Northern Dynasty Minerals Ltd.’s [NDM-TSX; NAK-NYSE] shares sank on Friday May 25 after the company said a framework deal that could have given First Quantum Minerals Ltd. [FM-TSX] the right to earn a 50% interest in its flagship Pebble copper-gold project in Alaska has been terminated.
Investors reacted to the news by sending Northern Dynasty shares down 25.5% or $0.23 to 67 cents on Friday morning on volume of over 1 million shares. The 52-week range is 84 cents and $2.99.
Pebble is Northern Dynasty’s principal asset, owned through its Alaska based subsidiary and other wholly-owned subsidiaries. It consists of 2,402 mineral claims in southwest Alaska.
First discovered in 1989, the Pebble deposit has been described as one of the greatest stores of mineral wealth on the planet.
However, the project has been a lightning rod for global environmentalists who expressed concerns about the impact of such a large mining operation on local salmon runs.
On Friday, Northern Dynasty issued a brief statement saying that it and First Quantum have been unable to reach agreement on the option and partnership transaction contemplated in a December 15, 2017 framework agreement between the parties. “As such the framework agreement has been terminated in accordance with its terms,” Northern Dynasty said.
Northern Dynasty did not say what its next steps will be.
However, the announcement sends the Vancouver company back to the drawing board in its bid to find another joint venture partner to replace Anglo American, which had the right to earn a 50% interest in the project, but withdrew from the partnership in September, 2013 after investing US$541 million.
Under the framework deal, an affiliate of First Quantum would have executed a four-year option agreement requiring the affiliate to pay US$150 million in separate installments, including an initial US$37.5 million. That money would have to be applied towards the cost of advancing the permitting process for development of the Pebble Project.
The option agreement would also have entitled the First Quantum affiliate to earn a 50% interest in a partnership which owns the Pebble Project by investing US$1.35 billion.
When the deal was first announced, First Quantum said its participation in the option agreement was subject to due diligence and necessary regulatory approvals being secured. As a result, final execution of the option deal was not expected to occur until the second quarter of 2018.
Friday’s announcement comes after Northern Dynasty recently filed a technical report that featured a minor increase in the estimate of the mineral resources at Pebble.
The increase resulted from a change in the metallurgical processing approach as outlined in the Project Description submitted to the U.S. Army Corps of Engineers in late 2017 and resulted in changes to metal recoveries used to establish the pit shell which constrains the resource estimate.
At a 0.3% copper equivalent cut-off, the current estimate includes 6.456 billion tonnes in the combined measured and indicated categories at a grade of 0.40% copper, 0.34 g/t gold, 240 ppm molybdenum, containing 57 billion pounds of copper, 71 million ounces of gold, 3.4 billion pounds of molybdenum and 345 million ounces of silver.