td resarch Event
We have lowered our target price and estimates for Northern Dynasty after Joe Biden
was declared the winner of the U.S. Presidential elections.
Impact: POTENTIALLY NEGATIVE
In our view, a Biden Administration would be negative for Pebble based on
Biden's campaign promise this past August to stop the project. This action would
be consistent with steps taken during the Obama-Biden administration in 2014,
where the U.S. EPA proposed a 'pre-emptive' veto of the project ahead of a Record
of Decision (ROD) under the formal NEPA permitting process. In July 2019, the
EPA, under the Trump Administration, withdrew the 'pre-emptive' veto clearing the
way for the U.S. Army Corps of Engineers (USACE) to issue a ROD on the project.
While it is unclear at this point how a Biden Administration would plan to block
the project, it is important to highlight that the EPA still retains the right to veto the
project under Section 404(c) of the Clean Water Act, assuming the USACE were
to issue a positive ROD on the project. As a reminder, on July 24, the USACE
published the Final EIS, which generally concluded that the impacts to Bristol Bay
salmon are not expected to be significant.
According to the USACE website, the Corps is still targeting the issuance
of a ROD this fall. The final ROD is subject, among other factors, to the
acceptability of Pebble's Compensation Mitigation Plan (CMP), which is required
to compensate for the direct and indirect impacts caused by the project (see
link). Based on the company's last update, field work on the CMP was expected
to conclude in September with the submission shortly thereafter. Given that the
compensatory or offsetting lands include state lands, the CMP would require
acceptance from the state of Alaska.
TD Investment Conclusion
We are lowering our target price to $1.15 from $1.70 and maintaining our HOLD
rating on the company. Our lower target price reflects increased risk that the project
is delayed or outright blocked under a Biden administration. It is important to highlight
that even with the Biden win there is a possibility that a positive ROD could be issued
during the presidential transition period.