Executive Summary / Key Takeaways

• Strategic Alignment as Primary Value Unlock: The June 2025 exit of Barrick Gold (NYSE:GOLD) and entry of Paulson Advisers as a perfectly aligned partner transformed NovaGold from a "comatose" JV participant into a controlling economic owner of Donlin Gold, removing the single largest headwind that had stalled progress since 2021 and igniting a revaluation that management believes can restore the stock to its $12-15 trading range as a first step.

• Jurisdictional Safety Commands a Premium: In an era where Chairman Thomas Kaplan warns that gold mines in less stable jurisdictions face nationalization risk, Donlin's location in Alaska—ranked a top-tier mining jurisdiction with federal permits in hand and Native Corporation partnerships—provides an irreplaceable moat that justifies a potential "zero discount rate" valuation and positions the project as a strategic asset for institutional capital.

• Scale and Grade Create Unmatched Economics: With 39 million ounces at 2.24 grams per tonne—more than double the industry average for open-pit projects—Donlin is designed to produce over 1 million ounces annually for 27 years at cash costs in the lower half of the industry range, delivering margins that could reach "thousands of dollars per ounce" at current gold prices and establishing a resource base that is "rarer than a hen's tooth" in today's exploration landscape.

• Timing Synchronizes with Gold Bull Market Catalysts: The initiation of a bankable feasibility study in 2025-2026, coinciding with gold's emergence as a "second largest global reserve asset" and executive orders classifying gold as strategic, creates a multi-year catalyst pathway that management believes can drive the stock from recent lows near $2 to a $30 target, with construction decisions targeted for 2027 and production by 2031.

• Capital Intensity Remains the Critical Variable: While the $125 million cash position provides a 2.5-year runway at current burn rates, the estimated $7-8 billion development capex requirement represents the single greatest execution risk, with future funding dependent on a combination of corporate debt, project finance, and potentially government support that management insists is readily available for a project of this caliber.

Setting the Scene: The Last Great Undeveloped Gold Asset

NovaGold Resources Inc., incorporated in 1984 and headquartered in Vancouver, operates as a pure-play gold development company with a singular focus: advancing the Donlin Gold project in Alaska's Yukon-Kuskokwim region. This is not a diversified miner with multiple operating assets, nor is it an exploration company hunting for new discoveries. Donlin represents one of the largest and highest-grade undeveloped open-pit gold deposits globally, containing approximately 39 million ounces of gold in measured and indicated resources on a 100% basis. The project is designed to produce over 1 million ounces annually across a 27-year mine life, with approximately 1.4 million ounces per year in the first decade—output that would make it America's largest gold mine by a wide margin.

The gold development industry operates on a fundamentally different timeline than producing miners. Companies like NovaGold generate zero revenue for years, sometimes decades, as they navigate permitting, feasibility studies, and capital raising. This creates a unique risk-reward profile where value is created through de-risking milestones rather than quarterly production. The competitive landscape reflects this dynamic: direct peers include Perpetua Resources (PPTA), advancing a smaller gold-antimony project in Idaho; i-80 Gold (IAUX), which has begun modest production in Nevada; Skeena Resources (SKE), developing a high-grade but smaller deposit in British Columbia; and Western Copper and Gold (WRN), pursuing a copper-dominant project in Yukon. None approach Donlin's sheer scale or production profile, yet all compete for the same pool of development capital and investor attention.

NovaGold's current positioning is the direct result of a 15-year strategic impasse that ended in 2025. From 2006 through 2021, the company operated Donlin as a 50-50 joint venture with Barrick Gold, a partnership Chairman Thomas Kaplan described as creating a "comatose" state where misaligned priorities prevented feasibility updates, stalled permitting progress, and left the share price languishing despite gold's ascent. The June 2025 transaction, which saw NovaGold and Paulson Advisers acquire Barrick's 50% interest for $1 billion, fundamentally altered this trajectory. NovaGold increased its economic interest to 60% while gaining a "perfectly aligned partner" in Paulson, who holds the remaining 40% and shares equal governance rights. This swap of a misaligned partner for a philosophically and financially aligned one is what Kaplan calls the "game changer" that has already ignited a revaluation from $2 to nearly double digits.

Technology, Partnership, and Strategic Differentiation

Donlin's geological advantage begins with grade. At 2.24 grams per tonne, the deposit is more than double the global industry average for open-pit projects, which has fallen below one gram. This grade differential translates directly into cost structure: higher-grade ore requires less processing per ounce, positioning Donlin in the lower half of the industry's cost curve. Management estimates margins could reach "thousands of dollars per ounce" at current prices, a stark contrast to marginal producers struggling with sub-gram grades. The open-pit design further enhances economics by avoiding the complexity and capital intensity of underground mining, a challenge that constrains competitors like Skeena Resources.

Jurisdictional safety represents a second, equally critical moat. Chairman Kaplan's warnings about nationalization risk are not theoretical; they stem from direct experience in South Africa, Zimbabwe, and Congo. He contends that governments in jurisdictions where the rule of law is "more of a novelty" will inevitably move to capture mining profits, creating a "contagion" where democracies and autocracies alike face pressure to reassert control over strategic assets. Alaska's ranking as a top-tier mining jurisdiction—third out of 80 globally, with AA risk ratings—provides a secure foundation that is becoming increasingly scarce. The project's location on private land owned by two Alaska Native Corporations (Calista and TKC) with life-of-mine agreements further insulates it from federal land-use disputes that plague western U.S. projects. These corporations have a treaty-based mandate for mining-related economic development, aligning their interests directly with project success.

The Paulson partnership fundamentally changes the strategic equation. Unlike Barrick, whose global portfolio and competing priorities created what Kaplan termed a "fraud relationship" that left NovaGold "dead money," Paulson brings attributes that extend beyond capital. As an institutional firm with in-house talent and a track record of advancing assets like Donlin up the value chain, Paulson provides both financial capacity and expertise. The equal governance structure (50/50 voting despite NovaGold's 60% economic interest) might appear as a risk—reducing NovaGold's ability to assert proportionate rights—but management frames it as a feature that ensures perfect alignment. This structure prevents the impasses that plagued the Barrick era, where one partner could block progress. The partnership's combined $1 billion equity raise in May 2025, priced at $3.75 per share with a backstop warrant structure, demonstrates institutional confidence that management claims was "the toughest deal" Kaplan has done in 32 years, precisely because it secured the project's future.

Exploration upside provides a third, underappreciated dimension to the moat. Only 5% of Donlin's land package has been explored, with the known 39 million ounces concentrated on just 3 kilometers of an 8-kilometer trend. Regional exploration effectively ceased in the early 2000s after Barrick's failed 2006 hostile takeover attempt, leaving the remaining 95% of the property untouched. Kaplan's geologists believe "the next Donlin could be at Donlin," suggesting that future drilling could materially expand the resource base beyond already-industry-leading levels. The 2025 drill program, which completed 18,454 meters in September, confirmed consistent mineralization across multiple zones with standout intervals up to 23.49 g/t gold, demonstrating that the deposit remains open at depth and along strike. This exploration optionality is entirely absent from peers with smaller, more defined footprints.

Financial Performance: Development Stage by Design

NovaGold's financial statements reflect its deliberate development-stage strategy rather than operational weakness. The company reported a net loss of $15.6 million in the third quarter of 2025, an increase of $4.9 million year-over-year, driven entirely by higher field expenses at Donlin and increased general and administrative costs associated with the transaction. For the first nine months, the net loss expanded by $44.3 million, but $39.6 million of this was a non-cash, non-recurring warrant expense from the backstop agreement that enabled the equity raise. The underlying cash burn from operations was $12.6 million on a TTM basis, a modest figure for a project of Donlin's scale.

The balance sheet tells a more nuanced story. As of August 31, 2025, NovaGold held $125.2 million in cash and term deposits, which management asserts provides "sufficient working capital to cover anticipated funding of the Donlin project and corporate general and administrative costs for at least the next two and a half years at current spending levels." This runway is critical because it carries the company through the BFS phase without requiring immediate dilutive financing. The investment in Donlin Gold LLC jumped to $214.9 million from $2.6 million year-over-year, reflecting the $200 million consideration for the additional 10% interest plus $9.1 million in capitalized transaction costs. This accounting treatment—capitalizing rather than expensing the acquisition costs—preserves cash flow metrics while building the asset base.

Capital allocation priorities are laser-focused on de-risking Donlin. The 2025 budget for NovaGold's 60% share increased to $24 million from $21.5 million due to the higher ownership stake and ramped-up site activity, while corporate G&A rose to $18 million from $16 million to cover transaction-related professional fees. These increases are not signs of cost control issues but rather investments in the BFS process, which is expected to cost $80-100 million on a 100% basis over two years. Management anticipates Donlin site expenditures will run approximately $40 million annually during the study period, with NovaGold funding 60%. This level of spending is consistent with peers: Perpetua Resources budgeted similar amounts for its feasibility work, while i-80 Gold's development capex is spread across multiple smaller projects with less focus.

The promissory note to Barrick, which stood at $162.6 million as of August 31, represents a legacy liability that could constrain future cash flows. The note accrues interest at U.S. prime plus 2%, compounded semi-annually, and is payable from 85% of NovaGold's share of future mine revenue or net proceeds from any interest reduction. However, the June 2025 amendment provides an option to prepay the note in full for $100 million on or before December 2026, a 38% discount to face value that management may execute if financing conditions permit. This prepayment option is a valuable call right that could save approximately $62 million plus future interest, effectively creating a potential equity infusion upon project financing.

Outlook, Guidance, and Execution Path

Management's guidance provides a clear roadmap to production. The immediate focus is awarding the BFS contract by year-end 2025, with work expected to take approximately two years. This timeline positions NovaGold for a construction decision around 2027, followed by a four-year build period targeting commercial production in 2031. The BFS represents the most significant catalyst since the Paulson transaction, as it will update the 2011 feasibility study with current economics, engineering, and environmental parameters. Greg Lang, a 30-year Barrick veteran who built Goldstrike and Cortez before joining NovaGold, emphasizes that the study will be "very important work necessary for a future feasibility study" and expects it to add "substantial value" by refining mine planning assumptions and confirming metallurgical performance.

The 2025 drill program, completed in September, directly supports the BFS by converting resources to reserves and gathering geotechnical data for tailings and water retention structures. Results confirmed consistent mineralization across the ACMA and Lewis deposits with high-grade intercepts up to 23.49 g/t, demonstrating that the deposit's known zones remain robust. This work is essential for securing the remaining state permits, particularly the tailings dam certification that is "well advanced" and expected to be received "well in advance of completing the bankable feasibility study." The federal permits remain in place despite ongoing litigation, with the U.S. District Court remanding only a narrow tailings analysis issue while denying requests to vacate approvals.

Funding the path to production is the central question for investors. Management is explicit that future funding will require a combination of corporate debt, project-specific debt, and potentially government support or royalty/streaming arrangements. Kaplan's confidence—"I'm not worried about financing"—stems from his belief that Donlin's scale and strategic importance will attract institutional capital that is "the best that we've ever seen in our lifetimes." He notes that if the feasibility study had been updated in 2021 as planned, $1-2 billion in project financing would have been "readily available." The current gold price environment, with bullion at record highs and central banks treating gold as a strategic reserve asset, strengthens this argument. However, the company has not provided detailed guidance on how it will bridge the gap from $125 million in cash to the estimated $7-8 billion development budget, leaving this as the key variable to monitor.

Risks and Asymmetries: What Can Break the Thesis

Permitting delays represent the most immediate execution risk. While federal permits are secure, state-level appeals on water rights and pipeline right-of-way remain pending, with decisions anticipated in 2025. The Alaska Supreme Court appeal on the Clean Water Act Section 401 certification is expected to complete briefing in late 2025 or early 2026. Although Greg Lang states that litigation "is not an issue that overly concerns us" and "has all, so far, gone very well," any adverse ruling could delay the BFS timeline or impose additional study requirements. The Federal District Court's remand on tailings storage facility analysis, while narrow, demonstrates that even permitted projects face ongoing legal challenges that can add time and cost.

Partner alignment risk persists despite the Paulson partnership's touted benefits. The LLC agreement gives NovaGold a 60% economic interest but only 50% voting rights, meaning Paulson can block major decisions. While management frames this as ensuring alignment, the structure inherently reduces NovaGold's control. If Paulson's priorities diverge—perhaps on financing timing, development phasing, or exit strategy—the project could face new impasses. The agreement also means NovaGold's share of funding obligations is 60% while its governance influence is 50%, a mismatch that could create friction during the capital-intensive construction phase.

Capital intensity is the existential risk. The estimated $7-8 billion development cost is among the largest capital requirements for any North American mining project. While Donlin's grade and scale support robust economics, financing this amount will likely require multiple tranches of equity and debt that could substantially dilute existing shareholders. The company's inability to use Form S-3 until July 2026 due to a delinquent 8-K filing limits its ability to raise capital efficiently, potentially forcing it into more expensive private placements or project-level financing with onerous terms. If gold prices retreat from current highs or if capital markets tighten, the project could face funding gaps that delay development indefinitely.

Execution risk is amplified by NovaGold's lack of operating history. While Lang and CFO Peter Adamek bring deep Barrick experience, the company has never built or operated a mine. The transition from feasibility to construction introduces engineering, procurement, and construction management challenges that have derailed many well-designed projects. The 2025 drill program's success is encouraging, but it represents only 18,454 meters of drilling—minimal compared to the detailed engineering and geotechnical work required for a project of this scale. Any significant cost overruns or schedule delays during construction could erode the project's economics and investor confidence.

Valuation Context: Pricing a Pre-Production Giant

At $9.93 per share, NovaGold trades at an enterprise value of $4.08 billion, a valuation that cannot be assessed through traditional earnings-based metrics given the absence of revenue and negative profitability. Instead, investors must evaluate the company through resource-based multiples and peer comparisons. On a per-ounce basis, the EV implies approximately $105 per ounce of gold resource (using the 39 million ounce figure), a figure that appears reasonable compared to development-stage peers but rich relative to producers who trade at lower multiples on proven reserves.

Peer comparisons highlight NovaGold's premium positioning. Perpetua Resources, with a smaller gold-antimony resource in Idaho, trades at an EV of $2.57 billion despite having $445 million in cash—nearly 3.6 times NovaGold's liquidity. i-80 Gold, which has begun modest production in Nevada, commands an EV of $1.08 billion but generates negative gross margins and burns cash across multiple smaller projects. Skeena Resources, developing a high-grade but significantly smaller deposit in British Columbia, trades at $2.45 billion EV with less than half of Donlin's resource base. Western Copper and Gold, with a copper-dominant project in remote Yukon, trades at just $470 million EV, reflecting both its smaller gold exposure and higher jurisdictional risk.

The most relevant valuation metric is cash runway relative to development timeline. NovaGold's $125 million cash, against a quarterly burn that averaged $6.3 million in the first nine months of 2025 (excluding the one-time warrant charge), provides roughly 20 quarters of funding—sufficient to complete the BFS and advance permitting but insufficient to begin construction. This creates a clear catalyst pathway: the BFS completion in 2027 will either unlock project-level financing at attractive terms or expose valuation gaps that require equity dilution. Management's confidence in financing is supported by the project's strategic importance and Alaska's political support, but investors must weigh this against the reality that no U.S. gold project of this scale has been financed in the past decade.

Conclusion: The Aligned Path Forward

NovaGold has emerged from a 15-year strategic impasse to control, economically, one of the world's most attractive undeveloped gold assets at precisely the moment when jurisdictional safety and scale command maximum premium. The Paulson partnership removes the primary headwind that made the stock "dead money" since 2021, while the initiation of the BFS and ongoing drilling create a multi-year catalyst pathway that management believes can drive the stock from recent lows to $12-15 and ultimately $30. The project's fundamentals—39 million ounces at more than double industry-average grade, located in Alaska with federal permits secured—support this ambition with potentially industry-leading margins.

The investment thesis hinges on two variables: execution of the BFS timeline and successful navigation of the capital raise required for construction. If the BFS confirms robust economics and financing is secured on reasonable terms, NovaGold offers exposure to a multi-decade gold production story with exploration upside that could materially expand the resource. If permitting delays, partner misalignment, or capital market tightening emerge, the company could face dilutive raises or development stalls that erode value. The stock's 150% move since the Paulson transaction suggests the market is beginning to price in the alignment premium, but the full revaluation will depend on delivering the BFS and demonstrating that America's largest gold mine can be financed and built on schedule. For investors willing to accept the execution risk inherent in mega-project development, NovaGold represents a rare combination of scale, grade, and timing in a gold market that increasingly rewards jurisdictional safety.