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speak about Donlin is reminiscent of the way I speak about tigers and jaguars – the apex predators in their ecosystems – and I have also been known to compare it to a Vermeer or a da Vinci. So it is not inconceivable that in the deep recesses of my reptilian neocortex, what I consider to be the category-killer nature of NOVAGOLD is something about which I hold a certain enthusiasm normally reserved for my extracurricular activities. My kids even began to joke that if we had another child, we’d name it Donlin! In every joke, there is some truth.
I am sometimes asked why, if my schedule permits, I join Greg, Mélanie, and Igor on investor roadshows, and the reason is that I genuinely enjoy their company – otherwise, I definitely wouldn’t do it. Moreover, I really love to tell the Donlin story. This is especially so as it just gets better and better. I don’t care to speak of legacy, but there’s no doubt that, whereas I have enjoyed more than my fair share of hits for a best-of album, in my mind from a professional standpoint Donlin surely will mark my most enduring gold record. That’s saying quite a lot, as San Cristobal transformed Bolivian mining and the broader region of Potosi very much for the better. But still, Donlin’s impact could be bigger and, as a generational gold asset, it truly stands unparalleled. Its unique quality and scale make it more rare than a Leonardo da Vinci. It is indeed a Carel Fabritius. I’ll leave the reader to look that one up if he or she got this far. Suffice to say that Fabritius represents the Holy Grail for lovers of Rembrandt and his school, in much the same way I believe that Donlin represents the Holy Grail in the gold space.
14 Do you still see NOVAGOLD as well-positioned in terms of its downside protections, or is the gold market past the need for that?
One should never be past thinking in terms of downside protection. Indeed, as a seasoned player in the natural resources space who strongly believes in the notion that if an investor has covered the downside the upside will take care of itself, let me actually highlight the downside protections we’ve put in place for NOVAGOLD’s owners in order to ensure that your company, effectively an unexpiring warrant without time decay, is positioned to prosper.
First of all, let us remind ourselves: NOVAGOLD is a pure play on a federally permitted mining project – on Native corporation land already designated for mining – that we believe will constitute the largest single pure gold mine in the world, in one of the few parts of the world where mining is welcomed and the rule of law isn’t a novelty. Barring a cataclysmic event that would likely see gold trading above $20,000 (in which case I shall have sold out of my equities and will be living in an island lair somewhere near Madagascar) Donlin will never be nationalized, de facto or de jure. The project enjoys tremendous support at the local, state, and federal levels.
And we have a well-managed, tier-one partner in Barrick Gold. Moreover, NOVAGOLD has a balance sheet that, between cash on hand and receivables, exceeds $250 million, with maybe more to come. With federal permitting behind us, and Galore Creek monetized, NOVAGOLD’s current obligated burn rate is nominal at a time when we are flush with cash.
What this means is that, were the gold price to go down before they revive in full, and should the space be seized by a panic, we simply could not go out of business under any reasonable scenario – at a time when producers still could go bankrupt and, at the very least, companies that are burning cash likely would have to raise funds at the worst possible moment. As we often say, we relish the fact that we can afford to sleep well at night. While I don’t believe that the fundamentals of gold, or the industry, require a washout to set the stage for gold’s next big move higher, these head fakes do happen. Shakeouts before a blistering move upward are classic chart patterns. Think of a V-bottom and you may recall a few. This is assuredly not a scenario our shareholders should fear – the Electrum team having been in that movie several times over the years, and knowing well from firsthand experience how to position our portfolio companies in order to identify opportunity in market displacements.
We have thus deliberately positioned NOVAGOLD in such a manner that we likely would not need to raise
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