DEFA14A: NOVAGOLD Defends Executive Pay Amidst ISS Concerns Ahead of AGM

NOVAGOLD is seeking shareholder support for its executive compensation (Say-on-Pay) at the upcoming Annual General Meeting (AGM) on May 15, 2025, addressing concerns raised by ISS regarding performance targets and compensation levels.

Summary

• NOVAGOLD is addressing concerns raised by ISS regarding its executive compensation program ahead of its Annual General Meeting on May 15, 2025.
• ISS has recommended a vote against the Say-on-Pay resolution, citing concerns about performance targets, discretionary vesting of performance share units (PSUs), and total compensation exceeding the median of peers.
• Glass, Lewis & Co. (GL) has recommended shareholders vote FOR all proposals at the 2025 AGM, noting the company maintains a fair program structure with sufficient emphasis on performance-based compensation.
• Historically, NOVAGOLD's Say-on-Pay resolution has received strong shareholder support, averaging 91.28% approval over the past three Annual General Meetings with an average voter turnout of 77.69%.
• The company has engaged with shareholders holding approximately 80% or more of the issued and outstanding shares.
• In December 2024, the Board approved a discretionary payout of 25% of the 2021 PSUs, totaling 102,100 Common Shares, even though the performance criteria were not met.
• NOVAGOLD argues that its compensation program is designed to attract and retain executives with specialized skills for the Donlin Gold project, which is a large and complex undertaking.
• The company referenced compensation packages of senior mining companies like Barrick Gold Corporation, Newmont Corporation, Agnico Eagle Mines Ltd., and Kinross Gold Corporation when planning 2024 executive compensation.
• NOVAGOLD's executive team demonstrated strong performance ratings in fiscal year 2024, with individual performance ratings ranging from 100% to 135%.
• The expected increase of NOVAGOLD's ownership in Donlin Gold from 50% to 60% enhances the Company's influence over the project's development.
• The closing of the transaction late in the second quarter or early in the third quarter of 2025 will establish the new Donlin Gold ownership with Paulson Advisers.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While NOVAGOLD defends its executive compensation and highlights positive aspects like shareholder engagement and executive performance, the negative recommendation from ISS and concerns about compensation levels create a degree of uncertainty.

Positives

• Glass Lewis has recommended shareholders vote FOR all proposals at the 2025 AGM.
• NOVAGOLD has historically received strong shareholder support for its Say-on-Pay resolution, averaging 91.28% approval over the past three AGMs.
• The company has been consistent in engaging with its shareholders holding approximately 80% or more of the issued and outstanding shares.
• NOVAGOLD's executive team demonstrated strong performance ratings in fiscal year 2024, with individual performance ratings ranging from 100% to 135%.
• The expected increase of NOVAGOLD's ownership in Donlin Gold from 50% to 60% enhances the Company's influence over the project's development.
• Paulson Advisers is acquiring a 40% ownership stake in Donlin Gold.

Negatives

• ISS has recommended a vote against NOVAGOLD's Say-on-Pay resolution.
• ISS has a 'High Concern' rating due to a perceived misalignment between compensation and performance.
• The 2021 PSU awards did not meet the performance criteria for a guaranteed minimum payout as of November 30, 2024.
• ISS noted concerns about NOVAGOLD targeting compensation above the median of peers.

Risks

• Failure to secure shareholder support for the Say-on-Pay resolution could lead to negative publicity and potential governance challenges.
• The Donlin Gold project is a significant undertaking due to its size, scale, and remote location, which could lead to unexpected challenges and delays.
• The company's ability to attract and retain executive officers with the necessary talent and experience is crucial for the success of the Donlin Gold project.
• Factors outside the company's control could impact its ability to meet performance criteria for PSU awards.

Future Outlook

NOVAGOLD remains committed to a pay-for-performance framework that aligns executive compensation with shareholder value and company progress, and will continue to evaluate its compensation structure as Donlin Gold advances.

Management Comments

• The Compensation Committee is asking for continued support for the Advisory Vote on Executive Compensation (Say-on-Pay).
• Maintaining an active shareholder engagement program continues to be a high priority for the Company and the Committee.
• The company wants to highlight the rationale behind its compensation decisions, which are designed to ensure NOVAGOLD's long-term success and shareholder value creation.
• Ensuring leadership continuity is essential to our long-term success and the advancement of Donlin Gold.

Industry Context

The document highlights the ongoing debate surrounding executive compensation in the mining industry, particularly for companies with large, undeveloped assets. It also shows the influence of proxy advisory firms like ISS and Glass Lewis on shareholder voting decisions.

Comparison to Industry Standards

• The Committee referenced the compensation packages of Barrick Gold Corporation, Newmont Corporation, Agnico Eagle Mines Ltd., and Kinross Gold Corporation when planning 2024 executive compensation.
• This was done to measure the competitiveness of our compensation programs and because the Committee considers these companies to be competitors for our executive talent.

Stakeholder Impact

• Shareholders are being asked to vote on the Say-on-Pay resolution, which will impact executive compensation.
• Employees may be affected by changes to the compensation program or the company's ability to retain key personnel.
• The Donlin Gold project is important to the local communities in Alaska, and its development could have significant economic and social impacts.

Next Steps

• Shareholders will vote on the Say-on-Pay resolution at the Annual General Meeting on May 15, 2025.
• The company will continue to engage with shareholders to address their concerns and garner support for its compensation program.
• The closing of the transaction late in the second quarter or early in the third quarter of 2025 will establish the new Donlin Gold ownership with Paulson Advisers and will bring significant financial backing and expertise, crucial for advancing Donlin Gold and updating the Feasibility Study.

Key Dates

Keywords

NOVAGOLD, Say-on-Pay, Executive Compensation, Donlin Gold, Shareholder Vote, ISS, Glass Lewis, PSU, Performance Targets, AGM