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Here's Why Shares of Novagold Resources Dropped 13% in February

By Scott Levine - Mar 8, 2020 at 10:57AM

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COVID-19 concerns weren't the only things shaking investors' confidence last month.

What happened

Reversing course from the 1.8% uptick they experienced in January, shares of Novagold Resources (NG -1.10%) sank 13% in February, according to data from S&P Global Market Intelligence. Along with its partner Barrick Gold, Novagold Resources is engaged in the development of its principal asset, the Donlin Gold project, located in Alaska.

A cursory glance at the price of gold and Novagold's stock may confound investors since the price of gold rose 1.6% last month while Novagold's stock plummeted. Narrowing our focus to the end of the month, however, we find that the price of the yellow stuff dipped lower, scaring investors of this volatile gold company, while this fear, undoubtedly, was exacerbated by insiders selling shares as well as the overall fear of the novel coronavirus.

Rows of gold bars.

Image source: Getty Images.

So what

Since there's a strong correlation between movements in the price of gold and the stocks of gold miners, the drop in Novagold's stock isn't very surprising. Working to bring the Donlin Gold project to fruition, Novagold Resources doesn't currently generate revenue, making it one of the more high-risk plays among gold-oriented stocks. So when the price of gold started to tumble late in February -- at the same time the market sell-off was shaking investors' overall confidence -- shareholders decided to leave their positions.

NG Chart

NG data by YCharts.

Another factor which stoked investors' fears was insider selling during February. Throughout the month, David Ottewell, Novagold's Chief Financial Officer, sold 54,020 shares and disposed of 52,366 shares. Similarly, Gregory Lang, the company's CEO, sold 62,512 shares on the last day of the month.

Now what

For investors who are keen on Novagold's long-term prospects developing the Donlin Gold project, the stock's downward movement last month is much ado about nothing. After all, insiders may sell shares for a variety of reasons; it's not solely an indication of an executive's lack of confidence in the company. 

It appears, in fact, that the market has come to this conclusion, as shares have rebounded about 9% since the beginning of March as of this writing.

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Stocks Mentioned

NovaGold Resources Inc. Stock Quote
NovaGold Resources Inc.
NG
$5.37 (-1.10%) $0.06
Barrick Gold Corporation Stock Quote
Barrick Gold Corporation
GOLD
$18.39 (-0.86%) $0.16

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