Page 30 - Demo

assumption in valuing something that the conditions upon
exit are going to be the same as they are today. In other words, they don’t game things out. What we always try to do is we say to ourselves, okay, hopefully we’re buying when you have, as John Templeton put it, maximum pessimism. That was certainly the case when we came into NOVAGOLD. It was on the verge of bankruptcy, and we hadn’t owned one share when we came in as a white knight and saved the company. And because of the exigent circumstances, we were able to go to 40 percent rather than having to take a takeover bid. I wanted to buy the whole company, but fortunately, I have around me people whose job in life....
2008 when the deal was signed. But one of the most important things is that he said, “Look, you’re in a position to buy the company for $2 a share. You have the cash. Barrick tried to buy it at $16 a share. You don’t think that they’re going to walk you up dollar for dollar until they get to where they want?” And it turns out that Barrick wasn’t the only company that was hoping to buy NOVAGOLD on the cheap. There were others, including Newmont and even the Russians. And so we realized we have an opportunity to take control of one of the greatest gold stories in the development space: NOVAGOLD. But we would have to settle for less than a hundred percent. And we ended up going 40 percent fully diluted. That was the right move.
The attributes of Donlin Gold are that we are in a
situation where the grade gives us plenty of leeway. Grades have collapsed over the decade-plus that I’ve been in the NOVAGOLD story. We’re now approaching one gram per tonne for projects and going sub-one gram per tonne. At a certain point, particularly if you’re not in stable jurisdictions, this is a real challenge.
When we look at Donlin Gold, which has multiples more than those projects, we know that we have a cushion. And if anything, the results of the drill programs over the last couple of years have given us, with great input from Mark Bristow as a geologist – and the Barrick team – a much greater definition on the controls on the mineralization. The Bristow of Barrick, or the Barrick of Bristow, is absolutely committed to wanting to know every single ounce that will come out over a 10-year period. And I think that’s a great discipline. I think you, as an investor
– I, as an investor – in the space have come to understand that when people cut corners, the back end can be pretty brutal. The more work you do on the front end, the more the back will take care of itself.
Now we know that once Donlin Gold is built, it will have been pretty well-engineered. Costs will be known. Cash flow year X will be pretty much known other than the gold price.
Look, we have an A team: You have the Barrick side, of course, led by Mark; you have the NOVAGOLD side led by Greg. Richard Williams built Pueblo Viejo for Barrick and at the time Goldcorp, now Newmont, and is one of the world leaders
Calmer heads prevail.
It’s not just calmer heads, it’s wiser heads. So, in this instance, comrade Igor Levental was whispering into my
ears as he was supposed to: “Thou art mortal, Caesar.” So, whereas I sold my energy company and was flush with cash and brimming with conviction on gold, particularly on the holy grail, in my mind, which was Donlin Gold, then hence NOVAGOLD, he was saying, “You know, you might think twice or three times about making a bid for the entire company because everyone may be asleep,” as it was December 31st,
28