NOVAGOLD RESOURCES INC. — Q1 2021 Form 10-Q
Reporting period: Three months ended February 28, 2021. Financial amounts are in U.S. dollars unless noted. NOVAGOLD is a gold exploration and development company with a 50% interest in the Donlin Gold project in Alaska; it reported no revenue from its planned principal business.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | None | None |
| General and administrative expense | $5.329 million | $4.714 million |
| Donlin Gold equity loss | $1.968 million | $1.568 million |
| Operating loss | $7.297 million | $6.282 million |
| Net loss | $7.956 million; $0.02 per share | $6.595 million; $0.02 per share |
| Cash used in operating activities | $4.286 million | $3.497 million |
| Donlin Gold funding | $2.946 million | $2.600 million |
At February 28, 2021, cash and cash equivalents were $63.2 million and term deposits were $51.0 million, totaling $114.2 million, down $7.7 million from November 30, 2020. Total assets were $218.0 million, total liabilities $113.2 million, and equity $104.9 million. There was no revenue, so operating margins are not meaningful.
The $111.2 million Barrick promissory note comprises $51.6 million principal and $59.7 million accrued interest, at U.S. prime plus 2%. It is payable from 85% of NOVAGOLD’s share of future mine revenue or from qualifying proceeds on reducing its Donlin interest. The filing reports no conventional operating debt maturity schedule.
Changes versus the prior-year quarter
- Net loss increased by $1.4 million, about 21%; operating loss increased by $1.0 million, about 16%.
- G&A rose by $0.6 million, mainly from higher share-based compensation, salaries, and legal fees. Donlin equity loss increased by $0.4 million, attributed to completion of assays from the 2020 drill program.
- Operating cash use increased by $0.8 million, with management citing lower interest income and higher G&A costs. Other income/expense shifted from $0.9 million of income to $0.1 million of expense, including foreign exchange effects.
Outlook, developments, and risks
- Management expects 2021 expenditures of $31–$35 million: $18–$22 million for Donlin Gold and $13 million for corporate G&A. The Donlin estimate includes $11 million for drilling, camp improvements, and studies and $7 million for permitting, community engagement, and administration; another $4 million of studies is contingent on mid-year approval by both owners.
- The company expects to receive a $75 million Newmont note in July 2021, due upon the earlier of completion of a Galore Creek pre-feasibility study or July 27, 2021. Management believes available working capital is sufficient for the next twelve months’ anticipated costs. No assurance is given that future financing will be available on favorable terms or at all; substantial additional capital would be needed for Donlin engineering and construction.
- Donlin work planned for 2021 includes confirmation and extension drilling and further technical studies to inform updated models, mine plans, and possible feasibility-study and engineering work. A construction decision requires owner-board approval, permits, and financing.
- Key permitting matters remained pending: the Alaska right-of-way agreement and pipeline lease authorization, an appeal concerning the Clean Water Act certification, and decisions on water-right applications. The company expected decisions in the first half of 2021. Delays could result from litigation, public opposition, regulatory review, additional information requests, or COVID-19 impacts.
- Management described COVID-related risks to employee health, travel, workforce productivity, and field work. The filing lists commodity-price, financing, permitting, infrastructure, partner, environmental, and other development risks. It reports no material current, pending, or threatened litigation and no material changes to the prior 10-K risk factors.
Important facts for investors to verify
- Whether the expected $75 million Newmont note was received on schedule and whether the remaining Galore Creek notes or contingent note have changed in value or timing.
- Progress and outcomes for Donlin permits, the Clean Water Act appeal, water rights, drilling, and owner approvals; confirm actual spending against the 2021 budget.
- Available liquidity after planned spending and the company’s financing plans if Donlin advances toward engineering or construction.
- Growth in accrued interest on the Barrick note, which is variable-rate and substantial relative to reported equity.
- The company remains pre-revenue and dependent on financing and future Donlin development; actual project timing, costs, and production remain uncertain.