NovaGold Resources Inc. (NG) Q4 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen and welcome to the NOVAGOLD Fourth Quarter 2018 Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to turn the call over to Mr. Melanie Hennessey, Vice President of Corporate Communications. Ma’am, you may begin.

Thank you, Victor. Good morning, everyone. We are pleased that you have joined us for NOVAGOLD’s fourth quarter and year-end financial results and also for an update on the Donlin project. On today’s call, we have Dr. Thomas Kaplan, NOVAGOLD’s Chairman; Greg Lang, NOVAGOLD’s President and CEO; and David Ottewell, NOVAGOLD’s Vice President and CFO. At the end of the webcast, we will take questions both by phone and by e-mail. But before we get started, I would like to remind our listeners that any statements made today may contain forward-looking information such as projections and goals, which are likely to involve risks disclosed in our Form 10-K and in our EDGAR and SEDAR filings and in various forward-looking disclaimers included in this presentation. With that, I have the great pleasure of introducing Greg Lang, NOVAGOLD’s President and CEO. Greg?

Thank you, Melanie, and good morning, everyone. We are pleased that you could join us to hear about our year end results. What a year it’s been. The team’s perseverance has paid off, delivering on significant milestones that were first laid out when I joined the company in 2012. Key events in 2018 as shown on Slide 4, included the completion of the six year National Environmental Policy Act review with the receipt of the Donlin Gold joint Record of Decision and federal permits. Along with completing the federal permitting process the project received several major state permits throughout the year, which will continue through 2019. In July, we sold Galore Creek project to Newmont for a total consideration of up to $275 million. Further strengthening our treasury and allowing us to advance Donlin Gold up the value chain. The sale was a great outcome for both companies. In November, 62%, the Alaska voters rejected Ballot initiative 1, the Stand for Salmon initiative, proving once again, that this state already the second largest gold producer in the country remains open for business. In the same month, NOVAGOLD received an award for it’s permitting efforts at Donlin from the American Exploration & Mining Association for the design, strong safety culture, environmental stewardship and community engagement. Congratulations to the team. We are all very proud of these accomplishments and look forward to 2019. For those of you who are new to the company, NOVAGOLD’s 50% owned Donlin Gold project is located about 280 miles west of Anchorage, as shown on Slide 5. And is one of the largest undeveloped gold deposits in the world today. We now have a federally permitted project for development in Alaska, one of the most business friendly jurisdictions in the world, which welcomes responsible mine development. Slide 6, provides a high level summary of the extensive amount of permitting work the team has accomplished over the year. We have continued to advance and derisk Donlin Gold, staying true to our strategy. Last year we worked with federal and state agencies in cooperation with Calista and TKC our native corporation partners. 11 other cooperating agencies and many people from the Y-K region participated in the review process. The six year federal state and regional permitting marathon, which resulted in a successful outcome. Most recent state permits were issued last Friday for the reclamation and closure plan approval and the waste management permit. We will continue to receive more permits throughout the year and we’ll keep you updated if they come through. Federal permitting is an extensive undertaking, that requires both in-depth expertise and widespread collaboration amongst the various parties in order to get it done right. It was a great effort in which our hard work has paid off. Slide 7, shows the signing ceremony for the Record of Decision last summary, marking the completion of the federal permitting process, and the first time in history that two federal agencies the Army Corps of Engineers and the Bureau of Land Management participated in a signing ceremony for the issuance of the Donlin Gold Record of Decision. We are pleased with the outcome, as the project was approved in its entirety with no unusual stipulations or conditions attached to the approval. On Slide 8, we highlight that with permitting and scoping level optimization work largely complete, our focus will shift toward updating the feasibility study and revise project development plan. The recent completion of the merger between Barrick and Randgold, we are looking forward to work with the new technical team to advance the project in a responsible and cost effective manner. Since 2012, NOVAGOLD has considered opportunities to monetize it's 50% interest in the Galore Creek project. And as mentioned earlier, the company succeeded in making this happen by selling its share of Galore Creek to Newmont for a total consideration of up to $275 million. Upon close last July, $100 million was deposited to our treasury. We also have additional payments totaling $100 million expected to be received in the next few years. An additional contingent payment of $75 million will be due on a construction decision by the owners. Slide 9, shows a photo of the ownership transition ceremony, which we held last August along with the Tahltan Nation, Teck and Newmont. We were really pleased with this transaction, the win-win for all parties involved, and we wish Teck and Newmont great success in advancing and ultimately developing Galore Creek into a major copper-gold mine. We are proud of our extensive engagement efforts with our shareholders and local stakeholders as highlighted on Slide 10. Relationships in the communities where we operate is core in everything we do. In 2018, extensive engagement efforts continued throughout the Y-K where Donlin is located. We have many joint meetings with Calista highlighting the benefits of the project. TKC also worked with Donlin Gold on outreach visits to the Kuskokwim villages. We've held over 400 village meetings over the years. The new and very successful program called the Green Star backhaul was launched by NOVAGOLD in 2018. This entails working with six villages along the river to remove approximately 20 tons of hazardous materials and other wastes via barges. We will build upon this program in 2019. We also sponsored key sporting, educational, environmental advance and other initiatives over the last year, which are listed at the bottom of the slide. We are always present in the communities and throughout the region. NOVAGOLD also hosted a Donlin Gold site tour with multiple sell-side representatives last summer and included a dinner with the Alaska Governor, key state commissioners and the executives from both TKC and Calista. Now with that, I'll turn the call over to our CFO, David Ottewell. Dave?

Thank you, Greg. Slide 11 highlights our operating performance for the fourth quarter and year. Our fourth quarter net loss from continuing operations decreased by $2.7 million to $6.2 million, primarily due to lower permitting cost for Donlin Gold, no drilling programs in 2018 and higher interest income. For the year, share-based compensation expense included in G&A decreased by $2.6 million due to changes in the company's long-term incentive program. The vesting period for new stock options and for mature units were extended to three years from two years. Cash flows are highlighted on Slide 12. During the fourth quarter of 2018 and for the year, lower spending at Donlin Gold due to lower permitting costs and no drilling program was offset by working capital changes, primarily related to the timing of term deposit maturities. In the fourth quarter, discontinued operations provided $4.6 million from a refund of Galore Creek reclamation deposit. We ended the year with cash and term deposit of $167 million. On Slide 13, we note NOVAGOLD’s healthy treasury. In 2019, we expect to spend approximately $24 million, including $13 million for our share of Donlin Gold and $11 million for corporate, general and administrative costs. At Donlin Gold, 2019 activities includes the commencement of additional field work and more detailed engineering that will require multi-year commitment to support the application for Alaska Dam Safety certificate. Looking ahead, as mentioned by Greg, we have $100 million receivable from Newmont with an additional $75 million contingent on Galore Creek construction. Back to you, Greg.

Thank you, Dave. Now turning to a brief overview of our Donlin Gold asset on Slide 14, which highlights all the key attributes one would seek as a model and leader in the gold industry. With its noteworthy size, high grade, a mine life that spans decades, exploration upside, strong growth in partnerships and jurisdictional safety, Donlin Gold is unique on all counts. Beginning with size as shown on Slide 15, compared to other development stage projects with 39 million ounces of gold, Donlin is clearly at the top of the list and about five times the size of the peer average. Another key attribute shown on Slide 16 is the excellent quality of the deposit. Donlin grade at 2.25 grams is twice the world industry average and puts it in a category of its own as one of the highest grade known open-pit gold deposits. This is a very important quality in the context of the challenges facing the precious metals industry as reserve grades continue to decline and sources of emerging production become increasingly scarce. Donlin Gold has longevity with an anticipated production profile greater than 1 million ounces per year over a 27-year mine life. Clearly, in a league of its own when compared to the peer groups as shown on Slide 17. Once in production, the project will contribute great economic benefits to all our stakeholders for decades to come. To put the project size in perspective, the bubble diagram on Slide 18 shows the 10 largest producing gold mines in the world, of which only five were expected to produce more than a million ounces a year in 2018. Projects like Donlin are very scarce and they are needed to replenish reserves. Shown on Slide 19, we have roughly 1,400 drill holes in this deposit that has defined resource, with over 90% of them being core holes, giving us a very in-depth understanding of the deposit. Beyond all the drilling completed to-date, substantial exploration potential remains along the 8-kilometer mineralized belt as shown on Slide 20. ACMA and Lewis open pits are defined by the white border and contain the 39 million ounce resource. As we have only drilled 3 kilometers of an 8-kilometer belt, we expect the mine life to go way beyond the projected 27 years. When the time is right, we will resume exploration activities. Another key project attribute is having an incredible deposit located in Alaska, one of the safest mining jurisdictions and the second largest gold producing state in the U.S. As highlighted on Slide 21, location is the very important factor, as Alaska is a jurisdiction that welcomes responsible resource development. As of now federally-permitted gold development project, we had moved Donlin far up the value chain and heavily de-risked the asset, as we said we would do back in 2012. We are more enthusiastic than ever about the Donlin Gold and the opportunity it represents for everyone involved and we are looking forward to the next chapter in advancing the Donlin Gold project. We engage frequently with our shareholders, it helps broaden our understanding of their priorities as well as guides and improves our disclosure and governance practices. In 2018, NOVAGOLD engaged with shareholders representing 82% of the company’s issued and outstanding shares ahead of the company’s annual general meeting, and we conducted post proxy outreach last fall to obtain feedback from our largest shareholders. We will report the results of this back to the respective committees of the board for their consideration. We would like to thank all our shareholders for their ongoing commitment. Before we conclude the formal portion of this presentation, I would like to extend our gratitude and a special thank you to our fellow board members; Gerry McConnell and Gil Leathley, who retired in 2018. They made extraordinary contributions to NOVAGOLD, starting with Gerry, who founded the company in 1984 and whose dedicated leadership helped transform what was an exploration startup into the company we know today. And secondly, Gil Leathley, who was Chief Operating Officer and subsequently a member of the board and special adviser to me. With over 55 years of industry experience, his guidance in setting and maintaining the highest standards of the various facets of operating performance, not only set the tone for our achievements at both Donlin Gold, but also set the benchmark in operating excellence for many years to come. And finally, I want to thank David Deisley, who retired at the end of 2018. As our former Executive Vice President and General Counsel, he was instrumental in guiding the company through the various aspects of its activities, corporate transformation through a successful permitting and social engagement. We wish all of these gentlemen a long and healthy retirement. I would now like to hand the call over to Dr. Kaplan who will make closing remarks. Tom?

Thank you very much, Greg. Amidst the expressions of gratitude, which I share for Gerry, Gil and Dave, I’d like to take a moment to express my deepest gratitude to you, Greg. What you have done, what your team has done has been a credit to the mining industry. And I can certainly say that having been in this business for 25 years, the experience that I’ve had working with you and your management team has far and away been the most enjoyable that I have known. You have been and the team has given nothing but joy. And the results themselves of the company’s activities, I think, reaffirm that. In my remarks, I’d like to touch on a few things which I believe need to be highlighted and I shall also be doing so in writing in this year’s annual report. One of them is that having been in this business for a long period of time, I am like almost everyone else in this call, normally on the investors side of the table, vetting managements, vetting assets, taking a view on natural resources prices whether they were silver, copper, gold or natural gas for that matter. I can say that there has been, in my experience, very few examples of a company that said what it was going to do and actually did it to the letter. People forget that 10 years ago and this January is indeed the 10th anniversary of Electrum’s entry into the NOVAGOLD story. The company had all kinds of problems that made it almost uninvestable. When you look at the progress, which has been made over the last 10 years, you would realize that this is one of the great turnaround stories in the industry. But the period that I’d like to highlight is the period in which time Greg became the CEO of NOVAGOLD. Coincidentally, I became Chairman [Audio Dip] story of this unique asset base which we had, we raised a lot of money, over $300 billion at $9.5 a share. To any investors who might still be in it from that offering, I can assure you that you will not see the company selling shares below that price. We don’t do down rounds. And if anything, the company that we have is in a better position to buy back shares, if gold has another head-fake to the downside then perhaps to sell shares. This is really important. Greg highlighted the uniqueness of Donlin. And I would put it to anyone on this call to challenge the assertion. I don’t believe that there is an asset whose combined attributes of size, grade, exploration potential, production profile, all-in cash cost, mine life, jurisdictional safety and community relations comes even close in comparison to Donlin. That’s why we’ve gone from saying it’s the best development stage story in the world today to being unique. You can’t even find something like this in a difficult jurisdiction. To be able to have a permitted mine that one day in one or two phases will be the largest pure gold producing mine in the world in the safest [ph] gold producing state in the safest jurisdiction in the world, that is for an investor like myself, the Holy Grail. I’ve navigated and profited in Bolivia, The Congo, Zimbabwe, South Africa, East Texas. I’ve had great assets. My team has found some of the best. We’ve acquired control of some of the best, but we’ve never been in a position of being the largest shareholder of an asset that is unique, that couldn’t be repriced, that even if someone found it today would most likely take 20 years to be able to get to the position where NOVAGOLD finds itself. I have zero doubt in my mind, metaphysical certitude when the investors sentiment returns to this space and portfolio managers are calling up their brokers and saying, What can we buy? One of the stocks that’s going to be given to them as a recommendation will be NOVAGOLD. There are many reasons for that. One that I would highlight is, I think that after the experiences that most investors have had in the developing world, and remember as I’ve just cited, my ability to speak about this comes from experience and having made money in the developing world. I believe the game is over. And subscribing to the Woody Allen line, I’m not afraid of death, I just don’t want to be there when it happens. We pulled up stakes from the emerging markets about seven or eight years ago, and I became what at that time seemed like the Jeremiah of resource nationalism and jurisdictional safety. Today, that mantra of not just going where the gold is, but gold where you would be willing to take your family on a vacation, has become much more commonplace. If I’m right, there will be a bubble in gold stocks, but particularly those where a broker can tell the PM, this is a place where you can invest money and go to your IC and if you’ve got spare time you can go whale watching or you can go gambling in Nevada or go to the Sydney Opera House or some other safe places. I believe that, that will be existential. I have no doubt that comes the next leg in the bull market and I will repeat that I believe we are just in a correction within a long-term bull market that will go beyond 1,900, but comes a time when sentiment returns to this woefully undercapitalized sector, you’re going to see investors saying, Find a great asset, solid management that is in a place where when I go to sleep at night, when I wake up in the morning, whatever I thought I owned, I still own. Now, you’ve heard all the reasons why Donlin is unique. I think that we are blessed. I think that Barrick is blessed to be able to have a reserve, a resource that is accretive on practically every metric from the metric of how much of your reserves are located in safe places through to grade, through to production profile, and the fact as Greg said, that we just think we’re scratching the surface in terms of the exploration potential. You’re dealing with 40 million, 45 million ounces of resources on three kilometers of an eight-kilometer belt and that eight-kilometer belt is only 5% of the total land package. As my Chief Geologist, Larry Buchanan told me, after we became the largest shareholder of NOVAGOLD, I believe the next Donlin will be found at Donlin. Now that we have a partner who has understood what it means to really create value from the drill bit, we may yet see very pleasant surprises. Obviously, we’re partners. We’ve been great partners to Barrick over the last 10 years. And we expect to be so for many more years to come. Now, let me reflect upon one of the unsung attributes of this company. I hinted at it earlier on. This company tells the truth. When Greg and I did that capital raising at $9.5. We made some promises to those investors, it was 2012. We promised to spin-off our Alaskan copper assets. That company spun off as NovaCopper and now trading under the name Trilogy, has performed really well, and we’re very hopeful that there will be more good news to follow. We certainly have a lot of shareholders who have NOVAGOLD and have Trilogy, and they’re very happy with what we did. But in order to make NOVAGOLD the pure play on Donlin, that was our stated objective, we also had another great asset in the stable, that was Galore. Galore is a wonderful asset. And we wish Newmont and Teck all the best in developing it. We believe that one day that will be among the lowest cost, if not the lowest-cost producers of copper in a Tier 1 jurisdiction. Great local partners. But from our standpoint, we didn’t have the ability to simply say, okay, we’re going to develop two megaprojects in tandem. But we also said, we’re not giving it away. We know that we could sell it any day for $50 million. We knew that there’s real money here. And the deal which gives us $200 million guaranteed and we hope as much as $275 million kept phase with all the shareholders to whom we said, don’t worry about it, we will not sell this asset under $200 million. And we expect, as I said, to get more. We didn’t get pennies for it, we got real money. That real money on our balance sheet means that today we have between cash on hand and factorable receivables about $0.25 billion with our permitting pretty much done. Most of it is done, the federal permits are done. If gold were to go into a nuclear winter before it makes its next move, what we call the classic v-bottom head-fake, we’re one of the only companies that literally can’t go out of business. We wouldn’t be hemorrhaging cash like producers do, but we wouldn’t be subjected to the vagaries of the market like those who are developing gold mines now are doing. We would be in a position where people would know this company could hunker down decades, literally decades, if anything – if we get the opportunity, we will be buying back shares, not selling them. We will not have to sell shares under duress. The next time we sell shares, we hope it will be simply because we and whoever partner we have, whether it’s Barrick or anyone else who comes into the story in their place want to take this project forward. As all of you know, we’re not in a rush. I do not believe that people should be giving away gold at $1,300. I think it’s a mistake. I think that if you’re a true believer in gold, you wait. And if you’re not a true believer in gold and you think gold could go down, you definitely do not want to be in a position of being a producer. You want to be husbanding those reserves and not putting any analyst in the position where they have to factor lower gold prices and how much money you’re having to burn and how much capital you have to raise to stay in business. The fact that we don’t have any of those question marks over us, while we have a permitted mine in the United States that we’re dealing with, this is to me, what I said, the Holy Grail. We think it’s the best position for a gold investor to be in. You have a mine that we said would be permitted. It was not only permitted in Alaska, which people were very concerned about for a variety of reasons that we don’t have to go into that were not to our company. And we said we have no opposition. We have wonderful local partners in Calista and TKC. Alaska is open for business. Well, we’ve proven it. And the state itself, as Greg referenced, reaffirmed it a couple of months ago by 2:1 that their environmental laws, which are already pretty great and stringent, needn’t be made more complicated to hold back development, where that development can change the lives of people. So we said what we were going to do in terms of Trilogy, in terms of making NOVAGOLD a pure play, that we would be permitted. We also expressed such confidence in the deposit that we sell to our partners and we ever decided some drill holes into it, people would get very excited. We did. There aren’t that many companies like Barrick or NOVAGOLD, who can report 130 meters of 6 grams or 64 meters of 5 grams. Whether the whole size of the deposit ends up being larger, who knows? We believe that if we were to drill along some strike, we would be adding reserve. Now, you’ve heard all the reasons why we believe we’re unique. You’ve heard that I’ve been in the story for 10 years. I can tell you that rather than being fatigued, I have never been more excited about the prospects for this company. I fully expect that we, as Electrum, the largest shareholder, could have a multibillion dollar payday from this story. I believe that being able to have assets of this kind when sentiment returns is just what the market needs. One thing we know, the gold industry needs assets like this. Whether you look at asset quality, where the grade of the average gold mine has plunged 60%, 70% to 100% and I believe we’ll be under a gram. During this period of the last decade, we’ve seen so few successes in exploration, so few. 5 million ounces, it’s minimum that we look at as an investment company, NOVAGOLD and Barrick has 6 million ounces in storage within the pit, that itself would be one of the most accretive additions in the gold space. Of course, we’re going to get to it. And of course, finding an asset like Donlin is a 10,000 to 1 proposition. So no wonder that mega mergers are happening. The Barricks of the world, the Newmonts of the world, they need to make deals, they need to add reserves. They know that they’re burning through reserves faster than they can replace them. They also know that gold is not like oil. I think Ian Telfer was right when he said that we’re going to see, if we haven’t already seen, peak gold. Having been in the hydrocarbon business and done really well in that business through exploration, unlike hydrocarbons, the mining industry do not have any new technologies like frac-ing or horizontal drilling to be able to unlock vast reservoirs of resources. The reality is there are no vast reservoir of resources. In other words, between the lack of technology and the fact that this stuff isn’t there and the quality has also collapsed simultaneously, I would say that the horse has not only left the barn, it closed the barn door. That’s why great North American assets will be like catnip when the time comes. And we’ve seen it before. In 2010, our stock went from five to 15 in a matter of weeks and that was when we had headwinds. We didn’t have the kind of relationship with Barrick that we had before. People didn’t believe you could permit one of the biggest mines in the world, eventually, in Alaska. We didn’t have a management team that we got two years later when Greg Lang joined us from Barrick and brought Richard Williams and Dave Deisley and Dave Ottewell into our stable people, who could manage any major mining company. We had headwinds, those headwinds became tailwinds. Now, I would add that at that time, 10 years ago, people were not buying into necessarily my jurisdictional thesis. I had debates in public from those who said I was alarmist, they don’t anymore. To me that is determinative. People no longer go where the gold is. They will go where they can sleep well at night. Now, I’ll take just a few minutes and there may be more questions on it, to address now the most asked question that we get as a company, because it used to be, when will you get the permits? It used to be, will you be able to get a decent price for Galore? It used to be things about our company, where we had the most ability to comment on the outcome. The question we get now is where does your spend go on this project? First of all, let me start by saying that we believe that the introduction of Randgold, the introduction of Mark Bristow into the Barrick equation is a momentous game changer in terms of accelerating the value proposition that is Donlin. Now, let me make sure that I express this very, very clearly. That is not a statement that we are of interest now than we were then in pushing Donlin into production until such time as it’s what our shareholders want and what our partners want. But no matter how we slice it, whatever happens with regards to Barrick, whether they choose to adopt our narrative that this will be one of the greatest mines in the world some time in the future when the returns are right, when the gold market is right, when our shares are better, when their shares are better, whatever have you, the patient philosophy, it’s great. Randgold are famous for being superb operators. And I’ve known Mark for many, many years. He’s one of the most honorable and ethical people I’ve ever met. So, we’re extremely comfortable with having Barrick as partners. We think they’d be great. But I don’t walk in Barrick shoes. And they have a portfolio that spans the entire globe. They will have, after they’ve done their reviews, whatever priorities they choose to have and that will be their business. It’s for any individual that are willing to part with their half of this project, we would be very happy to work with them, because remember we have a right to first refusal, to be able to make sure that this asset is in great hands. It’s our very considered belief that there would be multiple bidders for this asset. We would have no problem with any of a number of them. So, for us, there would be a sales process that would be China like, but the attributes of Donlin that make it imperative to any major mining or medium-size mining company. It’s only going to attract more investor interest to a very closely held company at this point. If on the other hand, they choose to stay, then I would speculate that knowing Mark and how shareholder-friendly he is, as our share price would rise, he would make sure that all of the analysts of NOVAGOLD and Barrick’s gold would give him credit for what’s now an apples-to-apples valuation between our half of Donlin and theirs. Either way, it’s good for shareholders. Anything that allows us to have a partner, whether it’s Barrick or whomever, will be accretive to us, because we have the best story in the space. We have the safest story for investors, who want long-term leverage, but don’t want to have to take a short or medium-term view on when gold will kick in and begin the next leg of the bull market. So when we look at it, it’s win-win. Any statement that makes our shares more publicly assessed is going to be very positive for us. As much as we love going and talking about the asset where, by definition, the one who steps into their space, starts talking about virtues and they have a bigger phone than we do, you’re going to be hearing Tom Kaplan in stereo and that’s a terrible thing. One Tom Kaplan may be enough, but in stereo, I just sound hell of a lot better. So we look forward to the future with a tremendous amount of optimism. We feel that every business has been checked, every promise has been kept, every payment that we’ve made, whether it’s to our shareholders on the ground in Alaska, through to our shareholders, the federal, state governments, our analysts, all of them have been maintained with absolute fidelity. The one that is going to be icing on the cake for the next phase of the market, understanding what kind of an asset Donlin is, is just an added blessing and we welcome it. With that, I say thank you to our shareholders, those who follow us. And, as you know, we love getting questions. Please throw them. And if you don’t get to ask on this call, give a shout to Melanie, Greg, myself, any of the team, are always happy to get investor feedback. Thank you very much.

Thank you, Tom. Victor, we’ll open the line for questions.

Yes, ma’am. [Operator Instructions]. And our first question comes from the line of John Bridges from JPMorgan. You may begin.

Good morning, Tom, Greg, everybody.You raised the issue, the very topical issue of the Barrick transition. Could you give us a little bit more color on what the market is thinking in terms of Donlin? You suggest the potential for sale. But from our perspective, the U.S. tax regime for the mining industry seems to be one of the best in the world at this time. So sale sounds a bit strange, but just wondering what you thought.

Greg, let me begin. John, I’m not saying that Barrick is going to sell. What I’m trying to highlight is that no matter how you slice it, no matter through which facet you look through the prism, if Barrick stays, it’s great. If Barrick leaves, it’ll be great. I love Mark Bristow. I think he is one of the greatest CEOs, not just to this generation, but in the mining space. And I’m not saying this to flatter him, I’ve known him for many years. Every dealing that I’ve ever had with him in every sphere of life has been marked by honor and goodwill. And he knows it. And he knows that and I think that he would say the same about me. Bringing him as a partner would be a dream. Is there any reason why Barrick should sell it? From my perspective, no. I agree, but I – Mark is a friend, but I respect that business is business. And if for any reason he and his team were focusing – what I’m saying is that any outcome will make our shares go higher. You have to understand, for the first time in the Randgold story, because Randgold really know how to market their virtues of which they have many, but whether it’s Randgold or any new buyer of that asset, we will have so much more positive exposure through having a partner who for the first time will champion and talk about the merits of the asset in a way that we have not seen in many years. So when I talk about that, I’m not speculating. And no, I have not been given one iota of a hint that Barrick would like to sell or redeploy Donlin, not remotely. I’m talking about it from the standpoint of my shareholders. I’m talking about it because it’s not a question mark in my eyes because whatever the outcome is, it’s going to be accretive, it’s going to lead to a higher share price. Do you really think that if I put NOVAGOLD into play, that it would be at this price? No way. We’re the company that I think the share price is no reflection of where it would trade in a sale and it’s no reflection of the fact that the company could actually buy back shares that it sold at $9.50. So things that make Larry Tisch famous. I’m not saying that I would ever be in his pants, but know how to be opportunistic. From all standpoints, we believe that we have been surrounded, is what I’m saying. Does that answer your question, John, or not?

Absolutely, absolutely. Yes, I just wanted a bit of clarification on that. I understand it’s very difficult one to address. Just as a follow-up, the scoping study of the Phase I project at Donlin, will that be released? Or is that still under review by Barrick?

John, this is Greg. As you might guess, a lot of new players have come into the mix in there: Greg Walker, John Steele, Catherine Raw. And they’re rapidly coming up the learning curve on Donlin. So, we’ll give them a little bit of time to get their feet on the ground and then we’ll deal with that question.

Excellent. Well done guys and congratulations on last year’s achievements.

Thank you, John.

And our next question comes from the line of Stephen Walker from RBC Capital. You may begin.

Thank you, operator. Good morning. Greg, just kind of a follow-up to John’s question. The NOVAGOLD budget for Donlin in 2019 is $13 million. Has Barrick committed to its 50% share of the joint venture at this time? Are they going to be funding their share of the $13 million – excuse me, their $13 million which is their 50% share?

Stephen, they have committed to fully funding their share. And we’re continuing our dialogue with Barrick on other additional work we may undertake in 2019.

Great. Thank you. And there’s a comment in the release that talks about the need for engineering, multiyear engineering, a detailed engineering for the tailings. Can you talk a little bit about that? And what’s required for that particular project – for that aspect of the project?

Sure, Stephen. Final permits, we have all the permits in hand, essentially, to begin work at the site, if we were so inclined. But some of the facilities, the tailings dam is certainly one, require fully engineered detailed drawings before the final permits are issued. So the work that we’re undertaking this year is to advance the final design of the tailings dam and other water retention and control structures throughout the project site.

Perfect. And Barrick’s committed to that process, from the sounds of it, is that in fact correct?

That is indeed correct. They’re 100% committed and the Donlin budget has been approved by the Donlin Gold board.

One last question. There was no optimization project update as was asked by John, am I correct in my assumption that the pre-existing projects team that you have been working with is either no longer there or no longer working on the Donlin project? And do you, in fact, have the liaison that you had in the first half of the year or the first three quarters of the year that are working with you on the optimization study?

Yes. We do, Stephen. Andy Cole, the Donlin Gold project General Manager who’s the Barrick secondee remains with the project as do other Barrick technical people. And as I mentioned to John, Catherine Raw, Greg Walker and John Steele, who are somewhat new to Donlin, are rapidly getting up to speed on the project. So we’ve had numerous review meetings with the new players.

Perfect. That’s very helpful. And it’s good to hear that Andy is still involved in the project. Thank you, Greg. That’s all my questions.

Thank you, Stephen.

[Operator Instructions] Our next question will come from the line of Howie Flinker from Flinker & Co. You may begin.

Hi, Tom, hi, Greg, hi, Melanie. I just want to point out that, Tom, your connection was spotty. So on the replay, you might try to clean that up.

Thank you, Howie.

Thanks, Howie.

You’re welcome. That’s all for me.

Thank you again, Howie.

And our next question comes from the line of David Lapinski as a Private Investor. You may begin.

Yes, good morning, Greg. Mark Bristow has publicly said that Barrick wants to divest of any mine that doesn’t produce 1 million ounces or greater. And that being the case, it seems to me that Donlin is going to produce 1 million plus a year. And taking that into account, doesn’t it make sense that Barrick Gold instead of selling would be the buyer of NovaGold to produce that sizable quantity? I mean, I assure you there's talk going both ways, but to me it's a no-brainer that he should acquire NovaGold at prices today, which are ridiculously low because if we take into account the 20 million ounces that NovaGold owns in the ground. And let's just say hypothetically you put a value of $1,000 an ounce on that, that's $20 billion asset. Now NovaGold, when you take into account your cash and cash receivables, your market cap is $900 billion. So you're talking about 20 times the price of your market cap. So if you want to be conservative, that would be a $80 price. So if you want to be conservative and you cut it in half to $40, OK, that's half the price. OK, let's be conservative again. Let's divide that price in half again to $20, OK, and that's realistic. That means a share price for NovaGold of at least $20 on a double conservative area, would you agree with that?

Well, I do like your math, David. Thank you. But I do think there is certainly a lot of potential in our stock, particularly looking at current levels.

Well, the largest shareholders sell – would the largest shareholder, I forgot your name, sir.

Tom Kaplan.

Don, would you sell at $15? Because I would vote it down. I would vote it down if it's $15.

First of all, bless your heart. I really believe that while some people may have been rolling their eyes while you were talking about the upside, let me share with you, this would be the silliest stock in the gold space to short. It doesn’t trade at a value which we would call a market clearing price if the stock were the object of a takeover. And at the same time as we say, it’s the only one in the space or one of the only ones in the space, which truly can’t go out of business, wouldn’t hemorrhage cash and wouldn’t have to dilute its share offering, if gold were to go down before it goes up. And we have two scenarios on the gold price. One is that like Jeffrey Gundlach calls it, gold is coiling like a snake and has actually broken out if you look at certain charts. And there’s another one where we – scenario B, where we have one more head-fake to the downside before we see you [Audio Dip] quite high. I don’t really know. But as an investor and we are considered sophisticated investors, our job is to look at every conceivable scenario focused on the downside, because if downside is taken care of the upside will take care of itself. And the upside for that is that we will see new all-time highs in gold. I’d said before that I do believe that for a lot of the reasons that we’ve cited for just within the gold industry, we will see a new equilibrium price of $3,000 to $5,000 at some point in the future and that’s wonderful. But, of course, you’ve still got to get to $1,900 to go to $3,000. At $1,900, the NPV of this project based on the 2012 feasibility study is indeed $20 billion if you use the 0% discount rate, which is exactly what I think will happen for U.S. assets of good quality and this one, we argue, is the best. Before people went to Peru in Yanacocha and Indonesia and Africa, et cetera, U.S. asset returns valued with 0% discount rates because they were arbitraged against certain jurisdictions like Canada, South Africa and Australia. I think that we will see when gold starts to move. I think the stock will go to all-time highs in the 20s. As I said in 2010 with headwinds, we went from five to 15 in a matter of weeks. I think we will see all-time highs. And that may very well be where we would rate the X component of a project financing. It’s for sure, we don’t need to raise money. We won’t need to raise funds. Many scenarios that we see, no such time as we and our partner would make a constructive decision. That is a tremendous luxury. It’s not wrong to say that we have a much greater likelihood of being the object of opportunist takeover attempts than we do by get getting into any [Audio Dip]. I don’t believe the frisky and independent-minded shareholders would accept that. I know I would not. And the primary reason is that I believe that any merger that we would do, certainly at the present moment, things can change. But any merger that we would do would dilute the best gist of this story, which is that it’s a pure play on a big North American asset. And so if we merged, I mean, cash wouldn’t work for us. Shares, they would have to offer the same kind of risk-adjusted leverage that we get today. We have all the leverage to an upside in gold. And if anything, only opportunity if gold goes down first. We will not be crying, we won’t be losing sleep, we won’t be sweating. We will, in fact, probably be taking proactive measures that will be accretive for shareholders. We’ve never done anything stupid, we’ve never diversified, we never blew our cash on stupid stuff. The management team is pretty astute. We’ve checked every single box, even with our partner, whatever they decide to do, will be great for us. So can I look at it in terms of what our partnership feels like as a takeover attempt with someone else? No. They certainly have an appetite right now and we’re really comfortable with the position in which we as investors just find ourselves. I hope I answered your question.

Yes, but you know it’s interesting to two points. One, being I feel safer owning NOVAGOLD stock than I do having money in a bank. And on top of that, the Chinese – I’ve been doing business with China for 40 years. Okay? I sell China wastepaper and they are the market. And every time the price gets too high, they back away. So the price comes down, then they come back in with new orders. So China in the last week announced they’re increase in gold reserves to something like 1,800 to 1,900 tons, which is a total lie. Because if they were to come out, I firmly believe that China has 15,000 to 20,000 tons because of the Chinese or the Shanghai Oil Exchange and the option to convert Yuan into gold at the Shanghai Gold Exchange. Okay, they can’t just have 1,800 tons to run a program like that. And if they were to announce to the world that they had 15,000 tons, you know as well as I do, the price would rise $500 in a day.

I completely agree with you and I agree with your assessment. I have no doubt that the official numbers of the Chinese gold reserves are understated, that what they talk about is maybe what they have sitting in one aspect of the Bank of China, but they have so many parastatals that I do believe are accumulating gold. And this is not because I’m a gold buff or any other thing, it’s in China’s strategic interest to wait for the time to accumulate, when they can ...

That’s right, that’s right, to keep the price down.

Yes, it’s not in their...

To keep the price down.

It’s very rarely that when someone when they’re accumulating to broadcast that they’re accumulating. And the Chinese have never gone to Goldman and said, give me an order for 10 million ounces or hit my bid. If the World Bank or the IMF or Germany, for example, not that it would happen, I don’t see any official sector statement. But if they go to the Chinese and show them something that would tempt them because the size would be big enough that it would achieve an objective, they might reveal themselves. But otherwise, what’s most likely is that the Chinese do have more gold now than the United States, officially, and they will wait to announce it when it’s optimal for them in order to be able to broadcast that for one of the most obvious areas embedded within the neocortex of all humans that in gold they have become the middle kingdom.

That’s right, gold is money, everything else is credit. That’s right.

I think they see it. And I think that one day that will be announced. And woe unto the shorts because if they ever do that from a strategic point, gold will hit $500 in Tokyo and it will be mayhem.

There’s – of course, with all the central banks and everything that’s going on, is the world is going to have to go back to hard money and what that looks like, their strategic drawing rights with gold as part of the asset, I don’t know. But it’s inevitable. And you know what else is interesting to me? For – the first person that asked the question was JPMorgan, okay? JPMorgan, from what I’ve read, they’ve got 11,000 tons of silver in their safe under – in New York, is that true?

I don’t know the answer to that.

Why are they holding 11,000 tons?

You’d have to – look...

I know I’m taking a lot of time, but what you have to understand is that this manipulation by the big banks on the price of gold and silver, okay, has done direct harm to NOVAGOLD shareholders, because you know as well as I do, that if oil goes up, the oil stocks go up. If gold goes up, the gold stocks go up. If they suppress it and push it down, the gold stocks go down. So NOVAGOLD has damages. And whether you ever want to pursue that, there’s litigation going on all over the place right now.

Well, I can say that JPMorgan has been a wonderful supporter of the company over the years. So we’re definitely not pursuing anything against them. But the truth of the matter is that I do believe the fundamental clout, I believe that gold will break out from the declining wedge pattern from which we see. And again, it could have one more head-fake, but I do believe that the path of resistance, least resistance for gold is multiplying. It has to go down from $950 to shake every weak hand out. And I don’t think it does. I, in fact, I know it doesn’t need to do that. But if it had to, to make some mining companies go out of business, shakeout weak hands. We don’t know, that’s outside of our control. But I do believe with absolute conviction that we would see a v-bottom and a reversal that would take us past all-time highs. We saw it before. We saw it with silver in the early 2000s, it went up to six, got people excited. Get a head-fake back down to four then went back to six, the people were shaken out, were paralyzed. And it began a journey that ultimately took silver back to 50. So, I do see that, but if you may, I’m happy to continue this conversation with you off-line. If you give Melanie your number, I’m willing to call you personally and spend as much time talking about this as we can, but I think we should give some people – some other people a chance online, if that’s all right?

That’s fine. Thank you very much.

You’re very welcome. Thank you.

Thank you. And I’m actually showing no further questions at this time. I’d like to turn the call back to Greg Lang, President and CEO, for closing remarks.

Well, everyone, thank you for participating in our call and enjoy the rest of your day.

Thank you, and I did mean it. Give me a call on the Maytag repair [ph]. I’m happy to take your calls and continue talking. Thank you from me.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.