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brings added autonomy to the reserve base? As with smart-money endorsements by investors, central bank purchases of gold are the opposite of contrary indicators. The message these varied asset allocators are sending is a phenomenal harbinger of good things to come for our space.
Finally, I should add that the outperformance of the gold equities against gold this year – and, in turn, NOVAGOLD’s outperformance in particular relative to its peer group – is reaffirming our point of view that the company’s shares truly represent the finest way to play the coming bull market. While in 2019 our shareholders experienced the best price action in many years, despite how far NOVAGOLD has come during the last decade, our share price is still half of what it reached in 2010. So our optimism for our shareholders seems well-placed, for a multitude of reasons.
Just by being in the right place with the right asset at the right time, NOVAGOLD defines what I consider to be the hallmark of a great natural resource investment. My strategy has always been to take a stake in category- killer assets and watch the results. It worked for me in silver, platinum group metals, and hydrocarbons. Some years back, I amended the mantra from “great assets that give you enormous leverage to an underlying theme” to “great assets that give you enormous leverage to an underlying theme and that are located in safe jurisdictions that will allow you to keep the fruits of that leverage.” NOVAGOLD embodies that latter iteration in a perfectly neat and intellectually accessible package.
From a micro standpoint, NOVAGOLD’s accomplishments alone since we last traded in the teens are enormously impressive. Every promise we have made has been kept, every de-risking of our asset base and strategy has been successfully implemented, and all the moves we have taken to date render our company precisely what we wanted to have in time for the bull market’s resumption: namely, a focused play on the greatest development story in the gold world. In so becoming, we have sharpened our case to be among the very few go-to stocks come the imminent Great Revaluation of those scarce, high-quality gold assets located in safe places. For that, we certainly are. Being a pure gold play – especially following the reaffirmation by Barrick of our tier-one U.S. asset status, a gold standard of sorts in the gold industry – could not come at a better time for a project that has secured its federal permits. For Donlin is a project that seems tailor-made to fill a vacuum of category-killer assets in the gold industry’s pipeline. The deficiencies of the space at large – be it the collapse in grades, the exhaustion of old mines (along with the abject paucity of new discoveries of size), or the advent of jurisdictional risk as an existential risk to mining companies – and many other factors combine to make Donlin something of the Holy Grail. Owning a half share in this trophy, during something of a religious revival for gold, constitutes as much a spiritual as a temporal tailwind for our team. To extend the metaphor even further, we suspect the experience will be positively rapturous for our fellow shareholders.
How rapturous? Let me answer the question this way. I am occasionally asked how NOVAGOLD should be valued. Putting aside the fact that I am obviously biased towards the company for all of the reasons that I have specified, the reality is quite simple. Look at what I do. If I thought there was a better buy out there that I could not afford to make with our present capital base, I would have already put NOVAGOLD into play and sold it.
But to the Electrum team and me, that better asset and superior value simply does not exist. By implication, we believe it’s still very cheap. Not as cheap as last year of course, when I wrote as follows:
As of this writing, our shares are trading below $4. This does not represent a market-clearing price. Those who believe our half of Donlin Gold – which I believe constitutes without a doubt one of the most important development-stage gold plays in the world – to be worth only a billion dollars in today’s fire-sale environment are so steeped in negative market sentiment that they have lost perspective. This, of course, is normal investor sentiment at the end of a cyclical downturn. Nonetheless, a billion dollars for half of a project that we expect could be worth a significant multiple of that amount when gold enters the next phase of the bull market is unrealistic in my view. Think of NOVAGOLD in these terms: a superlative asset that cannot, as the saying goes, be “recreated in a garage.” Then you’ll understand why I believe that buying NOVAGOLD today is like having a second bite of (the) Apple when Steve Jobs came back into the picture. Yes, I believe it is that good of an opportunity.
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