Northern Dynasty

The U.S. Government Resurrected this “Zombie Stock” …Again

The gamblers rolled the dice on this giant mine in Alaska again. The Pebble Project has a long, mixed history.
It’s in a region that hosts many operating mines:

It’s one of the world’s largest undeveloped copper and gold resources. Its current resource is around 80.6 billion pounds of copper, 107.4 million ounces of gold, and 5.6 billion pounds of molybdenum.

Back in 2007, senior mining company Anglo American partnered with Northern Dynasty (TSXV: NAK) to develop Pebble.

We became interested in 2008, as Northern Dynasty’s shares collapsed with the rest of the stock market. At that point, the company’s market value was around $300 million. Anglo American committed $1.42 billion of investment to earn 50% of the project.

That is the kind of math we love as investors.

Here was a giant mining company, full of accountants, engineers, and geologists, who believe that they can invest $1.42 billion to own half the project. And they expect to make money on that investment.

On the other hand, we had the owner of the project. The market (in its infinite wisdom) only saw the value of the other half of the project at $300 million. That meant the share price could rise over 370% just to meet the value Anglo American paid for its other half!

Over time, the proposed mine hit many political and regulatory hurdles. Anglo American exited its partnership on the Pebble Mine in 2013.

The most vocal opponents to the mine are commercial salmon fishermen that work in Bristol Bay. Salmon fishing is a major economic driver in the region. It supports thousands of jobs and produces billions of dollars for the region every year.

The senior political leadership was against the project as well. Alaska’s Senators Lisa Murkowski and Dan Sullivan (both staunch republicans) came out against the mine. And Governor Bill Walker supported federal efforts to block the mine.

You would think that a project with that kind of opposition would be dead, dead, dead…but you would underestimate the optimism of mining investors.

As you can see, there were pulses of renewed life in 2016, 2020, and today.

n 2016, the election of Donald Trump ushered in a new, more lenient permitting regime. Investors believed that the rollback of the EPA would result in the mine going forward. Shares of the stock rose 1,000% on the optimism.
That didn’t immediately happen, and shares trailed off again. In two years, the stock was back to its previous price…a 90% loss.

However, in February 2019, the Army Corp. of Engineers issued a draft Environmental Impact Statement that didn’t close the door to the mine going forward. It found that the mine did not pose significant risk of environmental harm.

Once again, investors swarmed the stock and the zombie rose…

In 2020, investors flooded the stock as the final decision on the environmental permit loomed. Finally, in November 2020, the Army Corps. of Engineers denied the permit application.

The High Country News wrote:

Shares fell 85% from their July 23rd high. It was a huge blow to investors, again.

That put the zombie back into the ground for good…right? Wrong.

Somehow, the market forgot all that history. The re-election of Trump, the loosening of environmental regulation and permitting criteria all seem new. But we’ve seen this before. And yet shares of the stock are up…again.
Investors built the current optimistic outlook on the same platform as before. Trump will roll back regulations and grant the permit. Shares rocketed higher this month:

Northern Dynasty shares are up over 375% in just over a year. The zombie rides again. The question is, for how long? Political opposition remains strong in Alaska (including both Republican Senators).

It’s difficult to imagine them ever building this mine. But there is room for more optimism.

The company is worth about $650 million today. Investors should stay away. That’s too much risk. But traders, gamblers and punters should keep an eye on this one. There is definitely a play on this stock going up and coming back down.

For the Good,
The Mangrove Investor Team

Numbers You Need to Know

6

In Alaska, we have six large operating and producing mines, six advanced exploration projects, and two projects in its permitting phase. (Alaska Miners Association)

March 30, 1867

On March 30, 1867, Russia agreed that the United States would pay $7.2 million for the territory of Alaska. (National Archives)

16

Alaska has the lowest population density in the United States. If Manhattan, New York, shared the same population density, it would have only 16 residents. (Gray Line Alaska)

What’s New in Sustainable Investing

ESG Watch: New SEC rules under Trump turn up the heat for sustainable investors

The targets of President Donald Trump’s attacks are many and various, but one area to which he has been consistently hostile is ESG, the environmental, social and governance risks that have become increasingly important to investors in recent years. (Reuters)

What Do DEI Rollbacks Mean for Investors?

FThe DEI rollbacks have raised concerns among some investors, as many employers believe that diversity is good for business. Such employers argue that a diverse workforce fosters an inclusive environment that encourages idea-sharing and collaboration while also helping to attract and retain talent. (Morningstar)

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