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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended August 31, 2023

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Transition Period from to

Commission File Number: 001-31913

 

logo.jpg

NOVAGOLD RESOURCES INC.

(Exact Name of Registrant as Specified in Its Charter)

 

British Columbia

N/A

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

201 South Main Street, Suite 400  

Salt Lake City, Utah, USA

84111

(Address of Principal Executive Offices)

(Zip Code)

 

(801) 639-0511
(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

 

Title of Each Class Trading Symbol Name of each exchange on which registered
Common Shares, no par value NG

NYSE American

Toronto Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

Non-accelerated filer ☐

Smaller reporting company

     
Accelerated filer ☐   Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

As of September 26, 2023, the Company had 334,181,149 Common Shares, no par value, outstanding.

 

 

 

 

 

 

 

 

 
 

Cautionary Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains forward-looking statements or information within the meaning of Canadian securities laws and the United States Private Securities Litigation Reform Act of 1995 concerning anticipated results and developments in our operations in future periods, planned exploration activities, the adequacy of our financial resources and other events or conditions that may occur in the future. These forward-looking statements may include statements regarding perceived merit of properties, exploration results and budgets, mineral reserves and resource estimates, work programs, anticipated timing of updated reports and/or studies, capital expenditures, operating costs, cash flow estimates, production estimates and similar statements relating to the economic viability of a project, timelines, strategic plans, including our plans and expectations relating to the Donlin Gold project, permitting and the timing thereof, market prices for precious metals, or other statements that are not statements of fact. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. Statements concerning mineral resource estimates may also be deemed to constitute “forward-looking statements” to the extent that they involve estimates of the mineralization that will be encountered if the property is developed.

 

Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as “expects”, “is expected”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “potential”, “possible” or variations thereof or stating that certain actions, events, conditions or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements.

 

Forward-looking statements are based on a number of material assumptions, including those listed below, which could prove to be significantly incorrect:

 

 

our ability to achieve production at the Donlin Gold project;

 

 

estimated capital costs, operating costs, production and economic returns;

 

 

estimated metal pricing, metallurgy, mineability, marketability and operating and capital costs, together with other assumptions underlying our resource and reserve estimates;

 

 

our expected ability to develop adequate infrastructure and that the cost of doing so will be reasonable;

 

 

assumptions that all necessary permits and governmental approvals will be obtained and retained, and the timing of such approvals;

 

 

assumptions made in the interpretation of drill results, the geology, grade and continuity of our mineral deposits;

 

 

our expectations regarding demand for equipment, skilled labor and services needed for the Donlin Gold project;

 

 

our activities will not be adversely disrupted or impeded by development, operating or regulatory risks; and

 

 

our expectations regarding the timing and outcome of the appeals of the Donlin Gold 401 Certification (as defined below), State Pipeline ROW (as defined below) agreement and lease, the application for water rights, and the Donlin Gold Joint Record of Decision and 404 permit (both as defined below).

 

Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation:

 

 

uncertainty of whether there will ever be production at the Donlin Gold project;

 

 

our history of losses and expectation of future losses;

 

 

risks related to our ability to finance the development of the Donlin Gold project through external financing, strategic alliances, the sale of property interests or otherwise;

 

 

uncertainty of estimates of capital costs, operating costs, production and economic returns;

 

 

commodity price fluctuations;

 

 

risks related to market events and general economic conditions;

 

 

risks related to the coronavirus global health pandemic (COVID-19) or other endemics/pandemics;

 

 

risks related to the third parties on which we depend for Donlin Gold project activities;

 

 

dependence on cooperation of the co-owner of Donlin Gold in exploration and development of the project;

 

 

risks related to opposition to our operations at our mineral exploration and development properties from non-governmental organizations or civil society;

 

 

the risk that permits and governmental approvals necessary to develop and operate the Donlin Gold project will not be available on a timely basis, subject to reasonable conditions, or at all;

 

 

risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of our mineral deposits;

 

 

uncertainties relating to the assumptions underlying our resource and reserve estimates, such as metal pricing, metallurgy, mineability, marketability and operating and capital costs;

 

 

risks related to the inability to develop or access the infrastructure required to construct and operate the Donlin Gold project;

 

 

uncertainty related to title to the Donlin Gold project;

 

 

 

 

mining and development risks, including risks related to infrastructure, accidents, equipment breakdowns, labor disputes or other unanticipated difficulties with, or interruptions in, development, construction or production;

 

 

competition in the mining industry;

 

 

risks related to governmental regulation and permits, including environmental regulation;

 

 

risks related to our largest shareholder;

 

 

risks related to conflicts of interests of some of the directors and officers of the Company;

 

 

risks related to the need for reclamation activities on our properties and uncertainty of cost estimates related thereto;

 

 

credit, liquidity, interest rate and currency risks;

 

 

risks related to increases in demand for equipment, skilled labor and services needed for exploration and development of the Donlin Gold project, and related cost increases;

 

 

our need to attract and retain qualified management and technical personnel;

 

 

uncertainty as to the outcome of potential litigation;

 

 

risks related to information technology systems;

 

 

risks related to the Company’s status as a “passive foreign investment company” in the United States; and

 

 

risks related to the effects of global climate change on the Donlin Gold project.

 

This list is not exhaustive of the factors that may affect any of our forward-looking statements. Forward-looking statements are statements about the future and are inherently uncertain, and our actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to in our Annual Report on Form 10-K for the year ended November 30, 2022 and this Quarterly Report on Form 10-Q under the heading “Risk Factors” and elsewhere.

 

Our forward-looking statements contained in this Quarterly Report on Form 10-Q are based on the beliefs, expectations, and opinions of management as of the date of this report. We do not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations or opinions should change, except as required by law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.

 

 

 

 

 

 

 
 

PART I - FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

NOVAGOLD RESOURCES INC.

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(Unaudited, US dollars in thousands)

 

   

As of

August 31,

2023

   

As of

November 30,

2022

 
ASSETS                

Cash and cash equivalents

  $ 44,079     $ 63,882  

Term deposits

    86,000       62,000  

Notes receivable (Note 4)

          24,421  

Other assets (Note 6)

    1,816       2,235  

Current assets

    131,895       152,538  

Investment in Donlin Gold (Note 5)

    3,099       3,848  

Other assets (Note 6)

    3,139       2,803  

Total assets

  $ 138,133     $ 159,189  
                 

LIABILITIES

 

Accounts payable and accrued liabilities

  $ 1,654     $ 769  

Accrued payroll and related benefits

    1,936       2,532  

Other liabilities (Note 8)

    370       1,298  

Current liabilities

    3,960       4,599  

Promissory note (Note 7)

    133,274       123,685  

Other liabilities (Note 8)

    858       1,002  

Total liabilities

    138,092       129,286  
                 
Commitments and contingencies (Notes 7 and 8)            
                 
EQUITY                
Common shares     1,985,663       1,983,962  
Contributed surplus     87,691       82,866  

Accumulated deficit

    (2,048,890 )     (2,012,508 )

Accumulated other comprehensive loss

    (24,423 )     (24,417 )

Total equity

    41       29,903  

Total liabilities and equity

  $ 138,133     $ 159,189  

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

These condensed consolidated interim financial statements are authorized for issue by the Board of Directors on October 3, 2023. They are signed on the Company’s behalf by:

 

/s/ Gregory A. Lang, Director

/s/ Anthony P. Walsh, Director

 

 

 

1

 

 

 

NOVAGOLD RESOURCES INC.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(Unaudited, US dollars in thousands except per share amounts)

 

 

   

Three months ended August 31,

    Nine months ended August 31,  
Operating expenses:   2023     2022     2023     2022  

General and administrative (Note 10)

  $ 5,243     $ 4,872     $ 16,385     $ 15,420  

Equity loss – Donlin Gold (Note 5)

    3,978       9,412       15,996       21,893  
      9,221       14,284       32,381       37,313  
                                 

Loss from operations

    (9,221 )     (14,284 )     (32,381 )     (37,313 )

Interest expense on promissory note

    (3,433 )     (2,198 )     (9,589 )     (5,394 )

Accretion of notes receivable

    145       212       579       631  

Other income (expense), net (Note 11)

    1,435       147       5,084       988  

Loss before income taxes and other items

    (11,074 )     (16,123 )     (36,307 )     (41,088 )

Income tax expense

                (75 )      

Net loss

    (11,074 )     (16,123 )     (36,382 )     (41,088 )
                                 
Other comprehensive income (loss):                                

Foreign currency translation adjustments

    85       (761 )     (6 )     (497 )
                                 

Comprehensive loss

  $ (10,989 )   $ (16,884 )   $ (36,388 )   $ (41,585 )
                                 

Net loss per common share – basic and diluted

  $ (0.03 )   $ (0.05 )   $ (0.11 )   $ (0.12 )
                                 
Weighted average shares outstanding                                

Basic and diluted (thousands)

    334,158       333,337       334,022       333,172  

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

2

 

 

 

NOVAGOLD RESOURCES INC.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited, US dollars in thousands)

 

   

Three months ended

August 31,

   

Nine months ended

August 31,

 
   

2023

   

2022

   

2023

   

2022

 
Operating activities:                                

Net loss

  $ (11,074 )   $ (16,123 )   $ (36,382 )   $ (41,088 )
Adjustments:                                

Equity loss – Donlin Gold

    3,978       9,412       15,996       21,893  

Share-based compensation

    2,225       2,105       6,526       6,301  

Interest expense on promissory note

    3,433       2,198       9,589       5,394  

Foreign exchange (gain) loss

    21       (423 )     (15 )     (264 )

Accretion of notes receivable

    (145 )     (212 )     (579 )     (631 )

Gain on sale of mineral property

                (556 )      

Change in fair value of marketable securities

    45       647       (333 )     (66 )

Other operating adjustments

    4       2       43        

Net change in operating assets and liabilities (Note 13)

    210       750       (254 )     (1,506 )

Net cash used in operating activities

    (1,303 )     (1,644 )     (5,965 )     (9,967 )
                                 

Investing activities:

                               

Proceeds from term deposits

          62,000       62,000       78,000  

Purchases of term deposits

    (24,000 )     (62,000 )     (86,000 )     (70,000 )

Proceeds from note receivable

    25,000             25,000        

Funding of Donlin Gold

    (2,475 )     (8,438 )     (15,247 )     (24,925 )

Proceeds from sale of mineral property

                556        

Acquisition of property and equipment

    (133 )           (147 )      

Net cash provided from (used in) investing activities

    (1,608 )     (8,438 )     (13,838 )     (16,925 )
                                 

Financing activities:

                               

Withholding tax on share-based compensation

                      (2,122 )

Net cash used in financing activities

                      (2,122 )
                                 

Effect of exchange rate changes on cash and cash equivalents

    36       (278 )           (178 )

Net change in cash and cash equivalents

    (2,875 )     (10,360 )     (19,803 )     (29,192 )

Cash and cash equivalents at beginning of period

    46,954       72,292       63,882       91,124  

Cash and cash equivalents at end of period

  $ 44,079     $ 61,932     $ 44,079     $ 61,932  

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

3

 

 

 

NOVAGOLD RESOURCES INC.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF EQUITY

(Unaudited, US dollars and shares in thousands)

 

   

Nine months ended August 31, 2023

 
   

Common shares

   

Contributed

   

Accumulated

           

Total

 
   

Shares

   

Amount

   

surplus

   

deficit

   

AOCL*

   

equity

 
                                                 

November 30, 2022

    333,753     $ 1,983,962     $ 82,866     $ (2,012,508 )   $ (24,417 )   $ 29,903  

Share-based compensation

                2,161                   2,161  

Stock options exercised

    230       734       (734 )                  

Net loss

                      (10,659 )           (10,659 )

Other comprehensive loss

                            (101 )     (101 )

February 28, 2023

    333,983     $ 1,984,696     $ 84,293     $ (2,023,167 )   $ (24,518 )   $ 21,304  

Share-based compensation

                2,140                   2,140  

Stock options exercised

    115       687       (687 )                  

Net loss

                      (14,649 )           (14,649 )

Other comprehensive income

                            10       10  

May 31, 2023

    334,098     $ 1,985,383     $ 85,746     $ (2,037,816 )   $ (24,508 )   $ 8,805  

Share-based compensation

                2,225                   2,225  

Stock options exercised

    35       34       (34 )                  

Deferred share units (DSUs) settled in shares

    48       246       (246 )                  

Net loss

                      (11,074 )           (11,074 )

Other comprehensive income

                            85       85  

August 31, 2023

    334,181     $ 1,985,663     $ 87,691     $ (2,048,890 )   $ (24,423 )   $ 41  

 

   

Nine months ended August 31, 2022

 
   

Common shares

   

Contributed

   

Accumulated

           

Total

 
   

Shares

   

Amount

   

surplus

   

deficit

   

AOCL*

   

equity

 
                                                 

November 30, 2021

    332,416     $ 1,978,520     $ 82,216     $ (1,959,165 )   $ (23,289 )   $ 78,282  

Share-based compensation

                2,091                   2,091  

Performance share units (PSUs) settled in shares

    430       1,731       (1,731 )                  

Stock options exercised

    144       550       (550 )                  

Withholding tax on PSUs

                (2,122 )                 (2,122 )

Net loss

                      (9,995 )           (9,995 )

Other comprehensive income

                            178       178  

February 28, 2022

    332,990     $ 1,980,801     $ 79,904     $ (1,969,160 )   $ (23,111 )   $ 68,434  

Share-based compensation

                2,105                   2,105  

Stock options exercised

    347       984       (984 )                  

Net loss

                      (14,970 )           (14,970 )

Other comprehensive income

                            86       86  

May 31, 2022

    333,337     $ 1,981,785     $ 81,025     $ (1,984,130 )   $ (23,025 )   $ 55,655  

Share-based compensation

                2,105                   2,105  

Net loss

                      (16,123 )           (16,123 )

Other comprehensive loss

                            (761 )     (761 )

August 31, 2022

    333,337     $ 1,981,785     $ 83,130     $ (2,000,253 )   $ (23,786 )   $ 40,876  

 

* Accumulated other comprehensive loss

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

4

 

 

NOVAGOLD RESOURCES INC.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited, US dollars in thousands except per share amounts)

 

 

NOTE 1 NATURE OF OPERATIONS AND BASIS OF PRESENTATION

 

NOVAGOLD RESOURCES INC. and its affiliates and subsidiaries (collectively, “NOVAGOLD” or the “Company”) operate in the mining industry, focused on the exploration for and development of gold mineral properties. The Company has no realized revenues from its planned principal business purpose. The Company’s principal asset is a 50% interest in the Donlin Gold project in Alaska, USA. The Donlin Gold project is owned and operated by Donlin Gold LLC (“Donlin Gold”), a limited liability company that is owned equally by wholly-owned subsidiaries of NOVAGOLD and Barrick Gold Corporation (“Barrick”).

 

The Condensed Consolidated Interim Financial Statements (“interim statements”) of NOVAGOLD are unaudited. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. These interim statements should be read in conjunction with NOVAGOLD’s Consolidated Financial Statements for the year ended November 30, 2022. The year-end balance sheet data was derived from the audited financial statements and certain information and footnote disclosures required by United States generally accepted accounting principles (US GAAP) have been condensed or omitted.

 

The functional currency for the Company’s Canadian operations is the Canadian dollar and the functional currency for the Company’s U.S. operations is the United States dollar. References in these Condensed Consolidated Interim Financial Statements and Notes to $ refer to United States dollars and C$ to Canadian dollars. Dollar amounts are in thousands, except for per share amounts.

 

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Contingent note receivable

 

A portion of the proceeds related to the sale of Galore Creek to a subsidiary of Newmont Corporation (“Newmont”) includes a $75,000 note receivable, contingent upon the approval of a Galore Creek project construction plan by the owner(s). The Company has not assigned a value to the contingent note receivable as management determined that the approval of the Galore Creek project construction was not probable as of the closing of the Galore Creek sale or in subsequent periods. The contingent note will be recognized when, in management’s judgement, it is probable that the payment will occur, and that the amount recorded will not reverse in future periods.

 

Investment in affiliates

 

Investments in unconsolidated ventures over which the Company has the ability to exercise significant influence, but does not control, are accounted for under the equity method and include the Company’s investment in the Donlin Gold project. The Company identified Donlin Gold as a Variable Interest Entity (VIE) as the entity is dependent on funding from its owners. All funding, ownership, voting rights, and power to exercise control is shared equally on a 50/50 basis between the owners of the VIE. Therefore, the Company has determined that it is not the primary beneficiary of the VIE. The Company’s maximum exposure to loss is its equity investment in Donlin Gold.

 

The equity method is a basis of accounting for investments whereby the investment is initially recorded at cost and the carrying value is adjusted thereafter to include the investor’s pro rata share of post-acquisition earnings or losses of the investee, as computed by the consolidation method. Cash funding increases the carrying value of the investment. Profit distributions received or receivable from an investee reduce the carrying value of the investment.

 

Donlin Gold is a non-publicly traded equity investee owning an exploration and development project. Therefore, the Company assesses whether there has been a potential triggering event for other-than-temporary impairment by assessing the underlying assets of the equity investee for recoverability and assessing whether there has been a change in the development plan or strategy for the project. If the underlying assets are not recoverable, the Company will record an impairment charge equal to the difference between the carrying amount of the investee and its fair value.

 

Share-based payments

 

The Company records share-based compensation awards exchanged for employee services at fair value on the date of the grant and expenses the awards in the Consolidated Statements of Loss over the requisite employee service period. The fair values of stock options are determined using a Black-Scholes option pricing model. The fair values of PSUs are determined using a Monte Carlo valuation model. The Company’s estimates may be impacted by certain variables including, but not limited to, stock price volatility, employee stock option exercise behaviors, additional stock option grants, estimates of forfeitures, the Company’s performance, and the Company’s performance in relation to its peers.

 

5

NOVAGOLD RESOURCES INC.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited, US dollars in thousands except per share amounts)

 

 

NOTE 3 SEGMENTED INFORMATION

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer. The Chief Executive Officer considers the business from a geographic perspective considering the performance of our investment in the Donlin Gold project in Alaska, USA (Note 5).

 

 

NOTE 4 NOTES RECEIVABLE

 

On July 27, 2018, the Company sold its interest in the Galore Creek project to Newmont for cash proceeds of $100,000, a $75,000 note receivable due on the earlier of the completion of a Galore Creek pre-feasibility study or July 27, 2021, a $25,000 note receivable due on the earlier of the completion of a Galore Creek feasibility study or July 31, 2023, and a contingent note for $75,000 upon approval of a Galore Creek project construction plan by the owner(s). The Company received from Newmont $75,000 on July 27, 2021 and $25,000 on July 27, 2023.

 

A contingent note for $75,000 is receivable upon approval of a Galore Creek project construction plan by the owner(s). No value was assigned to this final $75,000 contingent note receivable. The Company determined that Galore Creek project construction approval was not probable as of the closing of the Galore Creek sale. The Company’s assessment did not change as of August 31, 2023.

 

 

NOTE 5 INVESTMENT IN DONLIN GOLD

 

The Donlin Gold project is owned and operated by Donlin Gold, a limited liability company in which wholly-owned subsidiaries of NOVAGOLD and Barrick each own a 50% interest. Donlin Gold has a board of four representatives, with two representatives selected by Barrick and two representatives selected by the Company. All significant decisions related to the Donlin Gold project require the approval of at least a majority of the Donlin Gold board.

 

Changes in the Company’s Investment in Donlin Gold are summarized as follows:

 

   

Three months ended August 31,

   

Nine months ended August 31,

 
   

2023

   

2022

   

2023

   

2022

 

Balance – beginning of period

  $ 4,602     $ 7,582     $ 3,848     $ 3,576  
Share of losses:                                

Mineral property expenditures

    (3,827 )     (9,280 )     (15,542 )     (21,567 )

Depreciation

    (141 )     (120 )     (424 )     (291 )

Accretion

    (10 )     (12 )     (30 )     (35 )
      (3,978 )     (9,412 )     (15,996 )     (21,893 )

Funding

    2,475       8,438       15,247       24,925  

Balance – end of period

  $ 3,099     $ 6,608     $ 3,099     $ 6,608  

 

6

NOVAGOLD RESOURCES INC.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited, US dollars in thousands except per share amounts)

 

The following amounts represent the Company’s 50% share of the assets and liabilities of Donlin Gold. Donlin Gold capitalized the initial contribution of the Donlin Gold property as Non-current assets: Mineral property with a carrying value of $64,000, resulting in a higher carrying value of the mineral property for Donlin Gold than that of the Company.

 

   

As of

August 31,

   

As of

November 30,

 
   

2023

   

2022

 

Current assets: Cash, prepaid expenses and other receivables

  $ 3,359     $ 4,220  

Non-current assets: Right-of-use assets, property and equipment

    1,600       2,036  

Non-current assets: Mineral property

    32,615       32,615  

Current liabilities: Accounts payable, accrued liabilities and lease obligations

    (1,744 )     (2,322 )

Non-current liabilities: Reclamation and lease obligations

    (731 )     (701 )

Net assets

  $ 35,099     $ 35,848  

 

 

NOTE 6 OTHER ASSETS

 

   

As of

August 31,

2023

   

As of

November 30,

2022

 
Other current assets:                

Accounts receivable

  $ 323     $ 301  

Interest receivable

    1,005       62  

Receivable from Donlin Gold

    233       574  

Prepaid expenses

    255       1,298  
    $ 1,816     $ 2,235  
                 
Other long-term assets:                

Marketable equity securities

  $ 2,174     $ 1,845  

Right-of-use assets

    804       939  

Office equipment

    161       19  
    $ 3,139     $ 2,803  

 

 

NOTE 7 PROMISSORY NOTE

 

The Company has a promissory note payable to Barrick of $133,274, comprised of $51,576 in principal, and $81,698 in accrued interest at U.S. prime plus 2%. The promissory note resulted from the agreement that led to the formation of Donlin Gold, where the Company agreed to reimburse Barrick for a portion of their expenditures incurred from April 1, 2006 to November 30, 2007. The promissory note and accrued interest are payable from 85% of the Company’s share of revenue from future mine production or from any net proceeds resulting from a reduction of the Company’s interest in Donlin Gold. The carrying value of the promissory note approximates fair value.

 

7

NOVAGOLD RESOURCES INC.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited, US dollars in thousands except per share amounts)

 

 

NOTE 8 OTHER LIABILITIES

 

   

As of

August 31,

2023

   

As of

November 30,

2022

 
Other current liabilities:                

Remediation liabilities

  $ 181     $ 1,156  

Lease obligations

    189       142  
    $ 370     $ 1,298  
                 
Other long-term liabilities:                

Remediation liabilities

  $ 200     $ 200  

Lease obligations

    658       802  
    $ 858     $ 1,002  

 

 

NOTE 9 FAIR VALUE ACCOUNTING

 

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the significance of the inputs used in making the measurement. The three levels of the fair value hierarchy are as follows:

 

Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 — Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

 

The Company’s financial instruments consist of cash and cash equivalents, term deposits, accounts receivable, receivable from Donlin Gold, marketable equity securities, accounts payable and accrued liabilities, and a promissory note. The fair value of the promissory note approximates its carrying value based on accrued interest at U.S. prime plus 2% and the terms for repayment from future mine production or from any net proceeds resulting from a reduction of the Company’s interest in Donlin Gold. The fair value of the Company’s other financial instruments approximates their carrying value due to the short‐term nature of their maturity. The Company’s financial instruments initially measured at fair value and then held at amortized cost include cash and cash equivalents, term deposits, accounts receivable, receivable from Donlin Gold, accounts payable and accrued liabilities, and a promissory note. The Company’s marketable equity securities are valued using quoted market prices in active markets and as such are classified within Level 1 of the fair value hierarchy. The fair value of the marketable equity securities was $2,174 as of August 31, 2023 ($1,845 as of November 30, 2022), calculated as the quoted market price of the marketable equity security multiplied by the quantity of shares held by the Company.

 

 

NOTE 10 GENERAL AND ADMINISTRATIVE EXPENSES

 

    Three months ended August 31,    

Nine months ended August 31,

 
   

2023

   

2022

   

2023

   

2022

 

Share-based compensation (Note 12)

  $ 2,225     $ 2,105     $ 6,526     $ 6,301  

Salaries and benefits

    1,691       1,607       5,149       5,033  

Office expense

    783       750       2,488       2,228  

Professional fees

    375       162       1,236       922  

Corporate communications and regulatory

    167       246       981       930  

Depreciation

    2       2       5       6  
    $ 5,243     $ 4,872     $ 16,385     $ 15,420  

 

8

NOVAGOLD RESOURCES INC.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited, US dollars in thousands except per share amounts)

 

 

NOTE 11 OTHER INCOME (EXPENSE), NET

 

   

Three months ended August 31,

   

Nine months ended August 31,

 
   

2023

   

2022

   

2023

   

2022

 

Interest and dividend income

  $ 1,501     $ 371     $ 4,180     $ 658  

Gain on sale of mineral property

                556        

Change in fair market value of marketable securities

    (45 )     (647 )     333       66  

Foreign exchange gain (loss)

    (21 )     423       15       264  
    $ 1,435     $ 147     $ 5,084     $ 988  

 

 

NOTE 12 SHARE-BASED COMPENSATION

 

   

Three months ended August 31,

   

Nine months ended August 31,

 
   

2023

   

2022

   

2023

   

2022

 

Stock options

  $ 1,170     $ 1,195     $ 3,432     $ 3,580  

Performance share unit plan

    995       855       2,926       2,550  

Deferred share unit plan

    60       55       168       171  
    $ 2,225     $ 2,105     $ 6,526     $ 6,301  

 

Stock options

 

A summary of stock options outstanding and activity during the nine months ended August 31, 2023 are as follows:

 

   

Number of stock options (thousands)

   

Weighted- average exercise price per share

   

Weighted- average

remaining

contractual term

(years)

   

Aggregate

intrinsic

value

 

November 30, 2022

    7,717     $ 6.18                  

Granted

    2,292       5.71                  

Exercised

    (1,021 )     3.79                  

Cancelled

    (293 )     6.79                  

August 31, 2023

    8,695     $ 6.31       2.37     $ 831  

Vested and exercisable as of August 31, 2023

    4,959     $ 6.23       1.31     $ 831  

 

 

 

9

NOVAGOLD RESOURCES INC.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited, US dollars in thousands except per share amounts)

 

The following table summarizes other stock option-related information:

 

   

Nine months ended August 31,

 
   

2023

   

2022

 
Weighted-average assumptions used to value stock option awards:                

Expected volatility

    48.4 %     46.5 %

Expected term of options (years)

    4       4  

Expected dividend rate

           

Risk-free interest rate

    3.85 %     1.13 %

Expected forfeiture rate

    2.8 %     2.9 %

Weighted-average grant-date fair value

  $ 2.40     $ 2.49  

Intrinsic value of options exercised

  $ 2,024     $ 3,630  

Cash received from options exercised

  $     $  

 

As of August 31, 2023, the Company had $3,925 of unrecognized compensation cost related to 3,736,000 non-vested stock options expected to be recognized and vest over a period of approximately 2.25 years.

 

Performance share units

 

A summary of PSU awards outstanding and activity during the nine months ended August 31, 2023 are as follows:

 

   

Number of PSU awards (thousands)

   

Weighted- average grant day fair value per award

   

Aggregate

intrinsic

value

 

November 30, 2022

    1,257     $ 7.65          

Granted

    787       5.74          

Vested

                   

Performance adjustment

    (439 )     6.96          

August 31, 2023

    1,605     $ 6.89     $ 751  

 

As of August 31, 2023, the Company had $4,768 of unrecognized compensation cost related to 1,605,000 non-vested PSU awards expected to be recognized and vest over a period of approximately 2.25 years.

 

The following table summarizes other PSU-related information:

 

   

Nine months ended August 31,

 
   

2023

   

2022

 

Performance multiplier on PSUs vested

    %     93 %

Common shares issued (thousands)

          430  

Total fair value of common shares issued

  $     $ 2,903  

Withholding tax paid on PSUs vested

  $     $ 2,122  

 

 

NOTE 13 NET CHANGE IN OPERATING ASSETS AND LIABILITIES

 

   

Three months ended August 31,

   

Nine months ended August 31,

 
   

2023

   

2022

   

2023

   

2022

 
Changes in operating assets and liabilities:                                

Other assets

  $ (422 )   $ 17     $ 432     $ (684 )

Accounts payable and accrued liabilities

    1,039       173       885       144  

Accrued payroll and related benefits

    559       595       (596 )     (860 )

Remediation liabilities

    (966 )     (35 )     (975 )     (106 )
    $ 210     $ 750     $ (254 )   $ (1,506 )

 

10

 

 

Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations (dollars in thousands, except per share amounts)

 

In Managements Discussion and Analysis of Financial Condition and Results of Operations, NOVAGOLD, the Company, we, us and our refer to NOVAGOLD RESOURCES INC. and its consolidated subsidiaries. The following discussion and analysis of our financial condition and results of operations constitutes managements review of the factors that affected our financial and operating performance for the three- and nine-month periods ended August 31, 2023 and August 31, 2022. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto contained elsewhere in this report and our Annual Report on Form 10-K for the year ended November 30, 2022, as well as other information we file with the Securities and Exchange Commission on EDGAR at www.sec.gov and with Canadian Securities Administrators on SEDAR+ at www.sedarplus.ca. References herein to $ refer to United States dollars and C$ to Canadian dollars.

 

Overview

 

We operate in the gold mining industry, primarily focused on advancing the Donlin Gold project in Alaska. The Donlin Gold project is held by Donlin Gold LLC (“Donlin Gold”), a limited liability company owned equally by wholly-owned subsidiaries of NOVAGOLD and Barrick.

 

Our corporate goals include continuing to advance the Donlin Gold project toward a construction decision; maintaining support for Donlin Gold among the project’s stakeholders; promoting a strong safety, sustainability, and environmental culture; maintaining a favorable reputation of NOVAGOLD; and preserving a healthy balance sheet. Our operations primarily relate to the delivery of project milestones, including the achievement of various technical, environmental, sustainable development, economic and legal objectives, obtaining necessary permits, completion of feasibility studies, preparation of engineering designs and the financing to fund these objectives. 

 

Donlin Gold highlights

 

Stakeholder and government engagement

 

Donlin Gold's enduring partnerships with Calista Corporation (“Calista”) and The Kuskokwim Corporation (TKC) have been pivotal in facilitating comprehensive outreach throughout the Yukon-Kuskokwim (“Y-K”) region. In June 2023, Donlin Gold further strengthened its commitment by adding a new community liaison representative from the local village of Nunapitchuk, bringing the total to six. These collaborative efforts are reinforced by the establishment of 14 Shared Values Statements with key villages in the Y-K region. These statements formalize Donlin Gold's ongoing engagement with local communities, build upon existing long-term relationships, and address specific community needs.

 

During the third quarter, Donlin Gold, in collaboration with Calista and the village of Crooked Creek, conducted additional meetings in Alaska with State officials and the US Army Corps of Engineers (“Corps”). Meetings were also held in Washington, DC with delegation members and senior leadership from the U.S. Department of Interior as part of ongoing bipartisan outreach efforts to the Biden Administration and U.S. Congress, including Senators Lisa Murkowski and Dan Sullivan and Representative Mary Peltola from the Y-K region. In all these meetings, Calista, Donlin Gold, and Crooked Creek have highlighted the thoroughness of the project’s environmental review and permitting processes, as well as the partnerships with Native Alaskans that own the land.

 

In August, Donlin Gold received recognition from U.S. Representative Mary Peltola during the Alaska Oil & Gas Association conference for its exceptional project outreach and community engagement efforts. This acknowledgment underscores Donlin Gold's commitment to fostering positive relationships and actively involving local communities in the Y-K region, reflecting the importance of responsible and sustainable resource development in Alaska.

 

Environment and social investments

 

NOVAGOLD’s efforts are focused on education, community wellness, cultural preservation, and environmental stewardship. Donlin Gold supports these initiatives through fisheries studies and other environmental activities, subsistence and cultural preservation activities, and grants. A wide range of activities and projects were carried out in the third quarter with Calista and TKC.

 

Health and Safety

 

Donlin Gold supported the Chevak Search and Rescue team and provided funding to various health and safety initiatives of communities throughout the Y-K and Cook Inlet regions such as Skwentna and Nikolai.

 

11

 

Healthy Lifestyle and Cultural Preservation

 

In collaboration with the village of Napaimute, Donlin Gold actively participated in and provided principal support for the “In It For The Long Haul” waste backhaul program for the sixth year in a row. This vital project is dedicated to the collection, removal, and safe disposal of household hazardous and electronic waste from villages across the Y-K region, preventing its adverse impact on landfills and waterways. This year's program achieved significant milestones, including the removal of waste from fish camps in the Middle Kuskokwim. Moreover, Donlin Gold employees from three villages (Marshall, Pilot Station, and Pitka's Point) played a pivotal role in initiating waste backhaul operations along the Yukon River, culminating in the collection and proper disposal of 17,000 pounds of hazardous and electronic waste. Appliances were collected and removed from Kuskokwim villages and collected in Bethel where the annual event with our partners took place.

 

Education

 

Advancing education opportunities in Alaska is another high priority for both NOVAGOLD and Donlin Gold. In June 2023, Donlin Gold supported the Excel Alaska program which is a non-profit providing supplemental academic, career and technical education initiatives for rural youth and young adults across the Y-K region. Students receive high school credit toward graduation and concurrent college credits.

 

Donlin Gold also continues to financially support the Alaska School Activities Association, a statewide nonprofit organization established to direct, develop and support Alaska’s high school interscholastic sports, academic and fine arts activities.

 

NOVAGOLD continued its annual funding of a scholarship at University of Alaska for underrepresented students majoring in Mine Engineering and Geology.

 

Permitting

 

Permitting in the United States and in Alaska has been a tremendous achievement to date and a substantial undertaking over many years to ensure a diligent, thorough, transparent, and inclusive process for all involved, including stakeholders from the Y-K region. Donlin Gold, its owners, and its partners Calista and TKC are intimately familiar with the permitting and regulatory processes applicable to the project and will continue to support the State in its defense of the thorough and diligent permitting process. Together, they will also continue working to secure the various remaining state-level permits and certificates required for the project.

 

The Donlin Gold camp re-opened in February to continue geotechnical and hydrological fieldwork to collect additional data needed to advance toward the next step in the design documentation required for the Alaska Dam Safety certificates, with field work completed in July. Issuance of the certificates is expected in 2026. In 2022, Donlin Gold applied for a new air quality permit based on updated air quality modeling and emissions controls information. The new air quality permit was issued in July 2023 and was not appealed. The regularly scheduled re-issuance of the project’s Alaska Pollutant Discharge Elimination System (APDES) permit from the Alaska Department of Environmental Conservation (ADEC) is underway and was extended indefinitely through reissuance, which is expected to occur in 2024.

 

Litigation

 

On June 3, 2020, Earthjustice joined by Orutsararmiut Native Council (ONC), ten Y-K villages, and the Alaska Community Action on Toxics filed a formal appeal with the ADEC Commissioner of the State’s water quality certification under Section 401 of the Clean Water Act (the “401 Certification”). The appeal process consisted of an Administrative Hearing in front of an Administrative Law Judge (ALJ) appointed by the ADEC Commissioner. On April 12, 2021, the ALJ issued his opinion for the Commissioner’s consideration recommending the 401 Certification be vacated. The Commissioner issued his decision to uphold the 401 Certification on May 27, 2021. The decision was appealed on June 28, 2021, in Alaska Superior Court by Earthjustice, on behalf of ONC. On September 27, 2021, Donlin Gold filed a motion requesting a short term stay in the case to allow the State to fully consider additional technical materials on mercury and temperature; the State indicated to the Court that they did not oppose the motion. On October 22, 2021, Donlin Gold submitted to ADEC expert technical reports on mercury and temperature. On November 22, 2021, ADEC filed an additional motion asking to remand the 401 certification back to ADEC to determine how the additional information affects the certification. Earthjustice did not oppose the motion although had comments on the remand process. On December 29, 2021, the Court granted the remand request, dismissed the case without prejudice, and left in place the existing certification. On May 13, 2022, the ADEC Water Division Director reaffirmed the 401 certification. On June 13, 2022, Earthjustice appealed the elements of the decision related to temperature to the Commissioner and requested an adjudicatory hearing with an ALJ. On July 14, 2022, the Commissioner granted the request for the hearing and a new ALJ was assigned. On September 14, 2022, Earthjustice filed their initial brief. Donlin Gold and ADEC filed response briefs on October 14, 2022. Earthjustice filed their final reply brief on October 21, 2022. On August 18, 2023, the Commissioner reaffirmed ADEC’s issuance of the 401 Certification.

 

12

 

On September 20, 2021, Earthjustice, representing ONC, Cook Inletkeeper, and three Y-K villages, filed an appeal of the State pipeline ROW authorization in Alaska Superior Court. An appeal was also filed by a second party, Robert Fithian, the owner of an outdoor guiding business located near the proposed Donlin Gold pipeline route, on September 20, 2021. The two appeals were consolidated into a single case before the Alaska Superior Court based in Anchorage, Alaska. On April 12, 2023 and July 3, 2023, the Alaska Superior Court affirmed ADNR’s issuance of the ROW lease in the Earthjustice case and Robert Fithian case, respectively. The decision in the Earthjustice case has been appealed to the Alaska Supreme Court. The briefing process is underway. Mr. Fithian did not appeal to the Alaska Supreme Court.

 

On May 25, 2022, Earthjustice, on behalf of ONC and five Y-K villages, filed an appeal of the final Water Rights in Alaska Superior Court. The appellants filed their initial brief on November 21, 2022. On April 25, 2022, the ADNR Commissioner denied the appeal; however, Earthjustice, ONC and five villages appealed the Commissioner’s decision in Alaska Superior Court on May 25, 2022. The briefing process was completed, and oral arguments were held on July 19, 2023. On September 1, 2023, the Alaska Superior Court affirmed ADNR’s decision on Donlin Gold’s water rights permits.

 

In September 2022, 13 tribes sent letters to the Corps and the U.S. Environmental Protection Agency (EPA). The letter to the Corps requests that it consider requiring a supplemental environmental impact statement (EIS) on the Donlin Gold project and revoke the Clean Water Act Section 404 permit (the “404 permit”) in light of what the tribes consider “new information” since the final EIS was issued in 2018. Additionally, the EPA letter requested that it initiate a Clean Water Act Section 404(c) veto process for the Donlin Gold project. In early January 2023, Donlin Gold and Calista both submitted responses to the Corps on why the requests to prepare a supplemental EIS or revoke the 404 permit should not be granted. In January 2023, Donlin Gold also provided a response to the EPA describing why the agency should not initiate a 404(c) process. To date, neither the Corps nor EPA has responded to the tribes’ letters.

 

On April 6, 2023, Earthjustice with ONC and six Y-K villages filed suit against the U.S. government in Anchorage Federal District Court. The lawsuit asks the Court to invalidate the Donlin Gold Joint Record of Decision, including the 404 permit issued by the Corps and ROW lease for the portions of the pipeline on Federal lands issued by the Bureau of Land Management of the U.S. Department of Interior. The U.S. Department of Justice (DOJ) is defending the issuance of the permits by those Federal agencies. The State of Alaska, Donlin Gold and Calista have been granted intervenor status in this case. DOJ is compiling the Administrative Record for the court, and the briefing process is expected to be scheduled in early 2024.

 

Donlin Gold project

 

The continued focus at Donlin Gold is to update the geologic and resource models with the data derived from the extensive drill program that took place over the last three years; reviewing key project assumptions, inputs, and design components for optimization (mine engineering, metallurgy, hydrology, and infrastructure); advancing remaining permits through the regulatory process and supporting the State in maintaining the existing permits; and, through continued engagement, sustaining and expanding project support in the Y-K region.

 

The 2023 field program at the Donlin Gold project was safely completed on schedule in July and included comprehensive fieldwork and geotechnical drilling required for the Alaska Dam Safety certificates. This involved data collection at the locations earmarked for water retention structures, including the proposed Tailings Storage Facility (TSF). The fieldwork included 1,840 meters of geotechnical drilling, 74 water retention structure test pits, 25 kilometers of seismic survey, and TSF test plot liner installation. Fieldwork to further define groundwater at the site included 1,279 meters of hydrogeologic drilling with instrumentation and pump tests, providing essential information for mine planning and design. At the historic Lyman placer site, restoration work included significant stream and pond habitat creation. Final work including anticipated aquatic life access and use is planned for the 2024 field season.

 

The recently completed comprehensive work provided valuable information for the Donlin Gold LLC board and its owners. The resulting information was further discussed during the most recent workshop in Alaska and is helping us define the next steps in the advancement of the Donlin Gold project and workplan for the coming years. The owners will advance the Donlin Gold project in a financially disciplined manner with a strong focus on engineering excellence, environmental stewardship, a strong safety culture and continued community engagement.

 

Our share of funding for the Donlin Gold project in the first nine months of 2023 was $15,247. For the full year in 2023, we expect our share of Donlin Gold LLC funding to be $18,000, including $8,000 for external affairs, permitting, environmental, land, and legal activities and $10,000 for project planning and fieldwork, including an increase of $1,000 to fund additional mining studies.

 

The Donlin Gold LLC board must approve a construction program and budget before the Donlin Gold project can be developed. The timing of the required engineering work and the Donlin Gold LLC board’s approval of a construction program and budget, the receipt of all required governmental permits and approvals, and the availability of financing, commodity price fluctuations, risks related to market events and general economic conditions among other factors, will affect the timing of and whether to develop the Donlin Gold project. Among other reasons, project delays could occur as a result of co-owner disagreements, public opposition, litigation challenging permit decisions, requests for additional information or analysis, limitations in agency staff resources during regulatory review and permitting, or project changes made by Donlin Gold LLC.

 

13

 

We record our interest in the Donlin Gold project as an equity investment, which results in our 50% share of Donlin Gold’s expenses being recorded in the income statement as an operating loss. The investment amount recorded on the balance sheet primarily represents unused funds advanced to Donlin Gold.

 

Other remediation

 

During the third quarter, $955 in remediation costs were incurred for fieldwork at the historic former New Gold House property in Nome, Alaska. Final work including seeding is planned for the 2024 field season.

 

Consolidated Financial Results

 

Third quarter 2023 compared to 2022

 

In the third quarter of 2023, Net loss decreased by $5,049 from 2022, primarily due to lower field expenses at Donlin Gold and increased interest income on cash and term deposits, partially offset by an increase in interest expense on the promissory note. Donlin Gold expenses in the third quarter of 2023 included fieldwork and geotechnical drilling for the Alaska Dam Safety certificates applications and hydrological drilling to support mine planning and design completed in July were lower than the large exploration drilling program in the third quarter of 2022.

 

First nine months 2023 compared to 2022

 

In the first nine months of 2023, Net loss decreased by $4,706 from 2022, primarily due to lower field expenses at Donlin Gold, increased interest income on cash and term deposits, and other income related to the 2021 sale of the Company’s interest in the San Roque mineral property, partially offset by an increase in interest expense on the promissory note and higher corporate travel and legal expenses. Donlin Gold expenses were lower in 2023 with fieldwork and geotechnical drilling for the Alaska Dam Safety certificates applications and hydrological drilling to support mine planning and design completed in July, compared to the large exploration drilling program in 2022.

 

Liquidity and Capital Resources

 

Liquidity overview

 

At present, we believe we have sufficient working capital available to cover anticipated funding of the Donlin Gold project and corporate general and administrative costs through completion of an updated Donlin Gold feasibility study. Further, we believe we have sufficient working capital available to cover anticipated costs and expenses for at least the next three years. Substantial additional capital will be required once a decision to commence engineering and construction is reached by the Donlin Gold LLC board for the Donlin Gold project. Future financing to fund construction is anticipated through debt, equity, project specific debt, and/or other means. Our continued operations are dependent on our ability to obtain additional financing or to generate future cash flows. However, there can be no assurance that we will be successful in our efforts to raise additional capital on terms favorable to us, or at all. For further information, see section Item 1A, Risk Factors Our ability to continue the exploration, permitting, development, and construction of the Donlin Gold project, and to continue as a going concern, will depend in part on our ability to obtain suitable financing in our Annual Report on Form 10-K for the year ended November 30, 2022, as filed with the SEC on January 25, 2023.

 

Our anticipated expenditures in fiscal year 2023 are approximately $32,000, including $18,000 to fund our share of the Donlin Gold project, $13,000 for corporate general and administrative costs, and $1,000 for working capital and other items.

 

Our financial position includes the following as of August 31, 2023:

 

 

Cash and cash equivalents of $44,079, primarily held at three large Canadian domestic chartered banks with high credit ratings.

 

 

Term deposits of $86,000 denominated in U.S. dollars and held at two large Canadian domestic chartered banks with high credit ratings and maturities of less than one year.

 

 

Promissory note payable to Barrick of $133,274, including accrued interest at U.S. prime plus 2%. The promissory note and accrued interest are payable from 85% of the Company’s share of revenue from future Donlin Gold project production or from any net proceeds resulting from a reduction of the Company’s interest in Donlin Gold.

 

14

 

Cash flows

 

In the third quarter of 2023 cash and cash equivalents decreased by $2,875, mainly to fund our share of Donlin Gold and for corporate administrative expenses. The decrease in cash used in operating activities in the third quarter of 2023 compared to 2022 was primarily due to interest proceeds received on cash and term deposits. The decrease in cash used in investing activities was primarily due to lower Donlin Gold funding requirements. The Newmont note payment of $25,000 was received in July 2023 and $24,000 was invested in term deposits.

 

In the first nine months of 2023 cash and cash equivalents decreased by $19,803, mainly to fund our share of Donlin Gold and for corporate administrative expenses, partially offset by the note proceeds received from Newmont. The decrease in cash used in operating activities in the first nine months of 2023 compared to 2022 was primarily due to increased interest proceeds received on cash and term deposits in 2023, the timing of corporate liability insurance payments, and withholding tax paid on share-based compensation in 2022 (no PSUs vested in 2023). The decrease in cash used in investing activities was primarily due to the Newmont note proceeds and lower Donlin Gold funding requirements, partially offset by net proceeds from term deposits in 2022.

 

Outstanding share data

 

As of September 26, 2023, the Company had 334,181,149 common shares issued and outstanding. Also, as of September 26, 2023, the Company had: i) a total of 8,695,067 stock options outstanding; 7,660,400 with a weighted-average exercise price of $6.29 and the remaining 1,034,667 of those stock options with a weighted-average exercise price of C$8.74; and ii) 1,605,500 PSUs and 287,072 deferred share units outstanding. Upon exercise or pay out, as applicable, of the foregoing convertible securities, the Company would be required to issue a maximum of 11,390,389 common shares.

 

 

 

 

 

15

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

Our financial instruments are exposed to certain financial risks, including credit and interest rate risks.

 

Credit risk

 

Concentration of credit risk exists with respect to our cash and cash equivalents, and term deposit investments. Cash and cash equivalents are primarily held at three large Canadian domestic chartered banks with high deposit credit ratings (S&P: AA- or A-1(mid), Moody’s: Aa1 or Aa3). All term deposits are held through two of the largest Canadian domestic chartered banks with high deposit credit ratings (S&P: AA-, Moody’s: Aa1) and have maturities of less than one year.

 

Interest rate risk

 

The interest rate on the promissory note owed to Barrick is variable with the U.S. prime rate. Based on the amount owing on the promissory note as of August 31, 2023, and assuming all other variables remain constant, a 1% change in the U.S. prime rate would result in an increase/decrease of approximately $1.3 million in the interest accrued on the promissory note per annum.

 

Item 4.

Controls and Procedures

 

Management, with the participation of our President and Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of August 31, 2023. On the basis of this review, our President and Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our President and Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

There have not been any changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated by the SEC under the Exchange Act) during the Company’s most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company’s internal controls over financial reporting are based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

 

 

 

 

 

16

 

PART II - OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

From time to time, we are a party to routine litigation and proceedings that are considered part of the ordinary course of our business. We are not aware of any material current, pending, or threatened litigation.

 

Item 1A.   Risk Factors

 

There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended November 30, 2022, as filed with the SEC on January 25, 2023. The risk factors in our Annual Report on Form 10-K for the year ended November 30, 2022, in addition to the other information set forth in this quarterly report, could materially affect our business, financial condition or results of operations. Additional risks and uncertainties not currently known to us or that we deem to be immaterial could also materially adversely affect our business, financial condition or results of operations.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3.

Defaults Upon Senior Securities

 

None.

 

Item 4.

Mine Safety Disclosures

 

These disclosures are not applicable to us.

 

Item 5.

Other Information.

 

None.

 

Item 6.

Exhibits

 

See Exhibit Index.

 

 

 

 

 

17

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

   Date: October 3, 2023

NOVAGOLD RESOURCES INC.

     
     
     
 

By:

/s/ Gregory A. Lang

   

Gregory A. Lang

   

President and Chief Executive Officer

(principal executive officer)

 

 

By:

/s/ David A. Ottewell

   

David A. Ottewell

   

Vice President and Chief Financial Officer

(principal financial and accounting officer)

 

 

 

 

 

18

 

EXHIBIT INDEX

 

Exhibit No.

 

Description

     

31.1

 

Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)

31.2

 

Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)

32.1

 

Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350

32.2

 

Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101

 

The following materials are filed herewith: (i) Inline XBRL Instance, (ii) Inline XBRL Taxonomy Extension Schema, (iii) Inline XBRL Taxonomy Extension Calculation, (iv) XBRL Taxonomy Extension Labels, (v) XBRL Taxonomy Extension Presentation, and (vi) Inline XBRL Taxonomy Extension Definition.

104

 

Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

 

 

 

 

 

 

 

 

19

Exhibit 31.1

 

CERTIFICATION PURSUANT TO
RULE 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Gregory A. Lang, certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q of NOVAGOLD Resources Inc.;

   

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

   

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

   

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     
 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     
 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     
 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     
 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date: October 3, 2023

 

By: /s/ Gregory A. Lang                                    

   Gregory A. Lang

   President and Chief Executive Officer

   (principal executive officer)

 

Exhibit 31.2

 

CERTIFICATION PURSUANT TO
RULE 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, David A. Ottewell, certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q of NOVAGOLD Resources Inc.;

   

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

   

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

   

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     
 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     
 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     
 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     
 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date: October 3, 2023

 

By: /s/ David A. Ottewell                                  

     David A. Ottewell

     Vice President and Chief Financial Officer

     (principal financial and accounting officer)

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of NOVAGOLD Resources Inc. (the “Registrant”) for the period ended August 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory A. Lang, President and Chief Executive Officer of the Registrant, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: October 3, 2023

 

By:  /s/ Gregory A. Lang                                   

     Gregory A. Lang

     President and Chief Executive Officer

     (principal executive officer)

 

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of NOVAGOLD Resources Inc. (the “Registrant”) for the period ended August 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David A. Ottewell, Vice President and Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: October 3, 2023

 

By: /s/ David A. Ottewell                                  

      David A. Ottewell

      Vice President and Chief Financial Officer

      (principal financial and accounting officer)

 

 
v3.23.3
Document And Entity Information - shares
3 Months Ended
Aug. 31, 2023
Sep. 26, 2023
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Aug. 31, 2023  
Document Transition Report false  
Entity File Number 001-31913  
Entity Registrant Name NOVAGOLD RESOURCES INC  
Entity Incorporation, State or Country Code A1  
Entity Address, Address Line One 201 South Main Street, Suite 400  
Entity Address, City or Town Salt Lake City  
Entity Address, State or Province UT  
Entity Address, Postal Zip Code 84111  
City Area Code 801  
Local Phone Number 639-0511  
Title of 12(b) Security Common Shares, no par value  
Trading Symbol NG  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding (in shares)   334,181,149
Entity Central Index Key 0001173420  
Current Fiscal Year End Date --11-30  
Document Fiscal Year Focus 2023  
Document Fiscal Period Focus Q3  
Amendment Flag false  
v3.23.3
Condensed Consolidated Interim Balance Sheets (Unaudited) - USD ($)
$ in Thousands
Aug. 31, 2023
Nov. 30, 2022
ASSETS    
Cash and cash equivalents $ 44,079 $ 63,882
Term deposits 86,000 62,000
Notes receivable (Note 4) 0 24,421
Other assets (Note 6) 1,816 2,235
Current assets 131,895 152,538
Investment in Donlin Gold (Note 5) 3,099 3,848
Other assets (Note 6) 3,139 2,803
Total assets 138,133 159,189
Liabilities [Abstract]    
Accounts payable and accrued liabilities 1,654 769
Accrued payroll and related benefits 1,936 2,532
Other liabilities (Note 8) 370 1,298
Current liabilities 3,960 4,599
Promissory note (Note 7) 133,274 123,685
Other liabilities (Note 8) 858 1,002
Total liabilities 138,092 129,286
Commitments and Contingencies  
EQUITY    
Common shares 1,985,663 1,983,962
Contributed surplus 87,691 82,866
Accumulated deficit (2,048,890) (2,012,508)
Accumulated other comprehensive loss (24,423) (24,417)
Total equity 41 29,903
Total liabilities and equity $ 138,133 $ 159,189
v3.23.3
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Aug. 31, 2023
Aug. 31, 2022
Aug. 31, 2023
Aug. 31, 2022
Operating expenses:        
General and administrative (Note 10) $ 5,243 $ 4,872 $ 16,385 $ 15,420
Equity loss – Donlin Gold (Note 5) 3,978 9,412 15,996 21,893
Operating Expense 9,221 14,284 32,381 37,313
Loss from operations (9,221) (14,284) (32,381) (37,313)
Interest expense on promissory note (3,433) (2,198) (9,589) (5,394)
Accretion of notes receivable 145 212 579 631
Other income (expense), net (Note 11) 1,435 147 5,084 988
Loss before income taxes (11,074) (16,123) (36,307) (41,088)
Income tax expense 0 0 (75) 0
Net loss (11,074) (16,123) (36,382) (41,088)
Other comprehensive income (loss):        
Foreign currency translation adjustments 85 (761) (6) (497)
Comprehensive loss $ (10,989) $ (16,884) $ (36,388) $ (41,585)
Net loss per common share – basic and diluted (in dollars per share) $ (0.03) $ (0.05) $ (0.11) $ (0.12)
Weighted average shares outstanding        
Basic and diluted (thousands) (in shares) 334,158 333,337 334,022 333,172