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Donlin Gold

Technical Report

Project Overview

Large high-grade1 gold project located in a tier-one jurisdiction, Alaska.

The Donlin Gold project is located in the historic Kuskokwim Gold Belt of Southwest Alaska, 10 miles north of the village of Crooked Creek, and is managed by Donlin Gold LLC, which is owned equally by subsidiaries of NOVAGOLD and Barrick Gold Corporation. Donlin Gold's unique status is defined by six distinguishing characteristics: exceptional reserve size and production capability, high grade for large-scale open-pit mining, significant exploration upside, leverage to higher gold prices, location in a favorable jurisdiction, and strong Alaska Native Corporation and community partnerships.

Novagold

SIZE: 39Moz

With measured and indicated resources of approximately 39 million ounces of gold (541 million tonnes of gold at an average grade of 2.2 grams per tonne, inclusive of proven and probable reserves of 34 million ounces of gold at an average grade of 2.09 grams per tonne), and an additional approximately six million ounces of inferred resources (92 million tonnes at an average grade of approximately 2.0 grams per tonne), Donlin Gold is one of the largest known undeveloped gold deposits today. 

GRADE: 2.2g/t

Donlin Gold is also blessed with high grade compared to other open pit mines and projects, with a measured and indicated resource grade of 2.2 grams per tonne.  This makes it one of the highest grade known undeveloped open-pit gold deposits. Furthermore, over its anticipated 27-year life, Donlin Gold’s cost of sales, excluding depreciation and reclamation costs, are estimated to be $635 per ounce (based on life-of mine costs applicable to sales of $19,240 million). All-in sustaining costs, which add sustaining capital expenditures, corporate administration, and reclamation, are expected to be $735 per ounce1. This is very favorable in today’s world, and, as these numbers are a function of Donlin Gold’s excellent grade, is yet another example of why size and quality matter.

(1)See Non GAAP financial measures here

PRODUCTION PROFILE: 1.1Moz/year

As envisioned in the second updated feasibility study, Donlin Gold has the potential to become one of the largest gold-producing mines in the world, producing approximately 1,500,000 ounces of gold annually in the first five years of operation and approximately 1,100,000 ounces per year over its 27-year life.

EXPLORATION POTENTIAL

Beyond its already large mineral endowment, Donlin Gold has substantial exploration potential, with the opportunity to expand the current open-pit resource along strike and at depth. Considering that the current pit occupies only part of a three-kilometer segment of an eight-kilometer mineralized gold belt, in NOVAGOLD's view it is possible that Donlin Gold's mine life, already measured in decades, will be greater than anticipated.

LEVERAGE

The leverage to higher gold prices Donlin Gold enjoys is exceptional. Its after-tax Net Present Value (NPV) at US$1,200 per ounce-gold and a 5% discount rate, was estimated at US$547 million, as fully described in the Donlin Gold second updated feasibility study which can be found here. This number rises to $6.2 billion if undiscounted. Importantly, the resultant NPV sensitivity analysis showed a more than eight-fold increase in value to US$4.6 billion at US$1,700 per ounce of gold ($14.6 billion if undiscounted), and then nearly a 50% further increase in NPV to US$6.7 billion at US$2,000 per ounce of gold. At the zero discount rate at which we believe North American assets may once again be rated, as they were not so long ago, that number rises to more than US$19 billion.

JURISDICTIONAL SAFETY

The fact that Donlin Gold is located in the United States gives NOVAGOLD a tremendous competitive advantage. Jurisdiction is an important issue today in the resources sector. One of the key questions that investors will be asking of mining companies is: where in the world are your assets located? Investing in the wrong region carries risks well beyond what you find in North America. With five major producing mines, Alaska is the second largest gold producing state in the United States.

PARTNERSHIPS

Donlin Gold enjoys broad support, including from our Alaska Native Corporation stakeholders, the Calista Corporation (Calista) and The Kuskokwim Corporation (TKC), who own the mineral and surface rights to Donlin Gold. The project is on private land selected by Calista for the development of its mineral endowment. Our well-established track record of social engagement and environmental stewardship in the community distinguishes NOVAGOLD from its peers. The government of Alaska cites Donlin Gold as a model project for responsible development, a reputation that is reinforced with a unique association with the Green Star Communities Program of the Alaska Forum on the Environment sponsored in conjunction with Donlin Gold to promote hazardous waste collection and backhaul. That’s not something you see every day, and we’re proud of it.

Footnotes

(1) Represents average grade of measured and indicated mineral resources, inclusive of mineral reserves. See “Cautionary Note Concerning Reserve and Resource Estimates” and “Mineral Reserve and Mineral Resource” table

Source: Donlin Gold Project NI 43-101 Technical Report titled “Donlin Creek Gold Project Alaska, USA, NI 43-101 Technical Report on Second Updated Feasibility Study” effective November 18, 2011, amended January 20, 2012. A copy of the Donlin Gold Technical Report is available here as well as at www.sedar.com or www.sec.gov.

Technical Reports and Qualified Persons

The documents referenced below provide supporting technical information for the Donlin Gold project.

Project                     Qualified Person(s)                                
Donlin Gold             Gordon Seibel R.M. SME “Donlin Creek Gold Project Alaska, USA, NI 43-101 Technical Report on Second Updated Feasibility Study” prepared by AMEC, effective November 18, 2011, amended January 20, 2012.
                                 Kirk Hanson P.E.     

Clifford Krall, P.E., who is the Mine Engineering Manager for NOVAGOLD and a “qualified person” under NI 43-101, has approved the scientific and technical information contained on this website.

  • Donlin Gold project estimates as per the second updated feasibility study effective November 18, 2011 and amended January 20, 2012.  The 39 million ounces of mineral resources represents 100% of measured and indicated resources, of which NOVAGOLD’s share represents 50%.  Measured and indicated resources are inclusive of proven and probable reserves.  Measured resources total 8M tonnes grading 2.52 g/t Au, and indicated resources total 534M tonnes grading 2.24 g/t Au. Proven reserves total 8M tonnes grading 2.32 g/t Au, and probable reserves total 497M tonnes grading 2.08 g/t Au. See “Cautionary Note Concerning Reserve & Resource Estimates” and “Reserve and Resource Table” with footnotes here.
  • Cost of sales are unescalated and based on the 2011 Donlin Gold Second Updated Feasibility Study.
  • All-in sustaining costs were calculated with figures from the 2011 Donlin Gold Second Updated Feasibility Study and projected NOVAGOLD corporate administrative costs.
  • Net Present Value (NPV): All dollar figures are in USD and reflect after-tax NPV (at a 0% and 5% discount rates) of the Donlin Gold project as of 1/1/2014. At a 5% discount rate, the NPV is: $547 m @ $1,200 gold; $1,465m @ $1,300 gold; $3,147m @ $1,500 gold; $4,581 m @ $1,700 gold; $6,722 m @ $2,000 gold; and $10,243 m @ $2,500 gold. Project development costs prior to 1/1/2014 are treated as sunk costs. 
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