NovaGold Resources is Cheap and Oversold

I have begun building a position in shares of NovaGold (NG/NG.TO) in the $4-5 range and believe that the price is very close to a short term bottom. At a closing price of $4.05 yesterday on NG, the stock is off over 30% in the past 7 trading days with an RSI reading of 25 (oversold). The share price was $7.25 as recent as early August so it has nearly been cut in half during this gold miner correction. Now is exactly the time that you want to be buying this stock and the downside looks limited to me.NovaGold owns 50% each in two monstrosities called the Donlin Gold (Alaska) and Galore Creek (Canada-mainly copper but also has 8 million ounces of gold and over 100M ounces of silver) assets. Their partner at Donlin is Barrick Gold (world’s largest gold producer) and Teck Resources (Canadian mining behemoth) at Galore. Donlin is enormous with 34 million ounces of gold reserves and another 11mm ounces in the resource categories. The grade is solid at 2.2 GPT versus the global average at 1.12 GPT and the project is at the permitting stage after 16 years of development. Call it 45 million ounces, which is over $50 billion worth of gold at today’s prices, and the deposit has the potential to double in size from here.Donlin dwarfs all other new gold deposits in North America to the tune of having more M&I gold resources than the next 4 projects combined (Livengood-Brucejack-Meliadine-Rainy River). New discovery potential abounds at Donlin and there is enormous leverage to the gold price where the NPV (net present value) at 5% increases 20 fold with just a double in the gold price to $2,500. NPV at 0% (not valid until closer to or even in production) is over $6B at today’s gold price and goes up almost 5X to $27 billion at $2,500 gold.Galore Creek has over 9 billion pounds of copper, 8 million ounces of gold, and 136mm ounces of silver as well. 6 billion pounds of copper to be produced over 18 years and at $3 copper that will be nearly $1 billion in annual revenues with tremendous margins. NG/Teck project costs of only 80 cents per pound of copper, which is outstanding. I will let investors dig deeper on Galore and Donlin fundamentals as I most importantly want to get this piece published for early October 12th. The price is right to act now and that includes an opportunity to make 20-25% on a trade if that’s your style. But I think this stock can go to $20-$50 per share within 3-5 years based on fundamentals aligned with a gold price that retests the 2011 highs.This is a 10 year, monthly chart on NovaGold above. My chart line may be off by a smidgen but we should see strong support on the stock in the 4$ area. The share price hit $20 in 2007 and $17 in late 2010 and I think the $12-14 range will be retested in the next 24 months, which is a triple or better.Below is the daily chart which shows via the top upper right circle that the price is already becoming oversold near $4. The other circle adjacent to the red line (200 day moving average) is a gap in the chart, which will likely be filled. That’s nearly a 40% return from $4.05 and it could happen within just a few weeks. A very realistic shorter term goal is a 20-25% move back near $5.The weekly chart below shows more signs that the lows are very near here close to $4. We see the long term uptrend line still intact with MACD at the bottom being quite stretched. MACD has been below zero for 10 straight weeks and could easily begin turning up anytime.Lastly, the company has a very impressive board of directors and institutional shareholder base. Thomas Kaplan of the Electrum Group is the Chairman and his firm owns over 26% of the company. When you add in Fidelity (8.5%), John Paulson (8%), the top 5 investors own over 50% of the stock. This is pretty unusual for a north of $1 Billion market capitalization company and speaks to the conviction of some very smart money.I urge readers to begin acquiring shares of NovaGold for long term investment. Also, traders can begin adding as well for a potential 20-25% gain within a month or two (it could reverse within hours/days). You may want to add half immediately and keep some dry powder if the miners decide to have one more flush lower before a sustainable rally ensues. This is the exact type of gift that investors would have dreamed of just a couple of months ago when the share price was surging over $7.I am long shares of NG

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