Update to NioCorp Shareholders
March 27, 2017
From Mark A. Smith, P.E., Esq.
Executive Chairman & CEO, NioCorp Developments Ltd.
Fellow Shareholder:
As we announced earlier today, our team recently achieved a very big milestone in the Elk Creek Superalloy Materials Project: production of a high-purity (99.9%) commercial grade Scandium Trioxide material. This high-purity product should be able to meet the needs of virtually every use of Scandium of which we are aware. It meets or exceeds the purity specifications of all of the potential customers with whom we have been in discussions regarding future Scandium sales. We are sending samples of Elk Creek Scandium to prospective customers shortly.
Demonstrating our ability to produce a commercial Scandium product with a 99.9% purity (known in our business as 3Ns or “three nines” Scandium) is a major milestone in our ongoing effort to move the Elk Creek Project forward. Additionally, we have now been able to finalize our plans for the Scandium purification circuit to be used in the Elk Creek facility. Locking down the chemical processes we intend to use in this circuit was one of the final major elements necessary for completion of the Elk Creek Feasibility Study.
Now, with our high-purity Scandium production capacities proven, we are approaching the finish line for our Feasibility Study (FS). The volume of work that remains in the FS is not trivial, to be sure, and it will take a number of weeks to complete. But the most challenging elements of this or any mining project FS have been completed and are behind us.
Scott Honan and his team can now confidently predict that we will be able to publicly release our FS results in the second quarter of this calendar year. Thus, after more than three years of very hard work by a lot of very experienced and dedicated professionals, we can see a completed Elk Creek Project FS on the near-term horizon.
NioCorp Executive Chairman Mark A. Smith comments on the Company’s success in producing a high-purity, commercial grade Scandium Trioxide product.
We made a conscious decision more than a year ago to invest extra time and resources into optimizing certain components of the Project, particularly the metallurgical processes that are designed to produce our commercial products. While this increased the time to complete the FS beyond our initial projections, past experience had shown us that extra effort in this area can yield substantial benefits.
In short, there are no roadblocks to completing the FS and we are engaged in wrapping up the final components now. We are on track to deliver a major mining project FS years faster than most exploration-stage companies seeking to develop a project of this magnitude. As you can imagine, I very much look forward to sharing with you the results of all of this work.
What Work Remains on the Feasibility Study?
While we have proceeded with our FS on a very rapid pace relative to most other mining companies, watching this process from the sidelines can be like watching water boil. Or watching paint dry. You can pick your analogy.
To help our owners better understand what remains to be done in our FS, and what this works involves, I asked the team to construct a list of the final major elements that remain. Here is what the team is working on now and is moving to completion:
Final Remaining Tasks for the Elk Creek Feasibility StudyMaterials Characterization for Impoundment Design and Mine Backfill Purposes
We are now analyzing and quantifying the physical, geotechnical, environmental, and geochemical properties of our plant tailings and evaluating their engineering properties for use as a backfill material in the mine. Testing required in this process involves the curing of a range of mixtures of the tailings with cement and or backfill that can take up to 28 days. The properties determined during these test programs will drive the capital and operating costs of the backfill system and the surface impoundment. FS-Level Hydrometallurgical Engineering Design
We have now locked down hydrometallurgical process and are working to complete the FS-level process engineering, layout, and cost estimating for the hydrometallurgical plant (where we chemically separate and purify scandium, titanium and niobium oxides). We have already completed this work for the pyrometallurgical plant, mineral processing plant, wastewater treatment plant, and supporting infrastructure systems.Cost Estimating
We are securing multiple vendor cost estimates on major equipment and process systems as design engineering for those systems is advanced. This involves providing an FS-level engineering specification to each vendor in order to get an FS-level estimate for the cost of each major piece of equipment. These quotes are important in estimating costs of construction, a key input to the FS.Updates to Market Studies for Planned Commercial Products
Given that previously commissioned market studies are more than one year old, we are having these updated. These updates are nearly completed.Final CAPEX/OPEX Estimates
Once all design engineering, cost estimates, and other inputs are finalized, this data is integrated into the FS Technical Economic Model, which will provide project capital expenditures (CAPEX), mining rates, production rates, and operating expenditures (OPEX). The model is prepared with a targeted CAPEX and OPEX accuracy of +/-15%. The model will reflect a detailed construction and commissioning schedule for all aspects of the Project.
The Benefits of Our Intense Focus on Metallurgical Process Optimization
As you may have read in NioCorp press releases over the past several months, our decision to spend additional time and energy in an effort to further optimize the Elk Creek facility’s metallurgical processes is likely to pay off in several areas, relative to the findings of our October 2015 Preliminary Economic Assessment (“Oct. 2015 PEA”). These advances are likely to (1) reduce CAPEX and OPEX of certain components of the Project; (2) shrink the Project’s environmental footprint; and (3) streamline our permitting process.
The details of these advances will be outlined in our FS. But here is a quick recap of what we can disclose at this point:
Innovations Through Metallurgical Optimization
Less Water --> Smaller Equipment
Our engineers discovered a way to attain high rates of Niobium recovery while using much less water that originally required. This allowed us to reduce the size of a number of major pieces of equipment in our designs for the Niobium recovery and purification processes and water management infrastructure. These size reductions are expected have beneficial impacts to CAPEX and OPEX costs for those portions of the plant.
Recycling Some of Our Waste Stream Into Usable Materials
The team engineered a pathway to take significant fractions of the neutralization and acid regeneration solids that we expected to produce and convert them into supplies of neutralizing agents and process reagents that we use to make commercial products. In other words, we found a way to recycle some of our planned waste streams and convert them into usable material.
Benefits of these Breakthroughs
A reduction in the size of NioCorp’s planned acid generation plant, which is designed to recycle chemical reagents used in the production of commercial products.
An estimated 60-85% reduction in certain reagent purchases from third parties.
An estimated 50% reduction in the volumes of neutralization solids and leaching residue as compared to that expected to be produced by the processes outlined in our Oct. 2015 PEA.
Lower costs associated with the Project’s planned tailings storage facility.
Elimination of the construction and operation of approximately seven kilometers of a railroad spur line and associated rail transport infrastructure for the Project. That advance, coupled with other changes we made to the layout of the processing facility, allowed us to reduce the overall Project’s estimated impact on wetlands and other federally regulated waters to less than 0.5 acres of wetlands and less than 300 feet of contiguous stream channel in total. That includes impacts from our planned waterline to the Missouri River.
No EA or EIS. It now highly likely that the regulatory approval we will need from the U.S. Army Corps of Engineers will require neither an Environmental Assessment nor an Environmental Impact Statement. Either of those regulatory processes can add many months or years to a project like this.
Next Steps Following Release of the FS: Community and Investor Outreach, Project Permitting, Project Finance, and Construction Launch
Mark Smith speaks to the next steps in the Elk Creek Project following release of the Feasibility Study.
Once we publicly release the detailed FS documents, we will continue work on and we will kick things into high gear on a number of elements of the Project:Community and Investor Outreach: Soon after we release the high-level findings of the FS, we will launch a number of public and investor outreach programs to communicate the results from the FS. These will include:
A conference call with investors from around the globe to walk through the FS’s findings and discuss next steps in moving the Project forward.
A southeast Nebraska Town Hall meeting (to which you certainly are invited) where we will walk through the FS and our plans for the Project in extensive detail.
Briefings to potential customers, downstream industry representatives, public policymakers and regulators, and many other current and future stakeholders in the Project.
Permitting: We expect to file for and obtain approval this year from the U.S. Army Corps of Engineers (USACE) for a Nationwide Permit under Section 404 of the Clean Water Act that will cover both our surface processing facilities and the waterline that we intend to construct to the Missouri River. This permitting pathway will require neither an Environmental Assessment nor an Environmental Impact Statement, which is a very big and a very positive change from what we had assumed in our October 2015 Preliminary Economic Assessment. This more streamlined permitting process was made possible by Scott’s team’s ability to reduce our likely impacts on wetlands and other federally regulated waters to such low levels that the Project does not require such reviews. This is a direct result of spending more time and resources in conducting our FS.
The USACE permit is the only federal permit we need to secure for this Project, which is another aspect of this Project that differentiates it from many other mining projects. There are a number of state and local permits we are working to secure, and I anticipate success in all of those efforts.Project Finance: The effort to finance the Project will kick into high gear after release of the detailed FS documents. Actually, I have been engaged for many months in preliminary discussions with major investment groups across several continents. At this stage, I can report that potential investment interest in our Project is high, assuming that our FS findings, prospects for sale of our commercial products, and other factors are considered attractive to investors. Institutional investment funds and lenders will go through our FS documents in great detail, and they will challenge us on virtually every point of the FS as part of their due diligence process. Fortunately, we have been through this process before and we know what to expect and how to prepare. This is yet another reason why it is critically important that a project’s FS be done with great attention to detail and accuracy, and by teams who are veterans of this process.
Mark Smith talk about personal values and NioCorp's corporate culture and how it helps to drive environmental innovation and permitting streamlining.
One major element of our financing package is a potential low-interest loan guarantee from the German government through its Untied Loan Program. Because of the fact that we secured a commercial offtake agreement for up to 50% of our Ferroniobium with German-based ThyssenKrupp, the Project has received in-principle eligibility approval under this program. The next step in this process is to have German loan guarantee program officials review our detailed FS documents.
Construction Launch: While the launch of construction activities in Nebraska is contingent upon many factors – sufficient permitting approvals and sufficient access to capital resources, to name two of the biggest – my hope is that we can begin construction activities by the end of 2017 or in calendar Q1 of 2018. The expected length of construction period and launch of commercial construction will be outlined in detail in our FS. But, believe me, I intend for us to push forward on all of these fronts as rapidly as we can.
Thank You for Your Patience and Support
In summary, I want to thank you for your continuing patience and support. 2017 promises to be a momentous year for NioCorp and for the Elk Creek Superalloy Materials Project. I look forward to keeping you apprised of developments as they occur. And, as always, feel free to reach out to us with any questions or comments.
Respectfully,
Mark A. Smith
Executive Chairman and CEO
NioCorp Developments Ltd.
ceo@niocorp.com
Qualified Persons:
Eric Larochelle, Eric Larochelle, B.Eng of SMH Process Innovation, a Qualified Person as defined by National Instrument 43-101, is responsible for the Elk Creek hydrometallurgical program and has read and approved the technical information contained in this communication.
Jeff Osborn, BSc Mining, MMSAQP of SRK Consulting (U.S.), Inc., a Qualified Person as defined by National Instrument 43-101, has overall responsibility for SRK portions of the Elk Creek Project FS and has read and approved the technical information contained in this communication.
Guy Cinq-Mars, PMP & Operations Manager of Tetra Tech Inc., a Qualified Person as defined by National Instrument 43-101, is responsible for the Elk Creek feasibility study process plants design team and has read and approved the technical information contained in this communication
