Northern Dynasty Minerals: Bucking the Downtrend

After almost a month of a very good run, the gold and mining sector has been under some correction this week. After gold hit $640 bottom on June 27th, gold has been up only $40-$50 at the peak, but the mining sector has been up almost twice as much percentage wise.

Yesterday was an ugly day, but one stock in my portfolio bucked the downtrend of the mining sector - Northern Dynasty Minerals (NAK). I purchased this stock at $6.2 back in February 2006, near the bottom, but it was not the best timing, since you could purchase at the same price again in October 2006. However, the stock has been doubled since then.

It seems to me that NAK bucking the trend yesterday has something to do with a very bullish report from Raymond James Analyst Tom Meyer Wednesday. The report has captured all the positive elements about this company and most of the elements I have discussed in my HUI vs. Gold posts last month, to summarize them as follows:

1) NAK has a great quality on its large reserve. This is the main reason why I purchased the company initially. It is very rare to find a company with such large and good reserve.

2) On the same token, it has a low cost structure and long mine life, all a very rare combination these days among mining companies.

3) It has a large exposure to the copper, gold and moly market which I consider to be bullish long term. Tom Meyer's target of C$25 is only 50% of NAV of the Company (C$50.5) which is only based on copper at $1.8, gold at $605 and moly at $10. By the production time, I expect NAK can realize much better price for profit.

4) At my HUI vs. Gold posts, I have discussed that most of the junior miners will probably be acquired and/or merge with other large ones. The fact that Rio Tinto (RTP) already holds almost 20% of outstanding shares of NAK is definitely a big plus for it becoming a potential target in the future. We all know what happened to Alcan (AL) with the $101 tender offer from Rio Tinto.

NAK 1-yr chart