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Shares of prospective copper and gold mining company Northern Dynasty Minerals (NYSEMKT: NAK) jumped over 25% last month without any news. However, the move can be explained by knowing that investors are expecting significant news before the end of September -- and looking to get into a position before it's announced.
What does that cryptic wording mean? In a June 23 interview with Business News Network of Canada, Northern Dynasty Minerals CEO Ron Thiessen said, "I feel pretty comfortable that we can achieve a repartnering by the end of [the third quarter] of this year." That would be a big and necessary catalyst for the company and the stock, perhaps enough to push shares to new levels that held for the foreseeable future.
Northern Dynasty Minerals uses the term "re-partnering" to describe its ongoing efforts to bring in a blue-chip partner or two with deep pockets that can help to develop the expansive Pebble Project. The term also reminds investors that the company had partners in the past, but they bailed after environmental regulations shutdown development.
No matter what investors call it, bringing in partners (again) will be one of the most important events in the project's history. Pebble will be very expensive to develop up front -- orders of magnitude more costly than the tiny company can handle by itself. Pebble covers a vast area of land, has a low concentration of ore in many locations, and is situated in the Alaskan wilderness -- where everything from energy to equipment is sold or rented at a premium.
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Despite the 25% gain in August, analysts and investors appear torn about Northern Dynasty Minerals as an investment. On one hand, the Pebble Project is one of the largest undeveloped copper and gold mines in the world and holds an incredible amount of mineral wealth. On the other hand, investors are being asked to ride out a significant amount of risk and uncertainty until 2024, when production is expected to begin.
Given the new deregulation push and the CEO's confidence, investors should likely expect a partnership to be announced in the near future. However, I lean heavily in favor of sitting this one out. Northern Dynasty Minerals hasn't proven itself very capable of developing Pebble in the past -- even before environmental regulations began to derail the project -- and there's an awfully long way to go to develop the mine into the world-leading asset it's touted to be. If you disagree, then consider that the company has plenty of time to prove me wrong. But even in that event, you'd still be better off waiting for the project to be further de-risked before starting a position.
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