Mining companies have to spend huge amounts of money, energy, and time to build new mines. But if they have producing assets already, then there's cash available to carry the company until the new mine starts producing. What happens when a mining company doesn't have any producing assets? That's the issue facing Northern Dynasty Minerals, Ltd. (NYSEMKT:NAK) and its investors. Here's where this mining company will be in five years -- if everything goes according to plan.

What it's got

There's little question that Northern Dynasty Minerals owns a valuable asset. The Pebble Project, as it is known, contains measured and indicated reserves that would rank it among the largest mines in the world. That includes 57 billion pounds of copper, 71 million ounces of gold, 345 million ounces of silver, and 3.4 billion pounds of molybdenum. The problem here is that Pebble isn't a producing mine. In fact, it isn't even a mine that's being built.

A man standing at the mouth of a mine with the sun behind him

Image source: Getty Images

At this point Pebble is still grappling with the the task of getting the necessary permits to build a mine. This hasn't been an easy process thanks to the location of the property, near Bristol Bay, a key area for salmon fishing. Opposition has been stiff from environmentalists, the salmon industry, and locals. And somewhat surprisingly, a change in the White House hasn't materially altered the situation.

Even assuming the permitting process goes as well as the company hopes, Northern Dynasty won't have permission to move forward until the end of 2020 or early 2021. That doesn't mean the company has to sit on its hands and wait, but getting government approval for the mine is really the lynchpin here. It is the single biggest issue for investors to watch, and it will be the biggest determinant of where Northern Dynasty will be in five years time and beyond.

Two sets of bar charts showing that the Pebble Project would be one of the world's largest copper and gold mines if it gets built.

The Pebble Project could be huge. Image source: Northern Dynasty Minerals

While it is working on the permitting process, Northern Dynasty is doing other prep work. That includes things like engineering, feasibility, and environmental studies. It will also start looking at the design of the project and may even be able to do some of the early groundwork to prepare for the larger construction effort. But all of these things cost money.

Raising some cash

At this point, Northern Dynasty's costs are relatively modest compared to what will be required to actually start building the Pebble Project. But without any operating assets to go with Pebble, Northern Dynasty has no revenue at all coming in. It's losing money now and will likely lose more money as Pebble ramps up until -- and unless -- the project actually starts to produce.

To pay for all of the preliminary work, Northern Dynasty has made multiple secondary offerings of stock. Over the past three years, the would-be miner's share count has roughly tripled. On a positive note, the company has avoided debt, which is a good thing since it has no revenues to cover interest costs. However, every new share that gets issued to pay for the costs of building the mine dilutes the value that current shareholders will see when a mine gets built.

A timeline showing that the Pebble Mine won't be completed until 2024 at the earliest.

The Pebble Project timeline, as it stands today. Image source: Northern Dynasty Minerals

In fact, Northern Dynasty hasn't even started to look at project financing yet. That isn't scheduled to start until 2019, at the earliest. The red ink today is really all related to getting the mine approved. The costs to build the mine will be much, much larger and may require material share sales, debt, and even taking on partners. In the best case scenario, first product could be coming out of the mine in 2024, with full production in 2025.

Not quite there yet

In five years' time, Northern Dynasty Minerals will likely still be a money-losing company that's still in the process of trying to build a mine. If everything goes according to current plans, the Pebble Project could shortly thereafter be an operating mine, at which point the story will change materially. However, if you are looking at Northern Dynasty Minerals today, you need to recognize that it is really an option on what could be a large mine many years in the future. Conservative investors would be better off avoiding this name for now... and perhaps even another five to seven years.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.