Year-End Financial Results and Project Update
23, 2009 - Vancouver, British Columbia - NovaGold Resources Inc. (TSX: NG, NYSE
Alternext: NG) today announced the results of its fiscal year ended November
30, 2008 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 on Tue, February 24, 2009 at 11am PST (2pm EST).
Toll-free 1-866-240-8955 or webcast at
million financing completed in January 2009
million bridge loan repaid through share conversion
Creek gold project Feasibility Study results and initiation of permit process
Creek copper-gold project funding arrangements amended with Teck and studies
define optimized development approach
Creek gold project assessment underway
Conference call Tuesday, February 24, 2009 at 11 am PST (2 pm EST)
represented a period of unprecedented market volatility and uncertainty, with
historic changes in the public markets impacting every sector of the economy.
Gold itself was one of the few bright spots in the marketplace as one of the
only asset classes to maintain and even appreciate in value during the year.
The last 12 months have been equally challenging for precious metals stocks
including NovaGold. Setbacks at the Company’s Rock Creek project and
uncertainty over the Company’s ability to secure financing and repay its
short term debt last fall, combined with the sell off in the general market
resulted in tremendous swings in valuation for the Company.
announcement in late December of a US$75 million investment by Electrum
Strategic Resources, a New York based private equity firm, along with several
other investors, and the conversion of the Company’s US$20 million bridge
loan, NovaGold’s share price has outperformed the sector for the first two
months of 2009. With one of the largest resource bases of any junior or
mid-tier producing gold company, NovaGold is well positioned in 2009 to add
value in the current rising Gold market.
Creek Gold Project, Alaska
Creek gold project is managed by a limited liability company owned 50% each by
NovaGold and Barrick Gold U.S. Inc., a wholly-owned subsidiary of Barrick Gold
Corporation. In June a preferred project design was selected for the Donlin
Creek project and the partners undertook to complete a feasibility study. The
results of this feasibility study are expected to be available by the end of
calendar Q1-2009 with the NI 43-101 technical report being available within 45
days thereafter. The Donlin Creek project is expected to have a throughput
design of approximately 50,000 tonnes per day using onsite diesel and wind
cogeneration for power. Using this design, Donlin Creek would operate for more
than 20 years and potentially produce 1 to 1.5 million ounces of gold
annually. Permitting would start in early 2009 with construction targeted to
start in 2012. The feasibility study will provide updated operating and capital
cost estimates for the project based on the revised project development plan.
highlights from 2008 at Donlin Creek show that the deposits remain open to
expansion laterally and at depth beyond the current resource pit boundary
demonstrating the potential for significant resource expansion. An updated reserve/resource
estimate is anticipated to be released as part of the feasibility work showing
an overall increase in the contained gold for the project beyond that in the
last resource estimate from June 2008.
is located in southwestern Alaska and is one of the world’s largest
undeveloped gold deposits. As currently envisioned, the mine would be developed
as a high-tonnage open-pit year-round operation. NovaGold and Barrick are
moving forward cooperatively to maximize the value of the Donlin Creek deposit
by advancing the project through feasibility and permitting while bringing
sustainable economic benefits to the local Native Alaskan communities in the
Creek Copper-Gold-Silver Project, British Columbia
Creek project is managed by the Galore Creek Mining Corporation (GCMC), a
partnership controlled equally by NovaGold and Teck Cominco. During 2008, an
extensive engineering review to optimize the development plan for Galore Creek
was undertaken. The results of these engineering optimization studies have
identified a number of modified approaches to the project that show the
potential for significant expansion of the project throughput, a shorter
construction schedule, location of the process facilities to allow for future
expansion, and fewer risks associated with construction and operations. As
currently envisioned the project would be one of the world’s largest
undeveloped copper-gold projects. In addition, current prices for key mine
inputs including diesel, steel, major mechanical equipment and contract labor
have decreased significantly since the peak levels in 2008 and indicate
potential for reduced overall capital costs.
2008, construction work continued on the access road to connect the Galore Creek
access road segments that were completed during the 2007 construction season
with Highway 37. Land access has now been established to kilometer 40 at a
lower cost than originally estimated. Going forward, in addition to maintaining
the infrastructure investment to date on the project, work is expected to focus
on road link-up to the south terminal of the Galore Creek access tunnel at
kilometer 91, and finalization of optimization studies prior to an update to
the project feasibility study.
the Province of British Columbia announced its plans to move forward with the
environmental assessment process and First Nations consultation for the
Northwest Transmission Line along Highway 37 which would provide access for the
project to the BC Hydro electric grid.
2009, the Company announced that it had amended the agreement with Teck Cominco
for the Galore Creek Project, where Teck will now fund 100% of Galore Creek
costs until the aggregate amount contributed by Teck after November 1, 2008, together
with funds previously contributed by Teck on optimization studies, equals C$60
million. Both companies continue to hold 50% interests in the partnership but
during the period of Teck’s sole funding, Teck will have a casting vote on
the Partnership’s Management Committee with respect to the timing and nature
of expenses to be funded. Following Teck’s $60 million contribution, all
further costs at Galore will be funded by Teck and NovaGold in accordance with
their respective partnership interests and there will no longer be any casting
vote for either party.
is located in northwestern British Columbia and is one of the world’s largest
undeveloped copper-gold deposits. As currently envisioned, the mine would be
developed as a high-tonnage open-pit operation producing a high-quality
precious, metal rich copper concentrate. Galore Creek Mining Corporation is
committed to working at Galore Creek in a sustainable and responsible manner
and to meeting all aspects of the participation agreement with its partners of
the Tahltan Nation.
Creek Gold Project, Alaska
Creek gold mine received regulatory authorizations and began the commissioning
process in September 2008. In late November 2008, the Company decided to
suspend the project as a result of unanticipated mechanical problems,
challenges in meeting additional environmental requirements, uncertainty of
anticipated project cash flow and uncertainty of the Company’s ability to
finance itself during the severe prevailing credit and equity market conditions
at that time. These start-up issues were further compounded by the effects of
arctic winter weather conditions experienced in Nome, Alaska.
continues to work with state and federal regulators to meet its environmental
requirements and is completing a detailed project assessment to determine the
cost, timing and requirements to successfully restart the commissioning
growth-focused precious metals company, NovaGold is committed to creating
shareholder value while working responsibly with the communities in which our
projects are based to bring long-term sustainable economic development. We look
forward to reporting on further developments on the Company's projects during
the months ahead.
Due to a
change in accounting policy relating to exploration expenditures, results for
2007 have been restated. Refer to note 2 of the consolidated financial
statements for the year ended November 30, 2008 for details.
For the year
ended November 30, 2008, the Company reported a loss of $195.0 million (or
$1.84 per share) compared to a restated loss of $109.0 million (or $1.10 per
share) for the previous year. The 2008 loss was after non-cash asset impairment
costs of $160.9 million at the Rock Creek mine with no comparable amount in
2007. The loss before impairment costs for 2008 was $34.1 million compared with
$109.0 million for 2007.
the Company’s land and gravel sales, gold royalties and other revenues were
$2.2 million during the year ended November 30, 2008 compared with $1.1 million
in 2007. The increase was due to the increased sales of land in Nome, Alaska.
Interest income decreased to $2.2 million for the year ended November 30, 2008
compared with $6.0 million in 2007, due to lower average cash balances.
the year ended November 30, 2008 were $77.9 million compared to $184.1 million
in 2007. The decrease is primarily due to the following:
discussed in note 2 of the consolidated financial statements, the Company has
changed its accounting policy regarding exploration expenditures and now
expenses exploration as incurred. Due to an increased focus on the Company’s
core development assets, exploration expenditures have decreased from $66.5
million in 2007 to $49.6 million in 2008. Of the exploration costs in 2008,
$15.3 million on a cash basis was funded by Teck.
· At the
end of 2007 the Canadian dollar was trading close to a 30-year high against the
US dollar. Due to the effect of the weakening of the Canadian dollar since
then, on the difference between the Company’s US dollar cash balances and its
US dollar liabilities, foreign exchange losses substantially increased from
$3.6 million in 2007 to $28.7 million in 2008.
· In 2007
the Company made a provision of $93.1 million, on a 100% basis, for suspension
and demobilization costs at the Galore Creek project. In 2008 these expensed
suspension costs were reduced by $36.1 million primarily as a result of funds
being used to acquire construction equipment of $38.0 million, including
assuming $3.0 million of capital leases, rather than incurring stand-by charges
and other contract break fees.
decrease in non-cash stock-based compensation expense to $1.4 million in 2008
from $2.0 million in 2007, due to decrease in stock option grants in 2008.
general and administrative costs, salaries and benefits (other than the
non-cash stock-based compensation), corporate development and communications
and professional fees, decreased to $15.0 million in 2008 compared with $18.9
million in 2007. The decrease is due to less corporate activity during 2008 as
compared to the prior year.
· In 2008
the Company expensed $5.8 million of interest and accretion charges relating to
the 5.5% US$95 million convertible notes issued in March 2008, and amounts
payable Barrick related to Donlin Creek.
In 2008 the
Company also disposed of its interest in the shares of US Gold Corporation for
a gain of $15.3 million, disposed of its interests in NovaGreenPower (formerly
Coast Mountain Power) for a gain of $32.0 million and incurred an asset
impairment cost at the Rock Creek project of $160.9 million.
30, 2008, the Company had cash and cash equivalents of $12.2 million and a
working capital deficiency of $19.2 million. Subsequent to November 30, 2008
the Company completed private placements totaling US$75 million by issuing
57,692,308 Units at a price of US$1.30 per Unit. Each Unit consists of one
common share and one common share purchase warrant exercisable at a price of
US$1.50 prior to the fourth anniversary of the closing date. In addition, the
Company’s US$20 million bridge loan was converted into 15,762,565 shares at a
rate of $1.53 per share and 750,000 warrants at $1.53 per share were exercised
for net proceeds of $1.1 million. The Company also sold its holdings in Alexco
Resource Corp. (“Alexco”) for net proceeds of $3.8 million.
subsequent to November 30, 2008, the Company renegotiated its agreement with
Teck whereby Teck would cover 100% of the costs at Galore Creek from November
1, 2008 onwards to a total of approximately $44 million before NovaGold would
be required to contribute further funds.
Company’s three material projects are the Donlin Creek, Rock Creek and Galore
Creek projects. The Company’s share of the 2009 budget at the Donlin Creek
project is approximately US$14 million, part of which will be incurred
completing the feasibility study and the remainder is planned to be used for
permitting activities at the project. The Rock Creek project is in care and
maintenance, pending a review of whether to recommence start-up at the project.
The current care and maintenance budget at Rock Creek for 2009 is approximately
US$7 million, excluding settlement of payables from 2008. The budget for care
and maintenance and optimization studies activities at the Galore Creek Project
for 2009 is $15.7 million, however, NovaGold is not required under its revised agreement
with Teck to fund any of those costs.
does not plan to commence development or construction at its Donlin Creek and
Galore Creek projects in 2009, nor does it currently plan to recommence the
start-up process at the Rock Creek project. However, the Company will need
external financing to develop and construct its major properties and to fund
the exploration and development of its other mineral properties in future
years. Sources of external financing may include bank borrowings and future
debt and equity offerings. There can be no assurance that financing will be
available on acceptable terms, or at all. The failure to obtain financing could
have a material adverse effect on the Company’s growth strategy and/or
results of operations and financial condition. The mineral properties that the
Company is likely to develop are expected to require significant capital
expenditures. There can be no assurance that the Company will be able to secure
the financing necessary to retain its rights to, or to begin or sustain
production at, any of its mineral properties.
23, 2009, NovaGold had $83.9 million of unrestricted cash and cash equivalents,
of which $3.6 million specifically relates to the Galore Creek project.
a growth-focused precious metals company with exploration, development and
mining properties in Alaska and Western Canada. NovaGold has a 50/50
partnership on the Donlin Creek gold project in Alaska, one of the world’s
largest gold deposits, with Barrick Gold. The Company also has a 50/50
partnership on the Galore Creek copper-gold-silver project in British Columbia
with Teck Cominco. NovaGold owns 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. NovaGold
trades on the TSX and NYSE Alternext under the symbol NG. More information is
available online at www.novagold.net or by e-mail at firstname.lastname@example.org.
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Senior Vice President and CFO
Vice President, Strategic Development
Note Regarding Forward-Looking Statements
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 properties, statements regarding intentions with respect to
obligations due for various projects, strategic alternatives, timing of
permitting, construction and production and other milestones, 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 Cominco in the exploration and development of the Donlin
Creek 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; fluctuations in metal prices and currency exchange rates, and
other risks 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 management beliefs,
opinions, projections, or other factors should they change.
free: 866-669-6227 http://www.novagold.net/