NioCorp Developments Ltd. — Form 10-Q summary
Period: The filing covers the quarter and nine months ended March 31, 2019, not 2018 Q3 as indicated in the request metadata. Financial statement amounts below are in U.S. dollars, in thousands unless otherwise noted. The filing was signed May 10, 2019.
Business context and reporting period
NioCorp is a pre-revenue mineral exploration and development company focused on the Elk Creek Niobium/Scandium/Titanium Project in Nebraska. It reports one operating segment and has no mining operations or operating revenue. Its stated strategy is to advance Elk Creek toward construction and commercial production, contingent on securing substantial financing.
Financial results and liquidity
| Metric | Three months ended March 31 | Nine months ended March 31 |
|---|---|---|
| Operating expenses, 2019 / 2018 | $1,587 / $1,350 | $4,803 / $4,845 |
| Net loss, 2019 / 2018 | $1,519 / $3,146 | $5,723 / $6,919 |
| Loss per share, 2019 / 2018 | $0.01 / $0.02 | $0.03 / $0.03 |
| Operating cash used, 2019 / 2018 | Not presented for quarter | $3,134 / $4,627 |
| Financing cash provided, 2019 / 2018 | Not presented for quarter | $3,225 / $4,620 |
There is no operating revenue, so operating or net profit margins are not meaningful. Cash at March 31, 2019 was $126, compared with $73 at June 30, 2018. Current assets were $888 and current liabilities $5,403, resulting in a $4,515 working-capital deficit. Total assets were $11,548; total liabilities were $7,590.
Convertible debt totaled approximately $2,987: $800 current and $2,187 noncurrent. Related-party loans from CEO Mark Smith totaled $1,480 and were secured by company assets; the loans bore 10% interest and were due in June 2019. Accounts payable and accrued liabilities were $3,115, including $124 interest payable to Mr. Smith. The company reported compliance with Lind convertible-security covenants at March 31, 2019.
Material changes versus comparable periods
- Nine-month net loss narrowed by $1,196 year over year, while quarterly net loss also declined. The comparative periods included larger financial-instrument fair-value charges: $1,811 for nine months in 2018 versus $633 in 2019, and $1,514 for the 2018 quarter versus none in the 2019 quarter. These are noncash valuation items and influence the reported loss comparison.
- Nine-month exploration expense increased to $2,863 from $1,499, chiefly reflecting engineering and feasibility-study work. Employee-related costs, professional fees, and other operating expenses declined; total nine-month operating expenses were broadly flat.
- Operating cash use fell to $3,134 from $4,627, helped in part by a $1,436 increase in accounts payable and accrued liabilities. Financing cash inflows were $3,225, including $2,476 from stock issuance and $1,000 of convertible-debt funding.
- Shares outstanding rose to 226.7 million at March 31 from 213.4 million at June 30, 2018, through private placements, debt conversions, and other issuances. Lind converted $3,399 of debt into shares during the nine-month period.
Outlook, project economics, and risks
Management said approximately $4.6 million was needed for planned operations through June 30, 2019, net of the subsequent April placement. It estimated a need to raise $7.7–$8.5 million to fund the next 12 months of financing and detailed-engineering work. Management warned that funding is not assured, additional equity could be dilutive, and activities may need to be reduced if financing is unavailable. The filing states substantial doubt exists about the company’s ability to continue as a going concern; it has no operating income and depends on new financing and continued creditor and shareholder support.
The updated 2019 Feasibility Study, announced April 16, 2019, is a project forecast, not current company guidance or realized performance. It estimated a 36-year mine life, gross life-of-mine revenue of about $20.8 billion, average annual EBITDA of about $370 million, and after-tax NPV of about $2.10 billion at an 8% discount rate. Estimated upfront capital expenditure was $1.143 billion, with net pre-production capital expenditure of $879 million after projected pre-production net revenue. Compared with the 2017 study, the updated study increased mine life, NPV, and projected revenue, while raising all-in operating cost to $196.41 per tonne from $179.99. These estimates depend on assumptions including prices, costs, permitting, financing, construction, and successful operation.
The revised mine plan includes artificial ground freezing for shaft construction and on-site treatment and reuse of process and mine water, with solid salt stored on site. NioCorp said this removes the planned Missouri River discharge and eliminates the need for certain discharge-related permits; it still expected to pursue an air permit and other construction permits. Planned next steps included filing the updated NI 43-101 technical report, securing project financing, advancing permits and engineering, and awarding EPC contracts.
After quarter-end, NioCorp raised approximately C$1.8 million in two tranches of a private placement completed April 29 and May 9, 2019; units included shares and warrants. The proceeds were designated for working capital and general corporate purposes. Management also cited commodity-price, currency, permitting, environmental, engineering, cost-escalation, and financing risks. The company disclosed no material pending legal proceedings, no defaults upon senior securities, and effective disclosure controls at period-end.
Important facts for investors to verify
- Whether the company secured the stated $7.7–$8.5 million near-term funding need and could meet June 2019 debt maturities and other current obligations.
- Cash runway and working-capital position after the April/May 2019 placements, debt conversions, and subsequent expenditures.
- Whether the updated feasibility assumptions, project capital and operating costs, mineral reserve estimates, and projected economics are supported by the final technical report and remain current.
- Progress and timing for permits, detailed engineering, EPC contracts, and project financing; the filing gives no assurance that financing or permitting will be obtained.
- Potential dilution from outstanding convertible securities, options, warrants, and any future fundraising; the filing reported 230,554,228 common shares outstanding as of May 10, 2019.