NovaGold Resources Inc (NG) 2013 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the NOVAGOLD first-quarter 2013 conference call and webcast. My name is Darcel and I will be your operator for today. At this time all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions).

I would now like to turn the conference over to your host for today, Ms. Melanie Hennessey, Vice President of Corporate Communications. Please proceed.

Thank you, Darcel. Hello, everyone, and thank you for joining us today. On the call, we have Greg Lang, NOVAGOLD's President and CEO; and David Ottewell, NOVAGOLD's Vice President and CFO. As stated by Darcel, at the end of the formal part of the presentation, we will take questions both by phone and by e-mail.

So before we get started, I would like to remind our listeners that any statements made today by the management team may contain forward-looking statements. Such statements include projections and goals which are likely to involve risks detailed in our various SEDAR filings and in various forward-looking disclaimers included in the first quarter financials release and in the presentation.

With that, I have the pleasure of introducing Greg Lang, NOVAGOLD's President and CEO. Greg?

Thank you, Melanie. NOVAGOLD is off to a great start in 2013. Key deliverables were achieved as listed on slide four. We continued to de-risk our flagship Donlin Gold project and further advance the Galore Creek project in British Columbia.

Donlin Gold advanced permitting in the first quarter with the completion of the public scoping where we received positive and constructive reviews from the various meetings held in the villages and in Anchorage, Alaska. The permitting process, a 3- to 4-year undertaking, is now moving in for the preparation of the preliminary draft environmental impact statement.

NOVAGOLD also issued tremendous results from last year's Galore Creek exploration program which included many significant intercepts from the almost 28,000 meters of drilling and, more importantly, the discovery of the 700-meter long meter long Legacy Zone adjacent to the main pit.

In addition, at the start of the year we received CAD54 million in cash from the exercise of warrants, further strengthening our cash balance which now stands at $300 million.

Lastly, we appointed Richard Williams to the position of Vice President of Engineering and Development, further strengthening our management team. Richard most recently led the successful design, construction and startup of the Pueblo Viejo Mine in the Dominican Republic.

Slide 5 highlights the key reasons why Donlin Gold is the most important asset of the next-generation mine. With measured and indicated resources of almost 40 million ounces and a grade of 2.2 grams. Donlin is one of the largest known high-grade undeveloped gold deposits.

As for the feasibility study and with no future expansions, the mine would produce greater than 1 million ounces a year over a 27-year mine life. This is further magnified when considering the exploration potential of Donlin Gold. The existing reserves and resources are situated in a 3-kilometer area of a gold belt that spans over 8 kilometers.

Many companies in the mining sector have felt the impact of operating assets in challenging and uncertain jurisdictions. In that context, NOVAGOLD is one of the few mine developers with assets in two of the safest geopolitical jurisdictions in the world.

Given all of these attributes, we expect that NOVAGOLD will be recognized as an investment of choice among institutions seeking premium valuations among gold equities with projects that have superior grades, long-lived ore bodies and significant exploration potential.

I'll now hand it over to David Ottewell who will walk you through our first quarter financials in more detail.

Thank you, Greg. During the first quarter, as Greg just mentioned, the Donlin Gold permitting process advanced with community scoping meetings and the compilation and presentation of baseline data to facilitate preparation of the EIS.

Our share of Donlin funding was on track at $2.4 million for the quarter, and for the year we continue to expect our share of funding to be $15 million. At Galore Creek, the campus closed for the winter season and our share of funding was CAD700,000. In the summer, Galore will drill another 10,000 meters to follow up on last year's successful program. Our share of funding at Galore Creek is expected to be CAD8 million for the full year.

Slide 8 highlights our operating expenses for the first quarter. Our operating losses decreased dramatically from the prior year thanks to the completed reorganization of the Company. Our ongoing administrative expenses are lower than we no longer have any costs associated with Rock Creek and Ambler.

Due to the strengthening of the US dollar compared to the Canadian dollar during the first quarter, we recorded a CAD7.9 million net foreign exchange gain largely due to our US dollar-denominated cash balance of $300 million at the end of the first quarter.

Turning to our cash flow on slide nine, the cash used in operating activities decreased 62% to CAD9.3 million in the first quarter this year from CAD24.6 million in the first quarter last year. We received CAD54 million from the exercise of the remaining outstanding warrants, leaving us with approximately $300 million. This leaves us in a solid position to repay the $95 million convertible notes and to fund Donlin Gold through the entire expected permitting process.

Last week, we notified convertible note holders of their option to require the Company to repay all or a portion of their notes on May 1, 2013. Otherwise, the convertible notes will mature in two more years on May 1, 2015.

Turning to slide 10, today NOVAGOLD is a simpler more focused Company. Our ongoing operating expenditures have been reduced by nearly two thirds. For 2013, we continue to expect to spend $15 million at Donlin, $8 million at Galore Creek, $15 million in administrative costs and $3 million in interest assuming the full $95 million repayment of the convertible notes on May 1.

With that, I'll turn back to Greg.

Thank you, David. Moving to slide 11, once the notice of intent for Donlin Gold was published last December, the public scoping period commenced and the Corps of Engineers launched a website for the EIS project which provides permitting updates and time lines.

Public comment period is the second phase of the EIS process and was completed on March 29 as per the schedule. Meetings held in the villages and Anchorage were all well attended and the Corps received positive and constructive reviews on Donlin Gold as part of the EIS process. This is a testament to the great foundation which the Donlin Gold team has built as well as the excellent and extensive community outreach which has taken place over the last 16 years. A summary of the public scoping comments will be available on the website in the near future.

An illustration of the time line is provided on slide 12. We have now begun the preparation of the preliminary draft environmental impact statement. Permitting in Alaska clearly defines federal and state environmental review process which involves the preparation of an EIS. The EIS is generally the most time-consuming aspect of the permitting. The Donlin Gold notice of intent to prepare an EIS was published in the Federal Register on December 14 and the public scoping process concluded on March 29.

Based on our past experience, I'm very pleased with the permitting progress to date. NOVAGOLD expects that it will take 3 to 4 years to permit Donlin. We welcome the scrutiny that the permitting process brings, given the importance of this project to the states and to the region. We have sufficient funds to take us all the way through development.

As shown on slide 13, in the first quarter we were very pleased with the excellent drill results from the 28,000-meter program at Galore Creek last year. This led to the discovery of the Legacy Zone, a 700-meter-long mineralized zone which is still open in all areas and will be the subject of further drilling in the upcoming season. The diagram on the right illustrates the tremendous change and expansion of the mineralization since 2011.

As we continue to consider selling Galore Creek, we are working at further increasing the asset value through a modest exploration program and various technical studies. The upcoming exploration season at Galore Creek has 10,000 meters of planned drilling focused mainly on the Legacy Zone. Once in production as envisioned by the Pre-Feasibility Study, Galore is expected to be the largest lowest-cost copper mine in Canada, which speaks volumes compared to other projects located in more challenging jurisdictions.

We recently announced Richard Williams' appointment as Vice President of Engineering and Development. Richard will be responsible for all aspects of the engineering and technical advancement of Donlin Gold and Galore Creek. Throughout his 30-year career with Barrick, he has developed and operated several major mines. He has extensive experience in the design, construction, and implementation of autoclave technology which is planned to be used to process the ores at Donlin Gold.

For the last seven years, he served as project director of the Pueblo Viejo operation in the Dominican Republic where he played a key role in designing and constructing four of the largest state-of-the-art autoclaves in the world. We are happy to have Richard onboard. He completes an excellent team that has been brought together to take NOVAGOLD forward as Donlin Gold advances through permitting and ultimately to a construction decision and beyond.

In closing, NOVAGOLD has a much simpler corporate structure and significantly lower expenses going forward. We have an experienced team that can enhance the value of Donlin Gold and Galore Creek. Additionally, we have $300 million in cash which is more than sufficient to fulfill our current financial obligations and to take Donlin Gold through the permitting process. All of this is reinforcing our focus on advancing Donlin Gold through permitting and up the value chain.

Operator, we would now like to open the line for questions.

(Operator Instructions) John Bridges, JPMorgan.

Hi, Greg, everybody. Just wondering if you could give us a bit of color on how the meetings went. You know, we hear that there's a lot of environmental oppositions projects in Alaska. I just wanted to get a sense as to how your process had gone and how constructive the comments actually were.

Sure, John. Well, I think I was really pleased with how the meetings went. This gives all interested stakeholders a forum on which to vent their concerns about the project. And what was pleasing about the meetings were the people that attended were very well-informed, they knew of the project, you know, the concerns expressed were what you would anticipate for a facility of this scale, and those concerns will help the Corps through the environmental impact studies.

But, what was pleasing, there was no organized opposition or theatrics which are common at meetings like this. It was all very constructive, very open and we've put a link to the Donlin Gold EIS website in our presentation and the comments will be published there in the very near future. And I certainly invite everyone to take the time to get a better understanding of the process and the comments that have been made. But certainly very supportive, and we're pleased with how the meetings went.

Well that's great. I like the record of decision estimated date of November 2015. I've got something I can put into my model now.

Well that's the -- part of the website is they publish the schedule which everybody is working toward, and the November 2015 date is certainly in line with our expectations of completing this process in 3 to 4 years.

Excellent, well, best of luck guys.

Thanks, John.

David Brigham, Brigham & Associates.

Good morning gentlemen. I'm wondering, are you still planning to run that natural gas line that was talked about a number of years ago? Is that still part of the plan?

Well, good morning, David. Yes, it is. The natural gas line from the Cook Inlet to the site will be studied as part of the environmental impact statement.

And that's designed to reduce the -- that's a key part of getting the operating costs into an acceptable range, I guess?

No, during the preparation of the feasibility study, the owners evaluated several different options for generating power. These included diesel and the various fossil fuels that are out there. The conclusion of this study was that natural gas provided a clean, low-cost power supply and it had the additional benefit of reducing the barge traffic necessary to supply diesel fuel to mine. So there were a lot of benefits, both financial and practical, to going with natural gas.

Thank you.

Thank you, David.

John Tumazos, John Tumazos Independent Research.

Good morning, good morning. Can you give us an update on the announcement I guess was made a year and half ago about potentially half of Donlin Creek being up for sale? Obviously, a lot of time has changed. There's other companies in that area -- Romios Gold, Copper Fox, Imperial Metals -- some which could be stronger acquisition candidates of your property. Others could be smaller companies that you could acquired. It's also possible that Teck's priorities have changed, and of course Barrick's priorities in management have changed in the last year. Do you think you're a buyer of a property or a seller of properties? Should we expect NOVAGOLD to give birth to another security, splitting the Alaskan from the B.C. stuff? You know, the world is changing in the way you play your -- the hand you're dealt could change, too.

Good morning, John. Let me try and break that into a couple of pieces. I think, first, I think you meant -- you were discussing our Galore Creek sale process.

Excuse me if I mentioned the wrong one, right, right, right.

Yes, but anyway, John, a year or so ago, we announced our intentions to sell Galore Creek. I think all of us in mining recognize that this is a difficult time to be selling big assets such as Galore Creek. The sale process is still ongoing. There's interest in the asset, but we're fortunate that we have plenty of cash right now that we don't need to sell an asset at the bottom of a market. So we're going to keep Galore. We're going to continue to fund the exploration and enhance the value, but the focus of NOVAGOLD right now really, clearly, is on advancing our Donlin Gold project. At the right time, we'll monetize Galore.

Thank you.

(Operator instructions) [Andrew Shopick], Private Investor.

Thank you, my question also related to Galore Creek, and I think you've answered it. I really wanted you to characterize the nature of the current activities surrounding the potential sale of Galore Creek, but I don't think there's anything further that you would be prepared to say at this time, so thank you.

Thank you for your interest, Andrew. As you might know, we do not keep the Galore Creek camp open during the winter months, so there's been no activity at site. When the snow comes off at the end of April, early May, we'll resume work there.

Thanks again.

There are no further questions at this time.

Thank you, everyone, for joining us on today's call. Have a great day.

Thank you.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect and have a great day.