NovaGold Resources stock [stock_market_widget type="inline" template="generic" color="default" assets="NG.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] has taken off this year despite the fact that the company is yet to begin commercial gold production. The impressive rally in the price of gold has turned out to be a major catalyst for NovaGold, which is not surprising as there are quite a few analysts out there who expect the yellow metal to keep rallying.
But when will NovaGold be able to take advantage of strong gold prices? Let’s find out.
Still Waiting to Begin Production
NovaGold’s flagship Donlin Gold mine – which it owns equally with Barrick Gold – is located in Alaska. NovaGold provided an update about the progress at the mine along with its second-quarter results.
The company announced that permitting activities are still underway at Donlin Gold. NovaGold has already received federal permits, as well as other important state permits so far. It is now in the process of getting other important state permits, some of which should be closed by the end of this year.
NovaGold is also progressing ahead with its local community outreach programs. However, the company has not given a specific timeline as to when it expects to begin production. That’s because there are still a few stages of development to be completed before a construction/production decision is made. NovaGold simply said over the latest conference call that it has moved one step forward into the next stage.
But patient investors stand to win big from NovaGold when it begins production. Let me explain why.
Don’t Miss These Positives
The Donlin Gold mine seems to be a very promising one according to NovaGold. According to the company’s President and CEO, Gregory Lang:
When built, Donlin Gold is expected to have a mine life measured in decades, particularly considering that the project’s already robust endowment is contained within only three kilometers of an eight-kilometer mineralized trend.
So not only is Donlin Gold expected to deliver high-quality gold production at low costs, it should also be able to produce the yellow metal for a long time to come. NovaGold Resources points out that Donlin Gold is expected to produce 1.5 million ounces of gold for the first five years of its operation. After that, it is expected to produce a million ounces of gold for nearly three decades.
Given that only six of the 10 largest gold producing mines are expected to clock 1 million ounces of production this year, NovaGold is sitting on a gold mine in the literal sense. With its high grades, Donlin Gold should help NovaGold take advantage of potential gold price growth in the long run and outperform its peers because of the strength of its asset base.
So it makes sense to continue holding the stock even though it is not yet in the production phase.
