Novagold Resources Inc. (AMEX:NG) shares are trading higher on Tuesday after the company and Paulson Advisers LLC inked a deal to acquire Barrick Gold Corporation‘s (NYSE:GOLD) 50% stake in Donlin Gold LLC for $1 billion in cash.
As per the terms, Novagold will purchase an additional 10% stake in Donlin Gold LLC for $200 million. The purchase raises its ownership to 60% from 50%.
Paulson Advisers will acquire the remaining 40% for $800 million, becoming a full and equal partner in managing the Donlin Gold project.
To fund its share of the acquisition, Novagold secured $170 million in equity commitments from Paulson, Electrum, and Kopernik at $3.00 per share. The balance of $30 million to be funded from its treasury.
The investors also received five-year warrants for 25.5 million shares at the same price.
This transaction establishes a new partnership between Novagold and Paulson aimed at advancing the Donlin Gold project.
The deal is expected to close in late second quarter or early third quarter of 2025.
Upon closure, Novagold and Paulson will sign a revised limited liability company agreement for Donlin Gold, granting both parties equal governance rights.
Additionally, Barrick has provided Novagold with the option to acquire the outstanding debt related to the Donlin Gold Project.
Novagold can purchase the debt for $90 million if exercised before the deal closes. It can cost $100 million if exercised within 18 months after closing, at which point the option will expire.
If Novagold chooses not to exercise this option, the debt will continue under its current terms.
The company’s partners will review the previously disclosed 2025 Donlin Gold expenditure of approximately $43 million on a 100% basis.
Novagold Chairman John Paulson said, “Donlin Gold is one of the most attractive development gold projects in the world. With 39 million ounces of gold at double the industry average grade, and an optimal location in the prime jurisdiction of Alaska — already the second largest gold-producing state in the United States — we believe that the project could create value for decades to come.”
”Enjoying excellent social license and formidable exploration upside potential to significantly expand its resources and production profile, Donlin Gold constitutes a superb opportunity for us to gain leverage to gold in the United States at an attractive valuation.”
As of Feb. 28, Novagold held approximately $93 million in cash and term deposits.
Price Action: NG shares are up 21.06% at $3.76 on Tuesday’s last check.
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