Page 32 - NG_AR_2016

Q+A
How do you view the opportunity at Galore Creek? What copper price would you need before market participants take interest in the project?
As we’ve focused on advancing Donlin Gold, Galore Creek has often been given too cursory a glance in our narrative. Our shareholders should know, however, that it’s a truly great asset – which is why our partner Teck spent C$373 million to earn their 50% interest in it.
Like Donlin Gold, Galore Creek is large in size and rich in grade. When built, it is expected to be the largest copper mine in Canada, as well as one of the lowest-cost producers. This is a big competitive advantage, as we know that the jurisdictional risks in copper are at least as pronounced as in gold. Additionally, the partnership enjoys an excellent time-tested relationship with the Tahltan Nation, its First Nations partner.
To be honest, if it weren't for NOVAGOLD’s focus on Donlin Gold, Galore Creek would be a worthy company-maker in and
of itself. The prefeasibility study published September 12, 2011 envisioned mining and processing facilities with throughput nominal capacity of 95,000 tonnes per day, resulting in production of 6.2 billion pounds of copper, 4.0 million ounces of gold, and 65.8 million ounces of silver over an approximate 18-year mine life. Cash costs were forecast to average approximately $0.80 per pound of payable copper after by-product credits.
Although we continue to evaluate opportunities to monetize our interest in the Galore Creek project (Teck has a right of rst refusal with respect to a sale by NOVAGOLD of its interest in the partnership) to support development of Donlin Gold, we are fortunate to have the exibility to continue to enhance the value and preserve its optionality with minimal cash spend.
5,000 4,000 3,000 2,000 1,000
NPV after-tax (US$ in millions)
Galore Creek: Significant upside potential with higher copper prices.
NPV at 7%
1.6B 1.1B
NPV at 5%
2.6B 2.1B
$3.25 $3.50 $3.75
3.5B 3.1B
0.9B
$2.65 $2.75
$3.00
$4.00
Copper Price $USD/oz
Galore Creek estimates as per the pre-feasibility study effective September 12, 2011. All dollar figures are in USD and reflect after-tax net present value (at 7% and 5% discount rates) of the Galore Creek project using a foreign exchange rate of 0.90 USD/CAD and assuming gold at US$1,100/oz, silver at US$18.50/oz. At a 7% discount rate, the net present value is: $124M @ $2.65 copper; $285M @ $2.75 copper; $679M @ $3.00 copper; $1,067M @ $3.25 copper;
$1,452M @ $3.50 copper; $1,837M @ $3.75 copper; $2,217M @ $4.00 copper.
30