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Should You Buy Into Northern Dynasty Minerals’ $2-Billion Dream?

Right now, Northern Dynasty Minerals (NYSEAMERICAN:NAK) and NAK stock appear to have a potential lifeline.  

Piece of copper set against black background
Source: Coldmoon Photoproject/Shutterstock.com

On Feb. 26, Northern Dynasty announced that the U.S. Army Corps of Engineers (USACE) had accepted Pebble Limited Partnership’s request to initiate “an administrative appeal” for Alaska’s Pebble Project, a potential mine development about 200 miles outside of Anchorage, Alaska. 

Previously, in November 2020, the USACE had delivered a negative “Record of Decision.” However, Pebble Limited Partnership — of which Northern Dynasty owns 100% — now basically has a shot at a second chance.

Unfortunately, though, that news didn’t move the stock. 

NAK Stock: The Feds Don’t Like It

What should you think of NAK stock?

As InvestorPlace’s Ian Bezek wrote on Mar. 13, there are lots of reasons why investors should stay away from Northern Dynasty. One chief reason, though, is the fact that the administrations of former Presidents Barack Obama, Donald Trump and now President Joe Biden have all opposed the Alaskan mine.

So, while USACE might be giving the Pebble Project a little oxygen, it’s hard to imagine a sane person giving any company the right to destroy pristine Alaskan wilderness.

Yet, at about 60 cents a share, NAK stock does attract a certain kind of speculator. Here’s why.

NAK Has Potential

Using Finviz.com, out of some 41 gold stocks listed on a U.S. stock exchange, you can only find four examples trading for less than a buck today and Northern Dynasty isn’t one of them. Additionally, there are no copper stocks trading below $1 — at least as listed on the site.

What’s more, using Investing.com, you can’t do much better, though you can see NAK stock 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. Most of the TSX gold producers are also available on the other-the-counter market. 

Another quick screen on Investing.com, though, and you can get 14 gold and silver producers trading at a dollar or less with a market capitalization greater than $100 million. Northern Dynasty’s current market cap is $306 million, despite having zero revenue, no other irons in the fire and no realistic chance of approval to establish its mine. 

But suspend reality for a moment.

The company’s March 2021 presentation shows that Pebble could be one of America’s largest copper and gold producers (Page 16). Northern Dynasty estimates that it could produce 318 million pounds of copper and 362,000 ounces of gold annually over 20 years of mining. And that doesn’t include the potential silver, molybdenum and rhenium reserves on the property. 

Based on a current copper price of $4.04 per pound and a gold price of about $1,713 an ounce as of today, we’re talking about close to $2 billion in annual revenue. Based on 509 million shares outstanding, that’s revenue of $3.74 a share and an extremely attractive forward price-to-sales (P/S) ratio.

For comparison, Barrick Gold (NYSE:GOLD) currently has a P/S ratio of 2.81. Today, Freeport-McMoRan (NYSE:FCX) has a P/S ratio of 2.36.

So, even with 509 million shares outstanding, NAK stock has got serious upside potential. However, that’s only if it can get shovels in the ground —  and that’s an enormous “if.”

The Bottom Line

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. It would also add another 1,150 indirectly. Plus, the average mining wage would be $100,000. In terms of taxes, it could also add more than $1.3 billion in state taxes and loyalties over 20 years (Page 21).

So, while it’s easy to say no to the project from afar, the benefits here make it difficult to pass on. That’s why NAK stock shareholders keep hanging in there. Covid-19 has been difficult for every state. This project would be a real shot in the arm. 

Personally, 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 could be a potential gold mine down the road.

On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.

Read More:Penny Stocks — How to Profit Without Getting Scammed

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. 

Article printed from InvestorPlace Media, https://investorplace.com/2021/03/nak-stock-should-you-buy-into-two-billion-dollar-dream/.

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