Anglo American Partnership Reduces Project Risk For Northern Dynasty

Shares in Northern Dynasty Minerals Ltd. (NAK) were on the move Thursday, rising more than 6% as investors reassess Wednesday's announcement that Northern has established a partnership with Anglo American plc (AAUKD) to develop its Pebble Copper-Gold-Molybdenum Project in southwestern Alaska.

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.

Comments

[dipps:]

Another stake (over 6%) has just come on Nothern Dynasty. SEC 13D (Securities & Exchange Commission) was just filed by Mitsubishi Corporation, this can only now lead to an eventual takeover of "NAK" with Rio Tinto and Anglo American already on board.

2007 Dec 10 10:04 PM