Perceived lack of support could scare mine investors

Posted: Wednesday, May 25, 2005

Questions surrounding Northern Dynasty Mines' plans for its giant Pebble mining project northwest of Iliamna may be serving to coalesce organized opposition, and investors should take a more cautious approach to the Alaska venture, according to the Internet mining newsletter Resource Investor.

The publication based in Florida but claiming to provide independent news, analysis and commentary about the mining industry to 50,000 readers in 187 countries, noted May 18 that local resistance to the mine project was growing in Alaska.

It could "plausibly have sufficient weight to stop the mine in its tracks," said author Stephen Clayson, writing from London, which is home to Galahad Gold PLC, the major investor in Northern Dynasty Minerals Ltd., parent company to Northern Dynasty Mines Inc. Galahad owns better than a third of NDM Ltd.'s stock.

"Opposition is being voiced by a diverse range of interest groups, broader based and more influential then might be imagined," Clayson wrote.

Included in those groups, Clayson said, are area residents dependent on subsistence lifestyles, the commercial and sports fishing industries that rely on a healthy Bristol Bay watershed, organized environmental groups whose aims may range from ensuring proper environmental threat mitigation measures to halting the project altogether, and other Alaskans who have yet to be convinced that the economic benefits outweigh the risks.

Because of the impact they could have on nervous investors, such stories tend to worry Sean Wallace, director of investor relations for the British Columbia-based Hunter Dickinson Inc., which manages Northern Dynasty Minerals Ltd.

He acknowledged that the mining industry, in general, is in a period marked by investor caution but said he knew little about Resource Investor. He was familiar, however, with its editor, Tim Wood, he said.

Just how influential Wood's Internet newsletter might prove to be, Wallace couldn't say, but he did note it was not unusual to see such cautionary articles, especially in today's weak mining market.

"Having been in this business for years, you would never, ever get involved with a project like this and not get this kind of article," he said.

Wallace said he was not aware that opposition was growing or becoming organized in Alaska and that NDM's public relations people were engaging with local communities about the mine project in an effort to ease concerns.

In recent public forums, however, some Bristol Bay watershed guide and lodge owners have expressed worries that even a well-run mine could deface the landscape enough to turn off high-rolling Outside anglers and hunters lured there for the wilderness experience. Fishers have raised a similar concern about the safety of salmon spawning streams.

The list of Native villages and organizations that have passed resolutions opposing mine development is growing. By the time NDM met with residents of the area last month at Newhalen, that list included New Koliganek Village Council and Koliganek Natives Ltd., the Nondalton Tribal Council and city of Nondalton, the city of New Stuyahok, the New Stuyahok Traditional Council and Stuyahok Ltd., and the city of Ekwok, Ekwok Village Council and Ekwok Natives Ltd.

That has not gone unnoticed by investors.

"The opinions of the Native villages carry a not inconsiderable weight during the permitting process, and the lobbying power of the surprisingly influential sports fishing fraternity should not be underestimated," Clayson wrote.

The Lake and Peninsula Borough, which has publicly endorsed development, has been coming under increasing pressure to withdraw support, Clayson continued, adding Gov. Frank Murkowski's personal approval rating was "extremely unimpressive," partly as a result of his support for the mine.

Still others, he said, view Northern Dynasty Mines' plans as the "thin edge of the wedge," and that other mining interests soon could seek to exploit their own claims in the area, eventually widening the size of the mining district's footprint.

Tucson-based Liberty Star Gold Corp. owns 981 claims covering 237 square miles — three times the territory held by NDM — around the ancient volcanic caldera that holds the promise of millions of dollars in mineral profits. Liberty announced last week its field study plans for this summer.

Wood said investor caution was not uncommon these days. Any number of factors might influence where they'd be willing to put their money, including local opposition to a project, pollution problems, poor management or that the course of development was running too slow.

"The hydraulics of investment will flow where it can be reasonably rewarded at lower risk," he said. "The market is continually trying to establish that balance. I'm not saying that is the problem with Pebble yet, but money may decide it will take too long to develop."

The influence of environmental activists cannot be discounted, Wood said. They've been gaining the upper hand, even in the face of what he said was Alaska's laudable effort to streamline its permitting process. Activists, he said, "have taken a zero-risk approach."

Public concern for the environment has influenced both mine development and investing in recent years, Wood said. However, improved mining techniques seen over the past quarter century have been influenced far more by the desire to maximize profits and leave a good legacy.

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