NOVAGOLD(NG) - 2024 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated interim financial statements for the period ended May 31, 2024, detailing a net loss of $24.0 million, total assets of $121.6 million, and an equity deficit of $27.5 million Condensed Consolidated Interim Balance Sheets As of May 31, 2024, total assets decreased to $121.6 million, total liabilities increased to $149.0 million, and the equity deficit widened to $27.5 million Balance Sheet Highlights (in thousands) | Balance Sheet Highlights (in thousands) | May 31, 2024 | Nov 30, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $52,568 | $45,749 | | Term deposits | $60,000 | $80,000 | | Total current assets | $113,945 | $127,219 | | Total assets | $121,577 | $133,290 | | Liabilities & Equity | | | | Total current liabilities | $3,891 | $3,906 | | Promissory note | $144,047 | $136,748 | | Total liabilities | $149,049 | $141,513 | | Total equity (deficit) | ($27,472) | ($8,223) | Condensed Consolidated Interim Statements of Loss and Comprehensive Loss For the six months ended May 31, 2024, the company reported a net loss of $24.0 million, a decrease from $25.3 million in the prior year, primarily due to lower equity losses from the Donlin Gold project Statement of Loss Highlights (in thousands) | Statement of Loss Highlights (in thousands) | Six Months Ended May 31, 2024 | Six Months Ended May 31, 2023 | | :--- | :--- | :--- | | General and administrative | $13,862 | $11,142 | | Equity loss – Donlin Gold | $6,951 | $12,018 | | Loss from operations | ($20,813) | ($23,160) | | Interest expense on promissory note | ($7,299) | ($6,156) | | Interest and dividend income | $3,071 | $2,679 | | Net loss | ($24,018) | ($25,308) | | Net loss per share | ($0.07) | ($0.08) | Condensed Consolidated Interim Statements of Cash Flows For the six months ended May 31, 2024, net cash used in operating activities was $6.6 million, while investing activities provided $13.4 million, leading to a $6.8 million increase in cash and cash equivalents Cash Flow Highlights (in thousands) | Cash Flow Highlights (in thousands) | Six Months Ended May 31, 2024 | Six Months Ended May 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($6,570) | ($4,662) | | Funding of Donlin Gold | ($7,334) | ($12,772) | | Net proceeds from term deposits | $20,000 | $0 | | Net cash provided from (used in) investing activities | $13,409 | ($12,230) | | Increase (decrease) in cash and cash equivalents | $6,819 | ($16,928) | Notes to Condensed Consolidated Interim Financial Statements This section clarifies that NOVAGOLD's principal asset is a 50% interest in the Donlin Gold project, detailing its equity method investment, a significant promissory note to Barrick, and share-based compensation - The company's principal asset is a 50% interest in the Donlin Gold project in Alaska, a joint venture with Barrick Gold Corporation[29] Change in Investment in Donlin Gold (in thousands) | Change in Investment in Donlin Gold (in thousands) | Six Months Ended May 31, 2024 | | :--- | :--- | | Balance – beginning of period | $3,071 | | Share of losses | ($6,951) | | Funding | $7,334 | | Balance – end of period | $3,454 | - A promissory note payable to Barrick totals $144.0 million as of May 31, 2024, accruing interest at U.S. prime plus 2% and repayable from 85% of future mine production revenue[42][47] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Donlin Gold project's advancement, including Q2 2024 activities and stakeholder engagement, noting a lower net loss due to reduced field expenses and sufficient liquidity for at least three years Donlin Gold Project Update Key activities at the Donlin Gold project in Q2 2024 included resource modeling, metallurgical testing, water model updates, and infrastructure planning, with the company's funding share at $7.3 million for the first six months - Key activities in Q2 2024 included ongoing resource modeling, metallurgical test work for flowsheet optimization, updating water models, and advancing regional infrastructure planning[65] - NOVAGOLD's funding share for the Donlin Gold project was $7.334 million for the first six months of 2024, with a full-year budget of $14.250 million[68] Stakeholder Engagement and Permitting The company maintained strong stakeholder relations, finalizing a 17th Shared Values Statement, while actively defending its permits against ongoing legal challenges in Alaska and Federal courts with oral arguments scheduled for mid-to-late 2024 - A 17th Shared Values Statement was finalized with a Y-K region community, formalizing engagement on local issues[73] - The company is actively defending its permits in multiple legal proceedings, including appeals of the Clean Water Act certification, state water rights, and the Federal Joint Record of Decision, with oral arguments scheduled for July and August 2024[79][80][86][87] Financial Results and Liquidity The net loss for Q2 2024 decreased by $0.9 million due to lower field expenses, and the company maintains a strong liquidity position of $112.6 million, sufficient for at least the next three years - The decrease in net loss for Q2 and the first six months of 2024 was primarily due to lower field expenses at Donlin Gold, increased interest income, and gains on marketable securities[89] Financial Position Highlights (in thousands) | Financial Position Highlights | As of May 31, 2024 | | :--- | :--- | | Cash and cash equivalents | $52,568 thousand | | Term deposits | $60,000 thousand | | Promissory note payable to Barrick | $144,047 thousand | - Anticipated expenditures for fiscal year 2024 are approximately $31.2 million, including $14.25 million for Donlin Gold funding and $16.95 million for general and administrative costs[92] Quantitative and Qualitative Disclosures about Market Risk The company's financial instruments are exposed to credit risk, concentrated in cash and term deposits, and interest rate risk from its variable-rate promissory note tied to the U.S. prime rate - A 1% change in the U.S. prime rate would result in an approximate $1.44 million change in the annual interest accrued on the promissory note payable to Barrick[101] Controls and Procedures As of May 31, 2024, management concluded that the company's disclosure controls and procedures are effective, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures are effective for timely and accurate SEC reporting[102] PART II - OTHER INFORMATION Legal Proceedings & Risk Factors The company reports no material current, pending, or threatened litigation and no material changes to previously disclosed risk factors from its Annual Report on Form 10-K - The company is not aware of any material current, pending, or threatened litigation[106] - There have been no material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended November 30, 2023[106] Other Information This section confirms no unregistered sales of equity securities, no defaults upon senior securities, and no applicable mine safety disclosures, with no other material information reported - The company reports no activity under Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), or Item 5 (Other Information)[107][108][109]