NovaGold Resources - Earnings Call - Q1 2025

Executive Summary

• Q1 FY2025 tracked to plan: net loss improved year over year on lower stock-based compensation and lower Donlin expenditures, with cash and term deposits of ~$93 million at quarter-end and Q1 cash expenditures of $8.3 million (Donlin $3.6m; corporate G&A $3.8m).
• EPS modestly beat S&P Global consensus: actual EPS of ($0.03) vs consensus of ($0.040), a beat of ~$0.01 per share, driven by lower SBC and Donlin spend; partially offset by lower interest income (consensus from S&P Global)*.
• 2025 spending guidance maintained: ~$37.5 million total (Donlin $21.5m; corporate G&A $16m), with Donlin’s 2025 project budget at $43 million on a 100% basis; drill program underway (15,000 meters) to support mine planning inputs and a potential feasibility study decision thereafter.
• Legal/regulatory remains a watch item but not on the critical path: remedy briefing completed and oral arguments scheduled for April 14, 2025, on the court’s request to evaluate a larger theoretical tailings-release scenario under NEPA; management views the matter as narrow and manageable.
• Near-term catalysts: drill results/field program progress, April 14 oral argument outcome, and subsequent owner decision on feasibility study (est. $80–$100m, ~2 years to complete once initiated), against a constructive gold-price backdrop highlighted by management.

What Went Well and What Went Wrong

What Went Well

• Cost discipline: Net loss decreased by ~$1.2 million year over year on lower stock-based compensation and lower Donlin expenditures; G&A otherwise in line with prior year.
• Strong liquidity runway: Cash and term deposits totaled ~$93 million at quarter-end; company reiterates ability to fund its share of activities for the next two years at current spending levels.
• Execution on 2025 plan: Camp opened in February; drilling started in March; ~15,000 meters planned to refine mine planning parameters and “modifying factors” for eventual resource-to-reserve conversion workstreams.
  • “Our net loss in the first quarter of 2025 decreased by $1.2 million… primarily due to lower stock-based compensation expense and lower Donlin Gold expenditures” — CFO.
  • “This year’s program includes three rigs that will drill some 15,000 meters, primarily focused on grid drilling to further develop the modifying factors and input parameters and assumptions for future mine planning” — Management.

What Went Wrong

• Lower interest income: Management cited lower interest income as a headwind relative to the prior year, partially offsetting the benefit from lower SBC and Donlin spend.
• Ongoing legal overhang: Federal court required additional NEPA analysis of a larger theoretical tailings release; remedy briefing completed with oral arguments April 14, 2025, prolonging resolution timing.
• Timeline risk/complexity to next phase: A bankable feasibility study, once initiated, would cost an estimated $80–$100 million and take ~2 years; owners have not yet made the go-forward decision.

Transcript

Speaker 3

Thank you for standing by. This is the conference operator. Welcome to the NovaGold First Quarter 2025 Financial Results Conference Call and Webcast. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one, on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. Webcast viewers may submit questions through the text box in the lower right corner of the webcast frame. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Melanie Hennessey, Vice President, Corporate Communications. Please go ahead.

Speaker 1

Disclaimers included in this presentation. I will now turn the presentation over to our President and CEO, Greg Lang. Greg?

Speaker 6

Thank you, Melanie. NovaGold is solely focused on the Donlin asset up in Alaska. Some of the key attributes that the Donlin project has: it's large. It's almost 40 million ounces of gold at a grade of two and a quarter grams. It'll be a large mine. Its production will average over a million ounces a year over a mine life measured in decades. The project is big now, but there is significant exploration potential along strike and at depth. We're up in Alaska, a world-leading mining jurisdiction with a well-established industry and in a state that supports responsible mining. Our project is owned by two Alaska Native corporations, Calista and The Kuskokwim Corporation. Our partnership with them has endured for many years. The federal permits are in hand, and we're wrapping up the state permits. We remain committed to environmental stewardship and responsible governance and development.

We've got an experienced management team that has the expertise to continue to advance the Donlin project, and we enjoy strong shareholder support from our institutional investors. Looking at slide six, Donlin will average over a million ounces a year of production throughout its life. This is twice the industry average and the largest producer in the development pipeline throughout the industry. As global production declines, the demand for high-quality assets like Donlin will continue to increase. At two and a quarter grams, the mine grade at Donlin is better than twice the industry average. Its high grade and longevity well position it to thrive through any gold cycle imaginable. The current slide depicts the exploration potential at Donlin. The 40 million ounce resource is contained in the ACMA and Lewis mining pits.

That area represents only 3 kilometers of an 8-kilometer system, and we've got gold-bearing drill holes all up and down trend. When the time is right, we will resume exploration, and there is the potential to substantially increase the endowment at Donlin. Alaska is the second largest gold-producing state in the United States. It has almost $5 billion in annual revenue from non-fuel mineral production. The industry in Alaska generates over $1 billion a year in goods and services. This results in 12,000 high-paying jobs for the local economy. A recent executive order aims to strengthen Alaska's position and encourage resource development. This initiative will drive new opportunities for gold mining, job creation, and economic expansion, which will enhance investor confidence, aligning well with Donlin Gold's potential. Turning to slide 10, the land at Donlin is owned by two Alaska Native corporations.

Calista owns the mineral rights, and The Kuskokwim Corporation owns the surface rights. They share their elders' vision for responsible mineral development. Their expertise and stewardship, grounded in a deep understanding of the significance of the land to their people, are crucial to responsible economic development and long-term benefits for the Yukon-Kuskokwim Region where their communities are located. Permitting in the U.S. is a long-term, rigorous process, and we have substantially completed it. Our federal permits are in hand, and our state permits are well advanced. The only remaining state permit of any consequence is for the tailings dam, and this work is well underway. We have secured these permits, and we are actively supporting the agencies in maintaining and defending these permits. This process has required extensive community engagement throughout. NovaGold has made significant strides in environmental stewardship and good governance. We will be shortly publishing our new sustainability report.

Safety has been a top priority at Donlin, and the project has achieved a record of no lost time accidents in well over a decade. We're very proud of our accomplishments in this area. NovaGold has a very experienced management team. All of us come from major mining corporations and have the expertise to take Donlin forward. We also enjoy strong institutional shareholder support. Over 70% of our shares are held with our top 10 shareholders. They share our vision for responsible long-term development, and we are extremely grateful for their support and their focus on helping us maintain and maximize the project's value. These are unprecedented times when it comes to gold price. It's hitting new records every week. Donlin Gold brings exceptional leverage in a jurisdiction where you can keep it. At an undiscounted rate, the current spot price yields over $40 billion.

This underscores the very significant economic potential at Donlin. Turning to the first quarter highlights, the camp at Donlin was opened earlier this year, and drilling commenced in March. We have a program of 15,000 meters planned for the year, initially focused on grid drilling to enhance our understanding of the parameters that will support mine planning that will ultimately feed into an updated feasibility study. NovaGold and Donlin staff have traveled to Juneau to meet with members of Alaska's Congressional Delegation to share information about Donlin and reinforce the project's importance to Alaska and the Yukon-Kuskokwim region. We also presented in Juneau to the Alaska House of Representatives Energy Committee to describe the project's energy needs and to discuss Alaska's environmental standards.

In collaboration with our native villages, we provided financial assistance to maintain the ice road on the Kuskokwim River, allowing the people in that region safe access between the villages. We continue to support local community events such as the Donlin Gold Basketball Tournament and the Kuskokwim 300 Sled Dog Race, where we sponsor three mushers from the YK region. We anticipate that we will receive comments from the agencies on the preliminary dam certification package that was recently submitted. The state water permits have been extended. In the litigation related to our permits, we continue to support Donlin in the state permits, and all of these cases have been fully briefed. In federal litigation, the court ordered supplemental briefing on the remedy that was completed in March, and oral arguments will take place on April 14th.

With a thorough understanding of the regulatory and legal landscape, Donlin Gold and its partners are committed to supporting and defending the permits that have been granted by the agencies. With that, I will now turn the call over to Peter Adamek, our Chief Financial Officer. Peter?

Speaker 0

Thank you, Greg. Turning to slide 20, our net loss in the first quarter of 2025 decreased by $1.2 million from the comparative 2024 quarter, primarily due to lower stock-based compensation expense and lower Donlin Gold expenditures, partially offset by lower interest income. Other than stock-based compensation expense, which declined by $1.4 million in the quarter, general and administrative costs during the quarter were in line with the comparative 2024 period. On slide 21, cash and term deposits decreased by $8.2 million, with corporate and administrative costs and our share of Donlin Gold expenditures partially offset by interest income, as well as approximately $1 million in proceeds from the sale of marketable securities. Compared to prior year, Donlin Gold's first quarter funding was unchanged, as Donlin Gold site activities related to the 2025 field program only commenced late in the quarter.

Turning to slide 22, our treasury remains robust, with cash and term deposits totaling $93 million at the end of the first quarter of 2025. Our first quarter cash expenditures remain on track to meet our 2025 budget and guidance. Donlin Gold expenses in the first quarter of 2025 were below the quarterly run rate implied by our 2025 guidance, as Donlin Gold site activities related to this year's field program only commenced late in the quarter. We expect Donlin Gold expenditures to ramp up in the second and third quarters. Our anticipated expenditures for 2025 remain unchanged at approximately $37.5 million, including $21.5 million for Donlin and $16 million for corporate G&A. With that, I'll now turn the presentation back over to Greg.

Speaker 6

Thank you, Peter. The Donlin Gold project budget for this year is $43 million. In addition to the drilling, we will continue geotechnical and geoscience work and project planning. We will advance the dam safety certificates, and our very active community relations, government affairs, and permits support will continue. NovaGold's priority remains focused on the work necessary to ultimately support a new bankable feasibility study. With a strong treasury of approximately $93 million, NovaGold is well positioned to fund our activities for the coming years. The path for Donlin is clear. We've got a lot of patience, we've got great partnerships, and an unrelenting focus on the long-term value at Donlin. To recap my presentation, Donlin Gold is unique in the gold space.

With a production profile of over a million ounces a year for almost three decades, the grade is exceptional, and the exploration potential along strike and at depth is unique. The jurisdictional safety of Alaska, particularly in light of the new executive orders, is immense and a key attribute in future investment in the state. We are steadfast in our relationships and collaboration with our native partners. Our permits are in hand. We remain committed to the environment and social and governance issues, and we have an experienced team that can take this project forward. Finally, we appreciate the longstanding support of our shareholders. We will now open the call for questions.

Speaker 3

Thank you. We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. The first question comes from Nick Giles with BYLE. Please go ahead.

Good morning, everyone. Thank you very much, Operator. This is Feather Sutherland on behalf of Nick Giles. Greg and the team, congrats on the progress in the quarter. My first question is about the court's ruling and the upcoming argument on April 14. What would be the next steps, and what are your expectations for the hearing regarding the evaluation of a larger theoretical release from Donlin Gold's tailings storage facility? And how strong is that position, if we can call it that way? Thank you.

Speaker 6

Good morning, Nick, and thank you for joining our call. The question you posed pertains to the litigation that's ongoing in the federal court regarding our 404 permit. The issue was that during the preparation of the EIS, we did not study a massive failure of the tailings dam. We just studied a partial failure, which we thought was adequate considering the design of the dam, which is all downstream construction rock fill. Rather than push back on that, the Corps of Engineers decided to, yes, let's just do the additional study. The argument before the courts right now is just to define that study, and both sides will file their briefs later this month, and then we will wait for a ruling. It's not an issue that I'm overly concerned by.

The judge's ruling was very narrow in the work they wanted the court to do, and it will take probably six, eight months to get that work done, and then the court will take whatever time they need to make a ruling. That is always a bit unpredictable. The court cases have all so far gone very well, and I anticipate they will continue to go well. It is not really anything that is on our critical path. We will navigate those in due course.

Great to hear. Thank you. The second one is, you already started the field program and drilling. Can you talk a bit about the modifying factors for converting mineral resources to mineral reserves and how the project might be revalued considering these conversions? With conversions, higher gold prices and probably potential inflationary corrections.

Okay. The first phase of the drill program is fairly tightly spaced drilling, almost on a spacing that you would use for ore control if you were mining. We are using the data from this drilling to really fine-tune bench heights, mining widths, and so on. It is really more of a fine-tuning exercise. The second part of the drill program, and that is what we are drilling now. The second part of the program is there are areas in and around the known ore bodies where the drill spacing is not adequate to calculate a reserve or a resource. Some of the holes will fill in some of the areas of light drilling, and the goal is to update or upgrade some of the inferred material. We will be guiding everybody as our results come in.

I appreciate the call, Greg, and the team. Continue. Best of luck. I turn it over for now. Thank you.

Thanks, Nick.

Speaker 3

The next question comes from Andy Skopic, Private Investor. Please go ahead.

Good morning. A couple of questions I'd like to ask. You've made reference to a fully bankable feasibility study, and I'd like to ask if you could estimate the cost of completing such a feasibility study and give any indication of the timeline for completion.

Speaker 6

I'll break that into parts. The estimated cost for a full bankable feasibility study is about $80 million-$100 million, and it's an undertaking that would require approximately two years. The owners of Donlin, us, and Barrick have not reached that decision yet. I think our main focus right now really is to get the drilling done, and based on that, we'll have more data on which to make a decision on the feasibility study.

Okay. Question for Peter. Given the budget that you've put forward for this current year, what is your projected use of cash?

Speaker 0

Thank you, Andy, for the question. Our budget was $37.5 million split between $16 million for NovaGold G&A, cash G&A, if you will, and the remainder is $21.5 million for Donlin. Our use of cash principally is to fund those two activities, and that's a little bit offset by interest income on the cash we have on deposit.

Okay. I'm going to come back to you, Greg, for one more.

Speaker 6

Sure.

I've been familiar with this story for quite some time. Although I am a retired investor now, I did meet Tom Kaplan in New York at a presentation probably close to a dozen years ago now. This has been a development company for a long time, and I think investors are just getting more than a little impatient with how slow things seem to be developing. You do have a partner in Barrick, and I just really wonder to what extent the development of this project, the pace is going to start to pick up.

As I mentioned in my remarks, we're working with our partner to complete this drill program and incorporate the results into our understanding of mining methods. This work will be done probably largely finished drilling late May, early June, and in a month or two to digest the close space drilling, and then we'll be in a position to move forward. Certainly, gold at record high prices is a motivator, but right now we're taking it one step at a time, and we're continuing to work with Barrick.

All right. Thank you very much.

Speaker 1

We have a few questions coming in from the line. The first is, can you comment on the resource and how much of it is refractory?

Speaker 6

The Donlin ore body is essentially all refractory. There is some oxide near surface, but that is relatively insignificant. The flow sheet at Donlin is to flow to concentrate and treat the concentrate in the autoclave and then subsequently leach the gold. It is very common in the industry. Certainly, Richard Williams, our Engineering Vice President and Chief Operating Officer, has probably 30 years' experience working with autoclaves. It is a technology that has been demonstrated to be reliable for decades in the mining industry and one that our team is very familiar with.

Speaker 1

Great. The last question from the line is, given the current treasury, is there any future needs for funding, and is that linked to litigation?

Speaker 6

As Peter mentioned in his remarks, our treasury is robust, and we've got more than sufficient funds to see us through this year. Regarding the litigation, we are working our way through it and supporting the U.S. Army Corps of Engineers, the State of Alaska, and the Bureau of Land Management in defending the rigorous work they did on those permits. I think it's something we need to work through, but it's really not a critical item for us. The courts have ruled in our favor every step of the way, and we expect that will continue.

Speaker 3

The next question comes from Robbie Nizami with National Bank Financial. Please go ahead.

Good morning, everyone. Thanks for taking the call. Greg, just given the strength in gold prices that we have at all-time highs, can you just speak a bit towards how this environment influences your decision-making or the pace of prioritization around this project, whether that comes to permitting or moving forward on the feasibility? Thank you.

Speaker 6

I think I'm not sure I fully understand your question, Robbie, but first off, thank you for joining us. We are probably the most important thing we need to do in the coming months is execute on our drill program and continue to really engage with the communities and our other stakeholders. That's really our focus. I think gold prices where they are now, certainly Donlin looks just like a very compelling investment. I think we're going to take this one step at a time, finish the drill program, fine-tune our mining methods, and that will then position the owners in a place to make a decision on the next steps.

Speaker 3

This concludes the question and answer session. I would like to turn the conference back over to Greg Lang for any closing remarks. Please go ahead.

Speaker 6

Everyone, thank you for taking the time to join our Q1 call this morning, and we look forward to updating everyone as we advance the work at Donlin this year. Thank you.

Speaker 3

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.