NovaGold Resources
Annual Report 2020

Plain-text annual report

THERE’S O N LY ONE DONLIN. AND ONLY ONE NOVAGOLD. 2 0 2 0 I N T E G R A T E D A N N U A L R E P O R T C O V E R P H O T O S : The Donlin Gold project (left) is located 10 miles north of the village of Crooked Creek in the historic Kuskokwim Gold Belt of southwest Alaska. Geologists inspect core samples (right). T A B L E O F C O N T E N T S CHAIRMAN’S MESSAGE ....................................................2 QUESTIONS AND ANSWERS .........................................11 DONLIN GOLD REGIONAL MAP ................................. 24 PRESIDENT AND CEO’S MESSAGE ............................. 25 SUSTAINABILITY SUMMARY ........................................ 30 COVID-19 RESPONSE PEOPLE HEALTH AND SAFETY PARTNERSHIPS ENVIRONMENTAL RESPONSIBILITY COMMUNITY AND SOCIAL RESPONSIBILITY GOVERNANCE AND CORPORATE POLICIES MINERAL RESERVES & MINERAL RESOURCES ...... 50 CORPORATE INFORMATION ........................................... 52 FINANCIAL REPORT (SEPARATE DOCUMENT) All scientific and technical information in the body of this annual report is qualified by – and is to be read in conjunction with – the Mineral Reserves & Mineral Resources table and associated notes found on page 50. All dollar amounts quoted in this report are in U.S. currency unless otherwise noted. This annual report contains forward-looking statements or information concerning anticipated results and developments in our operations in future periods, planned exploration activities, the adequacy of our financial resources, and other events or conditions that may occur in the future. It may include statements regarding perceived merit of properties, exploration results and budgets, mineral reserves and resource estimates, work programs, capital expenditures, operating costs, cash flow estimates, production estimates and similar statements relating to the economic viability of a project, timelines, strategic plans, including our plans and expectations relating to the Donlin Gold project, market prices for precious metals, or other statements that are not statements of fact. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable, and the beliefs, expectations, and opinions of management as of the date of this report. We do not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations, or opinions should change, except as required by law. Investors should therefore not place undue reliance on forward-looking statements. See complete disclaimer on page 50. Our employees and neighbors take pride in the work and activities depicted in the photographs throughout this report, most of which were taken at the Donlin Gold site or in the surrounding communities. With its Alaska Native partners, NOVAGOLD is dedicated to providing economic opportunities to the Yukon-Kuskokwim region in a culturally supportive, respectful, and professional manner. NOVAGOLD is a pure gold play focused on Alaska’s Donlin Gold project in equal partnership with Barrick Gold. Donlin is positioned to be one of the world’s largest gold mines, with 39 million ounces in measured and indicated mineral resources at a high average grade of 2.24 grams per tonne1 on a mineralized trend that occupies just 5 percent of its land package. We believe it offers investors extraordinary leverage to gold. We also believe that it’s only through a balanced development plan – one that enhances economic growth, provides a safe and healthy workplace, and establishes strong and collaborative working relationships – that we can bring tangible, long-lasting benefits to our community partners. We aim to achieve that goal through openness, transparency, constructive dialogue, and with respect for the values, the culture, and the language of the people of the Yukon-Kuskokwim region. 1 Donlin Gold data as per the Donlin Gold Second Updated Feasibility Study (as defined herein). Donlin Gold measured resources of approximately 8 Mt grading 2.52 g/t and indicated resources of approximately 534 Mt grading 2.24 g/t, each on a 100% basis and inclusive of mineral reserves. Mineral resources have been estimated in accordance with NI 43-101. 1 C H A I R M A N ’ S M E S S A G E Dr. Thomas Kaplan Chairman, Board of Directors MODERN MONETARY THEOLOGY FOR A WORLD IN FLUX reputable of their devotees are getting actual tattoos on their exoskeletons to reinforce and further advertise their affinity as new highs in the prices of crypto are being reached. Though such rituals may exist in the niche that is the precious metals sector, other than a knowing wink with my fellow travelers in the space, I for one have never been privy to a secret handshake among gold’s proponents, and certainly not any symbols of gang affiliation. Can one imagine the sheer contempt that would follow a gold bull like John Hathaway revealing he had piercings or body art applied to celebrate his prescient early calls on the noble metal? We do live in strange times, but, as the French would say, quand même… I know what it is like to make 10 times my money, even 100 times and, once, 200 times. So I am not one of those people who cries “Bubble!” when people are scoring a big win. To the contrary, actually. So let me be really clear: I come here not to bury the Caesar that is crypto, but rather to praise it. And of course, in that praise, to reflect upon what the impressive ascendancy of cryptocurrencies suggests about precious metals and thus NOVAGOLD – the vehicle which I have come to love more and more. Were this not to be the case, I would put NOVAGOLD into play and pivot to something else. I won’t, because it is by far the best gold story from my vantage point and I simply would not know how to replace its attributes. For decades, investors who are said to espouse a belief in While I shall get back to some of the more philosophical gold as a reliable and attractive store of value have had conferred musings on the crypto/gold narrative a bit further into this letter, upon them the epithet “goldbugs” in a nod to their supposed – and let us begin with how the NOVAGOLD story itself only got better in presumably flawed – ardor for the hard money thesis. Even those like myself, who are not captured by what John Paulson and I call 2020. Much better, in fact. For some of our new investors – some of whom are quite large – I feel compelled to repeat an inescapable “gold feevah” and hold no more than a common-sense conviction conclusion that guides my thinking about why I believe our that there is room in every portfolio for a time-tested currency company constitutes the finest way to play gold. LEVERAGE IN A PLACE WHERE YOU CAN KEEP THE REWARDS low risk moderate to high risk extreme risk no data that cannot be printed by fiat, have been given this label. As we of sound mind – including those as avowedly hyper-rational as Ray Dalio – are wont to say, being a proponent of having some gold among one’s cash is just prudence. Nevertheless, until recently in my experience, the emotionalism of gold’s detractors has been more viscerally marked by intolerance than that of gold’s adherents. After all, no other asset class is met with such wide- ranging disdain that its advocates are referred to as, well…insects. Until perhaps now, that is. For if those positive on gold are somehow creepy-crawly (a very British way of referring to bugs, worms, and the like), how soon will it be that those bullish on cryptocurrencies – for many of the same reasons that gold bulls promote the yellow metal – are referred to, affectionately of course, as Bitbugs? After all, the febrile religiosity and unbridled passion characterizing those whirling dervishes of what I shall hereinafter refer to as “crypto” is something that would make the merely pious goldbug blush. The new insecta are so famously loyal to their cause that they have developed mantras (e.g. HODL) while some of the most serious and The jurisdictional risk map is derived from the top 10 (lower risk) and bottom 10 (extreme risk) of 77 jurisdictions reviewed in the Fraser Institute’s Annual Survey of Mining Companies, 2020. Alaska is ranked number 5. 2 2020: ROCK BEATS PAPER? It’s apparent to me that we’re nearing an inflection point. For when I speak about our flagship project, Donlin Gold, I often ask this question of my audience: What other gold development-stage asset in the industry compares in its combination of enormous size, high grade for an open-pit (and hence the opportunity for lower all-in sustaining costs), truly superb exploration upside, a production profile of potentially the biggest pure-gold mine in the world, a mine life measured in decades, excellent local and industry partnerships, and the safety of being located in one of the world’s premier jurisdictions? I’ve never heard pushback with that one. If one cannot challenge the assertion, then Donlin Gold must be unique. To my delight, needless to say, a legitimate question has now arisen regarding one particularly sexy aspect of that uniqueness: That is, whether Donlin will represent the largest gold mine in the world after all. Many of you will have heard me share in the past that there is only one serious rival for those bragging rights. I am therefore elated to report that we have a challenger for that trophy, the Sukhoi Log project. Or as I like to call it, the Analog. For Donlin POSITIONED TO BE ONE OF THE WORLD’S LARGEST GOLD MINES Projected Annual Gold Production (millions of ounces) 1.10 0.5 0.45 0.39 0.37 0.36 Donlin Gold USA* Goldrush USA† Metates Mexico† Courageous Lake Canada† Côté Gold Canada† Salares Norte Chile† 1.20 1.00 0.80 0.60 0.40 0.20 0.00 * Anticipated annual gold production during full life of mine if put into production as contemplated in the Second Updated Feasibility Study. See “Cautionary Note Concerning Reserve & Resource Estimates” and “Mineral Reserves & Mineral Resources” and associated information on page 50. † Average of comparison group data of 5 projects based on large (2Moz P&P cut off ), North/South American gold-focused development projects with >75% projected revenues from gold, as per latest company documents, public filings and websites as of January 2021. might turn out to be the second-largest pure gold producer if our strategic assets. Evidently, Russians have learned to sleep with arms race with Russia escalates to where I hope it will in terms of one eye open for centuries – so they are not fazed. And we sure our respective projects’ production profiles. Comparables are a wish them uninterrupted, regenerative beauty sleep, for Polyus’ good thing for investors. They focus attention. And as we believe greenlighting that mine will be wonderful for the owners of that “to know Donlin is to love Donlin,” Sukhoi Log, the white swan Donlin. Our shareholders (and, one presumes, Barrick’s) owning the that alighted in Siberia in 2020, will likely bring deserved further equivalent of what Sukhoi Log boasts, yet in the second-largest attention to Donlin. gold-producing state in the United States, is, well…kind of special. The Donlin story has occasionally appeared to be too good What counts most for us is that major Western investment banks are to be true. To have another major gold mining company, Polyus, putting valuations of $10-$15 billion on Sukhoi Log in their analyses now developing Donlin’s analog in earnest is really exciting, as our of Polyus. This is what I have long said Donlin should be worth at stature is not diminished by the comparison. Indeed, it is enhanced. today’s prices. As your company’s most enthusiastic promoter, Think of it as being told that one dances like Gene Kelly or Fred I therefore hereby pledge to work even harder to close that gap. Astaire – or actually Ginger Rogers, who remarked somewhat archly Clearly, with only one global comparable, the potential value to that she could do everything Astaire did, just going backwards and be unlocked as the partners move forward at Donlin is now more wearing high heels. Who cares to whose glory one is compared, tangible than ever. right? If it is to any of these icons, one is an eternal star. The same The data points that revealed themselves in 2020 only goes for Donlin and Sukhoi Log. reinforced this conviction, and in multiple ways. Let us start with Being that Alaska was once a Russian colony, in many ways the sweetest part: Namely, that we and our Native Corporation it’s not surprising that analogies are drawn between these two partners Calista Corporation and The Kuskokwim Corporation major gold deposits. Both projects enjoy roughly the same amount (TKC), and of course the project’s co-owner Barrick Gold of ounces at a similar grade, and the same estimated ultimate Corporation, managed to successfully execute the largest drill production profile. It’s almost as if our Russian friends looked at program at Donlin in 12 years under the constraints of COVID-19 – a our last feasibility study and declared, “Let’s target that narrative!” truly remarkable achievement. That it was accomplished on budget in almost every metric. I am not suggesting that they wish to steal and within schedule was a testament to a beautiful collaboration what appears to be a compelling investment thesis. That would by all stakeholders. That there were no cases of COVID-19 or lost-time be rude. And in any event, I do see in their imitation the sincerest incidents at the Donlin Gold camp was a rewarding attestation to form of flattery. There is, however, just one itsy-bitsy difference the professionalism, discipline, and conscientiousness of our team between the two projects. We happen to stand on the right-hand and subcontractors. side of the Bering Strait, where one can sleep well at night and not have to wonder what the Kremlin might be thinking about the ownership of what I suspect shall be declared, in due course, 3 CHAIRMAN’S MESSAGEIn that regard, let me add this: Camaraderie matters. And so do honor and fidelity. As seen from our inaugural formal sustainability summary enclosed in this annual report, every single partner is committed to the highest standards of sustainability. This is not a new phenomenon. To us, environment, social, and governance (ESG) is not a revelation. It has been a way of life for 20 years. We never would have made it this far were that not the case. Donlin presents one of the longest and most extensive environmental baseline studies of any gold-mining project in history. As our Native Corporation partners can attest, we talk the talk and we walk the walk. Now that it is fashionable to discuss more fully one’s track record for doing it right in sustainable development, we are raising our hands – without fanfare but with great confidence. The truth is, our owners can take supreme comfort in NOVAGOLD’s pedigree in this particular area, as the board and management simply don’t know how to do anything other than through best practices. Our reward for this devotion to first principles, should one wish to get a little metaphysical about it, is that the deposit itself DOUBLE THE GOLD INDUSTRY’S AVERAGE GRADE 2.24G/T Donlin Gold average grade* 1.12G/T world average grade† * Represents average grade of measured and indicated mineral resources, inclusive of mineral reserves. See “Cautionary Note Concerning Reserve & Resource Estimates” and “Mineral Reserves & Mineral Resources” and associated information on page 50. † 2020 average grade of open-pit and underground deposits with gold as primary commodity and over 1Moz in measured and indicated resources, sourced from S&P Global Market Intelligence. showed it was a gift that keeps on giving. That the drilling was We welcome their participation in our story, as we do the two completed (with even more holes than planned) was astonishing additional Arabian Gulf sovereign wealth funds that already enough; that the results themselves were better than expected was have long-term exposure to NOVAGOLD via their holdings in The icing on the cake. There is a reason why assay labs are referred to in Electrum Group. Having such value-added investors cheering on our business as “the house of heartbreak.” Yet in an industry more Donlin is of true benefit to our shareholders, and I am grateful to often characterized by declining grades and disappointments, them all for wanting to see one of the largest gold mines in the Donlin proved the contrary. Once again, it delivered higher-grade world built when we and Barrick are ready to roll. results than the modeled projections – a blessing that few gold- mining projects can claim. From literally all standpoints, the mettle and metal displayed at Donlin this past year was awesome. GETTING BETTER AND BETTER: THE NOVAGOLD ADVANTAGE Not all of the year was as sweet, but we got through the I have often been called an activist in both my for- and bitter part really well – and then some. In terms of management’s non-profit lives and acknowledge that being a promoter of great resilience and integrity, we experienced what might be called causes and even greater assets, if they are genuinely Tier One,1 is a our finest hour when NOVAGOLD was subjected to what we real honor. Big cats, Rembrandt, gold (and in the latter, especially comfortably assert was a blatant manipulation of our stock price, Donlin)…they’re all of a piece: beautiful, meaningful, uniquely designed to blunt our momentum for the benefit of short sellers iconic within their own specific ecosystems – and irreplaceable. If I who conspired to carry out a short-and-distort scheme and/or am a promoter of such things, then promoter I shall be. At least in needed an exit when it looked like they might get squeezed as our each instance, in addition to capital, I also contribute my passion shares approached decade highs. I won’t dwell on that subject, as and my most preciously held commodity: time. I have skin in the we are currently pursuing justice through the courts against the game, and my heart as well. For money is not my be-all and end-all. misbenighted tip of the spear for that duplicity. Discretion is the Death shrouds, as they say, have no pockets and my interests are better part of valor. What is so astonishing to me about this case effectively intertwined. Indeed, David Macdonald, the professor is the sheer volume of the defamation that was required for it to of zoology who founded WildCRU, Oxford University’s Wildlife accomplish its task. Suffice it to say, the net result of the experience Conservation Research Unit, paid me the highest compliment when was that our shareholder support was exemplary. These investors he said that “while many are trying to turn tigers into gold, Tom is include the Kingdom of Saudi Arabia’s Public Investment Fund, trying to turn gold into tigers.” If you want to know what makes me renowned as one of the world’s savviest sovereign wealth funds. tick, that about sums it up. With that passion driving me on, not They liked what they saw and acted with gusto in the marketplace. for nothing am I sometimes called “the owner who lives above the store.” In my book, that’s more of a privilege than a responsibility. For as I often say, “It doesn’t take a genius to buy Rembrandt; it 1 NOVAGOLD defines a Tier One gold development project as one with a projected production life of at least 10 years, annual projected production of at least 500,000 ounces of gold, and average projected cash costs over the production life that are in the lower half of the industry cost curve. 4 I encourage any reader to peruse NOVAGOLD’s 20183 and 20194 annual reports. I do urge you to read them precisely because they takes a genius to be Rembrandt.” At this point, I could say the same are considered, by our investors, to represent the gold standard of for Donlin which, simply put, to me evokes a da Vinci. transparency and intellectual coherence in the gold development That sense of destiny was further evoked in 2020. For if Fortune space. As such, I am not aware of any shareholders who do not was impressed by all the positive developments that took place at understand our strategy and the steps we are taking to Donlin, she certainly expressed her approbation by giving us many implement it. signs. Such good luck is yet another reason why I have always felt In addition to these facts as we know them, our shareholders the NOVAGOLD story is so special that my only regret has been are accustomed to getting my forward-looking thoughts every year that more people don’t know of it. This will assuredly change, and on how the gold thesis is doing. This year’s “Thoughts” section will possibly sooner than we think. Given the gold industry’s suffering be a bit longer than usual. Knowing that brevity isn’t my strong from both asset scarcity and the ravages of rising jurisdictional risk, suit at the quietest of times, such a statement may appear quite we believe that having equal ownership in a Tier One asset located daunting. But if you are like me, watching the world (and not just in a Tier One jurisdiction suggests that time is clearly on our side. the markets) venture into uncharted waters begs for an attempt This, in turn, will give our shareholders maximum leverage in the at explanation. There are so many new facets to the new world perfect jurisdiction to keep the fruits of that leverage. disorder. Perhaps dozens. I shall dwell primarily on two of them: For more on that particular angle, one can watch my interview crypto as it relates to precious metals, and China. with Dan Tapiero2 for Real Vision, in which we talk gold and, yes, Donlin Gold. Since that interview was published, I can add that GOLDBUGS, BITBUGS, AND SILVERBUGS NOVAGOLD and our co-equal owner in the project, Barrick, are fully “I have always thought there might be a lot of cash in aligned in carefully planning out the future mine and monitoring starting a new religion.” developments to advance Donlin Gold toward construction – at a George Orwell to a friend, 1938 time when both partners conclude that they can achieve maximum Tempting as it is to veer into sex and politics and other benefits for all stakeholders, including our shareholders. temporal issues this year, let us stick with what now constitutes Meanwhile, momentum is building rather fast, for NOVAGOLD the less controversial, albeit more spiritual, subject of religion. The is becoming a go-to stock in the space, especially as the sentiment revelation of divine truth is a powerful thing, and it is a wondrous in this sector improves and interest is steadily but surely finding sight indeed to witness the birth of a new and passionate faith. a channel into scarce and consequential North American assets. Some might even argue that, in an era characterized by a perverse There are myriad good reasons for this. For while I hate to say it, alloy of cynicism and financial exultation, this spectacle is especially there won’t be very many players left in the gold space. Collapsing pronounced when money is involved. Real money – not this penny- grades, the paucity of new discoveries, and the churning through ante “a billion here, a billion there” kind of stuff, but rather a trillion of reserves at existing mines by the majors all but confirm that here or there. we have already reached a tipping point. As such, assets like The rise of cryptocurrencies in fact could be interpreted as Donlin Gold, with metrics that are accretive on practically every such a theological phenomenon. And George Orwell, as with dimension, are essentially unicorns. When I survey the landscape, many other cases in his observation of the human condition, was I am reminded of the carnage that was visited on the tech space likely onto something very much worth pondering here. For as after the late 1990s bubble burst. If one had the presence of mind JPMorgan strategists John Normand and Federico Manicardi wrote to sift through the wreckage and have the wits to pick a winner or in mid-January, “Whether cryptocurrencies are judged eventually two – say, an Amazon or an Apple – one made a generational trade. as a financial innovation or a speculative bubble, Bitcoin has already Similarly, I believe that those few gold companies that have great achieved the fastest-ever price appreciation of any must-have assets in great places will constitute generational opportunities. asset.” I believe that NOVAGOLD will stand among those precious few. The pious fidelity of the contemporary neo-monetary Candidly, helping this particular scenario come along is monotheists, a.k.a. the Bitbugs, is nonetheless all the more our objective. As the great wit Talleyrand put it, “The art of impressive given that the concentration of crypto wealth would statesmanship is to foresee the inevitable and to expedite its make even a plutocratic one-percenter blush. If what I have read occurrence.” We’re open about it. I’m open about it. We at The is true – admittedly, a high hurdle in this era of obfuscation and Electrum Group consider Donlin Gold to be the holy grail and want manipulation – approximately 2 percent of anonymous accounts it to be valued for the category-killer Electrum and its shareholders control some 95 percent of all Bitcoin holdings, a data point which see it to be. Electrum will make money only to the extent that NYU economist Nouriel Roubini also relayed.5 A further breakdown its co-investors will. And these fine folks are exceptionally well- educated about Donlin Gold’s narrative. For those new to the story, 2 https://www.realvision.com/the-kaplan-doctrine-conservation-preservation-and-value alongside-prices-flipside-crypto-202011281344 3 https://www.novagold.com/_resources/NG_2018-AR.pdf 4 https://www.novagold.com/_resources/NG_2019-AR.pdf 5 https://www.fxstreet.com/cryptocurrencies/news/bitcoin-whales-ownership-concentration-rises- 5 CHAIRMAN’S MESSAGEwell for the old gold. History shows that, when people behave civilly, multiple models derived from a common gene can survive in indicates that large holders, the so-called whales, would own about tandem – and indeed thrive. 92.4 percent of the 2 percent, with crypto exchanges accounting for nearly 7 percent.6 What a brilliant phenomenon it is to get people to want it despite this. Want and need are two distinct things; the difference between freedom and dependency. For our purposes that is to say that, while I genuinely want crypto to succeed, I don’t actually need A beautiful précis of the theistic aspects of cryptocurrencies7 crypto to succeed for Donlin and scarce assets in safe places to was published by Bloomberg early in 2021. It begins thus: become their own juggernauts. This is an excellent position in Bitcoin is the first true religion of the 21st century. which to find oneself. To go from the sacred to the profane, this Sometimes people call Bitcoin a religion pejoratively, reality actually applies to numerous asset classes. After all, Old as a way to sneer at its disciples. Or they call it a cult. Or Masters are reaching new highs at auction and in private sales. In they just use “religion” to imply that the whole thing is fact, an Old Master painting – Leonardo’s Salvator Mundi – holds the irrational. But I mean it with no judgment one way or record at auction for any work of art ever, despite being sold in a another. Just that it’s literally a religion. There’s plenty of market swirling with modernist and contemporary creations. There evidence for it. is a lot to be said for pedigree and scarcity. This piece was followed up a couple of weeks later by an I shall not, however, say much for why one should own gold – equally riveting reinforcement.8 Like the author, Joe Weisenthal, or crypto, for that matter. While each asset boasts some bells and I reserve the right to be non-judgmental while analyzing whistles that are unique to itself, their commonality of purpose the phenomenon. And yet, I sort of enjoy watching it. Most should form a sea change that is embraced by the gold bulls, who religions fizzle out and become rumps or insignificant cults. have witnessed the triumph of the essential arguments with a new The most prosperous religions, however, are often promoted as generation. And by now, practically all of these NMM evangelicals continuations of a successful model, or at least an established one. have heard their favorite asset referred to as “digital gold” or “the One need go no further than the Judeo-Christian-Islamic narrative new gold.” Millennials logically associate the received wisdom to evidence this point. So long as the Bitbugs are a bit tolerant of crypto as being the natural extension of something that has of the gold bulls’ denial of their exclusive right to the future of an actual multi-millennial pedigree. This rebooted applause for hard currency, all will be well. Gold is tested by time, and, even if gold is enormously bullish for the metal – for the zeitgeist has the technically demonetized for the time being, it is still a recognized potential to boost gold’s brand recognition as an aspirational asset and safe store of value that will continue to be seen as such by benchmark, at just the right time for an industry that cannot find central banks. Not unlike that Old Testament/New Testament/ sufficient quantities to replace their reserves. Think about it: Every Quran dynamic, I for one have a deepening suspicion that the time a Bitbug refers to crypto as “the new gold” or “digital gold,” evangelism of cryptocurrencies’ true believers may metamorphose they are paying a compliment to gold. True, they may be saying in a way that will reaffirm and enhance the case for gold itself as it as a backhanded compliment. But considering that this crowd part of a mix of alt-currencies. After all, the fundamental rationale probably never owned – or thought of owning – any non-fiat for ownership of cryptocurrencies is pretty much grounded in the currency (or was even familiar with the idea that they should or intrinsic justification for owning gold. could) until recently, any revelation at all regarding why gold has Crypto bulls recognize that the monotheistic principle of worked can only be accretive to the brand of a most under-owned “money that can’t be printed by fiat ad infinitum” began with gold financial asset. Some, led by reputable aficionados such as Mike (and, to be fair, silver too). Both assets hence are part of a wave Novogratz himself, actually espouse buying gold and, as seen most against the paganism of what began as a creeping and inchoate quixotically but very intelligently, there is clearly a strong retail (as irresponsibility and has now crystallized into a new creature well as institutional) interest in silver. If, as I suspect, these fellow altogether – namely, Modern Monetary Theory. True, this heresy leverage lovers happen to look for a new hit of octane, they will be remains the state religion. But with gold gaining new adherents, pivoting to the miners with enough enthusiasm to create a new and the hyping of cryptocurrencies’ various successor testaments bubble in that beaten-down asset class. and catechisms, the neo-monetary monotheists of what I am here For those who want some practical advice, therefore, I can and now christening “Modern Monetary Theology” are taking the only express how I am choosing to trade the gold/Bitcoin thesis to a new generation that many of the gold bulls, and I for phenomenon. It is through the equities of gold and silver mining one, would never have been able to reach on our own. Thus, I do shares. If crypto does well, it is a very good sign that gold will do believe that what Bitbugs refer to as the “new gold” bodes very fine. If digital currencies are themselves disrupted by governments 6 https://www.bloomberg.com/news/articles/2020-11-18/bitcoin-whales-ownership- concentration-is-rising-during-rally (accessed February 6, 2021) 7 https://www.bloomberg.com/news/newsletters/2021-01-04/five-things-you-need-to-know-to- start-your-day 8 https://www.bloomberg.com/news/articles/2021-01-21/bitcoin-is-a-faith-based-asset-joe- weisenthal 6 and their market deepens, crypto:gold ratios will emerge that will be tradable. The relative illiquidity of gold and silver will cause them to be revalued upward. And so it goes. I have always held that gold needs a $3,000-5,000 price for an equilibrium to be reached simply from a gold industry standpoint – with multiples of that if macro factors play out as they can. With the market cap of the entire precious metals sector amounting to not much more than the daily fluctuations in any of the new Nifty Fifty, it will not take of cryptocurrencies (and I suspect that the true winners are much more than the flapping of a butterfly’s wings to cause the not even named yet, other than perhaps in Chinese), there miners to revert to their historical golden mean in valuation. is still only one kind of gold and one kind of silver, history’s ON TO THE BEST PART time-tested monetary metals. And as we all know so well, both are genuinely hard to find and exploit. For once one Were I to be even fractionally right on my outlook for the has bucked the roughly 1,000-10,000:1 odds against finding metals, the surge will not be ephemeral. For it will coincide with something new through exploration, it will then take on that perfect storm of supply-demand fundamentals of which I am average 15-25 years to develop, permit, and build the mine convinced even more so now, and that ultimately argues for an itself. As we also appreciate, the industry has not generated epic higher revaluation of the metals – and their equitized proxies new discoveries for years. And grade is plunging – by half especially. Moreover, unlike crypto, the miners enjoy some highly over just the last decade. If anything, production is slated to favorable differentiators. Here are a few to get the juices flowing decline for years. and realize why I believe it’s game over for the precious f Let me also remind the reader that gold is not like metals bears: hydrocarbons, with vast reservoirs or resources ready to be f Gold is a hard business, literally and figuratively. A new switched on quickly should prices rise, or unlocked simply cryptocurrency essentially requires an algorithm – no small by new technologies such as horizontal drilling or fracking. feat, of course – but putting aside the benefits to being The mining industry does not enjoy the luxury of 3D seismic, a first-mover, a new and improved version of the coin and deposits can take decades to go from prospect to mine. can always be created if one wills it. Gold is uniform in its Peak gold really is peak gold. Barrick recently estimated that chemical composition, what one might call its algorithm. gold production will decline by 5 percent a year for years There is only one kind of Au. I do not have to imagine what going forward. I believe that’s about right. If anything, it will kind of regulation gold may face that can harm its thriving likely prove to be a conservative forecast as jurisdictions once – I already know what those scenarios are and can live with thought investible are no longer so, and declining grades the consequences. However, I can be quite sure that many mean higher costs with less output. What an incredible story. governments are looking at how to manage or even compete That’s why I often claim that, as far as supply is concerned, the with crypto. Suffice to say that, while there exist a multiplicity horse has already left the barn. DONLIN GOLD’S UPSIDE VALUE WITH HIGHER GOLD PRICES Net Present Value (NPV) (US$ in billions) NPV at 0% NPV at 5% f The future market darlings, gold miners – even the majors – are all pretty much small caps today. Those that remain are healthier than they have been in years. If I am remotely right in my thinking, gold and silver companies that operate in jurisdictions where one is allowed to keep the fruits of 27.0B all this leverage will potentially offer the biggest dividend Gold Price US$/oz $2,500 $2,000 $1,700 $1,500 $1,300 19.2B 14.6B 11.6B 8.2B $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 Donlin Gold estimates as per the Second Updated Feasibility Study, effective November 18, 2011, amended January 20, 2012. All dollar figures are in USD, represent 100% of the project of which NOVAGOLD’s share is 50%, and reflect after-tax net present value (at 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: $1,465M @ $1,300 gold; $3,147M @ $1,500 gold; $4,581M @ $1,700 gold; $6,722M @ $2,000 gold; and $10,243M @ $2,500 gold. The project requires a gold price of approximately $902 per ounce to break even on a cash flow basis. See “Cautionary Note Concerning Reserve & Resource Estimates” and “Mineral Reserves & Mineral Resources” and associated information on page 50. Wood Canada Limited (“Wood” formerly AMEC Americas Limited) is currently updating all sections of the Second Updated Feasibility Study with updated costs, economic assessment, permitting information, and technical information related to permitting, generated on the Donlin Gold project since 2011, which is anticipated to be finalized and filed during 2021. Based on that cost review, Wood determined that updating the Second Updated Feasibility Study using 2020 costs and new gold price guidance results in no material change to the mineral resources or mineral reserves. The economic assessment in the updated study may be materially different than in the 2011 study. potential in the investment world. And not just for equity investors looking at yield-generating stocks, but also for fixed-income investors looking for alternatives to bonds in the low-yield environment we find ourselves in – and which is likely to remain in place for the foreseeable future. The dividend streams from precious metals equities should attract a huge wall of yield-seeking money from the fixed-income market, which at the moment wouldn’t see crypto as a viable option. As such, for those who want real leverage to the New Monetary Theology, the miners deserve a really hard look. The pent-up buying power of that observation is good enough for me. As Michael Oakeshott, the late London School of Economics political philosopher put it so elegantly, “a true conservative is one who prefers…present laughter to utopian bliss.” 7 CHAIRMAN’S MESSAGE A RESOURCE MORE THAN FOUR TIMES THE SIZE OF THE PEER GROUP AVERAGE Donlin Gold* 39.0Moz 8.4 Moz peer group average† * Represents 100% of measured and indicated mineral resources, inclusive of mineral reserves, of which NOVAGOLD’s share is 50%. See “Cautionary Note Concerning Reserve & Resource Estimates” and “Mineral Reserves & Mineral Resources” and associated information on page 50. † Peer group data based on company documents, public filings and websites as of March 29, 2021. Comparison group of 15 projects based on large (2Moz Proven and Probable cut off), North/South American gold-focused development projects with >75% projected revenues from gold. ELECTRUM’S ALGORITHM be into that model ahead of any other. And truth be told, were the decision Electrum’s alone, we would have multiple drill rigs on Donlin right now. For the industry desperately needs reserve expansion at these grades. The CEO of Wheaton Precious Metals, Randy Smallwood, used a nice turn of phrase with Kitco to describe the collapse in grades and the fact that “it is getting tougher and tougher to find good solid assets and opportunities to grow”: Geological Inflation. As he put it far more succinctly than I am ever wont to do: “Having good long-life assets against this backdrop is incredibly important.”9 That is indeed our philosophy as well. WHITHER THE DOLLAR AND CHINA? For years I argued that, in a world where all paper currencies are toilet tissue, at least the dollar was double-ply. And as currencies are relative instruments, of the fiat currencies the dollar remained the best. Thus, one should own gold and the dollar simultaneously. Of course, I am always met with a raised eyebrow with that one because one of the most persistent myths remains that gold somehow needs a weak dollar. It does not, as illustrated It is true that my enlightened complacency might be with this case in point. influenced by the belief that I have found a formula to making outsized returns in natural resources when one owns the right asset in the right macro environment. Despite prospering in this business for nearly three decades, my personal perspectives are more qualitative – really as a historian who applies what he believes to be some of history’s important lessons. That has proven to be a strong comparative advantage in commodities investing, even if I still freely admit that the extent of my knowledge of the nuts and bolts of mining would fit generously into a thimble. Knowing what I do not know, from the very outset of my career I thus made it the first order of business to surround myself with people of the greatest integrity – that is, who are not afraid to tell me when the emperor is naked – and who are also at the top of their games in their respective spheres: wise individuals such as my “Doctors Nyet,” Ken Rye and fellow NOVAGOLD board member Igor Levental, in analyzing and negotiating deals; first- rate geologists, led by the remarkable Dr. Larry Buchanan; and enormously successful and battle-proven mine operators and builders, best exemplified in my experience by NOVAGOLD’s very own Greg Lang and Richard Williams. Electrum puts serious money into exploration. If we are really lucky, this formula can make 10x on a discovery. And if we get the macros right, we can expect that windfall to multiply a further 10x. Thus, should my team and I have the choice of where to put Electrum’s risk dollars today, it still would 8 I distinctly remember the day I sold my energy company in 2007. Oil was well north of $100 with Goldman Sachs claiming that a spike to $200 was possible – bless their hearts – and the dollar stood at $1.47 against the Euro. Gold had a $600 handle. And thus are put to rest two myths: First, that gold is a commodity like oil and will trade with commodities in tandem; second, that the dollar (having strengthened to its present $1.20 versus the Euro) needs to fall for gold to rise. Myths are wonderful things. Since that day some 13 years ago, gold has tripled during a period in which the dollar grew even stronger. Meanwhile, oil declined to a fraction of where it was when I had to decide in which currency I wished to be denominated as I pounced on the gold-mining opportunities that would present themselves. A year later, this would include NOVAGOLD, the company that had successfully and famously fended off a hostile takeover bid by Peter Munk’s Barrick. While the fiat currency alternatives to the dollar are ripening for sure, reserve currencies usually take a while to wither. After all, in an article published in the Washington Post and appropriately titled “How Trump made China’s currency great again,” the author cites the Nixon-era Treasury Secretary John Connally, who quipped – wickedly yet not incorrectly – to a group of European finance ministers that the “dollar is our currency, but it’s your problem.”10 So I will only say this: Watch China. I think of China as Dean Martin did of Sinatra when he said, “It’s Frank’s world; we just live in it.” American hegemony is receding as China’s is rising – a process that accelerated materially, in both directions simultaneously, during the last several years. 9 March 12, 2021 Kitco interview titled “Geological inflation is here; how does this affect gold and silver price?” 10 https://www.washingtonpost.com/opinions/2021/01/20/how-trump-made-chinas-currency- great-again/ Then there is this: I do believe that the Chinese are firmly dedicated to crypto in their bid to undercut one of the most As someone who is deeply pro-American, I write this with important pillars of American power – the take-it-or-leave-it genuine regret. Still, the fact is that China’s was the only one of nature of the dollar standard. Thus, to those who have learned the world’s largest economies that did not contract last year. The through experience the aphorism “Don’t fight the Fed,” I would contrast between their effectiveness (and concomitant brutality) in suggest that in the not-too-distant future it will be adjoined an implementing their policies and the performance of most Western important corollary: “Don’t fight the Fed and/or the People’s Bank countries is glaring. Such rigor, combined with the notion that of China.” While there certainly will be other countries that seek to there are some 1.4 billion of these hard-working people, should incorporate crypto into their strategies, I would bet on the Chinese be considered strongly. Of course, many would point out that the determination to perfect crypto and other aspects of the renminbi travails of the pandemic can be traced to Chinese wet markets. This alternative as they internationalize their currency. They will scrub might well be accurate. But it is also irrelevant when it comes to this their efforts internally and then expand to the Belt and Road and discussion. thenceforward to the rest of the world. The Great Depression that began in 1929 was triggered by As a more significant trading partner to more countries in the a stock market crash that originated in the United States. That world than the United States, the rise of China’s currency to reserve fact was fully forgotten in the ensuing socio-economic and status – at the expense of the dollar – is inevitable. If I had to hazard geo-political disasters that followed. What remains is the ironic a guess, it will also involve gold, of which the Middle Kingdom result that a singular crisis catalyzed by American excess resulted, is the largest producer and the largest buyer. And I believe as within less than a generation, in both the displacement of multiple well that it will involve Russia, which made news in 2021 when its empires and the United States itself emerging as a global hegemon. gold holdings surpassed U.S. Treasuries for the first time. That is Speaking figuratively now, we know how wars begin. But to a meaningful statement, both for how the country views gold (of paraphrase General David Petraeus’ trenchantly insightful which Russia has now overtaken Australia for the number two spot question not long after the Iraq War commenced, “Tell me, in global gold production) and what they seek to accomplish in how does this end?” terms of monetary autonomy. Vested interests are happy interests. This leads us to another reason why I don’t simply call crypto Moreover, I believe that, if the Chinese and Russians are not by the name of its present market leader, Bitcoin. I voluntarily put already acting in concert, they have ensured that their melodies aside the question of which cryptocurrencies will survive, partially are harmonious. Then of course there is Mother India, whose love as I would like this piece to retain some reasonable shelf life. But for gold has been requited with higher prices, thereby providing also because governments could cut the crypto story dead in its pretty much all Indians with positive reinforcement from holding tracks at any time. Note to the bulls: I strongly urge the space to gold as a store of value. So we have China, India, and Russia with find another name for it. Governments do not like to lose control a genuine vested interest in gold at a time when production is of their money without a fight. And they don’t need to look very declining and money printing has reached the “ho-hum, just pile it far for the casus belli. In a regulatory era determined to ensure that on” phase. In short, I can see that the long-term prognosis for gold “know your customer” is real, that money can be traced and that it – officially as well as unofficially – involves gold. For me personally, is utilized transparently, the mere expression cryptocurrencies itself I feel as the lady at the next table to Meg Ryan’s in When Harry Met invites a crackdown. What Jim Grant calls a “digital bearer bond” Sally…. When I watch the reaction of those three ambitious powers should really be called “happy money.” Anything but crypto. In that reprising her classic euphoria, my only response is, “I want what spirit, there’s also the environmental aspect. As Grant quipped: [they’re] having.” “That such energy-intensive ‘mining’ makes gold mining look green is, to the Bitcoin faithful, irrelevant.”11 But that cognitive dissonance may not last too long. 11 “Bitcoin Goes to Wall Street,” Grant’s Interest Rate Observer, Vol. 39, No. 3, February 19, 2021. 9 CHAIRMAN’S MESSAGEEARLY INNINGS STILL Obviously, I am not the only one to detect this paradigm shift in gold. There is no doubt that consciously and subconsciously If John is right, and if I am right, the place to be in order to the investment climate has changed in the bulls’ favor. The gold benefit from a legitimate revaluation (dare I say “bubble”?) remains narrative is far more well-received now than it was a couple the precious metals miners. The massive dividend streams to of years ago, and the expansion and quality of gold’s list of which I referred, coupled with the multiple expansion of those advocates has been beautiful to behold. So it has been with the companies with long-lived Tier One assets in Tier One jurisdictions, crypto phenomenon mirroring this pivot, and with its passionate could allow these companies to outshine everything else but some adherents who are presenting precious metals with a new pool in groundbreaking tech and biotech stocks – and yes, even crypto. We which to wade. If crypto multiplies, precious metals will prosper for live in a world in flux. Empires are rising, empires are declining. Gold their own merits and for their arbitrage opportunities as people may or may not be the biggest winner. But a winner it will be. And seek value amidst the alt-currencies. If crypto does not do well for that bodes well for me and the shareholders of NOVAGOLD. whatever reason, or faces increased regulation, gold’s time-tested reliability will let it continue to shine for all the reasons I have ACKNOWLEDGMENTS highlighted for years. I have evoked Fortune quite a few times in this piece. Those readers who know me understand it is no throwaway expression in my book. Rather, an appreciation for the inherent fickleness of TOP LONG-TERM SHAREHOLDERS life constitutes part and parcel of a deep affinity for certain classical 63.5% top 10 25.7% Electrum Strategic Resources LP & affiliates 7.5% Fidelity Management & Research Company 6.7% Paulson & Co. Inc. 6.4% BlackRock Institutional Trust & affiliates 4.9% Saudi Public Investment Fund 3.6% Van Eck Associates Corporation 3.0% First Eagle Investment Management 2.4% The Vanguard Group, Inc. 2.0% EXOR Investments (UK) LLP 1.3% State Street Global Advisors (US) 36.5% all other $3.0B market cap* * Market Capitalization based on 331.3 million shares issued and outstanding and NOVAGOLD share price of $9.31 as of April 1, 2021. Shareholder positions are based on the latest 13-D, 13-F or 13-G filings as of December 31, 2020. values of acknowledgment best evoked by Cicero, who put it so perfectly: “Gratitude is the greatest of the virtues and the mother of all the others.” I believe with all my heart and mind in the absolute truthfulness of this sentiment. And at no time in my adult life than during this past year have I felt more grateful for all those that I have around me and in my various ecosystems. To all those who are making the Donlin Gold project advance so gracefully and helping the NOVAGOLD story shine so brightly, you have my deepest appreciation. The year 2020 clearly would not have been the success it turned out to be without the wisdom and fidelity of all our allies and collaborators: our Alaska Native partners – Calista and TKC – and our joint-venture partner Barrick; the State of Alaska and the federal government; our board of directors; the management personnel in Salt Lake City, Vancouver, and at Donlin in Alaska; and all our contractors and professional advisors. As that owner who lives above the store, and knowing what it is to be a long-term investor, my gratitude for our fellow shareholders knows no bounds. From the more modest retail investors all the It is still early days in this story, however. At this juncture, I am way through to the most highly acclaimed fund managers and yet again reminded of the wise words of John Hathaway, whom I shrewdest sovereign wealth funds, we feel blessed with a trust regard as the Dean of the Gold Bulls: “A cursory inspection of the that NOVAGOLD holds sacred. U.S. fiscal situation suggests that the U.S. dollar deserves to rank Thank you all once again for that trust. Please stay safe. high on the endangered species list. We believe that now is the time And may you and your loved ones experience a healthy and to start layering in gold exposure, not when the rest of the world tries prosperous 2021. to do so.” 10 Dr. Thomas Kaplan Chairman, Board of Directors April 7, 2021 ONE-ON-ONE WITH DR. THOMAS KAPLAN Barrick itself was waiting in the wings to buy NOVAGOLD 1 Q + A YOU’VE BEEN IN THE NOVAGOLD STORY FOR 12 YEARS NOW. PLEASE TELL US HOW YOUR INVOLVEMENT HAPPENED. out of bankruptcy. They were not the only ones. That was the reason I didn’t try to acquire the whole company. A wise head, Igor Levental (the guy married to Jessica and also Electrum’s president) was whispering in my ear: Remember Caesar, thou art mortal. The argument went as follows: If you try to take it all and right out from under the noses of the majors that covet the company, all they have to do is walk you up dollar for dollar and so long as the number they pay is less than the takeover price that Barrick offered (and We at Electrum entered the NOVAGOLD saga on December the shareholders rejected), it is worth it for them. It was a pretty 31, 2008 as something of a white knight, purchasing the company’s good point, so we settled for less ownership but with certainty of shares for the very first time in order to literally save it from transaction. There’s greedy, and there’s stupid. Nonetheless, I could existential challenges across an extraordinarily broad front. Putting count on the fog of war for only so long and the fuse on the rescue aside the fact that the economic environment on that New Year’s of this pariah was short. It was so short, in fact, that I decided to Eve was not particularly permissive of any investment at all, our forego our characteristically fastidious due diligence process to rely intervention appeared – even to our closest friends – as akin to upon NOVAGOLD’s joint disclosures with Barrick. I decided that I catching a falling knife. But I had sold my hydrocarbon company, didn’t have to trust NOVAGOLD’s representations about Donlin, Leor Energy, for cash a year earlier in order to pivot to gold, and luck just their partner’s. as well as opportunity coalesced beautifully right where I had put Only after we had closed our investment in NOVAGOLD were my focus: NOVAGOLD. we able to send our chief geologist, Dr. Larry Buchanan, to walk the As a bit of background, I had long coveted exposure to the property and share his impressions. Larry’s award-winning team Donlin story. Watching at a distance from the early 2000s, I felt that had led the discovery and exploration at San Cristobal in Bolivia, I had missed the chance as NOVAGOLD’s shares rose from pennies which resulted in the identification of what developed into one into the teens on the back of drilling that produced what were of the largest silver and zinc mines of his generation. A man of clearly among the best exploration results in the gold industry. enormous integrity as well as talent, much like Igor he also only I wasn’t the only one who saw this potential; Barrick not only “speaks truth to power” and his opinion means a great deal to me. shared my view, but also tried to buy the company in 2006 when “Is the deposit at Donlin what we thought it was?”, I asked upon his NOVAGOLD’s market cap was approximately $1.2 billion. The failure return. “Oh no,” said Larry. Mercifully, before my heart sank, he then of their takeover attempt was to have enormous implications for quickly added that there was, in his opinion, very much more than both companies. the 30 million ounces12 already identified. Moreover, with that 8km By the end of 2008, NOVAGOLD was untouchable. Name the strike being a mere 5 or so percent of the property package, Larry’s crisis and the company defined it: debt coming due that would conclusion was most emphatic when he said that “the next Donlin have put it into bankruptcy, class-action lawsuits, environmental could be at Donlin. Congratulations.” Within a couple of years, we concerns with the EPA (regarding a modest gold property that was had sorted out the various messes that were leading NOVAGOLD to remediated and is now divested), loss of credibility with investors collapse before 2009, and by 2010 the equity returned to the price it and analysts, and hostility from at least one of its key partners. had been during the Barrick takeover attempt. I could go on. But being that we were not irrational by nature – and that it’s much more fun to speak to what transpired afterward – we reached the conclusion that if we could turn this disaster around it would prove to be worth it. 12 In April 2009, Novagold reported 35.3 million ounces of gold, on a 100% basis, contained in measured and indicated mineral resources, inclusive of proven and probable mineral reserves, of which Novagold’s share was 50%. This is supported by a past technical report, “Novagold Resources Inc., Donlin Creek Gold Project, Alaska, USA”, effective April 1, 2009. Measured resources, inclusive of proven reserves, totaled 10 million tonnes grading 2.53 grams per tonne, and indicated resources, inclusive of probable reserves, totaled 469 million tonnes grading 2.29 grams per tonne. This estimate has been superseded by the estimate contained in the Second Updated Feasibility Study effective November 18, 2011 and amended January 20, 2012. For current mineral reserves and resources, refer to “Cautionary Note Concerning Reserve & Resource Estimates” and “Mineral Reserves & Mineral Resources” table on page 50. 11 QUESTIONS AND ANSWERS2 Q + A NOVAGOLD IS ELECTRUM’S FLAGSHIP INVESTMENT BECAUSE YOU SAY DONLIN IS THE “HOLY GRAIL.” COULD YOU EXPLAIN THAT? an accelerating rate, Donlin has continued progressing at its natural pace. We refer to this phenomenon as “The Tortoise and the Hare.” Thus, rather than experiencing deal fatigue of any kind, it’s quite When we entered NOVAGOLD at the very end of 2008, as the opposite. The passage of time has only reinforced our belief in discussed earlier, we felt that Donlin was likely the best single Donlin’s uniqueness and hence NOVAGOLD’s potential as a go-to development asset in the gold space. The passage of time has not stock in the next up-leg of the gold cycle. only reinforced this opinion, but we now believe that industry fundamentals are rendering it unique. Let me put it this way. When I speak about Donlin, I often ask this simple question of my audience: What other development-stage asset in the industry compares in its combination of enormous size, high grade for an open- 4 Q + A pit (and hence low all-in cash costs), truly superb exploration upside, SO YOU SEE DONLIN AS “BEST IN BREED”? a production profile of potentially the biggest pure-gold mine in the Yes, completely. Certainly, the superlatives one can attach to world, a mine life measured in decades, excellent local community and it are quite remarkable. In one or two phases, Donlin could well industry partnerships, and also the safety of being located in one of represent the largest single pure gold mine in the world when the world’s premier jurisdictions? it begins production – and with decades of reserves. Other than I’ve never heard pushback with that one. If one cannot perhaps Sukhoi Log in Russia, there are no known potential pure- challenge the assertion, then Donlin must be unique. One might gold producers that would start with nearly 40 million ounces call it the gold industry’s variation on a theme of Sir Arthur Conan of contained gold in measured and indicated mineral resources Doyle’s “Holmes Method”…the Donlin Corollary! (inclusive of its 34 million ounces in proven and probable mineral 3 Q + A YOU HAVE COMPARED DONLIN TO THE STORY OF “THE TORTOISE AND THE HARE.” COULD YOU ELABORATE ON ELECTRUM’S STRATEGY HERE? reserves)13…and out of only the 3km portion of an explored 8km- long mineralized belt. And with that being only 5 percent of the land package. In other words, in an era characterized by declining reserves and precious few new discoveries, Donlin’s size could possibly increase along strike as well as in terms of depth – perhaps significantly so. In addition to quantity, as evidenced by our most recent highly successful drill campaign, this asset also offers extraordinary quality. Natural resources assets have been my livelihood for nearly Let’s just consider the numbers from the 2011 Feasibility Study three decades. And focusing on the rare “category killers” – – which we very much look forward to refreshing together with whether in silver, platinum group metals, or hydrocarbons – has Barrick. Though the project was envisaged to begin by processing rendered a rather good living. This certainly applies to Donlin an average head grade of 2.6 grams of gold per tonne in the first Gold, which to us represented the closest thing to a unicorn when five full years of production,14 even the average reserve grade of Electrum entered the NOVAGOLD story. To some, our investment 2.1 grams per tonne15 represents almost double the average grade then may have seemed long-dated. But our modus operandi is of other gold projects.16 Size and grade matter. The consequence effectively to buy and hold and be patient. Now, with its federal permits and excellent attributes as a bona fide category killer, Donlin doesn’t look so long-dated any longer. In fact, as other less- attractive mining projects around the world have been cancelled at 12 13 Donlin Gold data as per the Donlin Gold Second Updated Feasibility Study (as defined herein). Donlin Gold measured resources of approximately 8 Mt grading 2.52 g/t and indicated resources of approximately 534 Mt grading 2.24 g/t, each on a 100% basis and inclusive of mineral reserves. Mineral resources have been estimated in accordance with NI 43-101. Donlin Gold proven mineral reserves of approximately 8 Mt grading 2.32 g/t and probable mineral reserves of approximately 497 Mt grading 2.08 g/t, each on a 100% basis. 14 Donlin Gold data as per the Second Updated Feasibility Study. The average head grade processed in the first five full years of production is 2.62 g/t. For current mineral reserves and resources, refer to “Cautionary Note Concerning Reserve & Resource Estimates” and “Mineral Reserves & Mineral Resources” table. Projected average annual production represents 100% of which NOVAGOLD’s share is 50%. 15 Donlin Gold data as per the Donlin Gold Second Updated Feasibility Study (as defined herein). Donlin Gold proven mineral reserves of approximately 8 Mt grading 2.32 g/t and probable mineral reserves of approximately 497 Mt grading 2.08 g/t, each on a 100% basis. Mineral reserves have been estimated in accordance with NI 43-101. See “Cautionary Note Concerning Reserve and Resource Estimates” on page 50. 16 2020 average grade of open pit and underground deposits with gold as primary commodity and over 1Moz in measured and indicated resources is 1.12 g/t, sourced from S&P Global Market Intelligence. In light of these achievements, Mark Bristow appropriately observed: “Building on the last two decades of exploration, the of Donlin’s sheer scale and superior grade render the economics results continue to highlight Donlin’s world-class potential.” unusually attractive, with the numbers then suggesting per-ounce The highly successful and COVID-free conclusion of the 2020 life-of-mine cash costs of $585 and all-in sustaining costs of $735.17 drill program, and in particular the strong results Barrick and And critically, the operations will be located in a safe part of the NOVAGOLD have been sharing over the past eight months, world where an investor can tread without fear. As such, for us represents a major step forward in improving the geological Donlin constitutes the optimal way to invest in the space: that is, to seek confidence in the Donlin project, a necessary step to advancing the maximum leverage to gold in a jurisdiction that will allow investors Donlin up the value chain. to keep the fruits of that leverage. My emphasis on that last bit has led analysts to refer to it as the Kaplan Doctrine. While I enjoy the recognition, I personally call it the “Sleeping Well Rule.” In my case, regenerative sleep has always been directly correlated with higher returns. Hence our strategy with Donlin: the patient man’s way to get rich in gold while being able to sleep well at night. 5 Q + A HOW WOULD YOU CHARACTERIZE NOVAGOLD’S RELATIONSHIP WITH BARRICK? 6 Q + A FROM NOVAGOLD’S STANDPOINT, WHAT COMES NEXT? We’re starting to see our ideal scenario unfold as we imagined it would. At NOVAGOLD, we have always had a strategy regarding our flagship asset’s future, which has been articulated many, many times: namely, as gold bulls we believe that Donlin should and will be built when we can make not just a decent return, but a spectacular return. The partners have never been closer…or more closely aligned. The excellent drill results are indeed making this scenario look Working together as a team, in 2020 we successfully completed a better and better all the time. As declining gold grades pervade comprehensive, 85-hole drill campaign which covered some 23,400 the industry, it has been extraordinary to be able to continuously meters – the largest in 12 years.18 This is a big deal. Mark Bristow, report drill results that reinforce the attractiveness of Donlin Gold the president and CEO of Barrick, doesn’t drill something out of – already an exceptionally impressive asset in terms of size and academic interest – and neither do we, for that matter. And it is no grade for a large-scale open-pit gold project. The results from the coincidence, for instance, that Barrick and NOVAGOLD have been 2020 drill program effectively exceeded the Barrick/NOVAGOLD reporting jointly on the program. This too is a first, and a symbol of technical team’s modeled grade-thickness expectation.17 our deepening cooperation. Moreover, the assay results pointed to additional high-grade gold Both partners are obviously delighted with the outcome of the intersections that only increased the partners’ confidence in recent drill campaign, not only in terms of the actual results, which yielded geologic modeling concepts and confirmed multiple high-grade better grades and higher grade-thicknesses than predicted by extensions in both the intrusive (igneous) and sedimentary rocks. previous modeling, but also with the manner in which the work was These findings not only confirmed our assumptions, but also conducted – particularly in light of the COVID-19 pandemic. Our provided direction for future high-grade drill targets. two companies were especially proud of the fact that there were The next steps are now clear. All the data are being no cases of COVID-19 at the Donlin Gold site. Furthermore, with the incorporated into the geologic model and will be followed by help of dedicated community partners in Alaska and in the Yukon- an update of the mining schedules and life of mine business Kuskokwim (Y-K) region who share the objective of protecting the plans. Critically, we will also make sure that everything we plan is health of Donlin Gold’s workforce, a wide-ranging set of policies executed with special attention to the most up-to-date standards has been implemented to mitigate the spread of COVID-19. of safety, environmental protection, and social responsibility. This 17 Donlin Gold estimates as per the Second Updated Feasibility Study. All dollar figures are in USD and represent 100% of the project of which NOVAGOLD’s share is 50%. Donlin Gold estimates as per the Second Updated Feasibility Study effective November 18, 2011, as amended January 20, 2012. “Costs applicable to sales per ounce” and “All-in sustaining costs” are non-GAAP financial measures. See Non-GAAP Financial Measures at www.novagold.com. The project requires a gold price of approximately $902 per ounce to break even on a cash flow basis. Wood Canada Limited (“Wood” formerly AMEC Americas Limited) is currently updating all sections of the Second Updated Feasibility Study with updated costs, economic assessment, permitting information, and technical information related to permitting, generated on the Donlin Gold project since 2011, which is anticipated to be finalized and filed during 2021. Based on that cost review, Wood determined that updating the Second Updated Feasibility Study using 2020 costs and new gold price guidance results in no material change to the mineral resources or mineral reserves. The economic assessment in the updated study may be materially different than in the 2011 study. 18 See media release dated March 25, 2021, “Donlin Gold Announces Assay Results From Remaining 30 Percent of the 2020 Drill Program, Consistent With Previously Reported Results of Higher Than Predicted Grade-Thickness” here: https://www.novagold.com/_resources/news/2021-03-25.pdf exercise will take place in preparation for the partners to embark on updating the feasibility study, the completion of which would form the basis of an execution plan. A construction decision ultimately will follow when fiscal discipline and gold prices combine such that we believe all Donlin Gold stakeholders may be expected to derive a truly great return from this world-class project. Step by step, tortoise-like, we’re making our way to the finish line. 13 QUESTIONS AND ANSWERS8 Q + A 7 Q + A CONSIDERING THAT THE JOINT VENTURE IS A TRUE 50/50, HOW DO YOU NAVIGATE AROUND POSSIBLE DISAGREEMENTS AND STALEMATE JOINT VENTURE SITUATIONS? HOW WOULD YOU CHARACTERIZE YOUR RELATIONSHIP WITH YOUR NATIVE CORPORATION PARTNERS, CALISTA CORPORATION AND THE KUSKOKWIM CORPORATION? Calista and TKC are significant stakeholders of Donlin Gold – an important project that was designated by law for mining activities some five decades ago. Donlin Gold is a party to life of mine agreements with Calista, which owns the subsurface mineral Our joint venture with Barrick is indeed a true 50/50. The rights, and with TKC, a collection of 10 village corporations, which board of the joint venture entity, Donlin Gold LLC, comprises two owns the surface rights. Over the years, with the many challenges representatives from each company. The role of chair alternates we all had to face as well as the opportunities that were accorded annually and the board meets quarterly to review the strategic to us, we have become a real family – one that has been fortunate plans and activities, together with the approval of the budget. to share in the incredible value generated by the advancement of Dispute resolution mechanisms are in place to ensure that the Donlin Gold. Donlin Gold project progresses at a healthy pace and in the best For over 20 years, Donlin has enjoyed great relationships with interest of its stakeholders – including Native Corporation partners Calista and TKC. We’ve got a long history of hiring people from the who are mandated, under the Alaska Native Claims Settlement Act project’s region to work on-site and we’ve remained constantly (ANCSA) of 1971, to develop the land for the economic benefit of active in the area. Our company has long believed that this level of their people in the region. engagement and community support constitutes the fabric of the Catherine Raw, Barrick’s chief operating officer, North America, mining business and it is a core principle that we take to heart. We served as the chair of Donlin Gold LLC in 2020. This year, Greg have done so for more than two decades and we will continue to. Lang, NOVAGOLD’s president & CEO, is its chair. The joint venture I think we’ve all seen far too many projects get derailed because has been operating in this manner for many years. In fact, it is such relationships were not nurtured from the beginning. I could important to note that there is a lot of Barrick DNA around the not be prouder of the work we’ve done with our partners and we’re table. The Barrick side is represented by a team of its most seasoned clearly seeing the benefit of that in our successful navigation of operating talent, while the NOVAGOLD side is represented by two both the state and federal permitting processes. of Barrick’s senior operating alumni – Greg Lang, former president As we all respond to the COVID-19 crisis and help address the of Barrick North America and Richard Williams, NOVAGOLD’s vice impact it has had on the health of our communities, our economies, president of engineering and development, who, among other and even how we communicate with one another, significant things, was previously in charge of building Pueblo Viejo, now comfort can be derived from the longstanding relationships that one of Barrick’s most important mines. Thus, the joint venture unite us in the common goal of advancing the Donlin project. In can be best characterized by a spirit of high professionalism reaching out regularly to our stakeholders, interacting with our enhanced by a tremendous track record of technical excellence, investors to improve our governance practices, and engaging in safety, environmental stewardship, and social responsibility. That meaningful ways to promote the health and safety of our people is the culture of Barrick and NOVAGOLD – and hence the common onsite – and indeed throughout the region – Donlin Gold brings currency of Donlin Gold. much-needed assistance to the well-being of our communities. We’re really all in this together. In 2020, Donlin Gold continued its multi-decade collaboration with its Native Corporation partners and, if anything, these relationships deepened. Apart from the fact that approximately 80 percent of Donlin Gold’s direct hires for the drill program were Alaska Natives, we endeavored to be there for our partners in every way possible. We and our partners initiated more than 14 9 Q + A 320 engagement contacts with key individual stakeholders and community organizations, significantly more than in previous years. From engagement with tribal councils to receptions and WHY IS JURISDICTION THE EXISTENTIAL INVESTMENT CRITERION? CAN IT ACTUALLY GET WORSE THAN IT IS NOW? meetings seeking partnerships, Donlin Gold was able to stay closely Over the last decade, jurisdictional risk has migrated from connected – virtually for the most part – to advance key activities being regarded as an occasional nuisance to an existential threat. and projects throughout the region. Were I to name the numerous jurisdictions that have been struck Donlin Gold worked closely with its Alaska Native partners off my personal investment-grade list, it would hurt one’s ears Calista and TKC, along with other key representatives of the to hear the roll call. Projects that were slated to go online won’t, communities in the Y-K region, to effectively respond to the needs while some that did later have been subjected to mine closure due arising from the COVID-19 pandemic, as well as in other areas to social disruption or political fiat. Where allowed to continue, such as environmental management, training and education, and some companies have been extorted (at times with the threat of cultural initiatives. violence) out of most, if not all, of the financial rewards due to their A partnership with Bethel Community Services Foundation shareholders for their risk-taking and value enhancement – what I was established to support the Y-K Delta COVID-19 Response Fund, call “stealth nationalization.” In an increasing number of places, the as well as with Covenant House Alaska for homeless and at-risk brazenness of the confiscatory policies is such that “stealth” would youth services in Bethel. Supplies were provided to hundreds constitute a charming euphemism. of families and meals served to thousands of individuals in the Because it is politically impossible for neighboring countries Elders and Youth program. When the Donlin Gold project camp to hold an investor-friendly line, there will assuredly be more such temporarily closed in April 2020 due to COVID-19, Donlin Gold offences in the future. This wave, after all, is occurring during donated thousands of pounds of food to shelters and delivered relatively good times. As I have come to know most of our investors meals to every home in eight middle Kuskokwim villages. and consider them kindred spirits, I feel compelled to share yet On the environmental front, Donlin Gold worked with TKC, another dire observation, here posed as a question: What are the the State of Alaska, and the Alaska Native Tribal Health Consortium odds that the governments of gold-producing countries – which on an initiative to strengthen health and safety standards with are often dependent on the price of multiple raw materials – will let regard to water and sewer services in middle Kuskokwim-area the precious metals miners keep the windfall that may come if we communities. We collaborated with 28 community partners on experience another severe economic crisis and gold powers higher the Donlin Gold Backhaul Hazardous Waste Removal project and while most commodities collapse? It’s not so difficult to imagine. worked with key local groups to collect and remove some 45,000 That dichotomy actually happened during the last financial crisis. pounds of household hazardous materials. Gold – a currency – held its own, or went up, while much more Donlin Gold hosted virtual education camps for students in economically sensitive commodities fell. the project’s region in Alaska, while Donlin Gold co-sponsored There is no worse feeling than being right on the investment scholarships were awarded to local students selected by Calista and thesis and having the successful investment taken away from you. TKC to improve access to education. Calista has awarded hundreds I know, it’s dark. But it remains one of the most frequently asked of scholarships co-funded by Donlin Gold, with students attending questions of me. schools in Alaska and out of State. Donlin Gold also provided online activities and programs for youth and Elders. These various engagements reflect NOVAGOLD’s and Barrick’s full commitment to preserving the traditional lifestyles of, and providing support to, the local communities throughout the Y-K region. 15 QUESTIONS AND ANSWERS10 Q + A FROM THAT PARTICULAR STANDPOINT, WHAT KIND OF RELATIVE ADVANTAGE DOES ALASKA BRING TO YOU? For a mining investor, it is optimal to seek a Tier One asset19 With an asset boasting a life of mine of almost 30 years (and in a Tier One jurisdiction.20 Sadly, as I just discussed, location in the most likely a lot more than that), and in light of the strong bonds mining industry is ultimately the existential factor. A company can and mutual trust built over a 20-year period of working alongside never take its asset elsewhere, were geo-political conditions to our Native Corporation partners, as well as with local communities deteriorate. in the Y-K region, we believe that Donlin Gold should be able Fortunately, Donlin Gold is located in Alaska, one of the to secure a robust and enduring social license to advance its world’s most favorable mining jurisdictions where a strong culture project. That, of course, can never be taken for granted – hence of support exists for responsible mine development. That fact can our continuous engagement and daily commitment to these never be overestimated. As we stated in our January 27, 2021 relationships. press release: “…we feel enormously fortunate to be located in what is, after Nevada, the second-largest gold-producing State in a country where the rule of law is real, and to be partnered with the Alaska Native communities. An incredibly favorable factor that distinguishes Donlin Gold from most other mining assets in Alaska is the fact 11 Q + A YOU SPEAK A LOT ABOUT VALUES AS WELL AS VALUE. COULD YOU PLEASE EXPAND ON THIS? that it is located on private land that was designated We all know that reputation is hard won and easily lost. This by law for mining activities five decades ago. Donlin is best summed up by Electrum’s corporate motto: Intelligence is a Gold is a party to life-of-mine agreements with Calista commodity; Character is a currency. Character itself is fundamentally Corporation (“Calista”), which owns the subsurface about trying to do the right thing rather than the expedient mineral rights, and The Kuskokwim Corporation (TKC), thing. It’s about not losing one’s sense of honor, if one can use a collection of ten village corporations, which owns that elevated word these days and still get away with it, and more the surface rights. Involving the local communities prosaically, it’s about credibility. Doing what one says one is going in many aspects of the project is thus core to both to do is of course a wonderful way to maintain that credibility, both Barrick’s and NOVAGOLD’s philosophy and culture. personally and professionally. The benefits – short-, medium-, and long-term – are Speaking for Electrum and NOVAGOLD, when we say that there for all to see. Right now, this partnership is the we’re going to do something, we do it. Period. It makes life simpler source of key employment opportunities, scholarships, and it’s also good business. Quaint as that may sound in our and preferential contract considerations. But very increasingly transactional world, this code stems from a deep importantly, these agreements also include a revenue- philosophical attachment to a values-based and purpose-driven sharing structure, established by the Alaska Native life. It also comes from being, as the French would say, bien élevé Claims Settlement Act (ANCSA) of 1971, which resolved (“well brought up”) in business by partners who taught us that Alaska Native land claims and allotted 44 million one’s word should be one’s bond – simply because it is the right acres for land use to Alaska Native Corporations. thing to do. Reputation, after all, is the coin of the realm in life. Our long-term commitment to the region’s economic As goes the Russian proverb: “With lies you may get ahead in development is exemplified by Donlin Gold’s support of the world – but you can never go back.” Through leading by TKC’s initiative to launch middle Kuskokwim energy and example, these mentors gave us the greatest gift of all: namely, infrastructure projects. These partnerships, activities understanding the art of practicing integrity. and programs are illustrative of our commitment to the sustainable and responsible development of the Donlin Gold project for the benefit of all stakeholders.” 19 NOVAGOLD defines a Tier One gold development project as one with a projected production life of at least 10 years, annual projected production of at least 500,000 ounces of gold, and average projected cash costs over the production life that are in the lower half of the industry cost curve. 20 NOVAGOLD considers Tier One jurisdictions to be any in the top 10 rank by the Investment Attractiveness Index in the Fraser Institute’s Annual Survey of Mining Companies, 2020. Alaska is ranked number 5. 16 12 Q + A NOVAGOLD PLACES A GREAT DEAL OF EMPHASIS ON TRANSPARENCY AND INTEGRITY. WHAT DO YOU MEAN BY THAT? local stakeholders and partners, Calista and TKC, were strong indications of widespread support. The only references to the project in 2012, from a media standpoint, were positive. Six years later, we received the first-ever joint federal record of decision – delivered in a formal ceremony in the presence of the lead agency, the U.S. Army Corps of Engineers with the Bureau of Land Management – that included extensive input from those who held the reasonable concerns that any big project would bring; but not substantial opposition. For That means telling what one is going to do openly, and those who know the industry, this represents an amazing then delivering on those promises. And doing so in a way that occurrence practically anywhere in the world. the shareholders can take pride in the outcome. In my decade of f Then there is the building of the management team itself, experience with the NOVAGOLD team, I can tell you that it is their one that in truth could run a major mining company. When nature to do things right. the board of directors reorganized the company in early 2012 In terms of doing it right, let us start with what the team to focus on Donlin Gold, NOVAGOLD pledged to recruit top has not done – what I would call successes of omission. First and talent with demonstrated track records in large-scale mine foremost, the team has never been tempted to use NOVAGOLD’s permitting, development, and operation, with a particular cash or equity to do something foolish. Sadly, for the fortunes of focus on experience in North America. Knowing that a world- our industry, using common sense has proven to be a differentiator class asset warrants world-class professionals, the company in and of itself. For as Voltaire professed, “Common sense is not so set out to attract the very best people in their respective common.” If, by every metric, one believes one owns one of the specialties. And it did. NOVAGOLD’s current management, best assets on the planet, one simply does not “deworsify,” as the which has been in place for the past nine years, is, as one famed Peter Lynch put it so well. Deal junkies we are not. shareholder put it, “straight out of central casting.” Starting Then, there are the successes of commission – namely, those with Greg Lang, NOVAGOLD’s president and CEO, who has things Greg and his team promised to do, and then meticulously over 35 years of diverse experience in mine operations, delivered to the shareholders as measurable outcomes. When Greg project development, and evaluations – including eight and I joined NOVAGOLD in 2012, we made a series of promises: years as president of Barrick Gold North America, a wholly- f We promised to spin-off our Alaskan copper assets. That owned subsidiary of Barrick Gold Corporation. Greg held company, then called NovaCopper and now trading under the progressively increasing operating and project development name Trilogy Metals to reflect its polymetallic attributes, has responsibilities over his 10-year tenure with Barrick and, prior been a highly successful exercise in value accretion. to that, with Homestake Mining Company and International f In order to make NOVAGOLD the pure play on Donlin in the Corona Corporation – both of which are now part of Barrick. marketplace, we promised to sell Galore Creek – a beautiful Major mines that now represent the foundation of Barrick, asset, but a project too far for a development-stage company such as Cortez Hills, were built under Greg’s leadership. with a flagship as ambitious as Donlin Gold. We could have Richard Williams, NOVAGOLD’s vice president of engineering let Galore go in a fire sale. We didn’t. We sold it for real money and development – responsible for all aspects related to in a market where win-win monetization has been the the engineering and technical advancement of Donlin exception, not the rule. The cash position we find ourselves in, Gold – is yet another star. Richard spent over 30 years with with more guaranteed and potential payments to come, is to Barrick developing and operating major mines. He is a highly be celebrated. knowledgeable and experienced leader in the autoclave f We declared that, if given an opportunity to show the technology that is planned to be used to process ores at flexibility of the deposit, we would take it. The drill results Donlin Gold. Importantly, he served as project director of the Donlin Gold delivered in 2017 and most recently in 2020 Pueblo Viejo project in the Dominican Republic, now one exceeded our own expectations. We reckon that these results of the most successful mines in Barrick’s portfolio of assets. stand with or above the best drill results reported by any Richard’s seven-year tenure at Pueblo Viejo capped a career open-pit gold project. where he progressively held top operating roles that included f We stated that this project would be permitted. When the design, construction, and operation of mineral processing anyone pushed back, assuming permitting in Alaska would facilities of major mines, such as Goldstrike in Nevada and be a nightmare, we just shrugged our shoulders. The facts Mercur in Utah. David Ottewell, our vice president and chief pointed to the opposite. All we had ever heard from our 17 QUESTIONS AND ANSWERSEisenhower, echoing the commentary of Cardinal Mazarin and Napoleon, once remarked: “I’d rather have a lucky general than a financial officer, responsible for all aspects of the company’s smart general. They win battles and make me lucky.” The ideal of financial management, was another great catch. Dave is a course is to have both, and NOVAGOLD clearly does. And it shows. highly accomplished financial executive, with more than When I ask shareholders to name a specific mistake we made since 25 years of mining industry experience. Prior to joining our involvement in the company some nine years ago, they shake NOVAGOLD, he served as vice president and controller for their heads. Newmont. Other members of the NOVAGOLD team are equally accomplished in their respective areas of expertise. In order to attract this caliber of professionals, the company has to compete to recruit and retain top talent in the industry. And we did so successfully. 14 Q + A Such a remarkable series of kept promises certainly goes YOU SPEAK OF DONLIN GOLD’S LEVERAGE TO GOLD. HOW DO YOU SEE IT PLAYING OUT IN VALUATION? a long way in explaining why NOVAGOLD was so effective in The “Sleeping Well Rule” comes with additional rewards. In executing on its value-building strategy. our case, it renders Donlin Gold something of a go-to asset that 13 Q + A CAN WE FURTHER EXPAND ON THAT? HOW DO YOU RATE THE IMPORTANCE OF THE NOVAGOLD MANAGEMENT TEAM IN THIS VALUE- MAXIMIZATION EXERCISE? the proverbial prudent man can buy happily. This safety premium plays out by creating an exceptional risk-to-reward ratio, based on the leverage to higher gold prices enjoyed by Donlin Gold. The project’s after-tax Net Present Value (NPV) at US$1,700 per-ounce gold and a 5 percent discount rate was estimated to be US$4.6 billion ($14.6 billion if undiscounted). At US$2,000 per-ounce gold, the projected NPV increased 50 percent further to US$6.7 billion.21 At the zero discount rate at which I personally believe exploration- rich North American assets shall once again be rated – as they were The luxury of therapeutic and refreshing slumber underpinned not so long ago – that number would rise to over $19 billion. That by our asset is accentuated mightily by the fact that, under CEO is solely based on existing reserves. And, needless to say, I certainly Greg Lang’s leadership, the stewards of NOVAGOLD’s fortunes are do not believe that the $2,000 level just mentioned will prove to be themselves best-in-breed when it comes to management. They a real number in the next up leg in gold. Such a figure will one day have their eye on the ball, manage the company’s money frugally, represent gold’s support, as the next wave takes that price point care deeply about their shareholders and their partnerships, and out and the bull market resumes in earnest. are not remotely tempted to do stupid stuff. That latter part may Seen this way, NOVAGOLD to my mind constitutes the greatest sound like a low bar, but as my kids would say…is it really? Let’s be unexpiring call option on gold – with the potential for larger candid. We’re talking about an industry which, until very recently, underlying resources to revalue the optionality further as gold rises. was characterized by suboptimal performance and some epic Putting aside that I am obviously biased toward NOVAGOLD for examples of value destruction. Smart and humble management is all the reasons I have cited, the reality is nonetheless quite simple. thus enormously important – and valuable. Look at what I do, not just what I say. If I thought a better buy was Simply put, as evidenced above, management has done actually out there that I somehow could not afford to acquire with everything right since NOVAGOLD very nearly went into our present capital base, I would have already put NOVAGOLD bankruptcy and Electrum and the current team stepped in to turn into play and sold our position. But to the Electrum team and me, the company around. Indeed, I genuinely believe that Greg and his that theoretically superior asset and better value simply does not team have not committed one misstep – not a single one – since exist. By implication, we believe NOVAGOLD is an outstanding they entered the scene. They have not made stupid decisions combination of deep value as well as growth stock. that impaired shareholder value, not broken one promise, not left unchecked any box on the checklist of their business plan, and not forsaken any partner either legally or ethically. Truth be told, we have also been blessed with the benevolence of La Fortuna, which constitutes a key attribute of any company. Whatever could have gone right for NOVAGOLD has effectively gone right – from having truly decent people as counterparts from the various government permitting agencies, to delivering with our partners at Barrick stellar drill results, to having fabulous and lucky management. The latter point is not insignificant. General 18 21 Donlin Gold estimates as per the Second Updated Feasibility Study. All dollar figures are in USD, represent 100% of the project of which NOVAGOLD’s share is 50%, and reflect after-tax net present value (at 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: $1,465M @ $1,300 gold; $3,147M @ $1,500 gold; $4,581M @ $1,700 gold; $6,722M @ $2,000 gold; and $10,243M @ $2,500 gold. The project requires a gold price of approximately $902 per ounce to break even on a cash flow basis. Wood Canada Limited (“Wood” formerly AMEC Americas Limited) is currently updating all sections of the Second Updated Feasibility Study with updated costs, economic assessment, permitting information, and technical information related to permitting, generated on the Donlin Gold project since 2011, which is anticipated to be finalized and filed during 2021. Based on that cost review, Wood determined that updating the Second Updated Feasibility Study using 2020 costs and new gold price guidance results in no material change to the mineral resources or mineral reserves. The economic assessment in the updated study may be materially different than in the 2011 study. 15 Q + A WHY IS THE STATE OF THE GOLD INDUSTRY A PLUS FOR NOVAGOLD IN WAYS THAT ARE PERHAPS EVEN DISTINCT FROM MOST OF OUR PEERS? – something that is quite important to our investors, who want to know that one can grow organically and not have to do deals to add reserves. Just to provide an “Exhibit A” to our leverage to really low-hanging fruit, Donlin Gold effectively enjoys six million ounces of inferred mineral resources26 – two-thirds of which are The answer is both qualitative and quantitative. Over the last immediately within the reserve pit. That amount of gold alone decade, as mentioned earlier, the average grade of gold mines has would represent a major discovery in its own right these days! collapsed – and I suspect that it will ultimately fall below a gram And we believe there is likely much, much more beyond. per tonne. Donlin’s grade is multiples of that. So much for making I happened to be in the hydrocarbons business as well as the case for the quality (and thus also the concomitantly lower mining. Their respective profiles could not be more different. operating cost) side of the equation for Donlin. For a large-scale There really is such a thing as “peak gold.” In contrast to the case open-pit project located in a safe jurisdiction, Donlin’s grade with peak oil, the supply/demand dynamics of the gold industry is about as magnificent as one could ask for. Even so, the drill suffer from none of the supply variables that have rocked the results from both of our recent campaigns exceeded our modeled hydrocarbon markets. Even if this were not the case, it wouldn’t targets, delivering some of the best results we’ve ever seen for an matter: There are simply no known vast, shale-like, trapped open-pit deposit – and thus further accentuating Donlin’s relative resources to be tapped with new technologies such as fracking advantages. As we say, Donlin is a gift that keeps on giving. or horizontal drilling. That very realization is a major reason why I From the quantitative side of our relative advantages, our actually sold my energy company in 2007 – when oil was over $100 superNOVA shines ever brighter. With no real discoveries of a barrel – to pivot to gold when it still had a $600 handle. significant size as well as the declining grades – and the years, if Again, the gold industry can barely find the gold. Part of the not decades, it takes to put these discoveries into reserves and reason lies in the technology it uses, which is rather primitive. The mine them – the majors are burning through their reserves faster mining industry doesn’t possess exploration tools characterized than they can be replaced. This phenomenon is unlikely to change. by anything approaching the accuracy of 3D seismic. If a discovery Barrick has stated that the industry’s production is likely to fall by is to be made, it’s still more likely to be by prospectors on donkeys 5 percent annually for years to come. This is huge and yet, to my (or, perhaps only slightly more probable now, 4-wheel drives). And mind, maybe even optimistic. According to Citi Research, existing if those estimated 1,000-10,000:1 odds of navigating a prospect to mine production of 26 of the world’s largest miners is forecasted a mine are successfully bucked, it could still take 15-20 years – let to decline 13 percent by 2022 and 47 percent by 2027.22 In addition, me repeat: 15-20 years – to take the project up the value chain from according to S&P Global Market Intelligence, from 135 assets not prospect to first pour. In effect, from a mine supply standpoint, the yet in production, only 30 have greater than 10 million ounces of horse has already left the barn and the barn door has been gold in reserves and resources, and only nine of these assets have a firmly shut. grade of one gram per tonne or greater.23 The industry simply can’t The next bull market in gold therefore will not be met by a find the additional gold. Over the past 10 years, only 25 new gold tsunami of mine supply. Quite the opposite, in fact. People will deposits have been identified, totaling some 150 million ounces of be shocked by how little mine supply is available. The developing gold, which represents only 7 percent of what has been discovered world is unlikely to fill the pipeline. For with the “go where the gold in 30 years. Crucially, no major discoveries have been made in the is” mentality fairly crippled, and perhaps mortally so, it is quite last few years.24 possible that the risky jurisdictions shall prove to be uninvestable Long-life category-killer projects such as Donlin Gold are and unfinanceable in light of the various factors we discussed in therefore rare and extremely valuable. When compared to the extenso above. Hence the virtue of Donlin not just being a Tier One existing 15 other development-stage projects in the Americas, asset,27 but of being so in a Tier One jurisdiction.28 Donlin Gold’s resource is more than four times larger than the peer group’s average.25 Yet we can see much more resource upside 22 Citi Research, Global Gold Project Book “$130bn capex needed to sustain production”, May 16, 2018; reserve and production profiles of the 26 companies under Citi Research coverage, which represent ~38% of 2018 global mine production. 23 S&P Global Market Intelligence, “A decade of underperformance for gold discoveries”, May 5, 2020. Gold contained in reserves, resources and past production, as calculated by S&P Global Market Intelligence. Grade refers to combined Reserves and Resources. 24 Ibid. 25 Peer group data based on company documents, public filings and websites as of March 29, 2021. Comparison group of 15 projects based on large (2Moz Proven and Probable cut off ), North/ South American gold-focused development projects with >75% projected revenues from gold. 26 Donlin Gold data as per the Second Updated Feasibility Study (as defined herein). Donlin Gold inferred mineral resources of approximately 92 Mt grading 2.02 g/t. Represents 100% of inferred mineral resources, of which NOVAGOLD’s share is 50%. See “Cautionary Note Concerning Reserve and Resource Estimates” and “Mineral Reserves & Mineral Resources” table on page 50. Inferred mineral resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that they will be realized. 27 NOVAGOLD defines a Tier One gold development project as one with a projected production life of at least 10 years, annual projected production of at least 500,000 ounces of gold, and average projected cash costs over the production life that are in the lower half of the industry cost curve. 28 NOVAGOLD considers Tier One jurisdictions to be any in the top 10 rank by the Investment Attractiveness Index in the Fraser Institute’s Annual Survey of Mining Companies, 2020. Alaska is ranked number 5. 19 QUESTIONS AND ANSWERS16 Q + A WHILE THERE IS A LOT OF TALK ABOUT ADVANCING DONLIN GOLD TOWARD PRODUCTION, THE EXPLORATION POTENTIAL MUST BE TANTALIZING FOR INVESTORS LIKE ELECTRUM, WHO BOAST SUCH A STRONG TRACK RECORD IN CREATING WEALTH THROUGH THE DRILL BIT. HOW DO YOU SEE THE POTENTIAL UPSIDE IN RESOURCE EXPANSION? 17 Q + A YOU CALL NOVAGOLD A “PURE PLAY.” HOW SO? NOVAGOLD is a pure play on Donlin Gold. There is no pure play on the Barrick-Newmont joint venture in Nevada. I wish there were. There is, however, a pure play on the Barrick-NOVAGOLD joint venture in Alaska – which already ranks, incidentally, as the second We would love to have drill rigs going all the time at Donlin, largest gold-producing state in the Union, after Nevada. And that and one day we just might. Certainly, when I talk about the next glorious pure play is NOVAGOLD. This is great for NOVAGOLD big Donlin-like discovery possibly being at Donlin, the message is and great for Barrick, which, I am highly confident, will also reap two-fold. Number one, as recalled earlier, our stated resources at considerable rewards for its shareholders from Donlin that I do not Donlin Gold are located within only three kilometers of what we believe are presently reflected in Barrick’s share price. know to be an eight-kilometer mineralized trend. Hence Electrum’s legendary geologist Dr. Larry Buchanan assessing that Donlin’s potential endowment could easily be more, and then some. While one can obviously consider this to be the ultimate forward-looking statement, I personally believe that Larry is right. More than that, the eight-kilometer trend again only represents some 5 percent of the total land package at Donlin Gold. Number two, when Larry surmised that the next Donlin might possibly be at Donlin, it’s because there is a strong possibility that we could be dealing with a district here with the potential for more 18 Q + A SEVERAL OF YOUR LARGEST SHAREHOLDERS, SUCH AS FIDELITY AND PAULSON & CO., HAVE BEEN INVESTORS FOR A VERY LONG TIME. HOW DO YOU ACHIEVE SUCH IMPRESSIVE STAYING POWER WITH THESE IMPORTANT AND HIGHLY SOPHISTICATED INVESTORS? discoveries: a “New Carlin” or “New Nevada,” if you will. That’s if you No discussion about NOVAGOLD would be complete without dare to dream, and I do. But even if it didn’t turn out to be a district a shout-out to our outstanding shareholder base. As any investor and there’s no additional Donlin there, we remain in the presence looking at our story will immediately recognize, it is populated with of an asset that already has exceptional potential – and that sure many extraordinary names. In addition to Electrum, the company’s would be good enough for me. largest shareholders include Fidelity Management and Research, Again, I fully appreciate that this constitutes about as much of Paulson and Co., Saudi Arabia’s Public Investment Fund, Van Eck a forward-looking statement as anyone could make, so disregard Associates, BlackRock, First Eagle, and Exor, along with other highly it if you so wish. And if you want to consider it, then regard it as regarded institutions. As the largest shareholders of NOVAGOLD, – at best – apocryphal. That being said, the fact is, for a variety of Electrum is very proud to be joined by these highly astute investors reasons, the Donlin area has been under-explored beyond that who are regularly referred to as “smart money.” eight-kilometer belt. We know, as miners in this business, that if one We are indeed proud of the fact that these and many other is going out in search of elephants, one ought to look in elephant venerable financial institutions have owned our stock for a very country – and there simply is quite a lot of prospective land yet long time. For they see what we see, and are not just educated to be explored at Donlin. But I’ve been in this movie a number of consumers – but in fact among the very best that we could hope times in my career now, and I would not bet against such a scenario. to have in our corner. Fidelity, for example, joined the shareholder register when we did our last fundraising back in 2012. They have since added to their holdings, as NOVAGOLD has been consistently delivering on its promises and strategy set out in 2012 to restructure the company into a pure play on Donlin Gold while 20 successfully moving the project through permitting and up the value chain. We are also proud that First Eagle, which has one of the top mining investment teams in the business, saw the opportunity to take a position in NOVAGOLD during low commodity prices. NOVAGOLD was actually the first development-stage, non- production mining company in which First Eagle made a sizable investment. We are also enormously excited that the most recent investor to join this stellar group is Saudi Arabia’s Public Investment Fund. Their share interest in the company represents an investment of nearly $150 million. Taken together with the premier sovereign wealth funds who are investors in Electrum – namely, Mubadala and the Kuwait Investment Authority – one can discern a strong core of financial backing for our strategies. The institutional support makes a great deal of sense. Owning 19 Q + A AS YOU JUST ALLUDED TO, RECENT DISCLOSURES SHOW THAT THE PUBLIC INVESTMENT FUND (PIF) OF SAUDI ARABIA ACQUIRED 16+ MILLION SHARES OF NOVAGOLD OVER THE PAST TWO QUARTERS. CAN YOU PROVIDE FURTHER COLOR ON THE SIGNIFICANCE OF THAT INFORMATION? an asset which starts at approximately 39 million gold ounces in the We are delighted by the news that last year PIF made a measured and indicated mineral resource categories29 and could significant investment in NOVAGOLD, and as of the latest filing well evolve into the largest pure gold mine in the world – and at dated December 31, 2020 is our fifth largest shareholder with a grade that is twice the industry average at that – in and of itself an ownership of over 16 million shares. PIF is widely considered would be a beautiful thing for a sophisticated investor to behold. to be one of the world’s savviest sovereign wealth funds. Then comes the octane we provide – the leverage to higher gold Their investment is thus very meaningful to us on many levels. prices that we discussed earlier is very apparent in the numbers. Although our first engagement with PIF began as a discussion That alone could be an important reason why NOVAGOLD is so about potentially getting the fund involved in possible future fortunate to have such highly qualified shareholders seeking strong project financing, it is gratifying to observe PIF’s appreciation of leverage to escalating gold prices. If as we believe all roads lead to the tremendous value inherent in the stock of NOVAGOLD – and higher gold prices, I think a superhighway leads straight to Donlin – indeed acting on it. After performing their due diligence, PIF and that’s good for everybody involved. clearly realized that any future equity raise would likely happen Lastly, there is one additional factor that we believe shines at much higher levels, much later. As such, PIF concluded that it through when we meet with our investors. And that is our would make sense to act now and secure the benefit of that uplift previously mentioned emphasis on simple virtues, like not cutting by buying shares in the open market sooner rather than later. We any corners and doing it right. Our shared mantras that inform hope to deepen this very promising relationship and welcome their anything from technical work to the environmental and social participation in our future success. license we value so highly have served our shareholders well and given us considerable credibility. Part of that ethos is that we all feel deeply that honor – yes, honor – matters. Thus, the vows that we have made to our shareholders, stakeholders, and partners have been consistently kept and, as a result, our company has since been enjoying a coterie of exceptionally well-informed, savvy, and satisfied shareholders. 29 Donlin Gold data as per the Donlin Gold Second Updated Feasibility Study (as defined herein). Donlin Gold measured resources of approximately 8 Mt grading 2.52 g/t and indicated resources of approximately 534 Mt grading 2.24 g/t, each on a 100% basis and inclusive of mineral reserves. Mineral resources have been estimated in accordance with NI 43-101. 21 QUESTIONS AND ANSWERS20 Q + A FINALLY, WITH YOUR EXTENSIVE INTERESTS OUTSIDE OF NOVAGOLD – IN THE FIELD OF CONSERVATION AND OTHER PASSIONS AS A HISTORIAN, SUCCESSFUL ENTREPRENEUR, AND ART COLLECTOR – HOW DO YOU BALANCE YOUR PERSONAL VALUES WITH YOUR INVESTMENT THESIS IN NOVAGOLD? generally the most charismatic megafauna in their environment. And Rembrandt, whose work I collect and, more enjoyably, deploy in museums with both fervor and rigor, represents one of the There are several aspects to answering this question. The first greatest luminaries in history – his name evoking a revolution in is very straightforward, in that my predisposition to conservation the conveyance of freedom to the artists that followed him. As – be it of wildlife or the cultural heritage of our common humanity with cats and Old Masters, much of my professional track record – comes from a personal belief that the greatest imperative in life over the past 25 years has been built around sublime creations that is to give back. And conservation activism represents the most are more often than not characterized by scarcity as well as some impactful way in which I have expressed this creed. Indeed, it is slew of superlatives. I am told that the passion with which I speak a well-known fact in my circle that, had I possessed the aptitude, about Donlin is reminiscent of the way I speak about tigers and I would have wished to become a field zoologist and spent my jaguars – the apex predators in their ecosystems – or in fact of my career in wild cat conservation. But alas, my strength proved to be describing a Vermeer or a da Vinci. So it is not inconceivable that in in applying history, not science. Nonetheless, I rarely ever let go of the deep recesses of my reptilian neocortex, what I consider to be my interests and I never lost my youthful passion for the subject. the category-killer nature of NOVAGOLD is something about which Quite the contrary. At the first opportunity, I took advantage of I hold a certain enthusiasm normally reserved for my extracurricular my good fortune in the natural resources business to pivot to activities. creating conservation organizations – thereby enabling the very I am sometimes asked why, if my schedule permits, I join practitioners who did possess those talents that I lacked – with the Greg, Mélanie, and Igor on investor roadshows. The reason is that capabilities and freedom to save the biodiversity and ecosystems I genuinely enjoy their company – otherwise, I definitely wouldn’t that constitute one of our generation’s most precious endowments. do it. Moreover, I really love to tell the Donlin story. This is especially To the extent that wildlife conservation impacts my so as it just gets better and better. I don’t much care to speak of professional sensibilities, it is reflected in my team’s placing the legacy, yet there’s no doubt that, whereas I have enjoyed more greatest emphasis possible on selecting projects that I believe than my fair share of hits for a best-of album, in my mind from a can and should be built – yes, there have been those that I felt professional standpoint Donlin surely will mark my most enduring strongly should not be developed, for environmental and cultural gold record. That’s saying quite a lot, as San Cristobal essentially reasons – and, when taken up the value chain, exemplify the very transformed Bolivian mining and the broader region of Potosí – best practices in environmental standards. That’s a given. I take very much for the better. But still, Donlin’s impact could be even our social license at least as seriously. As mentioned repeatedly more significant. As a generational gold asset, it truly stands throughout this exchange, the support of one’s local stakeholders unparalleled. Its unique quality and scale make it more rare than is a gift that should not be taken for granted. Ever. a Leonardo da Vinci. It is indeed a Carel Fabritius. I’ll leave readers On a more subliminal level, I believe that, like many people, to look that one up if they got this far and did not by chance read I am most particularly attracted to the iconic. The big cats are The Goldfinch. 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. 22 A helicopter transporting supplies during the 2020 Donlin Gold drill program. Photo courtesy of ROTAK Helicopter Services. AFTER COMPLETING THE LARGEST DRILL PROGRAM IN 12 YEARS, WE’RE MORE CONVINCED THAN EVER. 23 QUESTIONS AND ANSWERSThe Calista region is home to 56 villages spread out along the Bering Sea coast and two of Alaska’s mightiest rivers. The Kuskokwim Corporation was formed by the merger of the 10 Village Corporations represented by blue dots. 24 NikolaiTakotnaMcGrathStony RiverLime VillageGeorgetownSleetmuteDONLIN GOLDNapaimuteCrooked CreekAniakRed DevilChuathbalukShagelukGraylingAnvikHoly CrossLower KalskagOhogamiutPitkas PointMountain VillageMarshallSaint Mary’sRussian MissionPilot StationUpper KalskagEmmonakChuloonawickNunam Iqua (Sheldon Point)AlakanukHamiltonBill Moore’s SloughKotlikChevakPaimiutNewtokScammon BayHooper BayTununakUmkumiuteKipnukKasiglukToksook BayNightmuteChefornakMekoryukKongiganakKwigillingokTuntutuliakEekQuinhagakGoodnews BayNapaskiakOscarvilleKwethlukAkiakTuluksakBethelAtmautluakNapakiakNunapitchukAkiachakAlaskaPlatinumP R E S I D E N T A N D C E O ’ S M E S S A G E Gregory A. Lang President and CEO Kuskokwim villages. As many communities found themselves cut off from winter transportation when the regional airline declared bankruptcy, Donlin stepped in to help coordinate essential deliveries to those remote communities without regular air service, one of the primary means of transportation in Western Alaska. The Donlin Gold 2020 drill program commenced as planned in February and continued through March. It was temporarily paused near the end of that month, however, when COVID-19 reached Alaska. Our most important objective was to secure the health and safety of the workforce and partners. To minimize the risk posed by the virus when the drill program began again in late May, NOVAGOLD, in conjunction with its joint-venture partner Barrick Gold Corporation, implemented strict protocols to protect the Donlin Gold workforce, resulting in zero COVID-19 cases on site and no lost-time incidents during 2020. In addition to regular safety meetings conducted at camp with personal protective equipment provided to all site employees and contractors, instructions about good hygiene and sanitation practices were added – all in an effort to ensure that everyone remains healthy and makes it home safely It is impossible to review 2020 without acknowledging the every day. cloud of the global COVID-19 pandemic that continues to affect We are proud of the active response in meeting urgent needs us all. NOVAGOLD had to go beyond the call of duty to practice in the Y-K communities during the COVID-19 pandemic. Donlin extraordinary care, discipline, focus, and professionalism to ensure Gold’s partnership with Calista Corporation and The Kuskokwim the safety and well-being of its workforce and that of Donlin Gold. Corporation (TKC) in ongoing community engagement also We recognized very early on that extensive preventive measures played a critical role in the implementation of environmental had to be put in place immediately to protect employees. We also management, safety, and educational programs, as well as health knew that communities near the Donlin Gold project in Alaska and cultural initiatives, in these very difficult circumstances. needed urgent help with transportation, food, and supplies. The majority of NOVAGOLD employees have been working COVID-19 RESPONSE remotely since the start of the pandemic and have not missed a beat. To the contrary, we endeavored to stay connected and Donlin Gold was one of the first mining companies in Alaska increased communications with our key stakeholders, shareholders, to respond to the pandemic. Along with its Native Corporation and investors to maintain momentum and share progress on our partners, the company rapidly engaged to provide much-needed stated strategy of advancing Donlin Gold, one of the largest and assistance to the remote and small villages in the region by highest-grade known open-pit deposits in the world in one of the partnering with tribal councils to coordinate food collection safest mining jurisdictions, Alaska. and delivery of supplies. Donlin also collaborated with tribal administrators to produce face masks for Elders and other people PARTNERSHIPS AND COMMITMENTS highly susceptible to COVID-19, and shipped 1,400 mask-making As we continue to deal with COVID-19 and its impact on the kits to 56 Yukon-Kuskokwim (Y-K) villages. A partnership was also health of our communities, great comfort can be derived from established with the Bethel Community Services Foundation to the multi-decade partnerships that unite us in the common goal support the Y-K Delta COVID-19 Response Fund, as well as with of advancing Donlin Gold for the benefit of its stakeholders. The Covenant House Alaska for homeless and at-risk youth services in project’s Native Corporation partners, Calista and TKC, as well as Bethel. Supplies were provided to hundreds of families – and meals Barrick, share our vision of building value for future generations. served to thousands of individuals – through the Elders and Youth Calista and TKC have been our partners since 1995. As the owners program. Donlin Gold donated thousands of pounds of food to shelters when the project camp temporarily closed in April due to the pandemic, and delivered food to every home in eight middle 25 PRESIDENT AND CEO’S MESSAGEIn the summer, commitment to Y-K communities was reflected in the Donlin Gold Backhaul Hazardous Waste Removal Partnership of the mineral and surface rights to the land, respectively, they – an initiative that saw 28 Y-K communities collaborate with key have a direct interest in seeing the project move forward. In local groups to remove approximately 45,000 pounds of household fact, concurrent private ownership of such rights is rather rare in hazardous materials and electronic waste, which was collected and mining projects today. The land where Donlin Gold is located was shipped out for proper disposal. This event built on three previous designated for mining under the Alaska Native Claims Settlement occasions during 2018 and 2019 when more than 140,000 pounds Act (ANCSA) long before exploration activities commenced, and of household hazardous materials were removed from 15 villages the respective rights were subsequently transferred to Calista and on the Kuskokwim River. TKC. Donlin Gold has life-of-mine agreements with both, and we Access to training and education is critical for youth and young are grateful for their long-term support and commitment to the adult students. Recognizing this need, Donlin Gold scholarships project. We are all dedicated to supporting Calista’s and TKC’s are awarded to students selected by Calista and TKC to benefit mandate to help develop their land for the economic benefit of education in the region. Calista awarded a total of 225 scholarships the region and for all stakeholders in accordance with ANCSA. in 2020, with 158 students attending schools in Alaska and 67 going The partnership with Calista and TKC has strengthened out of state. Donlin Gold also hosted two week-long virtual Alaska over the last year. All three partners collectively focused on Resource Education minerals camps for Y-K and Doyon students. safety, culture, and social responsibility by maintaining regular As part of Donlin Gold’s ongoing community engagement communication with stakeholders and engaging in meaningful efforts, Friendship Agreements were signed by six Y-K communities ways to promote the health and well-being of local communities. (Crooked Creek, Sleetmute, Nikolai, Akiak, Napaskiak, and Donlin Gold has continued its outreach activities with both Calista Napaimute) in 2020. These agreements build upon long-term and TKC via Tribal council and stakeholder meetings that have relationships and address specific community needs such as water, shifted to phone calls and video conferences given the ongoing sewer, and landfill projects; the ice road that connects remote situation with COVID-19. Other important initiatives included villages in the Y-K region during the winter months; salmon studies; Donlin Gold scholarships, which are granted annually to students and suicide prevention programs. These various partnerships, selected by Calista and TKC to benefit youth education in the activities, and programs demonstrate NOVAGOLD’s, as well as region, and the CleanUp GreenUp program, in which 32 Y-K Barrick’s, unwavering commitment to sustainable and responsible villages participated in cleaning up their communities. development for the benefit of all stakeholders in the Y-K region. TOP 10 RESULTS FROM THE 2020 DRILL PROGRAM DC20-1932 47.66 m at 4.8 g/t, including a sub-interval of 4.00 m at 19.5 g/t 6880000N DC20-1888 6.93 m at 43.1 g/t, including a sub-interval of 3.25 m at 90.5 g/t DC20-1877 4.17 m at 80.6 g/t, including a sub-interval of 3.15 m at 106.2 g/t DC20-1903 8.14 m at 45.3 g/t, including a sub-interval of 6.84 m at 52.1 g/t 6879000N Lewis Pit DC20-1878 19.77 m at 11.3 g/t, including a sub-interval of 7.00 m at 25.2 g/t ACMA Pit DC20-1912 37.30 m at 7.0 g/t, including a sub-interval of 3.30 m at 24.5 g/t DC20-1871 41.91 m at 11.6 g/t; including sub-intervals of 4.00 m at 17.0 g/t and 6.48 m at 38.8 g/t DC20-1866 45.91 m at 5.0 g/t; including a sub-interval of 11.95 m at 10.4 g/t 6878000N DC20-1930 51.15 m at 4.6 g/t, including a sub-interval of 7.60 m at 12.4 g/t E 0 0 0 0 4 5 DC20-1937 103.88 m at 6.1 g/t, including a sub-interval of 22.15 m at 12.5 g/t E 0 0 0 1 4 5 E 0 0 0 2 4 5 E 0 0 0 3 4 5 Pit outline is mineral reserve pit outline from Second Updated Feasibility Study. See “Cautionary Note Concerning Reserve & Resource Estimates” and “Mineral Reserves & Mineral Resources” and associated information on page 50. See media release dated March 25, 2021, “Donlin Gold Announces Assay Results From Remaining 30 Percent of the 2020 Drill Program, Consistent With Previously Reported Results of Higher Than Predicted Grade-Thickness” here: https://www.novagold.com/_resources/news/2021-03-25.pdf 26 2020 DRILL PROGRAM Despite numerous challenges, Donlin Gold successfully completed a drill program in 2020 – the largest at the site in 12 years. Initially, 80 holes totaling 22,000 meters of drilling were planned in the ACMA and Lewis deposit areas to validate recently developed geologic and resource modeling concepts and high- grade mineralization controls. Prior to re-opening the camp in late May, Donlin Gold met with community and tribal leaders throughout the Y-K region to ensure everyone agreed upon the new COVID-19 mitigation plan for those 2020 A C H I E V E M E N T S f advance the Donlin Gold project toward a construction/production decision working at site, as approximately 80 percent of the project’s direct (45% weighting) hires are Alaska Natives from the Y-K region. With extensive health f maintain/increase support for the Donlin Gold and safety measures in place, employees were enthusiastic about returning to work at Donlin Gold and the owners were able to re- mobilize four drill rigs and complete the drilling in September 2020. A total of 85 core holes were completed ahead of schedule in 2020, encompassing 23,361 meters and exceeding our original plan. On March 25, 2021, NOVAGOLD and Barrick reported final project among Native entities and other stakeholders (25%) f promote a strong safety, sustainability, and environmental culture (15%) f maintain a favorable reputation of the assay results from the program. We were pleased to see that these company and its projects among represent some of the best in the gold industry for a large open-pit shareholders (10%) deposit and have yielded higher drilled grade-thicknesses than predicted by previous modelling, which are expected to improve the interpretation of gold mineralization controls. The program results should not only improve geologic interpretation, but also provide encouragement for additional high-grade drill targets. The work was carried out safely despite the rise of COVID-19 cases throughout Alaska. I commend the Donlin Gold, NOVAGOLD, and Barrick teams for completing the drilling while implementing new and comprehensive safety protocols in response to the pandemic. It was indeed a remarkable operational milestone for us to complete this work ahead of schedule and without any COVID-19 cases at the Donlin Gold site. f manage the company treasury effectively and efficiently and streamline the corporate structure (5%) Specific tactical goals were set under each of these categories. Based on the level of completion and weighting, the compensation committee recommends an overall company performance rating ranging from 0-150% (100% as target). Both the committee and the board determined that, overall, the 2020 goals were achieved; the resulting rating was 109%. and of NOVAGOLD. ESG practices have always been a fundamental ENVIRONMENTAL, SOCIAL, AND GOVERNANCE part of our business, ever since the early days of exploration at the Over the past year, NOVAGOLD has developed an intentional Donlin Gold project site some 25 years ago. But as a development- and methodical process in shaping how the company reports stage company, measuring what we do and reporting it publicly information on environmental, social, and governance (ESG) have not been systematically organized in all areas of the business. matters to all stakeholders. It is a daunting task – as those in the For example, while the project enjoys longstanding exemplary investment community know – given the hundreds of frameworks health and safety practices – with voluminous environmental data being used globally to report and measure ESG performance. supporting air, waste, and water permits – we have not provided In addition to evaluating those frameworks, our internal ESG this information to the public annually. It is time for NOVAGOLD to team sought input from proxy advisory firms, ESG professionals, transition to a formal reporting process for the Donlin Gold project, institutional investors, pension plan fund managers, and other using ESG metrics, now that most permits are in hand and there is peers. We also worked with Barrick on forming a compatible and activity at the site. synchronized approach to reporting ESG information for Donlin We have a solid base upon which to build. Extensive external Gold. As a result, NOVAGOLD gained insight on best practices from affairs engagement with Donlin Gold’s Native Corporation partners a wide range of stakeholders and businesses in this area to help in the Y-K region has been effectively communicated over the last strike the right balance in ESG disclosures, especially considering two decades. Governance changes to date have been driven by the development stage of Donlin Gold and future needs as the the company’s adoption of best practices, and are facilitated by project develops. our ongoing shareholder engagement and proxy outreach with Our timing could not have been better. ESG principles help us input from shareholders. Not only has progress in these areas formalize how we measure and report to the broader market on the sustainability and societal impact of the Donlin Gold project 27 PRESIDENT AND CEO’S MESSAGEEXPECTED DEVELOPMENT LIFECYCLE OF ONE OF THE WORLD’S LARGEST OPEN-PIT MINING PROJECTS & N O I T A R O L P X E S E I D U T S L A T N E M N O R I V N E G N I T T I M R E P I L A C N H C E T D E T A D P U I & G N R E E N G N E I , S E I D U T S N O I T C U R T S N O C N O I T A R E P O 1.5 first five full years* Moz/year 1.1 Moz/year life of mine (27+ years)* CURRENT STATUS * Donlin Gold data as per the Second Updated Feasibility Study. For current mineral reserves and resources, refer to “Cautionary Note Concerning Reserve & Resource Estimates” and “Mineral Reserves & Mineral Resources” and associated information on page 50. Projected average annual production represents 100% of which NOVAGOLD’s share is 50%. been monitored at the project level; NOVAGOLD has also regularly PERMITTING communicated that progress through public filings, Management Alongside the great achievements of the 2020 drilling Information Circulars, media releases, corporate presentations, program, the record of successful permitting continued in early and our website. Environmental considerations and outreach 2020. With federal permitting complete, Donlin Gold has been initiatives with communities in the Y-K region have represented a working with its Native Corporation partners and continues core focus in the technical and social components of the Donlin to support the State of Alaska in advancing other permits and Gold project since inception; we just needed to develop a cohesive certifications required for the project. Several milestones were way to communicate the work already being done. NOVAGOLD and reached this past year with the issuance of key transportation and Barrick collaborated to develop Donlin Gold’s environmental and energy infrastructure approvals for the project. These include the social reporting framework, which we hope you find useful and final land leases, land use permits and material site authorizations informative. for the proposed transportation facilities on state lands, and In the long term, enhanced ESG reporting constitutes an the final easements for the access road and fiber optic cable. advantageous progression for a late-stage development company The remaining permits are not currently on the critical path for like NOVAGOLD. First, stakeholders benefit from increased further advancement of the project. Permitting takes tremendous transparency in conveying not just measurements of ESG but also leadership and attention to detail, along with transparency from targets and projections of future developments, providing both Donlin Gold with the support and contributions of TKC and the a road map and more frequent interactions with all stakeholders. communities closest to the project. We are extremely grateful Second, increased reporting will further strengthen relationships for the dedicated efforts of the entire team in advancing these with communities, investors, and other stakeholders. Third, these remaining permits and approvals for the project, and their overall efforts will produce an integrated ESG report within our annual commitment to environmental and governance best practices. reporting and highlight the company’s ongoing ESG work. We remain fully committed to transparency and engagement. Our approach is to augment the frequency and consistency of ESG communications with our partners, shareholders, and other stakeholders as we embark on the production of our first annual sustainability summary – which is integrated into this annual report. Additional ESG and COVID-19 pandemic response-related information can also be found in the sustainability section of the company’s website, along with details about our people and partnerships, health and safety, environmental responsibility, SUFFICIENT CASH TO ADVANCE DONLIN GOLD THROUGH TO A CONSTRUCTION DECISION $31-35M BUDGET* $114M $75M community and social responsibility, education and training, and TREASURY governance and corporate policies. Once you have had a chance to read our inaugural sustainability summary, please let us know how we are doing. We are invested in making meaningful improvements in every facet of what we do as we bring Donlin Gold up the value chain. 28 cash and term deposit balance on February 28, 2021 receivable from Newmont in July 2021† $0M $25M $50M $75M $100M $125M $150M $175M $200M * Anticipated 2021 expenditures disclosed on January 27, 2021, which includes $18-22M to Donlin Gold and $13M G&A. † NOVAGOLD sold its 50% ownership of the Galore Creek project to Newmont Corp. in 2018. Deferred compensation on the sale of Galore Creek includes $100M; $75M on earlier of Pre-Feasibility Study or July 27, 2021 and $25M on earlier of Feasibility Study or July 27, 2023. An additional $75M is due upon construction approval. 2021 GOALS AND BUDGET Even before the outstanding drill results received so far from the 2020 campaign, Donlin Gold was an extraordinary project. With approximately 39 million ounces of gold grading 2.24 grams per tonne1 in measured and indicated mineral resources, Donlin Gold dwarfs most comparable development projects in terms of its size and its grade. As envisioned, it would average 1.1 million ounces of gold production per year over its projected 27-year mine life.2 Very few mines exist in the gold industry with that level of production. And it’s located in one of the safest mining jurisdictions 2021 G O A L S f continue to advance the Donlin Gold project toward a construction decision in the world: Alaska. Donlin Gold also enjoys incredible exploration f maintain/increase support for Donlin Gold potential along its eight-kilometer gold-bearing trend, which could substantially increase the already sizable resource and further extend the mine life of the project. Such a one-of-a-kind asset is certainly worth all the time and attention needed to maximize its value. Looking ahead to 2021, NOVAGOLD and Barrick expect to integrate the Donlin Gold 2020 drill program results into an among the project’s stakeholders; promote a strong safety, sustainability, and environmental culture f maintain a favorable reputation among shareholders of NOVAGOLD, its governance practices, and its project updated geologic model and evaluate the timing to update f manage the company treasury effectively and the Donlin Gold feasibility study, followed by engineering work which would form the basis of an execution plan and, ultimately, a construction decision. To complete the model update, additional confirmation and extension drilling are planned for 2021, focusing on the continuity and structural controls of the higher- grade mineralization. To minimize the risks posed by COVID-19, efficiently, including streamlining the corporate structure NOVAGOLD will continue to be guided by a set of wide-ranging at the Donlin Gold project. I would also like to thank the entire safety policies to be applied at every company-related facility. NOVAGOLD board and team for their commitment, hard work, and NOVAGOLD anticipates spending approximately $31 to dedication to the company. It is a joy to work alongside each of you. $35 million in 2021. Between $18 and $22 million will be allocated My appreciation also extends to the various Alaska state agencies to fund our share of expenditures at the Donlin Gold project – for their diligence in advancing permitting for the project. including $11 million for the 2021 drilling program and studies; Finally, to our shareholders who so clearly understand and $7 million for camp improvements, community engagement, support the NOVAGOLD investment thesis, I thank you for your permitting, and administration; and an additional $4 million for unwavering support through the many challenges that 2020 other studies contingent upon mid-year approval by both brought. We value every engagement opportunity and will keep owners – as well as $13 million for corporate general and you informed of our progress as we work toward many more administrative costs. accomplishments in 2021, highlighting NOVAGOLD and this unique NOVAGOLD believes that with approximately $114 million in investment opportunity. cash and term deposits as of February 28, 2021, and $75 million The NOVAGOLD team has entered the new year extremely due from Newmont in July 2021, it has sufficient funds to cover excited about the recent assay results and very much looks forward anticipated corporate general and administrative costs and funding to further advancing the project throughout 2021. of the Donlin Gold project through to a construction decision. Our success in 2020 would not have been possible without the dedicated and experienced team of professionals at NOVAGOLD, Donlin Gold, and Barrick, as well as our top-performing drill crews and support teams at the project site. Their commitment to the task at hand and their timely and efficient response to the COVID-19 pandemic, while enhancing a multi-decade partnership with Calista and TKC, have been nothing short of outstanding, all of which is in large part responsible for the considerable achievements seen 1 Donlin Gold data as per the Donlin Gold Second Updated Feasibility Study (as defined herein). Donlin Gold measured resources of approximately 8 Mt grading 2.52 g/t and indicated resources of approximately 534 Mt grading 2.24 g/t, each on a 100% basis and inclusive of mineral reserves. Mineral resources have been estimated in accordance with NI 43-101. 2 As per the Donlin Gold Second Updated Feasibility Study (as defined herein). Gregory A. Lang President and CEO April 7, 2021 29 PRESIDENT AND CEO’S MESSAGESUSTAINABILITY SUMMARY NOVAGOLD is committed to responsible mining, protection of human life, encouragement of good health, good stewardship of the environment, and adding value to the communities in which we operate. We believe that mines can be developed in collaboration with people who have the local knowledge to help minimize environmental impacts while benefiting from economic activity. We’re committed to the principles of sustainable development, including the conservation and preservation of natural resources and of the environment. We strive to achieve the highest possible standards through our workforce performance, actions, and conduct. NOVAGOLD has thus far approached the disclosure of our environment, social, and governance (ESG) performance pragmatically as a development-stage company, disclosing benchmarks that we believe are the most relevant measurements of our performance. The completion of federal permitting of the Donlin Gold project in 2018 marked a development milestone that has led to the next phase in the evolution of NOVAGOLD’s ESG reporting against a backdrop of increasing interest from all stakeholders. The time is appropriate to increase transparency, accountability, and enhance the suite of ESG metrics the company discloses to stakeholders. We’re committed to providing stage-appropriate and relevant information, to all stakeholders, about ESG performance in alignment with the Donlin Gold project partner Barrick Gold Corporation. NOVAGOLD is working with Barrick to implement international best practice and industry standards at the Donlin Gold project and plans to expand disclosure as the project eventually moves toward construction and into operation. We are strong proponents of ongoing engagement and consultation with stakeholders through the entire development process. Our commitment to enhancing and improving social capital in the communities of the Yukon- Kuskokwim (Y-K) region has been integral to the Donlin Gold project from the outset. Additional training, hiring, and bidders’ preference included in the life-of-mine agreements with our Native Corporation partners, Calista Corporation and The Kuskokwim Corporation (TKC), date back to the mid-1990s and provide economic benefits to the Native Corporations and their shareholders. At the project level, Donlin Gold LLC has clearly defined responsibilities and commitments that align with NOVAGOLD and Barrick policies, standards, and management systems. Donlin Gold is not only committed to social responsibility, strong partnerships with local communities, and leaving a positive, sustainable legacy in the Y-K region; it’s also focused on sustainable development that provides benefits over the long term through opportunities for direct and indirect employment, local procurement, and community development projects. As we advance the Donlin Gold project toward a construction decision, NOVAGOLD will continue to focus on ESG in all areas, but particularly on enhanced reporting of activities and key metrics; improving crisis emergency preparedness; continuing engagement with all local, regional, and state stakeholders with a focus on environmental improvement; launching local regional advisory committees to provide perspective and local knowledge on issues specific to the project; and partnering with more local organizations in the Y-K region to build on sustainable initiatives that will support environmental projects, education, and health and safety initiatives. The first of the regional advisory committees has been formed under the Donlin Advisory Technical Review and Oversight Committee (DATROC). DATROC is a committee of Donlin Gold, Calista, and TKC representatives who monitor and provide oversight to the Donlin Gold project. The committee discusses environmental protection, cultural resources, subsistence uses, reclamation, and potential impacts on communities. Other advisory committees to be formed will include Environment, Transportation & Infrastructure, and Social & Cultural Responsibility. NOVAGOLD welcomes comments, questions, or suggestions about this report and related information. Please send your feedback to info@novagold.com. ESG data tables can be seen on our Sustainability webpage at www.novagold.com/ sustainability. Additional information and details about goal-setting methodology, practices, and measurement can be found in the 2021 Management Information Circular dated March 25, 2021 and available on www.sec.gov, www.sedar.com, and www.novagold.com. 30 The Donlin Gold project is located in the Kuskokwim belt of southwestern Alaska, just 10 miles north of Crooked Creek. 31 SUSTAINABILITY SUMMARYC O V I D - 1 9 R E S P O N S E NOVAGOLD and its partners implemented a wide-ranging set of protocols to ensure the safety and well- being of employees and contractors. 32 Facing the major global threat posed by COVID-19, in March 2020 NOVAGOLD and its partners implemented a wide-ranging set of protocols at our offices in Salt Lake City and Vancouver – and in conjunction with Barrick at the Donlin Gold project office in Anchorage and the Donlin Gold project site to ensure the safety and well-being of employees and contractors at these locations. To reduce risk, corporate office employees have been asked to continue to work remotely, avoid all non-essential travel, adhere to good hygiene practices, and engage in physical distancing for the foreseeable future. Among the small team at NOVAGOLD there have been no work-related cases of COVID-19. The following procedures, consistent with the State of Alaska’s health and safety rules, recommendations, and precautions, were designed to ensure the safety and well-being of employees and contractors at Donlin Gold work locations, as well as their families and local communities: f COVID-19 testing of all employees and contractors traveling to the Donlin Gold project site1 f charter flights used to safely transport employees to and from the project site, avoiding unnecessary potential exposures to COVID-19 f site medical staff conducting screenings for COVID-19 symptoms f diligent sanitization practices training and proper personal protective equipment (PPE) provided to all site employees and contractors f daily safety briefings before each shift reinforcing COVID-19 protocols with increased safety communication around hygiene and sanitization practices, physical distancing measures while at the project site, and education and awareness regarding self-identification of symptoms f weekly engagement with employee tribal councils to navigate project site procedures and protocol A history of interdependence among villages and a reliance on air and water travel eventually led to community spread of COVID-19 in area villages and resulted in various state and regional travel bans in the Y-K region, exacerbating the societal impacts – including supply chain interruptions and the need for assistance. Donlin Gold partnered with Calista and TKC, along with other key representatives in the region, to respond to urgent community needs. Donlin Gold support included food, PPE and cleaning supplies, diapers, formula, sanitary wipes, and COVID-19 health and safety training, as well as maintaining the ongoing partnership commitments in environmental management and training, including a focus on education and health. After a brief suspension of drilling in March, Donlin Gold safely restarted the 2020 drill program following consultations with village tribal councils in the Y-K region, communicating procedures to safely re-open the project site and recommence site activities, and submission of a COVID-19 management plan to the State of Alaska. With Donlin Gold’s extensive communication program and application of health and safety protocols, no employees or contractors tested positive for COVID-19 at the site in 2020, and drilling was successfully completed in September. Enhanced COVID-19 health protocols will remain in place for the foreseeable future at both NOVAGOLD offices and at Donlin Gold to protect the health of our workforce. 1 In-state personnel required one negative test prior to going to project site; village personnel, two negative tests upon arrival and prior to returning to their village; out-of-state personnel, two negative tests prior to going to project site. 56 260 1,400 4,189 YUKON AND COASTAL VILLAGES AIDED BOXES OF FRESH PRODUCE DISTRIBUTED FACE MASK KITS ASSEMBLED AND SHIPPED PLUS ONE FOR EVERY STUDENT IN THE KUSPUK SCHOOL DISTRICT Y-K ELDERS AND YOUTH FED IN 22 COMMUNITIES COMING TOGETHER AT A TIME WHEN WE NEED EACH OTHER THE MOST. e m o h y r e v e o t d n a s r e t l e h s o t d e r e v i l e d e r e w e t i s t c e o r p j l d o G n i l n o D e h t m o r f d o o f f o s d n u o p f o s d n a s u o h T e t i j s t c e o r p e h t n e h w s e g a i l l i v m w k o k s u K e d d M i l t h g i e n i . n a b l e v a r t l a c o l e h t o t e u d d e s o l c y l i r a r o p m e t Donlin Gold coordinated the delivery of food and supplies – including partnering with a local farmer to ship fresh vegetables to 56 Yukon and coastal communities after the regional airline went into bankruptcy and left communities without regular air carrier service. 33 SUSTAINABILITY SUMMARY P E O P L E Our relationships, and support of each other, are at the core Access to training and education are two of the important of the work we do together. Empowerment of all employees to be areas where we collaborate with our Native Corporation partners. their best enable each of us to make a difference and give everyone For example, scholarships are awarded to students selected a chance to be heard. These values extend to the communities in by Calista and TKC and funded by Donlin Gold. Calista has which we work; our employees are encouraged and supported awarded scholarships to 225 students, 158 of whom attended, to give back to their communities with paid time off when or are attending, Alaska post-secondary institutions. Among the volunteering locally, either with their professional organizations scholarship recipients there are 10 Y-K villages represented, with or through non-profit community organizations. chosen majors including business, education, engineering, health, In January 2015, NOVAGOLD adopted a Human Rights humanities, and Indigenous studies. Donlin Gold also hosted two Policy accepting and embracing our responsibility to respect week-long virtual Alaska Resource Education minerals camps in human rights as per the Universal Declaration of Human Rights, 2020 for Y-K students. and as articulated within the International Labor Organization’s A Donlin Gold workforce training and development plan Declaration on Fundamental Principles and Rights at Work, the will be implemented prior to construction and production United Nations Global Compact, and the United Nations Guiding activities. In addition, Donlin Gold will continue to foster a work Principles on Business and Human Rights. environment that recognizes the unique nature of the region’s In 2020, women comprised 46 percent (six of 13) of Alaska Native culture. Important items that will be considered in the NOVAGOLD’s employees. Selection of individuals for all positions development of the project include the importance of subsistence with the company is guided by our Code of Business Conduct harvesting activities, cross-cultural training for employees and and Ethics, a policy that prohibits discrimination in any aspect of supervisors, the importance of family relationships, and providing employment based on race, color, religion, ancestry, national origin, local employment. ethnicity, age, gender, pregnancy, genetic information (including of a family member), marital status, parenthood, disability, veteran status, sexual orientation, gender identity, gender expression, or other protected status. All Donlin Gold positions, including those hired through contractors, have a Calista and TKC shareholder hire preference. For the 2020 drill program, 80 percent of Donlin Gold’s direct hires were Alaska Natives. This is a continuation of the success of Donlin Gold’s local hiring program initiated during the exploration phase, and clearly demonstrates that the development of a skilled local workforce is an achievable goal. 2020 80% 46% 8% 30% 20% D I V E R S I T Y OF DIRECT HIRES FOR DONLIN GOLD’S DRILL PROGRAM WERE ALASKA NATIVES OF NOVAGOLD’S EMPLOYEES ARE WOMEN OF NOVAGOLD’S EMPLOYEES ARE ETHNIC MINORITIES OF NOVAGOLD’S BOARD MEMBERS ARE WOMEN OF NOVAGOLD’S BOARD MEMBERS ARE ETHNIC MINORITIES 34 Applicable Corporate Policies can be found at https://www.novagold.com/company/governance/ including Environmental Policy; Code of Business Conduct and Ethics; Anti-Corruption, Anti- Bribery, Anti-Fraud; Health and Safety; Human Rights Policy; and Social License and Sustainable Development. All Donlin Gold positions, including those hired through contractors, have a Calista and TKC shareholder hire preference. EMPOWERMENT THAT MAKES A DIFFERENCE. e c n e r e f f i d a e k a m o t s u f o h c a e s e l b a n e t s e b r i e h t e b o t s e e y o p m e l l l a f o t n e m r e w o p m E . d r a e h e b o t e c n a h c a e n o y r e v e e v i g d n a 35 SUSTAINABILITY SUMMARY H E A L T H A N D S A F E T Y NOVAGOLD is committed to the safety, health, and welfare At the project level, Donlin Gold continued high standards of our employees and their families, our contractors, and our of health and safety performance with a zero Lost Time Incident visitors, as well as the safety and well-being of the communities Frequency Rate1 in 2020. The Total Recordable Incident Frequency in which we work. NOVAGOLD’s management is committed to Rate2 in 2020 was 1.2, better than our goal of a maximum rate providing leadership in health and safety. All team members take of 1.5. In 2020, Donlin Gold employees and contractors received accountability for their personal safety and that of others working more than 550 hours of health, safety, and emergency response around them. We create a corporate culture that promotes safe training. Donlin Gold employees and contractors have worked work practices through individual and group employee motivation, more than 2.7 million hours over more than a decade without a safety achievement rewards, and safety performance recognition Lost Time Incident (LTI) or fatality. Trained medical staff are based both in the workplace and in our local communities. Our practices at the project site for response to and treatment of any injuries reflect the objectives that are codified in our Health and and any other employee health concerns. For seven consecutive Safety Policy. years, Donlin Gold has been honored with the Barrick Gold Merit NOVAGOLD, Donlin Gold, and our partners are committed to of Safety Award, a distinction that recognizes 365 consecutive days providing an environment in which all our people make it home of zero LTIs. Winning this safety award is an example of Donlin safely every day and empowering individuals and communities to Gold’s commitment to providing an injury-free workplace for all work together to ensure a bright future for everyone. This means: employees and contractors. f a focus on health and safety where we implement high Our commitment to health and safety extends beyond the standards for the protection of our workforce; Donlin Gold project and into the communities in the Y-K region. f promoting safety programs throughout the Y-K region; and, Donlin Gold purchased 1,400 face mask kits from a local supplier f developing our current and future workforce with training that were shipped to 56 Y-K villages as well as to every student and and educational activities and programs – available staff member in the Kuspuk School District, home to more than 350 throughout the Y-K region’s communities – that encourage students over a 12,000 square-mile area. Donlin Gold coordinated employees and contractors to live a safe and healthy life with Tribal administrators to identify community members who beyond the workplace. 2020 0 1.2 2.7M S A F E T Y LOST-TIME INCIDENTS (LTI) OR FATALITIES TOTAL RECORDABLE INCIDENT FREQUENCY RATE (GOAL: < 1.5) * CONSECUTIVE HOURS OVER MORE THAN 10 YEARS WITHOUT AN LTI * Total Recordable Incident Frequency Rate (TRIFR) is defined as an incidence rate of lost time injuries, fatalities, and medical incidents and is computed using the formula: (number of injuries and illnesses X 200,000) / employee hours worked = TRIFR. Note: ‘200,000’ represents the number of hours 100 employees work based on 40 hours per week, 50 weeks per year, and provides the standard base for calculating incidence rate for an entire year. 36 could assemble the masks for Elders and people at greater risk of contracting COVID. Recognizing additional need in Bethel, the largest community in the region, Donlin Gold provided financial support to the Y-K Delta COVID-19 Response Fund and the Bethel Community Services Foundation’s vulnerable youth services fund. Despite the challenges of COVID-19, Donlin Gold also continued to work with our Native Corporation partners on major community health and safety investments throughout the region. 1 Lost Time Incident Frequency Rate is defined using the calculation of number of lost-time injuries per one million employee hours worked. 2 Total Recordable Incident Frequency Rate is defined as an incidence rate of lost-time injuries, fatalities, and medical incidents and is computed using the formula: (number of injuries and illnesses X 200,000) / employee hours worked = medical incidence rate. Note: ‘200,000’ represents the number of hours 100 employees work based on 40 hours per week, 50 weeks per year, and provides the standard base for calculating the incidence rate for an entire year. Applicable Corporate Policies can be found at https://www.novagold.com/company/governance/ including Environmental Policy; Code of Business Conduct and Ethics; Anti-Corruption, Anti- Bribery, Anti-Fraud; Health and Safety; Human Rights Policy; and Social License and Sustainable Development. n o d e t a r o b a l l o c s r e n t r a p y t i n u m m o c t h g i e - y t n e w T e v o m e r d n a t c e l l o c o t 0 2 0 2 n i j t c e o r p l a v o m e R e t s a W s u o d r a z a H l u a h k c a B d o G n l i l n o D e h t . s l a l i r e t a m s u o d r a z a h d o h e s u o h f o s d n u o p 0 0 0 5 4 , In partnership with TKC, the village of Crooked Creek, and the Napaimute Tribe, Donlin Gold was the lead sponsor of a project to construct and maintain the upper portions of an ice road on the Kuskokwim River. IMPROVING THE HEALTH OF OUR PEOPLE, OUR COMMUNITIES, AND OUR REGION. 37 SUSTAINABILITY SUMMARY P A R T N E R S H I P S Barrick, a strong and well-established senior gold producer, is caused by COVID-19; an ice road that connects remote villages an equal partner with NOVAGOLD in the Donlin Gold project. in the Y-K region during the winter months; salmon studies; and Our relationships in Alaska and in the Y-K region have been suicide prevention programs. shaped by working together to achieve project milestones that In addition, Donlin Gold’s life of mine agreements with both increase project value for all stakeholders. Calista and TKC have Calista and TKC call for them to have the opportunity to bid on all been directly involved in outreach about the Donlin Gold project contracted work and receive bidders preference to encourage the for more than two decades, and they have provided a conduit for use of local businesses. These agreements also require Donlin Gold sharing local knowledge through the public comment periods in to prioritize the hire of shareholders of these Native Corporations. the permitting process. This is consistent with their stated goal to These provisions have directly led to many contracts being increase shareholder benefits and economic opportunities through awarded to Calista- and TKC-owned companies and employment innovation, growth, leadership, partnership, execution, and for Y-K region residents at the project site. financial discipline. To achieve this, they have developed internal Establishing collaborative working relationships with Y-K and external workforce programs, including internships, training, communities that function over the long term is essential to a apprenticeships, scholarships, and mentorships. Along with Barrick, solid development foundation based on respect for the values, Calista and TKC are active participants in our annual strategic the culture, and the language of the people of the Y-K region. planning sessions for the Donlin Gold project as well as community Relationship-building is only possible when based on a sincere engagement and state and federal government interactions approach of openness, constructive dialogue, and mutual respect. and initiatives. As an example of this approach, Donlin Gold will continue to All shareholders of Calista (subsurface rights owner) and TKC discuss options to mitigate or modify any project activities (surface rights owner) will benefit from the mine as landowners. that could negatively impact stakeholders based on open and The Alaska Native Claims Settlement Act (ANSCA) of 1971 resolved regular communication. Specifically, the natural gas pipeline Alaska Native land claims, allotting 44 million acres for land use that is envisioned to supply energy to the project site would to Native Corporations. Land valuable for resource potential was reduce barging on the river, including barging of diesel fuel, and selected by regional Corporations under ANCSA, and resource could provide a potential alternate energy source for the region. development companies were invited by the Native Corporations Following additional feedback, the pipeline was rerouted to avoid to explore the land. Benefits prescribed under ANCSA include potential impacts on the Iditarod National Historic Trail. Ongoing revenue sharing under Sections 7(i) and 7(j) distributions that feedback on project activities is coordinated through the DATROC, provide a formula to divide revenues earned from resource which is composed of senior leadership from Calista and TKC who extraction between regional and village Native Corporations. advise the Donlin Gold Board on issues of specific interest to the Donlin Gold prioritizes local hiring and invests in supporting communities. communities throughout the region, benefiting residents directly During the early part of 2020, Donlin Gold was the lead and indirectly. One example is that 80 percent of Donlin Gold’s sponsor of a project to construct and maintain the upper portions direct hires for the 2020 drill program were Alaska Natives from of an ice road on the Kuskokwim River from Crooked Creek to the Y-K region. In addition to already being one of Southwest Sleetmute, and provided technical data to assist the roadbuilder. Alaska’s largest employers, Donlin Gold also benefits the region’s In a region that has few roads, this is a safe, critical pathway for communities indirectly, through donations to Y-K nonprofit supplies and access to medical care during the winter. This was the organizations, schools, training programs, sporting events, first time the ice road extended as far upriver as Sleetmute, greatly scholarships, and more. improving safety and access to nearby communities for residents In 2020, Donlin Gold signed Friendship Agreements with six in remote locations, creating economic opportunity for local trade Y-K villages that formalize current engagement. These Friendship and, pre-COVID-19, facilitating increased community cooperation Agreements build upon long-term relationships and address needs for sports, social activities, and academics. At its completion in that are specific to each village, including water, sewer, and landfill February 2020, the ice road’s length constituted a record for the projects; medical and other critical supplies to address hardships Kuskokwim River at 355 miles long. 38 Applicable Corporate Policies can be found at https://www.novagold.com/company/governance/ including Environmental Policy; Code of Business Conduct and Ethics; Anti-Corruption, Anti- Bribery, Anti-Fraud; Health and Safety; Human Rights Policy; and Social License and Sustainable Development. As part of Donlin Gold’s ongoing community engagement efforts, Friendship Agreements were approved and signed by six Y-K communities. TANGIBLE, LONG- LASTING BENEFITS FOR ALL. 39 SUSTAINABILITY SUMMARYE N V I R O N M E N T A L R E S P O N S I B I L I T Y NOVAGOLD recognizes environmental management Any water that comes in contact with mine facilities would be as a corporate priority. Our employees, as well as Donlin used in the milling process to the maximum extent practicable or Gold employees and contractors, care about preserving the treated and discharged according to stringent permit standards. environment for future generations while also providing for safe, Also of importance to stakeholders is the traffic plan for the river responsible, and profitable operations for the benefit of employees, barges needed to transport fuel and other supplies to the site. shareholders, and communities. We set and maintain standards Many of these materials will be transported up the Kuskokwim of excellence for environmental performance at all our office and River during the open water shipping season, between June and project locations. In this regard, the NOVAGOLD environmental October. Following completion of geotechnical and planning work, policy sets out a statement of principles for all stages of a project: a comprehensive tailings management plan will be finalized. Donlin exploration, development, operation, and closure. Part of this Gold is committed to the design, construction, operation, and commitment means preserving the local community’s way of closure of a tailings storage facility that will meet the requirements life: Donlin Gold is dedicated to protecting subsistence rights on of the Global Industry Standard for Tailings Management as well the waters and lands that surround the project and honoring the as exceed design specifications of the State of Alaska’s Dam Safety traditions of Alaska Native culture practiced by our employees Program. The Donlin Gold tailings storage facility will be fully lined, and neighbors. NOVAGOLD’s current environmental performance relates and the main dam will be constructed using the Downstream Method,1 globally considered to be the most stable design for almost entirely to activities at the Donlin Gold project. It is our tailings storage. duty to support a project development plan that considers full The potential environmental effects of the proposed mine life-of-mine risks and opportunities – from exploration through project were detailed and evaluated as part of the National to construction, operation, and finally closure and reclamation. Environmental Policy Act process. The FEIS was issued in August Dialogue with local communities and our Alaska Native partners, 2018 and not only includes the potential effects of the project on who offered generations of traditional knowledge about the climate change, but also the potential effects of climate change local environment, began early in the project’s history. Donlin on the project itself; these risks are considered and have been Gold used this information to help guide the location, layout, and incorporated in the project design. The effects of climate change, design of the project infrastructure to avoid sensitive and culturally including the impacts of extreme weather conditions and melting important habitats and landscapes; this information was included permafrost, are incorporated into all permitting submissions, as in the Donlin Gold Final Environmental Impact Statement (FEIS), well as design engineering and operational and closure planning. with project adjustments informed by engagement with Y-K Further, the FEIS considered biodiversity by evaluating in detail the region stakeholders. potential project effects on local, regional, and statewide flora and An extensive environmental baseline-study program has fauna populations, including important and sensitive species. The been ongoing since 1996 to provide a foundation for responsible analysis specifically addressed how the ecosystem may change over development. Resources and topics in the baseline-study program time due to climate change. The project plan and permits include include air quality, fish and other aquatic resources, geotechnical extensive biodiversity monitoring and mitigation requirements conditions, hydrology/ground and surface water quality and that will be fully implemented as Donlin Gold moves to project quantity, land use, mercury, public health, socioeconomics, construction and operation. Finally, a reclamation and closure sediment quality, subsistence, vegetation, wetlands, and wildlife. plan for the proposed mine project has already been developed Data from these studies have been used in the planning and and approved by the State of Alaska to ensure that, when mining design of the mine, and to establish environmental conditions prior activity ceases, the mine is closed, and the land is reclaimed and to project development. All of this data has been submitted to restored. As required by state law and consistent with leading regulatory agencies as part of the FEIS and permitting processes. practice, this plan will be reviewed and updated periodically The Donlin Gold project team has been collecting background throughout operations. data for a fish protection plan with the understanding that protecting fish starts with protecting water. The project has been designed for no uncontrolled discharge of mine-contacted water. 40 1 See more information about different tailings storage facility designs at https://donlingold.com/ environment/tailings-management-plan/. COLLABORATING WITH REGIONAL STAKEHOLDERS TO MINIMIZE IMPACTS. (Top to bottom) Donlin Gold employees sample water near the project to update baseline data; environmental tech Gerald Beans; Marguerite Tibbles of Owl Ridge Resource Consultants conducts an aquatic resource survey. 41 SUSTAINABILITY SUMMARYAt Donlin Gold’s current development stage, the site’s existing potential for environmental impacts is based on a site camp of generally fewer than 100 employees and contractors, as was the stream and pond habitats that will support Coho salmon and case in 2020, at peak occupancy. Donlin Gold does not generate resident fish populations in the drainage. Finally, in 2020, Donlin operational process waste or wastewater, produce tailings nor Gold also conducted extensive water quality monitoring and waste rock, or use any cyanide. All runoff from field activities, aquatic resource surveys throughout the Crooked Creek watershed. including drill sites, is managed to protect water quality under state Due to Donlin Gold’s remote location, on-site diesel-fired permit requirements. All sanitary wastewater from the camp is power generation and heaters are used to support current project treated prior to disposal. Therefore, current activities pose very site activities. In 2020, Donlin Gold’s greenhouse gas emissions low risk to the environment. totaled 1,500 metric tonnes of CO2. As the mine project moves Consistent with our permit requirements and the corporate forward – and as practicable – the use of more renewable energy policies of NOVAGOLD and Donlin Gold, a very high level of sources such as wind or solar will be evaluated. environmental performance has been maintained at the project Donlin Gold used approximately 184,000 gallons of pumped site in the past – and this continued throughout 2020. Detailed ground water to support camp operations during 2020. Some operating and monitoring plans and policies have been established additional surface water was temporarily used for drilling for and implemented at the Donlin Gold project site that address operations, but this water was quickly and safely returned to area safe drinking water and sanitary wastewater systems; stormwater streams. As previously noted, the project site is located in a remote management; spill prevention and control; fuel, oil, and hazardous part of western Alaska where there are few other water users materials management; wetlands protection; wildlife interactions; and water scarcity has not been a concern. In addition, all water and many others. When the project site was occupied in 2020, the withdrawals and uses are authorized by the State of Alaska. This environmental team conducted daily inspections of all ongoing site process provides for protection of other local water uses, including activities as well as monitoring for potential releases to land and ensuring no adverse impacts to streams and aquatic life use. water. These areas include water and wastewater management, air At a broader level, hazardous waste management is a major quality, hazardous and other solid waste management, fuel storage community concern in the Y-K region because there are no and use (and associated spill risk), and the protection of biological safe, authorized sites in the region for long-term management resources around the site. Donlin Gold and its contractors have and disposal. In the fall of 2020, Donlin Gold collaborated with never been cited for any non-compliance with environmental 28 community partners, including regional and village tribal regulations, standards, or permit requirements. All hazardous waste governments and Y-K region businesses, on the Donlin Gold is strictly managed according to state and federal regulations. In Backhaul Hazardous Waste Removal Partnership to collect and 2020, Donlin Gold had no spills to water and no fuel or oil spills remove approximately 45,000 pounds of household hazardous greater than 10 gallons (the threshold for reporting to government materials – such as fluorescent tubes, lead acid batteries, and agencies). Per state permit requirements, Donlin Gold also electronic waste – for proper disposal. Donlin Gold was the primary stabilized and reclaimed all of the 2020 drill sites and associated funder of this endeavor, which built upon two previous disposal drill access roads after work was completed in these areas. events. In 2019, nearly 100,000 pounds of hazardous and electronic In 2020, Donlin Gold continued studies to monitor and waste was removed from 14 villages and Bethel on the Kuskokwim document environmental conditions in the project area. These River and in 2018, the initial Green Star® Waste Backhaul Project included fish and wildlife studies in the Middle Kuskokwim removed close to 40,000 pounds of hazardous waste and materials River, such as the multi-year program to characterize rainbow from six Middle Kuskokwim villages. Donlin Gold is also working smelt spawning. In this effort, Donlin Gold partnered with local with TKC, the State of Alaska, and the Alaska Native Tribal Health residents to continue to update the species behavior under current Consortium to upgrade, as well as improve, health and safety conditions and how it is used locally as an important subsistence standards of water and sewer services in Middle Kuskokwim resource. Closer to the project site, Donlin Gold advanced fish area communities. habitat restoration plans for areas of the Crooked Creek watershed previously affected by historical placer mining. With construction planned to start in 2021, these projects will restore and reconnect 42 Applicable Corporate Policies, including Environmental Policy and Social License and Sustainable Development, can be found at https://www.novagold.com/company/governance/. 1.5k 184k 0 0 28 45k METRIC TONNES OF CO2 IN GREENHOUSE GAS EMISSIONS GALLONS OF WATER USED TO SUPPORT CAMP OPERATIONS CITATIONS OR FINES HAZARDOUS MATERIAL SPILLS TO WATER OR LAND (>10 GALLONS) COMMUNITY PARTNERS HELPED WITH THE DONLIN GOLD BACKHAUL HAZARDOUS WASTE REMOVAL PROGRAM POUNDS OF HOUSEHOLD HAZARDOUS MATERIALS REMOVED FROM Y-K VILLAGES A barge arrives in Sleetmute, where it will be loaded up with household hazardous and electronic waste. Trained volunteers helped to remove 45,000 pounds of material from 10 Y-K villages in 2020. 43 SUSTAINABILITY SUMMARYNOVAGOLD is committed to respecting the history, culture, and customs of Indigenous communities who own, inhabit, or use lands on which the company operates. We respect the social, economic, and cultural rights of local and Indigenous people, strive to communicate with communities, stakeholders, and shareholders in an accurate and transparent manner, and endeavor to share success through partnerships with stakeholders in community development programs. Donlin Gold promotes economic self-reliance among Native communities through employment opportunities, business enterprise support, economic diversification, maintenance of subsistence lifestyles, and preferential contract consideration for Native-owned suppliers. As noted above, these are consistent with the specific Native employment and contracting requirements included in our life-of-mine agreements with Calista and TKC. As the project progresses, Donlin Gold will continue to focus on developing programs that benefit local communities, including improved infrastructure, support for education and health services, cultural heritage preservation, employment and business opportunities, income from royalty streams and compensation payments, and environmental restoration and protection. Donlin Gold supports applicable principles and commitments in the International Council on Mining & Metals Position Statement on Mining and Indigenous Peoples, which promotes constructive relationships between the mining and metals industry and Indigenous people based on respect, meaningful engagement, and mutual benefit. NOVAGOLD and its project partners are committed to preserving traditional lifestyles and providing economic opportunities to communities throughout the Y-K region, whose political and social structure is represented by a diverse group of social, business, and governmental entities. Relationships between these entities are often complex and influenced by competing political and economic interests. Calista, TKC, and a variety of other Alaska Native business entities and associations have an interest in the Donlin Gold project and its potential impact on the region. Engaging with communities in a respectful and culturally sensitive manner while developing long-term, mutually beneficial relationships has been our approach since the early exploration of the Donlin Gold project – and will continue throughout the life cycle of the project. In 2020, we supported Donlin Gold as it continued a multi- decade collaboration on community development programs with Native Corporation partners. These programs throughout the region benefit education, community wellness, cultural preservation, and environmental stewardship. Donlin Gold supports a wide range of organizations and causes, from youth sports to scholarships to search and rescue. C O M M U N I T Y A N D S O C I A L R E S P O N S I B I L I T Y Engaging with communities in a respectful and culturally sensitive manner while developing long-term, mutually beneficial relationships has been our approach since the early exploration of the Donlin Gold project. 44 $3M 320 $8M 17 IN DIRECT PAYMENTS, SPONSORSHIPS, AND COMMUNITY INITIATIVES ENGAGEMENTS WITH COMMUNITIES AND STAKEHOLDERS IN PURCHASES FROM 146 ALASKA-BASED SUPPLIERS NATIVE VILLAGES THAT DONLIN GOLD EMPLOYEES CALL HOME STRONG ALASKA NATIVE PARTNERSHIPS BENEFITING PEOPLE AND COMMUNITIES THROUGHOUT THE REGION. NOVAGOLD and its project partners are committed to preserving traditional lifestyles and providing economic opportunities to communities throughout the Y-K region. 45 SUSTAINABILITY SUMMARYThe arrival of the COVID-19 pandemic in Alaska deepened these strong relationships while introducing the Donlin Gold community relations team to new – and primarily virtual – Donlin Gold’s multi-decade collaboration on community collaborations with villages in the Y-K region. Donlin Gold had development programs with Native Corporation partners is more than 320 contacts with key individual stakeholders and one aspect of the stakeholder outreach program. Another is the community organizations in 2020, twice the usual number of sponsorship of local events and participants. The Kuskokwim 300 contact events made in previous years, with most communication is considered to be the premiere mid-distance dog sled race in occurring by telephone or video conference. Donlin Gold was the world, covering a 300-mile trail stretching from Bethel across able to reach out to communities and Tribes multiple times tundra and the Kuskokwim River to Aniak upriver and back. It is during 2020, including many they had not connected with in prior a popular regional event that is supported through community years. Usual stakeholder engagement involves regular in-person investment funding by Donlin Gold. In January 2020, prior to the meetings with key community leaders, community group update arrival of COVID-19 in Alaska, Pete Kaiser, a Donlin Gold-sponsored presentations, program development consultation, responding to musher and 2019 Iditarod sled dog race champion, won the environmental issues, and education and assistance with health Kuskokwim 300. Kaiser was born and raised in Bethel and is the and safety matters. From regular engagement with tribal councils first Yup’ik musher and the fifth Alaska Native to win an Iditarod to seeking partnerships with new parties, Donlin Gold was able to championship. stay connected to advance key activities and projects throughout Kaiser takes a leadership role in speaking with youth in the the region. Donlin Gold is guided in its approach by a detailed community about suicide prevention and his musher coat has a stakeholder engagement plan that uses stakeholder identification stitched-on patch that states “Suicide is never the answer.” Suicide and looks at their level of responsibility, influence, proximity, is the second leading cause of death in the United States among dependency, and representation in the project region. As part of individuals between the ages of 10 and 34. Based on CDC 2019 ongoing stakeholder mapping, organizations and individuals are data, Alaska has the second-highest suicide rate of any state, with categorized as low- or high-influence as well as low- or high-impact suicide being the leading cause of death among Alaska youth over in their relationship to the project. In addition, stakeholder surveys the age of 15. are regularly conducted in Alaska to uncover information or identify Donlin Gold also sponsored four Iron Dog teams for the annual communication gaps and provide perception mapping of the snowmobile race in February. The Iron Dog is the world’s longest project. An example of this is Calista’s 2020 media campaign “Truly snowmobile race and covers more than 2,600 miles as it traverses Our Project,” which communicated that the Donlin Gold project is the Alaskan backcountry. These races are traditions in the region located on Calista land – something surveys had indicated most and receive much local support, international media coverage, Calista shareholders were not aware of. and fans along the route and at each checkpoint. Donlin Gold works hard to address all concerns raised by Following the temporary closure of the project camp due residents of the Y-K region through its ongoing stakeholder to COVID-19 travel restrictions, Donlin Gold donated thousands engagement efforts. Community concerns or complaints may be of pounds of food to shelters and to every home in eight Middle conveyed in-person or by telephone with one of the community Kuskokwim villages. Additional support of communities during development or community relations personnel, or submitted the pandemic was the result of partnering with the Campfire through an anonymous online contact form. There were no Organization, the Association of Village Council Presidents, and grievances related to human rights (or any topic) filed in 2020, and the Yukon-Kuskokwim Health Corporation to fund Elder and youth there were no unresolved complaints outstanding at the end of meals throughout the summer – serving 22 communities, 4,189 the previous year. Still, Y-K region stakeholders regularly request individuals, and a total of 34,000 meals to Elders and youth in the information or share topics of concern with community relations region. In addition, 260 boxes of fresh produce were distributed staff, including employment opportunities, timing of project to 56 villages. development, and increased health and safety protocols related Donlin Gold is also supporting TKC in a local community to COVID-19. 46 development project to improve energy efficiency and develop reliable energy generation in all villages in the Middle Kuskokwim region. Other ongoing initiatives include providing online activities and programs for youth and Elders, strengthening sponsorships with investments in the First Alaskans Institute at the 2020 Elders & Youth Statewide conference and the Alaska Federation of Natives annual convention. The coastal village of Kongiganak is located approximately 220 miles from the Donlin Gold project. The 430-person village is one of the 56 villages in the Y-K region that Donlin Gold engages with. 47 SUSTAINABILITY SUMMARYG O V E R N A N C E A N D C O R P O R A T E P O L I C I E S NOVAGOLD is committed to maintaining robust corporate environment, and sustainability policies, including the company’s governance practices that enable us to achieve our company ESG performance and disclosures. There are five members on the goals and maintain the trust and confidence of our investors, committee with a cumulative total of senior mining management employees, regulatory agencies, and other stakeholders. We industry experience of greater than 160 years. All committee recognize the importance of consistent, transparent, and proactive members except NOVAGOLD’s president and CEO, Greg Lang, communication, and feel that facilitating our stakeholders’ are independent. The committee is composed of directors opportunities to share their perspectives with us help deepen our with knowledge and experience in the areas of environmental understanding of their interests, concerns, and priorities. stewardship and compliance, social license, worker safety, and The company establishes rigorous annual goals and discloses technical expertise in the permitting, planning, development, and details of levels of achievement for the goals of the previous operation of large mines. While the board is ultimately responsible year and for the upcoming year in the Management Information for oversight of the company’s ESG performance, the committee Circular. The executive team and the board work together to set reviews the company’s environmental and social engagement long-term strategic company goals and short-term annual goals. performance at every committee meeting and provides strategic The assessment of performance against these goals is monitored direction to management on these matters. The committee regularly during the year by the board. At the end of each year, the provides a report at each regular board meeting. compensation committee leads the annual review of company After our 2017 and 2018 annual shareholder meetings, we goal-setting and performance, executive performance evaluations, commenced post-proxy shareholder engagement campaigns in and setting of the executive and director compensation programs, response to suboptimal approval rates for our annual advisory say- as well as provides recommendations on those topics to the board on-pay resolution. Members of management, and, in some cases, for its consideration. members of both the compensation and the corporate governance NOVAGOLD’s board of directors and management team and nominations committees participated in these meetings. The acknowledge the importance of diversity, including experience, engagement resulted in the implementation of changes to the race, ethnicity, gender, age, and cultural background, because we executive compensation program, the adoption of a board service value the contributions of differing perspectives (which have also policy, and adoption of an executive compensation clawback been shown to correlate with long-term business success). When policy. We were pleased to see that the changes implemented after considering candidates for executive positions, the company’s listening to our shareholders resulted in higher approval ratings of evaluation considers the broadest possible assessment of each the say-on-pay proposal at our 2019 and 2020 annual candidate’s skills and background, the overriding objective to shareholder meetings. ensure the appropriate balance of skills, experience, and capacity Other governance changes in the past three years include the necessary to be successful. Because of this objective, the company departure of four long-tenured directors and the addition of three has not set targets for specific percentages of women, or other new independent directors; the reduction of the board size from aspects of diversity, in executive positions. Forty-six percent of 11 to 10 seats; an increase in the number of women on the board NOVAGOLD’s employees are women. from one to three; and the adoption of a board service policy to NOVAGOLD’s board of directors’ obligation is to oversee prevent over-boarding. There have also been numerous changes corporate strategy and governance, key functions in advising to the company’s executive compensation program since 2017 that management on strategic direction and practices, employee well- have had the cumulative effect of reduced total compensation. The being, and partnerships. Eight of the company’s 10 board members company’s revised approach to executive compensation resulted in are independent, three of whom are women. the say-on-pay resolution receiving 87 percent approval at the 2020 The environmental, health, safety and sustainability annual shareholder meeting. and technical committee is a standing sub-committee of the For more information, please refer to the Sustainability page NOVAGOLD board, to which the board has delegated certain on our website at www.novagold.com/sustainability/. responsibilities relating to oversight for the development, implementation, and monitoring of the company’s health, safety, 48 CORPORATE GOVERNANCE SUMMARY – CHANGES, 2017-2020 BOARD OF DIRECTORS f four directors have stepped down: Dr. Marc Faber, SHARE OWNERSHIP REQUIREMENTS f increased director share ownership Gerald McConnell, Gil Leathley, Rick Van Nieuwenhuyse requirements to an amount equal to f three directors have been added: Dr. Diane Garrett, 3X annual retainer within five years of Ethan Schutt, Dr. Elaine Dorward-King f reduced board size from 11 to 10 f increased gender diversity from 9% to 30% f board nominee slate is 80% independent joining board (effective August 2020) f increased CEO share ownership requirement to an amount equal to 5X annual salary from 3X (effective f adopted a board service policy to prevent overboarding August 2020) EXECUTIVE COMPENSATION f Summary Compensation Table (SCT) shows reduction in executive comp since 2017 f Realized pay is generally lower than realizable pay and SCT pay* STOCK AWARD, PERFORMANCE SHARE UNIT, AND DEFERRED SHARE UNIT PLANS APPROVED BY SHAREHOLDERS IN 2020† f stock award plan amendment – reduced plan share pool size to 8% f extended vesting period for options and Performance of issued and outstanding shares Share Units (PSUs) from two to three years (effective down from 10% * Refer to Realized and Realizable Pay Tables in Management Information Circular. Required every three years by the TSX. † December 2017) f eliminated individual performance rating as a multiplier for long-term incentive award value f CEO base salary unchanged for three years (2017-2019) f added a double-trigger change of control provision to option plan and PSU plan before award vesting is accelerated (effective January 2019) f adopted an executive compensation clawback policy f enhanced the description of annual company goals, including threshold, target, and maximum achievement descriptions 49 SUSTAINABILITY SUMMARYM I N E R A L R E S E R V E S & M I N E R A L R E S O U R C E S Donlin Gold (100% basis)* GOLD Reserves1 Proven Probable P&P Resources,2 inclusive of Reserves Measured Indicated M&I Inferred Notes: Tonnage kt 7,683 497,128 504,811 7,731 533,607 541,337 92,216 Grade g/t Au 2.32 2.08 2.09 2.52 2.24 2.24 2.02 Metal content koz Au 573 33,276 33,849 626 38,380 39,007 5,993 * Mineral Reserves & Mineral Resources are reported on a 100% basis. NOVAGOLD and Barrick each own 50% of the Donlin Gold project. Donlin Gold approximate cut-off grades (see Resources Footnotes): Reserves:1 Resources:2 0.57 g/t gold 0.46 g/t gold = metric tonne grams/tonne ounce thousand t g/t = = oz = k = million M a) This resource estimate has been prepared in accordance with NI 43-101 and the CIM Definition Standard, unless otherwise noted. b) See numbered footnotes below on resource information. c) Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade and contained metal content d) Tonnage and grade measurements are in metric units. Contained gold is reported as troy ounces. Resources Footnotes: 1) Mineral Reserves are contained within Measured and Indicated pit designs, and supported by a mine plan, featuring variable throughput rates, stockpiling and cut-off optimization. The pit designs and mine plan were optimized on diluted grades using the following economic and technical parameters: Metal price for gold of US$975/oz; reference mining cost of US$1.67/t incremented US$0.0031/t/m with depth from the 220 m elevation (equates to an average mining cost of US$2.14/t), variable processing cost based on the formula 2.1874 x (S%)+ 10.65 for each US$/t processed; general and administrative cost of US$2.27/t processed; stockpile rehandle costs of US$0.19/t processed assuming that 45% of mill feed is rehandled; variable recoveries by rock type, ranging from 86.66% in shale to 94.17% in intrusive rocks in the Akivik domain; refining and freight charges of US$1.78/oz gold; royalty considerations of 4.5%; and variable pit slope angles, ranging from 23º to 43º. Mineral Reserves are reported using an optimized net sales return value based on the following equation: Net Sales Return = Au grade * Recovery * (US$975/oz – (1.78 + (US$975/oz –1.78) * 0.045)) – (10.65 + 2.1874 * (S%) + 2.27 + 0.19) and reported in US$/tonne. Assuming an average recovery of 89.54% and an average S% grade of 1.07%, the marginal gold cut-off grade would be approximately 0.57 g/t, or the gold grade that would equate to a 0.001 NSR cut-off at these same values. The life of mine strip ratio is 5.48. The assumed life-of-mine throughput rate is 53.5 kt/d. 2) Mineral Resources are contained within a conceptual Measured, Indicated and Inferred optimized pit shell using the following assumptions: gold price of US$1,200/oz; variable process cost based on 2.1874 * (sulphur grade) + 10.6485; administration cost of US$2.29/t; refining, freight & marketing (selling costs) of US$1.85/oz recovered; stockpile rehandle costs of US$0.20/t processed assuming that 45% of mill feed is rehandled; variable royalty rate, based on royalty of 4.5% * (Au price – selling cost). Mineral Resources have been estimated using a constant Net Sales Return cut-off of US$0.001/t milled. The Net Sales Return was calculated using the formula: Net Sales Return = Au grade * Recovery * (US$1,200/oz – (1.85 + ((US$1,200/oz –1.85) * 0.045)) – (10.65 + 2.1874 * (S%) + 2.29 + 0.20)) and reported in US$/tonne. Mineral Resources are inclusive of Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. Inferred Resources are in addition to Measured and Indicated Resources. Inferred Resources have great uncertainty as to their existence and whether they can be mined legally or economically. Regarding Forward-Looking Statements This report includes certain “forward-looking information” and “forward-looking statements” (collectively “forward-looking statements”) within the meaning of applicable securities legislation, including the United States Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, included herein, including, without limitation, statements regarding the permitting, potential development, exploration, construction and operation of Donlin Gold and statements relating to NOVAGOLD’s future operating and financial performance and production estimates are forward-looking statements. Forward-looking statements are frequently, but not always, identified by words such as “expects”, “anticipates”, “believes”, “intends”, “estimates”, “potential”, “possible”, “poised”, and similar expressions, or statements that events, conditions, or results “will”, “may”, “could”, “would” or “should” occur or be achieved. These forward-looking statements may also include statements regarding the exploration potential of Donlin Gold; anticipated mine life; perceived merit of properties; anticipated permitting timeframes; exploration and drilling results and budgets; mineral reserve and resource estimates; work programs; capital expenditures; timelines; strategic plans; benefits of the project; market prices for precious metals, including the potential performance of the price of gold; whether the final $75 million promissory note from the sale of Galore Creek will mature and be payable; potential shareholder returns; the timing and outcome of ADNR’s decision to reconsider the ROW lease for the natural gas pipeline or other statements that are not statements of fact. Forward-looking statements involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from NOVAGOLD’s expectations include the uncertainties involving unexpected cost increases, which could include significant increases in estimated capital and operating costs; the need for additional financing to explore and develop properties and availability of financing in the debt and capital markets; risks related to the outbreak of the coronavirus global pandemic (COVID-19); uncertainties involved in the interpretation of drilling results and geological tests and the estimation of reserves and resources; the need for continued cooperation with Barrick Gold Corporation for the continued exploration and development of the Donlin Gold property; the need for cooperation of government agencies and native groups in the development and operation of properties; risks of construction and mining projects such as accidents, equipment breakdowns, bad weather, non-compliance with environmental and permit requirements; unanticipated variation in geological structures, ore grades or recovery rates; the need to obtain permits and governmental approvals; fluctuations in metal prices and currency exchange rates; whether a positive construction decision will be made regarding Donlin Gold or Galore Creek; the timing and outcome of ADNR’s decision to reconsider the ROW lease for the natural gas pipeline and other risks and uncertainties disclosed in NOVAGOLD’s annual report filed on Form 10-K for the year-ended November 30, 2020, and subsequently in NOVAGOLD’s quarterly reports filed on Form 10-Q, with the United States Securities and Exchange Commission (SEC), Canadian securities regulators, and in other NOVAGOLD reports and documents filed with applicable securities regulatory authorities from time to time. Copies of these filings may be obtained at no charge by visiting our Investor Relations website at www.novagold. com or the SEC’s website at www.sec.gov or at www.sedar.com. NOVAGOLD’s forward-looking statements reflect the beliefs, opinions and projections of management on the date the statements are made. NOVAGOLD assumes no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change, except as required by law. Forward-looking statements are based on a number of material assumptions, including but not limited to the following, which could prove to be significantly incorrect: our ability to achieve production at any of our mineral exploration and development properties; estimated capital costs, operating costs, production and economic returns; estimated metal pricing, metallurgy, mineability, marketability and operating and capital costs, together with other assumptions underlying our resource and reserve estimates; our expected ability to develop adequate infrastructure and that the cost of doing so will be reasonable; assumptions that all necessary permits and governmental approvals will be obtained and the timing of such approvals; assumptions made in the interpretation of drill results, the geology, grade and continuity of our mineral deposits; our expectations regarding demand for equipment, skilled labor and services needed for exploration and development of mineral properties; and that our activities will not be adversely disrupted or impeded by development, operating or regulatory risks. Cautionary Note Concerning Reserve & Resource Estimates This presentation uses the terms “mineral resources”, “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources”. United States investors are advised that, while such terms are recognized and required by Canadian securities laws, the SEC Industry Guide 7 (“Industry Guide 7”) does not recognize them. Under Industry Guide 7, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. Mineral resources that are not mineral reserves do not have demonstrated economic viability. United States investors are cautioned that they should not assume that all or any part of measured or indicated mineral resources will ever be converted into mineral reserves. Further, inferred mineral resources have a great amount of uncertainty as to their existence and as to whether they can be mined legally or economically. Disclosure of “contained ounces” is permitted disclosure under Canadian regulations, however, Industry Guide 7 normally only permits issuers to report “resources” as in place tonnage and grade without reference to unit measures. Accordingly, information concerning descriptions of mineralization and mineral resources contained in this presentation may not be comparable to information made public by United States companies subject to Industry Guide 7 reporting and disclosure requirements. The Company has no reserves, as that term is defined under Industry Guide 7. On October 31, 2018, the SEC adopted a final rule (“New Final Rule”) that will replace Industry Guide 7 with new disclosure requirements that are more closely aligned with current industry and global regulatory practices and standards, including National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI-43-101”). Companies must comply with the New Final Rule for the first fiscal year beginning on or after January 1, 2021, which for NOVAGOLD would be the fiscal year beginning December 1, 2021. While early voluntary compliance with the New Final Rule is permitted, NOVAGOLD has not elected to comply with the New Final Rule at this time. NI 43-101 is a rule developed by the Canadian Securities Administrators, which established standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. Unless otherwise indicated, all resource estimates contained in this presentation have been prepared in accordance with NI 43-101 and the CIM Definition Standards. Technical Reports and Qualified Persons The documents referenced below provide supporting technical information for the Donlin Gold project. Project Donlin Gold Qualified Person(s) Kirk Hanson P.E. Most Recent Disclosures “Donlin Creek Gold Project Alaska, USA, NI 43-101 Technical Report on Second Updated Feasibility Study” prepared by AMEC, effective November 18, 2011, amended January 20, 2012 (the “Second Updated Feasibility Study”). Clifford Krall, P.E., who is the Mine Engineering Manager for NOVAGOLD and a “qualified person” under NI 43-101, has approved the scientific and technical information contained in this annual report. Wood Canada Limited (“Wood” formerly AMEC Americas Limited) is currently updating all sections of the Second Updated Feasibility Study with updated costs, economic assessment, permitting information, and technical information related to permitting, generated on the Donlin Gold project since 2011, which is anticipated to be finalized and filed during 2021. Based on that cost review, Wood determined that updating the Second Updated Feasibility Study using 2020 costs and new gold price guidance results in no material change to the mineral resources or mineral reserves. The economic assessment in the updated study may be materially different than in the 2011 study. 50 An aerial image of the Y-K Delta, close to the village of Kongiganak, which is about 220 miles from the Donlin Gold project. 51 C O R P O R A T E I N F O R M A T I O N MANAGEMENT TEAM Gregory A. Lang President and Chief Executive Officer David Ottewell Vice President and Chief Financial Officer Mélanie Hennessey Vice President, Corporate Communications Ron Rimelman BOARD OF DIRECTORS Dr. Thomas Kaplan Chairman, NOVAGOLD RESOURCES INC.; Chairman and CEO, The Electrum Group Elaine Dorward-King (2, 3) Corporate Director Sharon Dowdall (2, 4) Corporate Director Vice President, Environment, Health, Safety, and Sustainability Diane Garrett (3, 4) Richard Williams President, CEO, and Director of Hycroft Mining Vice President, Engineering and Development Holding Corporation Gregory A. Lang (3, 5) TRANSFER AGENT President and CEO, NOVAGOLD RESOURCES INC. For information on share transfers, lost certificates, or a change of Igor Levental (4, 5) address, contact: Computershare 1.800.564.6253 (toll-free in Canada and the U.S.) 1.514.982.7555 (international direct dial) computershare.com AUDITORS PricewaterhouseCoopers LLP SHARE LISTINGS TSX, NYSE American: NG President, The Electrum Group Kalidas Madhavpeddi (2, 3) Corporate Director Clynton Nauman (1, 3) CEO, Alexco Resource Corp., and CEO, Asset Liability Management Group ULC Ethan Schutt (1, 4, 5) Executive Vice President and General Counsel, Bristol Bay Native Corporation Anthony Walsh (1, 2) Corporate Director Issued and outstanding at March 24, 2021, 331.3 million Independent Lead Director, NOVAGOLD RESOURCES INC. Members of: 1. Audit Committee 2. Compensation Committee 3. Environment, Health, Safety, Sustainability, and Technical Committee 4. Corporate Governance and Nominations Committee 5. Corporate Communications Committee 52 This annual report was printed carbon neutral, investing in renewable energy and clean technology projects. 2020 FINANCIAL REPORT From NOVAGOLD’s Annual Report on Form 10-K for the fiscal year ended November 30, 2020 For full Annual Report on Form 10-K, please visit www.novagold.com, www.sec.gov, or www.sedar.com Or call Investor Relations at 1.866.669.6227 ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS (virtual format) Wednesday, May 12, 2021 – 1pm PT Live Webcast at: www.virtualshareholdermeeting.com/NG2021 INVESTOR INQUIRIES T: 604.669.6227 Toll free: 1.866.669.6227 info@novagold.com novagold.com linkedin.com/company/novagold twitter.com/novagold facebook.com/novagold CORPORATE OFFICE 400 Burrard Street, Suite 1860 Vancouver, BC, Canada V6C 3A6 T: 604.669.6227 Toll free: 1.866.669.6227 F: 604.669.6272 info@novagold.com SALT LAKE CITY EXECUTIVE OFFICE 201 South Main Street, Suite 400 Salt Lake City, UT, USA 84111 T: 801.639.0511 F: 801.649.0509 Design by helveticka | Spokane, Washington N O V A G O L D . 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