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of Donlin’s sheer scale and superior grade render the economics unusually attractive, with the numbers then suggesting per-ounce life-of-mine cash costs of $585 and all-in sustaining costs of $735.17 And critically, the operations will be located in a safe part of the world where an investor can tread without fear. As such, for us Donlin constitutes the optimal way to invest in the space: that is, to seek the maximum leverage to gold in a jurisdiction that will allow investors to keep the fruits of that leverage. My emphasis on that last bit has led analysts to refer to it as the Kaplan Doctrine. While I enjoy the recognition, I personally call it the “Sleeping Well Rule.” In my case, regenerative sleep has always been directly correlated with higher returns. Hence our strategy with Donlin: the patient man’s way to get rich in gold while being able to sleep well at night.
HOW WOULD YOU CHARACTERIZE NOVAGOLD’S RELATIONSHIP WITH BARRICK?
The partners have never been closer...or more closely aligned. Working together as a team, in 2020 we successfully completed a comprehensive, 85-hole drill campaign which covered some 23,400 meters – the largest in 12 years.18 This is a big deal. Mark Bristow, the president and CEO of Barrick, doesn’t drill something out of academic interest – and neither do we, for that matter. And it is no coincidence, for instance, that Barrick and NOVAGOLD have been reporting jointly on the program. This too is a first, and a symbol of our deepening cooperation.
Both partners are obviously delighted with the outcome of the drill campaign, not only in terms of the actual results, which yielded better grades and higher grade-thicknesses than predicted by previous modeling, but also with the manner in which the work was conducted – particularly in light of the COVID-19 pandemic. Our two companies were especially proud of the fact that there were
no cases of COVID-19 at the Donlin Gold site. Furthermore, with the help of dedicated community partners in Alaska and in the Yukon- Kuskokwim (Y-K) region who share the objective of protecting the health of Donlin Gold’s workforce, a wide-ranging set of policies has been implemented to mitigate the spread of COVID-19.
17 Donlin Gold estimates as per the Second Updated Feasibility Study. All dollar figures are in USD and represent 100% of the project of which NOVAGOLD’s share is 50%. Donlin Gold estimates as per the Second Updated Feasibility Study effective November 18, 2011, as amended January 20, 2012. “Costs applicable to sales per ounce” and “All-in sustaining costs” are non-GAAP financial measures. See Non-GAAP Financial Measures at www.novagold.com. The project requires a gold price of approximately $902 per ounce to break even on a cash flow basis. Wood Canada Limited (“Wood” formerly AMEC Americas Limited) is currently updating all sections of the Second Updated Feasibility Study with updated costs, economic assessment, permitting information, and technical information related to permitting, generated on the Donlin Gold project since 2011, which is anticipated to be finalized and filed during 2021. Based on that cost review, Wood determined that updating the Second Updated Feasibility Study using 2020 costs and new gold price guidance results in no material change to the mineral resources or mineral reserves. The economic assessment in the updated study may be materially different than in the 2011 study.
18 See media release dated March 25, 2021, “Donlin Gold Announces Assay Results From Remaining 30 Percent of the 2020 Drill Program, Consistent With Previously Reported Results of Higher Than Predicted Grade-Thickness” here: https://www.novagold.com/_resources/news/2021-03-25.pdf
In light of these achievements, Mark Bristow appropriately observed: “Building on the last two decades of exploration, the results continue to highlight Donlin’s world-class potential.” The highly successful and COVID-free conclusion of the 2020 drill program, and in particular the strong results Barrick and NOVAGOLD have been sharing over the past eight months, represents a major step forward in improving the geological confidence in the Donlin project, a necessary step to advancing Donlin up the value chain.
FROM NOVAGOLD’S STANDPOINT, WHAT COMES NEXT?
We’re starting to see our ideal scenario unfold as we imagined it would. At NOVAGOLD, we have always had a strategy regarding our flagship asset’s future, which has been articulated many, many times: namely, as gold bulls we believe that Donlin should and
will be built when we can make not just a decent return, but a spectacular return.
The excellent drill results are indeed making this scenario look better and better all the time. As declining gold grades pervade the industry, it has been extraordinary to be able to continuously report drill results that reinforce the attractiveness of Donlin Gold – already an exceptionally impressive asset in terms of size and grade for a large-scale open-pit gold project. The results from the 2020 drill program effectively exceeded the Barrick/NOVAGOLD technical team’s modeled grade-thickness expectation.17 Moreover, the assay results pointed to additional high-grade gold intersections that only increased the partners’ confidence in recent geologic modeling concepts and confirmed multiple high-grade extensions in both the intrusive (igneous) and sedimentary rocks. These findings not only confirmed our assumptions, but also provided direction for future high-grade drill targets.
The next steps are now clear. All the data are being incorporated into the geologic model and will be followed by
an update of the mining schedules and life of mine business
plans. Critically, we will also make sure that everything we plan is executed with special attention to the most up-to-date standards of safety, environmental protection, and social responsibility. This exercise will take place in preparation for the partners to embark on updating the feasibility study, the completion of which would form the basis of an execution plan. A construction decision ultimately will follow when fiscal discipline and gold prices combine such that we believe all Donlin Gold stakeholders may be expected to derive a truly great return from this world-class project. Step by step, tortoise-like, we’re making our way to the finish line.
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