Prepared remarks
Thank you for standing by. This is the conference operator. Welcome to the NovaGold's Second Quarter 2025 Financial Results Conference Call and Webcast. I would now like to turn the conference over to Melanie Hennessey, Vice President, Corporate Communications. Please go ahead.
Thank you, Aisha, and good morning, everyone. Thank you for joining us on NovaGold's 2025 Second Quarter Webcast and Conference Call and also for an update on the Donlin Gold project. On today's call, we have NovaGold's Chairman, Dr. Kaplan; NovaGold's President and CEO, Greg Lang; and NovaGold's Vice President and CFO, Peter Adamek. At the end of the webcast, we will take questions by phone. Additionally, we will respond to questions received by e-mail. I would like to remind you, as stated on Slide 3, any statements made today may contain forward-looking information, such as projections and goals, which are likely to involve risks detailed in our various EDGAR and SEDAR filings and forward-looking disclaimers included in this presentation. I will now turn the presentation over to our Chairman, Dr. Kaplan.
Thank you, Melanie. I'm excited to announce the reintroduction of NovaGold into the gold development sector. If you observe the first chart we've presented, you'll see that for many years, NovaGold was arguably the most highly regarded gold development stock in the GDXJ. There were several reasons for this, and I want to provide context. As recently as 2021, NovaGold's share price stood at $12, translating to a market cap of $4 billion. We were on the verge of updating our feasibility study, which we strongly believed would have led to a construction decision. However, due to a difficult relationship with our then-partner, we found ourselves at a standstill. This impasse effectively rendered NovaGold inactive. It's crucial to recognize this situation, as we are confident that the developments from last quarter will not only revive us but potentially exceed the previous highs of $12 to $15 from five or six years ago.
Our goal moving forward is to detail how the removal of our single headwind, combined with numerous positive factors—such as the rising gold price and our drilling and permitting successes—will enable us to advance Donlin up the value chain and restore our valuation. We are committed to returning to the $12 to $15 price range that was standard prior to 2020, and to make up for lost time, especially considering that the gold price at that time was significantly lower than it is now. Let’s explore what has sustained our enthusiasm at the Electrum Group, which comprises my family's capital and sovereign wealth funds as our only external shareholders, over 17 years. We have not experienced deal fatigue; rather, our excitement has grown, highlighted by our new partnership with Paulson Advisors, which has made a substantial investment in Donlin. This situation raises the question of why Electrum, with its exemplary track record in elevating premier assets, along with Paulson Advisors, would acquire a 40% economic interest in Donlin for $800 million.
Before our periods of inactivity, I would ask if any other gold development project currently on the market offers a similar array of attributes. If the answer is no, then Donlin truly stands out in the gold sector. This unique combination is what has drawn Electrum, Paulson Advisors, and a high-quality base of sophisticated investors to NovaGold. For context, few gold mining projects can boast a starting point of 40 million ounces, and certainly not one that has maintained an average production of over 1 million ounces annually for nearly three decades. Importantly, the first decade of production averages 1.4 million ounces, and 1.5 million ounces in the first five years. We anticipate being capable of sustaining this production rate for decades, as the ore body size and quality offer us that potential. Additionally, the deposit's grade is double the industry average, which has recently declined to below a gram per ton.
Thus, we expect to achieve cash costs in the lower half of the industry range, which could yield margins in the thousands of dollars per ounce at current prices. Quality is key, and for a large open deposit, Donlin represents something exceptional. With an initial resource of 40 million ounces and the potential for an additional 6 million inferred ounces close to the pit—bringing our total to 45 million ounces—we are uniquely positioned. The Great Gold Strike mine ultimately reached 40 million ounces, and we are starting from that point. However, we believe this is just the beginning. Currently, only 5% of our land at Donlin, which includes holdings by NovaGold and Paulson, has been explored. Since our focus shifted due to our partnership issues, regional exploration essentially halted after Barrick's unsuccessful takeover attempt in 2006. At that time, Barrick had little incentive to push for greater reserve growth, or to determine if the next Donlin could be within our claims.
Despite speculation, our geologists from Electrum believe there's a significant chance the next major discovery could be at Donlin. Donlin is not just a mining site; it represents the potential to become a new Carlin trend or a Nevada-like scenario. The mineralized trend extends for 8 kilometers, yet our current resource estimate covers only 3 of those kilometers. Furthermore, this 8 kilometers constitutes only a small fraction of our total land package. Donlin is unquestionably world-class, and being in a prime mining jurisdiction only enhances its appeal. Following a recent site visit to Donlin, I can personally attest to its locale—it's a site where one can enjoy activities like whale watching or hiking, devoid of the threats associated with more unstable regions. Alaska is already the nation's second-largest gold-producing state and is recognized as one of the safest jurisdictions for mining.
Our partnerships with local native corporations have been invaluable allies. It's essential to note that Donlin is situated on private land designated for mining. We are fortunate to be in such a favorable location, a fact solidified by the federal permits we’ve secured from both the Bureau of Land Management and the U.S. Army Corps of Engineers, with state permitting moving forward as planned. Our commitment to environmental, social, and governance principles, alongside community well-being and governance, aligns well with our current and prospective investors. Now, with Paulson Advisors as our partner, we enjoy a significant alignment of interests both philosophically and financially. They bring capital access and expertise, having a strong track record in advancing similar assets. Combined with our management team's mine-building capabilities, we believe this partnership is a transformative opportunity that will propel us not just back to our previous valuation but push us beyond.
Our long-standing relationship with Paulson demonstrates a shared excitement, as does our connection with institutional investors, many of whom have been with us through this journey. Their support has been critical to our survival, and we aim to deliver immediate value to our shareholders. As we move forward, I want to reiterate that the confidence demonstrated by Paulson is rooted in both asset quality and the management team’s capabilities. I want to take a moment to highlight Greg Lang’s credentials. Before joining NovaGold, he had a 30-year tenure at Barrick and its predecessor companies, including eight years as President of Barrick North America. During his leadership, significant projects such as Gold Strike and Cortez were successfully developed on budget and on schedule. Our management team comprises industry veterans with extensive experience in mine building and permitting, positioning us strong in the sector.
Paulson's ongoing commitment to NovaGold over the past 15 years is linked to his belief in the long-term value of gold, which he sees as a critical investment. He has been a gold advocate for decades and correctly identified significant market trends before most others. He believes the gold trade will emerge as the defining investment opportunity of our generation, reflecting our mutual outlook on the gold market. We firmly believe we are in the early stages of a sustained bull market for gold, similar to the market dynamics of the late 1980s. The ongoing competition among central banks and private sector players, alongside geopolitical tensions, will further elevate gold's perceived value. The recent sanctions on Russia have prompted central banks worldwide to re-evaluate and increase their gold reserves, solidifying confidence in gold as a reliable asset. Looking at Donlin through the lens of our investment at varying gold prices reveals extraordinary leverage potential.
With a projected $15.2 billion valuation at $3,000 gold, based on our last technical report, we believe in the value of U.S. assets, especially as global dynamics shift. The upcoming feasibility study update, which should have initiated in 2021, will be a major catalyst and will lay the groundwork for a new team and consortium to advance our projects toward a construction decision. Our drill programs will now focus on expanding resources, ensuring our position as a leading player in the gold sector. With 95% of our property yet to be explored, we are dedicated to implementing a regional exploration program across our land. As we support state permitting efforts and engage with government representatives, we will continue our outreach initiatives in Alaska. Our strong support from native corporations reflects excitement about this transformative partnership with Paulson Advisors. Thank you very much.
Thank you, Tom. Turning to Slide 14. NovaGold reported a net loss of $54.3 million in the second quarter of 2025, representing an increase of $40.6 million from the comparable prior year period. This increase was primarily due to a $39.6 million noncash, nonrecurring charge related to warrants issued as consideration to certain investors for providing a backstop commitment as part of the Donlin Gold transaction announced during the second quarter. Excluding the impact of this noncash charge, our results for the three and six months ended May 31, 2025, reflect lower G&A spending and elevated Donlin Gold expenditures related to the 2025 field program in line with our budget and guidance. On Slide 15, our treasury increased by $225.7 million to $318.7 million at the end of the second quarter, primarily due to the closing of a public offering of 47.9 million shares and a private placement of 17.2 million shares early in May, generating $234.1 million in net proceeds to the company.
The net proceeds from the May capital raise were principally used to purchase an additional 10% interest in Donlin Gold early in the third quarter. The balance of the proceeds will be used to fund NovaGold's share of expenses at Donlin, including the update to the Donlin Gold feasibility study and for general corporate purposes. Excluding the equity financing, corporate G&A costs during the second quarter declined by $0.8 million, while our share of Donlin Gold funding increased by $3.1 million due to increased site activity in 2025 compared to the prior year when fieldwork activities were minimal. Moving now to Page 16. And as discussed on the previous slide, our treasury increased to $319 million at the end of the second quarter. Shortly after the end of the second quarter, we completed the Donlin Gold transaction on June 3. And on June 5, we announced the full exercise and closing of the underwriter's option to purchase an additional 15% shares following the May public offering, generating an additional $25.6 million in net proceeds to the company.
Pro forma these two announcements, our ending second quarter treasury stood at a very robust $136 million. Our cash expenditures for the first six months of fiscal 2025 have remained in line with our 2025 budget and guidance. However, given that our share of funding Donlin Gold's expenses has increased from 50% to 60% with the closing of the Donlin Gold transaction early in the third quarter, we expect our share of Donlin Gold funding to be higher than our previously issued 2025 guidance of $21.5 million. In light of the closing of the Donlin Gold transaction, NovaGold intends to provide an updated 2025 guidance with the release of our third-quarter results.
Thanks, Peter. The primary focus up in Alaska this year is a drill program. We started drilling in March, and we're about halfway through a 15,000-meter program. This program is focused on resource conversion in and around the ACMA and Lewis deposits. We also continue an extensive government and community engagement. Our new General Manager, Todd Dolan, who joined us recently from Kinross, traveled through the capital to meet our officials from Alaska, and reinforce the project's importance to both the state and the Y-K region. We continue to be active in community meetings and held one recently in Crooked Creek, which is the nearest community to the Donlin site. These meetings are about the advisory committees that we set up to enable the local residents to have input into the Donlin Gold project and keep them informed of all of our activities. We also continue to support safety programs traveling along with Cusco Quinn River distributing life jackets and other essential items to the local villages.
We've also been actively involved in a cleanup program where we help the communities dispose of trash and other hazardous waste throughout the Y-K region. Next slide, please. Permitting has been a focus of ours for many years and we're continuing to advance the existing permits as well as defend our permits in the courts. We have prevailed through the court rulings in all of the Alaska Court houses and the Alaska Superior Court recently upheld our 401 certification. In the federal litigation, the court upheld 2 out of 3 points that the plaintiffs raised. The court also remanded the project to do an additional study related to a tailings dam issue. And the order was recently received, and the court rejected the plaintiff's position to vacate the permits. So our permits remain solidly intact. Next slide, please. So why would you look at investing in NovaGold? And why now? Donlin is well positioned to be a major gold producer.
As Tom highlighted earlier, for the first 10 years, we were averaging 1.4 million ounces a year, making Donlin one of the largest, if not the largest, gold mines in the industry. When you compare Donlin to the other development projects that are advancing, it's more than double the average output of these other projects. Next slide, please. Grade is something that really sets the Donlin project apart from the other peer groups. Our grade is 2.25 grams, which is better than twice the industry average. The new mine in British Columbia recently came on stream quite successfully, and they're making good profits, and their grade is a third of what the Donlin grade is, which will enable Donlin to have exceptionally low cash costs. Next slide, please. This slide highlights the exploration potential on and around the Lewis and ACMA deposits. The ongoing drill program right now is targeted at sparsely drilled areas in and around the ACMA and Lewis deposits, where we have the potential to convert inferred resources and upgrade them into measured and indicated.
Along trend, we've got gold-bearing drill holes all up and down the 8-kilometer belt and we've only extensively explored 3 kilometers of this area. As Tom mentioned, we're going to be exploring throughout the claim holdings at Donlin and the areas shown here represents just a fraction of our total land package up in Alaska. Next slide. Alaska is a great place to do business. And some recent developments that we find quite exciting is one of them is the President has declared gold to be a strategic metal and issued executive orders aimed at unlocking the extraordinary resource potential up in Alaska. One of the areas of focus for the government, both on the state and federal level, is building a gas pipeline to bring natural gas down from the north slope into the Cook Inlet for export. And that's very important to Donlin because we had envisioned importing natural gas into the project and delivering it to the site via a pipeline.
Alaska is a great state. It's already the second largest producing state in the U.S. The government in Alaska values responsible resource development. As far as a jurisdictional rating, it's one of the top jurisdictions in the world. Next slide, please. Donlin is on private land owned by two Alaska Native Corporations. Calista owns the mineral rights and TKC owns the surface rights. We've got long-standing relationships with them. They have an owner's interest in seeing this project go forward. We were recently up in Alaska with the group of analysts and shareholders, and it was clear to everybody how excited they are about the project finally having a path forward. Next slide, please. Permitting is a very thorough and transparent process in the United States. We have completed our federal permitting process a few years ago, and we have time issued a joint record of decision from both the Army Corps of Engineers and the Bureau of Land Management.
We've also gotten all of the infrastructure, including the pipelines secured. The only remaining state permit of any consequence is for the tailings dam and other water retention structures. We've submitted the preliminary design packages. We anticipate having these permits in hand well in advance of beginning activities at the site. The state permits that are completed are also shown on this chart. Next slide, please. NovaGold remains dedicated to strong governance at the Board level. Our Board is diverse and includes many experienced industry professionals. From a health and safety perspective, the Donlin site has operated for a decade without any lost time injuries, and our program this year is continuing that impressive record of keeping our employees safe. We have always maintained a strong commitment to environmental stewardship, and that focus remains unchanged. Next, please. NovaGold enjoys significant institutional support, with our major shareholders listed here.
Many have been with the company and invested for years. Next, please. That wraps up our presentation this morning. I want to take this opportunity to thank our shareholders for their investment and trust in the direction of NovaGold and the Donlin project. I also want to express our appreciation to our Chairman, the Board of Directors, and the entire management team for their hard work in securing our increased interest. NovaGold is in a terrific position right now. For the first time in many years, we have a clear path forward. It's an exciting time for us, and we anticipate updating the markets and our stakeholders as we implement this year’s program and continue to enhance the value of the Donlin Gold project. We will now open the floor for any questions that may have come in.
Questions and answers
The first question comes from Nick Giles with B. Riley Securities.
Congratulations on the transaction and all the recent progress. My first question, can you remind us of the capital intensity of the feasibility study and ultimately, what timing could look like there?
Sure, Nick. Thank you for joining the call this morning. The last refresh we did of the capital was several years ago. It was a little over $7 billion. And I think what we're really focused on now is we know these numbers are stale and need to be updated. And that's, hence, why we're focused on completing a new feasibility study. Right now, we're preparing the necessary documents to solicit proposals from qualified engineering firms that can execute on the feasibility study for us. By the time we get the proposals out, evaluate them, and award a contract, we would anticipate kicking off the feasibility study somewhere late in the third quarter, or fourth quarter of this year. It's a process that we anticipate will take about 2 years on a 100% basis, cost about $80 million.
That's super helpful. I appreciate that detail. Maybe my second question really. With Barrick out of the picture now, how should we think about maybe the magnitude of annual spend changing? Or ultimately, how funds will be allocated in 2025 or in 2026 and beyond?
I believe that now that the transaction noise is behind us, our corporate spending will likely return to its historical levels. At the Donlin site, expenses will be higher as we begin the feasibility study, but not significantly more than this year since we already have a drill program in progress, which is quite costly. In 2026, spending on the feasibility study will begin to increase. Looking ahead at the projects and expenditures at Donlin, the feasibility study will take around two years, so you can expect approximately $40 million in spending for each of those years, with our share being 60%. Spending at NovaGold will definitely rise as we move forward, and as Peter mentioned, our treasury is currently very healthy. We have more than enough funds to carry the company and the project through to the feasibility study and eventually to a construction decision.
I know it's a bit early, but how are you thinking about funding the project in this new phase? Do you have a debt-to-equity split in mind? Any details you can share about financing options down the road?
Sure, Nick. And I think at this stage, I'll flip that question over to Dr. Kaplan, our Chairman.
Thank you, Nick. It's great to hear from you, and I appreciate your support. I'm not concerned about financing. The most challenging deal I've faced in my 32 years in this business was the recent one with Paulson to acquire Barrick's stake. I reached out to several prestigious names in the industry who were interested in joining us. Ultimately, John saw this as an exceptional opportunity and decided to contribute the entire $1 billion himself. We agreed that the best outcome for NovaGold’s share price, and consequently to create value for him, was for NovaGold to have a larger economic interest without disenfranchising him. During this process, it became clear that while some were willing to invest $250 million, every single one was prepared to invest $1 billion and wanted to finance the project if the feasibility study had been updated. However, if we had had the updated feasibility study, which we expect to deliver in a couple of years, I believe the share price would already be around $15, which would mean we would have faced a cost of $4 billion to $5 billion for Barrick's stake, which would be very challenging.
We learned we have substantial access to capital and strong support from those eager to see the largest gold mine in the United States built safely, with commitments in the range of $1 billion to $2 billion. The specifics of the debt-equity mix will depend on our future options. With an 8- to 10-year mine life, we encounter certain limitations, but if our mine life spans decades, starting with three and potentially extending to five, six, or even more, we can use our resources to mitigate dilution, which is our objective. We have not aggressively raised capital; the last time we did was in 2012 when Greg and I joined NovaGold and introduced ourselves as CEO and Chairman. This situation is unique and special. I learned that the most challenging capital raising I've ever undertaken was the one we just completed. We needed this to be discreet and closely held. Over the past year, we were concerned that the purchase price could change due to fluctuations in our market capitalization.
We settled on a $1 billion purchase price because that reflected NovaGold's market cap when I discussed with Mark Bristow, which led me to make an offer that he considered and accepted. I've attempted to buy the other half of Donlin five times in the last 15 years. I've learned that just because someone says no doesn't mean you shouldn't keep asking, as circumstances can change. This was the case with Barrick. It became clear that Barrick was shifting focus shortly after our deal was finalized, moving from a gold-centric to a more diversified mining company. We didn't want the news to leak because I feared the stock price would rise and jeopardize the deal, but fortunately, everything fell into place.
The next question comes from John Osha with Global Alliance Securities.
I have no questions, its been answered.
Great. Aisha I will then turn over to questions coming in via the webcast. Our first question comes from the line of Michael Postevoy from Texas Teachers. Tom, you said that the next online may be found within Donlin. If such a discovery were to materialize, could you share your thoughts on the potential geopolitical implications, specifically how it might reposition Donlin from a Tier 1 asset to a Tier 0 asset, one of true geopolitical and monetary significance?
Thank you, Michael. I want to clarify for everyone that there has been no regional exploration outside of the 8-kilometer belt, which only accounts for 5% of our land package. This is due to historical reasons related to the dynamics between Barrick and NovaGold, where Barrick believed NovaGold would eventually come into their possession. Consequently, there was little incentive to expand reserves and enhance NovaGold’s value or to conduct feasibility studies that could reveal the necessary gold prices. The lack of regional exploration is significant because the chance that a 40-million-ounce occurrence exists without any nearby occurrences is extremely low, and we believe it is unrealistically low. Donlin already holds strategic importance in geopolitical contexts, particularly in light of what we refer to as the Gold wars, which are being strategically contested by China and this administration.
China is both the largest producer and importer of gold, and its estimates regarding official gold reserves seem implausibly low unless they possess an incredibly sophisticated retail distribution system. We don't believe that is the case. Gold is already woven into the geopolitical narrative, particularly among major gold consumers like China and Russia. When central banks buy gold, it is a conscious decision driven by the understanding that it is the safest asset in their reserves, especially during political crises. This buying behavior suggests that gold is revaluating and may soon multiply in value. Having an asset like Donlin, projected to produce 1.5 million ounces annually and sustain that throughout its life, is strategically advantageous. It will become the largest gold mine in the United States, with the only comparable project being the Scuola project in Russia. We are positioned well in this regard.
If we can demonstrate that Donlin has a series of high-quality explorations akin to the infrastructure seen in Carlin or Nevada, we could significantly enhance our standing, potentially becoming another Agnico—a model of outstanding management, quality assets, and safe operating jurisdictions. Donlin could embody this ideal. Thank you.
We have the second question coming from the line of Keith Redman. Can you share a timeline of when you hope to get to production?
All right. Keith, thank you for the question. I mentioned earlier, but be clear. By the end of this year, we will begin updating the feasibility study, and that will take about 2 years. Concurrent with the study, we're also going to be evaluating financing options and just preparing ourselves so when the study is completed, and we certainly expect it will be positive. So when the study is completed, we'll be in a position to initiate the work at site, which we currently have the authorization to do with the Wetlands permit. So that 2 years will take us through the feasibility study and building the site up, will be about 4 years.
Thank you, Greg. And the final question coming from the webcast comes from the line of Nils from Long Advisers. What are the immediate priorities of the Paulson partnership that are likely to close the valuation gap versus historical precedents?
I'll start with that one and then flip it back to you, Tom. I think we are right now totally aligned with people at Paulson, and that we share the view that the next logical step to advance Donlin up the value chain is to update the feasibility study. So they are 100% in agreement with us that will get underway toward the end of this year. They are also supportive of the ongoing drill program that we have at site in all of the activities, whether it's defending our permits, community engagement. They are fully aligned with the approach that Donlin is taking.
I'll add this. There are very few funds in the United States that have dedicated gold analysts or the experience to help navigate an asset or a company up the value chain, as Paulson has done with Detour and is currently doing with Perpetual. I expect that both publicly and behind the scenes, many investors who know John and his right hand, Marcelo Kim, will reach out to Paulson. They understand that they lack the in-house capabilities that Paulson has and will ask them to tell the Donlin story. We believe that John will discuss the asset just as we do. He will highlight its unique attributes, making it a compelling case for many investors. Because this is a significant transaction with multiple positive catalysts ahead, I believe it's reasonable to expect that we will transition from very limited coverage of a story that had little to offer to substantial analytical coverage that will provide investors with knowledgeable advice to help them understand this story.
Lastly, it's important to note that someone like me, who maintained a 25% holding in the last offering, or John Paulson, who made an $800 million investment and was ready to buy more shares of NovaGold to ensure the transaction proceeded smoothly, shows that we are all aligned in wanting the NovaGold share price to rise. We are much better positioned now than we were five years ago when we had a $4 billion market cap or a stock price of $12. We now have favorable conditions, a fully aligned partner, and someone who wants to promote the strengths of Donlin rather than undermine the share price for other reasons. The one challenge we faced is gone. As we start to gain momentum, I fully expect we will reach all-time highs, not just because of the strengths we bring but because everyone is united in the same goal and putting their money where their mouth is. This isn't just talk; we are serious about regaining lost ground, catching up with the GDXJ, and continuing our legacy as the most highly rated gold development story in the world.
Thank you, Tom. Before we turn it back to Greg, I would just like to remind our listeners that Dr. Kaplan's letter to shareholders was recently published and is available on the homepage of our website. It provides some macro views on gold overview of the transaction. So I would encourage you. It is an interesting read. And with that, I'll hand it back over to Greg.
Thank you, Melanie, and thank you, everyone for joining our second quarter webcast and update. That concludes our presentation this morning.
This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.