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12 NG
As of today, our share price has more than doubled from when these bullish sentiments were initially expressed. I believe that we will be multiples above this. Let me give you a couple of points to ponder.
The last time we doubled from $8 to $16 was in 2010. True, it was during a generally favorable uplift in the mining equities. But what one has to remember is that NOVAGOLD not only performed beautifully, it did so in the face of some serious headwinds that were only subsequently resolved. The latest Feasibility Study on Donlin had yet to be completed. There was no Pre-Feasibility Study on Galore. There wasn’t a management team like Greg Lang and his crew. NOVAGOLD was not a pure play as we felt it should and did become; if anything, it was still messy in terms of its exposure to copper in Galore and the Ambler District (now spun off into Trilogy) and the still-pending divestiture of Rock Creek. As to that pure play on Alaska, in light of Pebble’s problems, there was a very strong skepticism regarding Donlin’s likelihood of obtaining its permits. And, of course, there was a sense of dissonance from the Barrick side, still smarting from the shareholders of NOVAGOLD having rejected their hostile takeover bid. A decade later, the drags on our performance then (such as they were, for after all the stock did triple from $5 to its highs) have disappeared. Indeed, all of these headwinds have resolved themselves into gale-force tailwinds. In other words, we are unencumbered by uncertainties that could hold us back.
Hold us back from what, one might ask? What is Donlin worth? Let’s start with discount rates. Even setting aside the fact that so much debt is trading at negative yields, I believe that the very few scarce, large, long-lived U.S. gold deposits will be valued using the 0% discount rates that prevailed before the “go where the gold is” frontier spirits took hold in the 1990s. Before Newmont’s adventurous sprint to Yanacocha, the prevailing wisdom was that U.S. assets were valued at 0%, as they were arbitraged against the then-risky jurisdictions from which investors would make their selections: Canada, Australia, and South Africa. This was especially the case if there happened to be some exploration upside. Ultimately, the pendulum swung so far in the other direction that assets in places like Indonesia and Tanzania achieved higher valuations than those in the United States! This was often due to the perception (or excuse) that such places were easier locales in which one could permit mines. Having been a poster child for regions like Bolivia, Pakistan, and other exotic places, I know whereof I speak. I came to believe that this particular era was over and acted accordingly with my own portfolio. Hence my mantra, or doctrine. If that observation on interest rates is remotely true, then an American asset with extraordinary geological upside – indeed the ultimate trophy, if in one or two phases we have the largest single pure gold- producing mine in the world – will be valued at 0% discount rates. The owner’s last feasibility study on Donlin Gold pegged that NPV at around $20 billion at $1,900 gold (on a 100% basis). But remember, this figure does not reflect any additional gold that might well be found beyond the 3km of an 8km mineralized belt! For all these reasons and more, I believe we could easily see a NOVAGOLD stock price far higher than where we are today when the animal spirits return to our space.
And, of course, I genuinely do not believe that the $1,900 level will prove to be a real number in the next up leg in gold. Such a price might one day constitute gold’s support, as the next wave takes that price point out and the bull market resumes in earnest.
This is the answer to but one query that I have received over the past year. What follows this letter is thus a Q&A compendium that hopefully should answer the most commonly asked questions of us – and then some. If we have missed any areas of enquiry, please feel free to ask of us, and we will do our best to oblige you.
Needless to say, such a remarkable positioning did not happen in a vacuum. In readying ourselves to be able to survive the worst and outperform during the good times to come, I wish to express my sincere appreciation to all of those who make this journey so rewarding. I am especially grateful to Calista and The Kuskokwim Corporation (TKC) for their steadfastness in working so constructively with the Donlin Gold team. These thanks extend as well to all of the federal and state government agencies and representatives that have been so supportive of our efforts. For a fruitful drill program at Donlin, and all individuals working on the optimization effort, I am grateful to Barrick and the Donlin Gold team. Lastly, on a more personal note, I wish to invoke Aristotle’s maxim that “friendship is like a partnership” and therefore thank my friends and partners – the management team led by Greg Lang, the board of NOVAGOLD, and our wonderfully engaged and value-adding

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