Announcement 05/05Very encouraging announcement today. Of course the company wants us to be encouraged but there's no denying the positivity here.
$20m expenditure, 30 site workers already onsite, long list of consultants/suppliers already employed (including SRK), feasibility study by end 2005, expediting of State agencies with a special team to act "in a timely manner", port, road and power plans being made, community action with local Anchorage office set up, all this is hugely positive. The various investors who put up the $22m raised recently for all this development must have been pretty confident the future was bright.
The company and the State could not say more positively at this stage how confident they are that Pebble will confront the doubters and become a profitable mine on a world scale not a series of uneconomic holes in the ground. The State is committing serious expenditure in human resources terms to the project.
The caveat at the foot of the report means the State has not approved the wording. But NDM would be foolish if they published anything about the State's intentions that was not the case.
Of course the project is dependent on high prices for the product and woulkd become marginal/uneconomic if the copper or gold prices fell heavily this year. Neither outcome looks probable to me. Another possible dampener would be the eventually proven resources figure which will show a substantially lower resource than the indicated "Rare Behemoth" calculation of 26.5m ounces of gold and 16.5m lbs of copper.
I am in the UK and attended a meeting at which Jim Slater (and his son Mark) spoke this week. He was publicly very positive about Galahad's involvement with Pebble, reiterated his view that gold in the ground at around $7 an ounce was a bargain and made it clear he was in it for the long haul. NDM management were here in the UK recently and I got good reports from people here who met them- they were impressed.
Just a thought. The obvious end game for NDM is to sell the deposit to a major, almost certainly before the first gold is poured. If all the infrastructure, permitting, and exploration is done by say end 2004 and the gold/copper/moly prices are good and look to continue that way, the price in early 2005 will be many times today's measly capitalisation. If the major waits until the the feasability study is completed then the price will rise a whole lot more. NDM just could sell Pebble only (+royalties) and keep the exploration lands.
However Plan B would be for NDM to actually borrow the funds ($500m/$1 bn??), construct the mine and run it. That would be a daunting prospect for what would be effectively a one-mine company with a 50-year life during which anything could happen in the metal prices cycles, but possible.