NOVAGOLD Resources (NYSE American, TSX: NG) will acquire the remaining interest in Donlin Gold that it does not already own from Paulson Advisors through an all-stock transaction, creating a gold company valued at about $4.2 billion and consolidating ownership of one of the world’s largest undeveloped gold projects.

Under the transaction, NOVAGOLD’s current stake in Donlin will be combined with Paulson Advisors’ interest to establish NovaGold Corporation, a company incorporated in Delaware. Existing NOVAGOLD shareholders are expected to hold nearly 65% of the combined company, while Paulson will receive about 35% in exchange for its Donlin interest. When Paulson’s existing NOVAGOLD holdings are included, Paulson will own about 40% of the new company.

NOVAGOLD said the acquisition will add more than 16 million ounces of measured and indicated resources to the company, including 13 million ounces classified as proven and probable reserves. It will also increase NOVAGOLD’s attributable gold production by more than 520,000 ounces per year during the first decade of Donlin’s operations.

Shares issued to Paulson in the combined company will be subject to a lock-up. The restriction will expire at the earliest of three events: Donlin project financing, Paulson reducing its ownership to below 10%, or the third anniversary of the transaction’s effective date.

“Consolidating our interest in Donlin into NOVAGOLD enhances Donlin’s organizational structure and will facilitate, streamline and expedite the development of the Donlin mine,” John Paulson said.

The transaction, which is expected to close in the fourth quarter, comes as gold miners seek to consolidate tier-one assets while record bullion prices strengthen balance sheets and improve access to capital. NOVAGOLD said that by ending the split ownership of Donlin, it will create a single U.S.-listed company and improve access to government agencies and sovereign wealth funds as the project moves into its next stage of development.

That ownership change matters because large undeveloped mines typically require coordinated decisions on financing, permitting, engineering and long-term construction planning before production can begin. A single controlling company can reduce the number of counterparties involved in those discussions, although Donlin’s development timeline will still depend on project financing and execution of the mine plan.

BMO Capital Markets analyst Raj Ray said the deal should simplify Donlin’s ownership structure and streamline discussions around project development and financing.

World-class asset

“Our combination epitomizes the ultimate ‘smart’ consolidation transaction in the gold industry that aligns the interest of everyone involved,” NOVAGOLD CEO Greg Lang said.

NovaGold Corporation will be co-chaired by NOVAGOLD chairman Thomas Kaplan and John Paulson. Its board will increase to 11 directors from 10. The company will also redomicile to the United States, where the Donlin project is located in southwest Alaska.

Donlin Gold contains approximately 40 million measured and indicated ounces grading 2.22 grams of gold per tonne, including mineral reserves. The scale and grade make it one of the mining industry’s largest and highest-grade undeveloped gold deposits.

The project is expected to produce about 1.1 million ounces of gold annually over a 27-year mine life. During its first decade, average annual production is projected to rise to about 1.3 million ounces because of higher initial grades.

The next milestones for investors and industry observers will include completion of the transaction, the company’s redomiciling process and any further updates on Donlin financing and development planning.

NOVAGOLD’s official announcement is available at novagold.com.