NioCorp Developments Ltd. — Form 10-Q Summary
Business context and period. This filing covers the three months ended September 30, 2017—the company’s fiscal first quarter of fiscal 2018. NioCorp is an exploration-stage company developing the Elk Creek niobium, scandium and titanium project in Nebraska. It had no mining revenue or production.
Financial results and position
Amounts below are in thousands of U.S. dollars, except per-share data.
| Metric | Quarter ended Sept. 30, 2017 | Comparable 2016 period |
|---|---|---|
| Revenue | None | None |
| Operating expenses | $1,932 | $2,980 |
| Net loss | $1,813 | $2,775 |
| Basic loss per share | $0.01 | $0.02 |
| Cash used in operating activities | $1,779 | $2,247 |
| Cash provided by financing activities | $1,567 | $64 |
Margins are not meaningful because the company had no revenue. At September 30, cash was $317; current assets were $704 and current liabilities were $4,438, resulting in a $3,734 working-capital deficit. Total assets were $11,373, total liabilities $7,060, and shareholders’ equity $4,313. Mineral interests were carried at $10,617.
Convertible debt was $3,178 in total ($572 current and $2,606 noncurrent), with a separate $16 derivative liability. Related-party loans totaled $1,175. Total liabilities declined from $8,460 at June 30, 2017; convertible debt declined in part through conversions to shares. No interest-rate margin or operating margin is reported.
Changes and material activity
- Net loss narrowed by $962 year over year. Operating expenses fell by $1,048, chiefly as exploration expenditures declined from $1,970 to $713 following completion and filing of the feasibility study; employee-related costs increased from $540 to $772, primarily due to share-based compensation.
- The July private placement issued 2,962,500 shares and warrants at C$0.65 per unit, raising approximately C$1.926 million gross. Lind advanced $500 under its convertible security during the quarter; $1.0 million face value was converted into 2,354,281 shares.
- Shares outstanding increased to 204,518,956 at quarter-end from 198,776,337 at June 30. The filing reported 205,281,674 shares outstanding as of November 9, 2017.
- Non-cash share-based compensation was $451. Foreign-exchange movements contributed a $237 gain, compared with a $33 loss in the prior-year quarter.
Outlook, financing, and risks
- Management estimated planned operational needs of approximately $7.8 million through June 30, 2018, and said it may need to raise $7.5–$8.0 million to fund the next 12 months. Average monthly expenditures were estimated at $452, including approximately $363 for administration and financing-related overhead and $89 for Elk Creek work.
- The company had no committed financing arrangements sufficient to meet those needs. Management was pursuing debt and equity funding; it warned that financing might not be available on acceptable terms, if at all, and equity or derivative issuances would likely dilute shareholders. Without funding, it may have to reduce planned activities.
- The financial statements disclose a material uncertainty that raises substantial doubt about the company’s ability to continue as a going concern. NioCorp has continuing losses, no operating revenue, a working-capital deficit, and depends on additional financing and continued creditor and shareholder support.
- Financing efforts included independent technical due diligence for a potential debt syndicate and reiterated in-principle eligibility for a German government UFK loan guarantee. Due diligence, market reviews, presentations, negotiations and approvals remained outstanding; no completed project financing was reported.
- The feasibility study described a planned 32-year underground mine producing payable niobium, scandium trioxide and titanium dioxide. Estimated capital costs included $705 million direct, $189 million indirect, $85 million pre-production and $109 million contingency, offset by a $79 million pre-production revenue credit. These are project estimates, not committed funding or a production forecast guarantee.
- Permitting and development work continued. The company expected to file an air construction permit by December 31, 2017; it also reported progress in the Army Corps permitting process and initiation of a process to select engineering, procurement and construction firms.
- Subsequent events: the CEO provided $180,000 under the existing credit facility, received October 20. Lind provided a further $250,000 on October 31, bringing funding under the convertible security increase to $750,000 by that date; warrants were issued in connection with the funding.
- Key risks include future financing availability and dilution, permitting and construction execution, feasibility and resource assumptions, commodity prices, foreign exchange, and the absence of mineral production. Management reported effective disclosure controls and no material change in internal control over financial reporting; it reported no material pending legal proceedings.
Important facts for investors to verify
- Whether NioCorp can secure the stated $7.5–$8.0 million near-term funding need and, separately, the substantial capital required to build Elk Creek.
- Current cash, working-capital deficit, debt maturities, covenant compliance, and the terms and conversion or warrant provisions of Lind and related-party financing.
- Share count and potential dilution from convertible securities, warrants, options, and future equity financing.
- Progress and outcomes of independent project due diligence, the UFK loan-guarantee process, financing negotiations, and required permits.
- Feasibility-study assumptions, estimated capital costs, projected production and mine life, and the risks that actual results may differ materially.