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Northern Dynasty Misled Investors on Pebble Project Securities Class Action

Pebble Mine Location

The Pebble Project envisions a vast mine for copper, gold, silver, and molybdenum—an open-pit mine of possibly two to three miles wide and a mile deep, with a 700-foot tailings dam covering several square miles. Add to that a remote location in Alaska, 200 miles from Anchorage, and severe weather conditions … and that the company has only twelve employees. The complaint for this securities class action claims that Northern Dynasty made public statements purposely underestimating the costs for the Pebble Project and its likelihood of profitability, in violation of the Securities Exchange Act of 1934.

The class for this action is all persons and entities who acquired the common stock of Northern Dynasty between September 16, 2013 and February 13, 2017.

Northern Dynasty, a Canadian company, develops mineral properties in the US. Its principal and possibly only project is the Pebble Project, which the company has called “a world-class investment opportunity” as one of the largest undeveloped sources of gold and copper ore. However, despite a commitment of over $750 million, it remains undeveloped.

According to the complaint, the company relied on employees of a subsidiary of Hunter Dickinson, Inc. (HDI), for geological, administrative, and management services. It has also relied on development partners for funding and technical services.

Its 50% partner in developing the Pebble Project was Anglo American, PLC, which committed over $500 million to the project. But in late 2013, Anglo American pulled out, taking a $300 million write-down. The complaint says that Northern Dynasty falsely portrayed this as a decision to focus on other priorities.

Northern Dynasty touted the Pebble Project as a fantastic opportunity. During the class period, the complaint claims, it estimated capital costs for development at $4.7 billion. According to the complaint, other studies estimated a much higher cost, possibly $12 billion, but Northern Dynasty did not disclose these studies in its public filings.

After the election of Donald Trump as President, the complaint says, the company pushed the idea that the project would at long last be able to proceed because of regulatory reforms.

Then, on February 14, 2017, Kerrisdale Capital Management, a hedge fund manager, published a report taking a short position on Northern Dynasty. Kerrisdale had spoken with project insiders, such as engineers who’d worked up cost estimates; it claimed that Northern Dynasty was aware that costs would be much higher than it had told investors, but had tried to suppress these other analyses.

Kerrisdale also disclosed that Anglo American had pulled out because it believed that upfront capital costs would be 100% higher and operating costs 20% higher, making the project not feasible. It claimed that, after years of trying, Northern Dynasty-affiliated engineers could not find a way to make the project profitable.

The following day, Northern Dynasty’s stock fell by over 21%, and it continued to decline in the days after that.  

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