Week of Feb. 5, 2017 —

Open pit gold/copper mine

Mining News: Pebble stars align

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Trump, expected EPA treaty, improved markets bode well for Alaska project

Shane Lasley

Mining News

After six tumultuous years, 2017 is shaping up to be a turnaround year for the enormous Pebble copper-gold-molybdenum project in Southwest Alaska.

“The stars that were previously askew, they seem to be lining up,” Northern Dynasty CEO Ron Thiessen told Mining News.

This star realignment is reflected in a US$37.4 million financing the Pebble project owner closed on Jan. 26. Underwritten by a trio of renowned financiers, this financing involved the issuance of 20.24 million shares at US$1.85 per share, not bad for a company whose stock was selling for a mere US27 cents per share this time last year.

Northern Dynasty’s share price enjoyed healthy gains throughout 2016, reaching US91 cents per share by early October. The election of Donald Trump, however, helped push the stock to a high of US$3.45 per share on Jan. 24.

While the election of a U.S. President focused on the economy played a major role in this meteoric rise, an upturn in metals prices and mining markets, a pending resolution of a court battle with the U.S. Environmental Protection Agency over the regulator’s efforts to severely restrict the project prior to permitting, renewed interest by several global mining companies and a new strategy for finally advancing the project into permitting is fueling investors’ appetite for this company that appears to have made a turn for the better.

Game changer

With roughly 56.8 billion pounds copper, 70.4 million ounces gold, 3.4 billion lbs molybdenum and 343.6 million oz silver in measured and indicated resource, Pebble is an enormous store of metals that could support a world-class mine for more than a century.

“This is a mine that has the capacity to operate 150 years,” Thiessen explained.

This multi-generation deposit, however, is located in the Bristol Bay region of Alaska, famed for a sockeye salmon fishery that is a cultural and economic asset to the people that live and work in the region.

This proximity to the Bristol Bay watershed garnered staunch opposition from environmental groups, fisherman and many Alaska Natives in the area that are concerned a Pebble mine could harm the fishery.

“Regardless of federal politics, the people of Bristol Bay remain steadfast in our dedication to protecting Bristol Bay and in opposition to mines like Pebble that threaten our traditional way of life,” United Tribes of Bristol Bay Executive Director Alannah Hurley said in a Jan. 24 statement.

Under the Obama administration, the opponents of Pebble enjoyed an ally in the EPA, which tested the bounds of its authority by taking regulatory action at the Pebble project before the permitting process began.

After compiling regional data and putting together some hypothetical mining scenarios for Pebble, the environmental agency decided to put strict limitations on the size of a mine that could be permitted for the enormous metals deposit.

“Outside parties did a mine design that was designed to fail in every aspect and even used methods that have been outlawed in the state of Alaska for a couple of decades,” Thiessen commented on the scenarios considered by EPA.

The Pebble Partnership, a company set up by Northern Dynasty to permit and potentially develop the deposit, found compelling evidence that EPA had a predetermined outcome for Pebble in mind and worked inappropriately close with anti-Pebble groups to devise and execute a plan to limit or prevent the project from entering permitting.

“I think what we have been faced with is an extraordinary attempt to usurp the normal NEPA process,” Thiessen said.

NEPA, the National Environmental Policy Act, provides the framework for environmental impacts of major projects in the U.S. and is a key part of the permitting process.

In 2014, the Pebble Partnership filed a suit action in federal district court in Alaska, alleging that since as early as 2008 the EPA was maintaining an inappropriately close relationship with anti-mine groups, violating the Federal Advisory Committee Act, a law designed to keep curtail “locker room discussions” between federal agencies and private committees.

With the trial nearing its end, by October it had become apparent that EPA and Pebble Partnership would likely reach an agreement that would settle this suit outside of the courtroom before President Obama left office.

Donald Trump’s successful presidential bid, however, changed the dynamics of the negotiations and the outlook for the Pebble project.

“We do think it is going to be a game changer for our project,” Pebble Partnership CEO Tom Collier told Mining News.

Adjusting to Trump

Collier, who earned a reputation for having a penchant for federal environmental law and bringing adversaries together during a 40-year legal career in Washington D.C., did not expect Trump to prevail on Nov. 8.

“I put a lot of time and thought into how Pebble would move into a Clinton administration and nowhere near as much into a Trump one,” the environmental law specialist admitted.

The unexpected outcome had the Pebble leadership re-evaluating the standing of the enormous copper project.

“Everybody sat back and tried to assess what exactly happened,” Thiessen told Mining News.

In fact, Collier wasted no time. He said that after the Trump presidency became apparent, at around midnight Alaska time, he went right to work and was on the phone to his contacts on the U.S. East Coast by 2 a.m., 6 a.m. EST.

After adjusting to the surprise outcome, Collier believes that Trump and his cabinet choices will rein in an EPA that enjoyed expanded authority under President Obama.

“The primary question during the Obama administration was environmental overreach,” he said.

This is coming from a Democrat that served as chief of staff to U.S. Department of the Interior Secretary Bruce Babbitt and was charged with managing much of the environmental policies being introduced by Vice President Al Gore.

“One of the things I felt was at the core of what we were trying to do in those days is to make sure we had support in the country for where we were going to take a particular environmental issue,” Collier reflected during a Jan. 30 interview with Mining News.

He believes that federal agencies under the Obama administration pushed the limits of their authority beyond the bounds of broad public support and that played a role in landing Trump the presidency.

Message of certainty

Scott Pruitt, Trump’s choice to head the EPA, is expected to seriously rein in the expanded powers of the environmental agency.

As Oklahoma’s attorney general, a post he filled until being nominated as EPA administrator, Pruitt was an active fighter of EPA overreach, suing the agency he has been chosen to run on a number of occasions.

Pruitt says that, if he is approved by Congress, he will advocate for environmental protection while keeping EPA within the bounds of law.

During his confirmation hearings Pruitt shared his beliefs that EPA should focus on enforcing the environmental laws already in place and refrain from making major policy shifts that create uncertainty. He said that if companies know the rules they can allocate resources to comply with the regulations, even though they do not particularly agree with them.

“Rule of law is important to economic development; it is important to send messages of certainty; it is important so that people can plan and allocate resources,” he said, answering a question posed by Sen. Dan Sullivan, R-Alaska.

The Pebble project is a prime example.

“We are the posterchild for that point. We spent over US$700 million getting ready to take a project into permitting and then we were told we couldn’t go into permitting, and that was the first time the agency had done that in its entire history,” Collier said.

Though settling the court case with EPA will have to wait until after Pruitt is confirmed by Congress, the Pebble CEO is hopeful that the incoming EPA administrator will reverse the previous attempt to keep Pebble out the normal permitting process.

Collier and Thiessen said they are not looking for any special consideration by Pruitt or anyone else in the Trump administration, they are just asking for their mine proposal to be vetted under a normalized permitting process.

Thiessen said the Army Corps of Engineers, which will be the lead agency during the Pebble NEPA process, is “going to go through and look at everything we do and our impacts, and determine if they are the least environmentally damaging, practical alternatives – and hold our feet to the fire.”

“If we cannot demonstrate to regulators, federal and state, that we are not going to damage that fishery, we are not going to get a permit,” he added.

New Pebble Partnership

The seemingly imminent lifting of the roadblock between Pebble and the NEPA permitting process opens the door for a global mining company to join Northern Dynasty in the Pebble Partnership.

As the largest undeveloped deposit of copper and gold on the planet, Pebble is an attractive target for global-scale mining companies looking to augment their future metals production.

“It is an enormously seductive project in terms of the size of the prize – what’s in the ground and what that could mean for copper, gold and silver in America,” Collier said.

Thiessen said Northern Dynasty is currently in advanced talks with a number of mining companies and the new Pebble partner may be a consortium of three or four of them.

While it has been assumed that no company would be willing to jump into Pebble until an acceptable agreement with EPA is finalized, Collier believes Trump’s win creates a sense of urgency.

“In this game of looking at a project that has a question about permitting, the more certain the answer is to that question the more the project costs; so there is an incentive to move perhaps even earlier than a final resolution with EPA,” explained the Pebble CEO.

Once the new Pebble Partnership is in place, Thiessen does not believe it will take long to advance the project into permitting.

The Northern Dynasty CEO would like to submit permit applications this year but said it will depend on the new partner(s) comfort with the proposed mine design.

“I’ve got to convince the major mining companies that are going to be our partners of the merits of what we are doing,” he explained.

If such partners would like to have a third party engineering firm go over the design, it could take a bit longer before permitting is initiated.

Thiessen indicated that the mine design that ultimately goes to permitting may be half the size of the 200,000-metric-ton-per-day operation detailed in a preliminary economic assessment published in 2011.

“We may be best served to take a more modest approach,” he said.

The Northern Dynasty CEO explained that this measured start to a mine at Pebble would allow the partnership to demonstrate that it will deliver on its environmental, socio-economic and financial promises.

While major mining companies typically would like to see larger throughput at a deposit the size of Pebble, the potential project partners may share Northern Dynasty’s views on the merits of easing into a mine that could be an important piece of their portfolio for decades to come.

Repositioning Pebble

With the door to the permitting process opening and potential partners in the wings, the Pebble Partnership is beginning to look at ways development of the project could be an economic engine and good neighbor to the fisherman and local residents of the Bristol Bay region, a vast expanse of Southwest Alaska about the size of Washington state.

While residents nearest the proposed mine largely support its development, those further away tend to oppose it. This disparity is generally due to the fact that residents living close to Pebble see tangible economic benefits from the development, while those further away see very little to reward to offset a perceived risk to the fishery, an important economic driver for the region.

“For years, commercial fishermen from Bristol Bay, Alaska, and the nation have spoken up saying that they do not want the world’s greatest sockeye fishery harmed by Pebble,” said Melanie Brown, member of Commercial Fishermen for Bristol Bay.

One of Collier’s primary tasks when hired as Pebble CEO in 2014 was to find ways to reposition Pebble so that the people living and working in the region are more comfortable with having a world-class mine as a neighbor.

While the Pebble Partnership wants to talk further with the people in the region before publicizing its finalized plans to reposition Pebble, Collier and Thiessen shared with Mining News some of the concepts under consideration.

Both CEOs said some type of revenue sharing for residents and Native village corporations in the region is an important step forward.

“The good thing about Pebble is it’s on state land; the bad thing about Pebble is it’s on state land,” Thiessen said.

He explains that other world-class deposits in Alaska, such as the Red Dog zinc mine and Donlin Gold mine project, are on Native lands. This provides the local populations with tangible benefits from the operation.

While Pebble would help to send badly needed money to state coffers and would be an extremely significant economic contributor to the Lake and Peninsula Borough, which covers the area where Pebble is located, the larger Bristol Bay region does not currently have a way to directly draw economic benefits from the rich copper-gold-molybdenum-silver deposit.

Collier said the Pebble Partnership is currently considering a profit sharing program for Bristol Bay residents and Native Village corporations.

Another major economic benefit the mine could provide to Bristol Bay residents and fishermen is low-cost power.

“We are going to make sure the power we bring in is available to all those communities,” Collier vowed.

Thiessen believes the power brought into the region for a mine a Pebble could cut the cost of power across the region by as much as 80 percent, a substantial savings for Bristol Bay residents and fish processors.

Contract preference for Native companies in the region, fishery enhancements and forming an advisory council made up of renowned people in the environmental community are among other repositioning ideas the Pebble Partnership is working on.

Collier said he is eager to talk with Alaskans about some of these ideas in the near future.

EDITOR’S NOTE: The 10 Democrats on the Senate Environment and Public Works Committee boycotted a scheduled Feb. 1 vote to confirm Oklahoma Attorney General Scott Pruitt as administrator of the Environmental Protection Agency. With Democrats continuing to hold out on Feb. 2, the 11 Republicans on the committee voted unanimously to suspend rules requiring at least two members of the minority party to be present for a vote to be held and moved the confirmation to the full Senate floor. –Shane Lasley, publisher