Northern Dynasty Minerals (NYSEAMERICAN:NAK) is sitting on a gold mine, in a quite literal sense. That is, if it escapes the regulatory limbo surrounding its Pebble Project mine. The company states that “The Pebble Project is the most significant undeveloped copper and gold resource in the world.” Unfortunately, the chances of the project ever seeing the light of the day are very slim. However, with NAK stock trading for a few cents, investors can take a chance on the name without investing much capital.
The Pebble Project has been controversial from the beginning. In 2014, the Environmental Protection Agency (EPA) proposed halting the project. However, it was brought back from the dead by the Trump administration in 2019. But Alaska Senator Lisa Murkowski is against the project and President Joe Biden also opposed it last year.
Still, the company has a market capitalization of roughly $300 million despite the project’s minimal chances. However, with the stock trading at just 58.6 cents, there’s no harm in engaging in a little wishful thinking.
The Pebble Project
The mine is a gold, copper, porphyry, and molybdenum mineral deposit located in Southwest Alaska. The company says that it is one of the largest copper-gold mines in American history. It has an estimated 57 billion pounds of copper, 3.4 billion pounds of molybdenum, 71 million ounces of gold, and more than 300 million ounces of silver.
Five major companies in the past have tried to get Pebble Project up and running. However, none of them was successful, and they all had to abandon the mine after burning millions of dollars on it. This raises serious concerns about the sustainability of the project. Moreover, Pebble does not have any reserves yet and there’s no pre-feasibility report on the mine.
Mining expert Richard Borden believes that the project has a negative net present value of roughly $3 billion. Of course, price assumptions are a concern. To generate a profit from the project, Northern Dynasty will need higher copper and gold prices.
The Chances of the Project Being Completed
The short answer is that the chances of the Pebble Mine being completed are looking incredibly bleak at this point. The U.S. Army Corps of Engineers denied a key water permit for the mine late last year. In January, Northern filed a formal appeal against the decision. The Corps of Engineers has accepted the appeal and will be announcing its decision later this year.
There has been significant opposition to the project on environmental grounds. Moreover, given President Biden’s clear stance on the project and his views on sustainability, it’s tough to see a way forward for the project.
Consequently, there does not seem to be any hope for progress on the mine for at least the next four years. If Republicans regain control of the government again, there could be hope for the project. However, things weren’t too smooth for the Pebble Project during the Trump administration either.
The Bottom Line on NAK Stock
It’s all or nothing for Northern Dynasty Minerals’ Pebble Project. At this point, the future looks rather grim for the company. However, that’s not necessarily a bad thing for investors. The stock is trading for well below $1 and is quite affordable. Therefore, you can afford to take a chance on a small investment in NAK stock. If everything works out, its value could increase exponentially; if not, it’s going to tumble.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.