They're building some pretty big windmills in Alaska these days.

Northern Dynasty Minerals (NYSEMKT:NAK) announced Friday it had reacquired total ownership and control of the the massive Pebble copper and gold project at the headwaters of Bristol Bay, with an eye toward triggering federal and state permitting in the first quarter of 2014. Playing the role of Sancho Panza to the miner's Don Quixote, the market bid up shares of Northern Dynasty by 12% on Friday, and it was up another 11% in midday trading today, but the stock has still lost three-quarters of its value from the highs it hit earlier this year.

Drill rigs at Pebble. Source: Northern Dynasty Minerals.

Back in September, Northern Dynasty's partner Anglo American (OTC:AAUKY) declared it would be withdrawing from the operation, likely seeing the writing on the wall as opposition to the project mounted at the same time it was facing internal pressure to realign its capital allocation policies. Although some $556 million had already been spent developing Pebble, the mining major has been hard put to justify the expenditures made in defense of some far-flung projects.

It ran into roadblocks obtaining permits at Minas Rio in Brazil that it purchased for $4.8 billion between 2007 and 2008 and has seen the estimates for developing the iron ore mine triple to $8.8 billion as changes to the scope of the project and higher-than-expected construction costs dragged it down. Anglo is now looking for a partner to help shoulder the expenses at the project, which is forecast to produce 26.5 million metric tons of iron ore annually. Its CEO was ousted because of the delays and cost overruns, and his replacement is taking a much sharper pencil to project expense accounts.

Last week Anglo said it would be directing capital only to priority projects in an effort to build cash flows over the next few years. Those include copper projects at Los Bronces in Chile and Quelleveco in Peru, iron ore at Sishen in South Africa, metallurgical coal in Australia, and a complete overhaul of its platinum business in the face of a weak pricing environment. It will keep its thumb in the pie of diamonds, platinum group metals, and thermal coal, but projects like Pebble, despite the rich opportunity it represents if it gets the necessary permits, are getting rationalized.

And it's not alone, as miners everywhere pull back to confront the new realities the industry faces. Goldcorp (NYSE:GG) recently said it was suspending all exploration activity at Cerro Negro in Argentina; Rio Tinto (NYSE:RIO) continues to extract itself from projects around the globe, including the just-announced closure of its alumina refinery at Gove in Australia; and most notably Barrick Gold (NYSE:GOLD) indefinitely suspended its Pascua Lama gold project in Chile.

Anglo believes it can no longer go off on quixotic campaigns like Pebble. As commodity prices tumbled from 10-year highs, miners who pursued growth at any price policies in a bid to dominate niche markets found they had overcapitalized their assets leaving them exposed. Anglo was one of them, and now it's pulling in the reins.

Northern Dynasty doesn't have that luxury. Its future depends on getting Pebble operational, so it will be looking for a new partner for the venture. That might be a tough sell, though the lure of the copper and gold project may prove attractive for someone. The mine has the potential to produce as much as 55 billion pounds of copper, 67 million ounces of gold, and 3.3 billion pounds of molybdenum during its nearly 80-year life while producing $2.4 billion a year to the local economy and $9 billion in new state and federal tax revenues.

Standing in the way, of course, are environmentalists and villagers who are worried the open-pit mine will irreparably harm the 40 million salmon that swim into Bristol Bay every year, along with local bear, moose, and caribou populations. They've lined up a diverse list of opponents behind them, including jeweler Tiffany and gunmaker Sturm, Ruger. The EPA has already proved it's opposed to the project, and with some 67 different state and federal permits required to get through to construction, it seems Northern Dynasty is tilting at windmills with its belief it can succeed. 

Just as Cervantes' hero was left wanting, investors are likely to have similar, unrealistic dreams that will go unfulfilled.