Is Northern Dynasty Minerals Now a Bargain?

I have to wonder if Northern Dynasty Minerals [TSX-V:NDM ($1.97); AMEX: NAK ($1.66)] is now a bargain. Back In December of 2007 I wrote an article titled, “Northern Dynasty Minerals a Take-Over Target?“. I thought it was a take-over target then! For those of you that don’t know, Northern Dynasty Minerals owns 50% the largest undeveloped (but advanced stage) copper-gold-molybdenum deposit in the world which is located in Alaska! It sold the other 50% for nearly $1.5 billion to Anglo American!

Since I wrote my last article, the Company has found more resources on the property and now has a great team together to oversee the completion of the Pre-feasibility Study in the second half of 2009 and ultimately get the company ready for permitting. Permitting won’t be easy in Alaska and a great team will be needed. This is one of the major risks still associated with NAK and can become a thorn in its side if things don’t go smooth.

I believe this may be an absolute steal at less than $2 a share. Why? When I originally wrote my article about NAK being a take-over target the share price was over $12! Today with 97.6 million shares, the market capitalization of the company sits at under $200 million. Remember, the other 50% sold for $1.5 billion! But it gets better.

There are two major corporations that have acquired significant share blocks in NAK. Rio Tinto plc owns a 19.8% interest and Mitsubishi Corporation owns 9.1%. Both of these corporations were buyers back when the share price was much higher! With the stock down so much, they must be itching to grab some extra shares. I know I am.

Time will tell whether or not I’m right on this one. Just remember, I thought it was a good investment at $12 a share and now it sits at $2, so I may be wrong and I’m certainly down quite a bit so far. I’m hoping time proves me right and the permitting goes well.  I do consider this a very risky investment, but one with a potentially large upside.

Full Disclosure: At the time of writing this article I DO own shares in NDM.

Comments

[vreporter:]

One has to ask why there would be any NEED for development in
the foreseeable future. In which case otherwise, it remains an undeveloped deposit. Many such natural resources projects have sealed their own fate through demand destruction. The dollar has further to climb as the deleveraging of past speculation continues. NAK is dead money among other investment "directions."

2008 Oct 19 10:24 AM

[GMiki1:]

The only problem with NAK is that people have been paid to flame it (my opinion in going on the Yahoo boards). And of course a lot of great producers and projects have been sold off in the general deleveraging. I hold NAK and I'm goggle-eyed at the price it's selling at now. It's an incredible resource and it will be developed. If you look through the company site and see who they have hired and how they are approaching permitting, you'll know it's a go. Also check out the recent voting in Alaska that went against greater strictures in licensing. The current stock price is a giveaway, an incredible bargain.

2008 Oct 20 01:19 PM

[ebeng:]

Where did the $1,5 billion go? NAK shows only $41million cash at hand. Will the co. be able to develop the mine with so little money, without going out for more funds and diluting the current shares? It shows no revenue, so selling shares or more pieces of the resources are the only ways to get financing. Or maybe it can dig into the mattress for some of that $1,5b.

2008 Oct 21 09:04 PM

[engine88:]

egenesis - The 1.5 billion was not a cash payment. Anglo agreed to pay the first 1.5 billion of project costs. So until that happens NAK will have minimal expenditures. Afterwards it's not so clear, but if that much ends up being spent I would think the project would be a definite go, so that 50% stake will be very valuable.

I predict that the project will go ahead basically because people will be in serious need of the economic benefit in the coming rough years, and metal prices will remain enough to make it attractive. The gold may end up being worth more than the copper.

2008 Oct 23 08:14 AM