Northern Dynasty Minerals Ltd (NYSEMKT:NAK) has refuted claims by an investment firm that the mining project, Pebble, is economically unviable. The report was prepared by Kerrisdale Capital Management and appeared on February 14. Immediately after the report went public, Northern Dynasty’s stock declined by around 30%.
While refuting the claims, Northern Dynasty went on to note that Kerrisdale Capital Management is an aggressive short-seller and actually had a short position in the company it was criticizing which meant that any unfounded negative remarks which could lead to a drop in the price of Northern Dynasty’s share price would be to the investment firm’s benefit.
In its report, Kerrisdale had alleged that Anglo American Plc had withdrawn from participating in the project a few years ago after making an investment of over $500 million because cost estimates had risen to $13 billion when it had previously been thought that it would cost $4.7 billion. Northern Dynasty refuted this saying that the reason Anglo American Plc quit the project was because the mining company wanted to concentrate on projects which would come at the lowest risk while returning the highest value.
“…our decision to withdraw from the project is the result of an internal prioritization of the many projects that we have in our portfolio,” James Wyatt-Tilby, an Anglo American spokesperson said then.
The mining company also clarified that the cost estimate of $13 billion was a preliminary figure and when an independent firm was commissioned to do another study, it was found that savings exceeding $4 billion could be generated.
Class action suits
Another accusation that Northern Dynasty leveled at Kerrisdale was that the investment firm relied on sources whose technical qualifications or authenticity could not be verified. And contrary to the allegation that investors were losing faith in the mining project, Northern Dynasty refuted that saying that $37 million had recently been raised from investors which was in itself a vote of confidence in the prospects of the project.
Since several class action lawsuits were filed after the publication of the Kerrisdale report, Northern Dynasty also expressed confidence that they would be struck out.
On Friday the share price of Northern Dynasty Minerals Ltd was unchanged at $2.26.