NovaGold (NYSE:NG) Q3 2013 Earnings Conference Call Transcript

NovaGold Resources Inc. (USA) (NYSE:NG)

Q3 2013 Earnings Conference Call Transcript

Event Held on October 10, 2013, 11:00 AM Eastern Time

 Section I: Management Presentation

 

Operator

Good day ladies and gentlemen, and welcome to the NovaGold third quarter conference call and webcast. My name is Whitley and I will be your operator for today. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session. As a reminder, this conference is being recorded for replay purposes.

I would like to turn the conference over to your host for today, Ms. Melanie Hennessey, Vice President, Corporate Communications. Please proceed.

Melanie Hennessey – Vice President, Corporate Communications, NovaGold

Thank you, Whitley. Good morning everyone, and thank you for joining us today. On today’s call we have Greg Lang, NovaGold’s president and CEO; and also David Ottewell, NovaGold’s vice president and CFO. At the end of the formal part of the presentation, we will take questions both by phone and by email.

Before we get started, I would like to remind our listeners that any statements made today by the management team may contain forward-looking information, such as projections and goals which are likely to involve risks detailed in our various SEDAR filings and in various forward-looking disclaimers included in the third quarter financial release and in this presentation.

With that, I have the pleasure of introducing Greg Lang, NovaGold’s president and CEO. Greg?

Greg Lang – President and CEO, NovaGold

Thank you, Melanie. Hello everyone and thank you for joining us this morning on our quarterly webcast. For those of you who are less familiar with NovaGold, or who have joined us for the first time, the company has two great assets located in North America as shown on slide four. Our 50% owned flagship asset, Donlin Gold, is a year into the permitting and is poised to become one of the largest producers in the gold industry. Galore Creek is also a valuable asset, expected to be one of the largest and lowest cost copper mines in Canada. We intend to sell all or a portion of our interest in Galore Creek and apply the proceeds to the development of Donlin Gold.

In the third quarter, we continued to achieve a number of key deliverables. More technical workshops were held in Alaska with the Corps of Engineers and other agencies to review the main components of the Donlin Gold environmental and social baseline data. Donlin Gold permitting advanced over the quarter with the review of the project alternatives by the Corps and applicable agencies. Galore Creek completed its 2013 drilling program on time and under budget. And last and certainly not least, we maintained our strong financial position.

I will now hand it over to David Ottewell who will take you through our third quarter results in more detail, after which time I will provide an overview of our third quarter activities at Donlin Gold and Galore Creek. Dave?

Dave Ottewell – Vice President and CFO, NovaGold

Thank you, Greg. Turning to slide six. During the quarter spending at our projects progressed as planned. At Donlin, our share cash funding was US$3.3 million in the third quarter and $10.2 million year-to-date, on track for a total of $15 million for the year to support permitting activities and preparation of the Preliminary Draft EIS by the Corps.

At Galore Creek, our share of cash funding was CAD$3.8 million for the quarter and $5.9 million year-to-date, on track for a total of $8 million for the year. Spending increased during the third quarter as we completed drilling to follow up on last year’s discovery of the Legacy Zone. Expenditures will be lower in the fourth quarter.

Slide seven highlights our income statement items for the third quarter. Our operating loss has decreased dramatically compared to the prior year. Excluding foreign exchange gains, our year-to-date operating loss has decreased by 43%. Administrative expenses have been reduced by 44% from the prior year and property-related costs have been eliminated entirely due to the spin-out of NovaCopper and the sale of Rock Creek last year.

Turning to our cash flow on slide eight. We spent $9.5 million for our operating activities in the third quarter, primarily for our share of funding to Donlin Gold and Galore Creek. At the end of August, we had cash and term deposits totaling US$205.7 million.

In September, we accepted offers from noteholders to repurchase another US$6.4 million of the convertible notes. We believe that we have sufficient funds to advance Donlin Gold through permitting, support ongoing activities at Galore Creek and repay the remaining $15.8 million of convertible notes in 2015.

NovaGold expenditures have been reduced by nearly two-thirds since last year, as shown on slide nine. For 2013, we continue to expect to spend $15 million at Donlin, $8 million at Galore Creek, $15 million in administrative costs and $3 million in interests. We are continuing to pursue opportunities to further reduce our costs.

We have determined that NovaGold will become a U.S domestic filer commencing December 1, 2013. Therefore our future filings will be under U.S. GAAP and we have elected to change our reporting currency from Canadian dollars to U.S. dollars. You will see these changes in our 2013 year-end filings.

Greg, I’ll pass it back to you.

Greg Lang – President and CEO, NovaGold

Thank you, Dave. Starting with an update on Galore Creek. On slide 10, at the end of the third quarter, Galore Creek safely and successfully executed the 2013 exploration program, completing more than 11,000 meters of drilling under budget. The 2013 program was a follow-up on the success of the 2012 drill program and was aimed to define the extent of the legacy mineralization and assess its impact on future mine design.