Northern Dynasty Minerals Ltd (NYSEAMERICAN:NAK) and Quantum Minerals have announced terminating an earlier agreement they had signed that would see both companies jointly developed the Pebble mining project located in Alaska. Following the announcement, shares of Northern Dynasty Minerals plunged 32% on Friday and an additional 6% on Monday.
The controversial project
In December 2017, First Quantum gave a boost to the project when it signed an agreement to jointly develop it. The Pebble project, which is located in South-Eastern Alaska is said to be the unexploited copper deposits globally. It is one of the biggest low-grade mine project in the world that is undeveloped.
In a statement, Northern Dynasty, which is based in Vancouver said that the turn of events was caused by the fact that it was unable to strike a deal with First Quantum. Apart from Northern Dynasty, Anglo American was also an interested partner in the project but pulled out in 2013.
Why the agreement failed
In addition to the fact that the two companies could not reach an agreement, the project was embroiled in permitting and environmental hurdles. The parties were unable to secure the necessary approvals to for the project.
Environmentalists have opposed the project on ground that it will have adverse ecological effects to the surround areas. Even before the environment impact assessment could be completed, the U.S. Environmental Protection Agency had indicated that it will block the project. This dispute was however solved in May 2017 and Northern Dynasty had been moving forward with getting the required permitting.
The terms of the agreement
In the December agreement, First Quantum’s subsidiary was tasked to work on signing an option agreement with Northern Dynasty. it would then pay a sum of $150 million spread over a period of four years. In return, it would get 50% stake in the Pebble Limited Partnership for a sum of $1.35 billion.
On the other hand, First Quantum would extent the option period for two more years after paying an agreed amount of money. First Quantum had already paid an early option payment of $37.5-million just after the agreement was signed in December.