NovaGold Resources Inc.

NovaGold Resources Inc.

March 01, 2005 13:32 ET

NovaGold Resources Announces Financial Results for the Year Ended November 30, 2004


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: NOVAGOLD RESOURCES INC.

TSX, AMEX SYMBOL: NG

MARCH 1, 2005 - 13:32 ET

NovaGold Resources Announces Financial Results for the
Year Ended November 30, 2004

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - March 1, 2005) - NovaGold
Resources Inc. (TSX:NG)(AMEX:NG) is pleased to report its financial and
operating results for the year ended November 30, 2004. Details of the
Company's financial results are described in the audited consolidated
financial statements and Management's Discussion and Analysis, this and
the details on each of the Company's projects including resource
estimates can be found on the Company's website www.novagold.net and on
SEDAR www.sedar.com.

Management's Discussion and Analysis

General

This Management's Discussion and Analysis of NovaGold Resources Inc.
(NovaGold or the Company) is dated February 28, 2005 and provides an
analysis of NovaGold's financial results for the year ended November 30,
2004 compared to the previous year. At February 25, 2005 the Company has
66.1 million common shares issued and outstanding. The following
information should be read in conjunction with the Company's November
2004 audited consolidated financial statements and related notes, which
are prepared in accordance with generally accepted accounting principles
in Canada (Canadian GAAP). The accounting policies have been
consistently followed in preparation of these financial statements
except that at December 1, 2003 the Company prospectively adopted the
revised requirements of the Canadian Institute of Chartered Accountants
(CICA) Handbook Section 3870 "Accounting for Stock-Based Compensation
and Other Stock-Based Payments". All amounts are expressed in Canadian
dollars unless otherwise indicated.

On July 15, 2004, the Company acquired all of the approximately 45% of
the outstanding common shares of SpectrumGold Inc. (SpectrumGold) not
previously held by the Company in a share exchange at a ratio of 1 share
of the Company for each 1.35 shares of SpectrumGold. The Company issued
8,573,518 common shares to SpectrumGold shareholders to acquire the
remaining interest at a deemed price of $6.41 per share, being the
market price at the date the proposed arrangement was announced. On July
15, 2004, the Company also assumed existing SpectrumGold stock options,
warrants and a property option agreement under which 1,734,072, 74,074,
and 222,222 of the Company's shares were issuable to the holders,
respectively, and SpectrumGold became NovaGold Canada Inc. The total
purchase price allocated to the shares issued and convertible
instruments assumed was $64.1 million of which $9.4 million was
allocated to the book value of acquired minority interest and $85.0
million was added to the carrying value of the Galore Creek project
including $30.3 million provided for future income taxes under purchase
accounting. The minority interest shown in the consolidated statements
of operations and deficit relates only to the period to July 15, 2004.

Description of Business

NovaGold is a precious metals company focused on the exploration and
development of high quality mineral properties in Alaska and Western
Canada. NovaGold is advancing four of the largest undeveloped resources
in North America: the Galore Creek gold-silver-copper project, the
Donlin Creek gold project in partnership with Placer Dome, the Ambler
project in partnership with subsidiaries of Rio Tinto and the Company's
Nome, Alaska operations. NovaGold had $56 million of cash at November
30, 2004 with no long-term debt, and one of the largest resource bases
of any exploration or development stage precious metals company. The
Company is listed on the Toronto Stock Exchange and the American Stock
Exchange under the symbol "NG".

The Company's major properties are:

- a joint venture interest in the Donlin Creek gold property in Alaska,

- the Galore Creek gold-silver-copper property in northwest British
Columbia,

- the Ambler copper-zinc-silver-gold property in Alaska, and

- the Rock Creek, Big Hurrah and Nome Gold properties near Nome, Alaska.

Donlin Creek

The Company's flagship project is the Donlin Creek property which
contains a measured and indicated resource estimated at 11 million
ounces of gold and an inferred resource estimated at 14.3 million ounces
of gold, making it one of the largest undeveloped gold resources in
North America. The Company's 70% interest in Donlin Creek is held
through a joint venture with Placer Dome US (Placer Dome). Placer Dome
became manager of the joint venture effective November 2002 and can earn
a 70% interest (diluting NovaGold to 30%) in the joint venture by
expending US$32 million on the property, completing a bankable
feasibility study and making a positive construction decision, for a
mine that would produce at least 600,000 ounces of gold per annum, on or
before November 2007. At the current daily production throughput being
contemplated of 30,000 tonnes per day the property would produce at
least 1,000,000 ounces per annum of gold for multiple years.

Galore Creek

The Company's Galore Creek property is held under a 100% option by
NovaGold, and contains an indicated resource estimated at 3.6 million
ounces of gold and 4.0 billion pounds of copper and an inferred resource
estimated at 1.4 million ounces of gold and 0.9 billion pounds of
copper, and is one of the largest undeveloped gold-copper resources in
North America. NovaGold also has an option to earn an 80% interest in
the nearby Copper Canyon deposit which contains an additional inferred
resource of 2.8 million ounces of gold, 38 million ounces of silver and
1.2 billion pounds of copper. In addition there are several other
identified deposits for which resources are currently being estimated.
Based on a Preliminary Economic Assessment conducted by the
international, independent engineering services firm Hatch, a 30,000 tpd
milling operation could produce 200 million pounds of copper concentrate
containing 270,000 ounces of gold and 1.8 million ounces of silver
annually during the first five years of mine life.

Ambler

The Ambler project is located approximately 180 miles southeast of the
largest zinc mine in the world: Teck-Cominco's Red Dog mine in
northwestern Alaska. NovaGold is acquiring a 51-per-cent interest in the
Ambler property through an option agreement with Kennecott Exploration
Company and Kennecott Arctic Company, subsidiaries of Rio Tinto plc.
NovaGold is manager of the project through to the completion of a final
positive feasibility study. An historic inferred resource of 36.3
million tonnes grading 4% copper, 5.5% zinc, 0.8% lead, 0.7 g/t gold and
54.9 g/t silver has been estimated for the Arctic deposit, one of a
series of massive sulfide copper-zinc-lead-gold-silver deposits in the
Ambler Mining district. This resource contains 3.2 billion pounds of
copper, 4.2 billion pounds of zinc and 640 million pounds of lead,
817,000 ounces of gold and 62.1 million ounces of silver.

Nome Operations

The Nome Operations consist of three separate advanced development stage
projects located near the town of Nome, Alaska: Rock Creek, Big Hurrah
and Nome Gold - all owned 100% by NovaGold. Each one is described below:

Rock Creek

The Rock Creek property is located 8 miles north of Nome, Alaska and
contains a measured and indicated resource estimated at 0.55 million
ounces of gold and an inferred resource estimated at 0.56 million ounces
of gold. Independent engineering firm Norwest Corporation completed a
Preliminary Economic Study on the Rock Creek property for the Company in
August 2003 and the Company has since initiated a Feasibility Study to
evaluate the economics for the development of a mine that could produce
100,000 ounces of gold annually.

Big Hurrah

The Big Hurrah property is located 40 miles east of Nome, Alaska on the
existing road system. The Company is currently evaluating an historical
resource containing approximately 100,000 ounces of near-surface gold
mineralization that could be mined and trucked to a milling facility
located at Rock Creek. This smaller, but higher grade material would
supplement the Rock Creek deposit.

Nome Gold

The Nome Gold property is located 3 miles north of Nome, Alaska and
contains a measured and indicated resource estimated at 1.2 million
ounces of gold and an inferred resource estimated at 1.1 million ounces
of gold. The resources are hosted by near-surface unconsolidated sands
and gravels. More than 4 million ounces of gold have been extracted from
the land owned by the Company since discovery around 1900. Mining was
shut-down on the project in 1998 due to low gold prices at the time. In
2004 the Company commenced engineering studies to evaluate the viability
of restarting mining operations at the property using modern mining and
milling techniques. This work will continue in 2005.

Results of Operations

Revenues from the Company's land and gravel sales, gold royalties and
other revenues were $2.5 million during the year ended November 30, 2004
compared with $1.2 million in 2003 and $2.1 million in 2002. The
increase in revenues is mainly due to increased land sales within the
Nome, Alaska city limits. Interest income increased to $1.3 million for
the year ended November 30, 2004 compared with $0.3 million in 2003 and
$0.2 million in 2002 due to the Company's larger cash balances held
during the year and the implementation of a formal cash management
program in 2003. The Company had anticipated a significant land sale for
the expansion of the Nome airport in 2004 however, in February 2005, the
Company received notification that the authorities will not be pursuing
the airport expansion.

Expenses were $12.0 million for the year ended November 30, 2004
compared with $8.3 million in 2003 and $5.5 million in 2002, including
in those years $5.8 million, $23,000 and zero, respectively, for stock
based compensation for which an equivalent amount was added to
shareholders' equity. Under the new CICA rules there was a charge for
stock-based compensation of $5.8 million during the year for options
granted to directors, officers, employee and service providers. As
permitted by the new rules in CICA 3870, the Company elected for the
year ended November 30, 2003 not to apply fair value accounting and to
measure the compensation cost using the intrinsic value method for
awards of stock options to officers, employees and directors under the
Company's stock-based compensation plan and to only recognize the
stock-based compensation charge of $23,000 for options granted to
non-employees. There was no comparable charge in 2002.

Other items of significance are the write-downs of mineral properties
and the foreign exchange gain or loss. The Company recorded a mineral
property write-down of $0.3 million during 2004 compared with $1.6
million in 2003 and $0.9 million in 2002. In 2004, the write-down is
associated with the Company's plans to sell 650399 BC Ltd (BC Ltd), a
wholly-owned subsidiary of NovaGold Canada Inc. which holds the
Company's Yukon and British Columbia assets other than Galore Creek and
its adjacent properties. Since the proceeds from the sale of BC Ltd are
anticipated to be $0.3 million less than the assets' original book
value, the Company wrote-down the assets by the same amount. In 2003,
the transfer of the Company's Yukon properties to BC Ltd. resulted in a
$1.5 million write-down. The Company recorded a $0.1 million foreign
exchange gain in 2004 compared with a $1.1 million foreign exchange loss
in 2003 and a $0.3 million gain in 2002. The foreign exchange loss in
2003 was mainly due to the effect of the strengthening of the Canadian
dollar during that year on the Company's US dollar cash positions early
in 2003.

Overall general and administrative costs, wages and benefits, corporate
development and communications, and professional fees have increased to
$6.1 million in 2004 compared with $5.4 million in 2003 and $5.0 million
in 2002. General and administrative costs have increased largely because
of increased insurance, regulatory, legal and stock exchange fees, and
costs of the Company's expanded listings of its securities. Wages and
benefits have increased due to the expansion of staff resources in all
areas of the Company required to meet the needs created by increased
business including expenditures on mineral exploration and development.

The Company had a net loss of $8.4 million (or $0.14 per share) for the
year ended November 30, 2004, compared with a net loss of $7.0 million
(or $0.14 per share) in 2003 and a net loss of $3.5 million (or $0.10
per share) in 2002. The net loss in 2004 would have been $2.6 million
(or $0.04 per share) excluding the non-cash stock-based compensation
charge of $5.8 million during the year. After removing the impact of
stock-based compensation, the decrease in net loss is due mainly to
increased land sales at the Nome operations and increased interest
income from the Company's cash balances.

Selected Financial Data

The following annual and quarterly information are prepared in
accordance with generally accepted accounting principles in Canada
(Canadian GAAP).

Annual Information

Fiscal years ended November 30, 2004, 2003 and 2002, in $000's except
per share amounts:



---------------------------------------------------------------------
2004 2003 2002
$ $ $
---------------------------------------------------------------------
---------------------------------------------------------------------
Net revenues 3,469 1,259 2,082
---------------------------------------------------------------------
Expenses and other (11,845) (8,212) (5,539)
---------------------------------------------------------------------
Loss for the year (8,376) (6,953) (3,457)
---------------------------------------------------------------------
Loss per share - basic and diluted (0.14) (0.14) (0.10)
---------------------------------------------------------------------
Expenditures on mineral properties
and related deferred costs(1)
USA 8,455 5,877 13,872
Canada 102,591(2) 4,637 92
---------------------------------------------------------------------
Total assets 210,499 99,958 52,723
---------------------------------------------------------------------
Total long term financial liabilities (740) (751) (1,496)
---------------------------------------------------------------------
Minority interest - (9,130) -
---------------------------------------------------------------------


Quarterly Information

In $000's except per share amounts, for the fiscal quarters ended:



---------------------------------------------------------------------
11/30/04 8/31/04 5/31/04 2/29/04
$ $ $ $
---------------------------------------------------------------------
---------------------------------------------------------------------
Net revenues 946 1,207 581 735
---------------------------------------------------------------------
Loss for the quarter (1,263) (286) (6,533) (294)
---------------------------------------------------------------------
Loss per share - basic
and diluted (0.01) (0.00) (0.12) (0.01)
---------------------------------------------------------------------
Expenditures on mineral
properties and related
deferred costs(1)
USA 3,852 3,153 970 480
Canada 7,621 92,980(2) 1,553 437
---------------------------------------------------------------------


---------------------------------------------------------------------
11/30/03 8/31/03 5/31/03 2/28/03
$ $ $ $
---------------------------------------------------------------------
---------------------------------------------------------------------
Net revenues 575 359 99 226
---------------------------------------------------------------------
Loss for the quarter (1,537) (636) (3,420) (1,360)
---------------------------------------------------------------------
Loss per share - basic
and diluted (0.02) (0.01) (0.08) (0.03)
---------------------------------------------------------------------
Expenditures on mineral
properties and related
deferred costs(1)
USA 2,916 1,942 781 238
Canada (109) 4,700 24 22
---------------------------------------------------------------------
(1) Expenditures on mineral properties and related deferred costs
include fair value adjustments and are net of recoveries and
option payments received.
(2) An excess of purchase price over book value of $84,958,000,
including deferred tax provision of $30,262,000, was allocated to
Galore Creek on the acquisition of SpectrumGold Inc. as restated.


The Company carries out exploration activities in Canada and the United
States. The Company's exploration activities are seasonal in nature and
programs tend to start late in the spring and complete by November.
During the fourth quarter, the Company expended $11.5 million on mineral
properties and related deferred costs. Of this amount, $7.4 million
related to spending at the Galore Creek project located in northern
British Columbia and $1.8 million related to spending at the Rock Creek
project located in Nome, Alaska. Also during the fourth quarter, the
Company's board of directors approved a new non-executive directors'
fees payment for the entire year of $0.1 million.

Factors that can cause fluctuations in the Company's quarterly results
are the timing of the Nome land sales, stock option grants and the
write-offs of mineral property costs previously capitalized. The
majority of the Company's properties are not yet in production,
consequently the Company believes that its loss (and consequent loss per
share) is not a significant factor to investors in the Company. Although
the Company's sales revenues are denominated in US dollars and a portion
of the expenses are denominated in US dollars, the Company's cash
balances, which are significantly larger than those US amounts, are
predominately in Canadian funds and therefore the Company has not been
materially susceptible to currency variations in 2004.

Liquidity and Capital Resources

The Company expended $3.2 million on net operating activities during the
year ended November 30, 2004 compared with $5.0 million in 2003 and $1.4
million in 2002.

The Company generated net proceeds from financing activities of $25.9
million in 2004 compared with $46.1 million in 2003 and $35.6 million in
2002. The majority of the proceeds arose from private placement share
issuances. On October 28, 2004 the Company issued by way of private
placement 1,980,200 flow-through common shares at $10.10 per
flow-through common share for net proceeds of $18.9 million. As part of
this offering, certain directors and employees of the Company purchased
79,600 flow-through common shares. In addition, 99,010 warrants
exercisable at $10.10 per share were issued to the agents as part of the
private placement of which all of the warrants are outstanding as of the
date of this report. An amount equivalent to the gross proceeds of $20.0
million will be renounced for Canadian tax purposes to the purchasers
effective December 31, 2004. Under new CICA guidelines, approximately
$7.0 million will be deducted from share capital and added to deferred
income taxes at the time of renunciation to reflect the tax deductions
foregone by the Company. The Company received net proceeds of $33.1
million in 2003 and $31.6 million in 2002 from the issuance of common
shares from private placements. The Company received $7.8 million in
2004 from the exercise of stock options and warrants compared to $13.0
million in 2003 and $5.2 million in 2002.

The Company expended $26.4 million on investing activities during 2004
compared with $0.9 million net in 2003 and $14.2 million in 2002. During
the year, the Company expended $1.2 million on investments, the largest
being a $1.0 million purchase of shares in Pioneer Metals as part of the
option on the Grace property, located immediately north of the Galore
Creek property. The Company expended $25.9 million in 2004 on mineral
properties and related deferred costs compared with $7.3 million in 2003
and $14.0 million in 2002. The majority of the 2004 mineral property
expenditures occurred at the Galore Creek and Rock Creek projects. The
Company significantly expanded mineral resources at the Galore Creek
project and undertook new studies on the potential of developing a mine
at the Rock Creek property. In 2003, the Company transferred its Yukon
and British Columbia assets into SpectrumGold and initially held less
than 50% ownership. Subsequently, the Company participated in a number
of private placements in SpectrumGold and secured a controlling
interest. The share transactions in SpectrumGold gave rise to several
fair value adjustments. In 2002, the primary focus of mineral property
expenditures was on the Donlin Creek property in Alaska, USA. In 2002,
the Company exceeded US$10 million of expenditures on the Donlin Creek
gold property, and thereby earned a 70% interest in the project from
Placer Dome, subject to certain back-in rights which Placer Dome has
elected to pursue.

The Company has no material off-balance sheet arrangements, no material
capital lease agreements and no material long term obligations. The
majority of the Company's expenditures on its properties are of a
discretionary nature.

At November 30, 2004, the Company's aggregate commitments for operating
leases totaled $3.3 million. These operating leases include the
Company's leased head office location and certain office equipment. The
future minimum lease payments at the year-end are approximately as
follows:



in thousands of Canadian dollars
----------------------------------------------
$
----------------------------------------------
2005 117
----------------------------------------------
2006 287
----------------------------------------------
2007 289
----------------------------------------------
2008 285
----------------------------------------------
2009 285
----------------------------------------------
Thereafter 2,013
----------------------------------------------


The Company has no significant financial or other instruments except
that its cash balances are largely invested in high quality commercial
or bank paper with terms of less than three months that can be easily
liquidated.

Outlook

At November 30, 2004 the Company had cash and cash equivalents of $56.1
million. On October 28, 2004 the Company issued by way of private
placement 1,980,200 flow-through shares (FTS) for gross proceeds of
$20,000,020. Under the FTS agreements the Company agreed to renounce
$20,000,020 of qualifying expenditures to the investors effective
December 31, 2004, although under Canadian tax law the expenditures may
actually be incurred up to December 31, 2005. The Company intends to
spend the entire amount on the Galore Creek project located in northern
British Columbia prior to December 31, 2005.

In 2005, the Company has budgeted to invest a minimum of $37 million on
exploration and development programs on its properties. This work is
anticipated to include a minimum of 60,000 meters of drilling with the
majority of the work focused on the Galore Creek, Rock Creek and Ambler
projects.

At the Galore Creek project, the Company plans to spend $20 million on
at least 50,000 meters of drilling with the objective to advance the
Inferred mineral resource at Galore to the Indicated category for which
quantity, quality and physical characteristics of the deposit can be
estimated with confidence to support mine planning and the overall
economic viability of the project. The Company plans to spend a minimum
$5 million on project engineering and environmental work. The objectives
are to complete a pre-feasibility level assessment of the project by
mid-2005 using updated resource models from 2004 drilling and latest
engineering estimates, to complete an in-fill drilling program to
convert inferred mineralization into indicated in all areas, to complete
all field engineering studies required to complete a feasibility study
by mid-2006, to complete collection and analysis of baseline
environmental data and to prepare a formal environmental assessment
document and key permit applications for submission by the end of 2005,
and to continue to build on our relationship with the Tahltan First
Nations and to conclude a legal agreement with the Tahltan regarding
project development.

At the Rock Creek project the final feasibility study has been initiated
using the services of the independent engineering firm Norwest
Corporation. The Company is completing additional in-fill drilling and
metallurgical testwork as part of the final feasibility study. The
budget of US$4 million is planned for the development work in 2005 with
the objective of the program to advance Rock Creek to a stage of being
fully permitted and ready to construct. A further US$1.75 million is
anticipated to be expended, mainly on drilling at the Big Hurrah
project, located 45 miles from Rock Creek.

The Company is still assessing the results of the 2004 season work at
both the Galore Creek and Rock Creek projects and may change the planned
expenditures on those projects dependent on the final 2004 season
results.

At the Ambler project, the Company plans to spend US$4 million on 6,000
meters of drilling with the objectives to advance the project to Scoping
level by continuing the drilling program to define the resource,
complete transportation and energy studies, increase the resource base
by testing possible ore zone extensions defined through deposit
modeling, and confirm and expand mineralization on select outlying
prospects and targets.

No financial contribution is required by NovaGold in 2005 for the Donlin
Creek project but US$11 million is budgeted to be invested by Placer
Dome on engineering and environmental studies for development of the
project. Studies in 2004 identified feasible alternatives for project
access and power supply.

Related Party Transactions

Effective July 31, 2004, the Company entered into an option agreement
with an officer of the Company for the Illinois Creek property located
in Alaska, USA for an initial payment of US$20,000. The Company has the
option to acquire 100% of the property by making payments totalling
US$0.25 million by April 30, 2009, expending US$1.5 million on
exploration on the property and making a further payment of US$1.0
million within 30 days of completion of the payments and expenditures,
subject to certain extensions. The officer retains a 2% net smelter
royalty on the property a portion of which may be purchased by the
Company on fixed terms.

The Company is in the process of selling BC Ltd, which holds the
Company's Yukon and British Columbia assets other than the Galore Creek
and its adjacent properties. The purchaser is a newly formed company
whose president is a director of NovaGold. The proceeds from the sale of
BC Ltd are anticipated to be shares in the new company at a deemed value
of $2.75 million, plus a cash payment equivalent to the cash existing in
BC Ltd at the time of the sale. The sale proceeds are equivalent to the
consolidated book value of the assets in BC Ltd and thus no gain or loss
on the sale is anticipated. The Company intends to option back certain
exploration rights to the Brewery Creek property from the purchaser.

Critical Accounting Estimates

The most critical accounting principles upon which the Company's
financial status depends are those requiring estimates of the
recoverability of its capitalized mineral property expenditures and the
amount of future reclamation obligations.

Mineral Properties and Related Deferred Costs

The Company records its interest in mineral properties at cost.
Exploration expenditures relating to properties that have resources or
significant mineralization requiring additional exploration are deferred
and will be amortized against future production following commencement
of commercial production, or written off if the properties are sold,
allowed to lapse, abandoned or become impaired.

Management of the Company reviews and evaluates the carrying value of
each mineral property for impairment when events or changes in
circumstances indicate that the carrying amounts of the related asset
may not be recoverable. If the total estimated future cash flows on an
undiscounted basis are less than the carrying amount of the asset, an
impairment loss is measured and assets are written down to fair value
which is normally the discounted value of future cash flows. Where
estimates of future net cash flows are not available and where other
conditions suggest impairment, management assesses whether carrying
value can be recovered by considering alternative methods of determining
fair value. When it is determined that a mineral property is impaired,
it is written down to its estimated fair value in accordance with the
CICA Handbook Section 3063 "Impairment of Long-Lived Assets".

Management's estimates of mineral prices, recoverable proven and
probable reserves, and operating, capital and reclamation costs are
subject to certain risks and uncertainties that may affect the
recoverability of deferred mineral property costs. Although management
has made its best estimate of these factors, it is possible that
material changes could occur which may adversely affect management's
estimate of the net cash flows expected to be generated from its
properties.

The recoverability of amounts shown for mineral properties and related
deferred costs is dependent upon the discovery of economically
recoverable reserves, securing and maintaining title and beneficial
interest in the properties, the ability of the Company to obtain
necessary financing to continue operations and to complete the
development and upon future profitable production or proceeds from the
disposition thereof. The discovery or establishment of adequate reserves
is dependent on successful exploration. Competition for exploration
resources at all levels is currently very intense, particularly
affecting availability of manpower, drill rigs and helicopters. As a
result of this, and other factors inherent in exploration, the Company
has uncertainty that it will be able to carry out its planned
exploration programs.

Reclamation Costs

The amounts recorded for reclamation costs are estimates based on
engineering studies and management's assessment of the work that is
anticipated to remediate old mine workings of the Company's Nome Gold
and Murray Brook sites, and exploration remediation at the Galore Creek
project. Actual results could differ from these estimates.

The Company's accounting policies are described in note 2 to the
consolidated financial statements.

Change in Accounting Policies

On December 1, 2003 the Company prospectively adopted the revised
requirements of Handbook Section 3870 "Accounting for Stock-Based
Compensation and Other Stock-Based Payments" whereby the fair value of
awards to both employees and non-employees are charged to the income
statement. The Company granted 1,860,000 stock options to directors,
officers, employees and service providers and recorded a stock-based
compensation charge of $5.8 million during the year.

Risk Factors

Exploration and Development

Mineral exploration and development involves a high degree of risk and
few properties that are explored are ultimately developed into producing
mines. There is no assurance that the Company's mineral exploration
activities will result in any discoveries of new bodies of commercial
ore. There is also no assurance that if commercial ore is discovered
that ore body would be economical for commercial production. Discovery
of mineral deposits is dependent upon a number of factors and
significantly influenced by the technical skill of the exploration
personnel involved. The commercial viability of a mineral deposit is
also dependent upon a number of factors which are beyond the Company's
control. Some of these factors are the attributes of the deposit,
commodity prices, government policies and regulation and environmental
protection.

The Company is earning an interest in certain of its key properties
through option agreements and acquisition of title to the properties is
only completed when the option conditions have been met. These
conditions include making property payments, incurring exploration
expenditures on the properties, and satisfactory completion of certain
pre-feasibility studies and third party agreements. If the Company does
not satisfactorily complete these option conditions in the time frame
laid out in the option agreements, the Company's title to the related
property will not vest and the Company will have to write-down its
previously capitalised costs related to that property.

Resource Estimates

There is a degree of uncertainty attributable to the calculation of
reserves and the corresponding grades. Resource estimates are dependent
partially on statistical inferences drawn from drilling, sampling and
other data. The measured and indicated and inferred resource figures set
forth by the Company are estimates, and there is no certainty that the
measured and indicated levels of gold will be realized. Declines in the
market price for gold may adversely affect the economics of a reserve
and may require the Company to reduce its estimates.

Price Volatility-Gold and Other Metals

The market price for gold and other metals is volatile and cannot be
controlled. There is no assurance that if commercial quantities of gold
and other metals are discovered, a profitable market may or continue to
exist for a production decision to be made or for the ultimate sale of
the metals. As the Company is currently not in production, no
sensitivity analysis for price changes has been provided or carried out.

About NovaGold

NovaGold is a precious metals company focused on creating value through
the exploration and development of high quality mineral properties in
Alaska and Western Canada. NovaGold is advancing four of the largest
undeveloped resources in North America: the Galore Creek
gold-silver-copper project, the Donlin Creek project in partnership with
Placer Dome, the Ambler Project in partnership with Rio Tinto, and the
Company's Nome, Alaska Operations. NovaGold has 63.3 million shares
outstanding, is well financed with no long-term debt, and one of the
largest resource bases of any exploration or development stage precious
metals company. More information is available online at www.novagold.net.

Forward-Looking Statements

The Management's Discussion and Analysis contains forward-looking
statements concerning anticipated developments in NovaGold's operations
in future periods. Forward-looking statements are frequently, but not
always, identified by words such as "expects," "anticipates,"
"believes," "intends," "estimates," "potential," "possible" and similar
expressions, or statements that events, conditions or results "will,"
"may," "could" or "should" occur or be achieved. These forward-looking
statements are set forth principally under the heading "Outlook" in the
Management's Discussion and Analysis. Forward-looking statements are
statements about the future and are inherently uncertain, and actual
achievements of NovaGold may differ materially from those reflected in
the forward-looking statements due to a variety of risks, uncertainties
and other factors. NovaGold's forward-looking statements are based on
the beliefs, expectations and opinions of management on the date the
statements are made, and NovaGold does not assume any obligation to
update forward-looking statements if circumstances or management's
beliefs, expectations or opinions should change. For the reasons set
forth above, investors should not place undue reliance on
forward-looking statements.



NOVAGOLD RESOURCES INC.
Consolidated Balance Sheets-Audited
in thousands of Canadian dollars

---------------------------------------------------------------------
---------------------------------------------------------------------
November 30, 2004 November 30, 2003
$ $
Assets
Current assets
Cash and cash equivalents 56,142 59,747
Restricted cash 469 54
Accounts receivable 192 189
Amounts receivable from related party 13 13
Inventory 39 99
Deposits and prepaid amounts 1,174 733
---------------------------------------------------------------------
58,029 60,835

Accounts and officer loan receivable 710 215
Land 1,757 1,683
Property, plant and equipment 1,131 660
Mineral properties and related
deferred costs 147,126 36,330
Investments 1,641 130
Reclamation deposit 105 105
---------------------------------------------------------------------
210,499 99,958
---------------------------------------------------------------------
---------------------------------------------------------------------
Liabilities
Current liabilities
Accounts payable and
accrued liabilities 6,867 4,560
Loan payable 200 200
Provision for reclamation costs 899 1,136
---------------------------------------------------------------------
7,966 5,896

Officer loan payable 204 215
Deferred tenant inducements - 119
Deferred income 21 -
Provision for reclamation costs 536 536
Minority interest - 9,130
Future income taxes 30,262 -
---------------------------------------------------------------------
38,989 15,896
---------------------------------------------------------------------
Shareholders' equity
Share capital 247,511 157,475
Contributed surplus 820 820
Stock-based compensation 5,811 23
Deficit (82,632) (74,256)
---------------------------------------------------------------------
171,510 84,062
---------------------------------------------------------------------
210,499 99,958
---------------------------------------------------------------------
---------------------------------------------------------------------

(See notes to consolidated financial statements)


(signed: Rick Van Nieuwenhuyse) (signed: James Philip)
Director Director
Approved by the Board of Directors



NOVAGOLD RESOURCES INC.
Consolidated Statements of Operations and Deficit-Audited
For the years ended November 30, 2004, 2003 and 2002
in thousands of Canadian dollars, except per share amounts

---------------------------------------------------------------------
---------------------------------------------------------------------
2004 2003 2002
$ $ $
Revenue
Land, gravel, gold and
other revenue 2,462 1,246 2,124
Interest income 1,289 346 196
---------------------------------------------------------------------
3,751 1,592 2,320

Cost of sales 282 333 238
---------------------------------------------------------------------
3,469 1,259 2,082
---------------------------------------------------------------------
Expenses and other
Corporate development and
communication 771 772 1,425
Exploration - 120 39
Foreign exchange loss (56) 1,111 (303)
Gain on settlement of
convertible royalty - - (105)
General and administrative 2,263 1,834 1,271
Mineral property recovery
in excess of costs (109) - -
Professional fees 851 836 1,401
Stock-based compensation 5,788 23 -
Wages and benefits 2,203 1,927 898
Write-down of mineral properties 250 1,586 913
Write-down of investments - 105 -
---------------------------------------------------------------------
11,961 8,314 5,539

Loss from equity investment - (36) -

Minority interest 116 138 -

---------------------------------------------------------------------
Loss for the year (8,376) (6,953) (3,457)

Deficit - Beginning of year (74,256) (67,303) (63,846)
---------------------------------------------------------------------
---------------------------------------------------------------------

Deficit - End of year (82,632) (74,256) (67,303)
---------------------------------------------------------------------
---------------------------------------------------------------------
Loss per share
Basic and diluted (0.14) (0.14) (0.10)

Weighted average number
of shares 59,160,082 48,683,103 35,929,200
---------------------------------------------------------------------
---------------------------------------------------------------------

(See notes to consolidated financial statements)



NOVAGOLD RESOURCES INC.
Consolidated Statements of Cash Flows-Audited
For the years ended November 30, 2004, 2003 and 2002
in thousands of Canadian dollars

---------------------------------------------------------------------
---------------------------------------------------------------------
2004 2003 2002
$ $ $
Cash flows from (used in)
operating activities
Loss for the year (8,376) (6,953) (3,457)
Items not affecting cash
Accretion of interest on
convertible instruments - - 62
Amortization 210 158 275
Foreign exchange (gain) loss (56) 773 60
Gain on settlement of
convertible royalty - - (105)
Loss from equity investment - 36 -
Mineral property recovery in
excess of cost (109) - -
Minority interest (116) (138) -
Stock-based compensation 5,788 23 -
Write-down of mineral properties 250 1,586 913
Write-down of investments - 105 -
---------------------------------------------------------------------
(2,409) (4,410) (2,252)
Net change in non-cash working capital
(Increase) decrease in accounts
receivable, deposits and
prepaid amounts (433) 1,517 (1,564)
(Increase) decrease in inventory 60 (7) (81)
Increase (decrease) in accounts
payable and accrued liabilities (426) (2,102) 2,460
---------------------------------------------------------------------
(3,208) (5,002) (1,437)
---------------------------------------------------------------------
Financing activities
Proceeds from issuance of
common shares - net 25,925 46,071 36,734
Repayment of convertible royalty - - (1,139)
---------------------------------------------------------------------
25,925 46,071 35,595
---------------------------------------------------------------------
Investing activities
Acquisition of property, plant
and equipment (800) (612) (229)
Acquisition of subsidiary - (2,213) -
Cash acquired with subsidiary - 1,504 -
Financing of subsidiary - 7,048 -
Expenditures on land improvements (74) - -
Expenditures on mineral properties
and related deferred costs - net (25,909) (7,296) (13,964)
Increase in accounts payable
and accrued liabilities 2,506 679 -
Increase in restricted cash (415) (54) -
Increase in accounts receivable (506) - -
Investments (1,180) - -
Tenant inducements - 119 -
---------------------------------------------------------------------
(26,378) (825) (14,193)
---------------------------------------------------------------------
Effect of exchange rate changes
on cash and cash equivalents 56 (884) -
Increase (decrease) in cash and
cash equivalents during the year (3,605) 39,360 19,965
Cash and cash equivalents -
Beginning of the year 59,747 20,387 422
---------------------------------------------------------------------
Cash and cash equivalents -
End of the year 56,142 59,747 20,387
---------------------------------------------------------------------
---------------------------------------------------------------------

(See notes to consolidated financial statements)


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