Shares of would-be copper and gold miner Northern Dynasty Minerals (NYSEMKT: NAK) were down nearly 17% at one point on Friday. By roughly 2 p.m. EDT, however, they had regained some ground and were down just 12% or so. That's a terrible performance given that the company announced that the much-anticipated Environmental Impact Statement covering its proposed Alaskan copper and gold mine, collectively known as the Pebble Project, had been released by the U.S. Army Corps of Engineers.
Based on the stock performance, you might think the news was bad, but it really wasn't. It was pretty much what was expected, largely giving the Pebble Project the green light to keep moving forward. There are two possible takeaways here. First, it could be a case of "buy the rumor and sell the news," with investors taking profits on a stock that gained over 400% between the start of the year and Thursday.
The other option is that the news release clearly highlighted that the Pebble Project is nowhere near complete, with CEO Ron Thiessen stating specifically that, "There is more work to be done." Investors may well have decided that the uncertainty here isn't worth the risk anymore after such a large price gain. Northern Dynasty Minerals' next steps are material, too. For starters, there are additional government hurdles to clear, notably at the state level. And, perhaps the biggest issue of all, is that the company will have to find a partner (or partners) to help it through the final project evaluation, design, and permitting stages of the project. Basically, the Pebble Project is still many years away from producing any copper or gold.
Northern Dynasty Minerals stock is not an appropriate holding for most long-term investors. The shares are effectively a bet that the company can get the Pebble Project completed -- a process that has already been faced with material levels of pushback. If the mine gets built, there's upside potential for the stock. If it doesn't... well, that won't be good for shareholders.
Meanwhile, expect the company's share price volatility to continue, especially given that (for now, anyway) the only way for it to raise money would be to tap the capital markets. And every time it sells more stock, as it did earlier in the year, current shareholders get diluted a bit further. Only more aggressive types who are willing to closely track their investments should be looking at Northern Dynasty Minerals stock today.
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