On January 22nd, NOVAGOLD RESOURCES (NG) released its 2019 fiscal year results and held a conference call the following day. Since the company last reported its quarterly results, the share price has risen from $6.34 to about $8.87 or about 40%. While not much has changed since we last looked at NOVAGOLD, here are some updates from the new 10-K, press release, and conference call.

A balance with risk on one side and reward on the other

Image Source: Getty Images

2019 Financial Performance

Financially speaking, NOVAGOLD's results for 2019 were in-line with previous years. The company ended the year with a net loss of $27.8 million compared to a net loss from continuing operations of $31.5 million and $36.9 million in 2018 and 2017, respectively. The total cash used for the year was about $18.5 million. This was also comparable with 2018 and 2017 which saw cash used of about $20 million and $19.6 million, respectively. The cash being used goes primarily to the company's operating activities and NOVAGOLD's share of Donlin Gold's funding.

The company's cash and term deposit position of $148.5 million as of November 30, 2019 remains substantial relative to its expected outflows. In addition to these assets, the company is owed $100 million from Newmont Mining (NEM 0.72%) from the sale of Galore Creek in 2018. The company expects $75 million by no later than July 2021, and the remaining $25 million by no later than July 2023. There is an additional $75 million that the company could receive "upon the approval of a Galore Creek project construction plan by the owner(s)"; however, no value is being assigned to this last $75 million on the company's balance sheet.

Looking Forward

In 2020, the company plans to spend $20 million to fund Donlin Gold and another $11 million for administrative expenses. This is about $10 million more than normal and will go to pay for a "22,000-meter, 80-hole drill program to test the extension of high-grade gold zones and validate geologic modeling concepts."

While management gave no timetable of when the company planned to begin mining, CEO Greg Lang reported that the federal permitting process has been completed, and that, "the timeline for development is now within the owners' control."

During the conference call, NOVAGOLD's chairman, Thomas Kaplan, gave his opinion about the future trajectory of the gold price. He believes that it is setup to perform similar to how it did during the late 1970s. However, given the supply and demand factors that he sees in the market, it could perform even better.

Chart of gold price since 2000 overlayed with 1970's gold prices

Image Source: NOVAGOLD

Additionally, Lang stated that, "with scale and grade, if it was built today, Donlin would be the largest producing gold mine in the industry." The company expects annual average production of 1.5 million ounces of gold in the first five years and 1.1 million ounces during its lifetime.

Kaplan said that, "we believe that the Donlin Project represents the greatest single option or warrant on the upside of gold that exists in the marketplace." Assuming that management's views come to fruition, then he may not be exaggerating. Combining the expected production with rising gold prices and the improved margins that comes from those price increases would lead to substantial returns for NOVAGOLD's owners. Using a 5% discount rate, the project's net present value ("NPV") is more than $3 billion at current gold prices of which the company's owners are entitled to half given the company's 50% stake in the project. And as gold's price rises, the NPV rises even more to $6.7 billion with gold at $2,000 per ounce and $10.2 billion at $2,500 per ounce.

Chart showing the NPV of Donlin Gold at different gold prices

Image Source: NOVAGOLD

Overall, NOVAGOLD remains an interesting long-term investment option in the gold space.