NOVAGOLD(NG) - 2022 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements NOVAGOLD RESOURCES INC.'s unaudited Condensed Consolidated Interim Financial Statements are presented, detailing financial position, performance, and cash flows, with notes on the 50% equity-accounted Donlin Gold project Condensed Consolidated Interim Balance Sheets Condensed Consolidated Balance Sheet Highlights (as of August 31, 2022) | Account | August 31, 2022 (in thousands) | November 30, 2021 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $61,932 | $91,124 | | Term deposits | $70,000 | $78,000 | | Total current assets | $157,113 | $169,451 | | Total assets | $166,581 | $198,852 | | Liabilities & Equity | | | | Total current liabilities | $3,458 | $4,383 | | Promissory note | $121,117 | $115,723 | | Total liabilities | $125,705 | $120,570 | | Total equity | $40,876 | $78,282 | Condensed Consolidated Interim Statements of Loss and Comprehensive Loss Statement of Loss Highlights | Metric (in thousands, except per share) | Three Months Ended Aug 31, 2022 | Three Months Ended Aug 31, 2021 | Nine Months Ended Aug 31, 2022 | Nine Months Ended Aug 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | General and administrative | $4,872 | $4,883 | $15,420 | $15,204 | | Equity loss – Donlin Gold | $9,412 | $6,748 | $21,893 | $12,914 | | Net loss | $(16,123) | $(11,790) | $(41,088) | $(30,267) | | Net loss per common share | $(0.05) | $(0.04) | $(0.12) | $(0.09) | Condensed Consolidated Interim Statements of Cash Flows Cash Flow Highlights (Nine Months Ended August 31) | Activity (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(9,967) | $(8,139) | | Net cash provided from (used in) investing activities | $(16,925) | $65,176 | | Net cash used in financing activities | $(2,122) | $(731) | | Net change in cash and cash equivalents | $(29,192) | $56,887 | | Cash and cash equivalents at end of period | $61,932 | $117,793 | Notes to Condensed Consolidated Interim Financial Statements - 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 equally owned with Barrick Gold Corporation[25] - The investment in Donlin Gold is accounted for under the equity method, with the company's share of Donlin Gold's net assets totaling $38.6 million as of August 31, 2022[29][41] - The company has a promissory note payable to Barrick totaling $121.1 million as of August 31, 2022, including $69.5 million in accrued interest, payable from 85% of future mine production revenue or proceeds from reducing its Donlin Gold interest[43] - The company holds a $25,000 note receivable from Newmont, due by July 2023, and a contingent note for $75,000 receivable upon approval of the Galore Creek project construction plan[35][37] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Donlin Gold project advancements, increased net loss due to higher project spending, and confirms sufficient working capital for future funding Donlin Gold Highlights - The 2022 drilling program was expanded and completed, totaling approximately 42,300 meters across 141 holes, with assay results anticipated in early 2023[66] - Permitting activities are advancing, with ongoing legal and administrative processes for the CWA Section 401 certification, State Right-of-Way (ROW) agreement, and water rights, with decisions expected in late 2022 and through 2023[62][63][64] - Donlin Gold signed Shared Values Statements with 11 villages in the Y-K region, formalizing engagement and addressing community needs like infrastructure and environmental studies[59] - NOVAGOLD's share of funding for the Donlin Gold project is expected to be approximately $32 million in 2022, an increase to support the expanded drilling program and other studies[68] Consolidated Financial Results Net Loss Comparison (2022 vs. 2021) | Period | Net Loss 2022 (in thousands) | Net Loss 2021 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Third Quarter | $(16,123) | $(11,790) | $4,333 increase | | First Nine Months | $(41,088) | $(30,267) | $10,821 increase | - The increase in net loss in 2022 is primarily attributed to the expanded Donlin Gold work program, higher interest expense on the Barrick promissory note, and lower accretion income[71][72] Liquidity and Capital Resources - As of August 31, 2022, the company had $61.9 million in cash and cash equivalents and $70.0 million in term deposits[15][78] - Total anticipated expenditures for fiscal year 2022 are approximately $48 million, which includes $32 million for the Donlin Gold project and $13 million for corporate G&A costs[74] - In the first nine months of 2022, cash and cash equivalents decreased by $29.2 million, mainly due to funding Donlin Gold activities and corporate expenses[76] - As of September 27, 2022, the company had 333,390,237 common shares outstanding[77] Quantitative and Qualitative Disclosures about Market Risk The company's financial instruments are exposed to credit risk from cash and notes receivable, and interest rate risk from its variable-rate promissory note to Barrick - Credit risk is managed by holding cash and term deposits in high-investment-grade Canadian chartered banks and having notes receivable from Newmont, an investment-grade company[80] - The company is exposed to interest rate risk on its promissory note to Barrick, which has a variable rate tied to the U.S. prime rate; a 1% change in the prime rate would alter the annual interest expense by approximately $1.2 million[81] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of August 31, 2022, with no material changes to internal controls over financial reporting - The President and Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective[83] - No changes in the company's internal control over financial reporting occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[84] PART II - OTHER INFORMATION Legal Proceedings The company is not aware of any material current, pending, or threatened litigation beyond routine business matters - The company is not aware of any material litigation that is current, pending, or threatened[86] Risk Factors No material changes have occurred to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended November 30, 2021 - No material changes have occurred to the risk factors set forth in the Annual Report on Form 10-K for the year ended November 30, 2021[88] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None[89] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[89] Mine Safety Disclosures This section is not applicable to the company - These disclosures are not applicable to us[89] Other Information The company reported no other information for the period - None[90] Exhibits This section provides an index of exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files - The exhibits include certifications by the CEO and CFO under Rule 13a-14(a) and Section 1350, as well as Inline XBRL files[98]