Northern Dynasty Minerals Ltd (NYSEMKT: NAK) is having a rough day in the market today. In fact, just about all basic materials companies are taking a bit of a dive. Nonetheless, I’m glad this stock came up on the Trade Ideas radar and was brought to my attention. The truth is that this is one of the most interesting Risk vs. Reward stories that I’ve seen in some time. At the end of the day, things could go very well, or very poorly, and quickly. In fact, in early May, a catalyst is coming that will largely define what we can expect to see from NAK, at least in the near term.
The Risk vs. Reward Question Surrounding NAK
As mentioned above, Northern Dynasty Minerals poses one of the most interesting Risk vs. Reward stories I’ve seen in some time. At the end of the day, the Pebble Project could prove to be massively profitable or massively expensive.
You see, the Pebble Project is in an area in Alaska known as Bristol Bay, and many argue that continued work on the project will lead to damaging effects to the environment, in particular, salmon in Bristol Bay. As a result, the EPA placed a pre-emptive veto on the project, making it impossible for NAK to apply for the permits they need in order to move forward with the project.
On the other hand, NAK believes that this fight is worth the risk. In fact, they’ve already spent more than $150 million on environmental studies to prove that they can indeed mine in Bristol Bay without posing a threat to the surrounding environment. Not to mention the hundreds of millions the company has spent on legal and other costs associated with attempting to push this project forward. So, we know the risk side.
On the reward side, if the Pebble Project were to go through, the mine would be the second largest gold mine in the world! On top of that, the mine would be the ninth largest copper mine in the world. Think of the amount of money in commodities that could be pulled out of the ground here and contributed to the Northern Dynasty Minerals balance sheet!
As mentioned above, while there’s a huge Risk vs. Reward argument here, there’s also a massive catalyst on the horizons that could make or break the NAK investment. At the moment, NAK is in mediation with the EPA, and that mediation is expected to come to an end before May 4th, 2017. At the end of this mediation, Northern Dynasty Minerals may have what they need to start applying for and obtaining permits. All in all, if all goes well, this would put the company on track to start mining at the Pebble Project by the year 2024.
Is The Risk Worth The Reward?
Well, that’s a question that only you can answer. What we do know here is that the potential reward here could be massive, but so too could be the losses. At the end of the day, the best thing that you can do is to do your research, get a thorough understanding of both sides of the Pebble Project, and make an educated decision once you have.
Never Miss The News Again
Do you want real-time, actionable news delivered to your inbox? Join the CNA Finance mailing list below!