Why NovaGold Resources Deserves Investors’ Attention

NovaGold Resources’ [stock_market_widget type="inline" template="generic" color="default" assets="NG.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] fiscal first-quarter results for the three-month period ending Feb. 28, 2019, revealed that the company managed to lower its loss.

The company delivered a net loss of $6.32 million during the quarter as compared to the prior-year period’s loss of $7.96 million. Its net loss per share came in at $0.02 as compared to $0.03 last year. The lower expenses were driven by a drop in the company’s general and administrative expenses, as well as the lower cost of operating the Donlin Gold mine.

However, investors should note that Novagold is yet to begin production. Let’s take a look at what can be expected of the company this year.

What’s Next for NovaGold?

NovaGold’s 2019 capital expenses will come in at $24 million. Of that, $13 million will go toward funding the company’s expenditure at the Donlin Gold project while the rest will go toward meeting general and administrative expenses.

With this level of expense, NovaGold believes that it will be better placed to achieve its four goals for the year:

Continue to advance the Donlin Gold project toward a construction/production decision; maintain an effective corporate social responsibility program; promote a strong safety culture by maintaining a zero lost time accident record; and safeguard the company’s treasury.

NovaGold holds a 50% stake in the Donlin Gold project of Alaska. The company says that this mine has approximately 39 million ounces of gold as measured and indicated mineral resource with an average grade of 2.24 grams per ton.

NovaGold’s second feasibility study for the mine has revealed that it can record average production of more than a million ounces a year over a period of 27 years. Moreover, the company has also clarified that there’s a lot of exploration potential at the Donlin Gold mine.

Where Does Donlin Gold Currently Stand?

According to the latest press release:

Current activities at Donlin Gold are focused on state permitting, optimization work, community outreach and workforce development in preparation for the construction and operation of this project.

The company recently received two permits and made progress on other approvals at the mine. It has been issued the final waste management permit, as well as the final reclamation and closure plan. The permitting work at the mine is mostly complete.

NovaGold should witness a decline in its permitting costs going forward.

As a result, NovaGold should witness a decline in its permitting costs going forward. In the first quarter, the company’s spending on continuing operations dropped by $1.2 million year over year on account of a drop in permitting and optimization costs.

More importantly, NovaGold seems to have ample liquidity at hand to keep developing this project. The company’s latest report reveals that it had $162 million in cash and term deposits at the end of the previous quarter. Looking ahead, it is on track to receive $100 million from Newmont Mining as a guaranteed payment.

In all, NovaGold doesn’t need to access the capital markets until it makes a construction decision at the Donlin Gold mine. As such, investors in the hunt for a gold stock that’s yet to begin commercial production should keep NovaGold Resources in mind.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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