On Tuesday, the Trump Administration announced that the U.S. Environmental Protection Agency would be scrapping Obama-era proposed restrictions on large-scale mining operations in Alaska’s Bristol Bay watershed. Politics aside, the announcement was certainly a victory for Canadian mining company Northern Dynasty Minerals (NAK) who owns the most significant underdeveloped copper, gold, molybdenum, and silver resource in the world.
The company’s pebble mine is near Lake Iliamna in southwestern Alaska and is expected to produce 70 million tons of valuable minerals per year. With the possible withdrawal of the 2014 Proposed Determination to limit water pollution––which was ultimately an attempt to veto Northern Dynasty’s initiative to develop one of the world’s most important mineral resources called the Pebble Project–––NAK is hoping to tap a U.S. $100 billion gold deposit in the region. While the policy change does not guarantee that the U.S. government will issue a permit for NAK’s planned Pebble Mine, the decision does remove a specific restriction that stood in the way of the company’s project.
In reaction, NAK’s stock skyrocketed nearly 65% in Tuesday's trading session, before giving back some of that rally today. However, H.C. Wainwright analyst Heiko Ihle believes there’s a lot more fuel in the tank to propel the stock even higher, as he reiterates a Buy rating on NAK with a $2.50 price target. (To watch Ihle’s track record, click here).
Ihle commented, "The removal of the Proposed Determination eliminates any uncertainty regarding the 2014 regulatory action in relation to progressing the Pebble Project through the permitting process. Additionally, we note that this move means the EPA can now work with the Army Corps to review the permit. The collaboration between the EPA and Army Corps could lead to possible changes in the proposed permit that would make the project more agreeable to attain proper permitting. We note the Army Corps has maintained its expected timeline of a Final Economic Impact Statement to be reached in 1Q20 amid a Record of Decision (ROD) in 2Q20."
"However, lifting of the restrictions does not guarantee the issuance of a permit by the U.S. Government. Nonetheless, this move should ease continued progress for Pebble, while simultaneously increasing investor interest given less opposition to the mine," the analyst added.
Additionally, Northern Dynasty established financial flexibility in late June after closing a $5 million bought deal which included 12.2 million common shares of the company for $0.41 per share. Even though this price sits well bellow the current share price, Ihle is not concerned, noting that “the deal was announced before the recent newsflow and concurrent share price increase.” Further, the proceeds from the transaction will serve to fund engineering, environmental, permitting, and evaluation expenses as well as outreach and engagement with political and regulatory offices.
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