Rio Tinto to grab 9.9% stake in Northern Dynasty

Vancouver — Rio Tinto (RTP-N) subsidiary Kennecott Canada Exploration is taking a 9.9% equity position in Hunter Dickinson group company Northern Dynasty Minerals (NDM-V, NAK-X), which is developing its Pebble copper-gold-molybdenum deposit in southwestern Alaska.

Kennecott will purchase 8,745,845 Northern Dynasty shares at $10 apiece for proceeds of about $87.5 million. The major also retains right of first refusal to participate in up to 50% of any future equity financings by Northern Dynasty, up until it’s ownership reaches 19.9%. Additionally, the senior can place up to three technical advisors to Northern Dynasty’s Pebble project management team.

Pebble West hosts a measured and indicated resource of 3 billion tonnes grading 0.28% copper, 0.32 gram gold and 0.015% molybdenum (a 0.56% copper equivalent) using a 0.3% copper-equivalent cutoff. With a 0.5% copper equivalent cut-off, the resource tonnage almost halves to 1.6 billion tonnes at 0.35% copper, 0.39 gram gold and 0.018% molybdenum (0.69% copper equivalent).

Earlier this year, the company also reviewed preliminary estimates for the Pebble East zone tabling an inferred resource of 1.8 billion tonnes grading 0.6% copper, 0.37 gram gold per tonne and 0.038% molybdenum (or a 1.05% copper-equivalent grade) using a 0.6% copper-equivalent cutoff grade. Boosting the cutoff grade to 1% copper equivalent drops the inferred tonnage estimate to 947 million tonnes, albeit at higher grades of 0.77% copper, 0.48 gram gold and 0.04% molybdenum (a 1.28% copper-equivalent).

Northern Dynasty has tabled a US$20-million, 30,000-metre drill program on Pebble East aimed at expanding and upgrading the deep resource. Permitting and feasibility studies at Pebble West are modeling proposed open-pit operations on the shallower, lower-grade deposit.

In late-2004, Northern Dynasty exercised a purchase option to acquire its initial 80% interest in the project from Teck Cominco (TEK.B-T). It also recently acquired the remaining 20% interest by issuing 14 million shares to seven Hunter Dickinson Group principals.

With 75.2 million shares outstanding, Northern Dynasty posts a $744-million market capitalization based on its recent $9.90 trading level.