Short seller says Northern Dynasty is “gaslighting investors”

The area where Pebble mine would be built, 320 km southwest of Anchorage, within the Bristol Bay watershed. (Image courtesy of Northern Dynasty Minerals)

J Capital Research, a company founded in China a decade ago usually targets overvalued media and tech companies for short-selling, but has now set its sights on the mining industry, specifically on gold explorers.

Back in June, JCap said the Donlin project in Alaska, which is 50-50 owned by Novagold and Barrick, “will never be built” and “in short, is a stock promote, not a mining plan.” Surprising no-one, the matter became the subject of lawsuits.

“Since management is bonused on lobbying success instead of for producing minerals, NAK has no reason to care that the new plan is irrational”

J Capital Research

On Wednesday, JCap went after Vancouver-based Northern Dynasty Minerals (TSE:NDM, NYSEAMERICAN: NAK) which is advancing another giant Alaska copper and gold project called Pebble.

In a report titled Pretend and Extend – The No Return Deposit, New York-based JCap, in typical fashion, pulls no punches accusing Northern Dynasty management of “gaslighting investors” and said the latest mine plan “is on its face absurd”: 

“We believe Northern Dynasty has crafted a money-losing mining plan to achieve government approvals. Since management is bonused on lobbying success instead of for producing minerals, NAK has no reason to care that the new plan is irrational: we think it will lose money, leave investors with a stranded asset, and be canceled anyway if Joe Biden is elected.

“So why has NAK twisted itself into this knot? The CEO of Pebble Partners, the operating entity for NAK’s low-concentration gold and copper deposit, will receive $4.4 mln of the promised $12.5 mln bonus for winning a green light just to start the permitting process.

“We believe that the deposit cannot be mined profitably and that mining majors Anglo American (AAL L) and Rio Tinto (RIO US) know that. AAL withdrew from its partnership in the mine in 2013 after spending $500 mln. Rio gifted its 19.1% stake in NAK to two Alaskan charities. One of those, the Bristol Bay Native Corporation, benefitting people in the impacted Bristol Bay area, promptly sold off the shares. 

“The local people clearly don’t believe in the mine. What’s more, NAK has claimed poverty to dodge a feasibility study, which would demonstrate economic viability. Pebble CEO Tom Collier said they did not have the money to pay for one despite the fact they have spent $1 bln and such a study would cost $80 mln at most.”

Northern Dynasty’s share price has been on a white-knuckle ride over the past few weeks after doubts about its ability to secure the necessary approvals for Pebble and following rumours, stoked by Donald Trump Jr’s opposition to the project, that the US president will block the mine.

On Wednesday, investors in Northern Dynasty shrugged off the short-seller’s report, sending the company’s shares 14% higher, affording it a $754 million market value in New York. The stock has doubled from its 2020 opening levels, but even after today’s bounce is down 52% from its summer highs.