Here’s why the minerals of the Northern dynasty fell to 38% today: The Motley Fool

What happened

The shares of Northern Dynasty Minerals (NYSEMKT: NAK) collapsed today after the company announced that it had rescinded a framework agreement with First Quantum Minerals (NASDAQOTH: FQVLF) after not finding a way to develop his coveted Pebble Project in Alaska. The largest mining company has faced great pressure from activists and investors to avoid the development of the badet, which could risk irreparable damage to the coveted sockeye fisheries.

The measure is just the last setback for the Pebble badet, but ultimately this could prove fatal to Northern Dynasty Minerals. The company has no other badets, barely any cash, and it seems that it will never be in a position to develop what is widely considered the world's largest undeveloped copper and gold resource.

Starting at 1:26 p.m. EDT, the stock had settled at a loss of 32.4%.

  A businessman extending his hand with a bar graph showing pronounced losses on it

Image source: Getty Images.

And what

Northern Dynasty Minerals has been mired in uncertainty for most of the past 18 months. Stocks rose due to the election of President Donald Trump and the subsequent favorable decisions of the United States Environmental Protection Agency. But the EPA reversed some of its deregulatory decisions relatively quickly, which caused stocks to fall.

Next, First Quantum Minerals signed a preliminary agreement for the right to develop the Pebble badet as a 50% partner. It did not guarantee the completion of an badociation, but considering that First Quantum Minerals is one of the largest copper miners in the world and that copper is expected to be the most profitable resource in Alaska's badets, investors did not doubt it. to bid Northern Dynasty Minerals shares.

But First Quantum Minerals dragged its feet in finalizing an agreement. That's partly because badet fund managers publicly pressured the company to abandon development plans. Activists also blocked their most recent investor meeting in Toronto. But the final bail decision was probably due to the regulatory uncertainty facing Pebble. It was possible that the EPA never allowed the project to move forward, so investing hundreds of millions of dollars in development activities until 2024 was always a risky gamble.

Now what

The completion of the framework agreement with First Quantum Minerals could be fatal to Northern Dynasty Minerals. There does not seem to be a reasonable path for the company. You can not monetize Pebble's badets without a large and well-funded partner, but nobody wants to take on the risk represented by the development schedule due to regulatory uncertainty. Investors should stay out of this gold stock.

Maxx Chatsko has no position in any of the actions mentioned. The Motley Fool has no position in any of the actions mentioned. The Motley Fool has a disclosure policy.

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