NovaGold Resources Inc (NG) 2008 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to the NovaGold 2008 first quarter results conference call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Mr. Rick Van Nieuwenhuyse, President and Chief Executive Officer. Please go ahead, Mr. Nieuwenhuyse.

Thank you, operator. And good morning, ladies and gentlemen. Thank you for joining us with our quarterly update call. It is a pleasure to be here and update you. Of course I will be making forward-looking statements and direct you to the second slide in the presentation. And without further ado we will move on here.

NovaGold is a company that has 26.5 million attributable ounces of gold, with core assets located in geopolitically stable North America. Our Nome Operations, which we expect to achieve production this year, midyear; our Donlin Creek project which is obviously a very large gold project with -- it is advancing to feasibility studies, as well as our Galore Creek project also advancing to feasibility study as we continue to work on that. We have strong alliances with major corporations, Teck Cominco, Barrick and Rio Tinto. An experienced team has a proven track record of resource growth and project advancement.

I would like to talk to you today -- review the projects for you but also talk about our valuation and our plans to move forward here. As I mentioned our projects all are located in North America, Alaska and Northern British Columbia. We have excelled at creating good partnerships with local First Nations and native corporations in Alaska. This has been a real benefit and help in achieving a rapid and successful permitting of our projects. And we think this is a core value of the company, and we think one that should be recognized by our shareholders as something that we do very well.

Just a quick review of the three projects, our Nome Operations is 100% owned. We have a 500,000 ounce proven and probable reserve there along with the 1.8 million ounce M&I resource and additional inferred resources. We will achieve production by midyear and generate cash flow. Our Donlin Creek project, 50% owned with Barrick Gold owning the other 50% in the Donlin Creek LLC, 29 million ounces of measured indicated along with 3.5 million ounces of inferred resources. This project moving rapidly towards feasibility and permitting.

Our Galore Creek project 50% owned by ourselves, 50% owned by Teck Cominco in the Galore Creek Mining Corporation. Basically a 9 billion[dt1] pound copper and 7 million ounce of gold in the M&I category along with additional (technical difficulty). And likewise this project is in the process of working towards optimization studies and moving towards feasibility studies feasibility in 2009.

With that kind of an asset base you can see that NovaGold has only a very few peer group companies in North America with assets of that size and quality. And I would point out again that we are located in -- our assets are located in Alaska and British Columbia which are good mining provinces and territories with good laws, good mining, pro-mining laws and stable geopolitical environment.

Just beginning with Donlin Creek you can see here on the slide seven where it stacks up in terms of other large resource projects in North America. There really aren't very many, and when you start looking at the ones that exist, they are certainly in more geopolitically challenged environments. From a valuation standpoint I would like to point out that a couple of recent acquisitions by major companies of these large resources, such as the Newmont acquisition of Miramar, for their Hope Bay project for $1.4 billion and the acquisition of the 51% interest in Cerro Casale project with Barrick acquiring Arizona Star last year for $805 million.

So these are the kinds of assets that major corporations want and need, and these are rare assets to have this many ounces located in one place in the earth's crust. So Donlin Creek, really among the peer group, really stands heads and shoulders above -- it's a high-quality project with a lot of ounces of gold. It's a gold only project, so it is not a mixed copper/gold. It is gold only.

Currently we are completing a 21,000 meter exploration drill program primarily focused on the East Acma target area where we've intersected significantly higher grades than the average grade of the deposit. We find that this Acma and East Acma core zone is about 20% better grade. And we've been very excited about continuing the exploration drilling on this project. We've completed about 14 drill holes in that program. We are a little less than half finished. We expect the program to wrap up by the end of May. We expect that these higher grades will have a positive impact on the net present value of the project, and result in improved overall mine plan.

We are concurrently looking at various throughput options and us along with optimizing the feasibility side of the project we are looking at throughput options ranging between 50,000 tonnes per day and 100,000 tonnes per day. At those levels you could be producing between 1.5 to 2.5 million ounces of gold. As I mentioned, our objective this year is to determine an optimal throughput design and then to select the power option and proceed to feasibility study.

This next diagram shows the area there, the open pit. This is done at a $650 gold price. This year we'll use a $750 gold price to update the resource model. But inside the pit there is the 32 million ounces of MI, measured indicated and inferred ounces. You can see there the Acma zone which is a very strong knot of mineralization focused along that -- one of the major porphyry units there that is shown in gold along an East-West, near East-West structural zone. It is that panel off to the east there, that square box that we are doing the 21,000 meters of drilling. You can see some of the holes that were completed last fall that were not included in resource. They are outside the pit shell.

But you see that those holes had some tremendously good intersections in them, nearly 200 meters at 5 grams certainly qualifies as one of the better holes drilled at Donlin, and I think one of the better holes drilled in the industry. It is that panel of mineralization that we are drilling out right now, and we expect to be able to update you on drill results there later this quarter.

Looking at this map here shows the entire district. You can see the white outline of the Donlin Creek pit area, and you can see numerous targets continuing for a total of 8 kilometers along the strike length. We are particularly interested in the Dome target there towards the north end of the district. It is about 5 kilometers from the edge of the pit, where we see significant mineralization similar to what we see at the Acma/Lewis deposit, but the difference is that we, the preliminary indications are that this is non-refractory mineralization. So this is mineralization that could be processed with a simple carbon and leach circuit and not requiring the autoclaves, which of course we have to use at Acma/Lewis. So the result, a higher quality ore for a similar grade and obviously higher margins from a production standpoint. So this is an area that we will be doing some more work on this summer and we plan to move the drill rigs up there sometime later in May. So a lot of future growth and excitement at the Donlin Creek project.

We are working very closely and very well with Barrick in the Donlin Creek LLC. And we will look forward to updating you on that project later in the year. On our Nome operations very exciting time for us as we've advanced this project from the initial discovery grassroots all the way through to now to production. We expect this operation to produce on an annualized basis 100,000 ounces of gold. We certainly see some potential to increase, not only the mine life, but the throughput eventually. This will allow us to generate cash flow, and we're expecting about $25 million of cash flow this year. And I will -- Don will speak a bit more to that a bit later; but I would like to now ask Peter Harris, our Chief Operating Officer who is up in Nome along with Don to give us an update from the field there on the advancements of the Rock Creek project.

Thanks, Rick. Good day, all. It's a pleasure to be on the call. You will have to excuse my voice; I spent quite a bit of time up in Nome, and we've had an interesting winter season in Nome. In fact I am kind of wondering if the weather has ever really figured out when spring is up here, but it is a fascinating project. The town is really looking forward to the commencement of production up here. Contractors and our operators have really been working hard over the last two to three months to finalize everything with -- inside the process facility.

So what I can report on this morning is that the process facility has essentially been dry and wet commissioned. Our crushing facility has been run and tested over the last two to three months with run of mine material. Modifications to improve throughput have been completed, and capacity through the crushing circuit has proved up the initial nameplate capacities.

We have approximately 1.5 months of ore faced up and ready for feed in stockpiles and throughout the open pit. The grinding and concentrating circuit has been run successfully in both dry and wet commissioning modes. With crushed ore feed fed into the milling circuit and slurry effectively moved through to the refinery, where commissioning gold has been poured. The facility is now ready for production on startup of attaining storage facility which we expect to occur this quarter.

Near record snowfalls in Nome this winter season have challenged our surface earthworks teams. However, the crews including our contractors have worked really well together to complete this facility for this quarter. We expect to move into production over the next few weeks and continuously ramp up from that point in time. One of the advantages, if there is an advantage to having the TSF be somewhat delayed because of the winter season that we've had up in Nome is the crews, both the operating crews and our contractors and our consultants and vendor representatives, have had sufficient time within the circuit to test the circuit and to dry and wet commission the circuit. So that we are expecting when we start up this facility and move towards full production a reasonably flawless start to the production process. We have effectively seen every single component within the process facility tested and dry and wet commissioned. Rick, over to you.

Thanks, Peter, for the update. Just to remind people moving to the next slide, Rock Creek has a reserve of 500,000 ounces. That is based on an updated feasibility study that we just recently released so that should include all of the current cost that we are seeing out there in the environment. We have an additional resource at Saddle that we, about 0.25 million ounces that we plan to move into the mine plan this year, get it up and measured indicated and moving into the mine plan and start the permitting process on that.

Additionally we have the Big Hurrah project located about 40 kilometers to the east there, and we will be working on getting that property permitted so that we can include that in the mine plan for next year. So we see a lot of exploration upside at Nome. Our objective will be to increase the mine life and then to look at opportunities to increase the throughput and output of gold there. So we are very excited to be very, very close to production here, and we will look forward to updating you on that as time moves forward here.

On our Galore Creek project, clearly a very large and high-quality copper/gold/silver resource, porphyry system. We have an experienced management team reviewing engineering options to identify a go-forward strategy. We expect to have an update for you on that in the fall and then move towards the completion of the feasibility study in the next 12 to 18 months. We are committed to building this mine. We think this is a high quality asset, and we certainly have huge support from the Tahltan First Nations and from the provincial government of British Columbia here. And we will look forward to updating you on that this fall, as well.

Just a reminder other assets; our Ambler project in northwest Alaska high-grade copper/zinc project. We will be doing some scoping studies on that, some drilling this summer and public consultation. Our NovaGreenPower portfolio of renewable energy power projects in BC and Alaska, including our Forrest Kerr project, which we now have completed the feasibility study on. We will be looking for a partner to develop, help develop that project. That process is underway, and of course, we have a portfolio of early stage exploration projects in Alaska and BC. And we are looking for new opportunities, and we've made a strategic decision to look at opportunities to maximize the value for our Ambler and NovaGreenPower assets, and we will be pursuing that later this year.

Don, I would like to turn it over to you to update everyone on our Q1 financials.

As Rick has outlined, it is an interesting year ahead of us. I will cover the results for Q1 2008, our financing activities post Q1 and our minimum expenditures on our main projects going forward for the rest of this year.

Q1 was an extraordinary quarter for the company with net earnings of C$28[dt2] million. The main elements of these were a C$15 million gain on the sale of our US gold shares that we purchased in 2005, and a C$15 million recovery of suspension costs at Galore Creek net of the portion attributable to Teck Cominco. We ended the quarter with a cash position of C$13.8 million and since the quarter-end we completed a US $95 million convertible note issuance that netted us almost $91 million. From the proceeds we paid off our line of credits, that had stood at C$10 million at the end of the quarter. So we have no current debts and significant funds in the bank.

The main expenditures on our main projects for the remainder of 2008 are for Rock Creek approximately C$20 million including exploration costs. As Peter outlined we are clearly in a time of commissioning leading to startups, so the exact timing of cash flow buildup is still somewhat fluid and this number will fluctuate a little bit, I'm sure.

At Donlin Creek, clearly our major asset at this point in time as of February 29th we had approximately C$18 million left to spend of the C$25 million initial budget at Donlin Creek; that is being funded 100% by NovaGold. And all future expenditures are planned to be funded 50-50 by NovaGold and Barrick. No budget has yet been approved for the activities for the second half of 2008, but we've provided within funds, within the company within our current financing plans, to cover costs for 2008 and 2009 up to the maximum provided for in our agreement with Barrick.

At Galore Creek NovaGold's share of the remaining budget for suspension costs and care and maintenance is $34 million; although some of this budget will be funded by non-cash sources such as GST refunds. And I would like to point out that much of the advanced studies, in fact all of the advanced studies that Rick has been talking about up to a maximum C$72 million will be covered 100% by our partner, Teck Cominco. So that is a very important factor and ongoing right now the care and maintenance budget, NovaGold's share is looking at running between C$5 million and C$10 million a year. The care and maintenance on that project is particularly low, and the C$72 million is going to fund all of the activities on the upside that Rick mentioned.

We also have activities at our other projects but none are individually material. On the financing side, for the financing for the project activities for the remainder of the year, they will come from a number of sources. On the larger projects obviously substantial portions of the expenditures will be funded by our partners Barrick and Teck Cominco. For NovaGold's percentages we will use the funds from the convertible note financing. We are working on a bank financing to leverage off the anticipated cash flow from Rock Creek. We plan to realize some value from our nongold assets and based on share price above Canadian $7 a share we can expect the exercise of C$24 million of warrants in October.

As Peter said, I am up here in Nome. The weather conditions are pretty extraordinary, but we have a fantastic team of people working on the construction and startup. I had the privilege of going through the facility at length yesterday, and they are doing a great job despite the extraordinary adverse conditions, the weather conditions are amazing for this late in the year to have so much snow around. But they are doing a great job and are very confident in their ability to meet their targets.

As Rick outlined, there is a tremendous amount of work going on for NovaGold in 2008, and with the convertible financing completed a few weeks ago we are in an excellent position financially to see this value return to our shareholders without access to equity markets. Back to you, Rick.

Thank you, Don. I would like to talk about NovaGold's valuation on the next slide here, and starting with, you see with the valuation that NovaGold is getting on a per ounce basis and (inaudible) value per ounce we are getting about C$43 an ounce. We think this is vastly undervalued in comparison to the development stage companies of which we will certainly be I think be one of. We are working on feasibilities on our major projects and Rock Creek will be put into production here imminently. The average of the development stage companies is about C$95 per ounce.

I would also point to some of the recent acquisitions; we've talked about the -- we mentioned the Arizona Star acquisition, the Miramar acquisition for the Hope Bay project. Also the Cumberland acquisition, those are all fairly recent acquisitions in this current gold price environment, and you are seeing their averaging about C$125. So that is the kind of value that we think our assets could be valued at in the market and obviously we will become a producer here imminently this year. With the producer valuations averaging about C$250 an ounce there is obviously (technical difficulty) range there, but on the lower end of the range it is C$132 an ounce.

So these are the objectives that we want to achieve this year; production at Rock Creek, advancing our two main projects, Donlin and Galore, to feasibility and we will obviously be working with our partners to achieve that objective.

This next slide is just a review of -- it is a bit of history, but it really just focuses again on value. In 2006 Barrick offered C$16 to acquire the company. At the time their offer was based on a 30% ownership of Donlin, where we had 16 million ounces outlined in the measured and indicated category, 5, 6 million ounces attributable to NovaGold at that time. The offer basically at fair value offer was C$110 an ounce. Obviously Rock Creek and Galore provided additional value. At that time, the gold price was C$600 an ounce.

Today we have a 50% ownership in Donlin Creek. Donlin Creek is recognized as 29.4 million ounces of measured and indicated resources; obviously with additional exploration potential as I mentioned earlier, so the attributable ounces to NovaGold are almost 15 million ounces. So using that C$110 valuation you can see that NovaGold's Donlin Creek project should be worth C$1.6 billion alone.

Plus obviously Rock Creek is now, is near to production; again, we expect production imminently here and our Galore Creek project of course is moving towards feasibility and we have a C$900 gold price environment. So I think this slide really speaks to the value that we see in NovaGold, and we are committed and we will be working hard to achieve that value for our shareholders in the days ahead of us here.

We are committed to getting Rock Creek in production. I think as you heard from Peter and Don who are up in Nome, we will achieve that here in very short order. That will bring cash flow to the company. We have a strong good balance sheet. We've got good partners and a huge gold endowment with 26.5 million ounces all located in politically stable places. We think we are very undervalued relative to our peer group, and we have a dedicated and hard-working management team that is going to work to achieve that value.

So I would like to turn the call back over to the operator and open it up for questions.

(OPERATOR INSTRUCTIONS) Stephen Walker, RBC Capital Markets.

Good afternoon or good morning, everybody. Just a question for Don, if you would Rick. The C$34 million that is budgeted for Galore Creek again, that is NovaGold share, but Teck is paying that on their behalf; I misunderstood. I just want to clarify whether the C$34 million is a joint venture, paid out by Teck or is that in fact cash paid by or funds paid by NovaGold?

That is the amount attributable to NovaGold. There is approximately C$28 million left of the suspension budget, suspension to mobilization budget and then our share that is going to be funded of the care and maintenance budget because of the balance that is likely to be funded from GST refunds and cash is probably going to be one-third of the care and maintenance budget so about C$6 million for that. So that is how we come to the C$34 million. But some of the actual cash that is going to go out is going to be funded from the cash that is coming in from other sources. So C$34 million is NovaGold's net.

C$28 million is part of the budget and then C$6 million anticipated back from -- okay, so the C$6 million is not within your current cash budget forecast, so it will be something in addition to the proceeds from the convertible and existing cash?

We've got a (inaudible) here, but that was about C$10 million of surplus cash at the beginning of December and there was about C$10 million of GST refunds, for 100% of the project. NovaGold gets to benefit initially for about one-third of that. So we get about C$6 million, C$7 million of that.

Okay, great. Thank you for that.

From an accounting viewpoint we will expense C$34 million or we will have expensed a total of C$34 million but from a cash basis it is more like C$28 million.

The C$18 million that is left to be spent at Donlin Creek, that you anticipate you will be spending that by -- when does that period end, when is the budget period for --

It is budgeted for the end of May, but looking at the way it is going now, it is possible it may not be until June or even possibly July.

And when is the joint venture meeting for that? When do you decide on next year's expenditures?

It is scheduled for May, scheduled for late May, by essentially May 31st.

Okay.

I think that is all in the contract that is on SEDAR.

Thank you very much for that.

(OPERATOR INSTRUCTIONS) Ryan Walker, MGI Securities.

Just two quick ones here, please. Just when can we expect some drill results from Donlin Creek to start coming out?

The drilling has been going on since about February. We expect to have results out I'd say within a month; we will probably intend to batch the results rather than releasing the drill hole at a time. We certainly have some results in, a lot of them are preliminary; obviously we've got to, want to make sure we do our QA/QC done properly. So I would expect within a month or so we should start releasing results.

Okay, great. With the weather conditions at Nome being challenging, as you said, how many -- would you have lost operating days do you think? Have you been in full production?

Peter, are you still on the line?

Sure am.

Do you want to answer that question?

Yes, I think the critical issue with the snowfall that we've had and the inclement weather that we've had is a lot of our construction has been involved with the detail of the excavation and infill of the tailing storage facility. Because of quality assurance and quality control requirements from our consulting engineers we have to ensure that certain weather conditions -- we can only erect that dam during certain weather conditions. So really to answer your question it has been more an issue for construction than operations. In operations I expect the operators will have sufficient snow clearing equipment, sanding equipment to continue in pretty much all conditions. So I would not expect the kind of interruption we've had in construction to be such a concern for operations.

Okay, great. Thank you very much.

[Edward Irvine], Wachovia Securities.

I was wondering if the tailings dam is still -- has it been inspected yet by the state inspectors or whoever the inspectors need to okay it?

Yes it has and I will let Peter comment a bit more on that. We are waiting what they call final authorization, and there is a few more steps that have to take place. But as far as I understand the inspection has taken place. Peter.

Yes, I can add to that, Rick. One of the things that we've ensured up here and in Alaska is that the Department of Natural Resources and the inspectorate division has been continuously informed of our progress. They have been out for site instructions as we progressed the dam. Also, our Smith Williams Consulting, our field engineers, consulting engineers are, of course, in touch with the Department of Natural Resources. So there are concurrent, we are taking concurrent steps with the regulators as our construction unfolds here.

The tailing storage facilities are essentially, the earthworks are essentially complete. We are now just lining the surface of the embankments. And the inspectorate division of the DNR have been out and have reviewed our progress. So to answer your question, yes, they are very informed of exactly where we are going, and they have also specified the requirements for us and how we proceed.

How long does it take to, once you start I guess grinding or whatever the first step is to actually producing gold? Do you see this as sort of a gradual two-month or three-month deal before you get to some full production or somewhere along the production line?

The main thing about a mill, Ed, is that you put ore in one side and literally gold comes out the other. So it is a very quick process and the ore is crushed and ground in the ball mill and runs right through the processing. It is not like a heap leach where it does take 60 to 90 days to get gold to come out of the other end of the process facility. Now we will be, and Peter had mentioned this, we will go through our ramp up schedule where we will operate at 25% capacity, 50% capacity, 75% and then 100%. Basically you want to make sure you work out all the bugs in the system and maybe Peter you can maybe comment on that a bit further.

One of the things I can report is that this facility and this deposit works to our advantage in that a significant portion of the deposit of the gold is -- can be released in gravity concentration. So in fact as soon as ore is shipped to the mill, is shipped to the crusher and then through to the mill, a significant percentage of that gold in the deposit reports to our gravity circuit, which in effect means that we see gold very rapidly coming off the tables and going through the refinery.

There is a ramp up, but as I mentioned, when I reported, the ramp up we expect to be somewhat faster than if we had the mill as the critical element on the critical path. As I mentioned, our consultants, our contractors and our operators and construction personnel have had a significant amount of time with the mill complete, built to test the various elements of the mill. So we expect when the tailing storage facility is ready for production we will be able to ramp up at a somewhat faster rate than we would other have ramped up if the mill had been on the critical path.

Now there is a storage -- will this be dry storage? It sounds like it will be dry coming out of the mill. Maybe we don't have to (multiple speakers).

It will be approximately 75% solids. (multiple speakers).

So you still have to be careful; you don't want any run-off from even the solids then?

Yes, Ed, we use what we call a thickener to make a substance that actually looks quite a bit like toothpaste. And that is what is actually stored behind the tailings dam, so it is not a water retention dam. It is a water retention or it is not a water retention structure. It is a dam structure that is intended to have minimal water behind it.

So this thing, this dam, and I'm not a miner but this tailings dam is different than the Galore Creek one that caused all the trouble?

Very, very different. It is not a water retention dam, and that was the issue at Galore Creek and building a very large water retention structure in a valley that receives a lot of water.

Now have you all still working on ways to look around this at Galore Creek?

Yes, we've engaged a new management team that has been dedicated to look at a number of different options of processing either by diverting water differently in the valley, perhaps using a tunnel or by processing just taking the ore out of the valley and processing outside of the valley either using conveyors or perhaps a slurry line. And the other side of the mountain, so to speak is a lot dryer and you could find a more traditional conventional tailing facility (inaudible) rather than a large water retention dam. So we are basically trying to design this thing so that we don't have the large water retention dam, and we will be hoping to, expecting to update you in the fall on which of these alternatives we will be pursuing (technical difficulty) feasibility, with the expectation of feasibility in 12 to 18 months.

Right, now last question is on Diamond Creek, where do we stand on power, what is our latest thinking on how to get power to Diamond Creek?

We are evaluating two scenarios, the more traditional onsite diesel with wind cogeneration, we know that scenario works. We believe that scenario can be permitted. We are also looking at the option of plugging into the intertie power on -- the grid power between Anchorage and Fairbanks. We also think this is a very viable option, and that it -- what we like about this option is it would bring sustainability to the region by bringing grid power into the region.

We are investigating all the various aspects of bringing power in and the availability of power on the grid. We think there is opportunity there. We will be updating you, our shareholders, on which option the Donlin Creek LLC partnership is going forward with in the fall. And then which when we select the option, we will then be completing the feasibility study in 2009 on that option.

Good luck.

Thank you.

Richard Jeffrey, a private investor.

Two questions. Firstly, the recent financing, the convertible issue, would that preclude severing the company into three or four spinouts such as done by other development companies?

(multiple speakers)

The financing, there are key assets within the company, primary one being Donlin Creek. If we were to end up distributing and splitting into -- let's say if we were to distribute Donlin Creek, then that could cause us an issue. But no, the splitting up into smaller assets underlying some of our other assets, that is not a problem at all. And even if we were to from the debenture side, or from the notes side distribute some of these assets, it would -- can be adjusted by an adjustment in the conversion price, but there are effects if we do that.

And that would be subject to negotiation with those you have issued the notes to, I take it?

It would depend on the site -- there is a formula in there, so as long as you can calculate the value of it, I don't think there is a negotiation; I think there is a formula of adjustment.

Right, secondly with regard to evaluation because it is a conundrum to me how you can have all these resources and carry the value that you have and I was kind of hoping you would opt for some sort of split up. As a shareholder I am just interested in getting money quickly and I'm wondering if, Rick, if your aim, dream to take these assets all the way might somehow get in the way of the valuation.

To address that, I think what we want to do -- I'm a major shareholder, as well, and I want to maximize the value out of these assets. I'm not sure what you mean by take these all the way. I think there is --.

Simply to grow the company with all of its existing projects into the ranks of a midtier and eventually a senior gold producer. Is that a conscious objective?

Maybe let me answer the question that way. What I want to do is maximize the value of the shareholders; I think achieving production does do that. Do we have to own 50% of Galore or 50% of Donlin Creek as a producing asset? No. Maybe we only need to own 30% of it. There are a lot of ways -- and I realize the big question is here how to raise the capital to build these big projects. Well, let's add the value into the project first and then evaluate what the best way to finance that project is. Perhaps an alternative or an alternative way of financing the project is to sell additional equity in the project.

Sure.

And to (inaudible) the capital. An asset like Donlin Creek that can produce 2 million ounces of gold a year, owning 30% of it might be just the right thing for NovaGold.

Yes, it wouldn't have bothered me if you had a free carried interest with that amount. Like as -- I just wonder where the money comes from and my own gut feel is that acumen with regard to innovative financing perhaps overseas as opposed to going to traditional Bay Street, Wall Street resources might not be just as important as proving up any additional ounces at this point.

I think you are quite right, and I think we are working towards that as well, looking at other strategic investment opportunities.

Okay, well, thank you.

John Hill, Citigroup.

Thanks for the very detailed presentation everyone. Very interesting. Just a follow-up on the recent debt issue. There was just some fine print in the back about repurchasing notes in the event of fundamental change, and one of the terms in there was kind of unusual. It is if continuing directors cease to constitute at least a majority of the board, so if the directors turn over you need to redeem the debt; what is the intent and what does this really mean?

To be honest with you, John, I will ask, I will invite Don to answer here, as well, I think as you said that was in the fine print. I am not aware that there is any specific -- any specific reason that that was put in there other than it is kind of boilerplate. (multiple speakers) Do you have anything to add to that Don?

No, just to reiterate that yes, we structured this based upon a standard structure that had been done on a number of convertibles in the previous 12 to 18 months. We didn't put a unique term in there. John, we can certainly email and correspond off-line if there is a detail there that you think is different.

No, it is just unusual; just curious, not a major item. Thank you.

Sure.

Mike Niehuser, Beacon Rock Research.

It was noted that there were 20,000 meters of drilling in 2007 that were to be released. I am just curious, is that infill drilling in the pit, or is that in East Acma or elsewhere?

The lion's share of that was infill drilling in the Acma/Lewis pit, and we have now -- we will be updating that resource soon. I actually don't have a specific time on that. We will get that out of the LLC. There was a modest amount of drilling, I think it is those three drill holes that I showed you in that three-dimensional diagram that were drilled on the East Acma target that were part of that 20,000 meters. So they were drilled late in the fall. They weren't -- we didn't even have the results available to us when we did the last resource update. But they are obviously clearly very exciting holes, and they are really I think portent for some excitement along that East Acma structure, particularly because they are better grade. And we've seen that consistently with the Acma deposit being 10%, 20% better grade overall than the sort of the overall resource and better grade than the Lewis deposit itself. So we will update our shareholders on the inclusion of the last 20,000 meters on the DC -- what we call the DC '08 model. I am just not exactly sure on the timing. I suspect it will be within this quarter now.

So it sounds like for the East Acma area we will probably have to wait until the second half of the year.

To get an updated resource on the, to include the East Acma area, yes, that would be at the earliest in the fall time. We don't have a specific time frame outlined on that, and when we meet with the Donlin Creek LLC, we will get some guidance on that.

Okay, thank you.

This concludes today's question-and-answer session. I would now like to turn the meeting back over to Mr. Van Nieuwenhuyse.

Thank you, operator, and thank you, ladies and gentlemen, for joining us on our conference call, our quarterly update here. We will be doing this again next quarter. If you didn't have a chance to ask your question, please don't hesitate to give us a call here in the office or send an email to the info at NovaGold.net address on the Web there. Then thank you very much, and thank you for your questions.

Thank you. The conference has now ended. Please disconnect your lines at this time. Thank you for your participation.

[dt1]from slide 5 of the presentation. [dt2]Per the press release all amounts are in Canadian dollars unless otherwise stated.