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By Stephen Lee
The backer of an Alaska copper and gold mine project said May 1 it needs another month to finish an agreement with the mine’s owner.
Should financier First Quantum Minerals Ltd. and Pebble Mine owner Northern Dynasty Minerals Ltd. fail to come together, the project would be in trouble. Northern Dynasty needs First Quantum’s $150 million cash infusion to file its application for permitting and to cover its legal and consulting costs, while the Army Corps of Engineers writes its environmental impact statement.
Meanwhile, Northern Dynasty’s financial filings sketch a picture of a company operating close to the bone. The company only has roughly $50 million in cash on hand, according to a March 29 financial statement.
The extension is the second delay between the two companies. Originally, the financing deal was supposed to be wrapped up by April 6. One day before that deadline hit, First Quantum and Northern Dynasty gave themselves 24 more days.
Neither First Quantum nor Northern Dynasty responded to interview requests about the delays.
A May 1 Northern Dynasty news release didn’t point to any specific reason for the continued delay, apart from language about how the deal hinges on the completion of due diligence, regulatory approval, and “the successful negotiation of the final form of the option agreement and associated commercial agreements.”
First Quantum threw Northern Dynasty a lifeline last December by investing $150 million in the company over four years, with an option to become a 50 percent owner of the mine later. At the time, First Quantum also paid out the first $37.5 million installment.
Circumstances have changed: Three large institutional investors—the treasurer of California, the comptroller of New York City, and the comptroller of New York state—have publicly pressured First Quantum to walk away from Pebble Mine, saying it’s both financially and environmentally risky.
On the other hand, the mine is also finally moving toward permitting. The Army Corps of Engineers is conducting the review process known as “scoping” as part of preparing an environmental impact statement.
Richard Bourke, senior credit analyst at Bloomberg Intelligence, cautioned against reading too much into the delay, especially considering that First Quantum has already sunk $37.5 million into the project.
“Given that we’re only four months away, I doubt they’re going to walk away,” Bourke told Bloomberg Environment. He also noted that First Quantum is spending $1.3 billion in capital expenditures this year.
But Joel Reynolds, western director and a senior attorney at the Natural Resources Defense Council, raised the possibility that public pressure might be getting to First Quantum.
“Perhaps First Quantum is getting the message that no mining company in its right mind would go anywhere near the Pebble project or its 100 percent owner, Northern Dynasty,” Reynolds told Bloomberg Environment.
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