Love it or hate it, but there’s no denying that Vancouver, Canada-based Northern Dynasty Minerals (NYSEAMERICAN:NAK) is a fascinating mining company. It’s always interesting to witness the contentious back-and-forth discussions among NAK stock traders.
Be advised, this stock is a fast mover in both directions. Also, it’s classified as a penny stock – i.e., a stock with a market capitalization below $250 or $300 million (though some folks informally use the term to denote stocks that trade below $5 per share).
The point is that you don’t want to load up on NAK stock, even if you like its prospects. Sure, there’s the potential for a multi-bagger here, but the share price could also conceivably get cut in half.
Mostly, it all depends on the success of just one mining project. So, if you’re ready to “go for the gold” (or in this case, copper), then let’s delve into the specifics of a dynamic, albeit risky, investment.
A Closer Look at NAK Stock
This should give you an idea of just how volatile NAK stock is. Amazingly, its 52-week range is 31 cents to $2.49.
And if we pull back and look at the big picture, we can see that the shares have traded as high as $18 in 2011. So, long-term investors might be in a tough position today.
Lately, NAK stock has drifted sideways, staying in a range between 50 and 60 cents. There was a push to $1 in February of this year, but that rally was short-lived.
Finally, I should point out that Northern Dynasty Minerals has earnings per share of around -10 cents on a trailing 12-month basis.
Investors should definitely want to see that number turn positive. However, that would likely require some good news, and a whole lot of luck.
A Long Shot
Just to recap, Northern Dynasty’s primary asset is called the Pebble Project. It’s located in Southwest Alaska, and the project’s mine is a gold, copper, porphyry and molybdenum mineral deposit.
The company asserts that the Pebble Project is one of the largest copper-gold mines in American history.
Along with 57 billion pounds of copper and 71 million ounces of gold, it’s estimated that the deposit has 300+ million ounces of silver and 3.4 billion pounds of molybdenum.
So, why isn’t Northern Dynasty Minerals a billion-dollar company yet? It’s because the Pebble Project is located near Bristol Bay in Alaska, in an environmentally sensitive area.
And until Northern Dynasty gets permission from the U.S. Environmental Protection Agency (EPA) to drill for all of those minerals, it will be awfully difficult for the company to turn a profit – and for NAK stock to escape from Penny Stock Land.
One analyst from Elephant Analytics summed it up concisely. He called the Pebble Project a long shot, and his argument is compelling.
A Ray of Hope?
The aforementioned analysts is skeptical that the Pebble Project will ever be approved. He cites President Biden’s pre-election mention of his opposition to the project.
He also seems to suggest that state-level support for the Pebble Project is questionable.
Moreover, it evidently has “minimal support among Democrats and mixed support among Republicans.”
On the other hand, perhaps the U.S. government might change its stance on the project.
Reportedly, the U.S. currently imports 35% of its copper. Yet, the Pebble Project could reduce this to 27%.
Irrespective of who’s in charge, it’s clear that the U.S. government doesn’t want the nation to be overly dependent on China and other countries for copper, an essential resource.
So just maybe – I know, I’m reaching here – regulators will soften their stances on the Pebble Project.
And if that happens, then NAK stock could move higher, very quickly.
The Bottom Line
Not everyone likes to bet on long shots. Still, sometimes it’s fine to take very small positions in risky plays.
NAK stock is one of those risky plays, no doubt. It’s cheap, volatile and full of moon-shot potential for the boldest traders among us.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.