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TABLE OF CONTENTS Jun 10 - 16, 2013 Volume 99 Number 17 - 0 comments

Northern Dynasty's scuffle with the EPA continues

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By: Matthew Keevil
2013-06-05

VANCOUVER — When it comes to media campaigns and social relations in the mining world, there might not be a more interesting case study than Northern Dynasty Minerals’ (NDM-T, NAK-N) ongoing defense of its large Pebble copper-gold-molybdenum project in southwest Alaska. Though the battle has been raging between Northern Dynasty and its environmental opponents for nearly a decade, it may soon come to its final stages as Pebble reaches its permitting milestone.

Since the Hunter Dickinson Group got started at Pebble in the early 2000s its ownership structure has gone through a few iterations, but now sits as a fifty-fifty partnership with major Anglo American (AAL-L). Since buying its 50% stake in 2007 Anglo has spent US$500 million on the project, with Northern Dynasty tacking on another US$180 million.

That spending has resulted in a 2011 preliminary economic assessment that outlines a base-case scenario with a 45-year mine life, which could be extended in excess of 80 years. At a 0.3% copper-equivalent cut-off, Pebble’s current resource stands at 5.9 billion tonnes measured and indicated resources grading 0.78% copper-equivalent, containing 55 billion lb. copper, 67 million oz. gold and 3.3 billion lb. moly.

But that’s all basically old news since Northern Dynasty and Anglo have not updated resource or economic numbers since 2011 after establishing Pebble as one of the largest undeveloped copper resources in the world — with a developmental price tag to match at US$4.7 billion.

So with the project dutifully outlined it appears the most interesting part of the story starts now, as Northern Dynasty and Anglo crank US$80 million into Pebble in 2013 with the goal of initiating permitting under the National Environmental Policy Act (NEPA) before year-end.

And though Northern Dynasty has yet to trigger a permitting review at Pebble it is already evident how big an issue the project will be for U.S. regulators. The company and the U.S. Environmental Protection Agency (EPA) continue to participate in a media relations scuffle that might not be receiving as much attention as the Keystone XL oil pipeline, but could end up being just as important for natural resource companies operating in the U.S.

On June 4 Northern Dynasty filed a 205-page submission to the EPA in response to its revised Bristol Bay Watershed Assessment — a report originally released in 2011 — that labelled the report “biased, manipulative and contrary to the EPA’s own guidelines.” The company maintains that the EPA relies on a hypothetical mine scenario that disregards modern engineering standards, environmental safeguards and project-specific mitigation measures.

Bristol Bay is a remote area in Alaska that is home to several native tribes, as well as a large fishing industry and sockeye salmon population.

“The [assessment] process has truly become the theatre of the absurd.” president and CEO Ronald Thiessen says. “We believe the [process] to be a cynical effort to manipulate public perception about a project before it has been proposed or undergone federal and state permitting. And we believe the [April 2013 draft] to be a fundamentally biased report that should have no bearing on the future of America’s most important undeveloped mineral resource.”

And much like Keystone, Pebble’s opponents remain relatively well-funded and, in some cases, carry a high profile. In late May actor Robert Redford, a well-known opponent of natural resource development, railed against Pebble in the Los Angeles Times. Over the past year opposition groups, including the Bristol Bay Native Corp. and the Natural Resources Defense Council, have spent in excess of US$500,000 fighting the project.

In response Northern Dynasty released a national economic impact study on Pebble on May 30. The study determined that the project would create 16,175 jobs during its five-year construction period, with another 14,715 sustaining jobs during its 30-year mine life. Pebble would contribute between US$2.4 billion and US$2.7 billion to the U.S. gross domestic product during production, with US$1.3 billion of that directly benefitting the state of Alaska.

“This study confirms the national importance of the mineral resources at Pebble, the development of which has the potential to increase U.S. copper production by 20% over decades of production, while supplying America’s manufacturing, construction and clean energy sectors with the raw materials they require,” Thiessen says. “Through significant capital investment, high-wage job creation, billions of dollars in government revenues and supply and service contracts, Pebble can benefit generations of Americans and Alaskans.”

In Northern Dynasty’s case, however, the economic implications of the project may not carry the desired weight during a review process. As has been the case with Keystone XL it could come down to what some call the fractured identity of President Barack Obama’s beleaguered administration, which has delayed many decisions on major natural resource projects.

But Northern Dynasty and Anglo have given themselves an ample timeline to sort out the permitting process. Pebble originally had its production date set for 2015, but it has been pushed back to a more conservative target in late 2021. The NEPA process is expected to take between three and four years due to broad public involvement and input from 11 federal and state agencies.

Northern Dynasty has traded within a 52-week range of $2.54 and $2.66. The company closed near its low at $2.63 at press time, with 95 million shares outstanding for a $247-million press-time market capitalization.

Pebble could rank as the largest mine in North America if it’s built, and could eventually produce 678 million lb. copper, 673,000 oz. gold and 32 million lb. moly per year.



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Photos

Northern Dynasty Minerals and Anglo American's Pebble copper-gold-molybdenum project in Alaska. Source: Northern Dynasty Minerals
Northern Dynasty Minerals and Anglo American's Pebble c...

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