NOVAGOLD RESOURCES INC 10-Q

Item 1. Financial Statements   NOVAGOLD RESOURCES INC. CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (Unaudited, US dollars in thousands)       As of February 28, 2022     As of November 30, 2021   ASSETS                 Cash and cash equivalents   $ 77,133     $ 91,124   Term deposits     78,000       78,000   Other assets (Note 6)     1,310       327   Current assets     156,443       169,451   Notes receivable (Note 4)     23,782       23,572   Investment in Donlin Gold (Note 5)     5,472       3,576   Other assets (Note 6)     2,714       2,253   Total assets   $ 188,411     $ 198,852                     Accounts payable and accrued liabilities   $ 536     $ 682   Accrued payroll and related benefits     731       2,637   Other liabilities (Note 8)     1,031       1,064   Current liabilities     2,298       4,383   Promissory note (Note 7)     117,235       115,723   Other liabilities (Note 8)     444       464   Total liabilities     119,977       120,570                     Commitments and contingencies (Notes 7 and 8)                                       EQUITY                 Common shares     1,980,801       1,978,520   Contributed surplus     79,904       82,216   Accumulated deficit     ( 1,969,160 )     ( 1,959,165 ) Accumulated other comprehensive loss     ( 23,111 )     ( 23,289 ) Total equity     68,434       78,282   Total liabilities and equity   $ 188,411     $ 198,852     The accompanying notes are an integral part of these condensed consolidated interim financial statements.   These condensed consolidated interim financial statements are authorized for issue by the Board of Directors on April 5, 2022. They are signed on the Company’s behalf by:   /s/ Gregory A. Lang       /s/ Anthony P. Walsh              1       NOVAGOLD RESOURCES INC. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (Unaudited, US dollars in thousands except per share amounts)       Three months ended February 28,       2022     2021   Operating expenses:                 General and administrative (Note 10)   $ 5,177     $ 5,329   Equity loss – Donlin Gold (Note 5)     4,040       1,968         9,217       7,297                     Loss from operations     ( 9,217 )     ( 7,297 ) Interest expense on promissory note     ( 1,512 )     ( 1,434 ) Accretion of notes receivable     210       854   Other income (expense), net (Note 11)     524       ( 79 ) Loss before income taxes and other items     ( 9,995 )     ( 7,956 ) Income tax expense     —       —   Net loss     ( 9,995 )     ( 7,956 )                   Other comprehensive income (loss):                 Foreign currency translation adjustments     178       778                     Comprehensive loss   $ ( 9,817 )   $ ( 7,178 )                   Net loss per common share – basic and diluted   $ ( 0.03 )   $ ( 0.02 )                   Weighted average shares outstanding                 Basic and diluted (thousands)     332,940       331,295     The accompanying notes are an integral part of these condensed consolidated interim financial statements.         2       NOVAGOLD RESOURCES INC. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (Unaudited, US dollars in thousands)       Three months ended February 28,       2022     2021   Operating activities:                 Net loss   $ ( 9,995 )   $ ( 7,956 ) Adjustments:                 Share-based compensation     2,091       2,042   Equity loss – Donlin Gold     4,040       1,968   Interest expense on promissory note     1,512       1,434   Foreign exchange loss     112       483   Accretion of notes receivable     ( 210 )     ( 854 ) Change in fair value of marketable securities     ( 500 )     ( 226 ) Other operating adjustments     —       2   Net change in operating assets and liabilities (Note 13)     ( 3,053 )     ( 1,179 ) Net cash used in operating activities     ( 6,003 )     ( 4,286 )                   Investing activities:                 Proceeds from term deposits     —       35,000   Purchases of term deposits     —       ( 25,000 ) Funding of Donlin Gold     ( 5,936 )     ( 2,946 ) Net cash provided by (used in) investing activities     ( 5,936 )     7,054                     Financing activities:                 Withholding tax on share-based compensation     ( 2,122 )     ( 731 ) Net cash used in financing activities     ( 2,122 )     ( 731 )                   Effect of exchange rate changes on cash and cash equivalents     70       250   Net change in cash and cash equivalents     ( 13,991 )     2,287   Cash and cash equivalents at beginning of period     91,124       60,906   Cash and cash equivalents at end of period     77,133     $ 63,193     The accompanying notes are an integral part of these condensed consolidated interim financial statements.     3       NOVAGOLD RESOURCES INC. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF EQUITY (Unaudited, US dollars and shares in thousands)       Common shares     Contributed     Accumulated             Total       Shares     Amount     surplus     deficit     AOCL*     equity                                                     November 30, 2020     330,412     $ 1,972,029     $ 81,203     $ ( 1,918,629 )   $ ( 23,876 )   $ 110,727   Share-based compensation     —       —       2,042       —       —       2,042   Performance share units (PSUs) settled in shares     574       1,460       ( 1,460 )     —       —       —   Stock options exercised     345       777       ( 777 )     —       —       —   Withholding tax on PSUs     —       —       ( 731 )     —       —       ( 731 ) Net loss     —       —       —       ( 7,956 )     —       ( 7,956 ) Other comprehensive income     —       —       —       —       778       778   February 28, 2021     331,331     $ 1,974,266     $ 80,277     $ ( 1,926,585 )   $ ( 23,098 )   $ 104,860                                                     November 30, 2021     332,416     $ 1,978,520     $ 82,216     $ ( 1,959,165 )   $ ( 23,289 )   $ 78,282   Share-based compensation     —       —       2,091       —       —       2,091   PSUs settled in shares     430       1,731       ( 1,731 )     —       —       —   Stock options exercised     144       550       ( 550 )     —       —       —   Withholding tax on PSUs     —       —       ( 2,122 )     —       —       ( 2,122 ) Net loss     —       —       —       ( 9,995 )     —       ( 9,995 ) Other comprehensive income     —       —       —       —       178       178   February 28, 2022     332,990     $ 1,980,801     $ 79,904     $ ( 1,969,160 )   $ ( 23,111 )   $ 68,434     * Accumulated other comprehensive loss   The accompanying notes are an integral part of these condensed consolidated interim financial statements.           4     NOVAGOLD RESOURCES INC. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited, US dollars in thousands except per share amounts)     NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION   NOVAGOLD RESOURCES INC. and its affiliates and subsidiaries (collectively, “NOVAGOLD” or the “Company”) operate in the mining industry, focused on the exploration for and development of gold mineral properties. The Company has no realized revenues from its planned principal business purpose. The Company’s principal asset is a 50 % interest in the Donlin Gold project in Alaska, USA. The Donlin Gold project is owned and operated by Donlin Gold LLC, a limited liability company that is owned equally by wholly-owned subsidiaries of NOVAGOLD and Barrick Gold Corporation (“Barrick”).   The Condensed Consolidated Interim Financial Statements (“interim statements”) of NOVAGOLD are unaudited. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. These interim statements should be read in conjunction with NOVAGOLD’s Consolidated Financial Statements for the year ended November 30, 2021. The year-end balance sheet data was derived from the audited financial statements and certain information and footnote disclosures required by United States generally accepted accounting principles (US GAAP) have been condensed or omitted.   The functional currency for the Company’s Canadian operations is the Canadian dollar and the functional currency for the Company’s U.S. operations is the United States dollar. References in these Condensed Consolidated Interim Financial Statements and Notes to $ refer to United States dollars and C$ to Canadian dollars. Dollar amounts are in thousands, except for per share amounts.     NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   Contingent note receivable   A portion of the proceeds related to the sale of Galore Creek to Newmont includes a $ 75,000 note receivable, contingent upon the approval of a Galore Creek project construction plan by the owner(s). The Company has not assigned a value to the contingent note receivable as management determined that the approval of the Galore Creek project construction was not probable as of the closing of the Galore Creek sale or in subsequent periods. The contingent note will be recognized when, in management’s judgement, it is probable that the payment will occur, and that the amount recorded will not reverse in future periods.   Investment in affiliates   Investments in unconsolidated ventures over which the Company has the ability to exercise significant influence, but does not control, are accounted for under the equity method and include the Company’s investment in the Donlin Gold project. The Company identified Donlin Gold as a Variable Interest Entity (VIE) as the entity is dependent on funding from its owners. All funding, ownership, voting rights, and power to exercise control is shared equally on a 50/50 basis between the owners of the VIE. Therefore, the Company has determined that it is not the primary beneficiary of the VIE. The Company’s maximum exposure to loss is its equity investment in Donlin Gold.   The equity method is a basis of accounting for investments whereby the investment is initially recorded at cost and the carrying value is adjusted thereafter to include the investor’s pro rata share of post-acquisition earnings or losses of the investee, as computed by the consolidation method. Cash funding increases the carrying value of the investment. Profit distributions received or receivable from an investee reduce the carrying value of the investment.   Donlin Gold is a non-publicly traded equity investee owning an exploration and development project. Therefore, the Company assesses whether there has been a potential triggering event for other-than-temporary impairment by assessing the underlying assets of the equity investee for recoverability and assessing whether there has been a change in the development plan or strategy for the project. If the underlying assets are not recoverable, the Company will record an impairment charge equal to the difference between the carrying amount of the investee and its fair value.   Share-based payments   The Company records share-based compensation awards exchanged for employee services at fair value on the date of the grant and expenses the awards in the Consolidated Statements of Loss over the requisite employee service period. The fair values of stock options are determined using a Black-Scholes option pricing model. The fair values of PSUs are determined using a Monte Carlo valuation model. The Company’s estimates may be impacted by certain variables including, but not limited to, stock price volatility, employee stock option exercise behaviors, additional stock option grants, estimates of forfeitures, the Company’s performance, and the Company’s performance in relation to its peers.     5     NOVAGOLD RESOURCES INC. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited, US dollars in thousands except per share amounts)     NOTE 3 – SEGMENTED INFORMATION   Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer. The Chief Executive Officer considers the business from a geographic perspective considering the performance of our investments in the Donlin Gold project in Alaska, USA (Note 5 ).     NOTE 4 – NOTES RECEIVABLE   On July 27, 2018, the Company sold its interest in the Galore Creek project to a subsidiary of Newmont Corporation (“Newmont”) for cash proceeds of $ 100,000 , a $ 75,000 note receivable due on the earlier of the completion of a Galore Creek pre-feasibility study or July 27, 2021, a $ 25,000 note receivable due on the earlier of the completion of a Galore Creek feasibility study or July 31, 2023, and a contingent note for $ 75,000 upon approval of a Galore Creek project construction plan by the owner(s). The Company received $ 75,000 from Newmont on July 27, 2021.   As of February 28, 2022, the carrying value of the $ 25,000 note receivable was $ 23,782 including $ 2,834 of accumulated accretion. The carrying value of the note receivable is being accreted to $ 25,000 over five years at a discount rate of 3.6 % based on quoted market values for Newmont debt with a similar term.   A contingent note for $ 75,000 is receivable upon approval of a Galore Creek project construction plan by the owner(s). No value was assigned to the final $ 75,000 contingent note receivable. The Company determined that Galore Creek project construction approval was not probable as of the closing of the Galore Creek sale. The Company’s assessment did not change as of February 28, 2022.     NOTE 5 – INVESTMENT IN DONLIN GOLD   The Donlin Gold project is owned and operated by Donlin Gold, a limited liability company in which wholly-owned subsidiaries of NOVAGOLD and Barrick each own a 50 % interest. Donlin Gold has a board of four representatives, with two representatives selected by Barrick and two representatives selected by the Company. All significant decisions related to the Donlin Gold project requires the approval of at least a majority of the Donlin Gold board.   Changes in the Company’s Investment in Donlin Gold are summarized as follows:       Three months ended February 28,       2022     2021   Balance – beginning of period   $ 3,576     $ 2,614   Share of losses                 Mineral property expenditures     ( 3,944 )     ( 1,901 ) Depreciation     ( 85 )     ( 67 ) Accretion     ( 11 )     —         ( 4,040 )     ( 1,968 ) Funding     5,936       2,946   Balance – end of period   $ 5,472     $ 3,592       6     NOVAGOLD RESOURCES INC. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited, US dollars in thousands except per share amounts)   The following amounts represent the Company’s 50% share of the assets and liabilities of Donlin Gold LLC. Donlin Gold LLC capitalized the initial contribution of the Donlin Gold property as Non-current assets: Mineral property with a carrying value of $ 64,000 , resulting in a higher carrying value of the mineral property for Donlin Gold LLC than that of the Company.       As of February 28, 2022     As of November 30, 2021   Current assets: Cash, prepaid expenses, and other receivables   $ 6,795     $ 3,815   Non-current assets: Right-of-use assets, property and equipment     1,355       1,417   Non-current assets: Mineral property     32,615       32,615   Current liabilities: Accounts payable, accrued liabilities and lease obligations     ( 2,608 )     ( 1,584 ) Non-current liabilities: Reclamation and lease obligations     ( 685 )     ( 687 ) Net assets   $ 37,472     $ 35,576       NOTE 6 – OTHER ASSETS       As of February 28, 2022     As of November 30, 2021   Other current assets:                 Accounts and interest receivable   $ 351     $ 302   Prepaid expenses     959       25       $ 1,310     $ 327   Other long-term assets:                 Marketable equity securities   $ 2,345     $ 1,830   Right-of-use assets     344       396   Office equipment     25       27       $ 2,714     $ 2,253       NOTE 7 – PROMISSORY NOTE   The Company has a promissory note payable to Barrick of $ 117,235 , comprised of $ 51,576 in principal, and $ 65,659 in accrued interest at U.S. prime plus 2 %. The promissory note resulted from the agreement that led to the formation of Donlin Gold, where the Company agreed to reimburse Barrick for a portion of their expenditures incurred from April 1, 2006 to November 30, 2007. The promissory note and accrued interest are payable from 85 % of the Company’s share of revenue from future mine production or from any net proceeds resulting from a reduction of the Company’s interest in Donlin Gold. The carrying value of the promissory note approximates fair value.     NOTE 8 – OTHER LIABILITIES       As of February 28, 2022     As of November 30, 2021   Other current liabilities:                 Remediation liabilities   $ 840     $ 840   Lease obligations     191       224       $ 1,031     $ 1,064   Other long-term liabilities:                 Remediation liabilities   $ 280     $ 280   Lease obligations     164       184       $ 444     $ 464       7     NOVAGOLD RESOURCES INC. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited, US dollars in thousands except per share amounts)     NOTE 9 – FAIR VALUE ACCOUNTING   Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the significance of the inputs used in making the measurement.  The three levels of the fair value hierarchy are as follows:   Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 — Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).   The Company’s financial instruments consist of cash and cash equivalents, term deposits, accounts receivable, and accounts payable and accrued liabilities. The fair value of the Company’s financial instruments approximates their carrying value due to the short‐term nature of their maturity. The Company’s financial instruments initially measured at fair value and then held at amortized cost include cash and cash equivalents, term deposits, accounts receivable, and accounts payable and accrued liabilities. The Company’s marketable equity securities are valued using quoted market prices in active markets and as such are classified within Level 1 of the fair value hierarchy. The fair value of the marketable equity securities was $ 2,345 at February 28, 2022 ( $ 1,830 at November 30, 2021), calculated as the quoted market price of the marketable equity security multiplied by the quantity of shares held by the Company.     NOTE 10 – GENERAL AND ADMINISTRATIVE EXPENSE       Three months ended February 28,       2022     2021   Share-based compensation (Note 12)   $ 2,091     $ 2,042   Salaries and benefits     1,768       1,768   Office expense     729       589   Corporate communications and regulatory     253       309   Professional fees     334       619   Depreciation     2       2       $ 5,177     $ 5,329       NOTE 11 – OTHER INCOME (EXPENSE), NET       Three months ended February 28,       2022     2021   Interest income     136     $ 178   Foreign exchange loss     ( 112 )     ( 483 ) Change in fair market value of marketable securities     500       226       $ 524     $ ( 79 )     NOTE 12 – SHARE-BASED COMPENSATION       Three months ended February 28,       2022     2021   Stock options   $ 1,193     $ 1,193   Performance share unit plan     836       796   Deferred share unit plan     62       53       $ 2,091     $ 2,042       8     NOVAGOLD RESOURCES INC. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited, US dollars in thousands except per share amounts)   Stock options   A summary of stock options outstanding and activity during the three months ended February 28, 2022 are as follows:       Number of stock options (thousands)     Weighted- average exercise price per share     Weighted- average remaining contractual term (years)     Aggregate intrinsic value   November 30, 2021     8,602     $ 5.43                   Granted     1,887       6.76                   Exercised     ( 365 )     4.21                   Cancelled     ( 2 )     7.59                   February 28, 2022     10,122     $ 5.73       2.51     $ 17,002                                     Vested and exercisable as of February 28, 2022     6,718     $ 4.75       1.69     $ 16,471     The following table summarizes other stock option-related information:       Three months ended February 28,       2022     2021   Weighted-average assumptions used to value stock option awards:                 Expected volatility     46.4 %     47.3 % Expected term of options (years)     4       4   Expected dividend rate     —       —   Risk-free interest rate     1.04 %     0.3 % Expected forfeiture rate     2.9 %     3.0 % Weighted-average grant-date fair value   $ 3.21     $ 3.66   Intrinsic value of options exercised   $ 1,001     $ 3,505   Cash received from options exercised   $ —     $ —     As of February 28, 2022, the Company had $ 6,048 of unrecognized compensation cost related to 3,404,000 non-vested stock options expected to be recognized and vest over a period of approximately 2.75 years.   Performance share units   A summary of PSU awards outstanding and activity during the three months ended February 28, 2022 are as follows:       Number of PSU awards (thousands)     Weighted- average grant day fair value per award     Aggregate intrinsic value   November 30, 2021     1,583     $ 5.94           Granted     517       6.75           Vested     ( 745 )     3.69           Performance adjustment     ( 56 )     3.69           Cancelled     ( 1 )     7.78           February 28, 2022     1,298     $ 7.65     $ 3,089       As of February 28, 2022, the Company had $ 6,077 of unrecognized compensation cost related to 1,298,300 non-vested PSU awards expected to be recognized and vest over a period of approximately 2.75 years.     9     NOVAGOLD RESOURCES INC. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited, US dollars in thousands except per share amounts)   The following table summarizes other PSU-related information:       Three months ended February 28,       2022     2021   Performance multiplier on PSUs vested     93 %     150 % Common shares issued (thousands)     430       574   Total fair value of common shares issued   $ 2,903     $ 5,723   Withholding tax paid on PSUs vested   $ 2,122     $ 731       NOTE 13 – NET CHANGE IN OPERATING ASSETS AND LIABILITIES       Three months ended February 28,       2022     2021   Changes in operating assets and liabilities:                 Other assets   $ ( 994 )   $ 768   Accounts payable and accrued liabilities     ( 151 )     ( 355 ) Accrued payroll and related benefits     ( 1,908 )     ( 1,592 )     $ ( 3,053 )   $ ( 1,179 )                       10       Item 2. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations   In Management ’ s Discussion and Analysis of Financial Condition and Results of Operations, “ NOVAGOLD ” , the “ Company ” , “ we, ” “ us ” and “ our ” refer to NOVAGOLD RESOURCES INC. and its consolidated subsidiaries. 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 three-month periods ended February 28, 2022 and 2021. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto contained elsewhere in this report and our Annual Report on Form 10-K for the year ended November 30, 2021, as well as other information we file with the Securities and Exchange Commission on EDGAR at www.sec.gov and with Canadian Securities Administrators on SEDAR at www.sedar.com. References herein to $ refer to United States dollars and C$ to Canadian dollars, in thousands, except for per share amounts.   Overview   We operate in the gold mining industry, primarily focused on advancing the Donlin Gold project in Alaska. The Donlin Gold project is held by Donlin Gold LLC (“Donlin Gold”), a limited liability company owned equally by wholly-owned subsidiaries of NOVAGOLD and Barrick.   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 pre-feasibility and feasibility studies, preparation of engineering designs and the financing to fund these objectives.   First quarter highlights   COVID-19 response   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 encouraged to get fully vaccinated against COVID-19, have been asked to work remotely, avoid all non-essential business travel, adhere to good hygiene practices, and engage in physical distancing. Continuation of the COVID-19 pandemic in 2022 and beyond could impact employee health, workforce productivity, insurance premiums, ability to travel, the availability of industry experts, personnel and equipment, restrictions or delays to field work, studies, and assay results, and other factors that will depend on future developments that may be beyond our control.   At Donlin Gold, with dedicated community partners in Alaska and in the Yukon-Kuskokwim (Y-K) region, who share the objective of protecting the health of Donlin Gold’s employees and contractors, a wide-ranging set of policies have been implemented at the Donlin Gold project site and Anchorage office designed to mitigate the spread of COVID-19.   The plan includes:     ● testing of all personnel prior to visiting the Donlin Gold project site;   ● testing on the third day after their arrival at camp;   ● additional testing for direct local hires ahead of returning to their villages to reduce the spread of the virus where minimal health services are available;   ● 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.   Community engagement   To date, Donlin Gold LLC has signed eight Shared Values Statements with villages in the Y-K region (Akiak, Sleetmute, Napaimute, Crooked Creek, Napaskiak, Nikolai, Tuluksak, and Upper Kalskag) that formalize current engagement with key local communities. These agreements with Donlin Gold expand upon the long-term relationships already established with these communities and address specific community needs such as water, sewer, and landfill projects; the ice road that connects remote villages in the Yukon-Kuskokwim (Y-K) region; salmon studies; and suicide prevention programs.     11     As a neighbor to others in the Y-K region and as a team largely made up of people from the area, Donlin Gold strives to aid communities with support and resources, particularly when health and safety are of concern. Donlin Gold is committed to support the needs of its community partners. During the first quarter 2022, Donlin Gold sponsored the Yukon-Kuskokwim Health Corporation Behavioral Health Calricaraq Program, a four-day event with traditional healing and wellness activities; for the tenth year in a row, Donlin Gold worked with the local school districts in the region as part of the national Dictionary Project in an effort to provide a personal dictionary to all third graders with a total of 5,000 dictionaries distributed to date; with support from TKC, provided smoke detectors for stakeholders in the Y-K region; and sponsored the Iron Dog Day, a new community partnership with Alaska Safe Riders, focused on winter safety with youth and families.   In partnership with TKC, the Village of Crooked Creek, and Napaimute Tribe, Donlin Gold was again the lead sponsor of a project to construct and maintain the upper portions of an ice road on the Kuskokwim River. Donlin Gold also provided technical data to assist the roadbuilder, including aerial photographs and ice measurements along the river. The road greatly improved safety and access to nearby communities for residents in remote locations. At its completion in February 2022, the Kuskokwim ice road was approximately 270 miles long connecting 17 communities.   Permitting   The State’s Clean Water Act (CWA) Section 401 certification (the “401 Certification”) of the Federal CWA Section 404 permit was formally appealed to the Commissioner of the Alaska Department of Environmental Conservation (ADEC) in June 2020, and the ADEC Commissioner referred the appeal to an Administrative Law Judge for review. The appeal focused on three narrow issues related to compliance with the State’s water quality standards near the mine site. On April 12, 2021, the Administrative Law Judge issued his opinion for the Commissioner’s consideration recommending the 401 Certification be vacated. The Commissioner issued his decision to uphold the 401 Certification on May 27, 2021. The decision was appealed on June 28, 2021 in Alaska’s Superior Court by Earthjustice on behalf of Orutsrarmiut Native Corporation (ONC). On December 29, 2021, the Court issued an order remanding the 401 Certification to ADEC for consideration of additional technical information provided by Donlin Gold. The appeal was stayed pending the results of the remand. The existing 401 Certification remains in effect during the remand period. Based on the remand schedule established by the Court order, ADEC’s decision is expected in the second quarter of 2022.   In April 2020, the Alaska Department of Natural Resources’ (ADNR) Division of Oil and Gas agreed to reconsider its decision on the State Right-of-Way (ROW) agreement and lease authorization for the buried natural gas pipeline. Under the reconsideration, on September 10, 2020, the ADNR issued for additional public comment a revised Consideration of Comments document. This document describes how the ADNR considered public input that was solicited in the ROW review, including how cumulative effects are addressed in the decision. The comment period on the document ended on November 9, 2020. On July 19, 2021, the ADNR Commissioner completed the reconsideration and upheld the ROW agreement and lease authorization. On August 9, 2021, two parties requested that the Commissioner conduct a further reconsideration. The first party was Earthjustice representing ONC, Cook Inletkeeper, and three villages. The second party was an individual who operates an outdoor guiding business around the pipeline route. The Commissioner rejected both further reconsideration requests on August 19, 2021. On September 20, 2021, Earthjustice, representing ONC, Cook Inletkeeper, and three villages, filed an appeal of the State ROW in Alaska Superior Court. An appeal was also filed by the second party in September 2021. The two appeals have been consolidated into a single case that is pending before the Alaska Superior Court based in Anchorage, Alaska. Legal briefings are being prepared by the parties and we anticipate a decision on the appeal in the second half of 2022 or the first half of 2023.   In November 2020, the ADNR published an initial public notice for comment on Donlin Gold’s 12 applications for water rights for the mine site and transportation facilities, which closed on December 15, 2020. Water rights are for local surface water sources and groundwater to be used for process water, dust control, fire protection, and potable water. In March 2021, the ADNR held a second two-week public notice period, which closed on March 26, 2021. All the final Water Rights were issued on June 29, 2021 by ADNR’s Division of Mining Land and Water. In July, they were administratively appealed to the ADNR Commissioner by Earthjustice, ONC, and five villages. We expect a decision on the appeal by the Commissioner in the second quarter of 2022.   Donlin Gold, working with its Native Corporation partners, continues to support the State of Alaska to advance other permits and certificates needed for the project. Donlin Gold continues to work with Calista, TKC, ADNR, and the U.S. Bureau of Land Management on re-locating easements and public ROWs in the project area. The field work related to the issuance of the Alaska Dam Safety certificates is planned to recommence during second half of 2022 or the first half of 2023. The work was temporarily paused to concentrate on the 2020 and 2021 geological drill programs.   Donlin Gold is fortunate to have time-tested partnerships with Calista and TKC, owners of the mineral and surface rights, respectively. The project’s location on private land specially designated for mining activities through the 1971 Alaska Native Claims Settlement Act, is a key attribute that distinguishes it from most other mining assets in Alaska. Our commitment to meaningful tribal consultation throughout project development and permitting has been tested over decades of reliable and dependable engagement with the community.     12     Donlin Gold project   Drilling is underway for 2022 and is designed for approximately 34,000 meters of tight spaced grid drilling in structural domains and in-pit and below-pit drilling in undrilled areas of the open pit. The newly obtained data from the 2021 drill program will be incorporated into the geologic and resource model followed by updated mining schedules and life of mine business plans prior to shifting to an updated feasibility study, subject to a formal decision by the Donlin Gold LLC board.   Ultimately, the 2021 and 2022 information should 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.   Our share of funding for the Donlin Gold project in the first quarter of 2022 was $5,936. In 2022, we continue to expect our share of Donlin Gold LLC funding to be $30,000, including $21,000 for follow-up drilling, camp improvements and studies, and $9,000 for permitting, community engagement and administration.   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.   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.   Consolidated Financial Results       Three months ended February 28,               2022     2021     Change   Net loss   $ (9,995 )   $ (7,956 )   $ (2,039 ) Net loss per common share, basic and diluted   $ (0.03 )   $ (0.02 )   $ (0.01 )   Net loss increased by $2,039 from 2021 to 2022, primarily due to the earlier commencement of the Donlin Gold drilling program in 2022, and reduced accretion income due to the maturity of the $75,000 Newmont note in July 2021, partially offset by lower legal expenses, an increase in the value of marketable securities, and favorable foreign exchange movements.   Liquidity and Capital Resources   Liquidity overview   At present, we believe we have sufficient working capital available to cover anticipated funding of the Donlin Gold project and corporate general and administrative costs until a decision to commence engineering and construction is reached by the Donlin Gold board for the Donlin Gold project, at which point substantial additional capital will be required. 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 our Annual Report on Form 10-K for the year ended November 30, 2021, as filed with the SEC and the Canadian Securities Regulators on January 26, 2022, 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 .     13     Our anticipated expenditures in fiscal year 2022 are approximately $46,000, including $30,000 to fund the Donlin Gold project, $13,000 for corporate general and administrative costs, $2,000 for withholding taxes on share-based compensation and $1,000 for working capital and other items.   Our financial position includes the following as of February 28, 2022:     ● Cash and cash equivalents of $77,133.     ● Term deposits of $78,000 denominated in U.S. dollars and held at Canadian chartered banks with high investment-grade ratings and maturities of one year or less.     ● Notes receivable of $25,000 due on the earlier of the completion of a Galore Creek feasibility study or July 27, 2023, and a note for $75,000 fully contingent upon approval of a Galore Creek project construction plan by the owner(s).     ● Promissory note payable to Barrick of $117,235, including accrued interest at U.S. prime plus 2%. The promissory note and accrued interest are payable from 85% of the Company’s share of revenue from future Donlin Gold project production or from any net proceeds resulting from a reduction of the Company’s interest in Donlin Gold.   Cash flows   In the first quarter of 2022 cash and cash equivalents decreased by $13,991, primarily to fund our share of Donlin Gold, for corporate administrative expenses, and for withholding taxes on share-based payments. The increase in cash used in the first quarter of 2022 compared to 2021 was due to the earlier commencement of the Donlin Gold drilling program in 2022, the timing of corporate liability insurance payments, increased withholding tax on share-based compensation in 2022 (no cash was used for CEO and CFO withholdings in 2021), and no proceeds received from term deposits in 2022 compared to $10,000 received in 2021.   Outstanding share data   As of March 29, 2022, the Company had 333,192,571 common shares issued and outstanding. Also, as of March 29, 2022, the Company had: i) a total of 9,672,751 stock options outstanding; 8,433,052 with a weighted-average exercise price of $5.78 and the remaining 1,239,699 of those stock options with a weighted-average exercise price of C$7.50; and ii) 1,293,200 PSUs and 323,939 deferred share units outstanding. Upon exercise or pay out, as applicable, of the foregoing convertible securities, the Company would be required to issue a maximum of 11,936,490 common shares.                   14