NOVAGOLD RESOURCES INC 10-K

Item 2. Properties   The following descriptions summarize selected information about our 50% interest in the Donlin Gold project located in Alaska, USA. The Donlin Gold project is without known reserves, as defined under SEC Industry Guide 7. Except for subsequent events or as otherwise noted, the disclosure in this Annual Report on Form 10-K of a scientific or technical nature for the Donlin Gold project is based on “Donlin Creek Gold Project Alaska, USA, NI 43-101 Technical Report on Second Updated Feasibility Study” (“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. 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. 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, mineral reserves and mineral resources remain unchanged.   Cautionary Note to U.S. Investors : This section and other sections of this Annual Report on Form 10-K contain the terms “measured mineral resources,” “indicated mineral resources,” “inferred mineral resources,” “proven mineral reserves,” and “probable mineral reserves” as defined in accordance with NI 43-101. Please note the following regarding these terms:   “ Proven mineral reserves ” and “ probable mineral reserves ” – The definitions of proven and probable mineral reserves used in NI 43-101 differ from the definitions for “proven reserves” and “probable reserves” as found in SEC Industry Guide 7. Accordingly, our disclosures of mineral reserves herein may not be comparable to information from U.S. companies subject to reporting and disclosure requirements of the SEC.   “ Measured mineral resources ” and “ indicated mineral resources ” – We advise U.S. investors that although these terms are recognized and required by Canadian regulations, these terms are not defined in SEC Industry Guide 7 and the SEC does not normally permit such terms to be used in reports and registration statements filed with the SEC. U.S. investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into reserves.   “ Inferred mineral resources ” – We advise U.S. investors that although this term is recognized by Canadian regulations, the SEC does not recognize it. “Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. Under Canadian rules, estimates of inferred mineral resources may not form the basis of a feasibility study or prefeasibility study, except in rare cases. The SEC normally only permits an issuer to report mineralization that does not constitute “reserves” as in-place tonnage and grade without reference to unit measures. U.S. investors are cautioned not to assume that any part or all of an inferred mineral resource exists or is economically or legally minable.     28 NOVAGOLD RESOURCES INC.     Donlin Gold Project, Alaska     The Donlin Gold project is an advanced-stage gold project held by Donlin Gold, a limited liability company that is owned 50% by our wholly-owned subsidiary, NOVAGOLD Resources Alaska Inc., and 50% by Barrick’s wholly-owned subsidiary, Barrick Gold U.S. Inc.   We entered into the limited liability company agreement with Barrick (“LLC Agreement”) dated December 1, 2007 which provided for the creation of Donlin Gold, which is jointly owned by us and Barrick on a 50/50 basis. Pursuant to the LLC Agreement, we agreed to reimburse Barrick out of future mine production cash flow for a portion of Barrick’s prior expenditures on the Donlin Gold project. As of November 30, 2020, the promissory note, including accrued interest, amounted to approximately $109.8 million. Funding for the project is currently shared by both parties on a 50/50 basis.   Except for events subsequent to the Donlin Gold FS, including the information contained under the heading “Item 1, Recent Developments – Donlin Gold,” or as otherwise stated or implied, the scientific and technical information regarding the Donlin Gold project in this Annual Report on Form 10-K is based on the Donlin Gold FS.   Property Description and Location     The Donlin Gold property 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 (the “Mining Lease”) for subsurface rights from Calista Corporation (“Calista”) and surface rights (the “Surface Use Agreement”) from The Kuskokwim Corporation (TKC), two Alaska Native corporations. Calista is one of 13 regional Alaska Native corporations established as part of the Alaska Native Claims Settlement Act of 1971 (ANCSA) and under ANCSA has title to the subsurface estate in the region. TKC was formed in 1977 when the ANCSA village corporations of Lower Kalskag, Upper Kalskag, Aniak, Chuathbaluk, Napaimute, Crooked Creek, Red Devil, Georgetown, Sleetmute and Stony River, which are located along the middle region of the Kuskokwim River, merged. Under ANCSA, TKC has title to extensive surface estate in the region, including most of the project lands. The property hosts a gold deposit currently estimated at 33.8 million ounces of proven and probable reserves averaging 2.09 grams per tonne. We believe that significant exploration potential remains in the Donlin Gold district, with prospects to increase mine life and/or justify future production expansions. See Reserve and Resource Estimate , below.   29     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.   Permits   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, 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 approval (Landing Area). Other permits were either put on hold, closed, or allowed to expire.   On August 7, 2012, we announced that Donlin Gold commenced permitting of the project by submitting a draft Plan of Operations and Section 404 Clean Water Act (CWA) draft permit application to federal and state regulators. The Section 404 permit application initiated the environmental review process under the National Environmental Policy Act (NEPA) which involves preparation of an EIS. The Corps selected AECOM, formerly URS, an independent contractor, to prepare the EIS. The Notice of Intent for the EIS was published in the Federal Register on December 14, 2012 and the NEPA public scoping process was completed on March 29, 2013. During the remainder of 2013 and through 2014 and 2015, Donlin Gold worked to address the remaining data needs for the draft EIS. Donlin Gold also continued to provide application materials and maintained ongoing dialogue with the key permitting agencies. 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. 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. The Corps received comments from federal and state agencies, local and tribal governments, Alaska Native organizations, businesses, special interest groups/NGOs, and individuals.   On April 27, 2018, the Notice of Availability of the Donlin Gold final EIS was published in the Federal Register . On August 13, 2018, the Corps and the 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. Additionally, 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 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 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. ADEC completed this review and affirmed its decision to issue this permit on July 25, 2019. There were no further appeals of the Waste Management Permit. 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 decision to approve the Reclamation and Closure Plan.   30     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   The 2011 Restated Exploration and Lode Mining Lease (“Calista Lease”) between Calista and Donlin Gold, includes subsurface (mineral) rights leased from Calista. 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 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.  The Calista Lease was amended once again effective June 6, 2014 (the “2014 Amendment”).  The 2014 Amendment did not affect the lands subject to the Calista Lease as restated on February 11, 2011.   On June 9, 2014, the Company announced that Donlin Gold and TKC reached an updated long-term Surface Use Agreement (SUA) for the Donlin Gold Project. The SUA with TKC grants non-exclusive surface use rights to Donlin Gold for mining activities. 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 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”).   31     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. The mining claims abut and largely surround northern and western boundaries of the lands subject to the Calista Lease and TKC SUA. 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 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 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 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. Elevations range from 150 meters to 640 meters. Ridges are well rounded and easily accessible by all-terrain vehicle. Hillsides are forested with black spruce, tamarack, alder, birch and larch. 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 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 1,965 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.   Year Company Work Performed Results 1909 to 1956 Various prospectors and placer miners Gold discovered in 1909. Placer mining by hand, underground, and hydraulic methods. Total placer gold production of approximately 30,000 ounces. 1970s to 2015 Robert Lyman and heirs Resumed sluice mining in Donlin Gold area and placer mined Snow Gulch. First year of mining Snow Gulch produced best results, with 800 ounces of gold recovered. Donlin Gold has obtained an agreement with the Lyman family to consolidate the land package around the proposed mine. 1974, 1975 Resource Associates of Alaska (RAA) Regional mineral potential evaluation for Calista. Soil grid and three bulldozer trenches dug in Snow Gulch area. Soil, rock, and vein samples have anomalous gold values. Trench rock sample results range from 2 to 20 grams per tonne gold. 1984 to 1987 Calista Corporation Minor work. Geologists from various mining companies, including Cominco and Kennecott, visit the property.   1986 Lyman Resources Auger drilling for placer evaluation finds abundant gray, sulfide rich clay near Quartz Gulch. Assays of cuttings average over 7 grams per tonne gold. Initial discovery of Far Side (“Carolyn”) prospect. 1987 Calista Corporation Rock sampling of ridge tops and auger drill sampling of Far Side prospect. Anomalous gold values from auger holes: best result = 9.7 grams per tonne gold. 1988 to 1989 Western Gold Exploration and Mining Co. Airborne geophysics, geological mapping, and soil sampling over most of the project area. Total of 13,525 meters of D9 Cat trenching at all prospects. Over 15,000 soil, rock chip, and auger samples collected. Drilling included 3,106 feet of AX core drilling, 404 meters in 239 auger holes, and 10,423 meters of RC drilling (125 holes). First metallurgical tests and petrographic work. Initial work identified eight prospects with encouraging geology (Snow, Dome, Quartz, Carolyn, Queen, Upper Lewis, Lower Lewis, and Rochelieu). Drilling at most of these prospects led to identification of the Lewis areas as having the best bulk-mineable potential. Mineral resource estimate completed.   32     Year Company Work Performed Results 1993 Teck Exploration Ltd. D-9 Cat trenching (1,400 meters) and two 500-meter soil lines in Lewis area. Petrographic, fluid inclusion, and metallurgical work. Identified new mineralized areas, updated Mineral resource estimate. 1995 to 2000 Placer Dome 87,383 meters of core, 11,909 meters of RC drilling and 8,493 meters of trenching. Environmental monitoring and assessment. Drilled the American Creek magnetic anomaly (ACMA), discovered the ACMA deposit. Numerous mineral resource estimation iterations. 2001 to 2002 NOVAGOLD 46,495 meters of core, 38,022 meters of RC drilling, 89.5 meters of geotechnical drilling, and 268 meters of water monitoring holes. Filed a preliminary assessment report on the project. Updated resource estimate. 2003 to 2005 Donlin Gold Joint Venture 25,448 meters of core and 5,979 meters of RC drilling. Calcium carbonate exploration drilling; IP lines for facility condemnation studies. Infill drilled throughout the resource area. Discovered a calcium carbonate resource. Poor quality IP data. 2006 Donlin Gold Joint Venture 92,804 meters of core drilling to support mineral resource classification conversion, slope stability, metallurgy, waste rock, carbonate exploration, facilities and port road studies. Geological model and mineral resource update. 2007 Donlin Gold Joint Venture Core drilling totaled 75,257 meters and included resource delineation, geotechnical and engineering, and carbonate exploration. 13 RC holes for monitor wells and pit pump tests totaled 1,043 meters. Improved pit slope parameters, positive hydrogeological results. Carbonate exploration was negative. Updated mineral resource estimate. Completed feasibility study with positive results. 2008 Donlin Gold LLC 108 core holes totaling 33,425 meters for exploration and facility related geotechnical and condemnation studies. Updated resource models. Metallurgical test work: flotation variability and CN leach. 54 test pits and 37 auger holes were also completed for overburden characterization. Resource expansion indicated for East ACMA. CN leach resource potential indicated for the main resource area, Snow, and Dome prospects. Facility sites successfully condemned. Updated resource estimates utilizing applicable data through 2007. 2009 Donlin Gold LLC 19 geotechnical core holes totaling 950 meters in facility sites and to address hydrology.   2010 Donlin Gold LLC Six geotechnical core holes totaling 2,090 meters to evaluate slope stability of expanded pit. Also drilled 90 auger holes totaling 585 meters and dug 59 test pits to further evaluate overburden conditions and gravel supplies within tailings storage facility (TSF) area. Pit slope stability of new pit design remained acceptable. Construction suitability of surficial materials in TSF is evaluated. 2017 Donlin Gold LLC 16 core holes totaling 7,040 meters to test targeted mineralized zones, collect structural data related to mineralization, and collect geotechnical data.   2019 Donlin Gold LLC 30 geotechnical core holes totaling 1,060 meters were drilled as part of a site investigation program in support of detailed dam design.   2020 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.               33     Geology   Regional Geology   The Kuskokwim region of southwestern Alaska is predominately underlain by rocks of the Upper Cretaceous Kuskokwim Group that filled a subsided northeast-trending strike-slip basin between a series of amalgamated terranes. Intermediate composition volcano-plutonic complexes intrude and overlie Kuskokwim Group rocks throughout the region.   Local Geology   The Donlin Gold deposits lie between two regional, northeast-trending, right lateral fault systems: the Denali-Farewell fault system to the south and the Iditarod-Nixon Fork fault system to the north. Undivided Kuskokwim Group sedimentary rocks and granite porphyry complexes are the main rock units.   Property Geology   Greywacke is dominant in the northern part of the area (“northern resource area” comprising Lewis, Queen, Rochelieu, and Akivik), while shale-rich units are common in the southern part of the area (“southern resource area” comprising South Lewis and ACMA).   Gold deposits are associated with an extensive Late Cretaceous–Early Tertiary gold–arsenic–antimony–mercury hydrothermal system. Gold-bearing zones exhibit strong structural and host rock control along north–northeast-trending fracture zones and are best developed where those zones intersect relatively competent host rocks. Mineralized material is most abundant in intrusive dikes and sills, but sedimentary rocks are also mineralized within strong fracture zones.   Geotechnical and Hydrology   A number of geotechnical and hydrological studies have been completed in support of feasibility and environmental reports for Donlin Gold.   Rowland Engineering Consultants performed the geotechnical assessments for the engineering to support design of the port site, airstrip, plant site and interconnecting roads. BGC, Inc (BGC). 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. BGC, CEMI, Hatch Ltd., and SRK, Inc. provided hydrologic studies, design criteria and associated test work for the water treatment plant requirements during construction, operations, and closure. Lorax Environmental performed water quality modeling for the post closure pit lake.   Exploration Potential   The mineral resource defined in the Donlin Gold FS is confined to a portion of the property. We believe there is considerable potential to increase the mineral resources at the Donlin Gold project. Numerous other targets have been identified along the 8-kilometer mineralized gold trend and are defined by surface sampling and various historical drill holes containing significant gold values.   Exploration potential in the vicinity of the open pit design in the Donlin Gold FS includes extensions along strike to the East ACMA, Lewis, and Crooked Creek areas. Mineralization remains open at depth under the current pit limits. Mineralization also remains open to the north of the planned pit and has been tested by shallow trenching and soil sampling, with limited drilling undertaken to date.   Exploration potential at the Donlin Gold project also exists outside the areas that have been the subject of the mine design in the Donlin Gold FS. Gold mineralization is associated with an overall north–northeasterly-trending high level dike/sill complex that has been outlined in the regional aero-magnetics as a magnetic low. The zone, approximately 8 kilometers long, and 4 kilometers wide, consists of a northern, dike-dominated area, and a southern, more sill-dominated area.   34     Mineralization   Southeast-dipping north-northeast-oriented fracture zones are the primary control on gold-bearing vein distribution within the north-northeast mineralized corridors. Composite vein zones or mineralized corridors range up to 30 meters in width and extend for hundreds of meters along strike. Intrusive rocks and to a lesser extent competent massive greywacke are the most favored host rocks, and act as a secondary control on the mineralization. Gold distribution in the deposit closely mimics the intrusive rocks, which contain about 74% of the mineral resource identified in the Donlin Gold FS. Structural zones in competent sedimentary units account for the remaining 26%.   Gold-bearing sulfides occur in both veins and disseminated zones in mafic igneous bodies, rhyodacite dikes and sills, and sedimentary rocks. Quartz-carbonate-sulfide (pyrite, stibnite, and arsenopyrite) veins are the primary mineralized features, but gold also occurs in thin, discontinuous sulfide fracture fillings.   Minor Elements and Deleterious Materials   The most abundant minor elements associated with gold-bearing material are iron, arsenic, antimony, and sulfur. They are contained primarily in the mineral suite associated with hydrothermal deposition of gold, including pyrite, arsenopyrite, realgar, native arsenic, and stibnite. Minor hydrothermal pyrrhotite, marcasite and syngenetic or sedimentary pyrite, also account for some of the iron and sulfur.   Three elements that have processing significance are mercury, chlorine, and fluorine. Graphitic carbon and carbonate minerals also would negatively affect the metallurgical process.   Metallurgy   Sufficient metallurgical test work was completed under the direction of Barrick personnel to support the Donlin Gold FS. Gold is mainly carried by arsenopyrite. Variation is observed in processing behavior between intrusive rocks and sedimentary rocks, but less so between the geographical sources.   Process testing generated development of the following conceptual flowsheet:     ● conventional crushing and grinding;     ● concentration by flotation;     ● pressure oxidation of the concentrate in an autoclave;     ● carbon-in-leach (“CIL”) cyanidation of the oxidized concentrate;     ● carbon strip and regeneration circuits;     ● gold electrowinning; and     ● refining and production of doré bars.   This processing concept incorporates proven commercial unit operations.   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. We have no known reserves under SEC Industry Guide 7. The mineral reserves are summarized in the table below.   Proven and Probable Mineral Reserve Estimate   Reserve Category   Tonnes (thousands)     Gold Grade (grams/tonne)     Contained Gold (thousands of ounces)   Proven     7,683       2.32       573   Probable     497,128       2.08       33,276   Proven and probable     504,811       2.09       33,849     35     Notes:     (1) Mineral reserves are contained within Measured and Indicated pit designs, and supported by a mine plan, featuring variable throughput rates, stockpiling and cut-off optimization. The pit designs and mine plan were optimized on diluted grades using the following economic and technical parameters: Metal price for gold of $975 per ounce; reference mining cost of $1.67 per tonne incremented $0.0031 per tonne per meter with depth from the 220 meter elevation (equates to an average mining cost of $2.14 per tonne), variable processing cost based on the formula 2.1874 x (S%) + 10.65 for each $ per tonne processed; general and administrative cost of $2.27 per tonne processed; stockpile rehandle costs of $0.19 per tonne processed assuming that 45% of mill feed is rehandled; variable recoveries by rock type, ranging from 86.66% in shale to 94.17% in intrusive rocks in the Akivik domain; refining and freight charges of $1.78 per ounce gold; royalty considerations of 4.5%; and variable pit slope angles, ranging from 23º to 43º. The Mineral Reserves are reported in accordance with NI 43-101, which differs from Industry Guide 7. The project is without known reserves under SEC Industry Guide 7. See Cautionary Note to U.S. Investors Regarding Estimates of Measured, Indicated and Inferred Resources and Proven and Probable Reserves, above.     (2) Mineral reserves are reported using an optimized net sales return value based on the following equation: net sales return = Gold grade * Recovery * ($975 – (1.78 + ($975 – 1.78) * 0.045)) – (10.65 + 2.1874 * (S%) + 2.27 + 0.19) and reported in $ per tonne.     (3) The life of mine strip ratio is 5.48. The assumed life-of-mine throughput rate is 53,500 tonnes per day.     (4) Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade and contained metal content.     (5) Mineral reserves are reported on a 100% basis. NOVAGOLD and Barrick each own 50% of the Donlin Gold project. Tonnage and grade measurements are in metric units. Contained gold ounces are reported as troy ounces.   Mineral reserves have been estimated using a long-term gold price assumption of $975 per ounce. Mineral resources are based on a Whittle™ pit optimized for all measured, indicated, and inferred blocks assuming a gold selling price of $1,200 per ounce and are inclusive of reserves.   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. The mineral resources have an effective date of July 11, 2011. The mineral resources are summarized in the table below.   Measured and Indicated Resources Estimate (inclusive of reserves)   Resource Category   Tonnes (thousands)     Gold Grade (grams/tonne)     Contained Gold (thousands of ounces)   Measured     7,731       2.52       626   Indicated     533,607       2.24       38,380   Measured and indicated     541,337       2.24       39,007     Notes:     (1) Mineral resources are inclusive of mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability. See Cautionary Note to U.S. Investors Regarding Estimates of Measured, Indicated and Inferred Resources and Proven and Probable Reserves, above.     (2) Mineral resources are contained within a conceptual measured, indicated and inferred optimized pit shell using the following assumptions: gold price of $1,200 per ounce; variable process cost based on 2.1874 * (sulfur grade) + 10.65; administration cost of $2.29 per tonne; refining, freight & marketing (selling costs) of $1.85 per ounce recovered; stockpile re-handle costs of $0.20 per tonne processed assuming that 45% of mill feed is re-handled; variable royalty rate, based on royalty of 4.5% * (Gold price – selling cost).     (3) Mineral resources have been estimated using a constant net sales return (NSR) cut-off of $0.001 per tonne milled. The net sales return cut-off was calculated using the formula: NSR = Gold grade * Recovery * ($1,200 – (1.85 + ($1,200 – 1.85) * 0.045)) – (10.65 + 2.1874 * (S%) + 2.29 + 0.20) and reported in $ per tonne. The marginal gold cut-off grade would be approximately 0.57 g/t, or the gold grade that would equate to a $0.001 NSR cut-off at these same values.     (4) Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade and contained metal content.     (5) Tonnage and grade measurements are in metric units. Contained gold ounces are reported as troy ounces. See Cautionary Note to U.S. Investors Regarding Estimates of Measured, Indicated and Inferred Resources and Proven and Probable Reserves, above.   Inferred Mineral Resource Estimate   Resource Category   Tonnes (thousands)     Gold Grade (grams/tonne)     Contained Gold (thousands of ounces)   Inferred     92,216       2.02       5,993     Notes:     (1) Inferred resources are in addition to measured and indicated resources. Inferred resources have a great amount of uncertainty as to their existence and whether they can be mined legally or economically. See Cautionary Note to U.S. Investors Regarding Estimates of Measured, Indicated and Inferred Resources and Proven and Probable Reserves, above.     (2) Tonnage and grade measurements are in metric units. Contained gold ounces are reported as troy ounces. See Cautionary Note to U.S. Investors Regarding Estimates of Measured, Indicated and Inferred Resources and Proven and Probable Reserves, above.   36     Feasibility Study and Updates   On December 5, 2011, we announced the results of the Donlin Gold FS which revised the previous 2009 feasibility study with updated mineral reserves and resources, capital costs and operating cost estimates. The Donlin Gold FS also utilizes natural gas as the primary power generation fuel source for the project rather than the original diesel option. Based on the Donlin Gold FS, the project is expected to be a conventional truck-and-shovel open-pit operation. The mine life is estimated to be 27 years based on a nominal processing rate of 59,000 tons (53,500 tonnes) per day. 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 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. The internal rate of return (IRR) at the same gold price is 6.0%. The NPV and IRR calculations exclude sunk costs of $168 million assumed to be spent in Years -6 and -7.   Base Case Project Sensitivity to Gold Price   Gold ($ per ounce)     LOM Cash Flow ($ million) ( 1)     Year -5 NPV5% ($ million) ( 2 )     Year -5 IRR (%) ( 2 )   $ 1,000     $ 2,143     $ (1,342 )     2.3   $ 1,100     $ 4,191     $ (385 )     4.3   $ 1,200     $ 6,197     $ 547       6.0   $ 1,300     $ 8,187     $ 1,465       7.5   $ 1,400     $ 10,166     $ 2,375       8.9   $ 1,500     $ 11,631     $ 3,147       10.2       Summary of Key Evaluation Metrics (Base Case at $1,200 per ounce gold)   Total tonnes mined (million)     3,260   Ore tonnes treated (million)     505   Strip ratio (waste tonnes per ore tonne)     5.48   Gold ounces recovered (million)     30.4   Gold recovery (%)     89.8 %   ($ million)         Gold, net revenue   $ 36,445   Less:         Mining     (8,200 ) Processing     (7,808 ) G&A, community, refining & land     (3,232 ) Costs applicable to sales ( 3 )     (19,240 ) Initial capital ( 1)     (6,511 ) Sustaining capital     (1,505 ) Total capital     (8,016 ) Income taxes     (2,741 ) Reclamation trust fund     (274 ) Salvage     23   Total costs     (30,248 ) Total cash flow ( 1 )   $ 6,197             Payback period (years)     9.2   Operation life (years)     27             Year -5 NPV 5% ( 2 ) ($ million)   $ 547   Year -5 IRR ( 2 )     6.0 %   Notes:     (1) Cash flow after-tax excludes sunk costs of $168 million assumed to be spent in Years -6 and -7.   (2) Reference dates for discounted cash flow metrics are Year -5 (January 1, 2014 per the Donlin Gold FS) and exclude sunk costs.   (3) Costs applicable to sales (US GAAP), excluding Depreciation and Reclamation costs.   37     Operating Cost Estimates       $ per ounce     $ per tonne milled   Mining cost   $ 270     $ 16.24   Process cost     257       15.47   G&A, community, refining & land     107       6.42       $ 634     $ 38.13     Capital Cost Estimates   Initial Capital ($ million)         Mining   $ 345   Site preparation /roads     236   Process facilities     1,326   Tailings     120   Utilities (including natural gas pipeline)     1,302   Ancillary buildings     304   Off-site facilities     243   Total direct costs     3,876   Owners’ costs     414   Indirect costs     1,405   Contingency     984   Total indirect and contingency     2,803   Total project cost   $ 6,679     Sustaining capital requirements are estimated at $1,505 million over the life of the mine.   Planned Mining Operations   The Donlin Gold project will be mined by a conventional truck-and-shovel operation. Initial pioneering and pit development will be undertaken to remove overburden, develop mine access roads suitable for large mining equipment, and “face-up” the initial pit for the large shovel and mining equipment.   Primary loading units for both bulk and selective mining in ore and waste will be large electric-hydraulic shovels, with large front-end loaders as secondary units. Large 360 tonne capacity haul trucks will be used for transporting both ore and waste out of the pit.   Blast hole drilling will be performed by medium-sized rotary and down-the-hole hammer drills with various hole diameters depending on bench height and desired mining selectivity. Reverse circulation (RC) drilling is planned for detailed geologic definition and grade control.   Support equipment will be used for road, bench, and dump maintenance and miscellaneous projects.   Planned Processing Operations   The Donlin Gold project ore will be processed by crushing and grinding, sulfide flotation concentration, concentrate treatment by pressure oxidation (POX) in an autoclave, carbon-in-leach (CIL) cyanide leaching of the oxide concentrate, electrowinning, and refining to produce doré bars on site.   Due to gold being associated with sulfide mineralization, primarily arsenopyrite and pyrite, the ore is considered refractory and requires POX pre-treatment to liberate the gold prior to CIL leaching. Sulfide flotation concentration is required prior to POX to concentrate the sulfide content to a level sufficient to fuel the POX operation.   Concentrate is recovered from the primary rougher flotation followed by regrinding of the tailings prior to secondary rougher flotation. The secondary rougher concentrate is processed through a cleaner scavenger circuit producing a concentrate which is combined with the primary rougher concentrate for treatment by POX. The final tailings from the secondary rougher flotation tailings is thickened, and due to their neutralizing potential, is then utilized to modify the pH of the POX discharge solution prior to being transported to the TSF.   38     The oxidized concentrate from the POX operation would then be cyanide leached in a conventional CIL circuit to produce a pregnant (gold-bearing) solution. Gold from the solution is adsorbed onto activated carbon, which is later stripped (gold desorbed from carbon) in an elution circuit. The pregnant solution after elution is fed through electrowinning (EW) cells, where cathodes are plated with gold-bearing materials, which are periodically removed, dried in retort, and melted in an induction furnace to produce doré bars.   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.   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. In these control systems, mercury will be collected for off-site shipment and management. Chemicals will be added to tailings to limit the potential for mercury releases from the TSF.   Proposed Production Plan and Schedule   Based on the Donlin Gold FS, the operating mine life is estimated to be 27 years with the nominal processing rate of 53,500 tonnes per day. Commercial gold production is proposed in the Donlin Gold FS after a period of 3 to 4 years for project permitting and concurrent engineering and 3.5 to 4 years for construction. The Donlin Gold FS also assumed that project engineering would proceed in parallel with project permitting. In addition, the Donlin Gold board must approve a construction program and budget before construction of the Donlin Gold project can begin. The timing of the initiation of the required engineering work, of the Donlin Gold board’s approval of a construction program and budget, and receipt of all required governmental permits and approvals will determine whether and when construction of the Donlin Gold project will begin.   Preproduction covers the first 15 months of the mine plan, when mining activities will focus on providing sufficient ore exposure for plant start-up. Ore mined during preproduction will be stockpiled and rehandled to the mill during operations. Average mine production increases progressively in the initial years until the peak rate of 425,000 tonnes per day is reached in Year 6.   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.   The potential magnitude of flow in the American Creek drainage, as well as discharge from springs in the valley floors, warrants the construction of an engineered rock drain system below the waste rock facility, including connecting secondary rock (finger) drains in the smaller contributing drainages.   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 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 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. The tailings dam will be constructed of compacted rock fill using the downstream method with a composite liner on the upstream face. The tailings impoundment footprint will be lined with a linear low-density polyethylene liner over a layer of broadly graded silty sand and gravel acting as low permeability bedding material and providing secondary containment. Material for construction will be sourced from the plant site and fuel farm during initial construction and from the open pit for the later raises during operations.   Water Diversion Dams   Water dams are required during the construction period and initial years of operation to protect the lined upstream face of the tailings-starter dam from a significant flood event, to provide a reliable source of fresh water during operation of the process plant, and to minimize runoff into the TSF.   39     Current and Planned On-Site Infrastructure   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.   In the nearby villages, Crooked Creek has approximately 105 residents and Aniak has a population of approximately 500. The workforce for the project would be sourced from the local area, from Alaskan regional centers and from other sources as required.   The project is a greenfield site. The on-site infrastructure for the project includes three main development sites in remote locations: the mine and plant site area (including the power plant), the permanent camp, and the airstrip. The plant site, power plant and fuel tank farm will be on a ridge above the proposed TSF. The layout of the plant site was designed to take maximum advantage of the natural topography. The layout also provides for efficient movement of equipment and material products around the site.   Planned Off-site Infrastructure   The off-site infrastructure for the project includes three main development sites in remote locations: the Jungjuk Port site and mine access road; the natural gas pipeline; and the Bethel Port facilities. 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 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.   Power   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. The power plant consists of two equal halves, each consisting of six reciprocating engines, and a separate steam turbine. The total generation facility is nominally rated at 182 MW initially and will increase to 215 MW after four years with the addition of two more generators (one in each half) to allow for N+2 redundancy, thus allowing planned maintenance and predicted outages without cutting back production.   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 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. No additional compression along the pipeline route would be required. The pipeline would have capacity to transport approximately 2 million cubic meters per day of natural gas.   Water   Water requirements for the proposed project have been summarized in a Water Resources Management Plan, which has been subject to review by state and federal agencies. Water primarily will be sourced from the two drainages (American and Anaconda Creeks) within the mine footprint and pit dewatering. 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 proposed reservoir in Snow Gulch.   40     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.   Markets   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. Under the LLC Agreement, the manager shall give the members prompt notice in advance of the delivery date upon which their respective shares of gold production will be available.   Since there are a large number of available gold purchasers, the members should not be dependent upon the sale of gold to any one customer. 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 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.   Taxation   The Donlin Gold FS contemplates that the following taxes may be levied on the project:     ● Federal income tax – the greater of the U.S. regular tax of 35% or alternative minimum tax of 20%.     ● Alaska state income tax – 9.4% of net income or alternative minimum tax of 18% of federal alternative minimum tax.     ● Alaska state mining license tax – 7% of taxable mining income, less depletion. There is a 3.5-year tax holiday on the mining license tax.   Income tax becomes payable after deductions for capital allowances. See Item 8, Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note 1 4 below, for subsequent events that may affect the taxes applicable to the project.   Financial Analysis   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 the Donlin Gold FS. Assumptions in the model comprised:     ● For discounted cash flow (or NPV) purposes, the model is based from Year -5 (January 1, 2014 per the Donlin Gold FS). Estimates were prepared for all the individual elements of cash revenue and cash expenditures for ongoing operations.     ● Estimated cash flows from revenue are based on a gold price of $1,200 per ounce as provided by Donlin Gold. The pit has been optimized at a gold price of $975 per ounce, which was the guidance in effect at the time the pit optimization work was completed.     ● Gold recovery is estimated to average 89.8% over the LOM based on work and testing performed for feasibility study and feasibility study update purposes.     ● Doré refining and shipping charges were estimated at $1.02 per ounce based on actual refining charges for Barrick’s Goldstrike operations and a quotation for transportation and insurance costs from the Donlin Gold project site to a U.S.-based refinery. An additional 0.1% of gold produced from the mine is included in refining costs. This amount represents the refiner’s estimate of the loss of gold that will occur during the refining process.     ● The current hydrometallurgical process selection renders any contained silver into a greater refractory state, which provides less than 10% silver recovery through standard metal leaching. As a consequence, no silver credit was applied to the project.     ● Assets will be sold over the course of the mine life, when they are no longer required for project-based work, as well as at the end of the mine life. Total recovered value from these sales is estimated at approximately $23 million.     ● Reclamation and closure costs were estimated at $274 million to be funded over the construction and operating period to fund closure and post-closure activities.     ● Inventory is included in the financial model as cash outflows in the year before start-up of operations.   Current Activities   For information on current activities, see section Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , below.     41     Item 3.     Legal Proceedings   Periodically, we are a party to or otherwise involved in legal proceedings arising in the normal course of business. Management does not believe that there is any pending or threatened proceeding against the Company which, if determined adversely, would have a material adverse effect on our financial position, liquidity or results of operations. 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   Pursuant to Section 1503(a) of the Dodd-Frank Act, issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose specified information about mine health and safety in their periodic reports. These reporting requirements are based on the safety and health requirements applicable to mines under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”) which is administered by the U.S. Department of Labor’s Mine Safety and Health Administration (MSHA). During the fiscal year ended November 30, 2020, the Company and its subsidiaries were not subject to regulation by MSHA under the Mine Act and thus no disclosure is required under Section 1503(a) of the Dodd-Frank Act. Donlin Gold LLC is the operator of the Donlin Gold project. Donlin Gold LLC is not a “subsidiary” of the Company for purposes of Section 1503(a) of the Dodd-Frank Act because the Company does not control Donlin Gold LLC.                                             42 NOVAGOLD RESOURCES INC.     PART II         Item 5.     Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities   Market Information   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 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.   Dividends   We have never declared or paid dividends on our common shares and our current business plan requires that, for the foreseeable future, any future earnings be reinvested to finance growth and development of our business. We will pay dividends on our common shares only if and when declared by our Board. In determining whether to declare dividends, the Board will consider our financial condition, results of operations, working capital requirements, future prospects, and other factors it considers relevant.   Certain Canadian Federal Income Tax Considerations for U.S. Residents   The following summarizes certain Canadian federal income tax consequences generally applicable under the Income Tax Act (Canada) and the regulations enacted thereunder (collectively, the “Canadian Tax Act”) and the Canada-United States Income Tax Convention (1980) (the “Convention”) to the holding and disposition of common shares.   This comment is restricted to holders of common shares each of whom, at all material times for the purposes of the Canadian Tax Act and the Convention, (i) is resident solely in the United States, (ii) is entitled to the benefits of the Convention, (iii) holds all common shares as capital property, (iv) deals at arm’s length with and is not affiliated with NOVAGOLD, (v) does not and is not deemed to use or hold any common shares in a business carried on in Canada, (vi) is not an insurer that carries on business in Canada and elsewhere and (vii) is not a “specified shareholder” (as defined in subsection 18(5) of the Canadian Tax Act) of NOVAGOLD (each such holder, a “U.S. Resident Holder”).   Certain U.S.-resident entities that are fiscally transparent for United States federal income tax purposes (including limited liability companies) may not in all circumstances be entitled to the benefits of the Convention. Members of or holders of an interest in such an entity that holds common shares should consult their own tax advisers regarding the extent, if any, that the benefits of the Convention will extend to the entity in respect of its common shares. This summary does not deal with special situations such as the particular circumstances of traders or dealers or holders who have entered into a “derivative forward agreement” (as defined in the Canadian Tax Act) in respect of the common shares. Such holders should consult their own tax advisors.   Generally, a U.S. Resident Holder’s common shares will be considered to be capital property of a U.S. Resident Holder provided that the U.S. Resident Holder does not use the common shares in the course of carrying on a business of trading and dealing in securities and has not acquired the common shares in one or more transactions considered to be an adventure or concern in the nature of trade (i.e. speculation).   This summary is based on the current provisions of the Canadian Tax Act and the Convention in effect on the date hereof, all specific proposals to amend the Canadian Tax Act and Convention publicly announced by or on behalf of the Minister of Finance (Canada) on or before the date hereof, and the current published administrative and assessing policies of the Canada Revenue Agency (CRA). It is assumed that all such amendments will be enacted as currently proposed, and that there will be no other material change to any applicable law or administrative or assessing practice, whether by judicial, legislative, governmental, or administrative decision or action, although no assurance can be given in these respects. Except as otherwise expressly provided, this summary does not take into account any provincial, territorial or foreign tax considerations, which may differ materially from those set out herein.   Currency conversion   For the purposes of the Canadian Tax Act, all amounts relating to the acquisition, holding or disposition of common shares, including dividends and proceeds of disposition must be determined in Canadian dollars based on the daily exchange rate of the Bank of Canada on the particular day, or such other rate of exchange as acceptable to the CRA.   43 NOVAGOLD RESOURCES INC.     Dividends on common shares   Under the Canadian Tax Act, dividends on shares paid or credited to a non-resident of Canada will be subject to Canadian withholding tax at the rate of 25% of the gross amount of the dividends. Under the Convention, a U.S. resident will generally be subject to Canadian withholding tax at the rate of 15% of the gross amount of such dividends unless the beneficial owner is a company which owns at least 10% of the voting shares of NOVAGOLD at that time, in which case the rate of Canadian withholding tax is generally reduced to 5%.   Disposition of common shares   A U.S. Resident Holder will not be subject to tax under the Canadian Tax Act in respect of any capital gain realized by such U.S. Resident Holder on a disposition of common shares unless the common shares constitute “taxable Canadian property” (as defined in the Canadian Tax Act) of the U.S. Resident Holder at the time of disposition and the U.S. Resident Holder is not entitled to relief under the Convention.   Generally, a U.S. Resident Holder’s common shares will not constitute “taxable Canadian property” of the U.S. Resident Holder at a particular time at which the common shares are listed on a “designated stock exchange” (which currently includes the TSX and NYSE American) unless at any time during the 60-month period immediately preceding a disposition both of the following conditions are true:     (i) the U.S. Resident Holder, any one or more persons with whom the U.S. Resident Holder does not deal at arm’s length, or partnership in which the U.S. Resident Holder or persons with whom the U.S. Resident Holder did not deal at arm’s length holds a membership interest directly or indirectly through one or more partnerships, alone or in any combination, owned 25% or more of the issued shares of any class or series of the capital stock of NOVAGOLD; and     (ii) more than 50% of the fair market value of the common shares was derived directly or indirectly from, or from any combination of, real or immovable property situated in Canada, “Canadian resource properties” (as defined in the Canadian Tax Act), “timber resource properties” (as defined in the Canadian Tax Act), or options in respect of, interests in or civil law rights in, such properties whether or not it exists.   In certain circumstances, a common share may also be deemed to be “taxable Canadian property” for purposes of the Canadian Tax Act.    Even if the common shares constitute “taxable Canadian property” to a U.S. Resident Holder, under the Convention, such a U.S. Resident Holder will not be subject to tax under the Canadian Tax Act on any capital gain realized by such holder on a disposition of such common shares, provided the value of such common shares is not derived principally from real property situated in Canada (within the meaning of the Convention).   U.S. Resident Holder s whose shares are taxable Canadian property should consult their own tax advisors.   Certain United States Federal Income Tax Considerations for U.S. Holders   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. U.S. 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.   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.   44 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. A U.S. 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. U.S. 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.   U.S. 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   None.   Repurchase of Securities   None.                             45 NOVAGOLD RESOURCES INC.     Item 6.     Selected Financial Data   The selected financial data set forth in the table below should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and our audited Consolidated Financial Statements and the Notes thereto.       Years ended November 30,   ($ thousands, except per share)   2020     2019     2018     2017     2016   Loss from operations   $ (33,237 )   $ (26,812 )   $ (27,291 )   $ (32,021 )   $ (28,998 )                                           Net loss from continuing operations   $ (33,564 )   $ (27,761 )   $ (31,466 )   $ (36,915 )   $ (32,697 ) Net loss from discontinued operations     —       —       (81,299 )     (2,101 )     (1,149 ) Net loss   $ (33,564 )   $ (27,761 )   $ (112,765 )   $ (39,016 )   $ (33,846 )                                           Net loss per common share – basic and diluted                                         Continuing operations   $ (0.10 )   $ (0.09 )   $ (0.10 )   $ (0.11 )   $ (0.10 ) Discontinued operations     —       —       (0.25 )     (0.01 )     (0.01 )     $ (0.10 )   $ (0.09 )   $ (0.35 )   $ (0.12 )   $ (0.11 )       As of November 30,       2020     2019     2018     2017     2016   Total assets   $ 224,441     $ 245,835     $ 260,929     $ 398,661     $ 408,261   Long-term liabilities   $ 110,205     $ 104,538     $ 96,581     $ 111,210     $ 104,947   Shareholders’ equity   $ 110,727     $ 137,954     $ 160,668     $ 284,029     $ 300,263                                             46 NOVAGOLD RESOURCES INC.     Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations   The following discussion and analysis of our financial condition and results of operations constitutes management’s review of the factors that affected our financial and operating performance for the years ended November 30, 20 20 and 201 9 . This discussion should be read in conjunction with the consolidated financial statements and notes thereto contained elsewhere in this report. 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 .   Overview   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.   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.   47 NOVAGOLD RESOURCES INC.     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, project changes made by Donlin Gold LLC, or any impact on operations from COVID-19.   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.   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.   48 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       Years ended November 30,   ($ thousands, except per share)   2020     2019     2018   General and administrative   $ (18,735 )   $ (16,321 )   $ (18,493 ) Equity loss - Donlin Gold     (14,502 )     (10,491 )     (8,798 ) Loss from operations   $ (33,237 )   $ (26,812 )   $ (27,291 )                           Net loss from continuing operations   $ (33,564 )   $ (27,761 )   $ (31,466 ) Net loss from discontinued operations, net of tax     —       —       (81,299 ) Net loss   $ (33,564 )   $ (27,761 )   $ (112,765 )                           Net loss per common share – basic and diluted                         Continuing operations   $ (0.10 )   $ (0.09 )   $ (0.10 ) Discontinued operations     —       —       (0.25 )     $ (0.10 )   $ (0.09 )   $ (0.35 )   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 ($0.10 per share) in 2020, primarily due to the increased Loss from operations and lower interest income, partially offset by a recovery of income taxes and lower interest expense . Lower interest rates in 2020 reduced interest income and the interest accrued on the promissory note payable to Barrick. The recovery of income taxes results from the Company’s intention to file a consolidated U.S. income tax return for its U.S. subsidiaries commencing with the year ended November 30, 2020 and in future periods.   Liquidity, Capital Resources and Capital Requirements       As of November 30,           ($ thousands)   2020     2019     Change   Cash and cash equivalents   $ 60,906     $ 67,549     $ (6,643 ) Term deposits     61,000       81,000       (20,000 )     $ 121,906     $ 148,549     $ (26,643 )   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.   49 NOVAGOLD RESOURCES INC.     The net changes in total Cash and cash equivalents and Term deposits resulted from:       Years ended November 30,   ($ thousands)   2020     2019     2018   Continuing operations                         Operating activities   $ (10,020 )   $ (6,127 )   $ (10,392 ) Funding of Donlin Gold     (15,276 )     (11,122 )     (8,907 ) Withholding tax on share-based compensation     (1,652 )     (1,197 )     —   Other     305       (9 )     (99 )       (26,643 )     (18,455 )     (19,398 ) Discontinued operation                         Galore Creek     —       —       102,448       $ (26,643 )   $ (18,455 )   $ 83,050     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 $13 million for corporate general and administrative costs. At present, we believe we have sufficient working capital available for the next twelve-month period to cover anticipated funding of the Donlin Gold project and corporate general and administrative costs.   Additional capital will be necessary if a decision to commence engineering and construction is reached for the Donlin Gold project. Future financings to fund construction are anticipated through debt, equity, project specific debt, and/or other means. Our continued operations are dependent on our ability to obtain additional financing or to generate future cash flows. However, there can be no assurance that we will be successful in our efforts to raise additional capital on terms favorable to us, or at all. For further information, see section Item 1A, Risk Factors – Our ability to continue the exploration, permitting, development, and construction of the Donlin Gold project, and to continue as a going concern, will depend in part on our ability to obtain suitable financing , above.   Contractual Obligations   Our contractual obligations as of November 30, 2020 were as follows:     ($ thousands)   Total     Less than 1 year     1-3 years     3-5 years     More than 5 years   Remediation   $ 182     $ 182     $ —     $ —     $ —   Office and equipment leases     611       207       420       7       —   Promissory note     109,801       —       —       —       109,801       $ 110,594     $ 389     $ 420     $ 7     $ 109,801     Off-Balance Sheet Arrangements   The Company does not have any material off-balance sheet arrangements required to be disclosed in this Annual Report on Form 10-K.   Outstanding share data   As of January 20, 2021, the Company had 331,320,620 common shares issued and outstanding. Also, as of January 20, 2021, the Company had: i) a total of 11,083,170 stock options outstanding; 9,557,572 of those stock options with a weighted-average exercise price of $5.22 and the remaining 1,525,598 with a weighted-average exercise price of C$6.80; and ii) 1,583,100 PSUs and 285,717 deferred share units (DSUs) outstanding. Upon exercise of the foregoing convertible securities, the Company would be required to issue a maximum of 13,747,537 common shares.   50 NOVAGOLD RESOURCES INC.     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 decrease in net loss primarily resulted from the recovery of income taxes.   Accounting Developments   For a discussion of Recently Issued Accounting Pronouncements, see Note 2 to the Consolidated Financial Statements .   Critical Accounting Policies   We believe the following accounting policies are critical to our financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, or expense being reported.   Contingent note receivable   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.   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. We 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 investment in Donlin Gold LLC. Donlin Gold LLC is a non-publicly traded equity investee holding exploration and development projects. The Company reviews and evaluates its investment in affiliates for other than temporary impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Events that could indicate impairment of an investment in affiliates include a significant decrease in long-term expected gold price, a significant increase in expected operating or capital costs, unfavorable exploration results or technical studies, a significant decrease in reserves, a loss of significant mineral claims, or a change in the development plan or strategy for the project. Asset impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset. If the underlying assets are not recoverable, an impairment loss is measured and recorded based on the difference between the carrying amount of the investee and its estimated fair value which may be determined using a discounted cash flow model.   Income taxes   We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under the asset and liability method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion or the entire deferred tax asset will not be recognized.   Share-based compensation   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 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. The fair value 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.   51 NOVAGOLD RESOURCES INC.     We grant members of our board of directors DSUs whereby each DSU entitles the directors to receive one common share of the Company when they retire from service with the Company. The fair value of the DSUs is measured at the date of the grant in amounts ranging from 50% to 100% of directors’ annual retainers at the election of the directors. The fair value is recognized in the Consolidated Statements of Loss over the related service period.   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 1.252 million non-vested PSU awards with $3.1 million of unrecognized compensation cost will be expensed over a period of approximately two years.