NOVAGOLD RESOURCES INC - Annual Report: 2015 (Form 10-K)

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Based on the last sale price on the NYSE-MKT of the registrant's common shares on May 29, 2015 (the last business day of the registrant's most recently completed second fiscal quarter) of $4.09 per share, the aggregate market value of the voting common shares held by non-affiliates was approximately $798,815,000.

As of January 20, 2016, the registrant had 319,323,874 common shares, no par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than March 29, 2016, in connection with the registrant's 2016 annual meeting of stockholders, are incorporated by reference into Part III of this Annual Report on Form 10-K.

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Forward-looking statements are based on a number of material assumptions, including those listed below, which could prove to be significantly incorrect:

 

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our ability to achieve production at any of our mineral exploration and development properties;

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estimated capital costs, operating costs, production and economic returns;

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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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our expected ability to develop adequate infrastructure and that the cost of doing so will be reasonable;

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assumptions that all necessary permits and governmental approvals will be obtained;

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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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our expectations regarding demand for equipment, skilled labor and services needed for exploration and development of mineral properties; and

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our activities will not be adversely disrupted or impeded by development, operating or regulatory risks.

 

Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation:

 

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uncertainty of whether there will ever be production at our mineral exploration and development properties;

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uncertainty of estimates of capital costs, operating costs, production and economic returns;

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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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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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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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risks related to the third parties on which we depend for our exploration and development activities;

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dependence on cooperation of joint venture partners in exploration and development of properties;

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credit, liquidity, interest rate and currency risks;

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risks related to market events and general economic conditions;

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uncertainty related to inferred mineral resources;

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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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risks related to lack of infrastructure required to develop, construct, and operate our mineral properties;

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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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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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commodity price fluctuations;

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risks related to governmental regulation and permits, including environmental regulation;

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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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uncertainty related to title to our mineral properties;

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uncertainty related to unsettled aboriginal rights and title in British Columbia;

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our history of losses and expectation of future losses;

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uncertainty as to the outcome of potential litigation;

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risks related to our largest shareholder;

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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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competition in the mining industry;

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our need to attract and retain qualified management and technical personnel;

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risks related to our current practice of not using hedging arrangements;

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risks related to conflicts of interests of some of the directors of the Company;

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risks related to global climate change;

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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; and

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increased regulatory compliance costs relating to the Dodd-Frank Act.

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NOVAGOLD RESOURCES INC.

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NOVAGOLD RESOURCES INC.

 

 

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NOVAGOLD RESOURCES INC.

Permitting activities continued at Donlin Gold in 2015 and were mainly focused on updating our Clean Water Act Section 404 permit application information and providing the U.S. Army Corps of Engineers (the "Corps"), the lead agency for the Donlin Gold EIS, with requested input and information as the Corps prepared and completed the draft Environmental Impact Statement (EIS). The EIS is required by the National Environmental Policy Act (NEPA), the act that governs the process by which most major projects in the United States are evaluated. The EIS is also, in large part, a determining factor in the overall permitting timeline which commenced in 2012 for Donlin Gold.

The Corps filed the Notice of Availability of the draft EIS in the Federal Register in November 2015. Subsequent to the filing of the draft EIS, the Corps issued a schedule for public meetings in the Yukon-Kuskokwin (Y-K) region and Anchorage on the Donlin Gold draft EIS. The Corps will accept all comments on the draft EIS until the close of the 5-month comment period at the end of April 2016, as well as review and respond to all comments in a final EIS, which the Corps' schedule anticipates will be published in 2017. This timeline provides ample opportunity for all the stakeholders to become informed and comment on the EIS. The Corps' time table for the Donlin Gold EIS process can be found on their website at www.donlingoldeis.com.

In addition to actively participating in the NEPA process, Donlin Gold continues to work simultaneously with the Corps and other permitting agencies to advance major permits and applications. A Request for Expression of Interest (RFEOI) for third party participation in the natural gas pipeline was issued to potential candidates. The submittals were determined to be responsive to the RFEOI, were from experienced and responsible bidders, and confirmed the potential for third party participation in construction of the natural gas pipeline.

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We make available, free of charge, on or through our website at www.novagold.com, our Annual Report on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act"). Our website and the information contained therein or connected thereto are not intended to be, and are not incorporated into this Annual Report on Form 10-K.

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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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the availability and cost of funds to finance construction and development activities;

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the timing and cost, which can be considerable, of the construction of mining and processing facilities as well as related infrastructure;

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potential opposition from non-governmental organizations, environmental groups or local groups which may delay or prevent development activities;

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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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the availability and cost of skilled labor and mining equipment; and

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the availability and cost of appropriate smelting and/or refining arrangements.

 

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anticipated tonnage, grades and metallurgical characteristics of the ore to be mined and processed;

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anticipated recovery rates of gold, copper and other metals from the ore;

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cash operating costs of comparable facilities and equipment; and

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anticipated climatic conditions.

 

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global or regional consumption patterns;

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expectations with respect to the rate of inflation;

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the relative strength of the U.S. dollar and certain other currencies;

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interest rates;

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global or regional political or economic conditions, including interest rates and currency values;

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supply and demand for jewelry and industrial products containing metals; and

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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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global economic conditions 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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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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negative economic pressures could adversely impact demand for future production from our mineral properties;

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construction related costs could increase and adversely affect the economics of any of our projects;

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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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the devaluation and volatility of global stock markets would impact the valuation of our equity and other securities.

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NOVAGOLD RESOURCES INC.

 

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these estimates will be accurate;

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mineral reserve, mineral resource or other mineralization figures will be accurate; or

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this mineralization could be mined or processed profitably.

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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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the resulting operations will achieve the anticipated production volume; or

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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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environmental hazards;

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industrial accidents;

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metallurgical and other processing problems;

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unusual or unexpected geologic formations and conditions;

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structural cave-ins or slides;

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flooding;

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fires;

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power outages;

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labor disruptions;

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explosions;

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landslides and avalanches;

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mechanical equipment and facility performance problems;

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availability of materials and equipment;

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metals losses; and

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periodic interruptions due to inclement or hazardous weather conditions.

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environmental protection;

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management and use of toxic substances and explosives;

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management of tailings and other wastes generated by our operations;

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management of natural resources;

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exploration and development of mines, production and post-closure reclamation;

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exports;

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price controls;

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taxation and mining royalties;

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regulations concerning business dealings with native groups;

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availability and use of water resources;

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labor standards and occupational health and safety, including mine safety; and

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preservation of historic and cultural resources.

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Our largest shareholder has significant influence on us and may also affect the market price and liquidity of our securities.

Electrum Strategic Resources L.P. ("Electrum") and its affiliate GRAT Holdings LLC hold in the aggregate 26.7% of our issued and outstanding common shares. Accordingly, Electrum and its affiliates will have significant influence in determining the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets and other significant corporate actions. Unless full participation of all shareholders takes place in such shareholder meetings, Electrum and its affiliates may be able to approve such matters itself. The concentration of ownership of the common shares by Electrum and its affiliates may: (i) delay or deter a change of control of the Company; (ii) deprive shareholders of an opportunity to receive a premium for their common shares as part of a sale of the Company; and (iii) affect the market price and liquidity of the common shares. In conjunction with the January 22, 2009 financing, we provided Electrum with the right to designate an observer at all meetings of the board of directors (the "Board") and any committee thereof so long as Electrum and its affiliates hold not less than 15% of our common shares. Electrum designated Igor Levental as its observer at our Board meetings. In July 2010, Igor Levental was appointed to our Board. In November 2011, Dr. Thomas S. Kaplan, was appointed Chairman of our Board. Dr. Kaplan is also the Chairman and Chief Executive Officer of The Electrum Group LLC, an investment advisor that manages Electrum's investments. As long as Electrum and its affiliates maintain its shareholdings in the Company, Electrum will have significant influence in determining the members of the Board. Without the consent of Electrum, we could be prevented from entering into transactions that are otherwise beneficial to us. The interests of Electrum and its affiliates may differ from or be adverse to the interests of our other shareholders. The effect of these rights and Electrum's influence may impact the price that investors are willing to pay for our shares. If Electrum or its affiliates sell a substantial number of our common shares in the public market, the market price of the common shares could fall. The perception among the public that these sales will occur could also contribute to a decline in the market price of our common shares.

Certain of our directors also serve as directors, or have significant shareholdings in, other companies involved in natural resource exploration and development or mining-related activities. To the extent that such other companies may participate in ventures in which we may participate in or in ventures which we may seek to participate in, the directors may have a conflict of interest. In all cases where the directors have an interest in other companies, such other companies may also compete with us for the acquisition of mineral property investments. Any decision made by any of these directors and officers involving the Company will be made in accordance with their duties and obligations to deal fairly and in good faith with a view to the best interests of the Company. In addition, each of the directors is required to declare and refrain from voting on any matter in which these directors may have a conflict of interest in accordance with the procedures set forth in the Business Corporations Act (British Columbia) and other applicable laws.  In appropriate cases, the Company will establish a special committee of independent directors to review a matter in which several directors, or management, may have a conflict.  Nonetheless, as a result of these conflicts of interest, the Company may not have an opportunity to participate in certain transactions, which may have a material adverse effect on the Company's business, profitability, financial condition, results of operation and prospects.

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treat ground and surface water to applicable water standards;

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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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provide adequate financial assurance to ensure required reclamation of land affected by our activities.

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NOVAGOLD RESOURCES INC.

The following descriptions summarize selected information about our 50% interest in the Donlin Gold project located in Alaska, USA and our 50% interest in the Galore Creek project located in British Columbia, Canada. Both of these projects are without known reserves, as defined under SEC Industry Guide 7. Except for subsequent events or as otherwise noted, the disclosure in this Annual Report on Form 10-K of a scientific or technical nature for our mineral properties is based on the following technical reports prepared in accordance with NI 43-101:

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NOVAGOLD RESOURCES INC.

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On August 7, 2012, we announced that Donlin Gold commenced permitting of the project by submitting a draft Plan of Operations and Section 404 of the U.S. Clean Water Act draft permit application to federal and state regulators. The Section 404 permit application initiated the environmental review process under NEPA which involves preparation of an EIS. The Corps selected AECOM, formerly URS, an independent contractor to prepare the EIS. The Notice of Intent for the EIS was published in the Federal Register on December 14, 2012 and the NEPA public scoping process was completed on March 29, 2013. During the remainder of 2013 and in 2014 and 2015, Donlin Gold worked to address the remaining data needs for the draft EIS. Donlin Gold also continued to provide application materials and maintained ongoing dialogue with the agencies that will issue the key permits and authorizations needed for the Donlin Gold project, including the air quality, water discharge, dam safety, wetlands, water use, fish habitat, and pipeline permits. During 2014, the Corps distributed initial drafts of the Environmental Consequences sections of the draft EIS to the cooperating agencies and they provided input to the Corps prior to the end of December 2014. The Corps filed the Notice of Availability of the draft EIS in the Federal Register in November 2015. Subsequent to the filing of the draft EIS, the Corps issued a schedule for public meetings on the Donlin Gold draft EIS in the Y-K region and Anchorage on the Donlin Gold EIS. The Corps will accept all written comments on the draft EIS until the close of the 5-month comment period at the end of April 2016 and respond to all comments in a final EIS which the Corps' schedule anticipates will be published in 2017.

An extensive list of additional federal and state government permits and approvals must be obtained before the Donlin Gold project can commence construction. Preparation of the applications for some of these permits and approvals requires additional, more detailed engineering that was not part of the Donlin Gold FS. Completion of this engineering will require a significant investment of funds, time, and other resources by Donlin Gold and its contractors. Also, the Donlin Gold board must approve a construction program and budget before construction of the Donlin Gold project can begin. The timing of the required engineering work and the Donlin Gold board's approval of a construction program and budget, the receipt of all required governmental permits and approvals, the availability of financing, as well as other factors, will affect whether and when construction of the Donlin Gold project will begin. Among other reasons, project delays could occur as a result of public opposition, limitations in agency staff resources during regulatory review and permitting, and/or project changes made by Donlin Gold.

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Rowland Engineering Consultants performed the geotechnical assessments for the engineering to support design of the port site, airstrip, plant site and interconnecting roads. BGC, Inc. performed geotechnical analyses for the design of the pit, waste rock facility, and TSF.

The site-wide hydrological model developed by BGC, is based on extensive drill data and climatic information for the area. BGC, Inc., CEMI and SRK, Inc. provided hydrologic studies, design criteria and associated test work for the water treatment plant requirements during construction, operations, and closure. Lorax Environmental performed water quality modeling for the post closure pit lake.

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conventional crushing and grinding;

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concentration by flotation;

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pressure oxidation of the concentrate in an autoclave;

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carbon-in-leach ("CIL") cyanidation of the oxidized concentrate;

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carbon strip and regeneration circuits;

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gold electrowinning; and

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refining and production of doré bars.

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Summary of Key Evaluation Metrics (Base Case at $1,200 per ounce gold)

Operating Cost Estimates

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The oxidized concentrate from the POX operation would then be cyanide leached in a conventional CIL circuit to produce a pregnant (gold-bearing) solution. Gold from the solution is adsorbed onto activated carbon, which is later stripped (gold desorbed from carbon) in an elution circuit. The pregnant solution after elution is fed through electrowinning (EW) cells, where cathodes are plated with gold-bearing materials, which are periodically removed, dried in retort, and melted in an induction furnace to produce doré bars.

Tailings from the CIL circuit would be treated in a cyanide detoxification process using SO2/air technology prior to being recombined with the flotation tailings and transported to the TSF.

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Water dams are required during the construction period and initial years of operation to protect the lined upstream face of the tailings starter dam from a significant flood event, to provide a reliable source of fresh water during operation of the process plant, and to minimize runoff to the TSF.

Current and Planned On-Site Infrastructure

 

Current site infrastructure comprises an all-season, soft-sided camp with facilities to house up to 150 people consisting of kitchen, living quarters, equipment shop, drill shack and other buildings required for support of year-round exploration activities.

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Natural gas will be delivered to site by an approximately 315-mile (500 kilometer) long 14-inch (356 millimeter) diameter pipeline to supply an on-site power generation facility. The Donlin Gold FS contemplates that the electric power for the site will be generated from a dual-fueled (natural gas and diesel), reciprocating engine power plant with a steam turbine utilizing waste heat recovery from the engines. The power plant consists of two equal halves, each consisting of six reciprocating engines, and a separate steam turbine. The total generation facility is nominally rated at 182 MW initially. This will increase to 215 MW after four years with the addition of two more generators (one in each half) to allow for N+2 redundancy, thus allowing planned maintenance and predicted outages without cutting back production.

Water

Water requirements for the proposed project have been summarized in a Water Resources Management Plan, which is subject to review by State and Federal agencies. Water primarily will be sourced from the two drainages (American and Anaconda Creeks) within the mine footprint and pit dewatering. In some years, the water supply from these sources may not be able to meet the makeup water requirements for the plant. In these circumstances, additional water will be obtained primarily from a reservoir in Snow Gulch.

The source of water supply for the construction camp and, later, the plant site potable water systems is an array of eight deep wells south of Omega Gulch, near Crooked Creek. Water supply will be pumped to freshwater storage tanks, and will be treated prior to consumption.

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Federal Income Tax – the greater of the U.S. Regular Tax of 35% or Alternative Minimum Tax of 20%.

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Alaska State Income Tax – 9.4% of net income or Alternative Minimum Tax of 18% of Federal Alternative Minimum Tax.

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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.

 

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For discounted cash flow (or NPV) purposes, the model is based from Year -5 (January 1, 2014 per the Donlin Gold FS). Estimates were prepared for all the individual elements of cash revenue and cash expenditures for ongoing operations.

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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.

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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.

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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.

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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.

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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.

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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.

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Inventory is included in the financial model as cash outflows in the year before start-up of operations.

Current Activities

Permitting activities continued at Donlin Gold in 2015 and were mainly focused on updating our Clean Water Act Section 404 permit application information and providing the Corps with requested input and information as the Corps prepared and completed the draft EIS. The EIS is required by NEPA, the act that governs the process by which most major projects in the United States are evaluated. The EIS is also, in large part, a determining factor in the overall permitting timeline which commenced in 2012 for Donlin Gold.

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The Corps filed the Notice of Availability of the draft EIS in the Notice of Federal Register in November 2015. Subsequent to the filing of the draft EIS, the Corps issued a schedule for public meetings in the Yukon-Kuskokwin region and Anchorage on the Donlin Gold draft EIS. The Corp will accept all comments on the draft EIS until the close of the 5-month comment period at the end of April 2016, as well as review and respond to all comments in a final EIS which the Corps' schedule anticipates will be published in 2017. This timeline provides ample opportunity for all the stakeholders to become informed and comment on the EIS. The Corps' time table for the Donlin Gold EIS process can be found on their website at www.donlingoldeis.com.

In addition to actively participating in the NEPA process, Donlin Gold continues to work simultaneously with the Corps and other permitting agencies to advance major permits and applications. A Request for Expression of Interest (RFEOI) for third party participation in the natural gas pipeline was issued to potential candidates. The submittals were determined to be responsive to the RFEOI, were from experienced and responsible bidders, and confirmed the potential for third party participation in construction of the natural gas pipeline.

Donlin Gold remains actively engaged in sponsorship activities at the community level, supporting local youth in leadership endeavors, visiting communities in the Y-K region and executing on its workforce development strategy.

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The Galore Creek project is located in the humid continental climate zone of coastal British Columbia and is characterized by cold winters and short, cool, summers. Within the Galore Creek valley, mean monthly temperatures range from -8.2ºC during the winter to 12.4ºC during the summer, with January and July typically being the coolest and warmest months, respectively. In the Upper West More Valley area, monthly average temperatures range from -8.9ºC in the winter to 7.9ºC in the summer. Precipitation begins to fall as snow in early October and continues until the end of May. The average annual precipitation for the whole Galore Creek valley watershed was estimated to be in the order of 3,000 millimeters. June and July tend to receive the least amount of precipitation on an annual basis (typically 40 to 60 millimeters of rain per month).

The project lies within a regional structure known as the Stikine Arch. Medium to steep slopes characterize the local terrain in the central and northern parts of the Galore Creek property. The surrounding topography is mountainous. The elevation of the tree line is variable, but alpine vegetation predominates above 1,100 meters. The forests below that elevation consist of Balsam fir, Sitka spruce and cedar. Alpine tundra is present at higher elevations.

The Galore Creek project is currently isolated from power and other public infrastructure and is currently not accessible by road. Because of glaciers covering the surrounding mountain passes, a large cross-section tunnel is needed to provide long-term vehicular access into the Galore Creek valley and for mobilization of individual component pieces of large mining equipment needed for mining the ore body using open pit methods. The time and cost for driving a tunnel in new and unexplored underground terrain is subject to many unknowns which could change the outcome significantly. The same surface constraints that preclude building a road into the site (i.e. severe topography, snowpack, glaciers and weather) also limit the amount of borehole information, geologic mapping and other site specific data that can be obtained so that subsurface conditions can be better understood before tunneling begins. Construction of the tunnel will most likely fall on the critical path for development of the mine and thus represents a significant cost and schedule risk for development of the Galore Creek project.

Within the land controlled by GCMC, there is sufficient area to allow for the construction of all project infrastructures as contemplated in the PFS. Except for the access corridor which is covered by the special use permit, all other infrastructure, including the processing plant and tailings area in West More and the Filter Plant Area near Kilometer 8 are located within GCMC's mineral claims. GCMC intends to file for mining leases to secure the surface rights for these areas, which are held by the Crown. GCMC considers it a reasonable expectation that surface use rights will be granted to the project. Ample water supply is available from surface and subsurface sources.

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Mineralization at Copper Canyon occurs primarily in a sub-volcanic syenite intrusive complex. This host lithology defines the primary difference from the main Galore Creek deposits. Chalcopyrite forms the primary sulfide mineralogy; bornite is rare. As at the Galore Creek project, mineralization is evenly disseminated and shows no apparent association with veining. The periphery of known mineralization contains elevated gold/copper ratios along with relatively higher concentrations of pyrite.

Metallurgy

The sulfide minerals at the Galore Creek project are predominately gold- and silver-bearing chalcopyrite, bornite and pyrite. A primary grind of 80% passing 200 microns provides sufficient rougher flotation liberation to separate the copper minerals from the pyrite and gangue. At this grind, the majority of the gold is either free or associated with the copper sulfides. The proposed treatment process uses conventional crushing and SAG and ball mill grinding, flotation to produce a precious-metal-bearing copper concentrate for shipment off-site.

Project History, Drilling and Exploration

Drilling History

Since initial discovery of the Galore Creek property in 1960 through 2013, approximately 311,181 meters were drilled in 1,212 core holes on the property. Most of this work has focused on the Central zone, with lesser amounts of work on eleven other target areas. Some zones have received only reconnaissance drilling. During the 1970s, drilling was principally confined to the Central zone but nine holes were also drilled on the North Junction zone. In 1989–1990, Mingold, an Anglo American subsidiary, drilled holes on the Southwest zone (eight holes, 1,026 meters), the North Rim showing (six holes, 546 meters), the Saddle zone (two holes, 226 meters) and two reconnaissance holes. The 1991 drill program was mainly directed at areas peripheral to the Central zone as well as exploration holes located in the Southwest, Butte, North Rim and Dry Creek zones.

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2011 Program

 

The 2011 drilling program included 10,000 meters of resource infill drilling to confirm previous results as well as to test the potential for upgrading and possible extensions of mineralization within the South Gold Lens and Bountiful areas of the Central pit.

 

2012 Program

 

 The 2012 drilling program totaled 27,900 meters of resource infill and exploration drilling. The objective of the infill drilling was to increase resources and upgrade material in all categories. The exploration drilling resulted in the discovery of the Legacy zone adjacent to the Central reserve pit.

 

2013 Program

 

The 2013 drilling program totalled 11,649 meters of resource in-fill and exploration drilling, 9,157-meters of which targeted the Legacy zone. An additional 2,492 meters of exploration drilling was conducted to better understand geological features that could influence the mineralization in Legacy, identify mineralization trends, and explore possible extensions of known mineralized zones adjacent to Legacy. Sufficient drilling was carried out in 2012 and 2013 to support preparation of a new resource estimate. The 2013 program also demonstrated that the copper mineralization may extend beyond the initial Legacy discovery in the direction of the Bountiful mineralization. The mineralization remains open to the south, west, and at depth.

 

The Galore Creek project is host to seven copper-gold-silver prospects, five defined mineral resource areas, and numerous showings and conceptual target areas.

 

2014-15 Programs

 

There were no drilling programs in 2014 or 2015.

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On July 31, 2007, the provincial government announced the issuance of a Mines Act permit for the Galore Creek project for construction of the access tunnel. An interim permit issued on July 4, 2007 authorized limited blasting to prepare and stabilize the rock face of the tunnel, as well as preparatory work for the sediment ponds. Receipt of the new permit authorized completion of the access road and tunnel and authorized the start of earthworks in the Galore Creek valley.

 

Construction Suspension

 

On November 26, 2007, we announced that NOVAGOLD and Teck had reached the decision to suspend construction activities at the Galore Creek project. A review and completion of the first season of construction indicated substantially higher capital costs and a longer construction schedule for the project. This, combined with reduced operating margins as a result of the stronger Canadian dollar, would make the project, as conceived and permitted, uneconomic at what was considered then to be industry consensus long-term metal prices. NOVAGOLD and Teck continue to view the Galore Creek project as a substantial resource and are working to identify an alternative development strategy that may allow for the resumption of construction.

 

Prior to the suspension of construction, substantial work was completed at the Galore Creek project, including clearing 80% of the 135-kilometer road right-of-way, completing 66 kilometers of pioneer road, installing a number of key bridges and initiating work on the road access tunnel into the Galore Creek valley. During the construction suspension and optimization period, the partners have maintained and intend to continue to maintain the existing infrastructure.

 

While permits granted for the original project design remain in place, any alternative project design will require new or additional permits before construction can resume.

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· · · ·

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 a nominal 95,000 tonnes per day.

Project plans envision the ore being crushed in the Galore Creek valley and then conveyed through the tunnel and along the access road to the processing plant. From there, concentrate would be piped along the remainder of the access road to Hwy 37. A trade off study will identify the best alternative for transport of concentrate to market. The project would primarily use electric power, with a power line built along the access road to tie into the 287-kV transmission line at the Bob Quinn substation. Some components of the revised Galore Creek mine plan, such as the mill and tailings location, would require new permits or amendments to existing permits. The majority of permits required for road construction remain in good standing. GCMC could continue with road and bridge work as the project moves through the feasibility stage, with the objective of shortening the construction timeline and reducing the need for helicopter support.

On July 27, 2011, we announced the results of the PFS for the Galore Creek project. The PFS estimates the Galore Creek project has proven and probable mineral reserves of 528 million tonnes grading 0.59% copper, 0.32 grams per tonne gold and 6.02 grams per tonne silver for estimated contained metal of 6.8 billion pounds of copper, 5.45 million ounces of gold and 102.1 million ounces of silver. In addition, the Galore Creek project has estimated measured and indicated mineral resources (exclusive of mineral reserves) of 286.7 million tonnes grading 0.33% copper, 0.27 grams per tonne gold and 3.64 grams/tonne silver for estimated contained metal of 2.07 billion pounds of copper, 2.53 million ounces of gold and 33.54 million ounces of silver, and estimated inferred mineral resources of 346.6 million tonnes grading 0.42% copper, 0.24 grams per tonne gold and 4.28 grams per tonne silver for estimated contained metal of 3.23 billion pounds of copper, 2.70 million ounces of gold and 47.73 million ounces of silver. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The PFS initial capital cost estimate for the Galore Creek project was C$5.2 billion dollars. Capital costs are estimated with an accuracy range of +25% / -20% (including contingency). The project's estimated net present value (NPV7%), using the PFS base case metal price assumptions set forth below, was assessed at C$137 million on a post-tax basis. The corresponding post-tax IRR of the project was estimated at 7.4%. Base case metal prices used in the PFS were $2.65 per pound copper, $1,100 per ounce gold and $18.50 per ounce silver with a foreign exchange rate of $0.91 = C$1.00.

Mining of the Galore Creek deposit is planned as a conventional truck-shovel open-pit mining operation at peak rates of 370,000 tonnes per day to support a nominal process throughput of 95,000 tonnes per day. Life of mine throughput average is approximately 84,000 tonnes per day due to the milling circuit constraining throughput as harder rock is encountered deeper in the open pits. The current 528 million tonne mineral reserve estimate is expected to support a mine life of approximately 18 years. Using a conventional crushing, grinding and flotation circuit, the project would produce a high-quality copper concentrate with significant gold and silver credits.

49

---

(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 $2.50 per 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.

 

Resource Estimate

 

 The measured and indicated mineral resource for the Galore Creek project (exclusive of mineral reserves) is estimated to total 286.7 million tonnes grading 0.33% copper, 0.27 grams per tonne gold and 3.64 grams per tonne silver for a total estimated metal content of 2,070 million pounds of copper, 2.53 million ounces of gold and 33.54 million ounces of silver at an NSR cut-off grade of C$10.08 per tonne.

Measured and Indicated Resources Estimate (exclusive of reserves)

 

		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

 

Effective Date July 11, 2011, G. Kulla, P.Geo.

 

Notes:

 

50

---

Inferred Mineral Resource Estimate

		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

Notes:

(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.

A rigorous quality control and quality assurance protocol has been used on the project, including blank and reference samples with each batch of assays. All our drill samples were analyzed by fire assay and ICP at ALS Chemex Labs in Vancouver, British Columbia, Canada.

Environmental Assessment and Permitting

The Galore Creek environmental assessment process was initiated in February 2004. As part of the environmental assessment process, a series of public meetings were held in various communities in the Galore Creek region, with the public and regulator comment periods running from July 10, 2006 to September 8, 2006 and September 22, 2006, respectively. The Tahltan Central Council, which was actively engaged in the entire assessment process, submitted their comments to the British Columbia Environmental Assessment Office (BCEAO) on October 18, 2006, including a letter of support from the Chair of the Tahltan Central Council. The permitting process for the Galore Creek project progressed as expected resulting in the receipt of the Provincial Environmental Assessment Certificate in February 2007. Federal authorizations were received during the second quarter of 2007.

Although construction at the Galore Creek project was suspended in late 2007, the Canadian Federal and Provincial authorizations to proceed remain in good standing as do a majority of the key permits required to continue construction. Specifically, since the Province has determined substantial construction of the project was initiated, the previous environmental assessment certificate remains valid without a time limit.

Existing permits associated with the existing construction camps, including water use and waste discharge, will continue to be maintained. Applications for all other project permits will be needed following completion of the environmental assessment process, although the time-critical permits, such as those needed for starting the tunneling can be prepared concurrent with the environmental assessment such that there should be little lag time following new environmental assessment certification before tunneling could begin.

Current Activities

 During 2015, information from field visits and mine planning was used to continue to optimize integrated mining, waste and water management concepts. A draft long-term site management plan was developed for care and maintenance. Also during 2015, Galore Creek sold excess construction equipment and awarded a generalized study of tunneling practice for the access and material handling tunnel into the Galore Creek valley. Galore Creek remains active in the community, sponsoring local fundraising events, supporting Tahltan literacy camps, as well as providing assistance and funding for research on the Tahltan language dictionary.

We will continue to evaluate opportunities to monetize the value of the asset, in whole or in part, to strengthen our balance sheet and focus primarily on the advancement of the Donlin Gold project.

For further information, see section Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, below.

Copper Canyon Acquisition

On May 20, 2011, we completed the acquisition of Copper Canyon Resources Ltd. ("Copper Canyon") a junior exploration company whose principal asset was its 40% joint venture interest in the Copper Canyon copper-gold-silver property that is adjacent to the Galore Creek project. A wholly-owned subsidiary of NOVAGOLD held the remaining 60% joint venture interest in the Copper Canyon property which it agreed to transfer to the Galore Creek Partnership. The Copper Canyon property is subject to a 2% NSR royalty which may be reduced to 0.5% by the payment of C$2.0 million to the royalty holder.

Periodically, we are a party to or otherwise involved in legal proceedings arising in the normal course of business. Management does not believe that there is any pending or threatened proceeding against the Company which, if determined adversely, would have a material adverse effect on our financial position, liquidity or results of operations. There are no material proceedings pursuant to which any of our directors, officers or affiliates or any owner of record or beneficial owner of more than 5% of our securities or any associate of any such director, officer or securityholder is a party adverse to us or has a material interest adverse to us.

Pursuant to Section 1503(a) of the Dodd-Frank Act, issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose specified information about mine health and safety in their periodic reports. These reporting requirements are based on the safety and health requirements applicable to mines under the Federal Mine Safety and Health Act of 1977 (the "Mine Act") which is administered by the U.S. Department of Labor's Mine Safety and Health Administration (MSHA). During the fiscal year ended November 30, 2015, the Company and its subsidiaries were not subject to regulation by MSHA under the Mine Act and thus no disclosure is required under Section 1503(a) of the Dodd-Frank Act. Donlin Gold is the operator of the Donlin Gold project and GCMC is the operator of the Galore Creek project. Neither Donlin Gold nor GCMC is a "subsidiary" of the Company for purposes of Section 1503(a) of the Dodd-Frank Act because the Company does not control either of Donlin Gold or GCMC.

PART II

Market Information

Our common shares trade on the NYSE-MKT and on the Toronto Stock Exchange (TSX) under the symbol "NG." On January 20, 2016, there were 661 holders of record of our shares, which does not include shareholders for which shares are held in nominee or street name. We believe that more than half of our common shares are beneficially owned by investors in the United States. The following table sets out the intraday high and low sales prices per share of our common shares on the NYSE-MKT and TSX for the periods indicated.

				NYSE-MKT				TSX
Year		Quarter		High		Low		High		Low
2015		Fourth		$4.05		$3.05		C$5.23		C$4.05
		Third		$4.18		$2.65		C$5.20		C$3.42
		Second		$4.25		$2.72		C$5.22		C$3.46
		First		$4.14		$2.56		C$5.17		C$2.94
2014		Fourth		$3.98		$2.33		C$4.32		C$2.65
		Third		$4.40		$2.96		C$4.72		C$3.23
		Second		$4.62		$2.91		C$5.11		C$3.16
		First		$3.80		$2.18		C$4.20		C$2.33

Dividends

We have never declared or paid dividends on our common shares and our current business plan requires that, for the foreseeable future, any future earnings be reinvested to finance growth and development of our business. We will pay dividends on our common shares only if and when declared by our Board. In determining whether to declare dividends, the Board will consider our financial condition, results of operations, working capital requirements, future prospects, and other factors it considers relevant.

Certain Canadian Federal Income Tax Considerations for U.S. Residents

The following summarizes certain Canadian federal income tax consequences generally applicable under the Income Tax Act (Canada) and the regulations enacted thereunder (collectively, the "Canadian Tax Act") and the Canada-United States Income Tax Convention (1980) (the "Convention") to the holding and disposition of common shares.

This comment is restricted to holders of common shares each of whom, at all material times for the purposes of the Canadian Tax Act and the Convention, (i) is resident solely in the United States, (ii) is entitled to the benefits of the Convention, (iii) holds all common shares as capital property, (iv) holds no common shares that are "taxable Canadian property" (as defined in the Canadian Tax Act) of the holder, (v) deals at arm's length with and is not affiliated with NOVAGOLD, (vi) does not and is not deemed to use or hold any common shares in a business carried on in Canada, and (vii) is not an insurer that carries on business in Canada and elsewhere (each such holder, a "U.S. Resident Holder").

Certain U.S.-resident entities that are fiscally transparent for United States federal income tax purposes (including limited liability companies) may not in all circumstances be regarded by the Canada Revenue Agency (CRA) as entitled to the benefits of the Convention. Members of or holders of an interest in such an entity that holds common shares should consult their own tax advisers regarding the extent, if any, to which the CRA will extend the benefits of the Convention to the entity in respect of its common shares. This summary does not deal with special situations such as the particular circumstances of traders or dealers or holders who have entered into a "derivative forward agreement" (as defined in the Canadian Tax Act) in respect of the common shares. Such holders should consult their own tax advisors.

Generally, a U.S. Resident Holder's common shares will be considered to be capital property of a U.S. Resident Holder provided that the U.S. Resident Holder acquired the common shares as a long-term investment; is not a trader or dealer in securities; did not acquire, hold or dispose of the common shares in one or more transactions considered to be an adventure or concern in the nature of trade (i.e. speculation); and does not hold the common shares as inventory in the course of carrying on a business.

This summary is based on the current provisions of the Canadian Tax Act and the Convention in effect on the date hereof, all specific proposals to amend the Canadian Tax Act and Convention publicly announced by or on behalf of the Minister of Finance (Canada) on or before the date hereof, and the current published administrative and assessing policies of the CRA. It is assumed that all such amendments will be enacted as currently proposed, and that there will be no other material change to any applicable law or administrative or assessing practice, whether by judicial, legislative, governmental or administrative decision or action, although no assurance can be given in these respects. Except as otherwise expressly provided, this summary does not take into account any provincial, territorial or foreign tax considerations, which may differ materially from those set out herein.

Disposition of common shares

A U.S. Resident Holder will not be subject to tax under the Canadian Tax Act in respect of any capital gain realized by such U.S. Resident Holder on a disposition of common shares unless the common shares constitute "taxable Canadian property" (as defined in the Canadian Tax Act) of the U.S. Resident Holder at the time of disposition and the U.S. Resident Holder is not entitled to relief under the Convention.

Generally, a U.S. Resident Holder's common shares will not constitute "taxable Canadian property" of the U.S. Resident Holder at a particular time at which the common shares are listed on a "designated stock exchange" (which currently includes the TSX and NYSE-MKT) unless at any time during the 60‑month period immediately preceding a disposition both of the following conditions are true:

(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, 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, owned 25% or more of the issued shares of any class or series of the capital stock of NOVAGOLD; 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 defined in the Canadian Tax Act), or options in respect of, interests in or civil law rights in, such properties whether or not it exists.

In certain circumstances, a common share may also be deemed to be "taxable Canadian property" for purposes of the Canadian Tax Act.

Even if the common shares constitute "taxable Canadian property" to a U.S. Resident Holder, under the Convention, such a U.S. Resident Holder will not be subject to tax under the Canadian Tax Act on any capital gain realized by such holder on a disposition of such common shares, provided the value of such common shares is not derived principally from real property situated in Canada (within the meaning of the Convention).

A U.S. Resident Holder whose shares are taxable Canadian property should consult their own tax advisors.

Dividends on common shares

Under the Canadian Tax Act, dividends on shares paid or credited to a non-resident of Canada will be subject to Canadian withholding tax at the rate of 25% of the gross amount of the dividends. Under the Convention, a U.S. resident will generally be subject to Canadian withholding tax at the rate of 15% of the gross amount of such dividends unless the beneficial owner is a company which owns at least 10% of the voting shares of NOVAGOLD at that time, in which case the rate of Canadian withholding tax is generally reduced to 5%.

Certain United States Federal Income Tax Considerations for U.S. Residents

There may be material tax consequences to U.S. Residents in relation to an acquisition or disposition of common shares or other securities of the Company. U.S. Residents should consult their own legal, accounting and tax advisors regarding such tax consequences under United States, state, local or foreign tax law regarding the acquisition or disposition of our common shares or other securities, in particular, the tax consequences of the Company being a "passive foreign investment company" (commonly known as a "PFIC") within the meaning of Section 1297 of the United States Internal Revenue Code. For further information, see section Item 1A, Risk Factors - Acquiring, holding or disposing of NOVAGOLD's securities may have tax consequences under the laws of Canada and the United States that are not disclosed in this Annual Report on Form 10-K and, in particular, potential investors should be aware that NOVAGOLD does not believe it is a "passive foreign investment company" under the U.S. Internal Revenue Code for the year ended November 30, 2015, but if it is or becomes a passive foreign investment company, there may be tax consequences for investors in the United States.

Unregistered Sales of Equity Securities

None.

Repurchase of Securities

None.

The selected financial data set forth in the table below should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and our audited Consolidated Financial Statements and the Notes thereto.

		Years ended November 30,
(dollars in thousands, except per share)		2015				2014				2013				2012				2011
Loss from operations		$	(31,696	)		$	(38,008	)		$	(55,776	)		$	(79,942	)		$	(115,996	)
Net income (loss) from continuing operations		$	(31,952	)		$	(40,484	)		$	(62,760	)		$	(7,586	)		$	78,235
Net loss from discontinued operations		$	—			$	—			$	—			$	(4,243	)		$	(33,094	)
Net income (loss) attributable to shareholders		$	(31,952	)		$	(40,484	)		$	(62,760	)		$	(11,829	)		$	64,767
Income (loss) per common share:
Basic:
Continuing operations		$	(0.10	)		$	(0.13	)		$	(0.20	)		$	(0.03	)		$	0.33
Discontinued operations			—				—				—				(0.02	)			(0.14	)
		$	(0.10	)		$	(0.13	)		$	(0.20	)		$	(0.05	)		$	0.19
Diluted:
Continuing operations		$	(0.10	)		$	(0.13	)		$	(0.20	)		$	(0.03	)		$	0.21
Discontinued operations			—				—				—				(0.02	)			(0.14	)
		$	(0.10	)		$	(0.13	)		$	(0.20	)		$	(0.05	)		$	0.07
		As of November 30,
			2015				2014				2013				2012				2011
Total assets		$	433,584			$	524,546			$	578,686			$	685,242			$	518,208
Long-term liabilities		$	100,771			$	100,204			$	108,684			$	94,907			$	265,059
Shareholders' equity		$	329,296			$	405,116			$	465,649			$	476,811			$	212,594

 

The following discussion and analysis of our financial condition and results of operations constitutes management's review of the factors that affected our financial and operating performance for the years ended November 30, 2015, 2014 and 2013. This discussion should be read in conjunction with the consolidated financial statements and notes thereto contained elsewhere in this report.

Overview

Our operations primarily relate to the delivery of project milestones, including the achievement of various technical, environmental, sustainable development, economic and legal objectives, obtaining necessary permits, completion of feasibility studies, preparation of engineering designs and the financing to fund these objectives.

In 2015, we successfully delivered on the key goals established at the beginning of the year. Highlights of our accomplishments include:

Advancement of the Donlin Gold project

Permitting activities continued at Donlin Gold in 2015 and were mainly focused on updating our Clean Water Act Section 404 permit application information and providing the U.S. Army Corps of Engineers (the "Corps"), the lead agency for the Donlin Gold EIS, with requested input and information as the Corps prepared and completed the draft Environmental Impact Statement (EIS). The EIS is required by the National Environmental Policy Act (NEPA), the act that governs the process by which most major projects in the United States are evaluated. The EIS is also, in large part, a determining factor in the overall permitting timeline which commenced in 2012 for Donlin Gold. This document is comprised of four main sections which:

·

Outline of the purpose and need for the development of the proposed mine and the benefit it would bring to the stakeholders of Donlin Gold's Native Corporation partners, Calista Corporation and The Kuskokwim Corporation (TKC).

·

Identify and analyze a reasonable range of alternatives to the mine development proposed by Donlin Gold which comprise variations on certain mine site facility designs, as well as local transportation and power supply options.

·

Involve the preparation of an environmental analysis of the proposed action and reasonable alternatives (including a no action alternative), which identifies and characterizes the potential physical, biological, social, and cultural impacts relative to the existing baseline conditions. This portion constitutes the most extensive part of the EIS.

·

Describe potential mitigation measures intended to reduce or eliminate the environmental impacts described in the impact analysis section.

In November 2015, the Corps filed the draft EIS. Following the filing of the draft EIS, the Corps issued a schedule for public meetings on the draft EIS, to be held in the Yukon-Kuskokwim (Y-K) region and Anchorage in the first quarter of 2016. The Corps will accept all comments on the draft EIS until the close of the 5-month comment period at the end of April 2016, as well as review and respond to all comments on the draft EIS in a final Donlin Gold EIS, which the Corps' schedule anticipates will be published in 2017. This timeline provides ample opportunity for all the stakeholders to become informed and comment on the EIS. The Corps' time table for the Donlin Gold EIS process can be found on their website at www.donlingoldeis.com.

In addition to actively participating in the NEPA process, Donlin Gold continues to work simultaneously with the Corps and other permitting agencies on major permit applications, including:

·

working with the State to finalize the air quality permit application and initiate preparation of the air quality permit;

·

finalizing approaches to water management, treatment, and discharge to facilitate issuance of the water discharge and use permits;

·

coordinating and supporting the State, Federal, and native landowner reviews of the rights-of-way and lease applications for the gas pipeline;

·

working with the State Dam Safety program on engineering evaluation and authorization of the seven large dams proposed for the project, including the tailings storage facility dam; and

·

supporting the Corps in finalizing the determination of the impacts on wetland areas, functions, as well as values and proposing compensatory mitigation as required by the Clean Water Act section 404 permitting process.

An extensive list of additional federal and state government permits and approvals must be obtained before the Donlin Gold project can commence construction. Preparation of the applications for some of these permits and approvals requires additional, more detailed engineering that were not part of the Donlin Gold feasibility study. Completion of this engineering will require a significant investment of funds, time, and other resources by Donlin Gold and its contractors. Also, the Donlin Gold board must approve a construction program and budget before construction of the Donlin Gold project can begin. The timing of the required engineering work and the Donlin Gold board's approval of a construction program and budget, the receipt of all required governmental permits and approvals, the availability of financing, among other factors, will affect whether and when construction of the Donlin Gold project will begin. Among other reasons, project delays could occur as a result of public opposition, limitations in agency staff resources during regulatory review and permitting, or project changes made by Donlin Gold.

Donlin Gold remains actively engaged in sponsorship activities at the community level, supporting local youth in leadership endeavors, visiting communities in the Y-K region and executing its workforce development strategy. Throughout 2015, Donlin Gold continued to promote safety, education and workforce development by supporting local and regional events, scholarships and programs. Donlin Gold led and participated in multiple community meetings throughout the region. Additionally, Donlin Gold participated in the annual spring Clean Up Green Up event, a community-wide effort to reduce litter and promote reuse and recycling.

Our share of funding for Donlin Gold in 2015 was $10.5 million for permitting, community engagement and development efforts. Our 50% share of the 2016 work program is expected to be approximately $9 million. The 2016 work program and budget includes funds to assist the Corps in continuing to advance the permitting process through issuance of the final EIS in 2017. In addition, Donlin Gold will continue to maintain its engagement with communities in the Y-K region.

We record our interest in the Donlin Gold project as an equity investment, which results in our 50% share of Donlin Gold's expenses being recorded in the income statement as an operating loss. The investment amount recorded on the balance sheet primarily represents unused funds advanced to Donlin Gold.

Galore Creek project

In 2015, the Galore Creek Partnership continued to advance technical studies in project mine planning and design, and waste rock and water management, and perform environmental monitoring, community commitments and site care and maintenance. We expect this effort to further improve the value and marketability of the Galore Creek project, which we continue to be open to monetizing, in whole or in part, to strengthen our balance sheet and focus primarily on the permitting of Donlin Gold.

During 2015, information from field visits and mine planning was used to continue to optimize integrated mining, waste and water management concepts. A draft long-term site management plan was developed for care and maintenance. Also during 2015, Galore Creek awarded a generalized study of tunneling practice for the access and material handling tunnel into the Galore Creek valley. Galore Creek remained active in the community in 2015, sponsoring local fundraising events and supporting Tahltan literacy camps in three villages in northern British Columbia.

Our share of cash funding for Galore Creek was $0.5 million in 2015, primarily for technical studies, care and maintenance, and community commitments. The Galore Creek Partnership sold excess construction equipment during 2015 and our $0.6 million share of the proceeds reduced our funding requirement. In 2016, our 50% share of the work program is expected to be approximately $1 million to continue to advance technical studies, community commitments and site care and maintenance.

We record our interest in the Galore Creek Partnership as an equity investment, which results in our 50% share of expenses being recorded in the income statement as an operating loss. The investment amount recorded on the balance sheet primarily represents the fair value of our investment in the Galore Creek Partnership in 2011, recorded upon Teck's completion of their earn-in, as well as unused funds advanced to the Partnership, all in Canadian dollars, and translated to U.S. dollars at the current exchange rate.

During 2015, there was a significant decline in the price of copper in U.S. dollars. A sustained decline in the long-term copper price is deemed to be an indicator of possible impairment for our investment in the Galore Creek Partnership and our 40% direct interest in the Copper Canyon mineral property. The Canadian dollar is the functional currency for our Canadian operations and therefore we assess whether there has been a potential impairment triggering event related to copper prices in Canadian dollars. Due to the substantial strengthening of the U.S. dollar in relation to the Canadian dollar, there has not been a significant decline in the price of copper in Canadian dollar terms and therefore is not presently an indicator of possible impairment.

 

Maintained our strong financial position

Cash and term deposits decreased by $38.6 million in 2015, $6.2 million less than originally planned and, excluding the $15.8 million repayment of the remaining convertible notes, was $3.2 million less than in the prior year. Cash and term deposits totaled $126.7 million at November 30, 2015.

Outlook

Our goals for 2016 include:

·

Advance the Donlin Gold project toward a construction/production decision.

·

Advance Galore Creek mine planning and project design.

·

Maintain a healthy balance sheet.

·

Maintain an effective corporate social responsibility program.

·

Evaluate opportunities to monetize the value of Galore Creek.

We do not currently generate operating cash flows. At November 30, 2015, we had cash and cash equivalents of $41.7 million and term deposits of $85.0 million. At present, we believe that these balances are sufficient to cover the anticipated funding at the Donlin Gold and Galore Creek projects in addition to general and administrative costs through completion of permitting at the Donlin Gold project. Additional capital will be necessary if permits are received at the Donlin Gold project and a decision to commence engineering and construction is reached. Future financings to fund construction are anticipated through debt, equity, project specific debt, and/or other means. Our continued operations are dependent on our ability to obtain additional financing or to generate future cash flows. However, there can be no assurance that we will be successful in our efforts to raise additional capital. For further information, see section Item 1A, Risk Factors - Our ability to continue the exploration, permitting, development, and construction of the Donlin Gold and Galore Creek projects, and to continue as a going concern, will depend in part on our ability to obtain suitable financing, above.

In 2016, we expect to spend approximately $25 million, including $9 million to fund our share of expenditures at the Donlin Gold project and $1 million at the Galore Creek project, $1 million for our share of joint Donlin Gold studies with Barrick, $12 million for general and administrative costs and $2 million for working capital and other corporate purposes.

Summary of Consolidated Financial Performance

		Years ended November 30,
($ thousands, except per share)		2015				2014				2013
Loss from operations		$	(31,696	)		$	(38,008	)		$	(55,776	)
Net loss		$	(31,952	)		$	(40,484	)		$	(62,760	)
Net loss per common share
Basic and diluted		$	(0.10	)		$	(0.13	)		$	(0.20	)

Results of Operations

2015 compared to 2014

Loss from operations decreased $6.3 million from $38.0 million in 2014 to $31.7 million in 2015. The decrease resulted from lower general and administrative expense and lower losses from equity investments in the Donlin Gold and Galore Creek projects. General and administrative expense decreased $2.2 million, primarily due to lower professional fees and favorable foreign exchange translation of expenses incurred in Canadian dollars. Our share of losses at the Donlin Gold project decreased by $3.0 million, as 2015 activities continued to focus primarily on permitting. At the Galore Creek project, our share of losses decreased by $1.5 million due to reduced activity and a gain on the sale of surplus equipment. Evaluation expense includes $0.4 million for the Company's share of the Donlin Gold project joint studies with Barrick.

Net loss decreased from $40.5 million ($0.13 per share – basic and diluted) in 2014 to $32.0 million ($0.10 per share – basic and diluted) in 2015. The decrease resulted primarily from the $6.3 million reduction in the loss from operations in 2015 compared to 2014. Interest expense decreased by $1.7 million primarily due to the repayment of the remaining $15.8 million of convertible notes in 2015.

2014 compared to 2013

Loss from operations decreased $17.8 million from $55.8 million in 2013 to $38.0 million in 2014. The decrease resulted from lower general and administrative expense and lower losses from equity investments in the Donlin Gold and Galore Creek projects. General and administrative expense decreased $4.9 million due to lower share-based compensation, office rent and professional fees. Our share of losses at the Donlin Gold project decreased by $0.6 million, as 2014 activities continued to focus primarily on permitting. At the Galore Creek project, our share of losses decreased by $11.4 million due to not conducting exploration and reduced camp activity in 2014 and mobile equipment being fully depreciated in 2013.

Net loss decreased from $62.8 million ($0.20 per share – basic and diluted) in 2013 to $40.5 million ($0.13 per share – basic and diluted) in 2014. The decrease resulted primarily from the $17.8 million reduction in the loss from operations in 2014 compared to 2013. Interest expense decreased by $5.8 million due to the $79.2 million repurchase of convertible notes in 2013. We recorded a write-down of marketable securities and other investments totaling $3.2 million in 2013 and had a lower tax expense of $0.3 million in 2014 compared to $3.9 million in 2013.

Liquidity, Capital Resources and Capital Requirements

		Years ended November 30,
($ thousands)		2015				2014				2013
Cash used in operations		$	(11,426	)		$	(9,808	)		$	(19,491	)
Cash used in investing activities		$	(964	)		$	(967	)		$	(128,846	)
Cash used in financing activities		$	(15,829	)		$	—			$	(24,812	)
		At November 30,
($ thousands)			2015				2014			Change
Cash and cash equivalents		$	41,731			$	70,325			$	(28,594	)
Term deposits		$	85,000			$	95,000			$	(10,000	)

During 2015, cash and cash equivalents decreased by $28.6 million and term deposits decreased by $10.0 million. The total decrease in cash and term deposits of $38.6 million was primarily related to the repayment of $15.8 million of the remaining convertible notes, $11.4 million used in operating activities for administrative costs and interest payments and $11.0 million to fund our share of the Donlin Gold and Galore Creek projects.

During 2014, cash and cash equivalents decreased by $10.9 million and term deposits decreased by $15.0 million. The total decrease in cash and term deposits of $25.9 million was primarily related to $9.8 million used in operating activities for administrative costs and interest payments and $15.9 million to fund our share of the Donlin Gold and Galore Creek projects.

The U.S. dollar denominated term deposits are held at two Canadian chartered banks. We have sufficient working capital available to advance the Donlin Gold project through the expected remaining permitting process.

 

Contractual Obligations

Our contractual obligations as of November 30, 2015 were as follows:

($ thousands)		Total				Less than 1 year				1-3 years				3-5 years				More than 5 years
Reclamation and remediation		$	451			$	451			$	—			$	—			$	—
Office and equipment leases			762				385				377				—				—
Promissory note			80,261				—				—				—				80,261
Total		$	81,474			$	836			$	377			$	—			$	80,261

Off-Balance Sheet Arrangements

The Company does not have any material off-balance sheet arrangements required to be disclosed in this Annual Report on Form 10-K.

Outstanding share data

As of January 20, 2016, we had 319,323,874 common shares issued and outstanding. As of January 20, 2016, we had 21,656,567 stock options with a weighted-average exercise price of C$4.63, 2,619,150 performance share units and 254,701 deferred share units outstanding. Upon exercise of the foregoing convertible securities, the Company would be required to issue a maximum of 25,839,993 common shares.

Related party transactions

The Company provided management services to Donlin Gold LLC for $nil in 2015, $235,000 in 2014 and $258,000 in 2013; office rental and services to Galore Creek Partnership for $349,000 in 2015, $398,000 in 2014 and $423,000 in 2013; and management and office administration services to NovaCopper Inc. for $nil in 2015, $nil in 2014 and $168,000 in 2013.

As of November 30, 2015, the Company has accounts receivable from Galore Creek of $28,000 (2014: $32,000) included in other current assets and $3,546,000 (2014: $4,139,000) included in other long-term assets.

 

Investment in affiliates

Investments in unconsolidated ventures over which the Company has the ability to exercise significant influence, but does not control, are accounted for under the equity method and include the Company's investments in the Donlin Gold and Galore Creek projects. We identified Donlin Gold LLC and the Galore Creek Partnership as Variable Interest Entities (VIEs) as these entities are dependent on funding from their owners. All funding, ownership, voting rights and power to exercise control is shared equally on a 50/50 basis between the owners of each VIE. Therefore, the Company has determined that it is not the primary beneficiary of either VIE. The Company's maximum exposure to loss is its investment in Donlin Gold LLC and Galore Creek Partnership.

Donlin Gold LLC and the Galore Creek Partnership are non-publicly traded equity investees in exploration and development projects. Therefore, we assessed whether there has been a potential impairment triggering event for other-than-temporary impairment by testing the underlying assets of the equity investee for recoverability and assessing whether there has been a change in the development plan or strategy for the project. If we determine that the underlying assets are recoverable and no other potential impairment conditions are identified, then the investment in the equity investee is carried at cost. If the underlying assets are not recoverable, we will record an impairment charge equal to the difference between the carrying amount of the investee and its fair value.

During 2015, there was a significant decline in the price of copper in U.S. dollars. A sustained decline in the long-term copper price is deemed to be an indicator of possible impairment for the Company's investment in the Galore Creek Partnership. The Canadian dollar is the functional currency for the Company's Canadian operations and therefore the Company assesses whether there has been a potential impairment triggering event related to copper prices in Canadian dollars. Due to the substantial strengthening of the U.S. dollar in relation to the Canadian dollar, there has not been a significant decline in the price of copper in Canadian dollar terms and therefore is not currently an indicator of possible impairment.

The strengthening of the U.S. dollar in relation to the Canadian dollar resulted in the Company's investment in the Galore Creek Partnership decreasing by $40.6 million, $21.9 million and $21.3 million during 2015, 2014 and 2013, respectively. The amounts are included in foreign currency translation adjustments and other comprehensive loss.

Mineral properties and exploration and evaluation expenditures

Mineral property acquisition costs, including directly related costs, are capitalized when incurred, and mineral property exploration and evaluation costs are expensed as incurred. Mine development costs include engineering and metallurgical studies, drilling and other related costs to delineate an ore body and the removal of overburden to initially expose an ore body at open pit surface mines. Capitalization of mine development project costs, that meet the definition of an asset, begins once mineralization is classified as proven and probable reserves as defined by SEC Industry Guide 7. Capitalized costs will be amortized using the units-of-production method over the estimated life of the proven and probable reserves. If mineral properties are subsequently abandoned or impaired, any unamortized costs will be charged to loss in that period.

The recoverability of the carrying values of our mineral properties is dependent upon economic reserves being discovered or developed on the properties, permitting, financing, start-up, and commercial production from, or the sale/lease of, or other strategic transactions related to these properties.

 

Share-based compensation

We operate a stock option plan and a performance share unit (PSU) plan, under which the entity receives services from employees as consideration for equity instruments (options or shares) of the Company. The fair value for the options and share units are recognized in earnings over the related service period. The total amount to be expensed related to options is determined by reference to the fair value of the options granted including any market performance conditions and the impact of any non-vesting conditions; and excluding the impact of any service and non-market performance vesting conditions.

The fair value of stock options is estimated at the time of grant using the Black‐Scholes option pricing model, and the fair value of the PSUs is measured at the grant date using a Monte Carlo simulation, which takes into account, as of the grant date, the fair market value of the shares, expected volatility, expected dividend yield and the risk‐free interest rate over the life of the PSU, to generate potential outcomes for stock prices which are used to estimate the probability of the PSUs vesting at the end of the performance measurement period.

We grant our board members deferred share units (each a DSU and collectively, DSUs), whereby each DSU entitles the directors to receive one common share of the Company when they retire from service with the Company. The fair value of the DSUs is measured at the date of the grant in amounts ranging from 50% to 100% of directors' annual retainers at the election of the directors. The fair value is recognized in consolidated statement of income (loss) over the related service period.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

Our financial instruments are exposed to certain financial risks, including currency, credit and interest rate risks.

Currency risk

We are exposed to financial risk related to the fluctuation of foreign exchange rates. We operate in Canada and the United States and a portion of our expenses are incurred in Canadian dollars. A significant change in the currency exchange rate between the Canadian dollar relative to the U.S. dollar could have an effect on our results of operations, financial position or cash flows.

We have not hedged our exposure to currency fluctuations. At November 30, 2015, we are exposed to currency risk through our investment in the Galore Creek project, mineral properties, deferred income taxes and cash balances held in Canadian dollars.

Based on the above net exposures as at November 30, 2015, and assuming that all other variables remain constant, a $0.01 appreciation or depreciation of the Canadian dollar against the U.S. dollar would result in an increase/decrease of approximately $3.1 million in our consolidated comprehensive income (loss).

Credit risk

Concentration of credit risk exists with respect to our cash and cash equivalents and term deposit investments. All deposits are held through two Canadian chartered banks with high investment-grade ratings and have maturities of one year or less.

Interest rate risk

The interest rate on the promissory note owed to Barrick is variable with the U.S. prime rate. Based on the amount owing on the promissory note as at November 30, 2015, and assuming that all other variables remain constant, a 1% change in the U.S. prime rate would result in an increase/decrease of $0.8 million in the interest accrued on the promissory note per annum.

Supplementary Data

For the required supplementary data, please see section "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Summary of Quarterly Results" above.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of our assets are made in accordance with management's authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

 Management conducted its evaluation of the effectiveness of our internal controls over financial reporting based on the framework in Internal Control — Integrated Framework (2013) by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of November 30, 2015.

 The effectiveness of our assessment of internal control over financial reporting as of November 30, 2015 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

 

 

 

 

 

Report of Independent Registered Public Accounting Firm

 

To the Shareholders of NOVAGOLD RESOURCES INC.

We have audited the accompanying consolidated balance sheets of NOVAGOLD RESOURCES INC. (NOVAGOLD or the Company) as of November 30, 2015 and November 30, 2014 and the related consolidated statements of loss and comprehensive loss, cash flows and equity for each of the years in the three-year period ended November 30, 2015. We also have audited NOVAGOLD's internal control over financial reporting as of November 30, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company's internal control over financial reporting based on our integrated audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall consolidated financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that: (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.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NOVAGOLD as of November 30, 2015 and 2014 and the results of its operations and its cash flows for each of the years in the three-year period ended November 30, 2015 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, NOVAGOLD maintained, in all material respects, effective internal control over financial reporting as of November 30, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

(signed) PricewaterhouseCoopers LLP

Chartered Professional Accountants

Vancouver, British Columbia

Canada

January 27, 2016

 

 

		At November 30,
		2015				2014
		(in thousands)
ASSETS
Cash and cash equivalents		$	41,731			$	70,325
Term deposits			85,000				95,000
Other assets (note 7)			3,310				3,735
Current assets			130,041				169,060
Investment in Donlin Gold (note 4)			1,058				1,618
Investment in Galore Creek (note 5)			242,906				283,247
Mineral property (note 6)			43,605				50,897
Deferred income taxes (note 14)			9,711				11,445
Other assets (note 7)			6,263				8,279
Total assets		$	433,584			$	524,546
LIABILITIES
Accounts payable and accrued liabilities		$	3,066			$	3,489
Convertible notes (note 8)			—				15,112
Other liabilities			451				625
Current liabilities			3,517				19,226
Promissory note (note 9)			80,261				76,153
Deferred income taxes (note 14)			20,510				24,051
Total liabilities			104,288				119,430
Commitments and contingencies (note 20)
EQUITY
Common shares
Authorized – 1,000 million shares, no par value
Issued and outstanding – 317.9 and 317.3 million shares, respectively			1,938,262				1,936,336
Contributed surplus			80,774				74,038
Accumulated deficit			(1,672,055	)			(1,640,103	)
Accumulated other comprehensive income (loss)			(17,685	)			34,845
Total equity			329,296				405,116
Total liabilities and equity		$	433,584			$	524,546

The accompanying notes are an integral part of these consolidated financial statements.

Approved by the Board of Directors

 

 

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

		Years ended November 30,
		2015				2014				2013
		(in thousands, except per share)
Operating expenses:
Equity loss - Donlin Gold (note 4)		$	11,016			$	13,985			$	14,620
Equity loss - Galore Creek (note 5)			392				1,941				13,352
General and administrative (note 11)			19,887				22,046				26,991
Evaluation			366				—				—
Depreciation			35				36				37
Write-down of assets (note 12)			—				—				776
			31,696				38,008				55,776
Loss from operations			(31,696	)			(38,008	)			(55,776	)
Other income (expense) (note 13)			(103	)			(2,213	)			(3,088	)
Loss before income taxes			(31,799	)			(40,221	)			(58,864	)
Income tax expense (note 14)			(153	)			(263	)			(3,896	)
Net loss			(31,952	)			(40,484	)			(62,760	)
Other comprehensive loss:
Unrealized losses on marketable equity securities
Unrealized holding losses during period			(227	)			(288	)			(855	)
Reclassification adjustment for losses included in net income (note 17)			426				—				2,738
Net unrealized gain (loss), net of $(2), $14 and $32 tax recovery (expense)			199				(288	)			1,883
Foreign currency translation adjustments			(52,729	)			(29,371	)			(34,687	)
Other comprehensive loss			(52,530	)			(29,659	)			(32,804	)
Comprehensive loss			(84,482	)		$	(70,143	)		$	(95,564	)
Net loss per common share
Basic and diluted		$	(0.10	)		$	(0.13	)		$	(0.20	)
Weighted average shares outstanding
Basic and diluted			317,850				317,203				313,372

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Years ended November 30,
		2015				2014				2013
		(in thousands)
Operating activities:
Net loss		$	(31,952	)		$	(40,484	)		$	(62,760	)
Adjustments to reconcile net loss to net cash used in operating activities:
Equity losses of affiliates			11,408				15,926				27,972
Share-based compensation			9,488				10,197				12,304
Interest on promissory note			4,108				4,425				3,622
Accretion of convertible notes			717				1,542				5,101
Depreciation			35				36				37
Deferred income taxes			(2	)			74				3,606
Write-down of investments			426				—				3,227
Write-down of assets			—				—				776
Foreign exchange gain			(4,771	)			(3,688	)			(10,448	)
Other			(515	)			(373	)			(721	)
Withholding tax on share-based compensation			(827	)			(636	)			(619	)
Net change in operating assets and liabilities (note 18)			459				3,173				(1,588	)
Net cash used in operations			(11,426	)			(9,808	)			(19,491	)
Investing activities:
Proceeds from term deposits			135,000				215,000				—
Purchases of term deposits			(125,000	)			(200,000	)			(110,000	)
Funding of affiliates			(10,964	)			(15,946	)			(18,793	)
Other			—				(21	)			(53	)
Net cash used in investing activities			(964	)			(967	)			(128,846	)
Financing activities:
Proceeds from share issuance, net			—				—				54,359
Repayment of debt			(15,829	)			—				(79,171	)
Net cash provided from (used in) financing activities			(15,829	)			—				(24,812	)
Effect of exchange rate changes on cash			(375	)			(162	)			(256	)
Decrease in cash and cash equivalents			(28,594	)			(10,937	)			(173,405	)
Cash and cash equivalents at beginning of period			70,325				81,262				254,667
Cash and cash equivalents at end of period		$	41,731			$	70,325			$	81,262

See note 21 for supplemental cash flow information.

The accompanying notes are an integral part of these consolidated financial statements.