Northern Dynasty Minerals has had a long slide, and now the
bulls are back.
The Canadian mining company owns half of southern Alaska's Pebble
formation, a giant deposit of copper, gold and molybdenum. It
surged from around $9 to $21 between December and February, then
fell all the way back to $11 earlier this month.
Yesterday the shares started moving early and ended the session up
7.05 percent to $12.45. Traders bought the November 15 calls, first
for $1.50 and later for as much as $1.75, pushing volume in the
strike past 5,000 contracts--more than 4 times previous open
The purchases reflect a belief that NAK will resume its rally over
the course of the year. Sometimes investors buy calls rather than
stock because it gives them the right to own shares down the road,
while reducing capital at risk in the case of a selloff. (See our
The strategy makes sense for a highly volatile and speculative
company such as NAK. The Pebble deposit is estimated to contain 55
billion tons of copper, 69 million ounces of gold, and 3.3 billion
pounds of molybdenum. It's co-owned by Anglo American, which is
paying to bring it online. But, initial permitting isn't expected
until late 2012, so it's still several quarters away from
NAK became a public company in 2003 and mostly drifted sideways
until late last year when it started to draw attention. That
suggests it's now on the radar of a new set of investors and could
be in the early stages of a bullish run.
Overall option volume in the name was 11 times greater than average
yesterday, with calls outnumbering puts by 46 to 1.