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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended February 29, 2016

OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from             to            

Commission File Number: 1-35447

NOVACOPPER INC.
(Exact Name of Registrant as Specified in Its Charter)

British Columbia	98-1006991
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)
Suite 1950, 777 Dunsmuir Street
Vancouver, British Columbia
Canada	V7Y 1K4
(Address of Principal Executive Offices)	(Zip Code)

(604) 638-8088
(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]      No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X]      No [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [   ]	Accelerated filer [   ]	Non-accelerated filer [   ]	Smaller reporting company [X]
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [   ]      No [X]

As of April 6, 2016, the registrant had 104,979,820 Common Shares, no par value, outstanding.

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NOVACOPPER INC.

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION		2
	Item 1.     Financial Statements	2
	Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
	Item 3.     Quantitative and Qualitative Disclosures about Market Risk	25
	Item 4.     Controls and Procedures	26
PART II - OTHER INFORMATION		27
	Item 1. Legal Proceedings	27
	Item 1A. Risk Factors	27
	Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds	27
	Item 3.     Defaults Upon Senior Securities	27
	Item 4.     Mine Safety Disclosures	27
	Item 5.     Other Information	27
	Item 6.     Exhibits	27

ii

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

NovaCopper Inc.
Consolidated Balance Sheets
(unaudited)

		in thousands of US dollars
		February 29,			November 30,
		2016			2015
		$			$
Assets
Current assets
Cash and cash equivalents		14,678			16,139
Accounts receivable		31			39
Deposits and prepaid amounts		532			707
		15,241			16,885
Plant and equipment (note 3)		394			446
Mineral properties and development costs (note 4)		33,850			33,850
		49,485			51,181
Liabilities
Current liabilities
Accounts payable and accrued liabilities (note 5)		497			751
		497			751
Shareholders’ equity
Share capital (note 6) – unlimited common shares authorized, no par value Issued – 104,979,820 (2015 – 104,796,421)		136,103			136,040
Warrants (note 6(d))		2,163			2,163
Contributed surplus		124			124
Contributed surplus – options (note 6(a,b))		18,025			17,841
Contributed surplus – units (note 6(c))		1,170			1,164
Deficit		(108,597	)		(106,902	)
		48,988			50,430
		49,485			51,181

Commitments and contingencies (notes 4, 6, 8)

(See accompanying notes to the interim consolidated financial statements)

/s/ Rick Van Nieuwenhuyse, Director

/s/ Kalidas Madhavpeddi, Director

Approved on behalf of the Board of Directors

2

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NovaCopper Inc.
Consolidated Statements of Loss and Comprehensive Loss
(unaudited)

in thousands of US dollars, except share and per share amounts
		For the three months ended
		February 29, 2016			February 28, 2015
		$			$
Expenses
Amortization		54			143
Foreign exchange loss (gain)		9			(20	)
General and administrative		348			381
Investor relations		4			6
Mineral properties expense (note 4(d))		667			327
Professional fees		136			161
Salaries		213			250
Salaries – stock-based compensation (note 6)		282			282
Total expenses		1,713			1,530
Other items
Interest and other income		(18	)		-
Loss and comprehensive loss for the period		(1,695	)		(1,530	)
Basic and diluted loss per common share	$	0.02		$	0.03
Weighted average number of common shares outstanding		104,940,884			60,614,960

(See accompanying notes to the interim consolidated financial statements)

3

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NovaCopper Inc.
Consolidated Statements of Changes in Shareholders’ Equity
(unaudited)

																	in thousands of US dollars, except share amounts
														Contributed			Contributed						Total
		Number of			Share						Contributed			surplus –			surplus –						shareholder's
		shares			capital			Warrants			surplus			options			units			Deficit			equity
		outstanding			$			$			$			$			$			$			$
Balance – November 30, 2014		60,296,365			111,833			2,163			124			17,089			2,008			(97,370	)		35,847
Restricted Share Units		337,336			636			-			-			-			(636	)		-			-
Stock-based compensation		-			-			-			-			279			3			-			282
Loss for the period		-			-			-			-			-			-			(1,530	)		(1,530	)
Balance – February 28, 2015		60,633,701			112,469			2,163			124			17,368			1,375			(98,900	)		34,599
Balance – November 30, 2015		104,796,421			136,040			2,163			124			17,841			1,164			(106,902	)		50,430
Restricted Share Units		108,399			34			-			-			-			(63	)		-			(29	)
Deferred Share Units		75,000			29			-			-			-			(29	)		-			-
Stock-based compensation		-			-			-			-			184			98			-			282
Loss for the period		-			-			-			-			-			-			(1,695	)		(1,695	)
Balance – February 29, 2016		104,979,820			136,103			2,163			124			18,025			1,170			(108,597	)		48,988

(See accompanying notes to the interim consolidated financial statements)

4

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NovaCopper Inc.
Consolidated Statements of Cash Flows
(unaudited)

		in thousands of US dollars
		For the three months ended
		February 29, 2016			February 28, 2015
		$			$
Cash flows used in operating activities
Loss for the period		(1,695	)		(1,530	)
Items not affecting cash
Amortization		54			143
Stock-based compensation		253			282
Net change in non-cash working capital
Decrease (increase) in accounts receivable		8			119
Decrease (increase) in deposits and prepaid amounts		175			152
Increase (decrease) in accounts payable and accrued liabilities		(254	)		(252	)
		(1,459	)		(1,086	)
Cash flows used in investing activities
Acquisition of plant and equipment		(2	)		-
		(2	)		-
Increase (decrease) in cash and cash equivalents		(1,461	)		(1,086	)
Cash and cash equivalents – beginning of period		16,139			5,074
Cash and cash equivalents – end of period		14,678			3,988

(See accompanying notes to the interim consolidated financial statements)

5

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NovaCopper Inc.
Notes to the Consolidated Financial Statements

1      Nature of operations

NovaCopper Inc. (“NovaCopper” or the “Company”) was incorporated in British Columbia under the Business Corporations Act (BC) on April 27, 2011. The Company is engaged in the exploration and development of mineral properties with a focus on the Arctic and Bornite Projects located in Northwest Alaska in the United States of America (“US”).

On January 11, 2010, Alaska Gold Company (“AGC”), at the time a wholly owned subsidiary of NovaGold Resources Inc. (“NovaGold”), purchased 100% of the Ambler lands, hosting the copper-zinc-lead-gold-silver Arctic Project. The Ambler lands were acquired on October 17, 2011 by NovaCopper US Inc. (“NovaCopper US”) through a purchase and sale agreement with AGC. On October 19, 2011, NovaCopper US acquired the exclusive right to explore the Bornite lands and lands deeded to NANA Regional Corporation, Inc. (“NANA”) through the Alaska Native Claims Settlement Act (“ANCSA”) located adjacent to the Ambler lands to create the Upper Kobuk Mineral Projects (“UKMP”). On October 24, 2011, NovaGold transferred its ownership of NovaCopper US to NovaCopper, then a wholly owned subsidiary of NovaGold, which was subsequently spun-out to NovaGold shareholders and publicly listed on April 30, 2012 (“NovaGold Arrangement”).

Where applicable, these consolidated financial statements reflect the statements of loss and comprehensive loss, and cash flows of the Arctic Project as if NovaCopper had been an independent operation from inception. Prior to the acquisition in 2010, NovaGold held an initial option from 2004 to earn a 51% interest in the property which was terminated upon entering into the purchase and sale agreement. All historical spending prior to April 30, 2012 was funded by NovaGold.

On June 19, 2015, we completed the acquisition of Sunward Resources Ltd. (“Sunward”), giving us 100% ownership in the Titiribi gold-copper exploration project in Colombia.

2      Summary of significant accounting policies

Basis of presentation

These consolidated financial statements have been prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) and include the accounts of NovaCopper and its wholly-owned subsidiaries, NovaCopper US, Sunward Investments Ltd., and Sunward Resources Limited (“Sunward BVI”). Sunward BVI registered a branch, Sunward Resources Sucursal Colombia, to do business in Colombia. All significant intercompany transactions are eliminated on consolidation. These financial statements were approved by the Company’s Audit Committee on behalf of the Board of Directors for issue on April 6, 2016.

All figures are in United States dollars unless otherwise noted.

The unaudited interim consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of our financial position as of February 29, 2016, our results of operations and cash flows for the three months ended February 29, 2016, and February 28, 2015. The results of operations for the three months ended February 29, 2016 are not necessarily indicative of the results to be expected for the year ending November 30, 2016.

As these interim consolidated financial statements do not contain all of the disclosures required by U.S. GAAP for annual financial statements, these unaudited interim consolidated financial statements should be read in conjunction with the annual financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended November 30, 2015 filed with the U.S. Securities and Exchange Commission (“SEC”) on February 8, 2016.

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Accounting standards adopted

Development stage entity

In June 2014, the FASB issued “Development Stage Entities – Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation” (“ASU 2014-10”). ASU 2014-10 eliminates the concept of a development stage entity, of which NovaCopper had been classified. Upon adoption, certain financial reporting disclosures will be eliminated including the presentation of an inception-to-date statement of income and cash flow. ASU 2014-10 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. The Company adopted this standard as of December 1, 2015. As a result of adopting the standard, we no longer include the cumulative during exploration stage column previously presented on our statement of loss and comprehensive loss and the statement of cash flows.

Recent accounting pronouncements

Leases

In February 2016, the FASB issued new accounting requirements for accounting for, presentation of, and classification of leases (“ASU 2016-02”). This will result in most leases being capitalized as a right of use asset with a related liability on our balance sheets. The requirements of the new standard are effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods, which for us is the first quarter of fiscal 2020. We are in the process of analyzing the impact of this guidance on our results of operations and financial position.

3    Plant and equipment

		in thousands of dollars
		February 29, 2016
					Accumulated
		Cost			amortization			Net
		$			$			$
British Columbia, Canada
Furniture and equipment		46			(26	)		20
Leasehold improvements		32			(22	)		10
Computer hardware and software		93			(73	)		20
Alaska, USA
Machinery, and equipment		2,877			(2,781	)		96
Vehicles		275			(268	)		7
Computer hardware and software		31			(31	)		-
Antioquia, Colombia
Machinery and equipment		206			(52	)		154
Leasehold improvements		73			(26	)		47
Vehicles		52			(12	)		40
Computer hardware and software		1			(1	)		-
		3,686			(3,292	)		394

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		in thousands of dollars
								November 30, 2015
					Accumulated
		Cost			amortization			Net
		$			$			$
British Columbia, Canada
Furniture and equipment		46			(24	)		22
Leasehold improvements		32			(20	)		12
Computer hardware and software		91			(65	)		26
Alaska, USA
Machinery, and equipment		2,877			(2,777	)		100
Vehicles		275			(262	)		13
Computer hardware and software		31			(31	)		-
Antioquia, Colombia
Machinery and equipment		206			(34	)		172
Leasehold improvements		73			(17	)		56
Vehicles		52			(8	)		44
Computer hardware and software		1			-			1
		3,684			(3,238	)		446

4      Mineral properties and development costs

		in thousands of dollars
		November 30,			Acquisition costs			February 29,
		2015			$			2016
		$						$
Alaska, USA
Ambler (a)		26,586			-			26,586
Bornite (b)		4,000			-			4,000
Antioquia, Colombia
Titiribi (c)		3,264			-			3,264
		33,850			-			33,850

		in thousands of dollars
		November 30,			Acquisition costs			November 30,
		2014			$			2015
		$						$
Alaska, USA
Ambler (a)		26,586			-			26,586
Bornite (b)		4,000			-			4,000
Antioquia, Colombia
Titiribi (c)		-			3,264			3,264
		30,586			3,264			33,850

(a)	Ambler
	On January 11, 2010, NovaGold, through AGC, a wholly-owned subsidiary, purchased 100% of the Ambler lands in Northwest Alaska, which contains the copper-zinc-lead-gold-silver Arctic Project and other mineralized targets within the volcanogenic massive sulfide belt. As consideration, NovaGold, issued 931,098 shares with a fair value of $5.0 million and agreed to make two cash payments to the vendor of $12.0 million each in January 2011 and January 2012. The fair value of these cash payments were $11.1 million and $10.3 million, respectively, at the transaction date valued using a discount rate of approximately 8%. The January 2011 payment was made by NovaGold on January 7, 2011 and the January 2012 payment was made by NovaGold, in advance, on August 5, 2011. Total fair value of the consideration was $26.6 million, including transaction costs associated with the acquisition of $0.1 million. The vendor retained a 1% net smelter return royalty that the owner of the property can purchase at any time for a one-time payment of $10.0 million. The current owner is NovaCopper US.
	Prior to the acquisition in 2010, NovaGold held an option to earn a 51% interest in the property which was terminated upon entering into the purchase and sale agreement.

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	As discussed in note 1, the property was acquired by NovaCopper US on October 17, 2011 through a purchase and sale agreement with AGC.
(b)	Bornite
	On October 19, 2011, NovaCopper US acquired the exclusive right to explore and the non-exclusive right to access and enter on the Bornite lands, and lands deeded to NANA through the ANCSA, located adjacent to the Ambler lands in Northwest Alaska. As consideration, NovaCopper US paid $4 million to acquire the right to explore and develop the combined Upper Kobuk Mineral Projects through an Exploration Agreement and Option to Lease with NANA. NANA also has the right to appoint a member to NovaCopper’s board of directors before April 2017. NANA has not exercised their right to appoint a board member at this time. Upon a decision to proceed with construction of a mine on the lands, NANA maintains the right to purchase between a 16%-25% ownership interest in the mine or retain a 15% net proceeds royalty which is payable after NovaCopper has recovered certain historical costs, including capital and cost of capital. Should NANA elect to purchase an ownership interest, consideration will be payable equal to all historical costs incurred on the properties at the elected percentage purchased less $40 million, not to be less than zero. The parties would form a joint venture and be responsible for all future costs, including capital costs of the mine based on their pro-rata share.
	NANA would also be granted a net smelter return royalty of between 1% and 2.5% upon the execution of a mining lease or a surface use agreement, the amount of which is determined by the classification of land from which production originates.
(c)	Titiribi
	On June 19, 2015, NovaCopper completed the acquisition of Sunward. As a result, the Company, through Sunward BVI and its branch Sunward Resources Sucursal Colombia owns 100% of the Titiribi gold-copper exploration project located southwest of the city of Medellin, in Antioquia Department, Colombia.

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(d)	Mineral properties expense
	The following table summarizes mineral properties expense for the three months ended February 29, 2016 and February 28, 2015.

		In thousands of dollars
		Three months			Three months
		ended			Ended
		February 29,			February 28, 2015
		2016			$
		$
Alaska, USA
Community		55			28
Engineering		173			4
Environmental		8			-
Geochemistry and geophysics		12			-
Land and permitting		98			96
Project support		39			49
Wages and benefits		148			150
		533			327
Antioquia, Colombia
Assaying		1			-
Land and permitting		6			-
Project support		50			-
Professional fees		20			-
Wages and benefits		57			-
		134			-
Mineral property expense		667			327

	Mineral property expenses consist of direct drilling, personnel, community, resource reporting and other exploration expenses as outlined above, as well as indirect project support expenses such as fixed wing charters, helicopter support, fuel, and other camp operation costs. Cumulative mineral properties expense in Alaska from the initial earn-in agreement on the property in 2004 to February 29, 2016 is $58.5 million and cumulative acquisition costs of $30.6 million totaling $89.1 million spent on the UKMP to date. Cumulative mineral properties expense in Colombia from the acquisition date of June 19, 2015 to February 29, 2016 is $0.4 million.
5	Accounts payable and accrued liabilities

		in thousands of dollars
		February 29,			November 30,
		2016			2015
		$			$
Trade accounts payable		137			200
Accrued liabilities		285			442
Accrued salaries and vacation		75			109
Accounts payable and accrued liabilities		497			751

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6      Share capital

Authorized:
      unlimited common shares, no par value

		in thousands of dollars, except share amounts
		Number of shares			Ascribed value
					$
November 30, 2014		60,296,365			111,833
Issued pursuant to the Sunward Arrangement		43,116,312			22,851
Exercise of options		7,499			7
Exercise of Sunward Arrangement Options		347,999			177
Restricted Share Units		795,368			819
Deferred Share Units		232,878			353
November 30, 2015		104,796,421			136,040
Restricted Share Units		108,399			34
Deferred Share Units		75,000			29
February 29, 2016, issued and outstanding		104,979,820			136,103

On March 28, 2012, the shareholders of NovaGold approved the NovaGold Arrangement in which NovaGold would distribute its interest in NovaCopper to its shareholders on the basis that each shareholder would receive one Common Share in NovaCopper for every six shares of NovaGold. On April 30, 2012 (the “Effective Date”), NovaGold distributed 46,578,078 Common Shares in NovaCopper to the shareholders of NovaGold. NovaCopper also committed to issue up to 6,181,352 common shares, once vested and exercised, to satisfy holders of NovaGold warrants (“NovaGold Warrants”), performance share units (“NovaGold PSUs”) and deferred share units (“NovaGold DSUs”) on record as of the close of business April 27, 2012. When exercised or in the case of NovaGold PSU or NovaGold DSU vested, NovaCopper has committed to deliver one Common Share to the holder for every six shares of NovaGold the holder is entitled to receive, rounded down to the nearest whole number. An amount of $12.2 million was recorded in contributed surplus representing a prorated amount of the historical NovaGold investment based on the fully diluted number of Common Shares at the Effective Date. Subsequent to the Effective Date, all NovaGold Warrants were exercised and all NovaGold PSUs were vested. As of February 29, 2016, 20,685 NovaGold DSUs remain outstanding, which will settle upon certain directors retiring from NovaGold’s board, and 391,486 NovaGold Arrangement Options remain outstanding as disclosed in note 6b.

(a) Stock options

During the period ended February 29, 2016, 1,785,000 options (February 28, 2015 – 1,620,000 options) at a weighted-average exercise price of CAD$0.44 (February 28, 2015 – CAD$0.62) were granted to employees, consultants and directors exercisable for a period of five years with various vesting terms between nil and two years. The weighted-average fair value attributable to options granted in the period was $0.13.

For the period ended February 29, 2016, NovaCopper recognized a stock-based compensation charge of $0.18 million (February 28, 2015 – $0.28 million) for options granted to directors, employees and service providers, net of forfeitures.

The fair value of the stock options recognized in the period has been estimated using an option pricing model.

Assumptions used in the pricing model for the period are as provided below.

		February 29, 2016
Risk-free interest rates		0.52%
Exercise price		CAD$0.44
Expected life		3.0 years
Expected forfeiture rate		0%-5%
Expected volatility		59.38%
Expected dividends		Nil

The Black-Scholes model requires the input of highly subjective assumptions.

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As of February 29, 2016, there were 2,382,249 non-vested options outstanding with a weighted average exercise price of $0.43; the non-vested stock option expense not yet recognized was $0.2 million, and this expense is expected to be recognized over the next two years.

A summary of the Company’s stock option plan and changes during the period ended is as follows:

					February 29, 2016
					Weighted average
					exercise price
		Number of options			$
Balance – beginning of period		5,288,350			0.57
Granted		1,785,000			0.32
Forfeited		(300,000	)		0.68
Balance – end of period		6,773,350			0.49

The following table summarizes information about the stock options outstanding at February 29, 2016:

The aggregate intrinsic value of vested share options (the market value less the exercise price) at February 29, 2016 was $0.01 million (February 28, 2015 - $nil).

(b) NovaGold Arrangement Options

Under the NovaGold arrangement, holders of NovaGold stock options received one option in NovaCopper for every six options held in NovaGold (“NovaGold Arrangement Options”). All NovaGold Arrangement Options are vested and subject to NovaGold’s stock option plan.

A summary of the NovaGold Arrangement Options and changes during the period ended is as follows:

					February 29, 2016
					Weighted average
					exercise price
		Number of options			$
Balance – beginning of period		509,272			4.77
Forfeited		(14,574	)		4.87
Expired		(103,212	)		5.63
Balance – end of period		391,486			4.45

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The following table summarizes information about the NovaGold Arrangement Options outstanding February 29, 2016.

The aggregate intrinsic value of vested NovaGold Arrangement Options (the market value less the exercise price) at February 29, 2016 was $nil (February 28, 2015 - $nil).

(c)   Restricted Share Units (“RSUs”) and Deferred Share Units (“DSUs”)

A summary of the Company’s unit plans and changes during the year ended is as follows:

		Number of RSUs			Number of DSUs
Balance – beginning of period		-			904,603
Granted		600,000			50,147
Vested/paid		(199,999	)		(75,000	)
Balance – end of period		400,001			879,750

For the three months ended February 29, 2016, NovaCopper recognized a stock-based compensation charge of $0.1 million (February 28, 2015 - $3,000), net of forfeitures.

On December 23, 2015, 600,000 RSUs were granted to officers vesting one third immediately, one third on the first anniversary of the grant date, and one third on the second anniversary. The 199,999 RSUs vested were settled through the issuance of 108,399 shares and a cash payment of $29,000.

(d)   Share purchase warrants

A summary of the Company’s warrants and changes during the period ended is as follows:

								Weighted
		Number of			Weighted			average
		Warrants			average years to			exercise price
					expiry			$
Balance – beginning of period		6,521,740			3.60			1.60
Balance – end of period		6,521,740			3.35			1.60

7      Financial instruments

The Company is exposed to a variety of risks arising from financial instruments. These risks and management’s objectives, policies and procedures for managing these risks are disclosed as follows.

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, deposits, and accounts payable and accrued liabilities. The fair value of the Company’s financial instruments approximates their carrying value due to the short-term nature of their maturity. All of the Company’s financial instruments are initially measured at fair value and then held at amortized cost.

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Financial risk management

The Company’s activities expose them to certain financial risks, including currency risk, credit risk, liquidity risk, interest risk and price risk.

(a)   Currency risk

Currency risk is the risk of a fluctuation in financial asset and liability settlement amounts due to a change in foreign exchange rates. The Company operates in the United States, Canada, and Colombia with some expenses incurred in Canadian dollars and Colombian pesos. The Company’s exposure to the Canadian dollar (“CDN”) is limited to cash of CDN$288,000, accounts receivable of CDN$23,000, deposits and prepaid amounts of CDN$146,000 and accounts payable of CDN$340,000. Based on a 10% change in the US-Canadian exchange rate, assuming all other variables remain constant, the Company’s net loss would change by approximately $8,000. The Company’s exposure to the Colombian peso (“COP”) is limited to cash of COP 80 million, deposit and prepaid amounts of COP 57 million, and accounts payable of COP 24 million. Based on a 10% change in the US-COP exchange rate, assuming all other variables remain constant, the Company’s net loss would change by approximately $3,000.

(b)   Credit risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company holds cash and cash equivalents with Canadian Chartered financial institutions and a Colombian financial institution. The Company’s accounts receivable consist of GST receivable from the Federal Government of Canada and other receivables for recoverable expenses. The Company’s exposure to credit risk is equal to the balance of cash and cash equivalents and accounts receivable as recorded in the financial statements.

(c)   Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulties raising funds to meet its financial obligations as they fall due. The Company does not have cash inflows from operations; therefore, the Company manages liquidity risk through the management of its capital structure and financial leverage.

Contractually obligated cash flow requirements as at February 29, 2016 are as follows.

(d)   Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk with respect to interest earned on cash and cash equivalents. Based on balances as at February 29, 2016, a 1% change in interest rates would result in a change in net loss of $0.15 million, assuming all other variables remain constant.

As we are currently in the exploration phase, none of our financial instruments are exposed to commodity price risk; however, our ability to obtain long-term financing and its economic viability could be affected by commodity price volatility.

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8      Commitment

The Company has commitments in respect of office leases requiring future minimum lease payments as follows:

		in thousands of dollars
		February 29, 2016
		$
2016		155
2017		74
Total		229

On January 25, 2013, the Company entered into a commitment to lease office space effective May 1, 2013 for a period of four years with a remaining total commitment as at February 29, 2016 of $0.18 million. As part of the acquisition of Sunward, the Company assumed an office lease in Vancouver, expiring on February 28, 2017 with a remaining commitment of $0.04 million and two office leases in Colombia, expiring on April 30, 2016 and May 31, 2016 respectively, with a total remaining commitment of $0.01 million.

9      Contingencies

Notice of lawsuit received over alleged environmental violation

In July 2015, Sunward was notified that Luisa Maria Escobar Wolf (“Escobar-Wolf”) had filed a lawsuit in the Fifth Court of Orality of Circuit of Medellin, Colombia. Previously, on April 28, 2014, Sunward received notice that Escobar-Wolf filed an arbitral action against Sunward pursuant to the arbitration clause contained in an easement agreement under which Sunward had acquired certain land access rights at the Titiribi Project. Escobar-Wolf alleges that a local water source had been affected as a result of Sunward’s drilling activities at the Titiribi Project and is seeking, amongst other things, damages totalling COP2,623,203,975 (approx. US$0.8 million).

Previously, during 2013, Corantioquia, the environmental agency for the Colombian State of Antioquia, investigated allegations that a local water source had been affected as a result of Sunward’s drilling activities at the Titiribi Project and on December 12, 2013, Corantioquia issued resolution No. 13128232 dismissing the allegations as the environmental agency’s internal studies showed that the water table levels are within acceptable, documented norms. The allegations made by Escobar-Wolf are the same ones Corantioquia investigated during 2013 and dismissed by the environmental agency. We have engaged legal counsel in Colombia to vigorously and expeditiously defend our position, and we believe that the Escobar-Wolf claim is without merit but it is too early to predict the outcome of the verbal process or the ultimate impact.

Investigation of alleged failure to obtain water permits

During 2013, Corantioquia notified Sunward of administrative proceedings which would have required a suspension of drilling activities resulting from what the agency alleged to be an omission in the failure to obtain a water permit or concession. On October 31 and December 30, 2013, Sunward received notices that Corantioquia had lifted the suspension on future drilling activities but is still considering whether to assess a penalty for failure to obtain water permits.

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10 Segment information

The Company’s reportable segments are based on geographic region for the Company’s operations. General corporate activities not associated with operating units and their various exploration activities are presented as corporate and other.

For the three months ended February 29, 2016:

		Alaska, USA			Antioquia,			Corporate and
					Colombia			other			Total
		$			$			$			$
Amortization		10			32			12			54
Foreign exchange loss		2			3			4			9
Interest and other income		-			-			(18	)		(18	)
Mineral properties expense		486			134			47			667
Overhead costs		7			-			976			983
Loss for the period		505			169			1,021			1,695

For the three months ended February 28, 2015:
		Alaska, USA			Antioquia,			Corporate and
					Colombia			other			Total
		$			$			$			$
Amortization		130			-			13			143
Foreign exchange loss (gain)		3			-			(23	)		(20	)
Interest and other income		-			-			-			-
Mineral properties expense		252			-			75			327
Overhead costs		42			-			1,038			1,080
Loss for the period		427			-			1,103			1,530

Other segment information regarding mineral properties and development costs, plant and equipment, assets and liabilities, was as follows:

As of February 29, 2016:
		Alaska, USA			Antioquia,			Corporate
					Colombia			and other			Total
		$			$			$			$
Mineral properties and development costs		30,586			3,264			-			33,850
Plant and equipment		103			241			50			394
Assets		31,175			3,548			14,762			49,485
Liabilities		(170	)		(7	)		(320	)		(497	)

As of November 30, 2015:
		Alaska, USA			Antioquia,			Corporate
					Colombia			and other			Total
		$			$			$			$
Mineral properties and development costs		30,586			3,264			-			33,850
Plant and equipment		113			273			60			446
Assets		31,509			3,631			16,041			51,181
Liabilities		(341	)		(24	)		(386	)		(751	)

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary notes

Forward-looking statements

This Management’s Discussion and Analysis contains “forward-looking information” and “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other applicable securities laws. These forward-looking statements may include statements regarding perceived merit of properties, exploration results and budgets, mineral reserves and resource estimates, work programs, capital expenditures, operating costs, cash flow estimates, production estimates and similar statements relating to the economic viability of a project, timelines, strategic plans, statements relating to anticipated activity with respect to the AMDIAR, including the Company’s plans and expectations relating to its Upper Kobuk Mineral Projects and Titiribi Project, completion of transactions, market prices for precious and base metals, or other statements that are not statements of fact. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. Statements concerning mineral resource estimates may also be deemed to constitute “forward-looking statements” to the extent that they involve estimates of the mineralization that will be encountered if the property is developed.

Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as “expects”, “is expected”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “potential”, “possible” or variations thereof or stating that certain actions, events, conditions or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements.

Forward-looking statements are based on a number of material assumptions, including those listed below, which could prove to be significantly incorrect:

• assumptions made in the interpretation of drill results, and of the geology, grade and continuity of the Company’s mineral deposits;
• our ability to achieve production at any of the Company’s mineral exploration and development properties;
• our expected ability to develop adequate infrastructure and that the cost of doing so will be reasonable;
• assumptions that all necessary permits and governmental approvals will be obtained;
• estimated capital costs, operating costs, production and economic returns;
• estimated metal pricing, metallurgy, mineability, marketability and operating and capital costs, together with other assumptions underlying the Company’s resource and reserve estimates;
• assumptions regarding our ability to integrate Sunward and maximize shareholder value at the Titiribi exploration asset;
• continued good relationships with local communities and other stakeholders;
• our expectations regarding demand for equipment, skilled labour and services needed for exploration and development of mineral properties;
• assumptions regarding the merit of litigation; and
• that our activities will not be adversely disrupted or impeded by development, operating or regulatory risks.

Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation:

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• risks related to the Company’s ability to finance its planned exploration activities at its mineral properties or to complete further exploration programs;
• risks related to the Company’s ability to finance the development of its mineral properties through external financing, strategic alliances, the sale of property interests or otherwise;
• risks related to the inability to define proven and probable reserves and the fact that none of the Company’s mineral properties are in production or under development;
• uncertainties relating to the assumptions underlying the Company’s resource estimates, such as metal pricing, metallurgy, mineability, marketability and operating and capital costs;
• risks related to uncertainty of whether there will ever be production at the Company’s mineral exploration and development properties;
• risks related to the Company’s ability to commence production and generate material revenues or obtain adequate financing for its planned exploration and development activities;
• risks related to lack of infrastructure, specifically a lack of road access to the UKMP site;
• risks related to commodity price fluctuations;
• risks related to market events and general economic conditions;
• uncertainty of estimates of capital costs, operating costs, production and economic returns;
• risks related to inclement weather which may delay or hinder exploration activities at its mineral properties;
• the Company’s history of losses and expectation of future losses;
• risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of the Company’s mineral deposits;
• uncertainty related to inferred mineral resources;
• uncertainty related to the economic projections contained herein derived from the PEA;
• risks related to the third parties on which the Company depends for its exploration and development activities;
• mining and development risks, including risks related to infrastructure, accidents, equipment breakdowns, labor disputes or other unanticipated difficulties with or interruptions in development, construction or production;
• credit, liquidity, interest rate and currency risks;
• uncertainty as to the Company’s ability to acquire additional commercially mineable mineral rights;
• risks and uncertainties relating to the acquisition of the Titiribi Project, such as the Company's ability to successfully explore and develop the Project and realize the anticipated benefits of the acquisition;
• risks arising from the Company’s acquisition of Sunward including political risk, international operations, changes in laws or policies, foreign taxation, foreign investment regimes, exchange control, corruption risk, the risk of guerilla and other criminal activities, labour matters and employee relations, seizure or expropriation of assets, or delays or the inability to obtain necessary governmental permits, licenses and regulatory approvals in foreign jurisdictions;
• risks and uncertainties relating to the integration of the Sunward acquisition, including the Company’s policies, procedures and controls;
• risks related to increases in demand for equipment, skilled labor and services needed for exploration and development of mineral properties, and related cost increases;
• the risk that permits and governmental approvals necessary to develop and operate mines on the Company’s properties will not be available on a timely basis or at all;
• risks related to governmental regulation and permits, including environmental regulation, including the risk that more stringent requirements or standards may be adopted or applied;
• risks related to the need for reclamation activities on the Company’s properties and uncertainty of cost estimates related thereto;
• uncertainty related to title to the Company’s mineral properties;
• risks related to competition in the acquisition of mineral properties;
• risks inherent in the acquisition of new properties including unknown liabilities;
• the Company’s need to attract and retain qualified management and technical personnel;
• risks related to conflicts of interests of some of the directors of the Company;

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• risks related to potential future litigation;
• risks related to global climate change;
• risks related to adverse publicity from non-governmental organizations;
• risks related to future sales or issuances of equity securities decreasing the value of existing common shares, diluting voting power and reducing future earnings per share;
• uncertainty as to the volatility in the price of the Company’s shares;
• the Company’s expectation of not paying cash dividends;
• adverse federal income tax consequences for U.S. shareholders should the Company be a passive foreign investment company;
• risks related to the voting power of our major shareholders and the impact that a sale by such shareholders may have on our share price;
• uncertainty as to the Company’s ability to maintain the adequacy of internal control over financial reporting as per the requirements of the Sarbanes-Oxley Act; and
• increased regulatory compliance costs relating to the Dodd-Frank Act.

This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of the Company or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to in NovaCopper’s Form 10-K dated February 5, 2016, filed with the Canadian securities regulatory authorities and the United States Securities and Exchange Commission (the “SEC”), and other information released by NovaCopper and filed with the appropriate regulatory agencies.

The Company’s forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made, and the Company does not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations or opinions should change, except as required by law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.

General

This Management’s Discussion and Analysis (“MD&A”) of NovaCopper Inc. (“NovaCopper” or the “Company”) is dated April 6, 2016 and provides an analysis of our unaudited interim financial results for the quarter ended February 29, 2016.

The following information should be read in conjunction with our February 29, 2016 unaudited interim consolidated financial statements and related notes which were prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The MD&A should also be read in conjunction with our audited consolidated financial statements and related notes for the year ended November 30, 2015. A summary of our accounting policies are outlined in note 2 of the audited consolidated financial statements. All amounts are in United States dollars unless otherwise stated. References to “Canadian dollars” and “C$” and “CDN$” are to the currency of Canada, references to “U.S. dollars”, “$” or “US$” are to the currency of the United States and references to “Colombian pesos” or “COP” are to the currency of the Republic of Colombia.

Erin Workman, P.Geo., an employee and Director, Technical Services, is a Qualified Person under National Instrument 43-101 - Standards of Disclosure for Mineral Projects (“NI 43-101”), and has approved the scientific and technical information in this MD&A.

NovaCopper’s shares are listed on the Toronto Stock Exchange (“TSX”) and the NYSE-MKT under the symbol “NCQ”. Additional information related to NovaCopper, including our annual report on Form 10-K, is available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

Description of business

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We are a base metals exploration company focused on exploring and developing our mineral holdings in the Ambler mining district located in Alaska, U.S.A. We conduct our Alaskan operations through a wholly-owned subsidiary, NovaCopper US Inc. (“NovaCopper US”). Our Upper Kobuk Mineral Projects, or UKMP, which we consider to be our material properties, consist of: i) the 100% owned Ambler lands which host the Arctic copper-zinc-lead-gold-silver Project; and ii) the Bornite lands being explored under a collaborative long-term agreement with NANA Regional Corporation, Inc. (“NANA”), a regional Alaska Native Corporation, which host the Bornite carbonate-hosted copper Project. We also own, through wholly-owned subsidiaries, a 100% interest in a gold-copper exploration project in Colombia.

Recent activities

Upper Kobuk Mineral Projects

We plan to advance the Arctic deposit to pre-feasibility over a two to three year period. We plan to invest approximately $5.5 million on the UKMP during the 2016 field season mainly for drilling at Arctic to collect information at Arctic for in-pit geotechnical studies for pit-slope stability, hydrology, waste rock characterization, and metallurgical data. Funds will also be utilized for environmental baseline data collection over the UKMP, to continue acid-base-accounting kinetic test work at Arctic, for engineering studies in preparation for a pre-feasibility study at Arctic, and also to complete the remaining thirty percent of the LiDAR survey over the UKMP initiated during the last field season (used to obtain high resolution mapping data).

Long-term incentives

On December 23, 2015, 525,000 stock options were granted to directors vesting immediately and 1,260,000 stock options were granted to employees vesting equally in thirds on the grant date, the first anniversary of the grant date, and the second anniversary of the grant date. Also on December 23, 2015, 600,000 RSUs were granted to officers vesting equally in thirds on the grant date, the first anniversary of the grant date, and the second anniversary of the grant. The first tranche of the RSUs vesting on December 23, 2015 were settled through the issuance of 108,399 Common Shares and a cash payment of $0.03 million used to satisfy payroll withholding taxes.

Property review

Our principal assets, the UKMP, are located in the Ambler mining district in Northwest Alaska. The UKMP comprises approximately 352,943 acres (142,831 hectares) of mineral rights covering the Ambler and Bornite lands.

Arctic Project

The Ambler lands, which host a number of deposits, including the high-grade copper-zinc-lead-gold-silver Arctic Project, and other mineralized targets within a 100 kilometer long volcanogenic massive sulfide (“VMS”) belt, are owned by NovaCopper US. The Ambler lands are located in Northwestern Alaska and consist of 112,058 acres (45,348 hectares) of Federal patented mining claims and State of Alaska mining claims, within which VMS mineralization has been found.

We have recorded the Ambler lands as a mineral property with acquisition costs capitalized and exploration costs expensed in accordance with our accounting policies. As a result of the spin-out of NovaCopper from NovaGold Resources Inc. (“NovaGold”) in 2012, the consolidated financial statements have been presented under the continuity of interest basis of accounting whereby the amounts are based on the amounts originally recorded by NovaGold as if we had held the property from inception.

Bornite Project

On October 19, 2011, NovaCopper US and NANA signed a collaborative agreement to explore and develop the Ambler mining district. Under the Exploration Agreement and Option to Lease (the “NANA Agreement”), NovaCopper US acquired the exclusive right to explore the Bornite property and lands deeded to NANA through the Alaska Native Claims Settlement Act (“ANCSA”), located adjacent to the Arctic Project, and the non-exclusive right to access and entry onto NANA’s lands. The agreement establishes a framework for any future development of either the Bornite Project or the Arctic Project. Both projects are included as part of a larger area of interest set forth in the NANA Agreement. The agreement with NANA created a total land package incorporating our Ambler lands with the adjacent Bornite and ANCSA lands with a total area of approximately 352,900 acres (142,831 hectares).

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As consideration, NovaCopper paid $4.0 million to NANA upon signing the NANA agreement and gave NANA the right to appoint a member to NovaCopper’s board of directors before April 2017. NANA has not exercised their right to appoint a board member at this time. Upon the decision to proceed with development of a mine within the area of interest, NANA maintains the right to purchase an ownership interest in the mine equal to between 16%-25% or retain a 15% net proceeds royalty which is payable after NovaCopper has recovered certain historical costs, including capital and cost of capital. Should NANA elect to purchase an ownership interest in the mine, consideration will be payable based on the elected percentage purchased and the costs incurred on the properties less $40.0 million, not to be less than zero. The parties would form a joint venture and be responsible for all future costs incurred in connection with the mine, including capital costs of the mine, based on each party’s pro-rata share.

NANA would also be granted a net smelter return royalty between 1% and 2.5% upon the execution of a mining lease or a surface use agreement, the amount of which is determined by the particular area of land from which production originates.

We have accounted for the Bornite property as a mineral property with acquisition costs capitalized and exploration costs expensed in accordance with our accounting policies.

Titiribi Project

On June 19, 2015, NovaCopper completed an arrangement to acquire Sunward Resources Ltd. (“Sunward”). As a result, NovaCopper, through wholly-owned subsidiaries, owns 100% of the Titiribi gold-copper exploration project located approximately 70 kilometers southwest of the city of Medellin, in Antioquia Department, Colombia. The Titiribi project’s principal mining title is concession 5085, which was created by the consolidation of five concessions and four exploration licenses. This concession, comprising of an area of 3,919 hectares, was registered with the National Mining Registry on April 18, 2013 and expires in 2043.

We have accounted for the Titiribi property as a mineral property with the acquisition costs capitalized and post-acquisition exploration costs expensed.

Summary of results

		in thousands of dollars,
		except for per share amounts
Selected financial results		Three months			Three months
		ended			ended
		February 29, 2016			February 28, 2015
		$			$
Amortization		54			143
General and administrative		348			381
Mineral properties expense		667			327
Professional fees		136			161
Salaries		213			250
Salaries – stock-based compensation		282			282
Loss and comprehensive loss for the period		1,695			1,530
Basic and diluted loss per common share		$0.02			$0.03

For the three months ended February 29, 2016, NovaCopper reported a net loss of $1.7 million (or $0.02 basic and diluted loss per common share) compared to a net loss of $1.5 million for the corresponding period in 2015 (or $0.03 basic and diluted loss per common share). This variance was primarily due to an increase in mineral properties expenses offset by a decrease in amortization, salaries, professional fees, and general and administrative costs. We incurred $0.7 million in mineral properties expense for the three months ended February 29, 2016 compared to $0.3 million for the three months ended February 28, 2015. The significant increase in mineral property expenses is related to waste characterization and geotechnical work conducted for the UKMP and expenditures incurred at the Titiribi mineral property. Amortization expense decreased by $0.1 million due to the timing of capital asset purchases and resulted amortization expense. The decrease in salaries and general and administrative expenses was primarily attributed to continued cost reduction efforts and the Company benefitting from the favorable foreign exchange movement of the US dollar against the Canadian dollar in 2016 compared to the first quarter of 2015. The decrease in professional fees is due to less consulting expenses incurred in 2016 compared to the first quarter of 2015.

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Selected financial data

Quarterly information

Factors that can cause fluctuations in our quarterly results include the length of the exploration field season at the properties, the type of program conducted, stock option vesting, and issuance of shares. Other factors that have caused fluctuations in the quarterly results that would not be expected to re-occur include the acquisition of Sunward and financing activities.

During the second quarter of 2014, we incurred $0.5 million in mineral property expenses as our field season start-up in 2014 occurred in July. As a result, no field season activity costs were incurred in the second quarter of 2014 resulting in a loss of $2.1 million for the second quarter of 2014. During the third quarter of 2014, we incurred mineral property expenses of $0.8 million due to a reduced field season program. We also incurred a one-time severance cost of $1.5 million relating to staff reductions offset against a recovery on reversal of previously accrued bonuses of $0.3 million. During the fourth quarter of 2014, we incurred $0.6 million of mineral property expenses mainly related to assaying costs incurred for the 2014 re-logging program.

During the first quarter of 2015, we incurred mineral property expense of $0.3 million mainly on community support and project staff salaries as our field season did not commence until early in the third quarter. During the second quarter of 2015, we incurred $0.3 million in mineral property expenses, the same level of activities as the first quarter of 2015. We also incurred $0.7 million in professional fees during the second quarter of 2015 mainly due to the acquisition of Sunward. The increase in professional fees was offset against the decrease in salaries during the second quarter of 2015 compared to the corresponding period in 2014. During the third quarter of 2015, we incurred mineral property expenses of $2.9 million as we completed our drilling program. As a result, our loss for the third quarter ended August 31, 2015 is higher compared to previous third quarter losses. Our net loss for the fourth quarter of 2015 of $2.1 million is increased from the fourth quarter net loss of 2014 of $2.0 million mainly due to higher mineral property expenses offset against a reduction in stock-based compensation.

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During the first quarter of 2016, our net loss was $1.7 million, which was higher than the net loss of $1.5 million in the first quarter of 2015. The increase was primarily attributed to higher mineral property expenses for engineering work conducted at UKMP and expenditures incurred for the Titiribi mineral property. The Titiribi mineral property was acquired as part of the Sunward acquisition in the third quarter of 2015.

Our properties are not yet in production; consequently, we believe that our loss (and consequent loss per common share) is not a primary concern to investors in the Company.

Liquidity and capital resources

At February 29, 2016, we had $14.7 million in cash and cash equivalents. We expended $1.4 million on operating activities during the three month period ended February 29, 2016, compared with expenditures of $1.1 million for operating activities for the same period in 2015. The majority of cash spent on operating activities during both periods was expended on mineral property expenses, general and administrative, and salaries. The increase in cash spent during the three months ended February 29, 2016 compared to the corresponding period in 2015 was mainly due to higher mineral property expense for engineering studies conducted for the UKMP and expenditures incurred in Colombia.

During the three month period ended February 29, 2016 and February 28, 2015, we received no cash from financing activities. During the three month period ended February 29, 2016, we expended $2,000 on investing activities for acquisition of equipment and $nil during the three month period ended February 28, 2015.

As at February 29, 2016, the Company continues to manage its cash expenditures and management believes that the working capital available is sufficient to meet its operational requirements for the next two years. Future financings are anticipated through equity offerings, debt financing, convertible debt, or other means, although there can be no assurance that a financing would be available on terms favorable to the Company, or at all.

Contractual obligations

Contractual obligated undiscounted cash flow requirements as at February 29, 2016 are as follows.

On January 25, 2013, the Company entered into a commitment to lease office space effective May 1, 2013 for a period of four years with a remaining total commitment of $0.18 million. As part of the acquisition of Sunward, the Company assumed an office space lease in Vancouver, expiring on February 28, 2017, with a remaining commitment of $0.04 million, and two office leases in Colombia, expiring on April 30, 2016 and May 31, 2016 respectively, with a total remaining commitment of $0.01 million.

Off-balance sheet arrangements

We have no material off-balance sheet arrangements. The Company has lease commitments for office spaces with a remaining total commitment of $0.23 million.

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Outstanding share data

At April 6, 2016, we had 104,979,820 common shares issued and outstanding. At April 6, 2016, we had outstanding 6,521,740 warrants with an exercise price of $1.60 each, 6,773,350 stock options with a weighted-average exercise price of $0.50, 936,633 DSUs, 400,001 RSUs, 333,153 NovaGold Arrangement Options with a weighted-average exercise price of $4.41, and 20,685 NovaGold DSUs for which the holder is entitled to receive one common share for every six NovaGold shares received. For additional information on NovaGold Arrangement Options and NovaGold DSUs, please refer to note 6 in our February 29, 2016 interim consolidated financial statements. Upon the exercise of all of the forgoing convertible securities, the Company would be required to issue an aggregate of 14,985,562 common shares.

Accounting standards adopted

Development stage entity

In June 2014, the FASB issued “Development Stage Entities – Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation” (“ASU 2014-10”). ASU 2014-10 eliminates the concept of a development stage entity, of which NovaCopper had been classified. Upon adoption, certain financial reporting disclosures have been eliminated including the presentation of an inception-to-date statement of income and cash flow. ASU 2014-10 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. The Company adopted this standard as of December 1, 2015. As a result of adopting the standard, we no longer include the cumulative during exploration stage column previously presented on our statement of loss and comprehensive loss and statement of cash flows.

Recent accounting pronouncements

Leases

In February 2016, the FASB issued new accounting requirements for accounting for, presentation of, and classification of leases (“ASU 2016-02”). This will result in most leases being capitalized as a right of use asset with a related liability on our balance sheets. The requirements of the new standard are effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods, which for us is the first quarter of fiscal 2020. We are in the process of analyzing the impact of this guidance on our results of operations and financial position.

Critical accounting estimates

The most critical accounting estimates upon which our financial status depends are those requiring estimates of the recoverability of our capitalized mineral properties, impairment of long-lived assets, income taxes and valuation of stock-based compensation.

Mineral properties and development costs

All direct costs related to the acquisition of mineral property interests are capitalized. The acquisition of title to mineral properties is a complicated and uncertain process. The Company has taken steps, in accordance with industry standards, to verify the title to mineral properties in which it has an interest. Although the Company has made efforts to ensure that legal title to its mining assets is properly recorded, there can be no assurance that such title will be secured indefinitely.

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Impairment of long-lived assets

Management assesses the possibility of impairment in the carrying value of its long-lived assets whenever events or circumstances indicate that the carrying amounts of the asset or asset group may not be recoverable. Significant estimates are made in assessing the possibility of impairment. Management considers several factors in considering if an indicator of impairment has occurred, including but not limited to, indications of value from external sources, significant changes in the legal, business or regulatory environment, and adverse changes in the use of physical condition of the asset. These factors are subjective and require consideration at each period end. If an indicator of impairment is determined to exist, management calculates the estimated undiscounted future net cash flows relating to the asset or asset group using estimated future prices, mineral resources, and operating, capital and reclamation costs. When the carrying value of an asset exceeds the related undiscounted cash flows, the asset is written down to its estimated fair value, which is usually determined using discounted future cash flows. Management’s estimates of mineral prices, mineral resources, foreign exchange rates, production levels and operating capital and reclamation costs are subject to risk and uncertainties that may affect the determination of the recoverability of the long-lived asset.

Income taxes

We must make estimates and judgments in determining the provision for income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits including interest and penalties. We are subject to income tax law in the United States, Canada and Colombia. The evaluation of tax liabilities involving uncertainties in the application of complex tax regulation is based on factors such as changes in facts or circumstances, changes in tax law, new audit activity, and effectively settled issues. The evaluation of an uncertain tax position requires significant judgment, and a change in such recognition would result in an additional charge to the income tax expense and liability.

Stock-based compensation

Compensation expense for options granted to employees, directors and certain service providers is determined based on estimated fair values of the options at the time of grant using the Black-Scholes option pricing model, which takes into account, as of the grant date, the fair market value of the shares, expected volatility, expected life, expected forfeiture rate, expected dividend yield and the risk-free interest rate over the expected life of the option. The use of the Black-Scholes option pricing model requires input estimation of the expected life of the option, volatility, and forfeiture rate which can have a significant impact on the valuation model, and resulting expense recorded.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our financial instruments are exposed to certain financial risks, including currency risk, credit risk, liquidity risk, interest risk and price risk. Our financial instruments consist of cash and cash equivalents, accounts receivable, deposits, and accounts payable and accrued liabilities. Our instruments are held in the normal course to meet daily operating and cash flow needs of the business. The fair value of the Company’s financial instruments approximates their carrying value due to the short-term nature of their maturity. All of our financial instruments are initially measured at fair value and then held at amortized cost.

(a)    Currency risk

Currency risk is the risk of a fluctuation in financial asset and liability settlement amounts due to a change in foreign exchange rates. We operate in the United States, Canada, and Colombia with some expenses incurred in Canadian dollars and Colombian pesos. The Company’s exposure to the Canadian dollar is limited to cash of CDN$288,000, accounts receivable of CDN$23,000, deposits and prepaid amounts of CDN$146,000 and accounts payable of CDN$340,000. Based on a 10% change in the US-Canadian exchange rate, assuming all other variables remain constant, the Company’s net loss would change by approximately $8,000. The Company’s exposure to the Colombian peso is limited to cash of COP 80 million, deposit and prepaid amounts of COP 57 million, and accounts payable of COP 24 million. Based on a 10% change in the US-COP exchange rate, assuming all other variables remain constant, the Company’s net loss would change by approximately $3,000.

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(b)    Credit risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company holds cash and cash equivalents with Canadian Chartered financial institutions and a Colombian financial institution. The Company’s accounts receivable consist of GST receivable from the Federal Government of Canada and other receivables for recoverable expenses. The Company’s exposure to credit risk is equal to the balance of cash and cash equivalents and accounts receivable as recorded in the financial statements.

(c)    Liquidity risk

Liquidity risk is the risk that we will encounter difficulties raising funds to meet our financial obligations as they fall due. The Company does not have cash inflows from operations; therefore, the Company manages liquidity risk through the management of our capital structure and financial leverage. Future financings are expected to be obtained through debt financing, equity financing, convertible debt, exercise of options, or other means. Continued operations are dependent on our ability to obtain additional financing or to generate future cash flows.

(d)    Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk with respect to interest earned on cash and cash equivalents. Based on balances as at February 29, 2016, a 1% change in interest rates would result in a change in net loss of $0.15 million, assuming all other variables remain constant.

As we are currently in the exploration phase, none of our financial instruments are exposed to commodity price risk; however, our ability to obtain long-term financing and our economic viability could be affected by commodity price volatility.

Item 4. Controls and Procedures

Management, with the participation of our President and Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of February 29, 2016. On the basis of this review, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our President and Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As permitted, the design of internal control over financial reporting excludes Sunward on the basis that Sunward was acquired on June 19, 2015.

Except as set forth in the paragraph above, there have not been any changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated by the SEC under the Exchange Act) during the Company’s most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are a party to routine litigation and proceedings that are considered part of the ordinary course of its business. We are not aware of any material current, pending, or threatened litigation. As disclosed previously in our 10-Q for the quarter ended May 31, 2015 and under Part I -Item 1, Sunward was notified that Luisa Maria Escobar Wolf has filed a lawsuit in the Fifth Court of Orality of Circuit of Medellin, Colombia to advance a verbal process. We do not consider this to be a material litigation.

Item 1A. Risk Factors

NovaCopper and its future business, operations and financial condition are subject to various risks and uncertainties due to the nature of its business and the present stage of exploration of its mineral properties. Certain of these risks and uncertainties are under the heading “Risk Factors” under NovaCopper’s Form 10-K dated February 5, 2016 available on SEDAR at www.sedar.com and EDGAR at www.sec.gov and on our website at www.novacopper.com.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

These disclosures are not applicable to us.

Item 5. Other Information.

None.

Item 6. Exhibits

Exhibits

See Exhibit Index.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: April 7, 2016

NOVACOPPER INC.

 

	By:	/s/ Rick Van Nieuwenhuyse
		Rick Van Nieuwenhuyse
		President and Chief Executive
		Officer
	By:	/s/ Elaine M. Sanders
		Elaine M. Sanders
		Vice President and Chief Financial
		Officer

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EXHIBIT INDEX

Exhibit No.		Description
31.1		Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)
31.2		Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)
32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350
32.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350
101**		Interactive Data Files
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

**

Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

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