Novagold creates $4.2B US gold giant with Donlin deal

Novagold Resources (NYSE-A, TSX: NG) will acquire the Donlin Gold stake in Alaska it does not already own from Paulson Advisors in an all-stock transaction that creates a gold miner worth about $4.2 billion and simplifies ownership of one of the world’s largest undeveloped projects.

The deal will combine Novagold’s existing stake in Donlin with Paulson Advisors’ interest to form NovaGold Corp., a Delaware-incorporated company. Existing Novagold shareholders will own nearly 65% of the new entity, while Paulson will receive about 35% in exchange for its Donlin interest. Including its current Novagold holdings, Paulson will own about 40% of the combined company. The deal is expected to close in the fourth quarter.

“Consolidating our interest in Donlin into Novagold enhances Donlin’s organizational structure and will facilitate, streamline and expedite the development of the Donlin mine,” John Paulson said.

The deal reflects a broader push by gold miners to consolidate tier-one assets as record bullion prices strengthen balance sheets and improve access to capital. By ending split ownership of Donlin, Novagold also creates a single U.S.-listed company that it said will improve access to government agencies and sovereign wealth funds to support the project’s next stage of development.

World-class asset

Shares in Novagold Resources gained 9.2% to $8.67 apiece in Toronto by mid-Wednesday, valuing the company at $3.76 billion. They’ve traded in a 52-week range of $7.02 to $19.69. 

“Our combination epitomizes the ultimate smart consolidation transaction in the gold industry that aligns the interest of everyone involved,” Novagold President and CEO Greg Lang said.

NovaGold Corp. will be co-chaired by Novagold chairman Thomas Kaplan and John Paulson, and its board will expand to 11 directors from 10. The miner will also redomicile to the U.S., home to the Donlin project.

Donlin holds about 560 million measured and indicated tonnes grading 2.22 grams gold per tonne for contained metal of about 40 million oz., Novagold said in January, making it one of the industry’s largest and highest-grade undeveloped gold deposits. It also holds 88.9 million inferred tonnes grading 2.03 grams gold for 5.8 million contained ounces.

The project is expected to produce about 1.1 million ounces annually over a 27-year mine life, with average annual production rising to about 1.3 million ounces during its first decade due to higher initial grades.