Pebble and Alaska: the investment case

Editor’s Note: Northern Dynasty Minerals President Ron Thiessen was a keynote speaker at RDC’s Alaska Resources Conference in November. The following is a condensed version of his speech, which is available at akrdc.org/membership/events/conference/2013/presentations/

When Anglo American announced its withdrawal from the Pebble Partnership (PLP) in September, opponents of responsible mineral development mistakenly portrayed their departure as the end of the road for one of the world’s most important undeveloped copper and gold resources.

However, Anglo American CEO Mark Cutifani has made it clear that the decision to withdraw was not based on the permitability of the Pebble Project, or any concern that Pebble would harm the Bristol Bay fishery. Anglo American’s decision was based solely on the outcome of its asset review process, and its stated desire to reduce spending on projects in pre-approval phases of development. Under the terms of the Pebble Limited Partnership Agreement, Anglo American was required to continue with the level of project funding necessary to proceed with permitting for four or more years followed by timely project construction, or to withdraw.

Cutifani has also said Pebble remains a project of merit that can and should be built. Anglo American still believes in Pebble because it is a world class project that will generate decades of benefits for Alaska, while protecting the important fisheries resources of Bristol Bay.

Pebble represents a tremendous asset for the future of Alaska and its economy. It is an asset owned by the State of Alaska, for the benefit of Alaskans and fortunately the rest of the United States. A recent economic impact study commissioned by PLP and authored by IHS Global Insight outlined the Pebble Project’s potential economic contributions during production, including:

• nearly 3,000 high-wage jobs for generations of Alaskans;
• more than $100,000 annual salaries for mine workers – double the State average;
• more than doubling Alaska’s mining industry contributions to State government coffers, including payments to the Permanent Fund;
• more than $1 billion annually in operating expenditures, expanding the State’s GDP by some 3 percent.

Since September, Northern Dynasty has been working with Anglo American to effect a timely withdrawal for Anglo and an orderly transition for Pebble. While that process has been difficult for many Pebble employees and contractors, Anglo American (over the past six years) has been a valued investor in Pebble and Alaska. Its contributions of technical expertise and $600 million of investment have significantly advanced engineering design, environmental science and regulatory planning for Pebble.

Now Pebble’s sole owner, Northern Dynasty’s focus is on qualifying and selecting the next major partner in Pebble and investor in Alaska – based on financial resources, technical expertise, experience working in the United States and a commitment to environmental stewardship and stakeholder relations. Our goal is to develop the Pebble resource in full partnership with Alaska Native communities, and we want a partner that shares that goal. Working with John Shively and the Pebble team, we have every confidence we will be successful.

Located on State of Alaska land in an area specifically designated for mineral exploration and development, the Pebble deposit is an asset of rare and historic significance. Its responsible development over decades of production, in partnership with Alaska Native communities and in coexistence with Bristol Bay’s famous salmon fisheries, is an opportunity coveted by many of the world’s great mining companies.

PLP’s work to finalize a permit application package for Pebble is nearing completion, and we expect to be in a position to initiate federal and state permitting under the National Environmental Policy Act as early as the first quarter of 2014. However, until the process of selecting the right partner for Pebble and the right investor for Alaska is more advanced, we won’t make a decision on the timing for applying for permits. But we will be ready.

There is no doubt that Anglo American’s withdrawal is tough news for Alaska. The global minerals industry is facing serious financial challenges today, as a result of scarce capital, weaker commodity prices and investor dissatisfaction. But mining is a notoriously cyclical business, such that the next great surge in mineral commodity prices and mining investment is being sown in the current bear market environment.

The question is: will Alaska and the Pebble Project be positioned to benefit from the coming bull market in metal commodities and mining investment? For our part, Northern Dynasty has every confidence in Pebble. We look forward to 2014 and to welcoming the next major resource investor in Alaska – in her people, her communities, her economy and the future of the State’s mining industry.

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