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Northern Dynasty Minerals' Mine Gets Rejected; Shares Plummet 55%

By Tyler Crowe - Nov 25, 2020 at 3:48PM

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The speculative mining stock was hoping for a key environmental permit to get approved; it didn't happen.

What happened

Shares of speculative gold mining stock Northern Dynasty Minerals ( NAK 7.53% ) are down 55.3% as of 2:30 p.m. EST today. The stock fell off a cliff after it failed to obtain a key permit from the U.S. Army Corps of Engineers. 

So what

All of Northern Dynasty's prospects for the future were tied up in one potential project: the Pebble project in Alaska. The company claimed that the reserves of gold and copper were some of the largest in the world, but it also happened to be located precariously close to one of Alaska's key fisheries in Bristol Bay.

A gold mine

Image source: Getty Images.

For more than 25 years since the company went public, it has been fighting to get this mine approved. It has faced numerous setbacks as plans to mitigate the impact of dredged material and other wastes haven't met either the Corps of Engineers' or the Environmental Protection Agency's standards.

This time around, it came down to the company's inability to address the issues the Corps of Engineers mentioned in its environmental impact statement back in July.

Now what

I can't say with certainty that this will be the final nail in the Pebble project's coffin, but a rejection from the Corps of Engineers is about as close as you can come. The company may file for an appeal, but this was a mine that was previously rejected under the Obama administration, was reevaluated and subsequently rejected by the Trump administration, and will now have to be negotiated with the Biden administration to move forward. 

Northern Dynasty's stock has always been more akin to buying a lottery ticket than buying a business. The Pebble project was its sole asset, it has no revenue other than issuing stock, and its entire business was contingent upon getting permits and finding some deep-pocketed partners to fund the development. 

The ways for this lottery stock to pay off are getting narrower and narrower, and anyone temped to buy are better suited walking away at this point.

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.

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