NovaGold Resources Will Get Better
NovaGold Resources (NG) shares have increased almost 20% this year as the company is making impressive moves at its flagship assets to improve their production capability. NovaGold is a developing gold mining company with two major assets in North America. One of them is the company's flagship asset, Donlin Gold, which is expected to become a key driver for the company going forward.
Moreover, NovaGold is well-positioned to counter the decline in the global commodity pricing environment by optimizing its mining operations and targeting superior quality gold producing mines.
Making impressive progress at its mines
NovaGold is continuing with its technical studies at Galore Creek during the second quarter that includes an appeal for expressing interest on the projected admission tunnel into Galore Valley. The gold mining company is hugely positive about the growth prospects of Galore Creek and expects it to become a significantly valuable asset as the worldwide copper markets recovers completely with several major attributes that are noted with Donlin Gold.
Galore Creek is expected to carry a higher grade of key metal deposits at lower costs and NovaGold has strategically entered into partnerships with Tahltan and the Teck Nations located in British Columbia which is a safe mining district.
The gold discovery at Galore Creek, coupled with the significant expansion prospects of the metal with extremely weak investments performed till date in the resource as a commodity as against other major investment commodities discussed above.
Although, gold is currently not in good shape, but still, its fundamental drivers remain strong with supply and demand supporting an improvement in gold pricing. The key demand drivers for gold include asset diversification, the notion of a safe investment, protection from currency devaluation, central bank purchasing, inflation/deflation prevention and budding market demand seeking trade.
At the same time, supply is constrained with declining reserve grades, rising production costs, falling production growth rates, poor discovery rates, lower growth budgets, weaker sales of central bank reserves and jurisdictional risk. This positive demand and negative supply environment could lead to an improvement in gold pricing.
Thus, the growth potential of NovaGold as illustrated from the key Donlin Gold project is further strengthened by robust fundamental investment drivers for gold as a commodity. The project is believed to have a significant payback at a wide range of gold prices. Also, there is huge growth potential considering the mineralized trend. Extended mine life allows greater chances of benefiting from one or more cyclical bull markets through the entire duration of the mine's operation.
Going forward, NovaGold is strategically partnering with Barrick Gold to conclude the EIS process. Both the companies are jointly committed to working together to deliver enhanced shareholder value from Donlin Gold's exclusive optionality.
The strategic partnership of NovaGold with Barrick is forecasted to significantly expand the former's mining base, while providing superior mining technologies to mine the metal at reduced costs and in greater quantities. The Donlin Gold project is a key development project being focused by the company and estimated to deliver sustainable long-term low-cost production, and thus, enhanced profitability.
Finally, NovaGold has a healthy balance sheet with a total cash position of $134.70 million and a smaller total debt of $78.17 million. This means that the company will be able to invest easily in its growth going forward due to a strong cash position. Thus, given the moves that NovaGold is adopting, I think that the company will be able to continue improving its performance at its mines going forward, making it a good investment.