statements. 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; intended use of proceeds; 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 Barrick Gold Corporation and Teck Resources
Limited for the continued exploration and development of the Donlin Gold 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,
which could include significant increases in estimated capital and operating
costs; fluctuations in metal prices and currency exchange rates; and other risk
and uncertainties disclosed in NovaGold's Annual Information Form for the
year-ended November 30, 2011, 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, except as required by law.
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 9
"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. Investors are cautioned not to assume that any
part or all of mineral deposits in these categories will ever be converted into
reserves. 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/