NOVAGOLD(NG) - 2023 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements This section presents NOVAGOLD RESOURCES INC.'s unaudited interim financial statements, including balance sheets, statements of loss, cash flows, and equity - The company's principal asset is a 50% interest in the Donlin Gold project in Alaska, owned and operated by Donlin Gold LLC, a joint venture with Barrick Gold Corporation. NOVAGOLD has no realized revenues from its planned principal business[27] Condensed Consolidated Interim Balance Sheets Total assets decreased to $138.1 million from $159.2 million, while total liabilities increased to $138.1 million, driven by accrued interest on the promissory note Condensed Consolidated Interim Balance Sheets (As of August 31, 2023 vs. November 30, 2022) | (in thousands USD) | August 31, 2023 | November 30, 2022 | | :--- | :--- | :--- | | Current Assets | $131,895 | $152,538 | | Cash and cash equivalents | $44,079 | $63,882 | | Term deposits | $86,000 | $62,000 | | Notes receivable | $0 | $24,421 | | Total Assets | $138,133 | $159,189 | | Current Liabilities | $3,960 | $4,599 | | Promissory note | $133,274 | $123,685 | | Total Liabilities | $138,092 | $129,286 | | Total Equity | $41 | $29,903 | Condensed Consolidated Interim Statements of Loss and Comprehensive Loss Net loss for Q3 2023 decreased to $11.1 million ($0.03/share) from $16.1 million, driven by lower Donlin Gold equity loss Statements of Loss (Three and Nine Months Ended August 31) | (in thousands USD, except per share) | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | General and administrative | $5,243 | $4,872 | $16,385 | $15,420 | | Equity loss – Donlin Gold | $3,978 | $9,412 | $15,996 | $21,893 | | Loss from operations | ($9,221) | ($14,284) | ($32,381) | ($37,313) | | Interest expense on promissory note | ($3,433) | ($2,198) | ($9,589) | ($5,394) | | Other income, net | $1,435 | $147 | $5,084 | $988 | | Net loss | ($11,074) | ($16,123) | ($36,382) | ($41,088) | | Net loss per share | ($0.03) | ($0.05) | ($0.11) | ($0.12) | Condensed Consolidated Interim Statements of Cash Flows Net cash used in operating activities improved to $6.0 million, with cash and cash equivalents decreasing by $19.8 million to $44.1 million Cash Flow Summary (Nine Months Ended August 31) | (in thousands USD) | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($5,965) | ($9,967) | | Net cash provided from (used in) investing activities | ($13,838) | ($16,925) | | Net cash used in financing activities | $0 | ($2,122) | | Net change in cash and cash equivalents | ($19,803) | ($29,192) | | Cash and cash equivalents at end of period | $44,079 | $61,932 | Notes to Condensed Consolidated Interim Financial Statements Notes detail accounting policies, Donlin Gold investment, Barrick promissory note terms, and the $25 million Newmont payment - The company received a $25 million note receivable payment from Newmont on July 27, 2023, related to the sale of the Galore Creek project. A final $75 million contingent note remains, but no value has been assigned as project construction approval is not deemed probable[37][38] - The company has a promissory note payable to Barrick totaling $133.3 million, comprising $51.6 million in principal and $81.7 million in accrued interest. The note is payable from 85% of NOVAGOLD's share of future mine production revenue or proceeds from reducing its interest in Donlin Gold[44] Investment in Donlin Gold (Nine Months Ended August 31, 2023) | (in thousands USD) | Amount | | :--- | :--- | | Balance – beginning of period | $3,848 | | Share of losses | ($15,996) | | Funding | $15,247 | | Balance – end of period | $3,099 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Donlin Gold project advancement, including stakeholder engagement, permitting, and litigation, noting decreased net loss and sufficient liquidity Donlin Gold Highlights This section highlights Donlin Gold's non-technical progress, including stakeholder engagement, advancing permits, and defending against legal challenges - Donlin Gold's partnerships with Calista Corporation and The Kuskokwim Corporation (TKC) are central to its outreach in the Yukon-Kuskokwim (Y-K) region, formalized by 14 Shared Values Statements with key villages[59] - A new air quality permit was issued in July 2023 and was not appealed. The re-issuance of the Alaska Pollutant Discharge Elimination System (APDES) permit is underway and expected in 2024[68] - The company successfully defended several permits: the ADEC Commissioner reaffirmed the 401 Water Quality Certification in August 2023, and the Alaska Superior Court affirmed the State pipeline ROW lease and water rights permits. An appeal of the ROW lease is now before the Alaska Supreme Court[69][70][71] - A new lawsuit was filed in April 2023 by Earthjustice against the U.S. government, seeking to invalidate the Donlin Gold Joint Record of Decision, including the federal 404 permit. The State of Alaska, Donlin Gold, and Calista have intervened in the case[73] Donlin Gold Project Donlin Gold project focuses on updating geological models, optimizing design, and advancing permits, with the 2023 field program completed for dam safety data - The 2023 field program was completed in July and included 1,840 meters of geotechnical drilling and 1,279 meters of hydrogeologic drilling to gather data for water retention structures and mine planning[75] - NOVAGOLD's expected share of funding for the Donlin Gold project for the full year 2023 is $18 million[77] Consolidated Financial Results Net loss decreased in Q3 and the first nine months of 2023, driven by lower Donlin Gold field expenses and increased interest income - Q3 2023 net loss decreased by $5.0 million compared to Q3 2022, mainly due to lower Donlin Gold expenses and higher interest income[82] - Net loss for the first nine months of 2023 decreased by $4.7 million compared to the prior-year period, for similar reasons as the quarterly decrease[83] Liquidity and Capital Resources NOVAGOLD expects sufficient working capital for three years, with anticipated fiscal 2023 expenditures of $32 million, supported by cash and term deposits - The company anticipates total expenditures of approximately $32 million in fiscal year 2023, including $18 million for its share of the Donlin Gold project[85] Financial Position as of August 31, 2023 | Item | Amount (in thousands USD) | | :--- | :--- | | Cash and cash equivalents | $44,079 | | Term deposits | $86,000 | | Promissory note payable to Barrick | $133,274 | - As of September 26, 2023, the company had 334,181,149 common shares outstanding[4][89] Quantitative and Qualitative Disclosures about Market Risk Primary market risks include credit risk, mitigated by highly-rated Canadian bank deposits, and interest rate risk from the variable-rate promissory note to Barrick - Credit risk is mitigated by holding cash and term deposits primarily at three large Canadian chartered banks with high credit ratings (S&P: AA- or A-1, Moody's: Aa1 or Aa3)[92] - A 1% change in the U.S. prime rate would change the annual interest accrued on the promissory note by approximately $1.3 million[93] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of August 31, 2023, with no material changes to internal controls - The President and CEO and the CFO concluded that the company's disclosure controls and procedures are effective[95] - No changes occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[96] PART II - OTHER INFORMATION Legal Proceedings The company is not a party to any material litigation outside of ordinary business, with Donlin Gold permit challenges detailed in MD&A - The company is not aware of any material current, pending, or threatened litigation, other than routine litigation incidental to its business[99] Risk Factors No material changes have occurred to the risk factors previously disclosed in the Annual Report on Form 10-K - No material changes have been made to the risk factors set forth in the Annual Report on Form 10-K for the year ended November 30, 2022[100] Other Disclosures This section confirms no unregistered equity sales, no defaults on senior securities, and no applicable mine safety disclosures - Item 2: No unregistered sales of equity securities[101] - Item 3: No defaults upon senior securities[101] - Item 4: Mine safety disclosures are not applicable[102]