NOVAGOLD and Paulson Consolidate Donlin Ownership
The largest undeveloped gold project in the US be held by a single entity
NOVAGOLD Resources Inc (TSX: NG) will acquire Paulson Advisers’ stake in Donlin Gold in an all-share transaction that will create a US$4.2 billion US gold developer.
Last year, Barrick Mining Corporation (NYSE: B) sold its 50% stake in Donlin to Paulson and NOVAGOLD for US$1 billion in cash, giving Paulson a 40% stake in the project and increasing NOVAGOLD’s interest from 50% to 60%.
Paulson founder John Paulson said he initially bought his stake to gain more exposure to gold.
“This was my dream from the very beginning to consolidate Donlin under one ownership, under NOVAGOLD,” he said on a conference call.
The consolidation announced on Wednesday will create NovaGold Corporation (New NG) and will be domiciled in the US and listed on the New York Stock Exchange.
“This deal, the second major deal over the last year, which is being done with John Paulson, is built on a 16-year partnership between NOVAGOLD and John Paulson,” NOVAGOLD chairman Dr Thomas Kaplan said.
“We literally exchanged the most difficult and challenging partner that I have seen in my decades in this business to quite simply the easiest one – one who always puts himself in the shoes of the other person.”
New NG will acquire NOVAGOLD on a one-for-one share basis.
Paulson and his affiliates will contribute their equity interests to New NG in exchange for shares, with the number of New NG shares to be issued at a 10% discount.
Current NOVAGOLD shareholders would own around 65% of New NG and Paulson would indirectly receive approximately 35% of New NG on a fully diluted basis in exchange for its ownership interest in Donlin.
Inclusive of its existing equity ownership in NOVAGOLD, Paulson would own approximately 40% of the economic interest in New NG which is inclusive of a 19.99% voting interest.
The New NG board will be co-chaired by Paulson and Kaplan and expanded from 10 to 11 directors.
Paulson intends to nominate Paulson partner Marcelo Kim as the second board designee to the New NG Board.
Directors and certain senior management of NOVAGOLD, as well as Electrum Strategic Resources and Paulson, which collectively represent approximately 28% of NOVAGOLD’s issued and outstanding common shares, have entered into voting support agreements.
‘Holy grail’
The Donlin project has resources of 40 million ounces at 2.22 grams per tonne gold, which sits just 7.5% of the project’s total land package.
An updated feasibility study was released last year, returning forecast capital costs of US$9.2 billion for a 27-year operation that would produce 1.1Moz of gold per year, including 1.3Mozpa in the first 10 years.
At a gold price of US$2100/oz, Donlin had a post-tax net present value (5% discount rate) of US$5.1 billion, an internal rate of return of 10.3% and a payback period of 6.5 years.
At US$4000/oz, the NPV5 rises to US$20.9 billion.
Kaplan described Donlin as the “holy grail” for mining investors.
“I do believe that after this transaction, NOVAGOLD will be seen by institutional investors who want extraordinary leverage to gold, but only in a jurisdiction that will allow you to keep its fruits,” he said.
“This will be seen as the greatest way to play gold development. The leverage to gold is absolutely unquestionable. You really can’t ask for better.”
The project partners have approved a budget of US$131.4 million for 2026 to advance the bankable feasibility study, permitting and exploration.
Federal and state permitting is complete, though the project requires several minor permits.
The BFS is due for completion in 2027, which, subject to positive economics and financing, will be followed by a final investment decision and a four-year construction period.
Once in production, Donlin would be the largest gold mine in the US and one of the largest in the world.
“Having the largest single gold-producing mine in the United States will be absolute catnip to investors who understand that they need to get back into gold or establish positions,” Kaplan said.
“We will be one of those beneficiaries.”