The debate over Pebble, the world’s biggest undeveloped gold and copper deposit, rages on.
As you probably know, Pebble is owned by Northern Dynasty, a company I recommended in July 2016. Some of our readers were able to get into the stock before it soared hundreds of percent higher. Now, the company is the focus of intense debate. Short sellers say Pebble isn’t economically viable. Bullish shareholders say the shorts are wrong and spreading misinformation. It’s become one of the biggest stories in the natural resource industry.
To give you an expert’s perspective on this debate, I sat down face to face and discussed Pebble with the legendary geologist David Lowell.
David Lowell is one of the greatest geologists of all time. He discovered the Escondida project, which became the world’s biggest copper mine. He’s discovered more than a dozen world-class economic mineral deposits as well. It’s an incredible achievement when you consider that the top tier geologists are lucky to discover one world class deposit in their career. David’s discoveries have given him the title of “world’s greatest mineral exploration geologist.” He’s forgotten more about finding deposits and building mines than most people will ever know.
David is also a mining engineer, which gives him unique insight on the costs involved in building a mine. I got to know David a lot better when he traveled to the Pebble project with me last year. As the debate over Northern Dynasty got louder and louder, I knew David would be a great source of insight on the topic.
The transcript of our discussion is below.
MK: David it’s a pleasure to sit here with you. I’d like to you get your professional opinion about Pebble on the record.
Today there is a lot of controversy going on in the market between the shorts and the longs and I thought it would be an incredible resource tool for the whole market to get the opinion of the greatest porphyry geologist that I know of which is David Lowell and ask his opinion.
What are your thoughts on the Pebble project after actually walking on site, looking at the core samples, looking all the publicly available information on the Pebble deposit which is owned by Northern Dynasty?
DL: Well it was a unique opportunity, all the work that has been done to date is a very large amount of diamond drilling, which all we know about the ore body are the cores obtained by the diamond drill operation, and I examined some of these, hopefully a representative sample of the core and looked around at the surface and read the very comprehensive reports on engineering and geology that had been made, including long-term environmental studies which include fisheries study which suggested in almost all cases I am aware of, the habitat increases. And I read the engineering reports recommending the project be carried out.
A kind of a horrible statistic is that because of interference by environmental clubs, and a wealthy fisherman that has a cabin within 100km radius of the project and by the American EPA bureau, the project has never been possible to move into the next stage. But something on the order of $700 million dollars has been spent thanks to interference by environmentalists and government agencies.
MK: Majors such as Anglo have invested a significant amount of dollars into it. How would you rank the Pebble project relative to other porphyry copper projects in the world that you are familiar with?
DL: It is the biggest deposit that I know of, that is ready to be put into production at this time and when it is in production, eventually, it will very likely be become the largest copper-gold mine in the world.
MK: So you do believe this is an economic deposit and the Pebble project will be in production one day?
DL: I am certain of that. And it’s possible to design a pit and concentrator assuming average grade which includes the higher grade and the lower grade, which will produce an optimum tonnage from the mine.
MK: And you believe there will be an open pit and underground portion to the project?
DL: Yes. And I believe there will be 2 or 3 different open pits. In the mining business, it’s common to begin to build the mill and begin on a high grade near surface part of the ore body.
MK: Wasn’t that how Escondida was originally started?
DL: Yes. Escondida and probably 20 other large scale mining operations.
MK: For open disclosure David, are you a shareholder of Northern
DL: Yes I am.
MK: What would you say to all of the critics and shorts out there and all of the so called geologic ”experts” who are saying the project is worthless? I’ve read and heard some people state including professional geologists, claim that the project is not economically viable or there’s nothing of value at Pebble What would you say to those individuals?
DL: I would say try to get back in a mining college and learn more.
MK: That’s exactly the response another Mining Hall of Famer, Bob Dickinson said on stage at my investment conference in Vancouver in January when I asked the same question.
DL: I totally agree, I think that it’s such a ridiculous statement it hardly bears arguing with, but I don’t know all the background of what they stated.
MK: Other than cyclicality of our business or the commodity price do you see any other fatal flaws to the Pebble project?
MK: I want to discuss the social aspects of a mine such as Pebble being brought into production and the effects to the community. We drove around the communities around the Pebble project such as Iliamna and other areas in the region where a gallon of milk is $15, a case of beer is $60 because everything is chartered in.
I truly believe that not only will there be 15,000 jobs created by the development of the Pebble deposit, but the community will benefit as a whole. Schools, hospitals the municipalities will have more money from the wealth generated from the mine and that will improve the standards of living for all. You’ve seen the social effects of mining more than anyone, what is your opinion?
DL: Well there almost all helpful, productive, higher standards of living, increased security, especially a mine like Pebble, which will probably span several generations. And in Alaska, the Alaskan government is in favor of the development, the district government is in favor of the development and most of the indigenous communities are in favor of development. So it’s surprising that they have been able to stop this development. Money from mines is new wealth. The money that comes out of a large high-grade mine benefits all.
MK: What do you see as the final outcome with respect to the Pebble project? You’ve worked with many majors, developing the deposits, finding deposits, selling them to the majors, what do you see as a shareholder yourself in Northern Dynasty as the eventual outcome for Northern Dynasty shareholders?
DL: I think the best outcome would be for a large company already experienced in producing copper and gold or a consortium of producers to take the project over.
MK: Like what took place with Escondida for example?
DL: Escondida was a consortium. A lot of additional money will have to be put into the development
MK: So you believe this project will warrant and attract billions of dollars in capital for infrastructure?
DL: Absolutely, I have, no question whatsoever. Pebble’s published ore grade of the deposit is higher than the ore grade in many of the Arizona, New Mexico mines, and higher than the number of big mines in production today like Highland Valley.
MK: And it will also be a clean concentrate?
MK: Whereas Escondida is more of a dirty concentrate now
DL: Yes, that’s right.
MK: Do you want to explain why clean concentrate is so important to my subscribers?
DL: Well there a number of minerals that typically occur with the copper minerals, and minerals that contain gold and some of these minerals like enargite, which contains arsenic, and minerals that contain mercury produce a dirty concentrate.
MK: And Mother Nature blessed Pebble because none of those ‘nasties’ are an issue in the Pebble concentrate?
DL: That’s right.
MK: So to conclude this Q&A; I just want to make sure we’re absolutely clear here, you’re a shareholder and you believe this is a world class deposit, you believe its economically viable, you believe it will be developed and put into production and it will be a multi-generational asset, am I correct on all fronts there?
DL: You are.
MK: I agree completely, as a large shareholder myself, I agree 100% with everything you said. David I thank you for your time in and sharing your thoughts with my subscribers.
DL: Good, thank you Marin.