NioCorp Developments Ltd. — Form 10-Q
Reporting period: The filing covers the three and nine months ended March 31, 2021, NioCorp’s fiscal third quarter. Although the request metadata says “2020 Q3,” the filing itself is for fiscal 2021 Q3. Financial amounts below are in thousands of U.S. dollars unless stated otherwise.
Business context
NioCorp is an exploration-stage company developing the Elk Creek niobium, scandium and titanium project in Nebraska. It has no mining operations or operating revenue and depends on debt and equity financing to fund project development and corporate expenses.
Financial performance and position
| Metric | Three months ended March 31 | Nine months ended March 31 |
|---|---|---|
| Operating revenue | None | None |
| Operating expenses | $845 (2020: $817) | $3,121 (2020: $2,710) |
| Net loss | $1,013 (2020: $1,262) | $3,147 (2020: $3,343) |
| Loss per share, basic and diluted | $0.00 (2020: $0.00) | $0.01 (2020: $0.01) |
| Cash used in operating activities | Not stated for quarter | $3,648 (2020: $2,172) |
| Cash provided by financing activities | Not stated for quarter | $11,917 (2020: $1,865) |
At March 31, 2021, cash was $8,626, total assets were $19,524, total liabilities were $13,835, and shareholders’ equity was $5,689. The company reported working capital of approximately $2.9 million, versus a $7.7 million deficit at June 30, 2020. No operating margin is meaningful because the company had no operating revenue.
Debt included $9,316 of convertible debt, a $3,818 related-party loan and credit-facility balance, and $213 of lease liabilities. The related-party borrowing was owed to CEO and Executive Chairman Mark Smith. The Lind III security was secured against company assets and carried conversion and warrant features.
Changes versus the comparable period
- Nine-month net loss narrowed to $3,147 from $3,343, despite operating expenses rising to $3,121 from $2,710. Lower foreign-exchange losses and higher other income contributed to the reduced loss; interest expense increased to $612 from $233.
- Operating cash outflow rose to $3,648 from $2,172, partly because the company continued paying down accounts payable and accrued liabilities.
- Financing cash inflow increased, principally due to the February 2021 Lind III financing, warrant and option exercises, and other financing activity. Cash rose from $307 at June 30, 2020, to $8,626 at March 31, 2021.
- Shares outstanding increased to 245.5 million from 235.9 million at June 30, 2020. Debt conversions, option and warrant exercises, and new warrants created further potential dilution.
Outlook, risks and notable items
- Going concern: Management disclosed substantial doubt about the company’s ability to continue as a going concern. It warned that March 31 cash might not cover normal operations and debt obligations for the next 12 months without additional financing or deferral of certain liabilities. Management said subsequent financing improved its ability to fund basic operations, but future financing remained uncertain.
- Financing and spending: Management anticipated a loss for the foreseeable future and estimated planned operational needs of approximately $9.2 million through June 30, 2021, including land purchase and debt repayments. It said additional financing would likely be needed to maintain properties and fund planned work. Future equity or derivative financings could dilute shareholders.
- Subsequent events: On April 23, 2021, the company closed on the purchase of two Nebraska land parcels and associated rights for approximately $6.2 million. It repaid the $1.0 million Smith Loan and made $500 in partial repayments on the Smith Credit Facility, plus $138 of accrued interest, using warrant-exercise proceeds. On May 10, it closed a private placement of 4,334,157 units at C$1.43 each, for gross proceeds of approximately C$6.2 million; each unit included a share and a two-year warrant exercisable at C$1.63.
- Project development: NioCorp contracted with Cementation USA for an evaluation of the underground mine design and a cost estimate for further detailed engineering. Further engineering work was contingent on additional financing. The company also began reviewing the potential to add rare-earth products; additional testing is required, and no commercial recovery plan was established in the filing.
- Other risks and unusual items: COVID-19-related capital-market disruption could affect financing and development timelines. The filing also cites permitting, construction costs, mineral-price volatility, resource estimates, water management, and secured-creditor covenants as risks. The company recorded $196 of SBA loan forgiveness income and a $163 loss on extinguishment related to the Nordmin note transaction during the nine-month period.
- The company reported no material pending legal proceedings, no defaults upon senior securities, and no off-balance-sheet arrangements. Management concluded disclosure controls were effective as of period-end.
Important facts for investors to verify
- Whether subsequent land-purchase and debt-repayment cash outflows, together with the May private-placement proceeds, leave adequate liquidity for the stated operating plan and upcoming obligations.
- The terms, outstanding balance, conversion activity, security and potential dilution associated with the Lind III and Nordmin convertible instruments and related warrants.
- Whether NioCorp can secure the substantial project financing required for engineering, construction and commercial operation, and on what terms.
- Progress on permitting, detailed engineering, water and infrastructure arrangements, and testing needed to establish whether rare-earth products are technically and economically recoverable.
- How COVID-19, market conditions, project costs and commodity prices may affect the development schedule, funding needs and going-concern outlook.