Ex Chevron mining, Molycorp CEO bets Niocorp next niobium gem

The man at the helm of Molycorp for 15-plus years, who helped to ignite a mania in the rare earths industry just five years ago, has bet big on a niobium project originally discovered by Molycorp.

Mark A. Smith has invested over $1.3 million personally for 8.4 percent of NioCorp Developments(TSXV:NB), which owns the Elk Creek project in Nebraska. He also assumed the CEO position in September 2013.

Smith is a big believer in the niobium market, and it is a market he professes to know a lot about.

In his first interview since joining the company, Mr. Smith tells us about the challenges he will have in developing NioCorp, and what the opportunity is for investors.

Nb

The first challenge Mr. Smith will face is educating the world about niobium.

“Contrary to my level of knowledge on it, it’s actually quite surprising to me how many people don’t even know what niobium is,” said Smith. “They don’t understand that every car that has a metal body out there contains niobium.”

Niobium is a powdery element that makes steel stronger and lighter.

Currently, only 10% of global steel production contains niobium. Smith says end users in the construction, automotive, aviation, energy and other sectors are demanding higher quality materials, and that Chinese steelmakers in particular offer a compelling growth opportunity for the commodity.

The market for niobium has grown steadily by an average of 4 percent to 6 percent in recent years, with the overall market now worth $4 billion annually. The price for niobium has also been steadily climbing, settling in the $40 to $45 per kilogram range over the past several years.

There is also the question of substitution. Vanadium has steel strengthening capabilities, too. Smith says roughly double the amount of vanadium is required to produce the same strength steel, but at substantially higher prices, making it an un-economic substitution. And in certain critical applications, such as high pressure pipeline steel, Niobium cannot be substituted.

Colin Rusch, Sr. Research Analyst with Northland Capital Markets in Minneapolis, gained notoriety for being an early supporter of Tesla Motors on CNBC. Mr. Rusch agrees with Mr. Smith, commenting, “Many investors are fundamentally missing what’s going on in the steel industry as we see secular demand growth for lighter weight and stronger materials. There is not a cost effective replacement for niobium as a steel strengthening agent.”

CBMM

There are just three operating niobium mines in the world currently, with 85 percent of the world’s supply coming from CBMM out of Brazil. CBMM is backed by the Moreira Salles family,considered Brazil’s richest.

CBMM is the cruise ship of the niobium industry because it can increase or decrease supply and affect price at anytime. Still, Smith sees this as a benefit, providing stability in supply and pricing, and believes NioCorp’s potential production will coincide with the market demanding additional material.

Smith has a long relationship with CBMM. Molycorp was a significant owner in CBMM from the 1960’s until 2007 and Smith was Molycorp’s “Shareholder Representative” to CBMM for several years, becoming “very friendly” with the stakeholders and management of the company, while gaining specialized knowledge of the niobium industry.

With so much supply coming from just one source, end users are also concerned with diversity of supply, Smith believes. “We certainly look at diversity of supply as we’re ordering materials for our company.”

Smith said he would consider approaching CBMM with the NioCorp opportunity when the project is further along.

Elk Creek

Location of the Elk Creek niobium deposit in Nebraska (Photo: Tetra Tech / Niocorp)

The Elk Creek project is the world’s third richest niobium deposit by grade and is the only primary niobium deposit known in the US, according to the company.

The 100% NioCorp-owned project is located in southeastern Nebraska, a state with only one other operating mine, but Smith says Elk Creek has tremendous local support. NioCorp has appointed Tony Fulton, former State Senator from Nebraska, who reached term limits last year, to the company’s advisory board.

The project is next to a highway and a rail line and has all the infrastructure boxes ticked, Smith says.

Compelling track record

A lawyer and engineer by trade, the Denver, Colorado based Smith, 54, was a senior executive at Unocal Corporation, overseeing its mining divisions, including Molycorp, from 1984 onwards. When Chevron bought Unocal in 2005, Smith was appointed President and CEO of Chevron Mining shortly thereafter.

In 2008, a group of private equity and hedge fund backers bought the Molycorp rare earth assets from Chevron for $82.5 million and recruited Smith as their new CEO.

Smith then oversaw the re-opening of its Mountain Pass rare earths mine in California, as well as a massive awareness campaign around the rare-earths sector, which resulted in countless other rare earth companies being founded during the period, but none with the success of Smith’s Molycorp.

By the time Smith resigned in 2012, Molycorp’s market cap was $1.6 billion, with a peak value of over $6 billion in 2011.

“It’s all public knowledge, but the original investors in Molycorp did extremely well,” Smith said in our interview.

NioCorp, valued at just $17 million by market cap at press time, is too small to be a fit for those investors at this stage in the mine development process, Smith believes.

Uphill climb

Smith would like to raise as much as $10 million to complete metallurgical optimization studies, and for infill drilling at Elk Creek with hopes to increase the quality and size of its resource for a feasibility report.

Smith says metallurgical recovery in the niobium space is key, and he hopes the company can increase its recoveries from greater than 50%, where they stand today, to as much as 58%, which will boost the project’s economics and demonstrate “world class” recovery.

“When I take a look at the share price today ($0.17 at press time) versus what will happen to the valuation of this company with a little bit of [good] metallurgy news and a little bit of [good] infill drilling news, then couple that with a feasibility study where all we’re trying to do is optimize the economics, I get pretty excited.” Smith continues, “I think this will be a very economic project.”

The capital markets for early stage mining ventures are unfortunately not as keen as Mr. Smith, with the TSX-Venture Index, a proxy for the junior mining sector, down roughly 75% since 2007, including a drop of over 25% in 2013 alone. Despite this, NioCorp’s share price increased 60% in 2013.

Smith himself has been the biggest buyer of NioCorp’s shares recently, with his $1.3 million + in purchases over the past year helping NioCorp to restart some of its development activities.

NioCorp has roughly 100.4 million shares outstanding, scattered amongst thousands of retail shareholders whom Smith will need to continue to re-energize as part of his go-forward plan.

While the market for mining stocks are out of favor, Smith says the Elk Creek project is a “gem” which more than makes up for any challenges. All options to finance the company are being considered in 2014, including the public markets, private equity, or even M&A.

“My experience in 33 years is that a good project with a good resource will find good financing. And I’m confident that we will,” Mr. Smith said in our interview.

People

With only three operating niobium mines in the world, Smith will have to utilize his experience and connections in the niobium industry if the company is to be successful.

NioCorp President Peter Dickie

His peers at NioCorp are also well versed with the commodity. Claude Defresne, one of NioCorp’s Directors, is a sought after expert on the niobium space. NioCorp President Peter Dickie, who previously led the company and recruited Mr. Smith, should be credited for finding such a high-quality replacement, and not discounted for his ability to tell the NioCorp story.

“I will only work with honest people and I’ve found that in the NioCorp management team,” Smith commented. “Everybody is 100 percent aligned in terms of what we’re doing and why and how we will get there.”

Mr. Rusch, the analyst from Minneapolis, investigated the NioCorp opportunity in late 2013.

“Of the potential mining sites for niobium, Elk Creek is extremely well positioned. Mark Smith’s experience effectively navigating the concerns of local communities and some of the largest global corporations to develop sustainable projects is second to none. Our diligence on his work turned up an exemplary track record and reputation. We believe NioCorp’s assets are very much in good hands.”

Smith’s passion for NioCorp is a refreshing sight in an otherwise depressed resources industry.

“I love to take a project like we have at NioCorp right now and build it into something meaningful and something that has purpose for the world. That’s what gets my blood pumping and I couldn’t be more excited to be where I am today in trying to help this company achieve its full potential.”

NioCorp has recruited an influential CEO who has done it before and has skin in the game. Next they intend to build the only niobium mine in the United States just in time for an increase in demand for the commodity.

“We have a gem sitting in Elk Creek, Nebraska.”

NioCorp Developments Ltd. trades on the TSX-Venture Exchange under the symbol NB, on the OTCQX under NIOBF, and in Frankfurt as BR3.

Watch our full interview with Mark Smith and contact the company for more information.

NOTE: Author was paid to make video and owns shares in the company. 

Disclaimer: Please read NioCorp Developments Ltd.’s Cautionary Statement Regarding Forward-Looking Statements carefully. All statements in this report, other than statements of historical fact should be considered forward-looking statements. These statements relate to future events or future performance. Forward-looking statements are often, but not always identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions. Much of this report is comprised of statements of projection. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Risks and uncertainties respecting mineral exploration companies are generally disclosed in the annual financial or other filing documents of those and similar companies as filed with the relevant securities commissions, and should be reviewed by any reader of this article. In addition, with respect to any particular company, a number of risks relate to any statement of projection or forward statement.

Nothing in this article should be construed as a solicitation to buy or sell any securities mentioned anywhere in this newsletter (specifically in regard to NioCorp Developments Ltd.). This article is intended for informational and entertainment purposes only! The author of this article and its publishers bear no liability for losses and/or damages arising from the use of this article.

We are shareholders of NioCorp Developments Ltd., and a service provider to the company, which means we are biased in bringing forward information on the company. You must recognize the inherent conflict of interest involved that may influence our perspective on NioCorp Developments Ltd.. This is why we stress that you conduct extensive due diligence as well as seek the advice of your financial advisor and a registered broker-dealer before investing in any securities.

Be advised, Pacific Website Company Inc., CEO.CA and its employees are not a registered broker-dealer or financial advisor. Before investing in any securities, you should consult with your financial advisor and a registered broker-dealer.

Never, ever, make an investment based solely on what you read in an online newsletter, including CEO.CA’s online newsletter, or Internet bulletin board, especially if the investment involves a small, thinly-traded company that isn’t well known.

Pacific Website Company Inc., owner of CEO.CA, its officers, directors, employees, and consultants shall not be liable for any damages, losses, or costs of any kind or type arising out of or in any way connected with the use of its products or services, including this article. Pacific Website Company Inc., owner of CEO.CA, its employees, consultants and affiliates are not responsible for any claims made by any of the mentioned companies or third party writers. You should independently investigate and fully understand all risks before investing. We want to remind you again that CEO.CA is often paid editorial fees for its writing and the dissemination of material. The clients represented by CEO.CA are typically development-stage companies that pose a much higher risk to investors. When investing in speculative stocks of this nature, it is possible to lose your entire investment over time. Please recognize that we are extremely biased when it comes to NioCorp Developments Ltd..

Cautionary Note Concerning Estimates of Inferred Resources:

This report and supportive documents used in the research process of this report use the term “Inferred Resources”. U.S. investors are advised that while this term is recognized and required by Canadian regulations, the Securities and Exchange Commission does not recognize it. “Inferred Resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of “Inferred Resources” may not form the basis of feasibility or other economic studies. U.S. investors are also cautioned not to assume that all or any part of an “Inferred Mineral Resource” exists, or is economically or legally mineable.

Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues.

Pacific Website Company Inc. and CEO.CA (including its employees and consultants) are not chartered business valuators; the methods used by business valuators often cannot justify any trading price for most junior stock exchange listed companies.

Any decision to purchase or sell as a result of the opinions expressed in this report OR ON CEO.CA will be the full responsibility of the person authorizing such transaction, and should only be made after such person has consulted a registered financial advisor and conducted thorough due diligence. Information in this report has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. Our views and opinions regarding the companies we feature on CEO.CA and in this newsletter are our own views and are based on information that we have received, which we assumed to be reliable. We do not guarantee that any of the companies mentioned in this newsletter (specifically NioCorp Developments Ltd.) or on CEO.CA will perform as we expect, and any comparisons we have made to other companies may not be valid or come into effect.

Pacific Website Company Inc. is a distributor (and not a publisher) of content supplied by third parties and subscribers. Accordingly, Pacific Website Company Inc. has no more editorial control over such content than does a public library, bookstore, or newsstand. Any opinions, advice, statements, services, offers, or other information or content expressed or made available by third parties, including information providers, Subscribers or any other user of The Pacific Website Company Inc. Network of Sites, are those of the respective author(s) or distributor(s) and not of Pacific Website Company Inc. Neither Pacific Website Company Inc. nor any third-party provider of information guarantees the accuracy, completeness, or usefulness of any content, nor its fitness for any particular purpose.

Pacific Website Company Inc, owner of CEO.CA, does not undertake any obligation to publicly update or revise any statements made in this report.

The information contained in this content is not an offer to buy or sell securities. Do not base any investment decision upon any materials found in this content. We are not registered as a securities broker-dealer or an investment advisor either within any securities regulatory authority. We are neither licensed nor qualified to provide investment advice. The information contained in this content is for informational and educational purposes only and is not intended to be used as a complete source of information on any particular company. Neither the information contained in this content, nor in any other place, is provided to any particular individual with a view toward their individual circumstances and nothing in this content should be construed as investment, business, or other professional advice. We are committed to providing factual information on the companies that are profiled. However, we do not provide any assurance as to the accuracy or completeness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions. We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so.

Individuals should assume that all information contained in this content is not trustworthy unless verified by their own independent research. Information contained in this content will contain “forward looking statements.” These forward looking statements are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ materially from those anticipated. Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company’s most recent reports or registration statements filed with the appropriate regulators. You should consider these factors in evaluating the forward looking statements and not place undue reliance upon such statements. To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in this content, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information). Any individual who chooses to invest in any securities should do so with caution. Investing in securities is speculative and carries a high degree of risk; you may lose some or all of the money that is invested. Always research your own investments and consult with a registered investment adviser or licensed stock broker before investing. We will not be responsible for the success or failure of any individual or entity which implements information received from this content.

Learn how to protect yourself and become a more informed investor at www.investright.org