Aug 2, 2007

Peter Grandich: Special Alert on Northern Dynasty

Northern Dynasty Minerals (NDM-TSX-V $16.10, NAK-AMEX $15.17)—

Who said “I love it when a plan comes together?” The largest gain I believe I have ever been a part of was Nevsun Resources back in the mid-1990s when it went from $1 to $21. I have felt for quite some time that NDM can surpass this when all is said and done. I first became involved with NDM at just 94¢. And, I’ve said since it was around $5 that it could end up worth at least $25. But, it’s been an uphill battle from the very start.
A well-known Canadian-based mining share fund manager called NDM “nothing but dirt” in the early days. Then, one billionaire who has a private lodge in the area (and would like to keep the whole place to himself) financially backed the “opposition” to the Pebble project, creating a mountain of resistance, which in fact has been little more than a molehill. Throw in the fact that the company did all its financings via non-broker placements (try getting coverage from the brokerage community when you’re a junior and not raising money through the brokerage community…a Vancouver Canucks Stanley Cup is more likely), and little recognition was been given to Pebble despite the fact that it is fast becoming the world’s biggest copper-gold deposit.

In just the last couple of weeks, NDM received more coverage than it did for the entire four years I’ve been a shareholder (I worked for the company until July,
2005). Timing is everything, I guess, as the company has announced a major joint venture with Anglo American. This is the project’s second major endorsement.
The first was Rio Tinto’s acquisition of nearly 20% of the outstanding shares of NDM (which now sets us up for even more interesting days ahead).

This JV does many things. For starters:
· Anglo is among the premier mining companies in the world today. It has the financial resources NDM lacked or would have needed to go to the market to raise.
· As noted earlier, this is now the second major mining firm to concurrently endorse the merits of Pebble. This point can’t be underscored enough (no fewer than 16 companies had signed confidentially agreements with NDM). For far too long, NDM was an orphan among the institutional community but with Anglo as a partner and Rio as a major shareholder, I fully anticipate NDM vaulting towards the top of most mining share institutional shopping lists.
· While Anglo has clearly jumped ahead of the other majors, there’s still the other
50% NDM fully controls. A consortium still can’t be ruled out and Rio’s nearly
20% ownership already is incentive for them to see about gaining enough control to be the other partner in Pebble.
· While it’s early, it wouldn’t come as a surprise to me to later learn that NDM has
hired bankers to explore the sale of their remaining ownership, especially once new drill results are released.
· Some recent analyst coverage suggests the shares were worth $50 fully valued, and at a 50% discount $25 ($25 has a familiar ring to it).
This news by no means makes NDM a slam-dunk or without risk. I don’t expect the opposition to now simply pack up and go home, nor are we out of the woods on gold and copper prices falling sharply. But I do think being a near “lone voice” is over for me. Good thing, as my throat hurts and my hands hurt from pounding the table for so long.

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