Novagold Resources Inc. (NG)

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NovaGold Resources, Inc. (NG)

Bank of America Merrill Lynch Canada Mining Conference Call

September 6, 2012 4:00 pm ET


Thomas S. Kaplan – Chairman


Unidentified Analyst

Moving along, we now go to NovaGold Resources and I think, I see the speaker right there, Dr. Thomas Kaplan, who is Chairman of NovaGold and he is also Chairman and CEO of Electrum Group, which is the – I believe the largest shareholder of NovaGold.

For those of you who don't know, NovaGold owns 50% of the Donlin Gold project, I almost said Creek sorry, the old name, and which is one of the world's largest undeveloped gold prospects and it’s currently moving ahead through permitting, but I’ll pass it on to Thomas.

Thomas S. Kaplan

Thank you. My group, the Electrum Group, has been the largest shareholder of NovaGold, at the end of 2008 the height of the financial crisis up until that time, we haven’t owned a share, but nonetheless NovaGold had an asset that I had always coveted and that was Donlin. The combination of Donlin and Galore Creek to us represented a unique opportunity to be able to acquire that which I think is the most important aspect going forward in the bull market, which is the scarcity value and the leverage that comes from great assets in jurisdictions where you will be allowed to keep the fruits of that leverage.

Let's start with Donlin itself. In our view, when you take into account the various aspects that go into making a great mine, Donlin has all of them and is indeed arguably the most important gold development project in the world today. In terms of size, 5 million ounces in all resources, 39 of which are proven and probable, but we believe that that's only a fraction of what still exist, the exploration potential along the 7 kilometers is excellent and our target is indeed to double the resources.

At 2.25 grams this is an extraordinarily high-grade. You’d really have to go to the Congo in order to be able to get it. The production profile is such that this will be one of only six mines in the world that produces over 1 million ounces a year and indeed when it goes into production at 1.5 million ounces it will be the largest single gold producing mine in the world.

Most importantly and this I do believe is going to become the existential factor going forward for investors, it’s in a jurisdiction that is safe. It's in a place that when an institutional investors says why they want to invest in the gold space, they’re going to be able to find comfort in the fact that they are not going to wake up in the morning and find out that they’ve been the subject of nationalization, accrue or other forms of sequestration.

In that respect, when you combine all of the attributes of size, grade, production profile, exploration potential, as well as jurisdictional safety, we believe that Donlin is unique. Certainly, in terms of size, it is the largest known gold project in development today, as I said at 45 million ounces and growing. It is also in term of the grade, higher than anything that you will find indeed other than in the Congo.

The exploration potential as I mentioned, the pit from which the 45 million ounces is drawn is only 3 kilometers, indeed a portion of 3 kilometers of an 8 kilometer identified trend, putting aside the fact that the reserves have doubled over the last five years. What’s very interesting about this is that if you look at the pit and then you look 7 kilometers forward, you are going from 2.25 grams to as high as 4 grams at the Donlin deposit. So the opportunity for this to become 100 million ounces is very clear.

Certainly the scarcity value is already evident. This is one of only 3 million plus producing projects or mines that are in the safe jurisdiction of North America, and there are only six in the entire world. The production at 1.5 million ounces a year, as I said will rival all of the greatest gold mines in the world including Grasberg, Cortez and Yanacocha.

Certainly in terms of the evolving developers, it leagues ahead even at a 1.1 million ounce a year production, throughout the earlier years of 1.5 million can probably be sustained with an expansion.

Very importantly, I'm often asked the question about jurisdictional safety and I would say that we are evangelical about it. Now don't get me wrong, my Group has been one of the largest investors in the emerging markets in gold. We've made money in Congo, Venezuela, Zimbabwe, South Africa until recently we’re the largest landholders in Pakistan. But I can tell you, by the end of this year, 90% of our holdings will be in North America, United States, Canada and Mexico.

It is my conceded opinion that within the next year when brokers are coming to tell you that, you might be interested in seeing companies with world-class assets, the first question that you're going to ask is where in the world are you. Because if you are not in the right place people are not going to talk to you, because they are quite simply not paid enough to make career risks on [doughy] countries and unfortunately it’s no longer just the baddies, Russia or Venezuela, every week, whether it’s Indonesia, or Peru or Ghana, it's a new country which is being added to the list of difficult jurisdictions. We see it in our own business and we’re reflecting that through our positions in companies in North America.

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