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The mining stock's growth potential has many investors imagining what the future will bring, but success won't come easy.
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There's big, and then there's Pebble Project big. That's the name of one of the world's largest undeveloped gold mines and the largest undeveloped copper mine, the prized asset of Northern Dynasty Minerals (NAK +0.02%). The company has a long and volatile history with state and federal regulators, which have stymied efforts to develop Pebble to date, although its fortunes may have changed for the better in 2017.
While there's still a long way to go before the gold stock begins selling product -- Pebble may not come online until 2024 at the earliest -- many investors have overlooked that timeline to instead focus on the incredible potential on paper. Are the bullish investors right? Could Northern Dynasty Minerals be a millionaire-maker stock?
Image source: Getty Images.
The numbers are simply staggering. According to the most optimistic combined estimates put forth by the company, Pebble could hold over 80 billion pounds of copper, 105 million ounces of gold, 5 billion pounds of molybdenum, and 515 million ounces of silver. Those resource estimates aren't likely to hold up to more detailed surveying, but they still leave plenty of room for error. It also suggests the asset will be in production for decades.
What's less obvious is that Pebble has the potential to be one of the world's lowest-cost copper mines, as explained by my Foolish colleague Reuben Gregg Brewer. If the numbers hold up, Northern Dynasty Minerals could generate some serious cash flow from its copper assets alone -- with the other precious metals being the cherry on top.
Plus, the company recently proposed a greatly reduced project area in a move that can be viewed as an olive branch to stakeholders concerned about Pebble's potential impact on Alaska's sockeye salmon fishery in Bristol Bay. That decision may help to avoid costly regulatory or legal battles and provide more confidence to shareholders in the timeline for receiving the necessary permitting approvals.
The biggest knock against Northern Dynasty Minerals isn't too imaginative, but shouldn't be dismissed for its simplicity: There's a lot that can go wrong between now and when production is expected to occur, all the way out in 2024. The company's past -- not exactly a textbook case of executing against strategic goals -- gives ample cause for doubt.
Investors should consider the following:
The list of potential risks doesn't make me think that Northern Dynasty Minerals can obtain the market valuation necessary to become a millionaire-maker stock.
Consider that a $10,000 investment would need to see a 100x return to grow to $1 million. That means the company's valuation would need to grow from $600 million today to $60 billion without a single drop of dilution. That seems pretty unlikely.
That said, even without making investors millionaires, if management threads the needle and executes, the company has potential to deliver healthy gains to investors. However, I'll maintain my long-standing position on the stock: I feel strongly that the odds are not in the company's favor.