PART I
Introduction
NioCorp was incorporated
under the laws of the Province of British Columbia under the Business Corporations Act (British Columbia) on February 27, 1987
under the name “IPC International Prospector Corp.” On May 22, 1991, we changed our name to “Kingston Resources
Ltd.” On June 29, 2001, we changed our name to “Butler Developments Corp.” On February 12, 2009, we changed our
name to “Butler Resource Corp.” On March 4, 2010, we changed our name to “Quantum Rare Earth Developments
Corp.” On March 4, 2013, we changed our name to “NioCorp Developments Ltd.”
NioCorp is a reporting
issuer in British Columbia, Alberta, Saskatchewan, Ontario, and New Brunswick. Our registered and records office is located at
595 Burrard Street, Suite 2600, Vancouver, British Columbia V7X 1L3 (ATTN: Blake, Cassels & Graydon LLP). Our head office is
located at 7000 South Yosemite Street, Suite 115, Centennial, Colorado 80112.
Historical Development of the Business
During 2009 and 2010,
the Company commenced mineral exploration activities in the Elk Creek, Nebraska area, including negotiations with local landowners
for land access agreements. The acquisition of the Elk Creek Project was closed in December 2010 and involved the purchase of all
of the issued and outstanding common shares of 859404 BC Ltd. (“859404”), a private British Columbia company, which
in turn held 100% of the issued and outstanding shares of ECRC, and was signatory to the option agreements covering the Elk Creek
Property area. A new Canadian company, 0886338 BC Ltd. was formed to merge with 0859404, and this merged entity was subsequently
amalgamated into 0896800.
The Company commenced
a field exploration program in 2011 which included verification of previous work which was completed on the Elk Creek Property
in the 1970s and 1980s, re-assaying of historic drill core, an airborne geophysical survey and the completion of five new diamond
drill holes. The available data for the Elk Creek Property was compiled into an updated NI 43-101 resource estimate for the Elk
Creek Project, which was issued in April 2012. Additional drilling and NI 43-101 technical reports, including resource updates
and PEAs, were completed and issued by the Company in 2014 and 2015.
During fiscal
years 2016 and 2017, the Company focused on feasibility study development and, on June 30, 2017, we announced the completion of
the Elk Creek Feasibility Study. The related technical report was filed in Canada on SEDAR on August 10, 2017. Information regarding
the Elk Creek Feasibility Study is discussed below under Item 2. “Properties.”
Loss of Foreign Private Issuer Status under U.S. Securities
Laws
Based on our analysis
of the number of Common Shares held by persons resident in the United States as of December 31, 2015, as well as the majority
of our assets, officers, and directors being in the United States, we did not meet the definition of a “foreign private issuer”
under Rule 405 of the Securities Act and as a result, effective July 1, 2016 we became subject to United States securities
laws as applicable to a United States domestic company for our fiscal year ended June 30, 2017. Further, based on our analysis
on December 31, 2016, we will remain subject to the reporting requirements of a domestic issuer for the fiscal year ending June 30,
2018.
You may read and copy
any materials we file with the SEC in the SEC’s Public Reference Room, 100 F Street N.E., Washington, D.C. 20549. You may
obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Additionally, the SEC maintains
an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically
with the SEC, which can be found at http://www.sec.gov.
Emerging Growth Company Status
We qualify as an “emerging
growth company” as defined in Section 101 of the Jumpstart our Business Startups Act (“JOBS Act”) as we do not
have more than $1.07 billion in annual gross revenue and did not have such amount as of June 30, 2017, being the last day of our
fiscal year.
We may lose our status
as an emerging growth company on the last day of our fiscal year during which (i) our annual gross revenue exceeds $1.07 billion
or (ii) we issue more than $1.0 billion in non-convertible debt in a three-year period. We will lose our status as an emerging
growth company if at any time we are deemed to be a large accelerated filer. We will lose our status as an emerging growth company
on the last day of our fiscal year following the fifth anniversary of the date of the first sale of common equity securities pursuant
to an effective registration statement.
As an emerging growth
company under the JOBS Act, we have elected to opt out of the extended transition period for complying with new or revised standards
pursuant to Section 107(b) of the JOBS Act. The election is irrevocable.
As an emerging growth
company, we are exempt from Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section 14A(a) and (b) of the Securities Exchange
Act of 1934 (the “Exchange Act”). Such sections are provided below:
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Section 404(b) of the Sarbanes-Oxley Act of 2002 requires a public company’s auditor to attest
to, and report on, management’s assessment of its internal controls.
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Sections 14A(a) and (b) of the Exchange Act, implemented by Section 951
of The Dodd–Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), require companies
to hold shareholder advisory votes on executive compensation and golden parachute compensation.
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As long as we qualify
as an emerging growth company, we will not be required to comply with the requirements of Section 404(b) of the Sarbanes-Oxley
Act of 2002 and Section 14A(a) and (b) of the Exchange Act.
Geographic and Segment Information
We have one reportable
segment consisting of evaluation, acquisition, exploration, and development activities which are focused principally in Nebraska,
U.S.A. We reported no material revenues during our last three fiscal years.
Corporate Structure
The Company’s
business operations are conducted primarily through ECRC. The below table provides an overview of the Company’s current subsidiaries
and their activities.
Name
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State/Province
of Formation
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|
Ownership
|
|
Business
|
0896800 B.C. Ltd.
|
|
British Columbia
|
|
100%
by the Company
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The only business of 0896800 is to hold the shares of ECRC
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Elk Creek Resources Corp.
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Nebraska
|
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100%
by 0896800
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The business of ECRC is the development of the Elk Creek Project
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Business Operations
NioCorp is a mineral
exploration company engaged in the acquisition, exploration, and development of mineral properties. NioCorp, through ECRC, is developing
a superalloy materials project that, if and when developed, will produce niobium, scandium, and titanium products. Known as the
“Elk Creek Project,” it is located near Elk Creek, Nebraska, in the southeast portion of the state.
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Niobium is used to produce various superalloys that are extensively used in high performance aircraft
and jet turbines. It also is used in HSLA steel, a stronger steel used in automotive, bridges, structural systems, buildings, pipelines,
and other applications that generally enables those applications to be stronger and lighter in mass. This “lightweighting”
benefit often results in environmental benefits, including reduced fuel consumption and material usage, which can result in fewer
air emissions.
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Scandium can be combined with aluminum to make super-high-performance alloys with increased strength
and improved corrosion resistance. Scandium also is a critical component of advanced solid oxide fuel cells, an environmentally
preferred technology for high-reliability, distributed electricity generation.
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Titanium is a component of various superalloys and other applications that are used for aerospace
applications, weapons systems, protective armor, medical implants and many others. It also is used in pigments for paper, paint,
and plastics.
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Our primary business
strategy is to advance our Elk Creek Project to commercial production. We are focused on obtaining additional funds to carry out
our near-term planned work programs associated with securing the project financing necessary to complete mine development and construction
of the Elk Creek Project.
With the recent filing
of the Elk Creek Feasibility Study (see Item 2 “Properties,” below), all work presently planned by us is directed at
obtaining the financing necessary to advance the Elk Creek Project to construction and operations. In addition, we are also conducting
permitting and other related activities at and for the Elk Creek Project.
Since the publication
of our October 2015 PEA, we have spent approximately $13.6 million in exploration related expenditures. The following table compares
cost guidance from the October 2015 PEA to actual exploration costs incurred as of June 30, 2017.
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|
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PEA
|
|
|
Actual
Expenditures
|
|
Category
|
|
Description
|
|
Guidance
1
|
|
|
FY2016
|
|
|
FY2017
|
|
|
Totals
|
|
(in
thousands)
|
|
PEA Recommended & Budgeted
Work:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Feasibility Study and Engineering
|
|
Feasibility study with hydrogeological, geochemistry, and geotechnical work programs
|
|
$
|
6,000
|
|
|
$
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2,671
|
|
|
$
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5,717
|
|
|
$
|
8,388
|
|
Metallurgical
|
|
Process feasibility study design and metallurgical testing program including backfill testing
|
|
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2,400
|
|
|
|
844
|
|
|
|
2,209
|
|
|
|
3,053
|
|
Other
2
|
|
Tailings geotechnical field test work with drilling, logging, cone penetration testing, and in situ and borrow materials laboratory testing in Area 7
|
|
|
160
|
|
|
|
—
|
|
|
|
17
|
|
|
|
17
|
|
|
|
Marketing Studies
|
|
|
200
|
|
|
|
—
|
|
|
|
63
|
|
|
|
63
|
|
Sub Total
|
|
|
|
|
8,760
|
|
|
|
3,515
|
|
|
|
8,006
|
|
|
|
11,521
|
|
Other exploration expenditures
3
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Drilling
|
|
|
|
|
—
|
|
|
|
197
|
|
|
|
—
|
|
|
|
197
|
|
Geologists and Field Staff
|
|
|
|
|
—
|
|
|
|
67
|
|
|
|
110
|
|
|
|
177
|
|
Field Management and Other
|
|
|
|
|
|
|
|
|
940
|
|
|
|
811
|
|
|
|
1,751
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Total
|
|
|
|
$
|
8,760
|
|
|
$
|
4,719
|
|
|
$
|
8,927
|
|
|
$
|
13,646
|
|
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(1)
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Anticipated expenditures required to develop a feasibility
study, as outlined in the PEA.
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(2)
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Expenditures included in “Feasibility study and
engineering” in financial statements.
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(3)
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Expenditures incurred to advance the overall Elk Creek
Project and Elk Creek Feasibility Study.
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Through June 30, 2017,
substantially all feasibility study work was completed, except for matters related to the finalization and filing of the related
technical report which was filed on SEDAR on August 10, 2017. Overall, deviations from the original PEA recommended and budgeted
work related to additional costs incurred for additional metallurgical analyses and subsequent engineering work related to process
breakthroughs included in the Elk Creek Feasibility Study.
Competitive Business Conditions
There is aggressive
competition within the minerals industry to discover and acquire mineral properties considered to have commercial potential. We
compete for the opportunity to participate in promising exploration projects with other entities. In addition, we compete with
others in efforts to obtain financing to acquire and explore mineral properties, acquire and utilize mineral exploration equipment,
and hire qualified mineral exploration personnel. We may compete with other mining companies for mining claims in regions adjacent
to our existing claims, or in other parts of the world should we dedicate resources to doing so in the future. These companies
may be better capitalized than us and we may have difficulty in expanding our holdings through the staking or acquisition of additional
mining claims or other mineral tenures.
In competing for qualified
mineral exploration personnel, we may be required to pay compensation or benefits relatively higher than those paid in the past,
and the availability of qualified personnel may be limited in high-demand mining periods, such as was the case in past years when
the price of gold and other metals was higher than it is now.
Specialized Skill and Knowledge
The Company’s
ability to continue to progress the Elk Creek Project will depend on its ability to attract and retain individuals with (among
other skills) financial, administrative, engineering, geological and mining skills, and knowledge of our industry and targeted
markets. Much of the necessary specialized skills and knowledge required by the Company as a mineral exploration company are available
from the Company’s current management team and Board of Directors. The Company retains outside consultants if additional
specialized skills and knowledge are required.
Cycles
The mining business
is subject to mineral price cycles. The marketability of minerals and mineral concentrates is also affected by worldwide economic
cycles. At the present time, weak demand for some minerals in many countries is suppressing commodity prices, although it is difficult
to assess how long such trends may continue. Fluctuations in supply and demand in various regions throughout the world are common.
The following table
sets forth commodity prices for the last five calendar years for the Ferroniobium, Scandium Trioxide and Titanium Dioxide products
the Company anticipates extracting from its Elk Creek Project. These pricing surveys may not be representative of the pricing that
the Company anticipates achieving for its products once commercial production begins from its Elk Creek Project.
Year
|
|
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Ferroniobium
U.S. Import Price
($/kg-Nb)
1
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|
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Scandium
Trioxide
U.S. Price
($/kg)
2
|
|
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Titanium
Dioxide
U.S. Price
($/kg)
3
|
|
2016
|
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$
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36
|
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$
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4,600
|
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$
|
0.73
|
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2015
|
|
|
|
42
|
|
|
|
5,100
|
|
|
|
0.84
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|
2014
|
|
|
|
43
|
|
|
|
5,000
|
|
|
|
0.95
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2013
|
|
|
|
45
|
|
|
|
5,000
|
|
|
|
1.25
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|
2012
|
|
|
|
45
|
|
|
|
4,700
|
|
|
|
2.20
|
|
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(1)
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Source: Roskill, “Niobium: Global Industry, Markets and Outlook to 2026, Thirteenth Edition,
2017.” Unit value is mass-weighted average U.S. import value of ferroniobium assuming 65% niobium content.
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(2)
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Source: USGS Mineral Commodity Summary, 2016. Scandium Trioxide, 99.99% purity, 5-kilogram lot
size.
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|
(3)
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Source: USGS Mineral Commodity Summary, 2016. Rutile mineral concentrate, bulk, minimum 95% TiO
2
,
f.o.b. Australia.
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As NioCorp’s
mining and exploration business is in the exploration stage, and NioCorp has not yet generated any revenue from the operation of
the Elk Creek Project, it is not currently significantly affected by changes in commodity demand and prices, except to the extent
that same impact the availability of capital for mineral exploration and development projects. As it does not carry on production
activities, NioCorp’s ability to fund ongoing exploration is affected by the availability of financing which is, in turn,
affected by the strength of the economy and other general economic factors.
Seasonality
The Elk Creek Project
is not subject to material restrictions on our operations due to seasonality.
Economic Dependence
Other than land and
mineral right option agreements and the Offtake Agreements, NioCorp’s business is not substantially dependent on any contract
such as a contract to sell the major part of its product or services or to purchase the major part of its requirements for goods,
services or its raw materials, or any franchise or license or other agreement to use a patent, formula, trade secret, process or
trade name upon which its business depends.
Government Regulation
The exploration and
development of a mining prospect is subject to regulation by a number of federal and state government authorities. These include
the EPA and the USACE as well as the various state and local environmental protection agencies. The regulations address many environmental
issues relating to air, soil, and water contamination, and apply to many mining related activities including exploration, mine
construction, mineral extraction, ore milling, water use, waste disposal, and use of toxic substances. In addition, we are subject
to regulations relating to labor standards, occupational health and safety, mine safety, general land use, export of minerals,
and taxation. Many of the regulations require permits or licenses to be obtained, the absence of which and/or inability to obtain
such permits or licenses will adversely affect our ability to conduct our exploration, development, and operation activities. The
failure to comply with the regulations and terms of permits and licenses may result in fines or other penalties or in revocation
of a permit or license or loss of a prospect.
General
While none of the
lands on which the Elk Creek Project is proposed to be built are owned by the United States Government, mining rights are governed
by the General Mining Law of 1872, as amended, which allows for the location of mining claims on certain federal lands upon the
discovery of a valuable mineral deposit and compliance with location requirements. The exploration of mining properties and development
and operation of mines is governed by both federal and state laws. Federal laws that govern mining claim location and maintenance
and mining operations on federal lands are generally administered by the Bureau of Land Management. Additional federal laws, governing
mine safety and health, also apply. State laws also require various permits and approvals before exploration, development or production
operations can begin. Among other things, a reclamation plan must typically be prepared and approved, with bonding in the amount
of projected reclamation costs. The bond is used to ensure that proper reclamation takes place, and the bond will not be released
until that time. Local jurisdictions may also impose permitting requirements, such as conditional use permits or zoning approvals.
Environmental Regulation
Our mineral projects
are subject to various federal, state and local laws and regulations governing protection of the environment. These laws are continually
changing and, in general, are becoming more restrictive. The development, operation, closure, and reclamation of mining projects
in the United States requires numerous notifications, permits, authorizations, and public agency decisions. Compliance with environmental
and related laws and regulations requires us to obtain permits issued by regulatory agencies and to file various reports and keep
records of our operations. Certain of these permits require periodic renewal or review of their conditions and may be subject to
a public review process during which opposition to our proposed operations may be encountered. We are currently operating under
various permits for activities connected to mineral exploration, reclamation, and environmental considerations. Our policy is to
conduct business in a way that safeguards public health and the environment. We believe that our operations are conducted in material
compliance with applicable laws and regulations.
Changes to current
local, state, or federal laws and regulations in the jurisdictions where we operate could require additional capital expenditures
and increased operating and/or reclamation costs. Although we are unable to predict what additional legislation, if any, might
be proposed or enacted, additional regulatory requirements could impact the economics of our projects.
Environmental Regulation − U.S. Federal Laws
The Comprehensive
Environmental, Response, Compensation, and Liability Act (“CERCLA”), and comparable state statutes, impose strict,
joint, and several liability on current and former owners and operators of sites and on persons who disposed of or arranged for
the disposal of hazardous substances found at such sites. It is not uncommon for the government to file claims requiring cleanup
actions and/or demands for reimbursement for government-incurred cleanup costs or natural resource damages. It is also not uncommon
for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by hazardous
substances released into the environment. The Federal Resource Conservation and Recovery Act (“RCRA”), and comparable
state statutes, govern the disposal of solid waste and hazardous waste and authorize the imposition of substantial fines and penalties
for noncompliance, as well as requirements for corrective actions. CERCLA, RCRA, and comparable state statutes can impose liability
for clean-up of sites and disposal of substances found on exploration, mining and processing sites long after activities on such
sites have been completed.
The Clean Air Act,
as amended (“CAA”), restricts the emission of air pollutants from many sources, including mining and processing activities.
Any future mining operations by the Company may produce air emissions, including fugitive dust and other air pollutants from stationary
equipment, storage facilities, and the use of mobile sources such as trucks and heavy construction equipment, which are subject
to review, monitoring and/or control requirements under the CAA and state air quality laws. New facilities may be required to obtain
permits before work can begin, and existing facilities may be required to incur capital costs in order to remain in compliance.
In addition, permitting rules may impose limitations on our production levels or result in additional capital expenditures in order
to comply with the rules.
The National Environmental
Policy Act (“NEPA”) requires federal agencies to integrate environmental considerations into their decision-making
processes by evaluating the environmental impacts of their proposed actions, including issuance of permits to mining facilities
and assessing alternatives to those actions. If a proposed action could significantly affect the environment, the agency must prepare
either a detailed statement known as an Environmental Impact Statement (“EIS”) or a less detailed statement known as
an Environmental Assessment (“EA”). The EPA, other federal agencies, and any interested third parties can review and
comment on the scoping of the EIS or EA and the adequacy of any findings set forth in the draft and final EIS or EA. This process
can cause delays in issuance of required permits or result in changes to a project to mitigate its potential environmental impacts,
which can in turn impact the economic feasibility of a proposed project.
The Clean Water Act
(“CWA”), and comparable state statutes, impose restrictions and controls on the discharge of pollutants into waters
of the United States. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a
permit issued by the EPA or an analogous state agency. The CWA regulates storm water from mining facilities and requires a storm
water discharge permit or Stormwater Pollution Prevention Plan for certain activities. Such a permit requires the regulated facility
to monitor and sample storm water run-off from its operations. The CWA and regulations implemented thereunder also prohibit discharges
of dredged and fill material in wetlands and other waters of the United States unless authorized by an appropriately issued permit.
The CWA and comparable state statutes provide for civil, criminal, and administrative penalties for unauthorized discharges of
pollutants, and impose liability on parties responsible for those discharges for the costs of cleaning up any environmental damage
caused by the release and for natural resource damages resulting from the release.
The Safe Drinking
Water Act (“SDWA”) and the Underground Injection Control (“UIC”) program promulgated thereunder, regulate
the drilling and operation of subsurface injection wells. The EPA directly administers the UIC program in some states and in others
the responsibility for the program has been delegated to the state. The program requires that a permit be obtained before drilling
a disposal or injection well. Violation of these regulations and/or contamination of groundwater by mining related activities may
result in fines, penalties, and remediation costs, among other sanctions and liabilities under the SDWA and state laws. In addition,
third party claims may be filed by landowners and other parties claiming damages for alternative water supplies, property damages,
and bodily injury.
Environmental Regulation − Nebraska
Nebraska has a well-developed
set of environmental regulations and responsible agencies, but does not have clearly defined regulations with respect to permitting
mines. As such, review of the project and the issuance of permits by Nebraska agencies and regulatory bodies could potentially
impact the total time to market for our Elk Creek Project. Other Nebraska regulations govern operating and design standards for
the construction and operation of any source of air contamination and landfill operations. Any changes to these laws and regulations
could have an adverse impact on our financial performance and results of operations by, for example, requiring changes to operating
constraints, technical criteria, fees, or surety requirements.
Employees
As of August
29, 2017, we employed eleven (11) employees, each of whom is a full-time employee.
Forward-Looking Statements
Certain statements
contained in this Form 10-K (including information incorporated by reference herein) are “forward-looking statements”
within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and are intended to be covered
by the safe harbor provided for under these sections. All statements, other than statements of historical facts, included herein
concerning, among other things, planned capital expenditures, future cash flows and borrowings, pursuit of potential acquisition
opportunities, our financial position, business strategy and other plans and objectives for future operations, future exploration
activities, future mineral resource estimates, and future joint venture arrangements are forward-looking statements. These forward-looking
statements are identified by their use of terms and phrases such as “may,” “expect,” “estimate,”
“project,” “plan,” “believe,” “intend,” “achievable,” “anticipate,”
“will,” “continue,” “potential,” “should,” “could,” and similar terms
and phrases.
Any statements that
express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions,
or future events or performance (often, but not always, using words or phrases such as “expects” or “does not
expect,” “is expected,” “anticipates” or “does not anticipate,” “plans,”
“estimates” or “intends,” or stating that certain actions, events or results “may,” “could,”
“would,” “might,” or “will” be taken, occur, or be achieved) are not statements of historical
fact and may be forward-looking statements. Forward-looking statements are subject to a variety of known and unknown risks, uncertainties,
and other factors that could cause actual events or results to differ from those expressed or implied by the forward-looking statements,
including, without limitation:
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risks related to our ability to operate as a going concern;
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risks related to our requirement of significant additional capital;
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risks related to our limited operating history;
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risks related to changes in economic valuations of the Elk Creek Project, such as net present value calculations, changes or disruptions in the securities markets;
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risks related to our history of losses;
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risks related to cost increases for our exploration and, if warranted, development projects;
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risks related to feasibility study results;
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risks related to the determination of the economic viability of a deposit;
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risks related to mineral exploration and production activities;
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risks related to our lack of mineral production from our properties;
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risks related to the results of our metallurgical testing;
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risks related to the price volatility of commodities;
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risks related to estimates of mineral resources and reserves;
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risks related to changes in mineral resource and reserve estimates;
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risks related to differences in United States and Canadian reserve and resource reporting;
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risks related to our exploration activities being unsuccessful;
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risks related to our ability to obtain permits and licenses for production;
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risks related to government and environmental regulations that may increase our costs of doing business or restrict our operations;
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risks related to proposed legislation that may significantly affect the mining industry;
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risks related to land reclamation requirements;
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risks related to competition in the mining industry;
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risks related to the difficulties of handling the disposal of mine water at our Elk Creek Project;
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risks related to equipment and supply shortages;
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risks related to current and future joint ventures and partnerships;
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risks related to our ability to attract qualified management;
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risks related to the ability to enforce judgment against certain of our Directors;
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risks related to currency fluctuations;
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risks related to claims on the title to our properties;
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risks related to surface access on our properties;
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risks related to potential future litigation;
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risks related to our lack of insurance covering all our operations;
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risks related to covenants contained in agreements with our secured creditors that may affect our assets;
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risks related to the extent to which our level of indebtedness may impair our ability to obtain additional financing;
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risks related to our status as a “passive foreign investment company” under the U.S. federal tax code;
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risks related to our Common Shares, including price volatility, lack of dividend payments, dilution and penny stock rules; and
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risks related to our debt.
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This list is not exhaustive
of the factors that may affect our forward-looking statements. Some of the important risks and uncertainties that could affect
forward-looking statements are described further under the section heading “Item 1A – Risk Factors,” below. Should
one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, believed, estimated, or expected. We caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking
statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or
unanticipated events, except as required by law.
Available Information
We maintain a website
at http://www.niocorp.com. We are not including the information contained on our web site as a part of, or incorporating it by
reference into, this Form 10-K. Our Common Shares are currently registered under Section 12(g) of the Exchange Act, we are currently
required to file reports on Forms 10-K, 10-Q or 8-K. Our Annual Report on Form 10-K (which includes our audited financial statements),
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a)
and 15(d) of the Exchange Act, are, and will be when filed, available on our website, free of charge, as soon as reasonably practicable
after we electronically file such reports with, or furnish those reports to, the SEC. You may also read and copy these reports,
proxy statements and other information at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.
You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330
for more information about the operation of the Public Reference Room. SEC filings are also available at the SEC’s website
at www.sec.gov. We do not intend to send security holders a printed version of our Annual Report as it will be available online.
We maintain a Code
of Business Conduct and Ethics for Directors, Officers and Employees (“Code of Conduct”). A copy of our Code of Conduct
may be found on our website in the Corporate Governance section under the main title “Corporate.” Our Code of Conduct
contains information regarding whistleblower procedures.
Our business activities
are subject to significant risks, including those described below. You should carefully consider these risks. If any of the described
risks actually occurs, our business, financial position and results of operations could be materially adversely affected. Such
risks are not the only ones we face and additional risks and uncertainties not presently known to us or that we currently deem
immaterial may also affect our business. This report contains forward-looking statements that involve risks and uncertainties.
Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of
factors, including the risks described below. See “Forward-Looking Statements.”
Risks Related to Our Business
Our ability to operate as a going concern is in
doubt.
The audit opinion
and notes that accompany our financial statements for the year ended June 30, 2017, disclose a going concern qualification and disclosures to our
ability to continue in business. The accompanying financial statements have been prepared under the assumption that we will continue
as a going concern. We are an exploration stage company and we have incurred losses since our inception.
We currently have
no historical recurring source of revenue and our ability to continue as a going concern is dependent on our ability to raise capital
to fund our future exploration and working capital requirements or our ability to profitably execute our business plan. Our plans
for the long-term return to and continuation as a going concern include financing our future operations through sales of our common
stock and/or debt and the eventual profitable exploitation of our Elk Creek Project. Additionally, capital markets and general
economic conditions in the United States and Canada may impose significant obstacles to raising the required funds. These factors
raise substantial doubt about our ability to continue as a going concern.
We will require significant additional capital to
fund our business plan.
We will be required
to expend significant funds to develop our existing properties and to identify and acquire additional properties to diversify our
property portfolio. We anticipate that we will be required to make substantial capital expenditures for the development of our
Elk Creek Project.
As of June 30,
2017, the Company had cash of $0.2 million and a working capital deficit of $5.8 million, compared to cash of $4.4 million and
working capital of $2.3 million on June 30, 2016.
As of June 30,
2017, the Company’s current planned operation needs are approximately $11.2 million through the end of fiscal 2018. From
the date of this Form 10-K, we anticipate that we may need to raise approximately $10.0 million to continue planned operations
for the next twelve months. This represents general overhead costs, expected costs relating to securing financing necessary for
the Elk Creek Project, satisfying outstanding accounts payable, and potential retirement of our short-term debt obligations. Access
to additional funds will be utilized to further advance the Elk Creek Project through substantive near-term milestones.
We are actively pursuing
such additional sources of debt and equity financing, and while we have been successful in doing so in the past, there can be no
assurance we will be able to do so in the future.
Our ability to obtain
necessary funding for these purposes, in turn, depends upon a number of factors, including the status of the national and worldwide
economy and the price of metals. We may not be successful in obtaining the required financing or, if we can obtain such financing,
such financing may not be on terms that are favorable to us.
Our inability to access
sufficient capital for our operations could have a material adverse effect on our financial condition, results of operations, or
prospects. Sales of substantial amounts of securities may have a highly dilutive effect on our ownership or share structure. Sales
of a large number of Common Shares in the public markets, or the potential for such sales, could decrease the trading price of
the Common Shares and could impair our ability to raise capital through future sales of Common Shares. We have not yet commenced
commercial production at any of our properties and, as such, have not generated positive cash flows to date and have no reasonable
prospects of doing so unless successful commercial production can be achieved at our Elk Creek Project. We expect to continue to
incur negative investing and operating cash flows until such time as we enter into successful commercial production. This will
require us to deploy our working capital to fund such negative cash flow and to seek additional sources of financing. There is
no assurance that any such financing sources will be available or sufficient to meet our requirements. There is no assurance that
we will be able to continue to raise equity capital or to secure additional debt financing, or that we will not continue to incur
losses.
We have a limited operating history on which to base an
evaluation of our business and prospects.
Since our inception,
we have had no revenue from operations. We have no history of producing products from any of our properties. Our Elk Creek Project
is in the exploration stage. Advancing our Elk Creek Project from exploration into the development stage will require significant
capital and time, and successful commercial production from Elk Creek will be subject to permitting and construction of the mine,
processing plants, roads, and other related works and infrastructure. As a result, we are subject to all of the risks associated
with developing and establishing new mining operations and business enterprises including:
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the timing and cost, which can be considerable, of further exploration, preparing feasibility studies,
permitting and construction of infrastructure, mining, and processing facilities;
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the availability and costs of drill equipment, exploration personnel, skilled labor, and mining
and processing equipment, if required;
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the availability and cost of appropriate smelting and/or refining arrangements, if required;
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compliance with environmental and other governmental approval and permit requirements;
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the availability of funds to finance exploration, development, permitting, and construction activities,
as warranted;
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potential opposition from non-governmental organizations, local groups, or local inhabitants that
may delay or prevent development activities;
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potential increases in exploration, construction, and operating costs due to changes in the cost
of fuel, power, materials, and supplies; and
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potential shortages of mining, mineral processing, construction, and other facilities related supplies.
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The costs, timing,
and complexities of exploration, development, and construction activities may be increased by the location of our properties and
competition from other mineral exploration and mining companies. It is common in exploration programs to experience unexpected
problems and delays during drill programs and, if commenced, development, construction, and mine start-up. Accordingly, our activities
may not result in profitable mining operations and we may not succeed in establishing mining operations or profitably producing
metals at any of our current or future properties, including our Elk Creek Project.
We have a history of losses and expect to continue
to incur losses in the future.
We have incurred losses
since inception, have negative cash flow from operating activities, and expect to continue to incur losses in the future. We incurred
the following losses from operations during each of the following periods ($000):
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$14,630 for the year ended June 30, 2017:
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$11,408 for the year ended June 30, 2016;
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$23,115 for the year ended June 30, 2015;
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We expect to continue
to incur losses unless and until such time as one of our properties enters into commercial production and generates sufficient
revenues to fund continuing operations. We recognize that if we are unable to generate significant revenues from mining operations
and dispositions of our properties, we will not be able to earn profits or continue operations. At this early stage of our operation,
we also expect to face the risks, uncertainties, expenses, and difficulties frequently encountered by companies at the start-up
stage of their business development. We cannot be sure that we will be successful in addressing these risks and uncertainties and
our failure to do so could have a materially adverse effect on our financial condition.
Increased costs could affect our financial condition.
We anticipate that
costs at our projects that we may explore or develop will frequently be subject to variation from one year to the next due to a
number of factors, such as changing ore grade, metallurgy, and revisions to mine plans, if any, in response to the physical shape
and location of the ore body. In addition, costs are affected by the price of commodities such as fuel, steel, rubber, chemicals,
and electricity. Such commodities are at times subject to volatile price movements, including increases that could make production
at certain operations less profitable or not profitable at all. A material increase in costs at any significant location could
have a significant effect on our profitability.
Risks Related to Mining and Exploration
Feasibility study results are
based on assumptions that are subject to uncertainty and the estimates may not reflect actual capital and operating costs and potential
revenues from any potential future production.
Feasibility studies,
including the Elk Creek Feasibility Study filed on SEDAR on August 10, 2017, are used to determine the economic viability of a
mineral deposit, including estimated capital and operating costs. Generally accepted levels of confidence in the mining industry
are plus or minus 15% for feasibility studies. These levels reflect the levels of confidence that exist at the time the study is
completed. While these studies are based on the best information available to us for the level of study, we cannot be certain that
actual costs will not significantly exceed the estimated cost. While we incorporate what we believe is an appropriate contingency
factor in cost estimates to account for this uncertainty, there can be no assurance that the contingency factor is adequate.
The nature of mineral exploration and production
activities involves a high degree of risk and the possibility of uninsured losses.
Exploration for and
the production of minerals is highly speculative and involves much greater risk than many other businesses. Most exploration programs
do not result in the discovery of mineralization, and any mineralization discovered may not be of sufficient quantity or quality
to be profitably mined. Our operations are, and any future development or mining operations we may conduct will be, subject to
all of the operating hazards and risks normally incident to exploring for and developing mineral properties, such as, but not limited
to:
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economically insufficient mineralized material;
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fluctuation in production costs that make mining uneconomical;
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unanticipated variations in grade and other geologic problems;
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difficult surface or underground conditions;
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metallurgical, pyrometallurgical, and other processing problems;
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mechanical and equipment performance problems;
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failure of dams, stockpiles, wastewater transportation systems, or impoundments;
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unusual or unexpected rock formations; and
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personal injury, fire, flooding, cave-ins, and landslides.
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Any of these risks
can materially and adversely affect, among other things, the development of properties, production quantities and rates, costs
and expenditures, potential revenues, and production dates. We currently have very limited insurance to guard against some of these
risks. If we determine that capitalized costs associated with any of our mineral interests are not likely to be recovered, we would
incur a write-down of our investment in these interests. All of these factors may result in losses in relation to amounts spent
that are not recoverable, or that result in additional expenses.
We have no history of producing commercial products
from our current mineral properties and there can be no assurance that we will successfully establish mining operations or profitably
produce minerals.
We have no history
of producing commercial products from our current mineral properties. We do not produce commercial products and do not currently
generate operating earnings. While we seek to move our Elk Creek Project out of exploration and into development and production,
such efforts will be subject to all of the risks associated with establishing new mining operations and business enterprises, including:
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the timing and cost, which are considerable, of the construction of mining and processing facilities;
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the availability and costs of skilled labor and mining equipment;
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compliance with environmental and other governmental approval and permit requirements;
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the availability of funds to finance construction and development activities;
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potential opposition from non-governmental organizations, local groups, or local inhabitants that
may delay or prevent development activities; and
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potential increases in construction and operating costs due to changes in the cost of labor, fuel,
power, materials, and supplies.
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It is common in new
mining operations to experience unexpected problems and delays during construction, development and mine start-up. In addition,
our management and workforce will need to be expanded, and sufficient housing and other support systems for our workforce will
have to be established. This could result in delays in the commencement of mineral production and increased costs of production.
Accordingly, we cannot assure you that our activities will result in profitable mining operations or that we will successfully
establish mining operations.
Results of metallurgical testing by us may not be
favorable to, or as expected by, us.
We have completed
significant bench, mini-pilot, and pilot scale metallurgical testing on material from the Elk Creek Project, and will continue
to complete necessary metallurgical testing at the bench, mini-pilot, and pilot scale as the exploration and, if warranted, development
of the Elk Creek Project progresses. There can be no assurance that the results of such metallurgical testing will be favorable
to, or will be as expected by, us. Furthermore, there can be no certainty that metallurgical recoveries obtained in bench or pilot
scale tests will be achieved in either subsequent testing or commercial operations. The development of a complete metallurgical
process to produce a saleable final product from the Elk Creek Project is a complex and resource intensive undertaking that may
result in overall schedule delays and increased project costs for us.
Price volatility could have dramatic effects on
the results of operations and our ability to execute our business plan.
The price of commodities
varies on a daily basis. Niobium is a specialty metal and not a commonly traded commodity such as copper, zinc, gold, or iron ore.
The price of niobium tends to be set through a limited long-term offtake market, contracted between very few suppliers and purchasers.
The world’s largest supplier of niobium, CBMM, supplies approximately 85% of the world’s niobium. Any attempt to suppress
the price of niobium by such supplier, or an increase in production by any supplier in excess of any increased demand, would have
negative consequences on the price of niobium and, potentially, on our value. The price of niobium may also be reduced by the discovery
of new niobium deposits, which could not only increase the overall supply of niobium (causing downward pressure on its price),
but could draw new firms into the niobium industry that would compete with us.
Scandium trioxide
is used in solid oxide fuel cells and has the potential to become a valuable alloy with aluminum in the aerospace and automotive
industries. Supply of scandium has been sporadic in recent years, and there are no primary scandium mines in the world at present.
Production primarily occurs as a byproduct from rare earth, titanium, and aluminum plants, primarily in Russia and China. Our management
believes the Elk Creek Project would significantly increase the world’s supply of scandium trioxide. Although the Company’s
market studies indicate a positive outlook for demand, there is no assurance at present that the Company could sell all of its
production. In addition, the sale of scandium represents a significant portion of the Elk Creek Project revenue; achieving the
revenue projected in the Company’s studies is subject to market growth in scandium, which is a developing market with a risk
of oversupply and/or undersupply disrupting pricing.
Titanium metal is
used in various superalloys and other applications for aerospace applications, armor, and medical implants and in oxide form is
a key component of pigments used in paper, paint, and plastics. The Elk Creek Project would produce a small quantity of titanium
dioxide relative to other producers. As a small producer, we would be subject to fluctuations in the price of titanium dioxide
that would result from normal variations in supply and demand for this commodity.
Estimates of mineralized material and resources
are subject to evaluation uncertainties that could result in project failure.
Our exploration and
future mining operations, if any, are and would be faced with risks associated with being able to accurately predict the quantity
and quality of mineralized material and resources/reserves within the earth using statistical sampling techniques. Estimates of
any mineralized material or resource/reserve on any of our properties would be made using samples obtained from appropriately placed
trenches, test pits, underground workings, and intelligently designed drilling. There is an inherent variability of assays between
check and duplicate samples taken adjacent to each other and between sampling points that cannot be reasonably eliminated. Additionally,
there also may be unknown geologic details that have not been identified or correctly appreciated at the current level of accumulated
knowledge about our properties. This could result in uncertainties that cannot be reasonably eliminated from the process of estimating
mineralized material and resources/reserves. If these estimates were to prove to be unreliable, we could implement an exploitation
plan that may not lead to commercially viable operations in the future.
Any material changes in mineral resource/reserve
estimates and grades of mineralization will affect the economic viability of placing a property into production and a property’s
return on capital.
Except for the Elk
Creek Feasibility Study filed on SEDAR on August 10, 2017, we have not completed feasibility studies on any of our properties and
have not commenced actual production. As a result, mineralization resource/reserve estimates may require adjustments or downward
revisions. In addition, the grade of ore ultimately mined, if any, may differ from that indicated by our feasibility studies and
drill results. Minerals recovered in small scale tests may not be duplicated in large scale tests under on-site conditions or in
production scale.
The resource/reserve
estimates included in the Elk Creek Feasibility Study and contained in this Form 10-K have been determined based on assumed future
prices, cut-off grades, and operating costs that may prove to be inaccurate. Extended declines in market prices for our products
may render portions of our mineralization and resource/reserve estimates uneconomic and may result in reduced reported mineralization
or may adversely affect any commercial viability determinations we may reach. Any material reductions in estimates of mineralization,
or of our ability to extract this mineralization, could have a material adverse effect on our share price and on the value of our
properties.
There are differences in U.S. and Canadian practices
for reporting reserves and resources.
Our reserve and resource
estimates are not directly comparable to those made in filings subject to SEC reporting and disclosure requirements, as we generally
report reserves and resources in accordance with Canadian requirements. These requirements are different from the practices used
to report reserve and resource estimates in reports and other materials filed with the SEC. It is Canadian practice to report measured,
indicated, and inferred mineral resources, which are generally not permitted in disclosure filed with the SEC by United States
issuers. In the United States, mineralization may not be classified as a “reserve” unless the determination has been
made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made.
Further, “inferred mineral resources” have a great amount of uncertainty as to their existence and as to whether they
can be mined legally or economically.
Readers of this Form 10-K are cautioned not to assume that all or any part of measured
or indicated mineral resources will ever be converted into reserves recognized under the SEC’s Industry Guide 7 reporting
requirements.
Accordingly, information
concerning descriptions of mineralization, reserves and resources contained in this Form 10-K, or in the documents incorporated
herein by reference, may not be comparable to information made public by other United States companies subject to the reporting
and disclosure requirements of the SEC.
Our exploration activities on our properties may
not be commercially successful, which could lead us to abandon our plans to develop our properties and our investments in exploration.
Our long-term success
depends on our ability to identify mineral deposits on our existing properties and other properties we may acquire, if any, that
we can then develop into commercially viable mining operations. Mineral exploration is highly speculative in nature, involves many
risks, and is frequently non-productive. These risks include unusual or unexpected geologic formations, and the inability to obtain
suitable or adequate machinery, equipment, or labor. The success of commodity exploration is determined in part by the following
factors:
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the identification of potential mineralization based on surficial analysis;
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availability of government-granted exploration permits;
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the quality of our management and our geological and technical expertise; and
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the capital available for exploration and development work.
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Substantial expenditures
are required to establish proven and probable reserves through drilling and analysis, to develop metallurgical processes to extract
metal, and to develop the mining and processing facilities and infrastructure at any site chosen for mining. Whether a mineral
deposit will be commercially viable depends on a number of factors that include, without limitation, the particular attributes
of the deposit, such as size, grade, and proximity to infrastructure; commodity prices, which can fluctuate widely; and government
regulations, including, without limitation, regulations relating to prices, taxes, royalties, land tenure, land use, importing
and exporting of minerals, and environmental protection. We may invest significant capital and resources in exploration activities
and may abandon such investments if we are unable to identify commercially exploitable mineral reserves. The decision to abandon
a project may have an adverse effect on the market value of our securities and the ability to raise future financing.
We may not be able to obtain or renew all required
permits and licenses to place any of our properties into production.
Our current and future
operations, including development activities and commencement of production, if warranted, on the Elk Creek Project, require permits
from governmental authorities and such operations are and will be governed by laws and regulations governing prospecting, development,
mining, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental
protection, mine safety, and other matters. Companies engaged in mineral property exploration and the development or operation
of mines and related facilities generally experience increased costs, as well as delays in production and other schedules as a
result of the need to comply with applicable laws, regulations, and permits. We cannot predict if all permits that we may require
for continued exploration, development, or construction of mining facilities and conduct of mining operations will be obtainable
or renewable on reasonable terms, if at all. Costs related to applying for and obtaining permits and licenses may be prohibitive
and could delay our planned exploration and development activities. Failure to comply with applicable laws, regulations, and permitting
requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations
to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment,
or remedial actions.
Facilities associated
with the Elk Creek Project, such as the mine, surface plant, tailings facilities, stockpiles and supporting infrastructure, are
likely to either temporarily or permanently impact waterbodies and wetlands that are subject to regulation by the USACE as Waters
of the United States (“WOUS”). The Company expects the USACE to require us to obtain and maintain a permit for the
Elk Creek Project. The duration of this permitting exercise is dictated by the USACE, and would need to be completed before facilities
that would impact WOUS could be constructed. We may experience delays or additional costs in relation to obtaining the necessary
permit and these delays and additional costs could negatively affect the economics of the Elk Creek Project and our results of
operations.
Parties engaged in
mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have
civil or criminal fines or penalties imposed for violations of applicable laws or regulations. Amendments to current laws, regulations,
and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material
adverse impact on our operations and cause increases in capital expenditures or production costs or reduction in levels of production
at producing properties or require abandonment or delays in development of new mining properties.
We are subject to significant governmental regulations
that affect our operations and costs of conducting our business.
Our current and future
operations, including exploration and, if warranted, development of the Elk Creek Project, are and will be governed by laws and
regulations, including:
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laws and regulations governing mineral concession acquisition, prospecting, development, mining,
and production;
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laws and regulations related to exports, taxes, and fees;
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labor standards and regulations related to occupational health and mine safety; and
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environmental standards and regulations related to waste disposal, toxic substances, land use reclamation,
and environmental protection.
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Companies engaged
in exploration activities often experience increased costs and delays in production and other schedules as a result of the need
to comply with applicable laws, regulations, and permits. Failure to comply with applicable laws, regulations, and permits may
result in enforcement actions, including the forfeiture of mineral claims or other mineral tenures, orders issued by regulatory
or judicial authorities requiring operations to cease or be curtailed, and may include corrective measures requiring capital expenditures,
installation of additional equipment, or costly remedial actions. We may be required to compensate those suffering loss or damage
by reason of our mineral exploration activities and may have civil or criminal fines or penalties imposed for violations of such
laws, regulations, and permits.
Existing and possible
future laws, regulations, and permits governing operations and activities of exploration companies, or more stringent implementation,
could have a material adverse impact on our business and cause increases in capital expenditures or require abandonment or delays
in exploration. Our Elk Creek Project is located in Nebraska, and Nebraska does not have clearly defined regulations with respect
to permitting mines which could potentially impact the total time to market for the project.
Our activities are subject to environmental laws
and regulations that may increase our costs of doing business and restrict our operations.
All phases of our
operations are subject to environmental regulation in the jurisdictions in which we operate. Environmental legislation is evolving
in a manner that may require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent
environmental assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors,
and employees. These laws address emissions into the air, discharges into water, management of waste, management of hazardous substances,
protection of natural resources, antiquities and endangered species, and reclamation of lands disturbed by mining operations. Compliance
with environmental laws and regulations, and future changes in these laws and regulations, may require significant capital outlays
and may cause material changes or delays in our operations and future activities. It is possible that future changes in these laws
or regulations could have a significant adverse impact on our properties or some portion of our business, causing us to re-evaluate
those activities at that time.
Regulations and pending legislation governing issues
involving climate change could result in increased operating costs, which could have a material adverse effect on our business.
A number of governments
or governmental bodies have introduced or are contemplating legislative and/or regulatory changes in response to concerns about
the potential impact of climate change. Legislation and increased regulation regarding climate change could impose significant
costs on us, on our future venture partners, if any, and on our suppliers, including costs related to increased energy requirements,
capital equipment, environmental monitoring and reporting, and other costs necessary to comply with such regulations. Any adopted
future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject
to such limitations. Given the emotion, political significance, and uncertainty surrounding the impact of climate change and how
it should be dealt with, we cannot predict how legislation and regulation will affect our financial condition, operating performance,
and ability to compete. Furthermore, even without such regulation, increased awareness and any adverse publicity in the global
marketplace about potential impacts on climate change by us or other companies in our industry could harm our reputation. The potential
physical impacts of climate change on our operations are highly uncertain, and could be particular to the geographic circumstances
in areas in which we operate and may include changes in rainfall and storm patterns and intensities, water shortages, changing
sea levels, and changing temperatures. These impacts may adversely impact the cost, production, and financial performance of our
operations.
Land reclamation requirements for our properties
may be burdensome and expensive.
Although variable
depending on location and the governing authority, land reclamation requirements are generally imposed on mineral exploration companies
(as well as companies with mining operations) in order to minimize long-term effects of land disturbance.
Reclamation may include
requirements to:
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control dispersion of potentially deleterious effluents;
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treat ground and surface water to drinking water standards; and
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reasonably re-establish pre-disturbance land forms and vegetation.
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In order to carry
out reclamation obligations imposed on us in connection with our potential development activities, we must allocate financial resources
that might otherwise be spent on further exploration and development programs. We plan to set up a provision for our reclamation
obligations on our properties, as appropriate, but this provision may not be adequate. If we are required to carry out unanticipated
reclamation work, our financial position could be adversely affected.
We face intense competition in the mining industry.
The mining industry
is intensely competitive in all of its phases. As a result of this competition, some of which is with large established mining
companies with substantial capabilities and with greater financial and technical resources than ours, we may be unable to acquire
additional properties, if any, or financing on terms we consider acceptable. We also compete with other mining companies in the
recruitment and retention of qualified managerial and technical employees. If we are unable to successfully compete for qualified
employees, our exploration and development programs may be slowed down or suspended. We compete with other companies that produce
our planned commercial products for capital. If we are unable to raise sufficient capital, our exploration and development programs
may be jeopardized or we may not be able to acquire, develop, or operate additional mining projects.
Difficulties in handling the disposal of waste waters
at our Elk Creek Project could negatively affect our potential production and economics at the project.
The Company has conducted
three investigations into the hydrogeology of the Elk Creek carbonatite, which is the geologic formation which hosts the mineralized
material that would be extracted by the Company’s mining operations. The Company expects to encounter significant amounts
of water in the carbonatite, which will need to be pumped out of the formation to facilitate a mining operation. Water quality
analyses have demonstrated that this water will have elevated temperature and salt content when compared to other water resources
in the area. While the Company has developed plans for a waterline to the Missouri River to allow discharge from mine dewatering,
there is no guarantee that the permits needed for the treatment and/or discharge of the water will be issued by the state of Nebraska
or the USACE, nor is there any guarantee that such permits will be issued in a timely fashion.
A shortage of equipment and supplies could adversely
affect our ability to operate our business.
We are dependent on
various supplies and equipment to carry out our mining exploration and, if warranted, development operations. The shortage of such
supplies, equipment, and parts could have a material adverse effect on our ability to carry out our operations and could therefore
limit, or increase the cost of, production.
Joint ventures and other partnerships, including
offtake arrangements, may expose us to risks.
We have entered into
offtake agreements related to our Elk Creek Project, and may enter into joint ventures or partnership arrangements, including additional
offtake agreements, with other parties in relation to the exploration, development, and production of certain of the properties
in which we have an interest. Any failure of such other companies to meet their obligations to us or to third parties, or any disputes
with respect to the parties’ respective rights and obligations, or price fluctuations and termination provisions related
to such agreements, could have a material adverse effect on us, the development and production at our properties, including the
Elk Creek Project, the joint ventures, if any, or their properties and therefore could have a material adverse effect on our results
of operations, financial performance, cash flows and the price of the Common Shares.
We may experience difficulty attracting and retaining
qualified management to meet the needs of our anticipated growth, and the failure to manage our growth effectively could have a
material adverse effect on our business and financial condition.
We are dependent on
a relatively small number of key employees, including our Chief Executive Officer. The loss of any officer could have an adverse
effect on us. We have no life insurance on any individual, and we may be unable to hire a suitable replacement for them on favorable
terms, should that become necessary.
It may be difficult to enforce judgments or bring
actions outside the United States against us and certain of our directors.
We are a Canadian
corporation and, as a result, it may be difficult or impossible for an investor to do the following:
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enforce in courts outside the United States judgments obtained in United States courts based upon
the civil liability provisions of United States federal securities laws against these persons and the Company; or
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bring in courts outside the United States an original action to enforce liabilities based upon
United States federal securities laws against these persons and the Company.
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Our results of operations could be affected by currency
fluctuations.
Our properties are
all located in the United States and most costs associated with these properties are paid in U.S. dollars. There can be significant
swings in the exchange rate between the U.S. and Canadian dollar. There are no plans at this time to hedge against any exchange
rate fluctuations in currencies.
Title to our properties may be subject to other
claims that could affect our property rights and claims.
There are risks that
title to our properties may be challenged or impugned. Our current Elk Creek Project is located in Nebraska and may be subject
to prior unrecorded agreements or transfers or native land claims, and title may be affected by undetected defects. Our current
leases give us an option to purchase the property in order to construct the Elk Creek Project, but the rights of the current owners
to sell the property subject to these options may be subject to prior unrecorded or unknown claims to title. We have investigated
our rights to explore and exploit the Elk Creek Project resource and, to the best of our knowledge, our rights in relation to lands
covering the Elk Creek Project resource are in good standing. However, there may be valid challenges to the title of our properties
that, if successful, could impair development and/or operations. Further, our current land agreements are of fixed duration, and
expire between December 2019 and September 2021.
We may be unable to secure surface access or purchase
required surface rights.
Although the Company
acquires the rights to some or all of the minerals in the ground subject to the mineral tenures that it acquires, or has a right
to acquire, in some cases it may not thereby acquire any rights to, or ownership of, the surface to the areas covered by such mineral
tenures. In such cases, applicable mining laws usually provide for rights of access to the surface for the purpose of carrying
on mining activities; however, the enforcement of such rights through the courts can be costly and time consuming. It is necessary
to negotiate surface access or to purchase the surface rights if long-term access is required. There can be no guarantee that,
despite having the right at law to access the surface and carry on mining activities, we will be able to negotiate satisfactory
agreements with any such existing landowners/occupiers for such access or purchase of such surface rights, and therefore we may
be unable to carry out planned mining activities. In addition, in circumstances where such access is denied, or no agreement can
be reached, we may need to rely on the assistance of local officials or the courts in such jurisdiction the outcomes of which cannot
be predicted with any certainty. Our inability to secure surface access or purchase required surface rights could materially and
adversely affect our timing, cost, or overall ability to develop any mineral deposits we may locate.
Our properties and operations may be subject to
litigation or other claims.
From time to time
our properties or operations may be subject to disputes that may result in litigation or other legal claims. We may be required
to assert or defend against these claims, which will divert resources and management time from operations. The costs of these claims
or adverse filings may have a material effect on our business and results of operations.
We do not currently insure against all the risks
and hazards of mineral exploration, development, and mining operations.
Exploration, development,
and mining operations involve various hazards, including environmental hazards, industrial accidents, metallurgical and other processing
problems, unusual or unexpected rock formations, structural cave-ins or slides, flooding, fires, and periodic interruptions due
to inclement or hazardous weather conditions. These risks could result in damage to or destruction of mineral properties, facilities,
or other property, personal injury, environmental damage, delays in operations, increased cost of operations, monetary losses,
and possible legal liability. We may not be able to obtain insurance to cover these risks at economically feasible premiums or
at all. We may elect not to insure where premium costs are disproportionate to our perception of the relevant risks. The payment
of such insurance premiums and of such liabilities would reduce the funds available for exploration and production activities.
Risk Related to Our Debt Securities
In the event of certain breaches with our Secured
Creditors, our assets may be affected.
We have, pursuant
to the Lind Agreement and in connection with the Smith Credit Agreement and Original Smith Loan (collectively, the “Current
Smith Loans”), granted security interests to Lind and Mark Smith (respectively, the “Secured Creditors”) over
all of the assets of the Company in consideration of the debt facilities provided by each Secured Creditor. In the event of certain
breaches of the Lind Agreement, and the terms of the Current Smith Loans, one or both of the Secured Creditors may be entitled
to execute on their security interests and seize or retain our assets, including the shares of 0896800 and ECRC, as well as any
assets of either subsidiary. Certain rights of each of the Secured Parties to execute on their security interests are subject to
notice and cure provisions in respect of default by us; however any such exercise could materially damage our value and our ability
to retain or progress development of the Elk Creek Project.
The level of our indebtedness from time to time
could impair our ability to obtain additional financing.
From time to time
we may enter into transactions to acquire assets or the shares of other companies or to fund development of the Elk Creek Project.
These transactions may be financed partially or wholly with debt, which may increase our debt levels above industry standards.
Our articles of incorporation do not limit the amount of indebtedness that we may incur. Our indebtedness could impair our ability
to obtain additional financing in the future on a timely basis to take advantage of business opportunities that may arise. Our
ability to service our debt obligations will depend on our future operations, which are subject to prevailing industry conditions
and other factors, many of which are beyond our control.
Risks Related to the Common Shares
We believe that we may be a “passive foreign
investment company” for the current taxable year and for one or more future taxable years, which may result in materially
adverse United States federal income tax consequences for United States investors.
We generally will be designated as a “passive
foreign investment company” under the meaning of Section 1297 of the United States Internal Revenue Code of 1986, as amended
(a “PFIC”) if, for a tax year, (a) 75% or more of our gross income for such year is “passive income” (generally,
dividends, interest, rents, royalties, and gains from the disposition of assets producing passive income) or (b) if at least 50%
or more of the value of our assets produce, or are held for the production of, passive income, based on the quarterly average of
the fair market value of such assets. United States shareholders should be aware that we believe we were classified as a PFIC during
our tax years ended June 30, 2017 and 2016, and based on current business plans and financial expectations, believe that we may
be a PFIC for the current and one or more future taxable years. If we are a PFIC for any taxable year during a U.S. shareholder’s
holding period, then such U.S. shareholder generally will be required to treat any gain realized upon a disposition of Common Shares
or warrants, or any “excess distribution” received on its Common Shares, as ordinary income, and to pay an interest
charge on a portion of such gain or distribution. These consequences will be mitigated with respect to the Common Shares, but not
the warrants, if the shareholder makes a timely and effective “qualified electing fund” or “QEF” election
or a “mark-to-market” election with respect to the Common Shares. A U.S. shareholder who makes a QEF election generally
must include in income on a current basis for U.S. federal income tax purposes its share of our net capital gain and ordinary earnings
for any taxable year in which we are a PFIC, whether or not we distribute any amount to our shareholders. A U.S. shareholder who
makes a mark-to-market election generally must include as ordinary income each year the excess of the fair market value of the
Common Shares over the taxpayer’s basis therein. Each U.S. shareholder should consult its own tax advisors regarding the
PFIC rules and the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares and warrants.
Our share price may be volatile and as a result
you could lose all or part of your investment.
In addition to volatility
associated with equity securities in general, the value of your investment could decline due to the impact of any of the following
factors upon the market price of the Common Shares:
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Disappointing results from our exploration efforts;
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Decline in demand for Common Shares;
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Downward revisions in securities analysts’ estimates or changes in general market conditions;
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Technological innovations by competitors or in competing technologies;
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Investor perception of our industry or our prospects; and
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General economic trends.
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In the past fiscal
year, the trading price of our stock on the TSX has ranged from a low of C$0.60 to a high of C$1.07. In addition, stock markets
in general have experienced extreme price and volume fluctuations, and the market prices of securities have been highly volatile.
These fluctuations are often unrelated to operating performance and may adversely affect the market price of the Common Shares.
As a result, you may be unable to sell any Common Shares you acquire at a desired price.
We have never paid dividends on the Common Shares.
We have not paid dividends
on the Common Shares to date, and we may not be in a position to pay dividends for the foreseeable future. Our ability to pay dividends
with respect to the Common Shares will depend on our ability to successfully develop one or more properties and generate earnings
from operations. Further, our initial earnings, if any, will likely be retained to finance our operations. Any future dividends
on Common Shares will depend upon our earnings, our then-existing financial requirements, and other factors, and will be at the
discretion of the Board.
Investors’
interests in the Company will be diluted and investors may suffer dilution in their net book value per Common Share if we issue
additional employee/Director/consultant options or if we sell additional Common Shares to finance our operations.
In
order to further expand the Company’s operations and meet our objectives, any additional growth and/or expanded exploration
activity will likely need to be financed through sale of and issuance of additional Common Shares, including, but not limited
to, raising funds to explore the Elk Creek Project. Furthermore, to finance any acquisition activity, should that activity be
properly approved, and depending on the outcome of our exploration programs, we likely will also need to issue additional Common
Shares to finance future acquisitions, growth, and/or additional exploration programs of any or all of our projects or to acquire
additional properties. We will also in the future grant to some or all of our Directors, officers, and key employees and/or consultants
options to purchase Common Shares as non-cash incentives. The issuance of any equity securities could, and the issuance of any
additional Common Shares will, cause our existing shareholders to experience dilution of their ownership interests.
If
we issue additional Common Shares or decide to enter into joint ventures with other parties in order to raise financing through
the sale of equity securities, investors’ interests in the Company will be diluted and investors may suffer dilution in
their net book value per Common Share depending on the price at which such securities are sold.
We
are subject to the continued listing criteria of the TSX and our failure to satisfy these criteria may result in delisting of
the Common Shares.
The
Common Shares are currently listed on the TSX. In order to maintain the listing, we must maintain certain financial and share
distribution targets, including maintaining a minimum number of public shareholders. In addition to objective standards, the TSX
may delist the securities of any issuer if, in the TSX’s opinion, the issuer’s financial condition and/or operating
results appear unsatisfactory; if it appears that the extent of public distribution or the aggregate market value of the security
has become so reduced as to make continued listing on the TSX inadvisable; if the issuer sells or disposes of principal operating
assets or ceases to be an operating company; if an issuer fails to comply with the listing requirements of TSX; or if any other
event occurs or any condition exists which makes continued listing on the TSX, in the opinion of the TSX, inadvisable.
If
the TSX delists the Common Shares, investors may face material adverse consequences, including, but not limited to, a lack of
trading market for the Common Shares, reduced liquidity, decreased analyst coverage of the Company, and an inability for us to
obtain additional financing to fund our operations.
The
issuance of additional Common Shares may negatively impact the trading price of our securities.
We
have issued Common Shares in the past and will continue to issue Common Shares to finance our activities in the future. In addition,
outstanding options, warrants, and broker warrants to purchase Common Shares may be exercised, resulting in the issuance of additional
Common Shares. The issuance by us of additional Common Shares would result in dilution to our shareholders, and even the perception
that such an issuance may occur could have a negative impact on the trading price of the Common Shares.
We
are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging
growth companies will make our Common Shares less attractive to investors.
We
are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth
company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies
that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section
404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy
statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder
approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years,
although circumstances could cause us to lose that status earlier, including if the market value of our Common Shares held by
non-affiliates exceeds $700 million as of any December 31 before that time, in which case we would no longer be an emerging growth
company as of the following June 30. We cannot predict if investors will find our Common Shares less attractive because we may
rely on these exemptions. If some investors find our Common Shares less attractive as a result, there may be a less active trading
market for our Common Shares and our stock price may be more volatile. Under the JOBS Act, emerging growth companies can also
delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably
elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the
same new or revised accounting standards as other public companies that are not emerging growth companies.
Broker-dealers
may be discouraged from effecting transactions in Common Shares because they are considered a penny stock and are subject to the
penny stock rules.
Our
Common Shares are currently considered a “penny stock.” The SEC has adopted Rule 15g-9 which generally defines “penny
stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of
less than $5.00 per share, subject to certain exceptions. The Common Shares are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited
investors.” The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000
or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse.
The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to
deliver a standardized risk disclosure document in a form prepared by the SEC, which provides information about penny stocks and
the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and
offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly
account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations,
and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting
the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the
penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer
must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s
written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity
in the secondary market for the Common Shares. Consequently, these penny stock rules may affect the ability of broker-dealers
to trade in the Common Shares.
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ITEM 1B.
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UNRESOLVED
STAFF COMMENTS
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None.
Elk
Creek Project, Nebraska
Our
principal mineral property is the Elk Creek Property, a niobium, scandium and titanium exploration project. The Elk Creek Project
does not have any proven or probable reserves under SEC Industry Guide 7 and the project is exploratory in nature. The below information
is in part summarized or extracted from our NI 43-101 technical report entitled “NI 43-101 Technical Report Feasibility
Study Elk Creek Niobium Project Nebraska” with an effective date of June 30, 2017.
Joanna
Poeck, B.Eng., SME-RM, MMSA-QP, and Ben Parsons, MSc, MAusIMM (CP), both of whom are independent Qualified Persons as defined
in NI 43-101, have reviewed and approved the mineral reserves and mineral resources, respectively, and have verified the data
contained in those portions of this feasibility study relevant to their area of responsibility included in this Annual Report
on Form 10-K related to the Elk Creek Project Feasibility Study. Eric Larochelle, B.Eng, who is a consultant to the
Company, and Jeff Osborn, BSc Mining, MMSAQP, are both independent Qualified Persons as defined in NI 43-101, and have reviewed,
approved and verified the scientific and technical information included in this Annual Report on Form 10-K related to the Elk
Creek Project Feasibility Study.
Property
Description and Location
The
Elk Creek Property is a niobium-bearing carbonatite deposit located in Johnson County, southeast Nebraska, USA. In addition to
niobium, other elements of economic significance include titanium and scandium. The Elk Creek Property is situated as shown in
Figure 1 below and is located within the USGS Tecumseh Quadrangle Nebraska SE (7.5 minute series) mapsheet in Sections 1-6, 9-11;
Township 3N; Range 11 and Sections 19-23, 25-36; Township 4N, Range 11, at approximately 40°16’ north and 96°11’
west in the State of Nebraska, in central USA. The Elk Creek Property is approximately 45 miles southeast of Lincoln, Nebraska,
the state capital of Nebraska.
Figure
1 - Property Map showing Location of Elk Creek Project
Title
and Ownership
The
Company currently holds 21 option agreements that are material to the Elk Creek Project. The current optioned land package covers
an area of 4,322 acres. In addition, On April 10, 2017, we announced that we had reached agreement with private landowners for
a perpetual easement of a land parcel at the terminus of the Company’s proposed waterline to the Missouri River from the
Elk Creek Property.
Option
agreements are between NioCorp’s wholly-owned subsidiary ECRC and the individual land owners. Land ownership for the agreements
significant to the project are shown in Figure 2 and listed in Table 1. Significant agreements are those which have been demonstrated
to host mineralized material, or which have the potential to be the site of buildings, facilities or other surface infrastructure.
Figure
2- Land Tenure Map
Source:
NioCorp, 2017
Table
1: Active Lease Agreements Covering The Elk Creek Project
Agreement
Identifier
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Hectares
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Acres
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Agreement
Expiry
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Beethe008
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107.82
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266.43
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30-Apr-20
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Beethe002
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146.56
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362.16
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19-Feb-21
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Beethe003
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48.69
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120.32
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24-Jun-20
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Beethe007
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66.27
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163.75
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20-Jan-21
|
Heidemann003
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48.56
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120.00
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17-Mar-20
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Heidemann004
|
62.96
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155.58
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15-Mar-20
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Heidemann005
|
79.55
|
196.57
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16-Mar-20
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Heidemann006
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64.75
|
160.00
|
26-Mar-20
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Heideman007
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64.75
|
160.00
|
25-Mar-20
|
Koehler001
|
64.75
|
160.00
|
12-Jun-20
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Krueger001
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123.41
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304.95
|
18-Dec-19
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Nielsen001
|
112.81
|
278.75
|
25-Jun-20
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Othmer003
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61.48
|
151.93
|
22-Jan-21
|
Othmer004
|
113.31
|
280.00
|
22-Jan-21
|
Watermann001
|
145.69
|
360.00
|
6-Sep-21
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Woltemath80S
|
32.37
|
80.00
|
4-Dec-19
|
Woltemath001
|
48.47
|
119.77
|
21-Jan-20
|
Woltemath002
|
152.49
|
376.81
|
4-Dec-19
|
Woltemath003J
|
89.03
|
220.00
|
25-Mar-20
|
Woltemath003P
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82.96
|
205.00
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25-Mar-20
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Shuey001
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32.37
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80.00
|
28-May-20
|
Source:
NioCorp, 2017
The
current estimated Mineral Resource is wholly contained within parcels Woltemath003J and Beethe008, and agreements covering both
of these properties have been secured. The Company considers these two leases to be the only leases on which the Company’s
development of the Elk Creek Project is substantially dependent. Negotiations for additional lands to support various configurations
of the surface operations have been completed. The Company believes that the surface plant and facilities associated with the
Elk Creek Project could be located in any number of places, and would not necessarily need to be sited on lands contiguous with
the Beethe008 and Woltemath003 properties.
As
part of the exploration option agreements, where required, the Company has also secured surface rights, which allow for access
to the land for drilling activities and associated mineral exploration and project development work.
The
agreements that involve mineral rights include a 2% NSR royalty attached with the option to purchase (“OTP”). The
agreements grant the Company an exclusive right to explore and evaluate the property for a period of 60 months, with an OTP the
mineral rights, the surface rights or a combination of the mineral and surface rights at any time during the term. As the Woltemath80S
agreement is limited to an OTP for the surface rights only, it does not contain an NSR provision.
Accessibility,
Physiography, Climate and Infrastructure
The
Elk Creek Property is easily accessible year round as it is situated approximately 45 miles southeast of Lincoln (State Capital),
Nebraska and approximately 68 miles south of Omaha, Nebraska. Access to the site can be completed via road or from one of the
regional airports. There are several regular flights to both Lincoln and Omaha; however, the Elk Creek Property is most easily
accessible from Lincoln. From Lincoln Municipal Airport, the Elk Creek Property is accessed via paved roads on the main network
and a secondary network of gravel roads. The drive from the Lincoln Municipal Airport to the property is typically 1 hour and
15 minutes, and from Omaha’s Eppley Airport the drive is approximately 1 hour and 45 minutes.
Geologists
can be sourced from local universities. An experienced mining-related workforce can be found in Denver, Colorado (eight hours
drive west of the Elk Creek Property).
Southeast
Nebraska is situated in a Humid Continental Climate (Dfa) on the Köppen climate classification system. In eastern Nebraska,
this climate is generally characterized by hot humid summers and cold winters. Average winter temperatures vary between 13°F
to 35°F. Average summer temperatures vary between 64°F to 90°F. Exploration, construction and operational activities
may be conducted all year round.
Average
monthly precipitation (rain and snowfall) varies between 0.9 and 5.0 inches. Average yearly precipitation is between 31 and 33
inches with an average yearly snowfall of approximately 28 inches. Nebraska is located within an area known for tornadoes which
runs through the central U.S. where thunderstorms are common in the spring and summer months. Tornadoes primarily occur during
the spring and summer and may occur into the autumn months.
The
Company has negotiated surface rights as needed as part of its existing lease agreements. There is sufficient suitable land area
available within the Elk Creek Property area for mine waste disposal, for future tailings disposal, a processing plant, and related
mine infrastructure.
There
are several local communities near the Elk Creek Property including Elk Creek and Tecumseh that will provide local housing for
the Elk Creek Project. There are a number of other communities within driving distance and the large cities of Lincoln and Omaha
are within reasonable driving distance. Mining activities currently taking place in the area are limited to limestone and aggregate
operations to support the local cement manufacturing and construction industries.
The
Elk Creek Property site has no existing infrastructure except being adjacent to the Nebraska state highway 50 and County Road
721. The Elk Creek Project will be accessed from County Road 721 through a guard gate into the Elk Creek Property.
The
Elk Creek Project is expected to incorporate surface and underground infrastructure, as well as tailings storage facilities. The
offsite infrastructure is expected to include a new high voltage transmission line constructed by the local utility company and
providing power to an on-site primary sub-station and a natural gas pipeline built by the owner of the interstate pipeline. Water
used on site in all capacities will be supplied from mine dewatering. See “
Feasibility Study
” below for additional
information regarding proposed infrastructure related to the Elk Creek Project.
The
local topography of eastern Nebraska is relatively low-relief with shallow rolling hills intersected by shallow river valleys.
Elevation varies from about 1,066 to 1,280 feet above sea level (masl). Bedrock outcrop exposure is nonexistent in the Elk Creek
Project area.
The
majority of the Elk Creek Project area is used for cultivation of corn and soybeans, along with uses as grazing land. Native vegetation
typical of eastern Nebraska is upland tall-grass, prairie and upland deciduous forests.
Geology
and Mineralization
Geology
The
Nebraska Precambrian basement predominantly comprises granite, diorite, basalt, anorthosite, gneiss, schist and clastic sediments.
A series of island arcs sutured onto the Archean continent created the basic framework of the area. This suture left a north-trending
intervening boundary zone ancestral to the Nemaha Uplift, providing a pre-existing tectonic framework which controlled the trend
of the later Midcontinent Rift System (1.0 to 1.2 billion years ago). The Carbonatite is located at the northeast extremity of
the Nemaha Uplift.
The
Elk Creek Property includes the Carbonatite that has intruded older Precambrian granitic and low- to medium-grade metamorphic
basement rocks. The Carbonatite and Precambrian rocks are believed to be unconformably overlain by approximately 200 m of Paleozoic
marine sedimentary rocks of Pennsylvanian age (approximately 299 to 318 million years ago).
As
a result of this thick cover, there is no surface outcrop within the Elk Creek Property area of the Carbonatite, which was identified
and targeted through magnetic surveys and confirmed through subsequent drilling. The available magnetic data indicates dominant
northeast, west-northwest striking lineaments and secondary northwest and north oriented features that mimic the position of regional
faults parallel and/or perpendicular to the Nemaha Uplift.
The
Elk Creek Carbonatite is an elliptical magmatic body with northwest trending long axis perpendicular to the strike of the 1.1
billion years ago Midcontinent Rift System, near the northern part of the Nemaha uplift. It was first discovered by drilling in
1971 and tentatively identified as a carbonatite on the basis that it resembled rocks of the Fen District of Norway. The definitive
confirmation of carbonatite was completed using Rare Earth Element (“REE”), P205 and 87Sr/86Sr isotope analysis. The
Carbonatite has also been compared to the Iron Hill carbonatite stock in Gunnison County, Colorado on the basis of similar mineralogy.
The
Carbonatite consists predominantly of dolomite, calcite and ankerite, with lesser chlorite, barite, phlogopite, pyrochlore, serpentine,
fluorite, sulfides and quartz. It is, however, believed from stratigraphic reconstruction based on drill core observation in the
area that the carbonatite is unconformably overlain by approximately 200 m of essentially flat-lying Palaeozoic marine sedimentary
rocks, including carbonates, sandstones and shales of Pennsylvanian age (approximately 299 to 318 million years ago).
Current
studies suggest that the Carbonatite was emplaced approximately 500 million years ago in response to stress along the Nemaha Uplift
boundary predating deposition of the Pennsylvanian sedimentary sequence (approximately 299 to 318 million years ago). However,
observations on drill cores from the Elk Creek Project site show that the contact between the Carbonatite body and the Pennsylvanian
sediments is a sheared but oxidized contact suggesting that the Carbonatite is intrusive in the Pennsylvanian sequence. Furthermore,
both rock types appear to have been affected by at least one main brittle-ductile deformation event resulting in formation of
fault structures. Microstructures including sub-vertical and sub-horizontal tension veins, together with related sheared veins
and fault planes displaying sub-vertical and sub-horizontal slickensides along drill cores are indications for the presence of
extensional and oblique to strike-slip faults. These faults could correspond to the magnetic lineaments present in the area.
Mineralization
The
property hosts niobium, titanium, and scandium mineralization as well as rare earth elements and barium mineralization that occurs
within the Elk Creek Carbonatite. The current known extents of the Carbonatite unit are approximately 950 m along strike, 300
m wide, and 750 m in dip extent, below the unconformity. Niobium, titanium and scandium are considered the main elements of interest,
within additional background on rare earth elements mineralization.
The
deposit contains significant concentrations of niobium. Based on the metallurgical testwork completed to date at a number of laboratories
using QEMSCAN® analysis, the niobium mineralization is known to be fine grained, and that 77% of the niobium occurs in the
mineral pyrochlore, while the balance occurs in an iron-titanium-niobium oxide mineral of varying composition.
Within
the Elk Creek Carbonatite, a host of other elements exist with varying degrees of concentration. The Company has completed both
whole rock analysis and multi-element analysis on all samples for the 2014 drilling program, described below, plus resampling
of selected historical core/pulps between 2011 and 2014.
Historical
Exploration
Drilling
at the Elk Creek Property was conducted in three phases. The first was during the 1970’s and 1980’s by the Molybdenum
Company of America (“Molycorp”), the second in 2011 by Quantum (NioCorp under its former name), and the third and
latest program from 2014 to 2016 by NioCorp. To date, 129 diamond core holes have been completed for a total of 64,981 m over
the entire geological complex. Of these, a total of 48 holes (33,909 m) have been completed to date in the mineralized area and
are used in the current Mineral Resource estimate. Five additional holes with a total length 3,353.1 m, were drilled for hydrogeologic
and geotechnical purposes. No sampling has been completed of these holes to date and therefore they have not been considered for
the Mineral Resource estimate.
All
drilling has been completed using a combination of Tricone, Reverse Circulation (“RC”) or Diamond Drilling (“DDH”)
in the upper portion of the hole within the Pennsylvanian sediments. All drilling within the underlying Carbonatite has been completed
using DDH methods.
Table
2: Summary of Drilling Database within Elk Creek Deposit Area
Year
|
|
Company
|
|
|
Number of Holes
|
|
|
Average Depth(m)
|
|
|
Sum Length(m)
|
|
1970-1980
|
|
Molycorp
|
|
|
|
27
|
|
|
|
596.6
|
|
|
|
16,108.2
|
|
2011
|
|
Quantum
|
|
|
|
3
|
|
|
|
772.6
|
|
|
|
2,317.7
|
|
2014-2015
|
|
NioCorp
|
|
|
|
18
|
|
|
|
845.4
|
|
|
|
15,482.8
|
|
Total
|
|
|
|
|
|
48
|
|
|
|
700.9
|
|
|
|
33,908.7
|
|
Source:
SRK, 2015
Molycorp
1973-1986
Between
1973 and 1974, Molycorp completed six drillholes: EC-1 to EC-4, targeting the Elk Creek anomaly and two other holes outside the
Elk Creek anomaly area. Drillholes were typically carried out by RC drilling through the overlying sedimentary rocks and diamond
drilling through the Ordovician-Cambrian basement rocks.
Molycorp
continued their drill program from 1977 and, in May 1978, Molycorp made its discovery of the current Mineral Resource with drillhole
EC-11. EC-11 is located on Section 33, Township 4N, and Range 11. The Carbonatite hosting the Elk Creek Project was intersected
at a vertical depth of 203.61 m (668 ft).
Molycorp
continued its drilling program through to 1984, which mainly centered on the Elk Creek Project within a radius of roughly 2 km.
By 1984, Molycorp had completed 57 drillholes within the Elk Creek gravity anomaly area, which included 25 drillholes over the
Elk Creek Project area.
From
1984 to 1986, drilling was focused on the Elk Creek gravity anomaly area. The anomaly area is roughly 7 km in diameter and drilling
was conducted on a grid pattern of approximately 610 by 610 m (roughly 2,000 by 2,000 ft.) with some closer spaced drillholes
in selected areas.
By
1986, a total of 106 drillholes were completed for a total of approximately 46,797 m (153,532 ft). The deepest hole reached a
depth of 1,038 m (3,406 ft) and bottomed in carbonatite.
Quantum,
2010-2011 (NioCorp under its former name)
In
April 2011, Quantum conducted a preliminary drill program (three holes) on the Elk Creek deposit and two REE exploration targets
(two holes), which have been excluded from the current Mineral Resource estimation, as they do not intersect the Nb
2
O
5
anomaly and are located to the east. The objectives of the drill program over the Elk Creek Property were to verify the
presence of higher grade niobium mineralization at depth, and to infill drill the known niobium deposit in order to upgrade the
resource category of the previous resource estimate and expand the known resource. The drill program was also established to collect
sufficient sample material for metallurgical characterization and process development studies of the niobium mineralization.
The
2011 program consisted of five inclined drillholes, totaling 3,420 m of NQ size diameter core. Inclusive of this total, three
drillholes, totaling 2,318 m were drilled into the known Elk Creek deposit.
NioCorp
2014 to present
NioCorp
commenced drilling on the Elk Creek Property using a three-phased program with the aim of increasing the confidence in the 2012
Mineral Resource Estimate from Inferred to Indicated. The three-phased program was originally based on 14 drillholes for approximately
12,150 m (announced in a press release on April 29, 2014), but was subsequently expanded during the program to 18 drillholes for
approximately 15,482 m. Three of the 18 drillholes were drilled for the purpose of metallurgical characterization and process
development studies. Two of these drillholes, NEC14-MET-01 and NEC14-MET-02 were not assayed, while NEC14-MET-03 was quarter cored
with one quarter being assayed and the remainder used for metallurgical testwork. The drilling has been orientated to intersect
the geological model from the southwest and northeast (perpendicular to the strike), with the exception of NEC14-011 and NEC14-012,
which were oriented southeast and northwest, respectively.
Elk
Creek Feasibility Study
On
June 30, 2017, we announced the results of the Elk Creek Feasibility Study related to the Elk Creek Project, and the related technical
report was completed and filed in Canada on SEDAR on August 10, 2017. The Elk Creek Project is planned as an underground mining
operation using a long-hole stoping mining method and paste backfill, operating with a processing rate of 2,760 tonnes per day.
Expected total production over the 32-year mine life includes 143,824 tonnes of payable niobium, 3,237 tonnes of scandium (Sc2O3),
and 359,128 tonnes of titanium (TiO2). Estimated up-front direct capital costs are $705 million, in addition to indirect costs
of $189 million, pre-production capital costs of $85 million, an overall contingency of $109 million, and pre-production net revenue
credit of $79 million.
Mineral
Reserves and Resources
The
Mineral Reserves and Mineral Resources disclosed below are based on the Elk Creek Feasibility Study in conformity with generally
accepted CIM “Estimation of Mineral Resource and Mineral Reserves Best Practices” guidelines, and are reported in accordance
with the CIM “Definition Standards – For Mineral Resources and Mineral Reserves, May 10, 2014.” Mineral Reserves
and Mineral Resources at the Elk Creek Project as of June 30, 2017 are summarized below in Table 3 and Table 4, respectively.
Cautionary
Note to U.S. Investors: The terms Proven Reserve, Probable Reserve, Indicated Resource, and Inferred Resource as described in
Tables 3 and 4 below are as defined in Canadian National Instrument 43-101. These terms are not defined under SEC Industry Guide
7 and are not SEC Industry Guide 7 proven and probable reserves. In addition, the estimation of inferred resources involves far
greater uncertainty as to their existence and economic viability than the estimation of other categories of resources. U.S. investors
are cautioned not to assume that estimates of inferred mineral resources exist, are economically minable, or will be upgraded
into measured or indicated mineral resources. See “Cautionary Note to U.S. Investors Regarding Mineral Reserve and Resource
Estimates” above.
Table
3: Underground Mineral Reserves Estimate for Elk Creek
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade
|
|
Classification
|
|
Tonnage
(000’st)
|
|
|
(Nb2O5%)
|
|
|
(TiO2%)
|
|
|
(Sc g/t)
|
|
Proven
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Probable
|
|
|
31,661
|
|
|
|
0.79
|
|
|
|
2.81
|
|
|
|
71.58
|
|
Proven and Probable
|
|
|
31,661
|
|
|
|
0.79
|
|
|
|
2.81
|
|
|
|
71.58
|
|
Source:
SRK, effective May 15, 2017.
|
1.
|
The
Elk Creek Project is amenable to underground longhole open stoping mining methods. Using results from metallurgical test work,
suitable underground mining and processing costs, and forecast product pricing SRK has reported the Mineral Reserve at a NSR cut-off
of US$180/t.
|
|
2.
|
NSR
uses the following factors:
|
|
●
|
Nb
2
O
5
:
0.699 is conversion from Nb
2
O
5
to Nb, 1,000 is kg conversion, 85.8% is the hydromet plant recovery, 96%
is the pyromet plant recovery, 100% payability, assuming a US$ 38.5 kg selling price.
|
|
●
|
TiO
2
:
1,000 is kg conversion, 40.3% is metallurgical recovery, assuming 100% payability, assuming
a US$ 0.88/kg is selling price.
|
|
●
|
Sc:
93.1% is metallurgical recovery, 100% payability, US$ 3,500 kg is selling price per kg
of scandium oxide, with a conversion of 0.652 is the amount of Sc in Sc
2
O
3
.
|
|
●
|
Price
assumptions for FeNb, Sc
2
O
3
, and TiO
2
are based upon
independent market analyses for each product.
|
|
●
|
Ore
reserves have been stated on the basis of a mine design, mine plan, and cash-flow model.
|
|
3.
|
Mining
recovery is applied and ranges from 94% to 100%.
|
|
4.
|
Mining
dilution (internal and external) is included. External stope dilution is 6%, and a portion
of the external stope dilution is applied using grade values based on average surrounding
block information. A development dilution of 5% is used at a 0% grade.
|
|
5.
|
The
Mineral Reserves were estimated by Joanna Poeck, BEng Mining, SME-RM, MMSAQP #01387QP,
a Qualified Person.
|
Table
4: Mineral Resource Statement for Elk Creek
Classification
|
|
|
Cut-off
NSR
(US$/t)
|
|
|
Tonnage
(000’s t)
|
|
|
Grade
(Nb
2
O
5
%)
|
|
|
Contained
Nb
2
O
5
(t)
|
|
|
Grade
(TiO
2
%)
|
|
|
Contained
TiO
2
(t)
|
|
|
Grade
(Sc g/t)
|
|
|
Contained
Sc
(t)
|
|
Indicated
|
|
|
|
180
|
|
|
|
90,900
|
|
|
|
0.66
|
|
|
|
598,400
|
|
|
|
2.59
|
|
|
|
2,353,300
|
|
|
|
70
|
|
|
|
6,300
|
|
Inferred
|
|
|
|
180
|
|
|
|
133,600
|
|
|
|
0.48
|
|
|
|
643,800
|
|
|
|
2.23
|
|
|
|
2,985,300
|
|
|
|
59
|
|
|
|
7,800
|
|
Source:
SRK, effective May 15, 2017. All figures rounded to reflect the relative accuracy of the estimates. Totals may not sum due to
rounding.
|
1.
|
Mineral
Resources are reported inclusive of the Mineral Reserve. Mineral Resources are not Mineral Reserves and do not have demonstrated
economic viability. All figures are rounded to reflect the relative accuracy of the estimate and have been used to derive sub-totals,
totals and weighted averages. Such calculations inherently involve a degree of rounding and consequently introduce a margin of
error. Where these occur, SRK does not consider them to be material. All composites have been capped where appropriate. Historical
samples have been validated via re-assay programs, and all drilling completed by NioCorp has been subjected to QA/QC. All composites
have been capped where appropriate, and estimates completed using Ordinary Kriging. The Concession is wholly owned by and exploration
is operated by NioCorp Developments Ltd
|
|
2
.
|
The
reporting standard adopted for the reporting of the MRE uses the terminology, definitions and guidelines given in the Canadian
Institute of Mining, Metallurgy and Petroleum (CIM) Standards on Mineral Resources and Mineral Reserves (May 10, 2014) as required
by NI 43-101.
|
|
3
.
|
The
Elk Creek Project is amenable to Underground longhole open stoping mining methods. Using results from metallurgical test work,
suitable underground mining and processing costs, and forecast product pricing SRK has reported the Mineral Resource at a NSR
cut-off of US$ 180/t.
|
|
4
.
|
NSR
uses the following factors
|
|
●
|
Nb2O5:
0.699 is conversion from Nb2O5 to Nb, 1000 is kg conversion, 85.8% is the hydromet plant recovery, 0.96 is the pyromet plant recovery,
100% payability, assuming a US$ 38.5 kg selling price.
|
|
●
|
TiO2:
1000 is kg conversion, 40.3% is metallurgical recovery, assuming 100% payability, assuming a US$ 0.88/kg is selling price.
|
|
●
|
Sc:
93.1% is met recovery, 100% payability, US$ 3,500 kg is selling price per kg of scandium oxide, with a conversion of 0.652 is
the amount of Sc in Sc2O3
|
|
●
|
Price
assumptions for FeNb, Sc
2
O
3
, and TiO
2
are based upon independent market analyses for each product.
|
|
5.
|
SRK
completed a site inspection of the deposit by Mr. Martin Pittuck, MSc, CEng, MIMMM, an appropriate “independent qualified
person” as this term is defined in NI 43-101.
|
Financial
Analysis Included in the Elk Creek Feasibility Study
The
metrics reported in the Elk Creek Feasibility Study are based on the annual cash flow model results. The metrics are on both a
pre-tax and after-tax basis, on a 100% equity basis with no Elk Creek Project financing inputs, and are in Q2 2017 U.S. constant
dollars. Foreign exchange impacts were deemed negligible as most, if not all costs and revenues are denominated in U.S. dollars.
Key
criteria used in the analysis are discussed in detail throughout this section. Principal Project assumptions used are shown summarized
below.
Description
|
Value
|
Pre-Production
Period
|
4
years
|
Process
Plant Life
|
32
years
|
Mine
Operating Days per Year
|
365
|
Mill
Operating Days per Year
|
365
|
Discount
Rate
|
EOP
@ 8%
|
Commercial
Production Year
|
2021
|
Source:
SRK, 2017
Summary
of Key Evaluation Metrics and Projected Economic Results Included in the Elk Creek Feasibility Study
Description
|
|
Value
|
|
Ore Mined (kt)
|
|
|
31,661
|
|
Waste Mined (kt)
|
|
|
1,484
|
|
Total Material Mined (kt)
|
|
|
33,145
|
|
Mining Rate (t/d)
|
|
|
2,760
|
|
Nb
2
O
5
Grade
|
|
|
0.79
|
%
|
TiO
2
Grade
|
|
|
2.81
|
%
|
Scandium Grade (g/t)
|
|
|
71.6
|
|
Contained Nb
2
O
5
(kt)
|
|
|
250
|
|
Contained TiO
2
(kt)
|
|
|
891
|
|
Contained Sc (t)
|
|
|
2,266
|
|
Total Ore Processed (kt)
|
|
|
31,661
|
|
Processing Rate (kt/y)
|
|
|
1,009
|
|
Average Recovery, Nb
2
O
5
|
|
|
82.4
|
%
|
Average Recovery TiO
2
|
|
|
40.3
|
%
|
Average Recovery Sc
|
|
|
93.1
|
%
|
Recovered Nb
2
O
5
(kt)
|
|
|
214
|
|
Recovered TiO
2
(kt)
|
|
|
359
|
|
Recovered Sc (t)
|
|
|
2,111
|
|
Description
|
|
Value
|
|
Realized Market Prices
|
|
|
|
|
Nb ($/kg)
|
|
$
|
39.60
|
|
TiO
2
($/kg)
|
|
$
|
0.88
|
|
Sc
2
O
3
($/kg)
|
|
$
|
3,675
|
|
Payable Metal
|
|
|
|
|
Nb (t)
|
|
|
143,824
|
|
TiO
2
(t)
|
|
|
359,128
|
|
Sc
2
O
3
(t)
|
|
|
3,237
|
|
Total Gross Revenue (in thousands)
|
|
$
|
17,906,337
|
|
Operating Costs (in thousands)
|
|
|
|
|
Mining Cost
|
|
|
(1,244,182
|
)
|
Process Cost
|
|
|
(3,285,282
|
)
|
Site G&A Cost
|
|
|
(268,038
|
)
|
Concentrate Freight Cost
|
|
|
(10,260
|
)
|
Other Infrastructure Costs
|
|
|
(211,595
|
)
|
Water Management Cost
|
|
|
(250,839
|
)
|
Tailings Management Cost
|
|
|
(45,682
|
)
|
Property Tax
|
|
|
(126,181
|
)
|
Royalties
|
|
|
(251,809
|
)
|
Annual Bond Premium
|
|
|
(4,762
|
)
|
Total Operating Costs (in thousands)
|
|
|
(5,698,630
|
)
|
Operating Margin (EBITDA)(in thousands)
|
|
|
12,207,706
|
|
Effective Tax Rate
|
|
|
24.1
|
%
|
Income Tax (in thousands)
|
|
|
(2,779,039
|
)
|
Total Taxes (in thousands)
|
|
|
(2,779,039
|
)
|
Working Capital
(1)
|
|
|
0
|
|
Operating Cash Flow (in thousands)
|
|
$
|
9,428,667
|
|
Source:
SRK, 2017
|
|
|
|
|
(1)
|
Does
not include Initial Working Capital (A/R, A/P, & Inv) of $30 million in Years -1 and +1.
|
Operating
Cost Estimates Included in the Elk Creek Feasibility Study
The
following unit rates are stated on a Run of Mine (“RoM”) basis where the costs are estimated from 2022 through 2051
period and do not include the first or last years of production nor preproduction and post closure Operating Costs. This basis
is used in order to give a more representative measurement of anticipated costs during normal operating conditions.
Description
|
|
RoM
US$/t ore
|
|
Mining Cost
|
|
$
|
39.43
|
|
Process Cost
|
|
|
111.56
|
|
Site G&A Cost
|
|
|
8.37
|
|
Tailings Management Cost
|
|
|
1.42
|
|
Water Management Cost
|
|
|
7.74
|
|
Total RoM Operating Costs
|
|
$
|
168.52
|
|
Source:
SRK, 2017
Capital
Cost Estimates Included in the Elk Creek Feasibility Study
The
following table shows the breakout in initial and sustaining capital estimates which total $1.50 billion. An overall 11.1% contingency
factor has been applied to the initial capital estimate while a smaller 1.4% contingency was applied to the sustaining capital
estimate. The initial capital estimate of $1,088 million can be partially offset by a Gross Preproduction Revenue Credit of $79
million (generated by preproduction product sales) to net to a cost of $1,008 million.
($000’s)
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
|
Initial
|
|
|
|
Sustaining
|
|
|
|
Total
|
|
Capitalized Preproduction Expenses
|
|
$
|
70,838
|
|
|
$
|
—
|
|
|
$
|
70,838
|
|
Site Preparation and Infrastructure
|
|
|
39,550
|
|
|
|
17,020
|
|
|
|
56,570
|
|
Processing Plant
|
|
|
367,125
|
|
|
|
109,365
|
|
|
|
476,490
|
|
Mine Water Management
|
|
|
99,756
|
|
|
|
19,335
|
|
|
|
119,091
|
|
Mining Infrastructure
|
|
|
178,564
|
|
|
|
205,722
|
|
|
|
384,285
|
|
Tailings Management
|
|
|
20,194
|
|
|
|
60,239
|
|
|
|
80,433
|
|
Site Wide Indirects
|
|
|
7,174
|
|
|
|
—
|
|
|
|
7,174
|
|
Processing Indirects
|
|
|
98,546
|
|
|
|
—
|
|
|
|
98,546
|
|
Mining Indirects
|
|
|
34,238
|
|
|
|
—
|
|
|
|
34,238
|
|
Process Commissioning
|
|
|
13,713
|
|
|
|
—
|
|
|
|
13,713
|
|
Owner’s Costs
|
|
|
38,365
|
|
|
|
—
|
|
|
|
38,365
|
|
Mine Water Management Indirects
|
|
|
10,760
|
|
|
|
—
|
|
|
|
10,760
|
|
Contingency
|
|
|
108,784
|
|
|
|
5,773
|
|
|
|
114,557
|
|
Total Capital Costs
|
|
$
|
1,087,608
|
|
|
$
|
417,453
|
|
|
$
|
1,505,061
|
|
Preproduction Revenue Credit
|
|
|
79,312
|
|
|
|
|
|
|
|
|
|
Net Project Total
|
|
$
|
1,008,296
|
|
|
|
|
|
|
|
|
|
Source:
SRK, 2017. Totals may not sum due to rounding.
Planned
Mining Operations
The
Elk Creek Project is planned as a high-grade underground mining operation using a long-hole stoping mining method and paste backfill,
with shaft access to minimize development through water bearing horizons. The mine will utilize jumbo drills for lateral development
and tophammer and down-the-hole drills for vertical development and production stoping. Bolters will be used for ground support.
Ore will be remotely mucked from the bottom stope accesses using 14 tonne Load-Haul-Dump units (“LHD”). The LHDs will
transport the ore to remuck bays to maximize the efficiency of the stope mucking operations. A second LHD and a fleet of 40 tonne
haul trucks will be used to transport ore from the remuck bays to the grizzly feeding the underground material handling system.
The ore is fed through the grizzly with a rock breaker into an underground crusher (the “Primary Crusher”) and via
a material handling system to the surface.
Planned
Processing Operations
Planned
ore process operations include mineral processing, hydrometallurgical processing (“Hydromet”), and pyrometallurgical
processing (“Pyromet”) housed in separate buildings.
The
mineral processing building will house all of its equipment within a single large building. The primary driver of mineral processing
is the dry processing of ore. Ore from the Primary Crusher (located in the underground mine) will be fed to the secondary cone
crusher system, operating in closed circuit with a double deck screen. The screen undersize from the cone crusher system will
be fed to a high-pressure grinding roll unit (“HPGR”), operating in closed circuit with another double deck screen.
The HPGR screen undersize is the comminution product that will report to the Hydromet process.
The
Hydromet plant building will be a multi-level engineered steel structure which will house equipment on two levels. Ore from mineral
processing will be fed through 12 individual processes required to separate the three recoverable products. The purpose of the
Hydromet processing steps is to leach the pay metals into solution using two separate acid leaches (HCl Leach and Sulfuric Acid
Bake), remove impurities, separate the three pay metals, and perform precipitation/processing to final solid oxide forms. Outputs
from the Hydromet Process include saleable titanium dioxide and scandium trioxide, with niobium pentoxide reporting to the Pyromet
plant for final processing. The Hydromet plant will be supported by a Hydrochloric Acid Regeneration plant and a Sulfuric Acid
Plant.
The
Pyromet building will house most of its equipment within a single building. The purpose of the Pyromet plant is to reduce the
niobium pentoxide coming from the Hydromet feed by converting it into a saleable ferroniobium (FeNb) metal. Aluminum shots and
iron oxide pellets will be introduced to an electric arc furnace on a continuous basis along with fluxing agents and niobium pentoxide
to produce a saleable FeNb metal.
Proposed
Production Plan and Schedule
Based
on the Elk Creek Feasibility Study, the operating mine life is approximately 32 years with a nominal processing rate of 2,760
tonnes per day. The Elk Creek Project timeline is based on First Metal 42 months after Authorization to Proceed, plus an additional
3 months of Ramp-up to 80% of production capacity for a total of 45 months, and assumes no financing constraints. The NioCorp
board must approve a construction program and budget before construction of the Elk Creek Project can begin. This approval, along
with the receipt of all required governmental permits and approvals and the completion of project financings, will determine whether
and when construction of the Elk Creek Project can begin.
Proposed
Tailings Storage
The
tailings produced by the process plant will consist of filtered water leach residue, calcined excess oxide, and slag. Four tailings
storage facilities (“TSF”) will be constructed sequentially to contain the tailings over the life of the project,
and would contain approximately 13.5 million tonnes of tailings. The tailings facilities have been designed to incorporate
two independent areas: a composite-lined tailings solids storage area; and an area with double lined containment including a leak
collection and recovery system for management of stormwater runoff and drainage from the tailings solids. The TSFs will store
predominantly dry (i.e., not in a slurry consistency) tailings from the plant with embankment construction based on a “downstream”
construction method. Facility closure is considered in the design.
Planned
Water Management
For
the first several years of construction, the advancement of the shaft and underground workings will require subsurface dewatering.
The waterline to the Missouri River is a critical element to the Elk Creek Project to allow discharge from the dewatering process
that will be required to construct and operate the mine. The waterline to the Missouri will require the installation of a 914
cm (36 inch) diameter pipeline within County Right-of-Way (“ROW”) of four counties in southeast Nebraska, the crossing
of State Highways as well as railroad crossings. The waterline will also require multiple pump stations and a diffuser structure
constructed in the Missouri River. A majority of the waterline and associated facilities will be constructed within ROW while
portions will require acquisition of property from private property owners.
The
Elk Creek Project will require multiple permits in order to construct and operate the system and to discharge the water to the
Missouri River. The process of obtaining the 404 and 408 permits from the USACE and the permit to discharge to the Missouri River
from the State of Nebraska are underway. Permits associated with occupying or crossing ROW and railroads as well as the Nebraska
Department of Environmental Quality (“NDEQ”) construction permit will be prepared during the preliminary and final
design phases of the Elk Creek Project. The waterline construction schedule has been evaluated and deemed to be feasible in regard
to the overall construction schedule for the mine. Certain activities related to data collection and preliminary design of the
waterline should commence in the near future to facilitate the overall Elk Creek Project schedule.
Because
the mine dewatering flow will exceed site process water requirements, approximately 25% of the flows will be used as makeup to
a Water Treatment Plant. The major feed to the water treatment plant will be the discharge from the process plant. A water treatment
plant including Reverse Osmosis treatment will be used to provide up to 300 gpm of potable water for the site, in addition to
providing 1,575 gpm to the production process.
Power
The
local power utility (Omaha Public Power District) will provide power from nearby transmission lines to the site. This will require
that an approximate 18-mile transmission line be installed by the utility to provide the site sub-station with the required site
power demand. The local power utility will also design and install the main substation that will be owned and maintained by the
utility. This infrastructure will be paid back through rate changes on the electrical usage.
Natural
Gas
A
total of four interstate pipelines intersect in the region of Beatrice NE which is approximately 28 miles to the West of the plant
site. Discussions have been initiated with all four pipelines and two local gas distributors to accept proposals for running a
lateral from one of the interstate pipelines to the project site. The interstate gas line owner will install/own/operate the lateral
pipeline to the site. The capital cost and the cost of transportation will be assessed in a tariff on the natural gas used. The
interstate pipeline owner will obtain the necessary permits, rights of way and land acquisitions as well as the metering and pressure
regulation station at the project site.
Markets
Market
studies for niobium, titanium dioxide and scandium trioxide are an important part of the proposed Elk Creek operation. These commodities,
especially niobium and scandium trioxide (scandium), are thinly traded without an established publicly available price discovery
mechanism. Hence, detailed third party market studies provide the basis for assumptions used in the economic analysis.
SRK
carried out a Niobium Marketing Study in Q2 2017 at the request of NioCorp. Based on this marketing study, the Elk Creek Feasibility
Study used the recommended real 2017 U.S. dollar base price of $40/kg Nb as the forward looking price for steel grade (65%) ferroniobium.
The base price is adjusted to a realized price to account for the discount provisions contained in the two ferroniobium offtake
agreements that the Company has concluded.
NioCorp
engaged OnG Commodities LLC (OnG) to produce a preliminary market assessment in April 2017 (OnG, 2017). The study examines current
scandium production trends (~20 t/y) from existing and emerging producers plus an outlook for supply to 2028. The outlook
then reviewed the current and emerging applications for scandium including fuel cells, aerospace, industrial and other uses plus
and an outlook for demand to 2028. Based on these inputs, OnG provided pricing forecasts and global demand volumes by year to
2028 based estimated production costs and supply-demand balances.
No
formal market study was done for titanium dioxide (TiO
2
) during the report period as it only represents 2% of overall
revenue in the economic analysis. All market information for titanium and titanium dioxide is derived from USGS Commodity Market
Summaries (Bedinger, 2016) and an internal SRK price database.
Taxation
Taxes
that may be levied on the Elk Creek Project can be summarized as follows:
|
●
|
Corporate
Income Tax (CIT) rates are 35% for Federal and 7.81% for Nebraska
|
|
●
|
Federal
taxable income is subject to Alternative Minimum Tax (AMT) of 20%
|
The
Elk Creek Project is eligible for federal depletion allowances and credits, as well as various state incentives. The calculated
effective income tax rate for the Elk Creek Project is 24.1%.
Environmental
and Social
A
number of key permits and environmental management requirements have been identified for the Elk Creek Project, some of which
need to be implemented as soon as practicable in order to maintain the proposed Elk Creek Project schedule.
|
●
|
While
not necessarily complex, the timing generally required to complete permitting through
any federal regulatory agency requires that NioCorp engage key agencies (in this case
the USACE and possibly the EPA) early on in Elk Creek Project development, and consider
the siting and orientation of facilities carefully in order to minimized the risk of
a protracted National Environmental Policy Act analysis of the Elk Creek Project.
|
|
●
|
Perhaps
one of the most critical approvals likely to be needed by the operation will be a radioactive
materials license from the Nebraska Department of Health and Human Services (“NDHHS”),
Office of Radiological Health. Because of their limited experience with hard rock mining
in the State of Nebraska, much less mining that includes Naturally Occurring Radioactive
Material, the NDHHS may require additional information and more time to approve the Elk
Creek Project under a Broad Scope License. Early and frequent engagement is a necessity
with respect to this regulatory agency.
|
|
●
|
Documentation
of existing baseline environmental conditions at the Elk Creek Project site was initiated
in 2014 and should continue throughout the permitting process. Additional studies will
need to be added once regulatory authorities have been given an opportunity to review
the current mine plan presented in the Elk Creek Feasibility Study and assess their particular
data needs for approval of the Elk Creek Project.
|
|
●
|
Surface
water monitoring should continue throughout the permitting process, and extend into construction
and operations as part of the Environmental Management System. The NDEQ Water Quality
Division has been engaged in order to discuss the Elk Creek Project and potential data
needs for a National Pollutant Discharge Elimination System discharge permit. This would
include both local discharges (if needed) as well as discharges to the Missouri River.
|
|
●
|
A
wetland delineation and potential jurisdictional waters assessment was conducted in late
2014 to identify wetland and drainage features within the proposed Elk Creek Project
boundary which resulted in a formal JD being issued by the USACE on September 6, 2016.
The entire project outside of the last 900 feet of the Missouri River waterline has been
authorized under the non-notifying provisions of Nationwide Permit 12. The final 900
feet will be authorized concurrently under Nationwide Permit 12 and a USACE Section 408
authorization for impacts to the Missouri River Bank Stabilization structure
|
|
●
|
Closure
costs for the Elk Creek Project have been estimated at just over $39 million, including
approximately $17 million for reclamation and closure of the tailings disposal facility
and $16 million for plant and building removal and reclamation.
|
|
●
|
Community
engagement has occurred in parallel with Nebraska field operations and has included public
meetings, presentations to public agencies, communications with local and state politicians,
meetings with environmental groups, and one-on-one meetings with area landowners.
|
Proposed
Activities
As
funds become available through the Company’s fundraising efforts, the following activities would be undertaken:
|
●
|
Acquisition
of key land parcels currently subject to the Company’s Option to Purchase agreements
|
|
●
|
Conclusion
of definitive natural gas and electrical supply agreements
|
|
●
|
Continuation
of the Company’s efforts to secure federal, state and local permits
|
|
●
|
Initiation
of detailed engineering for project facilities
|
|
●
|
Acquisition
of the remaining land rights needed for the Company’s waterline to the Missouri
River
|
|
●
|
Negotiation
of engineering, procurement and construction agreements
|
|
●
|
Initiation
of mine dewatering activities
|
|
●
|
Initiation
of long-lead equipment procurement activities
|
Corporate
Headquarters
We lease our executive office space at 7000 South Yosemite Street, Suite 115, Centennial, Colorado.
|
ITEM 3.
|
LEGAL
PROCEEDINGS
|
As
of August 29, 2017, we are not a party to any legal proceedings that could have a material adverse effect on the Company’s
business, financial condition or operating results. Further, to the Company’s knowledge no such proceedings have been threatened
against the Company.
|
ITEM 4.
|
MINE
SAFETY DISCLOSURES
|
Pursuant
to Section 1503(a) of the Dodd-Frank Act, issuers that are operators, or that have a subsidiary that is an operator, of a coal
or other mine in the United States are required to disclose specified information about mine health and safety in their periodic
reports. These reporting requirements are based on the safety and health requirements applicable to mines under the Federal Mine
Safety and Health Act of 1977 (the “Mine Act”) which is administered by the U.S. Department of Labor’s Mine
Safety and Health Administration (“MSHA”). During the fiscal year ended June 30, 2017, the Company and its subsidiaries
and their properties or operations were not subject to regulation by MSHA under the Mine Act and thus no disclosure is required
under Section 1503(a) of the Dodd-Frank Act.
PART
III
|
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
As
of August 25, 2017, the names, titles, ages, and dates of appointment of the members of the Company’s Board of Directors
and Executive Management are as set forth in the below table.
Name
|
|
Age
|
|
Position
|
|
Date
of Appointment
|
Mark
A. Smith
|
|
58
|
|
Chief
Executive Officer, President, Executive Chairman and Director
|
|
Chief
Executive Officer and Director: September 23, 2013
President and Executive Chairman: May 31, 2015
|
Joseph
A. Carrabba
|
|
64
|
|
Lead
Director
|
|
December
15, 2014
|
Michael
Morris
|
|
71
|
|
Director
|
|
July
27, 2014
|
David
C. Beling
|
|
76
|
|
Director
|
|
June
6, 2011
|
Anna
Castner Wightman
|
|
50
|
|
Director
|
|
February
23, 2016
|
Neal
Shah
|
|
43
|
|
Chief
Financial Officer
|
|
July
1, 2016
|
Scott
Honan
|
|
46
|
|
Vice
President, Business Development
|
|
May
6, 2014
|
John
Ashburn, Jr.
|
|
62
|
|
Vice
President, General Counsel and Corporate Secretary
|
|
April
2, 2015
|
Jim
Sims
|
|
56
|
|
Vice
President, External Affairs
|
|
November
2, 2015
|
Directors
Directors
hold office from election until the next Annual Meeting of Stockholders and until their successors are elected and qualified or
until their death, resignation or removal. The following sets forth a brief description of the business experience of each director
of the Company:
Joseph
Carrabba – Lead Director
Mr. Carrabba served as
the Chairman, President and Chief Executive Officer of Cliffs Natural Resources Inc., a publicly-held international mining and
natural resources company, from September 2007 until his retirement in November 2013. From 2013 until the present day, he has served
as CEO of Irati Energy, a private mining company in Brazil, and as a corporate director and consultant. Prior to joining Cliffs
Natural Resources Inc., Mr. Carrabba gained broad experience in the mining industry throughout Canada, the United States,
Asia, Australia and Europe. He was the former General Manager of Weipa Bauxite Operation of Comalco Aluminum and served in a variety
of leadership capacities at Rio Tinto, a global mining company, including as President and Chief Operating Officer of Rio Tinto’s
Diavik Diamond Mines, Inc. Mr. Carrabba is also a director of Newmont Mining Corporation, TimkenSteel Corporation, and the
Aecon Group. In addition, he was a director of KeyCorp from November 2009 until May 2017. He holds a bachelor’s degree in
geology from Capital University and his MBA from Frostburg State University in Maryland.
Mr. Carrabba’s
qualification to serve on our Board is based upon his many years of leadership and executive experience in large publicly traded
companies in the mining and materials processing industries.
Michael
Morris – Director
Mr. Morris
was formerly the Chairman of the Board of Heritage Oaks Bankcorp. When Heritage Oaks Bank merged with Pacific Premier Bancorp
on April 1, 2017, Mr. Morris became a member of the Pacific Premier Bancorp Board of Directors. He joined Heritage Oaks’
Board in January 2001 and assumed the Board chairmanship in 2007. In addition, Mr. Morris has worked since 1972 at Andre,
Morris & Buttery, a professional law corporation, where he now serves as Senior Principal and Chairman of the Board. From
2000 to late 2006, Mr. Morris served on the board of Molycorp, Inc. (“Molycorp”), a rare earths producer, which
at the time was a wholly owned subsidiary of Unocal Corporation (“Unocal”) and then Chevron Mining Inc. (“Chevron
Mining”), a wholly-owned subsidiary of Chevron Corporation. Mr. Morris was the only independent director of Molycorp
at that time. Mr. Morris is a graduate of Georgetown University and received his law degree from the University of San Francisco
School of Law. He has practiced business and environmental law for over 40 years. Mr. Morris served as a member of the Board
of Governors and Vice President of the State Bar of California. He served as a 1st Lieutenant in the U.S. Army from 1970 to 1972.
Mr. Morris’
qualification to serve on our Board is based on his years of senior executive leadership with publicly traded companies and his
long experience in the financial, banking, legal, and manufacturing fields.
David
Beling – Director
Mr. Beling is a Registered
Professional Mining Engineer with 52 years of experience and has been on the board of directors of 14 mining companies starting
in 1981. He has served as President, CEO, CFO and a director of Bullfrog Gold Corp., a gold exploration and development company,
since July 2011 and was the Executive Vice President and Chief Operating Officer of Geovic Mining Corp. from 2004 to 2010. Mr. Beling
has examined, significantly reviewed or been directly involved with 88 underground mines, 131 open pit mines and 164 process plants
in the global metal, energy and industrial mineral sectors. His employment included 14 years with five majors, then 38 years of
employment and consulting for 25 junior mining companies. Mr. Beling served on the Board of Directors of Animas Resources Ltd.(TSXv)
from June 2012 to April 2014.
Mr. Beling’s
qualification to serve on our Board is based upon his decades of senior leadership and executive positions with companies in the
mining and minerals processing sectors.
Anna
Castner Wightman – Director
A
sixth generation Nebraskan and a graduate of Nebraska Wesleyan University, Ms. Wightman serves as a Senior Director for First National Bank of Omaha, Nebraska, a position she has held since 2000. Prior to that, she worked for the Greater
Omaha Chamber of Commerce and served in the U.S. Congress for former Congressman Bill Barrett and former Congresswoman Virginia
Smith, both of whom represented the 3rd Congressional District of Nebraska. Ms. Wightman serves on the Boards of Directors of
the Nebraska Chamber of Commerce, Rose Theater for Performing Arts, and Joslyn Castle.
Ms. Wightman’s
qualification to serve on our Board is based on her extensive executive experience in the banking and financial services sectors,
and her deep knowledge of the Nebraska business and public policy landscapes.
Executive
Officers
The
executive officers of our Company are appointed by our board of directors and hold office until their earlier death, retirement,
resignation or removal. The following sets forth a brief description of the business experience of each executive officer of the
Company:
Mark
Smith – Executive Chairman, Director, President and Chief Executive Officer
Mr. Smith has 36 years
of experience in operating, developing, and financing mining and strategic materials projects in the Americas and abroad. In September
2013, he was appointed CEO and a Director of NioCorp. Since April 2015, Mr. Smith has also served as the President, Chief
Executive Officer, and Director for Largo Resources Ltd., a mineral company with an operating property in Brazil and projects
in Brazil & Canada. Mr. Smith has also served on the Board of Directors of IBC Advanced Alloys Corp. (“IBC”) since
May 2016. From October 2008 through December 2012, Mr. Smith served as President, Chief Executive Officer and Director of
Molycorp, where he was instrumentally involved in taking it from a private company to a publicly traded company with a producing
mine. From November 2011 through May 2015, he served on the Board of Directors at Avanti Mining (TSXv: AVT; Avanti Mining changed
its name to AlloyCorp in early 2015). From December 2012 through September 2013, he served as the Managing Director of KMSmith
LLC where he served as a consultant.
Prior
to Molycorp, Mr. Smith held numerous engineering, environmental, and legal positions within Unocal and later served as the President
and Chief Executive Officer of Chevron Mining. Mr. Smith also served for over seven years as the shareholder representative
of CBMM, a private company that currently produces approximately 85% of the world supply of niobium. During his tenure with Chevron
Mining, Mr. Smith was responsible for Chevron Mining’s three coal mines, one molybdenum mine, a petroleum coke calcining
operation and Molycorp’s Mountain Pass mine. At Unocal, he served as the Vice-President from June 2000 to April 2006, and
managed the real estate, remediation, mining and carbon divisions. Mr. Smith is a Registered Professional Engineer and serves
as an active member of the State Bars of California and Colorado. He received his Bachelor of Science degree in Agricultural Engineering
from Colorado State University in 1981 and his Juris Doctor, cum laude, from Western State University, College of Law, in 1990.
Mr. Smith’s
extensive leadership, management, strategic planning, and strategic materials industry expertise through his various leadership
and directorship roles in public companies large and small makes him well-qualified to serve as a member of the board of directors
of NioCorp.
Neal
Shah – Chief Financial Officer
Mr. Shah
joined NioCorp in September 2014 as Vice President of Finance, and now serves as the Company’s CFO. Mr. Shah served
as Finance Manager at Covidien Ltd., a medical device company since acquired by Medtronic, from May 2014 through September 2014.
From April 2011 until May 2014, he held the positions of Senior Manager of Corporate Development and M&A and more recently
the Director of Strategy and Business Planning at Molycorp, Inc. Mr. Shah graduated from the University of Colorado with
a BSc in Mechanical Engineering in 1996, and from Purdue University with an MBA in 2002. Since the completion of his MBA, Mr. Shah
also held key finance roles with Intel Corporation and IBM.
Scott
Honan – Vice President, Business Development
Mr. Honan joined NioCorp
in May 2014 and now serves as Vice President, Business Development. He also serves as President of Elk Creek Resources Corporation,
the NioCorp subsidiary that is developing the Elk Creek Project in Nebraska. Prior to his work at NioCorp, Mr. Honan served
in several leadership capacities at Molycorp, Inc. from February 2001 until May 2014, including as Vice President/Director Health,
Environment, Safety and Sustainability and General Manager and Environmental Manager from July 2011 to May 2014. With over 24
years of experience in the gold and rare earth industries, Mr. Honan is a graduate of Queen’s University in Mining
Engineering in both Mineral Processing (B.Sc. Honors) and Environmental Management (M.Sc.) disciplines.
John Ashburn, Jr. – Vice President, General Counsel and
Corporate Secretary
An
attorney with 36 years of experience, including 26 years in extractive industries, Mr. Ashburn joined NioCorp in January
2015 and was appointed to Vice President, General Counsel and Corporate Secretary in April 2015. He served as Vice President,
Chief Legal Officer and a member of the Board of Directors of Simbol, Inc., a privately held development stage Lithium production
company, from May 2013 until January 2015, and was Executive Vice President and General Counsel of Molycorp, Inc. from December
2008 until April 2013. Prior to that, he held senior legal positions with Chevron and Unocal. Mr. Ashburn holds a Juris Doctorate
from Northern Illinois University, School of Law.
Jim
Sims – Vice President, External Affairs
Mr. Sims
has more than 25 years of experience in devising and executing marketing, media relations, public affairs, and investor relations
operations for companies in the mining, chemical, manufacturing, utility, and renewable energy sectors. He joined NioCorp in November
2015, after serving for more than five years as Director (and then Vice President) of Corporate Communications for Molycorp, Inc.
from March 2010 through November 2015. Since May 2016, Mr. Sims has also served as Director of Investor and Public Relations for
IBC. Mr. Sims was President and CEO of Policy Communications, Inc. from 1998 until 2010, and served as White House Director of
Communications for the Energy Policy Development Group. A former U.S. Senate Chief of Staff, he is the co-founder and former Executive
Director of the Geothermal Energy Association, and he has served as Board Chairman of the Rare Earth Technology Alliance. He is
an honors graduate of Georgetown University.
Significant
Employees
There
are no other significant employees than those already discussed herein.
Family
Relationships
There
are no family relationships among the directors or executive officers of the Company.
Involvement
in Certain Legal Proceedings
During
the past ten years none of the persons serving as executive officers and/or directors of the Company and, with respect to promoter
or control persons, for the past five years, none have been the subject matter of any of the following legal proceedings that
are required to be disclosed pursuant to Item 401(f) of Regulation S-K. Further, no such legal proceedings are believed to be
contemplated by governmental authorities against any director or executive officer.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires the Company’s officers and directors, and persons who own more than ten percent of a
registered class of the Company’s equity securities, to file reports of ownership and changes in ownership of such securities
with the SEC. Officers, directors and greater than ten percent beneficial owners are required by applicable regulations to furnish
the Company with copies of all Section 16(a) forms they file.
Based
upon the review of the copies of Section 16(a) forms received by the Company, and upon written representations from reporting
persons concerning the necessity of filing a Form 5 Annual Statement of Changes in Beneficial Ownership, the Company believes
that, during fiscal 2017, all filing requirements applicable to reporting persons were met, other than the filing of a Form 4
for Mr. Mark Smith reporting the (a) exercise of existing warrants for Common Shares and (b) sale of existing warrants, which
Form 4 was inadvertently filed late due to an administrative error on November 8, 2016.
Code
of Business Conduct and Ethics
Our
Board of Directors has adopted a written Code of Business Conduct and Ethics applicable to our employees, officers and directors,
including those officers responsible for financial reporting. The Code of Business Conduct and Ethics is available on our website
at www.niocorp.com. If the Company amends the Code of Business Conduct and Ethics or grants a waiver, including an implicit waiver,
from the Code of Business Conduct and Ethics, the Company will disclose the information on its internet website. The waiver information
will remain on the website for at least twelve months after the initial disclosure of such waiver.
Nomination
of Directors
As
of August 29, 2017, there have been no material changes to the procedures by which our shareholders may recommend nominees to
our board of directors.
Audit
Committee and Audit Committee Financial Experts
Our Audit Committee is currently
comprised of Anna Castner Wightman, David Beling, and Michael Morris. Our Board has determined that Mr. Beling and Mr. Morris
are financial experts, as defined by the rules of the Securities and Exchange Commission, and Canadian rules and regulations.
The Audit Committee was established in accordance with Section 3(a)(58)(A) of the Exchange Act.
|
ITEM
11.
|
EXECUTIVE
COMPENSATION
|
The
following table sets out the compensation for the fiscal years ending June 30, 2017 and 2016 for the individual who served as
the Company’s Chief Executive Officer (or “CEO”) during the last fiscal year, as well as the Company’s
two most highly compensated executive officers other than the CEO who were serving at the end of the last fiscal year (collectively,
the “named executive officers”):
Fiscal
2017 Summary Compensation Table
Name and Principal Position (a)
|
|
Fiscal Year
(b)
|
|
|
Salary ($)
(c)
|
|
|
Option
Awards
(1)
($)
(f)
|
|
|
Total ($)
(j)
|
|
Mark A Smith, Chief Executive Officer, President
|
|
|
2017
|
(2)
|
|
$
|
270,000
|
|
|
$
|
198,688
|
|
|
$
|
468,688
|
|
|
|
|
2016
|
(2)
|
|
$
|
270,000
|
|
|
$
|
157,972
|
|
|
$
|
427,972
|
|
Neal Shah, Chief Financial Officer
|
|
|
2017
|
|
|
$
|
200,000
|
|
|
$
|
122,269
|
|
|
$
|
322,269
|
|
|
|
|
2016
|
|
|
$
|
109,375
|
|
|
$
|
73,720
|
|
|
$
|
183,095
|
|
Scott Honan, Vice President Business Development
|
|
|
2017
|
|
|
$
|
225,000
|
|
|
$
|
122,269
|
|
|
$
|
347,269
|
|
|
|
|
2016
|
|
|
$
|
212,500
|
|
|
$
|
105,315
|
|
|
$
|
317,815
|
|
John Ashburn, Jr., Vice President, General Counsel and Corporate Secretary
|
|
|
2017
|
|
|
$
|
200,000
|
|
|
$
|
122,269
|
|
|
$
|
322,269
|
|
|
|
|
2016
|
|
|
$
|
200,000
|
|
|
$
|
73,720
|
|
|
$
|
273,720
|
|
Jim Sims, Vice President External Affairs
|
|
|
2017
|
|
|
$
|
200,000
|
|
|
$
|
122,269
|
|
|
$
|
322,269
|
|
|
|
|
2016
|
|
|
$
|
116,667
|
|
|
$
|
103,348
|
|
|
$
|
220,015
|
|
|
(1)
|
Reflects
the grant date fair value of the option-based awards granted during the reported fiscal years computed in accordance with Financial
Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718. Assumptions used in the calculation
of these amounts are described in Note 8 in the Company’s consolidated financial statements included above under ITEM
8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
.
|
|
(2)
|
Disclosed
amounts paid to KMSmith LLC, an entity controlled by Mr. Smith.
|
Narrative
Disclosure to Summary Compensation Table
Compensation
Program Design
The
Board, in conjunction with the Compensation and Organization Committee of the Board (the “Compensation Committee”),
determines compensation and rewards to senior management on the basis of individual and corporate performance, both in the short
term and the long term, while at the same time being mindful of the responsibility that the Company has to its shareholders.
In
general, the Compensation Committee considers that its compensation program should be relatively simple in concept, given the
current stage of the Company’s development, and that its focus should be balanced between reasonable current compensation
and longer term compensation tied to performance of the Company as a whole. The Compensation Committee has not established a formal
set of benchmarks or performance criteria to be met by the Company’s named executive officers; rather, the members of the
Compensation Committee use their own subjective assessments of the level of success of the Company to determine, collectively,
whether or not the named executive officers are successfully achieving the Company’s business plan and strategy and the
degree to which they have performed in that regard. The Compensation Committee has not established any set or formal formula for
determining named executive officer compensation, either as to the amount thereof or the specific mix of compensation elements,
and compensation (and adjustments from time to time) is set through informal discussions at the Compensation Committee level.
Key
Elements of Named Executive Officer Compensation
Base
Salaries
The
members of the Compensation Committee use their own experience and familiarity with the industry, and consider the factors described
above, to determine what they believe to be reasonable base salaries for our named executive officers. The base salaries of the
named executive officers are set at levels which are considered by the members of the Compensation Committee to be competitive,
thereby enabling the Company to compete for and retain executives critical to the long-term success of the Company. Initially,
base salaries (or, for Mr. Smith, base consulting fees) are set through negotiation when executive officers join the Company (with
direct input from the Compensation Committee) and are subsequently reviewed each fiscal year to determine if adjustments are required.
There were no changes to named executive officer salaries during the fiscal year ended June 30, 2017.
Bonus
Compensation
The
Board has discretion, where deemed appropriate and financially affordable for the Company, to grant a cash bonus to a named executive
officer based on the performance of both the individual named executive officer and the Company. No such cash bonuses were granted
to any named executive officer during fiscal 2017.
Option-Based
Awards
The
incentive portion of each named executive officer’s compensation package consists primarily of stock options awarded under
the Company’s 2016 Incentive Stock Option Plan (the “Stock Option Plan”). Share ownership opportunities through
the grant of stock options are provided to align the interests of senior management of the Company with the longer-term interests
of the shareholders of the Company.
The
Stock Option Plan is administered by the Compensation Committee, and is intended to advance the interests of the Company through
the motivation, attraction and retention of officers and other key employees, directors and consultants of the Company and affiliates
of the Company and to secure for the Company and its shareholders the benefits inherent in the ownership of Common Shares of the
Company by officers and other key employees, directors and consultants of the Company and affiliates of the Company. Grants of
options under the Stock Option Plan are proposed/recommended by the CEO, and reviewed by the Compensation Committee. The Compensation
Committee can approve, modify or reject any proposed grants, in whole or in part. In general, the allocation of available options
among the eligible participants in the Stock Option Plan is on an ad hoc basis, and there is no set formula for allocating available
options, nor is there any fixed benchmark or performance criteria to be achieved in order to receive an award of or vest in options.
The
Compensation Committee does not consider the accounting value of any such option grants in determining the number of options to
award to any individual, as any such “value” is an accounting measure that is not relevant to incentivizing the individual.
The timing of the grants of options is determined by the Compensation Committee, and there is no regular interval for the awarding
of option grants. In general, a higher level of responsibility will result in a larger grant of options. Because the number of
options available is limited, in general, the Compensation Committee aims to have individuals at what it subjectively considers
to be the same levels of responsibility holding equivalent numbers of options, with additional grants being allocated for individuals
who the Compensation Committee believes are in a position to more directly affect the success of the Company through their efforts.
The
Compensation Committee looks at the overall number of options held by an individual (plus the exercise prices and remaining terms
of existing options and whether any previously granted options have expired out of the money or were exercised) and takes such
information into consideration when reviewing proposed new grants. After considering the CEO’s recommendations and the foregoing
factors, the resulting proposed option grant (if any) is then submitted to the Board for approval.
During
the fiscal year ended June 30, 2017, the Compensation Committee approved all recommendations for the grant of stock options
proposed by management, and the named executive officers were granted the following numbers of stock options effective March
6, 2017, each with an exercise price per share of C$0.76: Mr. Smith, 650,000 stock options; Mr. Honan, 400,000 stock options;
Mr. Ashburn, 400,000 stock options; Mr. Shah, 400,000 stock options; and Mr. Sims, 400,000 stock options. These stock options generally vest as follows: 50% six months after the grant date, 25%
12 months after the grant date, and the remainder 18 months after the grant date. Stock options generally remain exercisable
until five years after the grant date.
Employment
Agreements
The
Company and KMSmith, LLC (“KMSmith”) entered into a Consulting Agreement effective September 23, 2013 (the “Smith
Agreement”). Under the terms of the Smith Agreement, KMSmith, through Mark Smith, performs the duties and responsibilities
of the Chief Executive Officer of the Company and related services, for an indefinite term at a base rate of $270,000 per year,
generally payable in equal monthly installments of $22,500. KMSmith also received a one-time signing bonus of $165,000. Any other
bonuses and incentive payments are payable at the discretion of the Board of Directors. Mr. Smith is eligible to receive
stock options under the Stock Option Plan, as determined by the Board. The Company may terminate the Smith Agreement at any time
without notice or payment if (1) KMSmith commits a material breach of the Smith Agreement (subject to a cure period in certain
circumstances), (2) Mr. Smith dies or becomes permanently disabled, or (3) certain other “for cause” scenarios occur
(as further described in the Smith Agreement). In the event the Smith Agreement is terminated by the Company for any other reason
or if KMSmith terminates the Smith Agreement on the occurrence of a Triggering Event, the Company shall pay KMSmith a lump sum
termination fee equal to the annual salary in effect at the termination date as well as the average of any annual bonuses or other
cash incentive payments for two calendar years immediately preceding the year the termination occurs. A Triggering Event is defined
as: a substantial change in the nature of services to be performed by KMSmith; a material breach by the Company of the Smith Agreement
that is not remedied within 30 days of notice; the ceasing of the Company as a going concern; the failure of the Company to pay
a material amount due pursuant to the Smith Agreement within 30 days of the due date; or a material reduction in salary or any
other form of compensation payable by the Company to KMSmith, except where all senior executives or consultants of the Company
are subject to relatively similar reductions in such values. KMSmith may terminate the Smith Agreement for a reason other than
a Triggering Event on 90 days’ written notice and, should the Company immediately accept such termination notice, it shall
pay KMSmith the sum of $69,904. Should a change of control of the Company occur (as that term is defined in the Smith Agreement)
and, within one year, either a Triggering Event occurs and KMSmith terminates the Smith Agreement or KMSmith’s engagement
is terminated by the Company under circumstances that would give rise to a termination payment in the absence of a change of control,
then KMSmith shall be entitled to receive an amount equal to the annual salary in effect at the termination date as well as the
average of any annual bonuses or other cash payments for two calendar years immediately preceding the year the termination occurs.
In the event KMSmith is entitled to a termination payment with respect to a change of control, any stock options previously granted
to Mr. Smith shall become fully vested and shall remain exercisable for the original term of grant despite a termination
of KMSmith. Termination payments under the Smith Agreement are generally contingent on a release of claims by KMSmith. The Smith
Agreement also includes customary confidentiality and six-month employee non-solicitation provisions. No other named executive
officer is party to an employment agreement with the Company.
Stock
Options Under Stock Option Plan
In
accordance with the Stock Option Plan, the Company granted to its named executive officers stock options during the Company’s
2017 fiscal year; no other equity based awards were granted to the named executive officers during the 2017 fiscal year.
The
following table sets forth the outstanding equity awards for each named executive officer at June 30, 2017. The Company has not
granted full value stock-based awards to any of its named executive officers.
Outstanding
Equity Awards at 2017 Fiscal Year End
|
|
|
|
|
Option Awards
|
Name (a)
|
|
Grant Date
|
|
|
Number of
Securities Underlying Unexercised
Options (#) Exercisable
(b)
|
|
|
|
Number of
Securities Underlying Unexercised
Options (#) Unexercisable
(c)(1)
|
|
|
|
Option
Exercise Price
(C$) (e)
|
|
|
Option
Expiration
Date
(f)
|
Mark A. Smith
|
|
12/22/2014
|
|
|
300,000
|
|
|
|
—
|
|
|
|
0.80
|
|
|
12/22/2017
|
|
|
1/19/2016
|
|
|
562,500
|
|
|
|
187,500
|
|
|
|
0.62
|
|
|
1/19/2021
|
|
|
3/7/2017
|
|
|
—
|
|
|
|
650,000
|
|
|
|
0.76
|
|
|
3/7/2022
|
Total
|
|
|
|
|
862,500
|
|
|
|
837,500
|
|
|
|
|
|
|
|
Neal Shah
|
|
9/2/2014
|
|
|
500,000
|
|
|
|
—
|
|
|
|
0.76
|
|
|
9/2/2017
|
|
|
12/22/2014
|
|
|
200,000
|
|
|
|
—
|
|
|
|
0.80
|
|
|
12/22/2017
|
|
|
1/19/2016
|
|
|
262,500
|
|
|
|
87,500
|
|
|
|
0.62
|
|
|
1/19/2021
|
|
|
3/7/2017
|
|
|
—
|
|
|
|
400,000
|
|
|
|
0.76
|
|
|
3/7/2022
|
Total
|
|
|
|
|
962,500
|
|
|
|
487,500
|
|
|
|
|
|
|
|
Scott Honan
|
|
7/28/2014
|
|
|
250,000
|
|
|
|
—
|
|
|
|
0.65
|
|
|
7/28/2017
|
|
|
12/22/2014
|
|
|
200,000
|
|
|
|
—
|
|
|
|
0.80
|
|
|
12/22/2017
|
|
|
1/19/2016
|
|
|
375,000
|
|
|
|
125,000
|
|
|
|
0.62
|
|
|
1/19/2021
|
|
|
3/7/2017
|
|
|
—
|
|
|
|
400,000
|
|
|
|
0.76
|
|
|
3/7/2022
|
Total:
|
|
|
|
|
825,000
|
|
|
|
525,000
|
|
|
|
|
|
|
|
John Ashburn, Jr.
|
|
12/22/2014
|
|
|
500,000
|
|
|
|
—
|
|
|
|
0.80
|
|
|
12/22/2017
|
|
|
1/19/2016
|
|
|
262,500
|
|
|
|
87,500
|
|
|
|
0.62
|
|
|
1/19/2021
|
|
|
3/7/2017
|
|
|
—
|
|
|
|
400,000
|
|
|
|
0.76
|
|
|
3/7/2022
|
Total
|
|
|
|
|
762,500
|
|
|
|
487,500
|
|
|
|
|
|
|
|
Jim Sims
|
|
1/19/2016
|
|
|
375,000
|
|
|
|
125,000
|
|
|
|
0.62
|
|
|
1/19/2021
|
|
|
3/7/2017
|
|
|
—
|
|
|
|
400,000
|
|
|
|
0.76
|
|
|
3/7/2022
|
Total
|
|
|
|
|
375,000
|
|
|
|
525,000
|
|
|
|
|
|
|
|
Total for all Named Executive
Officers:
|
|
|
|
|
3,787,500
|
|
|
|
2,862,500
|
|
|
|
|
|
|
|
|
(1)
|
Unvested
stock options generally vest as follows: 50% six months after the grant date, 25% 12 months after the grant date, and the remainder
18 months after the grant date. Stock options generally remain exercisable until five years after the grant date.
|
Retirement
Plan Benefits
Each
named executive officer is eligible to participate in the Company’s 401(k) savings plan, which is designed to reward continued
employment with the Company and assist participants with financial preparation for retirement. All amounts credited under the
401(k) savings plan relate to participant contributions. The Company does not currently make matching or other contributions to
the 401(k) savings plan.
Termination
and Change of Control Benefits
Except
as described above, the Company has not entered into any plans or arrangements in respect of remuneration received or that may
be received by the named executive officers in respect of compensating such officers or directors in the event of a change of
control, termination of employment (as a result of resignation, retirement, change of control, etc.) or a change in responsibilities
following a change of control.
Compensation
of Directors
As
at the date of this Annual Report on Form 10-K, the Company has five directors, one of which is also a named executive officer,
Mr. Smith. For a description of the compensation paid to Mr. Smith, see “Fiscal 2017 Summary Compensation Table” above.
The
following table sets forth all compensation the Company granted to our directors, other than Mr. Smith, for the fiscal year ended
June 30, 2017:
Fiscal
2017 Director Compensation
Name (a)
|
|
Option Awards
(1)
($)
(d)
|
|
|
Total ($)
(h)
|
|
Joseph Carrabba
|
|
$
|
106,986
|
|
|
$
|
106,986
|
|
Dave Beling
|
|
$
|
91,702
|
|
|
$
|
91,702
|
|
Michael Morris
|
|
$
|
106,986
|
|
|
$
|
106,986
|
|
Anna Castner Wightman
(2)
|
|
$
|
283,170
|
|
|
$
|
283,170
|
|
Joe Cecil
(3)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(1)
|
Reflects
the grant date fair value of the option-based awards granted during the 2017 fiscal year computed in accordance with FASB ASC
718. Assumptions used in the calculation of these amounts are described in Note 8 in the Company’s consolidated financial
statements included above under ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
. The aggregate number of option awards
outstanding for each non-employee director listed in the table above at the end of fiscal 2017 was as follows: Mr. Carrabba, 1,250,000
stock options; Mr. Beling, 750,000 stock options; Mr. Morris, 1,150,000 stock options; and Ms. Wightman, 800,000 stock options.
Stock options held by directors generally vest as follows: 50% six months after the grant date, 25% 12 months after the grant
date, and the remainder 18 months after the grant date.
|
|
(2)
|
Ms.
Wightman was appointed to the board on February 23, 2016; however, her initial stock options were not awarded until July 2016.
|
|
(3)
|
Mr.
Joe Cecil, a director of the Company since November 14, 2014, determined not to stand for re-election at the Company’s December
9, 2016 Annual General Meeting, and accordingly ceased to be a director on December 9, 2016. Mr. Cecil received no compensation
for his services during this period.
|
For
the fiscal year ending June 30, 2017, the directors of the Company did not receive a cash fee for serving on the board of directors
of the Company. The directors of the Company have no standard compensation arrangements, or any other arrangements, with the Company,
except as herein disclosed. Executive officers of the Company who also act as directors of the Company do not receive any additional
compensation for services rendered in such capacity. See “Fiscal 2017 Summary Compensation Table” above.
Compensation
Committee Interlocks and Insider Participation
During
fiscal year ended June 30, 2017, Joseph Carrabba, David Beling and Michael Morris served on the Compensation Committee. None of
these individuals was an employee or an officer of the Company during the 2017 fiscal year, was formerly an officer of the Company,
or had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K.
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
Security
Ownership of Management
As
of August 25, 2017, the Company had 202,841,546 Common Shares issued and outstanding. The following table sets forth the beneficial
ownership of the Company’s Common Shares as of August 25, 2017, by each person who serves as a director and/or an executive
officer of NioCorp on that date, and the number of shares beneficially owned by all of the Company’s directors and named
executive officers as a group:
Name and Address of
Beneficial Owner
|
|
Position
|
|
Amount and Nature of Beneficial Ownership (1)
|
|
|
Percent of Common Shares
|
|
Mark A. Smith, PE, Esq
Highlands Ranch, Colorado, USA
|
|
President, Chief Executive Officer and Chairman
|
|
|
20,260,445
|
(2)
|
|
|
9.92
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Neal Shah
Superior, Colorado, USA
|
|
Chief Financial Officer
|
|
|
1,304,500
|
(3)
|
|
|
0.64
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Scott Honan
Centennial, Colorado, USA
|
|
Vice President, Business Development
|
|
|
1,030,000
|
(4)
|
|
|
0.51
|
%
|
|
|
|
|
|
|
|
|
|
|
|
John Ashburn, Jr.
Littleton, Colorado, USA
|
|
Vice-President, General Counsel and Corporate Secretary
|
|
|
1,924,452
|
(5)
|
|
|
0.94
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Jim Sims
Golden Colorado, USA
|
|
Vice-President, External Affairs
|
|
|
708,419
|
(6)
|
|
|
0.35
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Joseph A. Carrabba
Key Largo, Florida, USA
|
|
Lead Director
|
|
|
1,175,000
|
(7)
|
|
|
0..58
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Michael Morris
San Luis Obispo, California, USA
|
|
Director
|
|
|
530,250
|
(8)
|
|
|
0..26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
David C. Beling
Grand Junction, Colorado, USA
|
|
Director
|
|
|
850,000
|
(9)
|
|
|
0.42
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Anna Castner Wightman
Omaha, Nebraska, USA
|
|
Director
|
|
|
527,000
|
(10)
|
|
|
0.26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
All current directors, executive officers and named executive officers as a group (9 persons)
|
|
|
|
|
28,310,066
|
|
|
|
13.44
|
%
|
Notes
to Security Ownership of Management table shown above:
(1)
|
Calculated
in accordance with Rule 13d-3 of the Exchange Act.
|
|
(2)
|
As of August 25, 2017, Mr. Smith beneficially owns 18,770,445 Common Shares. He has sole voting
and investment power with respect to all such Common Shares. He beneficially owns 115,000 exercisable warrants. Each warrant entitles
Mr. Smith to acquire one Common Share at a price of C$0.75 until January 2019. In addition, he beneficially owns 1,375,000
vested stock options comprised of the following: On December 22, 2014, Mr. Smith was granted 300,000 options to purchase Common
Shares for a period of three years at a price of C$0.80. On January 21, 2016, Mr. Smith was granted 750,000 options to purchase
Common Shares for a period of five years at a price of C$0.62 and vest over a period of 18 months with 100% having vested at this
time. On March 6, 2017, Mr. Smith was granted 650,000 options to purchase Common Shares for a period of five years at a price
of C$0.76 which vest over a period of 18 months with 50% having vested in the next 60 days.
|
|
(3)
|
As of August 25, 2017, Mr. Shah beneficially owns 54,500 Common Shares. He has sole voting
and investment power with respect to all such Common Shares. In addition, he beneficially owns 1,250,000 vested stock options comprised
of the following: On September 2, 2014, Mr. Shah was granted 500,000 options to purchase Common Shares for a period of three
years at a price of C$0.76. On December 22, 2014, Mr. Shah was granted 200,000 options to purchase Common Shares for a period
of three years at a price of C$0.80. On January 21, 2016, Mr. Shah was granted 350,000 options to purchase Common Shares for
a period of five years at a price of C$0.62 and vest over a period of 18 months with 100% having vested at this time. On March
6, 2017, Mr. Shah was granted 400,000 options to purchase Common Shares for a period of five years at a price of C$0.76 which
vest over a period of 18 months with 50% having vested in the next 60 days.
|
|
(4)
|
As of August 25, 2017, Mr. Honan beneficially owns 130,000 Common Shares. He has sole voting
and investment power with respect to all such Common Shares. In addition, he beneficially owns 900,000 vested stock options comprised
of the following: On December 22, 2014, Mr. Honan was granted 200,000 options to purchase Common Shares for a period of three
years at a price of C$0.80. On January 21, 2016, Mr. Honan was granted 500,000 options to purchase Common Shares for a period
of five years at a price of C$0.62 and vest over a period of 18 months with 100% having vested at this time. On March 6, 2017,
Mr. Honan was granted 400,000 options to purchase Common Shares for a period of five years at a price of C$0.76 which vest
over a period of 18 months with 50% having vested in the next 60 days.
|
|
(5)
|
As of August 25, 2017, Mr. Ashburn beneficially owns 762,226 Common Shares. He shares both
voting and investment power with respect to all such Common Shares with his wife. He beneficially owns 112,226 exercisable warrants.
Each warrant entitles Mr. Ashburn to acquire one Common Share at a price of C$0.85 until February 2020. In addition, he beneficially
owns 1,050,000 vested stock options comprised of the following: On December 22, 2014, Mr. Ashburn was granted 500,000 options
to purchase Common Shares for a period of three years at a price of C$0.80. On January 21, 2016, Mr. Ashburn was granted 350,000
options to purchase Common Shares for a period of five years at a price of C$0.62 and vest over a period of 18 months with 100%
having vested at this time. On March 6, 2017, Mr. Ashburn was granted 400,000 options to purchase Common Shares for a period
of five years at a price of C$0.76 which vest over a period of 18 months with 50% having vested in the next 60 days.
|
|
(6)
|
As of August 25, 2017, Mr. Sims beneficially owns 8,419 Common Shares. He has sole voting
and investment power with respect to all such Common Shares. In addition, he beneficially owns 700,000 vested stock options comprised
of the following: On January 21, 2016, Mr. Sims was granted 500,000 options to purchase Common Shares for a period of five
years at a price of C$0.62 and vest over a period of 18 months with 100% having vested at this time. On March 6, 2017, Mr. Sims
was granted 400,000 options to purchase Common Shares for a period of five years at a price of C$0.76 which vest over a period
of 18 months with 50% having vested in the next 60 days.
|
|
(7)
|
As of August 25, 2017, Mr. Carrabba beneficially owns 100,000 Common Shares. He has sole voting
and investment power with respect to all such Common Shares In addition, he beneficially owns 1,075,000 vested stock options comprised
of the following: On December 22, 2014, Mr. Carrabba was granted 500,000 options to purchase Common Shares for a period of
three years at a price of C$0.80. On January 21, 2016, Mr. Carrabba was granted 400,000 options to purchase Common Shares
for a period of five years at a price of C$0.62 and vest over a period of 18 months with 100% having vested at this time. On March
6, 2017, Mr. Carrabba was granted 350,000 options to purchase Common Shares for a period of five years at a price of C$0.76
which vest over a period of 18 months with 50% having vested in the next 60 days.
|
|
(8)
|
As of August 25, 2017, Mr. Morris beneficially owns 55,250 Common Shares. He shares both voting
and investment power with respect to all such Common Shares with his wife. In addition, he beneficially owns 475,000 vested stock
options comprised of the following: On January 21, 2016, Mr. Morris was granted 300,000 options to purchase Common Shares
for a period of five years at a price of C$0.62 and vest over a period of 18 months with 100% having vested at this time. On March
6, 2017, Mr. Morris was granted 350,000 options to purchase Common Shares for a period of five years at a price of C$0.76
which vest over a period of 18 months with 50% having vested in the next 60 days.
|
|
(9)
|
As of August 25, 2017, Mr. Beling beneficially owns 350,000 Common Shares held in the name
of The Beling Family Trust. He shares both voting and investment power with respect to all such Common Shares with his wife as
the only trustees of The Beling Family Trust. In addition, he beneficially owns 500,000 vested stock options comprised of the following:
On December 22, 2014, Mr. Beling was granted 50,000 options to purchase Common Shares for a period of three years at a price
of C0.80. On January 21, 2016, Mr. Beling was granted 300,000 options to purchase Common Shares for a period of five years
at a price of C$0.62 and vest over a period of 18 months with 100% having vested at this time. On March 6, 2017, Mr. Beling
was granted 300,000 options to purchase Common Shares for a period of five years at a price of C$0.76 which vest over a period
of 18 months with 50% having vested in the next 60 days.
|
|
(10)
|
As of August 25, 2017, Mrs. Wightman beneficially owns 2,000 Common Shares. She shares both
voting and investment power with respect to all such Common Shares with her husband. In addition, she beneficially owns 525,000
vested stock options comprised of the following: On July 21, 2016, Mrs. Wightman was granted 500,000 options to purchase Common
Shares for a period of five years at a price of C$0.94 which vest over a period of 18 months with 75% having vested at this time.
On March 6, 2017, Mrs. Wightman was granted 300,000 options to purchase Common Shares for a period of five years at a price
of C$0.76 which vest over a period of 18 months with 50% having vested in the next 60 days.
|
Security
Ownership of Certain Beneficial Owners
As
of August 29, 2017, the Company is not aware of any persons that beneficially own more than 5% of its outstanding Common Shares
who does not serve as an executive officer or director of the Company.
Employee/Director
Hedging Is Not Permitted
The
Company’s insider trading policy prohibits hedging in the Company’s securities by employees, officers and directors
of the Company or their designees.
Change
in Control Arrangements
As
of August 29, 2017, there are no arrangements known to us that would result in a change in control of the Company. We are not,
to the best of our knowledge, directly or indirectly owned or controlled by another corporation or foreign government.
Equity
Compensation Plan Information
The
Company has an incentive stock option plan under which stock options are granted. Stock options have been determined by the Company’s
directors and are only granted in compliance with applicable laws and regulatory policy.
The
following is provided with respect to compensation plans (including individual compensation arrangements) under which equity securities
are authorized for issuance as of June 30, 2017.
Plan
Category
|
|
Number
of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants, and Rights
(a)
|
|
|
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants, and Rights
(b)
|
|
Number
of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in Column (a))
(c)
|
|
Equity
Compensation Plans Approved by Security Holders
(1)
|
|
|
16,605,000
|
|
|
C$
|
0.73
|
|
|
|
32,272,633
|
(2)
|
Equity
Compensation Plans Not Approved by Security Holders
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Total
|
|
|
16,605,000
|
|
|
C$
|
0.73
|
|
|
|
32,272,633
|
|
|
(1)
|
Represents
options granted pursuant to the Company’s Stock Option Plan.
|
|
(2)
|
Generally,
the maximum aggregate number of Common Shares which may be made issuable pursuant to the exercise of stock options granted under
the Stock Option Plan at any particular time (together with those Common Shares which may be issued pursuant to any other security-based
compensation plan of the Company or any other options for services granted by the Company at such time) will be a maximum of ten
percent (10%) of the number of issued and outstanding Common Shares at such time, provided that if any stock option subject to
the Stock Option Plan is exercised, forfeited, expires, is terminated or is cancelled for any reason whatsoever, then the Common
Shares previously subject to such stock option are automatically reloaded and available for future stock option grants.
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
Related
Party Transactions
The
following sets forth information regarding transactions between the Company (and its subsidiaries) and its officers, directors
and significant shareholders since July 1, 2014.
Loan
Transactions:
On
June 17, 2015, the Company entered into the Original Smith Loan in the amount of $1.5 million with Mark A. Smith, Chief Executive
Officer and Executive Chairman of NioCorp.
On
July 1, 2015, the Company entered into a non-revolving credit facility agreement (collectively, with the Original Smith Loan,
the “Smith Loans”) in the amount of $2.0 million with Mark Smith and completed a drawdown of $0.5 million on that
day, and an additional $0.1 million was drawn under the credit facility on December 2, 2015. A total indebtedness of $2.1 million
(comprised of $0.6 million under the credit facility and $1.5 million under the Original Smith Loan) was outstanding as of December
31, 2015. Both arrangements bear an interest rate of 10%, are secured by the Company’s assets pursuant to a general security
agreement, are subject to both a 2.5% establishment fee and 2.5% prepayment fee.
On
January 13, 2016, the Company repaid $1.1 million of the outstanding Smith Loans, representing 100% of amounts drawn down under
the credit facility, plus $0.5 million of the amount due under the one-year loan plus accrued interest of $108,461.
Effective
June 16, 2016, the Company and Mr. Smith agreed to extend the due date for the remaining loan amount of $1 million until
June 16, 2017.
On
January 16, 2017, the Company and Mr. Smith entered into the Smith Credit Agreement pursuant to which Mr. Smith agreed
to make available to the Company a credit facility of up to $2.0 million. Under the Smith Credit Agreement, Mr. Smith has
agreed to advance amounts requested by the Company under the credit facility (the “Loan”) up to the $2.0 million maximum.
The credit facility is non-revolving and amounts paid back under the terms of the Smith Credit Agreement do not again become available
for drawdowns at the request of the Company.
The
Company will pay interest to Mr. Smith on amounts outstanding under the Loan and on any overdue interest at a rate equal
to 10% per annum, calculated monthly in arrears, through to the date of repayment of the Loan. Interest on the Loan will be computed
on the basis of a 360-day year comprised on twelve 30-day months. Mr. Smith will also receive an establishment fee equal
to 2.5% of the amount of any drawdown payable at the time of the drawdown as consideration of the advancement of such drawdown.
Any
outstanding balance on the Loan, including accrued interest, shall be immediately due and payable by the Company on the date of
expiration of the Smith Credit Agreement, on January 16, 2018 or upon the occurrence of an Event of Default (as described below).
The Company can pre-pay the Loan at any time without notice and without penalty or prepayment fees.
Drawdowns
under the Smith Credit Agreement must be made on a business day before the expiration date for a minimum amount of $10,000 and
not cause to total amount advanced to exceed $2,000,000. Further, Mr. Smith must have received the written drawdown request
along with payment of the establishment fee. Each drawdown request is subject to the consent of Mr. Smith, which may be withheld
in Mr. Smith’s sole discretion.
Under
the terms of the Smith Credit Agreement, the Company has covenanted that so long as monies are outstanding under the Loan, it
will: (a) repay, or cause to be repaid, the Loan and all other monies required to be paid to Mr. Smith in accordance with
the Smith Credit Agreement and (b) duly observe and perform all obligations and agreement set forth in the Smith Credit Agreement.
The
following occurrences will trigger an Event of Default under the Smith Credit Agreement, causing the principal amount of the Loan
outstanding, plus accrued interest, costs and all other monies owing to Mr. Smith to immediately become payable upon demand
by Mr. Smith: (a) if the Company shall default in any payment of principal, interest or other amount when the same is required
under the Smith Credit Agreement and such default has continued for a period of seven days after notice in writing has been given
by Mr. Smith to the Company regarding such default, (b) if the Company shall become insolvent, make a general assignment
for the benefit of its creditors, or passes a resolution for the winding-up, merger or amalgamation of the Company, or the Company
declares bankruptcy or a receiver is appointed under applicable law, or a compromise or arrangement is proposed by the Company
to its creditors, or the occurrence of similar events, or (c) if the Company defaults in observing or performing any other covenant
or agreement of the Smith Credit Agreement and such default has continued for a period of seven days after notice in writing has
been given by Mr. Smith to the Company regarding such default.
The
Smith Credit Agreement is secured, along with the $1.0 million outstanding under the Original Smith Loan, by all of the Company’s
assets pursuant to a general security agreement between the Company and Mr. Smith dated June 17, 2015.
On
March 24, 2017, we announced that we had entered into amending agreements dated March 20, 2017, with Mr. Smith to extend the due
dates of the Smith Credit Agreement and Original Smith Loan to June 16, 2018 and June 17, 2018, respectively.
During the years ended June
30, 2017 and 2016, the Company paid interest of $71,000 and $108,000, respectively, under the Smith loans, with $99,000 remaining
payable as of June 30, 2017.
As
of August 29, 2017, there was $1,000,000 and $175,000 principal amount outstanding under the Smith Loans and the Smith Credit
Agreement, respectively.
Director
Independence
As
of August 29, 2017, the Company’s Board of Directors consists of Messrs. Smith, Carrabba, Beling, Morris and Ms. Wightman.
The Company utilizes the definition of “independent” as it is set forth in Section 803A of the NYSE MKT Company Guide.
Further, the board considers all relevant facts and circumstances in its determination of independence of all members of the board
(including any relationships). Currently, Messrs. Carrabba, Beling, Morris and Ms. Wightman are considered independent directors.
In addition, Mr. Joe Cecil, a director of the Company since November 14, 2014, determined not to stand for re-election at the
Company’s December 9, 2016 Annual General Meeting, and accordingly ceased to be a director on December 9, 2016. Mr. Cecil
was considered to be an independent director prior to his departure from the board.
ITEM 14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
The
following table presents fees for professional services rendered by BDO USA, LLP for each of the last two fiscal years for the
audit of the Company’s annual financial statements and review of financial statements included in the Company’s filings
and fees billed for other services rendered by BDO USA, LLP during those periods.
Financial Year
Ending June 30,
|
|
|
Audit Fees
($)
|
|
Audit Related Fees ($)
|
|
Tax Fees
($)
|
|
All Other Fees
($)
|
|
2017
|
|
|
|
290,000
|
|
|
|
—
|
|
|
|
16,347
|
|
|
|
—
|
|
|
2016
|
|
|
|
148,000
|
|
|
|
—
|
|
|
|
28,459
|
|
|
|
—
|
|
|
(1)
|
“Audit
Fees” include fees necessary to perform the annual audit and quarterly reviews of the Company’s consolidated financial
statements. Audit Fees include fees for review of tax provisions and for accounting consultations on matters reflected in the
financial statements. Audit Fees also include audit or other attest services required by legislation or regulation, such as comfort
letters, consents, reviews of securities filings and statutory audits. 2017 Audit Fees include fees for consent reviews and comfort
letters related to regulatory filings in the United States and Canada.
|
|
(2)
|
“Audit-Related
Fees” include services that are traditionally performed by the auditor. These audit-related services include employee benefit
audits, due diligence assistance, accounting consultations on proposed transactions, internal control reviews and audit or attest
services not required by legislation or regulation.
|
|
(3)
|
“Tax
Fees” include fees for all tax services other than those included in “Audit Fees” and “Audit-Related Fees.”
This category includes fees for tax compliance, tax planning and tax advice. Tax planning and tax advice includes assistance with
tax audits and appeals, tax advice related to mergers and acquisitions, and requests for rulings or technical advice from tax
authorities. For the financial years ended June 30, 2017 and 2016, these tax services included the preparation of Canadian, U.S.
and Nebraska tax returns and tax planning and tax advice services.
|
|
(4)
|
“All
Other Fees” includes all other non-audit services.
|
Pre-approval
Policies
Our
policy has been for the Audit Committee to pre-approve all audit, audit-related and non-audit services performed by our independent
auditors and to subsequently review the actual fees and expenses paid to our independent auditors. Accordingly, the Audit Committee
pre-approved all audit, audit-related and non-audit services performed by our independent auditors and subsequently reviewed the
actual fees and expenses paid to BDO USA, LLP. The Audit Committee has determined that the fees paid to BDO USA, LLP for services
are compatible with maintaining BDO USA, LLP’s independence as our auditors. All of the services provided by BDO USA LLP
during the year ended June 30, 2017 were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation
S-X.