What happened

Shares of would-be "Pebble Project" goldminer Northern Dynasty Minerals' (NAK 0.07%) stock sold off hard in early Monday trading, falling nearly 17% initially before retracing to arrive at about an 8% loss as of 11 AM EST. Curiously, the sell-off came in response to something that many investors might initially read as "good news."

Early this morning, Northern Dynasty announced that it has entered into a framework agreement with Canada's First Quantum Minerals Ltd., granting the latter an option to acquire up to 50% of Northern Dynasty's Pebble Project for $1.35 billion, in exchange for initial options payments totaling $150 million over four years.

Handtruck on track in a gold mine with exit at end of tracks.

The light at the end of Northern Dynasty's tunnel just got appreciably dimmer. Image source: Getty Images.

So what

As I said, this sounds like good news. Conditioned on a positive appraisal after conducting due diligence on Northern Dynasty's operations, First Quantum Minerals will pay Northern four annual $37.5 million installments on its options price (the first of which will be used to pay Northern Dynasty's costs as it seeks regulatory permits to begin operations). First Quantum has the further "option" of extending its option by two more years after the initial four year period, with the payment of additional sums (that will be offset against the eventual purchase price of $1.35 billion).

Now what

Now here's the thing that may be troubling investors. On the one hand, all of Northern Dynasty stock today currently costs just $612 million. The prospect of seeing that value more than quadruple ($1.35 billion is twice the company's current market cap, and that's the price for just half of Northern Dynasty's stock) may sound appealing. But this agreement also limits the potential upside if Northern Dynasty should succeed in striking it rich at Pebble.

Half the potential profits from this gold rush are being sold off to another investor right at the outset. Given the huge risks that investors are taking in investing in a company with no profits -- no revenues even -- today, they might not be best pleased at seeing their upside so suddenly and irrevocably capped by this deal.