Business Context and Reporting Period
This Form 8-K Current Report, dated July 25, 2018, details a material definitive agreement and subsequent asset disposition by NOVAGOLD RESOURCES INC. On July 27, 2018, the Company closed the sale of all its interests in the Galore Creek Project and the Copper Canyon property to Newmont Canada FN Holdings ULC (an affiliate of Newmont Mining Corporation).
Key Financial Metrics and Transaction Details
The transaction involves the sale of NovaGold Canada Inc., Copper Canyon Resources Ltd., and an intercompany receivable of approximately CAD$356,000,000. The aggregate consideration is up to $275,000,000, structured as follows:
- Cash at Closing: $100,000,000 received on July 27, 2018.
- Promissory Note 1: $75,000,000 payable upon the earlier of the completion of a pre-feasibility study or three years from the Closing Date.
- Promissory Note 2: $25,000,000 payable upon the earlier of the completion of a feasibility study or five years from the Closing Date.
- Promissory Note 3: $75,000,000 payable upon the earlier of a final decision to develop the project or the initiation of construction.
Newmont has guaranteed the obligations of Newmont Canada under the Share Purchase Agreement (SPA). The filing does not provide specific revenue, profit, cash flow, or margin figures for the reporting period, as this is a transactional report rather than a periodic financial statement.
Material Changes and Asset Disposition
The Company divested its 50% interest in the Galore Creek Partnership (GCP) and its direct and indirect interests in the Copper Canyon property. Prior to closing, the Company secured a waiver of the right of first refusal from Teck Resources Limited ("Teck"). Teck also confirmed the release of the Company from ongoing obligations under the Contribution Agreement and the GCP General Partnership Agreement, with no new cash call advances required prior to closing. Newmont or an affiliate assumed all obligations previously guaranteed by the Company.
Outlook, Risks, and Contingencies
Future cash inflows from the transaction are contingent upon specific milestones regarding the Galore Creek Project, including the completion of pre-feasibility and feasibility studies, or a final decision to develop the mine. The filing notes that pro forma financial information regarding the sale will be furnished in a subsequent amendment. No specific risks or contingencies beyond the standard representations and warranties of the SPA are detailed in this text.
Key Facts for Investor Verification
- Verify the receipt of the $100,000,000 cash payment at closing.
- Monitor the status of the Galore Creek Project's pre-feasibility and feasibility studies to determine the timing of the $100,000,000 in deferred promissory notes.
- Confirm the assumption of Company guarantees by Newmont to ensure no residual liability remains.
- Review the forthcoming pro forma financial information to understand the impact of the asset sale on the Company's balance sheet.