What happened

Shares of Northern Dynasty Minerals (NAK) dropped as much as 26.8% Monday after a surprise decision from the U.S. Environmental Protection Agency was handed down late Friday afternoon. The regulatory agency said in a statement that Alaska's Bristol Bay sockeye salmon fisheries -- the largest in the world -- deserve protection and that any mining projects developed in the region may pose "unacceptable risk." The decision is catching everyone off guard. 

Last spring, the EPA withdrew protections for the very same fisheries, which removed a major regulatory obstacle for the development of the company's massive Pebble Project, the world's largest undeveloped gold and copper mine. With the latest decision, the regulatory agency has publicly expressed its willingness to consider the viewpoints of stakeholders not named Northern Dynasty Minerals -- and Wall Street is freaking out that it will derail or, at the very least, delay the project.

As of 11:10 a.m. EST, the stock had settled to a 24.2% loss.

A finger pointing at a screen showing a downard trending chart.

Image source: Getty Images.

So what

The EPA did explicitly state its decision "neither deters nor derails the application process" of the Pebble Project. So that's good. But that was immediately followed by, "However, [the company's] permit application must clear a high bar, because [the] EPA believes the risk to Bristol Bay may be unacceptable."

While the EPA's statement was released last Friday, investors may suspect that Northern Dynasty Minerals knew the decision was coming. After all, at the end of 2017 it suddenly proposed a much smaller footprint for the Pebble Project and listed reduced impact on the Bristol Bay fisheries as a key reason for the change. That could help it complete the permit process.

This is still not a great development for Northern Dynasty Minerals. The company sat on its prized asset for years, unable to even complete the permit process, let alone begin the multi-year development process, due to environmental protections for sockeye salmon. The pro-business and anti-regulatory administration currently in office put a swift end to that concern, which appeared to send the company on its way to at least have the opportunity to fulfill its potential. That is now in greater doubt.

Now what

Although it's true that the latest EPA decision doesn't spell the end of the Pebble Project -- and therefore Northern Dynasty Minerals -- it does greatly complicate things for investors by sprinkling uncertainty over everything.

Will it directly delay the project's development? It wasn't expected to produce until 2024, and that was before this regulatory monkey wrench was thrown into the fray. Does it make First Quantum Minerals chicken out of the partnering process, or force it to demand a greater stake in the project to compensate for the added risk? Is this just a PR stunt by the EPA after receiving backlash for how it made its original decision last spring? (That may be unlikely, as it cited the economic importance of Bristol Bay in its recent decision to reinstate environmental protections.)

No one knows. But investors can probably expect increased volatility in the days and weeks ahead.