The Millstone Around Northern Dynasty's Neck

The miner is dragged a little bit deeper into the Bristol Bay morass with publication of the EPA's final assessment.

Jan 18, 2014 at 3:07PM

Copper and gold miner Taseko Mines (NYSEMKT:TGB) was blindsided by an erroneous assessment report issued by the Canadian Environmental Assessment Agency charging that its New Prosperity mine in British Columbia would wreak catastrophic damage on the environment because it was based upon flawed data. Rather than use the mitigation plans Taseko submitted, the agency erroneously substituted one from the country's mineral and resource agency, a plan that would lead to a horrendous outcome. 

The blatant disregard of the miner's plan in an effort to subvert the application process has thrown the whole review into question, and Taseko is challenging the flawed findings.

While perhaps not on the same level as the "unfathomable" efforts by our neighbors to the north, Northern Dynasty Minerals (NYSEMKT:NAK) is undergoing a similar trial by ordeal at its proposed Pebble mine in Alaska where the Environmental Protection Agency issued its third and final assessment yesterday of the copper and gold project on the Bristol Bay watershed. Although the miner hasn't even submitted a proposal yet, the agency has already determined Northern Dynasty will similarly cause "catastrophic effects." 

Instead of waiting for an actual plan to be devised as is routinely the case, the EPA chose to preemptively use Northern Dynasty's draft outline that it submitted to the SEC and then asked some mining experts for their opinion too. The resulting report gave the appearance of a predetermined outcome in search of a project to deny. The miner struck back at the regulatory agency, noting the hit job it did in its first two draft reports saying it had every expectation this latest version will be equally flawed.

Located on Bristol Bay at the headwaters of a major spawning ground that sees 40 million salmon swim in every year, Pebble is the single largest undeveloped copper-gold-molybdenum deposit in the world, with the potential to produce as much as 55 billion pounds of copper, 67 million ounces of gold, and 3.3 billion pounds of molybdenum over its near 80-year life. Thousands of jobs and billions of dollars in revenue and taxes are attached to its completion.

Maybe it was the mounting opposition to Pebble, or the need to conserve resources in an escalating cost environment, but Northern Dynasty Minerals has more problems than just an adversarial agency as it has also lost its partner for the mine's development and its major backer is poised to dump its stock.

This past September, Anglo American (NASDAQOTH:AAUKY) announced it was withdrawing from the project as it directed its limited capital only to priority projects as it seeks to build cash flows over the next few years. Then last month, investor Rio Tinto (NYSE:RIO) said it was considering divesting the near-20% ownership stake it has in Northern Dynasty as part of a strategic review that has come under increasing political pressure to back away from the unpopular Alaskan development scheme.

Without a partner, Northern Dynasty is unlikely to be able to move forward despite proceeding with its permitting plans. It also said the final EPA report "does not include any recommendations or regulatory actions that will affect future development of the Pebble Project."

Perhaps, but with hundreds of millions of dollars sunk into Pebble already, the project is a millstone around Northern Dynasty Minerals' neck. Nor will anyone throw it a life preserver -- the preemptive strike by the EPA ensures everyone will want to avoid any blowback.

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