Novagold Resources Inc: Form 10-Q for the period ended Feb 28, 2025

In Management’s Discussion and Analysis of Financial Condition and Results of Operations, “NOVAGOLD”, the “Company”, “we,” “us” and “our” refer to NOVAGOLD RESOURCES INC. and its consolidated subsidiaries. The following discussion and analysis of our financial condition and results of operations constitutes management’s review of the factors that affected our financial and operating performance for the three-month period ended February 28, 2025 and February 29, 2024. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto contained elsewhere in this report and our Annual Report on Form 10-K for the year ended November 30, 2024, as well as other information we file with the Securities and Exchange Commission on EDGAR at www.sec.gov (http://www.sec.gov) and with Canadian Securities Administrators on SEDAR+ at www.sedarplus.ca (http://www.sedarplus.ca). References herein to $ refer to United States dollars and C$ to Canadian dollars, in thousands, except for per share amounts.

Overview

We operate in the gold mining industry, primarily focused on advancing the Donlin Gold project in Alaska. The Donlin Gold project is held by Donlin Gold, a limited liability company owned equally by wholly-owned subsidiaries of NOVAGOLD and Barrick.

Our corporate goals include continuing to advance Donlin Gold toward a feasibility study and a subsequent construction decision; maintain a favorable reputation of NOVAGOLD and its Donlin Gold project among shareholders; promote strong community outreach and sustainability culture; maintain strong safety and environmental performance; and manage the Company treasury effectively and efficiently. Our operations primarily relate to the delivery of project milestones, including the achievement of various technical, environmental, sustainable development, economic and legal objectives, obtaining necessary permits and maintaining those received in good standing, advancement to a feasibility study, preparation of engineering designs and the financing to fund these objectives.

Donlin Gold project

In the first quarter of 2025, Donlin Gold achieved a number of milestones. The 2025 field program commenced with camp opening in February, followed by the start of drilling in March after quarter end. A total of 15,000 meters of drilling is planned, primarily focused on grid drilling to further develop the modifying factors (which are considerations used to convert mineral resources to mineral reserves) and mine planning input parameters.

Also during the first quarter of 2025, the Company collaborated with Donlin Gold, Calista Corporation (“Calista”), and The Kuskokwim Corporation on key ecological, educational and cultural awareness initiatives – including continued government affairs engagement with state representatives, information sharing about the project, and emphasis on its importance to Alaska and the Yukon-Kuskokwim (“Y-K”) region.

Our share of funding for the Donlin Gold project in the first quarter of 2025 was $3,614. In 2025, we continue to expect our annual share of Donlin Gold funding to be $21,500.

Strengthening partnerships and supporting the Y-K region’s environmental and social initiatives

In the first quarter of 2025, NOVAGOLD and Donlin Gold staff travelled to Juneau to meet with members of the Alaska State Legislature and to Washington, D.C., joined by Barrick staff, to meet with Alaska’s congressional delegations to share information about Donlin Gold and to reinforce the project’s importance to Alaska and the Y-K region. Donlin Gold also presented to the Alaska House of Representatives’ Energy Committee, as well as to the Resources committees of both the House and Senate, to describe the Donlin Gold project’s energy requirements and to discuss Alaska’s environmental standards.

In January, meaningful collaboration was deepened with the Native Village of Napaimute, with Donlin Gold extending financial assistance to maintain the Kuskokwim River Ice Road – a critical winter infrastructure that ensures the safe transport of residents to community events and serves as a conduit of economic activity for the Kuskokwim River communities. Additionally, Donlin Gold continued its support of and participation in the Alaska Safe Riders initiative, which promotes the secure use of snowmachines, all-terrain vehicles, and recreational off-road vehicles.

Financial assistance was also provided to Camp Fire Alaska, an organization dedicated to offering summer camps and programs to youth in rural communities across Alaska. Activities included music, sports, science, field trips, and numerous outdoor recreation opportunities.

Throughout the first quarter, Donlin Gold maintained its dedication to backing local community sports initiatives, exemplified by its sponsorship of the Donlin Gold Basketball Tournament held at the Bethel Regional High School, and Y-K mushers Isaac Underwood, Mike Williams Jr., and Pete Kaiser, the 2019 Iditarod champion and a Donlin Gold employee. Mr. Kaiser, who hails from Bethel, is the first Yup’ik musher and fifth Alaska Native to win an Iditarod championship. Additionally, he recently won his ninth Kuskokwim 300 – a point of tremendous pride for NOVAGOLD.

Upholding current permits and working to secure key state approvals

Donlin Gold continued to support the state and federal agencies defending their permits in litigation. The 401 Water Quality Certification, water rights permits and state pipeline ROW in state court have been fully briefed and argued, and decisions are anticipated in 2025.

On June 28, 2021, Earthjustice representing Orutsararmiut Native Council (“ONC”) filed an appeal of the Alaska Department of Environmental Conservation (“ADEC”) Commissioner’s decision upholding the ADEC’s Clean Water Act Section 401 water quality certification in Alaska Superior Court. In December 2021, at the request of the State of Alaska and Donlin Gold, the Alaska Superior Court suspended the case and remanded it to ADEC to allow for consideration of additional technical materials on mercury and temperature. After an administrative process, the Commissioner reaffirmed ADEC’s issuance of the 401 Certification on August 18, 2023. The suspension of the previously filed Alaska Superior Court case was then lifted and Earthjustice filed its opening brief with the Alaska Superior Court in January 2024. Briefing is complete and oral arguments were held on August 30, 2024. A decision is anticipated from the Alaska Superior Court in 2025.

On September 20, 2021, Earthjustice, representing ONC, Cook Inletkeeper, and three Y-K villages, filed an appeal of the State pipeline ROW authorization in Alaska Superior Court. On April 12, 2023, the Alaska Superior Court affirmed the Alaska Department of Natural Resources’ (“ADNR”) issuance of the ROW lease in the Earthjustice case. Earthjustice appealed the Superior Court’s decision to the Alaska Supreme Court. On May 25, 2022, Earthjustice, representing ONC and five Y-K villages, filed an appeal of ADNR’s issuance of certain water rights permits to Donlin Gold in Alaska Superior Court. After briefing and oral argument, on September 1, 2023, the Alaska Superior Court affirmed ADNR’s decision on Donlin Gold’s water rights permits. On October 2, 2023, Earthjustice appealed the Superior Court’s decision to the Alaska Supreme Court. Earthjustice’s opening brief was submitted to the Alaska Supreme Court on January 4, 2024. Response briefs from the State of Alaska and Donlin Gold were completed in April 2024, and Earthjustice subsequently filed their reply brief in May 2024. Briefing on Earthjustice’s appeal of the Alaska Superior Court affirmation of ADNR’s issuance of the State pipeline ROW lease to the Alaska Supreme Court was completed in February 2024. Oral arguments for both the water rights permits and the State pipeline ROW were held November 12, 2024, and a decision is anticipated in 2025.

On April 5, 2023, Earthjustice representing ONC and six Y-K villages filed suit against the U.S. government in Anchorage Federal District Court (the “Federal District Court”) asking the Federal District Court to invalidate the Donlin Gold JROD, which included the Corps’ issuance of the 404 permit and the Department of Interior, Bureau of Land Management’s issuance of the ROW lease for the portions of the pipeline on Federal lands. The U.S. Department of Justice (“DOJ”) is defending the issuance of the permits by those Federal agencies. The State of Alaska, Donlin Gold, and Calista were granted intervenor status in this case. The DOJ filed their brief supporting the issuance of the JROD and the sufficiency of the environmental analysis in the Final Environmental Impact Statement on April 2, 2024. Amicus briefs supporting the project were filed by the village of Crooked Creek and the Alaska federal Congressional delegation. Oral arguments were held on June 24, 2024, and the Federal District Court issued a decision on September 30, 2024. The decision rejected the plaintiffs’ arguments on two of the three issues raised in the litigation but agreed with plaintiffs that the federal agencies took too narrow of a view in analyzing the impact of a theoretical release from the tailings storage facility. The Federal District Court requested supplemental briefing on the appropriate remedy for addressing this issue. On October 7, 2024, the plaintiffs filed a request for reconsideration on one of the issues on which the Federal District Court had ruled against the plaintiffs and, at DOJ’s request, the Federal District Court suspended the schedule for briefing on the appropriate remedy until after the Federal District Court ruled on plaintiffs’ motion for reconsideration. On December 23, 2024, the Federal District Court denied plaintiffs’ request for reconsideration. Remedy briefing was completed in March 2025 and oral argument on remedy has been scheduled for April 14, 2025.

To date, all permits and approvals granted to Donlin Gold by federal and state agencies remain issued and in place while the legal challenges described above proceed. We recognize the importance of preparedness and organization in these matters. With the unwavering support of Donlin Gold and its owners, we will continue to back the state and federal agencies in defending their thorough and diligent permitting processes and are committed to working with the federal agencies and all stakeholders on an appropriate remedy to address the Federal District Court’s decision.

Consolidated Financial Results

Net loss decreased in the first quarter of 2025 by $1,202 from the comparative 2024 period, primarily due to lower stock-based compensation expense and lower Donlin Gold expenditures. Donlin Gold expenses in the first quarter of 2025 were below the quarterly run rate based on our 2025 guidance as Donlin Gold site activities commenced in February 2025 with the kick-off of this year’s field program. Other than stock-based compensation expense, which declined by $1,426 in the first quarter of 2025, general and administrative costs during the quarter were in line with the comparative 2024 period.

Liquidity and Capital Resources

Liquidity overview

With total cash and term deposits of $92,969, the Company has sufficient working capital available to cover anticipated funding of the Donlin Gold project and corporate general and administrative costs for at least the next two years at current spending levels. Additional capital may be required to complete an updated Donlin Gold feasibility study. Considerable additional capital will be required if a decision to commence engineering and construction is reached by Donlin Gold. Future financing to fund construction is anticipated through debt and equity offerings, project specific debt, and/or other means. Our continued operations, in the longer term, are dependent on our ability to obtain additional financing or to generate future cash flows. However, there is no assurance that we will be successful in our efforts to raise additional capital on terms favorable to us, or at all. For further information, see section Item 1A, Risk Factors – Our ability to continue the exploration, permitting, development, and construction of the Donlin Gold project, and to continue as a going concern, will depend in part on our ability to obtain suitable financing.

Our budgeted cash expenditures in fiscal year 2025 are approximately $37,500, including $21,500 to fund the Donlin Gold project, and $16,000 for corporate general and administrative costs.

Our financial position includes the following as of February 28, 2025:

• Cash and cash equivalents of $33,969, primarily held at three large Canadian chartered banks with investment grade credit ratings.
• Term deposits of $59,000 held at two large Canadian chartered banks with investment grade credit ratings with maturities of less than one year.
• Promissory note payable to Barrick of $155,087 including accrued interest at U.S. prime plus 2%, compounded semi-annually. The promissory note and accrued interest are payable from 85% of the Company’s share of revenue from future Donlin Gold project production or from any net proceeds resulting from a reduction of the Company’s interest in Donlin Gold.

Cash flows

In the first quarter of 2025 cash and cash equivalents decreased by $8,255, primarily to fund our share of Donlin Gold and for corporate administrative expenses.

Cash used in operating activities and funding of Donlin Gold in the first quarter of 2025 were generally unchanged from the comparable prior year period. During the first quarter of 2025, the Company received $952 in cash proceeds from the disposal of a marketable security investment previously held by the Company, following its acquisition.

Outstanding share data

As of March 26, 2025, the Company had 334,646,571 common shares issued and outstanding. Also, as of March 26, 2025, the Company had: i) a total of 8,258,700 stock options outstanding; 7,261,300 with a weighted-average exercise price of $6.11 and the remaining 997,400 of those stock options with a weighted-average exercise price of C$7.56; and ii) 1,225,100 PSUs and 307,555 deferred share units outstanding. Upon exercise or pay out, as applicable, of the foregoing convertible securities, the Company would be required to issue a maximum of 10,403,905 common shares.

Our financial instruments are exposed to certain financial risks, including credit and interest rate risks.

Credit risk

Concentration of credit risk exists with respect to our cash and cash equivalents, and term deposit investments. All term deposits are held at two Canadian chartered banks with investment grade credit ratings and have maturities of less than one year.

Interest rate risk

The interest rate on the promissory note owed to Barrick is variable with the U.S. prime rate. Based on the amount owing on the promissory note as of February 28, 2025, and assuming all other variables remain constant, a 1% change in the U.S. prime rate would result in an increase/decrease of approximately $1.6 million in the interest accrued on the promissory note per annum.

Management, with the participation of our President and Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of February 28, 2025. On the basis of this review, our President and Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our President and Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have not been any changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated by the SEC under the Exchange Act) during the Company’s most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company’s internal controls over financial reporting are based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended November 30, 2024, as filed with the SEC on January 23, 2025. The risk factors in our Annual Report on Form 10-K for the year ended November 30, 2024, in addition to the other information set forth in this quarterly report, could materially affect our business, financial condition or results of operations. Additional risks and uncertainties not currently known to us or that we deem to be immaterial could also materially adversely affect our business, financial condition or results of operations.