Northern Dynasty calls JCap report ‘fatuous, flimsy and self-serving’

Northern Dynasty (TSX: NDM; NYSE: NAK) responded on Thursday to a report issued by short seller J Capital Research, calling it “fatuous, flimsy and fundamentally self-serving,” as well as “typical of such efforts to profit by destroying the value of honest shareholders’ investments.”

In a report titled Pretend and Extend – The No Return Deposit, New York-based JCap, accused Northern Dynasty management of “gaslighting investors” over its giant Alaska copper and gold Pebble project and said the 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” said JCap.

“It is intrinsically a self-serving attempt to profit by creating panic in the marketplace”.

Northern Dynasty President & CEO Ron Thiessen

“We have heard and responded to the same baseless claims in JCap’s ‘research’ report countless times since they were initially levelled by New York-based ‘short-and-distort’ firm Kerrisdale Capital back in
2017,” said Northern Dynasty President & CEO Ron Thiessen.

“Financial markets weighed and dismissed Kerrisdale’s self-serving arguments then, and we are confident they will do so even more swiftly this time with these unoriginal allegations coming out of China.”

JCap claims that Pebble project will lose money, that capital costs have been underestimated and that the project’s proposed mining plan intentionally targets low-grade portions of the deposit.

“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.” said JCap.

“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.” 

Doubts about the project have steadily risen over recent months. Morgan Stanley, once one of the largest Northern Dynasty shareholders, sold most of its holdings three months ago, according to regulatory disclosures.

“We will take an appropriate amount of time to review the report and the market’s reaction to it, if any, as well as our options for protecting the company and our shareholders from these spurious claims,” Thiessen
said, noting the company may choose to issue a comprehensive response or may simply ignore what “is intrinsically a self-serving attempt to profit by creating panic in the marketplace”.

In its report, JCap said that the Northern Dynasty management “is openly saying that, once the plan is under way, they will push forward with another 58 years. Management claims they will not need any additional environmental approval to extend the life of the mine.”.

In a press release, the company said the claim is false and that “No future development scenario has been proposed at Pebble.”

Thiessen said other parties engaged in market manipulation and short-selling have conspired to cost Northern Dynasty shareholders, large and small, some $500 million in recent months.

Midday Friday, Northern Dynasty’s stock was up 1.48% on the TSE. The company has a C$694 million market capitalization.