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, 2021 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, 2021.   The effectiveness of our assessment of internal control over financial reporting as of November 30, 2021 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.                 72 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 2022 Annual Meeting of Shareholders (the “2022 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 2022 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 2022 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 2022 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, 2021, 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 options, warrants and rights (a)     Weighted average exercise price of outstanding options, warrants and rights (b)     Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)   Equity compensation plans approved by security holders                         Stock Award Plan     8,601,303 (1)   C$7.03/$5.42 (2)     17,991,941 (3) PSU     1,583,100 (4)     n/a       8,389,366 (5) DSU     306,321 (6)     n/a       3,017,834 (7) Equity compensation plans not approved by security holders     —       —       —   Total     10,490,724               29,399,141           73 NOVAGOLD RESOURCES INC.       (1) The options issued and outstanding represent approximately 2.59% of the Company’s Common Shares issued and outstanding as of November 30, 2021.   (2) Of the 8,601,303 options issued and outstanding, 1,166,898 have a weighted average exercise price of C$7.03 and 7,434,405 have a weighted average exercise price of $5.42.   (3) The number of options available for future issuance is a number equal to eight percent of the issued and outstanding Common Shares from time to time, less the number of outstanding options. The 17,991,941 options available for future issuance represent 5.41% of the Company’s issued and outstanding Common Shares as of November 30, 2021.   (4) Assumes vesting at 100% of PSU grant amount. PSUs can vest anywhere from 0% to 150% of the PSU grant amount depending upon performance against established quantitative performance criteria. The PSUs issued and outstanding represent approximately 0.48% of the Company’s Common Shares issued and outstanding as of November 30, 2021.   (5) The number of PSUs available for future issuance is a number equal to three percent of the issued and outstanding Common Shares from time to time, less the number of outstanding PSUs. The 8,389,366 PSUs available for future issuance represent 2.52% of the Company’s issued and outstanding Common Shares as of November 30, 2021.   (6) The DSUs issued and outstanding represent approximately 0.09% of the Company’s Common Shares issued and outstanding as of November 30, 2021.   (7) The number of DSUs available for future issuance is a number equal to one percent of the issued and outstanding Common Shares from time to time, less the number of outstanding DSUs. The 3,017,834 DSUs available for future issuance represent 0.91% of the Company’s issued and outstanding Common Shares as of November 30, 2021.                                     74 NOVAGOLD RESOURCES INC.       Item 13. Certain Relationships and Related Transactions, and Director Independence   The information appearing in our 2022 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 2022 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 54 Consolidated Balance Sheets 56 Consolidated Statements of Loss and Comprehensive Loss 57 Consolidated Statements of Cash Flows 58 Consolidated Statements of Equity 59 Notes to Consolidated Financial Statements 60   (a)(2) Financial Statement Schedules   Schedule A – The Financial Statements of Donlin Gold LLC as of November 30, 2021 and 2020 and for the years ended November 30, 2021, 2020 and 2019.   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)     76 NOVAGOLD RESOURCES INC.     3.4   Amended and Restated Articles of NOVAGOLD RESOURCES INC. dated May 12,2021 (incorporated by reference to Appendix A to Registrant’s definitive proxy statement filed with the Securities and Exchange Commission on March 25, 2021) 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     77 NOVAGOLD RESOURCES INC.     23.3   Consent of Henry Kim 23.4   Consent of Mike Woloschuk 23.5   Consent of Wood Canada Limited 23.6   Consent of Paul Chilson 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 96.1   S-K 1300 Technical Report Summary on the Donlin Gold Project, Alaska, USA 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                                   78 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 26, 2022         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 26, 2022         /s/ David A. Ottewell   Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) January 26, 2022         /s/ Thomas S. Kaplan   Board Chair January 26, 2022         /s/ Elaine Dorward-King   Director January 26, 2022         /s/ Sharon Dowdall   Director January 26, 2022         /s/ Diane Garrett   Director January 26, 2022         /s/ Igor Levental   Director January 26, 2022         /s/ Kalidas Madhavpeddi   Director January 26, 2022         /s/ Clynton R. Nauman   Director January 26, 2022         /s/ Ethan Schutt   Director January 26, 2022         /s/ Anthony P. Walsh   Director January 26, 2022     79         Item 15. (a)(2) Schedule A   Report of Independent Registered Public Accounting Firm   To the Board of Directors of Donlin Gold LLC   We have audited the accompanying financial statements of Donlin Gold LLC, which comprise the balance sheets as of November 30, 2021 and November 30, 2020, 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, 2021.   Management ’ s Responsibility for the Financial Statements   Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.   Auditors ’ Responsibility   Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.   An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.   Opinion   In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Donlin Gold LLC as of November 30, 2021 and November 30, 2020, and the results of its operations and cash flows for each of the three years in the period ended November 30, 2021 then ended in accordance with accounting principles generally accepted in the Unites States of America.       /s/ PricewaterhouseCoopers LLP   Chartered Professional Accountants   Vancouver, Canada January 14, 2022       A-1       DONLIN GOLD LLC BALANCE SHEETS   (U.S. dollars in thousands)       At November 30,       2021     2020                     ASSETS   Cash and cash equivalents   $ 6,754     $ 4,672   Inventory     302       46   Accounts receivable     142       25   Prepaid expenses     432       564   Current assets     7,630       5,307   Right of use assets (note 3)     202       351   Plant and equipment (note 4)     2,631       2,330   Mineral property (note 5)     65,230       65,230   Total assets   $ 75,693     $ 73,218                     LIABILITIES   Accounts payable and accrued liabilities   $ 2,815     $ 2,193   Lease obligations (note 3)     161       165   Due to related parties (note 6)     191       183   Current liabilities     3,167       2,541   Lease obligations (note 3)     64       216   Reclamation and remediation (note 7)     1,310       1,230   Total liabilities     4,541       3,987                     Commitments and contingencies (notes 3 and 8)                                   EQUITY   Partners’ contributions     480,730       445,556   Accumulated deficit     (409,578 )     (376,325 ) Total equity     71,152       69,231   Total liabilities and equity   $ 75,693     $ 73,218     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,       2021     2020     2019                             Operating expenses:                         Drilling, studies and engineering   $ 18,791     $ 17,641     $ 9,410   General and administrative     4,391       4,193       4,127   Permitting and environmental     4,120       2,106       2,128   Mineral property leases     3,191       2,885       3,249   Community relations     2,080       1,853       1,954   Depreciation     600       325       114   Accretion     80       -       -   Loss from operations     33,253       29,003       20,982                             Net loss and comprehensive loss   $ (33,253 )   $ (29,003 )   $ (20,982 )   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,       2021     2020     2019                             Operating activities:                         Net loss   $ (33,253 )   $ (29,003 )   $ (20,982 ) Adjustments:                         Depreciation     600       325       114   Other adjustments     73       -       -   Changes in operating assets and liabilities:                         Prepaid expenses     132       (408 )     (22 ) Inventory     (256 )     4       (50 ) Accounts receivable     (117 )     (25 )     -   Accounts payable and accrued liabilities     591       (1,169 )     2,037   Net cash used in operating activities     (32,230 )     (30,276 )     (18,903 )                           Investing activities:                         Capital expenditures - plant and equipment     (862 )     (1,629 )     (927 ) Net cash used in investing activities     (862 )     (1,629 )     (927 )                           Financing activities:                         Partners’ contributions     35,174       30,554       22,244   Net cash provided from financing activities     35,174       30,554       22,244                             Increase/(Decrease) in cash during the year     2,082       (1,351 )     2,414   Cash at beginning of year     4,672       6,023       3,609   Cash at end of year   $ 6,754     $ 4,672     $ 6,023         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, 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                                     Partners’ cash contribution     17,587       17,587       —       35,174   Net loss     —       —       (33,253 )     (33,253 ) November 30, 2021   $ 240,365     $ 240,365     $ (409,578 )   $ 71,152     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.  These financial statements have been prepared pursuant to Rule 3-09 of SEC Regulation S-X for inclusion in NOVAGOLD Resources Inc.’s 10-K, as the Company is an equity investee of NOVAGOLD Resources Alaska, Inc, a wholly owned subsidiary of NOVAGOLD Resources Inc.   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 been 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 2021, the water rights authorizations have been issued and are under administrative appeal to the Commissioner of Alaska Department of Natural Resources; the state pipeline right-of-way reconsideration was completed and the right-of-way authorization re-issued and is under appeal to the State superior court; the ADEC 401 Certification of the 404 permit is also under appeal in the State superior court.    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.   A-6 DONLIN GOLD LLC NOTES TO FINANCIAL STATEMENTS (U.S. dollars in thousands)     Leases   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.   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 and permits are obtained, the costs subsequently incurred to develop a mine on the property prior to the start of mining operations are capitalized. Capitalized costs will be amortized following commencement of commercial production using the unit of production method over the estimated life of proven and probable reserves.   Asset retirement obligations   The Company records a liability based on the best estimate of costs for site closure and reclamation activities that the Company is legally or contractually required to undertake.  The liability is estimated using expected 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.     A-7 DONLIN GOLD LLC NOTES TO FINANCIAL STATEMENTS (U.S. dollars in thousands)     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, 2021 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, 2021 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   Fair Value Disclosure Requirements   In August 2018, ASU No. 2018-13 was issued to modify and enhance the disclosure requirements for fair value measurements. The Company adopted this guidance on December 1, 2020. Adoption of this guidance did not impact the Company’s note disclosures.   NOTE 3 – LEASES   The Company leases office space under a non-cancelable operating lease with an original lease term 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.   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, 2021:   Operating lease cost   $ 156   Variable lease cost     —   Short-term lease cost     756       $ 912     Future minimum lease payments under non-cancellable operating leases as of November 30, 2021, were as follows:   2022     173   2023     58   Total future minimum lease payments     231   Less: imputed interest     (21 ) Total   $ 210       A-8 DONLIN GOLD LLC NOTES TO FINANCIAL STATEMENTS (U.S. dollars in thousands)     Other information regarding leases for the year ended November 30, 2021 includes the following:   Cash paid for operating leases   $ 168   Right-of-use assets obtained in exchange for lease liabilities   $ —   Weighted average remaining lease term (years) – operating leases     1.3   Weighted average discount rate – operating leases     3.94 %   NOTE 4 – PLANT AND EQUIPMENT       At November 30,       2021     2020   Plant and equipment   $ 6,018     $ 5,120   Accumulated depreciation     (3,387 )     (2,790 )     $ 2,631     $ 2,330     NOTE 5 – MINERAL PROPERTY       At November 30,       2021     2020   Acquisition cost   $ 64,000     $ 64,000   Asset retirement cost     1,230       1,230       $ 65,230     $ 65,230     The Donlin Gold Project is located in the Kuskokwim region of southwestern Alaska on private, Alaska Native-owned mineral and surface land and Alaska state mining claims. The property is under lease for subsurface mineral rights from Calista Corporation and surface land rights from The Kuskokwim Corporation, two Alaska Native corporations. The mineral property was jointly owned by Barrick and NOVAGOLD through an unincorporated joint venture prior to the formation of the Company. Upon formation of the Company, the mineral property contributed was recorded based on the predecessor accounting values of Barrick and NOVAGOLD. As such, mineral property includes the historic acquisition cost as the partners’ initial contribution to the Company.     NOTE 6 – RELATED PARTY TRANSACTIONS   The Company received management and administrative services from Barrick for $774 in 2021, $1,171 in 2020, and $1,210 in 2019. The Barrick amounts are included in General and Administrative expense.   The Company has accounts payable to Barrick at November 30, 2021 of $191 (2020: $171) for reimbursement of management and administrative services.   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 $1,310.  During the year, the discounted reclamation cost estimate was accreted resulting in a change in the estimated discounted cash flows of $80.  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 2022, $2,426 in 2023, $2,426 in 2024, $3,426 in 2025, and $3,426 in 2026 totaling $14,130.           A-9