Report From Wainwright that landed on my desktop via a friend client
They maintain their BUY rating ; The only difference is that they use a USD calculation ( OTC) instead of the CAD (TSX) one in the previous report. The valuation is very conservative on the basis of a 13 percent discount rate and then only 30 percent of that NPV ;based on the fact that we are not yet financed; Once we get financed the value will dramatically increase.
And we believe this project is about to get financed.
NioCorp Developments Ltd.
in USD
NIOBF: Price: $0.44; Market Cap (M): $102
Rating: Buy; Price Target: $0.90
Heiko F. Ihle, CFA
Tyler Bisset
ESG Principles Integrated; Aluminum-Scandium Successfully Produced in Test Run; Air Permit Filed; Reiterate Buy
Click here for complete report and disclosures
ESG principle integration. On September 3, 2019, NioCorp reported that the firm intends on integrating various Environment, Social, and Governance (ESG) principles into plans for its Elk Creek project. Management mentioned several beneficial environmental considerations, such as reducing air emissions and waste production. Further, the current design of the project as a zero-process-liquid discharge facility has already improved the project's economics while simultaneously reducing regulatory and permitting risk. We believe the focus on ESG principles within the mine plan could make NioCorp a more attractive investment to a broader group of investors.
Successful master alloy production. On August 7, 2019, NioCorp announced success in producing an Aluminum-Scandium master alloy, which was already the second test run at the Ames Laboratory’s Materials Preparation Center in Iowa. The Ames Laboratory is a U.S. Department of Energy national laboratory and a world leader in the R&D of rare earth metals. Notably, Aluminum-Scandium master alloys are used to add scandium into final aluminum-based alloy melts, which can improve weldability, increase yield and tensile strength, and reduce the weight of the metal. This successful test run has already helped NioCorp show a proof-of-concept for the possible commercial production of the master alloy.
Potential global rare earth leader. The proposed Elk Creek project is anticipated to produce roughly 95 tonnes of Scandium Trioxide per year. This amount greatly exceeds the estimated global annual production of 10 – 15 tonnes by the U.S. Geological Service, which currently mostly occurs in China. The Nebraska-based project could therefore make the U.S. the global production leader of Scandium Trioxide once nameplate capacity is achieved.
Air permit filed. On July 25, 2019, NioCorp reported the submittal of a State Construction Air Permit application for its Elk Creek project. The proposed project includes various advanced emission control technologies that are anticipated to lower prospective air emissions to levels below those that require the need for a permit under the Prevention of Significant Deterioration program. In short, this may lead to a more streamlined permitting process. Management attributes the lowered emission levels to reagents and the anticipated deployment of various emissions control technologies such as baghouses and scrubbers.
We reiterate our Buy rating and our PT of $0.90 per share. We have moved back our first production estimate to FY23 from FY22. The delay in our model is due to the current mine finance environment and not related to any more negative opinion on Elk Creek. Our valuation remains based on a DCF of operations, utilizing a 13% discount rate, amid a 0.3x NAV multiple to account for various longer-term risks associated with reaching production at the Elk Creek project. While likely conservative, we believe our discount rate and NAV multiple are warranted given the large capital requirements to bring Elk Creek into production amid many other obstacles typical of mine development. We note that Nebraska remains a geopolitically safe jurisdiction, while NioCorp's senior management team has extensive mining experience in moving projects into production.
Risks. (1) Raising capital to construct Elk Creek; (2) permitting risk; and (3) operating and technical risk.
