February 15, 2017
Dudley Pierce Baker
Northern Dynasty Minerals, NDM.TO and NAK, has treated shareholders and warrant holders extremely well over the last 6 months or so with gains of 500% and much more for the stock warrants of up to 2,000%.
That all changed on February 14, 2017, Valentine’s Day.
Briefly, due to a hack job by a New York based hedge fund and short seller, the shares and warrants plunged at one time around 40% before slightly recovering. On February 15th the shares and warrants made some very modest gains.
Below, I am sharing with you the analysis of our friends at The Casey Report for the details and particulars of what happened.
But first, I found interesting that while the shares were plunging on Valentine’s Day, two of the company’s insiders were actually buying shares in the open market.
On February 14th, Northern Dynasty Minerals Director Steven Ashby Decker acquired 20,000 Common Shares on a direct ownership basis at a price of US$2.435 through the public market on February 14th, 2017. This represents a $63,763 investment into the company’s shares and an account share holdings change of 18.2%.
In addition, Director Desmond Balakrishnan acquired 7,900 Common Shares on a direct ownership basis at a price of $3.000 through the public market. This represents a $23,700 investment into the company’s shares and an account share holdings change of greater than 100%.
The question now for investors is whether Northern Dynasty’s shares or stock warrants (there are 3 trading) should be bought, sold or held (until the dusk settles).
My current opinion basically mirrors that of The Casey Report and Doug Casey that Northern Dynasty is still a buy or at a minimum a hold.
Valentine’s Day Massacre
Now let’s get to the meat of what happened from our friends at Casey.
The Casey Report
February 14, 2017
|Urgent Update on Northern Dynasty Minerals Ltd. (NAK)|
If you own shares of Northern Dynasty Minerals Ltd. (NAK) you may know they fell more than 36% in the first hour of trading today.
Kerrisdale Capital, a New York-based hedge fund, issued a scathing report on the company. It also disclosed a short position in the company’s stock.
Northern Dynasty controls the world’s largest undeveloped gold deposit. Located in Alaska, the Pebble deposit didn’t stand a chance against onerous Obama-era EPA regulations. It does stand a chance at development during the Trump years.
In the report, Kerrisdale calls Northern Dynasty’s gold hoard “worthless.” They point to the company’s massive development capital needs. It may need $7 billion, $8 billion, or even $10 billion to develop its project. With 70 million ounces of gold, 57 billion pounds of copper, and 344 million ounces of silver in the ground, those capital requirements don’t seem so daunting. A $100-per-ounce increase in the price of gold raises the project’s value by $7 billion… completely changing the picture of high development costs.
Kerrisdale also points to the company’s difficulty obtaining a mining permit. Pebble became a political issue. Obama even visited the region. He took photos with locals and made statements that hurt Pebble. Considering the region has roughly two residents per square mile, there’s no way he went there on his own to get votes.
When we recommended buying shares of NAK last August, we shared a YouTube video of Robert Redford. In it, he makes a passionate case against mining Pebble’s gold.
We predict President Trump’s EPA will be far less political than the one that preceded it. We also don’t think Trump answers to movie stars and billionaire liberals. Instead, he represents the people. At least that’s what we’ve seen so far. If it keeps up, his administration may see the massive economic value in developing Pebble.
Doug Casey visited Pebble last summer. He noted the minuscule portion of Bristol Bay affected by the deposit. He also noted the radical advances made in mining technology. Modern mines have a far less noticeable impact on the environment than they did in the 1970s or 1980s.
Finally, Kerrisdale points to the “low grade” of Pebble’s gold. In order to recover its 70 million ounces of gold, the company must move and process 6.5 billion tonnes of earth. That means it would pull one troy ounce of gold from every 91 tonnes of earth processed.
What Kerrisdale hasn’t considered is that the Pebble mine sits unencumbered, ready for open-pit mining. The deposit’s low grade would make it impossible to mine if it was buried a mile under the earth’s surface. That’s not the case.
We could have saved Kerrisdale a lot of time. We knew about all of Pebble’s problems years ago. The difference is we think a rising gold price and a mining-friendly administration are more important.
This is not our first run-in with Kerrisdale. Late last summer, the firm wrote a similar hit piece on First Majestic Silver Corp. (AG). In it, they called for the company’s shares to fall “70%–80%” from current levels. They also disclosed a short position in the company’s stock taken prior to publishing.
First Majestic shares fell on that news. The fall triggered our trailing stop loss, taking us out of our position. They later recovered. We re-entered the trade, and First Majestic returned to its proper place as one of the best silver-mining firms we know of.
For now, we’re maintaining our BUY recommendation.
BUY Northern Dynasty Minerals Ltd. (NAK) up to $3 per share. Use a 50% trailing stop loss on the position.