Investors in proposed Nebraska mining venture balance optimism, impatience

NioCorp (Graphic: NET News)
Listen to this story: 

November 14, 2019 - 12:52am

There are two types of NioCorp investors with money on the line in the long-promised mining project proposed for Elk Creek in southeast Nebraska.

Optimistic or frustrated.



NioCorp management present at the 2019 annual shareholders meeting. 


Investor Steven Cordovano (left) speaks with NioCorp CEO Mark Smith following the annual shareholders meeting. (Photos: Bill Kelly/NET News)



An engineer's rendering of above-ground facilities at the proposed Elk Creek Mine in Nebraska.


 

Both groups want to hear the construction of the mine can begin. First, however, the company must complete a complex agreement that would provide millions in funding.

NioCorp is the Canadian company spearheading efforts to create a mining and processing facility for three in-demand minerals, niobium, scandium, and titanium.

After a decade of waiting, there is plenty of behind the scenes activity at the company. Chief Operating Officer Mark Smith told NET News before the company's annual shareholder's meeting, "we're getting very, very close at this point in time." But once again disappointed many supporters by not announcing that significant financing had been secured to allow construction to proceed.

"We have met with this party and have been meeting with them for well over two years," Smith said. "The commercial terms of our deal were really done almost two years ago. It's the formation of what they have to put together that's taking the amount of time."

Smith hopes in the series of agreements with engineering firms and potential customers reviewed during the annual meeting "as a reflection of our confidence moving forward."


What's Underground?

Here are the three metals known to be beneath the surface in Johnson County, Nebraska.

Niobium. Symbol Nb

Pure niobium has a hardness similar to that of pure titanium. When blended with other elements it is used to create superconducting of value in making products like magnets in MRI scanners. Other applications include welding and, because it’s not very toxic, jewelry. Niobium is considered a technology-critical element. Top exporters are Brazil, Canada, and the Netherlands.

Scandium.Symbol Sc

Scandium is a metallic rare-earth element. China is the largest exporter. Only 10 tons a year are mined worldwide. When used in small amounts in aluminum alloys, it creates a strong, light-weight metal useful in the aviation and aerospace industries.

Titanium. Symbol Ti

Known for its durability and strength, titanium also resists corrosion, even in seawater. Extracting titanium is considered difficult and costly. Leading exporters include China, Russia and Japan.


 

Investor reaction seems to be reflected in the two stock exchanges where NioCorp is listed. A big drop in share prices in the hours after the meeting, followed by a rebound that pushed shares to a historic high.

It's been known for decades a cache of rare earth elements lie buried beneath 640 Acres in southeast Nebraska. 

Niobium had always been of primary interest at the site. The geological tests revealed, "the niobium resource that we have at Elk Creek is the richest ore deposit of niobium known to exist in the United States."

Development of the project drew headlines as defense contractors and military leaders determined it was essential to have a reliable domestic source for the mineral. The unique properties of Niobium have proved useful in creating powerful magnets in MRI machines and in superalloys employed in jet engines and other heat resistant technology. Brazil and Canada are the major exporters of niobium.

As the project developed, there was increasing interest in the small but significant deposits of scandium, an element that, like niobium, can be used to create lightweight metals.

"There isn't a reliable and a large enough supply of scandium being produced today" to meet the demand of manufacturers, according to Smith, and the majority of it comes from China. 

It was the developing markets for niobium, titanium, and scandium that lead the Canadian speculators to advance the idea of marketing the deposits in Johnson County, Nebraska. 

"This is a very, very unique opportunity for Nebraska to put their name on the world headlines for a mineral (scandium) that just isn't mined anywhere else in the world," Smith said. Today the company estimates there will be $20.8 Billion in gross revenue for the expected 36-year life of the mine. (While technically not mined in quantity, scandium is extracted as a byproduct drawn from minerals like iron ore and uranium being mined in other countries.)

The promise of the available market is what convinced Steven Cordovano of Connecticut to purchase shares five years ago.

"The material that's in the ground is so useful and necessary," he said. "It's not a commodity like gold or silver. This is something that people really need."

Cordovano was among a handful of stockholders who made the trip to NioCorp's annual meeting in Denver on November 7. The owner of his own life sciences company he remains a patient stockholder. 

"It takes a lot longer than you think," he said. "I think patience is usually rewarded in these types of situations, and it takes a lot of confidence in management to stay."

Shareholder Jerry Hunnicutt from Kearney, Nebraska, wanted to bolster his confidence in NioCorp's management team face to face by attending this year's shareholder's meeting.

"Talking with the guys, just getting a feel for who the people are giving me more or less an intuitive sense, this thing's going to happen," Hunnicutt said.

With 230 Million NioCorp shares in issue, the company says more than 50% of the U.S. shareholders of-record live in Nebraska. That is considered an unusually large pool of stockholders for an out-of-state company.

Cordovano regularly speaks to other shareholders eager to move their investment forward.

"A lot of them have a substantial amount of money invested, and they are going to do quite well if, when, this comes to fruition," he said.

Most knew it was unlikely an announcement would be forthcoming the day of the shareholders meeting. CEO Smith said he knew the handful of investors attending in person, and dozens of others listening on an Internet audio feed were "going to be disappointed with what I'm going to say" because "we aren't going to say much about the project financing today."

In other words, NioCorp could provide no public news about a financial institution ready to bankroll the project and trigger the construction phase.

Federal regulations place tight restrictions on what can say and when they can say it when it might trigger activity on the stock exchanges. 

"We have Canadian lawyers, and we have U.S. lawyers," Smith told NET News, "and if there's one thing that they both agree on, this is the most sensitive area for discussion, and I have to be extremely careful what I say."

Investors listening to the briefing session heard Niocorp managers shared progress on the plans for the engineering of the mine and processing facility.

NioCorp's Vice-President for Business Development Scott Honan re-capped a year of good news announcements, including advancement in plans for the engineering of the project.

"We brought together a really great team," Honan said during the session. "These are firms that share our vision for the Elk Creek project, and they're going to give our investor group here a really great outcome."

One company, Cementation Americas Group, is designing and digging the mine shafts burrowing 12 hundred feet below ground. Another firm, Zachry, will build the metal processing facility above ground. 

"We had selected each of those contractors independently," Smith told NET News, there is "a very different expertise involved" in the design and construction of the two parts of the project.

The day before the annual meeting two of the key engineering firms hired to get it built met at NioCorp's headquarters to coordinate the work being done by the two companies because, as Smith said, "the highest risk issue during the construction phase is the transition between those two parts of the puzzle and the communication that is occurring right now is intended to eliminate as much of that risk as possible on the front end."

Smith said "meetings like this have been occurring for over two years."

The company emphasized an earlier announcement that it has committed to integrating sustainability and commitments to environmental principles into the design and procedures used at the Elk Creek site. 

Honan explained changes in processing water and air handling will reduce the impact on area natural resources. That will cut back or eliminate the need for particular state and federal environmental permits.

"Eliminating permitting is significant to us because, in my view, it really reduces schedule risk for the project," he said. Point to recent mining endeavors," Honan said. Projects can get hung up in the permitting process for a very long time.

NioCorp's initial plans would have discharged wastewater into the Missouri River, which would have required a review by government regulators, were set aside after the company re-engineered how some wastewater would be processed at the plan. The company claims it is a more environmentally responsible approach, which will also avoid a full permit process.

Chief financial officer Neal Shah reviewed the package of tax incentives negotiated with the State of Nebraska to reduce the tax liability of the processing plant and mine by as much as $200 million for the first ten years it's operational.

"The project's construction will involve peak hiring of about 12 hundred construction-related jobs over several years," Shah told the meeting. "That alone will drive significant new economic activity in Nebraska." 

The company estimates more than 400 permanent jobs will be filled once mining begins.

Each announcement from the company intended to show the Elk Creek project is close to being, in the company's words, "shovel-ready" for construction. 

"We're getting very, very close at this point in time," Smith said in the interview. "I hope that everybody sees in the press releases a reflection of our confidence moving forward."

ALLOY TESTS


NioCorp bankrolled preliminary research testing in 2017 at, IBC Advanced Alloys, a metals lab in Massachusetts. Metalworkers created a set of aluminum-scandium alloy ingots; cylindrical samples of metal to be used for additional lab tests.

NioCorp bankrolled preliminary research testing in 2017 at, IBC Advanced Alloys, a metals lab in Massachusetts. Metal workers created a set of aluminum-scandium alloy ingots; cylindrical samples of metal to be used for additional lab tests. 

CLICK HERE to see a video of the alloy test pour.

Following the shareholder's meeting, the covey of investors on hand seemed to share the measured take of Steven Cordovano, who observed, "I think people are seeing the light at the end of the mine shaft," laughing at his own use of the cliché.

Some investors didn't see that light.

After the NioCorp webcast, the company's stock took a ten percent dive on the Over The Counter (OTC) exchange.

While comments posted on the InvestorsHub on-line discussion forum were positive to neutral, critics of the stock called the company "a dead horse" while another complained, "investors get to hurry up and wait some more." A contributor identified as "HkWager" posted "wake up and see that they have nothing going as far as financing from any big banks.

Within a day, the optimists took control of the stock, buying tens of thousands of NioCorp shares and pushing the stock price up to record levels.

Fans of the company took to the discussion board cheered the upturn. One poster named "Boilermaker1" recognizing those who "are no doubt disappointed (about the lack of information about financing) and started selling and drove the price down. All I can say is THANKS," he continued. "I will be grabbing those bargain shares ASAP."

The stock has traded as low as 36 cents a share to almost twice that amount.

That kind of volatility should be expected, according to Robert Johnson, a professor with Creighton University's Heider College of Business, who has written both peer-reviewed research and the book "Investment Banking for Dummies."

"Especially in small, thinly traded stocks, if you want a small part of your portfolio, a very small part of your portfolio, you should think of them as more speculative," Johnson said. "You need to realize what you're doing is speculative."

As for the unusually high number of Nebraska investors speculating on a project, more or less, in the neighborhood, Johnson says "I think it gets back to wanting to get in on the ground floor of something big" like early investors in Warren Buffet's Berkshire-Hathaway.

Investor Jerry Hunnicutt from Kearney left the NioCorp meeting optimistic.

"I think everything they presented just is a signpost indicating we are on track." In the same breath Hunnicutt noted the topic of the day: "Obviously couldn't talk about what we call the big elephant in the room, the financing."

Certainly, no one was more aware of that "elephant" than CEO Smith> He said, in his parting message at the annual meeting, "as soon as there is something that our lawyers consider to be definitive enough I will be the first one yelling on top of the hill to let everyone know.

For investors, and residents of southeast Nebraska, it's still the only question they need to be answered: Will it happen?


Editor's Note: A previous version of the article mistakenly referred to Niobium's use in lightweight aircraft. The article has been corrected to note the element's value in creating heat resistant alloys used in aircraft engines. Also, an explanation of the difference between mining and extracting scandium was added for the reader's clarification.

Discussion

 

blog comments powered by Disqus