Northern Dynasty lands Anglo as Pebble partner

Vancouver — Northern Dynasty Minerals (NDM-V, NAK-X) has brought on senior miner Anglo American (AAUKD-Q, AAL-L, AGL-J) as an equal partner to develop its Pebble copper-gold-molybdenum porphyry deposit in southwestern Alaska.

The deal gives Anglo a 50% interest in a limited partnership in return for staged cash investments over several years totalling US$1.425 billion.

The market has been waiting to see what major would emerge to take a piece of the massive deposit. Northern Dynasty had previously discussed the possible formation of a consortium to advance the project through permitting, financing and mine construction, all of which Anglo will now take on.

The strategic partnership has a timeline targeting completion of a prefeasibility study by December 2008, full feasibility by 2011 and production by 2015.

Under its staged investment schedule, Anglo will spend US$125 million to complete the prefeasibility study and another US$325 million for a feasibility study. Upon a production decision, Anglo will commit to the next US$975 million of mine development spending to secure its 50% interest. Once the major has spent the US$1.425 billion required by the agreement, expenses will be shared jointly by the partners.

If Anglo does not complete the feasibility study by 2011, its overall funding requirement will be bumped up to US$1.5 billion.

“The project offers Anglo a unique opportunity to be involved in a very long-life, low-operating-cost mine,” said Anglo American CEO Cynthia Carroll in a statement.

However, development of Pebble, which Carroll described as one of the world’s largest copper-gold-molybdenum deposits, remains contentious. Northern Dynasty has borne the wrath of a number of well-funded groups opposed to any development in the Bristol Bay area, where Pebble is located, citing the importance of the region’s fishing industry and salmon habitat.

Opponents include well-known Alaskan investment banker Robert Gillam, who has strongly lobbied and financed movements against plans for a mine at Pebble. Gillam reportedly has significant real estate holdings in the region, including a sports fishing lodge.

The project has even seen a cool reception from normally pro-development Alaskan Senator Ted Stevens, who has expressed reservations about it.

The Pebble West deposit hosts a measured and indicated resource of 3 billion tonnes grading 0.28% copper, 0.32 gram gold per tonne and 0.015% molybdenum using a 0.3% copper-equivalent cutoff grade, with contained metal at 18.8 billion lbs. (8.5 million tonnes) copper, 31.3 million oz. gold and 993 million lbs. molybdenum. The deposit also holds 1.1 billion inferred tonnes averaging 0.25% copper, 0.3 gram gold and 0.015% molybdenum using the same cutoff grade.

The near-surface deposit is viewed as a potential open-pit operation.

The adjacent Pebble East deposit contains an inferred resource of about 3.4 billion tonnes at 0.57% copper, 0.36 gram gold and 0.036% molybdenum, using a 0.6% copper-equivalent cutoff grade. The zone, which remains open to the north and south, holds about 42.6 billion contained pounds (19.6 million tonnes) copper, 39.6 million oz. gold and 2.7 billion lbs. molybdenum.

Northern Dynasty is studying potential development of Pebble East as a bulk-tonnage, underground operation, due to its depth.

Shares of Northern Dynasty rallied about $3 in the days before the partnership announcement to touch a new high of $16.75 apiece. Following the news, the company’s stock gave back most of that gain to close down 14%, or $2.22 per share, at $13.88 per share. It has since traded above $14.00. Based on its 95 million shares outstanding, the company posts a market capitalization of about $1.3 billion.

Northern Dynasty’s largest shareholder is another major, Rio Tinto (rtp-n, rio-l), which owns 19.8% of the company. Rio holds rights to participate in up to 50% of certain future financings, however, once it reaches a threshold ownership level of 19.9%, its financing participation right will be reduced to that level.