Why NovaGold Resources Stock Is Worth Buying

NovaGold Resources [stock_market_widget type="inline" template="generic" color="default" assets="NG.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] stock has held its ground this year as it has been making the right moves to gain plaudits from Wall Street. The stock is up nearly 11% in 2019 so far, and investors will be hoping that it gets a shot in the arm next week when the company releases results for the second quarter of fiscal 2019.

Let’s see what’s expected of the company.

The Headline Numbers

NovaGold is yet to begin production, so investors won’t be much concerned with its revenue and earnings numbers. However, it is worth noting that the company’s loss is expected to fall to $0.01 per share as compared to $0.03 per share in the year-ago period.

Investors will be more concerned about what NovaGold has to say about the progress that it is making at its operations at the Donlin Gold project in Alaska, where it holds half of the stake. NovaGold points out that Donlin Gold holds measured and indicated mineral resource of 39 million ounces of gold and has an average grade of 2.24 grams per ton.

According to the feasibility study, the company believes that it will be able to deliver average production of over a million ounces over a 27-year period. Last quarter, NovaGold had the following to say about the Donlin Gold project:

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.

The good news for NovaGold investors is that the company has received a couple of permits and is making progress on other approvals. In all, the work related to permits is almost complete at the mine, and investors will be expecting the company to provide a timeline as to when production can begin.

NovaGold is Self-sufficient

With gold prices on the rise thanks to the global economic uncertainties, NovaGold should be able to tap the capital markets if needed.

A good reason why investors have been upbeat about NovaGold’s prospects this year is because of the company’s favourable balance sheet. It is sitting on nearly C$162 million in cash, while debt is much lower at C$98.3 million.

Given that the company is planning capital expenses of only $24 million for this year, it can easily fund itself without having to take on more debt. Moreover, with gold prices on the rise thanks to the global economic uncertainties, NovaGold should be able to tap the capital markets if needed.

That’s because the gold mining industry is currently in a consolidation phase, and NovaGold could be the subject of acquisition in case Donlin Gold moves ahead as per expectations. So, it would be worthwhile to keep a long position in NovaGold Resources as more good news from the company next week could send the stock higher and might also evoke interest from bigger players.

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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