NovaGold Announces US$60 Million Financing with Electrum Strategic
Resources
January 2, 2009 - Vancouver, British Columbia - NovaGold Resources Inc. (the
“Company” or "NovaGold") (TSX: NG, NYSE Alternext: NG) announced
today that it has entered into a definitive agreement with Electrum Strategic
Resources LLC (“Electrum”) providing for the sale to Electrum on a private
placement basis of 46,153,847 Units for a purchase price of US$1.30 per Unit,
for aggregate gross proceeds of US$60million. Each Unit consists of one common
share of NovaGold and one common share purchase warrant of NovaGold
(“Warrant”). Each Warrant entitles the holder thereof to acquire one common
share of NovaGold for an exercise price of US$1.50 prior to 5:00p.m. (Toronto)
on the fourth anniversary of the closing date.
Electrum Strategic Resources LLC is a New York-based private company. It
is a member of the Electrum Group of Companies, which holds one of the largest
and most diversified portfolios of precious metals exploration projects in the
world. Upon closing of the proposed financing, Electrum would become
NovaGold’s largest shareholder owning approximately 30% of the issued and
outstanding common shares of the Company and would own approximately 46% if all
Warrants were fully exercised.
“We are pleased to enter into a strategic alliance with NovaGold,”
said William Natbony, Electrum Strategic’s Chief Executive Officer. “Our
team is looking forward to working with NovaGold's management to develop the
company's impressive mineral endowment, one of the largest in the world. The
company is exceptionally well positioned to advance its operations along the
value chain and maximize the returns for all shareholders.”
“We believe that Electrum’s strategic alliance with NovaGold
recognizes the tremendous value of the Company’s key assets – its 50%
stakes in two of the largest undeveloped gold and copper-gold deposits in the
world,” said Rick Van Nieuwenhuyse, President and CEO of NovaGold. “This
investment substantially strengthens NovaGold’s balance sheet and provides
funding for the Company’s on-going commitments to advance our key projects
toward development. This source of funding will also allow the Company to look
at new opportunities that can provide future growth for the Company.”
The net proceeds of the offering are estimated to be approximately US$59
million and will be used to repay outstanding principal and interest owing
under the US$20 million bridge loan from Auramet Trading, LLC, to finance
continuing exploration and development activities at NovaGold’s Donlin Creek
gold project in Alaska, and the Company’s Galore Creek copper-gold project in
British Columbia, and to further examine, develop and, if warranted,
re-activate the Rock Creek Mine near Nome, Alaska and for general corporate
purposes.
Electrum will have the right, for four years, to participate pro-rata
(on a fully-diluted basis) in any future offering by NovaGold of equity
securities or any securities which are exercisable, exchangeable, or
convertible into equity securities so long as Electrum and its affiliates own
more than 15,000,000 shares of the common shares of NovaGold. This right of
participation is subject to certain exceptions including exceptions relating to
a grant or exercise of options issued under the Company’s stock option plan,
issuances of common shares on the exercise of outstanding warrants and
convertible securities, issuance of securities in connection with a strategic
acquisition or transaction by NovaGold, the primary purpose of which is to not
raise equity, and the issuance of securities in connection with an investment
by, or partnership or joint venture with, one of more strategic investors. Any
exercise of such rights will be subject to applicable Toronto Stock Exchanges
rules. NovaGold has agreed to enter into registration rights agreements with
Electrum at closing under which Electrum may require NovaGold to qualify
certain common shares for distribution in Canada and/or the United States. NovaGold
has agreed to provide Electrum with the right to designate an observer at all
meetings of the board of directors of NovaGold and any committee thereof so
long as Electrum and its affiliates hold not less than 15% common shares. Electrum
has agreed to vote its common shares at the 2009 Annual General Meeting of
NovaGold in favour of management’s nominees to the Company’s board of
directors or to abstain from voting on such matter
The completion of the offering is subject to a number of conditions
including obtaining any required regulatory approvals including approval of the
Toronto Stock Exchange (“TSX”) and the NYSE Alternext. The issuance of the
46,153,847 common shares to Electrum at closing (which represents 42.9% of the
currently issued and outstanding common shares of 107.5 million shares) would
result in Electrum owning approximately 30% of the then issued and outstanding
share capital of 153.7 million shares. If all of the proposed 46,153,847
Warrants were exercised for an additional aggregate exercise amount of
US$69,230,770 (for combined gross proceeds of approximately US$129 million), it
would result in the issue of a total of 92,307,694 common shares (representing
85.85% of the currently issued and outstanding common shares of NovaGold) resulting
in Electrum owning approximately 46.2% of the common shares of NovaGold. The
Warrants contain customary anti-dilution provisions in the event of certain
corporate reorganizations or issuances of securities by the Company to all its
shareholders.
Under the TSX Company Manual shareholder approval would be required as a
result of the number of common shares issued pursuant to the offering being in
excess of 25% of the currently issued and outstanding common shares of the
Company and as a result of the offering materially affecting control of
NovaGold. NovaGold has applied to the TSX under the provisions of Section
604(e) of the Company Manual for an exemption from securityholder approval
requirements. NovaGold’s board of directors, who are free from any interest
in the offering, are unrelated to Electrum and have authorized such
application, have concluded that NovaGold is in serious financial difficulty,
this offering is designed to improve NovaGold’s financial situation and this
transaction is reasonable for NovaGold in the circumstances. The transaction,
which is also subject to pre-merger notification requirements under the
Competition Act (Canada), is expected to be completed in early January 2009.
As a consequence of relying upon the financial hardship exemption under
Section 604(e) of the TSX Company Manual, the TSX has informed the Company that
it will, in the ordinary course, commence a de-listing review. The Company
believes that, upon completion of the offering, it will be in compliance with
all of the TSX listing requirements.
The Company has had discussions with a number of additional investors
about participating in the offering on the foregoing terms for up to an
additional US$15 million. No binding commitments have been entered into with
such investors. Any such additional investment will be subject to TSX and NYSE
Alternext approval.
About NovaGold
NovaGold is a precious metals company focused on exploration,
development and mining, with 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 info@novagold.net.
About Electrum
Electrum Strategic Resources LLC is a member of the privately-held
Electrum Group of Companies which is involved in precious metals exploration
and development around the world. Other members of the Electrum Group include
Electrum Ltd., which holds one of the world’s largest and most diversified
exploration portfolios comprising over 100 projects located in 16 countries in
the Americas, Africa, Asia and Eastern Europe; Electrum Strategic Holdings LLC,
which owns a strategic stake in a portfolio of exploration and development
properties in Eastern Europe; and Electrum USA Ltd., headquartered in Denver,
Colorado, which manages the Electrum Group's exploration and development
activities.
# # #
NovaGold Contacts
Don MacDonald
|
Greg Johnson
|
Senior Vice President and CFO
|
Vice President, Strategic
Development
|
604-669-6227 or
1-866-669-6227
Electrum Contact
Igor Levental
|
Executive Vice President, Corporate Development
|
303-832-7600
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, 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 ability
to satisfy closing conditions and to obtain necessary consents and approvals,
the possibility of adverse developments in the capital markets or NovaGold’s
business that could interfere with closing, 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, 2007,
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.
info@novagold.net
Toll free: 866-669-6227 http://www.novagold.net/
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