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$1,200; getting crushed or worse if gold goes to $900 before going to $1,900; and then having a bankrupt mine or a massively diluted vehicle that is then bought by, I don’t know, a savvy player like Mark Bristow – or even me, for that matter – in order to reopen or recapitalize it for when higher prices return. It makes no sense. It is an unforgiving error of commission because it simply does not need to happen. Unless, that is, one operates in a jurisdiction that has “use it or lose it” provisions. I would argue, however, that if you have that kind of gun to your head, there’s a good chance you’re already dead – just not buried yet.
Given the work ahead to best position and prepare Donlin for future development, time is on our side. What do we lose by waiting? Nothing. We’ve seen that just sitting can prevent disaster. What about the argument that one could lose the juiciest part of an upswing in prices by not being a producer? Let’s play that out. If I consider selling forward at a much higher gold price, I would be locking in a fairer price for my endowment than if I sold it at $1,200 with all its attendant drawbacks. That has to be better than selling at the whim of the market. Philosophically, I do not love hedging. I believe that there are times when it is smart and times when it is silly, but just being rationally objective, I would rather consider hedging some gold at higher prices as part of a project financing than selling gold at today’s prices. Of course, mentioning the word “hedging” at these higher prices, especially (ironically) to those who have no problem parting with the company’s gold at $1,200 in their pursuit of production at any price, is likely to prompt a vigorous debate. The outcome of the Socratic dialogue, however, usually ends up with my winning the argument – because
I have logic on my side. In other words, gold bulls get it; those who aren’t bullish on the fundamentals for gold sometimes don’t. But that’s fine. If you aren’t constructive on the price of gold, you aren’t going to buy our stock anyway. Nor should you. I know I wouldn’t either. As we say, “Bears don’t buy shares.”
What will the new leadership of Barrick do? It’s way too early to tell, but not too early to game it out. Let’s look at some possible scenarios:
f Barrick decides it has plenty on its plate and, for whatever reason, decides to sell their share of Donlin Gold. We would be thrilled, as it would trigger a sale process that would shine a very strong light on the unique virtues of Donlin. As Donlin is accretive in terms of pretty much any acquisition metric – including the big ones like reserves, production, grade, cash costs, mine life and jurisdictional risk – highlighting these facts with a sale process would be likely to strengthen our share price. As
we have a right of first refusal, we would help Barrick sell their share and, with partners, may consider participating in its purchase. Owning more of Donlin would amount to a gift, and we believe that there are plenty of motivated buyers who would want to participate in the story – and work with us to promote a narrative in a far more invigorated way than we’ve experienced heretofore with the pre- merger Barrick.
f Barrick decides to continue to frame the narrative and talk about Donlin as we have: a unique
asset with great leverage to higher prices in the future – in a jurisdiction that has never caused them grief. This will be great for us too. It’s one thing for NOVAGOLD to sing about the virtues of Donlin.
But Barrick’s reach is farther and deeper, and its influence will only be accentuated by the merger. Knowing the new management of Barrick, I can’t see them educating the myriad analysts who
cover them without insisting that they should get NOVAGOLD’s market-driven valuation of Donlin factored into their own valuation. After all, with Galore gone, it’s pretty much an apples-to-apples equation. This works for us and, indeed, is likely to lead to a virtuous circle if our shares rise and Barrick receives equal credit for its share, leading them to point that out and so on. If anything, the Newmont/ Goldcorp tie-up, which is more heavily tilted toward safer jurisdictions, adds a competitive impetus to Barrick highlighting its own premium North American assets.
f If Barrick is inclined to keep Donlin, and the Randgold mantra of a 20% IRR at $1,000 gold is upheld in North America as it was in Africa, Donlin will not make the cut. So we’ll have to wait for higher prices to materialize – as well as the likely revision of that particular criterion for ultra-large and long-lived mines in safe jurisdictions. This clearly works for us. After all, it’s the embodiment of our strategy!
f If the optimization is so successful as to make the economics sing at prices that would make Barrick wish to proceed with production, that revelation works for us as well. It could also make us

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