NovaGold Resources Investors Need to Remain Patient

NovaGold Resources [stock_market_widget type="inline" template="generic" color="default" assets="NG.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] has made investors a lot richer this year, delivering more than 60% gains so far. But a closer look at NovaGold stock’s recent price action makes it clear that the company has lost some momentum on the market. Towards the end of September, NovaGold shares were up 90% for the year.

This means that shares of the company have pulled back sharply of late. But is this an opportunity for investors to buy more shares? Let’s find out.

How is NovaGold Performing?

Investors should note that NovaGold is still not into commercial production. The company is developing its asset at Donlin Gold, and recently provided an update about the progress of the work done so far at the mine.

NovaGold has clarified that it has received Federal and multiple state permits for the Donlin Gold mine. The company is now busy getting other state permits for the mine. At the same time, NovaGold is currently in the process of collecting geotechnical data about the Donlin Gold mine.

The company expects to complete the geotechnical field program by the end of next year. NovaGold also provided an update about the resource profile of the Donlin Gold mine. The company says that Donlin Gold has “approximately 39,000,000 ounces of gold in measured and indicated mineral resources grading 2.24 grams per tonne.”

This means that NovaGold’s asset is capable of delivering impressive gold production and that too at a low cost base because of a strong grade profile. But what’s impressive to note is that NovaGold could get access to more deposits. According to the company:

Its unique stature is further enhanced by the presently quantified aspect of its gold endowment being contained within three kilometers of an eight-kilometer mineralized belt, all of which represents, in and of itself, a small portion of the overall land package.

So, there’s a chance that Donlin Gold could witness an expansion in its asset base going forward.

Other Aspects Are Also Looking Up

The company is sitting on nearly $153 million in cash, and it expects to receive another $100 million from Newmont in the coming four years.

NovaGold has enough resources to keep developing the Donlin Gold mine thanks to a favourable balance sheet. The company is sitting on nearly $153 million in cash, and it expects to receive another $100 million from Newmont in the coming four years. What’s more, NovaGold also expects to receive $75 million as a contingent payment if a construction plan is approved by the owners of the Galore Creek project.

In fact, NovaGold says that it does not need to raise capital for the development of the Donlin Gold mine until and unless it reaches a construction decision. So investors who are holding NovaGold shares need to remain patient.

The company’s impressive asset profile at Donlin Gold and a potential improvement in the same, along with the fact that gold prices continue to remain strong at over $1,500 an ounce mean that NovaGold Resources could deliver impressive long-term growth.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

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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