NOVAGOLD Reports 2018 Results

Subsequent to year-end, Donlin Gold received two major state permits on January 18, 2019:

• The Donlin Gold Reclamation and Closure Plan was approved by the Alaska Department of Natural Resources
• The Waste Management permit was issued by the ADEC

NOVAGOLD President Gregory A. Lang issued the following statement:

What a year it has been – I’m very proud of the team’s accomplishments and their dedicated efforts and perseverance – all of which has paid off since the federal permitting process for the Donlin Gold project came to a close and multiple key state permits were received. The Corps and BLM, in addition to various State of Alaska agencies, have worked diligently over the last six years to execute on the steps required to responsibly permit what we expect to be one of the most important undertakings in the gold development space. Input and guidance from our partners, Calista and TKC, as well as the excellent feedback received from the 11 cooperating agencies and people from the Y-K region throughout the interactive NEPA process and community meetings, have served to improve the resulting permits and the way the project is expected to be developed. It was a six-year federal, state and regional permitting marathon with a successful outcome! With permitting and scoping-level optimization work largely complete, NOVAGOLD’s focus is to continue advancing the Donlin Gold project.

Moreover, the momentum continued in 2018 with the sale of our share of the Galore Creek project to Newmont, a win-win for both companies where Teck gained a partner that will advance this important project in a responsible manner. Our patience in selling our interest in Galore Creek at the right time and at the right price has been rewarded and the transaction significantly strengthened our treasury.

Donlin Gold Project

Federal permitting of the Donlin Gold project was completed in the third quarter of 2018. It was truly a collaborative effort. On August 13, 2018, for the first time in history, two federal agencies, the Corps and the BLM, participated in an official signing ceremony for the issuance of the joint ROD for the Donlin Gold project. Coincident with the issuance of the ROD, the project received a combined permit under CWA Section 404 and Section 10 of the Rivers and Harbors Act. Furthermore, the BLM issued the Offer to Lease for the right-of-way for those portions of the natural gas pipeline that will cross federal lands. The Donlin Gold project also received the special permit for the pipeline from PHMSA.

Concurrent with the federal process, a considerable amount of diligent work has been carried out to advance major state permits for the Donlin Gold project. Over the last nine months, a number of these state permits were received or advanced. The State of Alaska issued a CWA Section 401 Certificate of Reasonable Assurance indicating that the CWA 404/10 permit complies with the State’s water quality standards; the APDES water discharge permit was issued with no appeal; the State of Alaska Department of Fish and Game delivered the Title 16 Fish Habitat permits for the mine area and transportation corridor; ADEC approved an extension by which construction of the Donlin Gold project as authorized by the Prevention of Significant Deterioration air quality permit must begin; and the final approval for the Donlin Gold Reclamation and Closure Plan as well as the final Waste Management Permit were received last week. The proposed state portion of the pipeline right-of-way and other state land use approvals are anticipated to be issued for public comment in the first half of 2019. The Alaska Dam Safety permits require additional fieldwork and more detailed engineering that will commence in 2019 and require a multi-year commitment.

With the recent completion of the merger between Barrick and Randgold, we are looking forward to working with the newly constituted technical team to advance the project in an efficient, responsible and cost-effective manner.

These days we are frequently asked: what are Barrick’s plans with respect to Donlin Gold? We are used to questions of this nature. After all, Barrick and NOVAGOLD have been partners for many years, during which time we have worked together collaboratively with the common objective of building value for the project stakeholders. NOVAGOLD is essentially in a win-win position. If Barrick, under the leadership of Mark Bristow, stays in, we believe it will be great for our shareholders to have such experienced partners. If, on the other hand, Barrick exits in favor of a motivated buyer that seeks ownership in a U.S. asset with unique technical and jurisdictional attributes, we will welcome a new partner with the obvious appreciation of how accretive this asset is for just about anyone in the industry. We expect that either outcome should be very positive for our shareholders. There is a reason why our Chairman refers to the changes at Barrick as a “white swan” event!

For this and so many other reasons, we are more enthusiastic than ever before about Donlin Gold and the opportunity it represents for all concerned. A federally-permitted gold development project, with an endowment of approximately 39,000,000 ounces of gold in the measured and indicated mineral resource categories that rivals some of the best mines in the industry, with an average grade of 2.24 grams per tonne1, it is one of the largest and among the highest grade open-pit gold development projects on the planet. With these attributes, Donlin Gold is expected to be a long-life mine operating for decades. In fact, we expect its operating life to go beyond the projected 27-year life, considering that the known endowment encompasses only three kilometers of an eight-kilometer mineralized belt. And finally, with the project located in Alaska, we are already blessed to be working in a jurisdiction that welcomes responsible resource development.

Galore Creek Project

Since 2012 NOVAGOLD has been seeking opportunities to monetize its 50-percent interest in Galore Creek, a world-class copper-gold-silver project located in British Columbia, Canada. In July 2018, the Company succeeded in making it happen by selling its share of Galore Creek to Newmont for total consideration of up to $275 million. The first payment of $100 million was received upon closing of the transaction; the second payment of $75 million is due upon the earlier of the completion of a new pre-feasibility study or three years from the closing date; and the third payment of $25 million is payable upon the earlier of the completion of a feasibility study or five years from the closing date. A final payment of $75 million is contingent upon approval of project construction by the owner(s). I was delighted to have the opportunity to transition ownership to Newmont in a formal ceremony with the Tahltan First Nation, a partner in the project, and I wish Teck and Newmont success in advancing and ultimately developing Galore Creek into a major world-class mine.

 

Stakeholder Engagement

Establishing strong and collaborative working relationships with the communities where we operate is at the core of our strategy. By engaging jointly with our Donlin Gold Native Corporation partners, Calista and TKC, we can create a solid foundation of common values based on mutual respect and appreciation of cultural traditions of the people in the Y-K region. In that spirit, extensive engagement efforts continued in 2018 with joint village meetings taking place with Calista throughout the Y-K region, highlighting the benefits of the project and being on hand to answer any questions. Donlin Gold and TKC collaborated on organizing post-NEPA outreach visits to the middle-Kuskokwim villages. Since 2010, Donlin Gold has conducted more than 400 village meetings. I’m always amazed at the various educational programs where we are having a positive impact, from scholarships to welding machines, we continue to support these initiatives for hundreds of students throughout the Y-K region. A new and very successful program that was launched by NOVAGOLD in 2018, was the Green Star® backhaul project, working with locals in six different middle Kuskokwim villages to identify, classify, package and remove approximately 20 tons of hazardous materials and other wastes by barge. This is a program that we will build upon in 2019. Additionally, Donlin Gold proudly sponsored several key sporting, educational and environmental events and initiatives last year such as the Iditarod, EXCEL Alaska, career fairs, Elder Mentor program, Clean Up Green Up, safety training, youth camps and local youth sporting teams.

Another key event unfolded toward the end of the year: Alaska voters rejected Ballot Measure No. 1, the Stand for Salmon initiative, by a 62 to 38 percent margin. Without compromising their excellent environmental regulations, Alaskans proved once again that the state – already the second largest gold producer in the country — is open for business.

Frequent engagement with our shareholders is fundamental in continuing to improve our disclosure and good governance practices. As such, we held a Donlin Gold site tour with multiple sell-side representatives last summer and a formal event with the Alaska Governor, key state commissioners, and the president and chief executive officers of both Calista and TKC. To broaden our understanding of our shareholders’ priorities, we continued our proxy and post proxy engagement efforts in 2018 by giving shareholders access to management, who in turn shared investor feedback with the Board of Directors and its respective committees. In 2018, NOVAGOLD engaged with shareholders representing 82-percent of the company’s issued and outstanding shares ahead of the company’s 2018 AGM and conducted a post-proxy outreach effort last fall to obtain feedback from the ten largest shareholders who we believed had voted against say-on-pay at the AGM, to be reported back to the respective committees of the Board for their consideration.

I would like to congratulate the team on receiving the 2018 Platinum Award for Corporate Excellence from the American Exploration and Mining Association. We are proud to be recognized for our permitting efforts at Donlin Gold and for NOVAGOLD’s strong safety culture, environmental stewardship and community engagement.

 

Balance Sheet

As a result of the Galore Creek sale, we materially increased our treasury, providing greater security to advance the Donlin Gold project. With $167 million in cash and term deposits as of year-end, and payment on additional notes receivable in the next five years from the sale of the Galore Creek project, we have sufficient funds to advance Donlin Gold and meet other financial obligations without recourse to our shareholders.

In conclusion, I would like to thank our shareholders for their support and dedication. We are thankful for their continued patience and commitment. We believe that it is only a matter of time before the broader market appreciates the exceptional value proposition of our investment thesis. I would also like to extend gratitude to our partners, Calista and TKC, for their consistent engagement in the local communities and their encouragement throughout the year. We congratulate our partner Barrick on its latest transformation. We are looking forward to working together to build value at Donlin Gold for all of our stakeholders. A special thank you to Teck and the Tahltan First Nation for their support as our former partners at Galore Creek. We know they will do well with Newmont as their new partner. Many thanks to our experienced and hard-working Board of Directors and dedicated management for their loyalty and commitment.

I would also like to extend a very special thank you to our esteemed fellow board members, Gerry McConnell and Gil Leathley, who retired in 2018. Gerry has made an extraordinary contribution to NOVAGOLD, a company he founded in 1984. His steady and dedicated leadership helped transform what was an exploration start-up into a significant precious metals mine developer. Gil began his association with NOVAGOLD in 2010, first as Senior Vice President and Chief Operating Officer and subsequently becoming a member of the Board of Directors and a Special Advisor to the President and CEO. With over 55 years of industry experience, his guidance in setting and maintaining the highest standards for various facets of operating performance has not only set the tone for our achievements at both Donlin Gold and Galore Creek but also set the benchmark for operating excellence for many years to come. And finally, I want to thank David Deisley who retired in 2018. As our former Executive Vice-President and General Counsel, he was instrumental in guiding the Company through various aspects of its activities, from corporate transformation to successful permitting and social engagement.

We wish all these gentlemen a long, healthy and rewarding retirement.

 

Gregory A. Lang
President & CEO