UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(cid:1)
(cid:2)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended November 30, 2014
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File Number: 1-35447
NOVACOPPER INC.
(Exact Name of Registrant as Specified in Its Charter)
British Columbia
(State or Other Jurisdiction of
Incorporation or Organization)
Suite 1950, 777 Dunsmuir Street
Vancouver, British Columbia
Canada
(Address of Principal Executive Offices)
98-1006991
(I.R.S. Employer
Identification No.)
V7Y 1K4
(Zip Code)
(604) 638-8088
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Shares, no par value
Name of Each Exchange on Which Registered
NYSE MKT
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:2) No (cid:1)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:2) No (cid:1)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes (cid:1) No (cid:2)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files). Yes (cid:1) No (cid:2)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. (cid:2)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act. (Check one):
Large accelerated filer (cid:2)
Accelerated filer (cid:2)
Non-accelerated filer (cid:1)
(Do not check if a smaller reporting
company)
Smaller reporting company(cid:2)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:2) No (cid:1)
As at May 31, 2014, the aggregate market value of the registrant’s Common Shares held by non-affiliates was approximately
$32.9 million. As of February 2, 2015, the registrant had 60,633,701 Common Shares, no par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A not later than March 30, 2015, in connection with the registrant’s 2015 annual meeting of stockholders, are incorporated
herein by reference into Part III of this Annual Report on Form 10-K.
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NOVACOPPER INC.
TABLE OF CONTENTS
Page
CURRENCY ............................................................................................................................................................................................ 2
FORWARD-LOOKING STATEMENTS ................................................................................................................................................ 2
CAUTIONARY NOTE TO UNITED STATES INVESTORS ................................................................................................................ 4
CAUTIONARY NOTE TO ALL INVESTORS CONCERNING ECONOMIC ASSESSMENTS THAT INCLUDE INFERRED
RESOURCES ........................................................................................................................................................................................... 5
GLOSSARY OF TECHNICAL ................................................................................................................................................................ 6
PART I ...................................................................................................................................................................................................... 9
Item 1. BUSINESS ................................................................................................................................................................... 9
Item 1A. RISK FACTORS ........................................................................................................................................................ 15
Item 1B. UNRESOLVED STAFF COMMENTS ..................................................................................................................... 27
Item 2. PROPERTIES ............................................................................................................................................................ 27
Item 3. LEGAL PROCEEDINGS .......................................................................................................................................... 51
Item 4. MINE SAFETY DISCLOSURES .............................................................................................................................. 52
PART II .................................................................................................................................................................................................. 53
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES ............................................................................................................................... 53
Item 6. SELECTED FINANCIAL DATA ............................................................................................................................. 64
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS........................................................................................................................................................................... 65
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ........................................................................... 79
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE ........................................................................................................................................................................... 98
Item 9A. CONTROLS AND PROCEDURES .......................................................................................................................... 98
Item 9B. OTHER INFORMATION.......................................................................................................................................... 98
PART III ................................................................................................................................................................................................. 99
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ................................................... 99
Item 11. EXECUTIVE COMPENSATION ............................................................................................................................. 99
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS ................................................................................................................................................... 99
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE ........ 99
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES ........................................................................................... 99
PART IV ............................................................................................................................................................................................... 100
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES ............................................................................... 100
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Unless the context otherwise requires, the words “we,” “us,” “our,” the “Company” and “NovaCopper” refer to
NovaCopper Inc., a British Columbia corporation, either alone or together with its subsidiaries as the context
requires, as of November 30, 2014.
CURRENCY
All dollar amounts are in United States currency unless otherwise stated. References to C$ or CDN$ refer to
Canadian currency, and $ or US$ to United States currency. All dollar amounts are expressed in thousands of
dollars, except references to per share amounts.
FORWARD-LOOKING STATEMENTS
The information discussed in this annual report on Form 10-K includes “forward-looking information” and
“forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 (the
“Exchange Act”), and applicable Canadian securities laws. These forward-looking statements 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 Upper Kobuk Mineral Projects, completion of transactions, market prices for precious
and base 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 assumptions
of management.
Statements concerning mineral resource estimates may also be deemed to constitute “forward-looking statements” to
the extent that they involve estimates of the mineralization that will be encountered if the property is developed. Any
statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections,
objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such
as “expects”, “is expected”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”,
“strategy”, “goals”, “objectives”, “potential”, “possible” or variations thereof or stating that certain actions, events,
conditions or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved, or the
negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-
looking statements. Forward-looking statements are subject to a variety of known and unknown risks, uncertainties
and other factors that could cause actual events or results to differ from those reflected in the forward-looking
statements, including, without limitation:
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risks related to inability to define proven and probable reserves;
risks related to our ability to finance the development of our mineral properties through external financing,
strategic alliances, the sale of property interests or otherwise;
none of the Company’s mineral properties are in production or are under development;
uncertainties relating to the assumptions underlying our resource estimates, such as metal pricing,
metallurgy, mineability, marketability and operating and capital costs;
uncertainty as to whether there will ever be production at any of our Upper Kobuk Mineral Projects;
uncertainty as to estimates of capital costs, operating costs, production and economic returns;
risks related to our ability to commence production and generate material revenues or obtain adequate
financing for our planned exploration and development activities;
risks related to lack of infrastructure including but not limited to the risk whether or not the Ambler Mining
District Industrial Access Road (“AMDIAR”) will receive the requisite permits and, if it does, whether the
Alaska Industrial Development and Export Authority (“AIDEA”) will build the AMDIAR;
risks related to future sales or issuances of equity securities decreasing the value of existing common
shares, diluting voting power and reducing future earnings per share;
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risks related to market events and general economic conditions;
uncertainty related to inferred mineral resources;
uncertainty related to the economic projections contained herein derived from the Preliminary Economic
Assessment titled “Preliminary Economic Assessment Report on the Arctic Project, Ambler Mining
District, Northwest Alaska” dated effective July 31, 2013 (the “PEA”);
risks related to inclement weather which may delay or hinder exploration activities at the Upper Kobuk
Mineral Projects;
risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of our
mineral deposits;
• mining and development risks, including risks related to infrastructure, accidents, equipment breakdowns,
labor disputes or other unanticipated difficulties with or interruptions in development, construction or
production;
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the risk that permits and governmental approvals necessary to develop and operate mines at the Upper
Kobuk Mineral Projects will not be available on a timely basis or at all;
commodity price fluctuations;
risks related to governmental regulation and permits, including environmental regulation, including the risk
that more stringent requirements or standards may be adopted or applied due to circumstances unrelated to
the Company and outside of its control;
risks related to the need for reclamation activities on our properties and uncertainty of cost estimates related
thereto;
uncertainty related to title to our mineral properties;
our history of losses and expectation of future losses;
risks inherent in the acquisition of new businesses or properties;
risks related to increases in demand for equipment, skilled labor and services needed for exploration and
development of mineral properties, and related cost increases;
our need to attract and retain qualified management and technical personnel;
risks related to conflicts of interests of some of our directors;
risks related to potential future litigation;
risks related to the voting power of our major shareholders and the impact that a sale by such shareholders
may have on our share price;
risks related to global climate change;
risks related to adverse publicity from non-governmental organizations;
uncertainty as to the volatility in the price of the Company’s shares;
the Company’s expectation of not paying cash dividends;
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adverse federal income tax consequences for U.S. shareholders should the Company be a passive foreign
investment company;
uncertainty as to our ability to maintain the adequacy of internal control over financial reporting as per the
requirements of Section 404 of the Sarbanes-Oxley Act (“SOX”); and
increased regulatory compliance costs, associated with rules and regulations promulgated by the SEC,
Canadian Securities Administrators, the NYSE MKT, the TSX, and the Financial Accounting Standards
Boards, and more specifically, our efforts to comply with the Dodd-Frank Wall Street Reform and
Consumer Protection Act (“Dodd-Frank”).
This list is not exhaustive of the factors that may affect any of our forward-looking statements. Forward-looking
statements are statements about the future and are inherently uncertain, and our actual achievements or other future
events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of
risks, uncertainties and other factors, including, without limitation, those referred to in this report under the heading
“Risk Factors” and elsewhere.
Our forward-looking statements are based on the beliefs, expectations and opinions of management on the date the
statements are made, and 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. For the reasons set forth
above, investors should not place undue reliance on forward-looking statements.
CAUTIONARY NOTE TO UNITED STATES INVESTORS
Unless otherwise indicated, all resource estimates, and any future reserve estimates, included or incorporated by
reference in this annual report on Form 10-K have been, and will be, prepared in accordance with Canadian National
Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of
Mining, Metallurgy and Petroleum Definition Standards for Mineral Resources and Mineral Reserves (“CIM
Definition Standards”). NI 43-101 is a rule developed by the Canadian Securities Administrators which establishes
standards for all public disclosure an issuer makes of scientific and technical information concerning mineral
projects. NI 43-101 permits the disclosure of an historical estimate made prior to the adoption of NI 43-101 that
does not comply with NI 43-101 to be disclosed using the historical terminology if the disclosure: (a) identifies the
source and date of the historical estimate; (b) comments on the relevance and reliability of the historical estimate; (c)
to the extent known, provides the key assumptions, parameters and methods used to prepare the historical estimate;
(d) states whether the historical estimate uses categories other than those prescribed by NI 43-101; and (e) includes
any more recent estimates or data available.
Canadian standards, including NI 43-101, differ significantly from the requirements of the SEC, and reserve and
resource information contained or incorporated by reference into this annual report on Form 10-K may not be
comparable to similar information disclosed by U.S. companies. In particular, and without limiting the generality of
the foregoing, the term “resource” does not equate to the term “reserves”. Under SEC 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. SEC
Industry Guide 7 does not define and the SEC’s disclosure standards normally do not permit the inclusion of
information concerning “measured mineral resources”, “indicated mineral resources” or “inferred mineral
resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves”
by U.S. standards in documents filed with the SEC. U.S. investors should also understand that “inferred mineral
resources” have a great amount of uncertainty as to their existence and great uncertainty as to their economic and
legal feasibility. It cannot be assumed that all or any part of an “inferred mineral resource” will ever be upgraded to
a higher category. Under Canadian rules, estimated “inferred mineral resources” may not form the basis of
feasibility or pre-feasibility studies except in rare cases. Investors are cautioned not to assume that all or any part of
an “inferred mineral resource” exists or is economically or legally mineable. Disclosure of “contained ounces” in a
resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to
report mineralization that does not constitute “reserves” by SEC standards as in-place tonnage and grade without
reference to unit measures. The requirements of NI 43-101 for identification of “reserves” are also not the same as
those of the SEC, and any reserves reported by us in the future in compliance with NI 43-101 may not qualify as
“reserves” under SEC standards. Accordingly, information concerning mineral deposits set forth herein may not be
comparable to information made public by companies that report in accordance with United States standards.
4
CAUTIONARY NOTE TO ALL INVESTORS CONCERNING ECONOMIC ASSESSMENTS
THAT INCLUDE INFERRED RESOURCES
Mineral resources that are not mineral reserves have no demonstrated economic viability. The preliminary
assessment on the Arctic project is preliminary in nature and includes “inferred mineral resources” that are
considered too speculative geologically to have economic considerations applied to them that would enable them to
be categorized as mineral reserves. There is no certainty that the feasibility studies or preliminary assessments at the
Arctic project will ever be realized.
5
GLOSSARY OF TECHNICAL
We estimate and report our resources and we will estimate and report our reserves according to the definitions set
forth in NI 43-101. We will modify and reconcile the reserves as appropriate to conform to SEC Industry Guide 7
for reporting in the U.S. The definitions for each reporting standard are presented below with supplementary
explanation and descriptions of the parallels and differences.
The following technical terms defined in this section are used throughout this Form 10-K:
NI 43-101 Definitions:
“AA” is atomic absorption.
“Ag” is the chemical symbol for silver.
“AMT” is audiomagnetotelluric.
“ARD” is acid rock drainage.
“Au” is the chemical symbol for gold.
“Ba” is barium.
“CIM” is the Canadian Institute of Mining, Metallurgy and Petroleum.
“Co” is the chemical symbol for cobalt.
“CO2” is carbon dioxide.
“CS-AMT” is controlled source audio-frequency magnetotelluric.
“Cu” is the chemical symbol for copper.
“DIGHEM” is a proprietary geophysical survey system.
“dilution” is waste, which is unavoidably mined with ore.
“dip” is the angle of inclination of a geological feature/rock from the horizontal.
“EM” is electromagnetic.
“fault” is the surface of a fracture along which movement has occurred.
“Fe” is the surface of a fracture along which movement has occurred.
“gangue” are non-valuable components of the ore.
“grade” is the measure of concentration of gold within mineralized rock.
“g” is a gram.
“g/t” is grams per metric tonne.
“ha” is a Hectare.
“ICP” is induced couple plasma.
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“ICP-AES” is inductively coupled plasma atomic emission spectroscopy.
“indicated mineral resource” means that part of a mineral resource for which quantity, grade or quality, densities,
shape and physical characteristics can be estimated with a level of confidence sufficient to allow the
appropriate application of technical and economic parameters, to support mine planning and evaluation of
the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing
information gathered through appropriate techniques from locations such as outcrops, trenches, pits,
workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably
assumed.
“inferred mineral resource” means that part of a mineral resource for which quantity and grade or quality can be
estimated on the basis of geological evidence, limited sampling and reasonably assumed, but not verified,
geological and grade continuity. The estimate is based on limited information and sampling gathered
through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.
“IRR” is internal rate of return.
“km” is a kilometer.
“m” is a meter.
“Mg” is the chemical symbol for magnesium.
“micron” or “µm” is 0.000001 meters.
“measured mineral resource” means that part of a mineral resource for which quantity, grade or quality, densities,
shape and physical characteristics are so well established that they can be estimated with a level of
confidence sufficient to allow the appropriate application of technical and economic parameters, to support
mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed
and reliable exploration, sampling and testing information gathered through appropriate techniques from
locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for both
geological and grade continuity to be reasonably assured.
“mineral reserve” means the economically mineable part of a measured or indicated mineral resource demonstrated
by at least a preliminary feasibility study. This study must include adequate information on mining,
processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting,
that economic extraction can be justified. A mineral reserve includes diluting materials and allowances for
losses that may occur when the material is mined.
“mineral resource” means a concentration or occurrence of natural solid inorganic material, or natural solid
fossilized organic material in or on the earth’s crust in such form and quantity and of such a grade or quality
that it has reasonable prospects for economic extraction. The location, quantity, grade, geological
characteristics and continuity of a mineral resource are known, estimated or interpreted from specific
geological evidence and knowledge.
“mm” is a millimeter.
“MS” is massive sulfide.
“MW” is million watts.
“NPV” is net present value
“ounce” or “oz” is a troy ounce.
“Pb” is the chemical symbol for lead.
“ppm” is parts per million.
7
“probable mineral reserve” means the economically mineable part of an indicated and, in some circumstances, a
measured mineral resource demonstrated by at least a preliminary feasibility study. This study must
include adequate information on mining, processing, metallurgical, economic and other relevant factors that
demonstrate, at the time of reporting, that economic extraction can be justified.
“proven mineral reserve” means the economically mineable part of a measured mineral resource demonstrated by
at least a preliminary feasibility study. This study must include adequate information on mining,
processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting,
that economic extraction is justified.
“QA/QC” is quality assurance and quality control.
“SG” is specific gravity.
“SRM” is standard reference material.
“strike” is the duration of line formed by the intersection of strata surfaces within the horizontal plane, always
perpendicular to the dip direction.
“tailings” is the finely ground waste rock from which valuable minerals or metals have been extracted.
“tonne” is a metric tonne: 1,000 kilograms or 2,204.6 pounds.
“t/d” is tonnes per day.
“XRF” is x-ray fluorescence spectroscopy.
“Zn” is the chemical symbol for zinc.
SEC Industry Guide 7 Definitions:
“exploration stage” deposit is one which is not in either the development or production stage.
“development stage” project is one which is undergoing preparation of an established commercially mineable
deposit for its extraction but which is not yet in production. This stage occurs after completion of a
feasibility study.
“mineralized material” refers to material that is not included in the reserve as it does not meet all of the criteria for
adequate demonstration for economic or legal extraction.
“probable reserve” refers to reserves for which quantity and grade and/or quality are computed from information
similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement
are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that
for proven reserves, is high enough to assume continuity between points of observation.
“production stage” project is actively engaged in the process of extraction and beneficiation of mineral reserves to
produce a marketable metal or mineral product.
“proven reserve” refers to reserves for which (a) quantity is computed from dimensions revealed in outcrops,
trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling
and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character
is so well defined that size, shape, depth and mineral content of reserves are well-established.
“reserve” refers to that part of a mineral deposit which could be economically and legally extracted or produced at
the time of the reserve determination. Reserves must be supported by a feasibility study done to bankable
standards that demonstrates the economic extraction. (“Bankable standards” implies that the confidence
attached to the costs and achievements developed in the study is sufficient for the project to be eligible for
tonnes and grade to include diluting
external debt financing.) A reserve includes adjustments to the in-situ
materials and allowances for losses that might occur when the material is mined.
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Item 1. BUSINESS
PART I
Our principal business is the exploration and development of our Upper Kobuk Mineral Projects (“Upper Kobuk
Mineral Projects” or “UKMP Projects”) located in the Ambler mining district in Northwest Alaska, United States of
America comprising the (i) Arctic Project, which contains a high-grade polymetallic volcanogenic massive sulfide
(“VMS”) deposit (“Arctic Project”); and (ii) Bornite Project, which contains a carbonate-hosted copper deposit
(“Bornite Project”). Our goals include expanding mineral resources and advancing our projects through technical,
engineering and feasibility studies so that production decisions can be made on those projects.
Name, Address and Incorporation
NovaCopper Inc. was incorporated on April 27, 2011 under the Business Corporations Act (British Columbia)
(“BCBCA”). Our registered office is located at Suite 2600, Three Bentall Centre, 595 Burrard Street, Vancouver,
British Columbia, Canada, and our executive office is located at Suite 1950, 777 Dunsmuir Street, Vancouver,
British Columbia, Canada.
Corporate Organization Chart
The following chart depicts our corporate structure together with the jurisdiction of incorporation of our subsidiary.
All ownership is 100%.
NovaCopper Inc.
(British Columbia)
NovaCopper US Inc.
(Delaware)
Upper Kobuk
Mineral Projects
(Ambler mining
district, Alaska)
Arctic Project
Bornite Project
Business Cycle
Our business, at its current exploration phase, is cyclical. Exploration activities are conducted primarily during
snow-free months. The optimum field season at the Upper Kobuk Mineral Projects is from late May to late
September. The length of the snow-free season at the Upper Kobuk Mineral Projects varies from about May
through November at lower elevations and from July through September at higher elevations.
NovaCopper’s Strategy
Our business strategy is focused on creating value for stakeholders through our ownership and advancement of the
Arctic Project and exploration of the Bornite Project and through the pursuit of similarly attractive base metal
projects. We plan to:
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advance the Arctic Project towards development with key activities including increased
definition of the mineral resources, technical studies to support completion of a pre-feasibility
or feasibility study, and the advancement of baseline environmental studies;
advance exploration in the Ambler mining district and, in particular, at the Bornite Project,
pursuant to the NANA Agreement (as more particularly described under “History of
NovaCopper – Agreement with NANA Regional Corporation”) through resource development
and initial technical studies; and
pursue project level or corporate transactions that are value accretive.
The Arctic Project PEA represents an early stage study and highlights certain opportunities for us to further expand
upon. Prior to commencing production, further studies that demonstrate the economic viability of the Arctic Project
must be completed including pre-feasibility or feasibility studies, all necessary permits must be obtained, a
production decision must be made by our board of directors (the “Board”), financing for construction and
development must be arranged and construction must be completed. In addition, we will be required to address
certain infrastructure challenges, including a road for access, transportation of supplies and mineral concentrate, and
obtain additional rights, including surface use rights and access rights. See “Item 1A. Risk Factors”.
Significant Developments in 2014
• On March 18, 2014, NovaCopper reported an updated NI 43-101 resource estimate for the Bornite Project
in a report entitled “NI 43-101 Technical Report on the Bornite Project, Northwest Alaska, USA”, dated
effective April 1, 2014, which updated the resource estimate previously released on February 5, 2013. At
the base case 0.5% copper cut-off grade, the Bornite Project is estimated to contain in-pit Indicated
Resources of 14.1 million tonnes of 1.08% Cu or 334 million pounds of contained copper. At the base case
0.5% copper cut-off grade, the Bornite Project is estimated to contain in-pit Inferred Resources of 109.6
million tonnes of 0.94% Cu or 2,259 million pounds of contained copper. Resources are stated as
potentially being economically viable in an open-pit mining scenario based on a projected metal price of
$3.00 per pound copper, total site operating costs of $18.00 per tonne, 87% metallurgical recoveries and an
average pit slope of 43 degrees. At the base case 1.5% copper cut-off grade, the Bornite Project is estimated
to contain below-pit Inferred Resources of 55.6 million tonnes of 2.81% Cu or 3,437 million pounds of
contained copper. Inferred resources are stated as potentially being economically viable in an underground
mining scenario based on a projected metal price of $3.00 per pound copper, total site operating costs of
$66.00 per tonne and an average metallurgical recovery of 87%. Inferred resources have a great amount of
uncertainty as to their existence and whether they can be mined legally or economically. It cannot be
assumed that all or any part of the Inferred resources will ever be upgraded to a higher category. Mineral
Resources that are not Mineral Reserves do not have demonstrated economic viability. See “Cautionary
Note to United States Investors.”
• On July 7, 2014, we announced the completion of a non-brokered private placement of approximately $7.5
million in Units to existing shareholders. Each Unit was priced at $1.15 per Unit and consisted of one
common share and one common share purchase warrant. Each common share purchase warrant entitles the
holders to purchase one common share at a price of $1.60 per share for a period of five years from the
closing date. Net proceeds from the private placement were $7.2 million. The gross proceeds raised were
allocated for the 12 months following closing to fund $2.7 million on program expenditures, $4.0 million
on general and administrative expenses including costs associated with the offering, and $0.8 million on
one-time expenses incurred in reducing annual general and administrative expenses.
• On August 15, 2014, we announced the departure of Senior VP Exploration, Joseph Piekenbrock, VP
Human Resources and Workforce Development, Sacha Iley, and VP Corporate Communications, Patrick
Donnelly, from our senior management team to reduce our general and administrative expenses.
• On October 28, 2014, we announced the results of our 2014 re-logging and re-sampling program at the
Bornite Project. During the 2014 field season, we re-logged the geology and re-sampled approximately
13,000 meters in 37 historical drill holes, originally drilled by Kennecott on the Bornite Project between
1959 and 1976, and submitted the samples for a complete 42 element Induced Coupled Plasma analysis. Of
the 37 historic drill holes sampled, 5 holes had intervals of copper grading more than 0.5% copper, and 21
holes contained mineralization grading more than 0.2% copper.
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Significant Developments in 2013
• On March 28, 2012, the security holders of NovaGold Resources Inc. (“NovaGold”) voted in favor of the
special resolution approving the spin-out of NovaCopper Inc. and its wholly-owned subsidiary NovaCopper
US Inc. (“NovaCopper US”) (“Plan of Arrangement” or “Arrangement”). Under the Plan of Arrangement,
each holder of NovaGold warrants on record as of April 30, 2012 received the right to receive one
NovaCopper Share for every six common shares of NovaGold represented by the warrant. On January 2,
2013, we announced that our largest shareholder, Electrum Strategic Resources L.P. (“Electrum”), added
an additional 5.2 million NovaCopper Shares to their holdings through the exercise of NovaGold warrants.
We received no proceeds from the exercise of the NovaGold warrants. Between January 10, 2013 to
January 18, 2013, we issued an additional 0.9 million NovaCopper Shares to various holders upon their
exercise of NovaGold warrants.
• On February 5, 2013, NovaCopper released an updated NI 43-101 resource estimate for the Bornite Project
in a report entitled “NI 43-101 Technical Report Resource Estimation – South Reef and Ruby Creek zones,
Bornite deposit, Upper Kobuk Mineral Projects, Northwest Alaska”, further to the resource estimate
previously released on July 18, 2012 with respect to the Ruby Creek zone. At the base case 1.0% copper
cut-off grade, the South Reef zone at the Bornite Project, which lies roughly 400 to 600 meters southeast of
the Ruby Creek zone, is estimated to contain Inferred Resources of 43.1 million tonnes of 2.54% Cu or
2,409 million pounds of contained copper. Inferred resources are stated as potentially being economically
viable in an underground mining scenario based on a projected metal price of $2.75 per pound copper and
total site operating costs of $60.00 per tonne. Mineral Resources that are not Mineral Reserves do not have
demonstrated economic viability. See “Cautionary Note to United States Investors.”
• On April 30, 2013, we announced the signing of a Memorandum of Understanding (“MOU”) with the
Alaska Industrial Development Export Authority (“AIDEA”) to investigate the viability of permitting and
constructing an industrial access road to the Ambler mining district and the UKMP Projects. The MOU
formalizes the roles of each party as they relate to advancing the AMDIAR, which AIDEA is expected to
commence permitting in 2014. The MOU also allows AIDEA to investigate various ways to fund the
construction and maintenance of the AMDIAR. Although no specific terms have yet been discussed on
payment for usage of the AMDIAR, the arrangement that AIDEA entered into with Cominco Ltd. (now
Teck Resources Ltd.) in 1986 for construction of the Red Dog Road and Port Facility may serve as a
general template for a final financing agreement. This MOU is non-exclusive, meaning that other mining
and exploration companies or other industrial users may also work in cooperation with AIDEA to support
development of the AMDIAR by signing their own MOUs.
• On July 30, 2013, we reported a new Preliminary Economic Assessment (“PEA”) prepared under NI 43-
101 for the Arctic project in a report entitled “Preliminary Economic Assessment Report on the Arctic
Project, Ambler Mining District, Northwest Alaska.” The PEA outlines an open-pit scenario of a 12-year
mine life supporting a 10,000 tonne-per-day conventional grinding mill-and-flotation circuit at the Arctic
deposit with a pre-tax net present value (“NPV”) of $927.7 million or 22.8% internal rate of return (“IRR”)
and after-tax NPV of $537.2 million or 17.9% IRR at an 8% discount rate. Initial capital expenditures are
estimated at $717.7 million with sustaining capital expenditures of $164.4 million. The base case scenario
assumes long-term metal prices of $2.90/lb for copper, $0.85/lb for zinc, $0.90/lb for lead, $22.70/oz for
silver and $1,300/oz for gold. The total average operating cost for the proposed mine is estimated at $63.93
per tonne milled. The PEA is preliminary in nature and includes inferred mineral resources that are
considered too speculative geologically to have the economic considerations applied to them that would
enable them to be categorized as mineral reserves. There is no certainty that the PEA will be realized. See
“Cautionary Note to United States Investors.”
• On October 9, 2013, we announced the completion of our 2013 exploration field season program at our
UKMP Projects which accomplished approximately 8,142 meters or 109% of planned drilling of which
4,684 meters was drilled at the Ruby Creek zone and 3,458 meters at the South Reef zone of the Bornite
Project. Results from the drilling campaign were released throughout the fall of 2013. The 2013 exploration
program was focused on expansion and further characterization of the resources identified in the 2013
Bornite resource technical report released in February 2013.
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• On December 18, 2013, we announced results from our re-sampling and re-assaying program of 33
historical drill holes at the Bornite Project. These holes were previously drilled and only selectively
sampled by Kennecott within the Ruby Creek zone of the Bornite deposit. Of the 33 historic drill holes
sampled, 26 holes had intervals of copper greater than 0.5% copper, and 29 holes contained mineralization
greater than 0.2% copper. The objectives of the re-assay/re-logging program were twofold: 1) to confirm
and conduct a Quality Assurance/Quality Control (“QA/QC”) program on the historical sample results; and
2) to identify additional lower-grade (0.2-0.5% copper) shallow material, which was not previously
sampled. The re-sampling and re-assaying program has confirmed previously known high-grade
mineralization. It is also expected to add additional lower-grade mineralization to the Company’s mineral
inventory.
Significant Developments in 2012
• On March 28, 2012, the security holders of NovaGold voted in favor of the special resolution approving the
Plan of Arrangement. On April 30, 2012, 46,578,078 Common Shares of NovaCopper (each, a
“NovaCopper Share” or “Common Share”) were distributed to NovaGold shareholders such that each
NovaGold shareholder of record on the effective date received one NovaCopper Common Share for every
six common shares of NovaGold held. In accordance with the terms of the Arrangement, NovaCopper had
committed to NovaGold to deliver up to 6,181,352 NovaCopper Shares to satisfy holders of NovaGold
warrants, performance share units, and deferred shares units on record as of the close of business April 27,
2012, on the same basis as NovaGold shareholders received under the Plan of Arrangement, at the time of
exercise or vesting, as applicable. NovaCopper was funded with $40.0 million in cash by NovaGold as part
of the Plan of Arrangement.
• On April 25, 2012, we began trading on the Toronto Stock Exchange (“TSX”) in Canada and NYSE-MKT
(formerly NYSE-AMEX) in the United States.
• During 2012, we completed the recruitment and hiring of our senior management team. Our President and
CEO, Rick Van Nieuwenhuyse, Vice President (“VP”) and Chief Financial Officer, Elaine Sanders, Senior
VP Exploration, Joseph Piekenbrock, and VP Human Resources and Workforce Development, Sacha Iley,
joined the Company full time from their previous employment at NovaGold. We also announced the
addition of Patrick Donnelly as VP Corporate Communications in August 2012.
• On July 18, 2012, we reported an initial resource estimate prepared under NI 43-101 for the Ruby Creek
zone of the Bornite property in a report entitled “NI 43-101 Technical Report Resource Estimation – Ruby
Creek zone, Bornite deposit, Upper Kobuk Mineral Project, Northwest Alaska.” At a 0.5% copper cut-off
grade, the Ruby Creek zone contains Indicated Resources of 6.8 million tonnes at 1.19% Cu or 178.7
million pounds of contained copper and Inferred Resources of 47.7 million tonnes of 0.84% Cu or 883.2
million pounds of contained copper. Resources are stated as contained within a potentially economic
resource limiting pit shell using a metal price of $3.00 per pound copper, mining costs of $1.50 per tonne,
processing costs of $10.00 per tonne, 100% recoveries and an average pit slope of 45 degrees. See
“Cautionary Note to United States Investors.”
• On October 10, 2012, we announced the completion of our 2012 drilling campaign at our UKMP Projects
which accomplished approximately 17,209 meters of which 15,457 meters were drilled at the South Reef
zone of the Bornite property and 1,752 meters at the Sunshine deposit on the Ambler lands. Results from
the drilling campaign have been released throughout the fall of 2012.
• On November 14, 2012, we announced initial metallurgical optimization results from the Arctic deposit
through the completion of a metallurgical test work program. The work results in an increase of copper
recoveries to 88.6% from 86.8% and zinc recoveries to 91.7% from 81.1% previously reported in our PEA
for the Arctic project entitled “NI 43-101 Preliminary Economic Assessment Ambler Project, Kobuk, AK”.
It also resulted in improved precious metal recoveries to the copper concentrate.
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History of NovaCopper
Spin-Out
We were formerly a wholly-owned subsidiary of NovaGold. At a special meeting of securityholders of NovaGold
held on March 28, 2012, the securityholders voted in favour of a special resolution approving the distribution of
Common Shares of NovaCopper to the shareholders of NovaGold as a return of capital through a statutory Plan of
Arrangement under the Companies Act (Nova Scotia).
On April 30, 2012, all of the outstanding NovaCopper Shares were distributed to shareholders of NovaGold such
that each NovaGold shareholder of record at the close of business on April 27, 2012 received one NovaCopper
Share for every six common shares in the capital of NovaGold held at that time. The NovaCopper Shares were
listed and posted for trading on the TSX and on the NYSE-MKT under the symbol NCQ on April 25, 2012.
Agreement with NANA Regional Corporation
On October 19, 2011, NANA Regional Corporation, Inc. (“NANA”), an Alaska Native Corporation headquartered
in Kotzebue, Alaska, and NovaCopper US entered an Exploration Agreement and Option Agreement, as amended
(the “NANA Agreement”) for the cooperative development of NANA’s respective resource interests in the Ambler
mining district of Northwest Alaska. The NANA Agreement consolidates our and NANA’s land holdings into an
approximately 142,831-hectare land package and provides a framework for the exploration and any future
development of this high-grade and prospective poly-metallic belt.
The NANA Agreement grants NovaCopper US the nonexclusive right to enter on, and the exclusive right to explore,
the Bornite lands and the Alaska Native Claims Settlement Act (“ANCSA”) lands (each as defined in the NANA
Agreement) and in connection therewith, to construct and utilize temporary access roads, camps, airstrips and other
incidental works. In consideration for this right, NovaCopper US paid to NANA $4 million in cash. NovaCopper
US will also be required to make payments to NANA for scholarship purposes in accordance with the terms of the
NANA Agreement. NovaCopper US has further agreed to use reasonable commercial efforts to train and employ
NANA shareholders to perform work for NovaCopper US in connection with its operations on the Bornite lands,
ANCSA lands and Ambler lands (as defined in the NANA Agreement) (collectively, the “Lands”). Under the
NANA Agreement, NANA also has the right to appoint a board member to NovaCopper’s Board within a five year
period following our public listing on a stock exchange.
The NANA Agreement has a term of 20 years, with an option in favour of NovaCopper US to extend the term for an
additional 10 years. The NANA Agreement may be terminated by mutual agreement of the parties or by NANA if
NovaCopper US does not meet certain expenditure requirements on the Bornite lands and ANCSA lands.
If, following receipt of a feasibility study and the release for public comment of a related draft environmental impact
statement, we decide to proceed with construction of a mine on the Lands, NovaCopper US will notify NANA in
writing and NANA will have 120 days to elect to either (a) exercise a non-transferrable back-in-right to acquire an
undivided ownership interest between 16% and 25% (as specified by NANA) of that specific project; or (b) not
exercise its back-in-right, and instead receive a net proceeds royalty equal to 15% of the net proceeds realized by
NovaCopper US from such project (following the recoupment by NovaCopper of all costs incurred, including
operating, capital and carrying costs). The cost to exercise such back-in-right is equal to the percentage interest in
the project multiplied by the difference between (i) all costs incurred by NovaCopper US or its affiliates on the
project, including historical costs incurred prior to the date of the NANA Agreement together with interest on the
historical costs; and (ii) $40 million (subject to exceptions). This amount will be payable by NANA to NovaCopper
US in cash at the time the parties enter into a joint venture agreement and in no event will the amount be less than
zero.
In the event that NANA elects to exercise its back-in-right, the parties will as soon as reasonably practicable form a
joint venture, with NANA’s interest being between 16% to 25% and NovaCopper US owning the balance of the
interest in the joint venture. Upon formation of the joint venture, the joint venture will assume all of the obligations
of NovaCopper US and be entitled to all the benefits of NovaCopper US under the NANA Agreement in connection
with the mine to be developed and the related Lands. A party’s failure to pay its proportionate share of costs in
connection with the joint venture will result in dilution of its interest. Each party will have a right of first refusal
over any proposed transfer of the other party’s interest in the joint venture other than to an affiliate or for the
purposes of granting security. A transfer by either party of any net proceeds royalty interest in a project other than
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for financing purposes will also be subject to a first right of refusal. A transfer of NANA’s net smelter return on the
Lands is subject to a first right of refusal by NovaCopper.
In connection with possible development of a mine on the Bornite lands or ANCSA lands, NovaCopper US and
NANA will execute a mining lease to allow NovaCopper US or the joint venture to construct and operate a mine on
the Bornite lands or ANCSA lands. These leases will provide NANA a 2% net smelter royalty as to production from
the Bornite lands and a 2.5% net smelter royalty as to production from the ANCSA lands. If NovaCopper US
decides to proceed with construction of a mine on the Ambler lands, NANA will enter into a surface use agreement
with NovaCopper US which will afford NovaCopper US access to the Ambler lands along routes approved by
NANA on the Bornite lands or ANCSA lands. In consideration for the grant of such surface use rights, NovaCopper
US will grant NANA a 1% net smelter royalty on production and an annual payment of $755 per acre (as adjusted
for inflation each year beginning with the second anniversary of the effective date of the NANA Agreement and for
each of the first 400 acres (and $100 for each additional acre) of the lands owned by NANA and used for access
which are disturbed and not reclaimed.
We have formed an oversight committee with NANA, which consists of four representatives from each of
NovaCopper and NANA (the “Oversight Committee”). The Oversight Committee is responsible for certain planning
and oversight matters carried out by us under the NANA Agreement. The planning and oversight matters that are
the subject of the NANA Agreement will be determined by majority vote. The representatives of each of
NovaCopper and NANA attending a meeting will have one vote in the aggregate and in the event of a tie, the
NovaCopper representatives jointly shall have a deciding vote on all matters other than Subsistence Matters, as that
term is defined in the NANA Agreement. There shall be no deciding vote on Subsistence Matters and we may not
proceed with such matters unless approved by majority vote of the Oversight Committee or with the consent of
NANA, such consent not to be unreasonably withheld or delayed.
Principal Markets
We do not currently have a principal market. Our principal objective is to become a producer of copper.
Specialized Skill and Knowledge
All aspects of our business require specialized skills and knowledge. Such skills and knowledge include the areas of
geology, mining and accounting. See “Executive Officers of NovaCopper” for details as to the specific skills and
knowledge of our directors and management.
Environmental Protection
Mining is an extractive industry that impacts the environment. Our goal is to evaluate ways to minimize that impact
and to develop safe, responsible and profitable operations by developing natural resources for the benefit of our
employees, shareholders and communities and maintain high standards for environmental performance at our Upper
Kobuk Mineral Projects. We strive to meet or exceed environmental standards at our Upper Kobuk Mineral
Projects. One way we do this is through collaborations with local communities, including Native Alaskan groups.
We are currently active only in Alaska, which has established environmental standards and regulations that we
intend to strive to exceed. Our environmental performance will be overseen at the Board level and environmental
performance is the responsibility of the project manager.
• All new activities and operations will be managed for compliance with applicable laws and
regulations. In the absence of regulation, best management practices will be applied to manage
environmental risk.
• We will strive to limit releases to the air, land or water and appropriately treat and dispose of
waste.
See “Arctic Project – Environmental Considerations”.
Employees
As of November 30, 2014, we had 9 full-time employees, 6 of whom were employed at our executive office in
Vancouver, BC, and 3 of whom were employed at our Upper Kobuk Mineral Projects. The number of individuals
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employed by us fluctuates throughout the year depending on the season; however during 2014, we had on average,
20 employees working for us. We have entered into executive employment agreements with two individuals, the
CEO and CFO.
We believe our success is dependent on the performance of our management and key employees, many of whom
have specialized skills in exploration in Alaska and the base metals industry. Substantially all of our exploration site
employees have been active in the Ambler mining district for the last five years and are knowledgeable as to the
geology, metallurgy and infrastructure related to mining development.
Segment Information
We operate in one geographical jurisdiction, being the United States, and all of our mineral properties and plant and
equipment are located in Alaska. Segment information relating to our assets is provided under the section heading
“Item 8. Financial Statements and Supplementary Data” below.
Competitive Conditions
The mineral exploration and development industry is competitive in all phases of exploration, development and
production. There is a high degree of competition faced by us in Alaska and elsewhere for skilled management
employees, suitable contractors for drilling operations, technical and engineering resources, and necessary
exploration and mining equipment, and many of these competitor companies have greater financial resources,
operational expertise, and/or more advanced properties than us. Additionally, our operations are in a remote
location where skilled resources and support services are limited. We have in place experienced management
personnel and continue to evaluate the required expertise and skills to carry out our operations. As a result of this
competition, we may be unable to achieve our exploration and development in the future on terms we consider
acceptable or at all. See “Item 1A. Risk Factors”.
Available Information
We make available, free of charge, on or through our website, at www.novacopper.com our annual report on Form
10-K which includes our audited financial statements, our quarterly reports on Form 10-Q and our current reports on
Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the U.S.
Securities Exchange Act of 1934. All filings are also available on www.sec.gov/edgar. Our website and the
information contained therein or connected thereto are not intended to be, and are not incorporated into this annual
report on Form 10-K.
Item 1A. RISK FACTORS
Investing in our securities is speculative and involves a high degree of risk due to the nature of our business and the
present stage of exploration of our mineral properties. The following risk factors, as well as risks currently unknown
to us, could materially adversely affect our future business, operations and financial condition and could cause them
to differ materially from the estimates described in forward-looking information relating to NovaCopper, or our
business, property or financial results, each of which could cause purchasers of securities to lose all or part of their
investments.
We have not defined any proven or probable reserves and none of our mineral properties are in production
or under development.
We have no history of commercially producing precious or base metals and all of our properties are in the
exploration stage. We have not defined or delineated any measured resources or proven or probable reserves on our
Upper Kobuk Mineral Projects. Mineral exploration involves significant risk, since few properties that are explored
contain bodies of ore that would be commercially economic to develop into producing mines. We cannot assure you
that we will establish the presence of any measured resources, or proven or probable reserves at the Upper Kobuk
Mineral Projects or any other properties. The failure to establish measured resources, or proven or probable
reserves, would severely restrict our ability to implement our strategies for long-term growth.
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We may not have sufficient funds to develop our mineral projects or to complete further exploration
programs.
We have limited financial resources. We currently generate no mining operating revenue, and must primarily
finance exploration activity and the development of mineral projects by other means. In the future, our ability to
continue exploration, development and production activities, if any, will depend on our ability to obtain additional
external financing. Any unexpected costs, problems or delays could severely impact our ability to continue
exploration and development activities. The failure to meet ongoing obligations on a timely basis could result in a
loss or a substantial dilution of our interests in projects.
The sources of external financing that we may use for these purposes include project or bank financing or public or
private offerings of equity and debt. In addition, we may enter into one or more strategic alliances or joint ventures,
decide to sell certain property interests, or utilize one or a combination of all of these alternatives. The financing
alternative we choose may not be available on acceptable terms, or at all. If additional financing is not available, we
may have to postpone further exploration or development of, or sell, one or more of our principal properties.
Even if one of our mineral projects is determined to be economically viable to develop into a mine, such
development may not be successful.
If the development of one of our projects is found to be economically feasible and approved by our Board, such
development will require obtaining permits and financing, the construction and operation of mines, processing
plants and related infrastructure, including road access. As a result, we are and will continue to be subject to all of
the risks associated with establishing new mining operations, including:
•
•
•
•
•
•
•
the timing and cost, which can be considerable, of the construction of mining and processing facilities
and related infrastructure;
the availability and cost of skilled labour and mining equipment;
the availability and cost of appropriate smelting and refining arrangements;
the need to obtain necessary environmental and other governmental approvals and permits and the
timing of the receipt of those approvals and permits;
the availability of funds to finance construction and development activities;
potential opposition from non-governmental organizations, environmental groups or local groups
which may delay or prevent development activities; and
potential increases in construction and operating costs due to changes in the cost of fuel, power,
materials and supplies.
The costs, timing and complexities of developing our projects may be greater than anticipated because our property
interests are not located in developed areas, and, as a result, our property interests are not currently served by
appropriate road access, water and power supply and other support infrastructure. Cost estimates may increase
significantly as more detailed engineering work is completed on a project. It is common in new mining operations to
experience unexpected costs, problems and delays during construction, development and mine start-up. In addition,
delays in the early stages of mineral production often occur. Accordingly, we cannot provide assurance that we will
ever achieve, or that our activities will result in, profitable mining operations at our mineral properties.
In addition, there can be no assurance that our mineral exploration activities will result in any discoveries of new
mineralization. If further mineralization is discovered there is also no assurance that the mineralization would be
economical for commercial production. Discovery of mineral deposits is dependent upon a number of factors and
significantly influenced by the technical skill of the exploration personnel involved. The commercial viability of a
mineral deposit is also dependent upon a number of factors which are beyond our control, including the attributes of
the deposit, commodity prices, government policies and regulation and environmental protection.
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The Upper Kobuk Mineral Projects are located in a remote area of Alaska, and access to them is limited.
Exploration and any future development or production activities may be limited and delayed by
infrastructure challenges, inclement weather and a shortened exploration season.
The Upper Kobuk Mineral Projects are located in a remote area of Alaska. Access to the Upper Kobuk Mineral
Projects is limited and there is currently no infrastructure in the area.
We cannot provide assurances that the proposed AMDIAR that would provide access to the Ambler mining district
will be permitted or built, that it will be built in a timely manner, that the cost of accessing the proposed road will be
reasonable, that it will be built in the manner contemplated, or that it will sufficiently satisfy the requirements of the
Upper Kobuk Mineral Projects. In addition, successful development of the Upper Kobuk Mineral Projects will
require the development of the necessary infrastructure. If adequate infrastructure is not available in a timely
manner, there can be no assurance that:
•
•
•
the development of the Upper Kobuk Mineral Projects will be commenced or completed on a timely
basis, if at all;
the resulting operations will achieve the anticipated production volume; or
the construction costs and operating costs associated with the development of the Upper Kobuk
Mineral Projects will not be higher than anticipated.
As the UKMP Projects are located in a remote area, exploration, development and production activities may be
limited and delayed by inclement weather and a shortened exploration season.
We have no history of production and no revenue from mining operations.
We have a very limited history of operations and to date have generated no revenue from mining operations. As
such, we are subject to many risks common to such enterprises, including under-capitalization, cash shortages,
limitations with respect to personnel, financial and other resources and lack of significant revenues. There is no
assurance that the Upper Kobuk Mineral Projects or any other future projects will be commercially mineable, and
we may never generate revenues from our mining operations.
Future sales or issuances of equity securities could decrease the value of any existing Common Shares, dilute
investors’ voting power and reduce our earnings per share.
We may sell additional equity securities (including through the sale of securities convertible into common shares)
and may issue additional equity securities to finance our operations, exploration, development, acquisitions or other
projects. We are authorized to issue an unlimited number of Common Shares. We cannot predict the size of future
sales and issuances of equity securities or the effect, if any, that future sales and issuances of equity securities will
have on the market price of the common shares. Sales or issuances of a substantial number of equity securities, or
the perception that such sales could occur, may adversely affect prevailing market prices for the Common Shares.
With any additional sale or issuance of equity securities, investors will suffer dilution of their voting power and may
experience dilution in our earnings per share.
Changes in the market price of copper and other metals, which in the past have fluctuated widely, will affect
our ability to finance continued exploration and development of our projects and affect our operations and
financial condition.
Our long-term viability will depend, in large part, on the market price of copper and other metals. The market prices
for these metals are volatile and are affected by numerous factors beyond our control, including:
•
•
•
global or regional consumption patterns;
the supply of, and demand for, these metals;
speculative activities;
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•
•
•
the availability and costs of metal substitutes;
expectations for inflation; and
political and economic conditions, including interest rates and currency values.
We cannot predict the effect of these factors on metal prices. A decrease in the market price of copper and other
metals could affect our ability to raise funds to finance the exploration and development of any of our mineral
projects, which would have a material adverse effect on our financial condition and results of operations. The market
price of copper and other metals may not remain at current levels. In particular, an increase in worldwide supply,
and consequent downward pressure on prices, may result over the longer term from increased copper production
from mines developed or expanded as a result of current metal price levels. There is no assurance that a profitable
market may exist or continue to exist.
Actual capital costs, operating costs, production and economic returns may differ significantly from those
described in the PEA.
The PEA technical report is an early stage study that is preliminary in nature. There can be no assurance that the
results described in the PEA will be realized. The capital costs to take our projects into production may be
significantly higher than anticipated.
None of our mineral properties have an operating history upon which we can base estimates of future operating
costs. Decisions about the development of the Arctic Project (or the Bornite Project) will ultimately be based upon
feasibility studies. Feasibility studies derive estimates of cash operating costs based upon, among other things:
•
•
•
•
anticipated tonnage, grades and metallurgical characteristics of the ore to be mined and processed;
anticipated recovery rates of metals from the ore;
cash operating costs of comparable facilities and equipment; and
anticipated climatic conditions.
Cash operating costs, production and economic returns, and other estimates contained in studies or estimates
prepared by or for us may differ significantly from those anticipated by the PEA and there can be no assurance that
our actual operating costs will not be higher than currently anticipated.
We will incur losses for the foreseeable future.
We expect to incur losses unless and until such time as our mineral projects generate sufficient revenues to fund
continuing operations. The exploration and development of our mineral properties will require the commitment of
substantial financial resources that may not be available.
The amount and timing of expenditures will depend on a number of factors, including the progress of ongoing
exploration and development, the results of consultants’ analyses and recommendations, the rate at which operating
losses are incurred, the execution of any joint venture agreements with strategic partners and the acquisition of
additional property interests, some of which are beyond our control. We cannot provide assurance that we will ever
achieve profitability.
Mineral resource and reserve calculations are only estimates.
Any figures presented for mineral resources in this Form 10-K and in our other filings with securities regulatory
authorities and those which may be presented in the future or any figures for mineral reserves that may be presented
by us in the future are and will only be estimates. There is a degree of uncertainty attributable to the calculation of
mineral reserves and mineral resources. Until mineral reserves or mineral resources are actually mined and
processed, the quantity of metal and grades must be considered as estimates only and no assurances can be given
that the indicated levels of metals will be produced. In making determinations about whether to advance any of our
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projects to development, we must rely upon estimated calculations as to the mineral resources and grades of
mineralization on our properties.
The estimating of mineral reserves and mineral resources is a subjective process that relies on the judgment of the
persons preparing the estimates. The process relies on the quantity and quality of available data and is based on
knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given
time may significantly change when new information becomes available. While we believe that the mineral resource
estimates included in this Form 10-K for the Upper Kobuk Mineral Projects are well established and reflect
management’s best estimates, by their nature mineral resource estimates are imprecise and depend, to a certain
extent, upon analysis of drilling results and statistical inferences that may ultimately prove to be inaccurate. There
can be no assurances that actual results will meet the estimates contained in feasibility studies. As well, further
studies are required.
Estimated mineral reserves or mineral resources may have to be recalculated based on changes in metal prices,
further exploration or development activity or actual production experience. This could materially and adversely
affect estimates of the volume or grade of mineralization, estimated recovery rates or other important factors that
influence mineral reserve or mineral resource estimates. The extent to which mineral resources may ultimately be
reclassified as mineral reserves is dependent upon the demonstration of their profitable recovery. Any material
changes in mineral resource estimates and grades of mineralization will affect the economic viability of placing a
property into production and a property’s return on capital. We cannot provide assurance that mineralization can be
mined or processed profitably.
Our mineral resource estimates have been determined and valued based on assumed future metal prices, cut-off
grades and operating costs that may prove to be inaccurate. Extended declines in market prices for copper, zinc,
lead, gold and silver may render portions of our mineralization uneconomic and result in reduced reported mineral
resources, which in turn could have a material adverse effect on our results of operations or financial condition. We
cannot provide assurance that mineral recovery rates achieved in small scale tests will be duplicated in large scale
tests under on-site conditions or in production scale.
A reduction in any mineral reserves that may be estimated by us in the future could have an adverse impact on our
future cash flows, earnings, results of operations and financial condition. No assurances can be given that any
mineral resource estimates for the Upper Kobuk Mineral Projects will ultimately be reclassified as mineral reserves.
See “Cautionary Note to United States Investors.”
Significant uncertainty exists related to inferred mineral resources.
There is a risk that inferred mineral resources referred to in this Form 10-K cannot be converted into measured or
indicated mineral resources as there may be limited ability to assess geological continuity. Due to the uncertainty
that may attach to inferred mineral resources, there is no assurance that inferred mineral resources will be upgraded
to resources with sufficient geological continuity to constitute proven and probable mineral reserves as a result of
continued exploration. See “Cautionary Note to United States Investors.”
Mining is inherently risky and subject to conditions or events beyond our control.
The development and operation of a mine is inherently dangerous and involves many risks that even a combination
of experience, knowledge and careful evaluation may not be able to overcome, including:
•
unusual or unexpected geological formations;
• metallurgical and other processing problems;
• metal losses;
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environmental hazards;
power outages;
labour disruptions;
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industrial accidents;
periodic interruptions due to inclement or hazardous weather conditions;
flooding, explosions, fire, rockbursts, cave-ins and landslides;
• mechanical equipment and facility performance problems; and
•
the availability of materials and equipment.
These risks could result in damage to, or destruction of, mineral properties, production facilities or other properties,
personal injury or death, including to our employees, environmental damage, delays in mining, increased production
costs, asset write downs, monetary losses and possible legal liability. We may not be able to obtain insurance to
cover these risks at economically feasible premiums, or at all. Insurance against certain environmental risks,
including potential liability for pollution and other hazards associated with mineral exploration and production, is
not generally available to companies within the mining industry. We may suffer a material adverse effect on our
business if we incur losses related to any significant events that are not covered by our insurance policies.
General economic conditions may adversely affect our growth, future profitability and ability to finance.
The unprecedented events in global financial markets in the past several years have had a profound impact on the
global economy. Many industries, including the copper mining industry, are impacted by these market conditions.
Some of the key impacts of the current financial market turmoil include contraction in credit markets resulting in a
widening of credit risk, devaluations, high volatility in global equity, commodity, foreign exchange and precious
metal markets and a lack of market liquidity. A worsening or slowdown in the financial markets or other economic
conditions, including but not limited to, consumer spending, employment rates, business conditions, inflation, fuel
and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates and
tax rates, may adversely affect our growth and ability to finance. Specifically:
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the global credit/liquidity crisis could impact the cost and availability of financing and our overall
liquidity;
the volatility of copper and other metal prices would impact our estimates of mineral resources,
revenues, profits, losses and cash flow, and the feasibility of our projects;
negative economic pressures could adversely impact demand for our future production, if any;
construction related costs could increase and adversely affect the economics of any project in the
Ambler district;
volatile energy, commodity and consumables prices and currency exchange rates would impact our
estimated production costs; and
the devaluation and volatility of global stock markets would impact the valuation of our equity and
other securities.
We cannot provide assurance that we will successfully acquire commercially mineable mineral rights.
Exploration for and development of copper properties involves significant financial risks which even a combination
of careful evaluation, experience and knowledge may not eliminate. While the discovery of an ore body may result
in substantial rewards, few properties which are explored are ultimately developed into producing mines. Major
expenses may be required to establish reserves by drilling, constructing mining and processing facilities at a site,
developing metallurgical processes and extracting metals from ore. We cannot ensure that our current exploration
and development programs will result in profitable commercial mining operations.
The economic feasibility of development projects is based upon many factors, including the accuracy of mineral
resource estimates; metallurgical recoveries; capital and operating costs; government regulations relating to prices,
taxes, royalties, land tenure, land use, importing and exporting and environmental protection; and metal prices,
20
which are highly volatile. Development projects are also subject to the successful completion of feasibility studies,
issuance of necessary governmental permits and availability of adequate financing.
Most exploration projects do not result in the discovery of commercially mineable ore deposits, and no assurance
can be given that any anticipated level of recovery of ore reserves, if any, will be realized or that any identified
mineral deposit will ever qualify as a commercially mineable (or viable) ore body which can be legally and
economically exploited. Estimates of mineral reserves, mineral resources, mineral deposits and production costs can
also be affected by such factors as environmental permitting regulations and requirements, weather, environmental
factors, unforeseen technical difficulties, the metallurgy of the mineralization forming the mineral deposit, unusual
or unexpected geological formations and work interruptions. If current exploration programs do not result in the
discovery of commercial ore, we may need to write-off part or all of our investment in our existing exploration stage
properties, and may need to acquire additional properties.
Material changes in mineral reserves, if any, grades, stripping ratios or recovery rates may affect the economic
viability of any project. Our future growth and productivity will depend, in part, on our ability to develop
commercially mineable mineral rights at our existing properties or identify and acquire other commercially mineable
mineral rights, and on the costs and results of continued exploration and potential development programs. Mineral
exploration is highly speculative in nature and is frequently non-productive. Substantial expenditures are required to:
•
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establish mineral reserves through drilling and metallurgical and other testing techniques;
determine metal content and metallurgical recovery processes to extract metal from the ore; and
construct, renovate or expand mining and processing facilities.
In addition, if we discover ore, it would take several years from the initial phases of exploration until production is
possible. During this time, the economic feasibility of production may change. As a result of these uncertainties,
there can be no assurance that we will successfully acquire commercially mineable (or viable) mineral rights.
We are subject to significant governmental regulations.
Our exploration activities are subject to extensive federal, state, provincial and local laws and regulations governing
various matters, including:
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environmental protection;
the management and use of toxic substances and explosives;
the management of natural resources;
the exploration and development of mineral properties, including reclamation;
exports;
price controls;
taxation and mining royalties;
• management of tailing and other waste generated by operations;
•
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labour standards and occupational health and safety, including mine safety; and
historic and cultural preservation.
Failure to comply with applicable laws and regulations may result in civil or criminal fines or penalties or
enforcement actions, including orders issued by regulatory or judicial authorities enjoining, curtailing or closing
operations or requiring corrective measures, installation of additional equipment or remedial actions, any of which
could result in significant expenditures. We may also be required to compensate private parties suffering loss or
21
damage by reason of a breach of such laws, regulations or permitting requirements. It is also possible that future
laws and regulations, or more stringent enforcement of current laws and regulations by governmental authorities,
could cause us to incur additional expense or capital expenditure restrictions, suspensions or closing of our activities
and delays in the exploration and development of our properties.
We require further permits in order to conduct current and anticipated future operations, and delays in
obtaining or failure to obtain such permits, or a failure to comply with the terms of any such permits that we
have obtained, would adversely affect our business.
Our current and anticipated future operations, including further exploration, development and commencement of
production on our mineral properties, require permits from various governmental authorities. Obtaining or renewing
governmental permits is a complex and time-consuming process. The duration and success of efforts to obtain and
renew permits are contingent upon many variables not within our control. Due to the preliminary stages of the
Upper Kobuk Mineral Projects, it is difficult to assess what specific permitting requirements will ultimately apply.
Shortage of qualified and experienced personnel in the U.S. federal and Alaskan State agencies to coordinate a
federally led joint environmental impact statement process could result in delays or inefficiencies. Backlog within
the permitting agencies could affect the permitting timeline or potential of the Upper Kobuk Mineral Projects, as
may negative public perception of mining projects in general due to circumstances unrelated to the Company and
outside of its control. Other factors that could affect the permitting timeline include (i) the number of other large-
scale projects currently in a more advanced stage of development which could slow down the review process for the
Upper Kobuk Mineral Projects and (ii) significant public response regarding the Upper Kobuk Mineral Projects.
We cannot provide assurance that all permits that we require for our operations, including any for construction of
mining facilities or conduct of mining, will be obtainable or renewable on reasonable terms, or at all. Delays or a
failure to obtain such required permits, or the expiry, revocation or failure to comply with the terms of any such
permits that we have obtained, would adversely affect our business.
Our activities are subject to environmental laws and regulations that may increase our costs and restrict our
operations.
All of our exploration, potential development and production activities are subject to regulation by governmental
agencies under various environmental laws. These laws address emissions into the air, discharges into water,
management of waste, management of hazardous substances, protection of natural resources, antiquities and
endangered species and reclamation of lands disturbed by mining operations. Environmental legislation is evolving
and the general trend has been towards stricter standards and enforcement, increased fines and penalties for
noncompliance, more stringent environmental assessments of proposed projects and increasing responsibility for
companies and their officers, directors and employees. Compliance with environmental laws and regulations may
require significant capital outlays on our behalf and may cause material changes or delays in our intended activities.
Several regulatory initiatives are currently ongoing within the State of Alaska that have the potential to influence the
permitting process for the Upper Kobuk Mineral Projects. These include a revision of the Alaska Mixing Zone
Regulations which may be required in order to permit a mixing zone for discharge in Subarctic Creek. Future
changes in these laws or regulations could have a significant adverse impact on some portion of our business,
requiring us to re-evaluate those activities at that time.
Environmental hazards may exist on our properties that are unknown to us at the present time and that have been
caused by previous owners or operators or that may have occurred naturally. We may be liable for remediating such
damage.
Failure to comply with applicable environmental laws, regulations and permitting requirements may result in
enforcement actions thereunder, including orders issued by regulatory or judicial authorities, causing operations to
cease or to be curtailed, and may include corrective measures requiring capital expenditures, installation of
additional equipment or remedial actions.
Land reclamation requirements for our exploration properties may be burdensome.
Land reclamation requirements are generally imposed on mineral exploration companies (as well as companies with
mining operations) in order to minimize long term effects of land disturbance. Reclamation may include
requirements to:
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treat ground and surface water to drinking water standards;
control dispersion of potentially deleterious effluents; and
reasonably re-establish pre-disturbance land forms and vegetation.
In order to carry out reclamation obligations imposed on us in connection with exploration, potential development
and production activities, we must allocate financial resources that might otherwise be spent on further exploration
and development programs. In addition, regulatory changes could increase our obligations to perform reclamation
and mine closing activities. If we are required to carry out unanticipated reclamation work, our financial position
could be adversely affected.
Title and other rights to our properties may be subject to challenge.
We cannot provide assurance that title to our properties will not be challenged. We own mineral claims which
constitute our property holdings. We may not have, or may not be able to obtain, all necessary surface rights to
develop a property. Title insurance is generally not available for mineral properties and our ability to ensure that we
have obtained a secure claim to individual mining properties may be severely constrained. Our mineral properties
may be subject to prior unregistered agreements, transfers or claims, and title may be affected by, among other
things, undetected defects. We have not conducted surveys of all of the claims in which we hold direct or indirect
interests. A successful claim contesting our title to a property will cause us to lose our rights to explore and, if
warranted, develop that property or undertake or continue production thereon. This could result in our not being
compensated for our prior expenditures relating to the property. In addition, our ability to continue to explore and
develop the property may be subject to agreements with other third parties including agreements with native
corporations and first nations groups, for instance, the lands at the UKMP Projects are subject to NANA Agreement
(as more particularly described under “History of NovaCopper – Agreement with NANA Regional Corporation”).
Risks inherent in acquisitions of new properties.
We may actively pursue the acquisition of exploration, development and production assets consistent with our
acquisition and growth strategy. From time to time, we may also acquire securities of or other interests in companies
with respect to which we may enter into acquisitions or other transactions. Acquisition transactions involve inherent
risks, including but not limited to:
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accurately assessing the value, strengths, weaknesses, contingent and other liabilities and potential
profitability of acquisition candidates;
ability to achieve identified and anticipated operating and financial synergies;
unanticipated costs;
diversion of management attention from existing business;
potential loss of our key employees or key employees of any business acquired;
unanticipated changes in business, industry or general economic conditions that affect the assumptions
underlying the acquisition;
decline in the value of acquired properties, companies or securities;
assimilating the operations of an acquired business or property in a timely and efficient manner;
• maintaining our financial and strategic focus while integrating the acquired business or property;
•
implementing uniform standards, controls, procedures and policies at the acquired business, as
appropriate; and
23
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to the extent that we make an acquisition outside of markets in which it has previously operated,
conducting and managing operations in a new operating environment.
Acquiring additional businesses or properties could place increased pressure on our cash flow if such acquisitions
involve a cash consideration. The integration of our existing operations with any acquired business will require
significant expenditures of time, attention and funds. Achievement of the benefits expected from consolidation
would require us to incur significant costs in connection with, among other things, implementing financial and
planning systems. We may not be able to integrate the operations of a recently acquired business or restructure our
previously existing business operations without encountering difficulties and delays. In addition, this integration
may require significant attention from our management team, which may detract attention from our day-to-day
operations. Over the short-term, difficulties associated with integration could have a material adverse effect on our
business, operating results, financial condition and the price of NovaCopper Shares. In addition, the acquisition of
mineral properties may subject us to unforeseen liabilities, including environmental liabilities, which could have a
material adverse effect on us. There can be no assurance that any future acquisitions will be successfully integrated
into our existing operations.
Any one or more of these factors or other risks could cause us not to realize the anticipated benefits of an acquisition
of properties or companies, and could have a material adverse effect on our financial condition.
High metal prices in past years have encouraged increased mining exploration, development and construction
activity, which has increased demand for, and cost of, exploration, development and construction services and
equipment.
The relative strength of metal prices in past years has encouraged increases in mining exploration, development and
construction activities around the world, which has resulted in increased demand for, and cost of, exploration,
development and construction services and equipment. While recent market conditions have had a moderating effect
on the costs of such services and equipment, increases in such costs may continue with the resumption of an upward
trend in metal prices. Increased demand for and cost of services and equipment could result in delays if services or
equipment cannot be obtained in a timely manner due to inadequate availability, and may cause scheduling
difficulties due to the need to coordinate the availability of services or equipment, any of which could materially
increase project exploration, development and/or construction costs.
We face industry competition in the acquisition of exploration properties and the recruitment and retention
of qualified personnel.
We compete with other exploration and producing companies, many of which are better capitalized, have greater
financial resources, operational experience and technical capabilities or are further advanced in their development or
are significantly larger and have access to greater mineral reserves, for the acquisition of mineral claims, leases and
other mineral interests as well as for the recruitment and retention of qualified employees and other personnel. If we
require and are unsuccessful in acquiring additional mineral properties or in recruiting and retaining qualified
personnel, we will not be able to grow at the rate we desire, or at all.
We may experience difficulty attracting and retaining qualified management and technical personnel to grow
our business.
We are dependent on the services of key executives and other highly skilled and experienced personnel to advance
our corporate objectives as well as the identification of new opportunities for growth and funding. Mr. Van
Nieuwenhuyse and Ms. Sanders are currently our only executive officers. It will be necessary for us to recruit
additional skilled and experienced executives. Our inability to do so, or the loss of any of these persons or our
inability to attract and retain suitable replacements for them, or additional highly skilled employees required for our
activities, would have a material adverse effect on our business and financial condition.
Some of our directors and officers have conflicts of interest as a result of their involvement with other natural
resource companies.
Certain of our directors and officers also serve as directors or officers, or have significant shareholdings, in other
companies involved in natural resource exploration and development or mining-related activities, including, in
particular, NovaGold. To the extent that such other companies may participate in ventures in which we may
participate in, or in ventures which we may seek to participate in, our directors and officers may have a conflict of
24
interest in negotiating and concluding terms respecting the extent of such participation. In all cases where our
directors and officers have an interest in other companies, such other companies may also compete with us for the
acquisition of mineral property investments. Such conflicts of our directors and officers may result in a material and
adverse effect on our profitability, results of operation and financial condition. As a result of these conflicts of
interest, we may miss the opportunity to participate in certain transactions, which may have a material adverse effect
on our financial position.
In the future we may be subject to legal proceedings.
Due to the nature of our business, we may be subject to numerous regulatory investigations, claims, lawsuits and
other proceedings in the ordinary course of our business. The results of these legal proceedings cannot be predicted
with certainty due to the uncertainty inherent in litigation, including the effects of discovery of new evidence or
advancement of new legal theories, the difficulty of predicting decisions of judges and juries and the possibility that
decisions may be reversed on appeal. There can be no assurances that these matters will not have a material adverse
effect on our business.
Our largest shareholder has significant influence on us and may also affect the market price and liquidity of
the Securities.
Electrum is our single largest shareholder, controlling approximately 27.8% of the outstanding voting securities.
Accordingly, Electrum will have significant influence in determining the outcome of any corporate transaction or
other matter submitted to the shareholders for approval, including mergers, consolidations and the sale of all or
substantially all of our assets and other significant corporate actions. Unless significant participation of other
shareholders takes place in such shareholder meetings, Electrum may be able to approve such matters itself. The
concentration of ownership of the shares by Electrum may: (i) delay or deter a change of control of the Company;
(ii) deprive shareholders of an opportunity to receive a premium for their shares as part of a sale of the Company;
and (iii) affect the market price and liquidity of the shares. Without the consent of Electrum, we could be prevented
from entering into transactions that are otherwise beneficial to us. The interests of Electrum may differ from or be
adverse to the interests of our other shareholders. The effect of these rights and Electrum’s influence may impact the
price that investors are willing to pay for securities. If Electrum sells a substantial number of shares in the public
market, the market price of the shares could fall. The perception among the public that these sales will occur could
also contribute to a decline in the market price of the shares.
Global climate change is an international concern, and could impact our ability to conduct future operations.
Global climate change is an international issue and receives an enormous amount of publicity. We would expect that
the imposition of international treaties or U.S. or Canadian federal, state, provincial or local laws or regulations
pertaining to mandatory reductions in energy consumption or emissions of greenhouse gasses could affect the
feasibility of our mining projects and increase our operating costs.
Adverse publicity from non-governmental organizations could have a material adverse effect on us.
There is an increasing level of public concern relating to the effect of mining production on our surroundings,
communities and environment. Non-governmental organizations (“NGOs”), some of which oppose resource
development, are often vocal critics of the mining industry. While we seek to operate in a socially responsible
manner, adverse publicity generated by such NGOs related to extractive industries, or our operations specifically,
could have an adverse effect on our reputation and financial condition or our relationship with the communities in
which we operate.
We may fail to achieve and maintain the adequacy of our internal control over financial reporting as per the
requirements of the Sarbanes-Oxley Act.
We are required to document and test our internal control procedures in order to satisfy the requirements of Section
404 of SOX. It requires an annual assessment by management of the effectiveness of our internal control over
financial reporting. We may in the future fail to achieve and maintain the adequacy of our internal control over
financial reporting, as such standards are modified, supplemented or amended from time to time, and we may not be
able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial
reporting in accordance with Section 404 of SOX. Our failure to satisfy the requirements of Section 404 of SOX on
25
an ongoing, timely basis could result in the loss of investor confidence in the reliability of our financial statements,
which in turn could harm our business and negatively impact the trading price of our Common Shares. In addition,
any failure to implement required new or improved controls, or difficulties encountered in their implementation,
could harm our operating results or cause us to fail to meet our reporting obligations. Future acquisitions of
companies may provide us with challenges in implementing the required processes, procedures and controls in our
acquired operations. Acquired companies may not have disclosure control and procedures or internal control over
financial reporting that are as thorough or effective as those required by securities laws currently applicable to us.
Our business is subject to evolving corporate governance and public disclosure regulations that have
increased both our compliance costs and the risk of noncompliance, which could have an adverse effect on
our stock price.
We are subject to changing rules and regulations promulgated by a number of United States and Canadian
governmental and self-regulated organizations, including the SEC, the Canadian Securities Administrators, the
NYSE-MKT, the TSX, and the Financial Accounting Standards Board. These rules and regulations continue to
evolve in scope and complexity and many new requirements have been created in response to laws enacted by the
United States Congress, making compliance more difficult and uncertain. Our efforts to comply with new rules and
regulations, including those promulgated under Dodd-Frank, have resulted in, and are likely to continue to result in,
increased general and administrative expenses and a diversion of management time and attention from revenue-
generating activities to compliance activities.
Our Common Shares are subject to various factors that have historically made share prices volatile.
The market price of our common shares may be subject to large fluctuations, which may result in losses to investors.
The market price of the Common Shares may increase or decrease in response to a number of events and factors,
including: our operating performance and the performance of competitors and other similar companies; volatility in
metal prices; the arrival or departure of key personnel; the number of Common Shares to be publicly traded after an
offering; the public’s reaction to our press releases, material change reports, other public announcements and our
filings with the various securities regulatory authorities; changes in earnings estimates or recommendations by
research analysts who track the Common Shares or the shares of other companies in the resource sector; changes in
general economic and/or political conditions; acquisitions, strategic alliances or joint ventures involving us or our
competitors; and the factors listed under the heading “Cautionary Statement Regarding Forward-Looking
Information”.
The market price of the Common Shares may be affected by many other variables which are not directly related to
our success and are, therefore, not within our control, including other developments that affect the market for all
resource sector securities, the breadth of the public market for the Common Shares and the attractiveness of
alternative investments.
We do not intend to pay any cash dividends in the foreseeable future.
We have not declared or paid any dividends on our Common Shares. Our current business plan requires that for the
foreseeable future, any future earnings be reinvested to finance the growth and development of our business. We do
not intend to pay cash dividends on the Common Shares in the foreseeable future. We will not declare or pay any
dividends until such time as our cash flow exceeds our capital requirements and will depend upon, among other
things, conditions then existing including earnings, financial condition, restrictions in financing arrangements,
business opportunities and conditions and other factors, or our Board determines that our shareholders could make
better use of the cash.
We may be a “passive foreign investment company” in future periods, which may have adverse U.S. federal
income tax consequences for U.S. shareholders.
U.S. investors in the Company should be aware that we believe we were not a passive foreign investment company
(“PFIC”) for the years ending November 30, 2012, 2013 and 2014 but may be a PFIC in future tax years. If we are a
PFIC for any year during a U.S. shareholder’s holding period, then such U.S. shareholder generally will be required
to treat any gain realized upon a disposition of Common Shares and any so-called “excess distribution” received on
its Common Shares as ordinary income, and to pay an interest charge on a portion of such gain or distributions,
unless the shareholder makes a timely and effective “qualified electing fund” election (“QEF Election”) or a “mark-
to-market” election. A U.S. shareholder who makes a QEF Election generally must report on a current basis its
26
share of our net capital gain and ordinary earnings for any year in which we are a PFIC, whether or not we distribute
any amounts to our shareholders. A U.S. shareholder who makes the mark-to-market election generally must
include as ordinary income each year the excess of the fair market value of the Common Shares over the taxpayer’s
basis therein. This paragraph is qualified in its entirety by the discussion below the heading “Certain U.S. Federal
Income Tax Considerations.” Each U.S. shareholder should consult its own tax advisor regarding the PFIC rules and
the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
The following descriptions summarize selected information about our Upper Kobuk Mineral Projects, which are
located in the Ambler mining district of Alaska and include the Arctic Project and the Bornite Project. All of the
UKMP Projects are without known reserves, as defined under SEC Industry Guide 7, and all proposed programs for
the properties are exploratory in nature.
Arctic Project, Ambler Mining District, Alaska
Arctic Project – Technical Report
Except with respect to the land size disclosure and the disclosure regarding the number of claims (which were both
increased subsequent to the effective date of the PEA), and the information under the heading “Arctic Project –
Current Activities”, or as otherwise stated, the scientific and technical information relating to the Arctic Project
contained in this Form 10-K is derived from, and in some instances is an extract from, the technical report titled
“Preliminary Economic Assessment Report on the Arctic Project, Ambler Mining District Northwest Alaska” dated
effective September 12, 2013 prepared by Tetra Tech and EBA, a Tetra Tech Company (and together with Tetra
Tech, “Tetra Tech”). Except with respect to the land size disclosure and the disclosure regarding the number of
claims (which were both increased subsequent to the effective date of the PEA), and the information under the
heading “Arctic Project – Current Activities” and except as otherwise stated, Erin Workman, P.Geo., an employee to
the Company and a Qualified Person as defined in 43-101, has approved the scientific and technical information
contained herein. Scott Petsel, P.Geo., an employee to the Company and a Qualified Person as defined in NI 43-101,
approved the scientific and technical information under the heading “Arctic Project – Current Activities,” and the
land size disclosure and the disclosure regarding the number of claims for the Ambler lands. The information
regarding the Arctic Project is based on assumptions, qualifications and procedures which are not fully described
herein. Reference should be made to the full text of the PEA which has been filed with certain Canadian securities
regulatory authorities pursuant to NI 43-101 and is available for review on SEDAR at www.sedar.com and on
EDGAR at www.sec.gov.
Arctic Project - Property Description and Location
The Arctic Project is located in the Ambler mining district of the southern Brooks Range, in the Northwest Arctic
Borough (“NWAB”) of Alaska. The Arctic Project is located 260 km east of the town of Kotzebue, 30 km north of
the village of Kobuk, 260 km west of the Dalton Highway, an all-weather state maintained public road, at
geographic coordinates N67.17° latitude and W156.38° longitude (Universal Transverse Mercator (UTM) North
American Datum (NAD) 83, Zone 4 coordinates 7453080N, 613110E). The current size of the Ambler lands is
approximately 65 km long x 8 km wide and comprises a total of 45,348 ha.
The Ambler lands comprise 45,348 ha of State of Alaska mining claims and US Federal patented mining claims in
the Kotzebue Recording District. The Ambler land tenure consists of 1,358 contiguous claims, including 875 40-
acre State claims, 481 160-acre State claims, and two Federal patented claims comprising 110 ha held in the name of
NovaCopper US Inc. The Arctic Project is located near the southern edge of the centre of the claim block. The
Federal patented claim corners were located by the US Geological Survey. There is no expiration date or labor
requirement on the Federal patented claims. Rent for each State claim is paid annually to the Alaska Department of
Natural Resources (“ADNR”). An Annual Labor Statement must be submitted annually to maintain the State claims
in good standing.
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In 1971, the US Congress passed the Alaska Native Claims Settlement Act which settled land and financial claims
made by the Alaska Natives and provided for the establishment of 13 regional corporations to administer those
claims. These are known as the Alaska Native Regional Corporations. One of these 13 regional corporations is
NANA. ANCSA Lands controlled by NANA bound the southern border of the Property claim block. National Park
lands are within 25 km of the northern property border.
Figure 1: Regional Location Map
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Figure 2: Upper Kobuk Mineral Projects Lands Prospect Location Map
There are no known environmental liabilities due to previous operators or from our ongoing exploration activities at
the Arctic Project. There has been no mine development or production on the Ambler lands.
Multiple permits are required during the exploration phase of the Arctic Project. Permits are issued from Federal,
State, and Regional agencies, including: the Environmental Protection Agency (“EPA”), the US Army Corps of
Engineers (“USACE”), the Alaska Department of Environmental Conservation (“ADEC”), the Alaska Department
of Fish and Game (“ADF&G”), the ADNR, and the NWAB. The State of Alaska permit for exploration on the
Arctic Project, the Annual Hardrock Exploration Activity (“AHEA”) Permit, is obtained and renewed every five
years through the ADNR – Division of Mining, Land and Water. NovaCopper holds an AHEA exploration permit
in good standing with the Alaska DNR. The Arctic Project is within the NWAB thus requiring a Title 9
Miscellaneous Land Use permit for mineral exploration, fuel storage, gravel extraction, and the operation of a
landfill. NovaGold held these permits in good standing during the 2004 to 2008 seasons and renewed the permits
for the 2010 exploration season to 2015. The Bornite Camp, Bornite Landfill, Dahl Creek Camp, and the to-be-
constructed Arctic Camp are permitted by the ADEC.
A number of statutory reports and payments are required to maintain the claims in good standing on an annual basis.
As the Arctic Project progresses, additional permits for environmental baseline and detailed engineering studies will
be necessary at federal, state, and local levels.
Arctic Project - Accessibility, Climate, Local Resources, Infrastructure and Physiography
Accessibility is one of the most significant challenges of developing the Arctic Project. There is no developed
surface access to the Ambler mining district.
Primary access to the Arctic Project is by air, using both fixed wing aircraft and helicopters. There are four well
maintained, approximately 1,500 m-long gravel airstrips located near the Arctic Project, capable of accommodating
charter fixed wing aircraft. These airstrips are located 66 km west at Ambler, 46 km southwest at Shungnak, 36 km
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southwest at Kobuk, and 32 km southwest at Dahl Creek. There is daily commercial air service from Kotzebue to
the village of Kobuk, the closest community to the Arctic Project. During the summer months, the Dahl Creek Camp
airstrip is suitable for larger aircraft, such as C-130 and DC-6. In addition to the four 1,500 m airstrips, there is a
700 m airstrip located at the Bornite Camp, approximately 25 km southwest of the Arctic Deposit, and a 400 m
airstrip located approximately 10 km southwest of the Arctic Deposit. The airstrip at Bornite is suited to smaller
aircraft, which support the camp with personnel and supplies. A winter trail and a one-lane dirt road suitable for all-
terrain vehicles or construction equipment links the Arctic Project’s main camp at Bornite to the 400 m Dahl Creek
airstrip and camp southwest of the Arctic Deposit.
The climate in the region is typical of a sub-arctic environment. Exploration is generally conducted from late May
until late September. Weather conditions on the Ambler lands can vary significantly from year to year and can
change suddenly. During the summer exploration season, average maximum temperatures range from 10°C to 20°C,
while average lows range from -2°C to 7°C. By early October, unpredictable weather limits regular helicopter travel
to the Arctic Project. During winter months, the Arctic Project can be accessed by snow machine, track vehicle, or
fixed wing aircraft. Winter temperatures are routinely below -25°C and can exceed -50°C. Annual precipitation in
the region averages at 395 mm with the most rainfall occurring from June through September, and the most snowfall
occurring from November through January.
The Arctic Project is located along the south slope of the Brooks Range, which separates the Arctic region from the
interior of Alaska. Nearby surface water includes Subarctic Creek, the Shungnak and Kogoluktuk Rivers, the Kobuk
River, and numerous small lakes. The Arctic Project is located at the eastern end of Subarctic Creek, a tributary of
the Shungnak River to the west, along a ridge between Subarctic Creek and the Kogoluktuk River Valley. The
property area is marked by steep and rugged terrain with high topographic relief. Elevations range from 30 masl
along the Kobuk River to 1,180 masl on a peak immediately north of the Arctic Project area. The divide between the
Shungnak and Kogoluktuk Rivers in the Ambler Lowlands is approximately 220 masl. The Kobuk Valley is located
at the transition between boreal forest and Arctic tundra. Spruce, birch, and poplar are found in portions of the
valley, with a ground cover of lichens (reindeer moss). Willow and alder thickets and isolated cottonwoods follow
drainages, and alpine tundra is found at higher elevations. Tussock tundra and low, heath-type vegetation covers
most of the valley floor. Intermittent permafrost exists on the Arctic Project.
Wildlife in the area includes caribou, moose, Dall sheep, bears (grizzly and black), wolves, wolverines, coyotes, and
foxes. Fish species include salmon, sheefish, arctic char, and arctic grayling. The Kobuk River, which briefly enters
the UKMP lands on its southwest corner, is a significant salmon spawning river. Subarctic Creek, which does not
contain anadromous fish, drains into the Shungnak River, which drains into the Kobuk River. The caribou on the
property belong to the Western Arctic herd that migrates twice a year – south in August, from their summer range
north of the Brooks Range, and north in March from their winter range along the Buckland River.
Currently, the Arctic Project does not have access to Alaska power and transportation infrastructure. Beginning in
2009, the Arctic Project has been the focus of the Ambler Mining District Access Corridor study The proposed
Ambler Access Route is a 322 km road running east from the Property to the Dalton Highway.
The proposed Arctic Project mine site infrastructure is spread over a distance of approximately 6 km within the
upper reaches of the Sub-Arctic Creek Valley. The proposed development for the Arctic Project consists of the
following major infrastructure: roads and an airstrip, mill buildings and related services facilities including
maintenance and truck shops, and assay lab, water supply and distribution, waste management, fuel storage, on site
explosive storage, power supply, tailings storage facility (“TSF”) and water management, water treatment plant,
construction and permanent camp accommodation, waste rock storage facilities, and communication infrastructure.
The proposed mine-site infrastructure has been located to take advantage of local topography, minimize pumping
requirements from the mill building to the TSF, minimize environmental impacts to Sub-Arctic Creek, minimize
snow avalanche mitigation requirements, and to reduce the haul distance from the pit to the primary crusher and
TSF.
The Arctic Deposit proposed access road branches off from the proposed AMDIAR and ends at the Arctic Deposit.
Figure 3 shows the overall road location plan showing the relationship of the proposed access road to the proposed
Brooks East corridor which eventually connects to the existing Dalton Highway 320 km from the access road
intersection. The proposed access road is 17 km long from the AMDIAR corridor to the Arctic Project site.
30
Figure 3: Proposed Access to the Arctic Project Site
AMDIAR
Proposed On Site Road
Proposed Bridge
Proposed Culvert
Kilometres
0
1
2
3
4
N
15 km
17 km
Proposed Arctic Pit Shell
e r
k R i v
a
n
g
n
u
h
S
10 km
Proposed Arctic Airstrip
5 km
0 km
K o g olu ktu k Riv er
AMDIAR
NOTES
CLIENT
The proposed location for an airstrip sufficient to support project activities is located in the valley approximately
21 km from the Arctic Project site. Geotechnical data is not available for the site but it is assumed that the facility
will require permafrost protection to ensure year round operations. The proposed airstrip will operate as a private
aerodrome and prior permission will be required for all aircraft utilizing the site. The gravel airstrip will be
approximately 1,524 meters long and capable of landing a Dash 8 – Q400/Hercules C130.
The Arctic Project will require power of 15 MW of peak load for 10,000 t/d operation demand. It is proposed that
power will be generated by five self-contained 3.6 MW prime diesel generators. Four units will be in service with
the fifth unit reserved for maintenance. Heat will be recovered from the generators and used to heat the mill, camp
and related facilities.
Arctic Project - History
During the 1940’s and 1950’s Bear Creek Mining Corporation (“BCMC”), an exploration subsidiary of Kennecott,
conducted regional reconnaissance exploration in the Cosmos Hills and the southern Brooks Range. Stream silt
sampling in 1963 by BCMC revealed a significant copper anomaly in Arctic Creek roughly 17 km northeast of the
previously identified Bornite deposit. The area was subsequently staked and, in 1967, eight core holes were drilled
at the Arctic Deposit yielding impressive massive sulphide intercepts over an almost 500-m strike length. BCMC
conducted intensive exploration on the property until 1977 and then intermittently through 1998. No drilling or
additional exploration was conducted on the Arctic Project between 1998 and 2004.
Arctic Project - Historical Metallurgical Testwork
Metallurgical studies during the Kennecott era included: two initial mineralogical studies undertaken by the
Kennecott Research Center (“KRC”) to evaluate and identify the potential beneficiation or metallurgical treatment
of concentrates of the samples from the deposit and a subsequent 1999 Lakefield Research Ltd. (Lakefield)
metallurgical test program to confirm and improve upon the results from the 1970s KRC test work program. In
2012, NovaCopper contracted SGS to conduct an extensive metallurgical program in support of the Artic PEA, the
results of which are described and summarized below under the heading “Arctic Project – Metallurgical Testing”.
31
Arctic Project - Historical Geophysics
Prior to 1998, Kennecott conducted a series of geophysical surveys which are poorly documented or are unavailable
to NovaCopper. In March 1998, Kennecott initiated an extensive helicopter-supported airborne electromagnetic
(“EM”) and magnetic survey covering the entire VMS belt, including the Arctic Deposit. Kennecott identified eight
EM anomalies which were deemed to have significant potential for mineralization and followed-up with additional
gravity lines and/or Controlled Source Audio-frequency Magneto-Telluric (“CSAMT”) lines during 1998.
Kennecott conducted no further geophysical field exploration in the district after 1998.
Arctic Project - Historical Drilling
Between 1967 and July 1985, Kennecott (BCMC) completed 86 holes (including 14 large diameter metallurgical
test holes) totalling 16,080 m. In 1998, Kennecott drilled an additional 6 core holes totalling 1,492 m to test for: 1)
extensions of the known Arctic resource; 2) grade and thickness continuity at Arctic; and 3) a nearby airborne
geophysical anomaly. Drilling for all BCMC/Kennecott campaigns in the Arctic Deposit area (1966 to 1998) totals
92 core holes for a combined 17,572 m.
No drilling was performed on the project between 1999 and 2003. NovaGold took control of the project in 2004.
Arctic Project - Historical Geochemistry
Historic geochemistry for the district, compiled in the 1998 Kennecott database, includes 2,255 soil samples, 922
stream silt samples, 363 rock samples, and 37 panned concentrate samples. Data has been sourced from several
companies including Kennecott, Sunshine Mining, Resource Associates of Alaska, and NANA. Sourcing of much of
the data had been poorly documented in the database. During 1998, Kennecott renewed its effort in the district, and,
as a follow-up to the 1998 EM survey, undertook directed soil and rock chip sampling in and around EM anomalies
generated in the geophysical targeting effort. During this period Kennecott collected 962 soils and 107 rocks and for
the first time used extensive multi-element inductively coupled plasma (“ICP”) analysis.
Arctic Project - Geologic Setting
Regional Geology
The Ambler mining district occurs along the southern margin of Brooks Range within an east-west trending zone of
Devonian to Jurassic age submarine volcanic and sedimentary rocks. The district covers both: 1) VMS-like deposits
and prospects hosted in the Devonian age Ambler Sequence (or Ambler Schist belt), a group of metamorphosed
bimodal volcanic rocks with interbedded tuffaceous, graphitic and calcareous volcaniclastic metasediments; and
2) epigenetic carbonate-hosted copper deposits occurring in Devonian age carbonate and phyllitic rocks of the
Bornite Carbonate Sequence. The Ambler Sequence occurs in the upper part of the Anirak Schist, the thickest
member of the Schist belt or Coldfoot subterrane. VMS-like stratabound mineralization can be found along the
entire 110 km strike length of the district. Immediately south of the Schist belt in the Cosmos Hills, a time
equivalent section of the Anirak Schist includes the approximately 1 km thick Bornite Carbonate Sequence.
Mineralization of both the VMS-like deposits of the Schist belt and the carbonate-hosted deposits of the Cosmos
Hills has been dated at 375 to 387 Ma.
In addition, the Ambler mining district is characterized by increasing metamorphic grade north perpendicular to the
strike of the east-west trending units. The district shows isoclinal folding in the northern portion and thrust faulting
to south (Schmidt 1983). The Devonian to Mississippian age Angayucham basalt and the Triassic to Jurassic age
mafic volcanic rocks are in low-angle over thrust contact with various units of the Ambler Schist belt and Bornite
Carbonate Sequence along the northern edge of the Ambler Lowlands.
Local/Property Geology
Rocks that form the Ambler Sequence consist of a lithologically diverse sequence of lower Paleozoic Devonian age
carbonate and siliciclastic strata with interlayered mafic lava flows and sills and felsic tuffs. The clastic strata,
derived from terrigenous continental and volcanic sources, were deposited primarily by mass-gravity flow into the
sub-wavebase environment of an extending marginal basin.
32
Though the Ambler Sequence is exposed over 110 km of strike length, descriptions and comments herein will refer
to an area between the Kogoluktuk River on the east and the Shungnak River on the west where we have focused the
majority of our exploration efforts over the last decade.
The local base of the Ambler Sequence consists of variably metamorphosed carbonates historically referred to as the
Gnurgle Gneiss. We interpret these strata as calc-turbidites, perhaps deposited in a sub-wavebase environment
adjacent to a carbonate bank. Calcareous schists overlie the Gnurgle Gneiss and host sporadically distributed mafic
sills and pillowed lavas. These fine-grained clastic strata indicate a progressively quieter depositional environment
up section, and the presence of pillowed lavas indicates a rifting, basinal environment.
Overlying these basal carbonates and pillowed basalts is a section of predominantly fine-grained carbonaceous
siliciclastic rocks which host a significant portion of the mineralization in the district including the Arctic Deposit.
This quiescent section indicates further isolation from a terrigenous source terrain.
The section above the Arctic Deposit host stratigraphy contains voluminous reworked silicic volcanic strata with the
Button Schist at its base. The Button Schist is a regionally continuous and distinctive albite porphyroblastic unit that
serves as an excellent marker above the main mineralized stratigraphy. The paucity of volcanically derived strata
below the Arctic Deposit host section and abundance above indicates that the basin and surrounding hinterlands
underwent major tectonic reorganization during deposition of the Arctic Deposit section. Greywacke sands that we
interpret as channeled high-energy turbidites occur throughout the section but concentrate high in the local
stratigraphy.
Several rock units show substantial change in thickness and distribution in the vicinity of the Arctic Deposit that
may have resulted from the basin architecture existing at the time of deposition. Between the Arctic Ridge,
geographically above the Arctic Deposit, and the Riley Ridge to the west, several significant differences have been
documented including: 1) the Gnurgle Gneiss, which is thickest in exposures along the northern extension of Arctic
Ridge and appears to thin to the west; 2) mafic lavas and sills which thicken from east to west; they show thick
occurrences in upper Subarctic Creek and to the west, but are sparsely distributed to the east; 3) the quartzite section,
which within and above the Arctic sulphide horizon does not occur in abundance east of Arctic Ridge; it is thicker
and occurs voluminously to the west; 4) the Button Schist which thickens dramatically to the west from exposures
on Arctic Ridge; exposures to the east are virtually nonexistent; and 5) Greywacke sands which do not exist east of
Subarctic Creek but occur in abundance as massive, channeled accumulations to the west, centered on Riley Ridge.
These data are interpreted by us to define a generally north-northwest-trending depocentre through the central
Ambler mining district. Diamictite occurrences described below in concert with these formational changes suggest
that the depocentre had a fault-controlled eastern margin with the basin deepening to the west. This original basin
architecture appears to have controlled mineralization of the sulphide systems at Ambler and Shungnak (Dead
Creek), concentrating fluid flow along structures on the eastern basin margin.
In addition to the underlying pre-deformational structural framework of the district suggested by the stratigraphic
thickening of various facies around the Arctic Deposit, the Ambler Sequence is deformed by two penetrative
deformational events that significantly complicate the distribution and spatial arrangement of the local stratigraphy;
as described below.
F1 Deformation: the earliest penetrative deformation event is associated with greenschist metamorphism and the
development of regional schistosity. True isoclinal folds are developed and fold noses typically are thickened. The
most notable F1 fold is the Arctic antiform that defines the upper and lower limbs of the Arctic Deposit. The fold
closes along a north-northeast- trending fold axis roughly mimicking the trace of Subarctic Creek and opening to the
east. Importantly, the overturned lower limb implies that the permissive stratigraphy should be repeated on a lower
synformal isocline beneath the currently explored limbs and would connect with the permissive mineralized
stratigraphy to the northwest at Shungnak (Dead Creek).
F2 Deformation: the earlier F1 schistosity is in turn deformed by the F2 deformational event that resulted in the local
development of an axial planar cleavage. The deformational event is well defined throughout the Schist belt and
results in a series of south verging open to moderately overturned folds that define a series of east-west trending
folds of similar vergence across the entire Schist belt stratigraphies. This event is likely temporarily related to the
emplacement of the Devonian Angayucham volcanics, the obducted Jurassic ophiolites and Cretaceous sediments
over the Schist belt stratigraphies. In addition to the earlier penetrative deformation events, a series of poorly defined
non-penetrative deformation events, likely as a consequence of Cretaceous extension, are seen as a series of warps
33
or arches across the district. The interplay between the complex local stratigraphy, the isoclinal F1 event, the
overturned south verging F2 event and the series of post-penetrative deformational events makes district geological
interpretation often extremely difficult at a local scale.
Recent work by us defines the Arctic Deposit as two or more discrete horizons of sulphide mineralization contained
in a complexly deformed isoclinal fold with an upright upper limb and an overturned lower limb hosting the main
mineral resources. Nearby drilling suggests a third limb, an upright lower limb, likely occurs beneath the currently
explored stratigraphy.
Mineralization occurs as stratiform semi-massive sulphide (“SMS”) to massive sulphide (“MS”) beds within
primarily graphitic chlorite schists and fine-grained quartz sandstones. The sulphide beds average four meters in
thickness but vary from less than one meter up to as much as eighteen meters in thickness. The bulk of the
mineralization is within six modelled zones lying along the upper and lower limbs of the Arctic isoclinal anticline.
All of the zones are within an area of roughly 1 km2 with mineralization extending to a depth of approximately
250 m below the surface. Mineralization characteristically varies from MS to SMS. Unlike more typical VMS
deposits, mineralization is not characterized by steep metal zonation or massive pyritic zones. Mineralization is
dominantly sheet-like zones of base metal sulphides with variable pyrite and only minor zonation usually on an
extremely small scale. No stockworks or stringer zones in association with the mineralization have been observed.
More importantly, the mineralization in general exhibits characteristics and textures common to replacement-style
mineralization. Mineralization is predominately coarse-grained sulphides consisting mainly of chalcopyrite,
sphalerite, galena, tetrahedrite, arsenopyrite, pyrite and pyrrhotite. Trace amounts of electrum and enargite are also
present. Gangue minerals associated with the mineralized horizons include quartz, barite, white mica, black chlorite,
talc, calcite, dolomite and cymrite.
Talc and magnesium chlorite are the dominant alteration products associated with the sulphide-bearing horizons.
Talc alteration grades downward and outward to mixed talc-magnesium chlorite with minor phlogopite, into zones
of dominantly magnesium chlorite, then into mixed magnesium chlorite-phengite with outer phengite-albite zones of
alteration. Thickness of alteration zones vary with stratigraphic interpretation, but tens of meters for the outer zones
is likely, as seen in phengite-albite exposures on the east side of Arctic Ridge. Stratigraphically above the sulphide-
bearing horizons significant muscovite as paragonite
in
sodium/magnesium ratios across the sulphide bearing horizons. Of particular note are the barium (“Ba”) species
including barite, cymrite (a high-pressure Ba phyllosilicate), and Ba-bearing muscovite, phlogopite and biotite.
These species associated with both alteration and mineralization has also been strongly remobilized during
metamorphism (Schmandt 2009).
is developed and results
in a marked shift
Historic interpretation of the genesis of the Ambler Schist belt deposits have called for a syngenetic VMS origin
with steep thermal gradients in and around seafloor hydrothermal vents resulting in metal deposition due to the rapid
cooling of chloride bound base metals. A variety of VMS types have been well documented in the literature
(Franklin et al. 2005) with the Ambler Schist belt deposits most similar to deposits associated with a bimodal mafic
dominant volcanism related to incipient rifting. The majority of field observations broadly support such a scenario at
the Arctic Deposit and include: 1) the tectonic setting with Devonian volcanism in an evolving continental rift; 2)
the geologic setting with bimodal volcanics including pillow basalts and limited felsic volcanic tuffs; 3) an alteration
assemblage with well-defined magnesium-rich footwall alteration and sodium-rich hanging wall alteration; and
4) typical polymetallic base-metal mineralization with massive and semi-massive sulphides. Although the majority
of field observations support a VMS genesis to the deposits of the Schist belt, a series of other observations and
characteristics suggest a more direct genetic link with that of the carbonate-hosted Bornite Deposit in the Devonian
Bornite Carbonate Sequence. Both deposit types have been dated at 375 to 387 Ma suggesting a clear temporal link.
The principal lithologic units captured in logging and mapping by us, in broad chronological order from oldest to
youngest are as follows: greenstone, chlorite schist, talc schist, grey to black schists, metarhyolites, most notably the
so-called button schist which serves as an important stratigraphic marker, quartz muscovite schists, diamictites and
greywackes
Arctic Project - Exploration
NovaGold began exploration of the Arctic Deposit and surrounding lands of the Schist belt in 2004 after optioning
the property from Kennecott. Previous exploration on the Arctic Project during Kennecott’s tenure is summarized in
“Arctic Project – History”. Field exploration was largely conducted during the period between 2004 to 2007 with
34
associated engineering and characterization studies between 2008 and the present. Table 2 summarizes the
exploration work conducted by NovaGold and us during our tenure from 2004 to the present.
Table 2: Summary of NovaCopper/NovaGold Exploration Activities Targeting VMS-style Mineralization in
the Ambler Sequence Stratigraphy and the Arctic Deposit
Work Completed
Year
Details
Focus
Geological Mapping
-
-
-
Geophysical Surveys
SWIR Spectrometry
TDEM
Downhole EM
Geochemistry
-
-
-
-
Survey
Collar
Photography/Topography
Technical Studies
Geotechnical
ML/ARD
Metallurgy
Geotechnical
Hydrology
Project Evaluation
Resource Estimation
PEA
and
2004
2005
2006
2004
2005
2006
2007
2007
2005
2006
2007
-
-
-
Arctic Deposit surface geology
Ambler Sequence west of the Arctic Deposit
COU, Dead Creek, Sunshine, Red
2004 drill holes Alteration characterization
2 loops
13 loops
6 loops
4 drill holes
Follow-up of Kennecott DIGHEM EM survey
District targets
Arctic extensions
Arctic Deposit
-
-
-
-
Stream silts – core area prospects
Soils – core area prospects
Stream silts – core area prospects
Soils – Arctic Deposit area
2004 to 2011
2004, 2008
2010
GPS
Resurveys
-
All 2004 to 2011 NovaCopper drill holes
Historical Kennecott drill holes
Photography/topography
2010
2011
2012
2012
2008
2011
2012
BGC
SRK
SGS
BGC
SRK
SRK
SRK
Preliminary geotechnical and hazards
Preliminary ML and ARD
Preliminary mineralogy and metallurgy
Preliminary rock mechanics and hydrology
Resource estimation
PEA
PEA update
Note: SWIR = short wave infrared; ML = metal leaching; BGC = BGC Engineering Inc.; SRK = SRK Consulting
The results of the above exploration programs have been incorporated into the PEA results. For further details, refer
to the PEA.
Arctic Project - Mineralization
In 2013, we updated the mineralization models, representing massive and semi-massive VMS-style mineralization.
Geometrically, the mineralization is confined to six lenticular mineralized zones concentrated along an isoclinal fold
hinge. Five of the six SMS zones contain a core of MS material. For more details regarding length, width, depth and
continuity together with a description of the type, character and distribution of the mineralization see
“Local/Property Geology” above.
Arctic Project - Drilling
Drilling at the Arctic Deposit has been ongoing since its initial discovery in 1965. Approximately 31,907 m of
drilling in 135 drill holes have been completed at the deposit or on potential extensions in 23 campaigns spanning 45
years. All of the drill campaigns have been run under the auspices of either: 1) Kennecott and its subsidiaries, or 2)
NovaGold, our predecessor company.
35
We and our predecessor company NovaGold, have drilled 17,983 m in 59 different drill holes targeting the Arctic
Deposit and several other prospects of the Ambler Schist belt. Table 3 summarizes all of the NovaCopper/NovaGold
tenure drilling on the Property.
Table 3: Summary of NovaCopper/NovaGold Drilling
Year
Meters
No. of
Drill Holes
2004
2005
2006***
2007
2008*
2011**
2012***
2,996
3,030
3,100
2,606
3,306
1,193
1,752
11
9
12
4
14
5
4
Sequence
Purpose of Drilling
AR04-78 to 88
AR05-89 to 97
AR06-98 to 109
AR07-110 to 113
AR08-114 to 126
AR11-127 to 131
SC12-014 to 017
Deposit scoping and verification
Extensions to the Arctic Deposit
Property-wide exploration drilling
Deep extensions of the Arctic Deposit
Grade continuity and metallurgy
Geotechnical studies
Exploration drilling – Sunshine
Notes:
*A total of 12 of the 14 holes drilled in 2008 were utilized in the 2012 SRK resource update. Two holes were
maintained in sealed frozen storage to provide additional metallurgical samples if required.
**Geotechnical holes drilled in 2011 are not included in the current resource estimation contained herein.
***Drilling in 2006 and 2012 targeted exploration targets elsewhere in the VMS belt.
Over the Arctic Project’s history, a relatively limited number of drill companies have been used by Kennecott and
NovaCopper/NovaGold at the Arctic Deposit. During Kennecott’s tenure on the Property, Sprague and Henwood, a
Pennsylvania-based drilling company was the principal contractor. Sprague and Henwood utilized company
manufactured drill rigs during their tenure on the Property. Many of their rigs remain at the Bornite Deposit and
constitute a historical inventory of 1950s and 1960s exploration artifacts. Tonto Drilling provided services to
Kennecott during Kennecott’s short return to the district in the late 1990s. We and NovaGold have utilized Boart
Longyear as our only contractor. The 2004 to 2012 NovaCopper/NovaGold drill programs used a single skid-
mounted LF-70 core rig, drilling HQ or NQ core. Wireframes were updated in 2013 to incorporate interpretation of
all drill results to date and have been included in the resource estimate.
Arctic Project - Sampling Methodology and Analysis
The data for the Arctic Deposit resource was generated over three primary drilling campaigns: 1966 to 1986 when
BCMC, a subsidiary of Kennecott Copper Corporation was the primary operator, 1998 when Kennecott Minerals
resumed work after a long hiatus, and 2004 to present with NovaGold and now us as the operators.
Sampling of drill core prior to 1998 by BCMC focused primarily on the mineralized zones; numerous intervals of
weak to moderate mineralization were not sampled during this period. During the 1998 campaign, Kennecott did
sample some broad zones of alteration and weak mineralization, but much of the unaltered and unmineralized drill
core was left unsampled. Little documentation on historic sampling procedures is available.
Between 2004 and 2006, NovaGold conducted a systematic drill core re-logging and re-sampling campaign of
Kennecott and BCMC era drill holes AR-09 to AR-74. NovaGold either took 1 to 2 m samples every 10 m, or
sampled entire lengths of previously unsampled core within a minimum of 1 m and a maximum or 3 m intervals.
The objective of the sampling was to generate a full ICP geochemistry dataset for the Arctic Deposit and ensure
continuous sampling throughout the deposit. Sample preparation procedures for NovaGold era work are described
below.
All drill core was transported by helicopter in secure core “baskets” to either the Dahl Creek camp or the Bornite
camp for logging and sampling. Sample intervals were determined by the geologist during the geological logging
process. Sample intervals were labelled with white paper tags and butter (aluminum) tags which were stapled to the
core box. Each tag had a unique number which corresponded to that sample interval. Sample intervals were
determined by the geological relationships observed in the core and limited to a three meter maximum length and
one meter minimum length. An attempt was made to terminate sample intervals at lithological and mineralization
boundaries. Sampling was generally continuous from the top to the bottom of the drill hole. When the hole was in
unmineralized rock, the sample length was generally three meters, whereas in mineralized units, the sample length
was shortened to one to two meters. Geological and geotechnical parameters were recorded based on defined sample
36
intervals and/or drill run intervals (defined by the placement of a wooden block at the end of a core run). Logged
parameters were reviewed annually and slight modifications have been made between campaigns, but generally
include rock type, mineral abundance, major structures, specific gravity (“SG”), point load testing, recovery and
rock quality designation measurements. Drill logs were converted to a digital format and forwarded to the Database
Manager, who imported them into the master database. Core was photographed and then brought into the saw shack
where it was split in half by the rock saw, divided into sample intervals, and bagged by the core cutters. Not all drill
core was oriented; however, core that had been oriented was identified to samplers by a line drawn down the core
stick. If core was not competent, it was split by using a spoon to transfer half of the core into the sample bag. Once
the core was sawed, half was sent to ALS Chemex Laboratories (“ALS Chemex”) in Vancouver for analysis and the
other half was stored at the Dahl Creek camp, but since has been consolidated at the storage facility at the Bornite
camp facilities or at our warehouse in Fairbanks. Shipment of core samples from the Dahl Creek camp occurred on a
drill hole by drill hole basis. Rice bags, containing two to four poly-bagged core samples each, were marked and
labelled with the ALS Chemex address, project and hole number, bag number, and sample numbers enclosed. Rice
bags were secured with a pre-numbered plastic security tie and a twist wire tie and then assembled into sling loads
for transport by chartered flights on a commercial airline to Fairbanks, where they were met by a contracted
expeditor for delivery directly to the ALS Minerals preparation facility in Fairbanks. In addition to the core, control
samples were inserted into the shipments at the approximate rate of one standard, one blank and one duplicate per 20
core samples:
• Standards: four standards were used at the Arctic Deposit. The core cutter inserted a sachet of the
appropriate standard, as well as the sample tag, into the sample bag.
• Blanks: were composed of an unmineralized landscape aggregate. The core cutter inserted about 150 g of
blank, as well as the sample tag, into the sample bag.
• Duplicates: the assay laboratory split the sample and ran both splits. The core cutter inserted a sample tag
into an empty sample bag.
Samples were logged into a tracking system on arrival at ALS Chemex, and weighed. Samples were then crushed,
dried, and a 250 g split pulverized to greater than 85% passing 75 µm.
Gold assays were determined using fire analysis followed by an atomic absorption spectroscopy finish. The lower
detection limit was 0.005 ppm gold; the upper limit was 1,000 ppm gold. An additional 34-element suite was
assayed by inductively coupled plasma-atomic emission spectroscopy (“ICP-AES”) methodology, following nitric
acid aqua regia digestion. The copper analyses were completed by atomic absorption (“AA”), following a triple acid
digest.
The accreditations of Primary and Secondary assay laboratories used during the 1966 – 1986 campaigns are not
known. ALS Analytical Lab (Fairbanks, Alaska) was the Primary assay lab between 1998 – present. ALS Chemex
has attained International Organization for Standardization (“ISO”) 9001:2000 registration. In addition, the ALS
Chemex laboratory in Vancouver is accredited to ISO 17025 by Standards Council of Canada for a number of
specific test procedures including fire assay of gold by AA, ICP and gravimetric finish, multi-element ICP and AA
assays for silver, copper, lead and zinc.
During 2013, we conducted a 26% audit of the NovaGold era assay database fields: sample interval, Au, Ag, Cu, Zn,
and Pb. This audit is documented in a series of memos. Our staff did not identify and/or correct any transcription
and/or coding errors in the database prior to resource estimation. We also retained independent consultant Caroline
Vallat, P.Geo. of GeoSpark Consulting Inc. to: 1) re-load 100% of the historical assay certificates, 2) conduct a
QA/QC review of paired historical assays and NovaGold era re-assays; 3) monitor an independent check assay
program for the 2004 to 2008 and 2011 drill campaigns; and 4) generate QA/QC reports for the 2004 to 2008 and
2011 drill campaigns.
Arctic – Security of Samples
Security measures taken during historical Kennecott and BCMC programs are unknown to NovaGold or us. We are
not aware of any reason to suspect that any of these samples have been tampered with. The 2004 to 2011 samples
were either in the custody of NovaGold personnel, contractors or the assay laboratories at all times as discussed
above, and the chain of custody of the samples is well documented.
37
Arctic Project - Mineral Resource Estimate
The mineral resource estimate was prepared by Tetra Tech with an effective date of the resource estimate as of
July 30, 2013.
The mineral resource model prepared by Tetra Tech considers diamond drill holes drilled by different operators
during the period 1965 to 2011. The majority of the assaying has been completed in recent years by us and our
previous parent company NovaGold. The mineral resource for the Arctic Project is supported by 43 core holes
(approximately 13,500 m) drilled by NovaGold and 92 core holes (approximately 17,600 m) drilled by previous
owners Kennecott, and/or a Kennecott subsidiary. The geological and assay database used to estimate the Arctic
Project mineral resources have been reviewed and audited by Tetra Tech.
Leapfrog™ software (version 2.5.1) was used to review and verify the resource estimation domains, prior to being
imported into Isatis™ software (version 2012.1) to prepare assay data for geostatistical analysis, variography, block
model construction, metal grade estimation and mineral resource tabulation. Mineral Resources were estimated into
five MS and six SMS lenses, and then combined for an overall grade for the mineralized portion of the 10 m by
10 m by 5 m block. Extreme lead and gold assays were capped prior to compositing. Ordinary kriging and inverse
distance squared estimates were run, with ordinary kriging used for resource reporting and inverse distance squared
used for validation. Search parameters were constrained within each mineralized domain and required an optimum
number of 15 composites, minimum number of 5 composites, minimum number of 2 drill holes, and maximum
search distance range of 200 m. In general, blocks categorized as Indicated were supported by at least two drill holes
within a 75 m search radii, and blocks categorized as Inferred were supported by at least 2 drill holes within a 150 m
search radii. Estimated resources for the Arctic Deposit are reported in the following Table 4 and Table 5.
The Arctic Project has no known reserves.
The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative
geologically to have the economic considerations applied to them that would enable them to be categorized as
mineral reserves. There is no certainty that the estimates contained in the PEA will ever be realized. Mineral
resources that are not mineral reserves do not have demonstrated economic viability.
Table 4 Indicated Resource Estimate for the Arctic Project (NSR Cut-off of $35/t)
Cautionary Note to United States Investors concerning estimates of Indicated Resources.This section uses the term
“indicated resources”. We advise United States investors that these terms are not recognized by the SEC. United
States investors are cautioned not to assume that estimates of indicated mineral resources are economically minable,
or will be upgraded into measured mineral resources. See “Risk Factors” and “Cautionary Note to United States
Investors.”
Category Mt
Cu
(%)
Zn
(%)
Pb
(%)
Indicated
23.848
3.26
4.45
0.76
Au
(g/t)
0.71
Ag
(g/t)
53.2
Cu
(Mlb)
Zn
(Mlb)
Pb
(Mlb)
Au
(Moz)
Ag
(Moz)
1,713
2,338
400.9
0.55
40.8
Notes:
1. These resource estimates have been prepared in accordance with NI 43-101 and the Canadian
Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards. Mineral resources
that are not mineral reserves do not have demonstrated economic viability. See “Risk Factors” and
“Cautionary Note to United States Investors.”
2. Mineral Resources are reported within mineralization wireframes, contained within an Indicated pit
design using an assumed copper price of $2.90/lb, zinc price of $0.85/lb, lead price of $0.90/lb,
silver price of $22.70/oz, and gold price of $1,300/oz.
3. Appropriate mining costs, processing costs, metal recoveries and inter ramp pit slope angles were
used to generate the pit design.
4. The $35.01/t milled cut-off is calculated based on a process operating cost of $19.03/t, G&A of
$7.22/t and site services of $8.76/t. NSR equals payable metal values, based on the metal prices
outlined in Note 2 above, less applicable treatment, smelting, refining costs, penalties, concentrate
transportation costs, insurance and losses and royalties.
5. The LOM strip ratio was estimated at 8.39.
6. Rounding as required by reporting guidelines may result in apparent summation differences
between tonnes, grade and contained metal content.
7. Tonnage and grade measurements are in metric units. Contained copper, zinc and lead pounds are
reported as imperial pounds, contained silver and gold ounces as troy ounces.
38
Table 5 Inferred Resource Estimate for the Arctic Project (NSR Cut-off of $35/t)
Cautionary Note to United States Investors concerning estimates of Inferred Resources. This section uses the term
“inferred resources”. We advise United States investors that these terms are not recognized by the SEC. The
estimation of inferred resources involves far greater uncertainty as to their existence and economic viability than the
estimation of other categories of resources. United States investors are cautioned not to assume that estimates of
inferred mineral resources exist, are economically minable, or will be upgraded into measured or indicated mineral
resources. See “Risk Factors” and “Cautionary Note to United States Investors.”
Category Mt
Cu
(%)
Inferred
3.363
3.22
Zn
(%)
3.84
Pb
(%)
0.58
Au
(g/t)
0.59
Ag
(g/t)
41.5
Cu
(Mlb)
Zn
(Mlb)
Pb
(Mlb)
Au
(Moz)
Ag
(Moz)
239
285
43.2
0.06
4.5
Notes:
1. These resource estimates have been prepared in accordance with NI 43-101 and the CIM Definition
Standards. See “Risk Factors” and “Cautionary Note to United States Investors.”
2. Mineral Resources are reported within mineralization wireframes, contained within an Inferred pit
design using an assumed copper price of $2.90/lb, zinc price of $0.85/lb, lead price of $0.90/lb,
silver price of $22.70/oz, and gold price of $1,300/oz.
3. Appropriate mining costs, processing costs, metal recoveries and inter ramp pit slope angles were
used to generate the pit design.
4. The $35.01/t milled cut-off is calculated based on a process operating cost of $19.03/t, G&A of
$7.22/t and site services of $8.76/t. NSR equals payable metal values, based on the metal prices
outlined in Note 2 above, less applicable treatment, smelting, refining costs, penalties, concentrate
transportation costs, insurance and losses and royalties.
5. The LOM strip ratio was estimated at 8.39.
6. Rounding as required by reporting guidelines may result in apparent summation differences
between tonnes, grade and contained metal content.
7. Tonnage and grade measurements are in metric units. Contained copper, zinc and lead pounds are
reported as imperial pounds, contained silver and gold ounces as troy ounces.
Arctic Project – Mining Operations
The Arctic Project is not currently in production; for contemplated exploration or development activities see below.
Arctic Project – Exploration and Development
As noted in the summary Arctic Project – Technical Report above, we engaged Tetra Tech to prepare a PEA for the
Arctic Project. The following summary describes the main results and assumptions of the PEA not previously
discussed above.
The PEA is based on a conventional truck-and-shovel, open-pit mine design at a single pit. The mining schedule was
developed based on a maximum mill capacity of 10,000 t/d. The Arctic Project’s total mine life is 13 years,
including 1 year of pre-stripping followed by 12 years of production. The pit uses four pushbacks and a minimum
mining width of 40 m. Over the 13-year life, the pit is producing 35.7 Mt of mineralized material and 299.4 Mt of
waste rock. The life-of-mine (“LOM”) stripping ratio is 8.39 and the stripping ratio excluding the pre-stripping
waste rock is 7.94. The mining schedule does not currently consider a low-grade stockpiling option but this can be
assessed in more detail in future studies.
Mineral Processing and Metallurgical Testing
Since 1970, metallurgical test work has been conducted to determine the flotation response of various samples
extracted from the Arctic Deposit. In general, the samples tested produced similar metallurgical performances. In
2012, SGS Mineral Services (“SGS”) conducted a metallurgical test program to further study metallurgical
responses of the samples produced from Zones 1, 2, 3, and 5 of the Arctic Deposit. The flotation test procedures
used talc pre-flotation, conventional copper-lead bulk flotation and zinc flotation, followed by copper and lead
separation. In general, the 2012 test results indicated that the samples responded well to the flowsheet tested. Below
is a summary of average results of the locked cycle tests (without copper and lead separation).
39
• The copper recoveries to the bulk copper-lead concentrates ranged from 89 to 93% excluding the Zone 1 &
2 composite which produced a copper recovery of approximately 84%; the copper grades of the bulk
concentrates were 24 to 28%.
• Approximately 92 to 94% of the lead was recovered to the bulk copper-lead concentrates containing 9 to
13% lead.
• The zinc recovery was 84.2% from Composite Zone 1 & 2, 93.0% from Composite Zone 3 and 90.5% from
Composite Zone 5. On average, the zinc grades of the concentrates produced were higher than 55%,
excluding the concentrate generated from Composite Zone 1 & 2, which contained only 44.5% zinc.
• Gold and silver were predominantly recovered into the bulk copper-lead concentrates. Gold recoveries to
this concentrate ranged from 65 to 80%, and silver recoveries ranged from 80 to 86%.
Using an open circuit procedure, the copper and lead separation tests on the bulk copper-lead concentrate produced
from the locked cycle tests generated reasonable copper and lead separation. The copper concentrates produced
contained approximately 28 to 31% copper, while the grades of the lead concentrates were in the range of 41% to
67% lead. Also, it appears that most of the gold reported to the copper concentrate and on average the silver was
equally recovered into the copper and lead concentrates.
The 2012 grindability test results showed that the Bond ball millwork index tests ranged from 6.5 to 11 kWh/t and
abrasion index tests fluctuated from 0.017 to 0.072 g for the mineralized samples. The data indicates that the
samples are neither resistant nor abrasive to ball mill grinding. The materials are considered to be soft or very soft in
terms of grinding requirements.
Recovery Methods
A 10,000 t/d process plant has been designed to process the massive and semi-massive sulphide mineralization of
the Arctic Property. The main economic elements found in the deposit are copper, zinc, lead, and associated gold
and silver. The process plant will operate two twelve hour shifts per day, 365 days per year with an overall plant
availability of 92%. The process plant will produce three concentrates: 1) copper concentrate, 2) zinc concentrate,
and 3) lead concentrate. Gold and silver are expected to be payable at a smelter and are recovered in both the copper
and lead concentrates. The process plant feed will be supplied from the Arctic open pit mine.
The mill feed will be hauled from the open pit to a primary crushing facility where the material will be crushed by a
jaw crusher to a particle size of 80% passing 125 mm.
The crushed material will be ground by two stages of grinding, consisting of one SAG mill and one ball mill in
closed circuit with hydrocyclones (SAB circuit). The hydrocyclone overflow with a grind size of approximately
80% passing 70 µm will first undergo pre-talc flotation, and then be processed by conventional bulk flotation (to
recover copper, lead, and associated gold and silver), followed by zinc flotation. The rougher bulk concentrate will
be cleaned and followed by copper and lead separation to produce a lead concentrate and a copper concentrate. The
final tailings from the zinc flotation circuit will be pumped to the TSF. Copper, lead, and zinc concentrates will be
thickened and pressure-filtered before being transported by truck to a port and shipped to smelters.
The LOM average mill feed is expected to contain 2.28% copper, 0.53% lead, 3.13% zinc, 0.5 g/t gold, and 37 g/t
silver. According to the mine plan developed for the PEA study and metallurgical test results, the LOM average
metal recoveries and concentrate grades are projected below:
•
•
•
copper concentrate recovery: 87.1% copper; 57.9% gold; 40.2% silver; copper grade: 29%
lead concentrate recovery: 74.0% lead; 6.8% gold; 40.2% silver; lead grade: 50%
zinc concentrate recovery: 86.8% zinc; zinc grade: 56%.
Tailings and Storage Facility
The co-disposal TSF will be a fully lined facility consisting of rockfill embankment constructed across the Sub-
Arctic Creek drainage, creating an impoundment that will extend up the drainage. The rockfill embankment will be
40
constructed to an ultimate crest elevation of 655 mamsl with the embankment being raised in stages to minimize the
initial capital construction cost. During operations, potential acid generating (“PAG”) waste rock will be placed at
the bottom and sides of the basin forming layers with consecutive disposal on tailings that will be filling the voids.
The tailings has the potential to generate acid and, therefore, the tailings and the PAG waste rock will be placed
under water and remain permanently submerged in order to reduce the potential for acid generation. Additional
studies will be required to determine the most suitable method of co-disposal and potential requirements for acid
rock drainage (“ARD”) management and mitigation programs will need to be part of the design of the TSF.
The TSF will be required to contain 110.5 Mm3 total over the 12-year LOM, with 23.8 Mm3 to accommodate the
tailings at an assumed stored dry density of 1.5 t/m3 and 86.7 Mm3 of PAG waste rock at an assumed stored dry
density of 1.9 t/m3. The TSF will be sited as a staged rockfill embankment with an upstream geomembrane liner.
The starter embankment will have a crest elevation of 560 m and impound 1 year of mining production, which is
approximately 670,000 m3 of tailings and 12.3 Mm3 of waste rock.
Arctic Project - Environmental Considerations
Environmental baseline data collection was initiated in 2007, including surface water quality sampling, wetlands
mapping, stream flow monitoring, aquatic life surveys, subsistence, meteorological monitoring, and acid base
accounting sampling. Additional baseline environmental data in the Ambler Lowlands, the Subarctic Creek
drainage, the Shungnak River drainage and downstream receiving environments will be required to support future
mine design, development of an environmental impact statement, permitting, construction and operations.
The Arctic Project has the potential to significantly improve work opportunities for local and regional residents. In
October 2011, we signed an agreement with NANA which in addition to consolidating landholdings in the Ambler
district has language establishing native hiring preferences and preferential use of NANA subsidiaries for contract
work. Furthermore, the agreement formalized an Oversight Committee, with equal representation from NANA and
us, to regularly review project plans and activities. In addition, a Subsistence Subcommittee has been formed to
protect subsistence and the Iñupiaq way of life and a Workforce Development Subcommittee is also in place to
address current and future employment needs. We meet monthly, during summer months, with the residents of
Kobuk, Shungnak and Ambler, the three villages closest to the project area. We also meet annually with eight other
NANA region villages including Noatak, Kivalina, Kotzebue, Kiana, Deering, Buckland, Selawik and Noorvik, for
the purpose of updating residents on project plans and fielding their questions and concerns. We have also
developed a good working relationship with the NWAB government.
The Arctic Project will be subject to a mine permitting process which will include compliance with the National
Environmental Policy Act and will require a number of major mine permits from state and federal agencies as well
as a significant number of minor permits. Although a number of federal conservation units are located in the general
vicinity of the Arctic Project, including but not limited to the Gates of the Arctic National Parks, Kobuk Preserve,
Selawik National Wildlife Refuge, and Kobuk Valley and Selawik Wilderness areas, there presence does not change
the permitting process nor add to the number of permits required for the Arctic Project.
We will be required to develop a formal project description and detailed reclamation and closure plan to support a
successful permit application strategy. The mine plan will embrace the concept of “design for closure”. In order to
reduce any lasting risk of environmental impacts, the plan will minimize surface disturbances during operations and
promote long-term stability of the site after closure.
No assurance can be given that new laws and regulations will not be enacted or that exiting laws and regulations will
not be applied in a manner that could limit or curtail the Arctic Project. Amendments to current laws, regulations,
licenses and permits governing operations and activities of mining companies, or more stringent implementation
thereof, could have a material adverse impact on the Arctic Project and cause increases in capital expenditures or
production costs, or reduction in levels of production, or abandonment, or delays in the development of the business.
Arctic Project - Current Activities
The focus of work on the Arctic Project in 2013 was the production of the PEA. Field work at the Arctic Project was
limited during 2013 to reconnaissance work, minor geochemical processing and regional mapping. Exploration
drilling was focused on the Bornite deposit in 2013. No work was completed in 2014 on the Arctic Project.
41
Bornite Project, Ambler District, Alaska
Bornite Project
Except for the information under the heading “Bornite Project – Current Activities” and except as otherwise stated,
the scientific and technical information relating to the Bornite Project contained in this Form 10-K is derived from,
and in some instances is an extract from, the technical report titled “NI 43-101 Technical Report on the Bornite
Project, Northwest Alaska, USA” report dated effective March 18, 2014 released April 1, 2014 (the “Bornite
Report”) prepared by BD Resource Consulting, Inc., SIM Geological Inc., and International Metallurgical &
Environmental Inc. Except for the information under the heading “Bornite Project – Current Activities” and except
as otherwise stated, Erin Workman, P.Geo., an employee to the Company and a Qualified Person as defined in 43-
101, has approved the scientific and technical information contained herein. Scott Petsel, P.Geo., an employee to the
Company and a Qualified Person as defined in 43-101, approved the scientific and technical information under the
heading “Bornite Project – Current Activities.” The information regarding the Bornite Project is based on
assumptions, qualifications and procedures which are not fully described herein. Reference should be made to the
full text of the Bornite Report which has been filed with certain Canadian securities regulatory authorities pursuant
to NI 43-101 and is available for review on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Bornite Project - Property Description and Location
The Property is located in the Ambler mining district of the southern Brooks Range, in the NWAB of Alaska. The
Property is located in Ambler River A-2 quadrangle, Kateel River Meridian T 19N, R 9E, sections 4, 5, 8 and 9. The
Bornite Project is located 248 km east of the town of Kotzebue, 19 km north of the village of Kobuk, 275 km west
of the Dalton Highway, an all-weather state maintained public road, at geographic coordinates N67.07° latitude and
W156.94° longitude (Universal Transverse Mercator (UTM) North American Datum (NAD) 83, Zone 4W
coordinates 7440449N, 589811E).
Bornite Project - Accessibility, Climate, Local Resources, Infrastructure, and Physiography
Primary access to the Project is by air, using both fixed wing aircraft and helicopters. There are four well
maintained, approximately 1,500 m-long gravel airstrips located near the Property, capable of accommodating
charter fixed wing aircraft. These airstrips are located 40 km west at Ambler, 23 km southwest at Shungnak, 19 km
south at Kobuk, and 15 km south at Dahl Creek. There is daily commercial air service from Kotzebue to the village
of Kobuk, the closest community to the Property. During the summer months, the Dahl Creek Camp airstrip is
suitable for larger aircraft, such as C-130 and DC-6. In addition to the four 1,500 m airstrips, there is a 700 m
airstrip located at the Bornite Camp. The airstrip at Bornite is suited to smaller aircraft, which support the Bornite
Camp with personnel and supplies.
There is no direct water access to the Property. During spring runoff, river access is possible by barge from
Kotzebue Sound to Ambler, Shungnak, and Kobuk via the Kobuk River.
A one-lane dirt track suitable for high-clearance vehicles or construction equipment links the Bornite Project’s main
camp to the 400 m Dahl Creek airstrip and village of Kobuk.
The climate in the region is typical of a sub-arctic environment. Exploration is generally conducted from late May
until late September. Weather conditions on the Project can vary significantly from year to year and can change
suddenly. During the summer exploration season, average maximum temperatures range from 10°C to 20°C, while
average lows range from -2°C to 7°C. By early October, unpredictable weather limits safe helicopter travel to the
Project. During winter months, the Project can be accessed by snow machine, track vehicle, or fixed wing aircraft.
Winter temperatures are routinely below -25°C and can exceed -50°C. Annual precipitation in the region averages at
395 mm with the most rainfall occurring from June through September, and the most snowfall occurring from
November through January.
Drilling and mapping programs are seasonal and have been supported out of the Main Bornite Camp and Dahl Creek
Camp. The main Bornite Camp facilities are located on Ruby Creek on the northern edge of the Cosmos Hills. The
camp provides office space and accommodations for the geologists, drillers, pilots, and support staff. There are four
2-person cabins installed by NANA prior to our tenure. In 2011, the main Bornite Camp was expanded to 20
sleeping tents, 3 administrative tents, 2 shower/bathroom tents, 1 medical tent, and 1 dining/cooking tent. With these
additions, the camp capacity was increased to 49 beds. A 30 m by 9 m core logging facility was also built in summer
42
of 2011. An incinerator was installed near the Bornite airstrip to manage waste created by the Bornite Project. Power
for the Bornite Project is supplied by a 175 kW Caterpillar diesel generator. Water is provided by a permitted
artesian well located 250 m from the Bornite Camp. In 2012, the camp was further expanded with the addition of a
laundry tent, a women's shower/washroom tent, a recreation tent, several additional sleeping tents, and a 2 x
enlargement of the kitchen tent. Camp capacity increased to 76 beds. The septic field was upgraded to accommodate
the increase in camp population. One of the two-person cabins was winterized for use by the winter caretaker. A
permitted landfill was established to allow for the continued cleanup and rehabilitation of the historic shop facilities
and surroundings. The Dahl Creek camp is an overflow or alternative facility to the main Bornite Camp. The Dahl
Creek camp has a main cabin for dining and administrative duties, and a shower facility. Sleeping facilities include
two hard-sided sleeping cabins with seven beds (primarily used for staff), two 4-person sleeping tents, and three 2-
person sleeping tents for a total of 21 beds. There are support structures, including a shop and storage facilities.
The Bornite Project is located on Ruby Creek on the northern edge of the Cosmos Hills. The Cosmos Hills are part
of the southern flank of the Brooks Range in Northwest Alaska. Topography in the area is moderately rugged.
Maximum relief in the Cosmos Hills is approximately 1,000 masl with an average of 600 masl. Talus covers the
upper portions of the hills; glacial and fluvial sediments occupy valleys. The Kobuk Valley is located at the
transition between boreal forest and Arctic tundra. Spruce, birch, and poplar are found in portions of the valley, with
a ground cover of lichens (reindeer moss). Willow and alder thickets and isolated cottonwoods follow drainages, and
alpine tundra is found at higher elevations. Tussock tundra and low, heath-type vegetation covers most of the valley
floor. Patches of permafrost exist on the Property. Wildlife in the Project area is typical of Arctic and Subarctic
fauna. Larger animals include caribou, moose, Dall sheep, bears (grizzly and black), wolves, wolverines, coyotes,
and foxes. Fish species include salmon, sheefish, arctic char, and arctic grayling. The Kobuk River, which briefly
enters the UKMP on its southwest corner, is a significant salmon spawning river. The caribou on the Property
belong to the Western Arctic herd that migrates twice a year – south in August, from their summer range north of
the Brooks Range, and north in March from their winter range along the Buckland River.
Bornite Project - History
Kennecott and Bear Creek Mining Tenure
Regional exploration began in the early 1900s when gold prospectors noted copper occurrences in the hills north of
Kobuk, Alaska. In 1947, local prospector Rhinehart “Rhiny” Berg along with various partners traversing in the area
located outcropping mineralization along Ruby Creek (Bornite) on the north side of the Cosmos Hills. They
subsequently staked claims over the Ruby Creek showings and constructed an airstrip for access. In 1957, BCMC,
Kennecott's exploration subsidiary, optioned the property from Berg. Exploration drilling in 1961 and 1962
culminated in the discovery of the “No.1 Ore Body” where drill hole RC-34 cut 20 m of 24% copper (the “No.1 Ore
Body” is a historic term used by BCMC that does not connote economic viability in the present context; it is
convenient to continue to use the term to describe exploration work and historic resource estimation in a specific
area of what is now generally known as Ruby Creek Upper Reef). The discovery of the “No.1 Ore Body” led to the
development of an exploration shaft in 1966. The shaft, which reached a depth of 328 m, encountered a significant
watercourse and was flooded near completion depth. The shaft was subsequently dewatered and an exploration drift
was developed to provide access for sampling and mapping, and to accommodate underground drilling to further
delineate mineralization. A total of 59 underground holes were drilled and, after the program, the shaft was allowed
to re-flood. The discovery of the Arctic Project in 1965 prompted a hiatus in exploration at Bornite, and only limited
drilling occurred up until 1976.
In the late 1990s, Kennecott resumed its evaluation of the Bornite deposit and the mineralization in the Cosmos Hills
with an intensive soil, stream, and rock chip geochemical sampling program using 32 element ICP analyses. Grid
soil sampling yielded 765 samples. Ridge and spur sampling resulted in an additional 850 soil samples in the
following year. Skeletonized core samples (85 samples) from key historic drill holes were also analyzed using 32
element ICP analytical methods. Geochemical sampling identified multiple areas of elevated copper and zinc in the
Bornite region.
Kennecott completed numerous geophysical surveys as an integral part of exploration throughout their tenure on the
property. Various reports, notes, figures, and data files stored in Kennecott’s Salt Lake City exploration office
indicated that geophysical work included, but was not limited to, the following:
• Airborne magnetic and EM surveys (fixed-wing INPUT) (1950s)
43
• Gravity, single point (“SP”), Audio-Frequency Magneto-Telluric (“AMT”), EM, borehole and surface
IP/resistivity surveys (1960s)
• Gravity, airborne magnetic, and CSAMT surveys (1990s)
We have little information or documentation associated with these geophysical surveys conducted prior to the
1990s. Where data are available in these earlier surveys, the lack of details in data acquisition, coordinate systems,
and data reduction procedures limit their usefulness. The only complete geophysical report available concerns down-
hole IP/resistivity results. Most notable is the 1996 Bouger gravity survey from the Bornite deposit into the Ambler
lowlands. The Bornite deposit itself is seen as a significant 3 milligal anomaly. Numerous 2 milligal to > 6 milligal
anomalies occur under cover in the Ambler lowlands and near the Aurora Mountain and Pardner Hill occurrences. In
addition to the geophysical surveys conducted by Kennecott, the ADNR completed an aeromagnetic survey of
portions of the Ambler mining district in 1974-1975.
Several studies have been undertaken reviewing the geology and geochemistry of the Bornite deposit. Most notable
is Murray Hitzman’s PhD dissertation at Stanford University and Don Runnel’s PhD dissertation at Harvard
University. Bernstein and Cox reported on mineralization of the “No. 1 Ore Body” in a 1986 paper in Economic
Geology. Kennecott conducted two technical reviews of the groundwater conditions and a summary of the findings
related to the flooding of the exploration shaft.
In 1961, Kennecott collected 32 coarse reject samples from five drill holes to support preliminary metallurgical test
work at Bornite. Samples targeted high-grade (> 10%) copper mineralization from the Upper Reef at Ruby Creek.
Bornite Project - Geological Setting and Mineralization
The Bornite Project is located within the Arctic Alaska Terrane, a sequence of mostly Paleozoic continental margin
rocks that make up the Brooks Range and North Slope of Alaska. It is within the Phyllite Belt geologic subdivision,
which together with the higher-grade Schist Belt, stretches almost the entire length of the Brooks Range and is
considered to represent the hinterland of the Jurassic Brooks Range orogeny. The southern margin of the Phyllite
Belt is marked by mélange and low angle faults associated with the Kobuk River fault zone, while the northern
boundary is thought to be gradational with the higher-grade metamorphic rocks of the Schist Belt.
The geology of the Bornite resource area is composed of alternating beds of carbonate rocks (limestone and
dolostone) and calcareous phyllite. Limestone transitions laterally into dolostone, which hosts the majority of the
mineralization and is considered to be hydrothermal in origin. Spatial relationships and petrographic work establish
dolomitization as genetically related to early stages of the copper mineralizing system.
Potentially the earliest and most prominent structure in the resource area is the northeast-trending, steeply
northwest-dipping Iron Mountain structure. The structure shows significant displacement of basal quartz phyllite to
the east across the structure and has been interpreted as: a pre or syn-mineral (Devonian) growth fault; or, the post-
mineral (Cretaceous) axis of a small overturned kink fold. To the north, the Bornite Carbonate sequence is in fault
contact with the Beaver Creek phyllite along the moderately north-dipping Beaver Creek fault. The fault, a thick,
brittle structure of potentially regional significance, defines the roughly bedded parallel base of the Beaver Creek
phyllite and the Bornite Carbonate sequence in the immediate Bornite area. Both the Beaver Creek fault and the
Bornite Carbonate sequence are cut by a series of north-trending high angle structures of apparent small
displacement.
Mineralization at Bornite occurs as tabular mineralized zones that coalesce into crudely stratiform bodies hosted in
secondary dolomite. Two significant dolomitic horizons that host mineralization have been mapped by drilling and
include: 1) the Lower Reef, a thick 100 to 300 m thick dolomitized zone lying immediately above the basal quartz
phyllite unit of the Anirak Schist; and 2) the Upper Reef, a 100 to 150 m thick dolomite horizon roughly 300 m
higher in section.
The Lower Reef dolomite outcrops along the southern margin of the Ruby Creek zone and is spatially extensive
throughout the deposit area. It hosts a significant portion of the shallow resources in the Ruby Creek zone as well as
higher grade resources down dip and to the northeast in the South Reef. The Upper Reef zone hosts relatively high-
grade resources to the north in the Ruby Creek zone. The Upper reef zone appears to lie at an important NE-
trending facies transition to the NW of the main drilled area and locally appears to be at least partially thrust over the
Lower Reef stratigraphy to the southeast.
44
Drill results from 2013 show dolomitization and copper mineralization in the Upper and Lower Reefs coalescing
into a single horizon along the northern limits of current exploration. The NE- trending Ruby Creek and South Reef
zones also coalesce into a roughly 1000 m wide zone of >200 m thick dolomite containing significant copper
mineralization dipping north at roughly 5-10 degrees.
Bornite Project – Mineralization
Copper mineralization at Bornite is comprised of chalcopyrite, bornite, and chalcocite distributed in stacked, roughly
stratiform zones exploiting favourable stratigraphy within the dolomitized limestone package. Mineralization occurs,
in order of increasing grade, as disseminations, irregular and discontinuous stringer-style veining, breccia matrix
replacement, and stratiform massive sulphides. The distribution of copper mineral species is zoned around the
bottom-centre of each zone, with bornite-chalcocite-chalcopyrite at the core and progressing outward to
chalcopyrite-pyrite. Additional volumetrically minor copper species include carrollite, digenite, tennantite-
tetrahedrite, and covellite. Stringer pyrite and locally significant sphalerite occur above and around the copper
zones, while locally massive pyrite and sparse pyrrhotite occur in association with siderite alteration below copper
mineralization in the Lower Reef.
In addition to the copper mineralization, significant cobalt mineralization is found accompanying bornite-chalcocite
mineralization. Cobalt occurs with high-grade copper as both carrollite (Co2CuS4) and as cobaltiferous rims on
recrystallized pyrite grains.
Appreciable silver values are also found with bornite-rich mineralization in the South Reef and Ruby Creek zones.
Bornite Project – Exploration
Exploration in and around the Bornite Project by Kennecott from 1957 to 1998 is summarized above. In addition to
the extensive drilling completed during the more than 40 year tenure of Kennecott in the district, Kennecott
completed widespread surface geochemical sampling, regional and property scale mapping, and numerous
geophysical surveys employing a wide variety of techniques. The majority of this data has been acquired by us and
forms the basis for renewed exploration that targets Bornite-style mineralization in the Bornite carbonate sequence.
NovaGold as the precursor company to us began to actively pursue an agreement to explore the Bornite Project with
NANA in 2005 resulting in an initial airborne geophysical survey in 2006. Negotiations on the consolidation and
exploration of the entire Ambler district continued for the next several years culminating in the NANA Agreement
in October, 2011.
With the NANA Agreement approaching completion, NovaGold initiated work in 2010 to begin to characterize the
exploration potential and depositional controls by re-logging and re-analyzing select drill holes with a Niton portable
x-ray fluorescence (“XRF”) to determine geochemical variability. In 2011, NovaGold began an initial drill program
to verify the historical database and exploration potential and conducted additional geophysical surveys to provide
better targeting tools for continued exploration in the district. In 2012, we expanded the IP geophysical coverage
completing a major district-wide survey that targeted the prospective Bornite Carbonate sequence. Subsequent
resource drilling between 2011 and 2013 based on the exploration targeting is discussed in the Bornite Project -
Mineral Resource Estimates section below.
2006 NovaGold Exploration
In 2006, NovaGold contracted Fugro Airborne Surveys to complete a detailed helicopter DIGHEM magnetic, EM
and radiometric survey of the Cosmos Hills. The survey covered a rectangular block approximately 18 km by 49
km which totaled 2,852 line kilometres. The survey was flown at 300 m line spacing with a line direction of N20E.
The DIGHEM helicopter survey system produced detailed profile data of magnetics, EM responses and radiometrics
(total count, uranium, thorium, and potassium) and was processed into maps of magnetics, discrete EM anomalies,
EM apparent resistivity, and radiometric responses.
2010 NovaGold Exploration
In 2010, in anticipation of completing the NANA Agreement, NANA granted NovaGold permission to begin low
level exploration at Bornite; this consisted of re-logging and re-analyzing select drill holes using a Niton portable
XRF. In addition to the 2010 re-logging effort, NovaGold contracted a consulting geophysicist, Lou O'Connor, to
45
compile a unified airborne magnetic map for the Ambler mining district from Kennecott, Alaska DNR, and
NovaGold airborne geophysical surveys.
2011 NovaGold Exploration
In 2011, NovaGold contracted Zonge International Inc. (“Zonge”) to conduct both dipole-dipole complex resistivity
induced polarization (“CRIP”) and natural source audio-magnetotelluric (“NSAMT”) surveys over the northern end
of the prospect to develop tools for additional exploration targeting under cover to the north.
NSAMT data were acquired along two lines totaling 5.15 line-km, with one line oriented generally north-south
through the centre of the survey area and one being the southernmost east-west line in the survey area. CRIP data
were acquired on five lines: four east-west lines and one north-south line, for a total coverage of 14.1 line-km and 79
collected CRIP stations. The initial objective of the survey was to investigate geological structures and the
distribution of sulphides possibly associated with copper mineralization.
Results from the paired surveys show that wide-spaced dipole-dipole resistivity is the most effective technique to
directly target the mineralization package. Broad low resistivity anomalies reflecting pyrite haloes and
mineralization appear to define the limits of the fluid package. Well-defined and often very strong chargeability
anomalies are also present, but appear in part to be masked by phyllitic units which also have strong chargeability
signatures. The NSAMT show similar resistivity features as the IP, but are less well resolved.
2012 NovaCopper Exploration
In light of the success of the 2011 geophysical program, we contracted Zonge to conduct a major district-wide
dipole/dipole IP survey, a down-hole IP radial array survey in the South Reef area, and an extensive physical
property characterization study of the various lithologies to better interpret the existing historical geophysical data.
Zonge completed 48 line km of 200 m dipole/dipole IP during 2012, infilling and expanding on the 2011 survey, and
stretching across the most prospective part of the outcropping permissive Bornite Carbonate sequence. The results
show a well-defined low resistivity area associated with mineralization and variable IP signatures attributed both to
mineralization and the overlying Beaver Creek phyllite. Numerous target areas occur in the immediate Bornite area
with lesser targets occurring in the Aurora Mountain and Pardner Hill areas and in the far east of the survey area.
During the 2012 drill program at South Reef, a single drill hole was targeted on a low resistivity area approximately
500 m to 600 m southeast of the South Reef mineralization trend. Although the drill hole intersected some dolomite
alteration in the appropriate stratigraphy, no significant sulphides were encountered.
In addition to the extensive ground IP survey, Zonge also completed 9 km of down-hole radial IP using an electrode
placed in drill hole RC12-0197 to further delineate the trend and potential in and around the South Reef. In addition
to the 2012 ground geophysical surveys, extensive physical property data including resistivity, chargeability,
specific gravity, and magnetic susceptibility were captured for use in modelling the existing ground IP and gravity
surveys, and the airborne EM and magnetic surveys.
In addition to geophysical focused exploration, a district wide geologic map was compiled integrating Kennecott’s
1970’s mapping of the Cosmos Hills with selective NovaCopper mapping in 2012.
2013 NovaCopper Exploration
The emphasis of the 2013 program was to further validate and refine the 2012 geologic map of the Cosmos Hills.
A deep penetrating soil and vegetation geochemical orientation survey was completed over the South Reef deposit,
utilizing various partial leaches and pH methods. The initial, approximately 1 km, test lines suggest a good response
for several of the partial leaches of the soils but little response in the vegetative samples; further follow-up is
warranted to the north of the deposit into the Ambler lowlands.
Bornite Project – Drilling
A total of 183 surface core holes and 51 underground core holes, totaling 78,147 m have been drilled, targeting the
Bornite deposit during 21 different annual campaigns dating from 1957 through 2013. All of the drill campaigns,
with the exception of the 2011 NovaGold campaign and the 2012 and 2013 NovaCopper campaigns were completed
46
by Kennecott or their exploration subsidiary BCMC. All drill holes (except RC13-230 and RC13-232 which have
been reserved for metallurgical studies) were utilized in the estimation of the current resource.
Sprague and Henwood, a Pennsylvania-based drilling company, completed all of the Kennecott drilling, with the
exception of the 1997 program (three drill holes) completed by Tonto Drilling Services, Inc. (a NANA-Dynatech
company). The 2011 thru 2013 NovaGold/NovaCopper programs used Boart Longyear Company as the drill
contractor.
In the initial years of drilling at Bornite, Kennecott relied on AX core (1.1875 in or 30.2 mm diameter), but, as
drilling migrated towards deeper targets, a change to BX core (1.625 in or 41.3 mm diameter) was implemented to
help limit deviation. From 1966 to 1967, drilling activity at Bornite moved underground and EX diameter core
(0.845 in or 21.5 mm diameter) was implemented to define the Ruby Creek Upper Reef zone “No.1 Ore Body”.
Drilling activity moved back to the surface in 1968, and, from 1968 to 1972, BX core was most commonly drilled.
In later years, core size increased to NX (2.125 in or 54.0 mm diameter) and finally, in 2011, core size increased to
NQ (1.874 in or 47.6 mm diameter) and HQ (2.5 in or 63.5 mm diameter). Progressively larger diameter drill rods
have been continually used over the years in an attempt to minimize drill hole deviations.
There is only partial knowledge of specific drill core handling procedures used by Kennecott during their tenure at
the Bornite Deposit. All of the drill data collected during the Kennecott drilling programs (1958 to 1997) was logged
on paper drill logs, copies of which are stored in the Kennecott office in Salt Lake City, Utah. Electronic scanned
copies of the paper logs, in PDF format, are held by NovaCopper. Drill core was sawed or split with a splitter, with
half core submitted to various assay labs and the remainder stored in the Kennecott core storage facility at the
Bornite Deposit. In 1995, Kennecott entered the drill assay data, the geologic core logs, and the down hole collar
survey data into an electronic format. In 2009, NovaGold geologists verified the geologic data from the original
paper logs against the Kennecott electronic format and then merged the data into a Microsoft™ SQL database.
Sampling of drill core by Kennecott and BCMC focused primarily on the moderate to high grade mineralized zones.
Intervals of visible sulphide mineralization containing roughly >0.5 to 1% copper were selected for analysis by
Union Assay Office Inc. of Salt Lake City, Utah. This approach left numerous intervals containing weak to
moderate copper mineralization un-sampled in the historic drill core.
Throughout our tenure at Bornite, the following core handling procedures have been implemented. Core is slung by
helicopter, or transported by truck or ATV, from the drill rig to the core-logging facility. Upon delivery, geologists
and geotechnicians open and inspect the core boxes for any irregularities. They first mark the location of each
drilling block on the core box, and then convert footages on the blocks into metric equivalents. Geotechnicians or
geologists measure the intervals (or “from/to”) for each box of core and include this information, together with the
drill hole ID and box number, on a metal tag stapled to the end of each box. Geotechnicians then measure the core to
calculate percent recovery and rock quality designation (“RQD”). RQD is the sum of the total length of all pieces of
core over 12 cm in a run. The total length of core in each run is measured and compared to the corresponding run
length to determine percent recovery. Core is then logged with lithology and visual alteration features captured on
observed interval breaks. Mineralization data, including total sulphide (recorded as percent), sulphide type (recorded
as a relative amount), and gangue and vein mineralogy are collected for each sample interval with an average
interval of approximately 2 m. Structural data is collected as point data. Geologists then mark sample intervals to
capture each lithology or other geologically appropriate intervals. Sample intervals of core are typically between
1 m and 3 m in length but are not to exceed 3 m in length. Occasionally, if warranted by the need for better
resolution of geology or mineralization, smaller sample intervals have been employed. Geologists staple sample tags
on the core boxes at the start of each sample interval, and mark the core itself with a wax pencil to designate sample
intervals. This sampling approach is considered sound and appropriate for this style of mineralization and alteration.
Drill core is digitally photographed prior to sampling. Drill core is cut in half using diamond core saws. Specific
attention to core orientation is maintained during core sawing to ensure that representative samples are obtained.
One-half of the core is retained in the core box for storage on site, or at our Fairbanks warehouse, and the other half
bagged and labeled for analysis. Samples are selected for specific gravity measurements.
In 2013, 33 historic Kennecott drill holes in the Ruby Creek area were re-logged, re-sampled and re-assayed as these
holes had previously only been selectively sampled by Kennecott. Entire holes were re-logged utilizing NovaCopper
protocols discussed above. Samples were submitted either as half-core, where previously sampled, or whole core
where un-sampled (this was done to ensure that a sufficient volume of material was provided for analysis). Sample
intervals were matched to historic intervals whenever possible, or selected to reflect NovaCopper sampling
procedures described above. The objectives of the re-assay/re-logging program were threefold: 1) to implement a
QA/QC program on intervals previously sampled by Kennecott in order to confirm the validity of their results; 2) to
47
identify additional lower-grade (0.2-0.5% copper), which was not previously sampled; and 3) to provide additional
multi-element ICP data to assist in the geologic interpretation of the deposit.
Bornite Project - Sample Preparation, Analyses and Security
Sample preparation, analytical lab accreditation and security measures taken during historical Kennecott and BCMC
programs are unknown to us; however, we are not aware of any reason to suspect that any of these samples have
been tampered with. The 2011 to 2013 samples were either in the custody of NovaGold or NovaCopper personnel
or the assay laboratories at all times, and the chain of custody of the samples is well documented.
Between 2011 and 2013, once drill core was sawed, one half was retained for future reference and the other half was
sent to ALS Minerals (formerly ALS Chemex) in Vancouver for analyses. Shipment of core samples from the
Bornite camp occurred whenever backhaul capacity was available on the chartered aircraft, which was generally 5 to
6 days a week. Rice bags, containing two to four individual poly-bagged core samples, were marked and labeled
with the ALS Minerals address, project name (Bornite), drill hole number, bag number, and sample numbers
enclosed. Rice bags were secured with a pre-numbered plastic security tie, assembled into loads for transport by
chartered flights on a commercial airline to Fairbanks, and directly delivered by a contracted expeditor to the ALS
Minerals preparation facility in Fairbanks. In addition to the core samples, control samples were inserted into the
shipments at the approximate rate of one standard, one blank and one duplicate per 17 core samples. Samples were
logged into a tracking system on arrival at ALS Minerals, and weighed. Samples were then crushed, dried, and a 250
g split was pulverized to greater than 85% passing 75 µm.
Gold assays in 2011 and 2012 were determined using fire analysis followed by an atomic absorption spectroscopy
(“AAS”) finish; gold was not analyzed in 2013. The lower detection limit was 0.005 ppm gold; the upper limit was
10 ppm gold. An additional 48-element suite was assayed by inductively coupled plasma-mass spectrometry (“ICP-
MS”) and ICP-AES methodologies, following a four acid digest. Over limit (>1.0%) copper and zinc analyses were
completed by AA, following a four acid digest.
ALS Minerals has attained International Organization for Standardization (ISO) 9001:2000 registration. In addition,
the ALS Minerals laboratory in Vancouver is accredited to ISO 17025 by Standards Council of Canada for a number
of specific test procedures including fire assay of gold by AA, ICP and gravimetric finish, multi-element ICP and
AA assays for silver, copper, lead and zinc. NovaCopper has no relationship with any primary or check assay labs
utilized.
During 2012 and 2013, NovaCopper staff performed continuous validation of the drill data; both while logging was
in progress and after the drill season was complete. NovaCopper also retained independent consultant Caroline
Vallat, P.Geo. of GeoSpark Consulting Inc. to: 1) import digital drill data to the master database and conduct
QA/QC checks upon import, 2) conduct a QA/QC review of paired historical assays and NovaCopper 2012 and
2013 re-assays; 3) monitor an independent check assay program for the 2012 and 2013 drill campaigns; and 4)
generate a QA/QC report for the 2012 and 2013 drill campaigns.
Bornite Project - Mineral Resource Estimates
The mineral resource estimate has been prepared by Bruce M. Davis, FAusIMM, BD Resource Consulting, and
Robert Sim, P.Geo., SIM Geological Inc., both “Independent Qualified Persons” as defined in NI 43-101. We have
filed two previous NI 43-101 Technical Reports on the Bornite Project dated July 18, 2012 and February 5, 2013.
The effective date of this resource is March 18, 2014.
In 2013, we drilled an additional 17 holes at Bornite totaling 8,142 m of which 4,684 m was drilled at the Ruby
Creek zone and 3,458 m at the South Reef zone. The program expanded the lateral, down-dip, extents in the
northern part of the deposit and also provided additional delineation of some internal parts of the western Ruby
Creek area. In addition to the 2013 drilling, we completed an extensive sampling program of 33 historical drill holes
located in the Ruby Creek area that were drilled but only selectively sampled by Kennecott. This program has
resulted in providing better continuity of mineral resources the Ruby Creek area.
The mineral resource estimate utilizes two-meter compositing of assays from 216 drill holes completed between
1961 and 2013. Estimated blocks were 5 x 5 x 5 meters on a side. Seven domains were established for the
estimation, all of which were treated as hard boundaries with no mixing of data between the domains. The domains
include two high-grade carbonate domains inside a 2% copper probability shell, three moderate-grade carbonate
48
domains inside a 0.2% copper probability shell, one weakly-mineralized carbonate domain outside the 0.2% copper
probability shell, and one weak-unmineralized phyllite domain. Visual inspections of the probability shells show
that they fit well with observed levels of bornite, chalcocite and chalcopyrite mineralization.
Based on the interpreted local high-grade nature of the mineralization, both capping and outlier restriction strategies
were implemented to control the influence of high-grade mineralization in the resource model. This methodology
removed approximately 5% of the contained copper in the Ruby Creek Zone and 8% of the contained copper in the
South Reef Zone. Copper grades are interpolated in model blocks using ordinary kriging with a minimum of one and
a maximum of twenty composited samples and a maximum of five samples from a single drill hole. A total of 4,472
specific gravity measurements, of which 40% are within the mineralized shells, were utilized to estimate densities in
the block model. Specific gravity values were estimated into model blocks using inverse distance squared moving
averages using the domains described previously.
The block models were validated through several methods: a thorough visual review of the model grades in relation
to the underlying drill hole sample grades; comparisons with the change of support model; comparisons with other
estimation methods; and, grade distribution comparisons using swath plots.
Resources included in the Indicated category includes blocks in the model that are within a maximum average
distance of 35 meters from three or more drill holes and exhibit a relatively high degree of confidence in the grade
and continuity of mineralization. Resources in the Inferred category require a minimum of one drill hole within a
maximum distance of 100 meters and exhibit reasonable confidence in the grade and continuity of mineralization.
In the opinion of the Qualified Persons, the resource evaluation reported herein is a sound representation of the
copper mineral resources found on the Bornite Project at the current level of sampling. The mineral resources have
been estimated in conformity with generally accepted CIM Estimation of Mineral Resources and Mineral Reserves
Best Practices Guidelines and are reported in accordance with the Canadian Securities Administrators’ NI 43-101.
Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no certainty
that all or any part of the mineral resource will be converted into mineral reserve.
Tests for reasonable prospects for economic viability suggest that the resource is potentially amenable to a
combination of open pit and underground extraction methods. The estimate of mineral resources for the Bornite
Project are summarized in, “Bornite Project – Mineral Resource Statement”.
Bornite Project - Mineral Resource Statement
Mineral Resources are classified in accordance with the 2010 CIM Definition Standards for Mineral Resources and
Mineral Reserves.
The Qualified Persons for the Mineral Resource estimate are Bruce Davis and Robert Sim, both Qualified Person’s
independent of us. Mineral Resources for the Bornite Project are found in Table 7 and Table 8.
Table 7: Indicated Resource Estimate for the Bornite Project
See “Cautionary Note to United States Investors” This section uses the term “indicated resources”. We advise
United States investors that these terms are not recognized by the SEC. United States investors are cautioned not to
assume that estimates of indicated mineral resources are economically minable, or will be upgraded into measured
mineral resources. See “Risk Factors” and “Cautionary Note to United States Investors”.
Type
Cut-off
(Cu %)
Mtonnes
Cu%
Cu
(Mlbs)
In-Pit(2)
0.5
14.1
1.08
334
Indicated
Notes:
1. These resource estimates have been prepared in accordance with NI 43-101 and the CIM Definition
Standards. Mineral resources that are not mineral reserves do not have demonstrated economic
viability. See “Risk Factors” and “Cautionary Note to United States Investors.”
49
2. Resources stated as contained within a pit shell developed using a metal price of US$3.00/lb Cu,
mining costs of US$2.00/tonne, milling costs of US$11/tonne, G&A cost of US$5.00/tonne, 87%
metallurgical recoveries and an average pit slope of 43 degrees.
3. Rounding as required by reporting guidelines may result in apparent summation differences
between tonnes, grade and contained metal content.
4. Tonnage and grade measurements are in metric units. Contained copper are reported as imperial
pounds.
5. All amounts are stated in U.S. dollars unless otherwise noted.
Table 8: Inferred Resource Estimate for the Bornite Project
See “Cautionary Note to United States Investors” This section uses the term “inferred resources”. We advise United
States investors that these terms are not recognized by the SEC. The estimation of inferred resources involves far
greater uncertainty as to their existence and economic viability than the estimation of other categories of resources.
United States investors are cautioned not to assume that estimates of inferred mineral resources exist, are
economically minable, or will be upgraded into measured or indicated mineral resources. See “Risk Factors” and
“Cautionary Note to United States Investors”.
Type
Cut-off
(Cu %)
Mtonnes
Cu%
Inferred
In-Pit (3)
Below-Pit
Total Inferred
0.5
1.5
109.6
55.6
165.2
0.94
2.81
1.57
Cu
(Mlbs)
2,259
3,437
5,696
Notes:
1. These resource estimates have been prepared in accordance with NI 43-101 and the CIM Definition
Standards. See “Risk Factors” and “Cautionary Note to United States Investors.”
2. Resources stated as contained within a pit shell developed using a metal price of US$3.00/lb Cu,
mining costs of US$2.00/tonne, milling costs of US$11/tonne, G&A cost of US$5.00/tonne, 87%
metallurgical recoveries and an average pit slope of 43 degrees.
3. Rounding as required by reporting guidelines may result in apparent summation differences
between tonnes, grade and contained metal content.
4. Tonnage and grade measurements are in metric units. Contained copper are reported as imperial
pounds.
5. All amounts are stated in U.S. dollars unless otherwise noted.
There are no known factors related to environmental, permitting, legal, title, taxation, socio-economic, marketing or
political issues which could materially affect the mineral resource.
Bornite Project – Metallurgy
Metallurgical testwork to date indicates that the Bornite Project can be treated using standard grinding and flotation
methods to produce copper concentrates. Initial testing indicates copper recoveries of approximately 87% resulting
in concentrate grades of approximately 28% copper with very low potential penalty elements. Further metallurgical
testwork is warranted to test these assumptions.
Bornite Project – Environmental Considerations
The Bornite Project area includes NANA’s Bornite and ANCSA lands, the Ruby Creek drainage (a tributary of the
Shungnak River), the Shungnak River drainage, and portions of the Ambler Lowlands. Since 2007, baseline
environmental data collection has occurred in the area including archaeology, aquatic life surveys, sediment
sampling, wetlands mapping, surface water quality sampling, hydrology, meteorological monitoring, and
subsistence. Additional baseline environmental data in NANA’s Bornite and ANCSA lands, the Ruby Creek
drainage, the Shungnak River drainage, portions of the Ambler Lowlands, and downstream receiving environments
will be required to support future mine design, development of an EIS, permitting, construction and operations.
50
Bornite Project – Exploration and Development Permitting
Development of the Bornite Project will require a significant number of permits and authorizations from state,
federal, and regional organizations. Much of the groundwork to support a successful permitting effort must be
undertaken prior to submission of permit applications so that issues can be identified and resolved, baseline data can
be acquired, and regulators and stakeholders can become familiar with the proposed project. The comprehensive
permitting process for the Bornite Project can be divided into three categories:
1. Exploration state/regional permitting: required to obtain approval for drilling, camp operations,
engineering, and environmental baseline studies.
2. Pre-application phase: conducted in conjunction with engineering feasibility studies. This stage includes
the collection of environmental baseline data and interaction with stakeholders and regulators to facilitate
the development of a project that can be successfully permitted.
3. The National Environmental Policy Act phase: formal agency review of the Federal and State requirements
for public and agency participation to determine if and how the Project can be done in an acceptable
manner.
The permit review process will determine the number of management plans required to address all aspects of the
Project to ensure compliance with environmental design and permit criteria. Each plan will describe the appropriate
environmental engineering standard and the applicable operations requirements, maintenance protocols, and
response actions.
Bornite Project – Current Activities
The 2014 exploration field season program also saw us undertake a significant drill core re-sampling and re-
assaying program at the Bornite Project consisting of approximately 13,000 meters in 37 historical drill holes, which
were originally drilled by Kennecott on the Bornite Project between 1959 and 1976, and submitted the samples to
ALS for a complete 42 element Induced Coupled Plasma analysis. During this period, Kennecott was focused on
identifying and quantifying high-grade copper mineralization. Given its focus on identifying very high-grade copper
mineralization, Kennecott did not focus its exploration efforts on sampling and assaying lower-grade (<1%)
disseminated copper mineralization.
During the 2014 field season, we submitted 5,819 samples for assaying. Of the submitted samples, 5,134 (11,149
meters) were from previously un-sampled and un-assayed drill core. The remaining 685 samples (1,503 meters)
were from drill core that was previously sampled by Kennecott and sent for re-assaying to confirm results. Of the
11,149 meters of historic drill core previously unsampled and unassayed drill core , 5 holes had intervals of copper
grading more than 0.5% copper, and 21 holes contained mineralization grading more than 0.2% copper.
The objectives of the re-logging/re-sampling program were threefold: 1) to identify additional low-grade (<1%
copper) near-surface mineralized material which had not been previously sampled; 2) to confirm and conduct a
QA/QC program on the historical sample results; and 3) to acquire a full geochemical data suite for the Ruby Creek
zone which can be utilized in future geological modeling. The re-logging and re-sampling program has confirmed
previously known higher-grade copper intervals (>1% copper) and extended the known near-surface lower-grade
copper halo. It is anticipated that these results will add lower-grade mineralization to the Bornite Project mineral
inventory as well as reduce the strip ratio in a potential open pit by converting zero grade material to low-grade
material.
The 2014 logging and sampling campaign followed consistent sampling methodology, assay and analytical
procedures as described above in 2011 - 2013.
We also maintained our stream gauging and meteorological stations allowing us to continue our environmental
baseline data collection in the region.
Item 3. LEGAL PROCEEDINGS
We are not aware of any material pending or threatened litigation or of any proceedings known to be contemplated
by governmental authorities that are, or would be, likely to have a material adverse effect upon us or our operations,
51
taken as a whole. There are no material proceedings pursuant to which any of our directors, officers or affiliates or
any owner of record or beneficial owner of more than 5% of our securities or any associate of any such director,
officer or security holder is a party adverse to us or has a material interest adverse to us.
Item 4. MINE SAFETY DISCLOSURES
Operations are subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under the
Federal Mine Safety and Health Act of 1977 (the “Mine Act”). At our current stage of exploration, we are not yet
subject to MSHA.
Companies required to file periodic reports under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), that operate mines regulated under the Mine Act are required to make certain disclosures pursuant to Section
1503(a) of Dodd-Frank. We have nothing to disclose pursuant to Section 1503(a) of Dodd-Frank for the fiscal year
ended November 30, 2014.
52
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Price Range of Common Shares
The NovaCopper Shares are listed on the TSX and the NYSE-MKT under the symbol “NCQ”. On February 2, 2015,
there were 1,493 holders of record of our shares, which does not include shareholders for which shares are held in
nominee or street name. The following tables set out the market price range of the Common Shares on the TSX and
NYSE-MKT for the 12 months prior to the date hereof.
Fiscal Quarter
April 25 – May 31, 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
December 2014 – February 2, 2015
NYSE-MKT
TSX (C$)
High
3.73
2.84
2.90
2.28
2.10
2.07
2.08
2.03
1.50
1.25
1.23
0.64
Low
2.45
1.70
1.79
1.75
1.66
1.66
1.55
1.22
0.94
0.85
0.60
0.41
High
5.16
2.81
2.90
2.19
2.14
2.20
2.18
2.15
1.68
1.35
1.34
0.75
Low
2.40
1.67
1.76
1.75
1.69
1.72
1.60
1.36
0.96
0.96
0.69
0.53
On February 2, 2015, the closing price of our Common Shares on the TSX was CDN$0.64 per Common Share and
on the NYSE-MKT was $0.52 per Common Share.
Dividend Policy
We have not declared or paid any dividends on our Common Shares. Our current business plan requires that for the
foreseeable future, any future earnings be reinvested to finance the growth and development of our business. We
will not declare or pay any dividends until such time as our cash flow exceeds our capital requirements and will
depend upon, among other things, conditions then existing including earnings, financial condition, restrictions in
financing arrangements, business opportunities and conditions and other factors, or our Board determines that our
shareholders could make better use of the cash.
53
Securities Authorized for Issuance under Equity Compensation Plans
The following table is as of February 2, 2015.
Number of securities to be
issued upon exercise of
outstanding options, warrants
and rights
Weighted-average exercise
price of outstanding options,
warrants and rights
Plan category
Number of securities
remaining available for future
issuance under equity
compensation plans (excluding
securities reflected in column
(a))
Equity
plans
security holders
compensation
by
approved
Equity
compensation
plans not approved by
security holders
(a)
4,391,238
-
Total
4,391,238
Stock Performance Graph
(b)
$0.57]
-
$0.57
(c)
4,703,817
-
4,703,817
The following graph compares the percentage change in the Company’s cumulative total shareholder return on its
NovaCopper Shares with the cumulative total return of the S&P/TSX Composite Index, assuming the reinvestment
of dividends. The performance chart assumes that C$100 per share was invested on May 31, 2012, in (i) the
Company’s Common Shares at the closing price of the Common Shares on such date of C$2.40 per share, as quoted
on the TSX; (ii) the S&P/TSX Composite Index; (iii) the S&P/TSX Global Base Metals Index USD; (iv) the
S&P/TSX Venture Composite Index.
Exchange Controls
There are no governmental laws, decrees or regulations in Canada that restrict the export or import of capital,
including foreign exchange controls, or that affect the remittance of dividends, interest or other payments to non-
resident holders of the securities of NovaCopper, other than Canadian withholding tax.
Certain Canadian Federal Income Tax Considerations for U.S. Holders
The following is a general summary of the principal Canadian federal income tax considerations generally
applicable under Income Tax Act (Canada) (the “Tax Act”) to a holder of Common Shares, each of whom, at all
54
relevant times, for the purposes of the Tax Act, holds such Common Shares as capital property, deals at arm’s length
with the Company, is not affiliated with the Company and, for purposes of the Tax Act, is not, and is not deemed to
be, a resident of Canada and has not and will not use or hold or be deemed to use or hold the Common Shares in the
course of carrying on business in Canada (a “Non-Resident Holder”). Special rules, which are not discussed below,
may apply to a non-resident of Canada that is an insurer which carries on business in Canada and elsewhere.
The Common Shares will generally be considered capital property to a Non-Resident Holder unless either (i) the
Non-Resident Holder holds the Common Shares in the course of carrying on a business of buying and selling
securities or (ii) the Non-Resident Holder has acquire the Common Shares in a transaction or transactions
considered to be an adventure or concern in the nature of trade.
The term “U.S. Holder,” for the purposes of this section, means a Non-Resident Holder who, for purposes of the
Canada-United States Income Tax Convention (1980) as amended, (the “Convention”), is at all relevant times a
resident of the United States and is a “qualifying person” within the meaning of the Convention. In some
circumstances, fiscally transparent entities (including limited liability companies) will be entitled to benefits under
the Convention. U.S. Holders are urged to consult with their own tax advisors to determine their entitlement to
benefits under the Convention based on their particular circumstances.
This summary is based on the current provisions of the Tax Act, the regulations thereunder (the “Regulations”), the
current provisions of the Convention, counsel’s understanding of the current published administrative policies and
assessing practices of the Canada Revenue Agency (the “CRA”) publicly available prior to the date hereof.
This summary also takes into account all specific proposals to amend the Tax Act and Regulations publicly
announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (collectively, the “Proposed
Tax Amendments”). No assurances can be given that the Proposed Tax Amendments will be enacted or will be
enacted as proposed. Other than the Proposed Tax Amendments, this summary does not take into account or
anticipate any changes in law or the administration policies or assessing practice of CRA, whether by judicial,
legislative, governmental or administrative decision or action, nor does it take into account provincial, territorial or
foreign income tax legislation or considerations, which may differ significantly from those discussed herein.
This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax
advice to any particular U.S. Holder and no representations with respect to the income tax consequences to any
particular U.S. Holder are made. This summary is not exhaustive of all Canadian federal income tax
considerations. Accordingly, U.S. Holders should consult their own tax advisors with respect to their own
particular circumstances. The discussion below is qualified accordingly.
Disposition of Common Shares
A Non-Resident Holder will not be subject to tax under the Tax Act in respect of any capital gain realized by such
Non-Resident Holder on a disposition of the Common Shares, nor will capital losses arising from the disposition be
recognized under the Tax Act, unless the Common Shares constitute “taxable Canadian property” (as defined in the
Tax Act) of the Non-Resident Holder at the time of disposition and the Non-Resident Holder is not entitled to relief
under an applicable income tax treaty or convention. As long as the shares are then listed on a designated stock
exchange (which currently includes the TSX and the NYSE-MKT) at the time of disposition, the Common Shares
generally will not constitute taxable Canadian property of a Non-Resident Holder, unless at any time during the 60-
month period immediately preceding the disposition: (i) the Non-Resident Holder, persons with whom the
Non-Resident Holder did not deal at arm’s length, partnerships in which the taxpayer or persons with whom the
taxpayer did not deal at arm’s length holds a membership interest directly or indirectly through one or more
partnerships, or the Non-Resident Holder together with all such persons, owned or was considered to own 25% or
more of the issued shares of any class or series of shares of the capital stock of the Company; and (ii) more than
50% of the fair market value of the Common Shares was determined directly or indirectly from one or any
combination of real or immovable property situated in Canada, “Canadian resource properties” (as determined in the
Tax Act), “timber resource properties” (as defined in the Tax Act) or a options in respect of, or interests in, or civil
law rights in, such properties, whether or not it exists.
If the Common Shares are taxable Canadian property to a Non-Resident Holder, any capital gain realized on the
disposition or deemed disposition of such shares, may not be subject to Canadian federal income tax pursuant to the
terms of an applicable income tax treaty or convention between Canada and the country of residence of a Non-
Resident Holder, including the Convention.
55
A Non-Resident Holder whose shares are taxable Canadian property should consult their own advisors.
Dividends on Common Shares
Under the Tax Act, dividends on shares paid or credited to a Non-Resident Holder will be subject to Canadian
withholding tax at the rate of 25% of the gross amount of the dividends. This withholding tax may be reduced
pursuant to the terms of an applicable income tax treaty or convention between Canada and the country of residence
of a Non-Resident Holder. Under the Convention, a U.S. Holder will generally be subject to Canadian withholding
tax at a rate of 15% of the gross amount of such dividends. In addition, under the Convention, dividends may be
exempt from Canadian non-resident withholding tax if paid to certain U.S. Holders that are qualifying religious,
trusts, companies,
scientific,
organizations or arrangements operated exclusively to administer or provide pension, retirement or employee
benefits that are exempt from tax in the United States and that have complied with specific administrative
procedures.
tax-exempt organizations and qualifying
literary, educational or charitable
Certain U.S. Federal Income Tax Considerations
The following is a general summary of certain anticipated U.S. federal income tax considerations applicable to a U.S.
Holder (as defined below) arising from and relating to the acquisition, ownership and disposition of Common Shares.
This summary is for general information purposes only and does not purport to be a complete analysis or listing of
all potential U.S. federal income tax considerations that may apply to a U.S. Holder as a result of acquisition of
Common Shares. Furthermore, this summary does not take into account the individual facts and circumstances of
any particular U.S. Holder that may affect the U.S. federal income tax considerations applicable to such U.S. Holder
of Common Shares. Except as specified below, this summary does not discuss applicable tax reporting
requirements. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal
income tax advice with respect to any U.S. Holder. U.S. Holders should consult their own tax advisors regarding the
U.S. federal, U.S. state and local, and foreign tax consequences relating to the acquisition, ownership and disposition
of Common Shares.
No ruling from the U.S. Internal Revenue Service (the “IRS”) or legal opinion has been requested, or will be
obtained, regarding the potential U.S. federal income tax considerations applicable to U.S. Holders as discussed in
this summary. This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is
different from, and contrary to, the positions taken in this summary. In addition, because the authorities on which
this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or
more of the positions taken in this summary.
Scope of this Summary
Authorities
This summary is based on the U.S. Internal Revenue , as amended (“Code”), regulations promulgated by the
Department of the Treasury (whether final, temporary or proposed) (“Treasury Regulations”), U.S. court decisions,
published rulings and administrative positions of the IRS, and the Convention, that are applicable and, in each case,
in effect as of the date of this document. Any of the authorities on which this summary is based could be changed in
a material and adverse manner at any time, and any such change could be applied on a retroactive or prospective
basis, which could affect the U.S. federal income tax considerations described in this summary. This summary does
not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be
applied on a retroactive basis.
U.S. Holders
For purposes of this section, a “U.S. Holder” is a beneficial owner of Common Shares that, for U.S. federal income
tax purposes, is (a) an individual who is a citizen or resident of the United States for U.S. federal income tax
purposes; (b) a corporation, or other entity classified as a corporation for U.S. federal income tax purposes, that is
created or organized in or under the laws of the United States or any state in the United States, including the District
of Columbia; (c) an estate if the income of such estate is subject to U.S. federal income tax regardless of the source
of such income; or (d) a trust if (i) such trust has validly elected to be treated as a U.S. person for U.S. federal
56
income tax purposes, or (ii) a U.S. court is able to exercise primary supervision over the administration of such trust
and one or more U.S. persons have the authority to control all substantial decisions of such trust.
Non-U.S. Holders
For purposes of this summary, a “Non-U.S. Holder” is a beneficial owner of Common Shares that is neither a U.S.
Holder nor a U.S. partnership (or other “pass-through” entity). This summary does not address the U.S. federal
income tax considerations applicable to Non-U.S. Holders relating to the acquisition, ownership and disposition of
Common Shares. Accordingly, Non-U.S. Holders should consult their own tax advisors regarding the U.S. federal,
U.S. state and local, and foreign tax consequences (including the potential application of and operation of any tax
treaties) relating to the acquisition, ownership, and disposition of Common Shares.
U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed
This summary does not address the U.S. federal income tax considerations applicable to U.S. Holders that are subject
to special provisions under the Code, including (a) U.S. Holders that are tax-exempt organizations, qualified
retirement plans, individual retirement accounts or other tax-deferred accounts; (b) U.S. Holders that are financial
institutions, underwriters, insurance companies, real estate investment trusts or regulated investment companies or
that are broker-dealers, dealers, or traders in securities or currencies that elect to apply a mark-to-market accounting
method; (c) U.S. Holders that have a “functional currency” other than the U.S. dollar; (d) U.S. Holders that own
Common Shares as part of a straddle, hedging transaction, conversion transaction, constructive sale or other
arrangement involving more than one position; (e) U.S. Holders that acquired Common Shares in connection with
the exercise of employee stock options or otherwise as compensation for services; (f) U.S. Holders that hold
Common Shares other than as a capital asset (generally property held for investment purposes) within the meaning of
Section 1221 of the Code; or (g) U.S. Holders that own, directly, indirectly or by attribution, 10% or more, by voting
power or value, of the outstanding shares of the Company. The summary below also does not address the impact on
persons who are U.S. expatriates or former long-term residents of the United States subject to Section 877 of the
Code. U.S. Holders and others that are subject to special provisions under the Code, including U.S. Holders
described immediately above, should consult their own tax advisors.
If an entity that is classified as a partnership (or other “pass-through” entity) for U.S. federal income tax purposes
holds Common Shares, the U.S. federal income tax consequences applicable to such partnership (or “pass-through”
entity) and the partners of such partnership (or owners of such “pass-through” entity) generally will depend on the
activities of the partnership (or “pass-through” entity) and the status of such partners (or owners). Partners of entities
that are classified as partnerships (and owners of “pass-through” entities) for U.S. federal income tax purposes
should consult their own tax advisors regarding the U.S. federal income tax consequences relating to the acquisition,
ownership and disposition of Common Shares.
Tax Consequences Other than U.S. Federal Income Tax Consequences Not Addressed
This summary does not address the U.S. state and local, U.S. estate and gift, U.S. alternative minimum tax, or
foreign tax consequences to U.S. Holders relating to the acquisition, ownership, and disposition of Common Shares.
Each U.S. Holder should consult its own tax advisor regarding the U.S. state and local, U.S. estate and gift, U.S.
federal alternative minimum tax and foreign tax consequences relating to the acquisition, ownership, and disposition
of Common Shares.
U.S. Federal Income Tax Consequences of the Acquisition, Ownership and Disposition of Common Shares
Distributions on Common Shares
Subject to the PFIC rules discussed below, a U.S. Holder that receives a distribution, including a constructive
distribution, with respect to a Common Share will be required to include the amount of such distribution in gross
income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent
of the current or accumulated “earnings and profits” of the Company, as computed for U.S. federal income tax
purposes. To the extent that a distribution exceeds the current and accumulated “earnings and profits” of the
Company, such distribution will be treated first as a tax-free return of capital to the extent of a U.S. Holder’s tax
basis in the Common Shares and thereafter as a gain from the sale or exchange of such Common Shares (see “Sale or
Other Taxable Disposition of Common Shares” below). However, the Company does not intend to maintain the
calculations of earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder
57
should therefore assume that any distribution by the Company with respect to the Common Shares will constitute
ordinary dividend income. Subject to applicable limitations, dividends paid by the Company to non-corporate U.S.
Holders, including individuals, generally will be eligible for the preferential tax rates applicable to long-term capital
gains for dividends, provided certain holding period and other conditions are satisfied, including that the Company
not be classified as a PFIC (as discussed below) in the tax year of distribution or in the preceding tax year.
Dividends received on Common Shares by corporate U.S. Holders will not be eligible for the “dividends received
deduction”. The dividend rules are complex, and each U.S. Holder should consult its own tax advisor regarding the
application of such rules.
Sale or Other Taxable Disposition of Common Shares
Subject to the PFIC rules discussed below, upon the sale or other taxable disposition of Common Shares a U.S.
Holder generally will recognize capital gain or loss in an amount equal to the difference between (a) the amount of
cash plus the fair market value of any property received and (b) its tax basis in such Common Shares sold or
otherwise disposed of. Such gain generally will be treated as “U.S. source” for purposes of applying the U.S. foreign
tax credit rules unless the gain is subject to tax in Canada and is re-sourced as “foreign source” under the Convention
and such U.S. Holder elects to treat such gain or loss as “foreign source” (see a more detailed discussion at “Foreign
Tax Credit” below). Any such gain or loss generally will be capital gain or loss, which will be long-term capital gain
or loss if, at the time of the sale or other disposition, such Common Shares are held for more than one year.
Preferential tax rates apply to long-term capital gains of a U.S. Holder that is an individual, estate, or trust. There are
currently no preferential tax rates for long-term capital gains of a U.S. Holder that is a corporation. Deductions for
capital losses are subject to significant limitations under the Code.
Foreign Tax Credit
A U.S. Holder who pays (whether directly or through withholding) Canadian income tax with respect to dividends
paid on the Common Shares generally may elect to deduct or credit such tax. This election is made on a year-by-
year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a
year.
Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the
proportionate share of a U.S. Holder’s U.S. federal income tax liability that such U.S. Holder’s “foreign source”
taxable income bears to such U.S. Holder’s worldwide taxable income. In applying this limitation, a U.S. Holder’s
various items of income and deduction must be classified, under complex rules, as either “foreign source” or “U.S.
source”. In addition, this limitation is calculated separately with respect to specific categories of income. Dividends
paid by the Company generally will constitute “foreign source” income and generally will be categorized as “passive
category income”. However, and subject to certain exceptions, a portion of the dividends paid by a foreign
corporation will be treated as U.S. source income for United States foreign tax credit purposes, in proportion to its
U.S. source earnings and profits, if United States persons own, directly or indirectly, 50 percent or more of the voting
power or value of the foreign corporation’s shares. A portion of any dividends paid with respect to the Common
Shares may be treated as U.S. source income under these rules, which may limit the ability of a U.S. Holder to claim
a foreign tax credit for any Canadian withholding taxes payable in respect of such amount. Because the foreign tax
credit rules are complex, U.S. Holders should consult their own tax advisors regarding the foreign tax credit rules,
including the source of any dividends paid to U.S. Holders.
Subject to certain specific rules, foreign income and withholding taxes paid with respect to any distribution in respect
of stock in a PFIC should qualify for the foreign tax credit. The rules relating to distributions by a PFIC are
complex, and a U.S. Holder should consult with its own tax advisor with respect to any distribution received from a
PFIC.
Receipt of Foreign Currency
The amount of any distribution paid in foreign currency to a U.S. Holder in connection with the ownership of
Common Shares, or on the sale, exchange or other taxable disposition of Common Shares, generally will be equal to
the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of actual or
constructive receipt (regardless of whether such foreign currency is converted into U.S. dollars at that time). If the
foreign currency received is not converted into U.S. dollars on the date of receipt, a U.S. Holder will have a basis in
the foreign currency equal to its U.S. dollar value on the date of receipt. A U.S. Holder that receives foreign
currency and converts such foreign currency into U.S. dollars at a conversion rate other than the rate in effect on the
58
date of receipt may have a foreign currency exchange gain or loss, which generally would be treated as U.S. source
ordinary income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual
method with respect to foreign currency received upon the sale, exchange or other taxable disposition of Common
Shares. U.S. Holders should consult their own U.S. tax advisors regarding the U.S. federal income tax consequences
of receiving, owning and disposing of foreign currency.
Additional Tax on Passive Income
Individuals, estates and certain trusts whose income exceeds certain thresholds will be required to pay a 3.8%
Medicare surtax on “net investment income” including, among other things, dividends and net gain from disposition
of property (other than property held in certain trades or businesses). U.S. Holders should consult with their own tax
advisors regarding the effect, if any, of this tax on their ownership and disposition of Common Shares.
Passive Foreign Investment Company Rules
If the Company is considered a PFIC within the meaning of Section 1297 of the Code at any time during a U.S.
Holder’s holding period, then certain different and potentially adverse tax consequences would apply to such U.S.
Holder’s acquisition, ownership and disposition of Common Shares.
PFIC Status of the Company
The Company generally will be a PFIC if, for a given tax year, (a) 75% or more of the gross income of the Company
for such tax year is passive income or (b) 50% or more of the assets held by the Company either produce passive
income or are held for the production of passive income, based on the fair market value of such assets. “Gross
income” generally includes all revenues less the cost of goods sold plus income from investments and from
incidental or outside operations or sources, and “passive income” includes, for example, dividends, interest, certain
rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities
transactions. Active business gains arising from the sale of commodities generally are excluded from passive income
if substantially all (85% or more) of a foreign corporation’s commodities are stock in trade or inventory, depreciable
property used in a trade or business, or supplies regularly used or consumed in a trade or business, and certain other
requirements are satisfied.
For purposes of the PFIC income test and asset test described above, if the Company owns, directly or indirectly,
25% or more of the total value of the outstanding shares of another corporation, the Company will be treated as if it
(a) held a proportionate share of the assets of such other corporation and (b) received directly a proportionate share
of the income of such other corporation. In addition, for purposes of the PFIC income test and asset test described
above, “passive income” does not include any interest, dividends, rents or royalties that are received or accrued by
the Company from a “related person” (as defined in Section 954(d)(3) of the Code), to the extent such items are
properly allocable to the income of such related person that is not passive income.
Under certain attribution rules, if the Company is a PFIC, U.S. Holders will be deemed to own their proportionate
share of any subsidiary of the Company which is also a PFIC (a “Subsidiary PFIC”), and will be subject to U.S.
federal income tax on (a) a distribution on the shares of a Subsidiary PFIC and (b) a disposition of shares of a
Subsidiary PFIC, both as if the U.S. Holder directly held the shares of such Subsidiary PFIC.
The Company believes that it was not a PFIC for the tax years ended November 30, 2012, 2013, and 2014, but may
be a PFIC in future tax years. The determination of whether the Company (or a subsidiary of the Company) was, or
will be, a PFIC for a tax year depends, in part, on the application of complex U.S. federal income tax rules, which are
subject to differing interpretations. In addition, whether the Company (or subsidiary) will be a PFIC for any tax year
depends on the assets and income of the Company (and each such subsidiary) over the course of each such tax year
and, as a result, cannot be predicted with certainty as of the date of this document. Accordingly, there can be no
assurance that the IRS will not challenge any determination made by the Company (or subsidiary) concerning its
PFIC status or that the Company (and any subsidiary) was not, or will not be, a PFIC for any tax year. U.S. Holders
should consult their own tax advisors regarding the PFIC status of the Company and any subsidiary of the Company.
Default PFIC Rules under Section 1291 of the Code
If the Company is a PFIC, the U.S. federal income tax consequences to a U.S. Holder of the acquisition, ownership
and disposition of Common Shares will depend on whether such U.S. Holder makes a QEF election or makes a
59
mark-to-market election under Section 1296 of the Code (a “Mark-to-Market Election”) with respect to Common
Shares. A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in
this summary as a “Non-Electing U.S. Holder”.
A Non-Electing U.S. Holder will be subject to the rules of Section 1291 of the Code with respect to (a) any gain
recognized on the sale or other taxable disposition of Common Shares and (b) any excess distribution paid on the
Common Shares. A distribution generally will be an “excess distribution” to the extent that such distribution
(together with all other distributions received in the current tax year) exceeds 125% of the average distributions
received during the three preceding tax years (or during a U.S. Holder’s holding period for the Common Shares, if
shorter).
If the Company is a PFIC, under Section 1291 of the Code any gain recognized on the sale or other taxable
disposition of Common Shares (including an indirect disposition of shares of a Subsidiary PFIC), and any excess
distribution paid on Common Shares (or a distribution by a Subsidiary PFIC to its shareholder that is deemed to be
received by a U.S. Holder) must be ratably allocated to each day of a Non-Electing U.S. Holder’s holding period for
the Common Shares. The amount of any such gain or excess distribution allocated to the tax year of disposition or
excess distribution and to years before the Company became a PFIC, if any, would be taxed as ordinary income. The
amounts allocated to any other tax year would be subject to U.S. federal income tax at the highest tax applicable to
ordinary income in each such year, and an interest charge would be imposed on the tax liability for each such year,
calculated as if such tax liability had been due in each such year. A Non-Electing U.S. Holder that is not a
corporation must treat any such interest paid as “personal interest”, which is not deductible.
If the Company is a PFIC for any tax year during which a Non-Electing U.S. Holder holds Common Shares, the
Company will continue to be treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of whether
the Company ceases to be a PFIC in one or more subsequent years. If the Company ceases to be a PFIC, a Non-
Electing U.S. Holder may terminate this deemed PFIC status with respect to Common Shares by electing to
recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above) as if such
Common Shares were sold on the last day of the last tax year for which the Company was a PFIC.
Under proposed Treasury Regulations, if a U.S. Holder has an option, warrant or other right to acquire stock of a
PFIC, such option, warrant or right is considered to be PFIC stock subject to the default rules of Section 1291 of the
Code. Under rules described below, if the Company was a PFIC, the holding period for the option, warrant or other
right would begin on the day after the date a U.S. Holder acquired the option, warrant or other right. This would
impact the availability of the QEF Election and Mark-to-Market Election with respect to an option, warrant or other
right. Thus, a U.S. Holder would have to account for an option, warrant or other right and Common Shares under the
PFIC rules and the applicable elections differently (see discussion below under “QEF Election” and “Market-to-
Market Election”.)
QEF Election
In the event the Company is a PFIC and a U.S. Holder makes a QEF Election for the first tax year in which its
holding period of its Common Shares begins, such U.S. Holder generally will not be subject to the rules of
Section 1291 of the Code discussed above with respect to its Common Shares. However, a U.S. Holder that makes a
QEF Election will be subject to U.S. federal income tax on such U.S. Holder’s pro rata share of (a) the net capital
gain of the Company, which will be taxed as long-term capital gain to such U.S. Holder, and (b) the ordinary
earnings of the Company, which will be taxed as ordinary income to such U.S. Holder. Generally, “net capital gain”
is the excess of (a) net long-term capital gain over (b) net short-term capital gain, and “ordinary earnings” are the
excess of (a) “earnings and profits” over (b) net capital gain. A U.S. Holder that makes a QEF Election will be
subject to U.S. federal income tax on such amounts for each tax year in which the Company is a PFIC, regardless of
whether such amounts are actually distributed to such U.S. Holder by the Company. However, a U.S. Holder that
makes a QEF Election may, subject to certain limitations, elect to defer payment of current U.S. federal income tax
on such amounts, subject to an interest charge. If such U.S. Holder is not a corporation, any such interest paid will
be treated as “personal interest”, which is not deductible.
A U.S. Holder that makes a QEF Election generally (a) may receive a tax-free distribution from the Company to the
extent that such distribution represents “earnings and profits” of the Company that were previously included in
income by the U.S. Holder because of such QEF Election and (b) will adjust such U.S. Holder’s tax basis in the
Common Shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF
60
Election. In addition, a U.S. Holder that makes a QEF Election generally will recognize capital gain or loss on the
sale or other taxable disposition of Common Shares.
The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election,
will depend on whether such QEF Election is timely. A QEF Election will be treated as “timely” if it is made for the
first year in the U.S. Holder’s holding period for the Common Shares in which the Company was a PFIC. A U.S.
Holder may make a timely QEF Election by filing the appropriate QEF Election documents at the time such U.S.
Holder files a U.S. federal income tax return for such year.
A QEF Election will apply to the tax year for which such QEF Election is made and to all subsequent tax years,
unless such QEF Election is invalidated or terminated or the IRS consents to revocation of such QEF Election. If a
U.S. Holder makes a QEF Election and, in a subsequent tax year, the Company ceases to be a PFIC, the QEF
Election will remain in effect (although it will not be applicable) during those tax years in which the Company is not
a PFIC. Accordingly, if the Company becomes a PFIC in a subsequent tax year, the QEF Election will be effective,
and the U.S. Holder will be subject to the QEF rules described above during a subsequent tax year in which the
Company qualifies as a PFIC.
As discussed above, under proposed Treasury Regulations, if a U.S. Holder has an option, warrant or other right to
acquire stock of a PFIC, such option, warrant or right is considered to be PFIC stock subject to the default rules of
Section 1291 of the Code on its disposition. However, a holder of an option, warrant or other right to acquire stock
of a PFIC may not make a QEF Election that will apply to the option, warrant or other right to acquire PFIC stock.
In addition, under proposed Treasury Regulations, if a U.S. Holder holds an option, warrant or other right to acquire
stock of a PFIC, the holding period with respect to shares of stock of the PFIC acquired upon exercise of such
option, warrant or other right will include the period that the option, warrant or other right was held. U.S. Holders
should consult their own tax advisors regarding the application of the PFIC rules to Common Shares.
The Company will make available to U.S. Holders, upon their written request, timely and accurate information as to
its status as a PFIC, and will provide to a U.S. Holder all information and documentation that a U.S. Holder making a
QEF Election with respect to the Company, and any Subsidiary PFIC in which the Company owns, directly or
indirectly, more than 50% of such Subsidiary PFIC’s total aggregate voting power, is required to obtain for U.S.
federal income tax purposes in the event it is a PFIC. However, U.S. Holders should be aware that the Company can
provide no assurances that it will provide any such information relating to any Subsidiary PFIC, in which the
Company owns, directly or indirectly, 50% or less of such Subsidiary PFIC’s aggregate voting power. Because the
Company may own shares in one or more Subsidiary PFICs, and may acquire shares in one or more Subsidiary
PFICs in the future, they will continue to be subject to the rules discussed above with respect to the taxation of gains
and excess distributions with respect to any Subsidiary PFIC for which the U.S. Holders do not obtain the required
information. U.S. Holders should consult their tax advisor regarding the availability of, and procedure for making, a
QEF Election with respect to the Company and any Subsidiary PFIC.
Mark-to-Market Election
A U.S. Holder may make a Mark-to-Market Election only if the Common Shares are marketable stock. The
Common Shares generally will be “marketable stock” if they are regularly traded on (a) a national securities
exchange that is registered with the SEC; (b) the national market system established pursuant to section 11A of the
Securities and Exchange Act of 1934; or (c) a foreign securities exchange that is regulated or supervised by a
governmental authority of the country in which the market is located, provided that (i) such foreign exchange has
trading volume, listing, financial disclosure and other requirements and the laws of the country in which such foreign
exchange is located, together with the rules of such foreign exchange, ensure that such requirements are actually
enforced; and (ii) the rules of such foreign exchange ensure active trading of listed stocks. If such stock is traded on
such a qualified exchange or other market, such stock generally will be “regularly traded” for any calendar year
during which such stock is traded, other than in de minimis quantities, on at least 15 days during each calendar
quarter. Each U.S. Holder should consult its own tax advisor regarding whether the Common Shares constitute
marketable stock.
A U.S. Holder that makes a Mark-to-Market Election with respect to its Common Shares generally will not be
subject to the rules of Section 1291 of the Code discussed above. However, if a U.S. Holder does not make a Mark-
to-Market Election beginning in the first tax year of such U.S. Holder’s holding period for Common Shares or such
U.S. Holder has not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to
certain dispositions of, and distributions on, the Common Shares.
61
A U.S. Holder that makes a Mark-to-Market Election will include in ordinary income, for each tax year in which the
Company is a PFIC, an amount equal to the excess, if any, of (a) the fair market value of the Common Shares, as of
the close of such tax year over (b) such U.S. Holder’s tax basis in such Common Shares. A U.S. Holder that makes a
Mark-to-Market Election will be allowed a deduction in an amount equal to the excess, if any, of (i) such U.S.
Holder’s adjusted tax basis in the Common Shares over (ii) the fair market value of such Common Shares (but only
to the extent of the net amount of previously included income as a result of the Mark-to-Market Election for prior tax
years).
U.S. Holders that make a Mark-to-Market Election generally also will adjust their tax basis in the Common Shares to
reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market Election. In
addition, upon a sale or other taxable disposition of Common Shares, a U.S. Holder that makes a Mark-to-Market
Election will recognize ordinary income or loss (not to exceed the excess, if any, of (a) the amount included in
ordinary income because of such Mark-to-Market Election for prior tax years over (b) the amount allowed as a
deduction because of such Mark-to-Market Election for prior tax years).
A Mark-to-Market Election applies to the tax year in which such Mark-to-Market Election is made and to each
subsequent tax year, unless the Common Shares cease to be “marketable stock” or the IRS consents to revocation of
such election. U.S. Holders should consult their own tax advisors regarding the availability of, and procedure for
making, a Mark-to-Market Election.
Although a U.S. Holder may be eligible to make a Mark-to-Market Election with respect to Common Shares, no
such election may be made with respect to the stock of any Subsidiary PFIC that a U.S. Holder is treated as owning
because such stock is not marketable. Hence, the Mark-to-Market Election will not be effective to eliminate the
interest charge described above with respect to deemed dispositions of Subsidiary PFIC stock or distributions from a
Subsidiary PFIC.
Other PFIC Rules
Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain
exceptions, would cause a U.S. Holder that had not made a timely QEF Election to recognize gain (but not loss)
upon certain transfers of Common Shares that would otherwise be tax-deferred (e.g., gifts and exchanges pursuant to
corporate reorganizations) in the event the Company is a PFIC during such U.S. Holder’s holding period for the
relevant shares. However, the specific U.S. federal income tax consequences to a U.S. Holder may vary based on the
manner in which Common Shares are transferred.
Certain additional adverse rules will apply with respect to a U.S. Holder if the Company is a PFIC, regardless of
whether such U.S. Holder makes a QEF Election. For example, under Section 1298(b)(6) of the Code, a U.S. Holder
that uses Common Shares as security for a loan will, except as may be provided in Treasury Regulations, be treated
as having made a taxable disposition of such Common Shares.
In any year in which the Company is classified as a PFIC, a U.S. Holder will be required to file an annual report with
the IRS containing such information as Treasury Regulations and/or other IRS guidance may require. U.S. Holders
should consult their own tax advisors regarding the requirements of filing such information returns under these rules,
including the requirement to file an IRS Form 8621.
In addition, a U.S. Holder who acquires Common Shares from a decedent will not receive a “step up” in tax basis of
such Common Shares to fair market value unless such decedent had a timely and effective QEF Election in place.
Special rules also apply to the amount of foreign tax credit that a U.S. Holder may claim on a distribution from a
PFIC.
The PFIC rules are complex, and U.S. Holders should consult their own tax advisors regarding the PFIC rules and
how they may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of
Common Shares in the event the Company is a PFIC at any time during such holding period for such Common
Shares.
62
Information Reporting, Backup Withholding Tax
Certain U.S. Holders are required to report information relating to an interest in Common Shares subject to certain
exceptions (including an exception for Common Shares held in accounts maintained by certain financial institutions),
by attaching a completed IRS Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for
each year in which they hold an interest in Common Shares. U.S. Holders are urged to consult their own tax
advisors regarding information reporting requirements relating to their ownership of Common Shares.
Payments made within the United States, or by a U.S. payor or U.S. middleman, of dividends on Common Shares,
and proceeds arising from certain sales or other taxable dispositions of Common Shares, may be subject to
information reporting and backup withholding tax, at the rate of 28%, if a U.S. Holder (a) fails to furnish such U.S.
Holder’s correct U.S. social security or other taxpayer identification number (generally on Form W-9); (b) furnishes
an incorrect U.S. taxpayer identification number; (c) is notified by the IRS that such U.S. Holder has previously
failed to properly report items subject to backup withholding tax; or (d) fails under certain circumstances to certify,
under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that
the IRS has not notified such U.S. Holder that it is subject to backup withholding tax. However, U.S. Holders that
are corporations generally are excluded from these information reporting and backup withholding tax rules. Any
amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holder’s
U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder timely furnishes the required
information to the IRS. U.S. Holders should consult their own tax advisors regarding the information reporting and
backup withholding tax rules.
Unregistered Sales of Equity Securities
On July 7, 2014, we closed a non-brokered private placement (the “Offering”) pursuant to which we issued and sold
to three existing shareholders (collectively, the “Investors”) an aggregate of 6,521,740 Units (each, a “Unit”) at a
purchase price per Unit of US$1.15 (the “Unit Price”), for gross proceeds of approximately $7.5 million, with each
Unit consisting of one common share in the capital of the Company (each, a “Share”) and one common share
purchase warrant, each entitling the holder, at its option, to purchase one additional Share (each, a “Warrant”).
The Warrants are exercisable for a period of five years from and after the closing at an exercise price of US$1.60 per
share, subject to certain adjustments (the “Exercise Price”). The Warrants have customary anti-dilution protections
including in the event of (i) certain distributions of cash and/or property made by the Company to its shareholders;
(ii) any rights offering at an offering price below 95% of the then current market price; (iii) any capital
reorganization; or (iv) any share reorganization. The Warrants also have weighted average anti-dilution protection
in the event that any subsequent equity financing (including an offering of derivative securities convertible into or
exercisable for equity), subject to certain exceptions, occurs following the closing at an offering price (including the
price of conversion or exercise of any derivative securities) below the Exercise Price; provided, however, that in no
circumstances shall the Exercise Price be adjusted below US$1.10.
The Offering was effected pursuant to the terms and provisions of unit purchase agreements negotiated separately
and entered into with each of the Investors on June 30, 2014.
The issuance and sale of the Units, Shares and Warrants (collectively, the “Securities”) has not been registered under
the Securities Act, and the Securities may not be offered or sold in the United States absent registration under or
exemption from the Securities Act and any applicable state securities laws. The Securities have been issued and sold
in reliance upon an exemption from registration afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of
Regulation D promulgated under the Securities Act, based on the following facts: each of the Investors has
represented that it is an accredited investor as defined in Rule 501 promulgated under the Securities Act, that it is
acquiring the Securities for investment only and not with a view towards, or for resale in connection with, the public
sale or distribution thereof in violation of applicable securities laws and that it has sufficient investment experience
to evaluate the risks of the investment; the Company used no advertising or general solicitation in connection with
the issuance and sale of the Securities to the Investors; and the Securities were issued as restricted securities.
Repurchase of Securities
During 2014, neither NovaCopper nor any affiliate of NovaCopper repurchased Common Shares of NovaCopper
registered under Section 12 of the Exchange Act.
63
Item 6. SELECTED FINANCIAL DATA
The selected financial data in the table below have been selected in part, from our consolidated financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States. The
selected financial data should be read in conjunction with those consolidated financial statements and the notes
thereto.
in thousands of dollars, except per share amounts
2014
$
Year ended November 30
2012
$
2013
$
2011
$
Results of operations
Loss and comprehensive loss for the
period
9,648
24,394
31,018
11,336
Basic and diluted loss per share
0.17
0.47
0.67
0.44
2010
$
3,340
0.14
Financial position
Working capital (deficit)
Total assets
Total long-term liabilities
Shareholders’ equity
4,846
36,826
-
35,847
5,423
38,899
-
37,157
21,190
55,696
-
53,723
(424)
31,772
-
31,251
(12,153)
26,607
11,098
3,296
64
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NovaCopper Inc.
(An Exploration-Stage Company)
Management’s Discussion & Analysis
For the Fourth Quarter and Year Ended November 30, 2014
(expressed in US dollars)
General
This Management’s Discussion and Analysis (“MD&A”) of NovaCopper Inc. (“NovaCopper” or “the Company”) is
dated February 5, 2015 and provides an analysis of our audited financial results for the year ended November
30, 2014 compared to the year ended November 30, 2013.
The following information should be read in conjunction with our November 30, 2014 audited consolidated
financial statements and related notes which were prepared in accordance with United States generally accepted
accounting principles (“U.S. GAAP”). A summary of the U.S. GAAP accounting policies are outlined in note 2 of
the audited consolidated financial statements. All amounts are in United States dollars unless otherwise stated.
Scott Petsel, P.Geo., an employee and the Upper Kobuk Mineral Projects Manager, is a Qualified Person under
National Instrument 43-101 - Standards of Disclosure for Mineral Projects (“NI 43-101”), and has approved the
scientific and technical information in this MD&A.
NovaCopper’s shares are listed on the Toronto Stock Exchange (“TSX”) and the NYSE-MKT under the symbol
“NCQ”. Additional information related to NovaCopper, including our annual report on Form 10-K, is available on
SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Description of business
We are a base metals exploration company focused on exploring and developing the Ambler mining district located
in Alaska, U.S.A. We conduct our operations through a wholly-owned subsidiary, NovaCopper US Inc.
(“NovaCopper US”). Our Upper Kobuk Mineral Projects, or UKMP Projects, consist of: i) the 100% owned Ambler
lands which host the Arctic copper-zinc-lead-gold-silver Project; and ii) the Bornite lands being explored under a
collaborative long-term agreement with NANA Regional Corporation, Inc. (“NANA”), a regional Alaska Native
Corporation, which host the Bornite carbonate-hosted copper Project.
We were formed in 2011 by NovaGold Resources Inc. (“NovaGold”) to hold the UKMP Projects, and were spun-out
to shareholders of NovaGold through a Plan of Arrangement effective April 30, 2012. NovaGold shareholders
received one NovaCopper common share for every six common shares of NovaGold held on the effective date of the
Plan of Arrangement.
Property review
Our principal assets, the UKMP Projects, are located in the Ambler mining district in Northwest Alaska. Our UKMP
Projects comprise approximately 352,943 acres (142,831 hectares) consisting of the Ambler and Bornite lands.
Arctic Project
The Ambler lands, which host a number of deposits, including the high-grade copper-zinc-lead-gold-silver Arctic
Project, and other mineralized targets within a 100 kilometer long volcanogenic massive sulfide (“VMS”) belt, are
owned by NovaCopper US. The Ambler lands are located in Northwestern Alaska and consist of 112,058 acres
(45,348 hectares) of Federal patented mining claims and State of Alaska mining claims, within which VMS
mineralization has been found.
On January 11, 2010, NovaGold purchased 100% of the Ambler lands. As consideration, NovaGold issued 931,098
common shares with a fair value of $5.0 million and agreed to make two cash payments to the vendor of
$12.0 million each in January 2011 and January 2012 for total consideration of $29.0 million. The January 2011
65
payment was made by NovaGold on January 7, 2011 and the January 2012 payment was made in advance by
NovaGold on August 5, 2011. Total fair value of the consideration was $26.5 million, including transaction costs
associated with the acquisition of $0.1 million. The vendor retained a 1% net smelter return royalty that the owner of
the property can purchase at any time for a one-time payment of $10.0 million.
We have recorded the Ambler lands as a mineral property with acquisition costs capitalized and exploration costs
expensed in accordance with our accounting policies. As a result of the spin-out of NovaCopper from NovaGold, the
interim consolidated financial statements have been presented under the continuity of interest basis of accounting
whereby the amounts are based on the amounts originally recorded by NovaGold as if we had held the property from
inception.
Bornite Project
On October 19, 2011, NovaCopper US and NANA signed a collaborative agreement to explore and develop the
Ambler mining district. Under the Exploration Agreement and Option to Lease (the “NANA Agreement”),
NovaCopper US acquired the exclusive right to explore the Bornite property and lands deeded to NANA through the
Alaska Native Claims Settlement Act (“ANCSA”), located adjacent to the Arctic Project, and the non-exclusive
right to access and entry onto NANA’s lands. The agreement establishes a framework for any future development of
either the Bornite Project or the Arctic Project. Both projects are included as part of a larger area of interest set forth
in the NANA Agreement.
As consideration, NovaCopper paid $4.0 million to NANA upon signing the NANA agreement and gave NANA the
right to appoint a member to NovaCopper’s board of directors within a five year period following our public listing
on a stock exchange. NANA has not exercised their right to appoint a board member at this time. Upon the decision
to proceed with development of a mine within the area of interest, NANA has a 120 day one time right to purchase
an ownership interest in the mine equal to between 16%-25% or retain a 15% net proceeds royalty which is payable
after NovaCopper has recovered certain historical costs, capital and cost of capital. Should NANA elect to purchase
an ownership interest in the mine, consideration will be payable based on the elected percentage purchased and the
costs incurred on the properties less $40.0 million, not to be less than zero. The parties would form a joint venture
and be responsible for all future costs incurred in connection with the mine, including capital costs of the mine,
based on each party’s pro-rata share. The completion of the agreement with NANA creates a total land package
which incorporates our Ambler lands with the adjacent Bornite and ANCSA lands for a total of approximately
352,900 acres (142,831 hectares).
NANA would also be granted a net smelter return royalty between 1% and 2.5% upon the execution of a mining
lease or a surface use agreement, the amount of which is determined by the particular area of land from which
production originates.
We have accounted for the Bornite property as a mineral property with acquisition costs capitalized and exploration
costs expensed.
Corporate developments
Financing
On July 7, 2014, we completed a non-brokered private placement with our three largest shareholders for $7.5
million in Units. Each Unit was priced at $1.15 per Unit and consisted of one common share and one common share
purchase warrant. Each common share purchase warrant entitles the holder to purchase one common share at a price
of $1.60 per share for a period of five years from the closing date. Net proceeds from the private placement were
approximately $7.2 million. The gross proceeds raised were allocated for the 12 months following closing to fund a
minimum of $2.7 million on program expenditures, $4.0 million on general and administrative expenses including
costs associated with the offering, and $0.8 million on one-time expenses incurred in reducing annual general and
administrative expenses. We are currently on track to meet our budgeted expenditures.
Long-term incentives
On September 9, 2014, the Board of Directors approved a grant of 1,620,000 stock options to employees and
directors.
66
Share issuances
Under the Plan of Arrangement, we committed to issue common shares to satisfy holders of NovaGold performance
share units (“PSUs”) and deferred shares units on record as of the close of business on April 27, 2012. When a share
unit vests, we committed to deliver one common share to such holder for every six shares of NovaGold the holder is
entitled to receive, pursuant to the warrant and share unit terms, rounded down to the nearest whole number. During
the year ended November 30, 2014, we issued 14,166 PSUs. As of November 30, 2014, no NovaGold PSUs remain
outstanding and 20,685 NovaGold DSUs remain outstanding, which will settle upon the NovaGold directors’
retirement.
Project activities
On March 18, 2014, we announced the release of an updated NI 43-101 compliant resource estimate for the Bornite
deposit and on April 1, 2014, we filed a NI 43-101 compliant technical report titled “NI 43-101 Technical Report on
the Bornite Project, Northwest Alaska, USA” dated effective March 18, 2014. This updated Bornite Project resource
estimation included the results of drilling completed and the re-logging and re-assaying program undertaken during
the 2013 field season. At a base case 0.50% copper cutoff grade, the Bornite Project is estimated to contain in-pit
indicated resources of 14.1 million tonnes at an average grade of 1.08% copper or 334 million lbs of contained
copper and in-pit inferred resources of 109.6 million tonnes at an average grade of 0.94% copper or 2.3 billion lbs of
contained copper. Resources are stated as contained within a pit shell developed using a metal price of $3.00/lb
copper, mining costs of $2.00/tonne, milling costs of $11/tonne, general and administrative cost of $5.00/tonne, 87%
metallurgical recoveries and an average pit slope of 43 degrees. In addition to the in-pit resources, at a base case
1.50% copper cutoff grade, the Bornite Project contains below-pit inferred resources of 55.6 million tonnes at an
average grade of 2.81% copper or 3.4 billion lbs of contained copper that may be amenable to underground
extraction methods. Resources are stated as potentially being economically viable in an underground mining
scenario based on a projected metal price of $3.00 per pound copper, underground mining costs of $50.00 per tonne,
milling costs of $11.00 per tonne, general and administrative of $5.00 per tonne, and an average metallurgical
recovery of 87%. See “Cautionary Note to United States Investors.”
During 2014, we focused efforts on supporting the Alaska Industrial Development Export Authority ("AIDEA”)
with their activities towards advancing the Ambler Mining District Industrial Access Road ("AMDIAR”) which is
anticipated to provide access to UKMP Projects. AIDEA continued to collect community input at meetings held
through the winter of 2013/2014 in various local villages. In late April 2014, AIDEA’s board of directors approved a
resolution authorizing AIDEA to proceed with an application for the Ambler road to the federal agencies that have
jurisdiction over the AMDIAR project and to engage a firm to prepare the environmental impact statement for the
project under the direction of the federal agencies. Environmental baseline studies were conducted by DOWL during
the summer field season in preparation for the submission of the environmental impact statement. The United States
Army Corps of Engineers (“USACE”) has selected HDR, Inc. as the third party environmental engineer to manage
the environmental impact statement process on behalf of the USACE.
The permitting document is substantially complete. In light of the recent drop in oil prices, the Government of
Alaska is reviewing all capital projects. We expect the permitting process will continue and expect to be able to
provide an update later in the first calendar quarter of 2015.
In early September 2014, we completed our 2014 re-logging program of approximately 13,000 meters in 37
historical drill holes at Bornite. Targeted historical holes were located within the near-surface Ruby Creek zone of
the Bornite deposit. This effort was a continuation of 2013’s program of re-sampling which targeted 33 drill holes
comprising 11,067 meters of core originally drilled and only selectively sampled by Kennecott between 1957 and
1975. The 2013 re-sampling program resulted in a significant increase in the amount of copper-bearing
mineralization at Bornite.
The objectives of the 2014 re-logging/re-sampling program were threefold: 1) to identify additional low-grade (<1%
copper) near-surface mineralized material which had not been previously sampled; 2) to confirm and conduct a
Quality Assurance/Quality Control program on the historical sample results; and 3) to acquire a full geochemical
data suite for the Ruby Creek zone which can be utilized in future geological modeling. The re-logging and re-
sampling program has confirmed previously known higher-grade copper intervals (>1% copper) and extended the
known near-surface lower-grade copper halo. Of the 37 selectively sampled historic drill holes, 5 holes had new
intervals of copper grading more than 0.5% copper, and 21 holes contained newly sampled mineralization grading
more than 0.2% copper. It is anticipated that these results will add lower-grade mineralization to the Company's
mineral inventory as well as reduce the strip ratio in a potential open pit by converting zero grade material to low-
67
grade material. A formal resource update will not be undertaken at this time but the information gathered from our
2014 work program will be incorporated into future studies.
We also continued to maintain our weather station and stream gauges in the region to continue our environmental
baseline data collection.
In Fiscal 2014, we expended $2.5 million on the UKMPs consisting of $1.2 million in wages and benefits, $0.4
million in project support expenses, $0.4 million in land maintenance and permit expenses, and $0.2 million in
geochemistry expenses.
Outlook
We plan to advance the Arctic deposit to feasibility over a two to three year period for a total investment of
approximately $20 million. We plan to invest approximately $8 to $10 million during the 2015 field season mainly
for drilling the Arctic in-pit resource from inferred to measured and indicated confidence levels to support the
classification of resources and collect Arctic in-pit geotechnical and metallurgical data. Funds will also be utilized
for environmental and engineering studies to gather information in preparation for a feasibility study. We will also
complete sufficient work to demonstrate the viability of a mining operation at Bornite, specifically with evaluating
potential synergies between the two sites and potentially lengthening the mine life of the UKMP Projects and the
Ambler mining district.
During 2015, we will also continue to focus efforts on supporting AIDEA in initiating the environmental impact
statement process in permitting the AMDIAR which is anticipated to provide access to UKMP Projects. With our
emphasis on local hiring, we continue to work closely with NANA on community relations and workforce
development strategies.
We do not currently generate operating cash flows. At November 30, 2014, we had cash and cash equivalents of
$5.1 million and working capital of $4.8 million. At January 31, 2015, we had approximately $4.2 million of cash
and cash equivalents. We will need to raise additional funds to continue operations and to support further
exploration and development of our projects and administration expenses. Based on the plan described above, we
are likely to require financing within the next twelve months. Future financings are anticipated through equity
financing, debt financing, convertible debt, or other means. There is no assurance that we will be successful in
obtaining additional financing, that sufficient funds will be available to us, or be available on favourable terms.
Summary of results
Selected expenses
Amortization
General and administrative
Mineral properties expense
Professional fees
Salaries
Salaries – stock-based compensation
Loss and comprehensive loss for the year
Basic and diluted loss per common share
Year ended
November 30,
2014
$
750
1,484
2,512
952
3,012
887
9,648
$0.17
in thousands of dollars,
except for per share amounts
Year ended
November 30,
2012
$
769
2,276
15,327
646
2,410
9,411
31,018
$0.67
Year ended
November 30,
2013
$
1,033
1,915
8,894
947
3,173
8,225
24,394
$0.47
For the year ended November 30, 2014, we reported a net loss of $9.6 million (or $0.17 basic and diluted loss per
common share) compared to a net loss of $24.4 million for the corresponding period in 2013 (or $0.47 basic and
diluted loss per common share) and a net loss of $31.0 million for the corresponding period in 2012 (or $0.67 basic
and diluted loss per common share). This variance was primarily due to a decrease in mineral property expenses,
stock-based compensation, and general and administration expenses for 2014 and 2013. This variance was primarily
due to the type of exploration program undertaken during the 2014 field season. The significant reduction in mineral
property expenses is related to the differing magnitude of the field programs at our UKMP Projects in 2014, 2013
and 2012. In 2014, we completed a re-sampling and re-assaying program of approximately 13,000 meters of
historical drill core. In 2013, we completed an exploration drilling campaign at Bornite of 8,142 meters and a re-
68
sampling and re-assaying program comprising 11,067 meters of historical drill core, and in 2012, we completed an
exploration drilling program mainly at Bornite of 17,209 meters. Mineral property expenses consist of direct
drilling, personnel, community, resource reporting and other exploration expenses, as well as indirect project
support expenses such as fixed wing charters, helicopter support, fuel, and other camp operation costs.
The other significant reduction in expenses is from a charge of $0.9 million in stock-based compensation in 2014
compared to $8.2 million in 2013, and $9.4 million in 2012. The expense recognized for current year included $0.5
million in expense relating to stock options and $0.4 million in expense relating to previously granted restricted
share units (“RSUs”) and deferred share units (“DSUs”). The expense recognized for 2013 of $8.2 million included
$4.8 million in expense relating to previously granted stock options and $3.4 million in expense relating to the RSU
and DSU grants in December 2012. On November 22, 2013, we cancelled 5,710,000 stock options at an exercise
price of CAD$3.11 which were originally granted in 2012. Remaining expense relating to unvested options at the
time of cancellation of $0.8 million was accelerated and recognized in the year. In 2012, we became a publicly listed
entity, and as a result, recorded stock-based compensation expense for the first time. Total expense recognized for
the year ended November 30, 2012 was $9.4 million.
General and administrative expenses for the year ended November 30, 2014 were $1.5 million, a reduction of $0.5
million from the $1.9 million incurred for the year ended November 30, 2013, and a further reduction of $0.4
million from the $2.3 million incurred for the year ended November 30, 2012. Expenses in 2012 were high due to
the spin-out and costs incurred in connection with becoming a separate public company from NovaGold. Expenses
in 2013 and 2014 represent a reduction in general and administrative expenses due to our efforts with cost
reductions. The comparable basic and diluted loss per common share for 2014 is lower than 2013 and 2012 mainly
as a result of the decreased loss and comprehensive loss for the year, as well as additional shares issued during 2014
as a result of the private placement completed in July 2014. Expenses to April 30, 2012, the date of completion of
the spin-out, were funded by NovaGold and its affiliates.
Other important variances for the twelve-month period ended November 30, 2014 compared to the same period in
2013 and 2012 are as follows: (a) $0.8 million in amortization compared to $1.0 million in 2013 and $0.8 million in
2012 due to timing of capital purchases in the prior fiscal year; (b) $0.9 million in professional fees in 2014 and
2013 compared to $0.7 million in 2012 primarily as additional expenses were incurred in financing and prospectus-
related filings in Canada and the United States in 2014 and 2013 respectively; (c) $3.0 million on salaries in 2014,
$3.2 million on salaries in 2013, and a similar amount of $2.4 million incurred in 2012, which reflects comparable
staff costs overall on an annualized basis because we did not have full time staff until May 2012. In 2014, we
incurred $1.5 million in severance expenses in August and September 2014 due to a one-time reduction in staff
which was offset by a recovery of $0.3 million due to a reversal of accrued bonuses to employees no longer eligible
to receive payment. In addition, as a result of the reductions, salaries of $0.4 million for the fourth quarter of 2014
were lower than the previous quarters of 2014.
Fourth quarter results
During the fourth quarter of 2014, we incurred a net loss of $2.0 million compared to $4.9 million for the
comparable period in 2013. The decrease in net loss in 2014 compared to 2013 was a result of reduced activities in
the fall of 2014 due to a re-logging and re-assaying program conducted in the 2014 field season compared with a
drilling program in 2013 which ended in mid-August. We incurred $0.6 million of mineral property expenses in the
fourth quarter of 2014 compared to $1.0 million in the fourth quarter of 2013. The decrease in net loss was also due
to reduced salary and general and administrative expenses in the fourth quarter of 2014 as we reduced staffing in
August 2014 by approximately half. We incurred salary expenses of $0.4 million in the fourth quarter of 2014
compared to $1.4 million in the fourth quarter of 2013. The fourth quarter of 2013 included a recording of $0.8
million in 2013 bonuses for which there is no comparable expense in 2014. General and administrative expenses
were reduced from $0.5 million in the fourth quarter of 2013 to $0.3 million in the fourth quarter of 2014. The other
item which reflects the decrease in net loss resulted from stock-based compensation of $1.4 million in the fourth
quarter of 2013 compared to $0.6 million in 2014 resulting from the cancellation of options and acceleration of
expense in late 2013 and the timing of expense due to vesting of stock options and units.
69
Selected financial data
Annual information
The following annual information is prepared in accordance with U.S. GAAP.
Year ended
November 30,
2014
$
2
9,650
9,648
36,826
979
Year ended
November 30,
2013
$
40
24,434
24,394
38,899
1,742
in thousands of dollars
Year ended
November 30,
2012
$
45
31,056
31,018
55,696
1,973
Interest income
Expenses
Loss and comprehensive loss for the year
Total assets
Total liabilities
Quarterly information
The following unaudited quarterly information is prepared in accordance with U.S. GAAP.
Q4 2014
11/30/14
$
-
596
(2,029)
(0.03)
Q3 2014
08/31/14
$
1
847
(2,911)
(0.05)
Q2 2014
05/31/14
$
-
489
(2,093)
(0.04)
Q1 2014
02/28/14
$
1
580
(2,616)
(0.05)
Q4 2013
11/30/13
$
4
1,134
(4,931)
(0.09)
Q3 2013
08/31/13
$
13
4,727
(6,890)
(0.13)
in thousands of dollars,
except per share amounts
Q1 2013
02/29/13
$
14
802
(6,626)
(0.13)
Q2 2013
05/31/13
$
9
2,231
(5,947)
(0.11)
Interest and other income
Mineral property expenses
Loss for the period
Loss per common share – basic
and diluted
Factors that can cause fluctuations in our quarterly results include the length of the exploration field season at the
properties, the type of program conducted, timing of property acquisition payments, stock option vesting, and
issuance of shares. Other factors that have caused fluctuations in the quarterly results that would not be expected to
re-occur include our incorporation and completion of the spin-out. Prior to April 2011, we had no shares outstanding
as the Company was not yet incorporated. As a result of the spin-out, the loss per common share has been restated as
if the distribution of common shares would have occurred at inception.
During the first quarter of 2013, we incurred expenses of $4.1 million in stock-based compensation expense due to
the vesting of previously granted stock options and the granting of RSUs and DSUs. We also recognized mineral
property expenses of $0.8 million related to preparation activities for the 2013 field season and ongoing engineering
studies. During the second quarter of 2013, we incurred mineral property expenses of $2.2 million consisting of the
start-up of the field season in May and continuation of engineering studies. We also incurred expenses of
$2.0 million in stock-based compensation due to the expense being recorded evenly over the vesting period of
previously granted stock options and RSUs. During the third quarter of 2013, mineral property expenses of $4.7
million were recorded as the majority of the exploration program was conducted during the quarter. During the
fourth quarter of 2013, stock-based compensation of $1.4 million was recorded due to an acceleration of expense as
a result of the cancelling of 5,710,000 stock options during the period. All expense for unvested options was
accelerated and included in the current period. During the first quarter of 2014, we incurred $0.1 million of stock-
based compensation expense due to the prior acceleration of expense in the fourth quarter of 2013. As a result, our
loss for the first quarter ended February 28, 2014 is significantly reduced. During the second quarter of 2014, we
incurred $0.5 million in mineral property expenses as our field season start-up in 2014 occurred in July, later than in
previous years. As a result, no field season activity costs were incurred in Q2 2014 resulting in a significantly
reduced loss of $2.1 million for the second quarter of 2014 compared to previous second quarter losses. During the
third quarter of 2014, we incurred mineral property expenses of $0.8 million due to a reduced field season program
resulting in a significantly reduced loss of $2.9 million compared to previous third quarter losses. We incurred a
one-time severance cost of $1.5 million relating to staff reductions. During the fourth quarter of 2014, we incurred
$0.6 million of mineral property expenses mainly related to assaying costs incurred for the 2014 field program. Our
net loss for the fourth quarter of 2014 of $2.0 million is reduced from the fourth quarter net loss of 2013 of $4.9
million mainly due to lower salaries and general and administrative expenses and a high stock-based compensation
charge in 2013.
70
Our properties are not yet in production; consequently, we believe that our loss (and consequent loss per common
share) is not a primary concern to investors in the Company.
Liquidity and capital resources
At November 30, 2014, we had $5.1 million in cash and cash equivalents. We expended $8.6 million on operating
activities compared with $15.2 million for operating activities for the same period in 2013, and expenditures of
$19.9 million for operating activities for the same period in 2012. A majority of cash spent on operating activities
during all periods was expended on mineral property expenses, salaries and general and administrative expenses,
which also accounts for the corresponding decrease. As the exploration field season in the Ambler district is
between May and early October of each year, a significant portion of the mineral property expenses and operating
activities are incurred during this time frame. The decrease is also somewhat offset by an adjustment for non-cash
working capital in 2012 as accounts payable and accrued liabilities were higher at $2.0 million at November 30,
2012 compared to $1.7 million at November 30, 2013 and $0.9 million at November 30, 2014. This difference
relates mainly to earlier settlement of mineral property expenses in the year and reduced spending in 2013 and 2014
compared to 2012.
During the year ended November 30, 2014, we generated $7.2 million from financing activities compared to
expenditures of $0.3 million on financing activities in the year ended November 30, 2013 and $43.8 million from
financing activities generated in the same period in 2012. The generation of cash in 2014 was raised from the
completion of a private placement of $7.2 million in July 2014. Cash was expended in 2013 to settle vested RSUs
which were not able to be settled in shares due to an insider participation limit in our RSU Plan. Cash of
$40.0 million was received from NovaGold in April 2012 with the completion of the Plan of Arrangement.
Additional funding of $3.8 million was received to fund operating expenses incurred up to April 30, 2012 and
$15.1 million in operating expense funding provided in the year ended November 30, 2011. No funding was
received from NovaGold subsequent to April 30, 2012. In 2011, the remaining $24.0 million in funding received
from NovaGold repaid the $24.0 million note payable on the purchase of the Ambler lands.
During the year ended November 30, 2014, we expended $0.02 million on investing activities compared with
$0.2 million in 2013 and $1.6 million in 2012. In 2012, our focus was on acquiring additional equipment to maintain
and improve road access and expand sleeping capacity of our camp. In 2013, we purchased vehicles and equipment
to replace existing aged vehicles and expand mobile capacity. In 2014, our expenditures were minimal and limited to
necessary replacements.
At November 30, 2014, we had $5.1 million in cash and cash equivalents and working capital of $4.8 million.
Substantial doubt exists as to our ability to continue as a going concern as our operating activities are dependent on
our ability to obtain additional financing. We will need to raise additional funds to continue operations and to
support further exploration and development of its projects and administration expenses. Future financings are
anticipated through equity financing, debt financing, convertible debt, or other means. There is no assurance that we
will be successful in obtaining additional financing, that sufficient funds will be available to us, or be available on
favourable terms. Factors that could affect the availability of financing include fluctuations in our share price, the
state of international debt and equity markets, investor perceptions and expectations, global financial and metals
markets, and progress on our exploration properties.
Contractual obligations
Contractual obligated undiscounted cash flow requirements as at November 30, 2014 are as follows.
Accounts payable and accrued liabilities
Office lease
Total
Total
$
979
429
1,408
< 1 Year
$
979
171
1,150
1–3 Years
$
-
258
258
in thousands of dollars,
unless otherwise specified
> 5 Years
$
-
-
-
3–5 Years
$
-
-
-
71
Off-balance sheet arrangements
We have no material off-balance sheet arrangements. On January 25, 2013, we entered into a commitment to lease
office space effective May 1, 2013 for a period of four years with a remaining total commitment of $0.4 million.
Outstanding share data
At February 2, 2015, we had 60,633,701 common shares issued and outstanding. At February 2, 2015, we had
6,521,740 warrants with a weighted-average exercise price of $1.60, 3,361,666 stock options with a weighted-
average exercise price of $0.75, 546,771 NovaGold arrangement options with a weighted-average exercise price of
$4.98, 1,029,572 deferred share units, and 20,685 NovaGold DSUs for which the holder is entitled to receive one
common share for every six NovaGold shares received outstanding.
New accounting pronouncements
Unless otherwise noted, the following revised standards and amendments are effective for annual periods beginning
on or after December 1, 2013 or as noted. We are continuing to assess the impact of these standards and
amendments or have determined whether we will early adopt them, as noted.
i.
Income tax disclosure
The Financial Accounting Standards Board (the “FASB”) issued “Presentation of an Unrecognized Tax
Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward
Exists” (“ASU 2013-11”) which amended Topic 740, Income Taxes to provide guidance on financial
statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax
loss, or a tax credit carryforward exists. It was released to provide clear guidance to minimize divergence in
practice when disclosing unrecognized tax benefits. ASU 2013-11 is effective for fiscal years beginning
after December 15, 2013. We adopted this standard for the fiscal year ending November 30, 2014. The
adoption of ASU 2013-11 did not have any impact as our disclosure meets the recommended practice.
ii.
Offsetting assets and liabilities
In January 2013, the FASB issued “Clarifying the Scope of Disclosures about Offsetting Assets and
Liabilities”
(“ASU 2013-01”). ASU 2013-01 clarifies Accounting Standards Update No. 2011-11:
“Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”) to restrict the scope of
implementation to derivatives accounted for under Topic 815, Derivatives and Hedging, which includes
bifurcated embedded derivatives repurchase agreements and reverse repurchase agreements, and securities
borrowing and lending transactions that require an offset or are subject to an enforceable master netting
arrangement. ASU 2013-01 is effective for fiscal years, and interim periods within those years, beginning
on or after January 1, 2013. We adopted this standard for the fiscal year ending November 30, 2014. The
adoption of ASU 2013-01 did not have a material impact on our results of operations, financial condition,
or cash flows.
iii.
Development stage entity
In June 2014, the FASB issued “Development Stage Entities – Elimination of Certain Financial Reporting
Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810,
Consolidation” (“ASU 2014-10”). ASU 2014-10 eliminates the concept of a development stage entity, of
which NovaCopper had been classified. Upon adoption, certain financial reporting disclosures will be
eliminated including the presentation of an inception-to-date statement of income and cash flow.
ASU 2014-10 is effective for fiscal years, and interim periods within those years, beginning after December
15, 2014. Early adoption of this standard is permitted, and we expect to adopt for the fiscal year ending
November 30, 2015. The adoption of ASU 2014-10 is expected to have an impact on the disclosure and
presentation of our statement of loss and comprehensive loss and the statement of cash flows. As a result of
adopting the standard, we will no longer include the “cumulative during exploration stage” column
currently presented on our statement of loss and comprehensive loss and the statement of cash flows.
72
iv.
Going Concern
In August 2014, the FASB issued “Disclosure of Uncertainties about an Entity’s Ability to Continue as a
Going Concern” (“ASU 2014-15”). Historically, there has been no guidance in U.S. GAAP about
management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to
continue as a going concern. This update provides the guidance to clarify when and how management
should be assessing their ability to continue as a going concern. ASU 2014-15 is effective for fiscal years
ending after December 15, 2016. Early adoption of this standard is permitted, and we expect to adopt for
the fiscal year ending November 30, 2015. We expect the adoption of ASU 2014-15 will have an impact on
the frequency with which we conduct going concern assessments. We do not expect the adoption to have
significant changes to our disclosure of going concern as we currently comply with appropriate guidance
issued by the U.S. Securities and Exchange Commission and guidance under U.S. auditing standards.
Critical accounting estimates
The most critical accounting estimates upon which our financial status depends are those requiring estimates of the
recoverability of our capitalized mineral properties, impairment of long-lived assets and valuation of stock-based
compensation.
Mineral properties and development costs
All direct costs related to the acquisition of mineral property interests are capitalized. The acquisition of title to
mineral properties is a complicated and uncertain process. The Company has taken steps, in accordance with
industry standards, to verify the title to mineral properties in which it has an interest. Although the Company has
made efforts to ensure that legal title to its mining assets are properly recorded, there can be no assurance that such
title will be secured indefinitely.
Impairment of long-lived assets
Management assesses the possibility of impairment in the carrying value of its long-lived assets whenever events or
circumstances indicate that the carrying amounts of the asset or asset group may not be recoverable. Significant
estimates are made in assessing the possibility of impairment. Management considers several factors in considering
if an indicator of impairment has occurred, including but not limited to, indications of value from external sources,
significant changes in the legal, business or regulatory environment, and adverse changes in the use or physical
condition of the asset. These factors are subjective and require consideration at each period end. If an indicator of
impairment is determined to exist, management calculates the estimated undiscounted future net cash flows relating
to the asset or asset group using estimated future prices, mineral resources, and operating, capital and reclamation
costs. When the carrying value of an asset exceeds the related undiscounted cash flows, the asset is written down to
its estimated fair value, which is usually determined using discounted future cash flows. Management’s estimates of
mineral prices, mineral resources, foreign exchange, production levels and operating capital and reclamation costs
are subject to risk and uncertainties that may affect the determination of the recoverability of the long-lived asset.
Stock-based compensation
Compensation expense for options granted to employees, directors and certain service providers is determined based
on estimated fair values of the options at the time of grant using the Black-Scholes option pricing model, which
takes into account, as of the grant date, the fair market value of the shares, expected volatility, expected life,
expected forfeiture rate, expected dividend yield and the risk-free interest rate over the expected life of the option.
The use of the Black-Scholes option pricing model requires input estimation of the expected life of the option,
volatility, and forfeiture rate which can have a significant impact on the valuation model, and resulting expense
recorded.
Risk factors
NovaCopper and its future business, operations and financial condition are subject to various risks and uncertainties
due to the nature of its business and the present stage of exploration of its mineral properties. Certain of these risks
and uncertainties are under the heading “Risk Factors” under NovaCopper’s Form 10-K dated February 5, 2015
available on SEDAR at www.sedar.com and EDGAR at www.sec.gov and on our website at www.novacopper.com.
73
Additional information
Additional information regarding the Company, including our annual report on Form 10-K, is available on SEDAR
at www.sedar.com and EDGAR at www.sec.gov and on our website at www.novacopper.com.
Cautionary notes
Forward-looking statements
This Management’s Discussion and Analysis contains “forward-looking information” and “forward-looking
statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, Section 21E of the
U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other applicable securities laws.
These forward-looking statements 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 the Company’s plans and expectations relating to its Upper Kobuk Mineral
Projects, completion of transactions, market prices for precious and base 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 assumptions of management. Statements concerning mineral
resource estimates may also be deemed to constitute “forward-looking statements” to the extent that they involve
estimates of the mineralization that will be encountered if the property is developed.
Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans,
projections, objectives, assumptions or future events or performance (often, but not always, identified by words or
phrases such as “expects”, “is expected”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”,
“intends”, “strategy”, “goals”, “objectives”, “potential”, “possible” or variations thereof or stating that certain
actions, events, conditions or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be
achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may
be forward-looking statements.
Forward-looking statements are based on a number of material assumptions, including those listed below, which
could prove to be significantly incorrect:
•
•
•
•
•
•
•
•
•
assumptions made in the interpretation of drill results, the geology, grade and continuity of the Company’s
mineral deposits;
our ability to achieve production at any of the Company’s mineral exploration and development properties;
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;
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 the Company’s resource and reserve estimates;
continued good relationship with local communities and other stakeholders
our expectations regarding demand for equipment, skilled labour and services needed for exploration and
development of mineral properties; and
our activities will not be adversely disrupted or impeded by development, operating or regulatory risks.
Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors
that could cause actual events or results to differ from those reflected in the forward-looking statements, including,
without limitation:
•
•
•
•
risks related to the Company’s ability to finance its planned exploration activities at its mineral properties
or to complete further exploration programs;
risks related to the Company’s ability to finance the development of its mineral properties through external
financing, strategic alliances, the sale of property interests or otherwise;
risks related to inability to define proven and probable reserves and none of the Company’s mineral
properties are in production or under development;
uncertainties relating to the assumptions underlying the Company’s resource estimates, such as metal
pricing, metallurgy, mineability, marketability and operating and capital costs;
74
•
•
•
•
•
•
•
•
•
•
•
risks related to uncertainty of whether there will ever be production at the Company’s mineral exploration
and development properties;
risks related to the Company’s ability to commence production and generate material revenues or obtain
adequate financing for its planned exploration and development activities;
risks related to lack of infrastructure, specifically a lack of road access to the Project site;commodity price
fluctuations;
risks related to market events and general economic conditions;
uncertainty of estimates of capital costs, operating costs, production and economic returns;
risks related to inclement weather which may delay or hinder exploration activities at its mineral
properties;
the Company’s history of losses and expectation of future losses;
risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of
the Company’s mineral deposits;
uncertainty related to inferred mineral resources;
uncertainty related to the economic projections contained herein derived from the PEA;
risks related to the third parties on which the Company depends for its exploration and development
activities;
•
•
•
•
•
•
• mining and development risks, including risks related to infrastructure, accidents, equipment breakdowns,
labor disputes or other unanticipated difficulties with or interruptions in development, construction or
production;
credit, liquidity, interest rate and currency risks;
uncertainty as to the Company’s ability to acquire additional commercially mineable mineral rights;
risks related to increases in demand for equipment, skilled labor and services needed for exploration and
development of mineral properties, and related cost increases;
the risk that permits and governmental approvals necessary to develop and operate mines on the
Company’s properties will not be available on a timely basis or at all;
risks related to governmental regulation and permits, including environmental regulation, including the
risk that more stringent requirements or standards may be adopted or applied;
risks related to the need for reclamation activities on the Company’s properties and uncertainty of cost
estimates related thereto;
uncertainty related to title to the Company’s mineral properties;
risks related to competition in the acquisition of mineral properties;
risks inherent in the acquisition of new properties including unknown liabilities;
the Company’s need to attract and retain qualified management and technical personnel;
risks related to conflicts of interests of some of the directors of the Company;
risks related to potential future litigation;
risks related to global climate change;
risks related to adverse publicity from non-governmental organizations;
risks related to future sales or issuances of equity securities decreasing the value of existing common
shares, diluting voting power and reducing future earnings per share;
uncertainty as to the volatility in the price of the Company’s shares;
the Company’s expectation of not paying cash dividends;
adverse federal income tax consequences for U.S. shareholders should the Company be a passive foreign
investment company;
risks related to the voting power of our majority shareholders and the impact that a sale by such
shareholders may have on our share price;
uncertainty as to the Company’s ability to maintain the adequacy of internal control over financial
reporting as per the requirements of the Sarbanes-Oxley Act; and
increased regulatory compliance costs relating to the Dodd-Frank Act.
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. Forward-
looking statements are statements about the future and are inherently uncertain, and actual achievements of the
Company or other future events or conditions may differ materially from those reflected in the forward-looking
statements due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to
in NovaCopper’s Form 10-K dated February 5, 2015, filed with the Canadian securities regulatory authorities and
the United States Securities and Exchange Commission (the “SEC”), and other information released by
NovaCopper and filed with the appropriate regulatory agencies.
75
The Company’s forward-looking statements are based on the beliefs, expectations and opinions of management on
the date the statements are made, and the Company does 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. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.
Cautionary note to United States investors
Reserve and resource estimates
This Management’s Discussion and Analysis has been prepared in accordance with the requirements of the
securities laws in effect in Canada, which differ from the requirements of U.S. securities laws. Unless otherwise
indicated, all resource and reserve estimates included in this Management’s Discussion and Analysis have been
prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-
101”) and the Canadian Institute of Mining, Metallurgy, and Petroleum Definition Standards on Mineral Resources
and Mineral Reserves. NI 43-101 is a rule developed by the Canadian Securities Administrators which establishes
standards for all public disclosure an issuer makes of scientific and technical information concerning mineral
projects. Canadian standards, including NI 43-101, differ significantly from the requirements of the SEC, and
resource and reserve information contained herein may not be comparable to similar information disclosed by U.S.
companies. In particular, and without limiting the generality of the foregoing, the term “resource” does not equate
to the term “reserves”. Under U.S. standards, 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. The SEC’s disclosure standards normally do not permit the inclusion of
information concerning “measured mineral resources”, “indicated mineral resources” or “inferred mineral
resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute
“reserves” by U.S. standards in documents filed with the SEC. Investors are cautioned not to assume that any part
or all of mineral deposits in these categories will ever be converted into reserves. U.S. investors should also
understand that “inferred mineral resources” have a great amount of uncertainty as to their existence and great
uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an “inferred
mineral resource” will ever be upgraded to a higher category. Under Canadian rules, estimated “inferred mineral
resources” may not form the basis of feasibility or pre-feasibility studies except in rare cases. Investors are
cautioned not to assume that all or any part of an “inferred mineral resource” exists or is economically or legally
mineable. Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations;
however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC
standards as in-place tonnage and grade without reference to unit measures. The requirements of NI 43-101 for
identification of “reserves” are also not the same as those of the SEC, and reserves reported by the Company in
compliance with NI 43-101 may not qualify as “reserves” under SEC standards. Accordingly, information
concerning mineral deposits set forth herein may not be comparable with information made public by companies
that report in accordance with U.S. standards.
76
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are engaged in the acquisition and exploration of base metal projects and related activities, including
exploration, engineering, permitting and the preparation of feasibility studies. The value of our properties is related
to the price of copper and zinc and changes in the prices of base metals could affect our ability to generate future
revenues.
Base metal prices may fluctuate widely from time to time and are affected by numerous factors, including the
following: expectations with respect to the rate of inflation, exchange rates, interest rates, global and regional
political and economic circumstances and governmental policies. The demand for and supply of base metals
significantly affect base metal prices. The supply of base metals consists of a combination of new mine production
and existing stocks of fabricated base metals. The demand for copper and zinc primarily consists of use in building
construction, power generation and transmission, electronic product manufacturing, and production of machinery
and vehicles. Additionally, hedging activities by producers, consumers and individuals can affect base metal supply
and demand. While copper and zinc can be readily sold on numerous markets throughout the world, their market
value cannot be predicted for any particular time.
Financial Instruments
Our financial instruments are exposed to certain financial risks, including currency risk, credit risk, liquidity risk,
interest risk and price risk. Our financial instruments consist of cash and cash equivalents, accounts receivable,
deposits, and accounts payable and accrued liabilities. Our instruments are held in the normal course to meet daily
operating and cash flow needs of the business. The fair value of accounts payable and accrued liabilities
approximates their carrying value due to the short-term nature of their maturity. All of our financial instruments are
initially measured at fair value and then held at amortized cost.
Currency risk
Currency risk is the risk of a fluctuation in financial asset and liability settlement amounts due to a change in foreign
exchange rates. We operate in the United States and Canada with some expenses incurred in Canadian dollars. Our
exposure is limited to cash of CDN$181,000, accounts receivable of CDN$13,000 and accounts payable of
CDN$171,000. Based on a 10% change in the US-Canadian exchange rate, assuming all other variables remain
constant, the Company’s net loss would change by approximately $2,000.
Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its
contractual obligations. We hold cash and cash equivalents with Canadian Chartered financial institutions which are
composed of financial instruments issued by Canadian banks. Our accounts receivable consist of GST receivable
from the Federal Government of Canada and receivables due for services provided to other parties. Our exposure to
credit risk is equal to the balance of cash and cash equivalents and accounts receivable as recorded in the financial
statements.
Liquidity risk
Liquidity risk is the risk that we will encounter difficulties raising funds to meet our financial obligations as they fall
due. We are in the exploration stage and do not have cash inflows from operations; therefore, we manage our
liquidity risk through the management of its capital structure and financial leverage. We will require financing
within the next twelve months. Future financings are expected to be obtained through debt financing, equity
financing, convertible debt, exercise of options, or other means. Continued operations are dependent on our ability
to obtain additional financing or to generate future cash flows. Our contractually obligated cash flow is disclosed
under the section titled Liquidity and capital resources under Item 7.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. We hold excess cash balances in money market funds which limits the risk of loss
due to interest rate changes to $nil.
77
As we are currently in the exploration phase none of our financial instruments are exposed to commodity price risk;
however, our ability to obtain long-term financing and its economic viability could be affected by commodity price
volatility.
78
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Supplementary Data
For the required supplementary data, please see the section heading “Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations – Summary of Quarterly Results and Fourth Quarter Results”
above.
NovaCopper Inc.
(An Exploration-Stage Company)
Consolidated Financial Statements
November 30, 2014, 2013 and 2012
(expressed in US dollars)
Management’s Report on Internal Control over Financial Reporting
The management of NovaCopper Inc. is responsible for establishing and maintaining adequate internal control over
financial reporting under Rule 13a-15(f) and 15d-15(f) of the U.S. Exchange Act. The Securities Exchange Act of
1934 defines this as a process designed by, or under the supervision of, the Company’s principal executive and
principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles, and includes those
policies and procedures that:
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the Company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures
of the Company are being made only in accordance with authorizations of management and directors of the
Company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that may have a material effect on the consolidated financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of
November 30, 2014. In making this assessment, the Company’s management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework
(2013).
Based upon our assessment and those criteria, management concluded that the Company’s internal control over
financial reporting was effective as of November 30, 2014.
/s/ Rick Van Nieuwenhuyse
/s/ Elaine Sanders
Rick Van Nieuwenhuyse
President & Chief Executive Officer
Elaine Sanders
Vice President & Chief Financial Officer
February 5, 2015
79
Report of the Independent Registered Public Accounting Firm
To the Shareholders of NovaCopper Inc.
We have audited the accompanying consolidated financial statements of NovaCopper Inc. (an exploration stage
company) which comprise the consolidated balance sheets as at November 30, 2014 and 2013 and the consolidated
statements of loss, comprehensive loss and deficit, changes in shareholders’ equity and cash flows for each of the
years in the three year period ended November 30, 2014 and cumulatively for the period from March 22, 2004 (date
of inception) to November 30, 2014, and the related notes, which comprise a summary of significant accounting
policies and other explanatory information.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with accounting principles generally accepted in the United States of America and for such internal
control as management determines is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an
audit to obtain reasonable assurance about whether the consolidated financial statements are free from material
misstatement. Canadian generally accepted auditing standards require that we comply with ethical requirements.
An audit involves performing procedures to obtain audit evidence, on a test basis, about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation
and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate
in the circumstances. An audit also includes evaluating the appropriateness of accounting principles and policies
used and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
NovaCopper Inc. as at November 30, 2014 and 2013 and the results of its operations and its cash flows for each of
the years in the three year period ended November 30, 2014 and cumulatively for the period from March 22, 2004
(date of inception) to November 30, 2014 in accordance with accounting principles generally accepted in the United
States of America.
Emphasis of Matter
Without qualifying our opinion, we draw attention to note 1 in the financial statements which discloses matters and
conditions that indicate the existence of a material uncertainty that casts substantial doubt about the Company’s
ability to continue as a going concern.
/s/ PricewaterhouseCoopers LLP
Chartered Accountants
Vancouver, British Columbia
February 5, 2015
80
NovaCopper Inc.
(An Exploration-Stage Company)
Consolidated Balance Sheets
As at November 30, 2014 and 2013
Assets
Current assets
Cash and cash equivalents
Accounts receivable
Deposits and prepaid amounts
Plant and equipment (note 3)
Mineral properties and development costs (note 4)
Liabilities
Current liabilities
Accounts payable and accrued liabilities (note 5)
Shareholders’ equity
Share capital (note 6) – unlimited common shares authorized, no par value
Issued -60,296,365 (2013 – 53,066,656)
Warrants (note 6)
Contributed surplus
Contributed surplus – options (note6(a, b))
Contributed surplus – units (note 6(c))
Deficit accumulated during the exploration stage
November 30, 2014
$
in thousands of dollars
November 30, 2013
$
5,074
176
575
5,825
415
30,586
36,826
979
979
111,833
2,163
124
17,089
2,008
(97,370)
35,847
36,826
6,484
90
591
7,165
1,148
30,586
38,899
1,742
1,742
104,895
-
152
17,248
2,584
(87,722)
37,157
38,899
Nature of operations, going concern, structure and plan of arrangement (note 1)
Commitments and contingencies (notes 4, 6, 10)
Subsequent events (note 11)
(See accompanying notes to the consolidated financial statements)
/s/ Rick Van Nieuwenhuyse, Director
/s/ Kalidas Madhavpeddi, Director
Approved on behalf of the Board of Directors
81
NovaCopper Inc.
(An Exploration-Stage Company)
Consolidated Statements of Loss and Comprehensive Loss
For the Years Ended November 30
Expenses
Amortization
Foreign exchange loss
General and administrative
Investor relations
Mineral properties expense (note 4(c))
Professional fees
Salaries
Salaries – stock-based compensation (note 6)
Total expenses
Other items
Accretion expense
Loss on disposal of equipment
Interest and other income
Loss and comprehensive loss for the year
2014
$
750
2
1,484
51
2,512
952
3,012
887
9,650
-
-
(2)
9,648
in thousands of dollars, except share and per share amounts
Cumulative
during
exploration stage
$
2013
$
2012
$
1,033
8
1,915
239
8,894
947
3,173
8,225
24,434
-
-
(40)
24,394
769
10
2,276
207
15,327
646
2,410
9,411
31,056
-
7
(45)
31,018
2,835
20
7,804
669
53,769
2,655
8,645
18,523
94,920
2,530
7
(87)
97,370
Basic and diluted loss per common share
Weighted average number of common
shares outstanding
$0.17
$0.47
$0.67
56,268,326
52,347,173
46,627,308
(See accompanying notes to the consolidated financial statements)
82
NovaCopper Inc.
(An Exploration-Stage Company)
Consolidated Statements of Changes in Shareholders’ Equity
For the Years Ended November 30
Balance – 2011
Funding provided and expenses paid by
NovaGold Resources Inc.
Issued pursuant to Plan of Arrangement
Issued pursuant to an employment agreement
Exercise of NovaGold Arrangement Options
Stock-based compensation
Loss for the year
Balance – 2012
Exercise of NovaGold Warrants
Exercise of NovaGold Arrangement Options
NovaGold Performance and Deferred Share
Units
Number of
shares
outstanding
200
-
46,577,878
76,005
10,986
-
-
46,665,069
6,088,262
52,243
16,586
Restricted Share Units reclassified from
-
liability
Restricted Share Units
Stock-based compensation
Loss for the year
Balance – 2013
Exercise of NovaGold Arrangement options
NovaGold Performance Share Units
Private placement
Restricted Share Units
Deferred Share Units
Stock-based compensation
Loss for the year
Balance – 2014
244,496
-
-
53,066,656
46,929
14,166
6,521,740
492,501
154,373
-
-
60,296,365
Share capital
$
27,280
-
Warrants
$
-
-
Contributed
surplus
$
36,281
43,763
Contributed
surplus –
options
$
-
-
in thousands of dollars, except share amounts
Total
shareholders’
equity
$
31,251
43,763
Deficit
$
(32,310)
-
Contributed
surplus –
units
$
-
-
64,496
316
76
-
-
92,168
11,996
254
32
-
445
-
-
104,895
631
28
5,068
929
282
-
-
111,833
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,163
-
-
-
-
2,163
(67,864)
-
-
-
-
12,180
(11,996)
-
(32)
-
-
-
-
152
-
(28)
-
-
-
-
-
124
3,368
-
(76)
9,411
-
12,703
-
(235)
-
-
-
4,780
-
17,248
(615)
-
-
-
-
456
-
17,089
-
-
-
-
-
-
-
-
-
2,633
(173)
124
-
2,584
-
-
-
(929)
(78)
431
-
2,008
-
-
-
-
(31,018)
(63,328)
-
-
-
-
316
-
9,411
(31,018)
53,723
-
19
-
-
2,633
-
-
(24,394)
(87,722)
-
-
-
-
-
-
(9,648)
(97,370)
272
4,904
(24,394)
37,157
16
-
7,231
-
204
887
(9,648)
35,847
(See accompanying notes to the consolidated financial statements)
83
NovaCopper Inc.
(An Exploration-Stage Company)
Consolidated Statements of Cash Flows
For the Years Ended November 30
Cash flows used in operating activities
Loss for the year
Items not affecting cash
Amortization
Accretion
Loss on disposal of equipment
Issuance of shares as compensation
Stock-based compensation
Net change in non-cash working capital
Decrease (increase) in accounts
receivable
Decrease (increase) in deposits and
prepaid amounts
Increase (decrease)in accounts payable,
accrued liabilities and due to related
parties
Cash flows from financing activities
Proceeds from private placement, net
Proceeds received on exercise of options
Funding provided by NovaGold on the
completion of the Plan of Arrangement
Funding provided and expenses paid by
NovaGold
Repayment of notes payable
Settlement of Restricted Share Units
Cash flows used in investing activities
Acquisition of plant & equipment
Acquisition of mineral properties
Increase (decrease) in cash and cash
equivalents
Cash and cash equivalents – beginning of
period
Cash and cash equivalents – end of
period
Non-cash investing and financing
activities
Issuance of common shares to NovaGold
to acquire NovaCopper US Inc.
Notes payable assumed on acquisition of
Ambler lands
Issuance of common shares by NovaGold
to acquire Ambler lands
2014
$
2013
$
in thousands of dollars
Cumulative
during
exploration stage
$
2012
$
(9,648)
(24,394)
(31,018)
(97,370)
750
-
-
-
887
(86)
16
(558)
1,033
-
-
-
8,136
275
(37)
(231)
769
-
7
316
9,411
(365)
(458)
1,452
2,855
2,530
7
316
19,636
(176)
(562)
1,018
(8,639)
(15,218)
(19,886)
(71,746)
7,231
16
-
-
-
-
7,247
(18)
-
(18)
(1,410)
6,484
5,074
-
-
-
-
20
-
-
-
(329)
(309)
(233)
-
(233)
(15,760)
22,244
6,484
-
-
-
-
-
40,000
3,763
-
-
43,763
(1,595)
(39)
(1,634)
22,243
1
22,244
-
-
-
7,231
36
40,000
61,256
(24,000)
(329)
84,194
(3,258)
(4,116)
(7,374)
5,074
-
5,074
27,280
21,471
5,000
(See accompanying notes to the consolidated financial statements)
84
NovaCopper Inc.
(An Exploration-Stage Company)
Notes to the Consolidated Financial Statements
1
Nature of operations, going concern, structure and plan of arrangement
NovaCopper Inc. (“NovaCopper” or the “Company”) was incorporated in British Columbia under the Business Corporations Act (BC)
on April 27, 2011. The Company is engaged in the exploration and development of mineral properties including the Arctic and
Bornite Projects located in Northwest Alaska in the United States of America (“US”).
Structure and plan of arrangement
On January 11, 2010, Alaska Gold Company (“AGC”), at the time a wholly owned subsidiary of NovaGold Resources Inc.
(“NovaGold”), purchased 100% of the Ambler lands, hosting the copper-zinc-lead-gold-silver Arctic Project, for consideration of
$29 million. The Ambler lands were acquired on October 17, 2011 by NovaCopper US Inc. (“NovaCopper US”) through a purchase
and sale agreement with AGC. On October 24, 2011, NovaGold transferred its ownership of NovaCopper US to NovaCopper, then a
wholly owned subsidiary of NovaGold, in exchange for 100 shares of NovaCopper, with an ascribed value of $27.3 million.
On October 19, 2011, NovaCopper US acquired the exclusive right to explore the Bornite lands and lands deeded to NANA Regional
Corporation, Inc. (“NANA”) through the Alaska Native Claims Settlement Act (“ANCSA”) located adjacent to the Ambler lands to
create the Upper Kobuk Mineral Projects (“UKMP Projects”).
Where applicable, these consolidated financial statements reflect the statements of loss and comprehensive loss, and cash flows of the
Arctic Project as if NovaCopper had been independently operating from inception. The cumulative statements of loss and
comprehensive loss include exploration costs of the Arctic Project and an allocation of NovaGold’s general and administrative costs
incurred on the basis of time committed by NovaGold staff to AGC and the ratio of expenses incurred on the Arctic Project as
compared to all costs incurred by AGC in the respective period.
The Arctic Project’s opening deficit has been calculated by applying the same allocation principles described above to the cumulative
transactions relating to the project from the date of its initial option in 2004 and includes an allocation of NovaGold’s general and
administrative expenses from the date of acquisition. Prior to the acquisition in 2010, NovaGold held an option to earn a 51% interest
in the property which was terminated upon entering into the purchase and sale agreement. All historical spending prior to April 30,
2012 was funded by NovaGold.
Going concern
These financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its
assets and discharge its liabilities in the normal course of business. As at November 30, 2014, the Company had consolidated cash of
$5.1 million and working capital of $4.8 million. Substantial doubt exists as to the Company’s ability to continue as a going concern
as the operating activities of the Company are dependent on its ability to obtain additional financing. The Company will need to raise
additional funds to continue operations and to support further exploration and development of its projects and administration expenses.
Future financings are anticipated through equity financing, debt financing, convertible debt, or other means. There is no assurance that
the Company will be successful in obtaining additional financing, that sufficient funds will be available to the Company, or be
available on favourable terms. Factors that could affect the availability of financing include fluctuations in the Company's share price,
the state of international debt and equity markets, investor perceptions and expectations, global financial and metals markets, and
progress on the Company's exploration properties. These financial statements do not reflect the adjustments in the carrying value of
the assets and liabilities, the reported expenses, and the balance sheet classifications used that would be necessary if the Company was
unable to realize its assets and discharge its liabilities in the normal course of operations. Such adjustments could be material.
2
Summary of significant accounting policies
Basis of presentation
These consolidated financial statements have been prepared using accounting principles generally accepted in the United States
(“U.S. GAAP”) and include the accounts of NovaCopper and its wholly-owned subsidiary, NovaCopper US. All significant
85
intercompany transactions are eliminated on consolidation. These financial statements were approved by the Company’s Board of
Directors for issue on February 5, 2015.
All figures are in United States dollars unless otherwise noted.
These financial statements include the historical assets, liabilities and expenses directly related to the Arctic Project and allocations of
NovaGold’s general and administrative expenses, as described in note 1, to present the financial position, results of operations and
cash flows of the Arctic Project on a standalone basis. The consolidated financial statements have been presented under the continuity
of interest basis of accounting whereby the amounts are based on the amounts recorded by NovaGold.
The consolidated financial statements may not necessarily reflect the financial position, results of operations and changes in cash
flows of the Company in the future or what they would have been had the Company been a separate, stand-alone entity for all of the
periods presented.
Cash and cash equivalents
Cash and cash equivalents comprise of highly liquid investments maturing less than 90 days from date of initial investment. Cash and
cash equivalents are designated as loans and receivables.
Plant and equipment
Plant and equipment are recorded at cost and amortization begins when the asset is substantially put into service. Amortization is
calculated on a straight-line basis over the respective assets’ estimated useful lives. Amortization periods by asset class are:
Computer hardware and software
Machinery and equipment
Office furniture and equipment
Vehicles
3 years
3 years
5 years
3 years
Mineral properties and development costs
All direct costs related to the acquisition of mineral property interests are capitalized. Mineral property exploration expenditures are
expensed when incurred. When it has been established that a mineral deposit is commercially mineable, an economic analysis has
been completed in accordance with SEC Industry Guide 7 and permits are obtained, the costs subsequently incurred to develop a mine
on the property prior to the start of mining operations are capitalized. Capitalized costs will be amortized following commencement of
commercial production using the unit of production method over the estimated life of proven and probable reserves.
The acquisition of title to mineral properties is a complicated and uncertain process. The Company has taken steps, in accordance with
industry standards, to verify the title to mineral properties in which it has an interest. Although the Company has made efforts to
ensure that legal title to its mining assets are properly recorded, there can be no assurance that such title will be secured indefinitely.
Impairment of long-lived assets
Management assesses the possibility of impairment in the carrying value of its long-lived assets whenever events or circumstances
indicate that the carrying amounts of the asset or asset group may not be recoverable. Management calculates the estimated
undiscounted future net cash flows relating to the asset or asset group using estimated future prices, proven and probable reserves and
other mineral resources, and operating, capital and reclamation costs. When the carrying value of an asset exceeds the related
undiscounted cash flows, the asset is written down to its estimated fair value, which is usually determined using discounted future cash
flows. Management’s estimates of mineral prices, mineral resources, foreign exchange, production levels and operating capital and
reclamation costs are subject to risk and uncertainties that may affect the determination of the recoverability of the long-lived asset. It
is possible that material changes could occur that may adversely affect management’s estimates.
Income taxes
The liability method of accounting for income taxes is used and is based on differences between the accounting and tax bases of assets
and liabilities. Deferred income tax assets and liabilities are recognized for temporary differences between the tax and accounting
basis of assets and liabilities as well as for the benefit of losses available to be carried forward to future years for tax purposes using
86
enacted income tax rates expected to be in effect for the period in which the differences are expected to reverse. Deferred income tax
assets are evaluated and, if realization is not considered more likely than not, a valuation allowance is provided.
Uncertainty in income tax positions
The Company recognizes tax benefits from uncertain tax positions only if it is at least more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the
financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being
realized upon settlement with the taxing authorities. Related interest and penalties, if any, are recorded as tax expense in the tax
provision.
Financial instruments
Held-for-trading financial assets and liabilities are recorded at fair value as determined by active market prices and valuation models,
as appropriate. Valuation models require the use of assumptions concerning the amount and timing of estimated future cash flows and
discount rates. In determining these assumptions, management uses readily observable market inputs where available or, where not
available, inputs generated by management. Changes in fair value of held-for-trading financial instruments are recorded in income or
loss for the period. Held-for-trading financial liabilities consist of other liabilities. The Company has no held-for-trading financial
assets.
Available-for-sale financial assets are recorded at fair value as determined by active market prices. Unrealized gains and losses on
available-for-sale investments are recognized in other comprehensive income. If a decline in fair value is deemed to be other than
temporary, the unrealized loss is recognized in net earnings. Investments in equity instruments that do not have an active quoted
market price are measured at cost. The Company has no available-for-sale financial assets.
Loans and receivables are recorded initially at fair value, net of transaction costs incurred, and subsequently at amortized cost using
the effective interest rate method. Loans and receivables consist of cash and cash equivalents, accounts receivable, and deposits.
Other financial liabilities are recorded initially at fair value and subsequently at amortized cost using the effective interest rate method.
Other financial liabilities include accounts payable and accrued liabilities.
Translation of foreign currencies
Monetary assets and liabilities are translated at the exchange rate in effect at the balance sheet date, and non-monetary assets and
liabilities at the exchange rate in effect at the time of acquisition or issue. Revenues and expenses are translated at rates approximating
the exchange rate in effect at the time of transactions. Exchange gains or losses arising on translation are included in income or loss
for the period.
The Company’s functional and reporting currency is the United States dollar.
Loss per share
Loss per common share is calculated based on the weighted average number of common shares outstanding during the year. The
Company follows the treasury stock method in the calculation of diluted earnings per share. Under the treasury stock method, the
weighted average number of common shares outstanding used for the calculation of diluted loss per share assumes that the proceeds to
be received on the exercise of dilutive stock options and warrants are used to repurchase common shares at the average market price
during the period. Since the Company has losses, the exercise of outstanding convertible securities has not been included in this
calculation as it would be anti-dilutive.
During the year ended November 30, 2012, in order to complete the spin-out of NovaCopper, a stock split was completed to be able to
distribute 46,578,078 common shares to the shareholders of NovaGold. As a result of the stock split, historical earnings per share have
been restated for all prior periods. Under the continuity of interest basis, the earnings per share have been presented as if the shares
outstanding following the stock split had always been outstanding including prior to incorporation of the entity.
87
Stock-based compensation
Compensation expense for options granted to employees, directors and certain service providers is determined based on estimated fair
values of the options at the time of grant using the Black-Scholes option pricing model, which takes into account, as of the grant date,
the fair market value of the shares, expected volatility, expected dividend yield and the risk-free interest rate over the expected life of
the option. The cost is recognized using the graded attribution method over the vesting period of the respective options. The expense
relating to the fair value of stock options is included in expenses and is credited to contributed surplus. Shares are issued from treasury
in settlement of options exercised.
Compensation expense for restricted share units and deferred share units granted to employees and directors, respectively, is
determined based on estimated fair values of the units at the time of grant using quoted market prices or at the time the units qualify
for equity classification under ASC 718. The cost is recognized using the graded attribution method over the vesting period of the
respective units. The expense relating to the fair value of the units is included in expenses and is credited to other liabilities or
contributed surplus based on the unit plan’s classification. Units may be settled in either i) cash, and/or ii) shares purchased in the
open market, and/or iii) shares issued from treasury, at the Company’s election at the time of vesting.
Use of estimates and measurement uncertainties
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions of
future events that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial
statements, and the reported amounts of expenditures during the reported period. Significant estimates include the basis of impairment
of mineral properties and income taxes. Actual results could differ materially from those reported.
Recent accounting pronouncements
i.
Income tax disclosure
The Financial Accounting Standards Board (the “FASB”) issued “Presentation of an Unrecognized Tax Benefit When a Net
Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU 2013-11”) which amended
Topic 740, Income Taxes to provide guidance on financial statement presentation of an unrecognized tax benefit when a net
operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. It was released to provide clear guidance to
minimize divergence in practice when disclosing unrecognized tax benefits. ASU 2013-11 is effective for fiscal years
beginning after December 15, 2013. We adopted this standard for the fiscal year ending November 30, 2014. The adoption of
ASU 2013-11 did not have any impact as our disclosure meets the recommended practice.
ii.
Offsetting assets and liabilities
In January 2013, the FASB issued “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” (“ASU 2013-
01”). ASU 2013-01 clarifies Accounting Standards Update No. 2011-11: “Disclosures about Offsetting Assets and
Liabilities” (“ASU 2011-11”) to restrict the scope of implementation to derivatives accounted for under Topic 815,
Derivatives and Hedging, which includes bifurcated embedded derivatives repurchase agreements and reverse repurchase
agreements, and securities borrowing and lending transactions that require an offset or are subject to an enforceable master
netting arrangement. ASU 2013-01 is effective for fiscal years, and interim periods within those years, beginning on or after
January 1, 2013. We adopted this standard for the fiscal year ending November 30, 2014. The adoption of ASU 2013-01 did
not have a material impact on our results of operations, financial condition, or cash flows.
iii.
Development stage entity
In June 2014, the FASB issued “Development Stage Entities – Elimination of Certain Financial Reporting Requirements,
Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation” (“ASU 2014-10”). ASU 2014-
10 eliminates the concept of a development stage entity, of which NovaCopper had been classified. Upon adoption, certain
financial reporting disclosures will be eliminated including the presentation of an inception-to-date statement of income and
cash flow. ASU 2014-10 is effective for fiscal years, and interim periods within those years, beginning after December 15,
2014. Early adoption of this standard is permitted, and we expect to adopt for the fiscal year ending November 30, 2015. The
adoption of ASU 2014-10 is expected to have an impact on the disclosure and presentation of our statement of loss and
comprehensive loss and the statement of cash flows. As a result of adopting the standard, we will no longer include the
88
cumulative during exploration stage column currently presented on our statement of loss and comprehensive loss and the
statement of cash flows.
iv.
Going Concern
In August 2014, the FASB issued “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”
(“ASU 2014-15”). Historically, there has been no guidance in U.S. GAAP about management’s responsibility to evaluate
whether there is substantial doubt about an entity’s ability to continue as a going concern. This update provides the guidance
to clarify when and how management should be assessing their ability to continue as a going concern. ASU 2014-15 is
effective for fiscal years ending after December 15, 2016. Early adoption of this standard is permitted, and we expect to adopt
for the fiscal year ending November 30, 2015. We expect the adoption of ASU 2014-15 will have an impact on the frequency
with which we conduct going concern assessments. We do not expect the adoption to have significant changes to our
disclosure of going concern as we currently comply with appropriate guidance issued by the U.S. Securities and Exchange
Commission and guidance under U.S. auditing standards.
3
Plant and equipment
British Columbia, Canada
Furniture and equipment
Leasehold improvements
Computer hardware and software
Alaska, USA
Machinery, equipment and camp
Vehicles
Computer hardware and software
British Columbia, Canada
Furniture and equipment
Leasehold improvements
Computer hardware and software
Alaska, USA
Machinery, equipment and camp
Vehicles
Computer hardware and software
Accumulated
amortization
$
(15)
(13)
(44)
(2,579)
(218)
(31)
(2,900)
Accumulated
amortization
$
(5)
(5)
(17)
(1,949)
(144)
(29)
(2,149)
in thousands of dollars
November 30, 2014
Net
$
31
19
54
254
57
-
415
in thousands of dollars
November 30, 2013
Net
$
41
27
63
884
131
2
1,148
Cost
$
46
32
98
2,833
275
31
3,315
Cost
$
46
32
80
2,833
275
31
3,297
4
Mineral properties and development costs
Alaska, USA
Ambler (a)
Bornite (b)
November 30, 2013
$
26,586
4,000
30,586
Acquisition costs
$
-
-
-
in thousands of dollars
November 30, 2014
$
26,586
4,000
30,586
89
Alaska, USA
Ambler (a)
Bornite (b)
(a) Ambler
November 30, 2012
$
26,586
4,000
30,586
Acquisition costs
$
-
-
-
in thousands of dollars
November 30, 2013
$
26,586
4,000
30,586
On January 11, 2010, NovaGold, through a wholly-owned subsidiary, purchased 100% of the Ambler lands in Northwest Alaska,
which contains the copper-zinc-lead-gold-silver Arctic Project and other mineralized targets within the volcanogenic massive
sulfide belt. As consideration, NovaGold, issued 931,098 shares with a fair value of $5.0 million and agreed to make two cash
payments to the vendor of $12.0 million each in January 2011 and January 2012, for total consideration of $29.0 million. The fair
value of these cash payments were $11.1 million and $10.3 million, respectively, at the transaction date valued using a discount
rate of approximately 8%. The January 2011 payment was made by NovaGold on January 7, 2011 and the January 2012 payment
was made by NovaGold in advance on August 5, 2011. Total fair value of the consideration was $26.5 million, including
transaction costs associated with the acquisition of $0.1 million. The vendor retained a 1% net smelter return royalty that the
owner of the property can purchase at any time for a one-time payment of $10.0 million.
Prior to the acquisition in 2010, NovaGold held an option to earn a 51% interest in the property which was terminated upon
entering into the purchase and sale agreement.
As discussed in note 1, the property was acquired on October 17, 2011 by NovaCopper US through a purchase and sale agreement
with AGC.
(b) Bornite
On October 19, 2011, NovaCopper US acquired the exclusive right to explore and the non-exclusive right to access and enter on
the Bornite lands and lands deeded to NANA through the ANCSA, located adjacent to the Ambler lands in Northwest Alaska. As
consideration, NovaCopper US paid $4 million to acquire the right to explore and develop the combined Upper Kobuk Mineral
Projects through an Exploration Agreement and Option to Lease with NANA. NANA also has the right to appoint a member to
NovaCopper’s board of directors within a five year period following our public listing on a stock exchange. Upon a decision to
proceed with construction of a mine on the lands, NANA maintains the right to purchase between a 16%-25% ownership interest
in the mine or retain a 15% net proceeds royalty which is payable after NovaCopper has recovered certain historical costs, capital
and cost of capital. Should NANA elect to purchase an ownership interest, consideration will be payable equal to all historical
costs incurred on the properties at the elected percentage purchased less $40 million, not to be less than zero. The parties would
form a joint venture and be responsible for all future costs, including capital costs of the mine based on their pro-rata share.
NANA would also be granted a net smelter return royalty of between 1% and 2.5% upon the execution of a mining lease or a
surface use agreement, the percent which is determined by the classification of land from which production originates.
(c) Mineral properties expense
The following table summarizes mineral properties expense for the years ended November 30, 2014, 2013 and 2012.
Community
Drilling
Engineering
Environmental
Geochemistry and geophysics
Land and permitting
Other income
Project support
Wages and benefits
Mineral property expense
November 30, 2014
$
137
-
117
36
238
378
(9)
438
1,177
2,512
November 30, 2013
$
171
1,949
1,206
90
438
409
(103)
2,029
2,705
8,894
in thousands of dollars
November 30, 2012
$
159
4,685
512
243
1,182
81
(82)
4,971
3,576
15,327
90
Mineral property expenses consist of direct drilling, personnel, community, resource reporting and other exploration expenses as
outlined above, as well as indirect project support expenses such as fixed wing charters, helicopter support, fuel, and other camp
operation costs. Cumulative mineral properties expense from the initial earn-in agreement on the property in 2004 to
November 30, 2014 is $53.8 million.
5
Accounts payable and accrued liabilities
Trade accounts payable
Accrued liabilities
Accrued salaries and vacation
Accounts payable and accrued liabilities
November 30, 2014
$
36
410
533
979
in thousands of dollars
November 30, 2013
$
196
427
1,119
1,742
At November 30, 2014, accrued salaries and vacation included $384,000 of accrued and unpaid bonuses relating to services provided
by officers during the year ended November 30, 2013 which is payable at the time certain conditions are met.
At November 30, 2013, accrued salaries and vacation included $970,000 of accrued and unpaid bonuses payable to employees and
officers relating to services provided during the year ended November 30, 2013. $711,000 of the accrued salaries due to officers at
November 30, 2013 was payable at the time certain conditions are met. With the departure of three officers during 2014, $293,000 of
the obligation was reversed during the year ended November 30, 2014.
6
Share capital
Authorized:
unlimited common shares, no par value
November 30, 2011
Issued pursuant to Plan of Arrangement
Issued pursuant to employment agreement
Exercise of NovaGold Arrangement Options
November 30, 2012
Exercise of NovaGold Warrants
Exercise of NovaGold Arrangement Options
NovaGold Performance and Deferred Share Units
Restricted Share Units
November 30, 2013
Exercise of NovaGold Arrangement options
NovaGold Performance Share Units
Private placement
Restricted Share Units
Deferred Share Units
November 30, 2014, issued and outstanding
in thousands of dollars, except share amounts
Number of shares
200
46,577,878
76,005
10,986
46,665,069
6,088,262
52,243
16,586
244,496
53,066,656
46,929
14,166
6,521,740
492,501
154,373
60,296,365
Ascribed value
$
27,280
64,496
316
76
92,168
11,996
254
32
445
104,895
631
28
5,068
929
282
111,833
On July 7, 2014, the Company completed a non-brokered private placement of Units for gross proceeds of $7.5 million. Each Unit
was priced at $1.15 per Unit and consisted of one common share of the Company and one common share purchase warrant. Each
common share purchase warrant entitles the holder to purchase one common share of the Company at a price of $1.60 per share for a
period of five years from the closing date. Total net proceeds from the private placement were $7.2 million. Use of proceeds raised
are restricted for 12 months following closing to a maximum of $4.0 million on general and administrative expenses, $2.7 million on
program expenditures, and $0.8 million on additional expenses incurred in reducing annual general and administrative expenses.
On April 30, 2012 (the “Effective Date”), under the Plan of Arrangement, NovaGold distributed its interest in NovaCopper to the
shareholders of NovaGold on the basis that each shareholder received one share in NovaCopper for every six shares of NovaGold held
on the record date. NovaCopper committed to issue up to 6,181,352 common shares to satisfy holders of NovaGold warrants
91
(“NovaGold Warrants”), performance share units (“NovaGold PSUs”) and deferred share units (“NovaGold DSUs”) on record as of
the close of business April 27, 2012 on the same basis as NovaGold shareholders under the Plan of Arrangement. When a warrant is
exercised or a unit becomes vested, NovaCopper has committed to deliver one common share to the holder for every six shares of
NovaGold the holder is entitled to receive, rounded down to the nearest whole number. An amount of $12.2 million was recorded in
contributed surplus representing a pro-rated amount of the historical NovaGold investment based on the fully diluted number of
common shares at the Effective Date.
During the year ended November 30, 2014, the Company issued 14,166 common shares in settlement of NovaGold PSUs which
vested on January 29, 2014 (November 30, 2013 – 16,586 common shares). As of November 30, 2014, no NovaGold PSUs remain
outstanding.
As of November 30, 2014, 20,685 NovaGold DSUs remain outstanding, which will settle upon the NovaGold directors’ retirement.
(a) Stock options
The Company has a stock option plan providing for the issuance of options with a rolling maximum number equal to 10% of the
issued and outstanding common shares of the Company at any given time. The Company may grant options to its directors, officers,
employees and service providers. The exercise price of each option cannot be lower than the greater of Market Price or Fair Market
Value of the shares (as such terms are defined in the plan) at the date of the option grant. The number of shares optioned to any single
optionee may not exceed 10% of the issued and outstanding shares at the date of grant. The options are exercisable for a maximum of
five years from the date of grant, and may be subject to vesting provisions.
During the year ended November 30, 2014, 1,620,000 options (2013 – 65,000 options) at a weighted-average exercise price of
CAD$1.22 (2013 - CAD$1.98) were granted to employees, consultants and directors exercisable for a period of five years with
various vesting terms between nil and two years. The weighted-average fair value attributable to options granted in 2014 was of $0.44
(2013 - $0.73).
The fair value of the stock options recognized in the period has been estimated using an option pricing model.
Assumptions used in the pricing model for the period are as provided below.
Risk-free interest rates
Exercise price
Expected life
Expected volatility
Expected dividends
November 30, 2014
1.16%
CAD$1.22
3.0 years
60.2%
Nil
November 30, 2013
1.11-1.46%
CAD$1.97-1.98
3.0 years
56.2-58.8%
Nil
November 30, 2012
1.02-1.59%
CAD$1.77-3.11
3.0 – 5.0 years
59.0-101.3%
Nil
The Black-Scholes and other option pricing models require the input of highly subjective assumptions. As NovaCopper has no history
of granting stock options prior to April 30, 2012, the Company considered historical information from NovaGold in estimating the
expected life of the options granted during the period. Further, volatility considered both the Company’s historical price observations
available and the historical price observations of NovaGold over the expected term of the options.
The Company recognized a share-based payments charge of $0.5 million for the year ended November 30, 2014, net of forfeitures.
For the year ended November 30, 2013, a charge of $4.7 million was recognized with the majority of the expense recognized for
options granted in the previous year with an additional expense of $0.8 million for options cancelled in 2013, net of forfeitures. For
the year ended November 30, 2012 a charge of $9.2 million was recognized.
On November 22, 2013, the Company cancelled 5,710,000 stock options at an exercise price of CAD$3.11 which were granted in
2012. The remaining expense of $0.8 million relating to unvested options at the time of cancellation was accelerated and recognized in
the year.
As of November 30, 2014, there were 698,338 non-vested options outstanding with a weighted average exercise price of $1.09; the
non-vested stock option expense not yet recognized was $0.2 million, and this expense is expected to be recognized over the next two
years.
92
A summary of the Company’s stock option plan and changes during the year ended is as follows:
Balance – beginning of year
Granted
Forfeited
Balance – end of year
November 30, 2014
Weighted average exercise
price
$
1.79
1.07
1.74
1.11
Number of options
168,332
1,620,000
(46,666)
1,741,666
The following table summarizes information about the stock options outstanding at November 30, 2014.
Range of price
$ 1.07 to $ 1.73
Number of
outstanding
options
1,741,666
1,741,666
Weighted
average years to
expiry
4.65
4.65
Outstanding
Weighted
average exercise
price
$
1.11
1.11
Exercisable
Weighted
average exercise
price
$
1.12
1.12
Unvested
Number of
unvested options
698,338
698,338
Number of
exercisable
options
1,043,328
1,043,328
The aggregate intrinsic value of vested share options (the market value less the exercise price) at November 30, 2014 was $nil (2013 -
$0.01 million, 2012 - $nil).
(b) NovaGold Arrangement Options
Under the Plan of Arrangement, holders of NovaGold stock options received one option in NovaCopper for every six options held in
NovaGold (“NovaGold Arrangement Options”). The exercise price of the options in NovaCopper was determined based on the
relative fair values of NovaCopper and NovaGold based on the volume weighted-average trading prices on the Toronto Stock
Exchange for the five trading days commencing on the sixth trading day following the Effective Date. All other terms of the options
remained the same. A total of 2,189,040 options to acquire NovaCopper shares were granted under the Plan of Arrangement on April
30, 2012. No stock options granted by NovaGold after the Effective Date are subject to the Plan of Arrangement. The fair value of the
NovaGold Arrangement Options was estimated using an option pricing model at a weighted average fair value of $1.74 in 2012.
The Company recognized a stock based compensation recovery of $(0.02) million for the year ended November 30, 2014, expense of
$0.07 million for the year ended November 30, 2013, and expense of $0.2 million for the year ended November 30, 2012.
A summary of the NovaGold Arrangement Options and changes during the year ended is as follows:
Balance – beginning of year
Exercised
Forfeited
Expired
Balance – end of year
November 30, 2014
Weighted average exercise
price
$
4.08
1.15
4.56
2.58
5.06
Number of options
1,709,503
(212,075)
(301,416)
(474,597)
721,415
93
The following table summarizes information about the NovaGold Arrangement Options outstanding at November 30, 2014.
Range of price
$ 2.98 to $ 3.99
$ 4.00 to $ 5.99
$ 6.00 to $ 7.99
Number of
outstanding
options
169,444
345,036
206,935
721,415
Weighted
average years to
expiry
0.83
1.63
1.21
1.32
Outstanding
Weighted
average exercise
price
$
3.13
5.00
6.74
5.06
Exercisable
Weighted
average exercise
price
$
3.11
5.00
6.74
5.07
Number of
exercisable
options
163,888
345,036
206,935
715,859
Unvested
Number of
unvested
options
5,556
-
-
5,556
The aggregate intrinsic value of vested NovaGold Arrangement Options (the market value less the exercise price) at November 30,
2014 was $nil (2013 - $0.02 million, 2012 – $0.02 million) and the aggregate intrinsic value of exercised options in 2014 was $0.02
million (2013 - $0.07 million, 2012 - $0.03 million).
As of November 30, 2014, there were 5,556 non-vested NovaGold Arrangement Options outstanding with a weighted average
exercise price of CAD$3.69; the non-vested stock option expense not yet recognized was $0.01 million; and this expense is expected
to be recognized over the first quarter of 2015.
(c) Restricted Share Units and Deferred Share Units
On November 29, 2012, the Board of Directors approved a Restricted Share Unit Plan (“RSU Plan”) and a Non-Executive Director
Deferred Share Unit Plan (“DSU Plan”) to provide long-term incentives to employees, officers and directors. The RSU and DSU Plans
may be settled in cash and/or common shares at the Company’s election with each Restricted Share Unit (“RSU”) and Deferred Share
Unit (“DSU”) entitling the holder to receive one common share or equivalent value.
On December 5, 2012, 1,295,500 RSUs were granted to employees and officers vesting equally in thirds on June 5, 2013, December 5,
2013, and December 5, 2014. 750,000 DSUs that were granted to directors vested immediately and are to be paid out at the time of
retirement from NovaCopper.
On September 9, 2014, 186,650 DSUs were granted to directors vesting upon the commencement of the Company's annual
shareholder meeting in Spring 2015. Also in early September, cash payments owing to directors for fees of $207,000 were cancelled.
The remaining 56,073 DSUs were granted to directors throughout the year ended November 30, 2014 based on their election to
receive 50% of their annual retainer in DSUs.
A summary of the Company’s unit plans and changes during the year ended is as follows:
Balance – beginning of year
Granted
Vested/paid
Forfeited
Balance – end of year
Number of RSUs
851,673
-
(492,501)
(21,836)
337,336
Number of DSUs
750,000
242,723
(154,373)
-
838,350
For the year ended November 30, 2014, NovaCopper recognized a stock-based compensation charge of $0.4 million (2013 -
$3.4 million), net of forfeitures.
Subsequent to fiscal year end, on December 5, 2014, 337,336 RSUs vested to employees and officers and were settled through the
issuance of 337,336 common shares. Following the vesting on December 5, 2014, no RSUs remain outstanding.
94
7
Management of capital risk
The Company relies upon management to manage capital in order to accomplish the objectives of safeguarding the Company’s ability
to continue as a going concern in order to pursue the development of its mineral properties and maintain a capital structure which
optimizes the costs of capital at an acceptable risk (note 1). The Company’s current capital consists of equity funding through capital
markets and funding received from its prior owner, NovaGold, prior to its public listing.
As the Company is currently in the exploration phase none of its financial instruments are exposed to commodity price risk; however,
the Company’s ability to obtain long-term financing and its economic viability may be affected by commodity price volatility.
To facilitate the management of its capital requirements, the Company prepares annual expenditure budgets that are updated as
necessary depending on various factors, including successful capital deployment and general industry conditions.
8
Financial instruments
The Company is exposed to a variety of risks arising from financial instruments. These risks and management’s objectives, policies
and procedures for managing these risks are disclosed as follows.
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, deposits, and accounts payable and
accrued liabilities. The fair value of accounts payable and accrued liabilities approximates their carrying value due to the short-term
nature of their maturity. All of the Company’s financial instruments are initially measured at fair value and then held at amortized
cost.
Financial risk management
The Company’s activities expose them to certain financial risks, including currency risk, credit risk, liquidity risk, interest risk and
price risk.
(a) Currency risk
Currency risk is the risk of a fluctuation in financial asset and liability settlement amounts due to a change in foreign exchange rates.
The Company operates in the United States and Canada with some expenses incurred in Canadian dollars. The Company’s exposure is
limited to cash of CAD$181,000, accounts receivable of CAD$13,000 and accounts payable of CAD$171,000. Based on a 10%
change in the US-Canadian exchange rate, assuming all other variables remain constant, the Company’s net loss would change by
approximately $2,000.
(b) Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual
obligations. The Company holds cash and cash equivalents with Canadian Chartered financial institutions which are comprised of cash
and money market accounts. The Company’s accounts receivable consist of GST receivable from the Federal Government of Canada
and receivables due for services provided to other parties. The Company’s exposure to credit risk is equal to the balance of cash and
cash equivalents and accounts receivable as recorded in the financial statements.
(c) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulties raising funds to meet its financial obligations as they fall due.
The Company is in the exploration stage and does not have cash inflows from operations; therefore, the Company manages liquidity
risk through the management of its capital structure and financial leverage as outlined in notes 1 and 7 to the consolidated financial
statements.
95
Contractually obligated cash flow requirements as at November 30, 2014 are as follows.
Accounts payable and accrued liabilities
Office lease
(d) Interest rate risk
Total
$
979
429
1,408
< 1 Year
$
979
171
1,150
1–2 Years
$
-
258
258
2–5 Years
$
-
-
-
in thousands of dollars
Thereafter
$
-
-
-
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Company holds excess cash balances in money market funds which limits the risk of loss due to interest rate
changes to $nil.
9
Income taxes
Income tax expense differs from the amount that would result from applying the Canadian federal and provincial income tax rates to
earnings before income taxes. These differences result from the following items:
Combined federal and provincial statutory tax rate
Income taxes at statutory rate
Difference in foreign tax rates
Effect of statutory rate changes
Expiry of net operating losses
Non-deductible expenditures
Other
Valuation allowance
Income tax expense
November 30, 2014
$
26.00%
(2,508)
(580)
-
-
243
(224)
3,069
-
November 30, 2013
$
25.67%
(6,261)
(1,590)
(20)
-
2,139
-
5,732
-
in thousands of dollars
November 30, 2012
$
25.13%
(7,794)
(2,652)
6
376
2,498
(39)
7,605
-
Future income taxes arise from temporary differences in the recognition of income and expenses for financial reporting and tax
purposes. The significant components of future income tax assets and liabilities at November 30, 2014 and 2013 are as follows:
Future income tax assets
Non-capital losses
Mineral property interest
Deferred interest
Property, plant and equipment
Share issuance costs
Other deductible temporary differences
Total future tax assets
Valuation allowance
Net future income tax assets
Future income tax liabilities
Other taxable temporary differences
Future income tax liabilities
Net future income tax assets
November 30, 2014
$
in thousands of dollars
November 30, 2013
$
48,717
14,266
9,041
24
235
699
72,982
(72,979)
3
3
3
-
45,278
14,704
9,041
13
105
748
69,889
(69,840)
49
49
49
-
The Company has loss carry-forwards of approximately $123.1 million that may be available for tax purposes. Certain of these losses
occurred prior to the incorporation of the Company and are accounted for in the financial statements as if they were incurred by the
Company, as described in note 1. Prior to the Plan of Arrangement, the Company undertook a tax reorganization during the year in
order to preserve the future deductibility of these losses for the Company, subject to the limitations below. Future tax assets have been
recognized to the extent of future taxable income and the future taxable amounts related to taxable temporary differences for which a
future tax liability is recognized can be offset. A valuation allowance has been provided against future income tax assets where it is
not more likely than not that the Company will realize those benefits.
96
The losses expire as follows in the following jurisdictions:
2015
2016
2017
2018
Thereafter
Non-capital losses
Canada
$
-
-
-
-
12,498
12,498
in thousands of dollars
Operating losses
United States
$
-
-
-
4,206
106,394
110,600
Future use of these U.S. loss carry-forwards is subject to certain limitations under provisions of the Internal Revenue Code including
limitations subject to Section 382, which relates to a 50% change in control over a three-year period, and are further dependent upon
the Company attaining profitable operations. An ownership change under Section 382 occurred on January 22, 2009 regarding losses
incurred by AGC, of which the attributes of those losses were transferred to NovaCopper US with the purchase of the mineral property
in October 2011. Therefore, approximately $42.6 million of the U.S. losses above are subject to limitation under Section 382.
Accordingly, the Company’s ability to use these losses may be limited.
An additional change in control may have occurred after November 30, 2011 which may further limit the availability of losses prior to
the date of change in control.
10
Commitment
On January 25, 2013, the Company entered into a commitment to lease office space effective May 1, 2013 for a period of four years.
The future minimum lease payments as at November 30, 2013 are approximately as follows.
2015
2016
2017
Total
11
Subsequent events
in thousands of dollars
November 30, 2014
$
171
181
77
429
On December 5, 2014, 600,000 stock options were granted to directors vesting immediately and 1,020,000 stock options were granted
to employees vesting equally in thirds on the grant date, the first anniversary of the grant date, and the second anniversary of the grant
date. Also on December 5, 2014, 337,336 RSUs, originally granted on December 5, 2012, vested to employees and were settled
through the issuance of 337,336 common shares.
97
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted by the
Company under U.S. and Canadian securities legislation is recorded, processed, summarized and reported within the time periods
specified in those rules, including providing reasonable assurance that material information is gathered and reported to senior
management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to permit timely
decisions regarding public disclosure. Management, including the CEO and CFO, has evaluated the effectiveness of the design and
operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) and15d-15(e) of the US Exchange Act
and the rules of Canadian Securities Administration, as at November 30, 2014. Based on this evaluation, the CEO and CFO have
concluded that the Company’s disclosure controls and procedures were effective.
Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rule 13a-15(f) and 15d-15(f)of the U.S. Exchange Act and National Instrument 52-109 Certification of Disclosure in Issuer’s Annual
and Interim filings. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations.
Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation. Management has used the Committee of Sponsoring Organizations of the Treadway Commission
framework (2013) to evaluate the effectiveness of the Company’s internal control over financial reporting. Based on this assessment,
management has concluded that as at November 30, 2014, the Company’s internal control over financial reporting was effective.
Attestation Report of the Registered Public Accounting Firm
This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control
over financial reporting. As a non-accelerated filer, management’s report was not subject to attestation by the company’s registered
public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which exempts non-accelerated
filers from complying with Section 404(b) of the Sarbanes-Oxley Act of 2002.
Changes in Internal Controls
There has been no change in our internal control over financial reporting during the year ended November 30, 2014 that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. OTHER INFORMATION
None.
98
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Executive Officers of NovaCopper
PART III
As of November 30, 2014, we had two executive officers, namely Rick Van Nieuwenhuyse and Elaine Sanders. The following
information is presented as of November 30, 2014.
Name and Residence
Rick Van Nieuwenhuyse
British Columbia, Canada
Director, President and Chief Executive Officer
Elaine Sanders
British Columbia, Canada
VP, Chief Financial Officer and Corporate
Secretary
Age
59
45
Held Office Since
April 29, 2011(1)
January 30, 2012(2)
Business Experience During Past Five Years
Chief Executive Officer of NovaCopper
(2011 – present); Former President and Chief
Executive Officer of NovaGold
VP and Chief Financial Officer of
NovaCopper (2012 – present); Corporate
Secretary of NovaCopper (2011 – present);
Vice President, Chief Financial Officer and
Corporate Secretary of NovaGold (2011 –
2012); and Vice President Finance of
NovaGold (2006 – 2011).
(1) Mr. Van Nieuwenhuyse was appointed President and Chief Executive Officer on April 29, 2011. He became a full-time employee of the Company
on January 9, 2012.
(2) Ms. Sanders was appointed Chief Financial Officer on January 30, 2012. She became a full-time employee of the Company on November 13,
2012.
The information responsive to Items 401, 405, 406 and 407 of Regulation S-K to be included in our definitive Proxy Statement for our
2015 Annual Meeting of Shareholders, to be filed within 120 days of November 30, 2014, pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the “2015 Proxy Statement”), is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
The information responsive to Items 402 and 407 of Regulation S-K to be included in our 2015 Proxy Statement is incorporated herein
by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information responsive to Items 201(d) and 403 of Regulation S-K to be included in our 2015 Proxy Statement is incorporated
herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information responsive to Items 404 and 407 of Regulation S-K to be included in our 2015 Proxy Statement is incorporated herein
by reference.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information responsive to Item 9(e) of Schedule 14A to be included in our 2015 Proxy Statement is incorporated herein by
reference.
99
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a)
Documents Filed With This Report
1.
FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Loss and Comprehensive Loss
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
80
81
82
83
84
85
2.
FINANCIAL STATEMENT SCHEDULES
None.
3.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
NovaCopper Inc. Equity Incentive Plan identified in exhibit list below.
Employment Agreement between the Registrant and Rick Van Nieuwenhuyse, dated January 9, 2012, identified in exhibit list
below.
Employment Agreement between the Registrant and Elaine Sanders, dated November 5, 2012, identified in exhibit list below.
2004 Stock Award Plan of NovaGold Resources Inc. (as amended) identified in exhibit list below.
NovaGold 2009 Performance Share Unit Plan identified in exhibit list below.
NovaGold 2009 Deferred Share Unit Plan identified in exhibit list below.
NovaCopper Inc. 2012 Restricted Share Unit Plan identified in exhibit list below.
NovaCopper Inc. 2012 Deferred Share Unit Plan identified in exhibit list below.
(b)
Exhibits
Exhibit
No.
3.1
Description
Certificate of Incorporation (incorporated by reference Exhibit 99.2 to the Registration Statement on Form 40-F as
filed on March 1, 2012, File No. 001-35447)
3.2
Articles of NovaCopper Inc., effective April 27, 2011, as altered March 20, 2011 (incorporated by reference to Exhibit
99.3 to Amendment No. 1 to the Registration Statement on Form 40-F as filed on April 19, 2012, File No. 001-35447)
10.1
Commitment Agreement between NovaGold Resources Inc. and NovaCopper Inc. dated effective April 19, 2012
100
Exhibit
No.
(incorporated by reference to Exhibit 99.1 to the Form 6-K dated April 25, 2012)
Description
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
21.1
23.1
23.2
23.3
23.4
23.5
23.6
23.7
31.1
31.2
Exploration Agreement and Option to Lease between NovaCopper US Inc. and NANA Regional Corporation, Inc.
dated October 19, 2011(incorporated by reference to Exhibit 99.1 to the Form 6-K dated April 25, 2012)
Net Smelter Returns Royalty Agreement among Kenecott Exploration Company, Kennecott Arctic Company, Alaska
Gold Company, and NovaGold Resources Inc. dated effective January 7, 2010 (incorporated by reference to Exhibit
99.1 to the Form 6-K dated April 25, 2012)
Employment Agreement between the Registrant and Rick Van Nieuwenhuyse, dated January 9, 2012 (incorporated by
reference to Exhibit 4.4 of the Registrant’s registration statement on Form S-8 as filed on April 27, 2012, File No.
333-181020)
Employment Agreement between the Registrant and Elaine Sanders, dated November 5, 2012 (incorporated by
reference to Exhibit 10.5 to the Registration Statement on Form 10-K as filed on February 12, 2013, File No. 001-
35447)
2004 Stock Award Plan of NovaGold Resources Inc. (as amended) (incorporated by reference to Appendix A of
Exhibit 99.2 of NovaGold Resources Inc.’s report on Form 6-K as filed on April 29, 2009), as amended pursuant to
the Plan of Arrangement (incorporated by reference to Exhibit 99.1 of NovaGold Resources Inc.’s report on Form 6-K
as filed on March 1, 2012)
NovaGold 2009 Performance Share Unit Plan (incorporated by reference to Appendix C of Exhibit 99.2 of NovaGold
Resources Inc.’s report on Form 6-K as filed on April 29, 2009), as amended pursuant to the Plan of Arrangement
(incorporated by reference to Exhibit 99.1 of NovaGold Resources Inc.’s report on Form 6-K as filed on March 1,
2012)
NovaGold 2009 Deferred Share Unit Plan (incorporated by reference to Appendix E of Exhibit 99.2 of NovaGold
Resources Inc.’s report on Form 6-K as filed on April 29, 2009), as amended pursuant to the Plan of Arrangement
(incorporated by reference to Exhibit 99.1 of NovaGold Resources Inc.’s report on Form 6-K as filed on March 1,
2012)
Form of NovaCopper Inc. Stock Option Agreement (incorporated by reference to Exhibit 4.5 of the Registrant’s
registration statement on Form S-8 as filed on April 27, 2012, File No. 333-181020)
NovaCopper Inc. 2012 Restricted Share Unit Plan (incorporated by reference to Exhibit 10.11 to the Registration
Statement on Form 10-K as filed on February 12, 2013, File No. 001-35447)
NovaCopper Inc. 2012 Deferred Share Unit Plan (incorporated by reference to Exhibit 10.12 to the Registration
Statement on Form 10-K as filed on February 12, 2013, File No. 001-35447)
Form of Unit Subscription Agreement (incorporated by reference to Exhibit 99.3 to the Form 8-K filed July 8, 2014)
Form of Warrant (incorporated by reference to Exhibit 99.4 to the Form 8-K filed July 8, 2014)
Subsidiaries of the Registrant
Consent of PricewaterhouseCoopers LLP
Consent of Erin Workman
Consent of Scott Petsel
Consent of Tetra Tech
Consent of BD Resource Consulting, Inc.
Consent of SIM Geological Inc.
Consent of International Metallurgical & Environmental Inc.
Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)
Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)
101
Exhibit
No.
32.1
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350
Description
32.2
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350
____________
102
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
NOVACOPPER INC.
By: /s/ Rick Van Nieuwenhuyse
Name: Rick Van Nieuwenhuyse
Title: President and Chief Executive Officer
Date: February 5, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Rick Van Nieuwenhuyse
Rick Van Nieuwenhuyse
President, Chief Executive Officer and
February 5, 2015
Director (Principal Executive Officer)
/s/ Elaine Sanders
Elaine Sanders
Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
February 5, 2015
/s/ Clynton Nauman
Clynton R. Nauman
Lead Director
Representative
and Authorized US
February 5, 2015
/s/ Tony Giardini
Tony Giardini
/s/ Thomas Kaplan
Dr. Thomas S. Kaplan
/s/ Gregory Lang
Gregory A. Lang
/s/ Igor Levental
Igor Levental
/s/ Kalidas Madhavpeddi
Kalidas V. Madhavpeddi
/s/ Gerald McConnell
Gerald McConnell
/s/ Janice Stairs
Janice Stairs
Director
Director
Director
Director
Director
Director
Director
103
February 5, 2015
February 5, 2015
February 5, 2015
February 5, 2015
February 5, 2015
February 5, 2015
February 5, 2015
Name of Subsidiary
Jurisdiction of Organization
SUBSIDIARIES OF THE REGISTRANT
NovaCopper US Inc. (1) ………………………………………. Delaware
(1) 100% owned by NovaCopper Inc.
Exhibit 21.1
104
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 (No. 333-188950 and No. 333-
181020) and S-3/A (No. 333-185127) of NovaCopper Inc. of our report dated February 5, 2015, relating to the consolidated financial
statements which appears in this Annual Report on Form 10-K for the year ended November 30, 2014.
Exhibit 23.1
/s/ PricewaterhouseCoopers LLP
Chartered Accountants
Vancouver, British Columbia
February 5, 2015
105
CONSENT OF ERIN WORKMAN
Exhibit 23.2
I hereby consent to the inclusion in this Annual Report on Form 10-K, which is being filed with the United States
Securities and Exchange Commission, of references to my name and to the use of the technical information included in
the “Arctic Project” and the “Bornite Project” sections, in NovaCopper Inc.’s Annual Report on Form 10-K for the year
ended November 30, 2014.
I also consent to the incorporation by reference in NovaCopper Inc.’s Registration Statement on Form S-3 (No. 333-
185127) and Registration Statements on Form S-8 (No. 333-188950 and No. 333-181020), of references to my name and
to the use of the technical information included in the Annual Report on Form 10-K as described above.
DATED: February 5, 2015
/s/ Erin Workman
Name: Erin Workman
106
CONSENT OF SCOTT PETSEL
Exhibit 23.3
I hereby consent to the inclusion in this Annual Report on Form 10-K, which is being filed with the United States
Securities and Exchange Commission, of references to my name and to the use of the technical information included in
the “Arctic Project – Current Activities” and the “Bornite Project – Current Activities” sections, and the disclosure
regarding land size and the number of claims for the Ambler lands, in NovaCopper Inc.’s Annual Report on Form 10-K
for the year ended November 30, 2014.
I also consent to the incorporation by reference in NovaCopper Inc.’s Registration Statement on Form S-3 (No. 333-
185127) and Registration Statements on Form S-8 (No. 333-188950 and No. 333-181020), of references to my name and
to the use of the technical information included in the Annual Report on Form 10-K as described above.
DATED: February 5, 2015
/s/ Scott Petsel
Name: Scott Petsel
107
CONSENT OF TETRA TECH
Exhibit 23.4
We hereby consent to the inclusion in this Annual Report on Form 10-K, which is being filed with the United States
Securities and Exchange Commission, of references to our name and to the use of the technical report titled “Preliminary
Economic Assessment Report on the Arctic Project, Ambler Mining District Northwest Alaska” dated effective
September 12, 2013 (the “Technical Report”).
We also consent to the incorporation by reference in NovaCopper Inc.’s Registration Statement on Form S-3 (No. 333-
185127) and Registration Statements on Form S-8 (No. 333-188950 and No. 333-181020), of references to our name and
to the use of the Technical Report, which is included in the Annual Report on Form 10-K.
DATED: February 5, 2015
/s/ Hassan Ghaffari
Name: Tetra Tech
7
108
CONSENT OF BD RESOURCE CONSULTING, INC.
We hereby consent to the inclusion in this Annual Report on Form 10-K, which is being filed with the United States
Securities and Exchange Commission, of references to our name and to the use of the technical report titled “NI 43-101
Technical Report on the Bornite Project, Northwest Alaska, USA” dated effective April 1, 2014 (the “Technical Report”).
We also consent to the incorporation by reference in NovaCopper Inc.’s Registration Statement on Form S-3 (No. 333-
185127) and Registration Statements on Form S-8 (No. 333-188950 and No. 333-181020), of references to our name and
to the use of the Technical Report, which is included in the Annual Report on Form 10-K.
Exhibit 23.5
DATED: February 5, 2015
/s/ Bruce Davis
Name: BD Resource Consulting, Inc.
109
CONSENT OF SIM GEOLOGICAL INC.
Exhibit 23.6
We hereby consent to the inclusion in this Annual Report on Form 10-K, which is being filed with the United States
Securities and Exchange Commission, of references to our name and to the use of the technical report titled “NI 43-101
Technical Report on the Bornite Project, Northwest Alaska, USA” dated effective April 1, 2014 (the “Technical Report”).
We also consent to the incorporation by reference in NovaCopper Inc.’s Registration Statement on Form S-3 (No. 333-
185127) and Registration Statements on Form S-8 (No. 333-188950 and No. 333-181020), of references to our name and
to the use of the Technical Report, which is included in the Annual Report on Form 10-K.
DATED: February 5, 2015
/s/ Robert Sim
Name: SIM Geological Inc.
110
CONSENT OF INTERNATIONAL METALLURGICAL & ENVIRONMENTAL INC.
We hereby consent to the inclusion in this Annual Report on Form 10-K, which is being filed with the United States
Securities and Exchange Commission, of references to our name and to the use of the technical report titled “NI 43-101
Technical Report on the Bornite Project, Northwest Alaska, USA” dated effective April 1, 2014 (the “Technical Report”).
We also consent to the incorporation by reference in NovaCopper Inc.’s Registration Statement on Form S-3 (No. 333-
185127) and Registration Statements on Form S-8 (No. 333-188950 and No. 333-181020), of references to our name and
to the use of the Technical Report, which is included in the Annual Report on Form 10-K.
Exhibit 23.7
DATED: February 5, 2015
/s/ Jeff Austin
Name: International Metallurgical & Environmental Inc.
111
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Exhibit 31.1
I, Rick Van Nieuwenhuyse, certify that:
1. I have reviewed this annual report on Form 10-K of NovaCopper Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based
on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 5, 2015
By:
/s/ Rick Van Nieuwenhuyse
Rick Van Nieuwenhuyse
Chief Executive Officer
112
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Exhibit 31.2
I, Elaine Sanders, certify that:
1. I have reviewed this annual report on Form 10-K of NovaCopper Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based
on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 5, 2015
By:
/s/ Elaine Sanders
Elaine Sanders
Chief Financial Officer
113
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of NovaCopper Inc. (the “Company”) on Form 10-K for the year ended November 30, 2014, as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Rick Van Nieuwenhuyse, Chief Executive
Officer of the Company, certify that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: February 5, 2015
By:
/s/ Rick Van Nieuwenhuyse
Rick Van Nieuwenhuyse
President and Chief Executive Officer
114
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of NovaCopper Inc. (the “Company”) on Form 10-K for the year ended November 30, 2014, as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Elaine Sanders, Chief Financial Officer of the
Company, certify that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: February 5, 2015
By:
/s/Elaine Sanders
Elaine Sanders
Chief Financial Officer
115