The Gold Report - Thu, Apr 6, 2017

Permitting at NOVAGOLD's Donlin Project Is Entering Its Final Stage

The release of NOVAGOLD's first quarter results has analyst Raj Ray of National Bank Financial highlighting that permitting for the Donlin Gold project is entering its final stage.

8km Trend at Donlin Gold Project

NOVAGOLD Resources Inc. (NG:TSX; NG:NYSE.MKT) announced on April 3 its results for the fiscal year Q1/17, which ended on Feb. 28. The company noted that work continues on the "Donlin Gold environmental impact statement (EIS) as the U.S. Army Corps of Engineers, the project's lead federal permitting agency, works to complete the final EIS." The Donlin Gold project in Alaska is a 50-50 joint venture with Barrick Gold. The company also owns 50% of the Galore Creek copper-gold-silver project in British Columbia.

Analyst Raj Ray of NBF, in an April 4 research flash, noted that permitting activities for Donlin continue to advance. "The comment period on the draft environmental impact statement was completed mid-2016 and the U.S. Army Corps of Engineers (USACE), the lead federal agency with responsibility for preparing the EIS, is in the process of reviewing the comments received on the draft EIS. NG management expects filing of the final EIS in early 2018," wrote Ray.

Ray noted that the company indicated that it "made a special permit request to the Pipeline and Hazardous Material Safety Administration (PHMSA) for some design change considerations to the 315-mile long pipeline that is expected to transport natural gas to the Donlin Gold project site from the Cook inlet in Alaska. Management indicated on the conference call that the review and comment period required for the special permit request is not expected to have a material impact on the timeline for the filing of the Final EIS."

NOVAGOLD also announced that as of Feb. 28, 2017, it has $98 million in its treasury, an amount that Ray believes is "sufficient to complete permitting of Donlin Gold." According to Ray, "management previously announced [a] fiscal 2017 operating budget of US$23 mln, including US$11 mln for G&A, US$10 mln to fund NG's 50% share of permitting expenditures at the Donlin Gold project and US$2 mln at the Galore Creek project. Management also intends to explore potential monetization opportunities for Galore Creek over 2017, which could provide further cushion to NG's already strong cash balance."

"We view NG as a long-dated option on the gold price that offers investors long-term exposure to a large-scale and relatively high grade open-pit deposit in a stable jurisdiction which could assume significance if our forecast for industry-wide production decline plays out over the next few years," stated Ray.

"Given the large capex requirement we contend that a favorable construction decision on the Donlin Gold project will depend among other things on a sustained period of strong gold price," the analyst concluded.

1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
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