General

Novo Reports 2021 Financial Results – Yahoo Finance

Novo Resources Corp.

VANCOUVER, British Columbia, March 31, 2022 (GLOBE NEWSWIRE) — Novo Resources Corp. (“Novo” or the “Company”) (TSX: NVO, NVO.WT & NVO.WT.A) (OTCQX: NSRPF) is pleased to announce its financial results for the three and twelve-month periods ended December 31, 2021. All amounts are expressed in Canadian dollars, unless otherwise noted.

This news release should be read together with Novo’s management’s discussion and analysis (the “Annual MD&A”) and audited consolidated financial statements (the “Audited Financial Statements”) for the year ended December 31, 2021 (“Fiscal 2021”) and the eleven-month transitional period ended December 31, 2020 (“Fiscal 2020”) which are available under Novo’s profile on SEDAR (www.sedar.com). The fourth quarter of Fiscal 2021 is referred to as “Q4 2021” in this news release.

Highlights

  • Revenue of $112.2 million from the sale of 49,232 ounces of gold from the Company’s Beatons Creek gold project (the “Beatons Creek Project”) in Fiscal 2021 ($29.9 million from the sale of 13,023 ounces in Q4 2021) at an average realized price1 of $2,281 / A$2,421/ US$1,819 per ounce ($2,294 / A$2,498 / US$1,821 per ounce for Q4 2021) subsequent to Novo’s inaugural gold pour on February 16, 20212

  • Cash and cash equivalents of $32.5 million as at December 31, 2021

  • Investment portfolio balance of $156.2 million3 as at December 31, 2021, including a 9.13% undiluted stake in New Found Gold Corp. (TSXV: NFG) (“New Found”)

  • Continuing focus on high-priority exploration targets, with exploration spend of $12.1 million in Fiscal 2021 ($12.3 million in Fiscal 2020)

  • Earnings before interest, taxes, depreciation and amortization (“EBITDA”)1 of $41.7 million in Fiscal 2021 ($(49.8) million for Q4 2021) and adjusted EBITDA1 of $(2.4) million in Fiscal 2021 ($(5.2) million for Q4 2021)

  • Total cash costs1 of $1,865 / A$1,980 / US$1,488 per ounce sold in Fiscal 2021 ($2,296 / A$2,501 / US$1,822 in Q4 2021) and all-in sustaining costs (“AISC”)1 of $2,637 / A$2,799 / US$2,104 per ounce sold in Fiscal 2021 ($3,143 / A$3,423 / US$2,494 per ounce sold in Q4 2021)

  • Recognition of a one-time non-cash gain of $85.6 million in Fiscal 2021 as a result of the accounting treatment (discontinuation of equity accounting; see below) for the Company’s investment in New Found

  • Recognition of a non-cash impairment charge of $46.9 million in Q4 2021 due to uncertainty regarding the timing of the receipt of the Fresh mining approvals and Beatons Creek Project operational performance to date against forecast

  • Completion of final payment of AUD$3 million for the Comet Well project near Karratha, Western Australia in February 20214

  • Amendment of senior secured credit facility with Sprott Private Resource Lending II (Collector), LP (the “Sprott Facility”) and draw-down of additional USD$5 million in April 20215

  • Completion of sale of part of the Company’s Blue Spec project near Nullagine, Western Australia to Calidus Resources Ltd. (ASX: CAI) (“Calidus”) in April 2021 for gross aggregate consideration of AUD$12.5 million cash (AUD$2.5 million received in Fiscal 2020) plus 13,333,333 ordinary shares of Calidus6, all of which were sold in Q4 2021 (along with some pre-existing Calidus shares) for gross proceeds of AUD$8.7 million

  • Completion of $26.4 million brokered private placement of special warrants in May 20217

Also refer to the Company’s Q4 2021 operational update8 and comprehensive exploration update9. The Company will provide further operations and exploration updates during April 2022.

________________________
1 Non-IFRS measure; the definitions and reconciliations of these measures are included under “Non-IFRS Measures” below.
2 Refer to the Company’s news release dated February 16, 2021.
3 Novo’s ability to dispose of its investments is subject to certain thresholds under the Sprott Facility. Please refer to the Annual MD&A which is available under Novo’s profile on SEDAR at www.sedar.com. Novo’s investment in New Found Gold Corp. is subject to escrow requirements pursuant to National Instrument 46-201 Escrow for Initial Public Offerings. The value of Novo’s holdings in Elementum 3D, Inc. (“E3D”) is based on E3D’s most recent financing price of US$8.00 per unit comprised of one common share and one-half of one common share purchase warrant. Except for its investment in E3D and warrant holdings, the fair value of Novo’s investments is based on closing prices of its investments and relevant foreign exchanges rate as at December 31, 2021.
4 Refer to the Company’s news release dated February 4, 2021.
5 Refer to the Company’s news release dated April 9, 2021.
6 Refer to the Company’s news release dated March 23, 2021.
7 Refer to the Company’s news release dated May 4, 2021.
8 Refer to the Company’s news release dated January 14, 2022.
9 Refer to the Company’s news release dated January 28, 2022.

Financial Highlights

In thousands of CAD, except where noted

For the three
months ended
December 31,
2021

For the three
months ended
December 31,
2020

For the year
ended
December 31,
2021

For the
11-month
period ended
December 31,
2020

Gold sold

Oz Au

13,023

49,232

Average realized price1

$/oz

2,294

2,281

Average realized price1

AUD$/oz

2,498

2,421

Average realized price1

USD$/oz

1,821

1,819

Total revenue

$

29,857

112,243

Cost of goods sold

$

(37,769

)

(110,767

)

Net loss from operations

$

(5,084

)

(10,640

)

(22,740

)

(26,804

)

Impairment of non-current assets

$

(46,905

)

(46,905

)

Other income, net

$

2,253

574

90,947

398

Finance items

$

(2,395

)

(503

)

(16,337

)

(2,173

)

Income tax expense (benefit)

$

739

(7,145

)

778

Net loss for the period after tax

$

(59,304

)

(10,569

)

(704

)

(27,801

)

Basic and diluted loss per common share

$/share

(0.24

)

(0.05

)

(0.00

)

(0.14

)

EBITDA1

$

(49,839

)

(8,598

)

41,508

(24,209

)

Adjusted EBITDA1

$

(5,187

)

(9,172

)

(2,534

)

(24,607

)

Adjusted earnings1

$

(16,116

)

(11,143

)

(52,073

)

(28,199

)

Adjusted earnings per common share1

$/share

(0.07

)

(0.05

)

(0.22

)

(0.14

)

Total cash costs1

$/oz

2,296

1,865

Total cash costs1

AUD$/oz

2,501

1,980

Total cash costs1

USD$/oz

1,822

1,488

AISC1

$/oz

3,143

2,637

AISC1

AUD$/oz

3,423

2,799

AISC1

USD$/oz

2,494

2,104

The Company did not have any revenue-generating operations prior to its inaugural gold pour on February 16, 20212.

Novo generated revenue of $112.2 million from the sale of 49,232 ounces of gold at an average realized price1 of $2,281 / A$2,421/ US$1,819 per ounce in Fiscal 2021. Approximately 1,362,534 tonnes of mineralized material were processed through the Golden Eagle processing facility (the “Golden Eagle Plant”) in Fiscal 2021 subsequent to the Company’s inaugural gold pour2, equating to an annual processing rate of approximately 1.6 million tonnes per annum. Processed material had an average head grade of 1.25 g/t Au with average recovery of 93.0%8 resulting in 49,364 ounces of gold produced in Fiscal 20218.

Revenue for Q4 2021 was $29.9 million from the sale of 13,023 ounces of gold at an average realized price1 of $2,294 / A$2,498 / US$1,821 per ounce. Processing rates were affected by a number of unscheduled short-term mill shuts during Q4 2021, including a longer shut in early November 2021 which accompanied significant crusher maintenance10. Approximately 395,000 tonnes of mineralized material were processed through the Golden Eagle Plant in Q4 2021 at an average head grade of 1.16 g/t Au and average recovery of 91.5%8. The Company produced 12,833 ounces of gold and sold 13,023 ounces of gold in Q4 20218.

The Company generated a net loss of $(0.7) million or $(0.00) per share in Fiscal 2021, and a net loss of $(59.3) million or $(0.24) per share in Q4 2021.

EBITDA1 totaled $41.5 million in Fiscal 2021 ($(49.8) million in Q4 2021), and adjusted EBITDA1 totaled $(2.5) million in Fiscal 2021 ($(5.2) million in Q4 2021).

Total cash costs1 were $1,865 / A$1,980 / US$1,488 in Fiscal 2021 ($2,296 / A$2,501 / US$1,822 in Q4 2021). AISC1 was $2,637 / A$2,799 / US$2,104 in Fiscal 2021 ($3,143 / A$3,423 / US$2,494 in Q4 2021). Total cash costs1 and AISC1 are heavily influenced by the number of ounces of gold sold and are higher than anticipated due to, among other things, a lower production base than forecast.

Adjusted earnings (losses)1 were $(52.0) million or $(0.22) per share in Fiscal 2021, and $(16.1) million or $(0.07) per share in Q4 2021. Non-cash adjustments include a gain recognized on the discontinuation of equity accounting for the Company’s investment in New Found, impairment related to the Beatons Creek Project, and income tax expenses related to the movement in fair value of the Company’s investment portfolio.

The Company recognized a non-cash impairment expense of $46.9 million related to the Company’s Beatons Creek Project in Q4 2021 due to current uncertainty regarding the timing of the receipt of the Fresh mining approvals and Beatons Creek Project operational performance to December 31, 2021 against forecast.

The Company is committed to aggressively advancing its highly prospective exploration portfolio and devoted
$12.1 million to such efforts in Fiscal 2021.

________________________
10 Refer to the Company’s news releases dated November 1, 2021, and November 5, 2021.

Financial Position

In thousands of CAD,

December 31, 2021

December 31, 2020

January 31, 2020

except where noted

$’000

$’000

$’000

Cash

32,345

40,494

28,703

Short-term investments

108

195

88

Working capital1

3,925

14,071

26,051

Sprott Facility adjusted working capital (USD$)1

18,332

25,089

Marketable securities3

156,209

18,770

14,457

Available liquidity1

102,868

59,623

42,501

Total assets

462,682

456,408

158,049

Current liabilities excluding current portion of financial liabilities

19,805

12,083

1,082

Non-current liabilities excluding non-current portion of financial liabilities

36,342

28,615

Financial liabilities (current and non-current)

75,608

86,271

8,565

Total liabilities

148,420

126,969

9,647

Shareholders’ equity

314,262

329,439

148,402

The Company held cash and cash equivalents of $32.5 million as at December 31, 2021, with a working capital1 balance of $3.9 million. The Company’s investment portfolio balance grew by 732% from December 31, 2020 to $156.2 million3 and includes the Company’s 9.13% undiluted investment in New Found (currently worth approximately $114.75 million) along with the Company’s undiluted 12.6% investment (pre-financing) in unlisted Elementum 3D Inc. (“E3D”). The Company revalued its holdings in E3D in Q4 2021 from $6.6 million to $16.5 million based on E3D’s ongoing financing at USD$8.00 per unit.

During Fiscal 2020, the Company determined that it exercised significant influence over New Found pursuant to IAS 28 Investment in Associates and Joint Ventures. On September 17, 2021, immediately subsequent to New Found’s most recent annual general meeting, Novo determined that it had ceased to exercise significant influence over New Found, discontinued equity accounting, and recognized its retained interest in New Found as a marketable security at fair value resulting in a non-cash one-time gain of $85.6 million based on the difference between New Found’s fair value using its share price on the date of derecognition ($7.15) and the carrying value of the investment using the equity accounting method, with certain adjustments.

The Sprott Facility remains fully drawn at USD$40 million. Interest accrues on the outstanding principal amount of the Sprott Facility at a rate of 8% per annum plus the greater of (i) US three-month LIBOR and (ii) 1.00%. All interest is payable in cash on a monthly basis. Principal is repayable commencing December 2022 and quarterly thereafter until September 2024 in eight equal instalments. The availability of the Sprott Facility is subject to certain conditions and covenants, including the maintenance of minimum unrestricted cash and working capital balances after certain adjustments. As at December 31, 2021 and the date of this news release, the Company is in compliance with Sprott Facility conditions and covenants, as amended or waived.

Outlook

The Company reiterates its previous production forecast for the first half of 2022 of 27 koz – 33 koz Au11, which remains influenced by close-spaced drilling and mine-to-mill reconciliation efforts and assumes receipt of requisite approvals. The Company will provide an operations performance and approvals update following completion of the first quarter of 2022.

________________________
11 Refer to the Company’s news releases dated December 13, 2021, and January 14, 2022.

Non-IFRS Measures

Certain non-IFRS measures have been included in this news release. The Company believes that these measures, in addition to measures prepared in accordance with International Financial Reporting Standards (“IFRS”), provide readers with an improved ability to evaluate its underlying performance and to compare it to information reported by other companies. The non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures do not have any standardized meaning prescribed under IFRS, and therefore may not be comparable to similar measures presented by other companies.

Non-IFRS measures for Fiscal 2021 are not necessarily indicative of ongoing performance considering the Company was still ramping up operations through to September 30, 2021 and declared commercial production effective October 1, 202112.

________________________
12 Refer to the Company’s news release dated October 12, 2021.

Average Realized Price

The Company uses the average realized price per ounce of gold sold to better understand the gold price and, once applicable, cash margin realized throughout a period.

Average realized price is calculated as revenue from contracts with customers plus treatment and refinery charges included in dore revenue less silver revenue divided by gold ounces sold.

The following table reconciles this non-IFRS measure to the most directly comparable IFRS measure disclosed in the Annual MD&A and Audited Financial Statements.

In thousands of CAD, except where noted

For the three
months ended
December 31,
2021

For the three
months ended
December 31,
2020

For the year
ended
December 31,
2021

For the
11-month
period ended
December 31,
2020

Revenue from contracts with customers

$

29,857

112,243

Treatment and refining charges

$

72

255

Less: Silver revenue

$

(52

)

(215

)

Gold revenue

$

29,877

112,283

Gold sold

oz

13,023

49,232

Average realized price

$/oz

2,294

2,281

Foreign exchange rate

CAD:AUD

1.0890

1.0616

Average realized price

AUD$/oz

2,498

2,421

Foreign exchange rate

CAD:USD

0.7936

0.7978

Average realized price

USD$/oz

1,821

1,819

Total Cash Costs

The Company reports total cash costs on a per gold ounce sold basis. In addition to measures prepared in accordance with IFRS, such as revenue, the Company believes this information can be used to evaluate its performance and ability to generate operating earnings and cash flow from its mining operations. The Company uses this metric to monitor operating cost performance.

Total cash costs include cost of sales such as mining, processing, mine general and administrative costs, royalties, selling costs, and changes in inventories less non-cash depreciation and depletion, write-down of inventories and site share-based payments where applicable, and silver revenue divided by gold ounces sold to arrive at total cash costs per ounce of gold sold. Refer to the Annual MD&A for the treatment of depreciation and depletion costs prior and subsequent to the declaration of commercial production.

The following table reconciles this non-IFRS measure to the most directly comparable IFRS measure disclosed in the Annual MD&A and Audited Financial Statements.

In thousands of CAD, except where noted

For the three
months ended
December 31,
2021

For the three
months ended
December 31,
2020

For the year
ended
December 31,
2021

For the
11-month
period ended
December 31,
2020

Gold sold

Oz Au

13,023

49,232

Total cash cost reconciliation

Cost of sales

$

37,768

110,767

Less: Depreciation and depletion*

$

(7,809

)

(18,730

)

Less: Silver Revenue

$

(52

)

(215

)

Less: Site share-based compensation

$

Total cash costs

$

29,907

91,822

Cash costs per oz of gold sold

$/oz

2,296

1,865

Foreign exchange rate

CAD:AUD

1.0890

1.0616

Cash costs per oz of gold sold

AUD$/oz

2,501

1,980

Foreign exchange rate

CAD:USD

0.7936

0.7978

Cash costs per oz of gold sold

USD$/oz

1,822

1,488

*Depreciation and depletion are reconciled to aggregate depreciation and depletion in the operating adjustments in the consolidated statements of cash flows in the Audited Financial Statements.

All-in Sustaining Costs

The Company believes that AISC more fully defines the total costs associated with producing gold. AISC is calculated based on the definitions published by the World Gold Council (“WGC”). The WGC is not a regulatory organization. The Company calculates AISC as the sum of total cash costs (as described above), sustaining capital expenditures (excluding significant projects considered expansionary in nature), accretion on decommissioning and restoration provisions, treatment and refinery charges, payments on lease obligations, site share-based payments where applicable, and corporate administrative costs less any share-based payments directly attributable to exploration and non-operating payments on lease obligations, all divided by gold ounces sold during the period to arrive at a per ounce amount.

Other companies may calculate this measure differently as a result of differences in underlying principles and policies applied. Differences may also arise due to a different definition of sustaining versus expansion capital. Refer to the Annual MD&A for the treatment of depreciation and depletion costs prior and subsequent to the declaration of commercial production.

The following table reconciles this non-IFRS measure to the most directly comparable IFRS measure disclosed in the Annual MD&A and Audited Financial Statements.

In thousands of CAD, except where noted

For the three
months ended
December 31,
2021

For the three
months ended
December 31,
2020

For the year
ended
December 31,
2021

For the
11-month
period ended
December 31,
2020

Gold sold

Oz Au

13,023

49,232

All-in sustaining cost reconciliation

Total cash costs

$

29,907

91,822

Sustaining capital expenditures

$

5,448

5,448

Accretion on rehabilitation provision

$

138

473

Treatment and refinery charges

$

72

255

Payments on lease obligations

$

576

11,889

Less: non-operating payments on lease obligations*

$

(113

)

(1,155

)

Site share-based compensation

$

Corporate administrative costs

$

5,115

25,094

Less: exploration share-based payments**

$

(211

)

(4,005

)

Total all-in sustaining costs

$

40,932

129,821

AISC per oz of gold sold

$/oz

3,143

2,637

Foreign exchange rate

CAD:AUD

1.0890

1.0616

AISC per oz of gold sold

AUD$/oz

3,423

2,799

Foreign exchange rate

CAD:USD

0.7936

0.7978

AISC per oz of gold sold

USD$/oz

2,494

2,104

*The non-operating payments on lease obligations adjustment includes lease amounts which are not directly related to the Company’s operations at the Beatons Creek Project. This figure is not separately disclosed in the Audited Financial Statements.
**Share-based payment expenses directly attributable to the Company’s exploration staff are excluded from the calculation of AISC. This figure is not separately disclosed in the Audited Financial Statements and is a subset of the share-based payments expense outlined in Note 20 of the Audited Financial Statements.

EBITDA

The Company uses EBITDA to better understand its ability to generate liquidity by producing operating cash flow to fund working capital needs, service debt obligations, and fund capital expenditures.

EBITDA is defined as net earnings before interest and finance expense, interest and finance income, current income tax expense, deferred income tax expense, depreciation and depletion. EBITDA is also adjusted for non-recurring transactions such as the change in fair value of derivative instruments, foreign exchanges gains and losses, gains and losses on the disposal of assets, impairment, and other income. Refer to the Annual MD&A for the treatment of depreciation and depletion costs prior and subsequent to the declaration of commercial production.

The following table reconciles this non-IFRS measure to the most directly comparable IFRS measure disclosed in the Annual MD&A and Audited Financial Statements.

In thousands of CAD, except where noted

For the three
months ended
December 31,
2021

For the three
months ended
December 31,
2020

For the year
ended
December 31,
2021

For the
11-month
period ended
December 31,
2020

$’000

$’000

$’000

$’000

Net loss for the period

(59,304

)

(10,569

)

(704

)

(27,801

)

Interest and finance expense

2,422

483

16,428

2,311

Interest and finance income

(27

)

(21

)

(91

)

(138

)

Current income tax expense / (income)

(739

)

7,145

(778

)

Deferred income tax expense

Depreciation and depletion

7,809

1,509

18,730

2,197

EBITDA

(49,839

)

(8,598

)

41,508

(24,209

)

Other (income) / expenses

(2,253

)

(574

)

(90,947

)

(398

)

Impairment of non-current assets

46,905

46,905

Adjusted EBITDA

(5,187

)

(9,172

)

(2,534

)

(24,607

)

*Depreciation and depletion is reconciled to aggregate depreciation and depletion in the operating adjustments in the consolidated statements of cash flows in the Audited Financial Statements.

Adjusted Earnings and Adjusted Basic and Diluted Earnings per Share

The Company uses adjusted earnings and adjusted basic and diluted earnings per share to measure its underlying operating and financial performance.

Adjusted earnings are defined as net earnings adjusted to exclude specific items that are significant, but not reflective of the Company’s underlying operations, including: foreign exchange (gain) loss, (gain) loss on financial instruments at fair value, impairment, and non-recurring gains and losses on treatment of marketable securities, sale of E&E assets, and associated tax impacts. Adjusted basic and diluted earnings per share are calculated using the weighted average number of shares outstanding under the basic and diluted method of earnings per share as determined under IFRS. Refer to the Annual MD&A for the treatment of depreciation and depletion costs prior and subsequent to the declaration of commercial production.

The following table reconciles this non-IFRS measure to the most directly comparable IFRS measure disclosed in the Annual MD&A and Audited Financial Statements.

In thousands of CAD, except where noted

For the three
months ended
December 31,
2021

For the three
months ended
December 31,
2020

For the year
ended
December 31,
2021

For the
11-month
period ended
December 31,
2020

Basic weighted average shares outstanding

245,939,504

230,353,507

239,822,300

198,880,088

Adjusted earning and adjusted basic earnings per shares reconciliation

Net earnings / (loss) for the period

$

(59,304

)

(10,569

)

(704

)

(27,321

)

Adjusted for:

Other (income) / expenses

$

(2,253

)

(574

)

(90,947

)

(398

)

(Profit) / loss on disposal of exploration asset

$

(725

)

(14,472

)

2,517

Impairment of non-current assets

$

46,905

46,905

Income tax expense / (benefit)

$

(739

)

7,145

(778

)

Adjusted earnings

$

(16,116

)

(11,143

)

(52,073

)

(27,719

)

Adjusted basic earnings per share

$/share

(0.07

)

(0.05

)

(0.22

)

(0.14

)

Available Liquidity

The Company believes that available liquidity provides an accurate measure of the Company’s ability to liquidate assets in order to satisfy its liabilities. The Company uses this metric to help monitor its risk profile.

Available liquidity includes cash, short-term investments, and assets which are readily saleable within the next 12 months, including gold in circuit and stockpiles, receivables, marketable securities (to the extent that an established market exists for such marketable securities, they are free of any long-term trading restrictions, and sufficient historical volume exists to liquidate holdings within 12 months), and gold specimens. The market value of certain marketable securities has been used in the calculation of available liquidity which may not reconcile to the accounting treatment of such marketable securities. Refer to the Annual MD&A and Notes 5 and 11 of the Audited Financial Statements.

The following table reconciles this non-IFRS measure to the most directly comparable IFRS measure disclosed in the Annual MD&A and Audited Financial Statements.

December 31,
2021

December 31,
2020

January 31,
2020

January 31,
2019

$’000

$’000

$’000

$’000

Cash

32,345

40,494

28,703

42,832

Short-term investments

108

195

88

93

Gold in circuit

788

3

Stockpiles

4,732

565

Receivables

6,127

1,806

6,657

1,160

Marketable securities

58,691

16,477

6,979

1,336

Gold specimens

77

83

74

159

Available liquidity

102,868

59,623

42,501

45,580

December 31, 2021

# of shares

Share price

Foreign
exchange

Adjusted value
$’000

Kalamazoo Resources Limited Ordinary Shares

10,000,000

$

0.38

0.9420

3,579

GBM Resources Ltd Ordinary Shares

11,363,637

$

0.12

0.9420

1,232

New Found Gold Corp Common Shares*

6,000,000

$

8.98

1

53,880

58,691

*Some of the Company’s New Found shares remain subject to escrow restrictions pursuant to National Instrument 46-201 Escrow for Initial Public Offerings. As at December 31, 2021, 6,000,000 of the Company’s 15,000,000 New Found shares had been released from escrow. The Company’s remaining 9,000,000 New Found shares will be released from escrow semi-annually, with 2,250,000 New Found Shares being released in February and August of each year. As at March 31, 2022, 8,250,000 New Found Shares had been released from escrow.

December 31, 2020

# of shares

Share price

Foreign
exchange

Adjusted value
$’000

Calidus Resources Limited Ordinary Shares

5,138,537

$

0.51

0.9835

2,552

American Pacific Mining Corp. Common Shares

266,666

$

0.18

1

47

Essential Metals Limited Ordinary shares

4,450,000

$

0.08

0.9835

358

Kalamazoo Resources Limited Ordinary Shares

10,000,000

$

0.60

0.9835

5,852

GBM Resources Ltd Ordinary Shares

11,363,637

$

0.14

0.9835

1,564

New Found Gold Corp Common Shares *

1,500,000

$

4.07

1

6,105

16,477

*As at December 31, 2020, 1,500,000 of the Company’s 15,000,000 New Found shares had been released from escrow. Refer to the preceding table for further details.

January 31, 2020

# of shares

Share price

Foreign
exchange

Adjusted value
$’000

Calidus Resources Limited Ordinary Shares

5,658,537

$

0.26

0.8860

1,309

Kalamazoo Resources Limited Ordinary Shares

10,000,000

$

0.64

0.8860

5,670

American Pacific Mining Corp. Common Shares

533,332

$

0.06

1

32

Essential Metals Limited Ordinary shares

50,000,000

$

0.01

0.8860

576

6,979

January 31, 2019

# of shares

Share price

Foreign
exchange

Adjusted value
$’000

Calidus Resources Limited Ordinary Shares

56,585,366

$

0.02

0.9561

1,302

American Pacific Mining Corp. Common Shares

266,666

$

0.13

1

33

Essential Metals Limited Ordinary shares

50,000,000

$

0.02

0.9561

813

1,336

Working Capital

Working capital is defined as current assets less current liabilities and is used to monitor the Company’s liquidity.

The following table reconciles this non-IFRS measure to the most directly comparable IFRS measure disclosed in the Annual MD&A and Audited Financial Statements.

December 31, 2021

December 31, 2020

$’000

$’000

Current assets

49,385

46,976

Current liabilities

45,460

32,905

Working capital

3,925

14,071

Sprott Facility Adjusted Working Capital

Sprott Facility adjusted working capital is a derivation of working capital with a series of adjustments as permitted pursuant to the Sprott Facility. The Company uses Sprott Facility adjusted working capital to monitor its compliance against certain covenants within the Sprott Facility.

The following table reconciles this non-IFRS measure to the most directly comparable IFRS measure disclosed in the Annual MD&A and Audited Financial Statements.

December 31, 2021

December 31, 2020

In thousands of CAD, except where noted

$’000

$’000

Working capital

$

3,925

14,071

Sprott Facility (current)

$

6,339

Lease liabilities (current)

$

12,453

10,645

Sumitomo funding liability

$

5,780

6,071

Sumitomo written call option

$

1,083

1,157

Sprott Facility adjusted working capital

$

29,580

31,944

Foreign exchange rate

CAD:USD

0.7888

0.7854

Sprott Facility adjusted working capital

USD$

23,332

25,089

CAUTIONARY STATEMENT

The decision by the Company to produce at the Beatons Creek Project was not based on a feasibility study of mineral reserves demonstrating economic and technical viability and, as a result, there is an increased uncertainty of achieving any particular level of recovery of minerals or the cost of such recovery, including increased risks associated with developing a commercially mineable deposit. Production has not achieved forecast to date. Historically, such projects have a much higher risk of economic and technical failure. There is no guarantee that anticipated production costs will be achieved. Failure to achieve the anticipated production costs would have a material adverse impact on the Company’s cash flow and future profitability.

The Company cautions that its declaration of commercial production effective October 1, 202112 only indicates that the Beatons Creek project was operating at anticipated and sustainable levels and it does not indicate that economic results will be realized.

QP STATEMENT

Dr. Quinton Hennigh (P.Geo.) is the qualified person, as defined under National Instrument 43-101 Standards of Disclosure for Mineral Projects, responsible for, and having reviewed and approved, the technical information contained in this news release. Dr. Hennigh is the non-executive co-chairman and a director of Novo.

ABOUT NOVO

Novo operates its flagship Beatons Creek Project while exploring and developing its prospective land package covering approximately 12,500 square kilometres in the Pilbara region of Western Australia. In addition to the Company’s primary focus, Novo seeks to leverage its internal geological expertise to deliver value-accretive opportunities to its shareholders. For more information, please contact Leo Karabelas at (416) 543-3120 or e-mail leo@novoresources.com.

On Behalf of the Board of Directors,

Novo Resources Corp.

Michael Spreadborough

Michael Spreadborough

Executive Co-Chairman

Forward-looking information

Some statements in this news release contain forward-looking information (within the meaning of Canadian securities legislation) including, without limitation, production forecast for the first half of 2022. These statements address future events and conditions and, as such, involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the statements. Such factors include, without limitation, customary risks of the resource industry and the risk factors identified in the Annual MD&A which is available under Novo’s profile on SEDAR at www.sedar.com. Forward-looking statements speak only as of the date those statements are made. Except as required by applicable law, Novo assumes no obligation to update or to publicly announce the results of any change to any forward-looking statement contained or incorporated by reference herein to reflect actual results, future events or developments, changes in assumptions or changes in other factors affecting the forward-looking statements. If Novo updates any forward-looking statement(s), no inference should be drawn that the Company will make additional updates with respect to those or other forward-looking statements.

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