Morgan Stanley Dumps the Pebble Mine, Northern Dynasty

Multinational investment banking and financial services firm reports over 99 percent reduction in shares of Northern Dynasty Minerals, sole owner of widely-condemned Bristol Bay mining scheme; Bristol Bay leaders applaud the sell-off.

Adding to the financial woes of embattled Pebble Mine owner Northern Dynasty Minerals, global investment banking firm Morgan Stanley filed a form 13F with the Securities and Exchange Commission on March 31, 2020 reporting a reduction of 99.14 percent in its shareholdings in the proposed Bristol Bay copper and gold mine’s underfunded Canadian owner. Once the fourth largest institutional shareholder in Northern Dynasty, Morgan Stanley moved in this report to 57^th on the list of all shareholders, reducing its position from 3,479,137 shares to just 29,749 shares.

According to CNN Money, Morgan Stanley’s holdings in fact had reached a high point of 4,579,900 before the major sell-off reported at the end of March, resulting in a cumulative percentage reduction of 99.36 percent in the number of shares attributed to the company on behalf of itself and its clients. 

Morgan Stanley’s sell-off is just the latest indication on a global scale of the financial toxicity of this uniquely reckless mining scheme:

• In 2011, Mitsubishi Corporation sold out.
• In 2013, Anglo American abandoned its partnership, walking away from an investment of almost $600,000,000.
• In 2014, Rio Tinto donated its shares to two Alaskan non-profits.
• In 2018, First Quantum Minerals walked away from an investment five months earlier of $37.5 million and terminated negotiations for a 50 percent partnership.
• In 2018, BlackRock zeroed out its shareholdings in Northern Dynasty.
• For over a decade, Tiffany & Co., leading a group of some 60 major jewelers, condemned the project because there are some places that simply should not be mined, and Bristol Bay is one such place.
• Since February 2011, Northern Dynasty’s share value has dropped over 94 percent in value. In 2017, based on a thorough financial analysis of the company, New York investment firm Kerrisdale Capital Management called Northern Dynasty “worthless,” observing that even President Trump “can’t make a success out of a value-destroying boondoggle.” The Pebble Mine, it said, is “doomed,” “politically-impaired” and “commercially futile.”

While the reasons for Morgan Stanley’s recent sell-off are unknown, the global investment company is known as a strong proponent of the principle that environmental and social responsibility are essential to long-term investment success. Sustainable investment, the global investment leader has prominently argued, requires attention to a company’s impact on the planet and on the communities affected.

Based on that commitment, leaders from Bristol Bay have urged Morgan Stanley to dissociate itself and its clients from Northern Dynasty and the Pebble Mine, and last month representatives from the region—including the Bristol Bay Native Corporation, United Tribes of Bristol Bay, Bristol Bay Native Association, Bristol Bay Economic Development Corporation, Bristol Bay Regional Seafood Development Association, United Fishermen of Bristol Bay, and Salmon State—met by video conference with Morgan Stanley representatives to confirm their longstanding opposition to the project and applaud Morgan Stanley’s response. For many years, opposition in Alaska has been intense and overwhelming—80 percent in the Bristol Bay region and over 60 percent state-wide—and that opposition shows no signs of relenting. 

Deep concern about environmental and social impacts of the project have not been answered through the accelerated, deeply flawed Army Corps of Engineers permitting process, as comments from stakeholders across the ideological spectrum (including several federal agencies) on the quality of the environmental review have been consistently negative. 

Similarly, questions about the financial viability of the project have gone unanswered despite repeated inquiries from Congress, Alaskans, the media, and others. Former Rio Tinto environment and permitting chief Richard Borden estimated, for example, based on his independent economic analysis, that the project as proposed would lose $3 billion and is almost certainly financially infeasible.

Northern Dynasty has adamantly refused to disclose any analysis of the scheme’s projected costs and revenue, presumably because a negative financial assessment would deter—not attract—new investors. And the cash-strapped 100 percent owner’s desperate hope—its “business plan—is that the issuance of a permit by the Army Corps will attract new investment, a new partner, or a buy-out, leaving the Pebble Mine’s future to some yet-to-be-determined company allegedly “waiting in the wings.” 

If such a company indeed exists, it will necessarily bring with it a very high tolerance for risk of all kinds—financial, technical, legal, regulatory, environmental, social, and, of course, reputational risk, since any company that chooses to associate with Northern Dynasty will inevitably be tarred by the widespread condemnation that the Pebble Mine so richly deserves. 

Road access to the project site, too, is uncertain, as landowners along the infrastructure corridor have re-affirmed that they will not consent.

Finally, with a major national election just months away, there is also political risk, since a change in federal leadership will enable EPA to renew major restrictions on the project—restrictions previously proposed based on the significant, unacceptable, and potentially “catastrophic” risks to the region that the agency’s scientists have predicted from mining even at a scale far smaller than is currently proposed by the Pebble project for permitting. Under the federal Clean Water Act, even after a permit has been issued by the Army Corps, EPA retains its authority to prohibit or restrict an activity or project “at any time” in a sensitive region like the Bristol Bay watershed—the incubator for trillions of wild salmon, including 50 percent of the world’s sockeye. 

Morgan Stanley’s recent sell-off of Northern Dynasty shares is one more ominous signal to investors and the mining industry that the Pebble Mine is indeed, as so many have said, the “wrong mine in absolutely the wrong place.” Investors ignore this at their peril, as so many Northern Dynasty shareholders and former partners have already learned the hard way. 

Northern Dynasty is a global pariah and a bad investment, and its sole asset—the Pebble Mine—is a disaster in the making.