Feasibility Study results position NioCorp “shares to head skyward”
NioCorp Developments Ltd. (TSX: NB | OTCQX: NIOBF) (“NioCorp”) released a positive feasibility study for its Elk Creek project in Southeast Nebraska. The results show that the deposit contains valuable niobium, scandium and titanium metals. The primary focus of the group is to produce ferroniobium and to this end, the company has already secured an offtake for 75% of its production, which de-risks the project considerably.
According to the feasibility study, this massive ore body has a potential value of $17.6bn over a life of 32 years and has the capacity to produce 143,824 tonnes of niobium, 3,237 tonnes of scandium and 359,128 tonnes of titanium oxides. Capital raising is already in full swing, with $2m already secured in a private placement so that construction on the mine can begin. The company must now execute a graceful run-up to completing the $1bn facility that could turn Nebraska, which is not a major mining destination by local or global standards, into the state’s major mining destination.
Taking a total of only 36 months, the feasibility study was completed remarkably efficiently, which is largely attributable to the experience of the management team allowing them to move more confidently through the formalities of the exploration stage. Now that the project is de-risked, the company can follow-up on an in-principal agreement with a loan guarantee scheme from the German government to serve as debt financing. This loan agreement will be sufficient to kickstart decent equity financing and propel NioCorp to the ranks of major producer.
The study’s results show that the potential returns are indeed substantial and demonstrates a positive net present value (NPV) and internal rate of return (IRR) of $2.3billion and 24.3% respectively, at a discount rate of 8% and an after-tax NPV of $1.7bn. The payback period following production is expected to be 3.4 years. With three quarters of the company’s ferroniobium production already committed, recouping the cost outlay should be a smooth run.
Over the last six years, more than $6bn was invested into the niobium market and the landscape of this niche metal has gone through considerable changes in a very short time frame. For years, ferroniobium demand was met by almost entirely by the Salles family in Brazil (CMBB), with Anglo American’s Brazilian operations providing the balance. IAMGOLD in Canada was arguably the only other significant producer. Since this time, 30% of CMBB has been sold to two Asian consortia for $3.9bn, while IAMGOLD sold its deposit to Magris Resources, a private equity firm, backed by Singapore and Hong Kong investors and not to be left behind, Anglo American sold its Brazilian based niobium business to China Molybdenum (CMOC). Today, Asian investors are said to own more than one third of the globe’s ferroniobium production capacity.
Ferroniobium is used to increase steel strength, and with the US’s emphasis on domestic infrastructure development, high-strength steel is going to be important in the medium term. Moreover, as the largest players are now in Asian hands, the regional diversification, that Niocorp offers, cannot be underestimated.
With a key federal permit in-hand, NioCorp’s advance should be fairly swift, especially considering that management have completed the feasibility stage in such a short time frame. Once the funding is secured, construction could be complete within a couple of years, and with numbers like these, the value of the company’s shares are set to head skyward. NioCorp is currently trading at C$0.68 with a market cap of C$129.74m, and investors hopeful about making money from the junior mining world should be looking for the most feasible, de-risked, and therefore potentially profitable outfits.
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