Page 26 - NG_AR_2015

Q:
In two years’ time, could you proceed with the development of the Donlin Gold project? If so, how would you finance its capital expenditures?
A:
David Ottewell
vice president and chief financial officer NOVAGOLD
Kelvin Dushnisky
president Barrick Gold
A:
Cash and Term Deposits 1
$127
1) Includes $85M in term deposits as of November 30, 2015.
M
Sufficient cash to meet the company’s financial obligations and advance the Donlin Gold project through the remaining permitting process
2016 Budget 2
$25
$9.0M Donlin Gold $1.0M Galore Creek $15.0M G&A, interest, and
M
Donlin Gold joint studies 2) 2016 anticipated budget expenditure disclosed on January 27, 2016.
24
The co-owners will evaluate the economics of the Donlin Gold project once the permitting phase is complete and we’re in a position to make a construction decision. That’s a couple of years away, so we have time to think about strategy. In principle, when gold increases in value, we expect Donlin Gold to look incredibly attractive. NOVAGOLD takes a long-term view of the asset, which is an extremely rich gold deposit whose value is to be maximized for all its stakeholders rather than given away in a low gold price environment.
For us, NOVAGOLD’s shares are as precious as the metal itself. When the time is right, we expect to have multiple financing options available, including equity, debt, equipment leases, and third-party owner/operator arrangements. In the meantime, we’re working with Barrick to explore ways to reduce the initial cost of building the project.
We believe that NOVAGOLD has sufficient funds to cover its share of anticipated funding for Donlin Gold, as well as general and administrative costs, through to the completion of permitting.
The Donlin Gold project has the potential to become a world class asset for Barrick and for our partner NOVAGOLD.
We would like nothing more than to see this potential realized. At the same time, we are very focused on disciplined capital allocation. Working with NOVAGOLD, we continue to evaluate potential design and execution enhancements to further improve the economics of the project. The goal is to ensure the project can meet our investment criteria at prevailing gold prices when permitting at Donlin Gold is complete. In the interim, given the current stage of the project, it is too soon to speculate on what form project financing might take. What we can say, however, is that we will continue to strengthen our balance sheet and improve our financial flexibility, so that we have the option to pursue opportunities such as the Donlin Gold project in the future.