NioCorp Developments Ltd. — Form 10-Q Summary
Reporting period: Three months ended September 30, 2018 (the company’s fiscal first quarter), compared with the three months ended September 30, 2017. The company is developing the Elk Creek niobium, scandium and titanium project in Nebraska and has no operating revenue.
Financial results and position
| Metric | Quarter ended September 30, 2018 | Prior-year quarter / comparison |
|---|---|---|
| Operating revenue | None | None |
| Operating expenses | $1.258 million | $1.932 million |
| Exploration expenditures | $777,000 | $713,000 |
| Net loss | $1.731 million | $1.813 million |
| Comprehensive loss | $1.834 million | $2.098 million |
| Operating cash used | $1.372 million | $1.779 million |
| Financing cash provided | $3.299 million | $1.567 million |
| Cash at period end | $2.011 million | $73,000 at June 30, 2018 |
Amounts are U.S. dollars; financial statement figures are in thousands unless stated otherwise. Margins are not meaningful because the company had no operating revenue.
- Total assets were $13.384 million; total liabilities were $8.383 million; shareholders’ equity was $5.001 million.
- Working capital was in deficit by $491,000, improved from a $3.4 million deficit at June 30, 2018.
- Convertible debt was $5.174 million. Related-party loans totaled $1.480 million, including $1.0 million outstanding to CEO Mark Smith under the original loan and $480,000 under his credit facility.
- Basic and diluted loss per share was $0.01, unchanged from the prior-year quarter. Weighted-average shares rose to 215.4 million from 202.0 million.
Material changes and financing
- Operating expenses fell by $674,000 year over year, principally due to lower employee-related costs and professional fees. Exploration expenditures increased by $64,000, mainly reflecting higher technical studies and engineering costs.
- Net loss improved by $82,000, while the noncash change in financial-instrument fair value rose to $493,000 from $23,000. The filing attributes the 2018 amount in part to Lind warrants and convertible-security valuation effects.
- September private placements raised approximately C$3.13 million gross through 4,975,158 units, each comprising one common share and half a warrant. The company also received $1.0 million from Lind; $1.0 million of original Lind convertible security was converted into 2,547,427 shares during the quarter.
- Shares outstanding were 220.9 million at quarter end and 221.8 million as of November 8, 2018. Further equity or derivative issuance may dilute existing shareholders.
Outlook, risks and other developments
- Management estimated planned operating needs of approximately $3.8 million through June 30, 2019, and anticipated raising $4.5–$5.0 million to fund the next 12 months of planned operations, financing work and engineering. Average monthly expenditures were estimated at about $430,000.
- The company expects continuing losses and depends on additional financing. Management stated that it does not have sufficient cash to fund normal operations and debt obligations for the next 12 months without deferring certain current liabilities and raising additional funds. The filing identifies substantial doubt about the company’s ability to continue as a going concern; there is no assurance that financing will be available on acceptable terms, or at all.
- Nordmin engineering work indicated that the proposed 33-mile waterline to the Missouri River may not be needed. If adopted, the design change could eliminate the need for certain additional federal permits and a Nebraska discharge permit. Recommendations remained under review, and effects on project economics had not yet been assessed.
- After quarter end, NioCorp announced a conditional sales agreement with Traxys for 12 tonnes of scandium trioxide annually for 10 years, up to 120 tonnes total. It depends on project financing, approvals, construction and other conditions; it does not represent current revenue.
- Other risks include permitting and construction, resource and feasibility assumptions, commodity and currency fluctuations, project cost increases, and dependence on equity and debt markets. Convertible-security covenants were reported as compliant at September 30, 2018. Convertible notes’ due date was extended in October 2018 to October 14, 2019.
Important facts for investors to verify
- Whether NioCorp secures enough financing to meet near-term obligations and advance Elk Creek without materially dilutive or restrictive terms.
- Actual cash use and financing proceeds relative to management’s stated funding needs and operating-cost estimates.
- Whether the proposed mine-design changes are adopted, their permitting consequences, and any effect on project capital costs, schedule or economics.
- Whether the Traxys agreement’s conditions are satisfied and whether planned scandium production and sales assumptions are achievable.
- Convertible debt valuation, related-party borrowing terms, repayment obligations and any subsequent share dilution.