Is NovaGold Resources a Buy After Earnings?
As an investor in smaller speculative gold mining companies with no revenues, I think it is very tempting to look for companies with large projects. But such projects take a lot of capital to bring them into production. They also take a lot of time. This time is not just attributable to the fact that a bigger resource requires that a bigger mine be built. It is also attributable to the long and extensive permitting process that precedes this construction.
Environmental regulators and activists are going to devote their efforts toward these large projects, and unless a small project is going to do something horrendous for the environment, its owners should have little trouble receiving a permit in a timely fashion. Consequently I tend to avoid smaller mining companies with enormous projects.
To highlight this sentiment, I will look at NovaGold Resources (NYSEMKT:NG).
NovaGold released its Q4 earnings results on Tuesday. NovaGold’s two mines — Donlin and Galore Creek — are not yet in production, so the company’s sales came in at $0 and it recorded a slight loss due to expenses. However, when analyzing a company that is bringing mining projects into production, it is more important to highlight what the company accomplished in achieving this production.