Gold's Plunge Won't Help NovaGold Earnings

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

NovaGold Resources (NYSEMKT: NG  ) will release its quarterly report on Wednesday, and the long wait for the exploration-stage mining company to produce revenue is almost certain to continue. With NovaGold relying on two key projects on which it partners with Barrick Gold (NYSE: ABX  ) and Teck Resources (NYSE: TCK  ) for potential future sales and profits, earnings will probably stay stuck in the red unless the company manages to move forward with production activity.

At first glance, the fall in gold prices would seem to have little impact on NovaGold, given that it hasn't actually extracted any bullion from its mines. Yet as NovaGold and its partners explore the viability of moving forward with plans to develop those mines, gold prices have a key role in guiding strategy, especially given some of the high costs that the Donlin Gold project in Alaska could incur in production. Let's take an early look at what's been happening with NovaGold Resources over the past quarter and what we're likely to see in its 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 earnings ever go positive?
Analysts have actually been somewhat more optimistic about NovaGold earnings prospects in recent months, keeping their estimates stable for the quarter that ended in August but cutting a dime per share from loss estimates for the 2014 fiscal year. Nevertheless, the stock hasn't recovered much from its sharp declines earlier this year, bouncing just 7% since early July.

Despite the slow pace of NovaGold's progress, the company has continued to push ahead with permitting for its Donlin Gold project, in which Barrick Gold is a partner. NovaGold said in July it had completed the public scoping component of the Environmental Protection Agency process, earning positive reviews and getting constructive comments at public meetings. Having submitted baseline data to the Army Corps of Engineers, the next step will be to prepare and submit a formal environmental impact statement for the mine. NovaGold expects the permitting process to take two to three more years to complete.

Meanwhile, NovaGold has continued to update its models on the resource potential of the Galore Creek project in Canada. Prefeasibility numbers pegged the mine as potentially the largest and lowest-cost copper area in Canada, and the company has noted that with political and labor unrest in many areas of the world that today produce the bulk of available copper, Galore Creek could benefit from Canada's stability. Still, NovaGold reaffirmed its hope to sell its 50% interest in the joint venture with Teck Resources to raise capital and concentrate on Donlin.

The challenge for investors, though, is whether they'll reap the rewards when and if NovaGold's projects pan out. The company has reduced its convertible debt by more than $70 million this year, in part by issuing $54 million in warrants that had the impact of diluting growth prospects for existing shareholders. Given the length of time that investors could have to wait before seeing any production from its mines, further action to cover expenses could sap more of the potential from NovaGold shares in the years to come.

In the NovaGold earnings report, watch for the company to provide the latest information on its ongoing permitting and development activities. Even in the best of worlds, though, NovaGold is likely to require a lot more patience before you'll see concrete signs of potential success.

Find a better gold play
If you think gold is poised to rebound and don't want to wait for NovaGold to pan out, we've got some other gold-stock ideas for you. The Motley Fool's new free report, "The Best Way to Play Gold Right Now," dissects the recent volatility in gold prices and gives two solid picks to consider. Click here to read the full report today!

Click here to add NovaGold Resources to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2672959, ~/Articles/ArticleHandler.aspx, 9/30/2016 4:57:49 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,308.15 164.70 0.91%
S&P 500 2,168.27 17.14 0.80%
NASD 5,312.00 42.85 0.81%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/30/2016 4:00 PM
NG $5.60 Down -0.11 -1.93%
NovaGold Resources CAPS Rating: ***
ABX $17.72 Down -0.22 -1.23%
Barrick Gold CAPS Rating: ***
TCK $18.03 Down -0.67 -3.58%
Teck Resources CAPS Rating: ***