Is Trump "Mining's New Best Friend"?
Northern Dynasty (NYSE: NAK) has seen its share price triple since the November 8th election of Donald Trump.
This time last year shares in Northern Dynasty traded at the C$0.22 level. Today they trade at C$3.30 with a market cap near C$1 billion.
Much of that move has come as a result of a better gold price since the election and a targeted promotional campaign that centers around the idea that a Trump presidency means that mining has a new best friend and that “mining’s new best friend” will greenlight the very controversial Pebble project in my old stomping grounds of Alaska.
The new wisdom says that President Trump will scale back unnecessary regulation that was burdensome in some cases — under the Obama administration — and an outright deathblow to many projects.
The EPA is expected to reverse a 2014 move that prevented Pebble from obtaining a permit.
Nomination hearings began Wednesday for Trump’s pick to head the agency, Scott Pruitt, a climate-change skeptic who has called for “regulatory rollback.”
A recent Bloomberg article described the challenges the project has faced:
The Pebble site, about 200 miles (320 kilometers) southwest of Anchorage, is nestled among the rolling tundra and pristine waters of Bristol Bay — home to the one of the world’s largest runs of sockeye salmon. That’s made it a lightening rod for opposition by environmentalists, indigenous groups, as well as commercial and sport-fishing industries. Tiffany & Co. is among retailers that have pledged not to source gold from the region. President Barack Obama declared Bristol Bay permanently off limits to oil and gas drilling and toured the region in 2015 in an effort to cement his environmental legacy.
The project itself is massive with measured, indicated, and inferred resources of 81.5 billion pounds of copper, 107 million ounces of gold, and 514 million ounces of silver.
So, is a Trump presidency an automatic green light for mining projects in the U.S.?
Like real estate, I believe it’s all about location.
The company intends to apply for its Clean Water Act Section 404 permit in 2017 and initiate the National Environmental Policy Act process that would have the U.S. Army Corps of Engineers as the lead federal agency.
An effort by the EPA under former President Barack Obama to shut the project down, by preempting permits for large mines in Bristol Bay, is likely to be scuttled by new EPA administrator Scott Pruitt.
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Even if Trump rolls over the U.S. Clean Water Act and agencies that administer it, mainly the Environmental Protection Agency and the U.S. Army Corps of Engineers, Pebble must still deal with state of Alaska mining regulations, which are stringent, and everyone should remember that the project was opposed by Gov. Bill Walker.
He made this abundantly clear during his run for office in 2014.
Both Rio Tinto and Anglo-American have walked away from the project and the company will need a major partner with expertise and financial support to move the project forward.
Even Northern Dynasty Chief Executive Ronald Thiessen has chimed in. Thiessen told Bloomberg News on Jan. 23 that $150 million will be needed over four years to do permitting.
About $750 million has been invested at Pebble to date, including $150 million in environmental studies, Thiessen said in a presentation to investors.
After the EPA action is resolved, which Thiessen expects in April, it will take three to four years to obtain federal and state permits, according to the Northern Dynasty investor presentation, with first production as early as 2024.
That timeline is aggressive.
The large Donlin Gold project on the Kuskokwim River is on a five-year schedule with its EIS, and it does not face the kinds of complications that are present at Pebble.
However, Pebble will also have to get its state permits. Opponents to the mine will likely shift their focus from soliciting support within the EPA to the state legislature and state administration.There are economic benefits to the state — which it desperately needs — that may encourage some lawmakers to get behind the project.
Whether or not that happens we will have to wait and see.
Northern Dynasty has had a fantastic run for a number of reasons but it’s clear that the perception of Trump as “mining’s new best friend” has been the catalyst that has allowed for the optimism and run up in share price.
If Donald Trump is indeed “mining’s new best friend”, there are two stocks in the Resource Stock Digest Premium portfolio with much clearer and quicker paths to production; world-class assets with much smaller market caps and the potential to multiply many times over during the coming years.
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To your wealth, For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Resource Stock Digest Premium, and Resource Stock Digest Trader. For more about Gerardo, check out his editor page.
To your wealth,
For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Resource Stock Digest Premium, and Resource Stock Digest Trader. For more about Gerardo, check out his editor page.