What changed in this filing

/stocks — the workspaceLOADING

Item 2. Properties

2021-01-27 compared with 2020-01-22 · 252 added, 1264 removed, 651 unchanged (70% of the section changed)

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(“Donlin Gold FS”) for the Donlin Gold project in southwestern Alaska, USA, prepared by AMEC Americas Limited, now known as Wood Canada Limited (Wood), effective date November 18, 2011 and amended and filed on January 15, 2012.

The Donlin Gold FS has been filed with the securities regulatory authorities in each province of Canada and with the SEC.

NOVAGOLD engaged Wood to perform a detailed review of the capital and operating costs used in the Donlin Gold FS.

Based on the review Wood determined that updating costs using 2020 information will result in no material change to the mineral resources or mineral reserves of the Donlin Gold project.

Therefore, the Donlin Gold FS is considered current and supportive of the scientific and technical information summarized in this Form 10-K that was derived from that report.

NOVAGOLD intends to file the updated Technical Report EDGAR at www.sec.gov and on SEDAR at www.sedar.com  during 2021.

The updated Donlin Gold FS does not incorporate the latest Donlin Gold optimization work on the geologic modeling concepts or other optimization work since these assessments are still underway.

The Donlin Gold FS has been filed with securities regulatory authorities in each province of Canada and with the SEC.

Portions of the following information are based on assumptions, qualifications and procedures that are not fully described herein.

Reference should be made to the full text of the Donlin Gold FS which is available for review on EDGAR at www.sec.gov and on SEDAR at www.sedar.com.

Kirk Hanson, P.E., Gordon Seibel, R.M.

SME., both of whom are independent Qualified Persons as defined in NI 43-101, have approved the mineral reserves and mineral resources, respectively, included in this Annual Report on Form 10-K related to the Donlin Gold FS.

Clifford Krall, P.E., Manager of Mine Engineering for the Company and a “qualified person”

under NI 43-101, has approved the scientific and technical information included in this Annual Report on Form 10-K.

Kirk Hanson, P.E.

is an independent Qualified Person as defined in NI 43-101, has approved the mineral reserves and mineral resources included in this Annual Report on Form 10-K related to the Donlin Gold FS.

Clifford Krall, P.E., Manager of Mine Engineering for the Company and a Qualified Person under NI 43-101, has approved the scientific and technical information included in this Annual Report on Form 10-K.

The Donlin Gold FS described herein was prepared under the November 2010 version of the CIM Definition Standards.

The Qualified Persons who prepared the Donlin Gold FS certify that when applying the May 2014 version of the CIM Definition Standards, reserves and resources remain unchanged.

The Qualified Persons who prepared the Donlin Gold FS certify that when applying the May 2014 version of the CIM Definition Standards, mineral reserves and mineral resources remain unchanged.

Cautionary Note to U.S.

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See Reserve and Resource Estimate , below.

NOVAGOLD RESOURCES INC.

Other lands required for offsite infrastructure, such as the Jungjuk port site, the road to the port site and gas pipeline are categorized as Native, State of Alaska conveyed, or Bureau of Land Management (BLM) lands.

Other lands required for offsite infrastructure, such as the Jungjuk port site, the road from the port site to the mine site, and natural gas pipeline are categorized as Native, State of Alaska conveyed, or Bureau of Land Management (BLM) lands.

Rights-of-way are required from other Alaska Native corporations, the State of Alaska and BLM for the road and pipeline alignments that cross Native corporation, state and federal lands.

Donlin Gold obtained the necessary permits and certifications that allowed for the exploration, associated feasibility study test work, environmental monitoring, and Environmental Impact Study (EIS) baseline data collection efforts.

The current status of these permits is in line with the termination of the baseline data collection effort, temporary closure of the camp in May 2015, the seasonal reopening of the site for a drill program from July to November 2017, and the latest multi-year geotechnical drill program which commenced in mid-2019 for the issuance of the dam safety certifications.

The active permits include:

Alaska Department of Natural Resources (ADNR) temporary use of water;

ADNR Application for Permit to Mine in Alaska approval for the ongoing drill program), the U.S.

Army Corps of Engineering (individual 404 and nationwide 26);

Alaska Department of Environmental Conservation (septic system, multisector stormwater general permit –

The current status of these permits is in line with the termination of the baseline data collection effort, temporary closure of the camp in May 2015, and the seasonal reopening of the site for the geological drill program from July to November 2017, the geotechnical drill program in 2019 for the issuance of the Dam Safety Certifications, and the latest geological drill program in 2020.

The active permits include Alaska Department of Natural Resources (ADNR) temporary use of water;

ADNR Application for Permit to Mine in Alaska approval for the 2020 drill program), the U.S.

Army Corps of Engineering (individual 404 and nationwide 26 permits);

Alaska Department of Environmental Conservation (ADEC) authorizations (septic system, multisector stormwater general permit –

sector G, owners requested limit [air]);

and Federal Aviation Administration (Landing Area).

and Federal Aviation Administration approval (Landing Area).

Other permits were either put on hold, closed, or allowed to expire.

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The Corps addressed the cooperating agency comments on the preliminary draft and filed the Notice of Availability for public release of the draft EIS in the Federal Register in November 2015.

Subsequent to the filing of the draft EIS, the Corps issued a schedule for public meetings on the Donlin Gold draft EIS in the Y-K region and Anchorage, Alaska.

After the filing of the draft EIS, the Corps issued a schedule for public meetings on the Donlin Gold draft EIS in the Y-K region and Anchorage, Alaska.

The Corps conducted, and at the end of May 2016 completed, a six-month public comment period for the draft EIS, including 17 public comment meetings in communities across the Y-K region and in Anchorage.

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The Pipeline and Hazardous Materials Safety Administration previously issued a special permit for the natural gas pipeline on June 5, 2018.

All Donlin Gold EIS documents were made available on a website at www.donlingoldeis.com.

Donlin Gold is preserving the EIS website for informational purposes until the site is transferred to the possession of the State of Alaska.

Several major State of Alaska permits were also issued and advanced during 2018 and 2019.

After a public notice and comment period, the State of Alaska issued a Certificate of Reasonable Assurance under CWA Section 401 on August 10, 2018, indicating that the CWA 404 permit complies with the State’s water quality standards.

The Alaska Pollutant Discharge Elimination System (APDES) water discharge permit was issued on May 24, 2018 and with no appeal, became effective on July 1, 2018.

Several major State of Alaska permits were also issued and advanced during 2018 through 2020.

After a public notice and comment period, ADEC issued a Certificate of Reasonable Assurance under CWA Section 401 on August 10, 2018, indicating that the CWA 404 permit complies with the State’s water quality standards.

The Alaska Pollutant Discharge Elimination System (APDES) water discharge permit was issued by ADEC on May 24, 2018 and became effective on July 1, 2018.

The State of Alaska Department of Fish and Game issued Title 16 Fish Habitat permits for the mine area and transportation corridor on August 30, 2018.

In October 2018, the State of Alaska Department of Environmental Conservation approved an extension of the date by which construction of the Donlin Gold project as authorized by the Prevention of Significant Deterioration air quality permit must begin until June 30, 2020.

We intend to seek a further extension of this permit in the first half of 2020.

On July 9, 2018, the State issued a 30-day public notice for proposed approval of the Donlin Gold Reclamation and Closure Plan.

The public notice period was subsequently extended to 60 days until September 6, 2018, with a public hearing held on August 27, 2018, in Bethel.

The draft Waste Management Permit was issued for public comment in the first quarter of 2018.

The final approvals of the Donlin Gold Reclamation and Closure Plan and final Waste Management Permit were issued on January 18, 2019.

In May 2020 ADEC approved a second extension of the date by which construction of the Donlin Gold project as authorized by the Prevention of Significant Deterioration air quality permit must begin until December 31, 2021.

The final approvals of the Donlin Gold Reclamation and Closure Plan and the Waste Management Permit were issued on January 18, 2019.

ADNR issued the easement, land leases, land use permits, and material site authorizations for the proposed transportation facilities, and easement for the fiber optic cable on State lands on January 2, 2020.

On November 30, 2020, ADNR issued a public notice for comment on Donlin Gold’s 12 water rights applications for the mine site and transportation corridor.

The public comment period was ended on December 15, 2020.

Final authorizations of the water rights are expected in the first half of 2021.

The Alaska Dam Safety certifications require additional fieldwork and more detailed engineering which commenced in 2019 and require a multi-year commitment.

On February 7, 2019, Earthjustice requested, and ADEC subsequently granted a request for informal review of the Waste Management Permit issuance.

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On February 7, 2019, Earthjustice also appealed the Reclamation and Closure Plan approval.

On December 31, 2019, ADNR after careful review, denied the appeal and affirmed the Division of Mining, Land and Water (DMLW)’s decision to approve the Reclamation and Closure Plan.

NOVAGOLD RESOURCES INC.

ADNR’s DMLW issued the easement, land leases, land use permits, and material site authorizations for the proposed transportation facilities, and easement for the fiber optic cable on State lands on January 2, 2020, following the issuance of the preliminary decisions on January 28, 2019 and the close of the public comment period for these decisions in March 2019.

The public comment period for the State Right-of-Way authorization for the natural gas pipeline began on January 28, 2019 and ended March 22, 2019, with final approvals expected in the first quarter of 2020.

The Alaska Dam Safety certificates require additional fieldwork and more detailed engineering which commenced in 2019 and require a multi-year commitment.

During 2018, a group called the Yukon-Kuskokwim River Alliance (YKRA) was formed to protect salmon habitat in the Yukon-Kuskokwim Delta.

To date, this organization along with the Association of Village Council Presidents and 13 of the 56 village councils in the Calista Region (Native Village of Kasigluk, Orutsararmiut Native Council (ONC), Native Village of Eek, Tuluksak Native Community, Tununak Council, Native Village of Nunapitchuk, Chuloonawick Tribal Council, Native Village of Kwigillingok, Native Village of Kongiganak, Chefornak Traditional Council, Chevak Native Village, Native Village of Napakiak and Quinhagak) have adopted resolutions opposing development of the Donlin Gold project.

Earthjustice, on behalf of ONC, Akiak Native Community IRA Council, Organized Village of Kwethluk, Native Village of Kwigillingok, Chuloonawick Tribal Council, and YKRA, requested an informal review of the State of Alaska’s 401 certification by the Commissioner of the Alaska Department of Environmental Conservation.

The review request was granted, and a decision is expected in the first quarter of 2020.

YKRA and ONC also requested that the Alaska Department of Fish and Game reconsider the issuance of the Title 16 Fish Habitat permits.

The Commissioner of the Department of Fish and Game explained the Department’s evaluation of and basis for the decision to issue the permits and declined the request for reconsideration.

On December 31, 2019, ADNR after careful review, denied the appeal and affirmed the decision to approve the Reclamation and Closure Plan.

ADNR’s DMLW issued the easement, land leases, land use permits, and material site authorizations for the proposed transportation facilities including the access road, airstrip, and upriver Jungjuk port, as well as the easement for the fiber optic cable on State lands on January 2, 2020.

On January 28, 2019, ADNR’s State Pipeline Coordinator Services (SPCS) issued a preliminary decision to grant the State Right-of-Way authorization for the natural gas pipeline.

The public comment period began on January 28, 2019 and ended on March 22, 2019.

The final offer to lease was issued on January 17, 2020 and was accepted by Donlin Gold in February 2020.

On February 6, 2020, Cook Inletkeeper, on behalf of the Susitna River Coalition and three Native village organizations requested that the ADNR Commissioner reconsider issuance of the ROW lease.

The ADNR Commissioner denied the request for reconsideration on February 18, 2020.

After Earthjustice filed a court appeal of the lease issuance and reconsideration denial, ADNR changed its position and accepted the reconsideration request on April 30, 2020 specifically to address cumulative effects.

On September 10, 2020, ADNR issued a revised Consideration of Comments document, which specifically addresses the potential cumulative effects of the pipeline.

The comment period on the revised document ended on November 9, 2020 and ROW lease offer is expected to be reissued in the first half of 2021.

In 2018, Earthjustice, on behalf of Orutsararmuit Native Council (ONC), Akiak Native Community IRA Council, Organized Village of Kwethluk, Native Village of Kwigillingok, Chuloonawick Tribal Council, and Yukon-Kuskokwim River Alliance, requested an informal review of the State of Alaska’s 401 certification.

The request was granted and on April 4, 2019, ADEC completed the informal review and reissued the certification.

On April 24, 2019, Earthjustice requested that ADEC vacate the reissued certification and conduct a second informal review of it.

On May 8, 2019, ADEC denied the request to vacate the certification but granted the second informal review request.

On May 7, 2020, ADEC sent a letter to Earthjustice indicating it had completed the second informal review and left the certification in place.

On June 3, 2020, Earthjustice joined by ONC, Chevak, Kasigluk, Eek, Kwinhagak, Marshall, Nightmute, Tununak, Kwethluk, Kotlik, SalmonState, and the Alaska Community Action on Toxics filed a formal appeal with the ADEC Commissioner.

The appeal process consists of an Administrative Hearing in front of an Administrative Law Judge (ALJ) appointed by the ADEC Commissioner.

The ALJ was subsequently appointed.

On July 31, 2020, based on the recommendations of the ALJ, the ADEC Commissioner determined that only ONC could join with Earthjustice in the appeal because the other parties had not participated in earlier stages of public comment and the informal reviews.

The ALJ established a briefing schedule that extends through January 20, 2021.

The ALJ’s opinion is expected by the end of the first quarter of 2021.

Once the ALJ’s review is complete, the ADEC Commissioner has 45 days to reach a final decision.

Thirteen of the 56 village councils in the Calista Region (Native Village of Kasigluk, ONC, Native Village of Eek, Tuluksak Native Community, Tununak Council, Native Village of Nunapitchuk, Chuloonawick Tribal Council, Native Village of Kwigillingok, Native Village of Kongiganak, Chefornak Traditional Council, Chevak Native Village, Native Village of Napakiak and Quinhagak) have adopted resolutions opposing development of the Donlin Gold project.

Mineral Tenure

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Calista also owns the corresponding surface estate on a portion of these lands, the rights to which are also included in the Calista Lease.

The Calista Lease provides Donlin Gold with rights to approximately 19,883 hectares (49,132 acres) of Calista-owned land.

The Calista Lease provides Donlin Gold with rights to approximately 49,392 acres (19,988 hectares) of Calista-owned land.

The Calista Lease was restated on February 11, 2011 to reflect all assignments and amendments made between its original execution on May 1, 1995 and February 11, 2011. 

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TKC owns and contributed to the SUA the corresponding surface estate over most of Calista’s subsurface estate included in the Calista Lease as well as some additional surface estate.

The SUA with TKC provides Donlin Gold with rights to approximately 16,763 hectares (41,422 acres) of TKC-owned land.

In addition to the leased land, Donlin Gold holds 493 State of Alaska mining claims comprising approximately 28,903 hectares (71,420 acres) in the Kuskokwim and Mt.

The SUA with TKC provides Donlin Gold with rights to approximately 41,817 acres (16,923 hectares) of TKC-owned land.

Lyman Resources in Alaska, Inc.

(Lyman Resources) has an existing placer mining lease covering approximately four-square miles (partially covering six sections) within the Calista Lease area.

The Lyman family also has title to approximately 14 acres of surface estate within the Snow Gulch area.

The Calista Lease grants priority to extraction of the lode mineralization in the event of a conflict of use between lode and placer mining operations, provided that a two-year notice period is provided to Lyman Resources.

Lyman Resources, the Lyman family, and Donlin Gold LLC executed a Surface Lease and Assignment of Mining Lease effective May 9, 2012 leasing the Lyman surface estate and assigning the Lyman placer lease within the Calista Lease area to Donlin for Project mining use (the “Lyman Lease”).

In addition to the leased land, Donlin Gold holds 493 State of Alaska mining claims comprising approximately 71,680 acres (29,008 hectares) in the Kuskokwim and Mt.

McKinley Recording Districts.

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The mining claims are located on lands that are owned by the State of Alaska (409) and on State-selected lands from the BLM (84).

All claims are approximately either 16.2 hectares (40 acres) or 64.8 hectares (160 acres) in size.

All claims are approximately either 40 acres (16.2 hectares) or 160 acres (64.8 hectares) in size.

Accessibility and Climate

The Donlin Gold property is located in southwestern Alaska, approximately 20 kilometers north of the village of Crooked Creek on the Kuskokwim River.

The Donlin Gold property is located in southwestern Alaska, approximately 12 miles (20 kilometers) north of the village of Crooked Creek on the Kuskokwim River.

The Kuskokwim River is a regional transportation route and is serviced by commercial barge lines.

A 25-kilometer-long winter road, designated as an Alaska State Highway route and transportation corridor, accesses the property from the barge landing at the village of Crooked Creek.

The Donlin Gold project currently has an all-season, soft-sided camp with facilities to house up to 150 people.

An adjacent 1,500-meter-long airstrip is capable of handling aircraft as large as L-100 Hercules (42,000 pounds or 19,050 kilograms), allowing efficient shipment of personnel, some heavy equipment, and supplies.

The Donlin Gold project can be reached directly by charter air facilities out of Anchorage, 450 kilometers to the east, and Aniak, 80 kilometers to the west.

A 16-mile-long (25-kilometer) winter road, designated as an Alaska State Highway route and transportation corridor, accesses the property from the barge landing at the village of Crooked Creek.

The Donlin Gold project currently has an all-season, soft-sided camp.

An adjacent 5,000-foot-long (1,500-meter) airstrip is capable of handling aircraft as large as L-100 Hercules (approximate cargo capacity of 42,000 pounds or 19,050 kilograms), allowing efficient shipment of personnel, some heavy equipment, and supplies.

The Donlin Gold project can be reached directly by charter air facilities out of Anchorage, 280 miles (450 kilometers) to the east, and Aniak, 50 miles (80 kilometers) to the west.

The project area is one of low topographic relief on the western flank of the Kuskokwim Mountains.

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Soft muskeg and discontinuous permafrost are common in poorly drained areas at lower elevations.

The area has a relatively dry interior continental climate with typically less than 50 cm (20 inches) total annual precipitation.

Summer temperatures are relatively warm and may reach nearly 30°C (83°F).

Minimum temperatures may fall to well below -42°C (-45°F) during the cold winter months.

NOVAGOLD RESOURCES INC.

The area has a relatively dry interior continental climate with typically less than 20 inches (50 centimeters) total annual precipitation.

Summer temperatures are relatively warm and may exceed 83°F (30°C).

Minimum temperatures may fall to well below -45°F (-42°C) during the cold winter months.

Exploration History

Approximately 1,880 exploration and development drill holes, totaling 415,820 meters, have been completed from 1988 through 2019.

Approximately 1,396 holes, totaling 339,733 meters, supported the resource model used in the Donlin Gold FS.

The remaining holes were either drilled after the completion of the Donlin Gold FS (2017 drill program) or were utilized for other purposes, such as district exploration, carbonate resource, facilities condemnation, hydrology, and infrastructure engineering.

Approximately 1,965 exploration and development drill holes, totaling 439,181 meters, have been completed from 1988 through 2020. Approximately 1,396 holes, totaling 339,733 meters, supported the resource model used in the Donlin Gold FS.

The remaining holes were either drilled after the completion of the Donlin Gold FS (2017 and 2020 drill programs) or were utilized for other purposes, such as district exploration, carbonate resource, facilities condemnation, hydrology, geotechnical, and infrastructure engineering.

Work Performed

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Mineral resource estimate completed.

Work Performed

Teck Exploration Ltd.

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Poor quality IP data.

NOVAGOLD RESOURCES INC.

Work Performed

Donlin Gold Joint Venture

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30 geotechnical core holes totaling 1,060 meters were drilled as part of a site investigation program in support of detailed dam design.

Donlin Gold LLC

85 core holes totaling 23,361 meters in both the ACMA and Lewis deposits to validate recent geologic modeling concepts and test for extensions of high-grade zones.

Regional Geology

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comprising South Lewis and ACMA).

NOVAGOLD RESOURCES INC.

Gold deposits are associated with an extensive Late Cretaceous–Early Tertiary gold–arsenic–antimony–mercury hydrothermal system.

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BGC, Inc (BGC).

performed geotechnical analyses for the design of the pit, waste rock facility, and TSF.

performed geotechnical analyses for the design of the pit, waste rock facility (WRF), and tailings storage facility (TSF).

The site-wide hydrological model developed by BGC, is based on extensive drill data and climatic information for the area.

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Minor hydrothermal pyrrhotite, marcasite and syngenetic or sedimentary pyrite, also account for some of the iron and sulfur.

Three elements that have particular processing significance are mercury, chlorine, and fluorine.

Three elements that have processing significance are mercury, chlorine, and fluorine.

Graphitic carbon and carbonate minerals also would negatively affect the metallurgical process.

NOVAGOLD RESOURCES INC.

Sufficient metallurgical test work was completed under the direction of Barrick personnel to support the Donlin Gold FS.

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This processing concept incorporates proven commercial unit operations.

Reserve and Resource Estimate

Mineral Reserve and Mineral Resource Estimates

The mineral reserves for the Donlin Gold project were classified using criteria appropriate under the CIM Definition Standards with an effective date of July 11, 2011.

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pit optimized for all measured, indicated, and inferred blocks assuming a gold selling price of $1,200 per ounce and are inclusive of reserves.

NOVAGOLD RESOURCES INC.

Mineral resources were classified using criteria appropriate under the CIM Definition Standards by application of the NSR-based cut-off that incorporated mining and recovery parameters, and constraint of the mineral resources to a pit shell based on commodity prices.

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During the first five years of full operation, expected production averages 1.46 million ounces of gold annually and an average of 1.13 million ounces of gold per year over its projected mine life.

The total capital cost estimate for the Donlin Gold project is approximately $6.7 billion including costs related to the natural gas pipeline and a contingency of $984 million.

The total initial capital cost estimate for the Donlin Gold project is approximately $6.7 billion including costs related to the natural gas pipeline and a contingency of $984 million.

The project’s estimated after-tax net present value at a 5% discount rate (“NPV5%”) is $547 million using the base case gold price of $1,200 per ounce.

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($ million) ( 2 )

NOVAGOLD RESOURCES INC.

Summary of Key Evaluation Metrics (Base Case at $1,200 per ounce gold)

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G&A, community, refining & land

NOVAGOLD RESOURCES INC.

Capital Cost Estimates

( $ million )

Initial Capital ($ million)

Site preparation /roads

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Tailings from the CIL circuit would be treated in a cyanide detoxification process using SO2/air technology prior to being recombined with the flotation tailings and transported to the TSF.

NOVAGOLD RESOURCES INC.

Mercury naturally occurs in the Donlin Gold project ores and mercury abatement controls will be installed in six areas of the process facilities including POX, hot cure, EW, retort, refinery furnace, and carbon regeneration kiln.

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Average mine production increases progressively in the initial years until the peak rate of 425,000 tonnes per day is reached in Year 6.

Waste Rock Facility

Waste rock from open pit mining will be placed in an ex-pit waste rock facility in the American Creek Valley, east of the pit area, or in a backfill dump in the ACMA pit.

The ultimate footprint of the facility covers an area of approximately 9 square kilometers.

Approximately 2,232 million tonnes of waste rock and overburden will be placed in the facility, and 423 million tonnes will be placed in the ACMA pit backfill dump.

Proposed Waste Rock Facility (WRF)

Waste rock from open pit mining will be placed in an ex-pit WRF in the American Creek Valley, east of the pit area, or in a backfill dump in the ACMA pit.

The ultimate footprint of the WRF covers an area of approximately 9 square kilometers.

Approximately 2,232 million tonnes of waste rock and overburden will be placed in the WRF, and 423 million tonnes will be placed in the ACMA pit backfill dump.

Approximately 103 million tonnes of waste rock will be used for construction purposes, and 17 million tonnes of overburden will be stockpiled and used later for reclamation purposes.

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Waste rock will be characterized by its potential for acid generation and assigned reactivity categories.

Non-acid-generating (NAG) rock will be placed directly in the waste rock facility, along with less reactive potentially acid-generating (PAG) rock, PAG5.

Some of the more reactive PAG rock, PAG6, will be encapsulated in cells in the waste rock facility to prevent water infiltration through them.

Non-acid-generating (NAG) rock will be placed directly in the WRF, along with less reactive potentially acid-generating (PAG) rock, PAG5.

Some of the more reactive PAG rock, PAG6, will be encapsulated in cells in the WRF to prevent water infiltration through them.

The most reactive PAG rock, PAG7, will be backfilled in the ACMA pit beneath the ultimate pit lake water level.

Concurrent reclamation of the waste rock facility will be undertaken during operations.

Proposed Tailings Storage

Proposed Tailings Storage Facility (TSF)

The TSF in the Anaconda Creek basin will be a fully lined impoundment with a cross valley dam downstream (“main dam”) in the valley.

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Current and Planned On-Site Infrastructure

Current site infrastructure comprises an all-season, soft-sided camp with facilities to house up to 150 people consisting of kitchen, living quarters, equipment shop, drill shack and other buildings required for support year-round exploration activities.

There is sufficient area within the project area to host an open-pit mining operation, including the proposed open pit, waste rock facility, TSF and process facilities (primary and pebble crushers, coarse ore conveyor and coarse ore stockpile, concentrator, water treatment plants, oxygen plant, boiler house, utility corridors, and access walkways).

Other planned site infrastructure comprises:

Current site infrastructure comprises an all-season, soft-sided camp with facilities consisting of kitchen, living quarters, equipment shop, drill shack and other buildings required for support of year-round exploration activities.

There is sufficient area within the project area to host an open pit mining operation, including the proposed open pit, waste rock facility, TSF and process facilities (primary and pebble crushers, coarse ore conveyor and coarse ore stockpile, concentrator, flotation, water treatment plants, POX, oxygen plant, boiler house, utility corridors, leach, refinery, cyanide destruct, and access walkways).

Other planned site infrastructure is comprised of:

access roads, airstrip, accommodation camp, fuel tank farm, and dual-fueled power plant, truck shop, truck wash, workshops and vehicle repair facilities, assay laboratory, administration facilities and change rooms.

Donlin Gold has secured the surface rights for the areas that may host these facilities.

NOVAGOLD RESOURCES INC.

In the nearby villages, Crooked Creek has approximately 105 residents and Aniak has a population of approximately 500.

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and the Bethel Port facilities.

The Jungjuk Port site is situated upriver on the Kuskokwim River near the mouth of Jungjuk Creek.

A port-to-mine access road (Jungjuk Road), approximately 44 kilometers long, will traverse varied terrain from the Jungjuk Port site to the mine site.

A 4.8-kilometer long spur road will serve the project airstrip.

The primary purpose of the road is to transport freight from the Jungjuk Port site to the mine mostly by conventional highway tractors and trailers.

The Jungjuk Port site is situated upriver from Bethel on the Kuskokwim River near the mouth of Jungjuk Creek.

A port-to-mine access road (Jungjuk Road), approximately 30 miles (48 kilometers) long, will traverse varied terrain from the Jungjuk Port site to the mine site.

A spur road, approximately 3 miles (4.8 kilometers) long, will serve the proposed project airstrip.

The primary purpose of the Jungjuk Road is to transport freight and diesel from the Jungjuk Port site to the mine site, mostly by conventional highway tractors, tankers, and trailers.

The natural gas pipeline is described under the Power heading below.

The Bethel Port will be situated near the town of Bethel, a community of approximately 6,080 residents, that is the main port on the Kuskokwim River and is an administrative and transportation hub for the 56 villages in the Y-K region.

The Port of Bethel is the northernmost medium-draft port in the United States and is served by ocean-going barges.

The proposed port would serve as a trans-shipment point from ocean barges to river barges to supply the project during the summer.

Natural gas will be delivered to site by an approximately 315-mile (500-kilometer) long 14-inch (356 millimeter) diameter pipeline to supply an on-site power generation facility.

The proposed Bethel Port will be situated near the town of Bethel, a community of approximately 6,080 residents, that is the main existing port on the Kuskokwim River and is an administrative and transportation hub for the 56 villages in the Y-K region.

The existing Port of Bethel is the northernmost medium-draft port in the United States and is served by ocean-going barges.

The proposed port would serve as a trans-shipment point from ocean barges to river barges to supply the project during the summer ice-free period.

Natural gas will be delivered to site by an approximately 316-mile (509-kilometer), 14-inch (356 millimeter) diameter pipeline to supply an on-site power generation facility.

The Donlin Gold FS contemplates that the electric power for the site will be generated from a dual-fueled (natural gas and diesel), reciprocating engine power plant with a steam turbine utilizing waste heat recovery from the engines.

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At the time of the Donlin Gold FS, the natural gas pipeline was a lower-cost alternative to the previously considered barging of diesel fuel to site to generate electricity.

The Donlin Gold FS operating costs are based on importing liquefied natural gas (LNG) by ship to Anchorage and total delivery costs to site which includes regasification of the LNG and delivery from Anchorage to the Donlin Gold project via the pipeline.

The pipeline would commence at the west end of the Beluga Gas Field, approximately 48 kilometers northwest of Anchorage at a tie-in near Beluga located in the Matanuska-Susitna Borough and would run to the mine site.

The Donlin Gold FS operating costs are based on importing liquefied natural gas (LNG) by ship to Anchorage and total delivery cost to site which includes regasification of the LNG and delivery from Anchorage to the Donlin Gold project via the pipeline.

The pipeline would commence at the west end of the Beluga Gas Field, approximately 30 miles (48 kilometers) northwest of Anchorage at a tie-in near Beluga located in the Matanuska-Susitna Borough and would run to the mine site.

The pipeline would receive booster compression supplied by one compressor station.

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In some years, the water supply from these sources may not be able to meet the makeup water requirements for the plant.

In these circumstances, additional water will be obtained primarily from a reservoir in Snow Gulch.

In these circumstances, additional water will be obtained primarily from a proposed reservoir in Snow Gulch.

The source of water supply for the construction camp and, later, the plant site potable water systems is an array of eight deep wells south of Omega Gulch, near Crooked Creek.

Water supply will be pumped to freshwater storage tanks and will be treated prior to consumption.

NOVAGOLD RESOURCES INC.

The marketing plan is for the owners of Donlin Gold to take in-kind their respective shares of the gold production, which they can then sell for their own benefit.

2 unchanged sentences

Gold can be sold to various gold bullion dealers or smelters on a competitive basis at spot prices.

It is expected that selling contracts for our share of the gold production will be typical of, and consistent with, standard industry practice, and be similar to contracts for the supply of doré

It is expected that selling contracts for NOVAGOLD’s share of the gold production will be typical of, and consistent with, standard industry practice, and be similar to contracts for the supply of doré

elsewhere in the world.

11 unchanged sentences

Financial Analysis

The total capital cost estimate for the Donlin Gold project is $6.7 billion including costs related to the natural gas pipeline and a contingency.

The total initial capital cost estimate for the Donlin Gold project is $6.7 billion, which includes costs related to the natural gas pipeline and a contingency.

The project’s estimated after-tax net present value (NPV 5%) is $547 million with an IRR after-tax at 6.0% using the base case gold price of $1,200 per ounce.

The undiscounted break-even gold price is $902 per ounce.

In the Donlin Gold FS, the overall economic viability of the project was evaluated by both discounted and undiscounted cash flow analyses, based on the engineering studies and cost estimates discussed in this study.

Assumptions in the model comprised:

15 unchanged sentences

For information on current activities, see section Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , below.

NOVAGOLD RESOURCES INC.

Item 3.     Legal Proceedings

2 unchanged sentences

There are no material proceedings pursuant to which any of our directors, officers or affiliates or any owner of record or beneficial owner of more than 5% of our securities or any associate of any such director, officer or securityholder is a party adverse to us or has a material interest adverse to us.

On June 29, 2020, the Company filed a lawsuit against J Capital Research USA LLC (“J Capital”) in the U.S.

District Court for the Eastern District of New York.

In its Complaint, the Company alleges J Capital made defamatory and libelous statements about the Company, its assets and management in a report issued by J Capital on May 28, 2020.

The Company is seeking unspecified damages from J Capital.

We do not believe this litigation is material to the Company.

Item 4.     Mine Safety Disclosures

11 unchanged sentences

Our common shares trade on the New York Stock Exchange (NYSE American) and on the Toronto Stock Exchange (TSX) under the symbol “NG.”

On January 15, 2020, there were 603 holders of record of our shares, which does not include shareholders for which shares are held in nominee or street name.

On January 20, 2021, there were 594 holders of record of our shares, which does not include shareholders for which shares are held in nominee or street name.

We believe that more than half of our common shares are beneficially owned by investors in the United States.

51 unchanged sentences

Certain United States Federal Income Tax Considerations for U.S.

There may be material tax consequences to U.S.

Residents in relation to an acquisition or disposition of common shares or other securities of the Company.

Residents should consult their own legal, accounting and tax advisors regarding such tax consequences under United States, state, local or foreign tax law regarding the acquisition or disposition of our common shares or other securities, in particular, the tax consequences if the Company is or becomes a “passive foreign investment company”

There may be material U.S.

federal income tax consequences to U.S.

holders in relation to an acquisition or disposition of common shares or other securities of the Company.

holders should consult their own legal, accounting and tax advisors regarding such tax consequences under United States, state, local or foreign tax law regarding the acquisition or disposition of our common shares or other securities, in particular the tax consequences if the Company is or becomes a “passive foreign investment company”

(commonly known as a “PFIC”) within the meaning of Section 1297 of the United States Internal Revenue Code.

For further information, see section Item 1A, Risk Factors - Acquiring, holding or disposing of NOVAGOLD ’

s securities may have tax consequences under the laws of Canada and the United States that are not disclosed in this Annual Report on Form 10-K and, in particular, potential investors should be aware that NOVAGOLD does not believe it is a “

passive foreign investment company ”

under the U.S.

Internal Revenue Code for the year ended November 30, 201 9 , but if it is or becomes a passive foreign investment company, there may be tax consequences for investors in the United States .

Unregistered Sales of Equity Securities

Current and potential U.S.

holders of our common shares should be aware that we believe we were a PFIC for the fiscal year ended November 30, 2020 and, based on current business plans and financial expectations, may be a PFIC in the current tax year and future tax years.

No opinion of legal counsel or ruling from the IRS concerning the status of the Company as a PFIC has been obtained or is currently planned to be requested.

PFIC classification is fundamentally factual in nature, generally cannot be determined until the close of the tax year in question and is determined annually.

Additionally, the analysis depends, in part, on the application of complex U.S.

federal income tax rules, which are subject to differing interpretations.

In any tax year in which we are a PFIC, shareholders that are U.S.

holders will be required to file an annual report with the Internal Revenue Service containing such information as Treasury Regulations or other tax rules may require.

NOVAGOLD RESOURCES INC.

Any gain recognized on the sale of common shares of a PFIC and any excess distributions paid on the common shares of a PFIC must be ratably allocated to each day in a U.S.

holder’s holding period for the common shares.

The amount of any such gain or excess distribution allocated to prior years of such U.S.

holder’s holding period for the common shares generally will be subject to U.S.

federal income tax at the highest tax applicable to ordinary income in each such prior year, and the U.S.

holder will be required to pay interest on the resulting tax liability for each such prior year, calculated as if such tax liability had been due in each such prior year.

Alternatively, a U.S.

holder that makes a timely “QEF election”

generally will be subject to U.S.

federal income tax on such U.S.

holder’s pro rata share of our “net capital gain”

and “ordinary earnings”

(calculated under U.S.

federal income tax rules), regardless of whether such amounts are actually distributed by us.

As a second alternative, a U.S.

holder may make a “mark-to-market election”

if we are a PFIC and the common shares are marketable stock under applicable Treasury Regulations.

holder that makes a mark-to-market election generally will include in gross income, for each taxable year in which we are a PFIC, an amount equal to the excess, if any, of (a) the fair market value of the common shares as of the close of such taxable year over (b) such U.S.

holder’s tax basis in such common shares.

holders are advised to consult their own tax advisors regarding the PFIC rules, including the elections that may be available.

For each tax year that the Company determines that it is a PFIC, upon the written request of a U.S.

holder, the Company will make available to such U.S.

holder all information and documentation that a U.S.

holder making a QEF election with respect to the Company is required to obtain for U.S.

federal income tax purposes.

Such information may be included on the Company’s website.

In addition, U.S.

holders will not be eligible for preferential tax rates on dividends paid by the Company if the Company is a PFIC in the tax year of such dividend distribution or in the preceding tax year.

holders should consult their own legal, accounting and tax advisors regarding the tax consequences of holding and disposing of common shares and other securities of the Company.

Unregistered Sales of Equity Securities

Repurchase of Securities

NOVAGOLD RESOURCES INC.

Item 6.     Selected Financial Data

9 unchanged sentences

Discontinued operations

At November 30,

As of November 30,

Long-term liabilities

5 unchanged sentences

F or a discussion of the years ended November 30, 201 9 and 201 8 , s ee section Item 7 ., Management’s Discussion and Analysis of Financial Condition and Results of Operations , on Registrant’s Annual Report on Form 10-K for the year ended November 30, 201 9 , filed with the Securities and Exchange Commission on January 2 2 , 20 20 .

Our corporate goals include continuing to advance the Donlin Gold project toward a construction decision maintaining support for Donlin Gold among the project’s stakeholders;

promoting a strong safety, sustainability, and environmental culture;

maintaining a favorable reputation of NOVAGOLD;

and preserving a healthy balance sheet.

Our operations primarily relate to the delivery of project milestones, including the achievement of various technical, environmental, sustainable development, economic and legal objectives, obtaining necessary permits, completion of feasibility studies, preparation of engineering designs and the financing to fund these objectives.

In 2019, we successfully delivered on the key goals established at the beginning of the year.

Highlights of our accomplishments include:

Advancement of the Donlin Gold project

Donlin Gold LLC continues to support the Alaska Department of Natural Resources (ADNR) to advance permits and certificates for the project.

ADNR’s approval of the Alaska Dam Safety certificates for the tailings storage facility and water retention and diversion structures requires a thorough multi-year stepwise process to deliver a final construction package to ADNR. 

During July 2019, Donlin Gold commenced a site investigation program in support of advancement of dam engineering from a feasibility level to a final construction package.

The site investigation information will support a preliminary design package, detailed design package and ultimately the final construction package, each of which will be submitted to ADNR for final approval and issuance of the dam safety certificates.

This program consists of geotechnical core drilling, test pits, overburden drilling, packer tests, hydrogeologic test well installation and pumping tests, and geophysical surveys.

Safety training and camp preparations were completed in the third quarter.

Due to wildfires that affected the project area, the program was temporarily suspended in July for a period of five weeks, as all personnel were safely moved as a precautionary measure and to accommodate firefighting operations.

There was no damage to Donlin Gold structures and equipment and the camp reopened in September.

ADNR’s Division of Mining, Land, and Water (DMLW) issued the easement land leases, land use permits, and material site authorizations for the proposed transportation facilities, and easement for the fiber optic cable on State lands on January 2, 2020, following the issuance of the preliminary decisions on January 28, 2019 and the close of the public comment period for these decisions in March 2019.

ADNR’s Division of Oil and Gas (DOG), is finalizing the ROW authorizations for the natural gas pipeline, following the issuance of the preliminary decision in March 2019.

In 2018, Earthjustice, on behalf of Orutsararmiut Native Council (ONC), Akiak Native Community IRA Council, Organized Village of Kwethluk, Native Village of Kwigillingok, Chuloonawick Tribal Council, and the Yukon-Kuskokwim River Alliance, requested an informal review of the State of Alaska’s 401 certification (the “Certification”) by the Director of the Division of Water in the Alaska Department of Environmental Conservation (ADEC).

In October 2018, the Director responded to the request by deciding to conduct the informal review and reissued the Certification on April 4, 2019. 

On April 24, 2019, Earthjustice requested a second informal review of the Certification and the request was granted by ADEC on May 4, 2019. 

A decision on the second informal review of the Certification is expected by the end of the first quarter of 2020.

The final approvals of the Donlin Gold Reclamation and Closure Plan and final Waste Management Permit were issued on January 18, 2019.

On February 7, 2019, Earthjustice, on behalf of ONC, Akiak Native Community, Chefornak Traditional Council, Chevak Traditional Council, Chuloonawick Native Village, Native Village of Eek, Kasigluk Traditional Council, Kongiganak Traditional Council, Organized Village of Kwethluk, Native Village of Kwigillingok, Native Village of Nightmute, Sleetmute Traditional Council, Tuluksak Native Community, and Native Village of Tununak, filed an administrative appeal of the Reclamation and Closure Plan Approval.

ADNR denied the appeal of the Donlin Gold Reclamation and Closure Plan on December 31, 2019 and affirmed DMLW’s original decision.

Additionally, Earthjustice, representing the same tribal entities in the appeal of the Reclamation and Closure Plan Approval, requested an informal review of the Waste Management Permit, which was completed by ADEC’s Division of Water on June 25, 2019 with their original decision upheld and with no further appeal.

COVID-19 response and community engagement

NOVAGOLD’s primary objective is to ensure the health and safety of its employees, partners and contractors.

The Company has implemented policies at its offices in Salt Lake City and Vancouver designed to ensure the safety and well-being of all employees and the people associated with them.

In that regard, to reduce risk, our employees have been asked to work remotely, avoid all non-essential travel, adhere to good hygiene practices, and engage in physical distancing.

At Donlin Gold LLC, with dedicated community partners in Alaska and in the Y-K region, who share the objective of protecting the health of Donlin Gold’s employees and contractors, a wide-ranging set of policies and procedures have been implemented at the Donlin Gold project site and office in Anchorage this year designed to mitigate the spread of COVID-19.

Drilling activities at the Donlin Gold project site commenced in March and were suspended in early April due to concerns related to the COVID-19 pandemic.

Activities recommenced in May after development and implementation of a new COVID-19 management plan.

The plan implemented a set of policies and procedures including testing of all employees and contractors prior to visiting the Donlin Gold project site;

utilizing charters to safely deliver employees to and from camp to minimize in-region travel;

screening and physical distancing measures while at camp;

more frequent sanitization practices;

and increased communication around hygiene and sanitization practices, as well as identification of symptoms.

Donlin Gold LLC also responded to the COVID-19 pandemic with urgently needed community support, including delivery of food and supplies to 56 villages in the Y-K region, alongside its Native Corporation partners Calista and TKC.

Donlin Gold LLC joined forces with the Bethel Community Services Foundation to support the Y-K Resiliency Fund and Covenant House Alaska, which provides services to homeless and at-risk youth, and partnered with the Campfire Organization to help fund 34,000 Elder and youth meals throughout 22 communities with other key donors in the region.

Despite this year’s challenges, Donlin Gold maintained some community engagement programs related to environmental management, safety, training, educational, health and cultural initiatives.

The programs included the Backhaul Hazardous Waste Removal from remote villages in the Y-K region, where a total of approximately 45,000 pounds of household hazardous materials, such as large appliances, fluorescent tubes, lead acid batteries, and electronic waste was collected and shipped out of the area for safe and proper disposal;

scholarships awarded to 225 students selected by our Native Corporation partners (Calista and TKC) to benefit youth education in the region;

advanced work to upgrade and improve health and safety standards of water and sewer services in the middle Kuskokwim portion of the Y-K region in partnership with TKC, the State of Alaska, and the Alaska Native Tribal Health Consortium;

and supported various environmental initiatives such as the Fishwheel energy project with TKC and the annual CleanUp GreenUp event that takes place in approximately 32 villages in the Y-K region to clean their outdoor environment.

Donlin Gold LLC has five Friendship Agreements with villages in the Y-K region (Sleetmute, Crooked Creek, Napaskiak, Nikolai, and Akiak) that formalize current engagement with key local communities.

These agreements include educational, environmental, and social initiatives to help support the villages.

Involving the local communities in many aspects of the project is core to both Barrick’s and NOVAGOLD’s philosophy as illustrated by the fact that approximately 80% of Donlin Gold direct hires for the 2020 drilling program were Alaska Natives.

The COVID-19 pandemic did not prevent us from delivering on the key goals we established or result in significant additional costs in 2020.

However, continuation of the COVID-19 pandemic in 2021 could impact employee health, workforce productivity, insurance premiums, ability to travel, the availability of industry experts and personnel, restrictions or delays to field work and studies, and other factors that will depend on future developments that may be beyond our control.

NOVAGOLD RESOURCES INC.

Donlin Gold LLC, with support from the project owners (NOVAGOLD and Barrick) are committed to growing strong and collaborative working relationships to preserve traditional lifestyles and support economic development for the benefit of Calista and TKC shareholders (owners of the mineral and surface rights, respectively) and the Yukon-Kuskokwim (Y-K) region.

Donlin Gold LLC and our Native Corporation partners held more than 200 engagement meetings in 2019 with individual stakeholders and community organizations and remained actively engaged in environmental sustainability projects in the Y-K region.

Donlin Gold project 

In 2020, Donlin Gold LLC completed an 85-hole drilling program totaling approximately 23,400 meters in both the ACMA and Lewis deposit areas, exceeding the planned program with additional holes.

The primary objective of the program, the largest such campaign at Donlin Gold since 2008, was to validate recent geologic modeling concepts and testing for extensions of high-grade zones in both intrusive (igneous) and sedimentary rocks.

Assay results received to-date from the 2020 drilling program have shown areas with higher grades observed over thinner intervals compared to those predicted by previous modeling, particularly in sedimentary rocks.

Reported results from the drilling support modeled lithology and improve understanding of controls of the higher grades.

Additional confirmation and extension drilling are planned in 2021 focusing on mineralization continuity, structural control, resource model upgrades, and geotechnical data collection.

The program specifics will be finalized once all assay results for the 2020 drill program have been received and integrated into an interim model update.

The newly obtained data will be incorporated into the geologic and resource model and should lead the owners to determine updated mining schedules and life of mine business plans.

Ultimately, the information will assist in determining the next steps to update the Donlin Gold feasibility study and initiate the engineering work necessary to advance the project design before reaching a construction decision.

The owners will advance the Donlin Gold project in a financially disciplined manner with a strong focus on engineering excellence, environmental stewardship, a strong safety culture and continued community engagement.

The Donlin Gold LLC board must approve a construction program and budget before the Donlin Gold project can be developed.

The timing of the required engineering work and the Donlin Gold LLC board’s approval of a construction program and budget, the receipt of all required governmental permits and approvals, and the availability of financing, commodity price fluctuations, risks related to market events and general economic conditions among other factors, will affect the timing of and whether to develop the Donlin Gold project.

Among other reasons, project delays could occur as a result of public opposition, litigation challenging permit decisions, requests for additional information or analysis, limitations in agency staff resources during regulatory review and permitting, or project changes made by Donlin Gold LLC.

NOVAGOLD and Barrick continue to study ways to improve the project’s value and to reduce initial capital outlays through enhanced project design and execution, engagement of third-party operators for certain activities, and potential for future financing of some capital-intensive infrastructure.

To date, these additional studies have identified key areas that have the potential to add value and maximize the future opportunity and longevity of the project.

In 2020, Donlin Gold LLC has envisioned a drilling program in the resource area to follow-up on recent drilling and technical work.

NOVAGOLD and Barrick will take all this work into account before reaching a construction decision and will advance the Donlin Gold project in a financially-disciplined manner with a strong focus on environmental stewardship and social responsibility.

Our share of funding for the Donlin Gold project in 2019 was $11.1 million for geotechnical fieldwork, permitting and community engagement efforts.

Our share of the 2020 work program and budget totals $20 million, including $11 million for the drilling program and $9 million for permitting and community engagement to continue to advance the project.

Our share of funding for the Donlin Gold project in 2020 was $15.3 million, $4.7 million lower than our original outlook of $20 million due to drill productivity exceeding planned rates, environmental and community engagement work delayed due to COVID-19 restrictions, assay costs carried forward into 2021 and lower administrative costs.

In 2021, our share of Donlin Gold LLC funding is expected to be $18 to $22 million, including:

$11 million for follow-up drilling, camp improvements and studies;

$7 million for permitting, community engagement and administration;

and an additional $4 million for other studies contingent upon mid-year approval by both owners.

We record our interest in the Donlin Gold project as an equity investment, which results in our 50% share of Donlin Gold’s expenses being recorded in the income statement as an operating loss.

The investment amount recorded on the balance sheet primarily represents unused funds advanced to Donlin Gold.

Maintained our strong financial position

Cash and term deposits decreased by $18.5 million in 2019 and totaled $148.5 million at November 30, 2019.

Our goals for 2020 include:

Advance the Donlin Gold project toward a construction/production decision.

Maintain a healthy balance sheet.

Maintain an effective corporate social responsibility program.

We do not currently generate operating cash flows.

At November 30, 2019, we had cash and cash equivalents of $67.5 million and term deposits of $81.0 million.

At present, we believe that these balances are sufficient to cover anticipated funding of the Donlin Gold project and corporate general and administrative costs.

Additional capital will be necessary if a decision to commence engineering and construction is reached for the Donlin Gold project.

Future financings to fund construction are anticipated through debt, equity, project specific debt, and/or other means.

Our continued operations are dependent on our ability to obtain additional financing or to generate future cash flows.

However, there can be no assurance that we will be successful in our efforts to raise additional capital on terms favorable to us, or at all.

For further information, see section Item 1A, Risk Factors - Our ability to continue the exploration, permitting, development, and construction of the Donlin Gold project, and to continue as a going concern, will depend in part on our ability to obtain suitable financing , above.

In 2020, we expect to spend approximately $31 million, including $20 million to fund our share of expenditures at the Donlin Gold project and $11 million for general and administrative costs.

Donlin Gold permitting

The ADNR’s Division of Mining, Land, and Water (DMLW) issued the easement land leases, land use permits, and material site authorizations for the proposed transportation facilities including the access road, airstrip, and upriver Jungjuk port, as well as the easement for the fiber optic cable on State lands on January 2, 2020.

After initially issuing the State Right-of-Way (ROW) agreement and lease authorization for the buried natural gas pipeline on January 17, 2020, the ADNR agreed to reconsider its decision on the ROW agreement and lease authorization for the buried natural gas pipeline in April 2020.

Under the reconsideration, on September 10, 2020, the ADNR issued for additional public comment a revised Consideration of Comments document.

This document further describes how the ADNR is considering previous public input that was solicited in the ROW review, including how cumulative effects are addressed in the decision.

The comment period ended on November 9, 2020.

Donlin Gold LLC supported the ADNR’s decision to complete this work and we expect that the final ROW agreement and lease authorization offer will be reissued by the ADNR in the first half of 2021.

In May 2020, ADEC approved a second extension of the date by which construction of the Donlin Gold project as authorized by the Prevention of Significant Deterioration air quality permit must begin until December 31, 2021.The State of Alaska’s CWA Section 401 certification of the Federal CWA Section 404 permit was formally appealed to the ADEC Commissioner in June 2020 by Earthjustice, on behalf of ONC, Akiak Native Community IRA Council, Organized Village of Kwethluk, Native Village of Kwigillingok, Chuloonawick Tribal Council, and the Yukon-Kuskokwim River Alliance.

The appeal focuses on three narrow issues related to compliance with the State’s water quality standards near the project site.

Donlin Gold LLC and its litigation team are actively involved in the process, assisting the State in responding to the appeal issues.

We expect that the ADEC Commissioner will issue his decision on the appeal in the first half of 2021.

On November 30, 2020, the ADNR published a public notice for comment on Donlin Gold’s 12 applications for water rights associated with the mine site and transportation facilities.

The comment period closed on December 15, 2020.

The ADNR is expected to issue final decisions on the water rights applications in the first half of 2021.

NOVAGOLD RESOURCES INC.

The ADNR’s issuance of the Alaska Dam Safety certificates for the tailings storage facility and water retention and diversion structures requires a thorough multi-year stepwise process to deliver a final construction package to the ADNR.

The program necessary for the certificates, including geotechnical core drilling, test pits, overburden drilling, packer tests, hydrogeologic test well installation and pumping tests, and geophysical surveys, commenced in 2019.

The field work was temporarily paused pending the prioritization of the 2020 drill program.

Summary of Consolidated Financial Performance

10 unchanged sentences

Discontinued operations

Results of Continuing Operations

General and administrative expense decreased from $18.5 million in 2018 to $16.3 million in 2019 primarily due to lower share-based compensation costs for stock options and performance share units (PSUs) compared to the prior year and lower salaries and benefits.

The Company extended the vesting period for new stock option and PSU grants issued beginning in 2018 from two to three years and eliminated the individual performance multiplier in the formula for long-term equity compensation, which had the potential to increase long-term equity incentive grants above the target amount.

Equity loss –

Donlin Gold increased from $8.8 million in 2018 to $10.5 million in 2019 due to the commencement of fieldwork to support the design packages needed to advance Alaska Dam Safety certification applications, partially offset by a reduction in permitting activities.

Net loss from continuing operations decreased from $31.5 million ($0.10 per share) in 2018 to $27.8 million ($0.09 per share) in 2019, primarily due to lower general and administrative costs, higher interest income and accretion of notes receivable, partially offset by increased costs at Donlin Gold and interest expense on the promissory note payable to Barrick.

Results of Discontinued Operations

Net loss from discontinued operations , net of tax of $81.3 million ($0.25 per share) in 2018 resulted primarily from the loss on the sale of Galore Creek, net of tax.

Results of Operations

Loss from operations increased from $26.8 million in 2019 to $33.2 million in 2020 due to increases in general and administrative and Donlin Gold expenses.

General and administrative expense increased due to higher share-based compensation, legal and regulatory costs, partially offset by lower travel costs.

Donlin Gold expenses increased due to the 2020 drilling program, partially offset by lower permitting, administrative, and community engagement costs.

Net loss from continuing operations increased from $27.8 million ($0.09 per share) in 2019 to $33.6 million ($0.10 per share) in 2020, primarily due to the increased Loss from operations and lower interest income, partially offset by a recovery of income taxes and lower interest expense .

Lower interest rates in 2020 reduced interest income and the interest accrued on the promissory note payable to Barrick.

The recovery of income taxes results from the Company’s intention to file a consolidated U.S.

income tax return for its U.S.

subsidiaries commencing with the year ended November 30, 2020 and in future periods.

Liquidity, Capital Resources and Capital Requirements

At November 30,

As of November 30,

($ thousands)

1 unchanged sentence

Term deposits

dollar denominated term deposits are held at Canadian chartered banks with high investment-grade ratings and have maturities of one year or less.

Term deposits are denominated in U.S.

dollars and are held at Canadian chartered banks with high investment-grade ratings and have maturities of one year or less.

NOVAGOLD RESOURCES INC.

7 unchanged sentences

Discontinued operation

Net cash used in operating activities decreased by $4.3 million, primarily due to higher interest income and lower salaries and benefits.

Funding of Donlin Gold increased by $2.2 million due to the commencement of geotechnical fieldwork, partially offset by lower permitting costs.

Withholding taxes were paid on vested performance share units in the first quarter of 2019.

No performance share units vested in 2018.

Net cash provided from discontinued operations of $102.4 million in 2018 included the receipt of $99.3 million in net cash proceeds on the sale of Galore Creek and $4.6 million of refunded cash deposits for Galore Creek reclamation bonding, partially offset by $1.5 million of Galore Creek project funding prior to the sale.

Total Donlin Gold funding of $11.1 million was $1.9 million lower than our original outlook of $13 million primarily due to the temporary suspension of geotechnical fieldwork as a result of summer wildfires in the project area.

General and administrative spending of $10.1 million was lower than our original outlook of $11 million due to lower salaries and benefits.

We have sufficient working capital available for the next twelve-month period to cover anticipated funding of the Donlin Gold project and corporate general and administrative costs.

Net cash used in operating activities increased by $3.9 million, primarily due to lower interest income, and higher legal and regulatory costs.

Funding of Donlin Gold increased by $4.2 million due to the 2020 drilling program.

Withholding taxes were paid on vested performance share units in each of the first quarters of 2020 and 2019.

Donlin Gold funding of $15.3 million was $4.7 million lower than our original outlook of $20 million primarily due to better than planned drill productivity and lower permitting, administrative and community engagement costs.

Spending on corporate general and administrative costs, excluding share-based compensation costs, was $0.5 million higher than our original outlook of $11 million due to higher legal and regulatory costs, partially offset by lower travel costs.

We do not currently generate operating cash flows.

As of November 30, 2020, we had cash and cash equivalents of $60.9 million and term deposits of $61.0 million.

In July 2021, we expect to receive $75 million from the first note receivable from Newmont in relation to the 2018 sale of our 50% interest in the Galore Creek project.

Our anticipated expenditures in 2021 are $31 to $35 million, including $18 to $22 million to fund the Donlin Gold project and $13 million for corporate general and administrative costs.

At present, we believe we have sufficient working capital available for the next twelve-month period to cover anticipated funding of the Donlin Gold project and corporate general and administrative costs.

Additional capital will be necessary if a decision to commence engineering and construction is reached for the Donlin Gold project.

Future financings to fund construction are anticipated through debt, equity, project specific debt, and/or other means.

Our continued operations are dependent on our ability to obtain additional financing or to generate future cash flows.

However, there can be no assurance that we will be successful in our efforts to raise additional capital on terms favorable to us, or at all.

For further information, see section Item 1A, Risk Factors –

Our ability to continue the exploration, permitting, development, and construction of the Donlin Gold project, and to continue as a going concern, will depend in part on our ability to obtain suitable financing , above.

Contractual Obligations

1 unchanged sentence

($ thousands)

Less than 1 year

More than 5 years

Office and equipment leases

9 unchanged sentences

Upon exercise of the foregoing convertible securities, the Company would be required to issue a maximum of 13,747,537 common shares.

Related party transactions

The Company provided technical services to Donlin Gold LLC for $nil in 2019, $658,000 in 2018 and $nil in 2017.

NOVAGOLD RESOURCES INC.

As of November 30, 2019, the Company has accounts receivable from Donlin Gold LLC of $nil (November 30, 2018:

$247,000) included in other current assets.

Related party transactions

The Company provided technical services to Donlin Gold LLC for $658,000 in 2018.

The Company did not provide technical services to Donlin Gold LLC in 2020 or 2019.

As of November 30, 2020, the Company has accounts receivable from Donlin Gold LLC of $6,000 (November 30, 2019:

$nil) included in Other current assets .

Fourth quarter results

During the fourth quarter of 2020, we incurred a net loss of $7.0 million compared to a net loss of $7.9 million for the comparable period in 2019.

The increase in net loss primarily resulted from Donlin Gold fieldwork to support the design packages needed to advance the application for Alaska Dam Safety certifications.

The decrease in net loss primarily resulted from the recovery of income taxes.

Accounting Developments

3 unchanged sentences

Contingent note receivable

As a portion of the proceeds on the sale of Galore Creek to Newmont, the Company received a contingent note for $75,000 receivable upon the approval of a Galore Creek project construction plan by the owner(s).

The Company has not assigned a value to the contingent note receivable as management determined that Galore Creek project construction approval was not probable as of the closing of the Galore Creek sale and the assessment did not change as of November 30, 2019.

As a portion of the proceeds on the sale of the Company’s 50% interest in the Galore Creek project to Newmont, the Company received a contingent note for $75 million receivable upon the approval of a Galore Creek project construction plan by the owner(s).

The Company has not assigned a value to the contingent note receivable as management determined that approval of Galore Creek project construction was not probable as of the closing of the Galore Creek sale, and management’s assessment did not change as of November 30, 2020.

The contingent note will be recognized only when, in management’s judgement, payment is probable, and the amount recorded will not reverse in future periods.

17 unchanged sentences

We grant share-based compensation awards in exchange for employee services, including a stock option plan and a PSU plan.

The fair value of awards granted under the plans are recognized in the Consolidated Statements of Loss over the related service period.

The fair value of awards granted under the plans are recognized in the C onsolidated S tatement s of L oss over the related service period.

The fair values of stock options are estimated at the time of each grant using a Black‐Scholes option pricing model, and the fair values of PSUs are measured at each grant date using a Monte Carlo valuation model.

5 unchanged sentences

The fair value is recognized in the Consolidated Statements of Loss over the related service period.

As of November 30, 2019, we had $2.2 million of unrecognized compensation cost related to 4.883 million non-vested stock options expected to be recognized and vest over a period of approximately two years.

As of November 30, 2020, we had $2.6 million of unrecognized compensation cost related to 4.681 million non-vested stock options expected to be expensed and vest over a period of approximately two years.

Also, as of November 30, 2020, we had 1.684 million non-vested PSU awards outstanding of which 0.432 million were fully expensed and vested in December 2020 with a multiplier of 150%.

The remaining 1.232 million non-vested PSU awards with $2.5 million of unrecognized compensation cost will be expensed and vest over a period of approximately two years.

NOVAGOLD RESOURCES INC.

Item 7A. 

Quantitative and Qualitative Disclosures about Market Risk

Our financial instruments are exposed to certain financial risks, including credit and interest rate risks.

Concentration of credit risk exists with respect to our cash and cash equivalents, term deposit investments and notes receivable.

All term deposits are held through Canadian chartered banks with high investment-grade ratings and have maturities of one year or less.

Notes receivable of $75 million upon the earlier of the completion of a new Galore Creek project pre-feasibility study or July 27, 2021, and $25 million upon the earlier of the completion of a Galore Creek project feasibility study or July 27, 2023 are due from a subsidiary of Newmont.

Newmont is a publicly-traded company with investment-grade credit ratings and has guaranteed the notes receivable.

Interest rate risk

The interest rate on the promissory note owed to Barrick is variable with the U.S.

Based on the amount owing on the promissory note as at November 30, 2019, and assuming all other variables remain constant, a 1% change in the U.S.

prime rate would result in an increase/decrease of approximately $1 million in the interest accrued by us per annum.

NOVAGOLD RESOURCES INC.

Item 8.     Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of NOVAGOLD RESOURCES INC.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of NOVAGOLD RESOURCES INC.

and its subsidiaries (together, the Company) as of November 30, 2019 and 2018, and the related consolidated statements of loss and comprehensive loss, cash flows and equity for each of the three years in the period ended November 30, 2019, including the related notes (collectively referred to as the consolidated financial statements).

We also have audited the Company's internal control over financial reporting as of November 30, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of November 30, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended November 30, 2019 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of November 30, 2019, based on criteria established in Internal Control –

Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

NOVAGOLD RESOURCES INC.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Recognition of the contingent note receivable

As described in Notes 2, 4 and 5 to the consolidated financial statements, on July 27, 2018, the Company completed the sale of its 50% interest in the Galore Creek Partnership and its 40% interest in the Copper Canyon mineral property (“the sale”).

As part of the consideration for the sale, the Company received a $75 million note (the “contingent note receivable”), which is contingent upon the approval of a Galore Greek construction plan by the owner(s). 

The Company’s assessment did not change as of November 30, 2019. 

The contingent note will be recognized when, in management’s judgment, it is probable that the payment will occur, and that the amount recorded will not reverse in future periods.

The principal consideration for our determination that performing procedures relating to the recognition of the contingent note receivable is a critical audit matter is that there was judgment made by management when determining if recognition was required, which in turn led to a high degree of subjectivity in performing audit procedures to evaluate management’s assessment as to the probability of whether a construction plan will be approved. 

Addressing the matter involved performing procedures and evaluating audit evidence, in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s process of assessing the basis for recognizing the contingent note receivable.

These procedures also included evaluating how management formulated their judgment as to the likelihood of the owner(s) of the project approving the Galore Greek construction plan.

This included considering both publicly available information and the latest annual progress report provided by the owner(s) of the project to the Company under the terms of the sale agreement.

(signed) PricewaterhouseCoopers LLP

Chartered Professional Accountants

Vancouver, Canada

January 22, 2020

We have served as the Company's auditor since 1984.

NOVAGOLD RESOURCES INC.

CONSOLIDATED BALANCE SHEETS

(US dollars in thousands)

At November 30,

Cash and cash equivalents

Term deposits

Other assets (Note 7)

Current assets

Notes receivable (Note 5)

Investment in Donlin Gold (Note 6)

Other assets (Note 7)

Accounts payable and accrued liabilities

Accrued payroll and related benefits

Income taxes payable

Other liabilities

Current liabilities

Promissory note (Note 8)

Deferred income taxes (Note 12)

Total liabilities

Commitments and contingencies (Note 16)

Common shares

Authorized –

1,000 million shares, no par value

Issued and outstanding –

327.6 and 323.2 million shares, respectively

Contributed surplus

Accumulated deficit

Accumulated other comprehensive loss

Total liabilities and equity

The accompanying notes are an integral part of these consolidated financial statements.

Approved by the Board of Directors

/s/ Gregory A.

Lang           

/s/ Anthony P.

NOVAGOLD RESOURCES INC.

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(US dollars in thousands except per share amounts)

Years ended November 30,

Operating expenses:

General and administrative (Note 10)

Equity loss - Donlin Gold (Note 6)

Loss from operations

Accretion of notes receivable (Note 5)

Interest expense on promissory note (Note 8)

Other income, net (Note 11)

Loss before income taxes and other items

Income tax expense (Note 12)

Net loss from continuing operations

Net loss from discontinued operations, net of tax (Note 4)

Other comprehensive income (loss):

Foreign currency translation adjustments

Reclassification of cumulative translation adjustment included in net loss from discontinued operations (Note 4)

Unrealized holding gain (loss) on marketable securities during period net of $nil, $(128) and $43 tax (recovery) expense, respectively

Reclassification adjustment for losses on marketable securities included in net loss from continuing operations (Note 11)

Comprehensive loss

Net loss per common share –

basic and diluted

Continuing operations

Discontinued operations

Weighted average shares outstanding

Basic and diluted (thousands)

The accompanying notes are an integral part of these consolidated financial statements.

NOVAGOLD RESOURCES INC.

CONSOLID ATED STATEMENTS OF CASH FLOWS

(US dollars in thousands)

Years ended November 30,

Operating activities:

Equity loss –

Donlin Gold (Note 6)

Interest expense on promissory note (Note 8)

Share-based compensation (Note 13)

Accretion of notes receivable (Note 5)

Deferred income tax expense (recovery) (Note 12)

Foreign exchange loss (gain)

Net loss from discontinued operations, net of tax (Note 4)

Other operating adjustments

Net change in operating assets and liabilities (Note 17)

Net cash used in operating activities of continuing operations

Investing activities:

Proceeds from term deposits

Purchases of term deposits

Funding of Donlin Gold

Net cash provided from (used in) investing activities of continuing operations

Net cash provided from (used in) investing activities of discontinued operations (Note 4)

Net cash provided from (used in) investing activities

Financing activities:

Withholding tax on share-based compensation

Net cash used in financing activities of continuing operations

Effect of exchange rate changes on cash and cash equivalents

Net change in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

The accompanying notes are an integral part of these consolidated financial statements.

NOVAGOLD RESOURCES INC.

CO NSOLIDATED STATEMENTS OF EQUITY

(US dollars and shares in thousands)

Common shares

November 30, 2016

Share-based compensation

PSUs settled in shares

DSUs settled in shares

Stock options exercised

Withholding tax on PSUs

Other comprehensive income

November 30, 2017

Share-based compensation

DSUs settled in shares

Stock options exercised

Other comprehensive loss

November 30, 2018

Cumulative-effect adjustment of adopting ASU No.

Share-based compensation

PSUs settled in shares

DSUs settled in shares

Stock options exercised

Withholding tax on PSUs

Other comprehensive income

November 30, 2019

* Accumulated other comprehensive loss

The accompanying notes are an integral part of these consolidated financial statements.

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

NOTE 1 –

NOVAGOLD RESOURCES INC.

and its affiliates and subsidiaries (collectively, “NOVAGOLD”

or the “Company”) operate in the mining industry, focused on the exploration for and development of gold mineral properties.

The Company has no realized revenues from its planned principal business purpose.

The Company’s principal asset is a 50 % interest in the Donlin Gold project in Alaska, USA.

The Donlin Gold project is owned and operated by Donlin Gold LLC, a limited liability company that is owned equally by wholly-owned subsidiaries of NOVAGOLD and Barrick Gold Corporation (“Barrick”).

NOTE 2 –

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Consolidated Financial Statements include the accounts of NOVAGOLD RESOURCES INC.

and its wholly-owned subsidiaries NOVAGOLD U.S.

Holdings Inc., NOVAGOLD Resources Alaska Inc., NOVAGOLD USA, Inc., and AGC Resources Inc.

All inter-company transactions and balances are eliminated on consolidation.

The Consolidated Financial Statements are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States (US GAAP).

The preparation of the Company’s Consolidated Financial Statements in accordance with US GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of expenses during the reporting period.

The Company bases its estimates and assumptions on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.

Actual results could differ from the amounts recorded in these Consolidated Financial Statements.

References in these Consolidated Financial Statements and Notes to $ refer to United States (US) dollars and C$ to Canadian dollars.

Dollar amounts are in thousands, except for per share amounts.

Foreign currency

The functional currency for NOVAGOLD RESOURCES INC.

is the Canadian dollar and the functional currency for the Company’s U.S.

operations is the U.S.

Therefore, gains and losses on U.S.

dollar denominated transactions and the effect of translating U.S.

dollar denominated balances of Canadian operations are recorded in net loss.

The effects of translating the Company’s Canadian operations from the Canadian dollar to the U.S.

dollar are recorded in Other comprehensive income (loss).

Cash and cash equivalents

Cash and cash equivalents consist of cash balances and highly liquid investments with original maturities of three months or less that are considered to be cash equivalents.

Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

Term deposits

The Company’s term deposits are classified as held to maturity and recorded at cost.

Term deposits are held at Chartered Canadian banks with original maturities of 12 months or less.

The term deposits are not traded in an active market.

Discontinued o perations

The Company reports the results of operations of a business as discontinued operations if a disposal represents a strategic shift that has (or will have) a major effect on the Company’s operations and financial results when the business is classified as held for sale.

The results of discontinued operations are reported in Net income (loss) from discontinued operations , net of tax in the accompanying Consolidated Statements of Operations for current and prior periods, including any gain or loss recognized on closing or adjustment of the carrying amount to fair value less cost to sell.

On July 27, 2018, the Company completed the sale of its 50 % interest in the Galore Creek Partnership (GCP) and its 40 % interest in the Copper Canyon mineral property in British Columbia, Canada (collectively referred to herein as “Galore Creek”).

As a result, the Company presents Galore Creek as a discontinued operation for all periods presented.

Accordingly, the Consolidated Statements of Loss and Comprehensive Loss and Cash Flows have been reclassified to present Galore Creek as a discontinued operation for all periods presented, and the amounts presented in these notes relate only to continuing operations unless otherwise noted.

For additional information regarding discontinued operations, see Note 4.

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

Contingent note receivable

A portion of the proceeds related to the sale of Galore Creek to Newmont includes a $ 75,000 note receivable, contingent upon the approval of a Galore Creek project construction plan by the owner(s).

The contingent note will be recognized when, in management’s judgement, it is probable that the payment will occur, and that the amount recorded will not reverse in future periods.

Investment in affiliates

Investments in unconsolidated ventures over which the Company has the ability to exercise significant influence, but does not control, are accounted for under the equity method and include the Company’s investment in the Donlin Gold project.

The Company identified Donlin Gold LLC as a Variable Interest Entity (VIE) as the entity is dependent on funding from its owners.

All funding, ownership, voting rights and power to exercise control is shared equally on a 50/50 basis between the owners of the VIE.

Therefore, the Company has determined that it is not the primary beneficiary of the VIE.

The Company’s maximum exposure to loss is its equity investment in Donlin Gold LLC.

The equity method is a basis of accounting for investments whereby the investment is initially recorded at cost and the carrying value is adjusted thereafter to include the investor’s pro rata share of post-acquisition earnings or losses of the investee, as computed by the consolidation method.

Cash funding increases the carrying value of the investment.

Profit distributions received or receivable from an investee reduce the carrying value of the investment.

Donlin Gold LLC is a non-publicly traded equity investee owning an exploration and development project.

Therefore, the Company assesses whether there has been a potential impairment triggering event for other-than-temporary impairment by testing the underlying assets of the equity investee for recoverability and assessing whether there has been a change in the development plan or strategy for the project.

If the underlying assets are not recoverable, the Company will record an impairment charge equal to the difference between the carrying amount of the investee and its fair value.

The Company accounts for income taxes using the liability method, recognizing certain temporary differences between the financial reporting basis of the Company’s liabilities and assets and the related income tax basis for such liabilities and assets.

This method generates deferred income tax liabilities and assets for the Company, as measured by the statutory tax rates in effect.

The Company derives its deferred income tax charge or benefit by recording the change in deferred income tax liabilities and asset balances for the year.

The Company’s deferred income tax assets include certain future tax benefits.

The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized.

Share-based payments

The Company records share-based compensation awards exchanged for employee services at fair value on the date of the grant and expenses the awards in the Consolidated Statements of Loss over the requisite employee service period.

The fair values of stock options are determined using a Black-Scholes option pricing model.

The fair values of PSUs are determined using a Monte Carlo valuation model.

The Company's estimates may be impacted by certain variables including, but not limited to, stock price volatility, employee stock option exercise behaviors, additional stock option grants, estimates of forfeitures, the Company's performance and the Company’s performance in relation to its peers.

Net income (loss) per common share

Basic and diluted income (loss) per share are presented for Net income (loss).

Basic income (loss) per share is computed by dividing Net income (loss) by the weighted-average number of outstanding common shares for the period.

Diluted income per share reflects the potential dilution that could occur if securities or other contracts that may require the issuance of common shares in the future were converted.

Diluted income per share is computed by increasing the weighted-average number of outstanding common shares to include the additional common shares that would be outstanding after conversion and adjusting net income for changes that would result from the conversion.

Only those securities or other contracts that result in a reduction in earnings per share are included in the calculation.

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

Recently adopted accounting pronouncements

Restricted Cash

In November 2016, ASU No.

2016 - 18 was issued related to the inclusion of restricted cash in the statement of cash flows.

The new guidance requires that a statement of cash flows present the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents.

This update is effective in fiscal years, including interim periods, beginning after December 15, 2017 and early adoption is permitted.

The Company retrospectively adopted this guidance as of December 1, 2018. 

The Company did not have restricted cash or restricted cash equivalents for the periods presented and adoption of this standard did not have any impact on the Consolidated Financial Statements or disclosures.

Statement of Cash Flows

In August 2016, ASU No.

2016 - 15 was issued related to the statement of cash flows.

The Company adopted this new guidance effective December 1, 2018 and made an accounting policy election to classify distributions received from its equity method investee, Donlin Gold LLC, using a cumulative earnings approach.

Distributions received will be considered returns on investment and classified as cash inflows from operating activities, unless the cumulative distributions received less distributions received in prior periods that were determined to be returns of investment exceed cumulative equity in earnings recognized.

When such an excess occurs, the current-period distribution up to this excess will be considered a return of investment and classified as cash inflows from investing activities.

Adoption of this standard did not have any impact on the Consolidated Financial Statements or disclosures.

Classification and Measurement of Financial Instruments

In January 2016, ASU No.

2016 - 01 was issued to amend the guidance on the classification and measurement of financial instruments, which was further amended in February 2018 by ASU No.

The new guidance requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income.

The new guidance also amends certain disclosure requirements for these investments.

The Company adopted this standard as of December 1, 2018 and reclassified $ 378 of unrealized holding gains and deferred income taxes related to investments in marketable equity securities from Accumulated other comprehensive loss to Accumulated deficit in the Consolidated Balance Sheets.

Recently is sued accounting pronouncements

February 2016, ASU No.

2016 - 02 was issued related to leases, which was further amended in September 2017 by ASU No.

2017 - 13, in January 2018 by ASU No.

2018 - 01, in July 2018 by ASU No.

2018 - 11, in December 2018 by ASU No.

2018 - 20 and in March 2019 by ASU No.

The new guidance modifies the classification criteria and requires lessees to recognize the assets and liabilities arising from most leases on the balance sheet.

The new guidance will be adopted for the Company’s fiscal year beginning December 1, 2019. 

Adoption of this guidance is not expected to materially increase the Company’s assets and liabilities.

Fair Value Disclosure Requirements

In August 2018, ASU No.

2018 - 13 was issued to modify and enhance the disclosure requirements for fair value measurements.

This update is effective in fiscal years, including interim periods, beginning after December 1, 2020, and early adoption is permitted.

The Company is currently evaluating this guidance and the impact on its Consolidated Financial Statements and disclosures.

NOTE 3 –

SEGMENTED INFORMATION

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.

The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer.

The Chief Executive Officer considers the business from a geographic perspective considering the performance of our investments in the Donlin Gold project in Alaska, USA (Note 6 ) and, prior to its disposal on July 27, 2018, the Galore Creek project in British Columbia, Canada (Note 4 ).

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

NOTE 4 –

DISCONTINUED OPERATIONS

Galore Creek transaction

On July 27, 2018, the Company completed the sale of its 50 % interest in the Galore Creek assets to Newmont.

The Company received $ 100,000 on closing;

a note for $ 75,000 receivable upon the earlier of the completion of a new Galore Creek project pre-feasibility study or July 27, 2021;

a note for $ 25,000 receivable upon the earlier of the completion of a Galore Creek project feasibility study or July 27, 2023;

and an additional note for $ 75,000 is receivable upon the approval of a Galore Creek project construction plan by the owner(s).

The Company has no remaining interest in Galore Creek.

The details of our Net loss from discontinued operations, net of tax , are set forth below:

Years ended November 30,

Equity loss –

Income tax expense

Galore Creek operations, net of tax

Loss on sale of Galore Creek, net of tax

In 2018, the Company recognized a L oss on sale of Galore Creek, net of tax , calculated as follows:

Cash consideration received on closing

Refund of reclamation deposits

Less closing costs

Fair value of notes receivable (Note 5)

Less book values:

Investment in GCP

Copper Canyon mineral property

Reclamation deposits

Reclassification of cumulative foreign currency translation adjustments

Deferred income tax recovery

Other comprehensive income (loss) was not impacted by discontinued operations as Galore Creek did not have any Other comprehensive income (loss) .

The details of our Net cash provided from (used in) investing activities of discontinued operations are set forth below:

Years ended November 30,

Funding of GCP

Net cash proceeds received

Reclamation deposits

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

NOTE 5 –

NOTES RECEIVABLE

The Company has notes receivable from Newmont including a $ 75,000 note receivable upon the earlier of the completion of a new Galore Creek project pre-feasibility study or July 27, 2021, and a $ 25,000 note receivable upon the earlier of the completion of a Galore Creek project feasibility study or July 27, 2023.

On closing of the Galore Creek sale, the Company estimated the fair value of the $ 75,000 and $ 25,000 notes receivable at $ 88,398 , assuming payments in three and five years , respectively, at a discount rate of 3.6 % based on quoted market values for Newmont debt with a similar term.

The carrying values of the notes receivable are being accreted to $75,000 and $25,000 over three and five years, respectively.

No value was assigned to the final $75,000 contingent note receivable.

The Company determined that Galore Creek project construction approval was not probable as of the closing of the Galore Creek sale.

The Company’s assessment did not change as of November 30, 2019.

Changes in the Company’s Notes Receivable are summarized as follows:

Years ended November 30,

Balance –

beginning of period

Fair value of notes receivable

Accretion of notes receivable

Balance –

end of period

NOTE 6 –

INVESTMENT IN DONLIN GOLD

The Donlin Gold project is owned and operated by Donlin Gold LLC, a limited liability company in which wholly-owned subsidiaries of NOVAGOLD and Barrick each own a 50 % interest.

Donlin Gold LLC has a board of four directors, with two directors selected by Barrick and two directors selected by the Company.

All significant decisions related to Donlin Gold LLC require the approval of at least a majority of the Donlin Gold LLC board members.

Changes in the Company’s I nvestment in Donlin Gold are summarized as follows:

Years ended November 30,

Balance –

beginning of period

Share of losses:

Mineral property expenditures

Balance –

end of period

The following amounts represent the Company’s 50% share of the assets and liabilities of Donlin Gold LLC.

Donlin Gold LLC capitalized as Non-current assets:

Mineral property , the initial contribution of the Donlin Gold property with a carrying value of $ 64,000 , resulting in a higher carrying value of the mineral property than that of the Company.

At November 30,

Current assets:

Cash, prepaid expenses and other receivables

Non-current assets:

Property and equipment

Non-current assets:

Mineral property

Current liabilities:

Accounts payable and accrued liabilities

Non-current liabilities:

Reclamation obligation

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

NOTE 7 –

At November 30,

Other current assets:

Accounts and interest receivable

Prepaid expenses

Other long-term assets:

Marketable equity securities

Office equipment

NOTE 8 –

PROMISSORY NOTE

The Company has a promissory note payable to Barrick of $ 103,787 , comprised of $ 51,576 in principal, and $ 52,211 in accrued interest at U.S.

prime plus 2 %.

The promissory note resulted from the agreement that led to the formation of Donlin Gold LLC, where the Company agreed to reimburse Barrick for a portion of their expenditures incurred from April 1, 2006 to November 30, 2007.

The promissory note and accrued interest are payable from 85 % of the Company’s share of revenue from future mine production or from any net proceeds resulting from a reduction of the Company’s interest in Donlin Gold LLC.

The carrying value of the promissory note approximates fair value.

Changes in the Company’s Promissory Note is summarized as follows:

Years ended November 30,

Balance –

beginning of period

Interest expense on promissory note

Balance –

end of period

NOTE 9 –

FAIR VALUE ACCOUNTING

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the significance of the inputs used in making the measurement.

The three levels of the fair value hierarchy are as follows:

Level 1 —

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 —

Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3 —

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The Company’s marketable equity securities are valued using quoted market prices in active markets and as such are classified within Level 1 of the fair value hierarchy.

The fair value of the marketable equity securities was $ 935 at November 30, 2019 ( $ 839 at November 30, 2018), calculated as the quoted market price of the marketable equity security multiplied by the quantity of shares held by the Company.

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

NOTE 1 0 –

GENERAL AND ADMINISTRATIVE

Years ended November 30,

Share-based compensation (Note 13)

Salaries and benefits

Office expense

Professional fees

Corporate communications and regulatory

NOTE 11 –

OTHER INCOME , NET

Years ended November 30,

Interest income

Change in fair market value of marketable securities

Foreign exchange gain (loss)

NOTE 1 2 –

The British Columbia provincial corporate tax rate increased from 11 % to 12 % commencing January 1, 2018, resulting in an increase in the Company’s statutory tax rate from 26 % in 2017 to 26.92 % in 2018, and to 27 % in 2019 onward.

tax reform enacted on December 22, 2017 ( the “Act”), allows a Section 250 deduction amounting to 37.5 % of the U.S.

entity’s foreign derived intangible income (FDII) for the fiscal year ended November 30, 2019.

This resulted in an FDII deduction of $ 96 which is equivalent to a tax saving of $ 20 .

As of January 16, 2020, the Company had completed the accounting for tax effects related to U.S.

tax reform corresponding to the fiscal year ended November 30, 2019.

The Act also includes a number of other provisions including the limitations on the use of future losses, repeal of the Alternative Minimum Tax regime and the introduction of a base erosion and anti-abuse tax.

These provisions are not expected to have immediate effect on the Company.

Given the significant complexity of the Act, further implications of the Act may be identified in future periods.

The Company’s Income tax expense consisted of:

Years ended November 30,

Income tax expense

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

The Company’s Loss before income tax and other items consisted of:

Years ended November 30,

The Company’s Income tax expense differed from the amounts computed by applying the Canadian statutory corporate income tax rates for the following reasons:

Years ended November 30,

Loss before income taxes and other items

Combined federal and provincial statutory tax rate

Income tax recovery based on statutory income tax rates

Reconciling items:

Non-deductible expenditures

Foreign accrual property income

Effect of different statutory tax rates on earnings or losses of subsidiaries

Effect of statutory tax rate change

Change in valuation allowance on deferred tax assets

Income tax expense

Effective tax rate

Components of the Company’s deferred income tax assets (liabilities) are as follows:

At November 30,

Deferred tax income assets:

Net operating loss carry forwards

Capital loss carry forwards

Mineral properties

Intangible assets

Property and equipment

Investment in affiliates

Unpaid interest expense

Unrealized loss on investments

Valuation allowances

Deferred income tax liabilities:

Investment tax credit

Notes receivable

Capitalized assets and other

Net deferred income tax assets (liabilities)

These amounts reflect the classification and presentation that is reported for each tax jurisdiction in which the Company operates.

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

Net deferred income tax assets and liabilities consist of:

At November 30,

Non-current deferred income tax assets

Non-current deferred income tax liabilities

Net operating losses available to offset future taxable income are as follows:

Year of Expiry

Under the U.S.

tax reform, net operating losses arising in tax years ending after December 31, 2017 can be carried over to each taxable year following the tax year of loss (indefinitely).

The Company has capital loss carry-forwards of approximately $ 354,356 ( November 30, 2018:

$ 355,162 ) for Canadian tax purposes.

These tax losses are carried forward indefinitely.

Future use of U.S.

loss carry-forwards is subject to certain limitations under provisions of the Internal Revenue Code including limitations subject to Section 

382, which relates to a 50% change in control over a three -year period and are further dependent upon the Company attaining profitable operations.

Ownership changes occurred on January 

22, 2009 and on December 

31, 2012 and the U.S.

tax losses related to NOVAGOLD Resources Alaska Inc.

and its investment in Donlin Gold LLC for the prior three -year periods prior to the change in control may be subject to limitation under Section 

Accordingly, the Company’s ability to use these losses may be limited or they may expire un-utilized.

Losses incurred to date may be further limited if a subsequent change in control occurs.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax asset.

Significant pieces of objective negative evidence evaluated included the cumulative loss incurred as of November 30, 2019.

Such objective evidence limits the ability to consider other subjective evidence such as management’s projections for future growth.

On the basis of this evaluation, as of November 30, 2019, a valuation allowance of $ 260,920 ( November 30, 2018:

$ 254,072 ) inclusive of valuation allowance for investment tax credits has been recorded in order to measure only the portion of the deferred tax asset that more likely than not will be realized.

The amount of the deferred tax asset considered realizable;

however, could be adjusted if estimates of future taxable income during the carry forward period are reduced or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as management’s projections for growth.

Uncertain tax position

There were no uncertain tax positions as of November 

30, 2019, 2018 and 2017.

The Company recognizes any interest and penalties related to uncertain tax positions, if any, as income tax expense.

Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheet.

As of November 

30, 2019, 2018 and 2017, there were no accrued interest and penalties related to uncertain tax positions.

The Company is subject to income taxes in Canada and the United States.

With few exceptions, the tax years that remain subject to examination as of November 

30, 2019 are 2015 to 2019 in Canada and 2016 to 2019 in the United States.

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

NOTE 1 3 –

SHARE-BASED COMPENSATION

Share incentive awards include a stock option plan for directors, executives, employees and eligible consultants, a PSU plan for executives, employees and eligible consultants and a DSU plan for directors of the Company.

Options granted to purchase common shares have exercise prices not less than the fair market value of the underlying share at the date of grant.

At November 

30, 2019, 31.4 million common shares were available for future share incentive plan awards under all three plans.

The Company recognized share-based compensation expense (see N ote 10 - G eneral and administrative ) as follows:

Years ended November 30,

Stock options

Performance share unit plan

Deferred share unit plan

Stock options

Stock options granted under the Company’s share-based incentive plans generally expire five years after the date of grant and vest in one - third annual increments beginning on the first anniversary of the date of grant.

The value of each option award is estimated at the date of grant using the Black-Scholes option pricing model.

The Black-Scholes option pricing model requires the input of subjective assumptions, including the expected term of the option award and share price volatility.

The expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination experience.

Expected volatility is based on the historical volatility of the Company’s shares at the date of grant over the same length of term.

These estimates involve inherent uncertainties and the application of management’s judgment.

In addition, management estimates the expected forfeiture rate and only recognizes expense for those options expected to vest.

As a result, if other assumptions had been used, the recorded share-based compensation expense would have been different from that reported.

A summary of stock options outstanding as of November 30, 2019, and activity during the year ended November 30, 2019 are as follows:

Number of stock options (thousands)

Weighted- average exercise price per share

Weighted- average

contractual term

November 30, 2018

November 30, 2019

Vested and exercisable as of November 30, 2019

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

The following table summarizes other stock option-related information:

Years ended November 30,

Weighted-average assumptions used to value stock option awards:

Expected volatility

Expected term of options (years)

Expected dividend rate

Risk-free interest rate

Expected forfeiture rate

Weighted-average grant-date fair value

Intrinsic value of options exercised

Cash received from options exercised

As of November 

30, 2019, the Company had $ 2,205 of unrecognized compensation cost related to 4,883,000 non-vested stock options expected to be recognized and vest over a period of approximately two years.

Performance share units

The Company has a PSU plan that provides for the issuance of PSUs in amounts as approved by the Company’s Compensation Committee.

Each PSU award entitles the participant to receive one common share of the Company at the end of a specified period.

The Compensation Committee may adjust the number of common shares for the achievement of certain performance and vesting criteria established at the time of grant.

The actual performance against each of these criteria generates a multiplier that varies from 0 % to 150 %.

Thus, the common shares that may be issued vary between 0% and 150% of the number of PSUs granted, as reduced by the amounts for participants no longer with the Company on the vesting date.

The value of each PSU granted is estimated at the grant date using a Monte Carlo simulation model.

The Monte Carlo simulation model requires the input of subjective assumptions, including the share price volatility of the Company’s stock, as well as comparator index and the correlation of returns between the comparator index and the Company.

Expected volatility is based on the historical volatility of the Company’s shares and the comparator index at the grant date.

These estimates involve inherent uncertainties and the application of management’s judgment.

As a result, if other assumptions had been used, our recorded share-based compensation expense would have been different from that reported.

A summary of PSU awards outstanding and activity during the year ended November 30, 2019 are as follows:

Number of PSU awards (thousands)

Weighted- average grant day fair value per award

November 30, 2018

Performance adjustment

November 30, 2019

During the year ended November 30, 2019, the Company paid $ 1,197 for employee withholding taxes on vested performance share units.

As of November 

30, 2019, the Company had 1,664,000 non-vested PSU awards outstanding of which 432,000 were fully expensed and vested on December 2, 2019 with a multiplier of 150 %.

The remaining 1,232,000 non-vested PSU awards with $ 2,516 of unrecognized compensation cost will be expensed and vest over a period of approximately two years.

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

The following table summarizes other PSU-related information:

Years ended November 30,

Performance multiplier on PSUs vested

Common shares issued (thousands)

Total fair value of common shares issued

Withholding tax paid on PSUs vested

Deferred share units

The Company has a DSU plan that provides for the issuance of DSUs in amounts where the Directors receive half of their annual retainer in DSUs and have the option to elect to receive all or a portion of the other half of their annual retainer in DSUs.

Each DSU entitles the Directors to receive one common share when they retire from the Company.

The Company granted 35,851 , 45,103 and 48,830 DSUs to Directors with a weighted-average grant day fair value of $ 4.40 , $ 4.07 and $ 4.36 per DSU during 2019, 2018 and 2017, respectively.

The Company issued 31,721 , 98,160 and 27,536 common shares under the DSU plan in 2019, 2018 and 2017, respectively.

At November 30, 2019, there were 258,762 DSUs outstanding.

NOTE 1 4 –

SHARE CAPITAL

Common shares

The Company is authorized to issue 1,000,000,000 common shares without par value, of which 327,629,928 were issued and outstanding as of November 30, 2019, and 323,222,840 were issued and outstanding as of November 30, 2018.

Preferred shares

Pursuant to the Company’s Notice of Articles filed under the Business Corporations Act (British Columbia), the Company is authorized to issue 10,000,000 preferred shares without par value.

The authorized but unissued preferred shares may be issued in designated series from time to time by one or more resolutions adopted by the Directors.

The Directors have the authority to determine the preferences, limitations and relative rights of each series of preferred shares.

At November 

30, 2019 and 2018, no preferred shares were issued or outstanding.

NOTE 1 5 –

RELATED PARTY TRANSACTIONS

The Company provided technical services to Donlin Gold LLC for $ nil in 2019 ($ 658 in 2018 and $ nil in 2017 ).

As of November 30, 2019, the Company has accounts receivable from Donlin Gold LLC of $ nil ( November 30, 2018:

$ 247 ) included in O ther current assets .

NOTE 1 6 –

COMMITMENTS AND CONTINGENCIES

Obligations under operating leases

The Company leases certain assets, such as office equipment and office facilities, under operating leases expiring at various dates through 2025.

Future minimum annual lease payments are $ 302 in 2020, $ 337 in 2021, $ 345 in 2022, $ 155 in 2023, $ 139 in 2024 and $ 23 thereafter, totaling $ 1,301 .

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

NOTE 17 –

NET CHANGE IN OPERATING ASSETS AND LIABILITIES

Years ended November 30,

Changes in operating assets and liabilities:

Accounts payable and accrued liabilities

Accrued payroll and related benefits

Other liabilities

NOTE 1 8 –

SUPPLEMENTAL CASH FLOW INFORMATION

Years ended November 30,

Interest received

Income taxes paid

Non-cash investing activities

During 2018, the Company recorded a non-cash increase to long-term notes receivable of $ 88,398 as a portion of the proceeds received on the sale of the Galore Creek assets (Note 5 ).

NOTE 1 9 –

UNAUDITED SUPPLEMENTARY DATA

Quarterly data

The following is a summary of selected quarterly financial information (unaudited):

Loss from operations

Net loss from continuing operations

Net loss from discontinued operations

Net loss per common share, basic and diluted

Continuing operations

Discontinued operations

Loss from operations

Net loss from continuing operations

Net loss from discontinued operations

Net loss per common share, basic and diluted

Continuing operations

Discontinued operations

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

Significant after-tax items were as follows:

Fourth quarter 2019:

Third quarter 2019:

Second quarter 2019:

First quarter 2019:

Fourth quarter 2018:

Third quarter 2018:

Loss on sale of Galore Creek, net of tax , $ 80,026 ($ 0.25 per share loss –

basic and diluted)

Second quarter 2018:

First quarter 2018:

NOVAGOLD RESOURCES INC.

Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. 

Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K.

Based on the foregoing, our management concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

There was no change in our internal control over financial reporting that occurred during the year ended November 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.

Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions;

providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements;

providing reasonable assurance that receipts and expenditures of our assets are made in accordance with management’s authorization;

and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements would be prevented or detected on a timely basis.

Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

Management conducted its evaluation of the effectiveness of our internal controls over financial reporting based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, management concluded that our internal control over financial reporting was effective as of November 30, 2019.

The effectiveness of our assessment of internal control over financial reporting as of November 30, 2019 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Item 9B. 

Other Information

NOVAGOLD RESOURCES INC.

PART III      

Item 10.     Directors, Executive Officers and Corporate Governance

The information in our definitive Proxy Statement, filed pursuant to Regulation 14A promulgated under the Exchange Act for the 2020 Annual Meeting of Shareholders (the “2020 Proxy Statement”) regarding directors and executive officers and Section 16 reporting information appearing under the headings “Election of Directors”

“Information Concerning The Board Of Directors And Executive Officers”

and “Security Ownership Of Certain Beneficial Owners And Management And Related Shareholder Matters.”

is incorporated by reference in this section.

Finally, the information in our 2020 Proxy Statement regarding the Audit Committee under the heading “Statement of Corporate Governance Practices”

is incorporated herein by reference.

We have adopted a Code of Business Conduct and Ethics that applies to our Chief Executive Officer, Chief Financial Officer and Corporate Controller or persons performing similar functions.

This Code of Business Conduct and Ethics is posted on our website ( www.novagold.com ).

We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on our website, at the address specified above.

Our Code of Business Conduct and Ethics, and charters for each Committee of our Board are also available on our website.

The Code of Business Conduct and Ethics and charters are also available in print to any shareholder who submits a request to:

Corporate Secretary, NOVAGOLD RESOURCES INC., 201 South Main Street, Suite 400, Salt Lake City, UT, USA.

Information on our website is not deemed to be incorporated by reference into this Annual Report on Form 10-K.

Item 11.     Executive Compensation

The information appearing in our 2020 Proxy Statement under the headings.

“Compensation Committee Interlocks and Insider Participation”, “Compensation Discussion & Analysis”, “Tabular Disclosure of Executive Compensation”, “Non-Executive Director Compensation”

and “Compensation Committee Report”

is incorporated by reference in this section.

Item 12.     Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The information appearing in our 2020 Proxy Statement under the heading “Security Ownership Of Certain Beneficial Owners And Management And Related Shareholder Matters”

is incorporated herein by reference.

The following table provides information as of November 30, 2019, regarding compensation plans under which equity securities of the Company are authorized for issuance.

Plan category

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights (C$)

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

Equity compensation plans approved by security holders

Equity compensation plans not approved by security holders

NOVAGOLD RESOURCES INC.

Item 13.     Certain Relationships and Related Transactions, and Director Independence

The information appearing in our 2020 Proxy Statement under the heading “Interest Of Informed Persons In Material Transactions”, “Board of Directors”

under the heading “Statement of Corporate Governance Practices”

is incorporated herein by reference.

Item 14.     Principal Accountant Fees and Services

The information appearing in our 2020 Proxy Statement regarding Audit Fees, Audit-Related Fees, Tax Fees, All Other Fees and Audit Committee Pre-Approval Policies under the subheading “Appointment of Auditors”

is incorporated herein by reference.

NOVAGOLD RESOURCES INC.

PART IV      

Item 15.     Exhibits and Financial Statement Schedules

(a)(1) Financial Statements

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Loss and Comprehensive Loss

Consolidated Statements of Cash Flows

Consolidated Statements of 

Equity  

Notes to Consolidated Financial Statements

(a)(2) Financial Statement Schedules

Schedule A –

The Financial Statements of Donlin Gold LLC as at November 30, 2019 and 2018 and for the years ended November 30, 2019, 2018 and 2017.

No other financial statement schedules are filed as part of this report because such schedules are not applicable or the required information is shown in the Consolidated Financial Statements or Notes thereto.

See “Item 8.

Financial Statements and Supplementary Data”.

(a)(3) Executive Compensation Plans and Arrangements

Employment Agreement between the Registrant and Gregory A.

Lang, dated January 9, 2012, identified in exhibit list below.

Employment Agreement between NOVAGOLD Resources Alaska, Inc.

(a wholly-owned subsidiary of the Registrant) and Gregory A.

Lang dated January 9, 2012, identified in exhibit list below.

Employment Agreement between NOVAGOLD USA, Inc.

and David Ottewell, dated September 10, 2012, identified in exhibit list below.

2004 Stock Award Plan of NOVAGOLD Resources Inc.

(as amended) identified in exhibit list below.

NOVAGOLD Resources Inc.

Employee Share Purchase Plan identified in exhibit list below.

NOVAGOLD Resources Inc.

2009 Performance Share Unit Plan identified in exhibit list below.

NOVAGOLD Resources Inc.

2009 Non-Employee Directors Deferred Share Unit Plan identified in exhibit list below.

Certificate of Continuance (British Columbia) dated June 10, 2013 (incorporated by reference to Exhibit 99.1 to the Form 6-K dated June 19, 2013)

Certificate of Discontinuance (Nova Scotia) dated June 10, 2013 (incorporated by reference to Exhibit 99.2 to the Form 6-K dated June 19, 2013)

Notice of Articles (British Columbia) dated June 10, 2013 (incorporated by reference to Exhibit 99.3 to the Form 6-K dated June 19, 2013)

Articles of NOVAGOLD RESOURCES INC.

dated June 20, 2013 (incorporated by reference to Exhibit 99.4 to the Form 6-K dated June 19, 2013)

NOVAGOLD RESOURCES INC.

Description of Common Shares

Amendment dated January 13, 2010 to Limited Liability Company Agreement dated December 1, 2007 between Donlin Gold LLC, Barrick Gold U.S.

and NOVAGOLD Resources Alaska, Inc.

(incorporated by reference to Exhibit 10.2 to Registrant’s Annual Report on Form 10-K for the year ended November 30, 2013, filed with the Securities and Exchange Commission on February 12, 2014) 

Limited Liability Company Agreement dated December 1, 2007 between Donlin Gold LLC, Barrick Gold U.S.

and NOVAGOLD Resources Alaska, Inc.

(incorporated by reference to Exhibit 10.8 to Registrant’s Annual Report on Form 10-K for the year ended November 30, 2013, filed with the Securities and Exchange Commission on February 12, 2014)

2004 Stock Award Plan of NOVAGOLD Resources Inc.

(as amended) (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2019, filed with the Securities and Exchange Commission on April 2, 2019)

NOVAGOLD Resources Inc.

Employee Share Purchase Plan (incorporated by reference to Exhibit 10.12 to Registrant’s Annual Report on Form 10-K for the year ended November 30, 2013, filed with the Securities and Exchange Commission on February 12, 2014)

NOVAGOLD Resources Inc.

2009 Performance Share Unit Plan (as amended) (incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2019, filed with the Securities and Exchange Commission on April 2, 2019)

NOVAGOLD Resources Inc.

2009 Non-Employee Directors Deferred Share Unit Plan (as amended) (incorporated by reference to Appendix E to Registrant’s definitive proxy statement, filed with the Securities and Exchange Commission on March 23, 2017)

Employment Agreement between the Registrant and Gregory A.

Lang, dated January 9, 2012.

(incorporated by reference to Exhibit 10.15 to Registrant’s Annual Report on Form 10-K for the year ended November 30, 2013, filed with the Securities and Exchange Commission on February 12, 2014)

Employment Agreement between the Registrant’s wholly-owned subsidiary, NovaGold USA, Inc., and David Ottewell, dated September 10, 2012.

(incorporated by reference to Exhibit 10.17 to Registrant’s Annual Report on Form 10-K for the year ended November 30, 2013, filed with the Securities and Exchange Commission on February 12, 2014)

Amendment dated July 15, 2010 to Limited Liability Company Agreement dated December 1, 2007 between Donlin Gold LLC, Barrick Gold U.S.

and NOVAGOLD Resources Alaska, Inc.

(incorporated by reference to Exhibit 10.18 to Registrant’s Annual Report on Form 10-K for the year ended November 30, 2013, filed with the Securities and Exchange Commission on February 12, 2014)

Amendment dated June 1, 2011 to Limited Liability Company Agreement dated December 1, 2007 between Donlin Gold LLC, Barrick Gold U.S.

and NOVAGOLD Resources Alaska, Inc.

(incorporated by reference to Exhibit 10.19 to Registrant’s Annual Report on Form 10-K for the year ended November 30, 2013, filed with the Securities and Exchange Commission on February 12, 2014)

Employment Agreement between the Registrant’s wholly-owned subsidiary, NOVAGOLD Resources Alaska, Inc., and Gregory A.

Lang, dated January 9, 2012.

(incorporated by reference to Exhibit 10.20 to Registrant’s Annual Report on Form 10-K for the year ended November 30, 2013, filed with the Securities and Exchange Commission on February 12, 2014)

Share Purchase Agreement, dated July 25, 2018, by and among NOVAGOLD RESOURCES INC., Newmont Mining Corporation and Newmont Canada FN Holdings ULC (incorporated by reference to Exhibit 99.3 of the Form 8-K/A, filed with the Securities and Exchange Commission on October 3, 2018)

Subsidiaries of the registrant

Consent of PricewaterhouseCoopers LLP

Consent of Kirk Hanson

Consent of Gordon Seibel

Consent of Wood Canada Limited

NOVAGOLD RESOURCES INC.

Consent of Clifford Krall

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The following materials are filed herewith:

(i) Inline XBRL Instance, (ii) Inline XBRL Taxonomy Extension Schema, (iii) Inline XBRL Taxonomy Extension Calculation, (iv) XBRL Taxonomy Extension Labels, (v) XBRL Taxonomy Extension Presentation, and (vi) Inline XBRL Taxonomy Extension Definition.

Cover Page Interactive Data File –

The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Confidential treatment has been granted for certain portions of this Exhibit pursuant to Rule 24b-2 of the Exchange Act, which portions have been omitted and filed separately with the SEC

Item 16.     Form 10-K Summary

NOVAGOLD RESOURCES INC.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NOVAGOLD RESOURCES INC.

/s/ Gregory A.

Gregory A.

President and Chief Executive Officer

January 22, 2020

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

/s/ Gregory A.

President, Chief Executive Officer and Director (Principal Executive Officer)

January 22, 2020

Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

January 22, 2020

/s/ Thomas S.

January 22, 2020

/s/ Sharon Dowdall

January 22, 2020

/s/ Diane Garrett 

January 22, 2020

/s/ Igor Levental 

January 22, 2020

/s/ Kalidas Madhavpeddi

January 22, 2020

/s/ Clynton R.

January 22, 2020

/s/ Ethan Schutt 

January 22, 2020

/s/ Anthony P.

January 22, 2020

Item 15.(a)(2) Schedule A

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Donlin Gold LLC

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Donlin Gold LLC (the Company) as of November 30, 2019 and 2018, and the related statements of loss and comprehensive loss, cash flows and equity for each of the three years in the period ended November 30, 2019, including the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended November 30, 2019 in conformity with accounting principles generally accepted in the United States of America (US GAAP).

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

(signed) PricewaterhouseCoopers LLP

Chartered Professional Accountants

Vancouver, British Columbia, Canada

January 21, 2020

We have served as the Company's auditor since 2013.

DONLIN GOLD LLC

BALANCE SHEETS

dollars in thousands)

At November 30,

Prepaid expenses

Current assets

Property and equipment (note 3)

Mineral property (note 4)

Accounts payable and accrued liabilities

Due to related parties (note 5)

Current liabilities

Reclamation and remediation (note 6)

Total liabilities

Commitments and contingencies (note 7)

Partners’

contributions

Accumulated deficit

Total liabilities and equity

The accompanying notes are an integral part of these financial statements.

DONLIN GOLD LLC

STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

dollars in thousands)

Years ended November 30,

Operating expenses:

Engineering and geotechnical drilling

General and administrative

Mineral and land leases

Community relations

Environmental compliance

Studies and drilling

Camp operations and maintenance

Loss from operations

Net loss and comprehensive loss

The accompanying notes are an integral part of these financial statements.

DONLIN GOLD LLC

STATEMENTS OF CASH FLOWS

dollars in thousands)

Years ended November 30,

Operating activities:

Changes in operating assets and liabilities:

Prepaid expenses

Accounts payable and accrued liabilities

Net cash used in operating activities

Investing activities:

Capital expenditures - property and equipment

Net cash used in investing activities

Financing activities:

Partners’

contributions

Net cash provided from financing activities

Increase/(Decrease) in cash during the year

Cash at beginning of year

Cash at end of year

The accompanying notes are an integral part of these financial statements.

DONLIN GOLD LLC

STATEMENTS OF EQUITY

dollars in thousands)

Barrick contributions

NOVAGOLD contributions

Accumulated deficit

Balance at December 1, 2016

Partners’

cash contribution

Balance at November 30, 2017

Partners’

cash contribution

Balance at November 30, 2018

Partners’

cash contribution

Balance at November 30, 2019

The accompanying notes are an integral part of these financial statements.

DONLIN GOLD LLC

NOTES TO FINANCIAL STATEMENTS

dollars in thousands)

NOTE 1 –

NATURE OF OPERATIONS AND ECONOMIC DEPENDANCE

On December 1, 2007, Barrick Gold U.S.

(“Barrick”) and NOVAGOLD Resources Alaska, Inc.

(“NOVAGOLD”), formed Donlin Gold LLC, a Delaware limited liability corporation, (the “Company”) to advance the Donlin Gold Project in Alaska.

Each of Barrick and NOVAGOLD own a 50% interest in the Company.

Donlin Gold LLC has a board of four directors, with two nominees selected by each company.

All significant decisions related to Donlin Gold LLC require the approval of both companies.

The Company currently depends on Barrick and NOVAGOLD for all of its funding and has received commitments from its shareholders that they will fund the Company for the next twelve months.

The Company’s Board of Directors approved the Project's Updated Feasibility Study in July 2012 and the Company subsequently submitted a Plan of Operations and the Wetlands Permit Application under Section 404 of the U.S.

Clean Water Act to the U.S.

Army Corps of Engineers (the “Corps”), formally initiating the permitting process.

In 2018, the Corps issued the final Environmental Impact Study (EIS) on April 27, 2018.

On August 13, 2018, the Corps and the Bureau of Land Management (BLM) issued a joint Federal Record of Decision (ROD) for the Donlin Gold project. 

Along with the ROD, the Corps issued a combined permit under CWA Section 404 and Section 10 of the Rivers and Harbors Act.

The BLM issued the Offer to Lease for the right-of-way for those portions of the natural gas pipeline that would cross federal lands.

The Pipeline and Hazardous Materials Safety Administration previously issued a special permit for the natural gas pipeline on June 5, 2018. 

Several major State of Alaska permits were also issued and advanced during the year.

During the year ended November 30, 2019, the Company continued to advance permitting of the Donlin Gold Project.

The final approvals of the Donlin Gold Reclamation and Closure Plan and final Waste Management Permit were received on January 18, 2019.

The Company also worked to secure further right of way agreements with the State and BLM related to development of infrastructure.

NOTE 2 –

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These financial statements are presented in United States dollars ($) and have been prepared in accordance with accounting principles generally accepted in the United States (GAAP).

Use of estimates

The preparation of the Company’s financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting period.

The more significant areas requiring the use of management estimates and assumptions relate to environmental, reclamation and closure obligations.

The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.

Accordingly, actual results will differ from amounts estimated in these financial statements.

Property and equipment

On initial recognition, property and equipment are recorded at cost subject to a ten thousand dollar threshold for capitalization.

Property and equipment are subsequently measured at cost less accumulated depreciation.

Depreciation is recorded over the estimated useful life of the assets at the following annual rates:

Computer equipment –

5 years straight line;

Computer software –

5 years straight line;

Furniture and equipment –

5 years straight line;

Leasehold improvements –

straight-line over the lease term.

DONLIN GOLD LLC

NOTES TO FINANCIAL STATEMENTS

dollars in thousands)

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.

Mineral properties

All direct costs related to the acquisition of mineral property interests are capitalized.

Mineral property exploration expenditures are expensed when incurred.

When it has been established that a mineral deposit is commercially mineable, an economic analysis has been completed in accordance with SEC Industry Guide 7 and permits are obtained, the costs subsequently incurred to develop a mine on the property prior to the start of mining operations are capitalized.

Capitalized costs will be amortized following commencement of commercial production using the unit of production method over the estimated life of proven and probable reserves.

Asset retirement obligations

The Company records a liability based on the best estimate of costs for site closure and reclamation activities that the Company is legally or contractually required to undertake. 

The liability is estimated using expected cash flows based on engineering and environmental reports and accreted to full value over time through periodic charges to income. 

Adjustments to the reclamation obligation arising from changes in estimates are recorded as a component of the mineral property.

The Company is not a taxable entity for income tax purposes.

Accordingly, no recognition is given to income taxes for financial reporting purposes.

Tax on the net income (loss) of the Company is borne by the owners through the allocation of taxable income (loss).

Net income for financial statement purposes may differ significantly from taxable income for the owners as a result of differences between the tax basis and financial reporting basis of assets and liabilities and the taxable income allocation requirements under the shareholders agreement.

Impairment of long-lived assets

Management assesses the possibility of impairment in the carrying value of its long-lived assets whenever events or circumstances indicate that the carrying amounts of the asset or assets group may not be recoverable.

Management calculates the estimated undiscounted future net cash flows relating to the asset or assets.

When the carrying value of an asset exceeds the related undiscounted cash flows, the asset is written down to its estimated fair value, which is usually determined using discounted future cash flows.

Management’s estimates of mineral prices, mineral reserves, foreign exchange rates, production levels and operating capital and reclamation costs are subject to risk and uncertainties that may affect the determination of the recoverability of the long-lived asset.

It is possible that material changes could occur that may adversely affect management’s estimates.

Cash and cash equivalents

Cash and cash equivalents consist of cash and highly liquid investments with original maturities of three months or less which are considered to be cash equivalents. 

The fair value of the Company’s financial assets, which includes cash, approximates their carrying values at November 30, 2019 due to their short-term nature. 

Trade payables

The fair value of the Company’s financial liabilities, such as accounts payable and accrued liabilities approximates their carrying values at November 30, 2019 due to their short-term nature.

DONLIN GOLD LLC

NOTES TO FINANCIAL STATEMENTS

dollars in thousands)

Due to related parties

The amounts due to Barrick and NOVAGOLD are non-interest bearing, unsecured and without specified terms of repayment.

Recently issued accounting pronouncements

In February 2016, Accounting Standard Update (ASU) No.

2016-02 was issued related to leases, which was further amended in September 2017 by ASU No.

2017-13, in January 2018 by ASU No.

2018-01, in July 2018 by ASU No.

2018-11, in December 2018 by ASU No.

2018-20 and in March 2019 by ASU No.

The new guidance modifies the classification criteria and requires lessees to recognize the assets and liabilities arising from most leases on the balance sheet.

The new guidance will be adopted for the Company’s fiscal year beginning December 1, 2019 Adoption of this guidance is expected to increase the Company’s assets and liabilities by approximately $0.5 million.

Fair Value Disclosure Requirements

In August 2018, ASU No.

2018-13 was issued to modify and enhance the disclosure requirements for fair value measurements.

This update is effective in fiscal years, including interim periods, beginning after December 15, 2019, and early adoption is permitted. 

The Company is currently evaluating this guidance and the impact on its Financial Statements.

NOTE 3 –

PROPERTY AND EQUIPMENT

At November 30,

Plant and equipment

Accumulated depreciation

NOTE 4 –

MINERAL PROPERTY

At November 30,

Acquisition cost

Asset retirement cost

The Donlin Gold Project is located in the Kuskokwim region of southwestern Alaska on private, Alaska Native-owned mineral and surface land and Alaska state mining claims.

The property is under lease for subsurface mineral rights from Calista Corporation and surface land rights from The Kuskokwim Corporation, two Alaska Native corporations.

The mineral property was jointly owned by Barrick and NOVAGOLD through an unincorporated joint venture prior to the formation of the Company.

Upon formation of the Company the mineral property contributed was recorded based on the predecessor accounting values of Barrick and NOVAGOLD.

As such, mineral property includes the historic acquisition cost as the partners’

initial contribution to the Company.  

NOTE 5 –

RELATED PARTY TRANSACTIONS

The Company received management and administrative services from Barrick for $1,210 in 2019, $765 in 2018, and $2,189 in 2017.

The Barrick amounts are included in General and Administrative expense.

The Company received engineering and administrative services from NOVAGOLD for $nil in 2019, $658 in 2018, $nil in 2017. 

The NOVAGOLD amount is included in Studies and Drilling expense.

DONLIN GOLD LLC

NOTES TO FINANCIAL STATEMENTS

dollars in thousands)

The Company has accounts payable to Barrick at November 30, 2019 of $112 (2018:

$65) for reimbursement of management and administrative services.

The Company has accounts payable to NOVAGOLD at November 30, 2019 of $nil (2018:

NOTE 6 –

RECLAMATION AND REMEDIATION

Although the ultimate amount of the reclamation costs to be incurred cannot be predicted with certainty, the total undiscounted amount of estimated cash flows required to settle the Company’s estimated obligations for work undertaken at the site to date is $1,384.

The amount has not been discounted due to the uncertainty of the timing of the reclamation activities due to the project’s current permitting activities and is not inflated.

Significant reclamation and closure activities include rehabilitation and decommissioning of the camp and drill sites.

NOTE 7 –

COMMITMENTS AND CONTINGENCIES

Estimated losses from contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could be incurred, and the amount of the loss can be reasonably estimated.

Legal expenses associated with the contingency are expensed as incurred.

If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency and estimated range of loss, if determinable, is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.

Management has identified no loss contingencies that meet the recognition criteria.

Obligations under operating leases

The Company leases certain assets, such as mineral property, land, office facilities and equipment, under operating leases.

Mineral property and land leases coincide with the currently projected Donlin Gold mine life, with provisions for a further extension, should production continue beyond that.

Office facilities and equipment leases expire at various dates through 2023.

Future minimum annual lease payments are $2,135 in 2020, $2,040 in 2021, $2,045 in 2022, $1,881 in 2023, and $1,838 in 2024 totaling $9,939.

The remaining 1.252 million non-vested PSU awards with $3.1 million of unrecognized compensation cost will be expensed over a period of approximately two years.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 2. Properties