The owners of the Pebble mine project fired back Friday against claims from a New York stock investment firm that the prospect is not economically or politically viable.
Northern Dynasty Minerals Ltd. called the Feb. 14 report from Kerrisdale Capital Management — which holds a short position in Northern Dynasty and could benefit from its stock value dropping — "unfounded" and "unsupported speculation."
Kerrisdale alleges mining major Anglo American Plc, which withdrew from the Pebble project in 2013 after investing more than $500 million, did so because internal calculations put the project's capital cost at close to $13 billion, not the $4.7 billion published in Northern Dynasty's 2011 preliminary project assessment.
At the time, Anglo American CEO Mark Cutifani called Pebble "a deposit of rare magnitude and quality" and said the decision to leave the project was part of a larger effort to focus on projects in the company's portfolio with the highest value and lowest risk.
If fully developed, Pebble would be one of the world's largest open-pit gold and copper mines. The deposit's location at the headwaters of the Bristol Bay drainage — also home to one of the world's largest salmon fisheries — has made it an extremely controversial project in Alaska and nationwide.
Vancouver-based Northern Dynasty says declining market conditions led its former partner to pull out of the project. Anglo American would have had to invest another $900 million to earn its 50 percent interest in Pebble, according to Northern Dynasty.
The mining company also notes repeatedly in its rebuttal that Kerrisdale relied on unnamed sources the investment firm claims had worked directly on the project, and says it recently raised $37 million from investors, proof that people with accurate information about Pebble still have faith in it.
Northern Dynasty's stock value fell by about 30 percent in the hours after the release of the Kerrisdale report, which called it "worthless." It rebounded to finish trading Feb. 14 down 18 percent for the day, but finished the week down 24 percent since the critical report was made public.
On Feb. 15, Rosen Law Firm, which calls itself "a global investor rights" firm, filed a class-action lawsuit against Northern Dynasty for buyers of the company's stock since September 2013, claiming Northern Dynasty has misled investors about Pebble's potential.
Similar lawsuits are common following a short seller report and "any such suits will prove equally baseless," Northern Dynasty responded.
Kerrisdale further contends the more than a dozen instances since 2004 in which Pebble leaders have said publicly the project would move into the permitting phase shortly solidifies the notion that the project can't be economically developed.
Pebble Limited Partnership spokesman Mike Heatwole said in an interview that the company is somewhat caught in a "catch-22" on the issue, with stakeholders demanding a mine plan while internally needing to follow deliberate processes.
He noted that large projects in Alaska regularly take a decade or more to develop and each time new technical or financial information is acquired it impacts multiple aspects of a project and slows the overall evaluation.
"What we're probably guilty of is being overly transparent about our plans," Heatwole said. "We start out a year with the best of intentions in terms of where we want to be in terms of rolling things out and for a variety of reasons internally those have shifted."
In recent years Pebble has been forced to allocate its resources to fending off what it considers to be an unjust Environmental Protection Agency, Heatwole added.
To that end, Northern Dynasty believes the EPA under President Donald Trump will allow Pebble to be appropriately evaluated.
[Pebble backers hope Trump administration breathes new life into mine project]
Under President Barack Obama, the EPA moved to block the project before the requisite environmental permits were applied for.
The agency has used its authority under Section 404 of the Clean Water Act to "veto" development projects in the past. However, Pebble and general resource development advocates contend the agency overstepped its bounds on Pebble and was biased from the outset in its evaluation of the project.
Pebble and the EPA are currently in mediation to settle a lawsuit brought by the mining company on that issue. Pebble was successful in obtaining an injunction against the EPA that halted its attempt to preemptively veto the project.
"Northern Dynasty and its technical advisors will provide full support to the lead federal regulatory agency to ensure that the environmental impact statement (EIS) completed at Pebble will be a rigorous scientific assessment of the environmental impact of a mine design that will incorporate robust engineering and environmental approaches and technologies," the company's response states. "This will clearly demonstrate to the agencies and stakeholders that Pebble meets and exceeds all relevant federal and state environmental standards."
On the state level, Northern Dynasty contends Kerrisdale paints a jaded picture of public consensus against Pebble in Alaska.
Kerrisdale's report notes a 2014 ballot measure in which two-thirds of Alaska voters were in favor of requiring legislative approval for Pebble in the event state and federal regulators gave it the green light.
Heatwole said the company didn't bother to campaign against the measure because it is clearly violates the state constitution.
"What is absolutely clear is that many Alaskans are concerned about the EPA's preemptive actions, and they want the project to be fully but fairly evaluated under the U.S. National Environmental Policy Act," Northern Dynasty's rebuttal states.
Northern Dynasty adds that the state of Alaska, under former Republican Gov. Sean Parnell, joined the Pebble Partnership as an intervenor plaintiff in another lawsuit questioning the EPA's statutory authority to block the project.
An appeal in that suit, which was dismissed by a federal District Court because the EPA had not finalized the process to block Pebble, is also on hold pending the outcome of the other litigation and the agency's subsequent determination.
Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com. (c)2015 the Alaska Journal of Commerce. Visit the Alaska Journal of Commerce at www.alaskajournal.com. Distributed by MCT Information Services.