British Columbia
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N/A
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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789 West Pender Street, Suite 720
Vancouver, British Columbia, Canada
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V6C 1H2
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(Address of Principal Executive Offices)
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(Zip Code)
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(604) 669-6227
(Registrant’s Telephone Number, Including Area Code)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Shares, no par value
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NYSE MKT
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Securities registered pursuant to Section 12(g) of the Act:
None
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(Do not check if a smaller
reporting company)
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PART I
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13
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Item 1. Business |
13
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Item 1A. Risk Factors |
18
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Item 1B. Unresolved Staff Comments |
31
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Item 2. Properties |
32
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Item 3. Legal Proceedings |
56
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Item 4. Mine Safety Disclosures |
56
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PART II
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57
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
57
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Item 6. Selected Financial Data |
59
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
60
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk |
67
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Item 8. Financial Statements and Supplementary Data |
68
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
94
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Item 9A. Controls and Procedures |
94
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Item 9B. Other Information |
94
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PART III
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95
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Item 10. Directors, Executive Officers and Corporate Governance |
95
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Item 11. Executive Compensation |
95
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
95
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Item 13. Certain Relationships and Related Transactions, and Director Independence |
95
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Item 14. Principal Accountant Fees and Services |
96
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PART IV
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97
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Item 15. Exhibits and Financial Statement Schedules |
97
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·
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our ability to achieve production at any of our mineral exploration and development properties;
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·
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estimated capital costs, operating costs, production and economic returns;
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·
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estimated metal pricing, metallurgy, mineability, marketability and operating and capital costs, together with other assumptions underlying our resource and reserve estimates;
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·
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our expected ability to develop adequate infrastructure and that the cost of doing so will be reasonable;
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·
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assumptions that all necessary permits and governmental approvals will be obtained;
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·
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assumptions made in the interpretation of drill results, the geology, grade and continuity of our mineral deposits;
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·
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our expectations regarding demand for equipment, skilled labor and services needed for exploration and development of mineral properties; and
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·
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our activities will not be adversely disrupted or impeded by development, operating or regulatory risks.
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·
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uncertainty of whether there will ever be production at our mineral exploration and development properties;
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·
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uncertainty of estimates of capital costs, operating costs, production and economic returns;
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·
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uncertainties relating to the assumptions underlying our resource and reserve estimates, such as metal pricing, metallurgy, mineability, marketability and operating and capital costs;
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·
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risks related to our ability to commence production and generate material revenues or obtain adequate financing for our planned exploration and development activities;
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·
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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;
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·
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risks related to the third parties on which we depend for our exploration and development activities;
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·
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dependence on cooperation of joint venture partners in exploration and development of properties;
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·
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credit, liquidity, interest rate and currency risks;
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·
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risks related to market events and general economic conditions;
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·
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uncertainty related to inferred mineral resources;
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·
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risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of our mineral deposits;
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·
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risks related to lack of infrastructure required to develop, construct, and operate our mineral properties;
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·
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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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·
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the risk that permits and governmental approvals necessary to develop and operate mines on our properties will not be available on a timely basis, subject to reasonable conditions, or at all;
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·
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commodity price fluctuations;
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·
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risks related to governmental regulation and permits, including environmental regulation;
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·
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risks related to the need for reclamation activities on our properties and uncertainty of cost estimates related thereto;
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·
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uncertainty related to title to our mineral properties;
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·
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uncertainty related to unsettled aboriginal rights and title in British Columbia;
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·
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our history of losses and expectation of future losses;
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·
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uncertainty as to the outcome of potential litigation;
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·
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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;
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·
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risks related to default under our unsecured convertible notes;
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·
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risks related to our majority shareholder;
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·
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risks related to increases in demand for equipment, skilled labor and services needed for exploration and development of mineral properties, and related cost increases;
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·
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increased competition in the mining industry;
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·
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our need to attract and retain qualified management and technical personnel;
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·
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risks related to our current practice of not using hedging arrangements;
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·
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uncertainty as to our ability to acquire additional commercially mineable mineral rights;
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·
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risks related to the integration of potential new acquisitions into our existing operations;
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·
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risks related to unknown liabilities in connection with acquisitions;
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·
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risks related to conflicts of interests of some of the directors of the Company;
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·
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risks related to global climate change;
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·
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risks related to opposition to our operations at our mineral exploration and development properties from non-governmental organizations or civil society;
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·
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uncertainty as to our ability to maintain the adequacy of internal control over financial reporting as per the requirements of the Sarbanes-Oxley Act; and
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·
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increased regulatory compliance costs relating to the Dodd-Frank Act.
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doré
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A semi-pure alloy of gold and silver.
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electrowinning
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The deposition of gold from solution to cathodes by passing electric current from anodes through gold-bearing solution.
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extrusive
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Said of igneous rock that has been erupted onto the surface of the Earth.
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geotechnical
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Said of tasks or analysis that provide representative data of the geological rock quality in a known volume.
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flotation
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A process used for the concentration of minerals, especially within base metal systems.
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geohazard
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A geologic state that may lead to widespread damage or risk, such as a landslide, debris flow, avalanche, etc.
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grade
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Quantity of metal or mineral per unit weight of host rock.
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greywacke
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A variety of sandstone generally characterized by its hardness, dark color, and poorly sorted angular grains of quartz, feldspar, and small rock fragments set in a compact, clay-fine matrix.
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host rock
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A body of rock serving as a host for other rocks or for mineral deposits.
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hydrothermal
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Pertaining to hot aqueous solutions of magmatic origin which may transport metals and minerals in solution.
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intrusive
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Said of igneous rock formed by the consolidation of magma intruded into other rocks.
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lithology
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The character of a rock described in terms of its structure, color, mineral composition, grain size, and arrangement of its component parts.
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mafic
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Igneous rocks composed mostly of dark, iron- and magnesium-rich minerals.
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massive
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Said of a mineral deposit, especially of sulfides, characterized by a great concentration of mineralization in one place, as opposed to a disseminated or veinlike deposit.
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mineral
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A naturally formed chemical element or compound having a definite chemical composition and, usually, a characteristic crystal form.
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mineral deposit
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A mineralized body which has been physically delineated by sufficient drilling, trenching, and/or underground work, and found to contain a sufficient average grade of metal or metals to warrant further exploration and/or development expenditures.
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mineralization
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A natural occurrence in rocks or soil of one or more yielding minerals or metals.
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net present value
(NPV)
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The sum of the value on a given date of a series of future cash payments and receipts, discounted to reflect the time value of money and other factors such as investment risk.
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ore
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Rock containing metallic or non-metallic materials that can be mined and processed at a profit.
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placer
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An alluvial deposit of sand and gravel, which may contain valuable metals.
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porphyry
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An igneous rock of any composition that contains conspicuous phenocrysts (large crystals or mineral grains) in a fine-grained groundmass.
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pyrite
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An iron sulfide mineral (FeS2), the most common naturally occurring sulfide mineral.
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pyrrhotite
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An unusual, generally weakly magnetic, iron sulfide mineral with varying iron content (Fe1-x S (x=0 to 0.2)).
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Mineral Reserve
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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.
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Mineral reserves are those parts of mineral resources which, after the application of all mining factors, result in an estimated tonnage and grade which, in the opinion of the Qualified Person(s) (as defined in NI 43-101) making the estimates, is the basis of an economically viable project after taking account of all relevant processing, metallurgical, economic, marketing, legal, environment, socio-economic and governmental factors. Mineral reserves are inclusive of diluting material that will be mined in conjunction with the mineral reserves and delivered to the treatment plant or equivalent facility. The term “mineral reserve” need not necessarily signify that extraction facilities are in place or operative or that all governmental approvals have been received. It does signify that there are reasonable expectations of such approvals.
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Professional Association
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A self-regulatory organization of engineers, geoscientists, or both engineers and geoscientists that is given authority or recognition by statute in a jurisdiction of Canada or a foreign (non-Canadian) association that is generally accepted within the international mining community as a reputable professional association; admits individuals on the basis of their academic qualifications, experience, and ethical fitness; requires compliance with the professional standards of competence and ethics established by the organization; requires or encourages continuing professional development; and has and applies disciplinary powers, including the power to suspend or expel a member regardless of where the member practices or resides.
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Feasibility Study
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A comprehensive technical and economic study of the selected development option for a mineral project that includes appropriately detailed assessments of realistically assumed mining, processing, metallurgical, economic, marketing, legal, environmental, social and governmental considerations together with any other relevant operational factors and detailed financial analysis, that are necessary to demonstrate at the time of reporting that extraction is reasonably justified (economically mineable). The results of the study may reasonably serve as the basis for a final decision by a proponent or financial institution to proceed with, or finance, the development of the project. The confidence level of the study will be higher than that of a Pre-Feasibility Study.
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Pre-Feasibility Study
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A comprehensive study of a range of options for the technical and economic viability of a mineral project that has advanced to a stage where a preferred mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, is established and an effective method of mineral processing is determined. It includes a financial analysis based on reasonable assumptions on mining, processing, metallurgical, economic, marketing, legal, environmental, social and governmental considerations and the evaluation of any other relevant factors which are sufficient for a Qualified Person, acting reasonably, to determine if all or part of the Mineral Resource may be classified as a Mineral Reserve.
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Preliminary
Economic Assessment
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A study, other than a pre-feasibility or feasibility study, that includes an economic analysis of the potential viability of mineral resources. |
Exploration Information
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Geological, geophysical, geochemical, sampling, drilling, trenching, analytical testing, assaying, mineralogical, metallurgical and other similar information concerning a particular property that is derived from activities undertaken to locate, investigate, define or delineate a mineral prospect or mineral deposit.
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It is recognized that in the review and compilation of data on a project or property, previous or historical estimates of tonnage and grade, not meeting the minimum requirement for classification as Mineral Resource, may be encountered. If a Qualified Person reports Exploration Information in the form of tonnage and grade, it must be clearly stated that these estimates are conceptual or order of magnitude and that they do not meet the criteria of a Mineral Resource
.
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Exploration stage
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Prospect is one which is not in either the development or production stage.
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Executive office
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Registered and records office
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201 South Main Street, Suite 400
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789 West Pender Street, Suite 720
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Salt Lake City, Utah, USA 84111
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Vancouver, BC, V6C 1H2
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Telephone (801) 639-0511
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Facsimile (604) 669-6272
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Facsimile (801) 649-0509
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Toll free 1(866) 669-6227
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At November 30,
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||||||||||||
($ thousands)
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2013
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2012
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2011
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|||||||||
Canada
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$ | 367,712 | $ | 407,037 | $ | 410,923 | ||||||
United States
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4,435 | 7,451 | 34,794 | |||||||||
Other
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— | 513 | 500 | |||||||||
$ | 372,147 | $ | 415,001 | $ | 446,217 | |||||||
Year
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High
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Low
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Average
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|||||||||
2009
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$ | 1,213 | $ | 810 | $ | 972 | ||||||
2010
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$ | 1,421 | $ | 1,058 | $ | 1,225 | ||||||
2011
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$ | 1,895 | $ | 1,319 | $ | 1,571 | ||||||
2012
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$ | 1,792 | $ | 1,540 | $ | 1,669 | ||||||
2013
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$ | 1,694 | $ | 1,192 | $ | 1,411 | ||||||
2014 (to January 31)
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$ | 1,267 | $ | 1,221 | $ | 1,245 | ||||||
·
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the timing and cost, which can be considerable, of the construction of mining and processing facilities and related infrastructure;
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·
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the availability and cost of skilled labor and mining equipment;
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·
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the availability and cost of appropriate smelting and/or refining arrangements;
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·
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the need to obtain necessary environmental and other governmental approvals and permits, and the timing and conditions of those approvals and permits;
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·
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the availability and cost of funds to finance construction and development activities;
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·
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potential opposition from non-governmental organizations, environmental groups or local groups which may delay or prevent development activities; and
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·
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potential increases in construction and operating costs due to changes in the cost of labor, fuel, power, materials and supplies, services, and foreign exchange rates.
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·
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anticipated tonnage, grades and metallurgical characteristics of the ore to be mined and processed;
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·
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anticipated recovery rates of gold, copper and other metals from the ore;
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·
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cash operating costs of comparable facilities and equipment; and
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·
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anticipated climatic conditions.
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·
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global or regional consumption patterns;
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·
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expectations with respect to the rate of inflation;
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·
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the relative strength of the U.S. dollar and certain other currencies;
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·
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interest rates;
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·
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global or regional political or economic conditions, including interest rates and currency values;
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·
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supply and demand for jewelry and industrial products containing metals; and
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·
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sales by central banks and other holders, speculators and producers of metals in response to any of the above factors.
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·
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the global economic recovery could make other investment sectors more attractive, thereby affecting the cost and availability of financing to us and our ability to achieve our business plan;
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·
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the volatility of metal prices would impact the economic viability of our mineral properties and any future revenues, profits, losses and cash flow;
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·
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negative economic pressures could adversely impact demand for future production from our mineral properties;
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·
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construction related costs could increase and adversely affect the economics of any of our projects;
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·
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volatile energy, commodity and consumables prices and currency exchange rates would impact our future production costs; and
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·
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the devaluation and volatility of global stock markets would impact the valuation of our equity and other securities.
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·
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these estimates will be accurate;
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·
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mineral reserve, mineral resource or other mineralization figures will be accurate; or
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·
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this mineralization could be mined or processed profitably.
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·
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the development of our mineral properties will be commenced or completed on a timely basis, if at all;
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·
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the resulting operations will achieve the anticipated production volume; or
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·
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the construction costs and ongoing operating costs associated with the development of our mineral properties will not be higher than anticipated.
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·
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environmental hazards;
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·
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industrial accidents;
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·
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metallurgical and other processing problems;
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·
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unusual or unexpected geologic formations and conditions;
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·
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structural cave-ins or slides;
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·
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flooding;
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·
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fires;
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·
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power outages;
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·
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labor disruptions;
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·
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explosions;
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·
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landslides and avalanches;
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·
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mechanical equipment and facility performance problems;
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·
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availability of materials and equipment;
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·
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metals losses; and
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·
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periodic interruptions due to inclement or hazardous weather conditions.
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·
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environmental protection;
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·
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management and use of toxic substances and explosives;
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·
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management of tailings and other wastes generated by our operations;
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·
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management of natural resources;
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·
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exploration and development of mines, production and post-closure reclamation;
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·
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exports;
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·
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price controls;
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·
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taxation and mining royalties;
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·
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regulations concerning business dealings with native groups;
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·
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availability and use of water resources;
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·
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labor standards and occupational health and safety, including mine safety; and
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·
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preservation of historic and cultural resources.
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treat ground and surface water to drinking water standards;
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·
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control dispersion of potentially deleterious effluents;
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reasonably re-establish pre-disturbance land forms and vegetation; and
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·
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provide adequate financial assurance to ensure required reclamation of land affected by our activities.
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·
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establish ore reserves through drilling and metallurgical and other testing techniques;
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·
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determine metal content and metallurgical recovery processes to extract metal from the ore; and
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·
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permit, construct, renovate or expand mining and processing facilities.
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·
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identifying acquisitions that fit our business strategy;
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·
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accurately assessing the value, strengths, weaknesses, contingent and other liabilities and potential profitability of acquisition candidates;
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·
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negotiating acceptable terms with the seller of the business or mineral property to be acquired; and
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·
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obtaining approval from regulatory authorities in the jurisdictions of the business or mineral property to be acquired.
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·
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assimilating the operations of an acquired business or mineral property in a timely and efficient manner;
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·
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maintaining our financial and strategic focus while integrating the acquired business or mineral property;
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·
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achieving identified and anticipated operating and financial synergies;
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·
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unanticipated costs;
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·
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diversion of management attention from existing business;
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·
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potential loss of key employees or key employees of any business acquired;
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·
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unanticipated changes in business, industry or general economic conditions that affect the assumptions underlying the acquisition;
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·
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decline in the value of acquired mineral properties, companies or securities;
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·
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implementing uniform standards, controls, procedures and policies at the acquired business, as appropriate; and
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·
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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.
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(i)
|
“Donlin Creek Gold Project Alaska, USA, NI 43-101 Technical Report on Second Updated Feasibility Study” (“Donlin Gold FS”) for the Donlin Gold project in southwestern Alaska, USA, effective date November 18, 2011 and amended and filed on January 20, 2012. The independent technical report was prepared for NOVAGOLD by Kirk Hanson, P.E., Gordon Seibel, R.M. SME., and Tony Lipiec, P.Eng., all of whom are Qualified Persons as defined in NI 43-101. The Donlin Gold FS has been filed with the securities regulatory authorities in each province of Canada and with the SEC. Portions of the following information are based on assumptions, qualifications and procedures that are not fully described herein. References should be made to the full text of the Donlin Gold FS which is available for review on EDGAR at
www.sec.gov
and on SEDAR at
www.sedar.com
.
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(ii)
|
“Galore Creek Copper-Gold Project NI 43-101 Technical Report on Pre-Feasibility Study, British Columbia – Canada” (the PFS) for the Galore Creek project in northwestern British Columbia, Canada, effective date July 27, 2011 and filed on September 12, 2011. The independent technical report was prepared for GCMC, NOVAGOLD and Teck Resources Inc. (“Teck”) by Robert Gill, P.Eng., Jay Melnyk, P.Eng., Greg Wortman, P.Eng., Greg Kulla, P.Geo., and Dana Rogers, P.E., all of whom are Qualified Persons as defined in NI 43-101. The PFS has been filed with the securities regulatory authorities in each province of Canada and with the SEC. Portions of the following information are based on assumptions, qualifications and procedures which are not fully described herein. References should be made to the full text of the PFS which is available for review on EDGAR at
www.sec.gov
and on SEDAR at
www.sedar.com
.
Heather White, B.Sc., P.Eng., who is a consultant to the Company and a "qualified person" under the NI 43-101, has approved the scientific and technical information included in this Annual Report on Form 10-K related to: (1) Donlin Gold since the issuance of the technical report filed on January 23, 2012, and (2) Galore Creek since the issuance of the technical report filed on September 12, 2011.
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Year
|
Company
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Work Performed
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Results
|
|
1909 to 1956
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Various prospectors and placer miners
|
Gold discovered in 1909. Placer mining by hand, underground, and hydraulic methods.
|
Total placer gold production of approximately 30,000 ounces.
|
|
1970s to present
|
Robert Lyman and heirs
|
Resumed sluice mining in Donlin Gold area and placer mined Snow Gulch.
|
First year of mining Snow Gulch produced best results, with 800 ounces of gold recovered. Donlin Gold has obtained an agreement with the Lyman family to consolidate the land package around the proposed mine.
|
|
1974, 1975
|
Resource Associates of Alaska (RAA)
|
Regional mineral potential evaluation for Calista. Soil grid and three bulldozer trenches dug in Snow Gulch area.
|
Soil, rock, and vein samples have anomalous gold values. Trench rock sample results range from 2 to 20 grams per tonne gold.
|
|
1984 to 1987
|
Calista Corporation
|
Minor work. Geologists from various mining companies, including Cominco and Kennecott, visit the property.
|
||
1986
|
Lyman Resources
|
Auger drilling for placer evaluation finds abundant gray, sulfide rich clay near Quartz Gulch.
|
Assays of cuttings average over 7 grams per tonne gold. Initial discovery of Far Side (“Carolyn”) prospect.
|
|
1987
|
Calista Corporation
|
Rock sampling of ridge tops and auger drill sampling of Far Side prospect.
|
Anomalous gold values from auger holes: best result = 9.7 grams per tonne gold.
|
|
1988 to 1989
|
Western Gold Exploration and Mining Co. (WestGold)
|
Airborne geophysics, geological mapping, and soil sampling over most of the project area. Total of 13,525 meters of D9 Cat trenching at all prospects. Over 15,000 soil, rock chip, and auger samples collected. Drilling included 3,106 feet of AX core drilling, 404 meters in 239 auger holes, and 10,423 meters of RC drilling (125 holes). First metallurgical tests and petrographic work.
|
Initial work identified eight prospects with encouraging geology (Snow, Dome, Quartz, Carolyn, Queen, Upper Lewis, Lower Lewis, and Rochelieu). Drilling at most of these prospects led to identification of the Lewis areas as having the best bulk-mineable potential. Mineral resource estimate completed.
|
|
1993
|
Teck Exploration Ltd.
|
D-9 Cat trenching (1,400 meters) and two 500 meter soil lines in Lewis area. Petrographic, fluid inclusion, and metallurgical work.
|
Identified new mineralized areas, updated Mineral resource estimate.
|
|
1995 to 2000
|
Placer Dome
|
87,383 meters of core, 11,909 meters of RC drilling and 8,493 meters of trenching. Environmental monitoring and assessment.
|
Drilled the American Creek magnetic anomaly (ACMA), discovered the ACMA deposit. Numerous mineral resource estimation iterations.
|
|
2001 to 2002
|
NOVAGOLD
|
46,495 meters of core, 38,022 meters of RC drilling, 89.5 meters of geotechnical drilling, and 268 meters of water monitoring holes.
|
Filed a preliminary assessment report on the project. Updated resource estimate.
|
Year | Company | Worked Performed | Results | |
2003 to 2005
|
Donlin Gold Joint Venture
|
25,448 meters of core and 5,979 meters of RC drilling. Calcium carbonate exploration drilling; IP lines for facility condemnation studies.
|
Infill drilled throughout the resource area. Discovered a calcium carbonate resource. Poor quality IP data.
|
|
2006
|
Donlin Gold Joint Venture
|
92,804 meters of core drilling to support mineral resource classification conversion, slope stability, metallurgy, waste rock, carbonate exploration, facilities and port road studies.
|
Geological model and mineral resource update.
|
|
2007
|
Donlin Gold Joint Venture
|
Core drilling totaled 75,257 meters and included resource delineation, geotechnical and engineering, and carbonate exploration. 13 RC holes for monitor wells and pit pump tests totaled 1,043 meters.
|
Improved pit slope parameters, positive hydrogeological results. Carbonate exploration was negative. Updated mineral resource estimate. Completed feasibility study with positive results.
|
|
2008
|
Donlin Gold LLC
|
108 core holes totaling 33,425 meters for exploration and facility related geotechnical and condemnation studies. Updated resource models. Metallurgical test work: flotation variability and CN leach. 54 test pits and 37 auger holes were also completed for overburden characterization.
|
Resource expansion indicated for East ACMA. CN leach resource potential indicated for the main resource area, Snow, and Dome prospects. Facility sites successfully condemned. Updated resource estimates utilizing applicable data through 2007.
|
|
2009
|
Donlin Gold LLC
|
19 geotechnical core holes totaling 950 meters in facility sites and to address hydrology.
|
||
2010
|
Donlin Gold LLC
|
Six geotechnical core holes totaling 2,090 meters to evaluate slope stability of expanded pit. Also drilled 90 auger holes totaling 585 meters and dug 59 test pits to further evaluate overburden conditions and gravel supplies within tailings storage facility (TSF) area.
|
Pit slope stability of new pit design remained acceptable. Construction suitability of surficial materials in TSF is evaluated.
|
|
·
|
concentration by flotation;
|
·
|
high pressure oxidation in an autoclave;
|
·
|
carbon-in-leach (“CIL”) cyanidation of the oxidized concentrate;
|
·
|
carbon strip and regeneration circuits;
|
·
|
gold electrowinning; and
|
·
|
refining and production of doré bars.
|
Reserve Category
|
Tonnes
(thousands)
|
Gold Grade
(grams/tonne)
|
Contained Gold
(thousands of ounces)
|
|||||||||
Proven
|
7,683 | 2.32 | 573 | |||||||||
Probable
|
497,128 | 2.08 | 33,276 | |||||||||
Proven and probable
|
504,811 | 2.09 | 33,849 | |||||||||
(1)
|
Mineral reserves are contained within Measured and Indicated pit designs, and supported by a mine plan, featuring variable throughput rates, stockpiling and cut-off optimization. The pit designs and mine plan were optimized on diluted grades using the following economic and technical parameters: Metal price for gold of $975 per ounce; reference mining cost of $1.67 per tonne incremented $0.0031 per tonne per meter with depth from the 220 meter elevation (equates to an average mining cost of $2.14 per tonne), variable processing cost based on the formula 2.1874 x (S%) + 10.65 for each $ per tonne processed; general and administrative cost of $2.27 per tonne processed; stockpile rehandle costs of $0.19 per tonne processed assuming that 45% of mill feed is rehandled; variable recoveries by rock type, ranging from 86.66% in shale to 94.17% in intrusive rocks in the Akivik domain; refining and freight charges of $1.78 per ounce gold; royalty considerations of 4.5%; and variable pit slope angles, ranging from 23º to 43º. The Mineral Reserves are reported in accordance with NI 43-101, which differs from Industry Guide 7. The project is without known reserves under SEC Industry Guide 7. See Cautionary Note to U.S. Investors Regarding Estimates of Measured, Indicated and Inferred Resources and Proven and Probable Reserves, above.
|
(2)
|
Mineral reserves are reported using an optimized net sales return value based on the following equation: net sales return = Gold grade * Recovery * ($975 – (1.78 + ($975 – 1.78) * 0.045)) – (10.65 + 2.1874 * (S%) + 2.27 + 0.19) and reported in $ per tonne.
|
(3)
|
The life of mine strip ratio is 5.48. The assumed life-of-mine throughput rate is 53,500 tonnes per day.
|
(4)
|
Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade and contained metal content.
|
(5)
|
Mineral reserves are reported on a 100% basis. NOVAGOLD and Barrick each own 50% of the Donlin Gold project. Tonnage and grade measurements are in metric units. Contained gold ounces are reported as troy ounces.
|
Resource Category
|
Tonnes
(thousands)
|
Gold Grade
(grams/tonne)
|
Contained Gold
(thousands of ounces)
|
|||||||||
Measured
|
7,731 | 2.52 | 626 | |||||||||
Indicated
|
533,607 | 2.24 | 38,380 | |||||||||
Measured and indicated
|
541,337 | 2.24 | 39,007 | |||||||||
(1)
|
Mineral resources that are not mineral reserves do not have demonstrated economic viability. See Cautionary Note to U.S. Investors Regarding Estimates of Measured, Indicated and Inferred Resources and Proven and Probable Reserves, above.
|
(2)
|
Mineral resources are inclusive of mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability. See Cautionary Note to U.S. Investors Regarding Estimates of Measured, Indicated and Inferred Resources and Proven and Probable Reserves, above.
|
(3)
|
Mineral resources are contained within a conceptual measured, indicated and inferred optimized pit shell using the following assumptions: gold price of $1,200 per ounce; variable process cost based on 2.1874 * (sulfur grade) + 10.65; administration cost of $2.29 per tonne; refining, freight & marketing (selling costs) of $1.85 per ounce recovered; stockpile re-handle costs of $0.20 per tonne processed assuming that 45% of mill feed is re-handled; variable royalty rate, based on royalty of 4.5% * (Gold price – selling cost).
|
(4)
|
Mineral resources have been estimated using a constant net sales return cut-off of $0.001 per tonne milled. The net sales return cut-off was calculated using the formula: NSR = Gold grade * Recovery * ($1,200 – (1.85 + ($1,200 – 1.85) * 0.045)) – (10.65 + 2.1874 * (S%) + 2.29 + 0.20) and reported in $ per tonne.
|
(5)
|
Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade and contained metal content.
|
(6)
|
Tonnage and grade measurements are in metric units. Contained gold ounces are reported as troy ounces. See Cautionary Note to U.S. Investors Regarding Estimates of Measured, Indicated and Inferred Resources and Proven and Probable Reserves, above.
|
Resource Category
|
Tonnes
(thousands)
|
Gold Grade
(grams/tonne)
|
Contained Gold
(thousands of ounces)
|
|||||||||
Inferred
|
92,216 | 2.02 | 5,993 | |||||||||
(1)
|
Inferred resources are in addition to measured and indicated resources. 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. See Cautionary Note to U.S. Investors Regarding Estimates of Measured, Indicated and Inferred Resources and Proven and Probable Reserves, above.
|
(2)
|
Tonnage and grade measurements are in metric units. Contained gold ounces are reported as troy ounces. See Cautionary Note to U.S. Investors Regarding Estimates of Measured, Indicated and Inferred Resources and Proven and Probable Reserves, above.
|
Gold
($ per ounce)
|
LOM Cash Flow
($ million)
|
Jan 2014 NPV
5%
($ million)
|
Jan 2014 IRR
(%)
|
|||||||||||
$ | 700 | $ | (5,690 | ) | $ | (4,917 | ) | — | ||||||
$ | 800 | $ | (2,838 | ) | $ | (3,637 | ) | — | ||||||
$ | 900 | $ | (45 | ) | $ | (2,374 | ) | — | ||||||
$ | 1,000 | $ | 2,143 | $ | (1,342 | ) | 2.3 | |||||||
$ | 1,100 | $ | 4,191 | $ | (385 | ) | 4.3 | |||||||
$ | 1,200 | $ | 6,197 | $ | 547 | 6.0 | ||||||||
$ | 1,300 | $ | 8,187 | $ | 1,465 | 7.5 | ||||||||
$ | 1,400 | $ | 10,166 | $ | 2,375 | 8.9 | ||||||||
$ | 1,500 | $ | 11,631 | $ | 3,147 | 10.2 | ||||||||
$ | 1,600 | $ | 13,092 | $ | 3,862 | 11.2 | ||||||||
$ | 1,700 | $ | 14,616 | $ | 4,581 | 12.3 | ||||||||
$ | 1,800 | $ | 16,156 | $ | 5,296 | 13.2 | ||||||||
$ | 1,900 | $ | 17.699 | $ | 6,010 | 14.2 | ||||||||
$ | 2,000 | $ | 19,248 | $ | 6,722 | 15.1 |
Total tonnes mined (million)
|
3,270 | |||
Ore tonnes treated (million)
|
505 | |||
Strip ratio (waste tonnes per ore tonne)
|
5.48 | |||
Gold ounces recovered (million)
|
30.4 | |||
Gold recovery (%)
|
89.8 | % | ||
($ million)
|
||||
Gold, net revenue
|
$ | 36,445 | ||
Less:
|
||||
Mining
|
(8,200 | ) | ||
Processing
|
(7,808 | ) | ||
G&A, community, refining & land
|
(3,241 | ) | ||
Costs applicable to sales(1)
|
(19,249 | ) | ||
Initial capital
|
(6,679 | ) | ||
Sustaining capital
|
(1,505 | ) | ||
Total capital
|
(8,184 | ) | ||
Income taxes
|
(2,748 | ) | ||
Reclamation trust fund
|
(274 | ) | ||
Total costs
|
(30,455 | ) | ||
Total cash flow(2)
|
$ | 6,197 | ||
Payback period (years)
|
9.2 | |||
Operation life (years)
|
27 | |||
Jan 2014 NPV5%(3) ($ million)
|
$ | 547 | ||
Jan 2014 IRR
|
6.0 | % | ||
(1)
|
Costs applicable to sales (US GAAP), excluding Depreciation and Reclamation costs.
|
(2)
|
Cash flow after-tax excludes sunk costs.
|
(3)
|
Reference dates for discounted cash flow metrics are January 1, 2014 and exclude funds expended before that date.
|
$ per ounce
|
$ per tonne
milled
|
|||||||
Mining cost
|
$ | 270 | $ | 16.24 | ||||
Process cost
|
257 | 15.47 | ||||||
G&A, community, refining & land
|
107 | 6.42 | ||||||
$ | 634 | $ | 38.13 | |||||
($ million)
|
||||
Mining
|
$ | 345 | ||
Site preparation /roads
|
236 | |||
Process facilities
|
1,326 | |||
Tailings
|
120 | |||
Utilities (including natural gas pipeline)
|
1,302 | |||
Ancillary buildings
|
304 | |||
Off-site facilities
|
243 | |||
Total direct costs
|
3,876 | |||
Owners’ costs
|
414 | |||
Indirect costs
|
1,405 | |||
Contingency
|
984 | |||
Total indirect and contingency
|
2,803 | |||
Total project cost
|
$ | 6,679 | ||
·
|
Federal Income Tax – the greater of the U.S. Regular Tax of 35% or Alternative Minimum Tax of 20%.
|
·
|
Alaska State Income Tax – 9.4% of net income or Alternative Minimum Tax of 18% of Federal Alternative Minimum Tax.
|
·
|
Alaska State Mining License Tax – 7% of taxable mining income, less depletion. There is a 3.5-year tax holiday on the mining license tax.
|
·
|
For discounted cash flow (or NPV) purposes, the model is based from January 1, 2014. Estimates were prepared for all the individual elements of cash revenue and cash expenditures for ongoing operations.
|
·
|
Estimated cash flows from revenue are based on a gold price of $1,200 per ounce as provided by Donlin Gold. The pit has been optimized at a gold price of $975 per ounce, which was the guidance in effect at the time the pit optimization work was completed. At the effective date of the Donlin Gold FS, gold was trading at around $1,650 per ounce.
|
·
|
Gold recovery is estimated to average 89.8% over the LOM based on work and testing performed for feasibility study and feasibility study update purposes.
|
·
|
Doré refining and shipping charges were estimated at $1.02 per ounce based on actual refining charges for Barrick’s Goldstrike operations and a quotation for transportation and insurance costs from the Donlin Gold project site to a U.S.-based refinery. An additional 0.1% of gold produced from the mine is included in refining costs. This amount represents the refiner’s estimate of the loss of gold that will occur during the refining process.
|
·
|
The current hydrometallurgical process selection renders any contained silver into a greater refractory state, which provides less than 10% silver recovery through standard metal leaching. As a consequence, no silver credit was applied to the project.
|
·
|
Assets will be sold over the course of the mine life, when they are no longer required for project-based work, as well as at the end of the mine life. Total recovered value from these sales is estimated at approximately $23.0 million.
|
·
|
Reclamation and closure costs were estimated at $273.7 million to be funded over the construction and operating period to fund closure and post-closure activities.
|
·
|
Inventory is included in the financial model as cash outflows in the year before start-up of operations.
|
·
|
Relocation of the tailings facility allowing for construction of a conventional tailings dam;
|
·
|
Relocation of the processing facilities allowing for future expansion;
|
·
|
Realignment of the tunnel and access road; and
|
·
|
Increase of daily throughput to approximately 90,000 tonnes per day.
|
Tonnes
|
Diluted Grade
|
Contained
Cu
|
Contained
Au
|
Contained
Ag
|
|||
(million tonnes)
|
Cu
(%)
|
Au
(g/t)
|
Ag
(g/t)
|
(billion pounds)
|
(million ounces)
|
(million ounces)
|
|
Proven
|
69.0
|
0.61
|
0.52
|
4.94
|
0.9
|
1.15
|
11.0
|
Probable
|
459.1
|
0.58
|
0.29
|
6.18
|
5.9
|
4.30
|
91.2
|
Proven and probable
|
528.0
|
0.59
|
0.32
|
6.02
|
6.8
|
5.45
|
102.1
|
(1)
|
Mineral reserves are contained within measured and indicated pit designs, and supported by a mine plan, featuring variable throughput rates, stockpiling and cut-off optimization. The pit designs and mine plan were optimized on diluted grades using the following economic and technical parameters: Metal prices for copper, gold and silver of $2.50per pound, $1,050 per ounce, and $16.85 per ounce, respectively. Mining and ore based costs (process, G&A and mine general) of C$1.60 per tonne mined and C$10.08 per tonne milled respectively; an exchange rate of $0.91 to C$1.00; variable recovery versus head grade relationships for both oxidized and non-oxidized material; appropriate smelting, refining and transportation costs; and inter ramp pit slope angles varying from 42º to 55º. The mineral reserves are reported in accordance with NI 43-101, which differs from SEC Industry Guide 7. The project is without known reserves as defined under SEC Industry Guide 7. See Cautionary Note to U.S. Investors Regarding Estimates of Measured, Indicated and Inferred Resources and Proven and Probable Reserves, above.
|
(2)
|
Mineral reserves are reported using a ‘cash flow grade’ ($NSR/SAG mill hour) cut-off which was varied from year to year in the scheduling process to optimize NPV. The cash flow grade is a function of the NSR ($ per tonne) and SAG mill throughput (tonnes per hour). The net smelter return (NSR) was calculated as follows: NSR = Recoverable Revenue – TCRC (on a per tonne basis), where: NSR = Net Smelter Return; TCRC = Transportation and Refining Costs; Recoverable Revenue = Revenue in Canadian dollars for recoverable copper, recoverable gold, and recoverable silver using the economic and technical parameters mentioned above. SAG throughputs were modeled by correlation with alteration types.
|
(3)
|
The life of mine strip ratio is 2.16.
|
(4)
|
Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade and contained metal content.
|
(5)
|
Tonnage and grade measurements are in metric units. Contained gold and silver ounces are reported as troy ounces, contained copper pounds as imperial pounds. See Cautionary Note to U.S. Investors Regarding Estimates of Measured, Indicated and Inferred Resources and Proven and Probable Reserves, above.
|
Tonnes
(million tonnes)
|
Cu Grade
(%)
|
Au Grade
(g/t)
|
Ag Grade
(g/t)
|
Contained Cu
(billion pounds)
|
Contained Au
(million ounces)
|
Contained Ag
(million ounces)
|
|
Measured
|
39.5
|
0.25
|
0.39
|
2.58
|
0.22
|
0.50
|
3.27
|
Indicated
|
247.2
|
0.34
|
0.26
|
3.81
|
1.85
|
2.04
|
30.26
|
Measured and indicated
|
286.7
|
0.33
|
0.27
|
3.64
|
2.07
|
2.53
|
33.54
|
(1)
|
Mineral resources are exclusive of Mineral reserves. Mineral resources that are not Mineral reserves do not have demonstrated economic viability. See Cautionary Note to U.S. Investors Regarding Estimates of Measured, Indicated and Inferred Resources and Proven and Probable Reserves, above.
|
(2)
|
Mineral resources are contained within a conceptual measured, indicated and inferred optimized pit shell using the same economic and technical parameters as used for Mineral reserves. Tonnages are assigned based on proportion of the block below topography. The overburden/bedrock boundary has been assigned on a whole block basis. Commodity prices used to constrain the Mineral Resources are $2.50 per pound copper, $1,050 per ounce gold, and $16.85 per ounce silver.
|
(3)
|
Mineral resources have been estimated using a constant NSR cut-off of $10.08 per tonne milled. The Net Smelter Return (NSR) was calculated as follows: NSR = Recoverable Revenue – TCRC (on a per tonne basis), where: NSR = Diluted Net Smelter Return; TCRC = Transportation and Refining Costs; Recoverable Revenue = Revenue in Canadian dollars for recoverable copper, recoverable gold, and recoverable silver using silver using the economic and technical parameters used for mineral reserves.
|
(4)
|
Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade and contained metal content.
|
(5)
|
Tonnage and grade measurements are in metric units. Contained gold and silver ounces are reported as troy ounces, contained copper pounds as imperial pounds.
|
Tonnes
(million tonnes)
|
Cu Grade
(%)
|
Au Grade
(g/t)
|
Ag Grade
(g/t)
|
Contained Cu
(billion pounds)
|
Contained Au
(million ounces)
|
Contained Ag
(million ounces)
|
|
Inferred
|
346.6
|
0.42
|
0.24
|
4.28
|
3.23
|
2.70
|
47.73
|
(1)
|
Inferred resources are in addition to measured and indicated resources. 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. See Cautionary Note to U.S. Investors Regarding Estimates of Measured, Indicated and Inferred Resources and Proven and Probable Reserves, above.
|
(2)
|
Tonnage and grade measurements are in metric units. Contained gold and silver ounces are reported as troy ounces, contained copper pounds as imperial pounds.
|
·
|
Better understanding of geochemistry, resulting in a different approach to waste rock and tailings management;
|
·
|
Simplified waste and water management strategy in the Galore Creek valley plant site and tailings relocated outside of the Galore Creek valley, in a new previously unaffected watershed (West More);
|
·
|
Deletion of a 30 kilometer section of access road down the Sphaler Valley to Porcupine and the Scott Simpson Valley, significantly reducing potential environmental impacts and geohazards;
|
·
|
Deletion of the airstrip that was to be constructed in the Porcupine Valley; and
|
·
|
Addition of new load-out facilities at the Port of Stewart.
|
NYSE-MKT
|
TSX
|
||||||||||||||
Year
|
Quarter
|
High
|
Low
|
High
|
Low
|
||||||||||
2013
|
First
|
$ | 5.03 | $ | 3.92 | $ | C4.95 | $ | C4.02 | ||||||
Second
|
4.14 | 2.12 | $ | 4.24 | $ | 2.18 | |||||||||
Third
|
3.46 | 1.90 | $ | 3.63 | $ | 1.99 | |||||||||
Fourth
|
2.85 | 2.04 | $ | 3.00 | $ | 2.12 | |||||||||
2012
|
First
|
11.57 | 7.77 | $ | 11.72 | $ | 7.96 | ||||||||
Second
|
8.43 | 4.98 | $ | 8.30 | $ | 5.00 | |||||||||
Third
|
6.72 | 3.61 | $ | 6.98 | $ | 3.66 | |||||||||
Fourth
|
6.30 | 3.98 | $ | 6.14 | $ | 4.00 | |||||||||
(i)
|
the U.S. Resident Holder, any one or more persons with whom the U.S. Resident Holder does not deal at arm’s length owned, or partnership in which the holder 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, alone or in any combination, 25% or more of the issued shares of any class of the capital stock of NOVAGOLD at any time in the 60 months preceding the particular time; and
|
(ii)
|
more than 50% of the fair market value of the common shares was derived directly or indirectly from, or from any combination of, real or immovable property situated in Canada, “Canadian resource properties” (as defined in the Canadian Tax Act), “timber resource properties” (as so defined), or options or interests therein, at any time in the 60 months preceding the particular time.
|
Years ended November 30,
|
||||||||||||||||||||
(
dollars in thousands, except per share
)
|
2013
|
2012
|
2011
|
2010
|
2009
|
|||||||||||||||
Loss from operations
|
$ | (55,776 | ) | $ | (79,942 | ) | $ | (115,996 | ) | $ | (22,773 | ) | $ | (46,412 | ) | |||||
Net income (loss) from continuing operations
|
$ | (62,760 | ) | $ | (7,586 | ) | $ | 78,235 | $ | (500,875 | ) | $ | (29,116 | ) | ||||||
Net income (loss) from discontinued operations
|
$ | — | $ | (4,243 | ) | $ | (33,094 | ) | $ | (133,521 | ) | $ | (20,269 | ) | ||||||
Net income (loss) attributable to shareholders
|
$ | (62,760 | ) | $ | (11,829 | ) | $ | 64,767 | $ | (634,396 | ) | $ | (49,385 | ) | ||||||
Income (loss) per common share:
|
||||||||||||||||||||
Basic:
|
||||||||||||||||||||
Continuing operations
|
$ | (0.20 | ) | $ | (0.03 | ) | $ | 0.33 | $ | (2.34 | ) | $ | (0.17 | ) | ||||||
Discontinued operations
|
— | (0.02 | ) | (0.14 | ) | (0.66 | ) | (0.18 | ) | |||||||||||
$ | (0.20 | ) | $ | (0.05 | ) | $ | 0.19 | $ | (3.01 | ) | $ | (0.35 | ) | |||||||
Diluted:
|
||||||||||||||||||||
Continuing operations
|
$ | (0.20 | ) | $ | (0.03 | ) | $ | 0.21 | $ | (2.34 | ) | $ | (0.17 | ) | ||||||
Discontinued operations
|
— | (0.02 | ) | (0.14 | ) | (0.66 | ) | (0.18 | ) | |||||||||||
$ | (0.20 | ) | $ | (0.05 | ) | $ | 0.07 | $ | (3.01 | ) | $ | (0.35 | ) | |||||||
As of November 30,
|
||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Total assets
|
$ | 578,686 | $ | 685,242 | $ | 518,208 | $ | 751,657 | $ | 667,837 | ||||||||||
Long-term liabilities
|
$ | 108,684 | $ | 94,907 | $ | 265,059 | $ | 880,010 | $ | 174,253 | ||||||||||
Shareholders’ equity
|
$ | 465,649 | $ | 476,811 | $ | 212,594 | $ | (157,290 | ) | $ | 479,661 | |||||||||
·
|
The Notice of Intent to prepare an EIS was published by the Corps in the Federal Register in December 2012, commencing the public scoping process.
|
·
|
Public scoping meetings were held in 13 villages and communities in Western Alaska and in Anchorage to provide information and insight about the project.
|
·
|
A data gap analysis to address questions and concerns that arose from the scoping meetings was prepared.
|
·
|
EIS Scoping Summary report completed and made available to the public (
www.donlingoldeis.com
).
|
·
|
Strong working relationships were maintained with the agencies and we continue to provide input throughout the permitting process.
|
·
|
Ongoing baseline data review was conducted including:
|
°
|
follow-up technical workshops highlighting core components of baseline environmental and social studies; and
|
°
|
completion of 2013 supplemental field studies.
|
·
|
EIS Alternatives Development occurred, including:
|
°
|
reasonable range of alternatives that are feasible, practicable and permittable to address key issues (i.e.: power – gas pipeline vs. diesel) has been defined; and
|
°
|
the initial screening of potential alternatives has been completed.
|
·
|
Preliminary Draft EIS preparation was commenced, initial draft chapters are in review by the Cooperating Agencies.
|
·
|
A strong safety record was maintained.
|
·
|
Several villages were engaged in work force development planning.
|
·
|
Donlin Gold was named “Employer of the Year” by the National Association of State Workforce Agencies.
|
·
|
Significant intercepts encountered on follow-up drilling from the Legacy zone discovery in 2012, a 700-meter long mineralized zone, adjacent to the Central Pit.
|
·
|
Extensions of the Legacy zone mineralization were identified to the south, west and at depth and provided information that will be useful to assess its impact on future mine design.
|
·
|
Results from the 2012 and 2013 drilling programs will be incorporated into a capital efficient work plan for 2014 that will advance the project.
|
·
|
Reduced cash flow used in continuing operations to $19.5 million in 2013 from $28.6 million in 2012.
|
·
|
Our cash used in operations and funding of the Donlin Gold and Galore Creek projects totaled $38.3 million, $2.7 million lower than our budget of $41 million.
|
·
|
Received proceeds of $54.4 million upon exercise of the remainder of our outstanding warrants.
|
·
|
Completed a tender offer for our Notes and subsequently purchased additional Notes
|
°
|
Reduced the principal obligation of the Notes from $95.0 million to $15.8 million.
|
°
|
Reduced associated interest expense.
|
·
|
We have sufficient cash available to repay the remaining $15.8 million of the outstanding Notes due in May 2015 and to advance the Donlin Gold project through the remaining expected permitting process.
|
·
|
Advance permitting of the Donlin Gold project.
|
·
|
Maintain a healthy balance sheet.
|
·
|
Undertake Galore Creek technical studies to build on successful 2012 and 2013 drill results.
|
·
|
Evaluate opportunities to monetize the value of Galore Creek.
|
·
|
Maintain an effective corporate social responsibility program.
|
Years ended November 30,
|
||||||||||||
($ thousands, except per share)
|
2013
|
2012
|
2011
|
|||||||||
Loss from operations
|
$ | (55,776 | ) | $ | (79,942 | ) | $ | (115,996 | ) | |||
Income (loss) from continuing operations
|
$ | (62,760 | ) | $ | (7,586 | ) | $ | 78,235 | ||||
Net income (loss) attributable to shareholders
|
$ | (62,760 | ) | $ | (11,829 | ) | $ | 64,767 | ||||
Net income (loss) per common share
|
||||||||||||
Basic
|
$ | (0.20 | ) | $ | (0.05 | ) | $ | 0.19 | ||||
Diluted
|
$ | (0.20 | ) | $ | (0.05 | ) | $ | 0.07 | ||||
Years ended November 30,
|
||||||||||||
($ thousands)
|
2013
|
2012
|
2011
|
|||||||||
Cash used in continuing operations
|
$ | (19,491 | ) | $ | (28,570 | ) | $ | (27,731 | ) | |||
Cash used in investing activities of continuing operations
|
$ | (128,846 | ) | $ | (34,842 | ) | $ | (41,279 | ) | |||
Cash provided from (used in) financing activities of continuing operations
|
$ | (24,812 | ) | $ | 323,585 | $ | 21,565 | |||||
As of November 30,
|
||||||||
($ thousands)
|
2013
|
2012
|
||||||
Cash and cash equivalents
|
$ | 81,262 | $ | 254,667 | ||||
Term deposits
|
$ | 110,000 | $ | — | ||||
($ thousands) |
Total
|
Less than 1 year
|
1-3 years
|
3-5 years
|
More than 5 years
|
|||||||||||||||
Reclamation and remediation
|
$ | 861 | $ | 861 | $ | — | $ | — | $ | — | ||||||||||
Office and equipment leases
|
1,622 | 440 | 846 | 336 | — | |||||||||||||||
Convertible notes - principal
|
15,829 | — | 15,829 | — | — | |||||||||||||||
Convertible notes - interest
|
1,306 | 871 | 435 | — | — | |||||||||||||||
Promissory note
|
71,728 | — | — | — | 71,728 | |||||||||||||||
/s/ Gregory A. Lang | /s/ David Ottewell |
Gregory A. Lang | David Ottewell |
President and Chief Executive Officer | Vice President and Chief Financial Officer |
February 12, 2014 |
i. | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; | |
ii. | 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 | |
iii. | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. |
At November 30,
|
||||||||
2013
|
2012
|
|||||||
ASSETS
|
||||||||
Cash and cash equivalents
|
$ | 81,262 | $ | 254,667 | ||||
Investments (note 4)
|
110,000 | — | ||||||
Other assets
|
5,549 | 4,203 | ||||||
Current assets
|
196,811 | 258,870 | ||||||
Investments (note 4)
|
1,280 | 2,900 | ||||||
Investment in affiliates (note 5)
|
307,455 | 339,271 | ||||||
Mineral properties (note 6)
|
54,813 | 59,100 | ||||||
Deferred income taxes (note 10)
|
9,728 | 15,679 | ||||||
Other assets
|
8,599 | 9,422 | ||||||
Total assets
|
$ | 578,686 | $ | 685,242 | ||||
LIABILITIES
|
||||||||
Accounts payable and accrued liabilities
|
$ | 3,492 | $ | 5,708 | ||||
Debt (note 7)
|
— | 73,606 | ||||||
Derivative liabilities (note 8)
|
— | 33,210 | ||||||
Other liabilities
|
861 | 1,000 | ||||||
Current liabilities
|
4,353 | 113,524 | ||||||
Debt (note 7)
|
85,298 | 68,106 | ||||||
Derivative liabilities (note 8)
|
83 | — | ||||||
Deferred income taxes (note 10)
|
23,303 | 26,546 | ||||||
Other liabilities
|
— | 255 | ||||||
Total liabilities
|
113,037 | 208,431 | ||||||
Commitments and contingencies (note 20)
|
||||||||
EQUITY
|
||||||||
Common shares
|
||||||||
Authorized - 1,000,000,000 shares, no par value
|
||||||||
Issued and outstanding - 316,661,000 and 279,927,000 shares
|
||||||||
issued less 9,000 and 9,000 treasury shares, respectively
|
1,933,953 | 1,462,102 | ||||||
Contributed surplus
|
66,811 | 454,260 | ||||||
Accumulated deficit during exploration stage
|
(1,599,619 | ) | (1,536,859 | ) | ||||
Accumulated other comprehensive income
|
64,504 | 97,308 | ||||||
Total equity
|
465,649 | 476,811 | ||||||
Total liabilities and equity
|
$ | 578,686 | $ | 685,242 | ||||
/s/ Gregory A. Lang | /s/ Anthony P. Walsh |
Years ended November 30,
|
From
|
|||||||||||||||
2013
|
2012
|
2011
|
Inception
|
|||||||||||||
Operating expenses:
|
||||||||||||||||
Exploration and evaluation
|
$ | — | $ | 363 | $ | 7,404 | $ | 237,145 | ||||||||
General and administrative (note 11)
|
26,991 | 39,145 | 26,218 | 271,117 | ||||||||||||
Equity loss of affiliates (note 5)
|
27,972 | 40,330 | 39,100 | 163,832 | ||||||||||||
Care and maintenance
|
— | — | 2,525 | 34,735 | ||||||||||||
Reclamation and remediation
|
— | — | — | 1,150 | ||||||||||||
Depreciation
|
37 | 104 | 1,106 | 3,905 | ||||||||||||
Write-down of assets (note 12)
|
776 | — | 39,643 | 40,419 | ||||||||||||
55,776 | 79,942 | 115,996 | 752,303 | |||||||||||||
Loss from operations
|
(55,776 | ) | (79,942 | ) | (115,996 | ) | (752,303 | ) | ||||||||
Other income (expense):
|
||||||||||||||||
Interest income
|
942 | 572 | 383 | 17,775 | ||||||||||||
Interest expense
|
(12,607 | ) | (15,305 | ) | (14,143 | ) | (75,153 | ) | ||||||||
Foreign exchange gain (loss)
|
10,448 | 2,987 | 7,490 | (17,434 | ) | |||||||||||
Gain (loss) on derivative liabilities (note 8)
|
1,356 | 76,246 | 61,684 | (564,970 | ) | |||||||||||
Gain on deconsolidation of Galore Creek (note 5)
|
— | — | 154,173 | 154,173 | ||||||||||||
Gain on disposition of assets
|
— | — | — | 47,467 | ||||||||||||
Write-down of marketable securities
|
(3,227 | ) | — | — | (3,227 | ) | ||||||||||
Other
|
— | 108 | — | 108 | ||||||||||||
|
(3,088 | ) | 64,608 | 209,587 | (441,261 | ) | ||||||||||
Income (loss) before income taxes
|
(58,864 | ) | (15,334 | ) | 93,591 | (1,193,564 | ) | |||||||||
Income tax recovery (expense) (note 10)
|
(3,896 | ) | 7,748 | (15,356 | ) | 6,724 | ||||||||||
Net income (loss) from continuing operations
|
(62,760 | ) | (7,586 | ) | 78,235 | (1,186,840 | ) | |||||||||
Net loss from discontinued operations (note 14)
|
— | (4,243 | ) | (33,094 | ) | (491,063 | ) | |||||||||
Net income (loss)
|
(62,760 | ) | (11,829 | ) | 45,141 | (1,677,903 | ) | |||||||||
Net loss attributable to non-controlling interest
|
— | — | (19,626 | ) | (78,284 | ) | ||||||||||
Net income (loss) attributable to shareholders
|
$ | (62,760 | ) | $ | (11,829 | ) | $ | 64,767 | $ | (1,599,619 | ) | |||||
Net income (loss) attributable to shareholders:
|
||||||||||||||||
Continuing operations
|
$ | (62,760 | ) | $ | (7,586 | ) | $ | 97,861 | $ | (1,108,556 | ) | |||||
Discontinued operations
|
— | (4,243 | ) | (33,094 | ) | (491,063 | ) | |||||||||
$ | (62,760 | ) | $ | (11,829 | ) | $ | 64,767 | $ | (1,599,619 | ) | ||||||
Income (loss) per common share (note 16)
|
||||||||||||||||
Basic:
|
||||||||||||||||
Continuing operations
|
$ | (0.20 | ) | $ | (0.03 | ) | $ | 0.33 | ||||||||
Discontinued operations
|
— | (0.02 | ) | (0.14 | ) | |||||||||||
$ | (0.20 | ) | $ | (0.05 | ) | $ | 0.19 | |||||||||
Diluted:
|
||||||||||||||||
Continuing operations
|
$ | (0.20 | ) | $ | (0.03 | ) | $ | 0.21 | ||||||||
Discontinued operations
|
— | (0.02 | ) | (0.14 | ) | |||||||||||
$ | (0.20 | ) | $ | (0.05 | ) | $ | 0.07 | |||||||||
Years ended November 30,
|
From
|
|||||||||||||||
2013
|
2012
|
2011
|
Inception
|
|||||||||||||
Net income (loss)
|
$ | (62,760 | ) | $ | (11,829 | ) | $ | 45,141 | $ | (1,677,903 | ) | |||||
Other comprehensive loss:
|
||||||||||||||||
Change in fair value of marketable securities, net of $32, $59, $64 and $(184) tax recovery (expense), respectively
|
||||||||||||||||
Net change from periodic revaluations
|
(855 | ) | (1,474 | ) | (1,635 | ) | (2,196 | ) | ||||||||
Net amount reclassified to income
|
2,738 | — | — | 2,409 | ||||||||||||
Net unrecognized gain (loss)
|
1,883 | (1,474 | ) | (1,635 | ) | 213 | ||||||||||
Foreign currency translation adjustments
|
(34,687 | ) | 7,235 | (29,825 | ) | 64,291 | ||||||||||
(32,804 | ) | 5,761 | (31,460 | ) | 64,504 | |||||||||||
Comprehensive income (loss)
|
$ | (95,564 | ) | $ | (6,068 | ) | $ | 13,681 | $ | (1,613,399 | ) | |||||
Comprehensive income (loss) attributable to:
|
||||||||||||||||
Shareholders
|
(95,564 | ) | $ | (6,068 | ) | 33,307 | $ | (1,535,115 | ) | |||||||
Non-controlling interest
|
— | — | (19,626 | ) | (78,284 | ) | ||||||||||
$ | (95,564 | ) | $ | (6,068 | ) | $ | 13,681 | $ | (1,613,399 | ) | ||||||
Years ended November 30,
|
From
|
|||||||||||||||
2013
|
2012
|
2011
|
Inception
|
|||||||||||||
Operating activities:
|
||||||||||||||||
Net income (loss)
|
$ | (62,760 | ) | $ | (11,829 | ) | $ | 45,141 | $ | (1,677,903 | ) | |||||
Adjustments to reconcile net income to net cash used in operating activities:
|
||||||||||||||||
Depreciation
|
37 | 104 | 1,106 | 3,905 | ||||||||||||
Deferred income taxes
|
3,606 | (7,748 | ) | 15,356 | (7,014 | ) | ||||||||||
Foreign exchange (gain) loss
|
(10,448 | ) | (2,987 | ) | (7,490 | ) | 29,664 | |||||||||
Loss from discontinued operations
|
— | 4,243 | 33,094 | 491,063 | ||||||||||||
Share-based compensation
|
12,304 | 19,862 | 8,987 | 69,403 | ||||||||||||
Equity losses of affiliates
|
27,972 | 40,330 | 39,100 | 163,832 | ||||||||||||
Gain on deconsolidation of Galore Creek
|
— | — | (154,173 | ) | (154,173 | ) | ||||||||||
Loss (gain) on derivative liabilities
|
(1,356 | ) | (76,246 | ) | (61,684 | ) | 564,970 | |||||||||
Write-down of assets
|
4,003 | — | 39,643 | 43,646 | ||||||||||||
Other
|
9,358 | 9,062 | 9,103 | 18,079 | ||||||||||||
Withholding tax on share based compensation
|
(619 | ) | (2,960 | ) | — | (5,897 | ) | |||||||||
Net change in operating assets and liabilities (note 13)
|
(1,588 | ) | (401 | ) | 4,086 | 3,603 | ||||||||||
Net cash used in continuing operations
|
(19,491 | ) | (28,570 | ) | (27,731 | ) | (456,822 | ) | ||||||||
Net cash used in discontinued operations (note 14)
|
— | (25,488 | ) | (22,015 | ) | (219,010 | ) | |||||||||
Investing activities:
|
||||||||||||||||
Additions to property and equipment
|
(78 | ) | (100 | ) | — | (218,301 | ) | |||||||||
Purchases of marketable securities
|
(110,000 | ) | — | (273 | ) | (110,273 | ) | |||||||||
Funding of affiliates
|
(18,793 | ) | (34,742 | ) | (36,467 | ) | (160,531 | ) | ||||||||
Acquisitions, net
|
— | — | (4,139 | ) | (4,645 | ) | ||||||||||
Proceeds from sale of assets
|
25 | — | — | 26,445 | ||||||||||||
Other
|
— | — | (400 | ) | (4,780 | ) | ||||||||||
Net cash used in investing activities of continuing operations
|
(128,846 | ) | (34,842 | ) | (41,279 | ) | (472,085 | ) | ||||||||
Net cash provided from (used in) investing activities of discontinued operations (note 14)
|
— | 483 | 4,306 | (328,507 | ) | |||||||||||
Financing activities:
|
||||||||||||||||
Proceeds from share issuance, net
|
54,359 | 323,585 | 14,182 | 1,217,437 | ||||||||||||
Proceeds from debt issuance, net
|
— | — | — | 92,200 | ||||||||||||
Repayment of debt
|
(79,171 | ) | — | — | (82,706 | ) | ||||||||||
Proceeds from non-controlling interest
|
— | — | 7,383 | 343,073 | ||||||||||||
Net cash provided from (used in) financing activities of continuing operations
|
(24,812 | ) | 323,585 | 21,565 | 1,570,004 | |||||||||||
Net cash provided from (used in) financing activities of discontinued operations (note 14)
|
— | (40,000 | ) | (24,000 | ) | (12,923 | ) | |||||||||
Effect of exchange rate changes on cash
|
(256 | ) | 132 | 729 | 605 | |||||||||||
Increase (decrease) in cash and cash equivalents
|
(173,405 | ) | 195,300 | (88,425 | ) | 81,262 | ||||||||||
Cash and cash equivalents at beginning of period
|
254,667 | 59,367 | 147,792 | — | ||||||||||||
Cash and cash equivalents at end of period
|
$ | 81,262 | $ | 254,667 | $ | 59,367 | $ | 81,262 | ||||||||
Common shares
|
Contributed surplus | Accumulated deficit during exploration stage | Accumulated other comprehensive income | Non-controlling Interest | Total equity | |||||||||||||||||||||||
Shares
|
Amount
|
|||||||||||||||||||||||||||
From inception December 5, 1984
|
— | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Net loss from inception to November 30, 2010
|
— | — | — | (1,589,797 | ) | — | (58,658 | ) | (1,648,455 | ) | ||||||||||||||||||
Other comprehensive income
|
— | — | — | — | 123,007 | — | 123,007 | |||||||||||||||||||||
Acquisition of non-controlling interest
|
— | — | — | — | — | 348,248 | 348,248 | |||||||||||||||||||||
Common share issuance
|
151,844 | 766,271 | 7,935 | — | — | — | 774,206 | |||||||||||||||||||||
Warrants issued/exercised
|
29,682 | 82,275 | — | — | — | — | 82,275 | |||||||||||||||||||||
Convertible debt issuance
|
18,551 | 19,771 | — | — | — | — | 19,771 | |||||||||||||||||||||
Share-based compensation and related share issuances
|
10,774 | 27,367 | 27,007 | — | — | — | 54,374 | |||||||||||||||||||||
Acquisitions
|
15,150 | 89,285 | — | — | — | — | 89,285 | |||||||||||||||||||||
November 30, 2010
|
226,001 | $ | 984,969 | $ | 34,942 | $ | (1,589,797 | ) | $ | 123,007 | $ | 289,590 | $ | (157,289 | ) | |||||||||||||
Net income (loss)
|
— | — | — | 64,767 | — | (19,626 | ) | 45,141 | ||||||||||||||||||||
Other comprehensive loss
|
— | — | — | — | (31,460 | ) | — | (31,460 | ) | |||||||||||||||||||
Disposition of non-controlling interest
|
— | — | — | — | — | (269,964 | ) | (269,964 | ) | |||||||||||||||||||
Warrants exercised
|
8,925 | 127,258 | (24,103 | ) | — | — | — | 103,155 | ||||||||||||||||||||
Conversion of foreign currency warrants
|
— | — | 469,694 | — | — | — | 469,694 | |||||||||||||||||||||
Share-based compensation and related share issuances
|
888 | 3,032 | 6,773 | — | — | — | 9,805 | |||||||||||||||||||||
Acquisition
|
4,171 | 43,512 | — | — | — | — | 43,512 | |||||||||||||||||||||
November 30, 2011
|
239,985 | $ | 1,158,771 | $ | 487,306 | $ | (1,525,030 | ) | $ | 91,547 | $ | — | $ | 212,594 | ||||||||||||||
Net loss
|
— | — | — | (11,829 | ) | — | — | (11,829 | ) | |||||||||||||||||||
Other comprehensive income
|
— | — | — | — | 5,761 | — | 5,761 | |||||||||||||||||||||
Common share issuance
|
35,000 | 317,841 | — | — | — | — | 317,841 | |||||||||||||||||||||
Warrants exercised
|
3,891 | 54,282 | (48,539 | ) | — | — | — | 5,743 | ||||||||||||||||||||
Share-based compensation and related share issuances
|
1,051 | 4,095 | 16,186 | — | — | — | 20,281 | |||||||||||||||||||||
Return of capital - NovaCopper Inc.
|
— | (72,887 | ) | (693 | ) | — | — | — | (73,580 | ) | ||||||||||||||||||
November 30, 2012
|
279,927 | $ | 1,462,102 | $ | 454,260 | $ | (1,536,859 | ) | $ | 97,308 | $ | — | $ | 476,811 | ||||||||||||||
Net loss
|
— | — | — | (62,760 | ) | — | — | (62,760 | ) | |||||||||||||||||||
Other comprehensive loss
|
— | — | — | — | (32,804 | ) | — | (32,804 | ) | |||||||||||||||||||
Warrants exercised
|
36,529 | 469,150 | (397,052 | ) | — | — | — | 72,098 | ||||||||||||||||||||
Share-based compensation and related share issuances
|
205 | 2,701 | 9,603 | — | — | — | 12,304 | |||||||||||||||||||||
November 30, 2013
|
316,661 | $ | 1,933,953 | $ | 66,811 | $ | (1,599,619 | ) | $ | 64,504 | $ | — | $ | 465,649 | ||||||||||||||
At November, 2013 | ||||||||||||||||
Cost
|
Unrealized
|
Fair Value
|
||||||||||||||
Basis
|
Gain
|
Loss
|
Basis
|
|||||||||||||
Current:
|
||||||||||||||||
$ | 110,000 | $ | — | $ | — | $ | 110,000 | |||||||||
Long-term:
|
||||||||||||||||
Marketable equity securities
|
$ | 1,067 | $ | 213 | $ | — | $ | 1,280 | ||||||||
At November 30, 2012 | ||||||||||||||||
Cost
|
Unrealized
|
Fair Value
|
||||||||||||||
Basis
|
Gain
|
Loss
|
Basis
|
|||||||||||||
Long-term:
|
||||||||||||||||
Marketable equity securities
|
$ | 4,067 | $ | 552 | $ | (2,222 | ) | $ | 2,397 | |||||||
Other investments, at cost
|
503 | — | — | 503 | ||||||||||||
$ | 4,570 | $ | 552 | $ | (2,222 | ) | $ | 2,900 | ||||||||
At November 30,
|
||||||||
2013
|
2012
|
|||||||
Donlin Gold LLC, Alaska, USA
|
$ | 1,720 | $ | 4,185 | ||||
Galore Creek Partnership, British Columbia, Canada
|
305,735 | 335,086 | ||||||
$ | 307,455 | $ | 339,271 | |||||
Years ended November 30,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Balance – beginning of period
|
$ | 4,185 | $ | 2,675 | $ | 1,970 | ||||||
Funding
|
12,155 | 18,439 | 22,382 | |||||||||
Share of losses
|
(14,620 | ) | (16,929 | ) | (21,677 | ) | ||||||
Balance – end of period
|
$ | 1,720 | $ | 4,185 | $ | 2,675 | ||||||
At November 30,
|
||||||||
2013
|
2012
|
|||||||
Current assets: Cash, prepaid expenses and other receivables
|
$ | 3,390 | $ | 4,836 | ||||
Non-current assets: Property and equipment
|
541 | 732 | ||||||
Non-current assets: Mineral property
|
32,692 | 32,692 | ||||||
Current liabilities: Accounts payable and accrued liabilities
|
(2,211 | ) | (1,383 | ) | ||||
Non-current liabilities: Reclamation
|
(692 | ) | (692 | ) | ||||
Net assets
|
$ | 33,720 | $ | 36,185 | ||||
At June 1, 2011
|
||||
Company’s fair value for 50% of Galore Creek Partnership
|
$ | 354,429 | ||
Company’s book value for 50% of Galore Creek Partnership
|
200,256 | |||
Gain on deconsolidation
|
$ | 154,173 | ||
Years ended November 30,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Balance – beginning of period
|
$ | 335,086 | $ | 333,380 | $ | — | ||||||
Fair value of 50% interest on deconsolidation
|
— | — | 354,429 | |||||||||
Funding
|
6,638 | 16,303 | 14,149 | |||||||||
Share of losses
|
(13,352 | ) | (23,401 | ) | (17,423 | ) | ||||||
Foreign currency translation
|
(22,637 | ) | 8,804 | (17,775 | ) | |||||||
Balance – end of period
|
$ | 305,735 | $ | 335,086 | $ | 333,380 | ||||||
At November 30,
|
||||||||
2013
|
2012
|
|||||||
Current assets: Cash, prepaid expenses and other receivables
|
$ | 377 | $ | 1,516 | ||||
Non-current assets: Property and equipment
|
263,797 | 281,073 | ||||||
Current liabilities: Accounts payable and accrued liabilities
|
(483 | ) | (1,245 | ) | ||||
Non-current liabilities: payables and decommissioning liabilities
|
(8,533 | ) | (9,087 | ) | ||||
Net assets
|
$ | 255,158 | $ | 272,257 | ||||
Years ended November 30,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Donlin Gold LLC:
|
||||||||||||
Mineral property expenditures
|
$ | 14,412 | $ | 16,753 | $ | 21,563 | ||||||
Depreciation
|
208 | 176 | 114 | |||||||||
14,620 | 16,929 | 21,677 | ||||||||||
Galore Creek Partnership:
|
||||||||||||
Mineral property expenditures
|
4,580 | 11,984 | 11,526 | |||||||||
Care and maintenance expense
|
2,444 | 4,952 | 1,167 | |||||||||
Depreciation
|
6,328 | 6,465 | 4,730 | |||||||||
13,352 | 23,401 | 17,423 | ||||||||||
$ | 27,972 | $ | 40,330 | $ | 39,100 | |||||||
At November 30,
|
||||||||
2013
|
2012
|
|||||||
Copper Canyon, B.C., Canada
|
$ | 54,813 | $ | 58,587 | ||||
San Roque, Argentina
|
— | 513 | ||||||
$ | 54,813 | $ | 59,100 | |||||
At May 20, 2011
|
||||
Issuance of 4,171,303 NOVAGOLD common shares
|
$ | 43,512 | ||
Cost of subscription of shares in Copper Canyon
|
2,382 | |||
Cash consideration
|
58 | |||
Total consideration
|
45,952 | |||
Less: net working capital acquired
|
(493 | ) | ||
Add: deferred income tax liability
|
14,813 | |||
$ | 60,272 | |||
At November 30,
|
||||||||
2013
|
2012
|
|||||||
Convertible notes
|
$ | 13,570 | $ | 73,606 | ||||
Promissory note
|
71,728 | 68,106 | ||||||
85,298 | 141,712 | |||||||
Less: current portion
|
— | (73,606 | ) | |||||
$ | 85,298 | $ | 68,106 | |||||
Years ended November 30,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Balance – beginning of period
|
$ | 73,606 | $ | 66,966 | $ | 61,342 | ||||||
Repurchases of Notes
|
(65,137 | ) | — | — | ||||||||
Accretion expense
|
5,101 | 6,640 | 5,624 | |||||||||
Balance – end of period
|
$ | 13,570 | $ | 73,606 | $ | 66,966 | ||||||
At November 30,
|
||||||||
2013
|
2012
|
|||||||
Principal amount
|
$ | 15,829 | $ | 95,000 | ||||
Unamortized debt discount
|
(2,259 | ) | (21,394 | ) | ||||
13,570 | 73,606 | |||||||
Embedded derivative
|
83 | 17,934 | ||||||
Net carrying amount
|
$ | 13,653 | $ | 91,540 | ||||
At November 30,
|
||||||||
2013
|
2012
|
|||||||
Convertible notes – Embedded derivative
|
$ | 83 | $ | 17,934 | ||||
Warrants – Derivative
|
— | 15,276 | ||||||
83 | 33,210 | |||||||
Less: current portion
|
— | (33,210 | ) | |||||
$ | 83 | $ | — | |||||
Years ended November 30,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Balance – beginning of period
|
$ | 17,934 | $ | 57,493 | $ | 88,138 | ||||||
Gain on embedded derivative liability for the period
|
(3,817 | ) | (39,559 | ) | (30,645 | ) | ||||||
Repurchases of Notes
|
(14,034 | ) | — | — | ||||||||
Balance – end of period
|
$ | 83 | $ | 17,934 | $ | 57,493 | ||||||
Years ended November 30,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Balance – beginning of period
|
$ | 15,276 | $ | 51,963 | $ | 641,895 | ||||||
Loss (gain) on derivative liability
|
2,461 | (36,687 | ) | (31,039 | ) | |||||||
Foreign exchange revaluation
|
— | — | (469,694 | ) | ||||||||
Conversion of warrants to equity
|
(17,737 | ) | — | (89,199 | ) | |||||||
Balance – end of period
|
$ | — | $ | 15,276 | $ | 51,963 | ||||||
|
Level 1
— Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
|
|
Level 2
—
Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
|
|
Level 3
— Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
|
Fair value at November 30, 2013
|
||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Assets:
|
||||||||||||||||
Cash equivalents
|
$ | 81,262 | $ | — | $ | 81,262 | $ | — | ||||||||
Marketable debt securities
|
110,000 | — | 110,000 | — | ||||||||||||
Marketable equity securities
|
1,280 | 1,280 | — | — | ||||||||||||
Liabilities:
|
||||||||||||||||
Embedded derivative liabilities
|
83 | — | — | 83 | ||||||||||||
Fair value at November 30, 2012
|
||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Assets:
|
||||||||||||||||
Cash equivalents
|
$ | 254,667 | $ | — | $ | 254,667 | $ | — | ||||||||
Marketable equity securities
|
2,900 | 2,900 | — | — | ||||||||||||
Liabilities:
|
||||||||||||||||
Derivative liabilities
|
15,276 | — | — | 15,276 | ||||||||||||
Embedded derivative liabilities
|
17,934 | — | — | 17,934 | ||||||||||||
Years ended November 30,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Current:
|
||||||||||||
Canada
|
$ | – | $ | – | $ | – | ||||||
Foreign
|
290 | – | – | |||||||||
$ | 290 | $ | – | $ | – | |||||||
Deferred:
|
||||||||||||
Canada
|
3,606 | (7,748 | ) | 15,356 | ||||||||
Foreign
|
– | – | – | |||||||||
3,606 | (7,748 | ) | 15,356 | |||||||||
Income tax expense (recovery)
|
$ | 3,896 | $ | (7,748 | ) | $ | 15,356 | |||||
Years ended November 30,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Canada
|
$ | (42,077 | ) | $ | 6,528 | $ | 118,285 | |||||
Foreign
|
(16,787 | ) | (21,862 | ) | (24,694 | ) | ||||||
$ | (58,864 | ) | $ | (15,334 | ) | $ | 93,591 | |||||
|
Years ended November 30,
|
|||||||||||
2013
|
2012
|
2011
|
||||||||||
Income (loss) before income taxes
|
$ | (58,864 | ) | $ | (15,334 | ) | $ | 93,591 | ||||
Combined federal and provincial statutory tax rate
|
25.67 | % | 25.13 | % | 26.67 | % | ||||||
Income tax expense (recovery) based on statutory income tax rates
|
(15,110 | ) | (3,853 | ) | 24,961 | |||||||
Increase (decrease) attributable to:
|
||||||||||||
(Non-deductible) taxable expenditures
|
2,913 | (3,717 | ) | 9,334 | ||||||||
Non-taxable unrealized gain (loss) on derivative financial instruments
|
615 | (9,253 | ) | (7,673 | ) | |||||||
Effect of different statutory tax rates on earnings of subsidiaries
|
(2,773 | ) | (3,471 | ) | 5,696 | |||||||
Effect of statutory rate change
|
(1,916 | ) | 54 | (3,040 | ) | |||||||
Change in valuation allowance
|
20,248 | 13,271 | (6,302 | ) | ||||||||
Non-controlling interest
|
– | – | 4,906 | |||||||||
Tax benefit generated on tax planning
|
– | – | (15,026 | ) | ||||||||
Other
|
(81 | ) | (779 | ) | 2,500 | |||||||
Income tax expense (recovery )
|
$ | 3,896 | $ | (7,748 | ) | $ | 15,356 | |||||
At November 30,
|
||||||||
2013
|
2012
|
|||||||
Deferred tax income assets:
|
||||||||
Asset retirement obligation
|
$ | 3,257 | $ | 1,886 | ||||
Net operating loss carry forwards
|
215,346 | 203,176 | ||||||
Capital loss carry forwards
|
40,180 | 41,774 | ||||||
Mineral properties
|
20,278 | 19,447 | ||||||
Property and equipment
|
381 | 4,226 | ||||||
Investment in affiliates
|
40,200 | 34,887 | ||||||
Share issuance costs
|
2,168 | 3,109 | ||||||
Unpaid interest expense
|
3,044 | 3,043 | ||||||
Investment tax credit
|
3,553 | 3,201 | ||||||
Other
|
2,322 | 1,496 | ||||||
|
330,729 | 316,245 | ||||||
Valuation allowances
|
(276,630 | ) | (260,492 | ) | ||||
54,099 | 55,753 | |||||||
Deferred income tax liabilities:
|
||||||||
Convertible debt
|
(197 | ) | (516 | ) | ||||
Investment in affiliates
|
(51,601 | ) | (50,349 | ) | ||||
Mineral properties
|
(14,224 | ) | (14,733 | ) | ||||
Capitalized assets & other
|
(719 | ) | (166 | ) | ||||
Unrealized gain on investments
|
(19 | ) | (55 | ) | ||||
Investment tax credit
|
(914 | ) | (801 | ) | ||||
(67,674 | ) | (66,620 | ) | |||||
Net deferred income tax liabilities
|
$ | (13,575 | ) | $ | (10,867 | ) | ||
Net deferred income tax asset, as presented in the
balance sheet
|
$ | 9,728 | $ | 15,679 | ||||
Net deferred income tax liability, as presented in the
balance sheet
|
$ | (23,303 | ) | $ | (26,546 | ) | ||
Year of Expiry
|
U.S.
|
Canada (C$)
|
||||||
2014
|
$ | – | $ | 5,661 | ||||
2015
|
– | 17,704 | ||||||
2024
|
1,032 | – | ||||||
2025
|
1,246 | – | ||||||
2026
|
13,382 | 30,803 | ||||||
2027
|
18,493 | 4,948 | ||||||
2028
|
85 | 653 | ||||||
2029
|
11,223 | 15,387 | ||||||
2030
|
10,916 | 22,138 | ||||||
2031
|
16,212 | 20,770 | ||||||
2032
|
306,661 | 36,388 | ||||||
2033
|
11,646 | 55,454 | ||||||
$ | 390,896 | $ | 209,906 | |||||
Years ended November 30,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Salaries
|
$ | 6,067 | $ | 9,658 | $ | 9,295 | ||||||
Share-based compensation (note 15)
|
12,304 | 19,862 | 8,987 | |||||||||
Office expense
|
4,462 | 4,891 | 2,834 | |||||||||
Professional fees
|
2,889 | 3,871 | 4,613 | |||||||||
Corporate development
|
1,269 | 863 | 489 | |||||||||
$ | 26,991 | $ | 39,145 | $ | 26,218 | |||||||
Years ended November 30,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Decrease (increase) in receivables and other assets
|
$ | (89 | ) | $ | (12,339 | ) | $ | 5,505 | ||||
Increase (decrease) in accounts payable and accrued liabilities
|
(1,231 | ) | 11,938 | (1,419 | ) | |||||||
Decrease in reclamation and remediation liabilities
|
(268 | ) | — | — | ||||||||
$ | (1,588 | ) | $ | (401 | ) | $ | 4,086 | |||||
Years ended November 30,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Revenues
|
$ | — | $ | 1,914 | $ | 913 | ||||||
Operating expenses:
|
||||||||||||
Cost of sales
|
— | 194 | 219 | |||||||||
Depreciation
|
— | 228 | 306 | |||||||||
Exploration and evaluation
|
— | 1,425 | 7,925 | |||||||||
General and administrative
|
— | 3,647 | 4,832 | |||||||||
Care and maintenance
|
— | 5,498 | 12,622 | |||||||||
Write-down of inventory
|
— | — | 7,022 | |||||||||
Reclamation and remediation
|
— | 1,456 | 20,788 | |||||||||
— | 12,448 | 53,714 | ||||||||||
Loss from operations
|
— | (10,534 | ) | (52,801 | ) | |||||||
Gain on sale of assets
|
— | 5,351 | 19,109 | |||||||||
Other income
|
— | 940 | 598 | |||||||||
Loss from discontinued operations
|
$ | — | $ | (4,243 | ) | $ | (33,094 | ) | ||||
Years ended November 30,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Net cash used in discontinued operations:
|
||||||||||||
Loss from discontinued operations
|
$ | — | $ | (4,243 | ) | $ | (33,094 | ) | ||||
Items not affecting cash:
|
||||||||||||
Depreciation
|
— | 228 | 306 | |||||||||
Reclamation and remediation
|
— | 1,456 | 20,788 | |||||||||
Write-down of inventory
|
— | — | 7,022 | |||||||||
Gain on sale of assets
|
— | (5,351 | ) | (19,109 | ) | |||||||
Net change in operating assets and liabilities
|
— | (10,742 | ) | (2,072 | ) | |||||||
Increase in reclamation bond
|
— | (6,836 | ) | — | ||||||||
$ | — | $ | (25,488 | ) | $ | (22,015 | ) | |||||
Net cash provided from (used in) investing activities of discontinued operations:
|
||||||||||||
Proceeds from sale of assets
|
$ | — | $ | 1,045 | $ | 11,879 | ||||||
Additions to property, plant and equipment
|
— | (561 | ) | (3,573 | ) | |||||||
Acquisition of mineral property
|
— | — | (4,000 | ) | ||||||||
$ | — | $ | 483 | $ | 4,306 | |||||||
Net cash used in financing activities of discontinued operations:
|
||||||||||||
Funding of NovaCopper spin-out
|
$ | — | $ | (40,000 | ) | $ | (24,000 | ) | ||||
Years ended November 30,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Stock options
|
$ | 8,135 | $ | 14,240 | $ | 6,773 | ||||||
Performance share unit plan
|
3,935 | 2,660 | 2,080 | |||||||||
Deferred share unit plan
|
234 | 193 | 134 | |||||||||
Incentive shares
|
— | 2,769 | — | |||||||||
$ | 12,304 | $ | 19,862 | $ | 8,987 | |||||||
Years ended November 30,
|
|||||
2013
|
2012
|
2011
|
|||
Weighted average share price
|
C$4.40
|
C$8.68
|
C$13.91
|
||
Average risk-free interest rate
|
1.07%
|
0.99% - 1.53%
|
1.05% - 2.11%
|
||
Exercise price
|
C$4.40
|
C$8.68
|
C$13.91
|
||
Expected life (years)
|
3
|
2.5 – 3.5
|
2.5 – 3.5
|
||
Expected volatility
|
56%
|
55% - 66%
|
70% - 81%
|
||
Expected dividends
|
Nil
|
Nil
|
Nil
|
||
2013
|
2012
|
2011
|
|||||||||
Number of shares
|
Weighted average exercise price
|
Number of shares
|
Weighted average exercise price
|
Number of shares
|
Weighted average exercise price
|
||||||
Outstanding at beginning of year
|
13,903
|
C$7.08
|
10,849
|
C$7.06
|
11,338
|
C$6.09
|
|||||
Granted
|
3,218
|
C$4.40
|
4,613
|
C$8.68
|
1,280
|
C$13.91
|
|||||
Exercised
|
(121)
|
C$2.23
|
(1,027)
|
C$3.13
|
(1,475)
|
C$4.61
|
|||||
Forfeited and expired
|
(1,777)
|
C$7.22
|
(532)
|
C$10.86
|
(294)
|
C$11.69
|
|||||
Outstanding at end of year
|
15,223
|
C$6.54
|
13,903
|
C$7.08
|
10,849
|
C$7.06
|
|||||
Stock options - issued and outstanding
|
Stock options - exercisable
|
|||||||||
Range of price
|
Number of outstanding options
|
Weighted average years to expiry
|
Weighted average exercise price
|
Number of exercisable options
|
Weighted average exercise price
|
|||||
C$ 2.23 to $ 3.99
|
1,272,480
|
0.10
|
C$2.23
|
1,272,480
|
C$2.23
|
|||||
C$ 4.00 to $ 5.99
|
7,642,052
|
2.57
|
C$4.78
|
6,039,914
|
C$4.83
|
|||||
C$ 6.00 to $ 7.99
|
2,110,300
|
2.74
|
C$6.56
|
1,554,966
|
C$6.38
|
|||||
C$ 8.00 to $ 9.99
|
560,000
|
1.13
|
C$8.07
|
560,000
|
C$8.07
|
|||||
C$10.00 to $11.99
|
2,092,382
|
2.97
|
C$10.22
|
1,742,661
|
C$10.23
|
|||||
C$12.00 to $13.99
|
1,395,400
|
2.11
|
C$13.08
|
1,395,400
|
C$13.08
|
|||||
C$14.00 to $15.04
|
150,000
|
3.54
|
C$14.89
|
150,000
|
C$14.89
|
|||||
15,222,614
|
2.36
|
C$6.54
|
12,715,421
|
C$6.66
|
||||||
Years ended November 30,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Outstanding at beginning of year
|
805,300 | 347,350 | 135,700 | |||||||||
Granted
|
706,150 | 584,800 | 244,000 | |||||||||
Vested
|
(167,735 | ) | (154,746 | ) | — | |||||||
Performance adjustment
|
(72,765 | ) | 38,396 | — | ||||||||
Forfeited
|
(2,500 | ) | (10,500 | ) | (32,350 | ) | ||||||
Outstanding at end of year
|
1,268,450 | 805,300 | 347,350 | |||||||||
Years ended November 30,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Net income (loss):
|
||||||||||||
Continuing operations
|
$ | (62,760 | ) | $ | (7,586 | ) | $ | 78,235 | ||||
Discontinued operations
|
— | (4,243 | ) | (33,094 | ) | |||||||
$ | (62,760 | ) | $ | (11,829 | ) | $ | 45,141 | |||||
Continuing operations
|
$ | (62,760 | ) | $ | (7,586 | ) | $ | 78,235 | ||||
Add: Interest on convertible debt
|
n/a | n/a | 10,849 | |||||||||
Less: Gain on derivative liability
|
n/a | n/a | (31,039 | ) | ||||||||
Diluted income from continuing operations
|
$ | (62,760 | ) | $ | (7,586 | ) | $ | 58,045 | ||||
Weighted average common shares (thousands):
|
||||||||||||
Basic
|
313,372 | 272,243 | 236,124 | |||||||||
Effect of employee share-based awards
|
n/a | n/a | 4,809 | |||||||||
Effect of convertible debt
|
n/a | n/a | 195 | |||||||||
Effect of warrants
|
n/a | n/a | 36,448 | |||||||||
Diluted
|
313,372 | 272,243 | 277,576 | |||||||||
Income per common share
|
||||||||||||
Basic:
|
||||||||||||
Continuing operations
|
$ | (0.20 | ) | $ | (0.03 | ) | $ | 0.33 | ||||
Discontinued operations
|
— | (0.02 | ) | (0.14 | ) | |||||||
$ | (0.20 | ) | $ | (0.05 | ) | $ | 0.19 | |||||
Diluted:
|
||||||||||||
Continuing operations
|
$ | (0.20 | ) | $ | (0.03 | ) | $ | 0.21 | ||||
Discontinued operations
|
— | (0.02 | ) | (0.14 | ) | |||||||
$ | (0.20 | ) | $ | (0.05 | ) | $ | 0.07 | |||||
Years ended November 30,
|
||||||||||||||||||||||||
2013
|
2012
|
2011
|
||||||||||||||||||||||
Number of warrants (thousands)
|
Weighted average exercise price
|
Number of warrants (thousands)
|
Weighted average exercise price
|
Number of warrants (thousands)
|
Weighted average exercise price
|
|||||||||||||||||||
Balance – beginning of year
|
36,529 | $ | 1.48 | 40,420 | $ | 1.49 | 49,345 | $ | 1.65 | |||||||||||||||
Exercised
|
(36,529 | ) | $ | 1.48 | (3,891 | ) | $ | 1.48 | (8,925 | ) | $ | 1.48 | ||||||||||||
Balance – end of year
|
— | — | 36,529 | $ | 1.48 | 40,420 | $ | 1.49 | ||||||||||||||||
At November 30,
|
||||||||
2013
|
2012
|
|||||||
Unrealized loss on marketable securities, net of $29 and $61 tax expense, respectively
|
$ | 184 | $ | (1,731 | ) | |||
Foreign currency translation adjustments
|
64,320 | 99,039 | ||||||
$ | 64,504 | $ | 97,308 | |||||
Years ended November 30,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Interest received
|
$ | 630 | $ | 588 | $ | 580 | ||||||
Interest paid
|
3,164 | 5,180 | 5,361 | |||||||||
Non-cash investing activities
|
||||||||||||
Note receivable from BSNC from sale of AGC (note14)
|
— | 4,965 | — | |||||||||
Issuance of 4,171,303 common shares for the acquisition of Copper Canyon (note 6)
|
— | — | 43,512 | |||||||||
2013
|
|||||||||||||
Q1
|
Q2
|
Q3
|
Q4
|
||||||||||
Operating income (loss)
|
$
|
(14,509
|
)
|
$
|
(12,225
|
)
|
$
|
(15,871
|
)
|
$
|
(13,171
|
)
|
|
Income (loss) from continuing operations
|
$
|
(13,776
|
)
|
$
|
(9,833
|
)
|
$
|
(19,962
|
)
|
$
|
(19,189
|
)
|
|
Income (loss) from discontinued operations
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
|||||
Net income (loss)
|
$
|
(13,776
|
)
|
$
|
(9,833
|
)
|
$
|
(19,962
|
)
|
$
|
(19,189
|
)
|
|
Income (loss) per common share
|
|||||||||||||
Basic:
|
|||||||||||||
Continuing operations
|
$
|
(0.05
|
)
|
$
|
(0.03
|
)
|
$
|
(0.06
|
)
|
$
|
(0.06
|
)
|
|
Discontinued operations
|
—
|
—
|
—
|
—
|
|||||||||
$
|
(0.05
|
)
|
$
|
(0.03
|
)
|
$
|
(0.06
|
)
|
$
|
(0.06
|
)
|
||
Diluted:
|
|||||||||||||
Continuing operations
|
$
|
(0.05
|
)
|
$
|
(0.03
|
)
|
$
|
(0.06
|
)
|
$
|
(0.06
|
)
|
|
Discontinued operations
|
—
|
—
|
—
|
—
|
|||||||||
$
|
(0.05
|
)
|
$
|
(0.03
|
)
|
$
|
(0.06
|
)
|
$
|
(0.06
|
)
|
||
2012
|
|||||||||||||
Q1
|
Q2
|
Q3
|
Q4
|
||||||||||
Operating income (loss)
|
$
|
(22,415
|
)
|
$
|
(17,315
|
)
|
$
|
(23,851
|
)
|
$
|
(16,361
|
)
|
|
Income (loss) from continuing operations
|
$
|
21,292
|
$
|
20,979
|
$
|
(14,716
|
)
|
$
|
(35,141
|
)
|
|||
Income (loss) from discontinued operations
|
$
|
(5,514
|
)
|
$
|
(5,966
|
)
|
$
|
2,320
|
$
|
4,917
|
|||
Net income (loss)
|
$
|
15,778
|
$
|
15,013
|
$
|
(12,396
|
)
|
$
|
(30,224
|
)
|
|||
Income (loss) per common share
|
|||||||||||||
Basic:
|
|||||||||||||
Continuing operations
|
$
|
0.09
|
$
|
0.08
|
$
|
(0.05
|
)
|
$
|
(0.13
|
)
|
|||
Discontinued operations
|
(0.02
|
)
|
(0.02
|
)
|
0.01
|
0.02
|
|||||||
$
|
0.07
|
$
|
0.06
|
$
|
(0.04
|
)
|
$
|
(0.11
|
)
|
||||
Diluted:
|
|||||||||||||
Continuing operations
|
$
|
0.03
|
$
|
0.03
|
$
|
(0.06
|
)
|
$
|
(0.12
|
)
|
|||
Discontinued operations
|
(0.02
|
)
|
(0.02
|
)
|
0.01
|
0.02
|
|||||||
$
|
0.01
|
$
|
0.01
|
$
|
(0.05
|
) |
$
|
(0.10
|
)
|
||||
Fourth quarter 2013:
|
(i) Income tax expense $3,896 ($0.01 per share, basic and diluted).
|
Third quarter 2013:
|
(i) Write-down of marketable securities $2,645 ($0.01 per share, basic and diluted).
|
Second quarter 2013:
|
(i) Gain on derivative liabilities $3,667 ($0.01 per share, basic and diluted).
|
First quarter 2013:
|
(i) Loss on derivative liabilities $3,276 ($0.01 per share, basic and diluted); (ii) gain from discontinued operations $4,917 ($0.02 per share, basic and diluted).
|
Fourth quarter 2012:
|
(i) Loss on derivative liabilities $9,001 ($0.03 per share, basic and diluted).
|
Third quarter 2012:
|
(i) Gain on derivative liabilities $10,052 ($0.04 per share, basic and $0.03, diluted).
|
Second quarter 2012:
|
(i) Gain on derivative liabilities $31,156 ($0.11 per share, basic and $0.10 per share, diluted); (ii) loss from discontinued operations $5,966 ($0.02 per share, basic and diluted).
|
First quarter 2012:
|
(i) Gain on derivative liabilities $44,039 ($0.18 per share, basic and $0.15 per share, diluted); (ii) loss from discontinued operations $5,514 ($0.02 per share, basic and diluted).
|
Plan category
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
Weighted-average exercise price of outstanding options, warrants and rights
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|
(a)
|
(b)
|
(c)
|
|
Equity compensation plans approved by security holders
|
16,598,639
|
C$6.54
|
17,657,205
|
Equity compensation plans not approved by security holders
|
—
|
—
|
—
|
Total
|
16,598,639
|
C$6.54
|
17,657,205
|
Page
|
|
Reports of Independent Registered Public Accounting Firm
|
69
|
Consolidated Balance Sheets
|
70
|
Consolidated Statements of Income (Loss)
|
71
|
Consolidated Statements of Comprehensive Income (Loss)
|
72
|
Consolidated Statements of Cash Flows
|
73 |
Consolidated Statements of Stockholders’ Equity (Deficit)
|
74
|
Notes to Consolidated Financial Statements
|
75
|
Exhibit
No.
|
Description
|
|
3.1
|
Certificate of Continuance (British Columbia) dated June 10, 2013 (incorporated by reference to Exhibit 99.1 to the Form 6-K dated June 19, 2013)
|
|
3.2
|
Certificate of Discontinuance (Nova Scotia) dated June 10, 2013(incorporated by reference to Exhibit 99.2 to the Form 6-K dated June 19, 2013)
|
|
3.3
|
Notice of Articles (British Columbia) dated June 10, 2013 (incorporated by reference to Exhibit 99.3 to the Form 6-K dated June 19, 2013)
|
|
3.4
|
Articles of NOVAGOLD RESOURCES INC. dated June 20, 2013 (incorporated by reference to Exhibit 99.4 to the Form 6-K dated June 19, 2013)
|
10.1
|
Underwriting Agreement dated February 2, 2012 between RBC Dominion Securities Inc. and J.P. Morgan Securities LLC (incorporated by reference to Exhibit 99.1 to the Form 6-K dated February 2, 2012)
|
|
Amendment dated January 13, 2010 to Limited Liability Company Agreement dated December 1, 2007 between Donlin Gold LLC, Barrick Gold U.S. Inc. and NOVAGOLD Resources Alaska, Inc.
|
||
10.3
|
Amendment dated February 11, 2009 to Galore Creek Partnership General Partnership Agreement dated August 1, 2007 (incorporated by reference to Exhibit 99.2 to the Form 6-K dated February 17, 2009)
|
|
10.4
|
Unit Purchase Agreement dated December 31, 2008 between Electrum and NOVAGOLD (incorporated by reference to Exhibit 99.1 to the Form 6-K dated February 13, 2009)
|
|
Amendment dated July 28, 2008 to Galore Creek Partnership General Partnership Agreement dated August 1, 2007 between NOVAGOLD Canada Inc., Teck Cominco Metals Ltd., Galore Creek Mining Corporation, NOVAGOLD Resources Inc. and Teck Cominco Limited
|
||
10.6
|
Indenture dated as of March 26, 2008 between NOVAGOLD and The Bank of New York (incorporated by reference to Exhibit 99.1 to the Registrant’s Report of Foreign Private Issuer on Form 6-K filed on March 26, 2008)
|
|
10.7
|
Supplemental Indenture No. 1 dated as of March 26, 2008 to the Indenture between NOVAGOLD and The Bank of New York providing for the issuance of the Notes (incorporated by reference to Exhibit 99.1 to the Form 6-K dated March 26, 2008)
|
|
Limited Liability Company Agreement dated December 1, 2007 between Donlin Gold LLC, Barrick Gold U.S. Inc. and NOVAGOLD Resources Alaska, Inc.
|
||
Amendment dated November 25, 2007 to Galore Creek Partnership General Partnership Agreement dated August 1, 2007 between NOVAGOLD Canada Inc., Teck Cominco Metals Ltd., Galore Creek Mining Corporation, NOVAGOLD Resources Inc. and Teck Cominco Limited
|
||
Galore Creek Partnership General Partnership Agreement dated August 1, 2007 between NOVAGOLD Canada Inc., Teck Cominco Metals Ltd., Galore Creek Mining Corporation, NOVAGOLD Resources Inc. and Teck Cominco Limited
|
||
10.11
|
2004 Stock Award Plan of NOVAGOLD Resources Inc. (as amended) (incorporated by reference to Appendix A of Exhibit 99.2 of the Registrant’s report on Form 6-K as filed on April 29, 2009)
|
|
NOVAGOLD Resources Inc. Employee Share Purchase Plan
|
||
10.13
|
NOVAGOLD Resources Inc. 2009 Performance Share Unit Plan (incorporated by reference to Appendix C of Exhibit 99.2 of the Registrant’s report on Form 6-K as filed on April 29, 2009)
|
|
NOVAGOLD Resources Inc. 2009 Non-Employee Directors Deferred Share Unit Plan
|
||
Employment Agreement between the Registrant and Gregory A. Lang, dated January 9, 2012.
|
||
Employment Agreement between the Registrant and David Deisley, dated September 4, 2012.
|
||
Employment Agreement between the Registrant’s wholly-owned subsidiary, NovaGold USA, Inc., and David Ottewell, dated September 10, 2012.
|
||
Amendment dated July 15, 2010 to Limited Liability Company Agreement dated December 1, 2007 between Donlin Gold LLC, Barrick Gold U.S. Inc. and NOVAGOLD Resources Alaska, Inc.
|
||
Amendment dated June 1, 2011 to Limited Liability Company Agreement dated December 1, 2007 between Donlin Gold LLC, Barrick Gold U.S. Inc. and NOVAGOLD Resources Alaska, Inc.
|
||
Employment Agreement between the Registrant’s wholly-owned subsidiary, NovaGold Resources Alaska, Inc., and Gregory A. Lang, dated January 9, 2012.
|
||
Employment Agreement between the Registrant’s wholly-owned subsidiary, NovaGold USA, Inc., and David Deisley, dated September 4, 2012.
|
||
Subsidiaries of the registrant
|
||
Consent of PricewaterhouseCoopers LLP
|
||
Consent of Robert Gill
|
||
Consent of Kirk Hanson
|
Consent of Greg Kulla
|
||
Consent of Tony Lipiec
|
||
Consent of Jay Melnyk
|
||
Consent of Dana Rogers
|
||
Consent of Gordon Seibel
|
||
Consent of Gregory Wortman
|
||
Consent of AMEC
|
||
23.11 | Consent of Heather White | |
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
||
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
||
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
||
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
NOVAGOLD RESOURCES INC. | |
By: /s/ Gregory A. Lang | |
Name: Gregory A. Lang | |
Title: President and Chief Executive Officer |
Signature
|
Title
|
Date
|
|
/s/ Gregory A. Lang
|
President, Chief Executive Officer and
Director (Principal Executive Officer)
|
February 12, 2014
|
|
/s/ David Ottewell
|
Vice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
|
February 12, 2014
|
|
/s/ Thomas S. Kaplan
|
Chairman
|
February 12, 2014
|
|
/s/ Sharon Dowdall
|
Director
|
February 12, 2014
|
|
/s/ Marc Faber
|
Director
|
February 12, 2014
|
|
/s/ Gillyeard J. Leathley
|
Director
|
February 12, 2014
|
|
/s/ Igor Levental
|
Director
|
February 12, 2014
|
|
/s/ Kalidas V. Madhavpeddi
|
Director
|
February 12, 2014
|
Signature | Title | Date | |
/s/ Gerald J. McConnell
|
Director
|
February 12, 2014
|
|
/s/ Clynton R. Nauman
|
Director
|
February 12, 2014
|
|
/s/ Rick Van Nieuwenhuyse
|
Director
|
February 12, 2014
|
|
/s/ Anthony P. Walsh
|
Director
|
February 12, 2014
|
|
At November 30,
|
||||||||
2013
|
2012
|
|||||||
(in thousands)
|
||||||||
ASSETS
|
||||||||
Cash
|
$ | 6,663 | $ | 9,381 | ||||
Prepaid expenses
|
118 | 290 | ||||||
Current assets
|
6,781 | 9,671 | ||||||
Property and equipment (note 3)
|
1,083 | 1,464 | ||||||
Mineral property
|
65,384 | 65,384 | ||||||
Total assets
|
$ | 73,248 | $ | 76,519 | ||||
LIABILITIES
|
||||||||
Accounts payable and accrued liabilities
|
$ | 2,427 | $ | 2,467 | ||||
Due to related parties (note 4)
|
1,995 | 299 | ||||||
Current liabilities
|
4,422 | 2,766 | ||||||
Reclamation and remediation (note 5)
|
1,384 | 1,384 | ||||||
Total liabilities
|
5,806 | 4,150 | ||||||
Commitments and contingencies (note 6)
|
||||||||
EQUITY
|
||||||||
Partner contributions
|
286,108 | 261,798 | ||||||
Accumulated deficit during exploration stage
|
(218,666 | ) | (189,429 | ) | ||||
Total equity
|
67,442 | 72,369 | ||||||
Total liabilities and equity
|
$ | 73,248 | $ | 76,519 | ||||
Years ended November 30,
|
From
|
|||||||||||||||
2013
|
2012
|
2011
|
Inception
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Operating expenses:
|
||||||||||||||||
General and administrative
|
$ | 7,438 | $ | 8,510 | $ | 7,267 | $ | 40,299 | ||||||||
Camp operations and maintenance
|
2,121 | 4,924 | 4,976 | 37,837 | ||||||||||||
Community relations
|
2,128 | 2,555 | 2,468 | 10,218 | ||||||||||||
Permitting
|
7,816 | 5,479 | 2,557 | 19,186 | ||||||||||||
Environmental compliance
|
3,873 | 7,908 | 9,874 | 40,090 | ||||||||||||
Feasibility and engineering
|
3,982 | 906 | 14,049 | 51,579 | ||||||||||||
Land lease payments
|
1,421 | 2,708 | 1,223 | 7,245 | ||||||||||||
Exploration and evaluation
|
— | 521 | 664 | 11,022 | ||||||||||||
Depreciation
|
417 | 351 | 227 | 1,215 | ||||||||||||
29,196 | 33,862 | 43,305 | 218,691 | |||||||||||||
Loss from operations
|
(29,196 | ) | (33,862 | ) | (43,305 | ) | (218,691 | ) | ||||||||
Other income (expense):
|
||||||||||||||||
Foreign exchange gain (loss)
|
(41 | ) | 5 | (50 | ) | (60 | ) | |||||||||
Interest income
|
— | — | — | 85 | ||||||||||||
|
(41 | ) | 5 | (50 | ) | 25 | ||||||||||
Net loss and comprehensive loss
|
$ | (29,237 | ) | $ | (33,857 | ) | $ | (43,355 | ) | $ | (218,666 | ) | ||||
Years ended November 30,
|
From
|
|||||||||||||||
2013
|
2012
|
2011
|
Inception
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Operating activities:
|
||||||||||||||||
Net loss
|
$ | (29,237 | ) | $ | (33,857 | ) | $ | (43,355 | ) | $ | (218,666 | ) | ||||
Adjustments to reconcile net income to net cash used in operating activities:
|
||||||||||||||||
Depreciation
|
417 | 351 | 227 | 1,215 | ||||||||||||
Foreign exchange (gain) loss
|
41 | (5 | ) | 50 | 60 | |||||||||||
Net change in operating assets and liabilities
|
||||||||||||||||
Accounts receivable and prepaid expenses
|
172 | (189 | ) | 1 | (118 | ) | ||||||||||
Accounts payable and accrued liabilities
|
1,656 | (216 | ) | 135 | 4,422 | |||||||||||
Net cash used in operations
|
(26,951 | ) | (33,916 | ) | (42,942 | ) | (213,087 | ) | ||||||||
Investing activities:
|
||||||||||||||||
Additions to property and equipment
|
(36 | ) | (430 | ) | (792 | ) | (2,298 | ) | ||||||||
Net cash used in investing activities
|
(36 | ) | (430 | ) | (792 | ) | (2,298 | ) | ||||||||
Financing activities:
|
||||||||||||||||
Partners’ contributions
|
24,310 | 36,876 | 44,764 | 222,108 | ||||||||||||
Net cash provided from financing activities
|
24,310 | 36,876 | 44,764 | 222,108 | ||||||||||||
Effect of exchange rate changes on cash
|
(41 | ) | 5 | (50 | ) | (60 | ) | |||||||||
Increase (decrease) in cash during the period
|
(2,718 | ) | 2,535 | 980 | 6,663 | |||||||||||
Cash at beginning of period
|
9,381 | 6,846 | 5,866 | — | ||||||||||||
Cash at end of period
|
$ | 6,663 | $ | 9,381 | $ | 6,846 | $ | 6,663 | ||||||||
Supplemental information:
|
||||||||||||||||
Interest received
|
$ | — | $ | — | $ | — | $ | 85 | ||||||||
Partners’ initial contribution (non-cash)
|
$ | — | $ | — | $ | — | $ | 64,000 |
Barrick Contributions
|
NOVAGOLD Contributions
|
Accumulated deficit
|
Total equity
|
|||||||||||||
(in thousands) | ||||||||||||||||
At inception December 1, 2007
|
$ | 32,000 | $ | 32,000 | $ | — | $ | 64,000 | ||||||||
Partners’ cash contribution
|
58,079 | 58,079 | — | 116,158 | ||||||||||||
Net loss from inception to
November 30, 2010
|
— | — | (112,217 | ) | (112,217 | ) | ||||||||||
Balance at November 30, 2010
|
$ | 90,079 | $ | 90,079 | $ | (112,217 | ) | $ | 67,941 | |||||||
Partners’ cash contribution
|
22,382 | 22,382 | — | 44,764 | ||||||||||||
Net loss
|
— | — | (43,355 | ) | (43,355 | ) | ||||||||||
Balance at November 30, 2011
|
$ | 112,461 | $ | 112,461 | $ | (155,572 | ) | $ | 69,350 | |||||||
Partners’ cash contribution
|
18,438 | 18,438 | — | 36,876 | ||||||||||||
Net loss
|
— | — | (33,857 | ) | (33,857 | ) | ||||||||||
Balance at November 30, 2012
|
$ | 130,899 | $ | 130,899 | $ | (189,429 | ) | $ | 72,369 | |||||||
Partners’ cash contribution
|
12,155 | 12,155 | — | 24,310 | ||||||||||||
Net loss
|
— | — | (29,237 | ) | (29,237 | ) | ||||||||||
Balance at November 30, 2013
|
$ | 143,054 | $ | 143,054 | $ | (218,666 | ) | $ | 67,442 |
At November 30,
|
||||||||
2013
|
2012
|
|||||||
Property and equipment
|
$ | 2,298 | $ | 2,262 | ||||
Accumulated depreciation
|
(1,215 | ) | (798 | ) | ||||
1,083 | $ | 1,464 |
Year ended November 30,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Barrick
|
$ | 3,044 | $ | 3,263 | $ | 2,985 | ||||||
NOVAGOLD
|
258 | 236 | 551 | |||||||||
$ | 3,302 | $ | 3,499 | $ | 3,536 |
(in thousands of Canadian dollars)
|
||||||||
2013
$
|
2012
$
|
|||||||
Assets
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
1,131 | 1,487 | ||||||
Deposits and prepaid expenses
|
16 | 48 | ||||||
GST recoverable
|
15 | 155 | ||||||
1,162 | 1,690 | |||||||
Mineral property, plant and equipment
(Note 6)
|
704,510 | 694,436 | ||||||
Reclamation bonds
(Note 8)
|
4,541 | 4,476 | ||||||
710,213 | 700,602 | |||||||
Liabilities
|
||||||||
Current liabilities
|
||||||||
Accounts payable and accrued liabilities
|
904 | 1,583 | ||||||
Due to Partners' (Note 11b)
|
630 | 456 | ||||||
1,534 | 2,039 | |||||||
Due to NovaGold Canada Inc
(Note 8)
|
4,453 | 4,388 | ||||||
Decommissioning and restoration provision
(Note 8)
|
14,466 | 13,670 | ||||||
20,453 | 20,097 | |||||||
Equity
|
||||||||
Partners' contributions
|
842,618 | 828,220 | ||||||
Partners' deficit
|
(152,858 | ) | (147,715 | ) | ||||
689,760 | 680,505 | |||||||
710,213 | 700,602 |
(in thousands of Canadian dollars) | ||||||||||||
2013
|
2012
|
2011
|
||||||||||
$ | $ | $ | ||||||||||
Other Income
|
||||||||||||
Interest income
|
7 | 20 | 21 | |||||||||
Expenses and other items
|
||||||||||||
General and administrative
|
3 | 10 | 44 | |||||||||
Professional fees
|
74 | 66 | 65 | |||||||||
Care and maintenance costs (Note 9)
|
5,073 | 9,583 | 8,694 | |||||||||
Write down of transmission line rights (Note 7)
|
- | - | 27,558 | |||||||||
5,150 | 9,659 | 36,361 | ||||||||||
(Loss and Comprehensive Loss) for the year
|
(5,143 | ) | (9,639 | ) | (36,340 | ) |
(in thousands of Canadian dollars) | ||||||||||||||||
NovaGold
Contributions
$
|
Teck
Contributions
$
|
Deficit
$
|
Total
$
|
|||||||||||||
Balance as at
|
||||||||||||||||
December 31, 2010
|
394,049 | 361,697 | (101,736 | ) | 654,010 | |||||||||||
Net loss for the year
|
- | - | (36,340 | ) | (36,340 | ) | ||||||||||
Contributions
|
14,310 | 25,982 | - | 40,292 | ||||||||||||
Balance as at
|
||||||||||||||||
December 31, 2011
|
408,359 | 387,679 | (138,076 | ) | 657,962 | |||||||||||
Net loss for the year
|
- | - | (9,639 | ) | (9,639 | ) | ||||||||||
Contributions
|
16,091 | 16,091 | - | 32,182 | ||||||||||||
Balance as at
|
||||||||||||||||
December 31, 2012
|
424,450 | 403,770 | (147,715 | ) | 680,505 | |||||||||||
Net loss for the year
|
- | - | (5,143 | ) | (5,143 | ) | ||||||||||
Contributions
|
7,199 | 7,199 | - | 14,398 | ||||||||||||
Balance as at
|
||||||||||||||||
December 31, 2013
|
431,649 | 410,969 | (152,858 | ) | 689,760 |
(in thousands of Canadian dollars)
|
||||||||||||
2013
$
|
2012
$
|
2011
$
|
||||||||||
Cash flows provided by operating activities
|
||||||||||||
Loss for the year
|
(5,143 | ) | (9,639 | ) | (36,340 | ) | ||||||
Items not affecting cash
|
||||||||||||
Write down of transmission line rights
|
- | - | 27,558 | |||||||||
Net change in non-cash working capital
|
||||||||||||
Decrease in GST recoverable
|
140 | 120 | 248 | |||||||||
Decrease in deposits and prepaid amounts
|
32 | 37 | 138 | |||||||||
Increase(decrease) in accounts payable and accrued liabilities
|
(1,008 | ) | (4,424 | ) | 1,293 | |||||||
(5,979 | ) | (13,906 | ) | (7,103 | ) | |||||||
Cash flows provided by financing activities
|
||||||||||||
Contributions from Teck Metals Ltd.
|
7,199 | 16,091 | 25,982 | |||||||||
Contributions from NovaGold Canada Inc.
|
7,199 | 16,091 | 14,310 | |||||||||
Due to NovaGold Canada Inc - Long Term
|
65 | 268 | - | |||||||||
Finance lease payments
|
- | (309 | ) | (702 | ) | |||||||
14,463 | 32,141 | 39,590 | ||||||||||
Cash flows provided by investing activities
|
||||||||||||
Additions to mineral property, plant and equipment
|
(8,775 | ) | (21,978 | ) | (28,046 | ) | ||||||
Reclamation bonds
|
(65 | ) | (268 | ) | (66 | ) | ||||||
(8,840 | ) | (22,246 | ) | (28,112 | ) | |||||||
Net cash increase (decrease) for the year
|
(356 | ) | (4,011 | ) | 4,375 | |||||||
Cash and cash equivalents at beginning of year
|
1,487 | 5,498 | 1,123 | |||||||||
Cash and cash equivalents at end of year
|
1,131 | 1,487 | 5,498 |
1
|
Nature of Operations and Economic Dependence
|
|
The Galore Creek Partnership ("Partnership") is a general partnership formed under the laws of the Province of British Columbia on August 1, 2007 for the purposes of development and construction of the Galore Creek mine project. The Partnership is 50% owned by NovaGold Canada Inc.
("NovaGold"), a wholly owned subsidiary of NOVAGOLD RESOURCES INC. and 50% owned by Teck Metals Ltd. ("Teck") a wholly owned subsidiary of Teck Resources Limited. The Partnership owns 100% of Galore Creek Mining Corporation, which is the operator of the project.
|
|
The Partnership's registered office is at 595 Burrard Street, Vancouver, British Columbia, Canada.
|
|
Upon formation of the Partnership, NovaGold contributed the Galore Creek project and Teck committed to contribute cash. Teck completed its earn-in obligation in 2011. Both NovaGold and Teck ("Partners")are currently equally responsible to fund future Partnership costs.
|
|
These financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Partnership will be able to continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business.
|
|
Presently, the Partnership is economically dependent upon its Partners, NovaGold and Teck, for financial support and the Partnership has commitments from its Partners that it will receive support for the next 12 months. The future recoverability of the Partnership's mineral property, plant and equipment is dependent upon: the ability of the Partnership to obtain continued support from its Partners or to obtain financing necessary to complete the development of its property, the existence of economically recoverable reserves, the securing and maintaining title and beneficial interest in the properties, and the future profitable production or proceeds from disposition of the mineral properties.
|
2
|
Basis of Preparation
|
|
These annual financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
|
|
These financial statements were prepared by management and approved by the Partnership Management Committee on February 5, 2014.
|
|
These annual financial statements include the results of the Partnership and its wholly owned subsidiary, Galore Creek Mining Corporation.
|
3
|
New IFRS Pronouncements
|
|
New IFRS pronouncements that have been issued but are not yet effective are listed below. The Partnership plans to apply the new standard in the annual period for which it is first required.
|
|
Financial Instruments
|
|
IFRS 9 Financial Instruments is part of the IASB's wider project to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 retains but simplifies the mixed financial instrument measurement model and establishes two primary measurement categories for financial assets: amortized cost and fair value. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. The Partnership has yet to assess the full impact of IFRS 9.
|
|
In November 2013, the IASB amended IFRS 9 to remove the mandatory effective date of January 1, 2015 due to continued work being performed on the other phases of the IFRS 9 project relating to impairment. The IASB will be announcing a mandatory effective date for IFRS 9 in the future when IFRS 9 is closer to completion. Entities are still permitted to early adopt all or part of IFRS 9.
|
4
|
Summary of Significant Accounting Policies
|
|
The significant accounting policies used in the preparation of these financial statements are as follows:
|
|
Mineral property, plant and equipment
|
|
Plant and equipment is recorded at cost, being the purchase price and the directly attributable costs to bring the assets to the location and condition necessary for it to be capable of operating in the manner intended by management. Mobile road building equipment is depreciated over its estimated useful life of 3 years on a straight line basis.
|
|
Exploration and evaluation costs
|
|
Exploration and evaluation costs are considered to be tangible assets, as they relate to the Galore Creek property for which resources exist and it is expected that the expenditures can be recovered by future exploitation or sale. These assets are not depreciated, as they are not currently available for use. When development is approved, capitalized exploration and evaluation costs will be reclassified to development costs or capital work-in-progress within property, plant and equipment.
|
|
Repairs and maintenance
|
|
Repairs and maintenance costs are charged to expense as incurred, except when these repairs significantly extend the life of an asset or result in an operating improvement. In these instances the portion of these repairs relating to the betterment is capitalized as part of plant and equipment.
|
4
|
Summary of Significant Accounting Policies (cont'd)
|
|
Impairment of tangible assets
|
|
The carrying amounts of non-current assets are reviewed for impairment whenever facts and circumstances suggest that the carrying amounts may not be recoverable. If there are indicators of impairment, the recoverable amount of the asset is estimated in order to determine the extent of any impairment. Where the asset does not generate cash flows that are independent from other assets, the recoverable amount of the cash generating unit ("CGU") to which the asset belongs is determined. The recoverable amount of an asset or CGU is determined as the higher of its fair value less cost to sell and its value in use. An impairment loss exists if the asset's or CGU's carrying amount exceeds the recoverable amount.
|
|
Value in use is determined as the present value of the future cash flows expected to be derived from an asset or CGU. The estimated future cash flows are discounted to their present value using a pre- tax discount rate that reflects current market assessments of the time value of money and the risks specific to the CGU for which estimates of future cash flows have not been adjusted. Fair value less cost to sell is the amount obtainable from the sale of an asset or CGU in an arm's length transaction between knowledgeable, willing parties, less the costs of disposal. For mining assets, fair value less cost to sell is often estimated using a discounted cash flow approach as a fair value from an active market or binding sale agreement is not readily available. Estimated future cash flows are calculated using estimated future prices, mineral reserves and resources, operating and capital costs. All assumptions used are those that an independent market participant would consider appropriate.
|
|
Leased assets
|
|
Leased assets in which the Partnership receives substantially all of the risks and rewards of ownership of the asset are capitalized as finance leases at the lower of the fair value of the asset or the estimated present value of the minimum lease payments. The corresponding lease obligation is recorded within debt on the balance sheet.
|
|
Assets under operating leases are not capitalized and rental payments are included in the statement of operations based on the terms of the lease.
|
|
Provisions
|
|
Decommissioning and restoration provisions
|
|
Future obligations to retire an asset, including dismantling, remediation and ongoing treatment and monitoring of the site related to normal operations are initially recognized and recorded as a provision based on estimated future cash flows discounted at a credit adjusted risk free rate. The decommissioning and restoration provision ("DRP") is adjusted at each reporting period for changes to factors including the expected amount of cash flows required to discharge the liability, the timing of such cash flows and the discount rate.
|
4
|
Summary of Significant Accounting Policies (cont'd)
|
|
Decommissioning and restoration provisions (cont'd)
|
|
The DRP will be accreted to full value over time through periodic charges to earnings. This unwinding of the discount will be charged to financing expense in the statement of operations and comprehensive loss.
|
|
The amount of the DRP initially recognized is capitalized as part of the related asset's carrying value and amortized to earnings once production commences. The method of amortization follows that of the underlying asset. The costs related to a DRP are only capitalized to the extent that the amount meets the definition of an asset and can bring about future economic benefit. A revision in estimates or a new disturbance will result in an adjustment to the provision with an offsetting adjustment to the capitalized retirement cost.
|
|
Other provisions
|
|
Provisions are recognized when a present legal or constructive obligation exists, as a result of past events, and it is probable that an outflow of resources that can be reliably estimated will be required to settle the obligation. Where the effect is material, the provision is discounted using an appropriate current market-based pre-tax discount rate.
|
|
Financial Instruments
|
|
The Partnership recognizes financial assets and liabilities on the balance sheet when the Partnership becomes a party to the contractual provisions of the instrument.
|
|
Cash and cash equivalents
|
|
Cash and cash equivalents consist of cash on deposit with banks and highly liquid short-term interest-bearing investments with maturities of 90 days or less from the original date of acquisition.
|
|
Due from / (to) Partners'
|
|
The amounts due from / (to) Partners' are non-interest bearing, unsecured and without specified terms of repayment.
|
|
Trade receivables and payables
|
|
Loans and receivables are initially recorded at fair value with subsequent measurement at amortized cost.
|
|
The fair value of the Partnership's financial liabilities, such as accounts payable and accrued liabilities approximates their carrying values at December 31, 2013 due to their short-term nature.
|
4
|
Summary of Significant Accounting Policies (cont'd)
|
|
Reclamation bonds
|
|
The Partnership's held-to-maturity reclamation deposits are carried at cost and bear fixed interest rates. The fair value of these deposits approximates their carrying values.
|
|
Due to NovaGold Canada Inc.
|
|
The amount due to NovaGold Canada Inc. is a non-interest bearing payable and is recorded at cost.
|
|
Income Taxes
|
|
The Partnership is not a taxable entity for federal and provincial income tax purposes. Accordingly, no recognition is given to income taxes for financial reporting purposes. Tax on the Partnership's net income (loss) is borne by the Partners' through the allocation of taxable income (loss). Net income for financial statement purposes may differ significantly from taxable income for the Partners' as a result of differences between the tax basis and financial reporting basis of assets and liabilities and the taxable income allocation requirements under the Galore Creek Partnership Agreement.
|
5
|
Critical Accounting Estimates and Judgments
|
|
In preparing these financial statements, the Partnership makes estimates and judgements that affect the amounts recorded. Actual results could differ from those estimates. The estimates and judgements are based on historical experience and other factors the Partnership considers to be reasonable, including expectations of future events. The estimates and assumptions that could result in a material impact to the carrying amounts of assets and liabilities are outlined below.
|
|
Decommissioning and Restoration Provisions
|
|
The DRP is based on current cost estimates using information available at the balance sheet date. The DRP requires other significant estimates and assumptions such as: requirements of the relevant legal and regulatory framework, and the timing, extent and costs of required decommissioning and restoration activities. To the extent the actual costs differ from these estimates, adjustments will be recorded and the statement of operations and comprehensive loss may be impacted.
|
6
|
Mineral property, plant and equipment
|
(in thousands of Canadian dollars) | |||
Exploration and
|
Mobile Construction
|
||
Evaluation
|
Equipment
|
Total
|
|
Cost
|
$
|
$
|
$
|
At December 31, 2011
|
647,004
|
38,982
|
685,986
|
Additions
|
35,553
|
-
|
35,553
|
At December 31, 2012
|
682,557
|
38,982
|
721,539
|
Additions
|
21,953
|
-
|
21,953
|
At December 31, 2013
|
704,510
|
38,982
|
743,492
|
Accumulated Depreciation
|
|||
At December 31, 2011
|
-
|
(14,144)
|
(14,144)
|
Depreciation
|
-
|
(12,959)
|
(12,959)
|
At December 31, 2012
|
-
|
(27,103)
|
(27,103)
|
Depreciation
|
-
|
(11,879)
|
(11,879)
|
At December 31, 2013
|
-
|
(38,982)
|
(38,982)
|
Net Book Value
|
|||
At December 31, 2011
|
647,004
|
24,838
|
671,842
|
At December 31, 2012
|
682,557
|
11,879
|
694,436
|
At December 31, 2013
|
704,510
|
-
|
704,510
|
6
|
Intangible Assets
|
(in thousands of Canadian dollars) | ||||
2010
|
Impairment
|
(Amortization)
|
2011
|
|
$
|
$
|
$
|
$
|
|
Power transmission rights
|
27,615
|
(27,558)
|
(57)
|
-
|
27,615
|
(27,558)
|
(57)
|
-
|
7
|
Intangible Assets (Cont'd)
|
|
During the year ended December 31, 2011, the Province of British Columbia's Minister of Environment and the Minister of Forests, Mines and Lands granted an environmental assessment certificate for BC Hydro's proposed Northwest Transmission Line Project ("NTL Project"). The NTL Project includes a new 287 kilovolt transmission line from the Skeena substation south of Terrace, to a new substation near Bob Quinn Lake. The Partnership determined that the granting of this certificate is a significant indication that the NTL Project will proceed. As a result, the Partnership's power transmission rights became redundant to the Galore Creek Project, and therefore the related $27.6M of associated costs were written off.
|
8
|
Decommissioning and Restoration Provision
|
a)
|
Reclamation provision
|
|
Although the ultimate amount of the reclamation costs to be incurred cannot be predicted with certainty, the total undiscounted amount of estimated cash flows required to settle the Partnership's estimated obligations is $14.5 million. The amount has not been discounted due to the uncertainty of the timing of the reclamation activities following the suspension of construction of the project. Significant reclamation and closure activities include land rehabilitation, decommissioning of roads, bridges, buildings and facilities.
The reclamation liabilities may be subject to change based on changes in management's estimates, changes in remediation technology or changes to the applicable laws and regulations.
|
( in thousands of Canadian dollars) | ||
2013
$
|
2012
$
|
|
Opening balance
|
13,670
|
13,670
|
Change in estimate
|
796
|
-
|
Accretion
|
-
|
-
|
Closing Reclamation Obligation
|
14,466
|
13,670
|
b)
|
Reclamation bonds
|
|
Each of the Partners' has provided collateral for their 50% share of reclamation bonds and letters of credit covering the required permits aggregating to $14.5 million.
|
|
At December 31, 2013 NovaGold funded $4.5 million of its share in respect of the BC Ministry of Forests and Range Special Use Permit ("Forestry Act Permit"), through the Partnership. The $4.5 million loan related to these reclamation bonds will be repaid to NovaGold once the Partnership's reclamation bond in respect of the Forestry Act Permit is released.
|
9
|
Expenses by Nature
|
(in thousands of Canadian dollars)
|
|||
2013
|
2012
|
2011
|
|
$
|
$
|
$
|
|
Community and stakeholder engagement
|
321
|
327
|
355
|
Environmental consulting and field work
|
785
|
915
|
1,635
|
Fuel and energy
|
21
|
494
|
224
|
Insurance and property tax
|
134
|
168
|
224
|
Maintenance and repair supplies
|
37
|
3,256
|
1,863
|
Office rent and support
|
519
|
866
|
985
|
Other camp costs
|
9
|
496
|
277
|
Salaries and employee benefits
|
2,974
|
2,442
|
2,598
|
Transportation
|
273
|
619
|
533
|
Total care and maintenance costs
|
5,073
|
9,583
|
8,694
|
10
|
Commitments and contingencies
|
a)
|
Operating lease commitments
The Partnership is party to certain operating leases. These operating leases include the Partnership's leased office location and certain office equipment with commitments ranging from one to six years. The future minimum lease payments as at December 31, 2013 are as follows:
|
(in thousands of Canadian dollars)
|
|
$
|
|
2014
|
187
|
2015
|
150
|
2016
|
166
|
Thereafter
|
111
|
b)
|
The Partnership has a royalty agreement entitling the counterparty to a maximum annual net smelter royalty of between 0.5% to 1.0%. The royalty is subject to positive future operating mine cash flow and is contingent upon reaching certain agreed financial targets.
|
11
|
Related party transactions
|
a)
|
Management services
|
|
During the period ended December 31, 2013, NovaGold and Teck provided the Partnership with management services totaling $469,732 (2012 - $798,149; 2011 - $880,655) and $748,506 (2012 - $1,132,296; 2011 - $1,990,452), respectively.
|
b)
|
Due to Partners'
|
|
As at December 31, 2013, the Partnership owed $36,323 (2012 - $32,962; 2011 - $159,858) to NovaGold and $594,232 (2012 - $422,674; 2011 - $696,537) to Teck for management services. The Partnership also owed $4.5 million (2012 - $4.4 million; 2011 - $4.1 million) to NovaGold in respect of reclamation bonds that NovaGold has funded in the Partnership's name.
|
12
|
Financial instruments
|
|
Financial assets are comprised of cash and short-term deposits and reclamation deposits. Cash and short-term deposits are held with large Canadian banks.
|
|
Financial liabilities are comprised of accounts payable and accrued liabilities and due to partners. All financial liabilities are due within 30 days, except the payable to NovaGold.
|
|
The Partnership is not subject to material market risk on any of its financial instruments. The carrying amount of all financial instruments approximates fair value.
|
13
|
Subsequent events
|
|
There were no events after the balance sheet date which would require adjustment to these financial statements (2012: none).
|
Section I
|
-
|
Definitions
|
1
|
Section II
|
-
|
Purpose
|
3
|
Section III
|
-
|
Eligibility and Enrollment
|
3
|
Section IV
|
-
|
Participant Contributions
|
4
|
Section V
|
-
|
Employer Contributions
|
7
|
Section VI
|
-
|
Investments
|
7
|
Section VII
|
-
|
Sale or Withdrawal
|
8
|
Section VIII
|
-
|
Administration
|
10
|
Section IX
|
-
|
Amendment and Termination
|
12
|
Section X
|
-
|
Miscellaneous Provisions
|
12
|
1.2
|
Unless the context otherwise requires, references to the masculine shall be deemed to include references to the feminine, and vice versa, and references to the singular shall be deemed to include references to the plural, and vice versa.
|
1.3
|
The headings in this Plan are for ease of reference only and shall not affect the interpretation of the provisions herein contained. A reference to a section shall, except where expressly stated otherwise, mean a section of this Plan, as applicable.
|
1.4
|
A reference to writing or written form shall include any legible format capable of being reproduced on paper, irrespective of the medium used.
|
|
3.2
|
Each Employee shall be eligible to participate in the Plan.
|
|
Enrollment
|
3.3
|
An eligible Employee may give written notice to the Company in a form prescribed by the Committee to start participation in the Plan. Participation shall commence on the first Business Day of the calendar month immediately following the date such notice is received or such date as may be approved by the Committee. Such notice shall constitute acceptance by the Employee of all the terms and conditions of the Plan and of any regulations adopted or to be adopted pursuant to Section 8.2. Such notice shall specify the full percentage of Base Salary that the Employee elects to contribute under the Plan, subject to the limitations set out in Section IV. Subject to Section 4.5, all contributions shall be made through payroll deductions.
|
3.4
|
The Employer shall, following receipt of notice under Section 3.3, commence payroll deductions with the first Pay Period in the following calendar month.
|
4.1
|
Pursuant to Section 3.3, the Employee shall specify the amount of any Participant Contributions he wishes to make. Such amount of Participant Contributions must be a whole percentage of the Participant’s Base Salary and may not exceed five percent of the Participant’s Base Salary. In the event that the Base Salary of a Participant varies at any time, future Participant Contributions of such Participant shall be automatically adjusted accordingly in order to reflect the same selected percentage applied to the Participant’s revised Base Salary.
|
4.2
|
Subject to Section 4.1, the Participant may, twice in any calendar year, give notice to the Employer to vary the amount of Participant Contributions to be deducted provided that no such notice may be given at any time where the Participant is subject to a blackout period imposed by the Company.
|
Stopping Participant Contributions
|
4.3
|
A Participant may, at any time, give written notice to the Employer to stop his Participant Contributions under the Plan on the date specified in such notice provided that no such notice may be given at any time where the Participant is subject to a blackout period imposed by the Company.
|
Paid Leave of Absence
|
|
4.4
|
A Participant on authorized paid leave of absence shall continue to make Participant Contributions through payroll deductions, as provided in Section 3.4, unless such Participant has given notice in writing to the Employee to stop Participant Contributions pursuant to Section 4.3.
|
Unpaid Leave of Absence/Long Term Disability/Workers’ Compensation
|
|
4.5
|
a)
|
In the event a Participant goes on unpaid maternity or other unpaid leave approved by the Participant’s Employer, such Participant may continue to make Participant Contributions based on the Base Salary in effect immediately prior to the leave by way of post-dated cheques remitted to the Employer. Such Participant may continue contributions under the Plan for up to one year from the first day of any such approved leave of absence.
|
|
b)
|
In the event a Participant goes on approved long term disability leave or Workers’ Compensation Leave, such Participant may continue to make Participant Contributions based on the Base Salary in effect immediately prior to the leave by way of post-dated cheques remitted to the Employer. Such Participant may continue contributions under the Plan for up to two years from the first day of such approved leave of absence.
|
|
c)
|
Should the Employer not receive such cheques prior to the commencement of the Participant’s leave of absence in (a) or (b) above, such Participant shall be deemed to have given notice in writing to the Employer to have stopped Participant Contributions.
|
4.6
|
A Participant who has stopped Participant Contributions pursuant to Section 4.3 or 4.5 is not permitted to restart Participant Contributions for a period of six calendar months (hereinafter “Suspension Period”) from the date that contributions are suspended.
|
4.7
|
A Participant may give notice to the Employer subsequent to the Suspension Period to re-start Participant Contributions under the Plan, but may not make up Participant Contributions that have been missed.
|
|
|
Timing
|
4.8
|
Unless a later date is specified in the relevant notice:
|
|
a)
|
The Employer shall, commencing with the first Pay Period following receipt of a notice under Section 4.2, vary the amount of Participant Contributions as specified in the notice;
|
|
b)
|
The Employer shall, commencing with the first Pay period following receipt of a notice under Section 4.3 or on such later date as may be specified in such notice, ensure that no further deductions of Participant Contributions are made by it under the Plan;
|
|
c)
|
The Employer shall, commencing with the first Pay Period following receipt of a notice under Section 4.7 to re-start deductions under the Plan, restart such Participant Contributions.
|
4.9
|
Termination of Employment, Retirement
|
In the event of the termination of employment for any reason, retirement or death of a Participant, or in the event the Plan is terminated pursuant to Section 9.2, Participant Contributions shall be automatically stopped. The rights of a Participant on termination of employment shall be determined in accordance with Section 10.2.
|
5.1
|
An Employer Contribution shall be awarded by the Employer to a Participant, in respect of the Participant Contributions, on the next Business Day following the end of the Pay Period applicable to the related Participant Contributions.
|
5.2
|
The Employer Contribution to be awarded for any Pay Period shall equal fifty percent (50%) of the related Participant Contributions.
|
5.3
|
The Employer Contribution is deemed to be a taxable benefit to the Employee and thus is subject to, and the Employer shall be entitled to withhold and remit, income tax, CPP and any other applicable statutory deductions in accordance with applicable law.
|
Conditions for Payment
|
5.4
|
Employer Contributions shall be awarded to a Participant with respect to Participant Contributions only if the Participant is still an Employee at the time the Employer Contribution is to be awarded, provided that for such purpose, a Participant who is on paid leave as provided in Section 4.4, on maternity leave or other authorized unpaid leave as provided in Section 4.5, shall be considered to be an Employee.
|
Remittance of Contributions
|
6.1
|
Participant Contributions withheld through payroll deduction by the Employer in each Pay Period (as well as Participant Contributions paid by way of post-dated cheques remitted to the Employer) together with any Employer Contributions in respect of such Pay Period shall be remitted by the Employer to the Brokerage Agent as soon as practicable following the end of such Pay Period (hereinafter “Award Date”).
|
Acquisition of Shares
|
6.2
|
The Administrative Agent shall direct the Brokerage Agent to purchase Shares on behalf of the Participants with all Participant Contributions and Employer Contributions on the open market, through the facilities of the Stock Exchange, if applicable, bi-monthly on such dates to be designated by the Company from time to time and if any such day is not a Business Day, on the next succeeding Business Day.
|
6.3
|
Contributions shall not earn any interest pending their use to purchase Shares.
|
|
Share Purchase Price
|
6.4
|
The price of the Shares purchased with the Participant Contributions and Employer Contributions in respect of a given purchase date shall correspond to their market price at the time of purchase, provided however that where the Brokerage Agent has purchased Shares under the Plan at various prices in connection with any particular purchase date, the purchase price of all Shares acquired on such purchase date shall be deemed to be the weighted average price paid for all Shares that are purchased under the Plan in respect of such purchase date.
|
6.5
|
All the Shares purchased by the Brokerage Agent on behalf of a Participant pursuant to the provisions of this Section VI may be registered in the name of the Brokerage Agent or its nominee, on behalf of, and as agent for, such Participant or may, in accordance with Section 7.2, be registered in the name of the Participant. All rights and privileges with respect to the Shares held in a Participant’s Account, including voting rights, shall be exercised solely by the Participant through the Brokerage Agent.
|
6.6
|
The Company is not a dividend paying company at this time. If in the future the Company commences paying dividends, Participants will be entitled to receive any dividends declared and paid in connection with Shares held in the Participant’s Account.
|
7.1
|
A Participant has the right to sell or withdraw shares from their account four times within any calendar year.
|
7.2
|
Subject to Section 7.1, a Participant may at any time give notice to the Administrative Agent to sell some or all of the Shares in the Participant’s Account in which case, the Administrative Agent shall direct the Brokerage Agent upon receipt of such notice to proceed to sell the number of Shares so specified on the open market, through the facilities of the Stock Exchange, if applicable, and pay to the Participant an amount equal to the net proceeds of such sale, after deduction of any applicable brokerage fees and expenses associated with the sale of such Shares. A Participant may at any time give notice to the Administrative Agent to withdraw (by way of certificate or transfer) some or all of the Shares in his Participant’s Account, in which case, the Administrative Agent shall direct the Brokerage Agent upon receipt of such notice to proceed to transfer and deliver to the Participant those Shares that have been withdrawn at the Participant’s direction. The Participant will be responsible for paying any fees for issuance of share certificates or transfer requests. The Administrative Agent may direct that Shares in the Participant’s Account be sold to cover any such fees. The Participant shall receive the cash equivalent for any fractional Shares credited to his or her Account.
|
Termination of Employment, Plan Termination
|
7.3
|
In the event of the termination of employment for any reason, retirement or death of a Participant, or in the event the Plan is terminated pursuant to Section 9.2, the Administrative Agent shall, as directed by the Participant, the Participant’s beneficiary or the legal representatives of the Participant’s estate, as applicable, direct the Brokerage Agent to transfer and deliver, or sell all the Shares in the Participant’s Account and deliver the net proceeds to the Participant, the Participant’s beneficiary or the legal representatives of the Participant’s estate, as applicable, after deduction of any applicable brokerage fees and expenses associated with the sale or withdrawal of those Shares. The Participant, beneficiary or legal representatives of the Participant’s estate, as applicable, shall provide the Administrative Agent with directions in accordance with this Section 7.3 within 90 days of the termination of employment, retirement or death of a Participant or Plan termination, as applicable. If no direction is received by the Administrative Agent within such time period, the Administrative Agent shall direct the Brokerage Agent to transfer and deliver the Shares in the Participant’s Account to the Participant, the Participant’s beneficiary or the legal representatives of the Participant’s estate, as applicable. The Participant will be responsible for paying any fees for issuance of share certificates or transfer requests. The Administrative Agent may direct that Shares in the Participant’s Account be sold to cover such fees. The Participant shall receive the cash equivalent for any fractional Shares credited to his or her Account.
|
8.2
|
The Committee may make, amend and repeal at any time and from time to time such regulations not inconsistent herewith, as it may deem necessary or advisable generally for the proper administration and operation of the Plan. In particular, the Committee may delegate to any persons, group of persons, including Employees of the Company, or to the Administrative Agent, such administrative duties and powers as it sees fit.
|
Interpretation
|
8.3
|
The Committee shall have the power to interpret the provisions of the Plan from time to time. All decisions and interpretations of the Committee respecting the Plan and all rules and regulations made from time to time pursuant hereto shall be binding and conclusive on the Company and all Participants and their respective legal representatives and on all Employees eligible to participate under the Plan.
|
8.4
|
The Administrative Agent shall maintain, or cause to be maintained, one or more separate accounts for each Participant. The Administrative Agent shall credit to the account of a Participant all Participant Contributions made by such Participant, all Employer Contributions awarded, and all Shares acquired under the Plan and shall deduct from such account all Shares sold or withdrawn by the Participant.
|
8.5
|
The Administrative Agent shall provide a statement of account to each Participant setting out the activity relating to the Participant’s Account on an annual basis containing such information as the Committee may prescribe from time to time.
|
8.6
|
Except as otherwise provided in this plan, the Employer shall pay all costs of administering the plan, including without limitation all the fees and expenses of the Administrative Agent. All brokerage fees relating to the acquisition of Shares under the Plan shall be borne by the Company. All brokerage and other fees relating to the sale or withdrawal of Shares shall be paid by the relevant Participants.
|
Shareholder Information; Right to Vote
|
8.7
|
If the holders of Shares are entitled to vote at a meeting of Shareholders of the Company, each Participant shall have the right to vote, in such manner as such Participant shall desire, the whole shares which are held on his behalf by the Brokerage Agent at the record date of the relevant meeting. Fractional Shares shall not be voted. At the direction of the Company, the Administrative Agent shall furnish records to the Company’s Transfer Agent as of the record date indicating the number of whole shares each Participant is entitled to vote. The Company’s Transfer Agent shall arrange to mail or deliver to each Participant who holds the relevant Shares in his or her account a copy of such Shareholder materials together with a form in which the Participant’s instructions may be provided to the Company’s Transfer Agent for the Shares as to how such Participant’s Shares are to be voted. If a duly completed and signed instruction form is received by the Company’s Transfer Agent for the Shares in time for the Shares to be voted, the Brokerage Agent, as the registered holder of the Shares, will cause the Shares to be voted according to the Participant’s instructions. A Participant who wishes to vote his or her Shares in person and who obtains a proxy for such Shares from the registered owner, shall be entitled, subject to complying with the requirements of applicable law, to attend the meeting of Shareholders, register with a representative of the Company’s Transfer Agent, obtain a ballot, and vote. The Brokerage Agent shall not exercise any voting rights in respect of any Shares for which it has not received voting instructions.
|
No Share Value Guarantee
|
8.8
|
The Company makes no representation or warranty as to the future market value of any Shares acquired under the Plan. None of the Company, the Administrative Agent or the Brokerage Agent shall have any liability to any Participant in connection with any purchase or sale of Shares under the Plan including, without limitation, any liability arising out of any delay in executing any purchase or sale of Shares under the Plan or on account of the purchase price paid or proceeds received in connection with any such purchase or sale.
|
Amendment
|
9.1
|
The Committee may amend or suspend at any time, and from time to time, all or any of the provisions of the Plan at its sole and complete discretion, except that no such amendment shall operate so as to deprive a Participant of any Shares credited to a Participant’s Account prior to the date thereof. Notwithstanding the foregoing, if any provision of the Plan contravenes any applicable law or regulation or any rule, regulation, by-law or policy of any regulatory authority or stock exchange having jurisdiction or authority over the Company or the Plan, then the Committee may amend such provision, retroactively or prospectively, to the extent required to bring such provision into compliance therewith.
|
Plan Termination
|
9.2
|
The Committee reserves the right, in its sole and complete discretion, to terminate the Plan, in whole or in part, at any time provided that no such termination shall operate so as to deprive a Participant of any Shares credited to a Participant’s Account prior to the date thereof. In the event that the Plan is terminated, in whole or in part, no further Employer Contributions shall be awarded to Participants affected by such termination.
|
Participant’s Rights not Transferable
|
10.1
|
Except as provided herein or as required by applicable legislation, the rights of a Participant pursuant to the provisions of the Plan are non-assignable and non-transferable, in whole or in part. No attempted assignment or transfer thereof, otherwise than in accordance with the provisions hereof, shall be effective.
|
No Effect on Employment
|
10.2
|
Participation in the Plan by an Employee shall be voluntary. The terms of employment of an Employee shall not be affected by his or her participation in the Plan. Nothing contained in the Plan or in any documentation pertaining thereto shall confer upon any Participant any right with respect to continuance of employment by the Employer or interfere in any way with the right of the Employer to terminate the employment of any Participant. Under no circumstances shall any person, who is or has at any time been a Participant, be able to claim from the Employer or any related person any sum or other benefit to compensate for loss of any rights or benefits under or in connection with this Plan or by reason of his or her participation herein. For greater certainty, a period of notice or payment in lieu thereof, if any, upon termination of employment, wrongful or otherwise, shall not be considered as extending the period of employment for purposes of the Plan.
|
10.3
|
This Plan shall be construed, enforced and administered in accordance with the laws of the Province of British Columbia and laws of Canada applicable therein.
|
|
Withholdings
|
10.4
|
The Company may withhold or cause to be withheld from any amount payable to a Participant, either under this Plan or otherwise, such amount as may be required by law to be withheld with respect to any tax or other required deductions and may, without limiting the generality of the foregoing, cause to be sold Shares in a Participant’s Account to the extent required in order to effect any such withholding or other required deduction.
|
|
Information to be Provided
|
10.5
|
Each Participant and other person entitled to benefits under the Plan shall, upon request, furnish information required by the Employer, Committee or the Administrative Agent in order to administer the Plan including, without limitation, to make the payments under Section 7.3.
|
|
Severability
|
10.6
|
If any provision or part of the Plan is determined to be void or unenforceable in whole or in part, such determination shall not affect the validity or enforcement of any other provision or part of the Plan.
|
1.
|
PURPOSE OF THE PLAN
|
1.1
|
This Plan has been established by the Corporation to promote the interests of the Corporation by attracting and retaining qualified persons to serve on the Board and to afford such Participants an opportunity to receive a portion of their compensation for serving as a director of the Corporation in the form of securities of the Corporation.
|
2.
|
PLAN DEFINITIONS AND INTERPRETATIONS
|
(a)
|
“Account”
means an account maintained for each Participant on the books of the Corporation which will be credited with Deferred Share Units, in accordance with the terms of the Plan.
|
(b)
|
“Board”
means the Board of Directors of the Corporation.
|
(c)
|
“Committee”
means the Compensation Committee of the Board.
|
(d)
|
“Common Shares”
means the common shares of the Corporation and
“Common Share”
shall mean a common share of the Corporation.
|
(e)
|
“Corporation”
means NovaGold Resources Inc. and its respective successors and assigns, and any reference in the Plan to action by the Corporation means action by or under the authority of the Board or any person or committee that has been designated for the purpose by the Board including, without limitation, the Committee.
|
(f)
|
“DSU”
or
“Deferred Share Unit”
means a bookkeeping entry equivalent in value to a Common Share credited to a Participant’s Account.
|
(g)
|
“Grant”
means any Deferred Share Unit credited to the Account of a Participant.
|
(h)
|
“Notice of Redemption”
means written notice, on a prescribed form, by the Participant, or the administrator or liquidator of the estate of the Participant, to the Corporation of the Participant’s wish to redeem his or her Deferred Share Units.
|
(i)
|
“Participant”
means a director of the Corporation who is designated by the Committee as eligible to participate in the Plan.
|
(j)
|
“Plan”
means this Deferred Share Unit Plan.
|
(k)
|
“Redemption Date”
means the date that a Notice of Redemption is received by the Corporation; provided in the case of a U.S. Eligible Participant, however, the Redemption Date will be made the earlier of (i) “separation from service” within the meaning of Section 409A, or (ii) within 90 days of the U.S. Eligible Participant’s death.
|
(l)
|
“
Reorganization
” means any (i) capital reorganization, (ii) merger, (iii) amalgamation, or (iv) arrangement or other scheme of reorganization.
|
(m)
|
“Section 409A
” means Section 409A of the
U.S. Internal Revenue Code of 1986, as amended
, and the Treasury Regulations promulgated thereunder as in effect from time to time.
|
(n)
|
“
Security Based Compensation Arrangement
” has the meaning defined in the provisions of the TSX Company Manual relating to security based compensation arrangements.
|
(o)
|
“Share Price”
means the closing price of a Common Share on the Toronto Stock Exchange averaged over the five (5) consecutive trading days immediately preceding either (a) in the case of a Grant, the last day of the fiscal quarter preceding the date of Grant in respect of a director, or (b) in the case of a redemption, the Redemption Date, as applicable, or in the event such shares are not traded on the Toronto Stock Exchange, the fair market value of such shares as determined by the Committee acting in good faith.
|
(p)
|
“Termination Date”
means the date of a Participant’s death, or retirement from, or loss of office or employment with the Corporation, within the meaning of paragraph 6801(d) of the regulations under the
Income Tax Act
(Canada), including the Participant’s resignation, retirement, removal from the Board, death or otherwise.
|
(q)
|
“
U.S. Eligible Participant
” refers to a Participant who, at any time during the period from the date Deferred Share Units are granted to the Participant to the date such Deferred Share Units are redeemed by the Participant, is subject to income taxation in the United States on the income received for his or her services as a director of the Corporation and who is not otherwise exempt from U.S. income taxation under the relevant provisions of the
U.S. Internal Revenue Code of 1986, as amended
, or the
Canada-U.S. Income Tax Convention, as amended from time to time
.
|
3.
|
NON-EMPLOYEE DIRECTOR COMPENSATION
|
3.1
|
Establishment of Annual Base Compensation
|
3.2
|
Payment of Annual Base Compensation
|
(a)
|
The Annual Base Compensation shall be payable in quarterly installments, with each installment payable as promptly as practicable following the last business day of the calendar quarter to which it applies. Quarterly payments shall be pro rated if Board service commences or terminates during a calendar quarter.
|
(b)
|
The Annual Base Compensation shall be paid fifty percent (50%) in Deferred Share Units and fifty percent (50%) in cash. The number of DSUs to be paid and the terms of the DSUs shall be determined as provided in the following sections of this Plan.
|
(c)
|
Each Director may also elect to receive in DSUs all or part of that portion of his or her Annual Base Compensation otherwise payable in cash by completing and delivering a written election to the Corporation on or before November 15
th
of the calendar year ending immediately before the calendar year with respect to which the election is made. Such election will be effective with respect to compensation payable for fiscal quarters beginning during the calendar year following the date of such election. In addition, so long a Director has not previously participated in a plan that is required to be aggregated with this Plan for purposes of Section 409A, a Director may elect on or before November 15,
2009 to receive his or her compensation for the fiscal quarter beginning December 1, 2009 in DSUs. Further, where an individual becomes a Director for the first time during a calendar year and such individual has not previously participated in a plan that is required to be aggregated with this Plan for purposes of Section 409A, such individual may elect to participate in the Plan with respect to fiscal quarters of the Corporation commencing after the Corporation receives such individual’s written election, which election must be received by the Corporation no later than 30 days after such individual’s appointment as a Director. For greater certainty, new Directors will not be entitled to receive DSUs pursuant to an election for the quarter in which they submit their first election to the Corporation or any previous quarter. Elections hereunder shall be irrevocable with respect to compensation earned during period to which such election relates.
|
(d)
|
All DSUs granted with respect to Annual Base Compensation will be credited to the Director's Account when such Annual Base Compensation is payable (the "
Payment Date
").
|
(e)
|
The Director's Account will be credited with the number of DSUs calculated to the nearest thousandths of a DSU, determined by dividing the dollar amount of compensation granted in DSUs on the Payment Date by the Share Price. Fractional Shares will not be issued and any fractional entitlements will be rounded down to the nearest whole number.
|
(f)
|
The Corporation may withhold from any amount payable to a Participant, either under this Plan, or otherwise, such amount as may be necessary so as to ensure that the Corporation will be able to comply with the applicable provisions of any federal, provincial, state or local law relating to the withholding of tax or other required deductions, including on the amount, if any, includable in the income of a Participant. The Corporation shall also have the right in its discretion to satisfy any such withholding tax liability by retaining, acquiring or selling on behalf of a Participant any Common Shares which would otherwise be issued or provided to a Participant hereunder.
|
4.
|
ADMINISTRATION OF DSU ACCOUNTS
|
4.1
|
Administration of Plan
|
(a)
|
to establish policies and to adopt rules and regulations for carrying out the purposes, provisions and administration of the Plan and to amend and rescind such rules and regulations from time to time;
|
(b)
|
to interpret and construe the Plan and to determine all questions arising out of the Plan and any such interpretation, construction or determination made by the Committee shall be final, binding and conclusive for all purposes;
|
(c)
|
to prescribe the form of the instruments used in conjunction with the Plan; and
|
(d)
|
to determine which members of the Board are eligible to participate in the Plan.
|
4.2
|
Redemption of Deferred Share Units
|
(a)
|
Each Participant shall be entitled to redeem his or her Deferred Share Units during the period commencing on the business day immediately following the Termination Date and ending on the 90th day following the Termination Date by providing a written Notice of Redemption to the Corporation. In the event of death of a Participant, the Notice of Redemption shall be filed by the administrator or liquidator of the estate of the Participant. In the case of a U.S. Eligible Participant, however, the redemption will be deemed to be made on the earlier of (i) “separation from service” within the meaning of Section 409A, or (ii) within 90 days of the U.S. Eligible Participant’s death.
|
(b)
|
Upon redemption, the Participant shall be entitled to receive, and the Corporation shall issue or provide:
|
(i)
|
subject to the limitations set forth in Section 6.2 below, a number of Common Shares issued from treasury equal to the number of DSUs in the Participant’s Account, subject to any applicable deductions and withholdings;
|
(ii)
|
subject to and in accordance with any Applicable Law, a number of Common Shares purchased by an independent administrator of the Plan in the open market for the purposes of providing Common Shares to Participants under the Plan equal in number to the DSUs in the Participant’s Account, subject to any applicable deductions and withholdings;
|
(iii)
|
the payment of a cash amount to a Participant equal to the number of DSUs multiplied by the Share Price, subject to any applicable deductions and withholdings; or
|
(iv)
|
any combination of the foregoing,
|
4.3
|
Payment Notwithstanding
|
5.
|
ALTERATION OF NUMBER OF SHARES SUBJECT TO THE PLAN
|
5.1
|
Subdivisions or Consolidations
|
5.2
|
Reorganizations
|
5.3
|
Adjustments
|
6.
|
MAXIMUM NUMBER OF SHARES TO BE ISSUED
|
6.1
|
Maximum Number of Shares
|
6.2
|
Maximum Number of Shares to Insiders
|
7.
|
AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
|
7.1
|
Amendment to the Plan
|
(a)
|
for the purposes of making formal minor or technical modifications to any of the provisions of the Plan including amendments of a “clerical” or “housekeeping” nature;
|
(b)
|
to correct any ambiguity, defective provision, error or omission in the provisions of the Plan;
|
(c)
|
amendments to the termination provisions of Section 7.2;
|
(d)
|
amendments necessary or advisable because of any change in applicable securities laws;
|
(e)
|
amendments to the transferability of Deferred Share Units provided for in Section 8.9;
|
(f)
|
amendments to Section 4.1 relating to the administration of the Plan;
|
(g)
|
any other amendment, fundamental or otherwise, not requiring shareholder approval under applicable laws or the rules of the Toronto Stock Exchange;
|
(h)
|
no such amendment of the Plan may be made without the consent of each affected Participant in the Plan if such amendment would adversely affect the rights of such affected Participant(s) under the Plan; and
|
(i)
|
shareholder approval shall be obtained in accordance with the requirements of the Toronto Stock Exchange for any amendment:
|
(i)
|
to Section 6.1 in order to increase the maximum number of Deferred Share Units which may be issued under this Plan (other than pursuant to Section 5);
|
(ii)
|
to Section 7.1 in any manner; or
|
(iii)
|
to the definition of “Participant”.
|
7.2
|
Plan Termination
|
8.
|
GENERAL PROVISIONS
|
8.1
|
Assignability
|
8.2
|
Unfunded Plan
|
8.3
|
Final Determination
|
8.4
|
No Right to Employment
|
8.5
|
No Other Benefit
|
8.6
|
No Shareholder Rights
|
8.7
|
Reorganization of the Corporation
|
8.8
|
Successors and Assigns
|
8.9
|
General Restrictions and Assignment
|
8.10
|
Section 409A
|
|
(a)
|
Except as permitted under Section 409A, any deferred compensation (within the meaning of Section 409A) payable to or for the benefit of a U.S. Eligible Participant may not be reduced by, or offset against, any amount owing by the U.S. Eligible Participant to the Corporation or any of its affiliates.
|
|
(b)
|
If a U.S. Eligible Participant becomes entitled to receive payment in respect of any Deferred Share Units as a result of his or her “separation from service” (within the meaning of Section 409A), and the U.S Eligible Participant is a “specified employee” (within the meaning of Section 409A) at the time of his or her separation from service, and the Committee makes a good faith determination that (i) all or a portion of the Deferred Share Units constitute “deferred compensation” (within the meaning of Section 409A) and (ii) any such deferred compensation that would otherwise be payable during the six-month period following such separation from service is required to be delayed pursuant to the six-month delay rule set forth in Section 409A in order to avoid taxes or penalties under Section 409A, then payment of such “deferred compensation” shall not be made to the U.S Eligible Participant before the date which is six months after the date of his or her separation from service (and shall be paid in a single lump sum on the first day of the seventh month following the date of such separation from service) or, if earlier, the U.S Eligible Participant’s date of death.
|
|
(c)
|
A U.S. Eligible Participant’s status as a specified employee shall be determined by the Corporation as required by Section 409A on a basis consistent with the regulations under Section 409A and such basis for determination will be consistently applied to all plans, programs, contracts, agreements, etc. maintained by the Corporation that are subject to Section 409A.
|
|
(d)
|
Each U.S Eligible Participant, any beneficiary or the U.S Eligible Participant’s estate, as the case may be, is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or for the account of such U.S Eligible Participant in connection with this Plan (including any taxes and penalties under Section 409A), and neither the Corporation nor any affiliate shall have any obligation to indemnify or otherwise hold such U.S Eligible Participant or beneficiary or the U.S Eligible Participant’s estate harmless from any or all of such taxes or penalties.
|
|
(e)
|
In the event that the Committee determines that any amounts payable hereunder will be taxable to a Participant under Section 409A prior to payment to such Participant of such amount, the Corporation may (i) adopt such amendments to the Plan and Deferred Share Units and appropriate policies and procedures, including amendments and policies with retroactive effect, that the Committee determines necessary or appropriate to preserve the intended tax treatment of the benefits provided by the Plan and Deferred Share Units hereunder and/or (ii) take such other actions as the Committee determines necessary or appropriate to avoid or limit the imposition of an additional tax under Section 409A.
|
|
(f)
|
In the event the Corporation terminates the Plan in accordance with Section 7, the time and manner of payment of amounts that are subject to Section 409A will be made in accordance with the rules under Section 409A. The Plan will not be terminated except as permitted under Section 409A.
|
8.11
|
Forfeiture Provision
|
|
(a)
|
a Participant experiences a Separation From Service as a result of a permanent decrease in the level of services provided to less than 20% of his past service in circumstances that do not constitute a retirement from, or loss of office or employment with, the Corporation or an affiliate thereof, within the meaning of paragraph 6801(d) of the regulations under the
Income Tax Act
(Canada); or
|
|
(b)
|
a Participant experiences a Separation From Service upon ceasing to be a director while continuing to provide services as an employee in circumstances that do not constitute a retirement from, or loss of office or employment with, the Corporation or an affiliate thereof, within the meaning of paragraph 6801(d) of the regulations under the
Income Tax Act
(Canada); or
|
|
(c)
|
a Participant experiences a serious disability that continues for more than 29 months in circumstances that constitute a Separation From Service and do not constitute a retirement from, or loss of office or employment with, the Corporation or an affiliate thereof, within the meaning of paragraph 6801(d) of the regulations under the
Income Tax Act
(Canada); or
|
|
(d)
|
a Participant experiences a retirement from, or loss of office or employment with, the Corporation or an affiliate thereof, within the meaning of paragraph 6801(d) of the regulations under the
Income Tax Act
(Canada) by virtue of ceasing employment as both an employee and as a director, but he continues to provide services as an independent contractor such that he has not experienced a Separation From Service.
|
8.12
|
Interpretation
|
8.13
|
Governing Law
|
8.14
|
Severability
|
8.15
|
Effective Date
|
|
GREG LANG
, Business person, of 5 Cobblewood Cove, Sandy, UT, USA, 84092
|
|
NOVAGOLD RESOURCES INC
.,
a company incorporated pursuant to the laws of Nova Scotia, extra-provincially registered and having its registered office in British Columbia at Suite 2300 – 200 Granville Street, Vancouver, British Columbia, V6C 1S4
|
|
(the “Company”)
|
1.
|
ENGAGEMENT AND DURATION
|
1.1
|
Engagement
|
|
The Company hereby employs the Executive as President & CEO and the Executive accepts such employment. The Executive shall also serve as President and CEO of NovaGold Alaska pursuant to the U.S. Agreement.
|
1.2
|
Term
|
|
The Executive's employment pursuant to the terms of this Agreement shall commence effective January 9, 2012 and shall continue indefinitely, unless and until terminated as set forth herein.
|
2.
|
DUTIES
|
2.1
|
Performance of Duties
|
|
The Executive shall act as President & CEO, and the Executive shall perform such services and duties as are normally provided by a President & CEO of a company in a business and of a size similar to the Company’s, and such other services and duties as may reasonably be assigned from time to time. Without in anyway limiting the foregoing, the Executive will be responsible for providing leadership and strategic direction.
|
2.2
|
Other Boards or Committees
|
|
The Executive’s performance of reasonable personal, civic or charitable activities or the Executive’s service on any boards or committees of any private or public companies shall not be deemed to interfere with the performance of the Executive’s services and responsibilities to the Company pursuant to this Agreement, so long as there is no conflict between the business of the Company and the business of the private or public companies. The Executive agrees to inform the Board of Directors of the Company (“Board”) forthwith upon the Executive being nominated to any such board or committee. The Executive’s right to participate on such boards or committees shall be subject to approval of the Board, which approval will not be unnecessarily withheld.
|
2.3
|
Reporting
|
|
The Executive shall report directly to the Board.
|
2.4
|
Instructions
|
|
The Executive will, subject to the terms of this Agreement, comply promptly and faithfully with the reasonable and lawful instructions, directions, requests, rules and regulations of the Board.
|
3.
|
REMUNERATION AND BENEFITS
|
3.1
|
Salary
|
|
The Company shall pay to the Executive for his services under this Agreement an annual salary of US$180,000, subject to all applicable statutory deductions and payable in substantially equal installments on the dates that the Company has established for paying wages to its employees.
|
3.2
|
Annual Review
|
|
The annual salary referred to in section 3.1 shall be reviewed at least annually by the Board in consultation with the Executive. The compensation committee of the Board ("Compensation Committee") shall make recommendations to the Board regarding appropriate salary adjustments. The annual salary referred to in section 3.1 shall be increased by such amount as is determined by the Board of Directors or the Compensation Committee in its sole discretion taking into consideration the performance of the Executive and the performance of the Company provided, however, that in no event shall the annual salary be less than the annual salary payable in the previous fiscal year.
|
3.3
|
Reimbursement of Expenses
|
|
The Company shall reimburse the Executive for all reasonable expenses incurred by him in the performance of this Agreement provided that the Executive provides the Company with written expense accounts with respect to each calendar month. The Company will provide the Executive with, or reimburse the Executive for, services and fees necessary for the performance of the Executive's duties including, but not limited to, membership in the Executive's professional institute, stock information accounts and fax lines.
|
3.4
|
Directors and Officers Liability Insurance
|
|
The Company shall provide the Executive with directors’ and officers’ liability insurance appropriate to the nature of his responsibilities under this Agreement. The directors’ and officers’ liability insurance will be subject to the terms and conditions of the insurance policy’s coverage.
|
3.5
|
Equipment
|
3.6
|
Annual Incentive Program
|
4.
|
CONFIDENTIALITY AND NON-DISCLOSURE
|
4.1
|
“Confidential Information”
|
4.2
|
Equitable Remedies
|
4.3
|
Use of Confidential Information
|
(a)
|
duplicate, transfer or disclose nor allow any other person to duplicate, transfer or disclose any of the Company’s Confidential Information; or
|
(b)
|
use the Company’s Confidential Information without the prior written consent of the Company.
|
4.4
|
Protection of Confidential Information
|
4.5
|
Exception
|
(a)
|
is or later becomes publicly known under circumstances involving no breach of this Agreement by the Executive;
|
(b)
|
is already known to the Executive at the time of receipt of the Confidential Information;
|
(c)
|
is lawfully made available to the Executive by a third party;
|
(d)
|
is disclosed by the Executive pursuant to a requirement of a governmental department or agency or disclosure is otherwise required by operation of law, provided that the Executive gives notice in writing to the Company of the required disclosure immediately upon his becoming advised of such required disclosure and provided also that the Executive delays such disclosure so long as it is reasonably possible in order to permit the Company to appeal or otherwise oppose such required disclosure and provides the Company with such assistance as the Company may reasonably require in connection with such appeal or other opposition;
|
(e)
|
is disclosed to a third party under an approved confidentiality agreement; or
|
(f)
|
is disclosed in the course of the Executive's proper performance of the Executive's duties under this Agreement.
|
4.6
|
Removal of Information
|
4.7
|
New Discoveries
|
4.8
|
Survival
|
4.9
|
Non-Solicitation
|
(a)
|
any person who is employed by the Company or any affiliated company to leave such employment; or
|
(b)
|
any person, firm or corporation whatsoever, who or which has at any time in the last two (2) years of his/her employment with the Company or any predecessor of the Company, been a customer of the Company, an affiliate company, or of any of their respective predecessors, provided that this subsection shall not prohibit the Executive from soliciting business from any such customer if the business is in no way similar to the business carried on by the Company, an affiliated company, any of their respective predecessors, subsidiaries or associates to cease its relationship with the Company or any affiliated company.
|
4.10
|
Equitable Relief
|
5.
|
DELIVERY OF RECORDS
|
6.
|
TERMINATION
|
6.1
|
The Executive’s Right to Terminate
|
(a)
|
at any time upon providing three months’ notice in writing to the Company; or
|
(b)
|
upon a material breach or default of any material term of this Agreement by the Company provided that the Executive advises the Company in writing of such breach or default within ninety (90) days of the date the Executive has become aware (or reasonably should have become aware) of the breach or default, and the Company has not cured such breach or default within 30 days from the receipt of such written notice.
|
6.2
|
Company’s Right to Terminate
|
|
The Company may terminate the Executive’s employment under this Agreement at any time:
|
(a)
|
for just cause which shall include, without limitation, any of the following events:
|
(i)
|
theft, dishonesty or fraud by the Executive with respect to the business of the Company;
|
(ii)
|
the conviction of the Executive for a criminal offence that gives rise or is likely to give rise to the Company's stock becoming ineligible for listing on any stock exchange or market or the Company's stock being subject to a cease-trade order by a Canadian or US securities regulatory authority; or
|
(iii)
|
any and all other omissions, commissions or other conduct which would constitute just cause at law; or
|
(b)
|
upon the Executive dying or becoming permanently disabled or disabled for a period exceeding 180 consecutive days or 180 non-consecutive days calculated on a cumulative basis over any two year period during the term of this Agreement. The Executive shall be deemed to have become disabled if, because of ill health, physical, mental disability or for other causes beyond the control of the Executive, the Executive has been unable or unwilling or has failed to perform the Executive's duties under this Agreement; or
|
(c)
|
for any other reason, after which the Company will pay the Executive the severance payment contemplated in section 6.3 to the Executive, subject to the terms of this Agreement. For greater certainty, no severance payments under Section 6.3 will be made following termination by the Company for just cause under Section 6.2(a).
|
6.3
|
Severance Payment
|
|
In the event of the termination of the Executive's employment:
|
(a)
|
by the Executive pursuant to subsection 6.1(b) of this Agreement; or
|
(b)
|
by the Company pursuant to subsection 6.2(c) or by the Company in breach of this Agreement;
|
|
the Company shall pay to the Executive within 10 days of such termination a severance payment equal to:
|
(c)
|
an amount equal to the Executive’s annual salary at the time of termination of the Executive’s employment plus the Executive’s annual incentive target for the fiscal year pursuant to the Company’s Annual Incentive Program, multiplied by two in the event that such termination occurs before the first anniversary of this Agreement; or
|
(d)
|
an amount equal to the Executive’s annual salary at the time of termination of the Executive’s employment plus the Executive’s annual incentive earned in the previous fiscal year pursuant to the Company’s Annual Incentive Program, multiplied by two in the event that such termination occurs on or after the first anniversary of this Agreement.
|
|
In addition, the Company shall reimburse the Executive within 10 days of such termination for all expenses as contemplated by section 3.3.
|
6.4
|
Compensation Otherwise Due to the Executive on Termination
|
|
In the event of the termination of the Executive's employment under this Agreement in circumstances other than those set out in section 6.3 of this Agreement, the Company shall pay the following amounts to the Executive within 10 days of the termination:
|
(a)
|
if terminated pursuant to subsections 6.1(a) or 6.2(a) of this Agreement, the Company shall pay to the Executive his then-current annual salary accrued pursuant to section 3.1 of this Agreement as of the date of termination or effective date of resignation, as applicable; or
|
(b)
|
if terminated pursuant to subsection 6.2(b) of this Agreement, the Company shall pay to the Executive:
|
(i)
|
his then-current annual salary accrued pursuant to this Agreement as of the date of termination; and
|
(ii)
|
a lump sum equal to the Executive’s annual salary at the time of termination of the Executive’s employment. Such payment will be made no later than March 15 of the year following the year of such termination.
|
6.5
|
Property Interests
|
6.6
|
Resignations
|
6.7
|
Payments in Full Settlement
|
7.
|
CHANGE OF CONTROL
|
7.1
|
Termination By Company.
|
(a)
|
a material change (other than a change that is clearly and exclusively consistent with a promotion) in the Executive’s position, duties, responsibilities, title or office in effect immediately prior to any Change of Control;
|
(b)
|
a material reduction in the Executive’s Base Salary
in effect immediately prior of any Change of Control; or
|
(c)
|
any material breach by the Company of any material provision of this Agreement;
|
7.2
|
Change of Control.
|
(a)
|
at least 50% in fair-market value of all the assets of the Company are sold to a party or parties acting jointly or in concert (as determined pursuant to the Ontario Securities Act, R.S.O. 1990, c.S.5, as amended (the “OSA”), mutatis mutandis) in one or more transactions occurring within a period of two (2) years; or
|
(b)
|
there is a direct or indirect acquisition by a person or group of persons acting jointly or in concert of voting shares of the Company that when taken together with any voting shares owned directly or indirectly by such person or group of persons at the time of the acquisition, constitutes 40% or more of the outstanding voting shares of the Company, provided that the direct or indirect acquisition by Electrum Strategic Resources LLC (“Electrum”) of voting shares of the Company shall not constitute a “Change of Control” unless the acquisition of such additional voting shares when taken together with any voting shares or securities convertible into voting shares (“Convertible Securities”) held directly or indirectly by Electrum at the time of acquisition constitutes 50% or more of the outstanding voting shares of the Company. For purposes of this subsection (b), all Convertible Securities owned by Electrum will be deemed to be fully converted or exercised and the number of outstanding voting shares of the Company will be adjusted to reflect such conversion or exercise and Electrum includes all persons acting jointly or in concert with Electrum; or
|
(c)
|
a majority of the then-incumbent Board of Directors’ nominees for election to the Board of Directors of the Company are not elected at any annual or special meeting of shareholders of the Company; or
|
(d)
|
the Company is merged, amalgamated, consolidated or reorganized into or with another body corporate or other legal person and, as a result of such business combination, more than 40% of the voting shares of such body corporate or legal person immediately after such transaction are beneficially held in the aggregate by a person or body corporate (or persons or bodies corporate acting jointly or in concert) and such person or body corporate (or persons or bodies corporate acting jointly or in concert) beneficially held less than 40% of the voting shares of the Company immediately prior to such transaction.
|
8.
|
U.S. AGREEMENT
|
9.
|
INDEMNIFICATION
|
10.
|
PERSONAL NATURE
|
11.
|
RIGHT TO USE EXECUTIVE’S NAME AND LIKENESS
|
12.
|
LEGAL ADVICE
|
13.
|
WAIVER
|
14.
|
NOTICES
|
14.1
|
Delivery of Notice
|
|
Any notice relating to this Agreement or required or permitted to be given in accordance with this Agreement shall be in writing and shall be personally delivered or mailed by registered mail, postage prepaid to the address of the parties set out on the first page of this Agreement. Any notice shall be deemed to have been received if delivered, when delivered, and if mailed, on the fifth day (excluding Saturdays, Sundays and holidays) after the mailing thereof. If normal mail service is interrupted by strike, slowdown, force majeure or other cause, a notice sent by registered mail will not be deemed to be received until actually received and the party sending the notice shall utilize any other services which have not been so interrupted or shall deliver such notice in order to ensure prompt receipt thereof.
|
14.2
|
Change of Address
|
|
Each party to this Agreement may change its address for the purpose of this Article 14 by giving written notice of such change in the manner provided for in section 14.1.
|
15.
|
APPLICABLE LAW
|
16.
|
SEVERABILITY
|
17.
|
ENTIRE AGREEMENT
|
18.
|
NON-ASSIGNABILITY
|
19.
|
BURDEN AND BENEFIT
|
20.
|
TIME
|
21.
|
COUNTERPARTS
|
NOVAGOLD RESOURCES INC.
________________________________
Per: TONY GIARDINI
|
By:
/s/ Gregory A. Lang
Gregory A. Lang
Chief Executive Officer
|
|
DAVID DEISLEY
, Business person, of 2988 W. 2
nd
Avenue, Vancouver, BC, Canada, V6K 1K4
|
|
NOVAGOLD RESOURCES INC
.,
a company incorporated pursuant to the laws of Nova Scotia, extra-provincially registered and having its registered office in British Columbia at Suite 2300 – 200 Granville Street, Vancouver, British Columbia, V6C 1S4
|
|
(the “Company”)
|
1.
|
ENGAGEMENT AND DURATION
|
1.1
|
Engagement
|
|
The Company hereby employs the Executive as Executive Vice President & General Counsel and the Executive accepts such employment. The Executive shall also serve as Executive Vice President & General Counsel of NovaGold USA pursuant to the U.S. Agreement.
|
1.2
|
Term
|
|
The Executive's employment pursuant to the terms of this Agreement shall commence effective November 1, 2012 and shall continue indefinitely, unless and until terminated as set forth herein.
|
2.
|
DUTIES
|
2.1
|
Performance of Duties
|
|
The Executive shall act as Executive Vice President & General Counsel, and the Executive shall perform such services and duties as are normally provided by an Executive Vice President & General Counsel of a company in a business and of a size similar to the Company’s, and such other services and duties as may reasonably be assigned from time to time.
|
2.2
|
Other Boards or Committees
|
|
The Executive’s performance of reasonable personal, civic or charitable activities or the Executive’s service on any boards or committees of any private or public companies shall not be deemed to interfere with the performance of the Executive’s services and responsibilities to the Company pursuant to this Agreement, so long as there is no conflict between the business of the Company and the business of the private or public companies. The Executive agrees to inform the Board of Directors of the Company (the “Board”) forthwith upon the Executive being appointed to any such board or committee. The Executive’s right to participate on such boards or committees shall be subject to approval of the Board, which approval will not be unnecessarily withheld. The Board acknowledges that as of the date of this Agreement, the Executive is a director of the companies set forth in Schedule A hereto, and approves the Executive’s right to participate on such boards.
|
2.3
|
Reporting
|
|
The Executive shall report directly to the President and Chief Executive Officer (“CEO”) of the Company.
|
2.4
|
Instructions
|
|
The Executive will, subject to the terms of this Agreement, comply promptly and faithfully with the reasonable and lawful instructions, directions, requests, rules and regulations of the Board and the CEO.
|
3.
|
REMUNERATION AND BENEFITS
|
3.1
|
Salary
|
|
A portion of the salary paid to the Executive for his services under the U.S. Agreement, subject to all applicable statutory deductions, shall be allocated as compensation paid by the Company under this Agreement.
|
3.2
|
Annual Review
|
|
The annual salary referred to in section 3.1 shall be reviewed at least annually by the CEO in consultation with the Executive. The CEO shall make recommendations to the Board or the compensation committee of the Board (“Compensation Committee”) regarding appropriate salary adjustments. The annual salary referred to in section 3.1 shall be increased by such amount as is determined by the Board or the Compensation Committee in its sole discretion taking into consideration the recommendations of the CEO, the performance of the Executive and the performance of the Company provided, however, that in no event shall the annual salary be less than the annual salary payable in the previous fiscal year.
|
3.3
|
Reimbursement of Expenses
|
|
The Company shall reimburse the Executive for all reasonable expenses incurred by him in the performance of this Agreement provided that the Executive provides the Company with written expense accounts with respect to each calendar month, by no later than the end of the calendar month following the incurring of such expenses. The Company will provide the Executive with, or reimburse the Executive for, services and fees necessary for the performance of the Executive's duties including, but not limited to, membership in the Executive's professional institute, stock information accounts and fax lines.
|
3.4
|
Directors and Officers Liability Insurance
|
|
The Company shall provide the Executive with directors’ and officers’ liability insurance appropriate to the nature of his responsibilities under this Agreement. The directors’ and officers’ liability insurance will be subject to the terms and conditions of the insurance policy’s coverage.
|
3.5
|
Equipment
|
3.6
|
Annual Incentive Program
|
4.
|
CONFIDENTIALITY AND NON-DISCLOSURE
|
4.1
|
“Confidential Information”
|
4.2
|
Equitable Remedies
|
4.3
|
Use of Confidential Information
|
(a)
|
duplicate, transfer or disclose nor allow any other person to duplicate, transfer or disclose any of the Company’s Confidential Information; or
|
(b)
|
use the Company’s Confidential Information without the prior written consent of the Company.
|
4.4
|
Protection of Confidential Information
|
4.5
|
Exception
|
(a)
|
is or later becomes publicly known under circumstances involving no breach of this Agreement by the Executive;
|
(b)
|
is already known to the Executive at the time of receipt of the Confidential Information;
|
(c)
|
is lawfully made available to the Executive by a third party;
|
(d)
|
is disclosed by the Executive pursuant to a requirement of a governmental department or agency or disclosure is otherwise required by operation of law, provided that the Executive gives notice in writing to the Company of the required disclosure immediately upon his becoming advised of such required disclosure and provided also that the Executive delays such disclosure so long as it is reasonably possible in order to permit the Company to appeal or otherwise oppose such required disclosure and provides the Company with such assistance as the Company may reasonably require in connection with such appeal or other opposition;
|
(e)
|
is disclosed to a third party under an approved confidentiality agreement; or
|
(f)
|
is disclosed in the course of the Executive's proper performance of the Executive's duties under this Agreement.
|
4.6
|
Removal of Information
|
4.7
|
New Discoveries
|
4.8
|
Survival
|
4.9
|
Non-Solicitation
|
(a)
|
any person who is employed by the Company or any affiliated company to leave such employment; or
|
(b)
|
any person, firm or corporation whatsoever, who or which has at any time in the last two (2) years of the Executive’s employment with the Company or any predecessor of the Company, been a customer of the Company, an affiliate company, or of any of their respective related companies to cease its relationship with the Company or any related company, provided that this subsection shall not prohibit the Executive from soliciting business from any such customer where such solicitation is unrelated to the business carried on by the Company or any related company.
|
4.10
|
Equitable Relief
|
5.
|
DELIVERY OF RECORDS
|
6.
|
TERMINATION
|
6.1
|
The Executive’s Right to Terminate
|
(a)
|
at any time upon providing three months’ notice in writing to the Company; or
|
(b)
|
upon a material breach or default of any term of this Agreement by the Company provided that if such material breach or default is capable of being remedied by the Company, it has not been remedied within 30 days after written notice of the material breach or default has been delivered by the Executive to the Company.
|
6.2
|
Company’s Right to Terminate
|
|
The Company may terminate the Executive’s employment under this Agreement at any time:
|
(a)
|
for just cause which shall include, without limitation, any of the following events:
|
(i)
|
theft, dishonesty or fraud by the Executive with respect to the business of the Company;
|
(ii)
|
the conviction of the Executive for a criminal offence that gives rise or is likely to give rise to the Company's stock becoming ineligible for listing on any stock exchange or market or the Company's stock being subject to a cease-trade order by a Canadian or US securities regulatory authority; or
|
(iii)
|
any and all other omissions, commissions or other conduct which would constitute just cause at law; or
|
(b)
|
upon the Executive dying or becoming permanently disabled or disabled for a period exceeding 180 consecutive days or 180 non consecutive days calculated on a cumulative basis over any two year period during the term of this Agreement. The Executive shall be deemed to have become disabled if, because of ill health, physical, mental disability or for other causes beyond the control of the Executive, the Executive has been unable or unwilling or has failed to perform the essential functions of Executive’s position under this Agreement, with or without reasonable accommodation (provided that no accommodation that imposes undue hardship on the Company will be required); or
|
(c)
|
at any time upon making the severance payment contemplated in section 6.3 to the Executive subject to the terms of this Agreement.
|
6.3
|
Severance Payment
|
|
In the event of the termination of the Executive's employment:
|
(a)
|
by the Executive pursuant to subsection 6.1(b) of this Agreement; or
|
(b)
|
by the Company pursuant to subsection 6.2(c) or by the Company in breach of this Agreement;
|
|
the Company shall pay to the Executive within 10 days of such termination a severance payment equal to:
|
(c)
|
an amount equal to the Executive’s annual salary at the time of termination of the Executive’s employment plus the Executive’s annual incentive target for the fiscal year pursuant to the Company’s Annual Incentive Program, multiplied by two in the event that such termination occurs before the first anniversary of this Agreement; or
|
(d)
|
an amount equal to the Executive’s annual salary at the time of termination of the Executive’s employment plus the Executive’s annual incentive earned in the previous fiscal year pursuant to the Company’s Annual Incentive Program, multiplied by two in the event that such termination occurs on or after the first anniversary of this Agreement.
|
|
In addition, the Company shall reimburse the Executive within 10 days of such termination for all expenses as contemplated by section 3.3.
|
6.4
|
Compensation Otherwise Due to the Executive on Termination
|
|
In the event of the termination of the Executive's employment under this Agreement in circumstances other than those set out in section 6.3 of this Agreement, the Company shall pay the following amounts to the Executive within 10 days of the termination:
|
(a)
|
if terminated pursuant to subsections 6.1(a) or 6.2(a) of this Agreement, the Company shall pay to the Executive his then-current annual salary accrued pursuant to section 3.1 of this Agreement as of the date of termination or effective date of resignation, as applicable; or
|
(b)
|
if terminated pursuant to subsection 6.2(b) of this Agreement, the Company shall pay to the Executive:
|
(i)
|
his then-current annual salary accrued pursuant to this Agreement as of the date of termination; and
|
(ii)
|
a lump sum equal to the Executive’s annual salary at the time of termination of the Executive’s employment. Such payment will be made no later than March 15 of the year following the year of such termination.
|
6.5
|
Property Interests
|
6.6
|
Resignations
|
6.7
|
Payments in Full Settlement
|
7.
|
CHANGE OF CONTROL
|
7.1
|
Termination By Company.
|
(a)
|
a material change (other than a change that is clearly and exclusively consistent with a promotion) in the Executive’s position, duties, responsibilities, title or office in effect immediately prior to any Change of Control;
|
(b)
|
a material reduction in the Executive’s Base Salary
in effect immediately prior to any Change of Control;
|
(c)
|
any material breach by the Company of any material provision of this Agreement; or
|
(d)
|
any action or event that would constitute a constructive dismissal of the Executive at common law.
|
7.2
|
Change of Control.
|
(a)
|
at least 50% in fair-market value of all the assets of the Company are sold to a party or parties acting jointly or in concert (as determined pursuant to the Ontario Securities Act, R.S.O. 1990, c.S.5, as amended (the “OSA”), mutatis mutandis) in one or more transactions occurring within a period of two (2) years; or
|
(b)
|
there is a direct or indirect acquisition by a person or group of persons acting jointly or in concert of voting shares of the Company that when taken together with any voting shares owned directly or indirectly by such person or group of persons at the time of the acquisition, constitutes 40% or more of the outstanding voting shares of the Company, provided that the direct or indirect acquisition by Electrum Strategic Resources LLC (“Electrum”) of voting shares of the Company shall not constitute a “Change of Control” unless the acquisition of such additional voting shares when taken together with any voting shares or securities convertible into voting shares (“Convertible Securities”) held directly or indirectly by Electrum at the time of acquisition constitutes 50% or more of the outstanding voting shares of the Company. For purposes of this subsection (b), all Convertible Securities owned by Electrum will be deemed to be fully converted or exercised and the number of outstanding voting shares of the Company will be adjusted to reflect such conversion or exercise and Electrum includes all persons acting jointly or in concert with Electrum; or
|
(c)
|
a majority of the then-incumbent Board of Directors’ nominees for election to the Board of Directors of the Company are not elected at any annual or special meeting of shareholders of the Company; or
|
(d)
|
the Company is merged, amalgamated, consolidated or reorganized into or with another body corporate or other legal person and, as a result of such business combination, more than 40% of the voting shares of such body corporate or legal person immediately after such transaction are beneficially held in the aggregate by a person or body corporate (or persons or bodies corporate acting jointly or in concert) and such person or body corporate (or persons or bodies corporate acting jointly or in concert) beneficially held less than 40% of the voting shares of the Company immediately prior to such transaction.
|
8.
|
U.S. AGREEMENT
|
9.
|
INDEMNIFICATION
|
10.
|
PERSONAL NATURE
|
11.
|
RIGHT TO USE EXECUTIVE’S NAME AND LIKENESS
|
12.
|
LEGAL ADVICE
|
13.
|
WAIVER
|
14.
|
NOTICES
|
14.1
|
Delivery of Notice
|
|
Any notice relating to this Agreement or required or permitted to be given in accordance with this Agreement shall be in writing and shall be personally delivered or mailed by registered mail, postage prepaid to the address of the parties set out on the first page of this Agreement. Any notice shall be deemed to have been received if delivered, when delivered, and if mailed, on the fifth day (excluding Saturdays, Sundays and holidays) after the mailing thereof. If normal mail service is interrupted by strike, slowdown, force majeure or other cause, a notice sent by registered mail will not be deemed to be received until actually received and the party sending the notice shall utilize any other services which have not been so interrupted or shall deliver such notice in order to ensure prompt receipt thereof.
|
14.2
|
Change of Address
|
|
Each party to this Agreement may change its address for the purpose of this Article 14 by giving written notice of such change in the manner provided for in section 14.1.
|
15.
|
APPLICABLE LAW
|
16.
|
SEVERABILITY
|
17.
|
ENTIRE AGREEMENT
|
18.
|
NON-ASSIGNABILITY
|
19.
|
BURDEN AND BENEFIT
|
20.
|
TIME
|
21.
|
COUNTERPARTS
|
NOVAGOLD USA, INC.
By:
/s/ Gregory A. Lang
Gregory A. Lang
Chief Executive Officer
|
By:
/s/ David Deisley
David Deisley
EVP & General Counsel
|
David Ottewell
, Business person, of 9522 Sand Hill Ct., Highlands Ranch, Colorado, 80126
|
|
(the “Executive”)
|
NovaGold USA, Inc
.
,
a company incorporated pursuant to the laws of Delaware, and having its principle office in Salt Lake City, at One Utah Center, 201 South Main Street, Suite 400, Salt Lake City, Utah, 84111
|
(the “Company”)
|
1.
|
ENGAGEMENT AND DURATION
|
1.1
|
Engagement
|
The Company hereby employs the Executive as Vice President & Chief Financial Officer and the Executive accepts such employment. NovaGold has also appointed the Executive as Vice President & Chief Financial Officer of NovaGold.
|
1.2
|
Term
|
The Executive’s employment pursuant to the terms of this Agreement shall commence effective November 13, 2012 and shall continue indefinitely, unless and until terminated as set forth herein.
|
1.3
|
At-Will Employment
|
2.
|
DUTIES
|
2.1
|
Performance of Duties
|
The Executive shall act as Executive Vice President & Chief Financial Officer, and the Executive shall perform such services and duties as are normally provided by an Executive Vice President & Chief Financial Officer of a company in a business and of a size similar to the Company’s, and such other services and duties as may reasonably be assigned from time to time.
|
2.2
|
Other Boards or Committees
|
2.3
|
Principal Place of Work
|
The Executive shall perform his duties under this Agreement at the Company’s principal executive offices which are currently located in Salt Lake City, Utah. The Executive acknowledges that his duties and responsibilities may involve a reasonable amount of traveling.
|
2.4
|
Reporting
|
The Executive shall report directly to the President and Chief Executive Officer (“CEO”) of the Company.
|
2.5
|
Instructions
|
The Executive will, subject to the terms of this Agreement, comply promptly and faithfully with the reasonable and lawful instructions, directions, requests, rules and regulations of the Board and the CEO.
|
3.
|
REMUNERATION AND BENEFITS
|
3.1
|
Salary
|
The Company shall pay to the Executive for his services under this Agreement an annual salary of US$325,000, subject to all applicable statutory deductions and payable in substantially equal installments on the dates that the Company has established for paying wages to its employees. Executive understands that his position is classified as exempt under both state and federal wage and hour law.
|
3.2
|
Annual Review
|
The annual salary referred to in section 3.1 shall be reviewed at least annually by the CEO in consultation with the Executive. The CEO shall make recommendations to the Board or the compensation committee of the Board (“Compensation Committee”) regarding appropriate salary adjustments. The annual salary referred to in section 3.1 shall be increased by such amount as is determined by the Board or the Compensation Committee in its sole discretion taking into consideration the recommendations of the CEO, the performance of the Executive and the performance of the Company provided, however, that in no event shall the annual salary be less than the annual salary payable in the previous fiscal year.
|
3.3
|
Reimbursement of Expenses
|
The Company shall reimburse the Executive for all reasonable expenses incurred by him in the performance of this Agreement provided that the Executive provides the Company with written expense accounts with respect to each calendar month, by no later than the end of the calendar month following the incurring of such expenses. The Company will provide the Executive with, or reimburse the Executive for, services and fees necessary for the performance of the Executive’s duties including, but not limited to, membership in the Executive’s professional institute, stock information accounts and fax lines.
|
3.4
|
Medical Benefits
|
The Company shall provide the Executive with group life, long-term disability, extended medical and dental insurance coverage (“benefit coverage”) in accordance with the terms of the benefit plans in effect from time to time and, to the extent provided by such plans, the Company shall extend medical and dental insurance coverage to the Executive’s spouse and child dependents. The Company may, in the Company’s discretion, change such benefit coverage or amend such benefits from time to time, as long as such changes do not apply solely to the Executive.
|
|
3.5
|
Directors and Officers Liability Insurance
|
The Company shall provide the Executive with directors’ and officers’ liability insurance appropriate to the nature of his responsibilities under this Agreement. The directors’ and officers’ liability insurance will be subject to the terms and conditions of the insurance policy’s coverage.
|
3.6
|
Vacation
|
The Executive shall be entitled to 5 weeks of paid vacation for each fiscal year with the Company. The Executive shall be entitled to a pro-rata portion of the Executive’s vacation entitlement for any part year of employment. The Executive shall take such vacation only at times approved in advance by the CEO, which approval shall not be unreasonably withheld. The Executive shall be covered by the Company’s vacation policy for banking and forfeiture of vacation days. In addition, the Executive shall be entitled to statutory holidays and the number of paid holidays provided for under the policies and procedures of the Company, as they exist from time to time.
|
3.7
|
Other Benefits
|
3.8
|
Equipment
|
3.9
|
Annual Incentive Program
|
3.10
|
Payroll
|
|
The Company may at its election provide remuneration and benefits set out in Article 3 of this Agreement through an affiliate of the Company.
|
4.
|
CONFIDENTIALITY AND NON-DISCLOSURE
|
4.1
|
“Confidential Information”
|
4.2
|
Equitable Remedies
|
4.3
|
Use of Confidential Information
|
(a)
|
duplicate, transfer or disclose nor allow any other person to duplicate, transfer or disclose any of the Company’s Confidential Information; or
|
(b)
|
use the Company’s Confidential Information without the prior written consent of the Company.
|
4.4
|
Protection of Confidential Information
|
4.5
|
Exception
|
(a)
|
is or later becomes publicly known under circumstances involving no breach of this Agreement by the Executive;
|
(b)
|
is already known to the Executive at the time of receipt of the Confidential Information;
|
(c)
|
is lawfully made available to the Executive by a third party;
|
(d)
|
is disclosed by the Executive pursuant to a requirement of a governmental department or agency or disclosure is otherwise required by operation of law, provided that the Executive gives notice in writing to the Company of the required disclosure immediately upon his becoming advised of such required disclosure and provided also that the Executive delays such disclosure so long as it is reasonably possible in order to permit the Company to appeal or otherwise oppose such required disclosure and provides the Company with such assistance as the Company may reasonably require in connection with such appeal or other opposition;
|
(e)
|
is disclosed to a third party under an approved confidentiality agreement; or
|
(f)
|
is disclosed in the course of the Executive’s proper performance of the Executive’s duties under this Agreement.
|
4.6
|
Removal of Information
|
4.7
|
New Discoveries
|
4.8
|
Survival
|
4.9
|
Non-Solicitation
|
(a)
|
any person who is employed by the Company or any affiliated company to leave such employment; or
|
(b)
|
any person, firm or corporation whatsoever, who or which has at any time in the last two (2) years of the Executive’s employment with the Company or any predecessor of the Company, been a customer of the Company, an affiliate company, or of any of their respective related companies to cease its relationship with the Company or any related company, provided that this subsection shall not prohibit the Executive from soliciting business from any such customer where such solicitation is unrelated to the business carried on by the Company or any related company.
|
4.10
|
Equitable Relief
|
5.
|
DELIVERY OF RECORDS
|
6.
|
TERMINATION
|
6.1
|
The Executive’s Right to Terminate
|
(a)
|
at any time upon providing three months’ notice in writing to the Company; or
|
(b)
|
upon a material breach or default of any term of this Agreement by the Company provided that if such material breach or default is capable of being remedied by the Company, it has not been remedied within 30 days after written notice of the material breach or default has been delivered by the Executive to the Company.
|
6.2
|
Company’s Right to Terminate
|
(a)
|
for just cause which shall include, without limitation, any of the following events:
|
(i)
|
theft, dishonesty or fraud by the Executive with respect to the business of the Company;
|
(ii)
|
the conviction of the Executive for a criminal offence that gives rise or is likely to give rise to NovaGold’s or the Company’s stock becoming ineligible for listing on any stock exchange or market or NovaGold’s or the Company’s stock being subject to a cease-trade order by a Canadian or US securities regulatory authority; or
|
(iii)
|
any and all other omissions, commissions or other conduct which would constitute just cause at law; or
|
(b)
|
upon the Executive dying or becoming permanently disabled or disabled for a period exceeding 180 consecutive days or 180 non-consecutive days calculated on a cumulative basis over any two year period during the term of this Agreement. The Executive shall be deemed to have become disabled if, because of ill health, physical, mental disability or for other causes beyond the control of the Executive, the Executive has been unable or unwilling or has failed to perform the essential functions of Executive’s position under this Agreement, with or without reasonable accommodation (provided that no accommodation that imposes undue hardship on the Company will be required); or
|
|
(c)
|
at any time upon making the severance payment contemplated in section 6.3 to the Executive subject to the terms of this Agreement, including Article 8.
|
6.3
|
Severance Payment
|
(a)
|
by the Executive pursuant to subsection 6.1(b) of this Agreement; or
|
(b)
|
by the Company pursuant to subsection 6.2(c) or by the Company in breach of this Agreement;
|
(c)
|
an amount equal to the Executive’s annual salary at the time of termination of the Executive’s employment plus the Executive’s annual incentive target for the fiscal year pursuant to the Annual Incentive Program, multiplied by two in the event that such termination occurs before the first anniversary of this Agreement; or
|
(d)
|
an amount equal to the Executive’s annual salary at the time of termination of the Executive’s employment plus the Executive’s annual incentive earned in the previous fiscal year pursuant to the Annual Incentive Program, multiplied by two in the event that such termination occurs on or after the first anniversary of this Agreement.
|
6.4
|
Compensation Otherwise Due to the Executive on Termination
|
(a)
|
if terminated pursuant to subsections 6.1(a) or 6.2(a) of this Agreement, the Company shall pay to the Executive within 10 days of the termination unless otherwise required by law his then-current annual salary accrued pursuant to section 3.1 of this Agreement as of the date of termination or effective date of resignation, as applicable; or
|
(b)
|
if terminated pursuant to subsection 6.2(b) of this Agreement, the Company shall pay to the Executive:
|
(i)
|
his then-current annual salary accrued pursuant to this Agreement as of the date of termination, within 10 days of the termination unless otherwise required by law; and
|
(ii)
|
a lump sum equal to the Executive’s annual salary at the time of termination of the Executive’s employment within 10 days after Executive executes a release without revocation as described in Article 8. Such payment will be made no later than March 15 of the year following the year of such termination.
|
6.5
|
Property Interests
|
6.6
|
Resignations
|
6.7
|
Payments in Full Settlement
|
7.
|
CHANGE OF CONTROL
|
7.1
|
Termination By Company.
|
(a)
|
a material change (other than a change that is clearly and exclusively consistent with a promotion) in the Executive’s positions, duties, responsibilities, titles or offices with the Company or NovaGold in effect immediately prior to any Change of Control;
|
(b)
|
a material reduction in the Executive’s Base Salary in effect immediately prior to any Change of Control; or
|
(c)
|
any material breach by the Company of any material provision of this Agreement;
|
(d)
|
any action or event that would constitute a constructive dismissal of Executive at common law,
|
7.2
|
Change of Control.
|
(a)
|
at least 50% in fair-market value of all the assets of NovaGold are sold to a party or parties acting jointly or in concert (as determined pursuant to the Ontario Securities Act, R.S.O. 1990, c.S.5, as amended (the “OSA”), mutatis mutandis) in one or more transactions occurring within a period of two (2) years; or
|
(b)
|
there is a direct or indirect acquisition by a person or group of persons acting jointly or in concert of voting shares of NovaGold that when taken together with any voting shares owned directly or indirectly by such person or group of persons at the time of the acquisition, constitutes 40% or more of the outstanding voting shares of NovaGold, provided that the direct or indirect acquisition by Electrum Strategic Resources LLC (“Electrum”) of voting shares of NovaGold shall not constitute a “Change of Control” unless the acquisition of such additional voting shares when taken together with any voting shares or securities convertible into voting shares (“Convertible Securities”) held directly or indirectly by Electrum at the time of acquisition constitutes 50% or more of the outstanding voting shares of NovaGold. For purposes of this paragraph (b), all Convertible Securities owned by Electrum will be deemed to be fully converted or exercised and the number of outstanding voting shares of NovaGold will be adjusted to reflect such conversion or exercise and Electrum includes all persons acting jointly or in concert with Electrum;
|
(a)
|
a majority of the then-incumbent Board of Directors’ nominees for election to the Board of Directors of NovaGold are not elected at any annual or special meeting of shareholders of NovaGold; or
|
(b)
|
NovaGold is merged, amalgamated, consolidated or reorganized into or with another body corporate or other legal person and, as a result of such business combination, more than 40% of the voting shares of such body corporate or legal person immediately after such transaction are beneficially held in the aggregate by a person or body corporate (or persons or bodies corporate acting jointly or in concert) and such person or body corporate (or persons or bodies corporate acting jointly or in concert) beneficially held less than 40% of the voting shares of NovaGold immediately prior to such transaction.
|
7.3
|
Limitation on Benefits
|
8.
|
EMPLOYEE RELEASE
|
9.
|
INDEMNIFICATION
|
10.
|
PERSONAL NATURE
|
11.
|
RIGHT TO USE EXECUTIVE’S NAME AND LIKENESS
|
12.
|
LEGAL ADVICE
|
13.
|
WAIVER
|
14.
|
NOTICES
|
14.1
|
Delivery of Notices
|
Any notice relating to this Agreement or required or permitted to be given in accordance with this Agreement shall be in writing and shall be personally delivered or mailed by registered mail, postage prepaid to the address of the parties set out on the first page of this Agreement. Any notice shall be deemed to have been received if delivered, when delivered, and if mailed, on the fifth day (excluding Saturdays, Sundays and holidays) after the mailing thereof. If normal mail service is interrupted by strike, slowdown, force majeure or other cause, a notice sent by registered mail will not be deemed to be received until actually received and the party sending the notice shall utilize any other services which have not been so interrupted or shall deliver such notice in order to ensure prompt receipt thereof.
|
14.2
|
Change of Address
|
Each party to this Agreement may change its address for the purpose of this Article 14 by giving written notice of such change in the manner provided for in section 14.1.
|
15.
|
APPLICABLE LAW
|
16.
|
SEVERABILITY
|
17.
|
ENTIRE AGREEMENT
|
18.
|
NON-ASSIGNABILITY
|
19.
|
BURDEN AND BENEFIT
|
20.
|
TIME
|
21.
|
WITHHOLDING
|
22.
|
COUNTERPARTS
|
NOVAGOLD USA, INC.
By:
/s/ Gregory A. Lang
Gregory A. Lang
Chief Executive Officer
|
By:
/s/ David Ottewell
David Ottewell
VP & Chief Financial Officer
|
|
GREG LANG
, Business person, of 5 Cobblewood Cove, Sandy, UT, USA, 84092
|
|
NOVAGOLD RESOURCES ALASKA, INC.
,
a company incorporated pursuant to the laws of Alaska and having its registered office c/o NOVAGOLD RESOURCES INC. in British Columbia at Suite 2300 – 200 Granville Street, Vancouver, British Columbia, V6C 1S4
|
|
(the “Company”)
|
1.
|
ENGAGEMENT AND DURATION
|
1.1
|
Engagement
|
|
The Company hereby employs the Executive as President & CEO and the Executive accepts such employment. The Executive shall also serve as President and CEO of NovaGold pursuant to the “Canada Agreement”.
|
1.2
|
Term
|
|
The Executive's employment pursuant to the terms of this Agreement shall commence effective January 9, 2012 and shall continue indefinitely, unless and until terminated as set forth herein.
|
1.3
|
At-Will Employment
|
|
The Executive’s employment is at-will, and either the Executive or the Company may terminate the relationship at any time, with or without prior notice, except as especially provided for in Articles 6 or 7 of this Agreement.
|
2.
|
DUTIES
|
2.1
|
Performance of Duties
|
|
The Executive shall act as President & CEO, and the Executive shall perform such services and duties as are normally provided by a President & CEO of a company in a business and of a size similar to the Company’s, and such other services and duties as may reasonably be assigned from time to time. Without in anyway limiting the foregoing, the Executive will be responsible for the duties set out in Schedule A hereto.
|
2.2
|
Other Boards or Committees
|
|
The Executive’s performance of reasonable personal, civic or charitable activities or the Executive’s service on any boards or committees of any private or public companies shall not be deemed to interfere with the performance of the Executive’s services and responsibilities to the Company pursuant to this Agreement, so long as there is no conflict between the business of the Company and the business of the private or public companies. The Executive agrees to inform the Board of Directors of the Company (“Board”) forthwith upon the Executive being nominated to any such board or committee. The Executive’s right to participate on such boards or committees shall be subject to approval of the Board, which approval will not be unnecessarily withheld.
|
2.3
|
Reporting
|
|
The Executive shall report directly to the Board.
|
2.4
|
Instructions
|
|
The Executive will, subject to the terms of this Agreement, comply promptly and faithfully with the reasonable and lawful instructions, directions, requests, rules and regulations of the Board.
|
3.
|
REMUNERATION AND BENEFITS
|
3.1
|
Salary
|
|
The Company shall pay to the Executive for his services under this Agreement an annual salary of US$420,000, subject to all applicable statutory deductions and payable in substantially equal installments on the dates that the Company has established for paying wages to its employees.
|
3.2
|
Inducement Shares
|
|
As an inducement to enter into this Agreement, the Company will, subject to approval of the Toronto Stock Exchange and applicable securities laws, arrange to issue the Executive 200,000 common shares of NovaGold. The entitlement to shares pursuant to this section 3.2 may be settled on a net withholding basis in order to satisfy any tax obligations of the Executive arising out of the grant of shares set out herein. Any such withholding will be satisfied by the Company on a cash basis at the then market price of the NovaGold’s shares, and the Executive will be issued that number of shares equal to 200,000 multiplied by (100% - the anticipated percentage withholding obligation).
|
3.3
|
Annual Review
|
|
The annual salary referred to in section 3.1 shall be reviewed at least annually by the Board in consultation with the Executive. The compensation committee of the Board ("Compensation Committee") shall make recommendations to the Board regarding appropriate salary adjustments. The annual salary referred to in section 3.1 shall be increased by such amount as is determined by the Board or the Compensation Committee in its sole discretion taking into consideration the performance of the Executive and the performance of the Company provided, however, that in no event shall the annual salary be less than the annual salary payable in the previous fiscal year.
|
3.4
|
Reimbursement of Expenses
|
|
The Company shall reimburse the Executive for all reasonable expenses incurred by him in the performance of this Agreement provided that the Executive provides the Company with written expense accounts with respect to each calendar month. The Company will provide the Executive with, or reimburse the Executive for, services and fees necessary for the performance of the Executive's duties including, but not limited to, membership in the Executive's professional institute, stock information accounts and fax lines.
|
3.5
|
Medical Benefits
|
|
The Company shall provide the Executive with group life, long-term disability, extended medical and dental insurance coverage (“benefit coverage”) in accordance with the terms of the benefit plans in effect from time to time and, to the extent provided by such plans, the Company shall extend medical and dental insurance coverage to the Executive’s spouse and child dependants. The Company may, in the Company’s discretion, change such benefit coverage or amend such benefits from time to time, as long as such changes do not apply solely to the Executive.
|
3.6
|
Directors and Officers Liability Insurance
|
|
The Company shall provide the Executive with directors’ and officers’ liability insurance appropriate to the nature of his responsibilities under this Agreement. The directors’ and officers’ liability insurance will be subject to the terms and conditions of the insurance policy’s coverage.
|
3.7
|
Vacation
|
|
The Executive shall be entitled to five weeks of paid vacation for each fiscal year of the Company. The Executive shall be entitled to a pro-rata portion of the Executive’s vacation entitlement for any part year of employment. The Executive shall take such vacation only at times approved in advance by the Board, which approval shall not be unreasonably withheld. The Executive shall be covered by the Company’s vacation policy for banking of vacation days. In addition, the Executive shall be entitled to statutory holidays and the number of paid holidays provided for under the policies and procedures of the Company, as they exist from time to time. For the avoidance of doubt, the Executive is entitled to a total of five weeks of paid vacation from his responsibilities as President and CEO of the Company and of NovaGold, and the terms of this Agreement and of the Canada Agreement regarding paid vacation will be interpreted accordingly.
|
3.8
|
Equipment
|
3.9
|
Annual Incentive Program
|
3.10
|
Other Benefits
|
|
In further recognition of your appointment, you will receive an initial grant of 100,000 PSUs upon the commencement of your employment. These PSUs vest upon the same performance criteria as those set by NovaGold with respect to its 2011 long term incentive grants. The terms and conditions of the PSUs will be in accordance with the terms of the PSU Plan and the requirements of the Toronto Stock Exchange, applicable securities laws, and U.S. federal income tax laws to the extent they are applicable.
|
3.11
|
Payroll
|
|
The Company may at its election provide remuneration and benefits set out in Article 3 of this Agreement through an affiliate of the Company.
|
4.
|
CONFIDENTIALITY AND NON-DISCLOSURE
|
4.1
|
“Confidential Information”
|
4.2
|
Equitable Remedies
|
4.3
|
Use of Confidential Information
|
(a)
|
duplicate, transfer or disclose nor allow any other person to duplicate, transfer or disclose any of the Company’s Confidential Information; or
|
(b)
|
use the Company’s Confidential Information without the prior written consent of the Company.
|
4.4
|
Protection of Confidential Information
|
4.5
|
Exception
|
(a)
|
is or later becomes publicly known under circumstances involving no breach of this Agreement by the Executive;
|
(b)
|
is already known to the Executive at the time of receipt of the Confidential Information;
|
(c)
|
is lawfully made available to the Executive by a third party;
|
(d)
|
is disclosed by the Executive pursuant to a requirement of a governmental department or agency or disclosure is otherwise required by operation of law, provided that the Executive gives notice in writing to the Company of the required disclosure immediately upon his becoming advised of such required disclosure and provided also that the Executive delays such disclosure so long as it is reasonably possible in order to permit the Company to appeal or otherwise oppose such required disclosure and provides the Company with such assistance as the Company may reasonably require in connection with such appeal or other opposition;
|
(e)
|
is disclosed to a third party under an approved confidentiality agreement; or
|
(f)
|
is disclosed in the course of the Executive's proper performance of the Executive's duties under this Agreement.
|
4.6
|
Removal of Information
|
4.7
|
New Discoveries
|
4.8
|
Survival
|
4.9
|
Non-Solicitation
|
(a)
|
any person who is employed by the Company or any affiliated company to leave such employment; or
|
(b)
|
any person, firm or corporation whatsoever, who or which has at any time in the last two (2) years of his/her employment with the Company or any predecessor of the Company, been a customer of the Company, an affiliate company, or of any of their respective predecessors, provided that this subsection shall not prohibit the Executive from soliciting business from any such customer if the business is in no way similar to the business carried on by the Company, an affiliated company, any of their respective predecessors, subsidiaries or associates to cease its relationship with the Company or any affiliated company.
|
4.10
|
Equitable Relief
|
5.
|
DELIVERY OF RECORDS
|
6.
|
TERMINATION
|
6.1
|
The Executive’s Right to Terminate
|
(a)
|
at any time upon providing three months’ notice in writing to the Company; or
|
(b)
|
upon a material breach or default of any material term of this Agreement by the Company provided that the Executive advises the Company in writing of such breach or default within ninety (90) days of the date the Executive has become aware (or reasonably should have become aware) of the breach or default, and the Company has not cured such breach or default within thirty (30) days from the receipt of such written notice.
|
6.2
|
Company’s Right to Terminate
|
|
The Company may terminate the Executive’s employment under this Agreement at any time:
|
(a)
|
for just cause which shall include, without limitation, any of the following events:
|
(i)
|
theft, dishonesty or fraud by the Executive with respect to the business of the Company;
|
(ii)
|
the conviction of the Executive for a criminal offence that gives rise or is likely to give rise to the Company's stock becoming ineligible for listing on any stock exchange or market or the Company's stock being subject to a cease-trade order by a Canadian or US securities regulatory authority; or
|
(iii)
|
any and all other omissions, commissions or other conduct which would constitute just cause at law; or
|
(b)
|
upon the Executive dying or becoming permanently disabled or disabled for a period exceeding 180 consecutive days or 180 non-consecutive days calculated on a cumulative basis over any two year period during the term of this Agreement. The Executive shall be deemed to have become disabled if, because of ill health, physical, mental disability or for other causes beyond the control of the Executive, the Executive has been unable or unwilling or has failed to perform the Executive's duties, with or without reasonable accommodation (provided that no accommodation that imposes undue hardship on the Company will be required), under this Agreement; or
|
(c)
|
for any other reason, after which, the Company will pay Executive the severance payment contemplated in section 6.3 subject to the terms of this Agreement, including Article 8. For greater certainty, no severance payments under Section 6.3 will be made following termination by the Company for just cause under Section 6.2(a).
|
6.3
|
Severance Payment
|
|
In the event of the termination of the Executive's employment:
|
(a)
|
by the Executive pursuant to subsection 6.1(b) of this Agreement; or
|
(b)
|
by the Company pursuant to subsection 6.2(c) or by the Company in breach of this Agreement;
|
|
then the Company shall pay to the Executive no later than March 15
th
of the year following the year in which the termination occurs, and subject to Article 8, a lump sum severance payment equal to:
|
(c)
|
an amount equal to the Executive’s annual salary at the time of termination of the Executive’s employment plus the Executive’s annual incentive target for the fiscal year pursuant to the Company’s Annual Incentive Program, multiplied by two in the event that such termination occurs before the first anniversary of this Agreement; or
|
(d)
|
an amount equal to the Executive’s annual salary at the time of termination of the Executive’s employment plus the Executive’s annual incentive earned in the previous fiscal year pursuant to the Company’s Annual Incentive Program, multiplied by two in the event that such termination occurs on or after the first anniversary of this Agreement.
|
|
In addition, the Company shall reimburse the Executive within 10 days of such termination for all expenses as contemplated by section 3.4.
|
6.4
|
Compensation Otherwise Due to the Executive on Termination
|
|
In the event of the termination of the Executive's employment under this Agreement in circumstances other than those set out in section 6.3 of this Agreement, the Company shall pay the following amounts to the Executive:
|
(a)
|
if terminated pursuant to subsections 6.1(a) or 6.2(a) of this Agreement, the Company shall pay to the Executive his then-current annual salary accrued pursuant to section 3.1 of this Agreement as of the date of termination or effective date of resignation, as applicable; or
|
(b)
|
if terminated pursuant to subsection 6.2(b) of this Agreement, the Company shall pay to the Executive:
|
(i)
|
his then-current annual salary accrued pursuant to this Agreement as of the date of termination; and
|
(ii)
|
a lump sum equal to the Executive’s annual salary at the time of termination of the Executive’s employment. Such payment will be made no later than March 15 of the year following the year of such termination.
|
6.5
|
Property Interests
|
6.6
|
Resignations
|
6.7
|
Payments in Full Settlement
|
7.
|
CHANGE OF CONTROL
|
7.1
|
Termination By Company.
|
(a)
|
a material change (other than a change that is clearly and exclusively consistent with a promotion) in the Executive’s position, duties, responsibilities, title or office in effect immediately prior to any Change of Control;
|
(b)
|
a material reduction in the Executive’s Base Salary
in effect immediately prior of any Change of Control; or
|
(c)
|
any material breach by the Company of any material provision of this Agreement;
|
7.2
|
Change of Control.
|
(a)
|
at least 50% in fair-market value of all the assets of the NovaGold are sold to a party or parties acting jointly or in concert (as determined pursuant to the Ontario Securities Act, R.S.O. 1990, c.S.5, as amended (the “OSA”), mutatis mutandis) in one or more transactions occurring within a period of two (2) years; or
|
(b)
|
there is a direct or indirect acquisition by a person or group of persons acting jointly or in concert of voting shares of NovaGold that when taken together with any voting shares owned directly or indirectly by such person or group of persons at the time of the acquisition, constitutes 40% or more of the outstanding voting shares of NovaGold, provided that the direct or indirect acquisition by Electrum Strategic Resources LLC (“Electrum”) of voting shares of NovaGold shall not constitute a “Change of Control” unless the acquisition of such additional voting shares when taken together with any voting shares or securities convertible into voting shares (“Convertible Securities”) held directly or indirectly by Electrum at the time of acquisition constitutes 50% or more of the outstanding voting shares of NovaGold. For purposes of this subsection (b), all Convertible Securities owned by Electrum will be deemed to be fully converted or exercised and the number of outstanding voting shares of NovaGold will be adjusted to reflect such conversion or exercise and Electrum includes all persons acting jointly or in concert with Electrum; or
|
(c)
|
a majority of the nominees of the then-incumbent Board of Directors of NovaGold for election to the Board of Directors of NovaGold are not elected at any annual or special meeting of shareholders of NovaGold; or
|
(d)
|
NovaGold is merged, amalgamated, consolidated or reorganized into or with another body corporate or other legal person and, as a result of such business combination, more than 40% of the voting shares of such body corporate or legal person immediately after such transaction are beneficially held in the aggregate by a person or body corporate (or persons or bodies corporate acting jointly or in concert) and such person or body corporate (or persons or bodies corporate acting jointly or in concert) beneficially held less than 40% of the voting shares of NovaGold immediately prior to such transaction.
|
7.3
|
Limit on Benefits.
|
8.
|
EMPLOYEE RELEASE
|
9.
|
CANADA AGREEMENT
|
10.
|
TAX EQUALIZATION
|
11.
|
TAX RETURN PREPARATION ASSISTANCE
|
12.
|
INDEMNIFICATION
|
13.
|
PERSONAL NATURE
|
14.
|
RIGHT TO USE EXECUTIVE’S NAME AND LIKENESS
|
15.
|
LEGAL ADVICE
|
16.
|
WAIVER
|
17.
|
NOTICES
|
17.1
|
Delivery of Notice
|
|
Any notice relating to this Agreement or required or permitted to be given in accordance with this Agreement shall be in writing and shall be personally delivered or mailed by registered mail, postage prepaid to the address of the parties set out on the first page of this Agreement. Any notice shall be deemed to have been received if delivered, when delivered, and if mailed, on the fifth day (excluding Saturdays, Sundays and holidays) after the mailing thereof. If normal mail service is interrupted by strike, slowdown, force majeure or other cause, a notice sent by registered mail will not be deemed to be received until actually received and the party sending the notice shall utilize any other services which have not been so interrupted or shall deliver such notice in order to ensure prompt receipt thereof.
|
17.2
|
Change of Address
|
|
Each party to this Agreement may change its address for the purpose of this Part 11 by giving written notice of such change in the manner provided for in section 11.1.
|
18.
|
APPLICABLE LAW
|
19.
|
SEVERABILITY
|
20.
|
ENTIRE AGREEMENT
|
21.
|
NON-ASSIGNABILITY
|
22.
|
BURDEN AND BENEFIT
|
23.
|
TIME
|
24.
|
COUNTERPARTS
|
NOVAGOLD RESOURCES ALASKA, INC.
Per:
____________________________________
Authorized Signatory
|
By:
/s/ Gregory A. Lang
Gregory A. Lang
Chief Executive Officer
|
David Deisley
, Business person, of 2988 W. 2
nd
Avenue, Vancouver, BC, Canada, V6K 1K4
|
|
(the “Executive”)
|
NovaGold USA, Inc
.
,
a company incorporated pursuant to the laws of Delaware, and having its principle office in Salt Lake City, at One Utah Center, 201 South Main Street, Suite 400, Salt Lake City, Utah, 84111
|
(the “Company”)
|
1.
|
ENGAGEMENT AND DURATION
|
1.1
|
Engagement
|
The Company hereby employs the Executive as Executive Vice President & General Counsel and the Executive accepts such employment. The Executive shall also serve as Executive Vice President & General Counsel of NovaGold pursuant to the “Canada Agreement”.
|
1.2
|
Term
|
The Executive’s employment pursuant to the terms of this Agreement shall commence effective November 1, 2012 and shall continue indefinitely, unless and until terminated as set forth herein.
|
1.3
|
At-Will Employment
|
2.
|
DUTIES
|
2.1
|
Performance of Duties
|
The Executive shall act as Executive Vice President & General Counsel, and the Executive shall perform such services and duties as are normally provided by an Executive Vice President & General Counsel of a company in a business and of a size similar to the Company’s, and such other services and duties as may reasonably be assigned from time to time.
|
2.2
|
Other Boards or Committees
|
2.3
|
Principal Place of Work
|
The Executive shall perform his duties under this Agreement at the Company’s principal executive offices which are currently located in Salt Lake City, Utah. The Executive acknowledges that his duties and responsibilities may involve a reasonable amount of traveling, including travel which may be required to perform his duties under the Canada Agreement.
|
2.4
|
Reporting
|
The Executive shall report directly to the President and Chief Executive Officer (“CEO”) of the Company.
|
2.5
|
Instructions
|
The Executive will, subject to the terms of this Agreement, comply promptly and faithfully with the reasonable and lawful instructions, directions, requests, rules and regulations of the Board and the CEO.
|
3.
|
REMUNERATION AND BENEFITS
|
3.1
|
Salary
|
The Company shall pay to the Executive for his services under this Agreement an annual salary of US$425,000, subject to all applicable statutory deductions and payable in substantially equal installments on the dates that the Company has established for paying wages to its employees. Executive understands that his position is classified as exempt under both state and federal wage and hour law. The Executive's annual salary shall be allocated by the Company between this Agreement and the Canada Agreement as appropriate.
|
3.2
|
Annual Review
|
The annual salary referred to in section 3.1 shall be reviewed at least annually by the CEO in consultation with the Executive. The CEO shall make recommendations to the Board or the compensation committee of the Board (“Compensation Committee”) regarding appropriate salary adjustments. The annual salary referred to in section 3.1 shall be increased by such amount as is determined by the Board or the Compensation Committee in its sole discretion taking into consideration the recommendations of the CEO, the performance of the Executive and the performance of the Company provided, however, that in no event shall the annual salary be less than the annual salary payable in the previous fiscal year.
|
3.3
|
Reimbursement of Expenses
|
The Company shall reimburse the Executive for all reasonable expenses incurred by him in the performance of this Agreement provided that the Executive provides the Company with written expense accounts with respect to each calendar month, by no later than the end of the calendar month following the incurring of such expenses. The Company will provide the Executive with, or reimburse the Executive for, services and fees necessary for the performance of the Executive’s duties including, but not limited to, membership in the Executive’s professional institute, stock information accounts and fax lines.
|
3.4
|
Medical Benefits
|
The Company shall provide the Executive with group life, long-term disability, extended medical and dental insurance coverage (“benefit coverage”) in accordance with the terms of the benefit plans in effect from time to time and, to the extent provided by such plans, the Company shall extend medical and dental insurance coverage to the Executive’s spouse and child dependents. The Company may, in the Company’s discretion, change such benefit coverage or amend such benefits from time to time, as long as such changes do not apply solely to the Executive.
|
|
3.5
|
Directors and Officers Liability Insurance
|
The Company shall provide the Executive with directors’ and officers’ liability insurance appropriate to the nature of his responsibilities under this Agreement. The directors’ and officers’ liability insurance will be subject to the terms and conditions of the insurance policy’s coverage.
|
3.6
|
Vacation
|
The Executive shall be entitled to 5 weeks of paid vacation for each fiscal year with the Company. The Executive shall be entitled to a pro-rata portion of the Executive’s vacation entitlement for any part year of employment. The Executive shall take such vacation only at times approved in advance by the CEO, which approval shall not be unreasonably withheld. The Executive shall be covered by the Company’s vacation policy for banking and forfeiture of vacation days. In addition, the Executive shall be entitled to statutory holidays and the number of paid holidays provided for under the policies and procedures of the Company, as they exist from time to time. For the avoidance of doubt, the Executive is entitled to a total of 5 weeks of paid vacation from his responsibilities as Executive Vice President & General Counsel of the Company and of NovaGold, and the terms of this Agreement and of the Canada Agreement regarding paid vacation will be interpreted accordingly.
|
3.7
|
Other Benefits
|
3.8
|
Equipment
|
3.9
|
Annual Incentive Program
|
3.10
|
Payroll
|
|
The Company may at its election provide remuneration and benefits set out in Article 3 of this Agreement through an affiliate of the Company.
|
4.
|
CONFIDENTIALITY AND NON-DISCLOSURE
|
4.1
|
“Confidential Information”
|
4.2
|
Equitable Remedies
|
4.3
|
Use of Confidential Information
|
(a)
|
duplicate, transfer or disclose nor allow any other person to duplicate, transfer or disclose any of the Company’s Confidential Information; or
|
(b)
|
use the Company’s Confidential Information without the prior written consent of the Company.
|
4.4
|
Protection of Confidential Information
|
4.5
|
Exception
|
(a)
|
is or later becomes publicly known under circumstances involving no breach of this Agreement by the Executive;
|
(b)
|
is already known to the Executive at the time of receipt of the Confidential Information;
|
(c)
|
is lawfully made available to the Executive by a third party;
|
(d)
|
is disclosed by the Executive pursuant to a requirement of a governmental department or agency or disclosure is otherwise required by operation of law, provided that the Executive gives notice in writing to the Company of the required disclosure immediately upon his becoming advised of such required disclosure and provided also that the Executive delays such disclosure so long as it is reasonably possible in order to permit the Company to appeal or otherwise oppose such required disclosure and provides the Company with such assistance as the Company may reasonably require in connection with such appeal or other opposition;
|
(e)
|
is disclosed to a third party under an approved confidentiality agreement; or
|
(f)
|
is disclosed in the course of the Executive’s proper performance of the Executive’s duties under this Agreement.
|
4.6
|
Removal of Information
|
4.7
|
New Discoveries
|
4.8
|
Survival
|
4.9
|
Non-Solicitation
|
(a)
|
any person who is employed by the Company or any affiliated company to leave such employment; or
|
(b)
|
any person, firm or corporation whatsoever, who or which has at any time in the last two (2) years of the Executive’s employment with the Company or any predecessor of the Company, been a customer of the Company, an affiliate company, or of any of their respective related companies to cease its relationship with the Company or any related company, provided that this subsection shall not prohibit the Executive from soliciting business from any such customer where such solicitation is unrelated to the business carried on by the Company or any related company.
|
4.10
|
Equitable Relief
|
5.
|
DELIVERY OF RECORDS
|
6.
|
TERMINATION
|
6.1
|
The Executive’s Right to Terminate
|
(a)
|
at any time upon providing three months’ notice in writing to the Company; or
|
(b)
|
upon a material breach or default of any term of this Agreement by the Company provided that if such material breach or default is capable of being remedied by the Company, it has not been remedied within 30 days after written notice of the material breach or default has been delivered by the Executive to the Company.
|
6.2
|
Company’s Right to Terminate
|
(a)
|
for just cause which shall include, without limitation, any of the following events:
|
(i)
|
theft, dishonesty or fraud by the Executive with respect to the business of the Company;
|
(ii)
|
the conviction of the Executive for a criminal offence that gives rise or is likely to give rise to the Company’s stock becoming ineligible for listing on any stock exchange or market or the Company’s stock being subject to a cease-trade order by a Canadian or US securities regulatory authority; or
|
(iii)
|
any and all other omissions, commissions or other conduct which would constitute just cause at law; or
|
(b)
|
upon the Executive dying or becoming permanently disabled or disabled for a period exceeding 180 consecutive days or 180 non-consecutive days calculated on a cumulative basis over any two year period during the term of this Agreement. The Executive shall be deemed to have become disabled if, because of ill health, physical, mental disability or for other causes beyond the control of the Executive, the Executive has been unable or unwilling or has failed to perform the essential functions of Executive’s position under this Agreement, with or without reasonable accommodation (provided that no accommodation that imposes undue hardship on the Company will be required); or
|
|
(c)
|
at any time upon making the severance payment contemplated in section 6.3 to the Executive subject to the terms of this Agreement, including Article 8.
|
6.3
|
Severance Payment
|
(a)
|
by the Executive pursuant to subsection 6.1(b) of this Agreement; or
|
(b)
|
by the Company pursuant to subsection 6.2(c) or by the Company in breach of this Agreement;
|
(c)
|
an amount equal to the Executive’s annual salary at the time of termination of the Executive’s employment plus the Executive’s annual incentive target for the fiscal year pursuant to the Annual Incentive Program, multiplied by two in the event that such termination occurs before the first anniversary of this Agreement; or
|
(d)
|
an amount equal to the Executive’s annual salary at the time of termination of the Executive’s employment plus the Executive’s annual incentive earned in the previous fiscal year pursuant to the Annual Incentive Program, multiplied by two in the event that such termination occurs on or after the first anniversary of this Agreement.
|
6.4
|
Compensation Otherwise Due to the Executive on Termination
|
(a)
|
if terminated pursuant to subsections 6.1(a) or 6.2(a) of this Agreement, the Company shall pay to the Executive within 10 days of the termination unless otherwise required by law his then-current annual salary accrued pursuant to section 3.1 of this Agreement as of the date of termination or effective date of resignation, as applicable; or
|
(b)
|
if terminated pursuant to subsection 6.2(b) of this Agreement, the Company shall pay to the Executive:
|
(i)
|
his then-current annual salary accrued pursuant to this Agreement as of the date of termination, within 10 days of the termination unless otherwise required by law; and
|
(ii)
|
a lump sum equal to the Executive’s annual salary at the time of termination of the Executive’s employment within 10 days after Executive executes a release without revocation as described in Article 8. Such payment will be made no later than March 15 of the year following the year of such termination.
|
6.5
|
Property Interests
|
6.6
|
Resignations
|
6.7
|
Payments in Full Settlement
|
7.
|
CHANGE OF CONTROL
|
7.1
|
Termination By Company.
|
(a)
|
a material change (other than a change that is clearly and exclusively consistent with a promotion) in the Executive’s position, duties, responsibilities, title or office in effect immediately prior to any Change of Control;
|
(b)
|
a material reduction in the Executive’s Base Salary in effect immediately prior to any Change of Control; or
|
(c)
|
any material breach by the Company of any material provision of this Agreement;
|
(d)
|
any action or event that would constitute a constructive dismissal of Executive at common law,
|
7.2
|
Change of Control.
|
(a)
|
at least 50% in fair-market value of all the assets of NovaGold are sold to a party or parties acting jointly or in concert (as determined pursuant to the Ontario Securities Act, R.S.O. 1990, c.S.5, as amended (the “OSA”), mutatis mutandis) in one or more transactions occurring within a period of two (2) years; or
|
(b)
|
there is a direct or indirect acquisition by a person or group of persons acting jointly or in concert of voting shares of NovaGold that when taken together with any voting shares owned directly or indirectly by such person or group of persons at the time of the acquisition, constitutes 40% or more of the outstanding voting shares of NovaGold, provided that the direct or indirect acquisition by Electrum Strategic Resources LLC (“Electrum”) of voting shares of NovaGold shall not constitute a “Change of Control” unless the acquisition of such additional voting shares when taken together with any voting shares or securities convertible into voting shares (“Convertible Securities”) held directly or indirectly by Electrum at the time of acquisition constitutes 50% or more of the outstanding voting shares of NovaGold. For purposes of this paragraph (b), all Convertible Securities owned by Electrum will be deemed to be fully converted or exercised and the number of outstanding voting shares of NovaGold will be adjusted to reflect such conversion or exercise and Electrum includes all persons acting jointly or in concert with Electrum;
|
(a)
|
a majority of the then-incumbent Board of Directors’ nominees for election to the Board of Directors of NovaGold are not elected at any annual or special meeting of shareholders of NovaGold; or
|
(b)
|
NovaGold is merged, amalgamated, consolidated or reorganized into or with another body corporate or other legal person and, as a result of such business combination, more than 40% of the voting shares of such body corporate or legal person immediately after such transaction are beneficially held in the aggregate by a person or body corporate (or persons or bodies corporate acting jointly or in concert) and such person or body corporate (or persons or bodies corporate acting jointly or in concert) beneficially held less than 40% of the voting shares of NovaGold immediately prior to such transaction.
|
7.3
|
Limitation on Benefits
|
8.
|
EMPLOYEE RELEASE
|
9.
|
CANADA AGREEMENT
|
10.
|
TAX EQUALIZATION
|
11.
|
TAX RETURN PREPARATION ASSISTANCE
|
12.
|
INDEMNIFICATION
|
13.
|
PERSONAL NATURE
|
14.
|
RIGHT TO USE EXECUTIVE’S NAME AND LIKENESS
|
15.
|
LEGAL ADVICE
|
16.
|
WAIVER
|
17.
|
NOTICES
|
17.1
|
Delivery of Notices
|
Any notice relating to this Agreement or required or permitted to be given in accordance with this Agreement shall be in writing and shall be personally delivered or mailed by registered mail, postage prepaid to the address of the parties set out on the first page of this Agreement. Any notice shall be deemed to have been received if delivered, when delivered, and if mailed, on the fifth day (excluding Saturdays, Sundays and holidays) after the mailing thereof. If normal mail service is interrupted by strike, slowdown, force majeure or other cause, a notice sent by registered mail will not be deemed to be received until actually received and the party sending the notice shall utilize any other services which have not been so interrupted or shall deliver such notice in order to ensure prompt receipt thereof.
|
17.2
|
Change of Address
|
Each party to this Agreement may change its address for the purpose of this Article 17 by giving written notice of such change in the manner provided for in section 17.1.
|
18.
|
APPLICABLE LAW
|
19.
|
SEVERABILITY
|
20.
|
ENTIRE AGREEMENT
|
21.
|
NON-ASSIGNABILITY
|
22.
|
BURDEN AND BENEFIT
|
23.
|
TIME
|
24.
|
WITHHOLDING
|
25.
|
COUNTERPARTS
|
NOVAGOLD USA, INC.
By:
/s/ Gregory A. Lang
Gregory A. Lang
Chief Executive Officer
|
|
By:
/s/ David Deisley
David Deisley
Executive VP & General Counsel
|
Name of Subsidiary
|
Jurisdiction of
Organization
|
NOVAGOLD Canada Inc. (100% owned by NOVAGOLD RESOURCES INC.)
|
British Columbia
|
Galore Creek Partnership (50% owned by NOVAGOLD Canada Inc.)
|
British Columbia
|
NOVAGOLD Resources (Bermuda) Limited (100% owned by NOVAGOLD RESOURCES INC.)
|
Bermuda
|
NOVAGOLD (Bermuda) Alaska Limited (100% owned by NOVAGOLD RESOURCES INC.)
|
Bermuda
|
NOVAGOLD US Holdings Inc. (100% Preferred Stock owned by NOVAGOLD RESOURCES INC. and 100% Common Stock owned by NOVAGOLD (Bermuda) Alaska Limited)
|
Delaware
|
NOVAGOLD Resources Alaska, Inc. (100% owned by NOVAGOLD US Holdings Inc.)
|
Alaska
|
Donlin Gold LLC (50% owned by NOVAGOLD Resources Alaska Inc.)
|
Alaska
|
NOVAGOLD USA, Inc. (100% owned by NOVAGOLD US Holdings Inc.)
|
Delaware
|
AGC Resources Inc. (100% owned by NOVAGOLD US Holdings Inc.)
|
Delaware
|
● | our report dated February 12, 2014, relating to NOVAGOLD’s consolidated financial statements and the effectiveness of internal control over financial reporting; | |
● | our report dated February 5, 2014, relating to the Galore Creek Partnership’s financial statements; and | |
● | our report dated February 7, 2014, relating to Donlin Gold LLC’s financial statements all of which appear in this Annual Report on Form 10-K for the year ended November 30, 2013. |