Page 25 - NG_AR_2014

Ron Rimelman
vice president, environment, health, safety, and sustainability
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First, an outline of the purpose of and need for the proposed project. Donlin Gold, Calista, and TKC materially contributed to this section detailing the need and the right to develop the land for the bene t of their stakeholders.
Second, the identi cation and analysis of a reasonable range of alternatives to the proposed mine. These alternatives include variations on certain mine site facility designs, local transportation options, and power supply options.
Third, the preparation of an environmental analysis of the proposed action and reasonable alternatives. This section identi es and characterizes the potential biological, social, and cultural impacts relative to the existing baseline conditions, and normally constitutes the most extensive part of the EIS.
Fourth, the potential mitigation measures intended to reduce or eliminate the environmental impacts described in the impact analysis section.
How does NOVAGOLD expect to nance its share of the capital cost to bring Donlin Gold into production?
Mr. Ottewell: Projects with solid economic fundamentals, such as Donlin Gold, have diverse and multiple nancing options including equity, debt, mobile equipment leasing, and third-party owner/operator nancings. In the meantime, we are exploring ways with our partner to reduce the upfront costs of building the project.
What is the economic feasibility of the project? What is the impact of a falling gold price and at what price is it no longer economical to build the project?
Mr. Ottewell: Donlin Gold’s after-tax Net Present Value* (NPV), using a ve-percent discount rate, is $547 million at $1,200 per ounce of gold . However, the project provides signi cant leverage to gold with the NPV increasing dramatically to $3.1 billion at $1,500 gold. Once permits are obtained and dependent on market conditions, we will be in a position to update the feasibility study and evaluate a construction decision. Based on the Donlin Gold 2011 second updated feasibility study, at below $1,200 per ounce the project and the majority of the other assets in the gold industry become uneconomic.
Where are you now in the permitting process?
Mr. Rimelman: We are past the halfway point in Donlin Gold’s EIS process, and we remain on schedule in our overall permitting timeline. Our focus is centered on the draft EIS, which comprises the following four sections:
Initial drafts of the EIS sections have been reviewed by the agencies, and their constructive input is being considered and incorporated by the Army Corps of Engineers into the draft EIS. In addition, Donlin Gold continues to work simultaneously with the appropriate permitting agencies on other major permit applications, such as air quality, water discharge and usage, gas pipeline, rights of way, wetlands, and dam safety.
What will the completion of permitting Donlin Gold mean to NOVAGOLD?
Mr. Rimelman: The completion of permitting will be a major milestone for the company, signi cantly de-risking the Donlin Gold project. As we get closer to obtaining the permits, we expect to update the operating and capital costs, input parameters, and underlying assumptions in the Donlin Gold second updated feasibility study, which was published three years ago. With this data and that of the market conditions at that time, NOVAGOLD and Barrick will be in a position to decide on the course of action with respect to a construction decision.
* Donlin Gold Net Present Value estimates as per the second updated feasibility study e ective November 18, 2011, as amended January 20, 2012. All dollar gures are in USD and re ect after-tax net present value (at a 0% and 5% discount rates) of the Donlin Gold project
as of 1/1/2014. At a 5% discount rate, the net present value is: $547m @ $1,200 gold; $1,465m @ $1,300 gold; $3,147m @ $1,500 gold; $4,581m @ $1,700 gold; $6,722m @ $2,000 gold; and $10,243m @ $2,500 gold. Project development costs prior to 1/1/2014 are treated as sunk costs.
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