Dear Fellow Shareholders:
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| Mark Smith, CEO & Executive Chairman, NioCorp Developments Ltd. |
2016 promises to be a very big year for NioCorp and for our flagship Elk Creek, Nebraska niobium-scandium-titanium project. In the coming year, we look forward to issuing the Elk Creek Feasibility Study, launching a global effort to secure project capital, and beginning construction activities at Elk Creek.
Compelling Economics and Strong Potential Returns
The niobium, scandium, and titanium products we expect to make will strengthen our world. They will deliver substantial economic and environmental benefits to many industries and to society. And, as our Preliminary Economic Assessment of October 2015 (PEA2, downloadable here) showed, they will help drive exceptional economics for this project:
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- Pre-tax net present value (NPV) of US$3.07 billion, with a pre-tax internal rate of return (IRR) of 31.7%
- After-tax NPV of US$2.30 billion, with an after-tax IRR of 27.6%
Average pre-tax cash flow of US$438 million
The economic analysis in our October PEA2 was based on an 8% discount rate and on expected annual production of the following:
- 7,490 tonnes of ferroniobium per year
- 97 tonnes of scandium trioxide per year
- 23,960 tonnes of titanium dioxide per year
Investment Analyst Firm Reiterates View that Elk Creek is a “Rare, Strategic Asset in a Mining Friendly Jurisdiction”
A update issued this week by the investment analyst firm Rodman & Renshaw noted the following:
“While commodity markets have been floundering, NioCorp has continued to progress its wholly-owned Elk Creek Project located in Nebraska while keeping a strong treasury. During 2015, the firm released an updated Preliminary Economic Assessment (PEA2), which included various updates to the process flowsheet, including the elimination of the flotation step. By doing this, the firm was able to include scandium oxide as an additional product which can be sold and augment niobium production. In our opinion, this further substantiates Elk Creek as a rare, strategic asset in a mining friendly jurisdiction. We highlight that niobium remains highly concentrated with only three sources of production and 85% of production from a single producer, CBMM. Given this, we believe management should advance Elk Creek towards the Feasibility level, despite recent headwinds in the commodity markets as a whole.”
Growing our Enterprise Value
As the Elk Creek Project has continued to advance over the past two years, NioCorp’s enterprise value1 has increased substantially.
At the close of 2013 – the year in which I came to NioCorp – the Company’s enterprise value (equity value less cash plus total debt) stood at US$14.1 million. I am pleased to report that, at the close of 2015, our enterprise value had grown to US$93.5 million. That is a 562% increase in only two years.
Why NioCorp is Such a Unique Value Proposition
Developing an industrial metals project like Elk Creek is not without challenges. Many junior mining companies are struggling to stay afloat these days. Most have been unable to raise sufficient capital to push their projects forward. Some have been forced to fundamentally alter their business plans. Others have shuttered projects entirely.
Fortunately for NioCorp, a number of factors differentiate us and our project from the rest of the field. Here are just a few of the reasons why NioCorp is a unique value proposition:
1. A Primary Product With Relatively Stable Pricing. Ferroniobium, our primary product, is a commodity that enjoys relatively stable pricing at attractive levels. This contrasts sharply with the high pricing volatility now plaguing other industrial metals and materials. Most ferroniobium is sold under long-term contracts between producers and consumers; perhaps only 5% of total production is sold via the spot market.
2. Robust Global Markets With Solid Growth Prospects. Global markets for ferroniobium are attractively sized ($2-$3 billion/year), highly dispersed, and are expected to enjoy relatively robust compound annual growth rates as high as 4%-6%.2 While steel consumption growth rates have slowed somewhat in recent years, there clearly is significant room for growth in the incidence and intensity of ferroniobium use in High Strength, Low Alloy (HSLA) steels. Stronger, lighter in weight, and more resistant to corrosion than conventional steels, HSLA steels are increasingly used in bridges, buildings, infrastructure projects, cars, trucks, ships, oil and gas pipelines, and many other applications.
3. Limited Substitution Risk. Ferroniobium has few effective substitutes in applications like superalloys and oil and gas pipelines. Also, because ferroniobium is added to HSLA steel in very small amounts, it is a very minor component of overall steel production cost; the higher cost to end consumers of ferroniobium-containing HSLA steels is more than offset by the reduction in total steel volumes required, which HSLA steel allows.
4. Extensive Uses Across Environmentally Preferred Technologies. Ferroniobium helps to add strength, reduce weight, decrease fuel consumption, and reduce associated air emissions in many applications. These benefits are strongly preferred from a product safety and environmental perspective. As government regulation around the world continues to incent – and often require – the use of safer and cleaner technologies, this should help support continuing long-term demand pull for this material.
5. Scandium: A Revolutionary Element. Another aspect of our differentiation is scandium, and the fact that we are on track to become one of the only primary producers of scandium in the Western world. Scandium is a truly revolutionary metal with many groundbreaking applications. For example, it is key to the success of an environmentally preferred clean energy technology known as Solid Oxide Fuel Cells, which increasingly are used to power installations at Google, Ebay, Walmart, and other Fortune 1000 companies. Scandium also has multiple potential applications in aluminum alloys for aerospace, transportation, and drinking water purification/desalination.
6. Our Products Have Vital Uses in Defense Technologies. All three of our primary products have important uses in national defense and homeland security technologies — in aviation, ships, vehicles, electronics, protective armor, and many others. Currently, there is no U.S. producer of either niobium or scandium. This fact is expected to help rally government support for our project.
7. Strong Support From Elected Officials and Local Residents. Last, but certainly not least, is the fact that our Elk Creek Project enjoys strong and very broad political and local stakeholder support in Nebraska. Such support is absolutely vital to the rapid development of any industrial metals development project in the U.S.
2015: A Year Of Extraordinary Progress
We would not be so well positioned for success today were it not for the tremendous progress that the NioCorp team has made over the past two years. The fact is that many junior mining companies can take between five to seven years to complete the work that the NioCorp team has completed in less than two years. I hope you are as proud as I am of the very rapid progress that the NioCorp team is making.As always, I am grateful for your support and for your continuing confidence in this Company’s ability to bring the Elk Creek Project online to commercial success. As the Company’s largest shareholder, I very much share your passion for moving this project to reality, to delivering increasing value to our shareholders, and to strengthening our world in the process.
Thank you again, and here’s looking to a fantastic 2016!
Sincerely,
Mark A. Smith, P.E., Esq.
President, CEO, and Executive Chairman
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Footnotes
1 NioCorp’s determination of enterprise value may not be comparable to that reported by other companies, especially those in other industries, since “enterprise value” is not a measure reported pursuant to Generally Accepted Accounting Principles or International Financial Reporting Standards. For more information on the financial condition and performance of NioCorp, as well as changes to its share capitalization, please refer to the audited annual and unaudited interim consolidated financial statements of NioCorp, available under NioCorp’s profile at www.sedar.com.
2 Proprietary growth forecast provided by an independent market analysis company.
For More Information
Contact Jim Sims, VP of External Affairs, NioCorp Developments Ltd., 720-639-4650, [email protected]
Qualified Persons
Jeff Osborn, BSc Mining, MMSAQP of SRK Consulting (U.S.), Inc., a Qualified Person as defined by National Instrument 43-101, has overall responsibility for the SRK portions of the Elk Creek PEA reports and has read and approved the technical information contained herein.
About NioCorp
NioCorp is developing the Elk Creek niobium / scandium / titanium project in Southeast Nebraska. Niobium is used to produce High Strength, Low Alloy (“HSLA”) steel, which is a lighter, stronger steel used in automotive, structural, and pipeline applications. Scandium can be combined with aluminum to make an alloy with increased strength and improved corrosion resistance. Scandium is also a critical component of advanced solid oxide fuel cells. Titanium is a key component of pigments used in paper, paint and plastics and is also used for aerospace applications, armor and medical implants.
Cautionary Statements
Neither TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release. The Mineral Resource presented in the October 2015 PEA has been reported following CIM guidelines. The October 2015 PEA is preliminary in nature and it includes a level of engineering precision and assumptions which are currently considered too speculative to have the economic considerations applied to them that would enable Mineral Resources to be categorized as Mineral Reserves. Inferred Mineral Resources are not included in the mine plan for the October 2015 PEA. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. The October 2015 PEA includes price and market assumptions concerning an expanded demand in the scandium market. There is no certainty that the October 2015 PEA will be realized. Certain statements contained in this press release may constitute forward-looking statements. Such forward-looking statements are based upon NioCorp’s reasonable expectations and business plan at the date hereof, which are subject to change depending on economic, political and competitive circumstances and contingencies. Readers are cautioned that such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause a change in such assumptions and the actual outcomes and estimates to be materially different from those estimated or anticipated future results, achievements or position expressed or implied by those forward-looking statements. Risks, uncertainties and other factors that could cause NioCorp’s plans or prospects to change include changes in demand for and price of commodities (such as fuel and electricity and the commodities being explored and proposed for development by NioCorp – niobium, titanium, and scandium) and currencies; changes or disruptions in the securities markets; legislative, political or economic developments; the need to obtain permits and comply with laws and regulations and other regulatory requirements; the possibility that actual results of work may differ from projections / expectations or may not realize the perceived potential of NioCorp’s projects; risks of accidents, equipment breakdowns and labor disputes or other unanticipated difficulties or interruptions; the possibility of cost overruns or unanticipated expenses in development programs; operating or technical difficulties in connection with exploration, mining or development activities; the speculative nature of mineral exploration and development, including the risks of diminishing quantities of grades of reserves and resources; and the risks involved in the exploration, development and mining business. NioCorp disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise revise any forward-looking statements whether as a result of new information, future events or otherwise.