Northern Dynasty Minerals Ltd (NYSEAMERICAN: NAK) has been an interesting stock to watch over the past year, with a 52 week range of $0.43 per share on the low and $1.12 per share on the high. Trading just above $0.60 per share at the moment, many are wondering if the stock is a good pick.
The truth of the matter is that if NAK is anything, it’s a long-term play. While the fruits of this play may prove to be incredibly bountiful, you’re going to have to think about an investment in the company like you think about planting a fruit tree. Plant it now, enjoy the fruits of your efforts in a few years.
Nonetheless, there’s a lot to be excited about here, and for the right investor, Northern Dynasty Minerals may offer up a value proposition that’s hard to ignore.
The Real Value Behind An Investment In NAK Stock
If you’re just starting to dig into Northern Dynasty Minerals, there’s a lot to learn. I’ll do my best to cover most of it here. First and foremost, it’s important that you are educated on the immense value that could be the result of the company’s work on a project known as the Pebble Project. Here are a few stats to nibble on first:
- Once complete, the Pebble Mine would be a massive accomplishment. Ultimately, the pit of the mine would span approximately 2 miles, becoming one of the largest mines in the world.
- The estimated resources under the soil of the Pebble Project are staggering. In fact, it is estimated that there are about 57 billion pounds of copper, 71 million ounces of gold, 3.4 billion pounds of molybdenum and 345 million ounces of silver. These are figures in the measured and indicated categories.
- Moreover, in the inferred category, the mine has an additional estimated 25 billion pounds of copper, 36 million ounces of gold, 2.2 billion pounds of molybdenum and 170 million ounces of silver.
- There are also expectations that palladium and rhenium will be found once the soil breaks. However, the amounts of these have not been estimated to date.
- All in all, it is expected that there are between $150 billion and $200 billion in materials hidden benieth the surface at Pebble. Moreover, NAK owns 100% of the project as it stands right now.
If you’re just looking at the immense value of the materials under the soil at the Pebble Project, at a current valuation of just over $200 million, buying shares right now seems like a steal. Nonetheless, there are some headaches to consider here.
Drawbacks To Investing In Northern Dynasty Minerals
While there is a massive amount of value in the Pebble Project, there are also some hurdles to get past when it comes to accessing that value. Some of the drawbacks of investing in Northern Dynasty Minerals include:
- For some time, NAK was in the midst of a battle with the United States Environmental Protection Agency (EPA). While the battle led to a settlement, outlining a path to permits, that path is a long one, and permitting is not going to be easy. Should the company’s permit applications get shot down, it will be the unhappy owner of untapped and unable-to-be-tapped land in the highly protected Bristoll Bay.
- While the company is on track to get permits rolling, the process is a long one and will take years to accomplish. If the company is lucky it will break ground sometime in the early to mid 2020s. However, with a project that is this large in an area that’s this protected, the time frame could be longer.
- Moreover, Northern Dynasty Minerals is highly dependent on contributions from the investing community. If investor interest in the company dries up, it will fall apart as it is not generating anything by way of meaningful revenue at the moment.
Digging A Little Deeper
Digging deeper into NAK, we find a few reasons to be excited. The settlement between the EPA and the company was a big win in and of itself, but reasons to be excited go a bit further than that at this point. Here are some that potential investors should consider:
- First and foremost, while the company is highly dependent on support from the investing community, it seems to have no problem at all when it comes to finding this support. The company recently announced the closing of a $3.2 million private placement. This comes just weeks after the company announced that it raised more than $15 million from institutional investors. While these dilutive transactions can prove to be painful in the short term, in the long run, it may be transactions like this that fund the company through to breaking ground on Pebble.
- It’s also worth mentioning that the NAK is definitely making progress when it comes to getting the Pebble Project rolling. In fact, on March 25, 2019, the United States Army Corpos of Engineers began a series of 9 public hearings on the Draft Environmental Impact Statement developed as part of the Pebble Permitting process. As the progress continues, investors are getting closer and closer to the potential development of the Pebble Project, a move that could make thousandaires millionaires.
- In the most recent earnings report, we saw losses narrow from $12.3 million, or $0.04 per share a year ago to $0.03 per share or just over $9 million in the most recent quarter. As the company is dependent on the investing community, declining losses are a great thing to see.
- Finally, a catalyst is just around the corner. Recently, the company announced that it will be holding its Annual General Meeting of Shareholders on June 11, 2019. During this meeting, shareholders will receive updates about corporate progress, financial data and of course, Pebble. Should these updates be positive, we could see some strong gains.
The Final Word
At the end of the day, NAK is an interesting company to get involved with. While this is not for the risk averse investor, nor the investor looking for a quick payoff. However, if you’ve got a comfortable appetite for risk and some time to wait, the payoff here could be an incredibly large one if all pieces fall in line.