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NOVAGOLD IS ELECTRUM’S FLAGSHIP INVESTMENT BECAUSE YOU SAY DONLIN IS THE “HOLY GRAIL.” COULD YOU EXPLAIN THAT?
When we entered NOVAGOLD at the very end of 2008, as discussed earlier, we felt that Donlin was likely the best single development asset in the gold space. The passage of time has not only reinforced this opinion, but we now believe that industry fundamentals are rendering it unique. Let me put it this way.
When I speak about Donlin, I often ask this simple question of
my audience: What other development-stage asset in the industry compares in its combination of enormous size, high grade for an open- pit (and hence low all-in cash costs), truly superb exploration upside,
a production profile of potentially the biggest pure-gold mine in the world, a mine life measured in decades, excellent local community and industry partnerships, and also the safety of being located in one of the world’s premier jurisdictions?
I’ve never heard pushback with that one. If one cannot challenge the assertion, then Donlin must be unique. One might call it the gold industry’s variation on a theme of Sir Arthur Conan Doyle’s “Holmes Method”...the Donlin Corollary!
YOU HAVE COMPARED DONLIN TO THE STORY OF “THE TORTOISE AND THE HARE.” COULD YOU ELABORATE ON ELECTRUM’S STRATEGY HERE?
Natural resources assets have been my livelihood for nearly three decades. And focusing on the rare “category killers” – whether in silver, platinum group metals, or hydrocarbons – has rendered a rather good living. This certainly applies to Donlin
Gold, which to us represented the closest thing to a unicorn when Electrum entered the NOVAGOLD story. To some, our investment then may have seemed long-dated. But our modus operandi is effectively to buy and hold and be patient. Now, with its federal permits and excellent attributes as a bona fide category killer, Donlin doesn’t look so long-dated any longer. In fact, as other less- attractive mining projects around the world have been cancelled at
an accelerating rate, Donlin has continued progressing at its natural pace. We refer to this phenomenon as “The Tortoise and the Hare.” Thus, rather than experiencing deal fatigue of any kind, it’s quite the opposite. The passage of time has only reinforced our belief in Donlin’s uniqueness and hence NOVAGOLD’s potential as a go-to stock in the next up-leg of the gold cycle.
SO YOU SEE DONLIN AS “BEST IN BREED”?
Yes, completely. Certainly, the superlatives one can attach to
it are quite remarkable. In one or two phases, Donlin could well represent the largest single pure gold mine in the world when
it begins production – and with decades of reserves. Other than perhaps Sukhoi Log in Russia, there are no known potential pure- gold producers that would start with nearly 40 million ounces
of contained gold in measured and indicated mineral resources (inclusive of its 34 million ounces in proven and probable mineral reserves)13...and out of only the 3km portion of an explored 8km- long mineralized belt. And with that being only 5 percent of the land package. In other words, in an era characterized by declining reserves and precious few new discoveries, Donlin’s size could possibly increase along strike as well as in terms of depth – perhaps significantly so. In addition to quantity, as evidenced by our most recent highly successful drill campaign, this asset also offers extraordinary quality.
Let’s just consider the numbers from the 2011 Feasibility Study – which we very much look forward to refreshing together with Barrick. Though the project was envisaged to begin by processing an average head grade of 2.6 grams of gold per tonne in the first five full years of production,14 even the average reserve grade of
2.1 grams per tonne15 represents almost double the average grade of other gold projects.16 Size and grade matter. The consequence
13 Donlin Gold data as per the Donlin Gold Second Updated Feasibility Study (as defined herein). Donlin Gold measured resources of approximately 8 Mt grading 2.52 g/t and indicated resources of approximately 534 Mt grading 2.24 g/t, each on a 100% basis and inclusive of mineral reserves. Mineral resources have been estimated in accordance with NI 43-101. Donlin Gold proven mineral reserves of approximately 8 Mt grading 2.32 g/t and probable mineral reserves of approximately 497 Mt grading 2.08 g/t, each on a 100% basis.
14 Donlin Gold data as per the Second Updated Feasibility Study. The average head grade processed in the first five full years of production is 2.62 g/t. For current mineral reserves and resources, refer to “Cautionary Note Concerning Reserve & Resource Estimates” and “Mineral Reserves & Mineral Resources” table. Projected average annual production represents 100% of which NOVAGOLD’s share is 50%.
15 Donlin Gold data as per the Donlin Gold Second Updated Feasibility Study (as defined herein). Donlin Gold proven mineral reserves of approximately 8 Mt grading 2.32 g/t and probable mineral reserves of approximately 497 Mt grading 2.08 g/t, each on a 100% basis. Mineral reserves have been estimated in accordance with NI 43-101. See “Cautionary Note Concerning Reserve and Resource Estimates” on page 50.
16 2020 average grade of open pit and underground deposits with gold as primary commodity and over 1Moz in measured and indicated resources is 1.12 g/t, sourced from S&P Global Market Intelligence.
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