Millions of dollars are being spent, ore samples drilled and analyzed, and power delivery investigated as a full-scale study of the feasibility of mining the Pebble deposit north of Lake Iliamna is under way.
The Canadian mining company engaged in all that is banking its future on the profitability of extracting gold, copper, molybdenum and other metals from what appears to be one of the largest porphyry deposits in North America.
To date, however, Northern Dynasty Minerals Ltd. or NDM, hasn't made a dime, and its stock prices reflect that.
As of Feb. 1, Northern Dynasty shares were trading at $4.70 on the Toronto Stock Exchange's Venture Exchange and at $3.76 on the American Stock Exchange. During the past year, the stock (symbol NAK) has floated between $2.90 and $9 a share on the Amex.
That's to be expected from a junior mining company at this point in its operations, said Shawn Wallace, director of investor relations for Hunter Dickinson Inc., a nonprofit organization providing managerial services to a group of mining companies including Northern Dynasty.
A junior mining company is one principally engaged in exploration and development, but lacks the self-sustaining cash flow of major mining companies.
Despite the bull market in gold and copper over the past few years, junior mining stocks have generally not benefited from the metals price advance.
"In a proper gold market, one would expect equities would reflect advances in the price of metals," Wallace said. "So far, Northern Dynasty hasn't seen that (investor) participation." Like other juniors, Northern Dynasty "has some catching up to do," he added.
At this time, Northern Dynasty has no earnings and is living on equity financing, mostly from large investors. But the company's prospects offer an opportunity to investors to profit as the company transforms itself into a mid-tier or major mining company, Wallace said.
"I can't say what to expect for the stock, but as we add value, we would expect the stock to act accordingly," he said.
The mining market is experiencing a good period and metal prices are strong, Wallace said. Northern Dynasty is poised to take advantage of that. A feasibility study, to be completed this year, is expected to demonstrate just how the company will make a profit.
An assessment of the Pebble site released late last fall showed it has excellent potential for a long-life mine with large-scale, low-cost metal production, the company said. Indeed, the highest of three production rates studied by Northern Dynasty analysts suggests that an open-pit mine could unearth 200,000 tons of ore per day, resulting in an annual average of 470 million pounds of copper, 674,000 ounces of gold, 15 million pounds of molybdenum and 2.5 million ounces of silver during the first 10 years of a 31-year mine life.
More recently, the company said, "continuing studies indicate that the Pebble resource is large enough to potentially utilize the largest, most cost-effective and efficient grinding equipment currently available."
The analysis indicated the Pebble mine could generate a 15.3 percent to 20.3 percent internal rate of return and between $1.047 billion and $2.091 billion at long-term average metal prices, according to Ronald Thiessen, NDM's president and chief operating officer.
NDM is conducting a comprehensive drilling operation at the Pebble site and engaging in engineering and environmental-socioeconomic work needed to complete the overall feasibility study in 2005.
Meanwhile, anticipating that study would give the green light to mining operations, NDM and the Homer Electric Association have launched a detailed study of how best to deliver electrical energy to the mine site.
At the same time, company officials are working with state officials to secure the necessary permits and to meet the necessary environmental requirements for a mining operation.
According to a Northern Dynasty brochure, permit review is expected to continue into 2007. Design and engineering work could commence late this year or early next year, and construction might begin by mid-2007. The mine could begin shipping metals to market in 2009.
