What happened
Shares of future copper and gold miners Northern Dynasty Minerals (NYSEMKT: NAK) They fell nearly 17% at one point on Friday. At around 2 p.m. EDT, however, they had recovered some ground and were only down 12%. It’s a terrible performance given that the company announced that the long-awaited Environmental Impact Statement covering its Alaska copper-gold mine proposal, collectively known as the Pebble Project, had been released by the US Army Corps of Engineers. USA
And that
Based on stock performance, you may think the news was bad, but it really wasn’t. It was more or less what was expected, largely giving the green light to the Pebble Project to keep moving forward. There are two possible conclusions here. First, it could be a “buy the rumor and sell the news” case, with investors making a profit in a stock that gained more than 400% between the start of the year and Thursday.
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The other option is that the press release clearly highlighted that the Pebble Project is far from complete, and CEO Ron Thiessen specifically stated that “there is more work to be done.” Investors may have decided that the uncertainty here is no longer worth it after such a large price gain. Northern Dynasty Minerals’ next steps are also material. For starters, there are additional government hurdles to overcome, especially at the state level. And, perhaps the biggest problem of all, is that the company will have to find a partner (or partners) to help it through the final project evaluation, design, and project authorization stages. Basically, the Pebble Project is still many years away from producing copper or gold.
Now what
Northern Dynasty Minerals shares are not an adequate holding for most long-term investors. The actions are effectively a gamble that the company can complete the Pebble Project, a process that has already faced material setbacks. If the mine is built, there is an upside potential for the stock. If you don’t … well, that won’t be good for shareholders.
In the meantime, expect the volatility of the company’s stock price to continue, especially since (for the moment, anyway) the only way to raise money would be to turn to the capital markets. And each time it sells more shares, as it did earlier this year, current shareholders dilute a little more. Only the most aggressive guys who are willing to closely monitor their investments should look at Northern Dynasty Minerals stocks today.
