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Northern Dynasty is Responsibly Developing the Pebble Project in Alaska, one of the Largest Undeveloped Copper and Gold Resources in the World; Ron Thiessen, President and CEO Interviewed

on 9/24/2020
We learned from Ron Thiessen, President and CEO of Northern Dynasty Minerals Ltd. (TSX: NDM; NYSE American: NAK) that they own one of the world’s largest, undeveloped, copper and gold resources, called the Pebble Project in Alaska. Pebble is one of the greatest stores of mineral wealth ever discovered, with a current resource estimate of 6.5 billion tonnes, in the measured and indicated categories, containing 57 billion lbs. copper, 71 million ounces gold, 3.4 billion lbs. molybdenum and 345 million ounces silver; and 4.5 billion tonnes in the inferred category, containing 25 billion lbs. copper, 36 million ounces gold, 2.2 billion lbs. molybdenum and 170 million ounces silver. Palladium and rhenium also occur in the deposit. We learned from Mr. Thiessen that they are now over two years into the permitting process and have already invested over a hundred million dollars in the process itself, for environmental engineering and socio-economic studies.

Northern Dynasty Minerals Ltd

Dr. Allen Alper: This is Dr. Allen Alper, Editor-in-Chief of Metals News, interviewing Ron Thiessen, the President and CEO of Northern Dynasty Minerals, which owns the Pebble Project in Alaska. He is also the President and CEO of Hunter Dickinson Services Inc, which is the management company for Northern Dynasty Minerals and doesn't actually own any shares in the public companies it provides services to. They just house the overhead there. Ron, could you give our readers/investors an overview of your Company? I know it's an outstanding, fantastic Company, with a huge gold and copper project in Alaska, with great potential and recognition.

Ron Thiessen: As most people will be aware, we've been working on the Pebble Project for almost 20 years now. It was discovered by Cominco in 1987. We acquired it in 2001. At that time it was about a billion ton resource, with about 100, 150 million tons of higher-grade mineralization and therefore sub-economic. It was in the middle of what I like to call the nuclear winter, when times were hard for the mineral sector.

Since that time, we've spent a great deal of money, time and effort. We've drilled over a million feet in boreholes, done a tremendous amount of engineering, created an environmental baseline that's second to none and cost about $150 million. Today the resource stands at a total of about 10 billion tons, and we've taken the project into permitting, based on a 20-year mine life and 1.3 billion tons of mineralization.

I'd say it's a geological analog to the Bingham Canyon Mine. It's a polymetallic copper porphyry of unique scale. We've had several majors in the Company or involved with the project over time, which is pretty typical for the way these projects develop over their lifetime. We're located on state land in Alaska, which is key. The federal government's participation is almost exclusively in relation to permitting issues. We started permitting this project in December of 2017, we're about a little over two and a half years into permitting. We've invested over a hundred million dollars in the permitting process itself, environmental engineering and socioeconomic studies. The final EIS, which was completed by the Army Corps of Engineers and filed on the Federal Registry July 24th of this year, found that development operations of Pebble Project would not have any negative impact on the commercial fishery in Bristol Bay.

It would not have any negative impact on the sustenance fishing for the region, and it would not have negative impacts on water quality in the region. But that it would have a very positive socioeconomic impact for the region, which is one of the more economically challenged areas of the United States.

It's in an area that's quite large, 40,000 to 50,000 square miles in total. The total population is about roughly 7,000 people, most of whom live on the coast. The Pebble site is quite distant from the coast at Bristol Bay, about 120 miles as the crow flies. . The closest community to Pebble is Iliamna, roughly 19 miles away. There are no roads. Everything at site was done by helicopter assist. The communities that are closest to us are generally known as “The Lakes” communities on Lake Iliamna, that would be Iliamna Village, Newhalen Village, Kokhanok Village, Igiugig; and on Lake Clark or Six Mile Lake, would be Nondalton. Most of those villages tend to have population bases of between 50 and 100. Newhalen, which has a high school, has the largest of about 200 people.

So it is a sparsely populated area. We've had excellent ongoing and long-term relationships with most of the villages that are close to Pebble and worked with them during the exploration and environmental studies periods when they provided housing for all of our people, catering, food services, housekeeping services, but many of the [people from the villages] also worked actively on our drilling programs and went on to become skilled drill operators and work on other projects.

Today we're on the cusp of the final decision by the US federal government, represented by the Army Corps of Engineers, under The Clean Water Act. The last significant step that is required before that decision can be made is called the compensatory mitigation proposal, and so the Army Corps of Engineers, as part of their Final EIS completion, determined what impact Pebble would have on wetlands and how we would need to mitigate for that impact. Obviously, you can't build a mine, a process plant, tailing sites, even crew quarters without some surface impact, and this was expected. The proposed Pebble Mine is located in a valley where there are no trees, very few migratory birds and for probably 11 months of the year there's no flowing water so it's not really a fish habitat.

The Army Corps of Engineers issued a mitigation requirement letter to us on August 24. It was what we had been discussing with them for the four to five weeks prior to that and so was not a surprise. We've been working on that mitigation plan and we think we have it more or less in place now. It'll be submitted for their review and hopefully approval here in the coming week or two. Then we would expect the decision on a ROD this fall, as detailed on the Army Corps of Engineers’ website.

That is the culmination of almost two decades of hard and arduous work and investment of about a billion dollars. It hasn't been without controversy. In the early years, we had lots of collaboration and cooperation from all of the communities in the region and, in particular, the regional native corporation, BBNC.

However, there was an anti-mining, anti-Pebble movement that was initiated, by a wealthy individual, about the time that Rio and Anglo came into the project. That fundamentally culminated in quite a bit of money being spent on the anti-mining campaign for Pebble, consisting of pretty much all fictitious issues that were designed to create angst in the communities, even in those that are far away from Pebble, such as Dillingham and Naknek and King Salmon. Most of those communities had been looking forward to opportunities for full time employment and now were concerned about the commercial fishery. That's why we were enthused when the Army Corps of Engineers published their very positive findings in the Final EIS, which is based on science and fact.

So that's where we stand today, Al. I think that Pebble is probably the largest undeveloped polymetallic porphyry deposit in North America and is probably the top three in the world. The accumulation of metal is pretty phenomenal in all classes.

Dr. Allen Alper: Well, that's fantastic. It's great that the Army Corps of Engineers has given the project a go ahead.

Ron Thiessen: Well, they've got one more step before we get the go ahead and that is what's called the Record of Decision. We have to appease them with our mitigation plan, and we're comfortable that we will be able to do that. And once that is done over the next several weeks, as well as a few other minor considerations, we feel they will be able to issue their Record of Decision.

Dr. Allen Alper: That will be so fantastic. You've really shown endurance, you and your Company, to keep at it despite the NGO attacks, et cetera, and have such a fantastic project, with such great potential. And you're doing everything the right way, looking at environmental impact, trying to do everything that will protect the environment, protect the people and be good for your community and for Alaska. I really admire you and your team and what you've been doing.

Ron Thiessen: It's a challenging profession, Al and thank you for acknowledging our efforts. We all live as we do largely because of the resources that our countries have. When you look around you, 95% of minerals that are above the ground used to be below the ground and it is there by virtue of mining operations and we need these mining operations. In North America, we have the most stringent environmental rules. And I would say we have the most equitable rules related to revenue sharing, whether that's royalties to the state, property taxes to the communities, fair labor laws and more. Everyone in North America should be proud when a mine is developed and operating as it helps increase self-sufficiency in metals rather than relying on imports from other jurisdictions and other countries where our kinds of development and labor laws and laws of equity, don't apply.

Dr. Allen Alper: That's fantastic. Well, I think you've done all the right things. You can be proud of what you and your Company have done. There's a slide that says Pebble Project Final Environment Impact Statement. Could you summarize that? It talks about independent science-based, transparent and expert view of Pebble Project impacts, and permeability and goes on to what you've been doing.

Ron Thiessen: Certainly. On our website, you'll find our corporate presentation, including information on the final environmental impact statement. It is truly the first intensive comprehensive independent environmental study that was commissioned and undertaken by the US Army Corps of Engineers. It involved many other federal agencies; the EPA, the Department of Interior, NOAA and others. It involved the State of Alaska, three agencies of the State of Alaska, and eight federally recognized indigenous tribes from western Alaska as well. It was intensively studied by a very comprehensive group of agencies. The studies and the engineering companies that were involved in putting all of this together, such as AECOM and HDR in Alaska, added up to well over a hundred million dollars.

There was another study that was undertaken back in 2011, 2012, by the Obama administration, without any kind of statutory authority. It was called the Bristol Bay Watershed Assessment. It had the input of very few of these agencies, and involved virtually zero field work. We offered them our environmental baseline studies at the time and we were told that they couldn't use them because they were too comprehensive. There was too much data and they didn't have the time and they didn't want to put the effort into that, so it was a “specious” study at best. In contrast, the Final EIS is really the gold standard for comprehensive studies for the Army Corps of Engineers, and it's the first time that a truly comprehensive study was done.

We have known all along that we wouldn't negatively impact the Bristol Bay fishery. In fact, I'm confident that ultimately we're going to have a big positive impact on the fishery. We're more than willing to enhance the fish habitat environment to improve survivability, improve numbers, if people want us to. But I think on the commercial side, the economic side, we can bring low cost power to this region. With low cost power they can diversify the products that they produce from this commercial fishery and enhance the value of the fishery tremendously, keeping more of the value creation in the local community instead of shipping it overseas. We also think we can be involved in some sort of financial assistance for the fishery. Most of the fishing licenses are owned out of state. Locals own very few fishing licenses anymore because locals find it challenging to operate profitably in this fishery. We think we can provide a form of “crop insurance” to locals, and help finance the repatriation of some of these licenses, and we are investigating this possibility.

On the EIS front, the findings on subsistence and wildlife resources, say that there is not expected to be any impact on harvest levels of fish and wildlife. Resources will continue to be available as they were before the mine was built. For the commercial and sport fisheries, which is what most people hear about, there is no measurable change in the number of returning salmon. We do not expect any impact on fishing vessel values as well. The fact that there's a mine in western Alaska is not going to denigrate the value of the fish to the commercial fishery. In fact, the most valuable fish from Alaska is the Copper River Salmon, which when they're harvested go across to all the high-end restaurants in the United States. It's the most expensive salmon you can buy. At the headwaters of the Copper River, was Colonel Kennecott's first copper mine. So certainly, the mine can't have any negative implications for the value of the commodity itself.

No anticipated impact on water quality. No effects on community groundwater or contact waters. On local communities, the increase in job opportunities, year round seasonal employment, steady income, lower cost of living, will be beneficial. A half-gallon of milk costs $13 to $15 in a local village in western Alaska because it only gets there by airplane. When we build this mine, the infrastructure will be available, not just to the mine, but all of the communities. Everything that those villages need. Gasoline is six bucks a gallon. Gasoline prices will come down. All of the food costs and other everyday living costs will decline as well. When we take people into the villages there, and go to a convenience store, they agree there is nothing convenient about paying $13-$15 for half a gallon of milk.

And there will be job opportunities, really the only industry that exists in western Alaska is the commercial fishery and it lasts about eight weeks. So it's very seasonal. Almost all of the employees in the processing plants are not even Americans. They're there on J-1 visas from Eastern Europe, Central America, Latin America, and Asia. So locals don't have an opportunity for employment or training. Also locals are doing their subsistence fishing at the same time as the commercial fishery. So we think this is a huge opportunity. We don't believe we have to choose between copper or fish. That would never be the case. This is all about the Bristol Bay fishery maintaining itself and growing and Pebble being added to the region. We're going to have about 800 direct jobs at the mine site, with mining salaries average about a hundred thousand dollars apiece. When you think of the population base out there, Pebble and its related infrastructure could literally employ every employable age person in western Alaska, who wanted a job, full time, all year round. These are extremely good paying jobs and not minimum wage type of scenarios.

Dr. Allen Alper: It sounds like this would be a godsend to the region, an opportunity for the people and your understanding and your Company's commitment to the environment will be great. So it sounds like it's a win-win for everyone.

Ron Thiessen: We're trying to ensure that that's the case. Recently, we introduced what we call the Pebble Performance Dividend. It's modeled on the permanent fund and basically it's a trust that people will register for and the trust will hold a royalty interest in the Pebble Project, and every year the trust will pay out a dividend based on that royalty.

And the minimum royalty will be $3 million per year. While that doesn't sound like a lot of money initially, when you think about the potential population base, that could amount to a thousand dollars per man, woman and child, and that $3 million minimum is during the construction period. It’s anticipated to be multiples of that once the mine is in production.

So everybody in the region will get a chance to participate in Pebble, in the revenues of Pebble, whether they work at Pebble or not. The county or the borough as it's called in Alaska, the LMP Borough, has an annual budget of about four and a half, five million dollars, and they're struggling to keep their schools and medical clinics open. Their share of property taxes from Pebble will be $19 to $20 million a year, four to five times their current budget. I won't say it's a windfall. It's an earned opportunity and people that are near this project, all of the villages that are near the project, Iliamna, Newhalen, Kokhanok, are very much in favor of the project. Farther away on the coast, I grant that there is opposition, no question, but I think that opposition has been created by very, very misdirected and fictitious predictions about the Pebble Project.

Dr. Allen Alper: Well, to me, it sounds like you and your Company are very responsible. You understand the opportunity for supplying gold and copper to the world, and also protecting the environment and helping the community, so I think that's fantastic.

Ron Thiessen: Well, thank you. We want to leave a great legacy, and not just a legacy of making a lot of money from the mine, but an environmental legacy, where we are stewards and custodians. We want this important fishery to continue to be successful. I have experience, with this fishery going back to the 1970s. I know it reasonably well as an outsider. It's not going to change, even for the sportsmen, who are really there for the trout, not the salmon, but even for them, the Bristol Bay fishery will continue to share its riches.

Dr. Allen Alper: Oh, that sounds excellent. We’ll publish your press releases as they come out so our readers/investors can follow your progress.

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