Clearly something just is not adding up here. The company has met 2.5/3 goals for the year, (I consider the framework agreement a half met goal until it is finalized.) and yet the share price reflects nearly none of the performance matched by management. Why do shares of NDM continue to slip after repeatedly, "good news"? There are a combination of factors that are setting NDM up for this turbulent course.
- Retail investors entered in droves in the last 6 months to profit from a partnership agreement.
- A seemingly lackluster deal with FQM for 1.5B for 50% ownership left investors feeling as if NDM took what they could get.
- Investors were under the impression CEO was referencing hints of a JV PR
- Stock is still plagued by the uncertainty of the true view of natives in the area. (there is much dispute the 2014 public view % was heavily skewed)
- Continued extensions from EPA on the comment period for Pebble.
Each of these reasons has caused the stock to slip due retail expectations not being met. However it is imperative to note that retail expectations are extraordinarily unrealistic. Most Retail "longs" and swingers have hedged their bets on the continued Cantor Reports and potential "any time news" FOMO. When the partner news came around and it was not the 3.5B + deal that pumpers imagined the retail shareholders suffered a reality check and have realized the stock will not magically pump to $6.00+ on hype alone.
The Opening of a Short Hole.
What the above situation has created is quite interesting from my perspective. The stock rallied to above $2.30 levels on the hype for the closing window of the partnership deal, PM the morning the news was released. The volume was a staggering 20M+ the day of the FQM Framework agreement the stock ended the session down in the $1.7x range. What happened here was not only a combination of profit taking and exiting positions due to a lack luster deal but the creation of MANY new short positions. Anyone able to short from 2.30-2.00 range is currently sitting on a handsome position if they have not yet closed. This here is where it gets interesting, Over the course of the last year I often stated how larger MMs have been unloading short positions to retail short investors since the Kerrisdale debacle, shooting their own kind in the foot so to speak. It is blatantly obvious that hidden in the mass volume the day of the agreement were many larger short positions being dumped onto retail. Small time shorts saw what they deemed a "bad deal" and with several uncertain catalysts for early 2018 a very easy short to medium term short position. Many of these new shorts have happily opened positions in the 1.9x 1.8x even the 1.7x levels anticipating the stock to touch levels similar to September/august of 2017 when the stock reached $1.21. On paper that's a still a pretty meat gain on sales shorts even when factoring in those pesky lending fees. After all NDM took the low ball deal they could and has few catalyst in the near term right? but there is just one problem here. This is a false reality and a metaphorical black hole for those interested in shorting NDM.
The Reality of Moving Forward.
Looking at where NDM is now we see the following in their favor.
- Have submitted permits to Army Corps, spending outside cash and not needing an offering to pay for them
- EPA veto lift and the heavily assumed resolution of the comment period.
- Accepted an extremely lucrative framework agreement setting up NDM for one of the largest plays of 2018
Did that last bullet raise your eyebrow? How could a 1.5B deal for 50% ownership of the largest copper mine in the world possibly be lucrative for anyone besides FQM? The answer is simple and one that any Management who loves making money would kill to set up. This low ball offer has set the stage for a bidding war to commence. NDM has gotten FQM to pay the costs of permit submission regardless if they sign on for the partnership deal. FQM is set to pay 1.5B for 50% ownership as it stands, that is until EPA has resolved and info on permit determinations start to come together. At that point the front of major miners who ignored pebble in it current phase will begin knocking on NDM's door and they will laugh at that 1.5B dollar deal. "1.5b billion? how about 2.5B" another will call "2.5B? how does 3.5B sound?" you see what is happening here. FQM has put them self in a very dangerous position by accepting to pay the permits before signing on as the first partner. Their 50% ownership is at risk of being stolen by larger majors with much deeper pockets. That is unless... FQM finalizes the deal by February and before any other possible bidder enters the stage. In doing this NDM will be put into a potentially dangerous situation allowing for a hostile take over of the their own company. Shareholders however win and profit greatly from either of these outcomes.
In Conclusion (TLDR):
- NDM has hit all of its goals for the previous year
- NDM has applied for permits using outside funds
- NDM has entered a deal that puts NDM or Partners in an extraordinarily lucrative position
- A legion of new short positions has been created at very low sp levels due to what is an assumed "Bad Deal".
- Odds of a bidding war continue to increase as more milestones are made.
- EPA Resolution is imminent and start of this aforementioned show.
- SP at current levels IS extremely undervalued.
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Disclosure: I am/we are long Nak.