Pebble stock investors settle a lawsuit with mine developer for $6.4 million

A group of shareholders and the developer of the proposed Pebble mine in Southwest Alaska have reached a $6.4 million settlement to resolve investors’ complaints that they had been misled by the company.

The investors had claimed in federal court that they were harmed when the stock price of Northern Dynasty Minerals collapsed following several blows to the project in 2020, including the release of secretly recorded video calls of Pebble executives discussing the project. They asserted that the company and executives made misleading statements about Pebble before a federal agency denied a permit for the project that year.

The Pebble copper and gold prospect is located in the Bristol Bay region, on state land about 200 miles southwest of Anchorage. An array of tribal, fishing and conservation groups have long opposed the mine, arguing it will destroy the valuable wild salmon fishery in the region. Northern Dynasty, which has worked to develop Pebble for two decades, has said it can safely be built.

Northern Dynasty stock lost much of its value over several months starting in August 2020, a period that culminated late that year when the U.S. Army of Corps Engineers rejected the permit application for the project, saying the proposed mine violated the public’s interest and did not comply with the Clean Water Act.

Also during that period, an environmental group released secretly recorded footage of Pebble executives discussing the future possibility of a much larger project than what the company had been pursuing with the Corps.

The shareholders had asserted in their case that Northern Dynasty had failed to disclose that the project did not follow the public interest or federal law, and that the company planned a much larger project than it had publicly pursued.

The settlement and other public filings do “not contain any admissions of liability,” according to a statement from Mike Westerlund, vice president of investor relations with Northern Dynasty.

“To the contrary, Northern Dynasty firmly believes that the notion of a ‘secret mine plan’ is baseless and the company denies any wrongdoing alleged by the plaintiffs,” the statement from Westerlund said. “The Company is confident that it would have prevailed at trial on the merits, when the full context and facts underlying the permitting process would show the allegations to be without merit.”

“Nonetheless, this settlement brings to an end what would have been a costly and protracted legal process, with the settlement amount representing a fraction of the expected costs of litigation to bring this case to verdict,” Westerlund’s statement said. “As the settlement amount is entirely within Northern Dynasty’s insurance policy limits, the Company does not anticipate corporate funds will be used to fund the settlement.”

The newly reached settlement amount is a good outcome for the shareholders considering Northern Dynasty’s financial status, according to the 34-page settlement filing in U.S. District Court in the Eastern District of New York. The filing was submitted last week by attorneys for the investors.

“The Settlement provides a substantial, immediate and guaranteed recovery” for the investors, “in light of Northern Dynasty’s current financial condition, decline in its market capitalization since the commencement of the class period, and its quickly depleting insurance coverage,” the filing says. “The Settlement is a favorable result in light of several obstacles Plaintiffs faced with ongoing litigation including proving liability and prevailing on loss causation.”

The filing says up to $281 million could have been awarded if the investors had prevailed in court, based on estimates from damage experts.

The Pebble Limited Partnership, which is owned by Northern Dynasty Minerals, is challenging the U.S. Army Corps of Engineers’ decision to deny a permit to build the mine. But the Environmental Protection Agency in January determined it will not allow the mine because the agency said it threatens the salmon fishery. Both Pebble and the administration of Alaska Gov. Mike Dunleavy have threatened legal action against the EPA decision, and a spokesperson with the state Department of Law said in a statement Monday that the state’s position remains the same and the EPA action “must be challenged.”

The shareholders’ lawsuit originated in late 2020 when Neil Darish, co-owner of the McCarthy Lodge about 300 road miles east of Anchorage, filed the first of two lawsuits against the company. The complaints were later combined into a single case with other investors named as the primary plaintiffs.

Darish, reached Monday, said he had not heard the outcome of the case, and had not heard from lawyers in the case. He said he’s been busy opening McCarthy Lodge for the summer tourism season.

He said he took a balanced view of the project and the need to protect Bristol Bay salmon, but was angry by what he said were the company’s misstatements in 2020.

“So far I have not gotten a check for a penny and I doubt I ever will, but that’s not the point,” he said. “It’s about the battle of ideas. There was lot of fear and concern on both sides. The company I think did more bad behavior than the environmentalists, if you’re looking at it from 50,000 feet.”

On Monday, the Bristol Bay Defense Fund, a broad coalition of groups that oppose Pebble, said in a statement that the settlement indicates Northern Dynasty was not telling the truth about the size and duration of the proposed project in their permitting proposal to the Corps.

“Northern Dynasty acted without any regard for the Tribes, commercial and sport fishers, or members of the Bristol Bay community who would be the most gravely impacted by their reckless and devious mining proposal,” the coalition said in a prepared statement.