Pebble Mine investor pulls out, putting controversial Alaska project in jeopardy

|     Juliet Eilperin & Steven Mufson     |

WASHINGTON (The Washington Post) – The major financial investor in the Pebble Mine project has pulled out, Northern Dynasty Minerals Ltd announced Friday, dealing a serious blow to the firm’s plan to build a controversial gold and copper mine near Alaska’s Bristol Bay.

The stock price of Northern Dynasty plummeted 28 per cent by midday Friday after it announced that First Quantum Minerals Ltd. had withdrawn from an agreement the two companies forged in mid-December. Under that partnership, First Quantum had provided USD37.5 million upfront and pledged USD150 million over the next three years to fund the permitting process, in exchange for a 50 per cent share in the project.

Environmental groups, which had lobbied First Quantum for months to withdraw from the deal, said constructing the massive mine would imperil a watershed that is home to the world’s largest sockeye salmon fishery.

Joel Reynolds, Western director of the advocacy group Natural Resources Defense Council, said Friday that First Quantum executives “deserve to be congratulated for listening to the people of Bristol Bay.” Reynolds, who met with the company’s chief executive this month, noted that it is the fourth major firm to abandon the project since 2011.

“There is a consistent pattern of major investors walking away from this project once they understand the overwhelming opposition and unavoidable environmental and economic risk,” Reynolds said. His group and others had argued that the combination of local residents’ concern and the scientific findings should deter First Quantum from consummating its deal with Northern Dynasty. “Our pitch fundamentally is, this is a bad investment for your shareholders.”

Northern Dynasty, which has no investments aside from the Pebble Mine project, received a boost with President Trump’s election and the confirmation of Environmental Protection Agency Administrator Scott Pruitt. The price of its stock more than tripled between the election in late 2016 and February 2017.

The company, which said in a release Friday that it had “terminated” the First Quantum option agreement “in accordance with its terms,” did not respond to a call seeking further comment.

The Pebble Mine project has been fraught for years. In 2014, the EPA invoked a provision under the Clean Water Act that barred Northern Dynasty from applying for federal permits on the grounds that scientific studies indicated the mining operation could cause “significant and irreversible harm” to the area’s fish habitat. Pruitt proposed reversing that decision last year, but after he consulted with tribal governments as well as Alaskan officials and the EPA received a million public comments – most of them negative – the administrator announced in January that he would revoke the agency’s earlier determination.

Northern Dynasty began the permit process application with the US Army Corps of Engineers in late December, after receiving a cash infusion from First Quantum. The Corps is taking comment on its scoping plan until the end of June, though environmentalists are seeking to extend the public comment period because the firm hopes to expand the proposed mine’s footprint and operation.

But without First Quantum, the Canadian company must seek another partner or be forced to drop the Pebble project.

“We believe that the company would be unable to fund the Pebble permitting process beyond 2018 without additional sources of capital,” Craig Hutchison, an analyst with TD Securities, said in a note to investors. “Therefore, we believe the company will have to re-engage with potential strategic partners to help fund Pebble. Given there is a limited number of potential parties to engage with, we view the timing of a potential new partnership agreement as highly uncertain.”

Hutchison issued a hold advisory to investors. Three analysts from other investment firms have urged clients to buy Northern Dynasty stock this year. The biggest shareholder is Stirling Global Value Fund, which has an eight per cent stake in the company. But short sellers – who bet on a company’s stock falling in value – had a relatively large position equal to 7.7 per cent of Northern Dynasty’s outstanding shares.

“More work remains to put an end to this project,” Carter Roberts, chief executive of WWF-US, said in a statement. “But after 14 years of efforts to develop the Pebble Mine, we hope this will mark the beginning of the end.”