I was at the Cambridge House Toronto show last week talking about how cheap Northern Dynasty was, and this week Anglo pulls out of the project.
The reasons why I think Northern Dynasty is cheap still hold:
- Lots of copper+gold in the ground. At $130m of market cap, there are 100m ounces of gold in the ground and another 37mt of copper; want to talk about huge….
- The mine is not going to be built for years, but there is still option value on that copper.
- At some point (10+ years), supply/demand for copper is going to get this mine built because we are going to need it.
- If/when the political winds shift, the value will go back up as the company is priced on the basis that a mine will never be built.
Hold time is still going to be measured in years, not months. Obama is staying president until 2016 and if the Keystone pipeline is not getting permitted, then there is not a chance in hell of Pebble getting a permit.
But on the other hand, maybe Anglo leaving will let the HDI group go back to the basics and figure out if there is a more sustainable, smaller mine in this project, something that works without $6b in capital.
If I was running RTP, or another major, I would consider buying HDI and putting Pebble on ice for a decade or two as a cheap option for the long-term supply.
HDI clearly has been cutting costs in the last 2-3 months with all the resumes that are floating around the street; probably the smart move in this sort of market. I think they are getting ready for the long haul.