Northern Dynasty Minerals Ltd (NYSEMKT: NAK) is a stock that I have covered for some time, and, while I may have questioned the validity of the investment a year ago, my opinion is very different today. At the end of the day, I believe that this stock is going to run and that today’s dip is just an opportunity to get in at a discount. Today, we’ll talk about why. However, before we do, I’d like to extend a big thank you to our partners at Trade Ideas for being the first to alert us to the declines today. Currently (11:28), NAK is trading at $1.83 per share after a loss of $0.05 per share (2.66%) thus far today.
Why I Was Concerned About NAK Last Year
As mentioned above, if you would have asked me about Northern Dynasty Minerals last year, I would have told you to move with caution. While my opinion is very different today, I feel as though it’s important to explain why I had this opinion and why the opinion has changed.
For NAK, the big value proposition is the Pebble Project. However, this posed a bit of an issue. The reality is that the United States Environmental Protection Agency (EPA) has been pushing on the company for years. In fact, the EPA even blocked the company’s ability to file for permits to get the Pebble Project underway, citing potential issues with the waterlife in the basin where the prospective mine is to be.
At the end of the day, my concern was that NAK simply wouldn’t be able to reach their goals of turning the Pebble Project into an active mine. If this were the case, the company would be forced to go back to the drawing board to figure out what to do next.
My Views Have Changed Dramatically
Throughout the year, my view with regard to Northern Dynasty Minerals has changed in a big way thanks to positive developments surrounding the Pebble Project. Today, there’s not a bearish thought in my mind when it comes to the company. In fact, I believe that this thing could fly in a big way in the years to come. The reason for this is simple.
You see, NAK didn’t take the EPA’s attempts to kick them down lightly. Instead, the company took legal action. By pushing the issue to the court, the company gained the upper-hand in negotiations. As a result, it was announced earlier this year that the company and the EPA had reached an agreement that would allow the company to file for the permits that would get the Pebble Project underway.
This Is Overwhelmingly Positive News
Now that the company has a clear pathway to get the permits they need in order to begin construction on the Pebble Project, the company is, in my view, ridiculously undervalued. Think about it; if and when the Pebble Project starts to move forward, it will quickly become one of the largest mines in the world with significant deposits of copper, gold, molybdenum, silver, and more. To get the full stats with regard to what is expected to be found in this mine, click here!
NAK May Actually Never Build The Mine… And That’s A Good Thing!
While the key value proposition with regard to Northern Dynasty Minerals is the Pebble Project, it’s my belief that Northern Dynasty Minerals will never actually break ground on the mine, and it’s not a bad thing. At the end of the day, the company has done all of the leg work to push the mine from a minute possibility to a high probability. With the ability to file for permits, the company is one massive leap ahead of where they were last year.
While all of this positive news is hitting the wire, we haven’t seen the price action in the stock that I believe the company deserves. As a result, the company is largely undervalued. With a market capitalization of around $540 million, the company is cheap, for lack of a better word. Considering all that they have accomplished and the current price, it’s my belief that a larger mining company will step in and acquire NAK before the company ever breaks ground at the Pebble Project. While this will be a relatively cheap asset to acquire for larger companies like Rio Tinto, the premium paid will likely offer incredible value to investors. While this is my own personal speculation, I simply don’t see things going any other way.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on NAK. In particular, we’re interested in following the ongoing work to bring the Pebble Project to fruition. We’re also interested in seeing if an acquisition does indeed take place. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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