NioCorp CEO Provides Working Capital to Company Through New $2 Million Credit Facility

Rhea-AI Summary

NioCorp Developments (NASDAQ:NB) has secured a new $2 million non-revolving credit facility from CEO and Executive Chairman Mark A. Smith. This facility aims to support the company's efforts in obtaining project financing for its Elk Creek Project in Southeast Nebraska and for general corporate purposes. The credit facility terms include a 10% annual interest rate, a 2.5% establishment fee for drawdowns, a 2.5% prepayment fee, and is secured by all company assets. The facility matures on June 30, 2025.

This transaction is considered a 'related party transaction' but is exempt from formal valuation and minority shareholder approval requirements due to its value being less than 25% of NioCorp's market capitalization. The company's Audit Committee and Board of Directors have reviewed and approved the terms of this transaction.

Positive

• CEO provides $2 million credit facility, demonstrating commitment to the company
• Credit facility supports project financing efforts for the Elk Creek Project
• Loan terms are relatively favorable considering the company's stage and market conditions
• Transaction exempt from formal valuation and minority shareholder approval requirements

Negative

• 10% annual interest rate and additional fees increase the cost of capital
• All company assets used as collateral for the loan
• Potential conflict of interest due to CEO providing the loan

Insights

Financial Analyst

The establishment of a $2 million credit facility by NioCorp's CEO is a double-edged sword for investors. While it provides much-needed working capital, it also raises concerns about the company's financial health. The 10% interest rate and additional fees suggest high-risk lending terms, potentially indicating difficulties in securing traditional financing. This move could be seen as a vote of confidence from the CEO, but it also increases the company's debt burden and dilutes shareholder value. The secured nature of the loan against all company assets is particularly noteworthy, as it puts the CEO in a privileged position in case of financial distress. Investors should closely monitor NioCorp's progress in securing project financing for the Elk Creek Project, as this credit facility appears to be a stopgap measure rather than a long-term solution.

Legal Expert

The credit facility transaction raises several legal and governance considerations. As a related party transaction, it falls under MI 61-101, but benefits from exemptions due to its size relative to NioCorp's market cap. However, the lack of a 21-day advance material change report could be scrutinized by regulators. The company's justification for expedited closing seems reasonable but may warrant further explanation. The involvement of the Audit Committee and Board in approving the transaction is a positive governance step. Investors should note the potential conflict of interest inherent in the CEO providing secured financing, as it could influence decision-making in favor of debt repayment over other corporate priorities. The general security agreement gives the CEO significant leverage, which could be problematic if the company faces financial difficulties.

Market Research Analyst

This credit facility highlights the challenging funding environment for critical minerals projects. NioCorp's reliance on its CEO for financing suggests investor appetite or difficulty in securing traditional project finance. The Elk Creek Project's focus on niobium, scandium and rare earth elements aligns with growing demand for critical minerals, particularly in the EV and high-tech sectors. However, the need for this credit facility indicates potential delays or complications in project development. Investors should compare NioCorp's progress and financing strategies with other players in the critical minerals space. The June 30, 2025 due date provides a timeline for assessing the company's ability to secure more substantial project financing or reach production. This development may impact investor perception of the project's viability and NioCorp's financial stability, potentially affecting its stock performance in the near term.

CENTENNIAL, CO / ACCESSWIRE / September 11, 2024 / NioCorp Developments Ltd. ("NioCorp" or the "Company") (NASDAQ:NB) is pleased to announce that CEO and Executive Chairman Mark A. Smith has agreed to establish a new $2 million non-revolving credit facility with NioCorp to assist the Company in continuing its work to secure project financing for the Company's critical minerals project in Southeast Nebraska (the "Elk Creek Project") and for general corporate purposes.

The credit facility bears an interest rate of 10% per annum, is subject to a 2.5% establishment fee for any drawdown and a 2.5% prepayment fee, and is secured by all of the Company's assets pursuant to a general security agreement. Any amounts outstanding under the credit facility will become due on June 30, 2025.

"On behalf of the Board, I would like to express my appreciation to Mark for his continuing support of the Company and its efforts to move the Elk Creek Project to commercial reality," said Michael J. Morris, Lead Independent Director of NioCorp's Board. "This credit facility demonstrates Mark's deep dedication to NioCorp's long-term success."

The credit facility is a "related party transaction" under Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"). Because the value of the credit facility is less than 25% of NioCorp's market capitalization, it is exempt from the formal valuation and minority shareholder approval requirements of MI 61-101, pursuant to the exemptions provided under Sections 5.5(a) and 5.7(1)(a) of MI 61-101, respectively. The Company did not file a material change report more than 21 days prior to the establishment of the credit facility as the final details were not settled until shortly before closing and the Company determined it was advisable to close on an expedited basis to secure the necessary financing. The Audit Committee of the Board of Directors (the "Board") and the Board have reviewed and approved of the terms of this transaction.

# # #

FOR MORE INFORMATION:

Jim Sims, Corporate Communications Officer, NioCorp Developments Ltd., (720) 334-7066, jim.sims@niocorp.com

@NioCorp $NB $NB.TO $BR3 #Niobium #Scandium #rareearth #neodymium #dysprosium #terbium #ElkCreek #EV #electricvehicle

ABOUT NIOCORP

NioCorp is developing a critical minerals project in Southeast Nebraska that is expected to produce niobium, scandium, and titanium. The Company also is evaluating the potential to produce several rare earths from the Elk Creek Project. Niobium is used to produce specialty alloys as well as High Strength, Low Alloy steel, which is a lighter, stronger steel used in automotive, structural, and pipeline applications. Scandium is a specialty metal that can be combined with Aluminum to make alloys with increased strength and improved corrosion resistance. Scandium is also a critical component of advanced solid oxide fuel cells. Titanium is used in various lightweight alloys and is a key component of pigments used in paper, paint and plastics and is also used for aerospace applications, armor, and medical implants. Magnetic rare earths, such as neodymium, praseodymium, terbium, and dysprosium are critical to the making of Neodymium-Iron-Boron magnets, which are used across a wide variety of defense and civilian applications.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of applicable Canadian securities laws. Forward-looking statements may include, but are not limited to, statements regarding the expected use of any fund drawn under the credit facility, including assisting the Company in continuing its work to secure sufficient project financing for the construction and operation of the Elk Creek Project and NioCorp's expectation to produce niobium, scandium and titanium and the potential to produce rare earths at the Elk Creek Project. Forward-looking statements are typically identified by words such as "plan," "believe," "expect," "anticipate," "intend," "outlook," "estimate," "forecast," "project," "continue," "could," "may," "might," "possible," "potential," "predict," "should," "would" and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements are based on the current expectations of the management of NioCorp and are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. Forward-looking statements reflect material expectations and assumptions, including, without limitation, expectations and assumptions relating to: NioCorp's ability to receive sufficient project financing for the construction of the Elk Creek Project on acceptable terms or at all; the future price of metals; the stability of the financial and capital markets; and current estimates and assumptions regarding the business combination with GX Acquisition Corp. II (the "Business Combination") and the standby equity purchase agreement (the "Yorkville Equity Facility Financing Agreement" and, together with the Business Combination, the "Transactions") with YA II PN, Ltd., an investment fund managed by Yorkville Advisors Global, LP, and their benefits. Such expectations and assumptions are inherently subject to uncertainties and contingencies regarding future events and, as such, are subject to change. Forward-looking statements involve a number of risks, uncertainties or other factors that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those discussed and identified in public filings made by NioCorp with the U.S. Securities and Exchange Commission and with the applicable Canadian securities regulatory authorities and the following: NioCorp's ability to operate as a going concern; NioCorp's requirement of significant additional capital; NioCorp's ability to receive sufficient project financing for the construction of the Elk Creek Project on acceptable terms or at all; NioCorp's ability to receive a final commitment of financiang from the Export-Import Bank of the United States on the anticipated timeline, on acceptable terms, or at all; NioCorp's ability to recognize the anticipated benefits of the Transactions, including NioCorp's ability to access the full amount of the expected net proceeds of under the Yorkville Equity Facility Financing Agreement over the next 18 months; NioCorp's ability to continue to meet the listing standards of The Nasdaq Stock Market LLC; risks relating to NioCorp's common shares, including price volatility, lack of dividend payments and dilution or the perception of the likelihood of any of the foregoing; the extent to which NioCorp's level of indebtedness and/or the terms contained in agreements governing NioCorp's indebtedness or the Yorkville Equity Facility Financing Agreement may impair NioCorp's ability to obtain additional financing; covenants contained in agreements with NioCorp's secured creditors that may affect its assets; NioCorp's limited operating history; NioCorp's history of losses; the material weaknesses in NioCorp's internal control over financial reporting, NioCorp's efforts to remediate such material weaknesses and the timing of remediation; the possibility that NioCorp may qualify as a passive foreign investment company under the U.S. Internal Revenue Code of 1986, as amended (the "Code"); the potential that the Transactions could result in NioCorp becoming subject to materially adverse U.S. federal income tax consequences as a result of the application of Section 7874 and related sections of the Code; cost increases for NioCorp's exploration and, if warranted, development projects; a disruption in, or failure of, NioCorp's information technology systems, including those related to cybersecurity; equipment and supply shortages; variations in the market demand for, and prices of, niobium, scandium, titanium and rare earth products; current and future offtake agreements, joint ventures, and partnerships; NioCorp's ability to attract qualified management; estimates of mineral resources and reserves; mineral exploration and production activities; feasibility study results; the results of metallurgical testing; the results of technological research; changes in demand for and price of commodities (such as fuel and electricity) and currencies; competition in the mining industry; changes or disruptions in the securities markets; legislative, political or economic developments, including changes in federal and/or state laws that may significantly affect the mining industry; the impacts of climate change, as well as actions taken or required by governments related to strengthening resilience in the face of potential impacts from climate change; the need to obtain permits and comply with laws and regulations and other regulatory requirements; the timing and reliability of sampling and assay data; the possibility that actual results of work may differ from projections/expectations or may not realize the perceived potential of NioCorp's projects; risks of accidents, equipment breakdowns, and labor disputes or other unanticipated difficulties or interruptions; the possibility of cost overruns or unanticipated expenses in development programs; operating or technical difficulties in connection with exploration, mining, or development activities; management of the water balance at the Elk Creek Project site; land reclamation requirements related to the Elk Creek Project; the speculative nature of mineral exploration and development, including the risks of diminishing quantities of grades of reserves and resources; claims on the title to NioCorp's properties; potential future litigation; and NioCorp's lack of insurance covering all of NioCorp's operations.

Should one or more of these risks or uncertainties materialize or should any of the assumptions made by the management of NioCorp prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

All subsequent written and oral forward-looking statements concerning the matters addressed herein and attributable to NioCorp or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to herein. Except to the extent required by applicable law or regulation, NioCorp undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events.

SOURCE: NioCorp Developments Ltd.

View the original press release on accesswire.com

FAQ

What is the purpose of NioCorp's new $2 million credit facility?

The new $2 million credit facility is intended to assist NioCorp (NASDAQ:NB) in securing project financing for its Elk Creek Project in Southeast Nebraska and for general corporate purposes.

Who provided the $2 million credit facility to NioCorp?

The $2 million credit facility was provided by NioCorp's CEO and Executive Chairman, Mark A. Smith.

What are the key terms of NioCorp's new credit facility?

The credit facility has a 10% annual interest rate, a 2.5% establishment fee for drawdowns, a 2.5% prepayment fee, is secured by all company assets, and matures on June 30, 2025.

Is the $2 million credit facility considered a related party transaction for NioCorp (NASDAQ:NB)?

Yes, the credit facility is considered a 'related party transaction' under Multilateral Instrument 61-101, but is exempt from formal valuation and minority shareholder approval requirements due to its value being less than 25% of NioCorp's market capitalization.