Report says Pebble Mine doesn't pencil out

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February 24th 4:50 am | Molly Dischner     

Political winds may indicate smoother sailing for a major proposed mine project in Bristol Bay, but new legal and financial hurdles may continue to stymie the project.

In mid-February, an East Coast investment company released a report that said it didn't believe the Pebble project was financially viable, and since then, several law firms have filed class action lawsuits against the company seeking to build the project on behalf of investors who believe they have been misled.

A major gold and copper mine proposed for an area near the headwaters of Lake Iliamna and the Nushagak watershed has long been contentious. If built, it could be the largest open pit mine in the world. And while past Environmental Protection Agency actions indicated a federal willingness to protect the area, the new administration's support for mining and resource development has led new investors to the project this winter.

But the February report by Kerrisdale Capital Management said those investors may have been mislead by overly optimistic information, and said the deposit up for development is too low-grade to generate a profit.

The Kerrisdale report said that the major mining company that withdrew from the Pebble Project did so because it believed the project was more expensive than originally expected. The higher cost could make the project far more difficult to finance and execute.

But in a statement released after the investment report came out, Northern Dynasty Minerals Ltd. said the Kerrisdale Capital Management report was "unsupported speculation."

The Northern Dynasty statement countered the mine planning scenario referred to by the Kerrisdale report, and also said that the major mining partner in the project, Anglo American, had walked away because it wasn't in a position to invest the $900 million needed to earn a 50 percent interest, not because it had decided the project was not viable.

Pebble Partnership spokesman Mike Heatwole wrote in an email that the report appears largely to be an attempt to drive the price of stock down. Kerrisdale acknowledged in the report that it could gain financially if stock prices drop.

Opponents of the project have said the financial issues are helpful to their cause, and just another indication of why the project isn't a good idea.

While the report was independent of efforts to oppose the project., United Tribes of Bristol Bay's Alannah Hurley said that it was a welcome addition to the conversation.

"... We are pleased to see financial analysts reaching the same conclusion we in the region have held for years," Hurley wrote in a statement. "The Pebble project is not economically, politically, or socially viable. Bristol Bay's future, like its past, will be defined by healthy salmon runs and vibrant tribal communities, not toxic projects like Pebble."

Trout Unlimited's Alaska Engagement Coordinator Sam Snyder said he hoped the recent financial news would have an impact on the project.

"I think the Kerrisdale Report properly outlined the hurdles they still face," Snyder said, noting that he hoped the financial issues would add to the case against building the mine.

But, opponents won't drop their own fight, and plan to continue advocating for state mechanisms that prevent the project.

"I think the financial tact was just kind of a nice bonus," Snyder said.

Opponents aren't the only parties who have taken note of the Kerrisdale report. The market responded nearly immediately as Northern Dynasty stock prices dropped, and several east coast law firms have since filed class action lawsuits, or declared their intent to do so. New York's Rosen Law Firm said that it was filing suit on behalf of purchasers of Northern Dynasty securities from September 2013 through February 2017, to recover damages under federal securities law.

By Feb. 21, at least five such suits had been filed, with others being discussed.

Heatwole said the company would rigorously defend itself in the new class action lawsuits.

"We remain very optimistic about the way forward for the project in 2017," he said.

In its statement, Northern Dynasty also said that it was considering a lawsuit against Kerrisdale over the report's allegations.

Molly Dischner can be reached at