Northern Dynasty Minerals Ltd (NASDAQ: NAK) is screaming for the top in the market this morning, following up on the strong gains seen out of the stock yesterday. The gains started when the company issued a press release announcing the appeal of a US Army Corps of Engineers decision to block the Pebble Project from coming to fruition.
Here’s what’s going on:
Skip to What You Want to Read
- Northern Dynasty Minerals Announces Appeal
- Retail Investors Squeeze the Shorts
- What Could Come of the Appeal
- What Analysts Think About NAK Stock
- Risks to Consider Before Buying NAK Stock
- Final Thoughts
Northern Dynasty Minerals Announces Appeal
Late last year, the United States Army Corps of Engineers issued a decision regarding the Pebble Project, a massive mine containing gold, copper, silver, and several other valuable minerals in the Alaskan watershed.
Well, I say mine, but the mine has not been built and the decision blocked permitting.
Nonetheless, NAK is appealing the decision, calling it arbitrary and stating that it is not in compliance with the Clean Water Act. In the press release, NAK provided several points of reasoning surrounding their appeal and seem pretty confident that they will win.
But it’s not over ‘till the fat lady sings, and I haven’t heard the first tune.
Retail Investors Squeeze the Shorts
With the news that NAK is appealing the USACE decision to block the Pebble Project from coming to fruition, retail investors seem to be latching on. Not only is there a chance that the appeal will turn over the decision, there was a strong chance that the announcement would lead to a massive short squeeze, which seems to be what’s taking place now.
You see, since Northern Dynasty Minerals received the notification that the USACE would block the Pebble Project, the stock has been down tremendously, and shorts have been all over it.
At last check, short percentage of the volume on the stock was a whopping 34%.
When a heavily shorted stock starts to tick up, those who are short are required to buy shares in order to cover their positions. This leads to incredible upticks in volume, and price.
That seems to be what happened yesterday and is continuing today. Moreover, the gains we’re seeing as a result of the NAK short squeeze could be far from over.
What Could Come of the Appeal
The appeal is a bit of a binary concept, with two potential outcomes:
- Turnover the Decision. The appeal could lead to the USACE making the decision to turn over their original decision surrounding the pebble project. This could open the door to permitting and allow NAK to move forward with their plans to develop the Pebble mine.
- Decision Stands. The appeal could also prove to be an expensive legal process that does absolutely nothing for the company with the decision standing. Should this be the case, Northern Dynasty Minerals will have to hit the drawing board yet again, or decide to launch yet another appeal.
Nonetheless, it’s important to keep in mind that this decision is a very big one for NAK and its investors. At present, the only real asset the company has is the mine that it intends on building. If permitting is not approved, Northern Dynasty Minerals has little to nothing to fall back on.
What Analysts Think About NAK Stock
At the moment, there aren’t many analysts covering NAK stock. In fact, there’s only one. However, that analyst seems to have a positive opinion, offering up a Buy rating with a price target of $1.20 per share.
Risks to Consider Before Buying NAK Stock
Before diving into NAK, or any other stock for that matter, it’s important to consider the risks. After all, there’s no such thing as an investment without the risk of loss. The most significant risks to consider with regard to NAK include:
- A Negative Appeal Decision. If the appeal doesn’t yield positive results, Northern Dynasty Minerals has little-to-nothing to fall back on. As such a negative appeal decision would likely lead to a significant decline in the value of the company’s shares.
- Penny Risks. NAK is a penny stock. As such, it is exposed to high levels of volatility in the market, which could make it difficult to plan entrance and exit decisions, and lead to painful losses.
- A Long Road. Even if the appeal leads to Northern Dynasty Minerals’ ability to get a permit for the Pebble Project, there’s still a long road ahead. The company doesn’t have the money or manpower it would take to develop the mine, so it would need to find partners, only adding to the risk associated with investing.
I’ve always been a root for the underdog kind of guy. I like seeing when those who have been bashed and belittled rise up to become leaders. There’s potential for that to be the case with NAK stock, and that’s exciting.
Moreover, with the current short squeeze, there could be massive gains in the short-term.
Nonetheless, before diving in, it’s important to consider the risks, especially since NAK stock is a very risky one as it stands. Yes, I want to see the company succeed, but the silver lining to the dark cloud is dimming by the day.