* Half of massive Pebble copper-gold project on the block
* Canadian junior Northern Dynasty looks to cash out
* Project faces opposition over salmon, environment
* Likely suitors limited to top diversified, gold majors
* Project's potential is huge if it's allowed to proceed
By Julie Gordon
TORONTO, Sept 9 Alaska's Pebble deposit, one of
the world's largest known gold and copper resources, presents
big problems for Northern Dynasty (NDM.TO), the junior Canadian
miner that wants to sell its 50 percent stake.
It's too big for all but the largest buyers, and political
and environmental concerns could derail the multi-billion
dollar project before it even gets under way.
"I don't think anybody questions that this is an extremely
valuable and important asset," said Dahlman Rose mining analyst
Adam Graf. "But without a 'social license', there may be
question marks as to whether or not a project can be
Estimated development costs of Dynasty's joint venture with
Anglo American (AAL.L) are at least $4.7 billion, limiting
potential suitors to the 'A' list of diversified miners and
gold majors like Rio Tinto (RIO.AX) or BHP Billiton (BHP.AX).
And a buyer needs the stomach for a fight in a project
opposed by scientists, aboriginals, environmentalists and even
Hollywood celebrities. As one of the world's largest open-pit
mines, Pebble would threaten a salmon fishery that also ranks
as the world's largest, they say.
Set against that are the big potential gains. Dynasty
released a preliminary economic study earlier this year,
confirming that the deposit - which has a measured and
indicated resource of 55 billion pounds of copper and 67
million ounces of gold - could produce ore for decades.
Map of Pebble deposit: r.reuters.com/nah63s
Factbox on Pebble deposit: [ID:N1E7880M7]
Acquisition costs have fallen too, after political concerns
knocked more than half the value off the shares from February's
record C$21.50. The shares were at C$9.32 on Friday.
That means a suitor could offer a healthy premium at about
C$30 a share, and still pay under 40 cents per pound of
recoverable copper, well below the two-year average for copper
deals at $1.35 per pound, according to TD Newcrest data.
OF GOLD AND SALMON
The Pebble deposit sits some 15 miles (23 km) northwest of
Iliamna, Alaska, home to about 100 people. The region's salmon
fishery produced about 31 million fish last year worth more
than $150 million, according to official state data, and
opponents frame the project as a choice: metals or fish.
Supporters say mines and salmon can coexist, pointing to
the Highland Valley and Gibraltar mines, both near Fraser River
salmon fisheries in British Columbia.
But Thomas Quinn, a professor at the University of
Washington, who focuses on fish ecology and has spent decades
studying the salmon of Iliamna Lake, isn't so sure.
"Step back and think about the magnitude of what is being
contemplated," said Quinn. "You're taking the most precious
salmon system anywhere and you're throwing at it the largest
scale project that's ever been contemplated."
"If you don't draw a line in the sand here, you're
basically saying there's none to be drawn."
Late last year, Canada blocked the development of the
Prosperity project in British Columbia due to environmental
concerns over a plan to pump tailings into a lake.
Prosperity is owned by Taseko Mines (TKO.TO), which is part
of the Hunter Dickinson group of mining companies that also
includes Northern Dynasty. Taseko has submitted a new plan to
regulators that it says addresses the problem.
While exact plans for Pebble have not yet been determined,
a massive open-pit mine is a given for a cost-efficient
development. The project will need a new road across 86 miles
of mostly untouched Alaskan wilderness, a pipeline to pump the
metal slurry to a deep-water port in Cook Inlet and the
infrastructure to power it all.
On the other hand, the mine would employ about 2,000 people
during construction and around 1,000 people once it's
operational. Locals would fill half the jobs.
The project would also bring cheaper power and other
infrastructure to a depressed region, and that could create a
veritable gold - and copper - rush in the area.
Copper is hot. Mass adoption of electronics and green
technologies, along with rapid urban growth in China and India,
has demand for the red metal easily outpacing mine supply.
And it is that gap between supply and demand that makes
Northern Dynasty appealing despite the political risks.
Rio Tinto already holds a 19 percent stake in the company.
Other diversified miners like BHP and Vale, or an Asian
consortium, are also likely suitors, said analysts.
Even top gold miners such as Barrick and Newmont Mining
(NEM.N) could be interested.
Either way, the door is open to any company willing to wait
out the challenges, said Graf.
"Once it is permitted, in all likelihood Northern Dynasty
will be trading significantly higher," he said. "You could buy
it now - If you're willing to take on the risk and you have
that long-term outlook."
(Editing by Frank McGurty and Janet Guttsman)