Friday, December 21, 2012

NovaGold (NG) Going For Gold

NovaGold (NG) is all about one thing - gold.  Specifically, they want to make their Donlin Gold project viable and have stated their intent to divest their interest in their Galore Creek project to stay focused on gold.  The Galore Creek property's grades of gold, silver, and copper don't look very promising anyway, so that's a good strategic move.

I like the fact that the CEO has a background in mining.  You've heard me state before that a prefer a geologist at the helm of a young company, but with a company that's ready to make a production decision it's better to have a mine operator.

NovaGold has a 43-101 statement for its Donlin Gold project.  The proven and probable resources have a grade of Au 2.09 g/t, which is pretty dog-gone attractive considering the declining grades miners are finding worldwide.  I am very intrigued by that report's estimates of the projects cash costs of production, which are significantly less than gold's historic average price of $615/oz.

Their Q3 financial statement for 2012 shows C$267M cash on hand at the end of August.  Their net losses amount to a little over $6M/month, so this burn rate gives them a life span of over 44 months.  They can survive more than twice that long if they sell the Galore Creek property at its $381M book valuation (yeah, I know, these kinds of things can get written down but they'll get something for it).

The most attractive aspect of this company for me right now is its beaten-down share price.  It's trading over four bucks a share right now, pretty far from its 52-week highs.  The fact that Barrick Gold retains a 50% interest in the Donlin Gold project indicates its attractiveness.  I haven't made a decision yet to go long because the company still needs a mature infrastructure at the site.  I am nonetheless interested in watching this one.

Full disclosure:  No position in NG at this time, although that may change in the near future.