Why Northern Dynasty Minerals Ltd Stock Rocketed Nearly 50% in January

Northern Dynasty doesn't produce any gold, silver, or copper, yet, but investors seem to hope Trump will help change that.

Reuben Gregg Brewer
Reuben Gregg Brewer
Feb 7, 2017 at 9:50AM
Energy, Materials, and Utilities

What Happened?

Shares of Northern Dynasty Minerals Ltd (NYSEMKT: NAK) rose an impressive 49.5% in January. But that's just a small part of the massive 294% gain since Nov. 8, when Donald Trump was elected to be the next U.S. president. Trump's election is important news for the outlook at some companies -- but it was clearly huge news for Northern Dynasty Minerals.

A picture of Northern Dynasty Minerals.employees talking about the Pebble project.

Image source: Northern Dynasty Minerals.

So What?

Northern Dynasty is developing the Pebble Project in Alaska. Although nothing has been pulled out of the ground yet, Pebble is thought to hold the second largest gold and silver reserves in the world and the ninth largest copper reserves. In other words, once this project is up and running, it will be a big deal... but only if it gets up and running.

Two bar charts showing the size of the Pebble project's copper and precious metals deposits relative to other mines throughout the world.

The opportunity of Pebble is huge.  Image source: Northern Dynasty Miners Ltd  

The problem for Northern Dynasty is that it's been fighting with the Environmental Protection Agency. And that's not only cost the company a lot of money, but it's made mine progress that much harder to achieve. With environmentally conscious Obama in the White House, investors were rightly concerned that Northern Dynasty might never be able to get through the regulatory red tape.

Trump, however, signaled throughout the election that he would be less environmentally focused than the Obama administration. Investors are clearly betting that Trump will live up to his word, which could turn Northern Dynasty's potential opportunity into a very real and material one.

Now What?

Northern Dynasty's only asset is a development stage project. That's not a bad thing, but it isn't the type of stock that conservative investors should buy. While the Trump presidency is expected to help smooth the way for the Pebble project, there's still a lot of uncertainty around when Northern Dynasty will be able to start making money off of the over $750 million it's spent so far -- there's a lot more costs to come. And that doesn't even take into consideration the inherent risks of building a mine from the ground up. Although the price gain in January was impressive, most investors would be better off sticking to more established miners.