Investors' initial reaction to the announcement that Northern is selling 50% of the Pebble project to Anglo American in exchange for a cash investment of US$1.425-billion was less than enthusiastic, as they drove the stock down more than 13% on Wednesday.
Analysts, meanwhile, have also been busy picking apart the deal, including Tom Meyer, who told Thursday that the Northern/Anglo partnership is excellent news that should result in a positive re-rating on Northern's stock. The Raymond James analyst maintained his "strong buy" rating and increased his price target from C$25 to C$29.
"In our view, the risk profile of the project has been reduced dramatically with the entrance of Anglo American at the project level," he said in a research note.
Mr. Meyer said Northern's financing risk has been removed as a result of Anglo's staged investment in Pebble, which includes a US$125-million infusion for a pre-feasibility study by the end of next year, C$325-million for another study by 2011 and C$975-million upon the decision to develop a mine.
The analyst also said the project's execution risk has decreased now that Anglo American joins Rio Tinto (RTP) – which owns 19.8% of Northern shares – as the second major mining company willing to contribute its global expertise to Pebble. It is widely regarded as one of the biggest mining projects in the world.