New Report Finds Pebble Mine Is “Gaslighting Investors”

Like the 2017 Kerrisdale Capital analysis, new report concludes Pebble Mine has “No Economic Viability”

Confirming many of the 2017 findings of New York-based investment firm Kerrisdale Capital, a new report issued by J Capital Research (J Cap) concludes that Northern Dynasty Minerals (NAK)—the company behind the Pebble Mine proposed at the headwaters of the world’s greatest wild salmon fishery in Bristol Bay, Alaska—“has crafted a money-losing mining plan to achieve government approvals.

“Since management is bonused on lobbying success instead of for producing minerals, NAK has no reason to care that the new plan is irrational: we think it will lose money, leave investors with a stranded asset, and be canceled anyway if Joe Biden is elected.”

The report cites one glaring reason why Northern Dynasty “twisted itself into this knot”: The CEO of subsidiary company Pebble Limited Partnership “will receive $4.4 mln of the promised $12.5 mln bonus for winning a green light just to start the permitting process.” (Note: the report also discloses that J Cap has short positions in the stock of Northern Dynasty Minerals.)

The report goes on to provide several examples of how Northern Dynasty Minerals is “gaslighting investors” and has “no economic viability.” Here are just two:

1. The mine is an economic loser.

As the report notes, “the deposit cannot be mined profitably.” The report cites the fact Anglo American withdrew from the project in 2013 after spending more than $500 million, and Rio Tinto gifted in 2014 its 19.1% stake in Northern Dynasty to two Alaskan charities (which promptly sold).

Indeed, every major mining company involved in Pebble has withdrawn—Mitsubishi in 2011, Anglo American in 2013, Rio Tinto in 2014, and First Quantum Minerals in 2018. Since then, Northern Dynasty Minerals has issued a series of special warrant sales—thereby diluting its share value—in order to stay afloat. Notably, however, it has not been able to entice a new moneyed partner.

According to the report: “Management is playing political games that benefit themselves, not investors.”

The report identified two critical omissions from NAK’s economic analysis which, when factored in, sink the project: 1. Initial capital costs are understated by as much as 50% ... [and] 2. Post-closure wastewater treatment is required for centuries and will cost billions.

The report prominently highlights the statement by the Army Corps of Engineers in its recent Final Environmental Impact Statement for the Pebble Mine project that “the long-term post-closure phase is expected to last for centuries” – a statement relegated to a mere footnote by the Corps despite the significant cost and environmental risk implications for the project as a whole.  Citing former Rio Tinto expert Richard Borden’s estimate, J Cap projects the post-closure costs alone at potentially in the range of an additional $4.5 billion—an amount omitted by Northern Dynasty from its cost estimates for the project.

Notably, as stated by J Cap, “NAK has claimed poverty to dodge a feasibility study, which would demonstrate economic viability.”

The report finds that “after spending close to $1 bln in to develop the Pebble deposit, NAK still cannot say if the deposit is economically viable and has failed to produce a feasibility study. We believe it is because they know it will demonstrate the mine is not economically viable.”

2. The mine is a political loser. 

Even if the Trump administration approves the Pebble Mine, “the project faces near certain cancellation on environmental grounds.”

According to the report, “Joe Biden could not have been more explicit in his view of the mine when he said a few weeks ago:

Bristol Bay has been foundational to the way of life of Alaska Natives for countless generations, provides incredible joy for recreational anglers from across the country, and is an economic powerhouse that supplies half of the world’s wild sockeye salmon. It is no place for a mine. The Obama-Biden Administration reached that conclusion when we ran a rigorous, science-based process in 2014, and it is still true today. The only reason we are still debating whether Pebble Mine should move forward is because hours after former EPA Administrator Scott Pruitt met with a mining executive behind closed doors, the Trump Administration reversed our thoughtful decision. Now, Alaskan culture, traditions, and jobs are on the line. As President, I will do what President Trump has failed to do: listen to the scientists and experts to protect Bristol Bay — and all it offers to Alaska, our country, and the world.”

The report finds: “Both federal and state governments clearly have the power to veto a Pebble mine regardless of any approved permits.”

Ultimately, the report concludes that “[t]here are many better options than NAK’s Pebble deposit.”

I couldn’t agree more. Now is the time to Stop the Pebble Mine.

About the Authors

Taryn Kiekow Heimer

Deputy Director, Marine Mammal Protection Project, Nature Program

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