Page 7 - NG2020AR

takes a genius to be Rembrandt.” At this point, I could say the same for Donlin which, simply put, to me evokes a da Vinci.
That sense of destiny was further evoked in 2020. For if Fortune was impressed by all the positive developments that took place at Donlin, she certainly expressed her approbation by giving us many signs. Such good luck is yet another reason why I have always felt the NOVAGOLD story is so special that my only regret has been
that more people don’t know of it. This will assuredly change, and possibly sooner than we think. Given the gold industry’s suffering from both asset scarcity and the ravages of rising jurisdictional risk, we believe that having equal ownership in a Tier One asset located in a Tier One jurisdiction suggests that time is clearly on our side. This, in turn, will give our shareholders maximum leverage in the perfect jurisdiction to keep the fruits of that leverage.
For more on that particular angle, one can watch my interview with Dan Tapiero2 for Real Vision, in which we talk gold and, yes, Donlin Gold. Since that interview was published, I can add that NOVAGOLD and our co-equal owner in the project, Barrick, are fully aligned in carefully planning out the future mine and monitoring developments to advance Donlin Gold toward construction – at a time when both partners conclude that they can achieve maximum benefits for all stakeholders, including our shareholders.
Meanwhile, momentum is building rather fast, for NOVAGOLD is becoming a go-to stock in the space, especially as the sentiment in this sector improves and interest is steadily but surely finding
a channel into scarce and consequential North American assets. There are myriad good reasons for this. For while I hate to say it, there won’t be very many players left in the gold space. Collapsing grades, the paucity of new discoveries, and the churning through of reserves at existing mines by the majors all but confirm that
we have already reached a tipping point. As such, assets like
Donlin Gold, with metrics that are accretive on practically every dimension, are essentially unicorns. When I survey the landscape,
I am reminded of the carnage that was visited on the tech space after the late 1990s bubble burst. If one had the presence of mind to sift through the wreckage and have the wits to pick a winner or two – say, an Amazon or an Apple – one made a generational trade. Similarly, I believe that those few gold companies that have great assets in great places will constitute generational opportunities.
I believe that NOVAGOLD will stand among those precious few.
Candidly, helping this particular scenario come along is
our objective. As the great wit Talleyrand put it, “The art of statesmanship is to foresee the inevitable and to expedite its occurrence.” We’re open about it. I’m open about it. We at The Electrum Group consider Donlin Gold to be the holy grail and want it to be valued for the category-killer Electrum and its shareholders see it to be. Electrum will make money only to the extent that
its co-investors will. And these fine folks are exceptionally well- educated about Donlin Gold’s narrative. For those new to the story,
I encourage any reader to peruse NOVAGOLD’s 20183 and 20194 annual reports. I do urge you to read them precisely because they are considered, by our investors, to represent the gold standard of transparency and intellectual coherence in the gold development space. As such, I am not aware of any shareholders who do not understand our strategy and the steps we are taking to implement it.
In addition to these facts as we know them, our shareholders are accustomed to getting my forward-looking thoughts every year on how the gold thesis is doing. This year’s “Thoughts” section will be a bit longer than usual. Knowing that brevity isn’t my strong
suit at the quietest of times, such a statement may appear quite daunting. But if you are like me, watching the world (and not just the markets) venture into uncharted waters begs for an attempt
at explanation. There are so many new facets to the new world disorder. Perhaps dozens. I shall dwell primarily on two of them: crypto as it relates to precious metals, and China.
GOLDBUGS, BITBUGS, AND SILVERBUGS
“I have always thought there might be a lot of cash in starting a new religion.”
George Orwell to a friend, 1938
Tempting as it is to veer into sex and politics and other temporal issues this year, let us stick with what now constitutes
the less controversial, albeit more spiritual, subject of religion. The revelation of divine truth is a powerful thing, and it is a wondrous sight indeed to witness the birth of a new and passionate faith. Some might even argue that, in an era characterized by a perverse alloy of cynicism and financial exultation, this spectacle is especially pronounced when money is involved. Real money – not this penny- ante “a billion here, a billion there” kind of stuff, but rather a trillion here or there.
The rise of cryptocurrencies in fact could be interpreted as such a theological phenomenon. And George Orwell, as with
many other cases in his observation of the human condition, was likely onto something very much worth pondering here. For as JPMorgan strategists John Normand and Federico Manicardi wrote in mid-January, “Whether cryptocurrencies are judged eventually as a financial innovation or a speculative bubble, Bitcoin has already achieved the fastest-ever price appreciation of any must-have asset.”
The pious fidelity of the contemporary neo-monetary monotheists, a.k.a. the Bitbugs, is nonetheless all the more impressive given that the concentration of crypto wealth would make even a plutocratic one-percenter blush. If what I have read
is true – admittedly, a high hurdle in this era of obfuscation and manipulation – approximately 2 percent of anonymous accounts control some 95 percent of all Bitcoin holdings, a data point which NYU economist Nouriel Roubini also relayed.5 A further breakdown
3 https://www.novagold.com/_resources/NG_2018-AR.pdf
4 https://www.novagold.com/_resources/NG_2019-AR.pdf
5 https://www.fxstreet.com/cryptocurrencies/news/bitcoin-whales-ownership-concentration-rises-
alongside-prices-flipside-crypto-202011281344
2 https://www.realvision.com/the-kaplan-doctrine-conservation-preservation-and-value
CHAIRMAN’S MESSAGE 5