Royalty has little impact on Pebble PEA
Despite welcome capital, results impacted minimally overall North of 60 Mining News – November 18, 2022
Last updated 11/17/2022 at 3:59pm
An updated preliminary economic assessment for Pebble shows that a US$60 million royalty investment deal between Northern Dynasty Minerals Ltd. and an unnamed investor has a minimal impact on the economics of the proposed mine at the world-class copper project in Southwest Alaska.
You can read about the sudden investment at Surprise $60 million investment for Pebble in the July 29, 2022, edition of North of 60 Mining News.
"In the updated technical report we have detailed the impact of the royalty financing on the value of the project," said Northern Dynasty President and CEO Ron Thiessen. "The results were aligned with our estimates at the time of the financing; the robust financial results of the 20-year base case are minimally impacted by the financing, which provides substantial working capital that we can use to advance the Pebble project in permitting."
The new economic analysis tabulates the effects of the royalty investment in comparison with a 2021 PEA.
The Pebble Mine outlined in the 2021 PEA generated a post-tax net present value (7% discount) of US$2.28 billion, an internal rate of return of 15.7%, and capital payback of 4.8 years.
Calculating in the 2% gold and 6% silver royalty for the first $12 million tranche of the financing, the Pebble Mine is estimated to generate a post-tax NPV (7% discount) of US$2.25 billion, an IRR of 15.6%, and capital payback of 4.8 years.
Calculating in the 10% gold and 30% silver royalty if all five tranches of the US$60 million financing were completed, the Pebble Mine is estimated to generate a post-tax NPV (7% discount) of US$2.1 billion, an IRR of 15.1%, and capital payback of 4.8 years.
Funds to fight fed interference
While the investment reflects a minimal impact on the economics, the injection of funds will help the Pebble Partnership navigate the complexities of the federal permitting process for the proposed mine.
"This financing, when completed, also gives us the financial wherewithal to keep fighting against what we consider to be unfounded interference by U.S. Federal Government agencies in an otherwise well-established, legal permitting process, as well as to deal with challenges from well-funded parties from outside the area that lack scientific or other factual studies to support their opposition," said Thiessen during the funding announcement in July.
Regardless of persisting opposition, Northern Dynasty continues to make efforts to advance this world-class and imperatively critical copper mine.
In the end, the 2022 PEA assesses the royalty's impact on the projected results for the three potential mine expansion scenarios and potential alternative strategies for gold recovery that were also presented in its 2021 PEA, which could form the basis for future permit applications and review.
Ultimately, as the company said, the royalty was found to have minimal impact on the results of these potential scenarios.
As the 2022 PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them to be categorized as mineral reserves, Northern Dynasty states that there is no assurance that the 2022 PEA will be realized.
The full text of the 2022 PEA has been filed on SEDAR and will also be filed on EDGAR and Northern Dynasty's website.