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U.S. assets before the great migration to the frontier markets
took hold. At $2,000 gold, using a 5% discount rate with just the proven and probable reserves in our feasibility study and nothing else, our share of Donlin Gold would be worth over $3 billion.* Of course, when gold reaches that level, it means the next leg of the gold bull market will be well underway and could carry us beyond its last peak of $1,900 in 2011 to an all-time high.
What do we believe shareholders can look forward to?
Here’s an anecdote: In 2010, when gold equities had a nice run, NOVAGOLD’s share price surged from $5 to $16 in a matter of weeks. That was before there was a feasibility study on Donlin Gold and a pre-feasibility study on Galore Creek; before new management was brought in with proven credentials of building major mines; before we showed that one could permit a major mine in Alaska with very limited opposition; and before Barrick’s attitude toward Donlin Gold went from being a headwind to a most constructive tailwind.
Today, we are more than halfway through permitting Donlin Gold, and Galore Creek has been shown to be a world-class copper-gold-silver asset as well. Plus, we have a strong balance sheet with over $100 million in cash and short-term deposits. All these attributes bode well for NOVAGOLD enjoying a premium valuation when the sector says goodbye to the correction phase that has characterized the gold bull market for the past  ve years – and embarks upon its next leg up.
How do you think about valuing NOVAGOLD?
In other words: What, potentially, is the largest pure gold mine in the world – in the safest jurisdiction in the world – really worth?
Let’s start with the basics. NOVAGOLD owns a 50% interest in Donlin Gold and Galore Creek, two of the best development assets in the industry. In terms of size, grade, exploration potential, production pro le, partnerships, and jurisdictional appeal, these assets o er an excellent opportunity for investors seeking leverage to gold through Donlin Gold and to copper through Galore Creek. The company also has a strong balance sheet, which means it should not need to raise additional capital until it’s prepared to advance Donlin Gold to construction. That provides not only extraordinary leverage, but also  nancial  exibility.
Donlin Gold enjoys an enormous endowment of 39 million ounces of gold in measured and indicated resources. For a mine to start with such a resource may well be a  rst. That the grade of the resource averages 2.2 grams per tonne, double the industry average, is truly epic. Moreover, with anticipated annual gold production of greater than one million ounces per year over a 27-year mine life, Donlin Gold is slated to be one of the largest producers in the world – and quite possibly, in its early years,
the largest pure gold producer in the world. This production is expected to originate from a three-kilometer portion of an eight- kilometer belt of already known mineralization. We believe that this could be just the beginning, and that we are dealing with a district that is wholly controlled by the existing partners. So this mineralized trend contains additional gold targets that could potentially lead to more discoveries and more production in the future. The project’s competitive advantage is further solidi ed by its location in Alaska, the second largest gold-producing state in the safest national jurisdiction in the world.
Our chairman and largest shareholder both believe that, due to its unique size, grade, mine life, and jurisdictional pro le – not to mention exploration upside – Donlin Gold will ultimately be valued using the zero percent discount rates that prevailed for
Donlin Gold: Significant value upside with higher gold prices.
Net Present Value (NPV) (US$ in millions)
NPV at 5% NPV at 0%
14.6B 11.6B
8.2B 6.2B
$1,500 $1,700 $2,000
Gold Price $USD/oz
*Donlin Gold estimates as per the second updated feasibility study effective November 18, 2011, as amended January 20, 2012. All dollar figures are in USD and reflect after-tax net present value (at a 0% and 5% discount rates) of the Donlin Gold project using the feasibility study reference date of 1/1/2014 (start of Year -05) as the first year of discounting. Estimated project development costs of approximately $172M to be spent prior to the reference date are treated as sunk costs. At a 5% discount rate, the net present value is: $547M @ $1,200/oz gold; $1,465M @ $1,300/oz gold; $3,147M @ $1,500/oz gold; $4,581M @ $1,700/oz gold; $6,722M @ $2,000/oz gold; and $10,243M @ $2,500/oz gold.

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