Hi Nioman, here is finally the text of the article. Hope this helps...
Summary: Investors who are not comfortable with uncertainty, volatility, and dilution should avoid small-caps. An appreciation for small-caps begins with an understanding of the minds of entrepreneurs. The typical small-cap consists of a driven team with strategic vision and equity, but little more. We are 12% in small-cap strategic metal stocks some of which have performed well, others not. scandium, rare metal, used in industry to improve aluminum, found in some minerals in Scandinavia RHJ/iStock via Getty Images
Before jumping in, I remind readers that investing in small-cap / early-stage companies is EXTREMELY RISKY. Most investors should stay away and those who won’t, like me, should remain attentive to news and concentrations while being prepared to “lose it all.” Also remember that most small-cap stocks do NOT trade in volume, meaning: a) they should be bought and sold against limit orders, and b) there are no guarantees that an investor can get in, or get out, when they want, at their price. As I’ll state again below, like I do when investing, always do your own due diligence in consultation with a licensed and competent financial / investment advisor who understands your unique needs, puts your interests above their own, and is not afraid to ‘save you from yourself.’ Also, remember, there are added considerations in owning foreign securities.
The Mind of an Entrepreneur To appreciate small-caps, it's best to first understand the mind of an entrepreneur. My dad was one. He contributed to the invention of radar and computers, and founded and helped start a number of ventures some of which were spectacularly successful, others of which crashed and burned. I grew up listening to him minimizing concerns about making payroll to focus on his companies' goals and move forward. Entrepreneurs are singular in that regard; they are comfortable with uncertainty and in working through the fits-and-starts of invention, innovation, commercialization, and converting daunting risks into reward. They are the Ernest Shackletons of business.
Rare Earths and Uranium I first referenced my interest in strategic metals in an article for SA in March 2021, two years ago. In that piece, I stated that, “When most of us think about the “defense industry” we zero in on major defense contractors including the likes of Boeing (BA), General Dynamics (GD), Lockheed Martin (LMT), Northrop Grumman (NOC), and Raytheon Technologies (RTX). However, in our interdependent world, this frame of reference is inadequate.” I concluded by saying:
”…the traditional definition of “military defense” is timeworn. It no longer aligns with global realities. Our countries, and we investors, need to start thinking more broadly about what it takes to defend our competitive advantage meaning our industries, companies, and jobs.”
That notion was prescient. Tensions with China and Russia, combined with the need for metals to help wean us from fossil fuels has, among other things, focused the United States and private sector on rare earths, uranium, and other ores. Indeed, when I first wrote about the subject, I saw two primary opportunities to invest in U.S. rare earth metals: a) MP Materials (MP) that had ‘going public’ by way of a SPAC, and b) Australia company, Lynas Rare Earths (OTCPK:LYSCF) (OTCPK:LYSDY) that is said to be the largest miner / processor of those metals outside China. So important are these two companies to the defense of that supply-chain that DoD entered into agreements with them to assist us with mining and refining.
Since the dates of our initial investments in those two companies, we have done very well on MP, “harvesting” gains along the way and remaining “up” 79% on our residual position. As for Lynas, we made some money, bailed out, got back in, and are currently down 24% given their recent problems in Malaysia. Nevertheless, my interest in strategic metals has grown and we later built out a book in uranium. Naturally, I couldn’t help myself and authored another article for Seeking Alpha entitled, “Uranium – Converging Threats And Opportunities”. I led off that piece stating:
Demand has reemerged for nuclear energy as a non-carbon replacement for fossil fuels. At the same time, countries are concerned about the supply of all fuels from adversaries. The public and private sectors have recognized these stressors and have stepped into help. This has revealed investment potential in the areas of uranium mining and enrichment. While all this was going on, President Biden and Congress engaged to improve our nation’s pathetic position in critical metals. Their actions included: a) President Biden invoking the “Defense Production Act” on March 31, 2022 to strengthen EV metal supply-chains, b) the Bipartisan Infrastructure Bill, aka “BIL”, signed into law on November 15, 2021, that among many other things, focuses resources on transitioning from fossil fuels to green energy the latter of which requires metals, and c) just two weeks ago, on February 28th:
“President Joe Biden signed a presidential waiver of some statutory requirements (Waiver) authorizing the use of the Defense Production Act (DPA) to allow the Department of Defense (DoD) to more aggressively build the resiliency of America's defense industrial base and secure its supply chains. Specifically included in the Waiver are defense organic industrial base supply chains critical to the DoD as well as critical supply chains for electronics, kinetic capabilities, castings and forgings, minerals and materials, and power and energy storage. This authority also affords the ability to invest in strategic areas that enable the industrial base such as workforce development.”
Our uranium holdings include four pure-play positions in Cameco (CCJ) Canada’s world-class miner, Energy Fuels (UUUU) a leading U.S. producer of uranium, Centrus Energy (LEU) a specialized enricher supported by DOE, and Uranium Energy Corporation (UEC) with various mining and royalty interests in the United States and Canada. We are up about 16% on CCJ and LEU, and down roughly like amounts on UUUU and UEC, call it a push. Since the date of my January 16, 2023 SA article on the subject, 2 of these 4 these stocks have out-performed the indexes while two have backed up sharply.
Chart Data by YCharts NioCorp Developments The federal government is serious about our strategic metal supply-chain independence, and it was against their escalating commitment that I took another sweep of rare earth opportunities and decided to invest in two more.
NioCorp Developments (OTCQX:NIOBF) is merging with SPAC, GX Acquisition Corp II (GXII) for the purpose of raising capital to continue work on its rare earth site in Elk Creek, Nebraska. NioCorp’s shareholders approved the combination on March 10th, and those of GX are expected to follow suit tomorrow, I believe. I won’t go out on a limb with assumptions; suffice it to say that comparing investment value to market capitalization indicates some initial upside, not a lot. “As soon as the financing details are complete, estimated to happen in the first part of 2023, construction of the plant will begin. It’s expected to take three years to build.”
The ground is believed to hold “superalloy materials like Niobium, Scandium, and Titanium … enable[ing] stronger and lighter transportation, longer-lived infrastructure, and more effective national security systems … [that] will improve fuel economy, reduce harmful air emissions, help to protect our environment ...” All three minerals are deemed “critical” by the US government; the mine is represented to be large and expected to have a long life of 36 years.
As I have learned, environmental challenges will ALWAYS arise in the mining industry. Still, it looks as though NioCorp has the regulatory green light to proceed, and I am comforted by the fact that it is operating in a red state that seem to be more receptive to such ventures. Parenthetically, the company has sold some of its anticipated output forward including to Traxys North America LLC (private) a global leader in specialty metals, and ThyssenKrupp (OTCPK:TYEKF) (OTCPK:TKAMY) a major industrial conglomerate of our close trading partner and NATO ally, Germany.
Ucore Rare Metals Ucore (OTCQX:UURAF) is a Nova Scotia company headquartered in Beford, across that basin from Halifax the city of my maternal forefathers (barrel makers). That said, the company’s reach is well to the West and South including at the Bokan-Dotson Ridge just beyond Kendrick Bay, on Prince of Wales Island, near the southern tip of Alaska’s panhandle. To the east, across Clarence Strait, in Ketchikan (great salmon fishing), Ucore has been delayed, for want of infrastructure, in building its first rare earth refining facility.
I have my doubts whether the Ketchikan facility will ever be completed. Putting that aside, Ucore made a classic entrepreneurial “pivot”, IMO, in deciding to also move forward in Louisiana, with a demo plant, in an existing facility. Near the Gulf of Mexico and the mouth of the Mississippi River could be central for the transshipment of ore and metals from/to the interior of the United States to/from foreign destinations as well as other sea ports of the United States (If China could cost-effectively import rare earth ores for processing from MP Materials only to ship those metals elsewhere including back to the United States, I well believe that a facility in Louisiana would be even more economic especially with the incentives that state is providing.)
I am no metallurgist, but the operation will use Ucore’s proprietary technology, RapidSX™ a, “transformative advanced column-based solvent extraction technique for separating light and heavy rare earth elements [HREE]. … Through independent evaluations conducted to date, the RapidSX™ platform is said to be at least 3x more efficient than CSX, with a shorter overall processing time and lower construction and operation costs. The same chemistry and unit operational steps as CSX are used, but the enhanced application of the chemistry through physics adds many additional benefits, including greater adaptability for various feedstocks and faster return to steady-state processing conditions after a disruption.” The company has received 2 tons in HREE feedstocks to demonstrate these capabilities.
Financials and Analysis This brings us back to an argument I made at the top of this article, namely that, “The typical small-cap consists of a driven team with strategic vision and equity, but little more.” In the discussion above, we see the action and vision that NioCorp and Ucore have taken to advance their businesses. In the table below, we see the financial profiles of these two early-stage “development” companies that show no revenue, are losing money, and have negative operating cash flows, precarious liquidity, but are well-capitalized ... for now. I have chosen to display their latest quarterly numbers because: a) Ucore will not report their year-end until April, and b) It really doesn’t matter much anyway when viewing cash bleed until the companies are ‘in production’; numbers courtesy of MarketWatch:
Last Reported Quarter
NioCorp Ucore
Revenue $0.0M $0.0M
Gross Income $0.0M -$23.9K
Net Income -$3.0M -$1.6M
Operating Cash Flow -$3.2M -$1.5M
Cash & Equivalents $574.5K $296.3K
Working Capital -$8.9M -$3.2M
Current Ratio 0.1xv0.3x
Total Liabilities $9.6M $5.8M
Shareholder Equity $20.1Mv$44.5M
Leverage Ratio 0.5x 0.1x
Current Short Interestv0.1% n/a
To drive home my point about small-cap investing, know that only one analyst covers each stock rating them “buys” with price targets still in the penny-stock range.
Buy OverW Hold UnderW Sell Target Price Upside NIOBF
1 0 0 0 0 $1.04 $0.96v+8%
UURAF 1 0 0 0 0 $3.72 $0.93 +300%
Final Notes on Investing Don’t take it from me, take it from Steven P. Bucci, Ph.D. writing for the conservative Heritage Foundation: “It’s increasingly vital that the United States establish a more reliable supply chain of critical minerals and materials to diversify away from relying on China [and Russia].” Or, if you’re of the liberal persuasion, take in the Brookings Institution, “…the U.S. and Europe have moved to build out their own critical minerals supply chains.” As we all know, it’s not often that the two largest and politically-opposed think tanks agree on a strategic priority.
In 2015, I wrote in my very first Seeking Alpha article back on strategic investing. Two years later, in 2017, I authored another article for SA entitled, “Baseball, S-Curves, And Forecasting”. In it, I included a picture of that iconic graph depicting early, growth, mature, and declining businesses. The rare earth and uranium companies mentioned above are just starting out at the far left reaches of this curve. Often / usually such organizations will falter before they flourish. Entrepreneurs are ‘comfortable’ with this rolling motion as am I. Most investors shouldn’t be.
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
News 
Market Data 
Discover 
