NOVAGOLD RESOURCES INC 10-K

Item 9A. Controls and Procedures   An evaluation was performed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K. Based on the foregoing, our management concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.   There was no change in our internal control over financial reporting that occurred during the year ended November 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.   REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING   Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of our assets are made in accordance with management’s authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.   Management conducted its evaluation of the effectiveness of our internal controls over financial reporting based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of November 30, 2020.   The effectiveness of our assessment of internal control over financial reporting as of November 30, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.   Item 9B. Other Information   None.         73 NOVAGOLD RESOURCES INC.     PART III         Item 10.     Directors, Executive Officers and Corporate Governance   The information in our definitive Proxy Statement, filed pursuant to Regulation 14A promulgated under the Exchange Act for the 2021 Annual Meeting of Shareholders (the “2021 Proxy Statement”) regarding directors and executive officers and Section 16 reporting information appearing under the headings “Election of Directors” “Information Concerning The Board Of Directors And Executive Officers” and “Security Ownership Of Certain Beneficial Owners And Management And Related Shareholder Matters.” is incorporated by reference in this section. Finally, the information in our 2021 Proxy Statement regarding the Audit Committee under the heading “Statement of Corporate Governance Practices” is incorporated herein by reference.   We have adopted a Code of Business Conduct and Ethics that applies to our Chief Executive Officer, Chief Financial Officer and Corporate Controller or persons performing similar functions. This Code of Business Conduct and Ethics is posted on our website (www.novagold.com). We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on our website, at the address specified above.   Our Code of Business Conduct and Ethics, and charters for each Committee of our Board are also available on our website. The Code of Business Conduct and Ethics and charters are also available in print to any shareholder who submits a request to: Corporate Secretary, NOVAGOLD RESOURCES INC., 201 South Main Street, Suite 400, Salt Lake City, UT, USA. 84111.   Information on our website is not deemed to be incorporated by reference into this Annual Report on Form 10-K.   Item 11.     Executive Compensation   The information appearing in our 2021 Proxy Statement under the headings. “Compensation Committee Interlocks and Insider Participation”, “Compensation Discussion & Analysis”, “Tabular Disclosure of Executive Compensation”, “Non-Executive Director Compensation” and “Compensation Committee Report” is incorporated by reference in this section.   Item 12.     Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters   The information appearing in our 2021 Proxy Statement under the heading “Security Ownership Of Certain Beneficial Owners And Management And Related Shareholder Matters” is incorporated herein by reference.   The following table provides information as of November 30, 2020, regarding compensation plans under which equity securities of the Company are authorized for issuance.   Plan category   Number of securities to be issued upon exercise of outstanding options, warrants and rights     Weighted-average exercise price of outstanding options, warrants and rights (US$)     Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))       (a)     (b)     (c)   Equity compensation plans approved by security holders     12,367,126     $4.59       27,282,265   Equity compensation plans not approved by security holders     —       —       —   Total     12,367,126     $4.59       27,282,265       74 NOVAGOLD RESOURCES INC.     Item 13.     Certain Relationships and Related Transactions, and Director Independence   The information appearing in our 2021 Proxy Statement under the heading “Interest Of Informed Persons In Material Transactions”, “Board of Directors” under the heading “Statement of Corporate Governance Practices” is incorporated herein by reference.   Item 14.     Principal Accountant Fees and Services   The information appearing in our 2021 Proxy Statement regarding Audit Fees, Audit-Related Fees, Tax Fees, All Other Fees and Audit Committee Pre-Approval Policies under the subheading “Appointment of Auditors” is incorporated herein by reference.                                   75 NOVAGOLD RESOURCES INC.     PART IV         Item 15.     Exhibits and Financial Statement Schedules   (a)(1) Financial Statements     Page Reports of Independent Registered Public Accounting Firm 53 Consolidated Balance Sheets 55 Consolidated Statements of Loss and Comprehensive Loss 56 Consolidated Statements of Cash Flows 57 Consolidated Statements of Equity 58 Notes to Consolidated Financial Statements 59             76     (a)(2) Financial Statement Schedules   Schedule A – The Financial Statements of Donlin Gold LLC as of November 30, 2020 and 2019 and for the years ended November 30, 2020, 2019 and 2018.   No other financial statement schedules are filed as part of this report because such schedules are not applicable or the required information is shown in the Consolidated Financial Statements or Notes thereto. See Item 8. Financial Statements and Supplementary Data .   (a)(3) Executive Compensation Plans and Arrangements   Employment Agreement between the Registrant and Gregory A. Lang, dated January 9, 2012, identified in exhibit list below.   Employment Agreement between NOVAGOLD Resources Alaska, Inc. (a wholly-owned subsidiary of the Registrant) and Gregory A. Lang dated January 9, 2012, identified in exhibit list below.   Employment Agreement between NOVAGOLD USA, Inc. and David Ottewell, dated September 10, 2012, identified in exhibit list below.   2004 Stock Award Plan of NOVAGOLD Resources Inc. (as amended) identified in exhibit list below.   NOVAGOLD Resources Inc. Employee Share Purchase Plan identified in exhibit list below.   NOVAGOLD Resources Inc. 2009 Performance Share Unit Plan identified in exhibit list below.   NOVAGOLD Resources Inc. 2009 Non-Employee Directors Deferred Share Unit Plan identified in exhibit list below.   (b) Exhibits   Exhibit No.   Description       3.1   Certificate of Continuance (British Columbia) dated June 10, 2013 (incorporated by reference to Exhibit 99.1 to the Form 6-K dated June 19, 2013) 3.2   Certificate of Discontinuance (Nova Scotia) dated June 10, 2013 (incorporated by reference to Exhibit 99.2 to the Form 6-K dated June 19, 2013) 3.3   Notice of Articles (British Columbia) dated June 10, 2013 (incorporated by reference to Exhibit 99.3 to the Form 6-K dated June 19, 2013) 3.4   Articles of NOVAGOLD RESOURCES INC. dated June 20, 2013 (incorporated by reference to Exhibit 99.4 to the Form 6-K dated June 19, 2013)   77 NOVAGOLD RESOURCES INC.     4.1   Description of Common Shares 10.1   Amendment dated January 13, 2010 to Limited Liability Company Agreement dated December 1, 2007 between Donlin Gold LLC, Barrick Gold U.S. Inc. and NOVAGOLD Resources Alaska, Inc. (incorporated by reference to Exhibit 10.2 to Registrant’s Annual Report on Form 10-K for the year ended November 30, 2013, filed with the Securities and Exchange Commission on February 12, 2014)  10.2   Limited Liability Company Agreement dated December 1, 2007 between Donlin Gold LLC, Barrick Gold U.S. Inc. and NOVAGOLD Resources Alaska, Inc. (incorporated by reference to Exhibit 10.8 to Registrant’s Annual Report on Form 10-K for the year ended November 30, 2013, filed with the Securities and Exchange Commission on February 12, 2014) 10.3   2004 Stock Award Plan of NOVAGOLD Resources Inc. (as amended) (incorporated by reference to Appendix A to Registrant’s definitive proxy statement, filed with the Securities and Exchange Commission on March 26, 2020) 10.4   NOVAGOLD Resources Inc. Employee Share Purchase Plan (incorporated by reference to Exhibit 10.12 to Registrant’s Annual Report on Form 10-K for the year ended November 30, 2013, filed with the Securities and Exchange Commission on February 12, 2014) 10.5   NOVAGOLD Resources Inc. 2009 Performance Share Unit Plan (as amended) (incorporated by reference to Appendix C to Registrant’s definitive proxy statement, filed with the Securities and Exchange Commission on March 26, 2020) 10.6   NOVAGOLD Resources Inc. 2009 Non-Employee Directors Deferred Share Unit Plan (as amended) (incorporated by reference to Appendix E to Registrant’s definitive proxy statement, filed with the Securities and Exchange Commission on March 26, 2020) 10.7   Employment Agreement between the Registrant and Gregory A. Lang dated January 9, 2012. (incorporated by reference to Exhibit 10.15 to Registrant’s Annual Report on Form 10-K for the year ended November 30, 2013, filed with the Securities and Exchange Commission on February 12, 2014) 10.8   Employment Agreement between the Registrant’s wholly-owned subsidiary, NovaGold USA, Inc., and David Ottewell, dated September 10, 2012. (incorporated by reference to Exhibit 10.17 to Registrant’s Annual Report on Form 10-K for the year ended November 30, 2013, filed with the Securities and Exchange Commission on February 12, 2014) 10.9   Amendment dated July 15, 2010 to Limited Liability Company Agreement dated December 1, 2007 between Donlin Gold LLC, Barrick Gold U.S. Inc. and NOVAGOLD Resources Alaska, Inc. (incorporated by reference to Exhibit 10.18 to Registrant’s Annual Report on Form 10-K for the year ended November 30, 2013, filed with the Securities and Exchange Commission on February 12, 2014) 10.10   Amendment dated June 1, 2011 to Limited Liability Company Agreement dated December 1, 2007 between Donlin Gold LLC, Barrick Gold U.S. Inc. and NOVAGOLD Resources Alaska, Inc. (incorporated by reference to Exhibit 10.19 to Registrant’s Annual Report on Form 10-K for the year ended November 30, 2013, filed with the Securities and Exchange Commission on February 12, 2014) 10.11   Employment Agreement between the Registrant’s wholly-owned subsidiary, NOVAGOLD Resources Alaska, Inc., and Gregory A. Lang, dated January 9, 2012. (incorporated by reference to Exhibit 10.20 to Registrant’s Annual Report on Form 10-K for the year ended November 30, 2013, filed with the Securities and Exchange Commission on February 12, 2014) 10.12 *   Share Purchase Agreement, dated July 25, 2018, by and among NOVAGOLD RESOURCES INC., Newmont Mining Corporation and Newmont Canada FN Holdings ULC (incorporated by reference to Exhibit 99.3 of the Form 8-K/A, filed with the Securities and Exchange Commission on October 3, 2018) 21.1   Subsidiaries of the registrant 23.1   Consent of PricewaterhouseCoopers LLP 23.2   Consent of Kirk Hanson 23.3   Consent of Wood Canada Limited  23.4   Consent of Clifford Krall    78 NOVAGOLD RESOURCES INC.     31.1   Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2   Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1   Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2   Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101   The following materials are filed herewith: (i) Inline XBRL Instance, (ii) Inline XBRL Taxonomy Extension Schema, (iii) Inline XBRL Taxonomy Extension Calculation, (iv) XBRL Taxonomy Extension Labels, (v) XBRL Taxonomy Extension Presentation, and (vi) Inline XBRL Taxonomy Extension Definition. 104   Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. *   Confidential treatment has been granted for certain portions of this Exhibit pursuant to Rule 24b-2 of the Exchange Act, which portions have been omitted and filed separately with the SEC   Item 16.     Form 10-K Summary   None       79 NOVAGOLD RESOURCES INC.       SIGNATURES   Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.     NOVAGOLD RESOURCES INC.       By: /s/ Gregory A. Lang                                       Name: Gregory A. Lang   Title: President and Chief Executive Officer   Date: January 27, 2021   Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:   Signature   Title Date         /s/ Gregory A. Lang   President, Chief Executive Officer and Director (Principal Executive Officer) January 27, 2021         /s/ David A. Ottewell   Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) January 27, 2021         /s/ Thomas S. Kaplan   Board Chair January 27, 2021         /s/ Elaine Dorward-King   Director January 27, 2021         /s/ Sharon Dowdall   Director January 27, 2021         /s/ Diane Garrett   Director January 27, 2021         /s/ Igor Levental   Director January 27, 2021         /s/ Kalidas Madhavpeddi   Director January 27, 2021         /s/ Clynton R. Nauman   Director January 27, 2021         /s/ Ethan Schutt    Director January 27, 2021         /s/ Anthony P. Walsh   Director January 27, 2021     80     Item 15. (a)(2) Schedule A   Report of Independent Registered Public Accounting Firm   To the Shareholders and Board of Directors of Donlin Gold LLC   Opinion on the Financial Statements   We have audited the accompanying balance sheets of Donlin Gold LLC (the Company) as of November 30, 2020 and 2019, and the related statements of loss and comprehensive loss, cash flows and equity for each of the three years in the period ended November 30, 2020, including the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended November 30, 2020 in conformity with accounting principles generally accepted in the United States of America.   Basis for Opinion   These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.   We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.   Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.   (signed) PricewaterhouseCoopers LLP   Chartered Professional Accountants   Vancouver, British Columbia, Canada January 20, 2021   We have served as the Company's auditor since 2013.     A-1     DONLIN GOLD LLC BALANCE SHEETS (U.S. dollars in thousands)       At November 30,       2020     2019                     ASSETS   Cash and cash equivalents   $ 4,672     $ 6,023   Inventory     46       50   Accounts receivable     25       —   Prepaid expenses     564       156   Current assets     5,307       6,229   Right of use assets (note 3)     351       —   Plant and equipment (note 4)     2,330       924   Mineral property (note 5)     65,230       65,384   Total assets   $ 73,218     $ 72,537                     LIABILITIES   Accounts payable and accrued liabilities   $ 2,193     $ 3,361   Lease obligations (note 3)     165       —   Due to related parties (note 6)     183       112   Current liabilities     2,541       3,473   Lease obligations (note 3)     216       —   Reclamation and remediation (note 7)     1,230       1,384   Total liabilities     3,987       4,857                     Commitments and contingencies (notes 3 and 8)                                   EQUITY   Partners’ contributions     445,556       415,002   Accumulated deficit     (376,325 )     (347,322 ) Total equity     69,231       67,680   Total liabilities and equity   $ 73,218     $ 72,537     The accompanying notes are an integral part of these financial statements.   A-2     DONLIN GOLD LLC STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (U.S. dollars in thousands)       Years ended November 30,       2020     2019     2018                             Operating expenses:                         Drilling, studies and engineering   $ 17,641     $ 9,410     $ 4,780   General and administrative     4,193       4,127       4,513   Mineral property leases     2,885       3,249       2,346   Permitting and environmental     2,106       2,128       4,231   Community relations     1,853       1,954       1,699   Depreciation     325       114       26   Loss from operations     29,003       20,982       17,595                             Net loss and comprehensive loss   $ (29,003 )   $ (20,982 )   $ (17,595 ) The accompanying notes are an integral part of these financial statements.                   A-3     DONLIN GOLD LLC STATEMENTS OF CASH FLOWS (U.S. dollars in thousands)       Years ended November 30,       2020     2019     2018                             Operating activities:                         Net loss   $ (29,003 )   $ (20,982 )   $ (17,595 ) Adjustments:                         Depreciation     325       114       26   Changes in operating assets and liabilities:                         Prepaid expenses     (408 )     (22 )     8   Inventory     4       (50 )     —   Accounts receivable     (25 )     —       —   Accounts payable and accrued liabilities     (1,169 )     2,037       (650 ) Net cash used in operating activities     (30,276 )     (18,903 )     (18,211 )                           Investing activities:                         Capital expenditures - plant and equipment     (1,629 )     (927 )     —   Net cash used in investing activities     (1,629 )     (927 )     —                             Financing activities:                         Partners’ contributions     30,554       22,244       17,812   Net cash provided from financing activities     30,554       22,244       17,812                             Increase/(Decrease) in cash during the year     (1,351 )     2,414       (399 ) Cash at beginning of year     6,023       3,609       4,008   Cash at end of year   $ 4,672     $ 6,023     $ 3,609     The accompanying notes are an integral part of these financial statements.     A-4     DONLIN GOLD LLC STATEMENTS OF EQUITY (U.S. dollars in thousands)       Barrick contributions     NOVAGOLD contributions     Accumulated deficit     Total equity                                     December 1, 2017   $ 187,473     $ 187,473     $ (308,745 )   $ 66,201                                     Partners’ cash contribution     8,906       8,906       —       17,812   Net loss     —       —       (17,595 )     (17,595 ) November 30, 2018   $ 196,379     $ 196,379     $ (326,340 )   $ 66,418                                     Partners’ cash contribution     11,122       11,122       —       22,244   Net loss     —       —       (20,982 )     (20,982 ) November 30, 2019   $ 207,501     $ 207,501     $ (347,322 )   $ 67,680                                     Partners’ cash contribution     15,277       15,277       —       30,554   Net loss     —       —       (29,003 )     (29,003 ) November 30, 2020   $ 222,778     $ 222,778     $ (376,325 )   $ 69,231     The accompanying notes are an integral part of these financial statements.               A-5     DONLIN GOLD LLC NOTES TO FINANCIAL STATEMENTS (U.S. dollars in thousands)   NOTE 1 – NATURE OF OPERATIONS AND ECONOMIC DEPENDANCE   On December 1, 2007, Barrick Gold U.S. Inc. (“Barrick”) and NOVAGOLD Resources Alaska, Inc. (“NOVAGOLD”), formed Donlin Gold LLC, a Delaware limited liability corporation, (the “Company”) to advance the Donlin Gold Project in Alaska. Each of Barrick and NOVAGOLD own a 50% interest in the Company. Donlin Gold LLC has a board of four directors, with two nominees selected by each company. All significant decisions related to Donlin Gold LLC require the approval of both companies. The Company currently depends on Barrick and NOVAGOLD for all of its funding and has received commitments from its shareholders that they will fund the Company for the next twelve months.   The Company’s Board of Directors approved the Project's Updated Feasibility Study in July 2012. The Company subsequently initiated the permitting process.  The U.S. Army Corps of Engineers (the “Corps”) issued the final Environmental Impact Study (EIS) on April 27, 2018. On August 13, 2018, the Corps and the Bureau of Land Management (BLM) issued a joint Federal Record of Decision (ROD) for the Donlin Gold project along with their respective federal permit authorizations.  Several major State of Alaska permits have also issued, including the approval of the Donlin Gold Reclamation and Closure Plan, final Waste Management Permit, Water Discharge permit, Title 16 Fish Habitat permits for the mine area and right of way agreements with the State and BLM. At the close of 2020, the water rights authorizations have completed their public notice process and the state pipeline right-of-way authorization has undergone a reconsideration request and also completed the public comment process.    NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   Presentation   These financial statements are presented in United States dollars ($) and have been prepared in accordance with accounting principles generally accepted in the United States (GAAP).   Use of estimates   The preparation of the Company’s financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring the use of management estimates and assumptions relate to environmental, reclamation and closure obligations. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results will differ from amounts estimated in these financial statements.   Plant and equipment   On initial recognition, plant and equipment are recorded at cost subject to a ten thousand dollar threshold for capitalization. Plant and equipment are subsequently measured at cost less accumulated depreciation. Depreciation is recorded over the estimated useful life of the assets at the following annual rates:   Computer equipment – 5 years straight line; Computer software – 5 years straight line; Furniture and equipment – 5 years straight line; and Leasehold improvements – straight-line over the lease term.   Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.   Mineral properties   All direct costs related to the acquisition of mineral property interests are capitalized. Mineral property exploration expenditures are expensed when incurred. When it has been established that a mineral deposit is commercially mineable, an economic analysis has been completed in accordance with SEC Industry Guide 7 and permits are obtained, the costs subsequently incurred to develop a mine on the property prior to the start of mining operations are capitalized. Capitalized costs will be amortized following commencement of commercial production using the unit of production method over the estimated life of proven and probable reserves.   A-6     DONLIN GOLD LLC NOTES TO FINANCIAL STATEMENTS (U.S. dollars in thousands)   Asset retirement obligations   The Company records a liability based on the best estimate of costs for site closure and reclamation activities that the Company is legally or contractually required to undertake.  The liability is estimated using expected discounted cash flows based on engineering and environmental reports and accreted to full value over time through periodic charges to income. Adjustments to the reclamation obligation arising from changes in estimates are recorded as a component of the mineral property.   Income taxes   The Company is not a taxable entity for income tax purposes. Accordingly, no recognition is given to income taxes for financial reporting purposes. Tax on the net income (loss) of the Company is borne by the owners through the allocation of taxable income (loss). Net income for financial statement purposes may differ significantly from taxable income for the owners as a result of differences between the tax basis and financial reporting basis of assets and liabilities and the taxable income allocation requirements under the shareholders agreement.   Impairment of long-lived assets   Management assesses the possibility of impairment in the carrying value of its long-lived assets whenever events or circumstances indicate that the carrying amounts of the asset or assets group may not be recoverable. Management calculates the estimated undiscounted future net cash flows relating to the asset or assets. When the carrying value of an asset exceeds the related undiscounted cash flows, the asset is written down to its estimated fair value, which is usually determined using discounted future cash flows. Management’s estimates of mineral prices, mineral reserves, foreign exchange rates, production levels and operating capital and reclamation costs are subject to risk and uncertainties that may affect the determination of the recoverability of the long-lived asset. It is possible that material changes could occur that may adversely affect management’s estimates.   Cash and cash equivalents   Cash and cash equivalents consist of cash and highly liquid investments with original maturities of three months or less which are considered to be cash equivalents.  The fair value of the Company’s financial assets, which includes cash, approximates their carrying values at November 30, 2020 due to their short-term nature.    Trade payables   The fair value of the Company’s financial liabilities, such as accounts payable and accrued liabilities approximates their carrying values at November 30, 2020 due to their short-term nature.   Due to related parties   The amounts due to Barrick and NOVAGOLD are non-interest bearing, unsecured and without specified terms of repayment.   Recently adopted accounting pronouncements   Leases   In February 2016, Accounting Standards Update (“ASU”) No. 2016-02 was issued which, together with subsequent amendments, is included in ASC 842, Leases. The standard was issued to increase transparency and comparability among organizations by requiring the recognition of right-of-use ("ROU") assets and lease liabilities on the balance sheet for all leases with an initial term greater than one year. Certain qualitative and quantitative disclosures are also required.   A-7     DONLIN GOLD LLC NOTES TO FINANCIAL STATEMENTS (U.S. dollars in thousands)   On December 1, 2019, the Company adopted this standard using the modified retrospective approach with the effective date as of the date of initial application. Consequently, results for the year ended November 30, 2020 are presented under ASC Topic 842. No prior period amounts were adjusted and continue to be reported in accordance with previous lease guidance, ASC Topic 840, Leases. All leases were reassessed under the new standard including lease identification, lease classification, and initial direct costs in relation to its leases in effect as of December 1, 2019. The Company also elected the practical expedients allowing: i) the use of hindsight in determining the lease term and assessing impairment of ROU assets based on all facts and circumstances through the effective date of the new standard; ii) the short-term lease recognition exemption whereby ROU assets and lease liabilities will not be recognized for leasing arrangements with terms less than one year; and iii) to combine lease and non-lease components and expense variable payments as rent/lease expense in the period incurred.   Adoption of the standard did not have an impact on the Company’s Balance Sheets, results from operations or cash flows. For required qualitative and quantitative disclosures related to leasing arrangements beginning in the period of adoption, see note 3. Changes to the Company’s accounting policy as a result of adoption are discussed below.   The Company reviews all contracts and determines if the arrangement represents or contains a lease, at inception. Operating leases are included in  Right of use assets and Lease obligations ( current and long-term ) in the Balance Sheets. The Company does not have any finance leases.   Operating lease ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments. The operating lease ROU asset also includes any upfront lease payments made and excludes lease incentives and initial direct costs incurred. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with a term of 12 months or less are not recorded on the balance sheet. The Company’s lease agreements do not contain any residual value guarantees.   Recently issued accounting pronouncements   Fair Value Disclosure Requirements   In August 2018, ASU No. 2018-13 was issued to modify and enhance the disclosure requirements for fair value measurements. This update is effective in fiscal years, including interim periods, beginning after December 15, 2019, and early adoption is permitted.  Adoption of this guidance is not expected to significantly impact the Company’s financial statements and note disclosures.   NOTE 3 – LEASES   On January 1, 2020, the Company recorded a new operating lease obligation of $480 arising from obtaining ROU assets. The Company leased office space under a non-cancelable operating lease with an original lease terms of 3.25 years. The lease requires monthly lease payments that are subject to annual increases throughout the lease term. The lease also includes a renewal option at the election of the Company to renew or extend the lease for an additional four years. The optional periods have not been considered in the determination of ROU assets or lease liabilities associated with the lease as management did not consider it reasonably certain it would exercise the option. The Company also leases land, however, since the non-cancelable lease terms do not exceed 12 months, these are quantified below as short-term leases and are not recorded in the Balance Sheets.   A-8     DONLIN GOLD LLC NOTES TO FINANCIAL STATEMENTS (U.S. dollars in thousands)   The Company performed evaluations of its contracts and determined its identified leases are operating leases and short-term leases.  No variable leases with non-cancelable terms greater than one month were identified.   Operating lease expenses are included on the Statement of Loss in General and administrative expense and Mineral property leases and include the following components for the year ended November 30, 2020:   Operating lease cost   $ 143   Variable lease cost     —   Short-term lease cost     618       $ 761     Future minimum lease payments under non-cancellable operating leases as of November 30, 2020, were as follows:   2021   $ 168   2022     173   2023     58   Total future minimum lease payments     399   Less: imputed interest     (28 ) Total   $ 381     Other information regarding leases for the year ended November 30, 2020 includes the following:   Cash paid for operating leases   $ 110   Right-of-use assets obtained in exchange for lease liabilities   $ 480   Weighted average remaining lease term (years) – operating leases     2.3   Weighted average discount rate – operating leases     3.94 %   NOTE 4 – PLANT AND EQUIPMENT       At November 30,       2020     2019   Plant and equipment   $ 5,120     $ 3,389   Accumulated depreciation     (2,790 )     (2,465 )     $ 2,330     $ 924     NOTE 5 – MINERAL PROPERTY       At November 30,       2020     2019   Acquisition cost   $ 64,000     $ 64,000   Asset retirement cost     1,230       1,384       $ 65,230     $ 65,384     The Donlin Gold Project is located in the Kuskokwim region of southwestern Alaska on private, Alaska Native-owned mineral and surface land and Alaska state mining claims. The property is under lease for subsurface mineral rights from Calista Corporation and surface land rights from The Kuskokwim Corporation, two Alaska Native corporations. The mineral property was jointly owned by Barrick and NOVAGOLD through an unincorporated joint venture prior to the formation of the Company. Upon formation of the Company, the mineral property contributed was recorded based on the predecessor accounting values of Barrick and NOVAGOLD. As such, mineral property includes the historic acquisition cost as the partners’ initial contribution to the Company.     A-9     DONLIN GOLD LLC NOTES TO FINANCIAL STATEMENTS (U.S. dollars in thousands)   NOTE 6 – RELATED PARTY TRANSACTIONS   The Company received management and administrative services from Barrick for $1,174 in 2020, $1,210 in 2019, and $765 in 2018. The Barrick amounts are included in General and Administrative expense. The Company received engineering and administrative services from NOVAGOLD for $nil in 2020, $nil in 2019, $658 in 2018.  The NOVAGOLD amount is included in Drilling, studies and engineering expense.   The Company has accounts payable to Barrick at November 30, 2020 of $171 (2019: $112) for reimbursement of management and administrative services. The Company has accounts payable to NOVAGOLD at November 30, 2020 of $6 (2019: $nil).   NOTE 7 – RECLAMATION AND REMEDIATION   Significant reclamation and closure activities include rehabilitation and decommissioning of the camp and drill sites. Although the ultimate amount or timing of reclamation costs cannot be predicted with certainty, the estimated discounted cash flows required to settle the Company’s obligations for work undertaken at the site to date is $1,230. During the year, the reclamation model was updated resulting in a change in cash flows of ($154).  The estimated cash flows are assumed to commence in five years from the balance sheet date.    NOTE 8 – MINERAL PROPERTY LEASES   The Company leases certain assets, such as mineral property leases, that are an exception to applying lease accounting under ASC 842.  These mineral property leases coincide with the currently projected Donlin Gold mine life, with provisions for a further extension, should production continue beyond that. Future minimum annual mineral property lease payments are $2,426 in 2021, $2,426 in 2022, $2,426 in 2023, $2,426 in 2024, and $3,426 in 2025 totaling $13,130.           A-10