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They are not remotely the same. The engineering report is a report summarizing and verifying the technical details of the project and is being performed by RPM Global. This is the one we/banks are waiting for. Banks are pretty good about reviewing the finances of a project on their own, but don't tend to be too knowledgeable on geology, metallurgy, etc.
Actually three years ago today his 18 million shares were worth $12.42MM CAD. Today $6.66MM, but why cherry pick numbers?
You and Landmark really are a special kind of stupid aren’t you? Buffett and Berkshire have no history in the mining industry and MS has acknowledged that they have no interest in Elk Creek. Any hypothetical NDA does not give a CEO permission to lie to investors. Buffett isn’t happening. Move on.
Jim's comments on the loan guarantee:
The short answer to your question is that a binding commitment for a loan guarantee from the German Government’s UFK program can be secured prior to execution of the overall financing package. That binding commitment is publicly disclosed at the time. The actual loan guarantee from the German Government is formally issued as part of the full debt package/solution for a project, given that (in our case) such a guarantee would be for a portion of our expected debt financing, and such debt financing is expected to be an integral element of the overall CAPEX raise. But the binding commitment of the UFK program for a loan guarantee is a very significant catalyst to completing the assembly of a project’s CAPEX solution.
By way of background, the team at Northcott Capital, which is helping to shepherd us through this program and the larger debt financing effort, has been through this process many times before on behalf of natural resource development projects such as ours. Assembling such debt packages can be a highly complex process that involves many players, multiple optionalities, and considerable time to navigate. Here is how the process general works in practice:
The first step is to obtain “in-principle eligibility.” We secured this following execution of our commercially binding offtake agreement with ThyssenKrupp. The guarantee amount is tied to the value of the FeNb to be sold into Germany. At present, a loan guarantee from the UFK program for our project is estimated to be in the US$120 million – US$130 million range. This initial determination from the German Government has been an important driver of our debt financing effort to date.
As you may know, the German Government funds this program because its manufacturing-based economy is highly dependent upon imports of raw materials such as FeNb. As such, it sees value in committing German taxpayer funds to help its manufacturing base secure such imported raw materials. Additionally, both the German government, and manufacturers such as ThyssenKrupp, see value in diversifying their upstream raw material supply chains as much as possible. That helps to de-risk their operations. Given the relatively limited supply diversity of FeNb today, an additional source – particularly from the U.S. – is welcomed by these manufacturers.
Our in-principle eligibility was re-confirmed recently after the UFK program received our Elk Creek Feasibility Study.
The next step is “Preliminary Approval” from the UFK program. That is a major step in the process, as Preliminary Approval is binding upon the German Government to provide the guarantee. This requires the appointment of a bank as the UFK agent and is undertaken in parallel with banking credit approvals. Typically, the Preliminary Approval will be received once the UFK Banks get their credit approvals. The grant of Preliminary Approval for a project is publicly disclosed.
Following Preliminary Approval, our team then works with a lender, and in our case in conjunction with consortium of lenders, on the terms of the financing to be guaranteed by the UFK program.
The actual guarantee from the UFK program is issued as a final part of a full debt package/solution for the project.
I received a lengthy email from Jim yesterday on the topic and I will post the relevant parts of it when I can easier copy and paste rather than trying it on a phone. The short answer is that the full debt package is required for the guarantee to be actually issued, however, Niocorp can secure a binding commitment from the UFK for the lender that they agree to use the guarantee with. The binding commitment is very significant and can likely act as the “kick start” that has oft been mentioned, but again it would not be guaranteed until final approval of the package. Much of this is a formality. There are much more details but this is the jest of it. Advocate77’s posts on the topic were pretty well spot on.
Agreed!
Lol....
Swings in both directions come easy at this volume, but I've got to think the IBC comments from yesterday are pushing this.
Courtesy of Advocate, italics mine:
Thank you. This is starting to come together. I think it is important that we and the company are careful to note that we are looking for preliminary approval to kick start this. Final approval will be contingent on the complete financial package coming together.
This assumes your interpretation is correct and we can go from in principle eligibility to preliminary approval with partial financing.
Where did you find this? This may at least indicate they can go from in principle eligibility to preliminary approval, but still wouldn’t have the final guarantee until the complete financing package is in place.
This is direct from the link under 3. Project Structure:
The commercial and technical feasibility of the raw material project to be financed as well as the total financing of the project must be ensured.
https://www.agaportal.de/en/main-navigation/rohstoffe-ufk-garantien/grundlagen-ufk-garantien/grundzuege-ufk-garantien
This is the key. This document and others make it clear that before the guarantee is made that the financing for the entire project must be secured. Mark has led investors to believe that the guarantee can be used as a first tranche or to kick start financing. I asked Jim about this last week immediately after the investor meeting and have not yet had a response. I know he follows this board to a certain extent, so he knows now who I am. Maybe one of the other investors with a greater rapport can ask as well. I will resend my email next week.
Any predictions that result in a market cap higher than the NPV are pie in the sky right now. I maintain the best case scenario is a buyout/JV that reflects the risk in the Scandium market. A 50% discount or 10 bagger at these prices seems about right.
1. The Northcott capital debt for shares swap at a 10% premium and with a four month holding period. If Northcott holding then I’m holding.
2. A $63MM deal with with Rockies Express, a subsidiary of Tallgrass, for the pipeline. Rockies Express is not wasting time negotiating this deal if they didn’t believe there was a high likelihood of it happening. Writing large contracts like this is a major undertaking for the legal teams on both sides and certainly not cheap.
3. It’s not the fact that 75% of the Niobium is spoken for, it’s the companies that signed the offtakes. Thyssen-Krup knows they need Niobium, but they also don’t want to be committed to purchasing more than they can use. Companies like them and Traxis aren’t signing offtakes that they don’t believe will ever come up to fruition.
The offtakes are old news, but here are votes of confidence from four different companies. There are a lot of things I disagree with and I’m disappointed that Mark keeps portraying that the German guarantee can kick start financing when it is clear that the German government requires a complete financing package before issuing the guarantee, but all in all Northcott, Rockies Express, TK, and Traxis are good enough short term reasons for the high risk/high reward portion of my portfolio.
This is correct. He said some of the financing being discussed involves the complete financial package. He did not say that these potential packages were for debt only.
Not quite per verbatim but pretty close.
The Northcott shares for debt deal. If they are willing to take shares for prospective services with a four month holding period it behooves me to at least hold until then as well.
And I like Niocorp.
You seem to view me as argumentative because you don’t like what I have to say. You do realize nothing I’ve said contradicts the possibility of Niocorp being extremely successful? None of these points are mutually exclusive. Niocorp is down now because of skepticism over a currently barely existent scandium market. This fact can be true, and you can be right that scandium and thus Niocorp is going to take off over the next few years. All that means is you made an accurate prediction well before the market. That’s usually a pretty good position to be in.
It’s no assumption. Again I point you to CleanTeq. No BFS. No third party engineering review. Trading near NPV. You really think the equity side is just sitting around waiting for the RPM Global report while they have a BFS at their fingertips and a chance to buy at a small fraction of NPV? That report is primarily for the debt side.
I’m not arguing at all about Walters questions. I said myself they were spot on. As it stands today, the general market is answering his first question with a no, hence the share price. If you think the answer is yes, quit complaining and buy, but don’t blame the market for the skepticism.
It’s certainly subject to inaccuracies and numerous assumptions, but the point remains the same. As stated in the BFS, this project is not economically viable without the Sc. There are two comparable companies. One has a very good return on its other minerals and is trading near NPV Of its prefeasibility study ($800MM market cap vs. $900MM NPV, both in AUD). The other is a pure play Sc company with a 33% IRR, a BFS that has been complete for over two years, a share price in the dumps and thus far an inability to secure financing.
Right now, Niocorp is trading like a company that is dependent on Sc in a market that does no have faith in the Sc predictions that have been made. This is THE REASON the share price is so low.
Walter’s two questions were right on. Major investors are currently answering his first with a no.
I don’t think either of them has all required permits. Nor does Niocorp. CleanTeq won’t have a BFS until early next year. SCY has no money. They both have higher priorities than getting all necessary permits in a very mining friendly country.
They lowered the NB price by $4 and doubled production cost from PEA1 to the BFS.
This is pretty easy to figure out. Just find the NPV of the Sc and subtract from the BFS NPV. I did assume equal production every year and the same pricing throughout. 103 Tonnes per year at $3675/kg with $1127/kg production gives $262,444,000 per year of net Sc revenue. Assume this starts in three years and continues for 32. We know the additional capex for the Sc is very low. I thought I remembered $30MM reported. This gives the Sc an NPV of nearly $2.8B pre tax, given the overall NPV of $2.3 this means the Nb is negative. This is exactly why the NFS itself said the project would not meet investment criteria on Nb alone.
You can play with the NPV numbers here:
https://www.calculatestuff.com/financial/npv-calculator
Why didn’t you include Nilsa Guerrero-Mahon, CPA & CFE?
Yes. Preliminary economic analysis and pre-feasibility study are essentially the same. The PEA is commonly used in North America and reported per the Canadian Institute of Mining standards. The PFS is typical to Australian mines. CleanTeq expects a BFS early next year, per the link I sourced. SCY’s BFS is available.
AO, How many mining projects have you watched advance through these stages? How far ahead is Niocorp vs. the others you’ve seen?
I guess I assume everyone here is already familiar with the Niocorp financials.
A simple google news search will identify many links, but here’s the official news release.
http://clients3.weblink.com.au/pdf/CLQ/01905558.pdf
Scandium International is another very good example. Their BFS has been complete for over two years and they are yet to obtain financing for the mere $90MM project on a $220MM NPV. All because it is a stand alone Scandium company completely dependent on the development of that market.
Lara Smith, the author of the Niocorp article posted at investorintel.com yesterday and linked here, has been very positive on SCY.
Why are you even attempting to compare Niocorp to the likes of Rio Tinto, BHP Billiton, or ALCOA? This is nonsense.
First of all, I thought Niocorp was a speciality chemicals company. Rio and BHP specialize in iron ore, a commodity if there ever was one. Both of these companies also have established annual revenues over $30 billion. This is nonsensical.
ALCOA is an aluminum company. The largest in the US. They regularly make headlines and set the stage for quarterly reports as one of the first large companies to report every quarter and their results are largely considered a good reflection of manufacturing in this country. They have nearly $10B in revenue as another commodity company.
None of it is odd. I don’t think the market needs 3 years of production, but it is clearly looking for some sort of evidence that scandium is a viable market. That could mean an offtake, financing, or some sort of production. I don’t think full value will be seen until there is a minimum of 12 months of operation with revenues similar to those forecasted in the BFS AND an optimistic market for the future of scandium.
If you take a look at the BFS numbers and back out the NPV of the Scandium production, the project has a negative value. This company going forward is 100% dependent on a new scandium market. If you believe that market will unfold as management and Andrew Matheson predict then there will be plenty of money to be made. As of now, the market is very skeptical of these forecasts. You want some evidence? Take a look at the CleanTeq PEA. They based all numbers on nickel and cobalt alone and the stock is trading very near NPV. Scandium is the gravy for them. Niocorp is nearing their own NPV without scandium.
CleanTeq did just release a new mineral reserve estimate. All minerals were increased, but scandium the most, which certainly suggests some optimism on their part in this developing market.
You did a fine job. I am confident that absolutely nobody on these boards is shorting the stock. The hurdles that a retailer has to jump over to short a penny stock on the OTC are pretty well insurmountable. The idea that the low pps is due to the negative posts on this board is the most laughable though. There are plenty of valid explanations for the price. Message board posts aren't one of them. You suggested the p&d strategy, but my view has always been more of blind fanaticism. That's fine in the sports world, I'm guilty of it myself. Not so much in investing. If someone makes one post questioning the scandium price and market, we are hit over the head with the sticky as if we aren't all well aware what NioCorp's stance on the subject is.
What's $8MM divided by nine months?
You can call it what you want. As of 6/30/17 the company needed $11.2MM to continue operations under the current strategy. This is direct from the 10k. We have widdled that down to a need of approximately $8MM in additional funding over the current fiscal year, assuming a financing package for the capex of the mine does not come first. Stark's snip provided further detail of the breakdown of the monthly expense. Which fact here are you trying to dispute?
The burn rate is that which maintains the status quo. I'd prefer to look at the expenditures required to actually pursue financing for a billion dollar mine.
On what exactly? Semantics? The company needs $8MM to continue pursuing financing over the rest of the fiscal year. You can figure a "burn rate" if you'd like, but that does nothing to further the project. Stark pointed out some additional details which I do not dispute. It simply takes more than a "burn rate" to advance this, which is where the $8MM number comes from. Other than nitpicking, I don't disagree with anything he's posted on this subject.
The math's not wrong, the 1.9MM increased cash on hand. That doesn't affect burn rate. I'd really argue the monthly burn is irrelevant right now. The key figure is the approximately $8MM needed to fund the rest of the fiscal year, less the value of the recent debt/equity swap. If financing doesn't happen by 6/30/2018, it's probably not happening under Niocorp.
This information is in the 10k. Burn rate is nearly $1MM/month.
As of June 30, 2017, the Company’s current planned operation needs are approximately $11.2 million through the end of fiscal 2018. From the date of this Form 10-K, we anticipate that we may need to raise approximately $10.0 million to continue planned operations for the next twelve months. This represents general overhead costs, expected costs relating to securing financing necessary for the Elk Creek Project, satisfying outstanding accounts payable, and potential retirement of our short-term debt obligations. Access to additional funds will be utilized to further advance the Elk Creek Project through substantive near-term milestones.
Please share what evidence you have that $1500 is base price. Is it just the numbers SCY and CLQ have used in there studies?
Stark, are posts comparing NB to the other potential scandium producers allowed?
Jeunke, I repeat myself when I continue to see misinformation spread that is easily refuted in the FS or other press releases. Scandium production being a nearly free byproduct is one example of that misinformation.
This misinformation on scandium costs has nothing to do with the costing principles by banks. I quoted a line directly from the BFS in which SRK writes that without Sc sales the project will not meet investment criteria to get this financed. That means the financing is contingent on the global Sc demand being somewhere near that which is predicted in the BFS. The debt markets are very risk averse so there is very real concern in getting financing for what it essentially a brand new market.
I've said nothing about today's press release, so I'm not sure how you believe your third point to be relevant to anything I've posted. It is certainly not a bad thing that we are able to swap debt for shares with Northcott rather than Lind or someone similar.
Your last two points are very much red herring arguments.
What is my point? My point is LM claimed he couldn't find the article where the company estimated the Sc production costs.
Jeunke was under the impression that Sc was a nearly free byproduct. This is not remotely true and the costs have been clearly outlined since the top level results were made public.