Report: Pebble shares are ‘worthless’
A New York investment firm tore apart claims by the owners of the Pebble mine project that developing the prospect is economically viable in a no-holds-barred report released Feb. 14.
Kerrisdale Capital called Vancouver-based Northern Dynasty Minerals Ltd., “worthless” in its 21-page report, contending sources directly involved in evaluating Pebble before Anglo American walked away from the project in 2013, despite spending roughly $500 million on it, said Pebble would cost close to $13 billion to construct, not the $4.7 billion capital cost Northern Dynasty arrived at in its preliminary project assessment.
“In the past decade, Northern Dynasty has hired at least two major engineering firms to prepare preliminary feasibility studies of Pebble laying out its economics in detail, yet it has failed to publish their findings — because they were damning,” Kerrisdale alleges.
The firm also acknowledges repeatedly in the report that it holds a short position in Northern Dynasty, meaning the firm could benefit financially if the value Northern Dynasty stock declines.
If developed to full-scale, Pebble would be one of the world’s largest open-pit gold and copper mines. It would also require construction of significant support infrastructure, including its own deepwater port and a nearly 90-mile access road.
The deposit’s location at the headwaters of the Bristol Bay drainage — also home to one of the world’s largest salmon fisheries — has made it an extremely controversial project in Alaska and nationwide.
To that end, Kerrisdale cites a 2014 statewide Alaska ballot measure in which Alaskans overwhelmingly opposed the Pebble project.
Whether the ballot measure, which requires the state Legislature to approve the project above and beyond state and federal regulators, is constitutional on the state level has been questioned; however it exemplifies Alaskans’ stance on Pebble, mine opponents argue.
Northern Dynasty stock fell by about 30 percent in the hours after Kerrisdale released its report and finished trading Feb. 14 down 18 percent.
Alaska Native, commercial fishing and environmental groups opposing the mine quickly grabbed the report and touted it as proof Pebble should be stopped.
Northern Dynasty issued a short statement of its own Feb. 14, promising a more detailed response by the end of the week.
“The rebuttal will expose the many inaccuracies and outright misstatements in the Kerrisdale report,” Northern Dynasty said. “Northern Dynasty’s Pebble project is indisputably one of the worlds largest undeveloped copper/gold deposits with a potential mine life which is measured in decades. Kerrisdale cites no technical or scientific studies whatsoever and relies on unnamed persons who were purported to have been involved with the project several years ago. Investors should not rely on the Kerrisdale report and should await the company’s detailed response now in progress.”
The report lists more than a dozen instances dating back to 2004 in which Pebble Limited Partnership and Northern Dynasty leaders said publicly the project’s environmental permits would be applied for, but that has yet to occur.
Sen. Lisa Murkowski, who has condemned the Environmental Protection Agency’s attempt to ban Pebble under the Obama administration before it starts as a violation of the federal regulatory process, has also criticized the Pebble Partnership for not making good in its promises to release a plan for the project — thus allowing it to be appropriately evaluated.
Pebble sued the EPA for attempting to “veto” the project, accusing the agency of a biased decision-making process. The EPA has not faired well in that case and is currently working to settle the lawsuit outside of court and an injunction preventing a preemptive veto is still in place.
President Donald Trump’s election renewed hope among the mine’s proponents that Pebble could get a better shake under the new administration.
In January, Northern Dynasty leaders told investors the company plans to file for Pebble’s permits in 2017.
Kerrisdale notes the project would forever face the threat of further EPA action under another presidential administration on top of the in-state opposition.
The agency’s authority to a halt a development project at nearly any time under Section 404 of the Clean Water Act is rather clear; whether the actions the EPA took to arrive at that conclusion for Pebble were legal is what is disputed.
Elwood Brehmer can be reached at [email protected].