NOVAGOLD(NG) - 2024 Q3 - Quarterly Report

Forward-Looking Statements Forward-Looking Statements Overview The report outlines forward-looking statements, based on management's expectations, subject to risks like production uncertainty, financing, and permit acquisition - The report contains forward-looking statements concerning future operations, exploration, financial resources, and the economic viability of the Donlin Gold project, based on management's assumptions and not guarantees of future performance[3] - Key assumptions underpinning these statements include the ability to achieve production, cooperation of the co-owner (Barrick), estimated costs and returns, stable metal pricing, and obtaining all necessary governmental permits and approvals[4] - The company identifies numerous risks that could cause actual results to differ, such as the uncertainty of production, financing risks, commodity price volatility, permit acquisition challenges, and opposition from non-governmental organizations (NGOs)[5][6] PART I - FINANCIAL INFORMATION Financial Statements The unaudited condensed consolidated interim financial statements for the period ended August 31, 2024, show a net loss of $10.7 million for the third quarter and $34.8 million for the nine-month period, with total assets of $114.7 million and a total equity deficit of $37.8 million Condensed Consolidated Interim Balance Sheets Balance Sheet Highlights (as of August 31, 2024) | Account | Aug 31, 2024 ($ thousands) | Nov 30, 2023 ($ thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | 45,572 | 45,749 | | Term deposits | 60,000 | 80,000 | | Total current assets | 107,108 | 127,219 | | Total assets | 114,731 | 133,290 | | Liabilities & Equity | | | | Total current liabilities | 3,591 | 3,906 | | Promissory note | 147,880 | 136,748 | | Total liabilities | 152,540 | 141,513 | | Total equity (deficit) | (37,809) | (8,223) | Condensed Consolidated Interim Statements of Loss and Comprehensive Loss Statement of Loss Highlights (in thousands, except per share) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | General and administrative | $5,120 | $5,243 | $18,982 | $16,385 | | Equity loss – Donlin Gold | $2,814 | $3,978 | $9,765 | $15,996 | | Loss from operations | $(7,934) | $(9,221) | $(28,747) | $(32,381) | | Net loss | $(10,743) | $(11,074) | $(34,761) | $(36,382) | | Net loss per share | $(0.03) | $(0.03) | $(0.11) | $(0.11) | Condensed Consolidated Interim Statements of Cash Flows Cash Flow Summary (Nine Months Ended Aug 31) | Cash Flow Activity | 2024 ($ thousands) | 2023 ($ thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | (10,609) | (5,965) | | Net cash provided from (used in) investing activities | 10,604 | (13,838) | | Net cash used in financing activities | (174) | 0 | | Increase (decrease) in cash | (177) | (19,803) | Notes to Financial Statements - The company's principal asset is a 50% interest in the Donlin Gold project, accounted for under the equity method as a Variable Interest Entity (VIE) where NOVAGOLD is not the primary beneficiary[15][19] - A promissory note of $147.9 million is payable to Barrick, comprising $51.6 million in principal and $96.3 million in accrued interest, repayable from 85% of NOVAGOLD's share of future mine production revenue[28] - For the nine months ended August 31, 2024, the company's share of losses from the Donlin Gold project was $9.8 million, and it contributed $10.2 million in funding[24] - Subsequent to the quarter end, on September 30, 2024, a U.S. Federal District Court issued a ruling on a lawsuit challenging federal permits for the Donlin Gold project, upholding two of three issues but finding the analysis of a theoretical tailings release too narrow and requesting supplemental briefing on the remedy[45] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the ongoing advancement of the Donlin Gold project, including metallurgical test work, resource modeling, and dam safety certifications, highlighting strong stakeholder engagement, environmental initiatives, and defense of project permits against legal challenges, while maintaining a strong liquidity position with $105.6 million in cash and term deposits, sufficient for at least the next three years of planned expenditures Donlin Gold Project Update - Principal activities in Q3 2024 included advancing metallurgical test work, updating resource modeling, and progressing Dam Safety Certification submissions[47] Donlin Gold Funding (NOVAGOLD's Share) | Period | Funding ($ thousands) | | :--- | :--- | | Q3 2024 | 2,864 | | Nine Months 2024 | 10,198 | | Full Year 2024 (Expected) | 14,250 | Stakeholder Engagement and Social Investments - The company continues strong engagement with local communities in the Y-K region through partnerships with Native Corporations Calista and TKC, including hosting site tours and public open houses[51][52] - Social and environmental initiatives include a salmon smolt monitoring program, the "In It for The Long Haul" waste backhaul program (removing ~140,000 lbs of hazardous waste in 2024), and support for youth employment and education programs[54][55] Permitting and Litigation - The company is actively defending its permits against multiple legal challenges filed by Earthjustice on behalf of various native councils and villages, with key appeals pending before the Alaska Supreme Court regarding the State pipeline ROW and water rights permits, and oral arguments scheduled for November 12, 2024[58][60] - A Federal District Court ruling on September 30, 2024, partially sided with plaintiffs challenging the federal Joint Record of Decision (JROD), finding the analysis of a potential tailings facility release was too narrow, and has requested further briefing on the appropriate remedy[61] Liquidity and Capital Resources - As of August 31, 2024, the company has $105.6 million in cash and term deposits, considered sufficient to cover anticipated funding for the Donlin Gold project and corporate costs for at least the next three years[65] Anticipated 2024 Cash Expenditures | Category | Amount ($ thousands) | | :--- | :--- | | Donlin Gold Project Funding | 14,250 | | General & Administrative Costs | 16,950 | | Total | 31,200 | Quantitative and Qualitative Disclosures about Market Risk The company's primary market risks are credit risk and interest rate risk, with credit risk managed by holding cash and term deposits with high-rated Canadian banks, and interest rate risk mainly associated with the variable-rate promissory note payable to Barrick, where a 1% change in the U.S. prime rate would impact annual interest expense by approximately $1.48 million - The company's main financial risk exposure is related to interest rates on its promissory note to Barrick, which is tied to the U.S. prime rate[70] - A 1% change in the U.S. prime rate would alter the annual interest accrued on the promissory note by approximately $1.48 million[70] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of August 31, 2024, and concluded that they are effective, with no material changes to internal control over financial reporting during the quarter - The President and CEO, along with the CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[71] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[72] PART II - OTHER INFORMATION Legal Proceedings The company states that it is not aware of any material current, pending, or threatened litigation, aside from routine litigation considered part of the ordinary course of business - The company reports no material current, pending, or threatened litigation outside of the ordinary course of business[72] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended November 30, 2023 - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended November 30, 2023, were reported[73] Other Items (2, 3, 4) The company reports no unregistered sales of equity securities, no defaults upon senior securities, and that mine safety disclosures are not applicable - Item 2: No unregistered sales of equity securities[73] - Item 3: No defaults upon senior securities[73] - Item 4: Mine safety disclosures are not applicable[73] Other Information This section discloses the promotion of Richard Williams to Chief Operating Officer, effective January 1, 2024 - Richard Williams was promoted to Chief Operating Officer, effective January 1, 2024, with his compensation increasing to $434,500 per year[74] Exhibits This section provides an index of the exhibits filed with the Form 10-Q, including employment agreements, CEO/CFO certifications, and XBRL data files - The report includes an index of all exhibits filed, such as employment agreements for Richard Williams and Peter Adamek, and required SEC certifications[77]