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2020: ROCK BEATS PAPER?
It’s apparent to me that we’re nearing an inflection point.
For when I speak about our flagship project, Donlin Gold, I often ask this question of my audience: What other gold development-stage asset in the industry compares in its combination of enormous
size, high grade for an open-pit (and hence the opportunity for lower all-in sustaining 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 and industry partnerships, and 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 Gold must be unique.
To my delight, needless to say, a legitimate question has now arisen regarding one particularly sexy aspect of that uniqueness: That is, whether Donlin will represent the largest gold mine in the world after all. Many of you will have heard me share in the past that there is only one serious rival for those bragging rights. I am therefore elated to report that we have a challenger for that trophy, the Sukhoi Log project. Or as I like to call it, the Analog. For Donlin might turn out to be the second-largest pure gold producer if our arms race with Russia escalates to where I hope it will in terms of our respective projects’ production profiles. Comparables are a good thing for investors. They focus attention. And as we believe that “to know Donlin is to love Donlin,” Sukhoi Log, the white swan that alighted in Siberia in 2020, will likely bring deserved further attention to Donlin.
The Donlin story has occasionally appeared to be too good
to be true. To have another major gold mining company, Polyus, now developing Donlin’s analog in earnest is really exciting, as our stature is not diminished by the comparison. Indeed, it is enhanced. Think of it as being told that one dances like Gene Kelly or Fred Astaire – or actually Ginger Rogers, who remarked somewhat archly that she could do everything Astaire did, just going backwards and wearing high heels. Who cares to whose glory one is compared, right? If it is to any of these icons, one is an eternal star. The same goes for Donlin and Sukhoi Log.
Being that Alaska was once a Russian colony, in many ways
it’s not surprising that analogies are drawn between these two major gold deposits. Both projects enjoy roughly the same amount of ounces at a similar grade, and the same estimated ultimate production profile. It’s almost as if our Russian friends looked at our last feasibility study and declared, “Let’s target that narrative!” in almost every metric. I am not suggesting that they wish to steal what appears to be a compelling investment thesis. That would
be rude. And in any event, I do see in their imitation the sincerest form of flattery. There is, however, just one itsy-bitsy difference between the two projects. We happen to stand on the right-hand side of the Bering Strait, where one can sleep well at night and
not have to wonder what the Kremlin might be thinking about
the ownership of what I suspect shall be declared, in due course,
POSITIONED TO BE ONE OF THE WORLD’S LARGEST GOLD MINES
Projected Annual Gold Production (millions of ounces)
1.20 1.00 0.80 0.60 0.40 0.20 0.00
1.10
0.5
0.45
USA* USA†
Mexico†
Canada†
Canada†
Chile†
* Anticipated annual gold production during full life of mine if put into production as contemplated in the Second Updated Feasibility Study. See “Cautionary Note Concerning Reserve & Resource Estimates” and “Mineral Reserves & Mineral Resources” and associated information on page 50.
† Average of comparison group data of 5 projects based on large (2Moz P&P cut off ), North/South American gold-focused development projects with >75% projected revenues from gold, as per latest company documents, public filings and websites as of January 2021.
strategic assets. Evidently, Russians have learned to sleep with
one eye open for centuries – so they are not fazed. And we sure wish them uninterrupted, regenerative beauty sleep, for Polyus’ greenlighting that mine will be wonderful for the owners of
Donlin. Our shareholders (and, one presumes, Barrick’s) owning the equivalent of what Sukhoi Log boasts, yet in the second-largest gold-producing state in the United States, is, well...kind of special. What counts most for us is that major Western investment banks are putting valuations of $10-$15 billion on Sukhoi Log in their analyses of Polyus. This is what I have long said Donlin should be worth at today’s prices. As your company’s most enthusiastic promoter,
I therefore hereby pledge to work even harder to close that gap. Clearly, with only one global comparable, the potential value to be unlocked as the partners move forward at Donlin is now more tangible than ever.
The data points that revealed themselves in 2020 only reinforced this conviction, and in multiple ways. Let us start with the sweetest part: Namely, that we and our Native Corporation partners Calista Corporation and The Kuskokwim Corporation (TKC), and of course the project’s co-owner Barrick Gold Corporation, managed to successfully execute the largest drill program at Donlin in 12 years under the constraints of COVID-19 – a truly remarkable achievement. That it was accomplished on budget and within schedule was a testament to a beautiful collaboration by all stakeholders. That there were no cases of COVID-19 or lost-time incidents at the Donlin Gold camp was a rewarding attestation to the professionalism, discipline, and conscientiousness of our team and subcontractors.
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Donlin Gold Goldrush Metates Courageous Lake Côté Gold Salares Norte
CHAIRMAN’S MESSAGE 3