On Wednesday, after the market closed, NovaGold Resources (NYSEMKT:NG) reported its second-quarter earnings results. Earnings came in at ($0.03). The loss isn't surprising for a junior miner, and when we look at these earnings reports, we are more interested in other things, such as how much progress the company has made. The company announced that it is almost done preparing its EIS (environmental impact statement). This document will need to get approved before NovaGold and its partner -- Barrick Gold (NYSE:ABX) -- can move forward with production.
While it is great to see the company move forward on the permitting front, my initial thesis remains intact, namely that investors simply have to wait too long for the project to go into production. This doesn't mean that the stock can't appreciate, but the company has another 2 years worth of permitting at least, and then 3 years of construction. This assumes the company can get financing relatively quickly. Waiting 5 years is risky given that there can be delays, and given that market conditions can change so that the economic analysis provided by the company today might not make sense in a few years.
Investors are discouraged from shorting the stock, but I would be very careful on the long side. News releases such as these can generate optimism that things are moving smoothly. But one stumble can generate an overreaction in the market, and shares can tumble. Investors are encouraged to look for companies that are nearer to production and which have smaller mines that are easier to bring into production.
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