Novagold Resources Inc. (NG)

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NovaGold Resources Inc. (NG)

Q32012 Earnings Call

October 11, 2012 11:00 am ET


Mélanie Hennessey, Vice President, Corporate Communications

Greg Lang - President and Chief Executive Officer

Elaine Sanders - Vice President and Chief Financial Officer


John Bridges, J.P. Morgan



Good day, ladies and gentlemen and welcome to the NovaGold third quarter conference call and webcast. My name is Deanna and I will be the operator for today. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would like to now turn the call over to your host, Ms. Erin O'Toole, Vice President, Corporate Communications. Please proceed.

Mélanie Hennessey

Thank you, Deanna. On today's call we have Greg Lang, NovaGold's President and CEO; and Elaine Sanders, NovaGold's Vice President and CFO. At the end of the formal part of the presentation, we will take questions both by phone and by e-mail.

Before we get started, I would like to remind our listeners that any statements made today by the management team may contain forward-looking statements. Such statements include projections and goals which are likely to involve risks detailed in our various SEDAR filings and in various forward-looking disclaimers included in the third quarter financials release and in the presentation.

With that, I have the great pleasure of introducing Greg Lang, NovaGold's President and CEO. Greg?

Greg Lang

Thank you, Mélanie and welcome everyone to this morning's call. NovaGold has achieved important milestones since the start of the year and we are delivering on the organization plan that was announced last November. Despite achieving all of our objectives since the start of the year, Barrick's second quarter comments, as they related to Donlin, were misinterpreted and have led to an extraordinary disconnect between NovaGold and its historical ratios and hence the share price performance.

Now, let's look at the facts. We are moving ahead with permitting as we always planned to do and this misunderstanding has led to an aberrational opportunity for investors that management intends to rectify. Among our list of achievements, the first was the filing of the Donlin Gold Updated Feasibility Study which was subsequently approved by the Donlin Gold board, and most importantly, the commencement of permitting occurred in the third quarter. This was by far most significant milestone for NovaGold.

At Galore Creek, this year's drill program is now complete and we look forward to updating the market on the results. In the third quarter and more recently, we announced the appointment of David Deisley as Executive Vice President and General Counsel and David Ottewell as Vice President and Chief Financial Officer. Both individuals are leaders in their respective fields and we are pleased that they will be joining us in a few weeks.

Additionally, we continued to advance the closure and divestiture of the Rock Creek property during the quarter and expect it will be finalized by year-end. We have sufficient cash on hand with $267 million. This will take Donlin all the way through permitting and ultimately a construction decision.

NovaGold is an institutional quality investment with tremendous shareholder support from our largest shareholders as listed on the table on slide six. We are a solid company. We have significant high-grade reserves, excellent exploration potential and an experienced management team. We have a healthy balance sheet and our assets are all located in secure jurisdictions. This is truly a golden opportunity with the company and is committed to shareholder value that provides superior leverage than the price of gold.

After surprises from previously safe jurisdictions such as Argentina and Australia, there has been an even greater industry focus on jurisdictional safety and resource nationalization, one of the top concerns facing the industry. Invested investors are becoming increasingly aware of the inherent risk in investing in these jurisdictions. The jurisdictions with low political risks such as North America will soon warrant a safety premium and investors will only have a handful of companies to choose from in this jurisdiction. We are well positioned with our assets in British Columbia and Alaska to achieve premium valuation.

Next, it is important to look at where we are at with our partner. Both NovaGold and Barrick jointly approved the feasibility study on July 11 and commenced permitting on July 26. While we were permitting, both parties will work to identify areas to reduce capital and further optimize the Donlin project. Permitting is expected to take three or four years at which time we would be in a position to make a decision on the construction of the project.

While other major projects around the world have seen delays or cancellations over the last quarter, Donlin has continued as previously planned and is now moving up the ranks in terms of major gold projects and their timelines. As the market realizes that nothing has changed with regard to Donlin Gold's progress, we believe NovaGold's share price will respond accordingly. The most important milestone in the third quarter was indeed the commencement of permitting with the submission of the Donlin Gold plan of operations just launched the NEPA process.

Over 16 years of work has gone into accumulating the baseline data in preparation of permit applications. This is one of the most robust databases prepared in advance of permitting and we expect that it will bode well as we permit Donlin. The U.S. Army Corps of Engineers, our lead agency in this process, has selected an independent contractor to prepare the Environmental Impact Statement.

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