Niocorp Developments Ltd (NB)

[Dutch123]

Food for thought

Today Brazil produces about 120 Kt of niobium, back in 1999 it was about 20 Kt. It took over 20 years to grow from from 20 to 120 Kt.
This is the diagram
https://minio.scielo.br/documentstore/1516-1439/BDGSCwPV98xBphJ8vJyrSsk/a20ca250d91c48e052adb3204c1d40962b485d3d.jpg
This is the article
https://www.scielo.br/j/mr/a/BDGSCwPV98xBphJ8vJyrSsk/?lang=en#ModalFigf03

Niocorp’s presentation says the scandium market today is 22 tonnes per year. If Elk Creek gets into production – in 3 years – scandium supply will go up from say 30 to 130 tonnes per year. A highly relevant question here: Can the market absorb this huge supply shock?

Here’s the relevant economic theory: https://en.wikipedia.org/wiki/Supply_shock
In the short run, an economy-wide positive supply shock will shift the aggregate supply curve rightward, increasing output and decreasing the price level.[1] A positive supply shock could be an advance in technology (a technology shock) which makes production more efficient, thus increasing output.
This diagram shows the effect of a positive supply shock
http://textbook.stpauls.br/Microeconomics/images/pic108.gif

Niocorp needs a scandium price of USD 3,600 per kilogram. A supply shock would put a lot of pressure on that price. Almost 60% of Niocorp’s revenue comes from scandium sales. Project CapEx > 1B USD.

IMO, a supply shock is what’s holding potentially interested CapEx investors back from stepping in. ‘Build it, and they will come’ is just too risky. And why would anyone want to be the first and sole investor putting in USD 25M (< 2,5% of the 1B required)? It doesn’t make those supply concerns go away!

Now all of these issues would completely disappear if Niocorp were to secure at least another 60 tonnes of scandium offtakes (@ USD 3,600 p/kg). And that's a huge challenge!