CEO @ work for NIOBAY METALS INC., NOV 25, 2017
NIOBAY METALS INC. (formerly MDN Inc.) MANAGEMENT’S DISCUSSION AND ANALYSIS – QUARTERLY HIGHLIGHTS FOR THE 3RD QUARTER ENDED SEPTEMBER 30, 2016
The following interim management’s discussion and analysis – quarterly highlights (“Interim MD&A”) of Niobay Metals Inc. (“Niobay Metals” or the “Company”) for the three months ended September 30, 2016 provides material information about the Company’s business activities during the interim period and updates disclosure previously provided in the Company’s management’s discussion and analysis for the year ended December 31, 2015 (“Annual MD&A”). This Interim MD&A should be read in conjunction with the Company’s unaudited condensed interim consolidated financial statements and related notes for the three and nine months ended September 30, 2016 (the “Interim Financial Statements”), the Company’s audited consolidated financial statements for the years ended December 31, 2015 and 2014 (the “Annual Financial Statements”), and the Company’s Annual MD&A, including the section describing risks and uncertainties.
The effective date of this Interim MD&A is November 24, 2016.
All financial results presented in this Interim MD&A are expressed in Canadian dollars unless otherwise indicated. The number of shares, warrants and stock options presented in this Interim MD&A have all been adjusted to reflect the impact of the one for five share consolidation described under Highlights for the Period.
NATURE OF OPERATIONS
Niobay Metals (formerly MDN Inc.) is a mineral resource company. The business of the Company consists of acquiring, exploring and evaluating mining properties. Niobay Metals has not yet determined whether its properties contain economically viable mineral deposits.
The Company’s efforts are focused on critical metals, with a specific interest for properties containing niobium. In June 2016, the Company completed the acquisition of a 100% interest in the James Bay niobium property (the “James Bay Niobium Project”), located in north-eastern Ontario. The Company also holds interests in properties located in Quebec (niobium and tantalum) and in Tanzania (gold). The Company’s common shares trade on the TSX Venture Exchange ("TSXV") under the symbol NBY.
HIGHLIGHTS FOR THE PERIOD
? On September 20, 2016, following receipt of shareholder approval at a special meeting of shareholders held on September 1, 2016 and subsequent approval by the Company’s board of directors of the filing of the applicable articles of amendment, the Company changed its name from MDN Inc. to Niobay Metals Inc. and proceeded with the consolidation of its common shares on the basis of one post-consolidation share for every five pre-consolidation
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shares. All outstanding share purchase warrants and stock options were also adjusted to reflect the one for five share consolidation. The Company’s shares commenced trading on the TSXV on a post-consolidation basis and under the new name and ticker symbol “NBY” on September 21, 2016. As of the date of this Interim M&A, the Company has 31,141,501 common shares, 500,000 common share purchase warrants and 1,118,800 stock options issued and outstanding.
? On August 4, 2016, the Company completed a non-brokered private placement of 7,180,000 common shares at a price of $0.25 per share for gross proceeds of $1,795,000. All of the securities issued pursuant to the private placement are subject to a statutory hold period expiring on December 5, 2016. In connection with the private placement, the Company issued 500,000 compensation warrants exercisable into 500,000 common shares at an exercise price of $0.30 per share expiring on July 5, 2019.
? Following the acquisition of the James Bay Niobium Project, all of the historical data was brought to the Company’s head office and compilation is now well advanced. In parallel, a team of geologists is currently working on the core that was drilled in the 1960s by the previous owner, located in Moosonee, a town approximately 40 km north of the James Bay Niobium Project. The planned cleaning, relogging and re-assaying of historical drill core will be completed by the end of the year. The objective of the review of historical data and analysis of the drill core is to complete a geological re-interpretation and a validation of the assay results of the 1960s. These re-assays and re-interpretation will enable the geologists to design a drilling campaign that is tentatively scheduled to take place in early 2017. With the results of the drill campaign, the Company should be in a position to complete a resource estimate in accordance with NI 43-101 standards. This would then lead to the preparation of a preliminary economic assessment by the end of 2017. The geological work is being done under the direct supervision of Jacquelin Gauthier, P.Ing., P. Geo., Senior Technical Advisor to the Company.
? The Company has initiated communications with the various stakeholders impacted by the James Bay Niobium Project and an application with the Ontario Ministry of Northern Development and Mines for an exploration permit has been filed.
? The Company invested an amount of approximately $85,000 on the James Bay Niobium Project during the three months ended September 30, 2016, and such amounts were capitalized in accordance with the Company’s accounting policy. This investment consisted mostly of consulting fees related to the geological work described above.
? The Company incurred a net loss of $230,226 ($0.01 per share) for the 3rd quarter ended September 30, 2016 compared to a net income of $678 ($0.00 per share) during the comparative period in 2015.
JAMES BAY NIOBIUM PROPERTY (Ontario)
In June 2016, the Company completed the acquisition of the James Bay Niobium Project located in the James Bay Lowlands in northern Ontario. The acquisition of the James Bay Niobium property marked a significant milestone for the Company. The extensive knowledge of the Company’s management team in the niobium field led Niobay Metals to conclude that the James Bay Niobium Project is a strategic asset that has the potential to create the long term growth of
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the Company and to become a major player in this critical metal production.
The James Bay Niobium Project was discovered in 1966 by James Bay Columbium Ltd. Historical estimates were established by exploratory and detailed drilling totalling over 14,000 meters in 85 holes, outlining the deposit to a maximum depth of 275 meters. The deposit has been drilled off in sections of 61 meters intervals along a strike of 730 meters. An historical estimate of 62 million tonnes at 0.52% Nb2O5 was established in 1967 by Dr. P. Price of Bechtel and Company. An exploration shaft was sunk to investigate soil conditions and to provide a 250 tonnes bulk sample. Subsequent pilot plant operations demonstrated a good quality pyrochlore concentrate and a recovery rate of 78% was achieved. Historical estimates and historical pilot plant results led to the realization in 1969, by Bechtel Canada, of a feasibility study on the project.
The historical estimates, the historical feasibility and the historical metallurgical testing are based on data obtained by previous operators in the 1960s. Niobay Metals has not yet undertaken the work necessary to verify or classify those historical results. Economic studies completed in the 1960s do not mean the James Bay Niobium property would be found to be economic today. Niobay Metals is not treating the historical estimates as having been verified by a qualified person. The Company will have to perform studies to validate the historical estimates.
OTHER PROPERTIES
Crevier (Quebec) No work has been done on the Crevier property during the current period.
Ikungu and Ikungu East properties (Tanzania)
MDN Tanzania, the Company’s wholly-owned subsidiary, applied for the extension of prospecting licences on two of its permits, in April 2015 and in June 2016. The extension applications have not yet been approved. Although the Company believes that the extensions will be obtained, there is no assurance that such extensions will be granted to MDN Tanzania.
MDN Tanzania received notices of assessment in April and June 2016 in respect of withholding taxes, claiming an amount of approximately $300,000 plus accrued interest of approximately $600,000. Management of the Company believes that it has always paid its withholding taxes in accordance with local requirements and that the amounts claimed are unfounded. MDN Tanzania intends to vigorously defend its position with the Tanzanian tax authorities.
SUMMARY OF OPERATING RESULTS
The Company incurred a net loss of $230,226 during the three months ended September 30, 2016 compared to a net income of $678 in 2015. The loss during the current period included mostly $204,191 in management and administration expenses and $25,700 as write-down of an amount related to the Prairie Lake property, on which the option held by the Company had been terminated in early 2016. The income in 2015 was due to the realization of a gain of $638,414 on settlement of liabilities in Tanzania, partially offset by a write-down of exploration and evaluation assets of $490,675 related to the Samaqua property and management and administration expenses of $115,283.
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Administrative expenses totalled $204,191 for the three months ended September 30, 2016 compared to $115,283 in 2015. Expenses in 2016 include $50,000 as a retirement allowance to the Company’s former CFO and higher investor relations and travel expenses related mostly to the August 2016 private placement of $1,795,000.
LIQUIDITY AND FINANCIAL POSITION
At September 30, 2016, the Company’s cash position amounted to $1,464,600 compared to $319,343 at December 31, 2015. On August 4, 2016, the Company completed a non-brokered private placement for a total amount of $1,795,000. Proceeds from the private placement are being used on the work program on the James Bay Niobium Project, and for working capital purposes. However, management estimates that it will require additional funds to meet all of its exploration and development activities related to the James Bay Niobium Project and to provide for management and administration expenses for at least the next 12 months. Such funding requirements may be met in the future in a number of ways, including the issuance of additional securities or other arrangements.
While management has been successful in securing financing in the past, there can be no guarantee that it will be able to do so in the future or that these sources of funding or initiatives will be available to the Company or that they will be available on terms which are acceptable to the Company. If management is unable to obtain new funding, the Company may be required to reduce the scope of, or eliminate future exploration and development activities, any of which could have a negative impact on the business, financial condition and results of operation of the Company.
Operating activities
For the nine months ended September 30, 2016, cash flows used in operating activities amounted to $349,938 compared to cash flows from operating activities of $26,401 in 2015. This decrease is mainly due to the change in non-cash working capital items of $106,936 compared to $472,003 in 2015. In 2015, the Company had received an amount of approximately $511,000 from the Tanzania Revenue Agency for the refund of sales taxes paid by the Company in prior years. In 2016, the Company received from XINYE a net amount of $96,878 (US$75,000) as a reimbursement of legal and other expenses related to the September 2015 Heads of Agreement on the assets in Tanzania, which was subsequently terminated. Financing activities
On August 4, 2016, the Company completed a non-brokered private placement through the issuance of 7,180,000 common shares at a price of $0.25 per share for proceeds of $1,795,000. Share issue expenses paid totaled $156,006 and included mostly legal, consulting and regulatory expenses.
Investing activities
For the nine months ended September 30, 2016, the cash inflows related to investing activities amounted to $97,953 compared to cash outflows of $122,018 in 2015. In 2016, the Company disposed of an investment of $250,000 compared to $400,000 in 2015. Additions to exploration and evaluation assets of $149,947 in 2016 included cash expenses of $49,945 related to the
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acquisition of the James Bay Niobium Project, $84,986 related to exploration and evaluation expenditures of the James Bay Niobium Project, $28,350 related to maintaining the assets in Tanzania in good standing and the application of an extension to the prospecting licences of one of the permits held and $57,910 in claims-related expenses of the Prairie Lake and Crevier properties. Additions to exploration and evaluation assets of $522,018 in 2015 related principally to the Samaqua project in Quebec.
RELATED PARTY TRANSACTIONS
The remuneration awarded to key management personnel, including directors, the Chief Executive Officer and the Chief Financial Officer, during the three months ended September 30, 2016 totaled $33,223 ($53,970 during the comparative period in 2015).
A company controlled by the CEO of the Company invoiced $12,100 during the three months ended September 30, 2016 for the services of a financial analyst ($6,410 in 2015), and invoiced $8,500 for the rental of office space ($8,250 in 2015).
RISKS AND UNCERTAINTIES
Reference is made to the description of risks and uncertainties included in the MD&A for the year ended December 31, 2015.
QUALIFIED PERSON
Jacquelin Gauthier, P.Ing., P. Geo., a Qualified Person under NI 43-101, has reviewed and approved all of the technical information in this Interim MD&A. Mr. Gauthier is a senior technical consultant to the Company.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Interim MD&A contains certain forward-looking statements as defined in applicable securities laws (referred to herein as "forward-looking statements"). Specifically, this Interim MD&A includes forward-looking statements regarding the Company’s strategic plans and objectives to create long term growth and to become a major player in the production of niobium; the timing, completion and results of planned exploration and drilling programs, planned resource estimate and planned preliminary economic assessment; future financial results and future financings. Forward-looking statements involve a number of risks and uncertainties, and there can be no assurance that such statements will prove to be accurate. Therefore, actual results and future events could differ materially from those anticipated in such statements.
Risks and uncertainties that could cause results or future events to differ materially from current expectations expressed or implied by the forward-looking statements include, but are not limited to, changes and volatility of metal prices and equity markets, the uncertainties involved in interpreting geological data and estimating mineral resources, changes or delays in exploration plans, the results of exploration programs, risks related to the receipt of regulatory and governmental permits and approvals, the timing and results of consultations with the aboriginal partners, increases in costs, changes in environmental legislation and regulation, general economic conditions and mining industry risks, as well as other risk factors discussed in this
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Interim MD&A, in the Company’s MD&A for the year ended December 31, 2015 and in the continuous disclosure documents filed by the Company and available on SEDAR at www.sedar.com. All forward-looking statements in this Interim MD&A are qualified by this cautionary statement. Accordingly, readers should not place undue reliance on forward-looking statements. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements whether as a result of new information or future events or otherwise, except as may be required by law.
ADDITIONAL INFORMATION AND CONTINUOUS DISCLOSURE
The Company regularly discloses additional information through press releases and financial statements available on the Company’s website at (www.niobaymetals.com) and on SEDAR at
