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NovaGold Earnings Won't End the Stock's Tailspin

NovaGold Resources (NYSEMKT: NG  ) will give investors its quarterly report on Wednesday. But the mining company has already seen its stock plunge in the wake of crashing gold prices, and NovaGold earnings results aren't likely to give investors much good news barring a big surprise.

NovaGold is in the uncomfortable position of having no revenue, as the company's mines are still stuck at the developmental stage. The key for the company's success is moving forward with its most lucrative projects, but falling gold prices aren't leaving its partners in much of a mood to cooperate. Let's take an early look at what's been happening with NovaGold over the past quarter and what we're likely to see in its quarterly report.

Stats on NovaGold Resources

Analyst EPS Estimate


Year-Ago EPS


Revenue Estimate


Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will NovaGold's earnings ever improve?
Analysts have had mixed views on NovaGold's long-term earnings prospects recently. They've widened their loss estimates for the current fiscal year by $0.02 per share, but narrowed their fiscal 2014 estimates by the same amount. Yet the stock has plunged almost 40% since early April, reflecting the fact that no one sees the company becoming profitable anytime soon.

The biggest challenge for NovaGold has been convincing its development partners to take action on its primary mining properties. The Donlin Gold project in Alaska is one of the largest known undeveloped gold deposits in the world, according to the company, but joint-venture partner Barrick Gold (NYSE: ABX  ) said last year that the economics of the mine didn't justify further action on its part, and as the deep pocket in the venture, Barrick is in a far better position to invest capital on Donlin than NovaGold. Similarly, high production costs at NovaGold's Galore Creek joint venture with Teck Resources (NYSE: TCK  ) has led NovaGold to consider a sale of its 50% interest in the venture in order to raise capital and focus on Donlin.

Still, NovaGold is pressing on. In April after its last earnings report, CEO Greg Lang noted that Donlin completed public scoping, an early stage of the permitting process. Next, the company will need to prepare a draft environmental impact statement, with NovaGold expecting the process to take three to four years. The company has also taken steps to try to make Galore Creek look more attractive by doing a small exploration program and technical studies there.

Moreover, the company still has the support of hedge fund manager John Paulson, despite his fund having taken a bloodbath in the fall in metals prices over the quarter. Yet with gold having fallen so far in just the past three months, even producing mines have lost investor interest, let alone stocks without any revenue.

In NovaGold's earnings, watch for the latest information on how the Donlin permitting process is going and whether the company has made any progress in selling Galore. For the most part, though, NovaGold is a long-term play that will take years to play out one way or the other. As such, don't expect NovaGold earnings to reverse the stock's plunge.

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5/27/2016 4:00 PM
NG $5.10 Down -0.25 -4.67%
NovaGold Resources… CAPS Rating: ***
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