Shares of Northern Dynasty Minerals (NYSEMKT:NAK) lost more than half their value in early trading on Aug. 24. Although the stock quickly regained a portion of that drop, the price was still off by 45% at roughly 10 a.m. EDT.
The big driver was a news release from the company that coincided with the start of the Republican National Convention. Essentially, the would-be miner announced that it had launched an advertising and outreach campaign to push for the approval of its giant Pebble copper and gold project. That mine, which is still in the permitting process, is basically the only asset Northern Dynasty owns. The company said the campaign targets "the Trump Administration, the Republican Party, its delegates and influencers." Politico reported yesterday that the Trump administration is planning to bock the Pebble Mine.
In the news release, the company's CEO said, "We’ve seen a small number of unelected but high-profile conservatives suggest President Trump should put his thumb on the scale when it comes to the final step of permitting at Pebble... Our campaign is simply a reminder to the White House, to the conservative establishment and US business leaders that the politicization of statutory permitting processes is anathema to rebuilding America’s economy, to restoring American jobs and attracting investment in job-creating projects and industries."
Based on that statement and the stock decline, it seems the big fear among investors is that the project will get delayed further or, worse, shut down completely. In fact, over the weekend, The Wall Street Journal reported that the Army Corps of Engineers would require significant additional changes to the Pebble project before it would grant its approval. Given the long and contentious permitting process so far, the fear that things may not be going as smoothly as hoped isn't unreasonable. The company's news release really was an ominous update.
For Northern Dynasty to lose so much value in such a short period of time is pretty shocking. However, there's a bigger picture here. At one point this year the stock was up around 450%. Even after the early-morning drop it was still higher by around 80% on the year. So while today's drop is an eye opener, euphoric investors clearly priced in a lot of good news here earlier in the year. As the reality sets in that the Pebble mine is still a work in progress, the excitement has understandably waned. Most long-term investors should probably be on the sidelines until Northern Dynasty has a functioning mine.