NOVAGOLD(NG) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements NOVAGOLD reported a $63.4 million net loss for the six months ended May 31, 2025, primarily due to a $39.6 million non-cash warrant expense, despite strengthening its financial position with $243.8 million raised from equity offerings Condensed Consolidated Interim Balance Sheets (Unaudited, US dollars in thousands) | | May 31, 2025 | November 30, 2024 | | :--- | :--- | :--- | | Current Assets | | | | Cash and cash equivalents | $293,737 | $42,224 | | Term deposits | $25,000 | $59,000 | | Total Assets | $329,295 | $109,753 | | Current Liabilities | $4,189 | $4,486 | | Promissory note | $158,795 | $151,522 | | Total Liabilities | $164,018 | $157,169 | | Total Equity (Deficit) | $165,277 | ($47,416) | Condensed Consolidated Interim Statements of Loss (Unaudited, US dollars in thousands) | | Six months ended May 31, 2025 | Six months ended May 31, 2024 | | :--- | :--- | :--- | | General & administrative | $10,621 | $13,862 | | Equity loss – Donlin Gold | $8,762 | $6,951 | | Warrant expense | ($39,607) | — | | Interest expense - promissory note | ($7,273) | ($7,299) | | Net loss | ($63,391) | ($24,018) | | Net loss per common share | ($0.19) | ($0.07) | - On May 9, 2025, the company closed a public equity offering and a concurrent private placement, receiving aggregate gross proceeds of approximately $243.8 million before deducting fees and expenses of about $9.7 million[50][51] - In connection with a backstop commitment agreement, the company issued 25.5 million warrants, resulting in a non-cash warrant expense of $39.6 million in the second quarter of 2025[52][54] - Subsequent to the quarter end, on June 3, 2025, the company acquired an additional 10% interest in the Donlin Gold project for $200 million, increasing its economic interest to 60%[69] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Donlin Gold project's increased stake to 60% via $260.4 million equity financing, noting a widened net loss from a $39.6 million warrant expense Donlin Gold Transaction and Financing On June 3, 2025, NOVAGOLD completed the acquisition of an additional 10% interest in Donlin Gold from Barrick for $200 million, increasing its economic stake to 60% - NOVAGOLD increased its economic stake in Donlin Gold to 60% by acquiring an additional 10% for $200 million, while Paulson acquired the remaining 40% from Barrick[75][80] - Despite holding a 60% economic interest, NOVAGOLD's voting interest is contractually set at 50% to ensure equal governance with its 40% partner, Paulson[84][121] - The transaction was funded by a $195.2 million public offering and a $64.4 million private placement, totaling $260.4 million[76] - The promissory note owed to Barrick was amended, providing an option for NOVAGOLD to prepay the full amount for $100 million on or before December 3, 2026[82][107] Donlin Gold Project Update In the second quarter of 2025, activities at the Donlin Gold project focused on preparing for an updated feasibility study and advancing a 15,000-meter drill program - A 15,000-meter drill program commenced in March, with 8,401 meters completed by the end of the second quarter, focusing on resource conversion and expansion[88][90] - The company is preparing for an updated feasibility study, with contracts expected to be awarded by year-end 2025[88] - On May 6, 2025, the Alaska Superior Court upheld the state's water quality certification for the project; this decision was subsequently appealed to the Alaska Supreme Court on May 28, 2025[96] - On June 10, 2025, a Federal District Court denied a request to vacate the project's federal permits and instead remanded the case to agencies for a supplemental analysis on a narrow issue, while retaining jurisdiction[98] Financial Results and Liquidity The net loss for the second quarter and first six months of 2025 increased by $40.6 million and $39.4 million respectively, primarily due to a one-time, non-cash warrant expense of $39.6 million - The increase in net loss for Q2 2025 was primarily driven by a $39.6 million non-cash, non-recurring charge for warrants issued under a backstop commitment agreement[100][101] Liquidity Position (as of May 31, 2025) | Item | Amount (in thousands) | | :--- | :--- | | Cash and cash equivalents | $293,737 | | Term deposits | $25,000 | | Total Cash and Term Deposits | $318,737 | - Pro-forma cash and cash equivalents were $111.3 million after the closing of the Donlin Gold Transaction ($200 million payment) and the exercise of the underwriters' overallotment option (+$26.9 million proceeds) in early June 2025[104][106] - The company's share of Donlin Gold funding is expected to be higher than the previous 2025 guidance of $21.5 million due to the increased 60% ownership stake and an expanded work plan[89][105] Quantitative and Qualitative Disclosures about Market Risk The company is exposed to credit risk through its concentration of cash and term deposits held at a few large Canadian banks with investment-grade ratings - Credit risk is concentrated in cash and term deposits held at a limited number of Canadian chartered banks with high credit ratings[113] - The promissory note owed to Barrick has a variable interest rate (U.S. prime + 2%). A 1% change in the U.S. prime rate would alter the annual interest expense by approximately $1,588 thousand[114] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of May 31, 2025, and concluded they were effective - The President and CEO, along with the CFO, concluded that the company's disclosure controls and procedures were effective as of May 31, 2025[115] - No changes that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting occurred during the quarter[116] PART II - OTHER INFORMATION Legal Proceedings The company is not aware of any material current, pending, or threatened litigation outside of the ordinary course of business - The company reports no material current, pending, or threatened litigation[118] Risk Factors New risks arise from shared governance with the 40% Donlin Gold co-owner, potentially impacting strategic decisions despite NOVAGOLD's 60% economic interest and funding obligation - A new risk factor is the dependence on cooperation with the new third-party co-owner of Donlin Gold, who holds a 40% economic interest but shares equal governance rights[120] - Despite owning 60% of Donlin Gold, NOVAGOLD's voting interest is contractually reduced to 50%, while its funding obligation remains at 60%. This disproportionate structure may reduce its ability to assert proportionate rights[121] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds that require disclosure under this item - None reported[122] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None reported[122] Mine Safety Disclosures This item is not applicable to the company - Not applicable[124] Other Information The company reported no other information - None reported[125] Exhibits This section provides an index of exhibits filed with the report, including agreements related to the Donlin Gold transaction, warrants, and required officer certifications - The report includes an index of all exhibits filed, such as the Membership Interest Purchase Agreement, Backstop Agreement, and officer certifications[127][132]