A Canadian mining company is punching back after being hit with
an uppercut by the U.S. Environmental Protection Agency (EPA).
Northern Dynasty Minerals (AMEX:
is a co-owner of the Pebble project, a polymetallic deposit located
200 miles south of Anchorage, Alaska. The site contains copious
amounts of gold, copper and molybdenum.
Northern Dynasty and a 50/50 European partner have put significant
financial resources into studying and assessing the mine in the
hope of one day pulling out its vast riches. And there is no
disputing the wealth that Pebble holds: 67 million ounces of gold,
3.3 billion pounds molybdenum and 55 billion pounds of copper.
But those hopes may have just been dashed, or at least delayed.
The EPA recently released a harsh watershed assessment report that
outlines numerous concerns, most notably the potential threat of a
dam breach that could leak waste material from the mine into the
surrounding Bristol Bay -- one of the world's largest salmon
This is not the final word on the project, but the opposition does
present a formidable roadblock to future development. Themarket
reacted swiftly, lopping nearly 40% off Northern Dynastyshares over
a brutal three-day selloff.
Why am I bringing this up? Because I see a potential
Scarcity & Real Wealth
readers know that I seldom see eye-to-eye with the EPA. And while I
don't agree with its ruling, the EPA may have just handed investors
an opportunity to take a flier on this stock -- and potentially
My take on the ruling
As a Louisiana native and avid fisherman, I witnessed firsthand the
damage caused by
oil spill in the Gulf of Mexico and understand the importance of
protecting waterways. I don't think anyone would dispute the need
for common sense safeguards.
But any regulations have to be balanced with the need to create
jobs, reduce dependence on foreign oil, keep homeowners' gas and
electricity bills in check, and harvest the nation's vital energy
and metals resources.
Those goals are usually at odds with the EPA's single-minded
mission to block drilling and mining projects rather than look for
compromise and solutions. The agency frequently overplays the hand
it has been dealt. Just last week, it was rebuked by a federal
appeals court that overturned a heavy-handed EPA mandate meant to
cripple coal-fired power plants.
In this particular case, the agency jumped the gun. Why do I say
that? Because Northern Dynasty hasn't submitted any specific plans
or proposals for the Pebble Mine. Heck, it hasn't even formally
applied for an environmental permit yet.
The Bristol Watershed report was a pre-emptive strike. And it was
based solely on hypothetical mining scenarios.
How can you assess the potential impact of a project that hasn't
even been designed yet? That's like rejecting a future job
candidate a few months before they officially turn in an
application and without anyone having read their resume.
For its part, Northern Dynasty argues that the EPA findings are
based on distorted maps and figures that "lean heavily" on
political propaganda disseminated by environmental groups.
The company also notes that the mine is little more than a speck,
covering just one-twentieth of one percent of the land in question.
The surrounding waters account for less than 1% of the bay's total
Pebble's owners have spent eight years (and $150 million) studying
the potential environmental impact. Those data were compiled in a
27,000 page report that was submitted to the EPA last December.
However, this work reportedly came in too late to be evaluated --
never mind that the company hasn't yet applied for a permit.
Ironically, the EPA dragged its heels for years on the Keystone
Pipeline and ultimately rejected the proposal because more study
time was needed. This time, the agency was in such a rush to pass
judgment that it apparently didn't even take the time to evaluate
Fortunately, this was only a rough draft (the final version is due
out in November). And a peer-review panel of 12 independent
scientists and consultants who were asked to review the report
skewered it earlier this month.
Some citedmultiple errors, omissions, flaws and inconsistencies.
Others logically pointed out that you can't reasonably determine
ecological risk from a project that is still in the hypothetical
Such stinging criticism from independent experts will force the EPA
to start over and rely more on science than politics -- which means
the Pebble Mine still has a fair chance.
Risks to Consider:
The difficulties that Northern Dynasty is facing underscore the
risk and uncertainty shared by all junior and exploratory miners.
The lesson here is simple: don't place too much value on metals in
the ground until they can be brought to the surface.
Action to Take -->
Northern Dynasty has a veteran management team. If the company can
sidestep the environmental hurdles and begin production, this $2
stock would be a steal. But that's a big "if". For now, I plan to
keep Northern Dynasty on my watch list.
-- Nathan Slaughter
P.S. -- While I'm waiting to pull the trigger on Northern
Dynasty, there's another "Scarcity" situation you need to know
about. It involves the Russians, a nuclear "crisis" and an
emergency briefing involving President Obama. You couldn't make
this stuff up. For details, go here.
Nathan Slaughter does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC does not
hold positions in any securities mentioned in this article.
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