10-Q: NOVAGOLD Boosts Donlin Gold Stake, Secures Funding

NOVAGOLD Resources Inc. increased its economic interest in the Donlin Gold project to 60% and successfully completed a significant equity offering to fund the acquisition and future development.

Summary

• Acquired an additional 10% interest in the Donlin Gold project, increasing ownership to 60% (from 50%) for $200 million.
• Paulson acquired the remaining 40% interest in Donlin Gold for $800 million, making them the new co-owner.
• Funded the acquisition through a $195.2 million net public equity offering and a $64.4 million gross private placement, totaling $260.4 million in aggregate gross proceeds.
• Net loss for the three months ended August 31, 2025, was $15.6 million, compared to $10.7 million for the same period in 2024.
• Net loss for the nine months ended August 31, 2025, was $79.0 million, significantly higher than $34.8 million in the prior year, primarily due to a $39.6 million non-cash warrant expense.
• Cash and cash equivalents at August 31, 2025, were $58.2 million, with term deposits of $67.0 million, resulting in total liquidity of $125.2 million.
• Issued a Request for Proposals (RFP) for the Donlin Gold Bankable Feasibility Study (BFS) and expects to award the contract before year-end.
• Completed the 18,454-meter 2025 drill program at Donlin Gold, confirming consistent mineralization across multiple zones, including standout intervals containing up to 23.49 g/t gold.
• Amended and restated the promissory note with Barrick, providing an option to prepay the note in full for $100 million on or before December 3, 2026 (original principal $158.9 million).
• Identified a deficiency in disclosure controls and procedures related to a late Form 8-K filing, which has been remediated, but resulted in ineligibility to use Form S-3 until July 2026.

Sentiment

Score: 6

Explanation: The sentiment is cautiously optimistic. Strategic positives include increasing ownership in the flagship Donlin Gold project and successfully securing significant capital. Project advancement towards a Bankable Feasibility Study and positive drill results are encouraging. However, the company reported increased net losses, a substantial non-cash warrant expense, and a temporary ineligibility to use Form S-3 for capital raises due to a disclosure control deficiency. Ongoing legal challenges and the shared governance structure of Donlin Gold also present uncertainties.

Positives

• Increased economic interest in the Donlin Gold project to 60%, solidifying control over the flagship asset.
• Successfully completed a $260.4 million equity offering, providing substantial funding for the acquisition and project advancement.
• Donlin Gold project is advancing with an RFP issued for the Bankable Feasibility Study (BFS), and the contract is expected to be awarded by year-end.
• The 2025 drill program at Donlin Gold confirmed consistent mineralization, including high-grade intervals up to 23.49 g/t gold.
• Maintained strong liquidity with $125.2 million in cash and term deposits, projected to cover anticipated funding and corporate costs for at least the next two and a half years.
• Secured an option to prepay the Barrick promissory note for $100 million by December 3, 2026, potentially reducing future interest burden.
• Continued extensive community engagement and environmental initiatives in the Yukon-Kuskokwim (Y-K) region of Alaska.
• The Alaska Superior Court upheld the Clean Water Act Section 401 water quality certification for the Donlin Gold project.

Negatives

• Net loss for the three months ended August 31, 2025, increased to $15.6 million from $10.7 million in the comparable prior year period.
• Net loss for the nine months ended August 31, 2025, significantly increased to $79.0 million from $34.8 million, primarily due to a $39.6 million non-cash warrant expense.
• Higher Donlin Gold expenses were incurred due to the increased ownership stake and heightened site activity.
• Identified a deficiency in disclosure controls and procedures due to a delinquent Form 8-K filing, leading to ineligibility to use Form S-3 for securities registration until July 2026.
• Despite holding a 60% economic interest in Donlin Gold, the company has a 50% voting interest, which may reduce its ability to assert proportionate rights at the project.

Risks

• Uncertainty regarding whether the Donlin Gold project will ever achieve production.
• Dependence on the cooperation of the co-owner (Paulson) for Donlin Gold project activities, as both parties have equal governance rights despite disproportionate economic interests.
• Potential for disagreements with the co-owner on how to efficiently develop and operate the Donlin Gold project.
• Inability to exert influence over certain strategic decisions made in respect of the jointly-governed Donlin Gold project.
• Risk that the co-owner may default on its obligations to Donlin Gold or other parties.
• Potential for litigation with the co-owner regarding joint business matters.
• Risks related to the ability to finance the development of the Donlin Gold project through external financing, strategic alliances, or sale of property interests.
• Uncertainty of estimates for capital costs, operating costs, production, and economic returns, including the impact of inflation.
• Commodity price fluctuations, particularly gold prices.
• Risks related to opposition to operations at mineral exploration and development properties from non-governmental organizations or civil society.
• Risk that necessary permits and governmental approvals for Donlin Gold development and operation may not be available on a timely basis, under reasonable conditions, or at all.
• Ongoing legal challenges to key permits and authorizations, including the Clean Water Act Section 401 Certification, State pipeline Right-of-Way, water rights permits, and the federal Joint Record of Decision (JROD).
• The Federal District Court remanded the JROD case to agencies to supplement NEPA analysis on a narrow issue regarding a theoretical release from the tailings storage facility.
• Ineligibility to use Form S-3 to register securities with the SEC until July 2026 due to a delinquent Form 8-K filing.
• Credit, liquidity, interest rate, and currency risks.
• Mining and development risks, including those related to infrastructure, accidents, equipment breakdowns, and labor disputes.
• Risks related to changes in governmental regulation and uncertainties from the current U.S. federal administration.
• Risks related to environmental laws and regulations.
• Risks related to the effects of global climate change on the Donlin Gold project.
• Risks related to information technology systems and cybersecurity attacks.

Future Outlook

NOVAGOLD expects to award the Bankable Feasibility Study (BFS) contract for Donlin Gold before year-end. The company's share of Donlin Gold 2025 funding is projected to increase to $24.0 million, and corporate general and administrative costs are expected to rise to $18.0 million for 2025. Future funding to support the full development of the Donlin Gold project is anticipated to involve a combination of corporate debt and equity, project-specific debt, and potentially a royalty, stream, and government support.

Management Comments

• The Donlin Gold Transaction marks a significant milestone in a long-term strategy to advance Donlin Gold.
• Our share of funding for the Donlin Gold project in the first nine months of 2025 was $18.5 million, in line with the revised 2025 guidance.
• We recognize the importance of preparedness and organization in these matters. Donlin Gold and its owners continue their unwavering support of the state and federal agencies in defending their thorough and diligent permitting processes, including working with the federal agencies and all stakeholders on an appropriate remedy to address the Federal District Court's remand decision.

Industry Context

The Donlin Gold project is positioned as potentially the largest single gold mine in the United States, located in Alaska, which is the second-largest gold-producing state. The company is advancing a major gold project in a favorable mining jurisdiction, but faces typical challenges of large-scale resource development, including significant capital requirements, permitting complexities, and environmental scrutiny. The involvement of Paulson as a new partner and the exit of Barrick indicate a strategic shift in project ownership and financing approach, potentially bringing new perspectives and capital to accelerate development in a competitive global gold market.

Comparison to Industry Standards

• The filing mentions issuing a Request for Proposals (RFP) for the Bankable Feasibility Study (BFS) to 'top-tier qualified engineering firms,' indicating adherence to standard industry practices for major project development.
• The 2025 drill program's initial results, confirming consistent mineralization with standout intervals up to 23.49 g/t gold, are strong indicators for a gold project, comparing favorably to typical exploration results in the industry.

Corporate Governance

Legal Proceedings

• Earthjustice (representing Orutsararmiut Native Council) appealed the Alaska Department of Environmental Conservation's (ADEC) Clean Water Act Section 401 water quality certification. The Alaska Superior Court upheld the certification on May 6, 2025, but Earthjustice appealed to the Alaska Supreme Court on May 28, 2025, with briefing anticipated to be completed in late 2025 or early 2026.
• Earthjustice appealed the State pipeline Right-of-Way (ROW) authorization. The Alaska Superior Court affirmed the Alaska Department of Natural Resources (ADNR) issuance of the ROW lease on April 12, 2023. Earthjustice appealed to the Alaska Supreme Court, with oral arguments held November 12, 2024, and a decision anticipated in 2025.
• Earthjustice appealed ADNR's issuance of certain water rights permits. The Alaska Superior Court affirmed ADNR's decision on September 1, 2023. Earthjustice appealed to the Alaska Supreme Court on October 2, 2023, with oral arguments held November 12, 2024, and a decision anticipated in 2025.
• Earthjustice filed suit against the U.S. government in the U.S. District Court for Alaska to invalidate the Donlin Gold Joint Record of Decision (JROD). The Federal District Court rejected plaintiffs' arguments on two of three issues but agreed on the need for supplemental NEPA analysis regarding a theoretical release from the tailings storage facility. On June 10, 2025, the court denied vacating permits and remanded the case to agencies for supplemental analysis, retaining jurisdiction.

Related Party Transactions

• Provided management and administrative services to Donlin Gold for $201 thousand in the three months ended August 31, 2025, and $533 thousand in the nine months ended August 31, 2025.
• Had accounts receivable from Donlin Gold of $651 thousand as of August 31, 2025.
• Issued 25,500,000 Backstop Warrants to institutional investors, including Electrum Strategic Resources L.P. (Electrum), with an estimated aggregate fair value of $39,607 thousand. Electrum received 6,375,000 warrants (fair value approximately $9,902 thousand). Dr. Thomas Kaplan, NOVAGOLD's Chairman, is the Chairman and Chief Executive Officer of The Electrum Group LLC, an affiliate of Electrum, which is NOVAGOLD's largest shareholder.
• Electrum purchased 13,333,334 shares of NOVAGOLD in the private placement concurrent with the public equity offering.

Stakeholder Impact

• **Shareholders**: Experienced dilution from the issuance of approximately 72.2 million new common shares. Benefited from the increased economic interest in the Donlin Gold project and the successful capital raise. Face increased net losses and a temporary ineligibility to use Form S-3 for securities registration until July 2026.
• **Employees**: Ongoing recruitment for various roles at Donlin Gold, supporting increased site activity and a dedicated team of over 80 personnel and contractors.
• **Communities (Y-K region, Alaska)**: The Donlin Gold project continues to serve as a central economic driver, hiring locals from 22 villages. Extensive community engagement, support for cultural preservation, educational programs, and aquatic habitat restoration efforts are ongoing.
• **Creditors (Barrick)**: The promissory note terms were amended, including a prepayment option for $100 million and a modified security package, impacting Barrick's future repayment expectations.
• **Paulson**: Became a new significant co-owner with a 40% economic interest and equal governance rights in Donlin Gold, establishing a key strategic partnership for project development.

Next Steps

• Award the Bankable Feasibility Study (BFS) contract for Donlin Gold to a qualified engineering firm before year-end.
• Continue defending permits in ongoing legal challenges, with briefing anticipated to be completed in late 2025 or early 2026 for the water quality certification appeal.
• Anticipate a decision in 2025 for the water rights permits and State pipeline Right-of-Way appeals.
• Federal agencies are ordered to supplement NEPA analysis on the narrow issue regarding a theoretical release from the tailings storage facility, as per the Federal District Court's remand.
• Continue recruitment for various roles at Donlin Gold to ramp up efforts toward the BFS.
• Evaluate the option to prepay the Barrick promissory note for $100 million on or before December 3, 2026.
• Potentially raise additional capital over the next two years, depending on the ultimate timing and cost of completing the BFS and commencing detailed engineering and construction.

Key Dates

Recommendation

The strategic move to increase ownership in Donlin Gold and secure substantial funding is a strong positive, indicating commitment to the flagship project. The project is advancing towards a critical Bankable Feasibility Study, and initial drill results are encouraging. However, the company continues to incur significant losses, exacerbated by a non-cash warrant expense, and faces ongoing permitting litigation and the challenge of managing a joint venture with equal governance rights despite disproportionate economic interest. The temporary ineligibility to use Form S-3 for capital raises is also a concern. Given the long-term nature of the Donlin Gold project and the mix of positive strategic developments against financial losses and operational risks, a 'Hold' recommendation is appropriate for investors awaiting further clarity on BFS results and project financing.

Keywords

Gold mining, Donlin Gold, Alaska, Exploration, Feasibility Study, Equity offering, Paulson, Barrick, SEC filing, Q3 2025, Mineral property, Project development, Corporate governance, Risk management, Permitting