NioCorp Developments Ltd. — Form 10-Q Summary
Business and period: NioCorp is an exploration-stage company developing the Elk Creek niobium, scandium and titanium project in Nebraska. This report covers the quarter and six months ended December 31, 2017 (fiscal Q2 and first half of FY2018); amounts below are U.S. dollars. The company had no operating revenue or mine production.
Financial performance and position
| Metric | Three months ended Dec. 31, 2017 | Six months ended Dec. 31, 2017 |
|---|---|---|
| Revenue | None | None |
| Operating expenses | $1.563 million | $3.495 million |
| Net loss | $1.960 million | $3.773 million |
| Loss per share | $0.01 | $0.02 |
| Cash used in operations | $2.566 million |
- Six-month total comprehensive loss was $4.031 million, including $258,000 of currency translation loss. No income tax benefit was recorded; profit margins are not applicable because there was no revenue.
- At December 31, cash was $80,000 and total current assets were $506,000. Current liabilities were $4.876 million, producing a $4.370 million working-capital deficit. Total assets were $11.178 million and total liabilities $6.485 million.
- Convertible debt was $2.276 million, including $667,000 current; related-party loans were $1.355 million. The CEO’s secured loans bear 10% interest, with principal due in June 2018. Cash from financing activities was $2.114 million for the six months, including equity issuance, convertible debt and related-party borrowing.
- Common shares outstanding rose from 198.8 million at June 30 to 208.9 million at December 31. The company also had 24.97 million warrants outstanding.
Changes versus comparable periods
- Six-month net loss declined to $3.773 million from $6.322 million in 2016, and operating cash use fell to $2.566 million from $5.073 million. Management attributed lower exploration spending principally to the timing of feasibility-study and project work.
- Six-month exploration expenditures were $1.016 million versus $4.367 million. Employee-related costs rose to $1.399 million from $962,000, primarily reflecting share-based compensation; professional fees declined to $393,000 from $612,000.
- Quarterly net loss was $1.960 million versus $3.547 million in the prior-year quarter. Fair-value movements in financial instruments and foreign exchange affected reported results and can be non-cash.
- Working-capital deficit improved from $5.8 million at June 30, 2017 to $4.4 million at December 31, partly due to financing inflows and conversions of Lind debt.
Outlook, financing and risks
- Going concern: The filing states that substantial doubt exists about the company’s ability to continue as a going concern. It has no operating income, limited cash and requires additional capital; failure to secure financing could force activity reductions.
- Management estimated approximately $3.1 million of planned needs through June 30, 2018, net of Lind’s subsequent $2.5 million funding and assuming a further $1.0 million call under the Lind agreement. It anticipated needing $5–6 million to fund the next 12 months. These are estimates, not committed funding requirements or assured proceeds.
- After quarter-end, Lind funded $2.5 million by February 7, 2018, increasing the convertible security’s face amount by $3.0 million including implied interest and generating warrants. Up to a further $2.0 million was available subject to conditions. The company also disclosed a $125,000 January draw under the CEO’s credit facility.
- The Revised Elk Creek Feasibility Study, filed December 15, 2017, did not change previously reported project economics. The proposed 32-year mine plan estimates initial direct capital costs of $705 million, plus indirect costs, pre-production capital and contingency; the report also describes estimated production of niobium, scandium trioxide and titanium dioxide. An independent technical review for potential project financiers was expected to finish in the quarter ending March 31, 2018. Permitting and financing remained in progress.
- Key risks include the need for substantial additional financing, project construction and permitting, feasibility assumptions and commodity demand/prices, mineral-resource estimates, foreign exchange, dilution, and the company’s lack of production. The company reported compliance with Lind covenants at December 31, no material pending legal proceedings, and no material changes to previously disclosed risk factors.
Investor verification points
- Confirm the terms, conversion effects and warrant dilution associated with Lind’s post-quarter funding, and whether any conditional additional funding was obtained.
- Assess cash runway, upcoming debt maturities and the gap between projected financing needs and committed capital.
- Review the Revised Elk Creek Feasibility Study’s capital-cost estimates, price sensitivities, technical-review status and permitting milestones.
- Evaluate the effect of continuing equity issuance, convertible debt conversions and outstanding options and warrants on existing shareholders.
- Check the filing’s period references: the report identifies the quarter ended December 31, 2017, while one statement caption in the supplied text says “December 21.”