Northern Dynasty Minerals (NYSEMKT:NAK) stock appears to have a potential lifeline.
On Feb. 26, Northern Dynasty announced that the US Army Corps of Engineers (USACE) had accepted the Pebble Limited Partnership’s request to initiate an administrative appeal for Alaska’s Pebble Project, a potential mine development 200 miles from Anchorage.
In November 2020, USACE delivered a negative “record of decision.”
USACE’s Pacific Ocean Division sent a letter to the Pebble Limited Partnership — Northern Dynasty owns 100% of the partnership — saying its request for appeal (RFA) met the criteria to move ahead.
However, the news didn’t move the stock.
The Feds Don’t Like It
As InvestorPlace’s Ian Bezek wrote on March 13, there are lots of reasons why investors should stay away from Northern Dynasty stock. Not the least of which is the fact that the Obama, Trump, and now Biden administrations have all opposed the Alaskan mine.
USACE might be giving the Pebble Project a little oxygen, but it’s hard to imagine a sane person giving any company the right to destroy pristine Alaskan wilderness.
Yet, at 76 cents a share, NAK stock does attract a certain kind of speculator. Here’s why.
NAK Stock Has Potential
Using Finviz.com, out of approximately 41 gold stocks listed on a U.S. stock exchange, I can only find three examples trading for less than a buck and Northern Dynasty isn’t one of them. I can find no copper stocks trading below $1.
Using Investing.com, I don’t do much better, but I do see NAK on the list.
Many junior gold producers trade on the Toronto Stock Exchange or TSX Venture Exchange. Northern Dynasty has a dual listing on both the TSX and NYSE American exchange. Most of the TSX gold producers also are available on the Over-the-Counter market.
Another quick screen and I get 11 gold and silver producers trading at a dollar or less with a market cap greater than $100 million. Northern Dynasty’s current market cap is $387 million despite having zero revenue, no other irons in the fire, and no realistic chance of getting approval to establish its Alaskan mine.
Suspend reality for a moment.
Page 16 of Northern Dynasty’s March 2021 presentation shows that Pebble could be one of America’s largest copper and gold producers. Northern Dynasty estimates that it could produce 318 million pounds of copper and 362,000 ounces of gold annually over 20 years of mining. That doesn’t include the potential silver, molybdenum, and rhenium reserves on the Pebble property.
Based on a current copper price of $4.12 a pound and a gold price of $1,726.33 an ounce, we’re talking about close to $2 billion in annual revenue. Based on 555 million shares outstanding, that’s revenue of $3.60 a share and a forward price-to-sales ratio of 4.7.
Barrick Gold (NYSE:GOLD) has a P/S ratio of 2.9, while Freeport-McMoRan (NYSE:FCX) has a P/S ratio of 3.9.
So, even with 555 million shares outstanding, it’s got serious upside potential, but only if it can get shovels in the ground–enormous if.
The Bottom Line on NAK Stock
Anyone who cares about Alaska’s environment should be absolutely opposed to the Pebble Project. However, there’s no denying the economic boost a project like this would provide the state.
As Northern Dynasty’s presentation states, Pebble would add 850 direct jobs in Alaska and another 1,150 indirectly with an average mining wage of $100,000. In terms of taxes, it could add more than $1.3 billion in state taxes and royalties over 20 years.
So, while it’s easy to say no to the project from afar, the state’s benefits make it difficult to pass on, which is why NAK shareholders keep hanging in there.
Covid-19 has been difficult for every state. This project would be a real shot in the arm.
I wouldn’t invest. However, that doesn’t mean you shouldn’t. If you have some fun money and don’t care about the environment too much, NAK stock provides a potential gold mine down the road.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
