As filed with the Commission on
September 22, 2016
File No. 333-213451
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-Effective Amendment No. 1
FORM S-1/A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
NioCorp Developments Ltd.
(Exact name of registrant as specified in
its charter)
British Columbia
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1099
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98-1262185
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial Classification
Code Number)
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(I.R.S. Employer Identification No.)
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7000 South Yosemite Street, Suite 115
Centennial, Colorado 80112
(720) 639-4647
(Address, including zip code, and telephone
number, including area code, of registrant’s principal executive offices)
CT Corporation System located at 111
Eighth Avenue, 13th Floor
New York, New York 10011
(800) 624-0909
(Name, address, including zip code, and
telephone number, including area code, of agent for service)
Copies to:
Jason K. Brenkert
Dorsey & Whitney LLP
1400 Wewatta Street, Suite 400
Denver, Colorado 80202
Approximate date of commencement of
proposed sale to the public:
As soon as practicable after this registration statement becomes effective.
If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box:
x
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier registration statement for the same offering.
¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. (Check one):
Large Accelerated Filer
¨
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Accelerated Filer
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Non-Accelerated Filer
x
(Do not check if a smaller
reporting company)
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Smaller Reporting Company
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CALCULATION OF REGISTRATION FEE
*
Title of Each Class of
Securities to be
Registered
(1)
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Amount to be
Registered
(2)
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Proposed Maximum
Offering Price Per
Share
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Proposed Maximum
Aggregate Offering
Price
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Amount of Registration
Fee
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Common Shares
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10,062,201
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$
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0.64
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(3)
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$
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6,439,809
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(3)
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$
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648.98
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(3)(4)
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(1)
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Includes Common Shares, which may be offered
pursuant to this registration statement, held by the selling security holders upon exercise of underlying warrants or options held
by selling security holders.
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(2)
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Pursuant to Rule 416 under the Securities
Act, the shares being registered hereunder include such indeterminate number of shares as may be issuable with respect to the shares
being registered hereunder as a result of stock splits, stock dividends or similar transactions.
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(3)
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Estimated solely for the purpose
of calculating the amount of registration fee pursuant to Rule 457(c) under the Securities Act. The proposed maximum offering
price per share and proposed maximum aggregate offering price are based upon the average of the high and low prices of
the common shares as of September 15, 2016 as quoted on the OTCQX of $0.64.
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(4)
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The filing fee of $648.98 was
previoulsy paid in full in connection with the Registrant’s filing of the Form S-1 (333-213451) on September 2, 2016. No
additional filing fee is due in connection with this filing.
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*All dollar amounts reflected herein refer
to U.S. Dollars unless otherwise noted.
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We hereby amend this registration statement
on such date or dates as may be necessary to delay our effective date until we will file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act
of 1933 or until this Registration Statement will become effective on such date as the Securities and Exchange Commission, in accordance
with Section 8(a) may determine.
The information contained
in this prospectus is not complete and may be changed. The selling security holders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities
and the selling security holders are not soliciting an offer to buy these securities in any state where the offer or sale is not
permitted.
Subject
To Completion, Dated September 22, 2016
NioCorp Developments Ltd.
10,062,201 Common
Shares
This prospectus relates to the resale
or other disposition from time to time by certain selling security holders as further described in this prospectus, of up to an
aggregate of 10,062,201 common shares (the “Common Shares”) of NioCorp Developments Ltd. (the “Company”,
“we”, “us” or “our”) acquirable upon exercise of common share purchase warrants and options
of the Company that were issued by the Company to such selling security holders in private transactions.
The selling security holders may sell or
otherwise dispose of the Common Shares covered by this prospectus or interests therein on any stock exchange, market or trading
facility on which the shares are traded or in private transactions. These dispositions may be at fixed prices, at prevailing market
prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale,
or at negotiated prices. Additional information about the selling security holders, and the times and manner in which they may
offer and sell Common Shares under this prospectus, is provided in the sections entitled “Selling Security Holders”
and “Plan of Distribution” of this prospectus.
We will not receive any proceeds from the
resale of the Common Shares by the selling security holders.
Our Common Shares are traded on the
Toronto Stock Exchange (the “TSX”) under the symbol “NB” and quoted on the OTCQX under the symbol “NIOBF.”
On September 15, 2016, the last reported closing bid price of our Common Shares was $0.64 per Common Share on the OTCQX and C$0.87
per Common Share on the TSX. These over-the-counter quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not necessarily represent actual transactions. You are urged to obtain current market quotations of the
Common Shares.
All dollar amounts reflected herein refer
to U.S. Dollars unless otherwise noted.
We are an “emerging growth company”
as defined under federal securities laws and, as such, may elect to comply with certain reduced public company requirements for
future filings.
Investing in the Common Shares involves
a high degree of risk. See “Risk Factors” beginning on page 5 of this prospectus.
Neither the Securities and Exchange
Commission (the “SEC”) nor any state securities commission has approved or disapproved of the securities offered hereby
or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is ,
2016
TABLE OF CONTENTS
GLOSSARY OF TERMS
BCSC
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British Columbia Securities Commission
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CIM
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Canadian Institute of Mining and Metallurgy
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CMC Agreement
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Means the Offtake Agreement dated July 2015 by and between the Company’s offtake agreement with CMC Cometals, a division of Commercial Metals Company
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Common Shares
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The Common Shares without par value in the capital stock of NioCorp as the same are constituted on the date hereof
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cut-off grade
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The lowest grade of mineralized material that qualifies as ore in a given deposit, that is, material of the lowest assay value that is included in a resource/reserve estimate
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deposit
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A mineralized body which has been physically delineated by sufficient drilling, trenching, and/or underground work, and found to contain a sufficient average grade of metal or metals to warrant further exploration and/or development expenditures. Such a deposit does not qualify as a commercially mineable ore body or as containing reserves or ore, unless final legal, technical and economic factors are resolved
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Diamond Drilling
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A type of rotary drilling in which diamond bits are used as the rock-cutting tool to produce a recoverable drill core sample of rock for observation and analysis
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Elk Creek Project
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NioCorp’s niobium, scandium and titanium project located
on the Elk Creek Property
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Elk Creek Property
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NioCorp’s Carbonatite property located in Southeast Nebraska, USA
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Ferroniobium
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An iron-niobium alloy, with a niobium content of 60-70%
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Feasibility Study
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Means a comprehensive study of a mineral deposit in which all geological, engineering, legal, operating, economic, social, environmental and other relevant factors are considered in sufficient detail that it could reasonably serve as the basis for a final decision by a financial institution to finance the development of the deposit for mineral production
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grade
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To contain a particular quantity of ore or mineral, relative to other constituents, in a specified quantity of rock
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host
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A rock or mineral that is older than rocks or minerals introduced into it or formed within it
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host rock
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A body of rock serving as a host for other rocks or for mineral deposits, or any rock in which ore deposits occur
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Lind Agreement
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NioCorp’s definitive convertible security funding agreement with an entity managed by The Lind Partners, a New York based asset management firm
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Mineral Reserve
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The economically and legally mineable part of a measured or indicated mineral resource demonstrated by at least a preliminary feasibility study under NI 43-101 standards or a bankable feasibility study under SEC Industry Guide 7 Standards. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A mineral reserve includes diluting materials and allowances for losses that may occur when the material is mined and processed
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Mineral Resource
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A concentration or occurrence of natural,
solid, inorganic or fossilized organic material in or on the Earth’s crust in such form and quantity and of such a grade
or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics
and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge. The term
“mineral resource” covers mineralization and natural material of intrinsic economic interest which has been identified
and estimated through exploration and sampling and within which mineral reserves may subsequently be defined by the consideration
and application of technical, economic, legal, environmental, socio-economic and governmental factors. The phrase “reasonable
prospects for economic extraction” implies a judgment by a qualified person (as that term is defined in NI 43-101) in respect
of the technical and economic factors likely to influence the prospect of economic extraction. A mineral resource is an inventory
of mineralization that, under realistically assumed and justifiable technical and economic conditions, might become economically
extractable.
Inferred Mineral Resource:
Under
CIM standards, an Inferred Mineral Resource is that part of a Mineral Resource for which quantity and grade or quality can be estimated
on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity.
The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops,
trenches, pits, workings and drill holes.
Indicated Mineral Resource:
Under
CIM standards, an Indicated Mineral Resource is that part of a Mineral Resource for which quantity, grade or quality, densities,
shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application
of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The
estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations
such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to
be reasonably assumed.
Measured Mineral Resource:
Under
CIM standards, a Measured Mineral Resource is that part of a Mineral Resource for which quantity, grade or quality, densities,
shape, physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate
application of technical and economic parameters, to support production planning and evaluation of the economic viability of the
deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate
techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm
both geological and grade continuity.
SEC Industry Guide 7 does not define
“mineral resources” and typically mineral resources may not be disclosed in reports filed with the SEC. See “Cautionary
Note to U.S. Investors Regarding Estimates of Mineral Reserves and Mineral Resources” below.
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National Instrument 43-101/ NI 43-101
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National Instrument 43-101 of the Canadian Securities Administrators entitled “Standards of Disclosure for Mineral Projects”
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NioCorp, we, us, our or the Company
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NioCorp Developments Ltd.
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Nb or niobium
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Means the alloying agent niobium, primarily used in the production
of high strength, low alloy (HSLA) steel
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Offtake Agreement
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An offtake agreement is an agreement between NioCorp and a third party for the purchase and sale of products to be produced from the Elk Creek Project, at market based prices, that will commence upon the Elk Creek Project reaching commercial production
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October 2015 PEA
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NioCorp’s Amended Preliminary Economic Assessment dated October 16, 2015
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Sc or scandium
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The element scandium, which is used for aerospace industry components as well as applications that call for high strength, low weight metals
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SRK
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SRK Consulting (US) Inc.
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SEC
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United States Securities and Exchange Commission
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Securities Act
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United States Securities Act of 1933, as amended
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Ti or titanium
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The element titanium, which in its oxide form is a common pigment in paper, paint and plastic. In its metallic form, Titanium is used in aerospace applications, armor, chemical processing applications, marine hardware applications, medical implants, power generation and in sporting goods
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TK Agreement
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Means the Offtake Agreement dated November 10, 2014 by and between the Company and ThyssenKrupp Metallurgical Products GmbH
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SEC Industry Guide 7 Definitions
exploration stage
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An “exploration stage” prospect is one which is not in either the development or production stage.
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development stage
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A “development stage” project is one which is undergoing preparation of an established commercially mineable deposit for its extraction but which is not yet in production. This stage occurs after completion of a feasibility study.
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mineralized material
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The term “mineralized material” refers to material that is not included in the reserve as it does not meet all of the criteria for adequate demonstration for economic or legal extraction.
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probable reserve
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The term “probable reserve” refers to reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.
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production stage
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A “production stage” project is actively engaged in the process of extraction and beneficiation of mineral reserves to produce a marketable metal or mineral product.
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proven reserve
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The term “proven reserve” refers to reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established.
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reserve
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The term “reserve” refers to that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. Reserves must be supported by a feasibility study done to bankable standards that demonstrates the economic extraction. “Bankable standards” implies that the confidence attached to the costs and achievements developed in the study is sufficient for the project to be eligible for external debt financing. A reserve includes adjustments to the in-situ tonnes and grade to include diluting materials and allowances for losses that might occur when the material is mined.
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Metric Equivalents
For ease of reference, the following factors
for converting Imperial measurements into metric equivalents are provided:
To convert from Imperial
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To metric
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Multiply by
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Acres
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Hectares
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0.404686
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Feet
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Metres
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0.30480
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Miles
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Kilometres
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1.609344
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Tons
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Tonnes
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0.907185
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Ounces (troy)/ton
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Grams/Tonne
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34.2857
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1 mile = 1.609 kilometres
1 acre = 0.405 hectares
2,204.62 pounds = 1 metric tonne = 1 tonne
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2000 pounds (1 short ton) = 0.907 tonnes
1 ounce (troy) = 31.103 grams
1 ounce (troy)/ton = 34.2857 grams/tonne
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CAUTIONARY NOTE TO U.S. INVESTORS REGARDING
MINERAL RESERVE AND RESOURCE ESTIMATES
The mineral estimates in this prospectus
have been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements
of United States securities laws. The terms “mineral reserve”, “proven mineral reserve” and “probable
mineral reserve” are Canadian mining terms as defined in accordance with Canadian National Instrument 43-101 – Standards
of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum (the
“CIM”) -
CIM Definition Standards on Mineral Resources and Mineral Reserves
, adopted by the CIM Council, as
amended. These definitions differ from the definitions in the SEC Industry Guide 7 under the United States Securities Act of 1933,
as amended (the “Securities Act”). Under SEC Industry Guide 7 standards, a “final” or “bankable”
feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis
to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority.
In addition, the terms “mineral resource,”
“measured mineral resource,” “indicated mineral resource” and “inferred mineral resource” are
defined in, and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and
are normally not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to
assume that all or any part of a mineral deposit in these categories will ever be converted into reserves. “Inferred mineral
resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal
feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category.
Under Canadian securities laws and regulations, estimates of inferred mineral resources may not form the basis of feasibility or
pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral
resource exists or is economically or legally mineable. Certain disclosures of the results of mining operations contained herein
are permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that
does not constitute “reserves” by SEC Industry Guide 7 standards as in place tonnage and grade without reference to
unit measures.
Accordingly, information contained in this
prospectus and the documents incorporated by reference herein contain descriptions of our mineral deposits that may not be comparable
to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States
federal securities laws and the rules and regulations thereunder.
CURRENCY AND EXCHANGE RATES
All dollar amounts in this prospectus are
expressed in United States dollars unless otherwise indicated. The Company’s accounts are maintained in United States dollars
and the Company’s financial statements are prepared in accordance with United States Generally Accepted Accounting Principles.
Some of the Company’s material agreements use Canadian dollars and the Company’s Common Share as traded on the Toronto
Stock Exchange are traded in Canadian dollars. As used herein “C$” represents Canadian dollars.
The following table sets forth the rate
of exchange for the Canadian dollar, expressed in United States dollars in effect at the end of the periods indicated, the average
of exchange rates in effect during such periods, and the high and low exchange rates during such periods based on the noon rate
of exchange as reported by the Bank of Canada for conversion of Canadian dollars into United States dollars.
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Year Ended June 30
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Canadian Dollars to U.S. Dollars
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2016
($)
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2015
($)
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2014
($)
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Rate at end of period
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0.7687
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0.8017
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0.9367
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Average rate for period
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0.7541
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0.8520
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0.9342
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High for period
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0.7972
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0.9404
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0.9768
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Low for period
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0.6854
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0.7811
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0.8888
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration
statement that we filed with the SEC.
You should rely only on the information
contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this
prospectus. This prospectus is offering to sell, and is seeking offers to buy, the securities only in jurisdictions where offers
and sales are permitted. The information contained in this prospectus speaks only as of the date of this prospectus unless the
information specifically indicates that another date applies, regardless of the time of delivery of this prospectus or of any sale
of our Common Shares.
We may provide a prospectus supplement
containing specific information about the terms of a particular offering by the selling security holders, or their transferees.
The prospectus supplement may add, update or change information in this prospectus. If information in a prospectus supplement is
inconsistent with the information in this prospectus, you should rely on the information in that prospectus supplement. You should
read both this prospectus and, if applicable, any prospectus supplement hereto. See “Where You Can Find More Information”
for more information.
This prospectus includes industry and
market data and other information that we have obtained from, or which is based upon, market research, independent industry publications
or other publicly available information. Any such data and other information is subject to change based on various factors, including
those described below under the heading “Risk Factors” and elsewhere in this prospectus.
Our logo and some of our trademarks
are used in this prospectus, which remain our sole intellectual property. This prospectus also includes trademarks, tradenames,
and service marks that are the property of other organizations. Solely for convenience, our trademarks and tradenames referred
to in this prospectus appear without the
TM
symbol, but those references are not intended to indicate, in any way,
that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to these
trademarks and tradenames.
We have not, and the selling security
holder has not, authorized anyone to provide you with information different from that contained or incorporated by reference in
this prospectus or in any supplement to this prospectus or free writing prospectus, and neither we nor the selling security holder
takes any responsibility for any other information that others may give you. This prospectus is not an offer to sell, nor is it
a solicitation of an offer to buy, the securities in any jurisdiction where the offer or sale is not permitted. You should not
assume that the information contained in this prospectus or any prospectus supplement or free writing prospectus is accurate as
of any date other than the date on the front cover of those documents, or that the information contained in any document incorporated
by reference is accurate as of any date other than the date of the document incorporated by reference, regardless of the time of
delivery of this prospectus or any sale of a security. Our business, financial condition, results of operations and prospects may
have changed since those dates.
Prospectus
Summary
This summary highlights information
contained elsewhere in this prospectus. It may not contain all of the information that you should consider before investing in
our Common Shares. You should read this entire prospectus carefully, including the “Risk Factors” and the financial
statements and related notes included herein. This prospectus includes forward-looking statements that involve risks and uncertainties.
See “Cautionary Note Regarding Forward-Looking Statements.” References to “we,” “our,” “NioCorp,”
the “Company” refer to NioCorp Developments Ltd.
About the Company
NioCorp 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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·
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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 High Strength, Low Alloy (“HSLA”) steel, a stronger steel used in automotive, bridges, structural systems, buildings, pipelines, and other applications that which 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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·
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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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·
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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 to complete a feasibility study for the Elk Creek Project and to begin development. Subject to delivering a positive
feasibility study for the Elk Creek Project, we intend to secure the project financing necessary to complete mine development and
construction of the Elk Creek Project.
NioCorp is a mineral exploration company
engaged in the acquisition, exploration and development of mineral properties. We are in the exploration stage as our properties
have not yet reached commercial production, and none of our properties is beyond the exploration stage at this time. All work presently
planned by us is directed at defining mineralization and increasing understanding of the characteristics of, and economics of,
that mineralization. In addition, we have also conducted permitting, land reclamation and other related activities at and for the
Elk Creek Project.
NioCorp was incorporated under the laws
of the Province of British Columbia under the BCBCA 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.”; and 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 Robson Court, 1000-840
Howe Street, Vancouver, British Columbia V6Z 2M1 (ATTN: Miller Thompson LLC). Our head office is located at 7000 South Yosemite
Street, Suite 115, Centennial, Colorado 80112.
Recent Developments
On September 8, 2016 we announced the
successful completion of a Jurisdictional Determination (JD) process with the US Army Core of Engineers (ACOE) for the Elk Creek
Project. The JD issued by the ACOE identifies wetlands and streams within the Elk Creek Project’s footprint that are considered
Waters of the US (WOTUS) and are therefore regulated under the federal Clean Water Act. The Elk Creek Project, as laid out in
the Company’s October 15 Preliminary Economic Assessment (PEA), was designed to minimize impacts on WOTUS wetlands and streams.
The JD reinforced our belief that there are no WOTUS wetlands and streams in the immediate footprint of the Elk Creek Project’s
mine mouth and product processing facilities.
On July 13, 2016, we announced that the
first sample of scandium material has been produced from our Elk Creek, Nebraska resource. The sample was produced during the on-going
bench testing and optimization program of the company’s scandium recovery operations at SGS in Lakefield, Ontario. The scandium
precipitate was produced through a process that is a precursor to the commercial process that will make higher-purity commercial
grade scandium trioxide at our Elk Creek, Nebraska mine and processing facility.
On July 11, 2016, we announced the completion
of our warrant exercise program for gross proceeds to us of C$4.8 million. A total of approximately 7.04 million C$0.65 share purchase
warrants expiring November 10, 2016. Each holder who exercised one warrant during the program received 1.11029 Common Shares, representing
one warrant share and 0.11029 of a Common Share, as the incentive portion. The program had been previously approved by our shareholders
on May 17, 2016.
On July 1, 2016, we appointed Neal Shah
as our Chief Financial Officer. Mr. Shah had served as our Interim Chief Financial Officer since April of 2015. Prior to that,
he was our Vice President of Finance.
On June 23, 2016, we announced the successful
completion of a Whole Ore Pre-Leach Pilot Plant (WPL) as part of our Elk Creek superalloy materials feasibility study. We believe
the WPL paves the way for our remaining feasibility study pilot plants to commence at the SGS Lakefield metallurgical testing facility
in Lakefield, Ontario. This pilot plant is a key component of the metallurgical development and design program that we anticipate
will lead to the completion of the Elk Creek superalloy materials feasibility study. It was designed to test the continuous operation
of the WPL operation as well as providing scandium-bearing solutions for a subsequent Scandium Solvent Extraction Pilot Plant,
along with Pre-Leach Residue for a subsequent Acid Bake / Water Leach Pilot Plant.
On June 20, 2016, we announced that we
had entered into a joint development agreement with IBC Advanced Alloys Corp. to investigate and develop applications for scandium-containing
alloys for multiple downstream markets.
On June 15, 2016, we announced that we
had entered into a commercial sales agreement (“CMC Agreement”) with CMC Cometals, a division of Commercial Metals
Company (“CMC”) of Fort Lee, New Jersey, under which CMC expects to purchase up to a maximum of 1,875 tonnes per year,
or roughly twenty-five (25%), of our potential annual Ferroniobium production from our Elk Creek, Nebraska resource. Under the
CMC Agreement, CMC will purchase this amount of Ferroniobium under a market-based pricing structure for an initial 10-year term,
with an option to extend beyond that period upon mutual agreement of the parties.
On January 20, 2016, we announced that
we had received an additional $250,000 in the first tranche funding of our convertible security funding agreement with an entity
managed by The Lind Partners.
On January 19, 2016, we announced the
closing of our non-brokered private placement of equity units. We received gross proceeds of C$5,247,485 through the issuance
of 9,074,835 units at a price of C$0.57 per unit. Each Unit was comprised of one Common Share and one Common Share purchase warrant,
each warrant entitles the holder to acquire a Common Share at a price of C$0.75 for a period of three years from their date of
issuance.
On December 23, 2015, we announced that
we had received conditional approval from the Toronto Stock Exchange (“TSX”) of a definitive convertible security funding
agreement (the “Lind Agreement”) with an entity managed by The Lind Partners, a New York based asset management firm
(together, “Lind”). We also announced that we received an initial $3.0 million in first tranche funding from Lind.
Under the Lind Agreement, we expect to receive a total of $4.5 million in first tranche funding from Lind. In addition to the $3.0
million transferred on December 23, 2015, an additional $1.0 million was transferred on December 30, 2015 and an additional $250,000
was transferred on January 20, 2016. Lind can increase the funding under the Lind Agreement by an additional $1.0 million during
its two-year term. Further, provided certain conditions are met, we will have the right to call an additional $ 1.0 million under
the Lind Agreement. The Lind Agreement also provides for the issuance of a second convertible security on mutual agreement of us
and Lind, in which Lind would fund up to another $6.0 million (the “Second Tranche”), which can also be increased by
$1.0 million.
On October 22, 2015, we announced that
we had closed a non-brokered private placement of unsecured convertible promissory notes for $0.8 million. The convertible promissory
notes bear interest at a rate of 8%, are payable quarterly in arrears, are non-transferable, and have a term of three years from
the date of issue. Principal under the convertible promissory notes was repayable by us in cash or Common Shares at a conversion
price of C$0.97 per Common Share, calculated on conversion or repayment using the then-current Bank of Canada noon exchange rate.
Accrued but unpaid interest on the convertible promissory notes was payable by us in cash or Common Shares at a price per Common
Share equal to the most recent closing price of our Common Shares prior to the delivery to us of a request to convert interest,
or the due date of interest, as applicable, calculated using the then-current Bank of Canada noon exchange rate.
On October 16, 2015, we announced that
we had amended our second Elk Creek PEA following a review by the British Columbia Securities Commission (“BCSC”).
The amended second Elk Creek PEA provided additional descriptions of the scandium demand and pricing assumptions included in the
second Elk Creek PEA, including that a significant portion of the Elk Creek Project revenue, and achieving that revenue projected
in the second Elk Creek PEA, is subject to market growth in scandium, which is a developing market with a risk of oversupply and/or
undersupply disrupting pricing. The amended PEA did not contain any changes to the project economics, mineral resource, plant design
or mine plan when compared to the PEA results announced in August 2015.
THE OFFERING
Shares Offered By the Selling Security Holders
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10,062,201 Common Shares
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Offering Price
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Determined at the time of sale by the selling security holders
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Use of Proceeds
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We will not receive any proceeds from the sale of the Common Shares by selling security holders covered by this prospectus.
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Common Shares Outstanding as of September 15, 2016
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180,580,037 Common Shares
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OTCQX and TSX Trading Symbol
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The Common Shares are quoted on the OTCQX under the symbol “NIOBF” and listed on the TSX under the symbol “NB”.
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Risk Factors
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Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 5 of this prospectus.
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Dividend Policy
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We currently intend to retain any future earnings to fund the development and growth of our business. Therefore, we do not currently anticipate paying cash dividends.
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SUMMARY FINANCIAL INFORMATION
The following tables summarize our
financial data for the periods presented. The summary statements of operations and comprehensive loss for the years ended June
30, 2016 and 2015, and the statement of financial position as of June 30, 2016 and 2015 have been derived from our audited financial
statements, which are included elsewhere in this prospectus. The historical results are not necessarily indicative of the results
to be expected for any future periods. You should read this data together with our financial statements and the related notes
included elsewhere in this prospectus, as well as “Management's Discussion and Analysis of Financial Condition and Results
of Operations” beginning on page 56 of this prospectus.
Statements of Operations and Comprehensive
Loss ($000)
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Years
Ended
June
30,
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2016
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2015
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Total revenue
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$
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-
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$
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-
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Total operating expenses
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9,518
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25,480
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Net loss
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11,408
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23,115
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Basic and diluted loss per share
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0.07
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0.17
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Statements of Financial Position ($000)
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As at
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June 30,
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June 30,
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2016
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2015
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Total assets
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$
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15,246
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$
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11,575
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Total liabilities
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9,052
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6,564
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Total shareholders’ equity
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6,194
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5,011
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RISK FACTORS
Investing in the Common Shares involves
a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other
information contained in this prospectus, before deciding to invest in the Common Shares. If any of the following risks materialize,
our business, financial condition, results of operation, and future prospects will likely be materially and adversely affected.
In that event, the market price of the Common Shares could decline and you could lose all or part of your investment.
Risks Related To Our Company
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, 2016, disclose a going concern qualification 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, the current capital markets and general
economic conditions in the United States are significant obstacles to raising the required funds. These factors raise substantial
doubt about our ability to continue as a going concern.
These consolidated financial statements
do not give effect to any adjustments required to realize its assets and discharge its liabilities in other than the normal course
of business and at amounts different from those reflected in the accompanying financial statements.
We will require significant additional
capital to fund our business plan.
We will be required to expend significant
funds to determine if proven and probable mineral reserves exist at our properties, to continue exploration and, if warranted,
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 continued exploration and, if warranted, development
of our Elk Creek Project. We have spent and will be required to continue to expend significant amounts of capital for drilling,
geological, and geochemical analysis, assaying, and feasibility studies with regard to the results of our exploration at our Elk
Creek Project. We may not benefit from some of these investments if we are unable to identify commercially exploitable mineral
reserves.
As of June 30, 2016, we had cash of
$4.4 million and working capital of $2.3 million. The Company’s current planned operation needs are $9.3 million until June
30, 2017. We currently have sufficient cash on hand to meet our planned expenditures for approximately the next four to six months
(December 2016 – February 2017). We anticipate that we will need to raise of minimum of $5 - 6 million to continue planned
operations for the next twelve months. We are actively pursuing such additional sources of debt and equity financing, and while
it has been successful in doing so in the past, there can be no assurance it 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. Capital markets worldwide have been adversely affected by substantial losses by financial institutions, caused
by investments in asset-backed securities. 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 completing feasibility studies, 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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completion of feasibility studies to verify reserves and commercial viability, including the ability to find sufficient ore reserves to support a commercial mining operation;
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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,
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 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 demand by 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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$11,408 for the year ended June 30, 2016; and
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$23,115 for the year ended June 30, 2015; and
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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
All of our properties, including
the Elk Creek Project, are in the exploration stage. There is no assurance that we can establish the existence of any mineral reserve
on the Elk Creek Project or any of our properties in commercially exploitable quantities. Unless and until we do so, we cannot
earn any revenues from these properties and if we do not do so we will lose all of the funds that we expend on exploration. If
we do not discover any mineral reserve in a commercially exploitable quantity, the exploration component of our business could
fail.
We have not established that any of our
mineral properties contain any mineral reserve according to recognized reserve guidelines, nor can there be any assurance that
we will be able to do so.
A mineral reserve is defined by the SEC
in its Industry Guide 7 as that part of a mineral deposit that could be economically and legally extracted or produced at the time
of the reserve determination. In general, the probability of any individual prospect having a “reserve” that meets
the requirements of the SEC’s Industry Guide 7 is small, and our mineral properties may not contain any “reserves”
and any funds that we spend on exploration could be lost. Even if we do eventually discover a mineral reserve on one or more of
our properties, there can be no assurance that they can be developed into producing mines and that we can extract those minerals.
Both mineral exploration and development involve a high degree of risk, and few mineral properties that are explored are ultimately
developed into producing mines.
The commercial viability of an established
mineral deposit will depend on a number of factors including, by way of example, the size, grade, and other attributes of the mineral
deposit, the proximity of the mineral deposit to infrastructure such processing facilities, roads, rail, power, and a point for
shipping, government regulation, and market prices. Most of these factors will be beyond our control, and any of them could increase
costs and make extraction of any identified mineral deposit unprofitable.
Feasibility study results and
preliminary economic assessment estimates are based on assumptions that are subject to uncertainty. A preliminary economic assessment,
such as our October 2015 PEA, does not have as high of a level of confidence as a feasibility study and the estimates may not
reflect actual capital and operating costs and potential revenues from any potential future production.
Feasibility studies are used to determine
the economic viability of a mineral deposit. Pre-feasibility studies and preliminary economics assessments are also used for this
purpose but have a much higher degree of uncertainty compared to a feasibility study. Feasibility studies are the most detailed
and reflect a higher level of confidence in the reported capital and operating costs. Generally accepted levels of confidence
in the mining industry are plus or minus 15% for feasibility studies, plus or minus 25-30% for pre-feasibility studies and plus
or minus 35-40% for preliminary economic assessments. 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 economic viability of a deposit
based on resources and a preliminary economic assessment, such as our October 2015 PEA for the Elk Creek Project, is based on
many assumptions and factors that are subject to uncertainty. Resources may never be converted to reserves and the cost estimates
in the preliminary economics assessment may be underestimated to a material degree thereby negatively impacting the potential
economic viability of the project.
Many factors are involved in the determination
of the economic viability of a deposit, including the achievement of satisfactory mineral reserve estimates, the level of estimated
metallurgical recoveries and capital and operating cost estimates. Resource estimates are based on the results of many drill holes
and the interpolation of those results between holes and such interpolations may not be accurate of the actual mineralization
at the project. Estimates in preliminary economic assessments, like our October 2015 PEA for the Elk Creek Project, are particularly
speculative and historically such studies have underestimated project capital and operating costs. The mine plan and processing
concepts in our October 2015 PEA are preliminary in nature and may not reflect the actual mine plan or processing concepts in
a feasibility study for our Elk Creek Project.
In preliminary economic assessments,
process analysis is typically limited to testing of small samples or bench scale testing. There is no certainty that anticipated
metallurgical recoveries from a preliminary economics assessment obtained in bench scale or pilot plant scale tests will be achieved
in commercial scale operations due to difficulties in upscaling from a pilot plant to commercial scale operations, including but
not limited to additional unanticipated capital costs in constructing the commercial scale operations and unforeseen losses in
recovery of product in processing at the commercial scale. At the preliminary economic assessment stage, metallurgical flow sheets
and recoveries are still in development and may change materially as the project moves towards a feasibility study. Capital and
operating cost estimates are based upon many factors, including anticipated tonnage and grades of ore to be mined and processed,
the configuration of the orebody, ground and mining conditions, expected recovery rates of product, and anticipated environmental
and regulatory compliance costs. Additionally, the economic feasibility of exploiting a mineral deposit may change as the result
of changing commodity and supply costs. Each of these factors involves uncertainties and as a result, we cannot give any assurance
that our Elk Creek Project will be economical. If a mine is developed at our Elk Creek Project, actual capital and operating costs,
production results, mine plans and processing concepts may differ materially from those anticipated in our current 2015 October
PEA.
The nature of mineral exploration
and production activities involves a high degree of risk and the possibility of uninsured losses
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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 development of 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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metallurgic 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 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 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, Companhia Brasileira de Metalurgia e Mineração (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
North American 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.
As we have not completed feasibility studies
on any of our properties and have not commenced actual production, mineralization resource 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 estimates contained in this
prospectus 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 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.
United
States investors are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be converted
into reserves.
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. Our disclosure
of the results of our mining operations is permitted disclosure under Canadian regulations; however, the SEC only permits issuers
to report “resources” as in-place tonnage and grade, without reference to unit measures.
Accordingly, information concerning descriptions
of mineralization, reserves and resources contained in this prospectus, 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 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 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 US Army Corps of Engineers (ACOE) as Waters
of the United States (WOUS). The Company expects the ACOE to require the company to obtain an Individual Permit for the project
on this basis, which will in turn require the ACOE to conduct an environmental analysis of the Elk Creek Project. The environmental
analysis may be in the form of an EA or a more lengthy EIS. The duration of this permitting exercise is dictated by the ACOE, and
could results in several years of additional permitting work 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 proposals to manage the water through treatment and/or discharge, there is a risk that the costs associated with
these management practices will negatively impact the Elk Creek Project’s overall economics. 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 Army Corps of Engineers,
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, 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.
Certain of our current leases with options to purchase
need to be renewed and we cannot guarantee that we will be successful in renewing those leases.
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 conduct our anticipated mining claims, 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, we are still in negotiations with certain landholders regarding the renewal
of leases with options to purchase regarding certain sections of property at our Elk Creek Project that have expired. If we are
unsuccessful in renewing these expired leases we may incur increases costs and difficulties in developing the Elk Creek Project
that could affect our results of operations and the value of our Common Shares.
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 a related party loan (the “Smith Loan”), 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 Smith Loan, one or both of
the Secured Creditors may be entitled to execute on their security and seize or retain our assets, including the shares of 0896800
B.C. Ltd. and Elk Creek Resource Corp., as well as any assets of either subsidiary. Certain rights of each of the Secured Parties
to execute on their security 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 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, 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 year ended June 30, 2016, and based on current business plans and financial expectations, believe that we may be a PFIC
for the current and future taxable years. If we are a PFIC for any 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 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, unless the shareholder makes a timely and effective “qualified electing fund” election (“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 report on a current basis its share of our net capital gain and ordinary earnings for any 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. This paragraph is qualified in its entirety by the discussion below under the heading “Certain United States
Federal Income Tax Considerations.” 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.
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 last 12 months, the price of our
stock on the TSX has ranged from a low of C$0.53 to a high of C$1.13. 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 our
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 Jumpstart Our Business Startups Act, or 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.
Cautionary
NOTE Regarding Forward-Looking Statements
The information discussed in this prospectus
includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. 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 requirement of significant additional capital;
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risks related to our limited operating history;
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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 our properties being in the exploration stage;
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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 estimates of mineral resources;
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risks related to changes in mineral resource 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 equipment and supply shortages;
|
|
·
|
risks related to current and future joint ventures and partnerships;
|
|
·
|
risks related to our ability to attract qualified management;
|
|
·
|
risks related to the ability to enforce judgment against certain of our Directors;
|
|
·
|
risks related to currency fluctuations;
|
|
·
|
risks related to claims on the title to our properties;
|
|
·
|
risks related to surface access on our properties;
|
|
·
|
risks related to potential future litigation;
|
|
·
|
risks related to our lack of insurance covering all our operations;
|
|
·
|
risks related to our status as a “passive foreign investment company” under US federal tax code;
|
|
·
|
risks related to the Common Shares, including price volatility, lack of dividend payments, dilution and penny stock rules; and
|
|
·
|
risks related to our debt.
|
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 “Risk Factors” in this prospectus. 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.
Use
of Proceeds
This prospectus relates to the sale or
other disposition of shares of our Common Shares by the selling security holders listed under “Selling Security Holders”
and their transferees. We will not receive any proceeds from any sale of the shares by the selling security holders.
SELLING SECURITY HOLDERS
This prospectus
covers the offering of up to 10,062,201 Common Shares by selling security holders - this includes Common Shares acquirable upon
exercise of our outstanding warrants and options.
Selling security
holders are persons or entities that, directly or indirectly, have acquired shares, or will acquire shares from us from time to
time upon exercise of certain warrants and options. This prospectus and any prospectus supplement will only permit the selling
security holders to sell the Common Shares identified in the column “Number of Common Shares Offered Hereby.”
The selling security
holders may from time to time offer and sell the Common Shares pursuant to this prospectus and any applicable prospectus supplement.
The selling security holders may offer all or some portion of the Common Shares they hold or acquire, but only Common Shares that
are currently outstanding or are acquired upon the exercise of certain warrants and options, and in either case included in the
“Number of Common Shares Offered Hereby” column, may be sold pursuant to this prospectus or any applicable prospectus
supplement.
The Common Shares issued to the selling
security holders are “restricted” shares under applicable federal and state securities laws and are being registered
to give the selling security holders the opportunity to sell their Common Shares. The registration of such Common Shares does not
necessarily mean, however, that any of these Common Shares will be offered or sold by the selling security holders. The selling
security holders may from time to time offer and sell all or a portion of their shares in the over-the-counter market, in negotiated
transactions, or otherwise, at market prices prevailing at the time of sale or at negotiated prices.
The registered Common Shares may be sold
directly or through brokers or dealers, or in a distribution by one or more underwriters on a firm commitment or best efforts basis.
To the extent required, the names of any agent or broker-dealer and applicable commissions or discounts and any other required
information with respect to any particular offer will be set forth in an accompanying prospectus supplement. See “Plan of
Distribution.”
Each of the
selling security holders reserves the sole right to accept or reject, in whole or in part, any proposed purchase of the registered
Common Shares to be made directly or through agents. To the extent that any of the selling security holders are brokers or dealers,
they may be deemed to be “underwriters” within the meaning of the Securities Act and any commissions received by them
and any profit on the resale of the registered shares may be deemed to be underwriting commissions or discounts under the Securities
Act. As of the date of this prospectus, based on the representations received by the Company from the selling shareholders, none
of the selling shareholders are brokers or dealers or affiliated with brokers or dealers.
The following table sets forth the name
of persons who are offering the resale of Common Shares by this prospectus, the number of Common Shares beneficially owned by each
person, the number of Common Shares that may be sold in this offering and the number of Common Shares each person will own after
the offering, assuming they sell all of the Common Shares offered. The information appearing in the table below is based on information
provided by or on behalf of the named selling security holders. We will not receive any proceeds from the resale of the Common
Shares by the selling security holders.
Name
|
|
Number
of Common
Shares Beneficially
Owned
Prior to this
Offering
(1)
|
|
|
Number
of Common
Shares Offered
Hereby
(2)
|
|
|
Number of
Common
Shares
after Offering
|
|
|
Beneficial
Ownership
After This
Offering
(1)
|
|
Charles R. Henry (3)
|
|
|
394,867
|
|
|
|
394,867
|
|
|
|
-
|
|
|
|
*
|
|
Yinan Zou (4)
|
|
|
40,647
|
|
|
|
40,647
|
|
|
|
-
|
|
|
|
*
|
|
Meng Xiaomei (5)
|
|
|
46,014
|
|
|
|
46,014
|
|
|
|
-
|
|
|
|
*
|
|
Ramon Salceda (6)
|
|
|
12,500
|
|
|
|
12,500
|
|
|
|
-
|
|
|
|
*
|
|
Jeb Handwerger (7)
|
|
|
27,272
|
|
|
|
27,272
|
|
|
|
-
|
|
|
|
*
|
|
Xun Lu (8)
|
|
|
200,973
|
|
|
|
60,973
|
|
|
|
140,000
|
|
|
|
*
|
|
Mark A Smith (9)
|
|
|
22,856,947
|
|
|
|
4,132,232
|
|
|
|
18,724,715
|
|
|
|
10.33
|
%
|
Alwin Leltz (10)
|
|
|
55,184
|
|
|
|
18,182
|
|
|
|
37,002
|
|
|
|
*
|
|
Helena Mesman (11)
|
|
|
32,687
|
|
|
|
32,687
|
|
|
|
0
|
|
|
|
*
|
|
Renny Van Wijk (12)
|
|
|
52,273
|
|
|
|
25,000
|
|
|
|
27,273
|
|
|
|
*
|
|
Maarten J. Betlem (13)
|
|
|
120,000
|
|
|
|
12,500
|
|
|
|
107,500
|
|
|
|
*
|
|
Klass De Groot (14)
|
|
|
47,982
|
|
|
|
30,602
|
|
|
|
17,380
|
|
|
|
*
|
|
Suzanne Sieverding (15)
|
|
|
44,184
|
|
|
|
12,500
|
|
|
|
31,684
|
|
|
|
*
|
|
Bennie Hoornveld (16)
|
|
|
35,093
|
|
|
|
25,000
|
|
|
|
10,093
|
|
|
|
*
|
|
Ruud Van de Winkel (17)
|
|
|
481,926
|
|
|
|
240,963
|
|
|
|
240,963
|
|
|
|
*
|
|
Jac Verhorevoort (18)
|
|
|
481,926
|
|
|
|
240,963
|
|
|
|
240,963
|
|
|
|
*
|
|
Marco Beenen (19)
|
|
|
323,986
|
|
|
|
96,385
|
|
|
|
227,601
|
|
|
|
*
|
|
John Peters (20)
|
|
|
481,926
|
|
|
|
240,963
|
|
|
|
240,963
|
|
|
|
*
|
|
Joseph Jansen (21)
|
|
|
172,289
|
|
|
|
72,289
|
|
|
|
100,000
|
|
|
|
*
|
|
Luc Jansen (22)
|
|
|
925,980
|
|
|
|
551,517
|
|
|
|
374,463
|
|
|
|
*
|
|
Jan Butler (23)
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
*
|
|
Toon Van Ginderen (24)
|
|
|
37,500
|
|
|
|
37,500
|
|
|
|
-
|
|
|
|
*
|
|
Karel Van Geelkerken (25)
|
|
|
36,364
|
|
|
|
18,182
|
|
|
|
-
|
|
|
|
*
|
|
Patricia Plomp (26)
|
|
|
61,724
|
|
|
|
30682
|
|
|
|
31,042
|
|
|
|
*
|
|
Matthijs Plomp (27)
|
|
|
61,724
|
|
|
|
30682
|
|
|
|
31,042
|
|
|
|
*
|
|
Arie Plomp (28)
|
|
|
86,364
|
|
|
|
43,182
|
|
|
|
43,182
|
|
|
|
*
|
|
Ko Beheer (29)
|
|
|
19,184
|
|
|
|
9,091
|
|
|
|
10,093
|
|
|
|
*
|
|
Hassan Ghrib (30)
|
|
|
27,273
|
|
|
|
27,273
|
|
|
|
-
|
|
|
|
*
|
|
Marc Van Duynhoven (31)
|
|
|
37,500
|
|
|
|
12,500
|
|
|
|
25,000
|
|
|
|
*
|
|
Anton Vermeij (32)
|
|
|
72,727
|
|
|
|
72,727
|
|
|
|
-
|
|
|
|
*
|
|
Max Lont (33)
|
|
|
12,500
|
|
|
|
12,500
|
|
|
|
-
|
|
|
|
*
|
|
Dirk Van De Velde (34)
|
|
|
192,770
|
|
|
|
96,385
|
|
|
|
96,385
|
|
|
|
*
|
|
Rene Clignett (35)
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
*
|
|
Hans Boekhoorn (36)
|
|
|
10,094
|
|
|
|
9,091
|
|
|
|
1,003
|
|
|
|
*
|
|
Arthur Lemmens (37)
|
|
|
19,184
|
|
|
|
9,091
|
|
|
|
10,093
|
|
|
|
*
|
|
Rogier Botting (38)
|
|
|
59,091
|
|
|
|
59,091
|
|
|
|
-
|
|
|
|
*
|
|
Paul Van Rooy (39)
|
|
|
72,214
|
|
|
|
43,182
|
|
|
|
29,032
|
|
|
|
*
|
|
Vincent Alwicher (40)
|
|
|
516,865
|
|
|
|
60,240
|
|
|
|
456,625
|
|
|
|
*
|
|
DJ Van Beem (41)
|
|
|
104,546
|
|
|
|
50,000
|
|
|
|
54,546
|
|
|
|
*
|
|
Robert Broeckmans (42)
|
|
|
12,500
|
|
|
|
12,500
|
|
|
|
-
|
|
|
|
*
|
|
Leon Van Dam (43)
|
|
|
402,273
|
|
|
|
52,273
|
|
|
|
350,000
|
|
|
|
*
|
|
Adriaan Verburg (44)
|
|
|
37,500
|
|
|
|
37,500
|
|
|
|
-
|
|
|
|
*
|
|
Kaje Broekhuizen (45)
|
|
|
170,187
|
|
|
|
45,187
|
|
|
|
125,000
|
|
|
|
*
|
|
Tamara Blauwaert (46)
|
|
|
481,926
|
|
|
|
240,963
|
|
|
|
240,963
|
|
|
|
*
|
|
Kees Volders (47)
|
|
|
21,591
|
|
|
|
21,591
|
|
|
|
-
|
|
|
|
*
|
|
Christa Van Ittersum (48)
|
|
|
77,389
|
|
|
|
45,187
|
|
|
|
32,202
|
|
|
|
*
|
|
Alwin Tetteroo (49)
|
|
|
42,684
|
|
|
|
12,500
|
|
|
|
30,184
|
|
|
|
*
|
|
Peter Tromp (50)
|
|
|
52,273
|
|
|
|
25,000
|
|
|
|
27,273
|
|
|
|
*
|
|
Jasper Nederbragt (51)
|
|
|
59,184
|
|
|
|
12,500
|
|
|
|
46,684
|
|
|
|
*
|
|
Marc Denil (52)
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
-
|
|
|
|
*
|
|
Luc Rigaux (53)
|
|
|
289,155
|
|
|
|
48,192
|
|
|
|
240,963
|
|
|
|
*
|
|
Guido Cloetens (54)
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
-
|
|
|
|
*
|
|
Guy Castelain (55)
|
|
|
192,770
|
|
|
|
96,385
|
|
|
|
96,385
|
|
|
|
*
|
|
Henri Van Der Vlught (56)
|
|
|
120,480
|
|
|
|
60,240
|
|
|
|
60,240
|
|
|
|
*
|
|
Marc Waeterschoot (57)
|
|
|
2,963,476
|
|
|
|
1,481,738
|
|
|
|
1,481,738
|
|
|
|
0.81
|
%
|
Fernand Frankignoul (58)
|
|
|
710,000
|
|
|
|
240,963
|
|
|
|
469,037
|
|
|
|
*
|
|
Rene Verhoeven (59)
|
|
|
18,182
|
|
|
|
9,091
|
|
|
|
9,091
|
|
|
|
*
|
|
Patrick Frankignoul (60)
|
|
|
598,115
|
|
|
|
144,578
|
|
|
|
453,537
|
|
|
|
*
|
|
Antony Okker (61)
|
|
|
739,091
|
|
|
|
49,091
|
|
|
|
690,000
|
|
|
|
*
|
|
Godelieve Verhaeghe (62)
|
|
|
283,362
|
|
|
|
120,481
|
|
|
|
162,881
|
|
|
|
*
|
|
Thema Bvba (63)
|
|
|
96,386
|
|
|
|
48,193
|
|
|
|
48,193
|
|
|
|
*
|
|
Mark Verhaaren (64)
|
|
|
47,593
|
|
|
|
47,593
|
|
|
|
-
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
35,953,397
|
|
|
|
10,062,201
|
|
|
|
25,873,014
|
|
|
|
|
|
*Less than 1%
|
(1)
|
This
table is based upon information supplied by the selling stockholders, which information
may not be accurate as of the date hereof. We have determined beneficial ownership in
accordance with the rules of the SEC. Except as indicated by the footnotes below, we
believe, based on the information furnished to us, that the selling stockholders named
in the table above have sole voting and investment power with respect to all shares of
common stock that they beneficially own, subject to applicable community property laws.
Applicable percentages are based on 180,580,037 shares outstanding on September
15,
2016, adjusted as required by rules promulgated by the SEC.
|
|
(2)
|
The
Common Shares issuable upon the exercise of warrants covered by this prospectus consist
of those warrants secured through participation in two of our recent financings: The
“November 2014 Private Placement” and the “January 2016 Private Placement.”
Each unit resulting from the November 2014 Private Placement consisted of one Common
Share of the Company and one Common Share purchase warrant (a “2014 Warrant”).
Each 2014 Warrant is exercisable and entitles the holder to acquire one Common Share
of the Company at a price of C$0.65 until November 10, 2016. Each unit resulting from
the January 2016 Private Placement consisted of one Common Share of the Company and one
Common Share purchase warrant (a “2016 Warrant”). Each 2016 Warrant is exercisable
and entitles the holder to acquire one Common Share of the Company at a price of C$0.75
per Common Share until January 15, 2019. The Common Shares issuable upon the exercise
of options covered by this prospectus consist of those options issued to such selling
security holder either on December 22, 2014 or January 19, 2016.
|
|
(3)
|
Charles R. Henry has voting and investment power over the
Common Shares. The jurisdiction of the selling security holder is the United States. Beneficial ownership includes 394,867
common shares issuable upon the exercise of warrants.
|
|
(4)
|
Yinan Zou has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is the United States. Beneficial ownership includes 40,647 common
shares issuable upon the exercise of warrants.
|
|
(5)
|
Meng Xiaomei has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder the United States. Beneficial ownership includes 46,014 common shares
issuable upon the exercise of warrants.
|
|
(6)
|
Ramon Salceda has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 12,500 common shares
issuable upon exercise of warrants
|
|
(7)
|
Jeb Handwerger has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is the United States. Beneficial ownership includes 27,272 common
shares issuable upon the exercise of warrants.
|
|
(8)
|
Xun Lu has voting and investment power over the Common Shares.
The jurisdiction of the selling security holder is the United States. Beneficial ownership includes 200,973 common shares
issuable upon the exercise of warrants.
|
|
(9)
|
Mark A Smith has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is the United States. Beneficial ownership includes 18,049,715 common
shares, 4,132,232 common shares issuable upon exercise of warrants at C$0.65 per common share, 300,000 common shares issuable
upon exercise of options at C$0.80 per common share and 375,000 common shares issuable upon exercise of options at C$0.62
per share. There are being registered for sale hereunder 4,132,232 common shares issuable upon exercise of warrants. Mr. Smith
is the Company’s Chief Executive Officer and a director of the Company.
|
|
(10)
|
Alwin Leltz has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 18,182 common shares
issuable upon the exercise of warrants.
|
|
(11)
|
Helena Mesman has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 32,687 common shares
issuable upon the exercise of warrants.
|
|
(12)
|
Renny Van Wijk has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 25,000 common shares issuable upon the exercise of warrants covered by this prospectus and 27,273 common shares issuable upon the exercise of warrants not covered by this prospectus.
|
|
(13)
|
Maarten J. Betlem has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 12,500 common shares issuable upon the exercise of warrants.
|
|
(14)
|
Klass De Groot has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 30,602 common shares
issuable upon the exercise of warrants.
|
|
(15)
|
Suzanne Sieverding has voting and investment power over the
Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 12,500 common
shares issuable upon the exercise of warrants.
|
|
(16)
|
Bennie Hoornveld has voting and investment power over the
Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 25,000 common
shares issuable upon the exercise of warrants covered by this prospectus and 10,093 common shares issuable upon the exercise
of warrants not covered by this prospectus.
|
|
(17)
|
Ruud Van de Winkel has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 240,963 common shares issuable upon the exercise of warrants and 240,963 common shares.
|
|
(18)
|
Jac Verhorevoort has voting and investment power over the
Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 240,963 common
shares issuable upon the exercise of warrants and 240,963 common shares.
|
|
(19)
|
Marco Beenen has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 96,385 common shares
issuable upon the exercise of warrants and 227,601 common shares.
|
|
(20)
|
John Peters has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 240,963 common shares issuable upon the exercise of warrants and 240,963 common shares.
|
|
(21)
|
Joseph Jansen has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is Belgium. Beneficial ownership includes 72,289 common shares issuable upon the exercise of warrants and 100,000 common shares.
|
|
(22)
|
Luc Jansen has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 374,463 common shares
issuable upon exercise of warrants and 551,517 common shares
|
|
(23)
|
Jan Butler has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 25,000 common shares issuable upon the exercise of warrants.
|
|
(24)
|
Toon Van Ginderen has voting and investment power over the
Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 37,500 common
shares issuable upon the exercise of warrants.
|
|
(25)
|
Karel Van Geelkerken has voting and investment power over
the Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 18,182
common shares issuable upon the exercise of warrants and 18,182 common shares.
|
|
(26)
|
Patricia Plomp has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 30,682 common shares
issuable upon the exercise of warrants covered by this prospectus and 31,042common shares.
|
|
(27)
|
Matthijs Plomp has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 30,682 common shares
issuable upon the exercise of warrants covered by this prospectus and 31,042 common shares.
|
|
(28)
|
Arie Plomp has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 43,182 common shares
issuable upon the exercise of warrants covered by this prospectus and 43,182 common shares.
|
|
(29)
|
Paul Klein Obbink has voting and investment power over the
Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 9,091 common
shares issuable upon the exercise of warrants covered by this prospectus and 10,093 common shares issuable upon the exercise
of warrants not covered by this prospectus.
|
|
(30)
|
Hassan Ghrib has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 27,273 common shares
issuable upon the exercise of warrants.
|
|
(31)
|
Marc Van Duynhoven has voting and investment power over the
Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 25,000 common
shares issuable upon the exercise of warrants.
|
|
(32)
|
Anton Vermeij has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 72,727 common shares
issuable upon the exercise of warrants.
|
|
(33)
|
Max Lont has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 12,500 common shares
issuable upon the exercise of warrants.
|
|
(34)
|
Dirk Van De Velde has voting and investment power over the
Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 96,385 common
shares and 96,385 common shares issuable upon the exercise of warrants.
|
|
(35)
|
Rene Clignett has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 50,000 common shares
issuable upon the exercise of warrants.
|
|
(36)
|
Hans Boekhoorn has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 9,091 common shares
issuable upon the exercise of warrants covered by this prospectus and 1,003 common shares issuable upon the exercise of warrants
not covered by this prospectus.
|
|
(37)
|
Arthur Lemmens has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 9,091 common shares
issuable upon the exercise of warrants covered by this prospectus and 10,093 common shares issuable upon the exercise of warrants
not covered by this prospectus.
|
|
(38)
|
Rogier Botting has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 59,091 common shares
issuable upon the exercise of warrants covered by this prospectus.
|
|
(39)
|
Paul Van Rooy has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 43,182 common shares
issuable upon the exercise of warrants covered by this prospectus and 29,032 common shares.
|
|
(40)
|
Vincent Alwicher has voting and investment power over the
Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 60,240 common
shares issuable upon the exercise of warrants covered by this prospectus and 456,625 common shares.
|
|
(41)
|
DJ Van Beem has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 50,000 common shares issuable upon the exercise of warrants covered by this prospectus and 54,546 common shares issuable upon the exercise of warrants not covered by this prospectus.
|
|
(42)
|
Robert Broeckmans has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 12,500 common shares issuable upon the exercise of warrants.
|
|
(43)
|
Leon van Dam has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 52,273 common shares
issuable upon the exercise of warrants and 350,000 common shares issuable upon the exercise of options.
|
|
(44)
|
Adriaan Verburg has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 37,500 common shares issuable upon the exercise of warrants.
|
|
(45)
|
Kaje Broekhuizen has voting and investment power over the
Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 45,187 common
shares issuable upon the exercise of warrants covered by this prospectus and 125,000 common shares
|
|
(46)
|
Tamara Blauwaert has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 240,963 common shares issuable upon the exercise of warrants and 240,963 common shares.
|
|
(47)
|
Kees Volders has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 21,591 common shares issuable upon the exercise of warrants.
|
|
(48)
|
Christa Van Ittersum has voting and investment power over
the Common Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 45,187
common shares issuable upon the exercise of warrants covered by this prospectus and 32,202 common shares.
|
|
(49)
|
Alwin Tetteroo has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 12,500 common shares
issuable upon the exercise of warrants and 30,184 common shares.
|
|
(50)
|
Peter Tromp has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 52,273 common shares
issuable upon the exercise of warrants covered by this prospectus.
|
|
(51)
|
Jasper Nederbragt has voting and investment power over the
Common Shares. The jurisdiction of the selling security holder is Germany. Beneficial ownership includes 46,684 common shares
issuable upon the exercise of warrants.
|
|
(52)
|
Marc Denil has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is Belgium. Beneficial ownership includes 100,000 common shares issuable upon the exercise of warrants.
|
|
(53)
|
Luc Rigaux has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is Belgium. Beneficial ownership includes 48,192 common shares issuable upon the exercise of warrants and 240,963 common shares.
|
|
(54)
|
Guido Cloetens has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is Belgium. Beneficial ownership includes 100,000 common shares issuable upon the exercise of warrants.
|
|
(55)
|
Guy Castelain has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is Belgium. Beneficial ownership includes 96,385 common shares issuable upon the exercise of warrants and 96,385 common shares.
|
|
(56)
|
Henri Van Der Vlught has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is Belgium. Beneficial ownership includes 60,240 common shares issuable upon the exercise of warrants and 60,240 common shares.
|
|
(57)
|
Marc Waeterschoot has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is Belgium. Beneficial ownership includes 1,481,738 common shares issuable upon the exercise of warrants and 1,481,738 common shares.
|
|
(58)
|
Fernand Frankignoul has voting and investment power over
the Common Shares. The jurisdiction of the selling security holder is Belgium. Beneficial ownership includes 240,963 common
shares issuable upon the exercise of warrants and 469,037 common shares.
|
|
(59)
|
Rene Verhoeven has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is Belgium. Beneficial ownership includes 9,091 common shares issuable
upon the exercise of warrants and 9,091 common shares.
|
|
(60)
|
Patrick Frankignoul has voting and investment power over
the Common Shares. The jurisdiction of the selling security holder is Belgium. Beneficial ownership includes 598,115 common
shares and 144,578 common shares issuable upon the exercise of warrants
|
|
(61)
|
Antony Okker has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is Belgium. Beneficial ownership includes 49,091 common shares issuable upon the exercise of warrants and 690,000 common shares.
|
|
(62)
|
Godelieve Verhaeghe has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is Belgium. Beneficial ownership includes 162,881 common shares and 120,481 common shares issuable upon the exercise of warrants.
|
|
(63)
|
Thema Bvba has voting and investment power over the Common Shares. The jurisdiction of the selling security holder is Belgium. Beneficial ownership includes 48,193 common shares issuable upon the exercise of warrants covered by this prospectus and 48,193 common shares.
|
|
(64)
|
Mark Verhaaren has voting and investment power over the Common
Shares. The jurisdiction of the selling security holder is The Netherlands. Beneficial ownership includes 47,593 common shares
issuable upon the exercise of warrants.
|
PLAN OF DISTRIBUTION
We are registering the Common Shares to
permit the resale of those Common Shares from time to time after the date of this prospectus at the discretion of the holders of
such Common Shares. We will not receive any of the proceeds from the sale by the selling security holders of the Common Shares.
We will bear all fees and expenses incident to our obligation to register the Common Shares.
The selling security holders may, at their
discretion, sell all, none, or a portion of the Common Shares beneficially owned by them and offered hereby from time to time directly
or through one or more underwriters, broker-dealers, or agents. If the Common Shares are sold through underwriters or broker-dealers,
the selling security holders will be responsible for underwriting discounts or commissions or agent's commissions. The Common Shares
may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices
determined at the time of sale, or at negotiated prices. These sales may be effected in transactions that may involve crosses or
block transactions,
|
·
|
on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
|
|
·
|
in the over-the-counter market;
|
|
·
|
in transactions otherwise than on these exchanges or systems or in the over-the-counter market;
|
|
·
|
through the writing of options, whether such options are listed on an options exchange or otherwise;
|
|
·
|
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
|
|
·
|
block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
|
|
·
|
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
|
|
·
|
an exchange distribution in accordance with the rules of the applicable exchange;
|
|
·
|
privately negotiated transactions;
|
|
·
|
sales pursuant to Rule 144;
|
|
·
|
broker-dealers may agree with the selling security holders to sell a specified number of such shares at a stipulated price per share;
|
|
·
|
a combination of any such methods of sale; and
|
|
·
|
any other method permitted pursuant to applicable law.
|
If the selling security holders effect
such transactions by selling Common Shares to or through underwriters, broker-dealers, or agents, such underwriters, broker-dealers,
or agents may receive commissions in the form of discounts, concessions, or commissions from the selling security holders or commissions
from purchasers of the Common Shares for whom they may act as agent or to whom they may sell as principal (which discounts, concessions,
or commissions as to particular underwriters, broker-dealers, or agents may be in excess of those customary in the types of transactions
involved). In connection with sales of the Common Shares or otherwise, the selling security holders may enter into hedging transactions
with broker-dealers, which may in turn engage in short sales of the Common Shares in the course of hedging in positions they assume.
The selling security holders may also sell Common Shares short and deliver Common Shares covered by this prospectus to close out
short positions and to return borrowed shares in connection with such short sales. The selling security holders may also loan or
pledge Common Shares to broker-dealers that in turn may sell such shares.
The selling security holders and any broker-dealer
participating in the distribution of the Common Shares may be deemed to be “underwriters” within the meaning of the
Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be
underwriting commissions or discounts under the Securities Act. At the time a particular offering of the Common Shares is made,
a prospectus supplement, if required, will be distributed that will set forth the aggregate amount of Common Shares being offered
and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions, and other
terms constituting compensation from the selling security holders and any discounts, commissions, or concessions allowed or re-allowed
or paid to broker-dealers.
Under the securities laws of some states,
the Common Shares may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states
the Common Shares may not be sold unless such shares have been registered or qualified for sale in such state, or an exemption
from registration or qualification is available and is complied with.
There can be no assurance that any selling
security holder will sell any or all of the Common Shares registered pursuant to the registration statement, of which this prospectus
forms a part.
The selling security holders and any other
person participating in such distribution will be subject to applicable provisions of the Exchange Act, and the rules and regulations
thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales
of any of the Common Shares by the selling security holders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the Common Shares to engage in market-making activities with respect to
the Common Shares. All of the foregoing may affect the marketability of the Common Shares and the ability of any person or entity
to engage in market-making activities with respect to the Common Shares.
We will pay all expenses of the registration
of the Common Shares, estimated to be approximately $120,000 in total, including, without limitation, Securities and Exchange
Commission filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that
a selling security holder will pay all underwriting discounts and selling commissions, if any. We will indemnify the selling security
holders against liabilities, including some liabilities under the Securities Act, in accordance with applicable registration rights
agreements, if any, or the selling security holders will be entitled to contribution. We may be indemnified by the selling security
holders against civil liabilities, including liabilities under the Securities Act, that may arise from any written information
furnished to us by the selling security holder specifically for use in this prospectus, in accordance with the related registration
rights agreement, or we may be entitled to contribution.
Once sold under the registration statement,
of which this prospectus forms a part, the Common Shares will be freely tradable in the hands of persons other than our affiliates.
Description
of Capital Stock
Common Shares
The authorized capital of the Company
consists of an unlimited number of Common Shares without par value, of which 180,580,037 were issued and outstanding as at September
15, 2016. The holders of Common Shares are entitled to receive notice of and attend all meetings of shareholders, with each Common
Share held entitling the holder to one vote on any resolution to be passed at such shareholder meetings. The holders of Common
Shares are entitled to dividends if, as and when declared by the Board. The Common Shares are entitled, upon liquidation, dissolution,
or winding up of NioCorp, to receive the remaining assets of NioCorp available for distribution to shareholders. There are no
pre-emptive, conversion, or redemption rights attached to the Common Shares.
Exchange Controls
There are no governmental laws, decrees,
or regulations in Canada that restrict the export or import of capital, including foreign exchange controls, or that affect the
remittance of dividends, interest or other payments to non-resident holders of the securities of NioCorp, other than Canadian withholding
tax. See “Certain Canadian Federal Income Tax Considerations for U.S. Residents” below.
Certain Canadian Federal Income Tax
Considerations for U.S. Residents
The following summarizes certain Canadian
federal income tax consequences generally applicable under the
Income Tax Act
(Canada) and the regulations enacted
thereunder (collectively, the “Canadian Tax Act”) and the
Canada-United States Income Tax Convention (1980)
(the “Convention”) to the holding and disposition of Common Shares.
Comment is restricted to holders of Common
Shares each of whom, at all material times for the purposes of the Canadian Tax Act and the Convention, (i) is resident
solely in the United States, (ii) is entitled to the benefits of the Convention, (iii) holds all Common Shares as capital
property, (iii) holds no Common Shares that are “taxable Canadian property” (as defined in the Canadian Tax Act) of
the holder, (iv) deals at arm’s length with and is not affiliated with NioCorp, (v) does not and is not deemed
to use or hold any Common Shares in a business carried on in Canada, and (vi) is not an insurer that carries on business in Canada
and elsewhere (each such holder, a “U.S. Resident Holder”).
Certain U.S.-resident entities that are
fiscally transparent for United States federal income tax purposes (including limited liability companies) may not in all
circumstances be regarded by the Canada Revenue Agency (the “CRA”) as entitled to the benefits of the Convention.
Members of or holders of an interest in such an entity that holds Common Shares should consult their own tax advisers regarding
the extent, if any, to which the CRA will extend the benefits of the Convention to the entity in respect of its Common Shares.
Generally, a
holder’s Common Shares will be considered to be capital property of the holder provided that the holder is not a trader
or dealer in securities, did not acquire, hold, or dispose of the Common Shares in one or more transactions considered to be an
adventure or concern in the nature of trade (
i.e
. speculation), and does not hold the Common Shares in the course
of carrying on a business.
Generally, a
holder’s Common Shares will not constitute “taxable Canadian property” of the holder at a particular time at
which the Common Shares are listed on a “designated stock exchange” (which currently includes the TSX) unless both
of the following conditions are true:
|
(i)
|
at any time during the 60-month period that
ends at the particular time, 25% or more of the issued shares of any class of the capital stock of NioCorp were owned by or
belonged to one or any combination of
|
|
(B)
|
persons with whom the holder did not deal at
arm’s length, and
|
|
(C)
|
partnerships in which the holder or a person
referred to in clause (B) holds a membership interest directly or indirectly through one or more partnerships, and
|
|
(ii)
|
at any time during the 60-month period that
ends at the particular time, more than 50% of the fair market value of the Common Shares was derived directly or indirectly
from, one or any combination of, real or immovable property situated in Canada, “Canadian resource properties”
(as defined in the Canadian Tax Act), “timber resource properties” (as defined in the Canadian Tax Act), or options
in respect of, or interests in any of the foregoing, whether or not the property exists.
|
This summary
is based on the current provisions of the Canadian Tax Act and the Convention in effect on the date hereof, all specific
proposals to amend the Canadian Tax Act and Convention publicly announced by or on behalf of the Minister of Finance (Canada)
on or before the date hereof, and the current published administrative and assessing policies of the CRA. It is assumed that all
such amendments will be enacted as currently proposed, and that there will be no other material change to any applicable law or
administrative or assessing practice, although no assurance can be given in these respects. Except as otherwise expressly provided,
this summary does not take into account any provincial, territorial, or foreign tax considerations, which may differ materially
from those set out herein.
This summary
is of a general nature only, is not exhaustive of all possible Canadian federal income tax considerations, and is not intended
to be and should not be construed as legal or tax advice to any particular U.S. Resident Holder. U.S. Resident Holders are urged
to consult their own tax advisers for advice with respect to their particular circumstances. The discussion below is qualified
accordingly.
A U.S. Resident
Holder who disposes or is deemed to dispose of one or more Common Shares generally should not thereby incur any liability for
Canadian federal income tax in respect of any capital gain arising as a consequence of the disposition.
A U.S. Resident
Holder to whom NioCorp pays or is deemed to pay a dividend on the holder’s Common Shares will be subject to Canadian withholding
tax, and NioCorp will be required to withhold the tax from the dividend and remit it to the CRA for the holder’s account. The
rate of withholding tax under the Canadian Tax Act is 25% of the gross amount of the dividend, but should generally be reduced
under the Convention to 15% (or, if the U.S. Resident Holder is a company which is the beneficial owner of at least 10% of the
voting stock of NioCorp, 5%) of the gross amount of the dividend. For this purpose, a company that is a resident of the United
States for purposes of the Canadian Tax Act and the Convention and is entitled to the benefits of the Convention shall be considered
to own the voting stock of NioCorp owned by an entity that is considered fiscally transparent under the laws of the United States
and that it is not a resident of Canada, in proportion to the company’s ownership interest in that entity.
Warrants
As of September 15, 2016, an aggregate
of 22,621,637 warrants, with each warrant convertible into one (1) Common Share, were issued and outstanding as follows:
Number
|
|
|
Exercise Price
|
|
|
Expiry Date
|
|
7,449,442
|
|
|
$
|
0.65
|
|
|
November 10, 2016
|
|
2,714,000
|
|
|
$
|
1.00
|
|
|
February 27, 2017
|
|
182,910
|
|
|
$
|
0.85
|
|
|
February 27, 2017
|
|
3,125,000
|
|
|
$
|
0.72
|
|
|
December 22, 2018
|
|
9,150,285
|
|
|
$
|
0.75
|
|
|
January 19, 2019
|
|
22,621,637
|
|
|
|
|
|
|
|
Each of the
foregoing warrants provides that in the event there is a subdivision, consolidation, reclassification, or other change of the
Common Shares into a greater or lesser number of Common Shares or other securities of NioCorp, the terms of the Common Shares
issuable on conversion of such warrants and the exercise price of such warrants will be adjusted accordingly.
Convertible
Securities
Convertible
Notes
On October 14,
2015, NioCorp issued unsecured convertible promissory notes in the aggregate principal amount of $0.8 million (the “Notes”).
The Notes bear
interest at a rate of 8%, payable quarterly in arrears, are nontransferable, and have a term of three years from the date of issue.
Principal under the Notes is convertible by lenders into, and payable by NioCorp in, Common Shares at a conversion price of C$0.97
per Common Share, calculated on conversion or repayment using the then-current Bank of Canada noon exchange rate. Accrued but
unpaid interest on the Notes will be convertible by lenders into, and payable by NioCorp in, Common Shares at a price per Common
Share equal to the most recent closing price of NioCorp’s Common Shares on the TSX prior to the delivery to NioCorp of a
request to convert interest, or the due date of interest, as applicable, calculated using the then-current Bank of Canada noon
exchange rate. Interest payable and any unconverted principal at maturity date is payable either in cash or Common Shares, at
the election of NioCorp. Conversion of any interest is subject to further TSX approval.
Each Note provides
that in the event there is a subdivision, consolidation, reclassification, or other change of the Common Shares into a greater
or lesser number of Common Shares or other securities of NioCorp, the terms of the Common Shares issuable on conversion of the
Notes and the price of such Common Shares will be adjusted accordingly.
The Notes become
due in accordance with their terms on October 14, 2018.
Lind Convertible
Securities
On December
14, 2015, NioCorp entered into a definitive convertible security funding agreement (the “Lind Agreement”) with an
entity managed by The Lind Partners, a New York-based asset management firm (collectively with The Lind Partners, “Lind”).
A first tranche $4.5 million was made in a series of advances between December 22, 2015 and January 19, 2016, pursuant to the
issuance of an initial convertible security with a face value of $5.4 million during the same period (the “Initial Convertible
Security”).
The Initial
Convertible Security has a two-year term from the date of issue and will incur a simple interest rate obligation of 10%, prepaid
and attributed to its face value. The Initial Convertible Security is secured by assets of NioCorp. Lind is entitled to convert
the Initial Convertible Security in monthly instalments over its term at a price per share equal to 85% of NioCorp’s five-day
trailing volume weighted average price on the TSX (“VWAP”) prior to the date that notice of conversion is provided
by Lind. The Lind Agreement contains restrictions on how much of the Initial Convertible Security may be converted in any particular
month. NioCorp has the option to buy back up to 70% of the Initial Convertible Security in cash at any time for a nominal premium.
Lind is entitled to accelerate its conversion right to the full amount of the face value of the Initial Convertible Security or
demand repayment thereof in cash upon a default and other designated events.
Lind is entitled
to increase the financing under the Initial Convertible Security by an additional $1.0 million during its two-year term and, provided
certain conditions are met, NioCorp will have the right to call an additional $1.0 million under the Initial Convertible Security
(a “First Tranche Increase”). The Lind Agreement also provides for the issuance of a second convertible security on
mutual agreement of NioCorp and Lind and completion of certain conditions, through which Lind may finance up to another $1.0 million
- $6.0 million convertible Security (the “Second Tranche”), which Lind would be entitled to subsequently increase
by up to 20% in its sole discretion (the “Second Tranche Increase”). Assuming a full First Tranche Increase, Second
Tranche and Second Tranche Increase, the total amount (including interest) that may be advanced by Lind under the Lind Agreement
is $16,440,000.
In respect of
the Second Tranche (if any), NioCorp has agreed to issue a number of warrants as is equal to (N), determined pursuant to the following
formula:
(the
Second Tranche amount / VWAP per share during the five consecutive trading days immediately before the closing date of the Second
Tranche) X 0.50 = N (the “Second Warrants”)
On the occurrence
of a First Tranche Increase (if any), NioCorp has agreed to issue a number of warrants as is equal to (N), determined pursuant
to the following formula:
|
·
|
($1,000,000 / VWAP per share during the five consecutive trading
days immediately before the closing date of the First Tranche Increase) X 0.50 = N (the “First Tranche Increase Warrants”)
|
On the occurrence
of a Second Tranche Increase (if any), NioCorp has agreed to issue a number of warrants as is equal to (N), determined pursuant
to the following formula:
|
·
|
((the Second Tranche Increase amount X 0.20) / VWAP per share
during the five consecutive trading days immediately before the closing of the Second Tranche Increase) X 0.50 = N (the “Second
Tranche Increase Warrants”)
|
Warrants which
may become issuable under the Lind Agreement will be priced as follows:
|
·
|
Second Warrants: 120% of the five day VWAP of the Common Shares
before the Second Tranche closing.
|
|
·
|
First Tranche Increase Warrants: 120% of the five day VWAP of
the Common Shares before the First Tranche Increase closing.
|
|
·
|
Second Tranche Increase Warrants: 120% of the five day VWAP
of the Common Shares before the Second Tranche Increase closing.
|
The foregoing
is intended as a brief description of the Lind Agreement only, and is qualified in its entirety by reference to the Lind Agreement
itself. Please refer to the full text of the Lind Agreement, filed as an exhibit to the registration statement of which this prospectus
forms a part. See “Where You Can Find Additional Information” below.
Incentive
Stock Options
As of September 15, 2016, an aggregate
of 12,175,000 incentive stock options are issued and outstanding, with each option exercisable into one (1) Common Share, as follows:
Option Grant Date
|
|
Option Exercise
Price
|
|
|
Option Expiry Date
|
|
Number of
Options Currently
Outstanding
|
|
July 21, 2016
|
|
C$
|
0.94
|
|
|
July 21, 2021
|
|
|
710,000
|
|
January 19, 2016
|
|
C$
|
0.62
|
|
|
January 19, 2021
|
|
|
5,575,000
|
|
April 28, 2015
|
|
C$
|
0.94
|
|
|
April 28, 2018
|
|
|
500,000
|
|
December 22, 2014
|
|
C$
|
0.80
|
|
|
December 22, 2017
|
|
|
3,220,000
|
|
September 2, 2014
|
|
C$
|
0.76
|
|
|
September 2, 2017
|
|
|
500,000
|
|
July 28, 2014
|
|
C$
|
0.65
|
|
|
July 28, 2017
|
|
|
1,250,000
|
|
May 20, 2014
|
|
C$
|
0.65
|
|
|
May 20, 2017
|
|
|
50,000
|
|
May 9, 2014
|
|
C$
|
0.50
|
|
|
May 9, 2017
|
|
|
370,000
|
|
Each agreement
in respect of the foregoing incentive stock options provides that in the event there is a subdivision, consolidation, reclassification,
or other change of the Common Shares into a greater or lesser number of Common Shares or other securities of NioCorp, the terms
of the Common Shares issuable on exercise of such options and the exercise price of such options will be adjusted accordingly.
Furthermore, the expiry period of each of the foregoing options will be accelerated in the event the holder ceases to hold their
applicable position as director, officer, consultant, or employee of NioCorp.
BUSINESS
General Corporate
Information
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 Robson Court, 1000-840 Howe Street, Vancouver, British Columbia V6Z 2M1 (c/o Miller Thompson LLC). 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 area, including negotiations with local landowners
for land access agreements. The option agreements between ECRC and individual landowners were in the form of five-year pre-paid
Exploration Lease Agreements (ELA), with an Option to Purchase (OTP) the mineral and/or surface rights during the term of the
option. The agreements granted the Company an exclusive right to explore and evaluate the landowner’s property for a period
of 60 months. These agreements expired in 2014 and 2015, as the case may be, and a number have been extended or renegotiated for
additional 60 month terms. Please see the section heading “Item 2 -Properties” below for additional information on
the current status of the land access agreements. The acquisition of the Elk Creek project by the Company involved the purchase
of all of the issued and outstanding common shares of 859404 BC Ltd., (“859404”) a private British Columbia company.
859404 holds 100% of the issued and outstanding shares of Elk Creek Resources Corp (ECRC), the Nebraskan corporation that was
signatory to the option agreements.
Following
the completion of land negotiations, the Company commenced a field exploration program in 2011 which included verification of
previous work that was completed on the property in the 1970s and 1980s, re-assaying of historic drill core, an airborne geophysical
survey and the completion of 5 new diamond drill holes. The available data for the property was compiled into an updated NI 43-101
resource estimate for the project, which was issued in April 2012. Additional drilling and NI 43-101 technical reports were completed
by the Company in 2014 and 2015.
The majority
of the historic drilling at the project site from the 1970s and 1980s was completed by Molycorp, a subsidiary of Union Oil Company
of California (Unocal). Molycorp wound up its mineral exploration activities in the early 1990s and dissolved its Nebraska subsidiary,
Molycorp Nebraska LLC, in the early 2000s. The diamond drill core generated during Molycorp’s drilling activities was subsequently
donated to the University of Nebraska – Lincoln and was stored at that university’s drill core storage facility near
Mead, Nebraska.
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 and within 30 days
of the filing of this prospectus, as well as the majority of our assets and directors being in the United States, we do not meet
the definition of a “foreign private issuer” under Rule 405 of the Securities Act. As a result, effective July 1,
2016 we were subject to United States securities laws as applicable to a United States domestic company and are filing this Form
S-1 as a domestic issuer.
You may read
and copy any materials we file with the SEC in the SEC's Public Reference Section, Room 1580, 100 F Street N.E., Washington, D.C.
20549. You may obtain information on the operation of the Public Reference Section 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 $1,000,000,000 in annual gross revenue and did not have such amount as of June 30, 2016, 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
$1,000,000,000 or (ii) we issue more than $1,000,000,000 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 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. Such sections are provided below:
|
·
|
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.
|
|
·
|
Sections 14A(a) and (b) of the Securities and Exchange Act,
implemented by Section 951 of the Dodd-Frank Act, require companies to hold shareholder advisory votes on executive compensation
and golden parachute compensation.
|
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 Securities Exchange Act of 1934.
Geographic
and Segment Information
We have one
reportable segment, consisting of evaluation, acquisition, exploration and, if warranted, development activities which are focused
principally in Nebraska, U.S.A. We reported no material revenues during our fiscal years ended 2014 and 2015.
Corporate
Structure
The Company’s
business operations are conducted primarily through Elk Creek Resources Corp. (“ECRC”), a private Nebraska corporation
and wholly-owned subsidiary of 0896800 B.C. Ltd. (“0896800”), a wholly-owned subsidiary of the Company. The below
table provides an overview of the Company’s current subsidiaries and their activities.
Name
|
|
State/Province
of Formation
|
|
Ownership
|
|
Business
|
0896800 B.C. Ltd.
|
|
British Columbia
|
|
100% by the Company
|
|
The only business of 0896800 is to hold the shares of ECRC
|
Elk Creek Resources Corp.
|
|
Nebraska
|
|
100% by 0896800
|
|
The business of ECRC is the development of the Elk Creek Project
|
Business
Operations
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.
|
·
|
Niobium is used to produce various superalloys that are extensively
used in high performance aircraft and jet turbines. It also is used in High Strength, Low Alloy (“HSLA”) steel,
a stronger steel used in automotive, bridges, structural systems, buildings, pipelines, and other applications that which
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.
|
|
·
|
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.
|
|
·
|
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.
|
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 to complete a feasibility study for the Elk Creek Project and to begin development.
Subject to delivering a positive feasibility study for the Elk Creek Project, we intend to secure the project financing necessary
to complete mine development and construction of the Elk Creek Project.
NioCorp is a
mineral exploration company engaged in the acquisition, exploration, and development of mineral properties. We are in the exploration
stage as our properties have not yet reached commercial production and none of our properties is beyond the exploration stage
at this time. All work presently planned by us is directed at defining mineralization and increasing understanding of the characteristics
of, and economics of, that mineralization. In addition, we have also conducted permitting, land reclamation, and other related
activities at and for the Elk Creek Project.
As noted above,
the Company conducts its business operations and holds assets primarily through its subsidiary entities. The following describes
the operations and assets of NioCorp’s subsidiaries through which NioCorp conducts its business operations.
Elk Creek
Project
As at the date
of this prospectus, the Company’s material mineral property is the Elk Creek Property. NioCorp’s interest in the Elk
Creek Project is held pursuant to exploration lease and option agreements between the Company’s subsidiary, ECRC, and individual
Nebraskan landowners (the “Elk Creek Leases”). The Elk Creek Leases held by ECRC comprise a series of agreements with
individual property owners in the form of a five-year pre-paid lease on the underlying mineral and/or surface rights. The agreements
contain a pre-determined buyout figure for permanent ownership of the mineral rights, and in certain instances, include an option
to acquire surface rights. The option to exercise the purchase option lies entirely with the Company. All Elk Creek Leases that
cover the mineral resource associated with the project were renegotiated during the fiscal year ended June 30, 2015, on substantially
identical terms, for a period of five years.
After filing
the initial Preliminary Economic Assessment on the Elk Creek Project (“PEA”) on May 19, 2015, the Company engaged
in additional bench and pilot testing of the metallurgical flowsheet for the proposed plant. During this testing, it was determined
that recoveries of targeted elements could be significantly increased by eliminating the flotation step and processing the resource
directly through a hydrometallurgical process. The discovery of this positive change to the flowsheet prompted the Company’s
decision to prepare a new Preliminary Economic Assessment. These changes are expected to allow the Company to recover significantly
higher percentages of all three elements from the mineral resource, including niobium recovery of 89.2%, scandium recovery of
90.0%, and titanium recovery of 87.6%. This in turn will reduce the volume of the resource required to be mined on a daily basis
and enable the Company to achieve the same level of ferroniobium and titanium dioxide production, as was noted in the Company’s
initial PEA, while increasing scandium trioxide output by approximately 661%. These changes result in minimal increases to CAPEX,
compared to the initial PEA. On August 4, 2015, the Company announced the completion of a second Preliminary Economic Assessment
(“PEA2”) for the Elk Creek Project, and the related technical report was filed in Canada on SEDAR on September 4,
2015 which was amended and re-filed in response to comments from the BCSC on October 16, 2015. PEA2 reflects the impacts of the
changes to the metallurgical flowsheet described above, additional information available regarding the hydrogeologic conditions
at the project site, and the completion of third-party market studies for ferroniobium and scandium trioxide. PEA2 retains the
technical and economic results previously disclosed by NioCorp in its August 4, 2015 and September 4, 2015 news releases, and
includes additional guidance and cautionary language required by NI 43-101 regarding uncertainty in realizing the results of PEA2.
In addition
to the underground mine, facilities described in the PEA2 also include a crushing and grinding operation. The ground material
will be fed to a hydrometallurgical operation that will produce a niobium precipitate, a scandium trioxide co-product as well
as a Titanium dioxide by-product. A final pyrometallurgical step will convert the niobium precipitate to ferroniobium using an
aluminothermic reduction process. In order to support these processing steps, a number of ancillary facilities would be constructed,
including stockpile areas, water pumping and treatment facilities, reagent and fuel storage areas, warehousing, utility installations,
rail infrastructure, office space, and a tailings impoundment. The underground mine would be accessed by a shaft and mined using
longhole stoping methods supported by a mine backfill plant located on surface.
Recent Corporate
Developments
On July 31,
2014, NioCorp entered into a financial advisory agreement to engage Mackie Research Capital Corporation (“MRCC”) to
assist in reviewing strategic options to meet NioCorp’s growth objectives and enhance shareholder value. NioCorp executed
a subsequent advisory agreement with MRCC on November 17, 2014 (the “Current Advisory Agreement”) to replace and supersede
the agreement of July 31, 2014. Pursuant to the Current Advisory Agreement, MRCC will assist NioCorp in the preparation of presentation
marketing materials, provide strategic guidance through NioCorp’s next stage of development, and expose NioCorp to MRCC’s
network of retail and institutional investors.
As consideration
under the Current Advisory Agreement, NioCorp paid MRCC a work fee (the “Work Fee”) of C$190,000 (plus applicable
taxes) and issued MRCC 750,000 broker warrants (the “Broker Warrants”) for a work period commencing effective August
1, 2014 and ending April 31, 2015. Each Broker Warrant entitles MRCC to acquire one unit of the Company (a “MRCC Unit”)
at an exercise price equal to C$0.55 at any time up to December 4, 2016. Each MRCC Unit consists of one Common Share and one full
Common Share purchase warrant (a “MRCC Warrant”). Each MRCC Warrant entitles MRCC to acquire one additional Common
Share at an exercise price equal to C$0.65 at any time up to December 4, 2016.
On November
28, 2014, NioCorp entered into a sponsorship engagement agreement with MRCC, pursuant to which MRCC has agreed to assist and sponsor
the Company for a listing on a senior North American stock exchange. In consideration for its services, MRCC was paid a cash fee
and issued 250,000 non-transferable compensation options (the “Compensation Options”). Each Compensation Option entitles
MRCC to acquire one unit of the Company (a “MRCC Comp Unit”) at an exercise price equal to C$0.60 at any time up to
January 14, 2017. Each MRCC Comp Unit consists of one Common Share and one full Common Share purchase warrant (a “MRCC Comp
Warrant”). Each MRCC Comp Warrant entitles MRCC to acquire one additional Common Share at an exercise price equal to C$0.65
at any time up to January 14, 2017.
On November
10, 2014 the Company entered into an offtake agreement (the “Offtake Agreement”) with ThyssenKrupp Metallurgical Products
GmbH (“ThyssenKrupp”) whereby ThyssenKrupp will purchase, at market rates, approximately 3,750 metric tons per year,
or fifty percent (50%), of the Company’s current planned annual Ferroniobium production from the Elk Creek Project for an
initial ten-year term, with an option to extend beyond that timeframe. The Offtake Agreement presupposes the Company obtaining
project financing, obtaining all necessary approvals, and constructing a mine and associated production plant at the Elk Creek
Project. ThyssenKrupp is based in Essen, Germany, and is part of the Business Area Materials Services, a global materials distributor
and service provider with 500 branches in 44 countries. The Company appointed ThyssenKrupp as its exclusive sales agent of its
production in Europe, with a stated amount to be sold in Germany. Pursuant to the Offtake Agreement, the Company granted ThyssenKrupp
a non-transferable warrant to acquire 8,569,000 Common Shares of the Company at an exercise price of C$0.67 per Common Share,
which expired on December 12, 2015. During the six months ended December 31, 2015, 1,500,500 of these warrants were exercised,
with the remainder expiring unexercised.
On January 29,
2016, the Company announced that Tony Fulton resigned from the NioCorp Board of Directors, effective immediately, as a result
of his confirmation by the Nebraska Legislature to serve as Nebraska Tax Commissioner. Subsequently, on February 23, 2016, the
Company’s shareholders approved a motion appointing Anna Castner Wightman of Omaha, Nebraska, to the Company’s Board
of Directors. A sixth generation Nebraskan and a graduate of Nebraska Wesleyan University, Ms. Wightman currently serves as Vice
President of Government Relations for First National Bank in Omaha, Nebraska, and served on the Boards of Directors of the Nebraska
Chamber of Commerce, Rose Theater for Performing Arts, and Joslyn Castle.
On June 15,
2016, we announced that we had entered into a commercial sales agreement (“CMC Agreement”) with CMC Cometals, a division
of Commercial Metals Company (“CMC”) of Fort Lee, New Jersey, under which CMC expects to purchase up to a maximum
of 1,875 tonnes per year, or roughly twenty-five (25%), of our potential annual Ferroniobium production from our Elk Creek, Nebraska
resource. Under the CMC Agreement, CMC will purchase this amount of Ferroniobium under a market-based pricing structure and for
an initial 10-year term, with an option to extend beyond that period upon mutual agreement of the parties.
On June 20,
2016, we announced that we had entered into a joint development agreement with IBC Advanced Alloys Corp. to investigate and develop
applications for scandium-containing alloys for multiple downstream markets.
On July 1, 2016,
we appointed Neal Shah as our Chief Financial Officer. Mr. Shah had served as our Interim Chief Financial Officer since April
of 2015. Prior to that, he was our Vice President of Finance.
On September 8, 2016 we announced the
successful completion of a Jurisdictional Determination (JD) process with the US Army Core of Engineers (ACOE) for the Elk Creek
Project. The JD issued by the ACOE identifies wetlands and streams within the Elk Creek Project’s footprint that are considered
Waters of the US (WOTUS) and are therefore regulated under the federal Clean Water Act. The Elk Creek Project, as laid out in
the Company’s October 15 Preliminary Economic Assessment (PEA), was designed to minimize impacts on WOTUS wetlands and streams.
The JD reinforced our belief that there are no WOTUS wetlands and streams in the immediate footprint of the Elk Creek Project’s
mine mouth and product processing facilities.
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 junior 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 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 rely on its ability to attract and retain individuals with (among other)
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 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, the weak demand for minerals in many countries are suppressing commodity prices, but it is difficult
to assess how long such trend 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 years for the products the Company anticipates extracting from its Elk Creek
Project, Ferroniobium, Scandium Trioxide and Titanium Dioxide.
Year
|
|
Ferroniobium
US
Import Price
($/kg-Nb)
1
|
|
|
Scandium
Trioxide
US
Price
($/kg)
2
|
|
|
Titanium
Dioxide
US
Price
($/kg)
3
|
|
2015
|
|
$
|
42.00
|
|
|
$
|
5,100
|
|
|
$
|
0.84
|
|
2014
|
|
$
|
42.00
|
|
|
$
|
5,400
|
|
|
$
|
0.95
|
|
2013
|
|
$
|
43.42
|
|
|
$
|
5,000
|
|
|
$
|
1.25
|
|
2012
|
|
$
|
43.66
|
|
|
$
|
4,700
|
|
|
$
|
2.20
|
|
2011
|
|
$
|
41.83
|
|
|
$
|
4,700
|
|
|
$
|
1.35
|
|
Source: USGS Mineral Commodity
Summary, 2016
1
Unit value is
mass-weighted average U.S. import value of ferroniobium assuming 65% niobium content
2
Scandium Trioxide,
99.99% purity, 5-kilogram lot size
3
Rutile mineral concentrate,
bulk, minimum 95% TiO2, f.o.b. Australia
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 the
Elk Creek Leases 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 United States Environmental Protection Agency (EPA) and the United States Army Corps of Engineers (ACOE) 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.
Federal
While none of
the lands on which the Elk Creek Project is proposed to be build are government-owned lands, on lands owned by the United States,
mining rights are governed by the General Mining Law of 1872, as amended, which allows 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 BLM. 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.
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, 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 (“CAA”), as amended, 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 United States Environmental Protection Agency (“EPA”),
other federal agencies, and any interested third parties will review and comment on the scoping of the EIS or EA and the adequacy
of and 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 SWDA 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.
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 September 15, 2016 we employed
eleven (11) employees, each of whom is a full-time employee.
Availability
of Raw Materials
All of the raw
materials we require to carry on our business are readily available through normal supply or business contracting channels in
Canada and the United States. Since commencing current operations in August 2010, we have been able to secure the appropriate
personnel, equipment, and supplies required to conduct our contemplated programs. As a result, we do not believe that we will
experience any shortages of required personnel, equipment, or supplies in the foreseeable future.
Reorganization
Except as disclosed
elsewhere herein, the Company has not undergone any material reorganizations in its three most recently completed financial years.
Available
Information
We maintain
a website at
http://www.niocorp.com
. The information contained on, or accessible through, our website is not part of this
prospectus. Because we have not registered a class of securities under Section 12 of the Exchange Act, we are not currently required
to file reports on Forms 10-K, 10-Q or 8-K. Once this prospectus is effective, we will file a Form 8-A to register our common
shares under Section 12(g) of the Exchange Act. Thereafter, 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, will be 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 facilities at 100 F Street, N.E., Room 1580, 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 facilities. 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 “Investors.” Our Code
of Conduct contains information regarding whistleblower procedures. We also maintain our Insider Trading Policy on our website.
PROPERTIES
Elk Creek
Project, Nebraska
Our principal
mineral property is the Elk Creek Property, a niobium exploration project located in southeast Nebraska, approximately 75 kilometers
(km) southeast of Lincoln, Nebraska (the state capital), and 110 km south of Omaha, Nebraska. 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 “Amended NI 43-101 Technical Report, Updated
Preliminary Economic Assessment, Elk Creek Niobium Project” and dated effective August 4, 2015, with an original report
date of September 4, 2015 and an amended report date of October 2015 (the “October 2015 PEA”), which was prepared
for us by SRK Consulting and Roche.
Property
Description and Location
The Elk Creek
Project is located in southeast Nebraska, USA. The Property is situated as shown in Figure 1 below and is located within 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 property is approximately 75 km southeast of Lincoln, Nebraska, the state capital of Nebraska.
The Project
is a niobium-bearing carbonatite deposit located in Johnson County, southeast Nebraska. In addition to niobium, other elements
of economic significance include titanium and scandium.
Figure 1 - Property Map showing
Location of Elk Creek Project
Title
and Ownership
Previously,
the Elk Creek Project consisted of 65 option agreements covering approximately 3,834 ha.
The Company
has since reviewed the required option agreements to advance the Elk Creek Project and has chosen not to enter into an extension
agreement on 44 agreements. These agreements covered mainly the larger area targeted in previous drilling campaigns. The Company
currently holds 16 land option agreements that are material to the project. The current optioned land package covers an area of
1,368 ha.
Option agreements
are between NioCorp’s subsidiary Elk Creek Resource Corp. (ECRC) and the individual land owners. ECRC is a Nebraska based
and wholly owned subsidiary of NioCorp. Land ownership for the agreements material to the project are shown in Figure 2 and listed
in Table 1. Material 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, 2016
Table 1: Active Lease Agreements
Covering the Project
|
|
Option Agreement
Name
|
|
Code
|
|
Hectares
|
|
|
Acres
|
|
|
Original
Agreement
Sign
Date
|
|
Original
Agreement
Expiry
|
|
New
/ Extended
Agreement
Expiry
|
1
|
|
Beethe, Elda E
|
|
Beethe008
|
|
|
107.82
|
|
|
|
266.43
|
|
|
April 30, 2010
|
|
April 30, 2015
|
|
April 30, 2020
|
2
|
|
Beethe, Harlan D. and Lisa M
|
|
Beethe003
|
|
|
48.69
|
|
|
|
120.32
|
|
|
April 15, 2010
|
|
April 15, 2015
|
|
June 24, 2020
|
3
|
|
Heidemann, Lavon L. and Robin Y
|
|
Heidemann005
|
|
|
79.55
|
|
|
|
196.57
|
|
|
March 16, 2010
|
|
March 16, 2015
|
|
March 16, 2020
|
4
|
|
Heidemann, Leland L. and Lola L
|
|
Heidemann006
|
|
|
64.75
|
|
|
|
160.00
|
|
|
March 26, 2010
|
|
March 26, 2015
|
|
March 26, 2020
|
5
|
|
Heidemann, Leslie L
|
|
Heideman007
|
|
|
64.75
|
|
|
|
160.00
|
|
|
March 25, 2010
|
|
March 25, 2015
|
|
March 25, 2020
|
6
|
|
Koehler, Robert and Ellen
|
|
Koehler001
|
|
|
64.75
|
|
|
|
160.00
|
|
|
June 4, 2010
|
|
June 4, 2015
|
|
June 12, 2020
|
7
|
|
Nielsen, Rolande O. and Tami R
|
|
Nielsen001
|
|
|
112.81
|
|
|
|
278.75
|
|
|
March 31, 2010
|
|
March 31, 2015
|
|
June 25, 2020
|
8
|
|
Woltemath Roger
|
|
Woltemath80S
|
|
|
32.37
|
|
|
|
80.00
|
|
|
Not applicable
|
|
Not applicable
|
|
December 4, 2019
|
9
|
|
Woltemath, Eileen M
|
|
Woltemath001
|
|
|
48.47
|
|
|
|
119.77
|
|
|
December 4, 2009
|
|
December 4, 2014
|
|
January 21, 2020
|
10
|
|
Woltemath, Roger L. and Nancy A
|
|
Woltemath002
|
|
|
152.49
|
|
|
|
376.81
|
|
|
December 4, 2009
|
|
December 4, 2014
|
|
December 4, 2019
|
11
|
|
Woltemath, Victor L. and Juanita E
|
|
Woltemath003
|
|
|
172.20
|
|
|
|
425.52
|
|
|
March 25, 2010
|
|
March 25, 2015
|
|
March 25, 2020
|
12
|
|
Shuey, Dr. Keith
|
|
Shuey001
|
|
|
32.37
|
|
|
|
80.00
|
|
|
December 2, 2009
|
|
December 2, 2014
|
|
May 28, 2020
|
13
|
|
Othmer, Mark and Tom
|
|
Othmer003
|
|
|
75.89
|
|
|
|
187.52
|
|
|
February 10, 2010
|
|
February 10, 2015
|
|
January 22, 2021
|
14
|
|
Othmer, Mark and Tom
|
|
Othmer004
|
|
|
113.31
|
|
|
|
280.00
|
|
|
February 10, 2010
|
|
February 10, 2015
|
|
January 22, 2021
|
15
|
|
Beethe, Verlyn
|
|
Beethe007
|
|
|
66.27
|
|
|
|
163.75
|
|
|
April 14, 2010
|
|
April 14, 2015
|
|
January 20, 2021
|
16
|
|
Beethe, Glenn W
|
|
Beethe002
|
|
|
146.56
|
|
|
|
362.16
|
|
|
April 15, 2010
|
|
April 15, 2015
|
|
February 19, 2021
|
Source: NioCorp, 2016
The known
mineralized material is wholly contained within parcels Woltemath003 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. The Company is still in the process of negotiating certain leases at the Elk Creek
Project that are ancillary to the project’s development. While the Company believes these leases would be useful in the
economic development of the project, the Company does not believe that the Company’s development of the project is substantially
dependent on the extension of these leases and these leases are not material to the Elk Creek Project. 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.
Each of the
agreements except for Woltemath80S include a 2% Net Smelter Return (“NSR”) royalty attached with the option to purchase
(“OTP”). The agreements grant the operator an exclusive right to explore and evaluate the property for a period of
60 months, with an OTP the mineral interest and in some cases the 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 75 km southeast of Lincoln (State Capital), Nebraska
and approximately 110 km south of Omaha, Nebraska. Access to 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 Project 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.
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 Project).
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 -10.4°C to 1.6°C.
Average summer temperatures vary between 18°C to 32°C. Exploration may be conducted all year round.
Average monthly
precipitation (rain and snowfall) varies between 22 and 127 mm. Average yearly precipitation is between 800 and 850 mm with an
average yearly snowfall of approximately 72 cm. Nebraska is located within an area known for tornados 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 the lease agreements. It is expected that with appropriate studies and negotiations
with land owners that land access and provision of land for infrastructure development will be achievable. There is sufficient
suitable land area available within the project area for mine waste disposal, for future tailings disposal, a processing plant,
and related mine infrastructure.
Elk Creek
is the nearest town to the Elk Creek Project, with a population of approximately 100 people. Tecumseh, with roughly 1,700 inhabitants,
is the nearest town of any size to the Elk Creek Project site and is situated approximately 11 km north of the Elk Creek Property.
Tecumseh is well-suited as a staging base for future exploration work at the Project with available accommodations, fuel, and
supplies. Contractors, bulk supplies, and skilled labor (engineering, surveying) may be sourced locally or from the cities of
Lincoln or Omaha. 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 Company
has links to the University of Nebraska Lincoln which operates a geology department. Between 2014 and 2016, the Company periodically
employed University of Nebraska – Lincoln geology students to complete field geology tasks. The University also owns the
core drilled by Molycorp in the 1970s and 1980s at the project site, and stores that core at their dedicated core storage facility
in Mead, Nebraska. The Company has periodically accessed this historic core between 2011 and 2016 for the purposes of re-logging,
re-assaying and reinterpreting the geology of the resource. The Company does not have a formal agreement with the University related
to the development of the Elk Creek Project.
There are three
electrical power generating stations within a 50 km radius of the Elk Creek Project that include the Beatrice and Sheldon coal
generating stations, and the Cooper nuclear power generating station.
The nearest
railway heads are found in both Tecumseh and Elk Creek. The Burlington Northern Santa Fe (BNSF) railway runs parallel to the Nemaha
River connecting Kansas City to Omaha and Lincoln.
The nearest
major airports are located in Lincoln and Omaha, Nebraska, and Kansas City, Kansas.
Water sources
are available near the Property from local rivers and from groundwater wells for drilling requirements.
The local topography
of eastern Nebraska is relatively low-relief with shallow rolling hills intersected by shallow river valleys. Elevation varies
from about 325 to 390 meters 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 Ga) (Carlson & Treves, 2005). 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 (ca. 299 to 318 Ma).
As a result
of this thick cover, there is no surface outcrop within the Elk Creek Project 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 Ga Midcontinent
Rift System, near the northern part of the Nemaha uplift (Burchett, 1982; Carlson, 1997). 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 (Treves
et al., 1972a and 1972b). The definitive confirmation of carbonatite was completed using Rare Earth Element (REE), P205 and 87Sr/86Sr
isotope analysis (Brookins et al., 1975). The Carbonatite has also been compared to the Iron Hill carbonatite stock in Gunnison
County, Colorado on the basis of similar mineralogy (Xu, 1996).
The Carbonatite
consists predominantly of dolomite, calcite and ankerite, with lesser chlorite, barite, phlogopite, pyrochlore, serpentine, fluorite,
sulfides and quartz (Xu, 1996). 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 (ca. 299 to 318 Ma).
Current studies
suggest that the Carbonatite was emplaced ca. 500 Ma (Xu, 1996) in response to stress along the Nemaha Uplift boundary predating
deposition of the Pennsylvanian sedimentary sequence (ca. 299 to 318 Ma). However, observations on drill cores from the 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 interests,
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 program, plus resampling of selected historical core/pulps between
2011 and 2014.
Historical
Exploration
Drilling at
the Elk Creek Project 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
in 2014 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 used in the current Mineral Resource
Estimate.
Five holes for a total length 3,353.1
m, of additional drilling been drilled since the completion of the April 28, 2015 Mineral Resource Estimate. These holes were
drilled for hydrogeologic and geotechnical purposes, and were not intended to augment 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
|
|
NioCorp
|
|
|
18
|
|
|
|
845.4
|
|
|
|
15,482.8
|
|
Subtotal
|
|
|
|
|
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 (Anzman, 1976). 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 Project with drillhole EC-11. EC-11
is located on Section 33, Township 4N, and Range 11. The Carbonatite hosting the 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 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 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 Nb2O5 anomaly and are located
to the east. The objectives of the drill program over the Elk Creek Project 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
NioCorp commenced
drilling on the Elk Creek Project 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.
Procedures
Detailed descriptions
of Molycorp’s drilling, sample procedures, analyses and security have not been documented and reviewed. Given Molycorp’s
position as a leader in the rare earth industry at the time, it is likely Molycorp applied industry best practice for the time
period. The 2011 drilling campaign was managed by Dahrouge and SRK under the same quality and procedures used in the current study.
The 2014 drilling program includes a quality control program to ensure the results can be used to verify earlier drilling results
and add confidence to the overall understanding of the deposit.
For the 2014
drilling program planned drillhole collars were initially located using a handheld Garmin
TM
Global Positioning System
(GPS) and marked with wooden stakes. A tracked excavator was used to construct the drill pad and collars were then relocated using
the GPS with wooden stakes after pad construction. A geological compass and an azimuth pointing system (APS) was used to sight
in the drill to the planned azimuth and inclination.
The 2014 core
drilling was conducted by both West-Core Drilling and Idea Drilling, both private contractors. West-Core used both an AVD R40
track-mounted core drill and an Atlas Copco CS-14 track-mounted core drill, while Idea used an Atlas Copco CT-20 truck-mounted
core drill. Overburden was cased in all drillholes to depths ranging from 18 to 37 m. The Pennsylvanian limestones and mudstones
overlying the target carbonatite were drilled PQ-sized core and HQ-sized core for drillholes NEC14-020 to NEC14-023. The Carbonatite
was drilled with HQ-sized core, with the exception of the three metallurgical holes (NEC14-MET-01, NEC14-MET-02 and NEC-14MET-03),
which were drilled completely using PQ-sized core. Core size reduction took place just beneath the Pennsylvanian-carbonatite contact
at depths ranging from 206 to 238 m. The core drilling rigs operated 24 hours/day and 7 days/week, with typical progress of 40
m/day.
During the
drilling operation, the core is retrieved from the core barrel and laid sequentially into wooden core boxes by the drilling contractor.
Interval blocks are then placed at all run breaks. Core recovery and RQD were generally good for most drill core. Core recovery
has been recorded in the data base and is measured in the field at the drilling rig by the geologist. Once the box is full, the
ends and top of the box are labeled with drillhole identification and the sequential box number. Upon completing a box, it is
stacked on a pallet or on a truck bed at the drill rig. At the end of each drilling shift, the boxes of core are transported by
the drilling contractor in a pickup truck to the NioCorp field office. At this point, the core is in the custody of Dahrouge Geological
Consulting Ltd. (Dahrouge). Eight of the 2014 drillholes had piezometers installed in them after drilling was complete. For these
drillholes, surface completion consisted of surface casing capped with a locking steel cover, a 1.2 m2 cement pad around the surface
casing and a steel name plate attached to the casing. Surface completion for the drillholes that did not have piezometers installed
consisted of a steel marker post and attached name plate. All name plates include drillhole number, total depth and orientation.
Abandonment of the drillholes consisted of cementing from total depth to surface in the non-piezometer drillholes and from total
depth to the bottom of the piezometers in the other drillholes with piezometer installations.
All drilling
completed by NioCorp has been logged by qualified geologist for both geological and geotechnical purposes. Trained staff was involved
at all stages of the sampling, sample packaging and sample transportation process. Day to day logging tasks were split between
Dahrouge and SRK, whereby Dahrouge completed all geological and sampling related tasks, while SRK focused on geotechnical logging
requirements. During the diamond drilling program (including the RC pre-collar drilling of RC/DD holes), staff members were based
full time at the drill project site.
Core sampling
method and approach has been consistent through the 2011 and 2014 drill programs. Core was boxed on site and delivered each day
to a core facility on the Elk Creek project site where the core was logged and split. Drill core was boxed and transported from
each drill rig to the core processing facility (distances up to 800 m), at the end of each 12-hour shift. Core logging involved
detailed geotechnical and geological information. All key geological features have been logged comprehensively. A project database
(SQL) which contains only the relevant rock codes and lithology descriptions has been created. Validation routines have been created
to ensure data entry fits required rules. The drill core within each core box was marked up and then split along orientation marks.
Cutting was completed using one of three electric-powered, water-cooled diamond-bladed BD 3003E core saws at the Elk Creek sample
preparation and storage facility. HQ and minor intervals of PQ core were halved for assay. The remaining core is stored at the
Elk Creek Project site for the drilling post 2011, while the historical samples are stored at a separate facility in Mead Nebraska.
Sample intervals, were taken generally using 1 m in length, were marked on the core and recorded in the geological database. Each
sample is assigned a unique sample number. Hand-held Niton-XRF and Magnetic susceptibility measurements were collected on the
core to assist geological and sample divisions. Specific gravity measurements were performed at approximately 6 m spacing. The
marked sample intervals were split in half by a wet diamond saw. Sampled intervals were placed in durable barcoded sample bags
that were clearly labelled and contain back up sample tags within each bag. Sample bags containing original core sections and
field inserted control samples were barcode scanned and secured in 5-gallon plastic shipping pails and dispatched to the commercial
laboratory, with detailed shipping logs and preparation requests. Transportation was completed by bonded trucking company to ensure
a chain of custody was maintained.
The 2011
and 2014 sawn core samples were shipped to Activation Laboratories Ltd. (Actlabs) 1336 Sandhill drive, Ancaster, Ontario Canada.
Actlabs is the primary laboratory for sample preparation and for analysis. Core samples were systematically assayed at Actlabs
for niobium (Nb2O5) and tantalum (Ta2O5) by XRF analysis. Whole Rock analysis and 43 Major Elements were completed using ICP and
ICP/MS (by a Perkin Elmer Sciex ELAN 6000, 6100, 9000 ICP/MS) finish following a Lithium metaborate/tetraborate fusion preparation
as defined by analytical Actlabs’ “8-REE Major Elements Fusion ICP(WRA)/Trace Elements Fusion ICP/MS(WRA4B2)”
package.
NioCorp has
integrated a series of routine QA/QC procedures throughout the sampling and analytical analysis for both the 2011 and 2014 drilling
programs, to ensure a high level of quality is maintained throughout the process. For the 2011 and 2014 sampling the QA/QC consisted
of the insertion of duplicate samples taken from various stages of the process, insertion of known control samples (Standards
Reference Material (SRM) and Blanks), plus an external check at a SGS laboratory. The duplicates accounted for 12% of the submissions
split between field duplicates, coarse rejects and pulp duplicates. A further 5% of submissions were SRM’s and approximately
5% we field blanks testing for any cross contamination. In addition, 5% of the routine samples were selected for external pulp
check samples, and submitted to SGS (Lakefield) Labs, as a third party analytical result confirmation.
Summary Results
The locations
of the drill holes completed since 2014 appear in Figure 3 below. Notable results from NioCorp’s exploration program are
summarized below. Note that these results are specific to the niobium content of the mineralized material at the Elk Creek project
as niobium is a useful indicator element. Each hole was also assayed for Ti, Sc and numerous other elements, and the full assay
results are captured in the resource database for the project.
Drillholes NEC14-006,
NEC14-007 and NEC14-008 were drilled along a North-East to South-West section line that was designed to drill across the mineralized
material. These holes were drilled at approximately 50 m (165 ft.) intervals along the drill section line.
Analytical highlights
for NEC14-007 and NEC14-008 appear below. Note that due to the angle of the drilling and other factors, the results presented
for the drill holes do not represent the true thickness of the mineralized material:
|
o
|
279 m interval between 628 – 907 m (open) at 0.60 % Nb2O5,
including
|
|
§
|
16 m (646 – 663 m) at 0.97 % Nb2O5
|
|
§
|
23 m (720 – 744 m) at 0.93 % Nb2O5
|
|
§
|
95 m (813 – 908 m) at 0.80 % Nb2O5, open at depth
|
|
o
|
448 m interval between 438 – 886 m at 0.69 % Nb2O5, including
|
|
§
|
32 m (466 – 498 m) at 1.09 % Nb2O5
|
|
·
|
5 m (493 – 498 m) at 1.68 % Nb2O5
|
|
§
|
9 m (553 – 563 m) at 1.00 % Nb2O5
|
|
§
|
13 m (610 – 623 m) at 1.02 % Nb2O5
|
|
§
|
12 m (760 – 772 m) at 2.12 % Nb2O5
|
|
·
|
3 m (768-771 m) at 3.23% Nb2O5
|
|
§
|
16 m (772 – 788 m) at 1.01 % Nb2O5
|
|
§
|
10 m (835 – 845 m) at 1.15 % Nb2O5
|
Drillholes NEC14-009
and NEC14-010 were completed along a parallel section line to the east of holes NEC14-006, NEC14-007 and NEC14-008.
|
o
|
183 m interval between 218 – 402 m (open) at 0.55 % Nb2O5,
including
|
|
§
|
29 m (218 – 247 m) at 0.76 % Nb2O5
|
|
§
|
11 m (271 – 282 m) at 1.06 % Nb2O5
|
|
§
|
11 m (302 – 313 m) at 1.01 % Nb2O5
|
|
o
|
252 m interval between 629 – 881 m at 0.73 % Nb2O5
|
|
§
|
70 m (788 – 859 m) at 1.10 % Nb2O5
|
|
o
|
311 m interval between 311 – 722 m at 0.64 % Nb2O5
|
|
§
|
26 m (442 – 468 m) at 0.72 % Nb2O5
|
|
§
|
14 m (537 – 551 m) at 0.86 % Nb2O5
|
|
·
|
7 m (537 – 544 m) at 1.25 % Nb2O5
|
|
§
|
10 m (538 – 548 m) at 1.0 % Nb2O5
|
|
§
|
30 m (611- 641 m) at 0.96 % Nb2O5
|
|
§
|
24 m (678– 700 m) at 1.42 % Nb2O5
|
|
§
|
6 m (716.5 – 722.5 m) at 2.47 % Nb2O5
|
|
·
|
3.5 m (716.5 – 720 m) at 3.09 % Nb2O5 (including individual
assay samples in excess of 4.06%)
|
Drillholes NEC14-011
and NEC14-012 define a north-west to south-east drill section through mineralized material, and the holes are oriented at right
angles to the two section lines defined by NEC14-006 through NEC14-0010. The results support niobium mineralization around the
outer edges of the mineralized material.
|
o
|
101 m interval between 223 – 324 m (open) at 1.00% Nb2O5
|
|
o
|
208.8 m interval between 251 – 459.80 m (open) at 0.95%
Nb2O5, including
|
|
§
|
84 m (251 – 335 m) at 1.00 % Nb2O5
|
|
§
|
56 m (352 – 408 m) at 0.95 % Nb2O5
|
|
§
|
46 m (414 – 460 m) at 1.15 % Nb2O5
|
|
§
|
79 m (476 – 555 m) at 0.52 % Nb2O5
|
NEC14-013 is
a vertical hole drilled through the center of the mineralized material, which provided data for both mineralized material and
geotechnical purposes. NEC14-015 was drilled on a southwest to northeast section line. Along with holes NEC14-012 and NEC14-011,
the results are supporting niobium mineralization around the outer edges of the mineralized material and its continuation at depth.
|
o
|
685.04 m interval between 195.22 – 880.26 m (open at depth)
at 0.74% Nb2O5, including
|
|
§
|
53 m (222.00 – 533.00 m) at 0.55 % Nb2O5
|
|
§
|
48 m (533.00 – 581.00 m) at 1.08 % Nb2O5
|
|
§
|
41 m (582.00 – 623.00 m) at 0.72 % Nb2O5
|
|
§
|
22 m (623.00 – 645.00 m) at 1.01 % Nb2O5
|
|
§
|
46 m (704.00 – 750.00 m) at 1.00 % Nb2O5
|
|
§
|
109 m (763.00 – 872.00 m) at 1.16 % Nb2O5
|
|
·
|
8 m (819.00 – 827.00 m) at 2.12 % Nb2O5
|
|
o
|
291.64 m interval between 536.20 – 827.84 m (open at depth)
at 0.72% Nb2O5, including
|
|
§
|
77.80 m (536.20 – 614 m) at 1.06 % Nb2O5
|
|
§
|
62.00 m (653.00 – 715.00) at 1.02 % Nb2O5
|
|
·
|
4.56 m (674.44 – 679.00 m) at 2.10 % Nb2O5
|
|
·
|
5.09 m (687.24 – 692.33 m) at 2.23 % Nb2O5
|
|
§
|
22.23 m (715 – 737.23 m) at 0.50 % Nb2O5
|
|
§
|
16.84 m (811 – 827.84 m) at 0.52 % Nb2O5
|
NEC14-014
was drilled along a southwest to northeast section line through the mineralized material. The results support niobium mineralization
in the area of the defined mineralized material and its continuation at depth.
|
o
|
390 m interval between 511 - 901 m (open at depth) at 0.68%
Nb2O5, including
|
|
§
|
15 m (511 – 526 m) at 1.27 % Nb2O5
|
|
·
|
5 m (520 – 525 m) at 2.03 % Nb2O5
|
|
§
|
126 m (649 -775 m) at 1.06 % Nb2O5
|
|
·
|
15 m (721 – 736 m) at 1.59 % Nb2O5
|
|
·
|
8 m (654 – 762 m) at 1.66 % Nb2O5
|
NEC14-016 was
drilled along a northeast to southwest trending section line through the mineralized material, and NEC14-Met-03 was a vertical
hole drilled through the approximate center of the mineralized material. NEC14-Met-03 was drilled along with two other holes (NEC14-Met-01
and NEC14-Met-02) for the specific purpose of generating a bulk sample of the mineralized material for pilot-scale testing, and
was quartered and assayed due to its location. These results, in addition to drillholes NEC14-011, NEC14-012, NEC14-013, NEC14-014,
and NEC14-015 support niobium mineralization in the area of the mineralized material and its continuation at depth.
|
o
|
37 m interval between 253 - 290 m at 0.61% Nb2O5
|
|
o
|
10 m interval between 581 - 591 m at 0.68% Nb2O5
|
|
o
|
276 m interval between 638 – 914 m (open at depth) at
0.95% Nb2O5, including
|
|
§
|
22 m (650 – 672 m) at 1.18 % Nb2O5
|
|
§
|
68 m (715 -783 m) at 1.49 % Nb2O5
|
|
·
|
10 m (766 – 776 m) at 2.02 % Nb2O5
|
|
§
|
28 m (806 -834 m) at 1.12 % Nb2O5
|
|
§
|
47 m (867 -914 m) at 1.01 % Nb2O5
|
|
o
|
716 m interval between 197 - 913 m (open at depth) at 0.85%
Nb2O5, including
|
|
§
|
8 m (289 – 297 m) at 1.24 % Nb2O5
|
|
§
|
12 m (328 -340 m) at 1.14 % Nb2O5
|
|
§
|
135 m (396 – 531 m) at 1.02 % Nb2O5
|
|
§
|
171 m (645 – 816 m) at 1.12 % Nb2O5
|
|
§
|
83 m (830 – 913 m) at 1.00 % Nb205
|
Drillholes NEC14-020,
NEC14-021, NEC14-022 and NEC14-023 were drilled through the mineralized material, along southwest to northeast trending section
lines. These results support niobium mineralization in the area of the mineralized material and its continuation at depth.
|
o
|
351 m (237 – 588 m) at 0.71 % Nb2O5, including
|
|
§
|
42 m (285- 327 m) at 1.41 % Nb2O5
|
|
·
|
8 m (295 – 303 m) at 2.10 % Nb2O5
|
|
§
|
20 m (377 – 397 m) at 1.01 % Nb2O5
|
|
§
|
26 m (419 – 445 m) at 0.87 % Nb2O5
|
|
§
|
13 m (507 – 520 m) at 0.92 % Nb2O5
|
|
§
|
17 m (570 - 587 m) at 1.08 % Nb2O5
|
|
o
|
304 (446 -750 m) at 0.98 % Nb2O5, including
|
|
§
|
15 m (446 – 461 m) at 1.08 % Nb2O5
|
|
§
|
86 m (510 – 596 m) at 1.11 % Nb2O5
|
|
§
|
88 m (654 - 742 m) at 1.28 % Nb2O5
|
|
·
|
4 m (660 – 664 m) at 3.41 % Nb2O5
|
|
o
|
322 m (437 – 759 m) at 0.60 % Nb2O5, including
|
|
§
|
56 m (438 – 494 m) at 0.81 % Nb2O5
|
|
§
|
22 m (467 - 489 m) at 1.23 % Nb2O5
|
|
§
|
29 m (527 – 556 m) at 1.17 % Nb2O5
|
|
§
|
10 m (686 – 696 m) at 1.15 % Nb2O5
|
|
o
|
25 m (808 – 833 m) at 0.45 % Nb2O5
|
|
o
|
17 m (865 – 882 m) at 0.45 % Nb2O5
|
|
o
|
9 m (304 – 313 m) at 0.46 % Nb2O5
|
|
o
|
135 m (333 – 468 m) at 0.70 % Nb2O5, including
|
|
§
|
7 m (333 – 340 m) at 1.29 % Nb2O5
|
|
§
|
4 m (348 - 352 m) at 1.30 % Nb2O5
|
|
§
|
51 m (366 - 417 m) at 1.04 % Nb2O5
|
|
·
|
16 m (381 – 397 m) at 1.33 % Nb2O5
|
|
o
|
24 m (527 – 550 m) at 0.39 % Nb2O5
|
|
o
|
18 m (568 – 586 m) at 0.86 % Nb2O5
|
Figure 3 - Elk Creek Project –
Recent Drill Hole Locations
Mineral
Resources
Mineral Resources
have been estimated in conformity with generally accepted Canadian Institute of Mining (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.
The drillhole
database used in the estimation is of high quality and has been independently verified by SRK. A three-dimensional geologic model
was constructed using ARANZ Leapfrog® Mining Software (Leapfrog®). Modeling was based on logged geology in the drilling
database, using a combination of geological controls and niobium grade shells.
The grade estimation
was confined to a hard boundary of three grade shell domains defined at 0.3%, 0.4% and 0.5% niobium pentoxide (Nb2O5%), with the
estimation using only the composited samples from the same domain.
Developments
in the metallurgical testwork indicated the potential to recover TiO2 and Sc based on a revised flowsheet. Further, the Company
completed a re-assay program of historical pulps, which were not included in the original 2011/2012 re-assay programs. The updated
database has been provided to SRK who completed a review of the database and the QA/QC information for the additional elements
to ensure their inclusion in the estimation process.
External laboratory
checks showed a bias between SGS and Actlabs laboratories, with Actlabs returning higher values for Nb2O5. The slight high bias
confirms the slight over reporting noted in the routine submissions of standard reference materials (SRMs), which SRK estimates
to be in the order of 4.0% to 4.4% (based on the SRMs). The bias in the external duplicates report a slight increase in the bias
to 8.7%. SRK considers the level of bias to be within acceptable levels for use in the current Mineral Resource. SRK noted some
gaps for TiO2 and Sc still remain within the database. The gaps in the database are a result of the current re-assay program being
limited to pulp material collected during the 2011 reanalysis program. Based on established relationships and statistical analysis,
SRK is comfortable to use the revised database for the current Mineral Resource Estimation.
Mineral Resources
utilized all the assay information from historical drilling and the NioCorp 2014 drilling program. Search distances were determined
from directional variograms calculated using the capped and composited samples. A nested search ellipse estimation method consisting
of three passes was used. The search ellipse has been rotated into the main dip and strike orientation of the deposit.
The grade estimation
(Nb2O5%, TiO2%, Sc_ppm) utilized an Ordinary Kriging (OK) algorithm supported by 5 m sample composites for all the mineralized
units, with Inverse Distance Weighting (IDW) to a power of 2, and a nearest neighbor estimate completed as cross checks. Search
distances were determined from directional variograms calculated using the capped and composited samples. A nested search ellipse
estimation method consisting of three passes was used. The search ellipse has been rotated into the main dip and strike orientation
of the deposit. Density has been assigned based on mean density per major geological unit from density determination values taken
during the 2014 estimation program, using a combination of weight in air/weight in water, and volumetric analysis. Resources are
reported as Nb2O5, TiO2 and Sc (ppm).
Density has
been estimated based on density determination values taken during the 2014 resource estimation program, using a combination of
weight in air/weight in water, and volumetric analysis. Based on a statistical review of the density measurements and the assay
results from the whole rock analysis, which including Fe2O3% and TiO2%, a general trend of higher density with higher grade was
identified and therefore an Ordinary Kriged estimate of density was chosen as the preferred option.
SRK validated
the Mineral Resource Estimates using a number of different validation techniques:
•
Inspection of block grades in plan and section and comparison with drillhole grades;
•
Comparative statistical study vs. composite data and alternative estimation methods; and
•
Sectional interpretation of the mean block and sample grades (swath plots).
The Mineral
Resources have been confined to estimated blocks within the Carbonatite. In order to determine the quantities of material offering
“reasonable prospects for economic extraction” by an underground mining method, SRK has defined an underground mining
cut-off grade (CoG) based on assumed costs, pricing and metallurgical recoveries. Costs and recoveries are based on bench mark
studies completed for similar projects, and application of possible local variations. The blocks above the mining CoG form contiguous
mining targets without isolated blocks that would be unlikely to warrant the cost of development. All material within the geological
wireframes above a CoG of 0.3% Nb2O5 has been considered to have reasonable prospects of being mined via underground methods.
Table 3: SRK Mineral
Resource Statement for Elk Creek, Effective Date April 28, 2015
Classification
|
|
|
Cut-off
(Nb2O5%)
|
|
|
Tonnage
(000’s
t)
|
|
|
Grade
(Nb2O5%)
|
|
|
Contained
Nb2O5
(000’s
kg)
|
|
|
Grade
(TiO2%)
|
|
|
Contained
TiO2
(000’s
kg)
|
|
|
Grade
(Sc
g/t)
|
|
|
Contained
Sc
(000’s
kg)
|
|
Indicated
|
|
|
|
0.3
|
|
|
|
80,500
|
|
|
|
0.71
|
|
|
|
572,000
|
|
|
|
2.68
|
|
|
|
2,160,000
|
|
|
|
72
|
|
|
5,800
|
|
Inferred
|
|
|
|
0.3
|
|
|
|
99,600
|
|
|
|
0.56
|
|
|
|
558,000
|
|
|
|
2.31
|
|
|
|
2,300,000
|
|
|
|
63
|
|
|
6,300
|
|
(1)
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. 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)
SRK reasonably expects the Project to be amenable to a variety of Underground Mining methods. Using results from initial metallurgical
testwork*, suitable underground mining and processing costs**, and forecast prices*** SRK has reported the Mineral Resource at
a cut-off of 0.3% Nb2O5. Other salable products (TiO2 and Sc2O3) were given value based on fixed relationships to Nb2O5 grade
(3.5TiO2:1Nb2O5, 9Sc:1Nb2O5).
*Average
metallurgical recoveries are: Nb (60%), TiO2 (58.7%), Sc2O3 (14.1%)
**Mining
costs, processing costs, and G&A costs total US$94.50/t
***Metal
price assumptions considered for the cutoff grade calculation are: Nb (US$/kg 50.00), TiO2 (US$/kg 2.50), Sc2O3 (US$/kg 2,400.00)
(4)
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.
The Mineral Resource presented has
been reported following CIM guidelines. The PEA is preliminary in nature, that it includes a level of engineering precision and
assumptions which are currently considered too speculative to have the economic considerations applied to them that would enable
Mineral Resources to be categorized as Mineral Reserves.
Cautionary
Note to US Investors: The terms Indicated Resource and Inferred Resource as described in Table 3 above are as defined in Canadian
National Instrument 43-101. These terms are not defined under SEC Industry Guide 7 and are not recognized by the SEC. These estimated
mineral resources are not SEC Industry Guide 7 proven and probable reserves. See “Cautionary Note to US Investors Regarding
Mineral Reserve and Resource Estimates” above.
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 ACOE and possibly the U.S. 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. At
this time, the design emphasis on limiting impacts to jurisdictional wetlands and waters
of the U.S. should result in the use of an Environmental Assessment as opposed to an
Environmental Impact Statement as the disclosure document for the ACOE analysis of the
Elk Creek Project. However, pursuing the option of including a 48 km waterline and discharge
of dewatering water to the Missouri River could trigger additional federal involvement
and extend the scope of NEPA to EIS proportions.
|
|
·
|
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 hardrock mining
in the State of Nebraska, much less mining that includes Naturally Occurring Radioactive
Material (NORM), 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 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 this PEA 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. Flow monitoring of all
surface water sampling locations should be added in order to calculate potential loading
to the watershed(s). The Nebraska Department of Environmental Quality (NDEQ) Water Quality
Division will be engaged as soon as practicable in order to discuss the Elk Creek Project
and potential data needs in order to initiate National Pollutant Discharge Elimination
System (NPDES) discharge permitting. This would include both local discharges 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 Project boundary which
resulted in a formal Jurisdictional Delineation being issued by the ACOE on September
6, 2016. A delineation of potential jurisdictional features along the discharge water
pipeline corridor to the Missouri River is still pending, as is the submission of an
individual permit application to the ACOE.
|
|
·
|
A
geochemical characterization program for the mineralized material, waste rock and tailings
has been initiated by SRK for the Project. Preliminary results are provided in Section
20. Addition studies are ongoing.
|
|
·
|
Closure
costs for the Project have been estimated at just over US$60 million, the bulk of which
(US$40 million) is intended for reclamation and closure of the tailings disposal facility.
Approximately US$15 million has been allocated for surface reclamation of the remaining
facilities (i.e., building demolition, site regrading and revegetation, shaft closure,
etc.), while the remaining US$5 million is set aside for post-closure monitoring and
maintenance. This estimate will be refined during development of the feasibility study.
|
|
·
|
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
During our fiscal
year ending June 30, 2017, our planned activities directed towards the Elk Creek Project’s Feasibility Study are as follows:
|
|
Planned
Expenditures
(US$000)
|
|
Engineering Services
|
|
$
|
3,599
|
|
Metallurgy / Process Design
|
|
|
844
|
|
Project Infrastructure and Logistics
|
|
|
130
|
|
Geology & Resources
|
|
|
50
|
|
Market Economics
|
|
|
50
|
|
Land Agreements
|
|
|
125
|
|
Total
|
|
$
|
4,798
|
|
Note: The majority of the
work included in the table remains ongoing.
In addition,
we anticipate spending approximately $820,000 on permitting activities relating to the initiation of construction following the
completion of the Feasibility Study and Project Financing as well as approximately $125,000 on third-party consultants. We presently
have the funds to complete a portion of the named activities, principally permitting, metallurgy and process design along with
a majority of the engineering work. We will require additional financing to complete the engineering work as part of the Feasibility
Study. Historically, the Company has used net proceeds from issuances of Common Shares to provide sufficient funds to meet its
near-term exploration and development plans and other contractual obligations when due.
LEGAL PROCEEDINGS
As of September
15, 2016, 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.
MARKET FOR
COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Market Information
The outstanding
Common Shares were first listed and posted for trading on the Vancouver Stock Exchange on December 1, 1987. On March 9, 2015 the
Common Shares commenced trading on the TSX under the trading symbol “NB”. In addition, the Company trades on the United
States Over-the-Counter Bulletin Board (“OTCBB”) and the OTCQX under the symbol “NIOBF” and on the Frankfurt
Stock Exchange as “BR3”.
The table below
sets forth the high and low closing prices of the Company’s Common Shares quoted on the OTCBB and OTCQX during the periods
indicated as reported by the Internet source OTC Markets (
http://otcmarkets.com
). The quotations reflect inter-dealer prices
without retail mark-up, mark-down or commission and may not reflect actual transactions.
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
Fiscal Quarter
|
|
Price
Range
|
|
|
Price
Range
|
|
|
Price
Range
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
First Quarter
|
|
$
|
0.190
|
|
|
$
|
0.091
|
|
|
$
|
0.720
|
|
|
$
|
0.498
|
|
|
$
|
0.689
|
|
|
$
|
0.478
|
|
Second Quarter
|
|
|
0.196
|
|
|
|
0.135
|
|
|
|
0.699
|
|
|
|
0.405
|
|
|
|
0.550
|
|
|
|
0.370
|
|
Third Quarter
|
|
|
0.253
|
|
|
|
0.137
|
|
|
|
1.510
|
|
|
|
0.585
|
|
|
|
0.870
|
|
|
|
0.370
|
|
Fourth Quarter
|
|
|
0.730
|
|
|
|
0.235
|
|
|
|
1.230
|
|
|
|
0.570
|
|
|
|
0.80
|
|
|
|
0.62
|
|
|
|
2017
|
|
Fiscal Quarter
|
|
Price Range
|
|
|
|
High
|
|
|
Low
|
|
First Quarter (Through September 15, 2016)
|
|
$
|
0.765
|
|
|
$
|
0.64
|
|
The closing sales price of the Company’s
Common Shares on the OTCQX as reported on September 15, 2016, was $0.64 per share.
The table below
sets forth the high and low closing prices in Canadian dollars of the Company’s Common Shares quoted on the TSX or TSX Venture
Exchange during the periods indicated as reported by the Internet source TMXmoney (
http://www.tmxmoney.com
). The quotations
reflect inter-dealer prices without retail mark-up, mark-down or commission and may not reflect actual transactions.
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
Fiscal Quarter
|
|
Price
Range
|
|
|
Price
Range
|
|
|
Price
Range
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
First Quarter
(1)
|
|
$
|
0.28
|
|
|
$
|
0.15
|
|
|
$
|
1.76
|
|
|
$
|
0.70
|
|
|
$
|
0.09
|
|
|
$
|
0.06
|
|
Second Quarter
|
|
|
0.78
|
|
|
|
0.27
|
|
|
|
1.54
|
|
|
|
0.72
|
|
|
|
0.69
|
|
|
|
0.53
|
|
Third Quarter
|
|
|
0.78
|
|
|
|
0.55
|
|
|
|
0.84
|
|
|
|
0.61
|
|
|
|
1.14
|
|
|
|
0.51
|
|
Fourth Quarter
|
|
|
0.81
|
|
|
|
0.49
|
|
|
|
0.69
|
|
|
|
0.54
|
|
|
|
1.13
|
|
|
|
0.53
|
|
|
|
2017
|
|
Fiscal Quarter
|
|
Price Range
|
|
|
|
High
|
|
|
Low
|
|
First Quarter (Through September 15, 2016)
|
|
$
|
1.00
|
|
|
$
|
0.53
|
|
|
(1)
|
The Company graduated its listing form the TSX Venture Exchange
to the TSX on March 11, 2015.
|
The closing sales price of the Company’s
Common Shares on the TSX as reported on September 15, 2016, was C$0.87 per Common Share.
Holders
As of September 15, 2016, we have 6,163
holders of record of the Common Shares.
Dividends
We have not
paid any cash dividends on the Common Shares since our inception and do not anticipate paying any cash dividends in the foreseeable
future. We plan to retain our earnings, if any, to provide funds for the expansion of our business.
Equity Compensation
Plans
The Company
has an incentive stock option plan under which stock options are granted. Stock options have been determined by the Company’s
directors and are only granted in compliance with applicable laws and regulatory policy.
The following
is provided with respect to compensation plans (including individual compensation arrangements) under which equity securities
are authorized for issuance as of June 30, 2016.
Equity
Compensation Plan Information
|
Plan
Category and
Description
|
|
Number
of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants, and Rights
(a)
|
|
|
Weighted-Average
Exercise
Price of Outstanding Options,
Warrants,
and Rights
(b)
|
|
|
Number
of Securities
Remaining Available for
Future
Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in Column (a))
(c)
|
|
Equity Compensation Plans Approved
by Security Holders
(1)
|
|
|
12,175,000
|
|
|
C$
|
0.71
|
|
|
|
5,871,799
|
|
Equity Compensation Plans
Not Approved by Security Holders
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Total
|
|
|
12,175,000
|
|
|
C$
|
0.71
|
|
|
|
5,871,799
|
|
|
(1)
|
Represents options granted pursuant to the Company’s Option
Plan.
|
Description
of the Stock Option Plan:
On January 22,
2016, NioCorp’s Board of Directors adopted the Stock Option Plan (the “Option Plan”).
As of the
date of this prospectus there are 12,175,000 stock options outstanding which represents, approximately 6.7% of the Company’s
currently issued and outstanding Common Shares.
During the fiscal
year ended June 30, 2015, the Compensation and Organization Committee (the “Compensation Committee”) approved all
recommendations for the grant of incentive stock options proposed by management (of which an aggregate of 2,800,000 (41%) were
granted to NEOs, 1,800,000 (26%) were granted to directors who are not NEOs and 2,220,000 (33%) were granted to non-NEO employees
and consultants).
Purpose of
the Plan
The Option Plan
is intended as an incentive to enable the Company to attract and retain qualified directors, officers, employees and consultants
of the Company and its affiliates, promote a proprietary interest in the Company and its affiliates among its employees, officers,
directors and consultants, and stimulate the active interest of such persons in the development and financial success of the Company
and its affiliates.
General Description
of the Plan
The Option Plan
is administered by the Compensation Committee. Options are granted by the Board based upon the recommendations of the Compensation
Committee. The Option Plan will be effective until January 22, 2026, unless earlier terminated by the Board.
The Company’s
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 key employees, officers and directors of the Company and subsidiaries 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 key employees,
officers, directors and consultants of the Company and subsidiaries of the Company. Grants of options under the 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 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 options. The Compensation Committee does not
consider the “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 attract 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 or the Company through their efforts. The Compensation
Committee looks at the overall number of options held by an individual (including the exercise price and remaining term 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.
A brief description
of the Option Plan is as follows:
|
1.
|
Options
may be granted to Employees, Senior Officers, Directors, Non-Employee Directors, Management
Company Employees, and Consultants (all as defined in the Option Plan) of the Company
and its affiliates who are, in the opinion of the Compensation Committee, in a position
to contribute to the success of the Company or any of its affiliates.
|
|
2.
|
The
aggregate number of common shares that may be issuable pursuant to options granted under
the Option Plan at any particular time (together with those common shares which may be
issued pursuant to any other security-based compensation plan(s) of the Company or any
other option(s) for services granted by the Company at such time), unless otherwise approved
by shareholders, may not exceed that number which is equal to 10% of the common shares
issued and outstanding at such time. For greater certainty, in the event options are
exercised, expire or otherwise terminate, the Company may (subject to such 10% limit)
grant an equivalent number of new options under the Option Plan and the Company may (subject
to such 10% limit) continue to grant additional options under the Option Plan as its
issued capital increases, even after the Option Plan has received regulatory acceptance
and shareholder approval.
|
|
3.
|
The
number of common shares subject to each option will be determined by the Board at the
time of grant (based upon the recommendations of the Compensation Committee), provided
that:
|
|
(a)
|
the maximum aggregate number of common shares reserved for issuance
pursuant to options granted under the Option Plan and any other share compensation arrangements of the Company for issuance
to insiders at any particular time may not exceed 10% of the issued common shares at such time; and
|
|
(b)
|
the number of common shares issued to Insiders pursuant to the
Option Plan (together with any common shares issued to insiders pursuant to any other share compensation arrangements of the
Company) within a 12-month period may not exceed 10% of the issued and outstanding number of common shares.
|
|
|
Subject
to the overall 10% limit described in 2 above, and the limitations on options to insiders
as set forth above, there is no maximum limit on the number of options which may be granted
to any one person.
|
|
4.
|
The
exercise price of an option will be set by the Compensation Committee in its discretion,
but such price shall be not less than the greater of:
|
|
(a)
|
the “volume weighted average trading price” - calculated
by dividing the total value by the total volume of common shares traded on the TSX during the five trading days immediately
prior to the date of grant); and
|
|
(b)
|
the closing price of the common shares on the TSX on the day
prior to the option grant.
|
|
5.
|
Options
may be exercisable for a period of up to ten years from the date of grant. The Option
Plan does not contain any specific provisions with respect to the causes of cessation
of entitlement of any optionee to exercise his option, provided, however, that the Board
may, at the time of grant, determine that an option will terminate within a fixed period
(which is shorter than the option term) upon the ceasing of the optionee to be an eligible
optionee (for whatever reason) or upon the death of the optionee, provided that, in the
case of the death of the optionee, an option will be exercisable only within one year
from the date of the optionee’s death.
|
|
6.
|
Notwithstanding
the expiry date of an option set by the Board, the expiry date will be adjusted, without
being subject to the discretion of the Board or the Compensation Committee, to take into
account any blackout period imposed on the optionee by the Company. If the expiry date
falls within a blackout period, then the expiry date will be the close of business on
the tenth business day after the end of such blackout period. Alternatively, if the expiry
date falls within two business days after the end of such a blackout period, then the
expiry date will be the difference between 10 business days reduced by the number of
business days between the expiry date and the end of such blackout period.
|
|
7.
|
The
Option Plan does not provide for any specific vesting periods. The Compensation Committee
may, at the time of grant of an option, determine when that option will become exercisable
and any applicable vesting periods, and may determine that that option will be exercisable
in installments.
|
|
8.
|
On
the occurrence of a takeover bid, issuer bid or going private transaction, the Board
has the right to accelerate the date on which any option becomes exercisable and may,
if permitted by applicable legislation, permit an option to be exercised conditional
upon the tendering of the common shares thereby issued to such bid and the completion
of, and consequent taking up of such common shares under, such bid or going private transaction.
|
|
9.
|
Options
are non-assignable except in the event of the death of the optionee, and may, during
his/her lifetime, only be exercised by the optionee.
|
|
10.
|
The
exercise price per optioned share under an option may be reduced, at the discretion of
the Board (upon the recommendation of the Compensation Committee), if:
|
|
(a)
|
at least six months has elapsed since the later of the date
such option was granted and the date the exercise price for such option was last amended; and
|
|
(b)
|
shareholder approval is obtained, including disinterested shareholder
approval if required by the TSX.
|
|
11.
|
The
present policy of the Board is not to provide any financial assistance to any optionee
in connection with the exercise of any option.
|
|
12.
|
The
present policy of the Board is not to transform an option granted under the Option Plan
into a stock appreciation right.
|
|
13.
|
If
there is any change in the number of common shares outstanding through any declaration
of a stock dividend or any consolidation, subdivision or reclassification of the common
shares, the number of shares available under the Option Plan, the shares subject to any
granted stock option and the exercise price thereof will be adjusted proportionately,
subject to any approval required by the TSX. If the Company amalgamates, merges or enters
into a plan of arrangement with or into another corporation, and the Company is not the
surviving or acquiring corporation, then, on any subsequent exercise of such option,
the optionee will receive such securities, property or cash which the optionee would
have received upon such reorganization if the optionee had exercised his or her option
immediately prior to the record date.
|
|
14.
|
The
Option Plan provides that, subject to the policies, rules and regulations of any lawful
authority having jurisdiction (including the TSX), the Board may, at any time, without
further action or approval by the shareholders of the Company, amend the Option Plan
or any option granted under the Plan in such respects as it may consider advisable and,
without limiting the generality of the foregoing, it may do so to:
|
|
(a)
|
ensure that the options granted under the Option Plan will comply
with any provisions respecting stock options under tax and other laws in force in any country or jurisdiction of which a optionee
to whom an option has been granted may from time to time be resident or a citizen;
|
|
(b)
|
make amendments of an administrative nature;
|
|
(c)
|
correct any defect, supply any omission or reconcile any inconsistency
in the Option Plan, any option or option agreement;
|
|
(d)
|
change vesting provisions of an option or the Option Plan;
|
|
(e)
|
change termination provisions of an option provided that the
expiry date does not extend beyond the original expiry date;
|
|
(f)
|
add or modify a cashless exercise feature providing for payment
in cash or securities upon the exercise of options;
|
|
(g)
|
make any amendments required to comply with applicable laws
or the requirements of the TSX or any regulatory body or stock exchange with jurisdiction over the Company;
|
|
(h)
|
add or change provisions relating to any form of financial assistance
provided by the Company to participants under the Option Plan that would facilitate the purchase of securities under the Option
Plan;
|
provided
that shareholder approval shall be obtained for any amendment that results in:
|
·
|
an increase in the common shares issuable under options granted
pursuant to the Option Plan;
|
|
·
|
a change in the persons who qualify as participants eligible
to participate under the Option Plan;
|
|
·
|
a reduction in the exercise price of an option;
|
|
·
|
the cancellation and reissuance of any option;
|
|
·
|
the extension of the term of an option;
|
|
·
|
a change in the insider participation limit;
|
|
·
|
options becoming transferable or assignable other than for the
purposes described in section 10 of the Option Plan; and
|
|
·
|
a change in the amendment provisions contained in the Option
Plan.
|
Other Compensation
Arrangements:
Other than the
Option Plan, the Company does not have any other compensation arrangements.
Management’s
Discussion and Analysis of FinanciaL Condition and Results of Operations
The following
discussion provides information regarding the results of operations for the years ended June 30, 2016 and 2015 and our financial
condition, liquidity and capital resources as of June 30, 2016 and 2015. The financial statements and the notes thereto contain
detailed information that should be referred to in conjunction with this discussion.
The following
discussion and analysis should be read in conjunction with and our historical consolidated financial statements and the accompanying
notes included elsewhere in this prospectus, as well as the Risk Factors and the
Cautionary Note Regarding Forward-Looking
Statements
included above.
Company Overview
NioCorp is developing
the Elk Creek Project, located in southeast Nebraska. The Elk Creek Project is an advanced niobium and scandium exploration project
that also contains Titanium. Niobium is used to produce HSLA steel, which is a lighter, stronger steel used in automotive, structural,
and pipeline applications. Scandium can be combined with Aluminum to make an alloy with increased strength and improved corrosion
resistance. Scandium also is a critical component of advanced solid oxide fuel cells. Titanium is a key component of pigments
used in paper, paint, and plastics, and is also used for aerospace applications, armor, and medical implants.
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 to complete a feasibility study for the Elk Creek Project and to begin development.
Subject to delivering a positive feasibility study for the Elk Creek Project, we intend to secure the project financing necessary
to complete mine development and construction of the Elk Creek Project.
The Company
also holds a position in a mineral exploration property located in Canada. At the present time, this property does not comprise
a material aspect of the Company’s business operations. Please refer to “Item 2 – Properties” above for
further detail regarding the Company’s mineral exploration properties.
2016 Highlights
The following highlights are from
the year ended June 30, 2016:
Strategic
|
·
|
The Company continued to make progress with respect to completing
a feasibility study for its Elk Creek Project, which included bench and pilot scale metallurgical testing to provide data
for the Feasibility Study plant design. On June 23, 2016, we announced the successful completion of a Whole Ore Pre-Leach
Pilot Plant (WPL). The WPL validated results from earlier bench-scale testing and paves the way for the remaining Feasibility
Study pilot plants to commence at the SGS Lakefield metallurgical testing facility in Lakefield, Ontario.
|
|
·
|
During 2016, the Company continued to make progress with
respect to ongoing permitting activities with the Army Corps of Engineers, the state of Nebraska and Johnson County, Nebraska
and advanced hydrogeologic modelling of the regional aquifer associated with the Mineral Resource.
|
|
·
|
On June 15, 2016, we announced that we had entered into the
CMC Agreement with CMC Cometals, a division of Commercial Metals Company (“CMC”) of Fort Lee, New Jersey, under
which CMC expects to purchase up to a maximum of 1,875 tonnes per year, or roughly twenty-five (25%), of our potential annual
Ferroniobium production from our Elk Creek, Nebraska resource. Under the CMC Agreement, CMC will purchase this amount of Ferroniobium
under a market-based pricing structure for an initial 10-year term, with an option to extend beyond that period upon mutual
agreement of the parties.
|
|
·
|
In March of 2016, the Company conducted another in a series
of Town Hall meetings with residents of Eastern Nebraska to discuss its Elk Creek Project. A capacity crowd of nearly 400
residents attended, with strong and vocal support expressed for the project by many residents.
|
|
·
|
The Company conducted its 2016 Annual Meeting on February 23,
2016. In addition to approving the reelection of all Board members standing for reelection, shareholders also elected Anna
Castner Wightman, to the Board. Ms. Wightman is a sixth generation Nebraskan who currently serves as Vice President of Government
Relations for First National Bank in Omaha, Nebraska.
|
|
·
|
On October 16, 2015, the Company announced that, as a result
of a review by the British Columbia Securities Commission, it had filed an amendment to its second Preliminary Economic Assessment,
filed in Canada on September 4, 2015, for the Elk Creek Project. The October 2015 PEA retains the technical and economic results
previously disclosed by NioCorp in its August 4, 2015 and September 4, 2015 news releases, and includes additional guidance
and cautionary language required by NI 43-101 regarding uncertainty in realizing the results of the October 2015 PEA.
|
|
·
|
On August 4, 2015, the Company announced that during bench
and pilot testing of the metallurgical flowsheet for the proposed plant, it was determined that recoveries could be significantly
increased by eliminating the flotation step and processing the resource directly through a hydrometallurgical process. Subsequently,
on September 4, 2015, the Company filed in Canada a second Preliminary Economic Assessment regarding the Elk Creek Project.
|
|
·
|
On September 17, 2015, the Company announced the production
of Ferroniobium using feed material from the Elk Creek Resource that meets specifications for commercial sale. The Ferroniobium
was produced during pyrometallurgical testing conducted at Kingston Process Metallurgy Inc. (“KPM”) in Kingston,
Ontario.
|
|
·
|
In July 2015, the Company completed diamond drill holes at the
prospective locations of the mine shaft and the ventilation raise. The data collected from these holes will assist in developing
cost estimates for the establishment of these key components of the mine infrastructure, and will serve to reduce risk in
these areas of the project.
|
Financing
and Other
|
·
|
On June 17, 2016, we completed a warrant exercise program
resulting in gross proceeds of C$4.8 million. A total of approximately 7.4 million C$0.65 share purchase warrants expiring
November 10, 2016 were exercised. Each holder who exercised one warrant during the program received 1.11029 Common Shares,
representing one Common Share and 0.11029 of a Common Share, as the incentive portion. The program had been previously approved
by our shareholders on May 17, 2016.
|
|
·
|
On January 19, 2016, the Company announced the closing of
a non-brokered private placement of 9,074,835 Units of the Company at a price of C$0.57 per Unit, which raised gross proceeds
of C$5.2 million. Each “Unit” consists of one Common Share of the Company and one transferable Common Share purchase
warrant. Each warrant is exercisable to acquire one additional Common Share for a period of 3 years at a price of C$0.75 per
Common Share.
|
|
·
|
On December 15, 2015, the Company announced the signing of the
Lind Agreement with Lind Asset Management IV, LLC (“Lind”). Through December 31, 2015, an initial $4.0 million
was funded pursuant to the issuance of an initial convertible security (“Convertible Security”), with an additional
$0.5 million received as of January 19, 2016 on the issuance of a further equivalent amount of the Convertible Security, including
interest. The Convertible Security is for a term of two years, and carries prepaid interest at a rate of 10% per annum. Lind
can increase the funding under the Convertible Security by an additional $1.0 million during its two-year term. Further, provided
certain conditions are met, the Company will have the right to call an additional $1.0 million under the initial Convertible
Security.
|
|
·
|
In November 2, 2015, the Company announced the appointment of
Jim Sims to the position of Vice President of External Affairs. In this capacity, Mr. Sims manages investor relations, media
relations, marketing, and government affairs.
|
|
·
|
On October 22, 2015, the Company announced the closing of a
non-brokered private placement of unsecured convertible promissory notes (the “Notes”), for gross proceeds $0.8
million (the “Private Placement”).
|
|
·
|
On July 1, 2015, the Company entered into a non-revolving
credit facility agreement in the amount of $2 million with Mr. Mark Smith, Chief Executive Officer, President, and Executive
Chairman of NioCorp, under which $0.5 million was drawn down. The arrangement bears an interest rate of 10%, is secured by
the Company’s assets pursuant to a general security agreement, is subject to both a 2.5% establishment fee and 2.5%
prepayment fee, and became due and payable on June 17, 2016.
|
Results of
Operations
Comparison
of Year Ended June 30, 2016 to June 30, 2015
|
|
For
the year ended
|
|
|
|
June
30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(US$000)
|
|
Operating expenses
|
|
$
|
9,518
|
|
|
$
|
25,480
|
|
Net loss
|
|
$
|
11,408
|
|
|
$
|
23,115
|
|
Net loss per share (basic and diluted)
|
|
$
|
0.07
|
|
|
$
|
0.17
|
|
The Company’s
net loss decreased to $11.4 million for 2016 from $23.1 million for 2015. These changes resulted primarily from decreased exploration
activities as work efforts transitioned from on-site drilling and related metallurgical testing to engineering efforts related
to the in-process feasibility study.
During the
years ended June 30, 2016 and 2015, the Company had no revenues. Operating expenses incurred related primarily to performing exploration
activities, as well as the activities necessary to support corporate and shareholder duties, and are detailed in the following
table.
|
|
For the year
ended
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(US$000)
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Consulting
|
|
$
|
201
|
|
|
$
|
242
|
|
Depreciation
|
|
|
9
|
|
|
|
10
|
|
Employee related costs
|
|
|
1,988
|
|
|
|
3,413
|
|
Finance costs
|
|
|
242
|
|
|
|
39
|
|
Professional fees
|
|
|
512
|
|
|
|
435
|
|
Exploration expenditures
|
|
|
4,719
|
|
|
|
18,051
|
|
Other operating expenses
|
|
|
1,847
|
|
|
|
3,178
|
|
Impairment of equipment
|
|
|
-
|
|
|
|
112
|
|
Total operating expenses
|
|
|
9,518
|
|
|
|
25,480
|
|
|
|
|
|
|
|
|
|
|
Change in financial instrument
fair value
|
|
|
2,719
|
|
|
|
-
|
|
Other gains
|
|
|
(587
|
)
|
|
|
|
|
Interest and other income
|
|
|
-
|
|
|
|
(16
|
)
|
Foreign exchange (gain)
loss
|
|
|
(528
|
)
|
|
|
434
|
|
Interest expense
|
|
|
275
|
|
|
|
-
|
|
Loss (gain) on available
for sale securities
|
|
|
11
|
|
|
|
(28
|
)
|
Income
tax expense (benefit)
|
|
|
-
|
|
|
|
(2,755
|
)
|
Net
Loss
|
|
$
|
11,408
|
|
|
$
|
23,115
|
|
Overall
decreases in operating expenses reflect decreased exploration expenditures as compared to the prior year. Significant items affecting
operating expenses are noted below:
Employee related costs
decreased
from $3.4 million in 2015 to $2.0 million in 2016 primarily due to a $1.6 million decrease in share-based compensation costs reflecting
the timing and amount of stock option grants, as well as changes in vesting periods. Options granted in 2015 were vested immediately,
resulting in 100% of the value being expensed upon grant. Options granted in 2016 vest over an 18-month period, and the corresponding
option value is being expensed over the vesting period. This decrease in share-based compensation expense was partially
offset by a $0.2 million increase related to headquarters personnel costs to support increased financing efforts and general operational
activities.
Finance
costs
represent fees and costs associated with financial transactions. Costs incurred for 2016 primarily reflect Lind Agreement
transaction costs.
Exploration
expenditures
decreased to $4.7 million (2015: $18.1 million) reflecting the timing of expenditures at the Elk Creek Project.
2016 expenditures primarily related to engineering and metallurgical testing work in support of our feasibility study, while 2015
costs included $10.3 million for drilling, metallurgical work, and geologists and field staff, which was necessary to support
the preparation and filing of an updated Canadian National Instrument 43-101 Mineral Resource Statement and the completion of
a Preliminary Economic Assessment. The following table provides additional details on exploration expense by period:
|
|
Year ended
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(US$000)
|
|
Feasibility study and engineering
|
|
$
|
2,671
|
|
|
$
|
5,892
|
|
Field management and other
|
|
|
940
|
|
|
|
1,791
|
|
Drilling, sampling and assaying
|
|
|
197
|
|
|
|
4,976
|
|
Metallurgical
|
|
|
844
|
|
|
|
4,506
|
|
Geologists and field staff
|
|
|
67
|
|
|
|
886
|
|
Total
|
|
$
|
4,719
|
|
|
$
|
18,051
|
|
Other
operating expenses
include investor relations, general office expenditures, stock and proxy expenditures and other miscellaneous
costs. Costs incurred during 2016 include $525,000 relating to the fair value of additional shares issued in connection with the
warrant exercise program discussed below under “
Recent Financing Activities
”. Similarly, 2015 costs include
$2,159,000 relating to the fair value of warrants issued to MRCC in connection with the 2015 Offering discussed above under “
Financing
”
and warrants issued in connection with the offtake agreement discussed below under “
Contractual Obligations and Off Balance
Sheet Arrangements
”.
Other
significant items impacting the change in the Company’s net loss are noted below
:
Change
in financial instrument fair value
represents non-cash changes in the market value of the Convertible Security, which is carried
at Fair value, as well as changes in the market value of the derivative liability component of the Notes.
Other
gains
recorded in 2016 represents the one-time reversal of a Canadian
tax-related accrual associated with flow-through capital shares issued in 2010.
Foreign
exchange (gain) loss
is primarily due to changes in the United States dollar (“USD”) against the Canadian dollar
(“CAD”). And reflects the timing of foreign currency transactions and subsequent changes in exchange rates. The gain
recorded in 2016 primarily relates to the USD-denominated Convertible Security, which is recorded on the Canadian parent company
books.
Interest
expense
represents interest incurred in connection with loans from Mark A. Smith and the Notes. Increases in 2016 over 2015
are based on the timing of the closing of the individual debt instruments.
Income
tax benefit
booked in 2015 reflects the recognition of $2.8 million of deferred tax benefit which was generated during 2015
to offset existing deferred tax liabilities associated with the acquisition of the Elk Creek mineral interest.
Recent
Financing Activities
During the
three years preceding the date hereof, the Company has granted an aggregate total 16,590,000 incentive stock options and issued
45,597,616 share purchase warrants. During the three years preceding the date hereof, The Company’s option holders have
exercised an aggregate total of 9,305,000 incentive stock options and 19,771,581 share purchase warrants.
On November
10, 2014, the Company closed a partially brokered and partially non-brokered private placement of 19,245,813 special warrants
(“2014 Special Warrants”) at an issue price of C$0.55 per 2014 Special Warrant to raise aggregate gross proceeds of
C$10,585,197 (the “2014 Offering”). The brokered portion of the 2014 Offering was completed using Mackie Research
Capital Corporation (“MRCC”), and each 2014 Special Warrant was exchangeable for no additional consideration into
one unit of the Company (a “2014 Unit”). Each 2014 Unit consisted of one Common Share and one Common Share purchase
warrant (a “2014 Warrant”). Each 2014 Warrant entitles the holder to acquire one Common Share at a price of C$0.65
until November 10, 2016. MRCC received C$112,917.59 and 205,304 options to acquire 2014 Units in consideration of its services
in connection with the 2014 Offering. On January 15, 2015 the Company announced it had filed and obtained a receipt from the British
Columbia Securities Commission for a final short form prospectus dated January 14, 2015. The receipt also evidences that the Ontario
Securities Commission has received the filing, as well as regulators in Alberta and New Brunswick under the Multilateral Instrument
11-102 Passport System. That prospectus qualified the distribution of 19,245,813 2014 Units underlying the 2014 Special Warrants
pursuant to the terms thereof, which were deemed to be issued on January 19, 2015. Proceeds of the Special Warrant private placement
were to be used to advance the Elk Creek Property and for general working capital.
On November
10, 2014 the Company entered into an off-take agreement with ThyssenKrupp Metallurgical Products GmbH (“TK”) whereby
TK will purchase approximately 3,750 tonnes or roughly 50 per cent of the Company's planned ferro-niobium production from its
Elk Creek Project for an initial 10-year term, with an option to extend beyond that time frame. The agreement presupposes the
company obtaining project financing, obtaining all necessary approvals and constructing a mine at the Elk Creek Project. Pursuant
to the agreement with TK, the Company also granted TK a non-transferable warrant entitling TK to acquire 8,569,000 Common Shares
at an exercise price of C$0.67 until December 12, 2015.
Pursuant to
a financial services advisory agreement with MRCC, the Company issued 500,000 advisory warrants on December 4, 2014 and 250,000
advisory warrants on January 14, 2015 (the “Advisory Warrants”). Each Advisory Warrant entitled MRCC to purchase a
unit of the Company at a price of C$0.55 each, on or before December 4, 2016 (each an “Advisory Unit”). Each Advisory
Unit consisted of one Common Share and one warrant exercisable at a price of C$0.65 per share until December 4, 2016. These Advisory
Warrants were exercised during the three-month period ended March 31, 2016, resulting in gross proceeds to the Company of C$412,500,
the issuance of 750,000 Common Shares and granting of an additional 750,000 warrants comprised in the Advisory Units.
Pursuant
to a sponsorship agreement between MRCC and the Company in connection with the Company’s graduation to the Toronto Stock
Exchange, the Company issued 250,000 agent’s sponsorship warrants on January 14, 2015 (the “Sponsor Warrants”),
entitling MRCC to purchase a unit of the Company (the “Sponsor Units”) at C$0.60 per Sponsor Unit until January 14,
2017. Each Sponsor Unit consisted of one common Share and one warrant exercisable at C$0.65 per share until January 14, 2017.
These Sponsor Warrants were exercised during the year ended June 30, 2016, resulting in gross proceeds to the Company of C$150,000,
the issuance of 250,000 Common Shares and the granting of an additional 250,000 warrants comprised in the Sponsor Units.
On February
27, 2015 the Company announced that it had closed a bought deal private placement offering with MRCC consisting of 2,914,000 special
warrants (“2015 Special Warrants”), including the exercise of 15% over-allotment option in full, at an issue price
of C$0.75 per 2015 Special Warrant for aggregate gross proceeds of C$2,185,500 (the “2015 Offering”). Each 2015 Special
Warrant was exchangeable for no additional consideration into one unit of the Company (a “2015 Unit”). Each 2015 Unit
consisted of one Common Share and one Common Share purchase warrant (a “2015 Warrant”). Each 2015 Warrant entitles
the holder to acquire one Common Share at a price of C$1.00 until February 27, 2017.
In consideration
for its services in connection with the 2015 Offering, MRCC received a cash commission of C$137,183 and 182,910 non-transferable
Compensation Options (“Compensation Options”). Each Compensation Option entitles MRCC to purchase one Common Share
at a price of C$0.85 for a period of 24 months from the closing date of the 2015 Offering. On March 26, 2015 the Company announced
it had filed and obtained a receipt from the securities regulators in British Columbia, Ontario, Alberta and Saskatchewan for
a final short form prospectus dated March 23, 2015. That prospectus qualified the distribution of 2,914,000 2015 Units issuable
pursuant to the terms thereof, which were deemed to be exercised on Monday, March 30, 2015.
On March 5,
2015, the Company announced that it obtained in-principle eligibility approval for a loan guarantee to be provided by the Federal
Republic of Germany which will support the Company’s debt financing strategy. This approval, which is the first of four
approvals, is based on the signed offtake agreement discussed below under “Three Year History of Material Corporate Agreements”,
and demonstrates that the Elk Creek Project will contribute in securing strategic raw materials supplies for Germany and that
the supply of Ferroniobium is in the economic interest of Germany. In addition, NioCorp appointed Northcott Capital Limited as
its financial advisor with respect to project debt financing for the development of the Elk Creek Project.
On June 17,
2015, the Company entered into a one-year loan in the amount of $1.5 million with Mark Smith, Chief Executive Officer and Executive
Chairman of NioCorp. Additionally, on July 1, 2015, the Company entered into a non-revolving credit facility agreement in the
amount of $2.0 million with Mr. Smith, and drew down $0.5 million. Both arrangements (collectively, the “Smith loans”)
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, and become due and payable on June 17, 2016. In January 2016, 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. On July 19, 2016 the Company announced an extension of the original one-year
loan agreement until June 17, 2017. Total indebtedness under the Smith Loans as of June 30, 2016 was $1 million.
On October
22, 2015, the Company announced that it had closed a non-brokered private placement of unsecured convertible promissory notes
(the “Notes”), for gross proceeds of up to $0.8 million. The Notes bear interest at a rate of 8%, payable annually
in arrears, are non-transferable and have a term of three years from the date of issue. Principal under the Notes is convertible
by lenders into, and payable by the Company in, common shares of the Company at a conversion price of C$0.97 per common share,
calculated on conversion or repayment using the then-current Bank of Canada noon exchange rate. Accrued but unpaid interest on
the Notes will be convertible by lender into, and payable by the Company in, Common Shares at a price per Common Share equal to
the most recent closing price of the Company’s common shares prior to the delivery to the Company of a request to convert
interest, or the annual due date of interest, as applicable, calculated using the then-current Bank of Canada noon exchange rate.
Total indebtedness under the Notes as of June 30, 2016 was $0.8 million.
On December
15, 2015, the Company announced that it would conduct a private placement of up to nine million units (each a “Unit”)
of the Company at a price of C$0.57 per Unit to raise gross proceeds of up to C$5.13 million (the “December Private Placement”).
On January 19, 2016, the Company announced the closing of the December Private Placement on an oversubscribed basis and issued
9,074,835 Units of the Company at a price of C$0.57 per Unit, which raised total gross proceeds of C$5.2 million. Each Unit consists
of one Common Share of the Company and one transferable Common Share purchase warrant (a “Warrant”). Each Warrant
is exercisable to acquire one additional Common Share of the Company for a period of 3 years at a price of C$0.75 per Common Share.
In addition, the Company issued 75,450 broker warrants at closing, each having the same terms as a Warrant, with the exception
of transferability.
On
December 15, 2015, the Company announced the signing of a definitive convertible security funding agreement (the “Lind Agreement”)
with Lind Asset Management IV, LLC (“Lind”). Through December 31, 2015, an initial $4.0 million was funded pursuant
to the issuance of an initial convertible security (“Convertible Security”), with an additional $0.5 million received
as of January 19, 2016 on the issuance of a further equivalent amount of the Convertible Security, including interest. Lind can
increase the funding under the Convertible Security by an additional $1.0 million during its two-year term. Further, provided
certain conditions are met, the Company will have the right to call an additional $1.0 million under the initial Convertible Security.
On December
22, 2015, the Company closed the first tranche of its private placement with Lind, which comprised an aggregate of (received in
tranches ending January 19, 2016) $4.5 million principal amount 10% secured Convertible Security and 3,125,000 transferable Common
Share purchase warrants (the “Lind Warrants”). The Convertible Security has a term of two years from its date of issuance,
and interest on the Convertible Security is prepaid and added to its principal amount; accordingly, the initial face value of
the Convertible Security is $5.4 million, and the yield of the Convertible Security (if held, unconverted, to maturity) will be
10% per annum, or $0.9 million. Each Lind Warrant entitles the holder to purchase one additional Common Share at a price of C$0.72
on or before December 22, 2018. The Convertible Security and Lind Warrants were issued pursuant to the Lind Agreement. The Convertible
Security is convertible into Common Shares of the Company at a conversion price equal to 85% of the volume weighted average trading
price of the Common Shares on the TSX (in Canadian dollars) for the five (5) consecutive trading days immediately prior to the
date on which Lind provides the Company with notice of its intention to convert an amount of the Convertible Security from time
to time. The issuance of the Convertible Security and the Lind Warrants was completed on a non-brokered private placement basis.
The Convertible Security is classified as a compound financial instrument for accounting purposes. Because the Convertible Security
is denominated in a currency that is different from the Company’s functional currency, both the liability and conversion
components are carried as borrowings. The Convertible Security is secured by the assets of the Company, being the shares of its
subsidiaries 0896800 and ECRC. The Convertible Security is also secured by a security interest over all assets of ECRC. The Convertible
Security contains financial and non-financial covenants customary for a facility of this size and nature, and includes a financial
covenant defining an event of default as all present and future liabilities of the Company or any of its subsidiaries, exclusive
of related party loans, for an amount or amounts exceeding C$2.0 million, and which have not been satisfied on time or within
90 days of invoice, or have become prematurely payable as a result of its default or breach. This covenant became effective after
February 1, 2016, and the Company remains in compliance through to the date hereof.
Total indebtedness
under the Convertible Security as of June 30, 2016 was $6.0 million.
On
June 17, 2016, we completed a warrant exercise program resulting in gross proceeds of C$4.8 million. A total of approximately
7.4 million C$0.65 share purchase warrants expiring November 10, 2016 were exercised during the incentive period, representing
about 50% of all C$0.65 Warrants outstanding and nearly 70% of warrant holders eligible to participate. Each holder who exercised
one warrant during the program received 1.11029 Common Shares, representing one warrant share and 0.11029 of a Common Share, as
the incentive portion. A total of 8,210,394 common shares were issued under the program, which was previously approved by our
shareholders on May 17, 2016.
Liquidity
and Capital Resources
We have no revenue
generating operations from which we can internally generate funds. To date, our ongoing operations have been financed by the sale
of our equity securities by way of private placements and the exercise of incentive stock options and share purchase warrants.
We believe that we will be able to secure additional private placements financings in the future, although we cannot predict the
size or pricing of any such financings. In addition, we can raise funds through the sale of interests in our mineral properties,
although current market conditions have substantially reduced the number of potential buyers/acquirers of any such interest(s).
This situation is unlikely to change until such time as we can develop a bankable feasibility study on one of our projects. When
acquiring an interest in mineral properties through purchase or option we will sometimes issue Common Shares to the vendor or
optionee of the property as partial or full consideration for the property interest in order to conserve our cash.
As of June
30, 2016, the Company had cash of $4.4 million and working capital of $2.3 million, compared to cash of $0.75 million and a working
capital deficiency of $5.7 million on June 30, 2015. This positive change in working capital is the result of the closing of financing
transactions initiated by the Company during 2016.
We expect that the Company will operate at
a loss for the foreseeable future. The Company’s current planned operation needs are $9.3 million until June 30, 2017. Burn
rate averages to approximately $775,000 a month where approximately $250,000 is for administrative purposes and approximately $550,000
is for planned exploration expenditures related to the completion of the feasibility study, permitting efforts, and third party
consultants until June 30, 2017. We currently have sufficient cash on hand to meet these planned expenditures for approximately
the next four to six months (December 2016 – February 2017). The Company’s ability to continue operations and fund
our current work plan is dependent on management’s ability to secure additional financing on or prior to December 2016. The
Company anticipates that it will need to raise of minimum of $5 – 6 million to continue planned operations for the next twelve
months. Management is actively pursuing such additional sources of debt and equity financing, and while it has been successful
in doing so in the past, there can be no assurance it will be able to do so in the future.
We currently have no further funding commitments
or arrangements for additional financing at this time (other than the potential exercise of options and warrants) and there is
no assurance that we will be able to obtain additional financing on acceptable terms, if at all. There is significant uncertainty
that we will be able to secure any additional financing in the current equity markets. The quantity of funds to be raised and
the terms of any proposed equity financing that may be undertaken will be negotiated by management as opportunities to raise funds
arise. Specific plans related to the use of proceeds will be devised once financing has been completed and management knows what
funds will be available for these purposes. Management intends to pursue funding sources of both debt and equity financing, including
but not limited to the issuance of equity securities in the form of common shares, warrants, subscription receipts or any combination
thereof in units of the Company pursuant to private placements to accredited investors or pursuant to equity lines of credit or
public offerings in the form of underwritten offerings, at-the-market offerings, registered direct offerings or other forms of
equity financing and public or private issuances of debt securities including secured and unsecured convertible debt instruments
or secured debt project financing. Management does not currently know the terms pursuant to which such financings may be completed
in the future, but any such financings will be negotiated at arms length. Future financings involving the issuance of equity securities
or derviatives thereof will likely be completed at a discount to the then current market price of the Company’s securities
and will likely be dilutive to current shareholders.
Exploration expenditure commitments (for
example, lease payments) are $125,000 until June 30, 2017 and planned exploration and development activities are approximately
$5.3 million until June 30, 2017. In order for the Company to maintain its currently held properties, and fund its currently anticipated
general and administrative costs and planned exploration expenditures for the fiscal year ending June 30, 2017, the Company will
therefore require additional financing during 2016-2017 in order to be able to carry out all of its planned exploration and development
activities at the Elk Creek Project. Should such financing not be available in that time-frame, we will be required to reduce
our activities and will not be able to carry out all of our presently planned exploration and development activities at the Elk
Creek Project on its currently anticipated scheduling.
The audit
opinion and notes that accompany our financial statements for the year ended June 30, 2016, disclose a “going concern”
qualification 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 do not have sufficient cash to fund normal operations and meet debt obligations for the next 12 months without deferring payment
on certain current liabilities and raising additional funds. We believe that the going concern condition cannot be removed with
confidence until the Company has entered into a business climate where funding of its planned ongoing operating activities is
secured.
We have no exposure
to any asset-backed commercial paper. Other than cash held by its subsidiaries for their immediate operating needs in Colorado
and Nebraska, all of our cash reserves are on deposit with a major United States chartered bank. We do not believe that the credit,
liquidity or market risks with respect thereto have increased as a result of the current market conditions. However, in order
to achieve greater security for the preservation of its capital, we have, of necessity, been required to accept lower rates of
interest, which has also lowered our potential interest income.
Operating
Activities
During 2016,
the Company's operating activities consumed $11.0 million of cash compared to $17.3 million in 2015. The cash used in operating
activities reflects the Company's funding of losses of $11.4 million, non-cash changes in financial instrument fair value of $2.7
million and non-cash items of share-based compensation and warrants totaling $1.6 million, and other minor non-cash adjustments.
Overall, the decrease in operating cash outflows is due to decreased exploration and development activities as discussed above
under “
Comparison of Year Ended June 30, 2016 to June 30, 2015
”. Going forward, the Company’s working
capital requirements are expected to increase substantially in connection the development of the Elk Creek Project.
Cash Flow
Considerations
As of June
30, 2016, the Company had cash of $4.4 million and working capital of $2.3 million compared to cash of $0.75 million and a working
capital deficiency of $5.7 million on June 30, 2015. This positive change in working capital is the result of the closing of financing
transactions initiated by the Company during 2016.
The Company
has historically relied upon equity financings to satisfy its capital requirements and will continue to depend heavily upon equity
capital to finance its activities. The Company may pursue debt financing in the medium term if it is able to procure such financing
on terms more favorable than available equity financing, however there can be no assurance the Company will be able to obtain
any required financing in the future on acceptable terms.
The Company
has limited financial resources compared to its proposed expenditures, no source of operating income and no assurance that additional
funding will be available to it for current or future projects, although the Company has been successful in the past in financing
its activities through the sale of equity securities.
The ability
of the Company to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions
and its success in developing the Elk Creek Project. Any quoted market for the Company's shares may be subject to market trends
generally, notwithstanding any potential success of the Company in creating revenue, cash flows or earnings, and any depression
of the trading price of the Company’s Common Shares could impact its ability to obtain equity financing on acceptable terms.
Historically,
the Company has used net proceeds from issuances of Common Shares to provide sufficient funds to meet its near-term exploration
and development plans and other contractual obligations when due. However, further development and construction of the Elk Creek
Project will require substantial additional capital resources. This includes near-term funding and, ultimately, funding for project
construction and other costs. See “
Financing
” above for greater detail on the Company’s recent equity
financings and discussion of arrangements related to possible future debt financing(s).
Financial
and Other Instruments
The Company’s
financial instruments consist of cash, receivables, marketable securities, accounts payable and accrued liabilities, related party
loan, convertible debt, and the derivative liability. The carrying value of receivables, accounts payable and accrued liabilities,
and related party loan approximates their fair values due to their immediate or short-term maturity. Cash and marketable securities
are carried at fair value using a level 1 fair value measurement. Convertible debt and derivative liability are carried at fair
value using level three measurements. The Company’s exposure to changes in market interest rates, relates primarily to the
Company’s earned interest income on cash deposits and short term investments. The Company maintains a balance between the
liquidity of cash assets and the interest rate return thereon. The carrying amount of financial assets, net of any provisions
for losses, represents the Company’s maximum exposure to credit risk.
Contractual
Obligations
The Company
currently has an offtake agreement dated November 10, 2014 (the “Offtake Agreement”) with ThyssenKrupp Metallurgical
Products GmbH (“ThyssenKrupp”) whereby ThyssenKrupp will purchase, at market rates, approximately 3,750 metric tons,
or fifty percent (50%), of the Company’s current planned ferroniobium production from the Elk Creek Project for an initial
ten-year term, with an option to extend beyond that timeframe. The Offtake Agreement presupposes the Company obtaining project
financing, obtaining all necessary approvals and constructing a mine at the Elk Creek Project. ThyssenKrupp is based in Essen,
Germany, and is part of the Business Area Materials Services, a global materials distributor and service provider with 500 branches
in 44 countries. The Company appointed ThyssenKrupp as its exclusive sales agent of its production in Europe, with a stated amount
to be sold in Germany. Pursuant to the Offtake Agreement, the Company has granted ThyssenKrupp a non-transferable warrant to acquire
8,569,000 Common Shares of the Company at an exercise price of C$0.67 per Common Share, which expired on December 12, 2015.
On June 15,
2016, we announced that we had entered into a commercial sales agreement (“CMC Agreement”) with CMC Cometals, a division
of Commercial Metals Company (“CMC”) of Fort Lee, New Jersey, under which CMC expects to purchase up to a maximum
of 1,875 tonnes per year, or roughly twenty-five (25%), of our potential annual Ferroniobium production from our Elk Creek, Nebraska
resource. Under the CMC Agreement, CMC will purchase this amount of Ferroniobium under a market-based pricing structure for an
initial 10-year term, with an option to extend beyond that period upon mutual agreement of the parties.
Tabular Disclosure
of Contractual Obligations
Information
regarding our known contractual obligations of the types described below as of June 30, 2016 is set forth in the following table
($000):
|
|
|
|
|
Payments due by period
|
|
|
|
|
|
|
Less than
|
|
|
1 - 3
|
|
|
4 - 5
|
|
|
After
|
|
|
|
Total
|
|
|
1 year
|
|
|
years
|
|
|
years
|
|
|
5 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
$
|
7,510
|
|
|
$
|
1,214
|
|
|
$
|
6,296
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Operating leases
|
|
|
349
|
|
|
|
207
|
|
|
|
123
|
|
|
|
19
|
|
|
|
-
|
|
Total contractual obligations
|
|
$
|
7,859
|
|
|
$
|
1,421
|
|
|
$
|
6,419
|
|
|
$
|
19
|
|
|
$
|
-
|
|
Off Balance
Sheet Arrangements
The Company
had no off balance sheet arrangements for the fiscal years ended June 30, 2016 and 2015.
Critical
Accounting Policies
In applying
the Company’s accounting policies, management undertakes a number of judgments, estimates and assumptions about recognition
and measurement of assets, liabilities, income and expenses. Actual results may differ from the judgments, estimates and assumptions
made by management and will seldom equal the estimated results.
The most significant
critical judgment that members of management have made in the process of applying the entity’s accounting policies and that
have the most significant effect on the amounts recognized in the consolidated financial statements is the policy on exploration
and evaluation assets.
In particular,
management is required to assess mineral interests for impairment. Note 5 to the consolidated financial statements discloses the
carrying values of such assets. As part of this assessment, management must make an assessment as to whether there are indicators
of impairment. If there are indicators, management performs an impairment test on the major assets within this balance.
The recoverability
of exploration and evaluation assets is dependent on a number of factors common to the natural resource sector. These include
the extent to which the Company can continue to renew its exploration and future development licenses with local authorities,
establish economically recoverable reserves on its properties, the ability of the Company to obtain necessary financing to complete
the development of such reserves and future profitable production or proceeds from the disposition thereof. The Company will use
the evaluation work of professional geologists, geophysicists and engineers for estimates in determining whether to commence or
continue mining and processing. These estimates generally rely on scientific and economic assumptions, which in some instances
may not be correct, and could result in the expenditure of substantial amounts of money on a deposit before it can be determined
whether or not the deposit contains economically recoverable mineralization. If a determination is made that a deposit does not
contain economically recoverable mineralization, or if other factors are present that indicate the existence of an impairment,
a property is written down to net realizable value, which could have a material effect on the financial positon and financial
performance of the Company.
Share-based
compensation is determined using the Black-Scholes pricing model based on estimated fair values of all share-based awards at the
date of grant and is expensed to the consolidated statement of loss over each award’s vesting period. The Black-Scholes
pricing model utilizes subjective assumptions such as expected price volatility and expected life of the option. Changes in these
input assumptions can significantly affect the fair value estimate, which could impact amounts recognized as expense and carried
as a component of shareholders’ equity. See Note 8b in the Company’s consolidated financial statements for the year
ended June 30, 2016 for a summary of the assumptions used to calculate the value of share-based compensation.
CERTAIN UNITED STATES FEDERAL INCOME
TAX CONSIDERATIONS
The following is a general summary of certain
material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from and relating to the
acquisition, ownership, and disposition of Common Shares acquired pursuant to this prospectus. This summary does not discuss any
tax consequences applicable to the selling security holders. Each selling security holder should consult its own tax advisor regarding
the tax consequences of the exercise of its warrants and options and the resale of Common Shares.
This summary is for general information
purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations
that may apply to a U.S. Holder arising from and relating to the acquisition, ownership, and disposition of Common Shares. In addition,
this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the
U.S. federal income tax consequences to such U.S. Holder, including, without limitation, specific tax consequences to a U.S. Holder
under an applicable income tax treaty. Accordingly, this summary is not intended to be, and should not be construed as, legal or
U.S. federal income tax advice with respect to any U.S. Holder. This summary does not address the U.S. federal alternative minimum,
U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences to U.S. Holders of the acquisition, ownership,
and disposition of Common Shares. In addition, except as specifically set forth below, this summary does not discuss applicable
tax reporting requirements. Each prospective U.S. Holder should consult its own tax advisors regarding the U.S. federal, U.S. federal
alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences relating to the acquisition,
ownership and disposition of Common Shares.
No legal opinion from U.S. legal counsel
or ruling from the Internal Revenue Service (the “IRS”) has been requested, or will be obtained, regarding the U.S.
federal income tax consequences of the acquisition, ownership, and disposition of Common Shares. This summary is not binding on
the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in this
summary. In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS and
the U.S. courts could disagree with one or more of the conclusions described in this summary.
Scope of this Summary
Authorities
This summary is based on the Internal Revenue
Code of 1986, as amended (the “Code”), Treasury Regulations (whether final, temporary, or proposed), published rulings
of the IRS, published administrative positions of the IRS, the Convention Between Canada and the United States of America with
Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended (the “Canada-U.S. Tax Convention”),
and U.S. court decisions that are applicable, and, in each case, as in effect and available, as of the date of this document. Any
of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change
could be applied retroactively. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed
legislation.
U.S. Holders
For purposes of this summary, the term
“U.S. Holder” means a beneficial owner of Common Shares acquired pursuant this prospectus that is for U.S. federal
income tax purposes:
|
·
|
an individual who is a citizen or resident of the United States;
|
|
·
|
a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any state thereof or the District of Columbia;
|
|
·
|
an estate whose income is subject to U.S. federal income taxation regardless of its source; or
|
|
·
|
a trust that (1) is subject to the primary supervision of a court within the U.S. and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.
|
U.S. Holders Subject to Special U.S.
Federal Income Tax Rules Not Addressed
This summary does not address the U.S.
federal income tax considerations applicable to U.S. Holders that are subject to special provisions under the Code, including,
but not limited to, U.S. Holders that: (a) are tax-exempt organizations, qualified retirement plans, individual retirement accounts,
or other tax-deferred accounts; (b) are financial institutions, underwriters, insurance companies, real estate investment trusts,
or regulated investment companies; (c) are broker-dealers, dealers, or traders in securities or currencies that elect to apply
a mark-to-market accounting method; (d) have a “functional currency” other than the U.S. dollar; (e) own Common Shares
as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than
one position; (f) acquire Common Shares in connection with the exercise of employee stock options or otherwise as compensation
for services; (g) hold Common Shares other than as a capital asset within the meaning of Section 1221 of the Code (generally, property
held for investment purposes); or (h) own, have owned or will own (directly, indirectly, or by attribution) 10% or more of the
total combined voting power of the outstanding shares of the Company. This summary also does not address the U.S. federal income
tax considerations applicable to U.S. Holders who are: (a) U.S. expatriates or former long-term residents of the U.S.; (b) persons
that have been, are, or will be a resident or deemed to be a resident in Canada for purposes of the Income Tax Act (Canada) (the
“Tax Act”); (c) persons that use or hold, will use or hold, or that are or will be deemed to use or hold Common Shares
in connection with carrying on a business in Canada; (d) persons whose Common Shares constitute “taxable Canadian property”
under the Tax Act; or (e) persons that have a permanent establishment in Canada for the purposes of the Canada-U.S. Tax Convention.
U.S. Holders that are subject to special provisions under the Code, including, but not limited to, U.S. Holders described immediately
above, should consult their own tax advisors regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate
and gift, U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of Common
Shares.
If an entity or arrangement that is classified
as a partnership (or other “pass-through” entity) for U.S. federal income tax purposes holds Common Shares, the U.S.
federal income tax consequences to such entity or arrangement and the partners (or other owners or participants) of such entity
or arrangement generally will depend on the activities of the entity or arrangement and the status of such partners (or owners
or participants). This summary does not address the tax consequences to any such partner (or owner or participants). Partners (or
other owners or participants) of entities or arrangements that are classified as partnerships or as “pass-through”
entities for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences
arising from and relating to the acquisition, ownership, and disposition of Common Shares.
Passive Foreign Investment Company Rules
PFIC Status of the Company
If the Company were to constitute a “passive
foreign investment company” under the meaning of Section 1297 of the Code (a “PFIC”, as defined below) for any
year during a U.S. Holder’s holding period, then certain potentially adverse rules may affect the U.S. federal income tax
consequences to a U.S. Holder as a result of the acquisition, ownership and disposition of Common Shares. The Company believes
that it was classified as a PFIC during the tax year ended June 30, 2016, and based on current business plans and financial expectations,
the Company expects that it may be a PFIC for the current tax year and may be a PFIC in future tax years. No opinion of legal counsel
or ruling from the IRS concerning the status of the Company as a PFIC has been obtained or is currently planned to be requested.
The determination of whether any corporation was, or will be, a PFIC for a tax year depends, in part, on the application of complex
U.S. federal income tax rules, which are subject to differing interpretations. In addition, whether any corporation will be a PFIC
for any tax year depends on the assets and income of such corporation over the course of each such tax year and, as a result, cannot
be predicted with certainty as of the date of this document. Accordingly, there can be no assurance that the IRS will not challenge
any determination made by the Company (or any subsidiary of the Company) concerning its PFIC status. Each U.S. Holder should consult
its own tax advisors regarding the PFIC status of the Company and each subsidiary of the Company.
In any year in which the Company is classified
as a PFIC, a U.S. Holder will be required to file an annual report with the IRS containing such information as Treasury Regulations
and/or other IRS guidance may require. In addition to penalties, a failure to satisfy such reporting requirements may result in
an extension of the time period during which the IRS can assess a tax. U.S. Holders should consult their own tax advisors regarding
the requirements of filing such information returns under these rules, including the requirement to file an IRS Form 8621 annually.
The Company generally will be a PFIC if,
for a tax year, (a) 75% or more of the gross income of the Company is passive income (the “PFIC income test”) or (b)
50% or more of the value of the Company’s assets either produce passive income or are held for the production of passive
income, based on the quarterly average of the fair market value of such assets (the “PFIC asset test”). “Gross
income” generally includes all sales revenues less the cost of goods sold, plus income from investments and from incidental
or outside operations or sources, and “passive income” generally includes, for example, dividends, interest, certain
rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.
Active business gains arising from the
sale of commodities generally are excluded from passive income if substantially all (85% or more) of a foreign corporation’s
commodities are stock in trade or inventory, depreciable property used in a trade or business, or supplies regularly used or consumed
in the ordinary course of its trade or business, and certain other requirements are satisfied.
For purposes of the PFIC income test and
PFIC asset test described above, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding
shares of another corporation, the Company will be treated as if it (a) held a proportionate share of the assets of such other
corporation and (b) received directly a proportionate share of the income of such other corporation. In addition, for purposes
of the PFIC income test and PFIC asset test described above, and assuming certain other requirements are met, “passive income”
does not include certain interest, dividends, rents, or royalties that are received or accrued by the Company from certain “related
persons” (as defined in Section 954(d)(3) of the Code) also organized in Canada, to the extent such items are properly allocable
to the income of such related person that is not passive income.
Under certain attribution rules, if the
Company is a PFIC, U.S. Holders will generally be deemed to own their proportionate share of the Company’s direct or indirect
equity interest in any company that is also a PFIC (a ‘‘Subsidiary PFIC’’), and will generally be subject
to U.S. federal income tax on their proportionate share of (a) any “excess distributions,” as described below, on the
stock of a Subsidiary PFIC and (b) a disposition or deemed disposition of the stock of a Subsidiary PFIC by the Company or another
Subsidiary PFIC, both as if such U.S. Holders directly held the shares of such Subsidiary PFIC. In addition, U.S. Holders may be
subject to U.S. federal income tax on any indirect gain realized on the stock of a Subsidiary PFIC on the sale or disposition of
Common Shares. Accordingly, U.S. Holders should be aware that they could be subject to tax under the PFIC rules even if no distributions
are received and no redemptions or other dispositions of Common Shares are made.
Default PFIC Rules Under Section 1291
of the Code
If the Company is a PFIC for any tax year
during which a U.S. Holder owns Common Shares, the U.S. federal income tax consequences to such U.S. Holder of the acquisition,
ownership, and disposition of Common Shares will depend on whether and when such U.S. Holder makes an election to treat the Company
and each Subsidiary PFIC, if any, as a “qualified electing fund” or “QEF” under Section 1295 of the Code
(a “QEF Election”) or makes a mark-to-market election under Section 1296 of the Code (a “Mark-to-Market Election”).
A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a “Non-Electing
U.S. Holder.”
A Non-Electing U.S. Holder will be subject
to the rules of Section 1291 of the Code (described below) with respect to (a) any gain recognized on the sale or other taxable
disposition of Common Shares and (b) any “excess distribution” received on the Common Shares. A distribution generally
will be an “excess distribution” to the extent that such distribution (together with all other distributions received
in the current tax year) exceeds 125% of the average distributions received during the three preceding tax years (or during a U.S.
Holder’s holding period for the Common Shares, if shorter).
Under Section 1291 of the Code, any gain
recognized on the sale or other taxable disposition of Common Shares (including an indirect disposition of the stock of any Subsidiary
PFIC), and any “excess distribution” received on Common Shares or with respect to the stock of a Subsidiary PFIC, must
be ratably allocated to each day in a Non-Electing U.S. Holder’s holding period for the respective Common Shares. The amount
of any such gain or excess distribution allocated to the tax year of disposition or distribution of the excess distribution and
to years before the entity became a PFIC, if any, would be taxed as ordinary income (and not eligible for certain preferred rates).
The amounts allocated to any other tax year would be subject to U.S. federal income tax at the highest tax rate applicable to ordinary
income in each such year, and an interest charge would be imposed on the tax liability for each such year, calculated as if such
tax liability had been due in each such year. A Non-Electing U.S. Holder that is not a corporation must treat any such interest
paid as “personal interest,” which is not deductible.
If the Company is a PFIC for any tax year
during which a Non-Electing U.S. Holder holds Common Shares, the Company will continue to be treated as a PFIC with respect to
such Non-Electing U.S. Holder, regardless of whether the Company ceases to be a PFIC in one or more subsequent tax years. A Non-Electing
U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the rules of Section
1291 of the Code discussed above), but not loss, as if such Common Shares were sold on the last day of the last tax year for which
the Company was a PFIC.
QEF Election
A U.S. Holder that makes a timely and effective
QEF Election for the first tax year in which the holding period of its Common Shares begins generally will not be subject to the
rules of Section 1291 of the Code discussed above with respect to its Common Shares. A U.S. Holder that makes a timely and effective
QEF Election will be subject to U.S. federal income tax on such U.S. Holder’s pro rata share of (a) the net capital gain
of the Company, which will be taxed as long-term capital gain to such U.S. Holder, and (b) the ordinary earnings of the Company,
which will be taxed as ordinary income to such U.S. Holder. Generally, “net capital gain” is the excess of (a) net
long-term capital gain over (b) net short-term capital loss, and “ordinary earnings” are the excess of (a) “earnings
and profits” over (b) net capital gain. A U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax
on such amounts for each tax year in which the Company is a PFIC, regardless of whether such amounts are actually distributed to
such U.S. Holder by the Company. However, for any tax year in which the Company is a PFIC and has no net income or gain, U.S. Holders
that have made a QEF Election would not have any income inclusions as a result of the QEF Election. If a U.S. Holder that made
a QEF Election has an income inclusion, such a U.S. Holder may, subject to certain limitations, elect to defer payment of current
U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a corporation, any such interest
paid will be treated as “personal interest,” which is not deductible.
A U.S. Holder that makes a timely and effective
QEF Election with respect to the Company generally (a) may receive a tax-free distribution from the Company to the extent that
such distribution represents “earnings and profits” of the Company that were previously included in income by the U.S.
Holder because of such QEF Election and (b) will adjust such U.S. Holder’s tax basis in the Common Shares to reflect the
amount included in income or allowed as a tax-free distribution because of such QEF Election. In addition, a U.S. Holder that makes
a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of Common Shares.
The procedure for making a QEF Election,
and the U.S. federal income tax consequences of making a QEF Election, will depend on whether such QEF Election is timely. A QEF
Election will be treated as “timely” if such QEF Election is made for the first year in the U.S. Holder’s holding
period for the Common Shares in which the Company was a PFIC. A U.S. Holder may make a timely QEF Election by filing the appropriate
QEF Election documents at the time such U.S. Holder files a U.S. federal income tax return for such year. If a U.S. Holder does
not make a timely and effective QEF Election for the first year in the U.S. Holder’s holding period for the Common Shares,
the U.S. Holder may still be able to make a timely and effective QEF Election in a subsequent year if such U.S. Holder meets certain
requirements and makes a “purging” election to recognize gain (which will be taxed under the rules of Section 1291
of the Code discussed above) as if such Common Shares were sold for their fair market value on the day the QEF Election is effective.
If a U.S. Holder makes a QEF Election but does not make a “purging” election to recognize gain as discussed in the
preceding sentence, then such U.S. Holder shall be subject to the QEF Election rules and shall continue to be subject to tax under
the rules of Section 1291 discussed above with respect to its Common Shares. If a U.S. Holder owns PFIC stock indirectly through
another PFIC, separate QEF Elections must be made for the PFIC in which the U.S. Holder is a direct shareholder and the Subsidiary
PFIC for the QEF rules to apply to both PFICs.
A QEF Election will apply to the tax year
for which such QEF Election is timely made and to all subsequent tax years, unless such QEF Election is invalidated or terminated
or the IRS consents to revocation of such QEF Election. If a U.S. Holder makes a QEF Election and, in a subsequent tax year, the
Company ceases to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those tax years
in which the Company is not a PFIC. Accordingly, if the Company becomes a PFIC in another subsequent tax year, the QEF Election
will be effective and the U.S. Holder will be subject to the QEF rules described above during any subsequent tax year in which
the Company qualifies as a PFIC.
The Company: (a) will make available to
U.S. Holders, upon their written request, information as to its status as a PFIC, and (b) for each year in which the Company is
a PFIC, provide to a U.S. Holder, upon written request, such information and documentation that a U.S. Holder making a QEF Election
with respect to the Company is reasonably required to obtain for U.S. federal income tax purposes. The Company may elect to provide
such information on its website. However, U.S. Holders should be aware that the Company can provide no assurances that it will
provide any such information relating to any Subsidiary PFIC. Because the Company may own shares in one or more Subsidiary PFICs
at any time, U.S. Holders will continue to be subject to the rules discussed above with respect to the taxation of gains and excess
distributions with respect to any Subsidiary PFIC for which the U.S. Holders do not obtain the required information. Each U.S.
Holder should consult its own tax advisors regarding the availability of, and procedure for making, a QEF Election with respect
to the Company and any Subsidiary PFIC.
A U.S. Holder makes a QEF Election by attaching
a completed IRS Form 8621, including a PFIC Annual Information Statement, to a timely filed United States federal income tax return.
However, if the Company does not provide the required information with regard to the Company or any of its Subsidiary PFICs, U.S.
Holders will not be able to make a QEF Election for such entity and will continue to be subject to the rules of Section 1291 of
the Code discussed above that apply to Non-Electing U.S. Holders with respect to the taxation of gains and excess distributions.
Mark-to-Market Election
A U.S. Holder may make a Mark-to-Market
Election only if the Common Shares are marketable stock. The Common Shares generally will be “marketable stock” if
the Common Shares are regularly traded on (a) a national securities exchange that is registered with the Securities and Exchange
Commission, (b) the national market system established pursuant to section 11A of the Securities and Exchange Act of 1934, or (c)
a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is
located, provided that (i) such foreign exchange has trading volume, listing, financial disclosure, and surveillance requirements,
and meets other requirements and the laws of the country in which such foreign exchange is located, together with the rules of
such foreign exchange, ensure that such requirements are actually enforced and (ii) the rules of such foreign exchange effectively
promote active trading of listed stocks. If such stock is traded on such a qualified exchange or other market, such stock generally
will be “regularly traded” for any calendar year during which such stock is traded, other than in
de minimis
quantities,
on at least 15 days during each calendar quarter.
A U.S. Holder that makes a Mark-to-Market
Election with respect to its Common Shares generally will not be subject to the rules of Section 1291 of the Code discussed above
with respect to such Common Shares. However, if a U.S. Holder does not make a Mark-to-Market Election beginning in the first tax
year of such U.S. Holder’s holding period for the Common Shares for which the Company is a PFIC and such U.S. Holder has
not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to certain dispositions of,
and distributions on, the Common Shares.
A U.S. Holder that makes a Mark-to-Market
Election will include in ordinary income, for each tax year in which the Company is a PFIC, an amount equal to the excess, if any,
of (a) the fair market value of the Common Shares, as of the close of such tax year over (b) such U.S. Holder’s adjusted
tax basis in such Common Shares. A U.S. Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal
to the excess, if any, of (a) such U.S. Holder’s adjusted tax basis in the Common Shares, over (b) the fair market value
of such Common Shares (but only to the extent of the net amount of previously included income as a result of the Mark-to-Market
Election for prior tax years).
A U.S. Holder that makes a Mark-to-Market
Election generally also will adjust such U.S. Holder’s tax basis in the Common Shares to reflect the amount included in gross
income or allowed as a deduction because of such Mark-to-Market Election. In addition, upon a sale or other taxable disposition
of Common Shares, a U.S. Holder that makes a Mark-to-Market Election will recognize ordinary income or ordinary loss (not to exceed
the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior tax years over
(b) the amount allowed as a deduction because of such Mark-to-Market Election for prior tax years). Losses that exceed this limitation
are subject to the rules generally applicable to losses provided in the Code and Treasury Regulations.
A U.S. Holder makes a Mark-to-Market Election
by attaching a completed IRS Form 8621 to a timely filed United States federal income tax return. A Mark-to-Market Election applies
to the tax year in which such Mark-to-Market Election is made and to each subsequent tax year, unless the Common Shares cease to
be “marketable stock” or the IRS consents to revocation of such election. Each U.S. Holder should consult its own tax
advisors regarding the availability of, and procedure for making, a Mark-to-Market Election.
Although a U.S. Holder may be eligible
to make a Mark-to-Market Election with respect to the Common Shares, no such election may be made with respect to the stock of
any Subsidiary PFIC that a U.S. Holder is treated as owning, because such stock is not marketable. Hence, the Mark-to-Market Election
will not be effective to avoid the application of the default rules of Section 1291 of the Code described above with respect to
deemed dispositions of Subsidiary PFIC stock or excess distributions from a Subsidiary PFIC to its shareholder.
Other PFIC Rules
Under Section 1291(f) of the Code, the
IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder that had not made a
timely QEF Election to recognize gain (but not loss) upon certain transfers of Common Shares that would otherwise be tax-deferred
(e.g., gifts and exchanges pursuant to corporate reorganizations). However, the specific U.S. federal income tax consequences to
a U.S. Holder may vary based on the manner in which Common Shares are transferred.
Certain additional adverse rules may apply
with respect to a U.S. Holder if the Company is a PFIC, regardless of whether such U.S. Holder makes a QEF Election. For example,
under Section 1298(b)(6) of the Code, a U.S. Holder that uses Common Shares as security for a loan will, except as may be provided
in Treasury Regulations, be treated as having made a taxable disposition of such Common Shares.
Special rules also apply to the amount
of foreign tax credit that a U.S. Holder may claim on a distribution from a PFIC. Subject to such special rules, foreign taxes
paid with respect to any distribution in respect of stock in a PFIC are generally eligible for the foreign tax credit. The rules
relating to distributions by a PFIC and their eligibility for the foreign tax credit are complicated, and a U.S. Holder should
consult with its own tax advisors regarding the availability of the foreign tax credit with respect to distributions by a PFIC.
The PFIC rules are complex, and each U.S.
Holder should consult its own tax advisors regarding the PFIC rules and how the PFIC rules may affect the U.S. federal income tax
consequences of the acquisition, ownership, and disposition of Common Shares.
General Rules Applicable to the Ownership
and Disposition of Common Shares
The following discussion describes the
general rules applicable to the ownership and disposition of the Common Shares but is subject in its entirety to the special rules
described above under the heading “Passive Foreign Investment Company Rules.”
Distributions on Common Shares
A U.S. Holder that receives a distribution,
including a constructive distribution, with respect to a Common Share will be required to include the amount of such distribution
in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of
the current and accumulated “earnings and profits” of the Company, as computed for U.S. federal income tax purposes.
A dividend generally will be taxed to a U.S. Holder at ordinary income tax rates if the Company is a PFIC for the tax year of such
distribution or the preceding tax year. To the extent that a distribution exceeds the current and accumulated “earnings and
profits” of the Company, such distribution will be treated first as a tax-free return of capital to the extent of a U.S.
Holder's tax basis in the Common Shares and thereafter as gain from the sale or exchange of such Common Shares. (See “Sale
or Other Taxable Disposition of Common Shares” below). However, the Company may not maintain the calculations of its earnings
and profits in accordance with U.S. federal income tax principles, and each U.S. Holder may have to assume that any distribution
by the Company with respect to the Common Shares will constitute ordinary dividend income. Dividends received on Common Shares
by corporate U.S. Holders generally will not be eligible for the “dividends received deduction.” Subject to applicable
limitations and provided the Company is eligible for the benefits of the Canada-U.S. Tax Convention or the Common Shares are readily
tradable on a United States securities market, dividends paid by the Company to non-corporate U.S. Holders, including individuals,
generally will be eligible for the preferential tax rates applicable to long-term capital gains for dividends, provided certain
holding period and other conditions are satisfied, including that the Company not be classified as a PFIC in the tax year of distribution
or in the preceding tax year. The dividend rules are complex, and each U.S. Holder should consult its own tax advisors regarding
the application of such rules.
Sale or Other Taxable Disposition of
Common Shares
Upon the sale or other taxable disposition
of Common Shares, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the
U.S. dollar value of cash received plus the fair market value of any property received and such U.S. Holder's tax basis in such
Common Shares sold or otherwise disposed of. A U.S. Holder’s tax basis in Common Shares generally will be such holder’s
U.S. dollar cost for such Common Shares. Gain or loss recognized on such sale or other disposition generally will be long-term
capital gain or loss if, at the time of the sale or other disposition, the Common Shares have been held for more than one year.
Preferential tax rates currently apply
to long-term capital gain of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential tax rates
for long-term capital gain of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations
under the Code.
Additional Considerations
Additional Tax on Passive Income
Certain U.S. Holders that are individuals,
estates or trusts (other than trusts that are exempt from tax) will be subject to a 3.8% tax on all or a portion of their “net
investment income,” which includes dividends on the Common Shares and net gains from the disposition of the Common Shares.
Further, excess distributions treated as dividends, gains treated as excess distributions under the PFIC rules discussed above,
and mark-to-market inclusions and deductions are all included in the calculation of net investment income.
Treasury Regulations provide, subject to
the election described in the following paragraph, that solely for purposes of this additional tax, that distributions of previously
taxed income will be treated as dividends and included in net investment income subject to the additional 3.8% tax. Additionally,
to determine the amount of any capital gain from the sale or other taxable disposition of Common Shares that will be subject to
the additional tax on net investment income, a U.S. Holder who has made a QEF Election will be required to recalculate its basis
in the Common Shares excluding QEF basis adjustments.
Alternatively, a U.S. Holder may make an
election which will be effective with respect to all interests in a PFIC for which a QEF Election has been made and which is held
in that year or acquired in future years. Under this election, a U.S. Holder pays the additional 3.8% tax on QEF income inclusions
and on gains calculated after giving effect to related tax basis adjustments. U.S. Holders that are individuals, estates or trusts
should consult their own tax advisors regarding the applicability of this tax to any of their income or gains in respect of the
Common Shares.
Receipt of Foreign Currency
The amount of any distribution paid to
a U.S. Holder in foreign currency, or on the sale, exchange or other taxable disposition of Common Shares, generally will be equal
to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt (regardless of whether
such foreign currency is converted into U.S. dollars at that time). A U.S. Holder will have a basis in the foreign currency equal
to its U.S. dollar value on the date of receipt. Any U.S. Holder who converts or otherwise disposes of the foreign currency after
the date of receipt may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally
will be U.S. source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method
of tax accounting. Each U.S. Holder should consult its own U.S. tax advisors regarding the U.S. federal income tax consequences
of receiving, owning, and disposing of foreign currency.
Foreign Tax Credit
Subject to the PFIC rules discussed above,
a U.S. Holder that pays (whether directly or through withholding) Canadian income tax with respect to dividends paid on the Common
Shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such Canadian
income tax. Generally, a credit will reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar basis,
whereas a deduction will reduce a U.S. Holder’s income that is subject to U.S. federal income tax. This election is made
on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during
a year.
Complex limitations apply to the foreign
tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder’s U.S.
federal income tax liability that such U.S. Holder’s “foreign source” taxable income bears to such U.S. Holder’s
worldwide taxable income. In applying this limitation, a U.S. Holder’s various items of income and deduction must be classified,
under complex rules, as either “foreign source” or “U.S. source.” Generally, dividends paid by a foreign
corporation should be treated as foreign source for this purpose, and gains recognized on the sale of stock of a foreign corporation
by a U.S. Holder should be treated as U.S. source for this purpose, except as otherwise provided in an applicable income tax treaty,
and if an election is properly made under the Code. However, the amount of a distribution with respect to the Common Shares that
is treated as a “dividend” may be lower for U.S. federal income tax purposes than it is for Canadian federal income
tax purposes, resulting in a reduced foreign tax credit allowance to a U.S. Holder. In addition, this limitation is calculated
separately with respect to specific categories of income. The foreign tax credit rules are complex, and each U.S. Holder should
consult its own U.S. tax advisors regarding the foreign tax credit rules.
Backup Withholding and Information Reporting
Under U.S. federal income tax law, certain
categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation.
For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals who are U.S. Holders that hold
certain specified foreign financial assets in excess of certain thresholds. The definition of specified foreign financial assets
includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained
by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment
that has an issuer or counterparty other than a U.S. person and any interest in a foreign entity. U.S. Holders may be subject to
these reporting requirements unless their Common Shares are held in an account at certain financial institutions. Penalties for
failure to file certain of these information returns are substantial. U.S. Holders should consult with their own tax advisors regarding
the requirements of filing information returns, including the requirement to file an IRS Form 8938.
Payments made within the U.S., or by a
U.S. payor or U.S. middleman, of dividends on, and proceeds arising from the sale or other taxable disposition of, Common Shares
will generally be subject to information reporting and backup withholding tax, at the rate of 28%, if a U.S. Holder (a) fails to
furnish such U.S. Holder’s correct U.S. taxpayer identification number (generally on Form W-9), (b) furnishes an incorrect
U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report
items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished
its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup
withholding tax. However, certain exempt persons generally are excluded from these information reporting and backup withholding
rules. Backup withholding is not an additional tax. Any amounts withheld under the U.S. backup withholding tax rules will be allowed
as a credit against a U.S. Holder’s U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes
required information to the IRS in a timely manner.
The discussion of reporting requirements
set forth above is not intended to constitute a complete description of all reporting requirements that may apply to a U.S. Holder.
A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess
a tax and, under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting
requirement. Each U.S. Holder should consult its own tax advisors regarding the information reporting and backup withholding rules.
THE ABOVE SUMMARY IS NOT INTENDED TO
CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE ACQUISITION, OWNERSHIP,
AND DISPOSITION OF COMMON SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO
THEM IN THEIR OWN PARTICULAR CIRCUMSTANCES.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Effective June 24, 2015, we ended our
relationship with Davidson & Company LLP Charted Professional Accountants (“Davidson”) as our independent registered
public accounting firm. Davidson’s dismissal as our independent registered public accounting firm was approved by our Board.
Davidson’s reports regarding the
Company's financial statements for the fiscal years ended June 30, 2014 and 2013 did not contain any adverse opinion or disclaimer
of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that the audit report
of Davidson on the Company's financial statements for fiscal years ended June 30, 2014 and 2013 contained an explanatory paragraph
which noted that there was substantial doubt about the Company's ability to continue as a going concern.
During the fiscal years ended June 30,
2014 and 2013, and during the period from July 1, 2014 to the date of dismissal, (i) there were no disagreements with Davidson
on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements,
if not resolved to the satisfaction of Davidson would have caused it to make reference to such disagreement in its reports; and
(ii) there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.
The Company has provided Davidson with
a copy of the foregoing disclosures and requested that Davidson furnish the Company with a letter addressed to the SEC stating
whether or not it agrees with the above statements. A copy of such letter will be filed as Exhibit 16.1 to this Registration
Statement on Form S-1.
Effective June 24, 2015, we engaged BDO
USA, LLP (“BDO”) as the Company's independent registered public accounting firm to audit the Company's financial statements
for the fiscal year ending June 30, 2015.
During each of the Company's two most recent
fiscal years and through the interim periods preceding the engagement of BDO, we (a) have not engaged BDO as either the principal
accountant to audit the Company's financial statements, or as an independent accountant to audit a significant subsidiary of the
Company and on whom the principal accountant is expected to express reliance in its report; and (b) has not consulted with BDO
regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of
audit opinion that might be rendered on the Company's financial statements, and no written report or oral advice was provided to
the Company by BDO concluding there was an important factor to be considered by the Company in reaching a decision as to an accounting,
auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement, as that term is defined
in Item 304(a)(1)(iv) of Regulation S-K or a reportable event, as that term is described in Item 304(a)(1)(v) of Regulation S-K.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Interest rate risk
The Company’s exposure to changes
in market interest rates, relates primarily to the Company’s earned interest income on cash deposits and short term investments.
The Company maintains a balance between the liquidity of cash assets and the interest rate return thereon. The carrying amount
of financial assets, net of any provisions for losses, represents the Company’s maximum exposure to credit risk.
Foreign currency exchange risk
The company incurs expenditures in both
U.S. and Canadian dollars. Canadian dollar expenditures are related to engineering and metallurgical related exploration expenses,
as well as certain professional services. As a result, currency exchange fluctuations may impact the costs of our operating activities.
To reduce this risk, we maintain sufficient cash balances in Canadian dollars to fund expected near-term expenditures.
Commodity price risk
The Company is exposed to commodity price
risk related to the elements associated with the Elk Creek Project. A significant decrease in the global demand for these elements
may have a material adverse effect on our business. The Elk Creek project is not in production, and the Company does not currently
hold any commodity derivative positions.
DIRECTORS AND EXECUTIVE OFFICERS
As of July 22, 2016, the names, titles,
and ages of the members of the Company’s Board of Directors and its executive officers are as set forth in the below table.
Name
|
|
Age
|
|
Position
|
|
Date of Appointment
|
Mark A. Smith
|
|
57
|
|
CEO, President, Executive Chairman and Director
|
|
CEO and Director: Sept. 23, 2013
President and Executive Chairman: May 31, 2015
|
Neal Shah
|
|
42
|
|
CFO
|
|
July 1, 2016; Interim CFO on March 31, 2015
|
Scott Honan
|
|
45
|
|
Vice President, Business Development
|
|
May 6, 2014
|
John Ashburn, Jr.
|
|
61
|
|
Vice-President, General Counsel and Corporate Secretary
|
|
April 2, 2015
|
Jim Sims
|
|
55
|
|
VP of External Affairs
|
|
November 2, 2015
|
Joseph A. Carrabba
|
|
63
|
|
Lead Director
|
|
December 15, 2014
|
Michael Morris
|
|
70
|
|
Director
|
|
July 28, 2014
|
David C. Beling
|
|
74
|
|
Director
|
|
June 6, 2011
|
Joseph D. Cecil
|
|
67
|
|
Director
|
|
November 14, 2014
|
Anna Castner Wightman
|
|
49
|
|
Director
|
|
February 23, 2016
|
The following sets forth a brief description
of the business experience of each director and executive officer of the Company:
Mark Smith – 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. Mr. Smith also serves as the President and Chief Executive Officer for Largo Resources
Ltd., a mineral company with an operating property in Brazil and projects in Brazil & Canada. From October 2008 through December
2012, Mr. Smith served as Chief Executive Officer and Director of Molycorp Inc., 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, he held numerous engineering,
environmental, and legal positions within Unocal Corporation (“Unocal”) and later served as the President and Chief
Executive Officer of Chevron Mining Inc. (“Chevron”), a wholly-owned subsidiary of Chevron Corporation. 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, Mr. Smith was responsible for Chevron’s three coal mines,
one molybdenum mine, a petroleum coke calcining operation and the 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 – CFO
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.,
based out of the company’s Boulder, CO office 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.'s corporate offices in Greenwood Village, CO. 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 - May 2014, including as Vice President Health, Environment, Safety and Sustainability
and General Manager and Environmental Manager. With over 23 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.
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. Jim also serves as Director of Investor and Public Relations for IBC Advanced Alloys Corporation. Jim was President and
CEO of Policy Communications, Inc. from 1998 – 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.
John Ashburn – Vice President,
General Counsel and Corporate Secretary
An attorney with 35 years of experience,
including 25 years in extractive industries, Mr. Ashburn joined NioCorp in January 2015 and was appointed to Vice President, General
Counsel and Corporate Secretary on April 2, 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 – January 2015,
and was Executive Vice President and General Counsel of Molycorp, Inc. from December 2008 – 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.
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 2006 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, Key Bank and the Aecon Group.
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 is currently Chairman of
the Board of Heritage Oaks Bankcorp. 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,
which at the time was a wholly owned subsidiary of Unocal and then Chevron. 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 the 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’s qualification to serve
on our Board is based on his based upon 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
is President, CEO, CFO and director of Bullfrog Gold Corp. 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. Employment
included 14 years with five majors, then 38 years of employment and consulting for 25 junior mining companies.
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.
Joseph D. Cecil – Director
Mr. Cecil served as Vice President
and Comptroller of Unocal from December 1997 until 2005. From 2005 until the present day, Mr. Cecil has been self-employed. He
also served as Unocal’s Principal Accounting Officer. During 1997, Mr. Cecil was Comptroller, International Operations of
Unocal. He was Comptroller of the 76 Products Company from 1995 until the sale of the West Coast refining, marketing and transportation
assets in March 1997. Mr. Cecil also served on the Board of Directors for Molycorp.
Mr. Cecil’s qualification to serve
on our Board is based upon years of experience in senior business and executive leadership roles in a variety of publicly traded
companies in the mining and mineral extraction industries.
Anna Castner Wightman – Director
A sixth generation Nebraskan and a
graduate of Nebraska Wesleyan University, Ms. Wightman serves as Vice President of Government Relations 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. Anna 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.
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
year 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 including: (a) any bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (b) any
criminal convictions; (c) any order, judgment, or decree permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking activities; (d) any finding by a court, the SEC or
the CFTC to have violated a federal or state securities or commodities law, any law or regulation respecting financial institutions
or insurance companies, or any law or regulation prohibiting mail or wire fraud; or (e) any sanction or order of any self-regulatory
organization or registered entity or equivalent exchange, association or entity. Further, no such legal proceedings are believed
to be contemplated by governmental authorities against any director or executive officer.
Executive
Compensation
The following table sets out the compensation
received for the fiscal years June 30, 2015 and June 30, 2016 in respect to each of the individuals who served as the Company’s
chief executive officer at any time during the last fiscal year, as well as the Company’s most highly compensated executive
officers:
Summary Compensation Table
Name
and Principal Position
(a)
|
|
Fiscal
Year
(b)
|
|
|
Salary
($)
(c)
|
|
|
Option
Awards (1)
($)
(f)
|
|
|
Total
($)
(j)
|
|
Mark A Smith, CEO, President
|
|
|
2016
|
(2)
|
|
$
|
270,000
|
|
|
$
|
157,972
|
|
|
$
|
427,972
|
|
|
|
|
2015
|
(2)
|
|
$
|
270,000
|
|
|
$
|
287,230
|
|
|
$
|
557,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott Honan, Vice President Business
|
|
|
2016
|
|
|
$
|
212,500
|
|
|
$
|
105,315
|
|
|
$
|
317,815
|
|
Development
|
|
|
2015
|
|
|
$
|
200,000
|
|
|
$
|
162,940
|
|
|
$
|
362,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Dickie, Former President and Former CEO
|
|
|
2015
|
(3)
|
|
$
|
164,165
|
|
|
$
|
248,580
|
|
|
$
|
412,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Ashburn, Jr., Vice-President, General Counsel and Corporate Secretary
|
|
|
2016
|
|
|
$
|
200,000
|
|
|
$
|
73,720
|
|
|
$
|
273,720
|
|
(1)
|
The value of the option-based awards was determined using the Black-Scholes option-pricing model, with the following assumptions:
|
|
|
2016
|
|
|
2015
|
|
Risk-free interest rate
|
|
|
0.75
|
%
|
|
|
1.25
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected stock price volatility
|
|
|
98.2
|
%
|
|
|
105.7
|
%
|
Expected life of options
|
|
|
2.15 years
|
|
|
|
2.15 years
|
|
Option pricing models require
the input of highly subjective assumptions, particularly as to the expected volatility of the stock. Changes in these assumptions
can materially affect the fair value estimate, and therefore it is management’s view that the existing models may not provide
a single reliable measure of the fair value of the Company’s stock option grants. The Company uses an option-pricing model
because there is no market for which employee options may be freely traded. Readers are cautioned not to assume that the value
derived from the model is the value that an employee might receive if the options were freely traded, nor assume that these amounts
are the same as those reported for income tax purposes.
(2)
|
Paid to KMSmith LLC, an entity controlled by Mr. Smith.
|
(3)
|
During the fiscal year ended June 30, 2015, Mr. Smith was appointed as President on May 31, 2015 following the retirement of Mr. Dickie as President, so the information provided for Mr. Dickie for the financial year ended June 30, 2015 is information for less than a full financial year.
|
Narrative Disclosure to Summary
Compensation Table
Compensation and Organization Committee
The Board has established a Compensation
and Organization Committee (the “Compensation Committee”), and has adopted a written charter for the Compensation Committee,
effective August 2015. The overall purpose of the Compensation Committee is to act on behalf of the Board and in the best interest
of the Company’s shareholders to support the Company’s efforts to attract, retain, develop and reward employees to
achieve its annual and strategic objectives. The written charter for the Compensation Committee sets out the role of the Chair
of the Compensation Committee.
The responsibilities of the Compensation
Committee generally include: (1) recommending compensation policies to the Board for approval and thereafter implementing such
policies; (2) ensuring the Company has programs in place to attract and develop management of the highest caliber and a process
to provide for the orderly succession of management; (3) assessing and reporting to the Board on the performance of the CEO; (4)
reviewing the compensation of the CEO and other officers and members of the Board and making recommendations in respect thereof
to the Board; (5) reviewing and approving any proposed amendments to the Company’s incentive stock options plan; (6) making
recommendations to the Board concerning stock option grants; and (7) overseeing and considering the implications and risks associated
with the Company’s compensation policies.
The Compensation Committee is responsible
for assisting the Board in monitoring, reviewing and approving compensation policies and practices of the Company and its subsidiaries
and administering the Company’s Incentive Stock Option Plan. With regard to the CEO, the Compensation Committee is responsible
for reviewing and approving corporate goals and objectives relevant to the CEO’s compensation, evaluating the CEO’s
performance in light of those goals and objectives and making recommendations to the Board with respect to the CEO’s compensation
level based on this evaluation. In consultation with the CEO, the Compensation Committee makes recommendations to the Board on
the framework of executive remuneration and its cost and on specific remuneration packages for each of the directors and officers
other than the CEO, including recommendations regarding awards under equity compensation plans. The Compensation Committee also
reviews executive compensation disclosure before the Company publicly discloses the information. The Compensation Committee’s
decisions are typically reflected in consent resolutions.
There is currently no formal executive
compensation program in place. The Board, in conjunction with the Compensation Committee, consider 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. The members of the Compensation Committee
use their own experience and familiarity with the industry to determine what they believe to be reasonable salaries.
The base salaries of senior management
of the Company 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, salaries (or, for
those executive officers who provide their services through consulting arrangements, consulting fees) are set through negotiation
when an executive officer joins the Company (with direct input from the Compensation Committee) and are subsequently reviewed each
fiscal year to determine if adjustments are required.
The incentive portion of the compensation
package consists primarily of the awarding of stock options. In addition, the Board has discretion where deemed appropriate and
financially affordable for the Company, to grant cash bonuses based on the performance of both the individual and the Company.
Share ownership opportunities through the grant of incentive 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.
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 executive officers, rather, the members of the Compensation Committee use their own subjective
assessments of the success (or otherwise) of the Company to determine, collectively, whether or not the executive officers are
successfully achieving the Company’s business plan and strategy and whether they have over, or under, performed in that regard.
The Compensation Committee has not established any set or formal formula for determining executive officer compensation, either
as to the amount thereof or the specific mix of compensation elements, and compensation, and adjustments thereto, are set through
informal discussions at the Compensation Committee level.
To date, neither the Compensation Committee
nor the Board as a whole has considered the implications of the risks associated with the Company’s compensation policies
and practices. At this time, the Company does prohibit executive officers or directors from purchasing financial instruments, including,
for greater certainty, prepaid variable forward contracts, equity swaps, collars, or units of exchange funds, that are designed
to hedge or offset a decrease in market value of equity securities granted as compensation or held, directly or indirectly, by
the executive officer or director.
Option-based Awards
The Company’s 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 key employees, officers and directors of the Company and subsidiaries 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 key employees, officers, directors
and consultants of the Company and subsidiaries of the Company. Grants of options under the 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 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 options.
The Compensation Committee does not consider
the “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 attract 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 or the Company through their efforts.
The Compensation Committee looks at the
overall number of options held by an individual (including the exercise price and remaining term 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, 2015,
the Compensation Committee approved all recommendations for the grant of incentive stock options proposed by management (of which
an aggregate of 2,800,000 (41%) were granted to executive officers, 1,800,000 (26%) were granted to directors who are not executive
officers and 2,220,000 (33%) were granted to non-executive officer employees and consultants).
During the fiscal year ended June 30, 2016,
the Compensation Committee approved all recommendations for the grant of incentive stock options proposed by management (of which
an aggregate of 2,450,000 (42%) were granted to executive officers, 1,600,000 (27%) were granted to directs who are not executive
officers and 1,825,000 (31%) were granted to non-executive officer employees and consultants)
Compensation Governance
The Company’s Compensation Committee
determines an appropriate amount of compensation for its executives, reflecting the need to provide incentive and compensation
for the time and effort expended by the executives while taking into account the financial and other resources of the Company.
As of the date of this prospectus, the
Compensation Committee is comprised of Joseph Carrabba as the Chairman, David Beling and Michael Morris. All members of the Compensation
Committee are independent.
The Compensation Committee has the authority
to engage and compensate, at the expense of the Company, any outside advisor that it determines to be necessary to permit it to
carry out its duties (including compensation consultants and advisers), but it did not retain any such outside consultants or advisors
during the financial year ended June 30, 2015.
Employment Agreements
We have entered into employment agreements
with certain Company officers and key employees, including Mr. Mark Smith (whom is listed in the executive compensation table above).
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, provides the duties and responsibilities of the Chief Executive
Officer of the Company and related services, for an indefinite term at a rate of $270,000 per annum, 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 entitled to receive stock options under the Company’s Stock Option
Plan, which options are approved by the Board at the time of grant. The Company may terminate the Smith Agreement at any time without
notice or payment should KMSmith commit a material breach of the Smith Agreement. In the event the Smith Agreement is terminated
by the Company for any reason other than as set out in the Smith Agreement 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 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; the ceasing
of the Company as a going concern; the failure of the Company to pay a material amount due; or a material reduction in salary.
KMSmith may terminate the Smith Agreement 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 without the occurrence of a Triggering Event, 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.
Stock Option, Stock Awards and Equity Incentive Plans
In accordance with the Company’s
Option Plan the Company granted certain of its executive officers stock options during the Company’s 2015 and 2016 fiscal
year; no other equity based awards were granted to executive officers during the 2015 or 2016 fiscal year.
The following table sets forth the outstanding
equity awards for each named executive officer at June 30, 2016. The Company has not granted stock based awards to any of its named
executive officers.
Outstanding Equity Awards at Fiscal
Year-End
|
|
Option Awards
|
|
|
|
|
|
|
Name and Principal Position
(a)
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(b)
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(c)
|
|
|
Option
Exercise
Price
(e)
|
|
|
Option
Expiration
Date
(f)
|
Mark A. Smith
(1)
|
|
|
300,000
|
|
|
|
Nil
|
|
|
|
0.80
|
|
|
12/22/2017
|
|
|
|
375,000
|
|
|
|
375,000
|
|
|
|
0.62
|
|
|
1/19/2021
|
Mark A Smith Total
|
|
|
675,000
|
|
|
|
375,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neal Shah
(2)
|
|
|
500,000
|
|
|
|
Nil
|
|
|
|
0.76
|
|
|
9/2/2017
|
|
|
|
200,000
|
|
|
|
Nil
|
|
|
|
0.80
|
|
|
12/22/2017
|
|
|
|
175,000
|
|
|
|
175,000
|
|
|
|
0.62
|
|
|
1/19/2021
|
Neal Shah Total:
|
|
|
875,000
|
|
|
|
175,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott Honan
(3)
|
|
|
370,000
|
|
|
|
Nil
|
|
|
|
0.50
|
|
|
5/9/2017
|
|
|
|
250,000
|
|
|
|
Nil
|
|
|
|
0.65
|
|
|
7/28/2017
|
|
|
|
200,000
|
|
|
|
Nil
|
|
|
|
0.80
|
|
|
12/22/2017
|
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
0.62
|
|
|
1/19/2021
|
Scott Honan Total:
|
|
|
1,070,000
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Ashburn, Jr.
(4)
|
|
|
500,000
|
|
|
|
Nil
|
|
|
|
0.80
|
|
|
12/22/2017
|
|
|
|
175,000
|
|
|
|
175,000
|
|
|
|
0.62
|
|
|
1/19/2021
|
John Ashburn Jr. Total
|
|
|
675,000
|
|
|
|
175,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jim Sims
(5)
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
0.62
|
|
|
1/19/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals:
|
|
|
3,545,000
|
|
|
|
1,225,000
|
|
|
|
|
|
|
|
|
(1)
|
On December 22, 2014, Mr. Smith was granted 300,000
options to purchase common shares for a period of 3 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 5 years at a price of C$0.62 and vest over a period of 18 months
|
|
(2)
|
On September 2, 2014, Mr. Shah was granted 500,000 options to purchase common shares for a period of 3 years at a price of C$0.80. On December 22, 2014, Mr. Shah was granted 200,000 options to purchase common shares for a period of 3 years at a price of C$0.76. On January 21, 2016, Mr. Shah was granted 350,000 options to purchase common shares for a period of 5 years at a price of C$0.62 and vest over a period of 18 months
|
|
(3)
|
On May 9, 2014, Mr. Honan was granted 500,000 options to purchase common shares for a period of 3 years at a price of C$0.50. On July 28, 2014, Mr. Honan was granted 250,000 options to purchase common shares for a period of 3 years at a price of C$0.65. On December 22, 2014, Mr. Honan was granted 200,000 options to purchase common shares for a period of 3 years at a price of $0.80. On January 21, 2016, Mr. Honan was granted 500,000 options to purchase common shares for a period of 5 years at a price of C$0.62 and vest over a period of 18 months
|
|
(4)
|
On December 22, 2014, Mr. Ashburn was granted
500,000 options to purchase common shares for a period of 3 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 5 years at a price of C$0.62 and vest over a period of 18
months.
|
|
(5)
|
On January 21, 2016, Mr. Sims was granted 500,000
options to purchase common shares for a period of 5 years at a price of C$0.62 and vest over a period of 18 months
|
Pension Plan Benefits
The Company does not have in place any
deferred compensation plan or pension plan that provides for payments or benefits at, following or in connection with retirement.
Termination and change of control benefits
Except as described above, the Company
has not entered into any plans or arrangements in respect of remuneration received or that may be received by the executive officers
in the Company’s most recently completed financial year or current financial year in respect of compensating such officers
or directors in the event of termination of employment (as a result of resignation, retirement, change of control, etc.) or a change
in responsibilities following a change of control.
Compensation of Directors
As at the date of this Registration Statement,
the Company has six directors, one of which is also an executive officer, Mark Smith. For a description of the compensation paid
to the executive officer of the Company who also acts as a director, see “Summary Compensation Table” above.
The following table sets forth all compensation the Company
granted to our directors, other than the director who is also an executive officer, for the fiscal year ended June 30, 2016:
Name
(a)
|
|
Option Awards
(1)
($)
(d)
|
|
|
Total
($)
(h)
|
|
Joseph Carrabba
|
|
$
|
84,252
|
|
|
$
|
84,252
|
|
Dave Beling
|
|
$
|
63,189
|
|
|
$
|
63,189
|
|
Michael Morris
|
|
$
|
63,189
|
|
|
$
|
63,189
|
|
Joseph Cecil
|
|
$
|
63,189
|
|
|
$
|
63,189
|
|
Anna Castner Wightman
|
|
|
Nil
|
|
|
|
Nil
|
|
(1)
|
The value of the option-based awards was determined using the Black-Scholes option-pricing model, with the following assumptions:
|
|
|
2016
|
|
Risk-free interest rate
|
|
|
0.75
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
Expected stock price volatility
|
|
|
98.2
|
%
|
Expected life of options
|
|
|
2.15 years
|
|
Option pricing models require
the input of highly subjective assumptions, particularly as to the expected volatility of the stock. Changes in these assumptions
can materially affect the fair value estimate, and therefore it is management’s view that the existing models may not provide
a single reliable measure of the fair value of the Company’s stock option grants. The Company uses an option-pricing model
because there is no market for which employee options may be freely traded. Readers are cautioned not to assume that the value
derived from the model is the value that an employee might receive if the options were freely traded, nor assume that these amounts
are the same as those reported for income tax purposes.
For the fiscal year ending June 30, 2016,
the directors of the Company did not receive a 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, other than as paid by the Company to such Executive Officers in their capacity as Executive officers. See “Summary
Compensation Table” above.
Compensation Committee Interlocks and
Insider Participation
During fiscal year ended June 30, 2016,
Joseph Carrabba, Anthony Fulton David Beling and Michael Morris served on the Compensation Committee. None of these individuals
is an employee or an officer of the Company or had any relationship with the Company requiring disclosure under Item 404 of Regulation
S-K. Anthony Fulton resigned from the Company’s Board of Directors on January 29, 2016.
Security
Ownership of Certain Beneficial Owners and Management
Security Ownership of Management
As of September 15, 2016 the Company
had 180,580,037 Common Shares issued and outstanding. The following table sets forth the beneficial ownership of the Company’s
Common Shares as of September 15, 2016 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
|
|
|
22,856,947
|
(2)
|
|
|
12.33
|
%
|
Neal Shah
Superior, Colorado, USA
|
|
Chief Financial Officer
|
|
|
929,500
|
(3)
|
|
|
0.51
|
%
|
Scott Honan
Centennial,
Colorado, USA
|
|
Vice President, Business Development
|
|
|
1,200,000
|
(4)
|
|
|
0.66
|
%
|
John Ashburn, Jr.
Littleton,
Colorado, USA
|
|
Vice-President, General Counsel and Corporate Secretary
|
|
|
1,325,000
|
(5)
|
|
|
0.73
|
%
|
Jim Sims
Golden Colorado, USA
|
|
Vice-President, External Affairs
|
|
|
258,419
|
(6)
|
|
|
0.14
|
%
|
Joseph A. Carrabba
Key
Largo, Florida, USA
|
|
Lead Director
|
|
|
800,000
|
(7)
|
|
|
0.44
|
%
|
Michael Morris
San
Luis Obispo, California, USA
|
|
Director
|
|
|
705,250
|
(8)
|
|
|
0.39
|
%
|
David C. Beling
Grand Junction, Colorado, USA
|
|
Director
|
|
|
650,000
|
(9)
|
|
|
0.36
|
%
|
Joseph D. Cecil
Laguna
Niguel, California, USA
|
|
Director
|
|
|
650,000
|
(10)
|
|
|
0.36
|
%
|
Anna Castner Wightman
Omaha, Nebraska, USA
|
|
Director
|
|
|
3,000
|
(11)
|
|
|
0.0
|
%
|
All current directors, executive officers and named executive officers as a group (10 persons)
|
|
|
|
|
29,378,116
|
|
|
|
15.42
|
%
|
Notes to
Security Ownership
of Management
table shown above:
|
(1)
|
Calculated in accordance with 1934 Act Rule 13d-3.
|
|
(2)
|
Mr. Smith currently holds 18,049,715 shares of
NioCorp Common stock. He currently holds 4,132,232 exercisable warrants. Each 2014 Warrant entitles Mr. Smith
to acquire one Common Share at a price of C$0.65 until November 2016. In addition, he currently holds 675,000 vested stock
options. On December 22, 2014, Mr. Smith was granted 300,000 options to purchase common shares for a period of 3 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
5 years at a price of C$0.62 and vest over a period of 18 months with 50% having vested at this time.
|
|
(3)
|
Mr.
Shah currently holds 27,250 shares of NioCorp Common stock. He currently holds 27,250 exercisable warrants. Each
2014 Warrant entitles Mr. Shah to acquire one Common Share at a price of C$0.65 until November 2016. In addition, he
currently holds 875,000 vested stock options. On September 2, 2014, Mr. Shah was granted 500,000 options to purchase
common shares for a period of 3 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 3 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 5 years at a price of C$0.62 and vest over a period of 18 months with 50% having
vested at this time.
|
|
(4)
|
Mr. Honan currently holds 130,000 shares of NioCorp
Common stock. In addition, he currently holds 1,070,000 vested stock options. On May 9, 2014, Mr. Honan was granted
500,000 options to purchase common shares for a period of 3 years at a price of C$0.50. On July 28, 2014, Mr. Honan was granted
250,000 options to purchase common shares for a period of 3 years at a price of C$0.65. On December 22, 2014, Mr. Honan was
granted 200,000 options to purchase common shares for a period of 3 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 5 years at a price of C$0.62 and vest over a period
of 18 months with 50% having vested at this time.
|
|
(5)
|
Mr. Ashburn currently holds 650,000 shares of
NioCorp Common stock. In addition, he currently holds 675,000 vested stock options. On December 22, 2014, Mr. Ashburn was
granted 500,000 options to purchase common shares for a period of 3 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 5 years at a price of C$0.62 and vest over a period
of 18 months with 50% having vested at this time.
|
|
(6)
|
Mr. Sims currently holds 8,419 shares of NioCorp
Common stock. In addition, he currently holds 250,000 vested stock options. On January 21, 2016, Mr. Sims was granted
500,000 options to purchase common shares for a period of 5 years at a price of C$0.62 and vest over a period of 18 months
with 50% having vested at this time.
|
|
(7)
|
Mr. Carrabba currently holds 100,000 shares of
NioCorp common stock. In addition, he currently holds 700,000 vested stock options. On December 22, 2014, Mr.
Carrabba was granted 500,000 options to purchase common shares for a period of 3 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 5 years at a price of C$0.62 and
vest over a period of 18 months with 50% having vested at this time.
|
|
(8)
|
Mr. Morris currently holds 55,2500 shares of
NioCorp common stock. In addition, he currently holds 650,000 vested stock options. On July 28, 2014, Mr. Morris was
granted 500,000 options to purchase common shares for a period of 3 years at a price of C$0.65. On January 21, 2016, Mr. Morris
was granted 300,000 options to purchase common shares for a period of 5 years at a price of C$0.62 and vest over a period
of 18 months with 50% having vested at this time.
|
|
(9)
|
Mr. Beling currently holds 350,000 shares of
NioCorp common stock. In addition, he currently holds 300,000 vested stock options. On July 28, 2014, Mr. Beling was
granted 100,000 options to purchase common shares for a period of 3 years at a price of C$0.65. On December 22, 2014, Mr.
Beling was granted 50,000 options to purchase common shares for a period of 3 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 5 years at a price of C$0.62 and vest over
a period of 18 months with 50% having vested at this time.
|
|
(10)
|
Mr. Cecil currently holds 650,000 vested stock
options. On December 22, 2014, Mr. Cecil was granted 500,000 options to purchase common shares for a period of 3 years
at a price of C$0.80. On January 21, 2016, Mr. Cecil was granted 300,000 options to purchase common shares for a period of
5 years at a price of C$0.62 and vest over a period of 18 months with 50% having vested at this time.
|
|
(11)
|
Mrs. Wightman currently holds 3,000 shares of
NioCorp common stock. On July 21, 2016, Mrs. Wightman was granted 500,000 options to purchase common shares for a period
of 5 years at a price of C$0.94 which vest over a period of 18 months and have not vested at this time.
|
Security Ownership of Certain Beneficial
Owners
As of September 15, 2016, 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 September 15, 2016, there are no
arrangements 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.
Certain
Relationships and Related Transactions
Related Party Transactions
The following sets forth information
regarding transactions between the Company (and its subsidiaries) and its officers, directors and significant shareholders since
the beginning of its fiscal year ended June 30, 2014.
Employment Agreements:
See “Executive Compensation -
Employment Agreements” above for a discussion of the employment agreements between the Company and Mr. Smith.
Loan Transactions:
On June 17, 2015, the Company entered
into a one-year 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 loan above, the “Smith Loans”) in the amount of
$2 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 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.
With the receipt of additional funding
proceeds from the December Private Placement and Convertible Security, 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. During the year ended June 30, 2016, $108,000 of interest was paid under the Smith loans, with $53,000
remaining payable as of June 30, 2016.
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.
Related Party Purchase in Equity Offering:
1. Mark Smith acquired 3,400,000 Common
Shares of the Issuer under a private placement closed October 21, 2013;
2. Mark Smith acquired 3,400,000 Common
Shares of the Issuer under a private placement closed December 23, 2013;
3. Mark Smith acquired 2,882,483 Common
Shares of the Issuer under a private placement closed March 19, 2014; and
4. Mark Smith acquired 4,132,232 2014
Special Warrants under the 2014 Offering.
The Company does not currently have in
place any specific policy or procedure in respect of the purchase of securities of the Company from treasury by the Company’s
directors or officers. Sections 147-153 of the BCBCA set out rules and procedures applicable to all British Columbia corporations,
pursuant to which a director presented with a resolution in respect of any matter (including an equity issuance) in respect of
which he/she has an interest must disclose that interest in writing to the Company’s board of directors prior to the approval
of such matter. This procedure ensures that each equity issuance to a director or officer of the Company is approved by all directors
of the Company not involved in such sale.
Director Independence
As of September 15, 2016, the Company’s
Board of Directors consists of Messrs. Smith, Carrabba, Beling, Morris, Cecil 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, Cecil and Ms. Wightman are considered independent directors.
INTERESTS OF EXPERTS
The financial statements as of June
30, 2016 and 2015 and for the years ended June 30, 2016 and 2015 included in this Prospectus and in the Registration Statement
have been so included in reliance on the report of BDO USA, LLP, an independent registered public accounting firm (the report
on the financial statements contains an explanatory paragraph regarding the Company's ability to continue as a going concern),
appearing elsewhere herein and in the Registration Statement, given on the authority of said firm as experts in auditing and accounting.
Certain portions of the description of
the Elk Creek Project were summarized or extracted from a technical report prepared in accordance with NI 43-101 dated October
16, 2015 and entitled “Updated Preliminary Economic Assessment, Elk Creek Niobium Project, Nebraska” those extracts
were reviewed and approved by Eric Larochelle, BEng (Roche Director, Specialty Metals & Hydrometallurgy) and Jeff Osborn, BEng
Mining, MMSAQP (SRK Principal Consultant, Mining Engineer).
None of the above experts has or is to
receive in connection with the offering, a substantial interest, direct or indirect, in the Company or any of its subsidiaries
nor was it connected with the Company or any of its subsidiaries as a promoter, managing or principal underwriter, voting trustee,
Director, officer, or employee.
Where
You Can Find More Information
We have filed with the SEC a registration
statement on Form S-1, including exhibits and schedules, under the Securities Act with respect to the Common Shares to be
sold in this offering. This prospectus, which constitutes a part of the registration statement, contains all of the information
set forth in the registration statement or the exhibits and schedules that are part of the registration statement. For further
information about us and our Common Shares, you may refer to the registration statement.
You may read, without charge, and copy,
at prescribed rates, all or any portion of the registration statement or any reports, statements or other information in the files
at the public reference room at the SEC’s principal office at 100 F Street NE, Washington, D.C., 20549. You may request copies
of these documents, for a copying fee, by writing to the SEC. You may call the SEC at 1-800-SEC-0330 for further information on
the operation of its public reference room. Our filings, including the registration statement, will also be available to you on
the Internet website maintained by the SEC at http://www.sec.gov.
INDEX TO FINANCIAL STATEMENTS
The following audited consolidated
financial statements of the Company as at and for the years ended June 30, 2016 and 2015 are attached as pages F-1 through F-21
and are incorporated herein by reference:
NioCorp Developments Ltd.
Consolidated Financial Statements
June 30, 2016
Report
of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
NioCorp Developments Ltd.
Denver, Colorado
We have audited the accompanying consolidated balance sheets
of NioCorp Developments Ltd. (the “Company”) as of June 30, 2016 and 2015 and the related consolidated statements
of operations and comprehensive loss, shareholders’ equity, and cash flows for the years then ended June 30, 2016 and 2015.
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with the standards
of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of NioCorp Developments Ltd. at June 30, 2016 and 2015,
and the results of its operations and its cash flows for the years then ended June 30, 2016 and 2015, in conformity with accounting
principles generally accepted in the United States of America.
The accompanying consolidated financial statements have
been prepared assuming that the Company will continue as a going concern. As described in Note 4 to the consolidated financial
statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial
doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described
in Note 4. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Our opinion is not modified with respect to this matter.
/s/ BDO USA, LLP
Spokane, Washington
September 1, 2016
BDO USA, LLP, a Delaware limited liability partnership,
is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network
of independent member firms.
BDO is the brand name for the BDO network and for each of
the BDO Member Firms.
NioCorp
Developments Ltd.
|
Consolidated
Balance Sheets
|
(expressed in thousands of U.S. dollars,
except share data)
|
|
|
|
|
|
As of June 30,
|
|
|
|
Note
|
|
|
2016
|
|
|
2015
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
$
|
4,412
|
|
|
$
|
753
|
|
Receivables
|
|
|
|
|
|
|
5
|
|
|
|
14
|
|
Prepaid expenses
|
|
|
|
|
|
|
101
|
|
|
|
58
|
|
Total current assets
|
|
|
|
|
|
|
4,518
|
|
|
|
825
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
65
|
|
|
|
67
|
|
Available for sale securities at fair value
|
|
|
|
|
|
|
32
|
|
|
|
46
|
|
Equipment
|
|
|
|
|
|
|
14
|
|
|
|
20
|
|
Mineral interests
|
|
|
5
|
|
|
|
10,617
|
|
|
|
10,617
|
|
Total assets
|
|
|
|
|
|
$
|
15,246
|
|
|
$
|
11,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
$
|
1,256
|
|
|
$
|
4,440
|
|
Related party loan
|
|
|
9
|
|
|
|
1,000
|
|
|
|
1,500
|
|
Flow-through tax liability
|
|
|
6
|
|
|
|
-
|
|
|
|
624
|
|
Total current liabilities
|
|
|
|
|
|
|
2,256
|
|
|
|
6,564
|
|
Convertible debt
|
|
|
7
|
|
|
|
6,466
|
|
|
|
-
|
|
Derivative liability, convertible debt
|
|
|
7
|
|
|
|
330
|
|
|
|
-
|
|
Total liabilities
|
|
|
|
|
|
|
9,052
|
|
|
|
6,564
|
|
Commitments
|
|
|
13
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, unlimited shares authorized; shares
outstanding: 180,467,990 at June 30, 2016 and 156,420, 334 at June 30, 2015
|
|
|
8
|
|
|
|
58,401
|
|
|
|
47,617
|
|
Additional paid-in capital
|
|
|
|
|
|
|
8,630
|
|
|
|
7,250
|
|
Accumulated deficit
|
|
|
|
|
|
|
(60,222
|
)
|
|
|
(48,814
|
)
|
Accumulated other comprehensive loss
|
|
|
|
|
|
|
(615
|
)
|
|
|
(1,042
|
)
|
Total shareholder equity
|
|
|
|
|
|
|
6,194
|
|
|
|
5,011
|
|
Total liabilities and equity
|
|
|
|
|
|
$
|
15,246
|
|
|
$
|
11,575
|
|
The accompanying notes
are an integral part of these consolidated financial statements
NioCorp Developments
Ltd.
|
Consolidated Statement
of Operations and Comprehensive Loss
|
(expressed in thousands of U.S. dollars, except share and
per share data)
|
|
|
|
|
|
For the year
ended June 30,
|
|
|
|
Note
|
|
|
2016
|
|
|
2015
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
|
|
|
|
|
|
$
|
201
|
|
|
$
|
242
|
|
Depreciation
|
|
|
|
|
|
|
9
|
|
|
|
10
|
|
Employee related costs
|
|
|
|
|
|
|
1,988
|
|
|
|
3,413
|
|
Finance costs
|
|
|
|
|
|
|
242
|
|
|
|
39
|
|
Professional fees
|
|
|
|
|
|
|
512
|
|
|
|
435
|
|
Exploration expenditures
|
|
|
10
|
|
|
|
4,719
|
|
|
|
18,051
|
|
Other operating expenses
|
|
|
|
|
|
|
1,847
|
|
|
|
3,178
|
|
Impairment of equipment
|
|
|
|
|
|
|
-
|
|
|
|
112
|
|
Total operating expenses
|
|
|
|
|
|
|
9,518
|
|
|
|
25,480
|
|
Change in financial instrument fair value
|
|
|
7
|
|
|
|
2,719
|
|
|
|
-
|
|
Other gains
|
|
|
6
|
|
|
|
(587
|
)
|
|
|
-
|
|
Interest and other income
|
|
|
|
|
|
|
-
|
|
|
|
(16
|
)
|
Foreign exchange (gain) loss
|
|
|
|
|
|
|
(528
|
)
|
|
|
434
|
|
Interest expense
|
|
|
|
|
|
|
275
|
|
|
|
-
|
|
Loss (gain) on available for sale securities
|
|
|
|
|
|
|
11
|
|
|
|
(28
|
)
|
Loss before income taxes
|
|
|
|
|
|
|
11,408
|
|
|
|
25,870
|
|
Income tax benefit
|
|
|
|
|
|
|
-
|
|
|
|
(2,755
|
)
|
Net loss
|
|
|
|
|
|
$
|
11,408
|
|
|
$
|
23,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (gain) loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
$
|
11,408
|
|
|
$
|
23,115
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting currency translation
|
|
|
|
|
|
|
(427
|
)
|
|
|
959
|
|
Total comprehensive loss
|
|
|
|
|
|
$
|
10,981
|
|
|
$
|
24,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share, basic and diluted
|
|
|
|
|
|
$
|
0.07
|
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
164,038,509
|
|
|
|
136,045,244
|
|
The accompanying notes
are an integral part of these consolidated financial statements
NioCorp Developments
Ltd.
|
Consolidated Statement
of Cash Flows
|
(expressed in thousands of U.S. dollars)
|
|
|
For the year
ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Total loss for the period
|
|
$
|
(11,408
|
)
|
|
$
|
(23,115
|
)
|
Adjustments for:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
9
|
|
|
|
10
|
|
Change in financial instrument fair value
|
|
|
2,719
|
|
|
|
-
|
|
Warrants expense
|
|
|
540
|
|
|
|
2,159
|
|
Unrealized loss (gain) on available-for-sale investments
|
|
|
11
|
|
|
|
(28
|
)
|
Impairment of equipment
|
|
|
-
|
|
|
|
112
|
|
Accretion of convertible debt
|
|
|
81
|
|
|
|
-
|
|
Deferred taxes
|
|
|
-
|
|
|
|
(2,755
|
)
|
Foreign exchange (gain) loss
|
|
|
(247
|
)
|
|
|
183
|
|
Other non-cash items
|
|
|
(587
|
)
|
|
|
-
|
|
Share-based compensation
|
|
|
1,049
|
|
|
|
2,506
|
|
|
|
|
(7,833
|
)
|
|
|
(20,928
|
)
|
Change in non-cash working capital items:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
8
|
|
|
|
25
|
|
Prepaid expenses
|
|
|
(63
|
)
|
|
|
(39
|
)
|
Accounts payable and accrued liabilities
|
|
|
(3,086
|
)
|
|
|
3,625
|
|
Net cash used in operating activities
|
|
|
(10,974
|
)
|
|
|
(17,317
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
-
|
|
|
|
(14
|
)
|
Acquisition of equipment
|
|
|
(4
|
)
|
|
|
(27
|
)
|
Net cash used in investing activities
|
|
|
(4
|
)
|
|
|
(41
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from issuance of capital stock
|
|
|
9,993
|
|
|
|
13,979
|
|
Share issue costs
|
|
|
(151
|
)
|
|
|
(521
|
)
|
Issuance of convertible debt, net of issuance costs
|
|
|
5,060
|
|
|
|
-
|
|
Related party debt draws
|
|
|
600
|
|
|
|
1,500
|
|
Related party debt repayment
|
|
|
(1,100
|
)
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
14,402
|
|
|
|
14,958
|
|
Exchange rate effect on cash
|
|
|
235
|
|
|
|
345
|
|
Change in cash during the period
|
|
|
3,659
|
|
|
|
(2,055
|
)
|
Cash, beginning of period
|
|
|
753
|
|
|
|
2,808
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
4,412
|
|
|
$
|
753
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Amounts paid for interest
|
|
$
|
144
|
|
|
$
|
-
|
|
Amounts paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Non-cash financing transaction
|
|
$
|
638
|
|
|
$
|
-
|
|
The accompanying notes
are an integral part of these consolidated financial statements
NioCorp Developments
Ltd.
|
Consolidated Statements
of Shareholders’ Equity
|
(expressed in thousands of U.S. dollars, except share data)
|
|
|
Common
Shares
Outstanding
|
|
|
Common
Stock
|
|
|
Additional
paid-in
capital
|
|
|
Deficit
|
|
|
Accumulated
other
comprehensive
income
|
|
|
Total
|
|
Balance, July 1, 2014
|
|
|
122,884,716
|
|
|
$
|
33,667
|
|
|
$
|
2,933
|
|
|
$
|
(25,699
|
)
|
|
$
|
(83
|
)
|
|
$
|
10,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private placement - November 2014
|
|
|
19,245,813
|
|
|
|
8,846
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,846
|
|
Private placement - March 2015
|
|
|
2,914,000
|
|
|
|
1,722
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,722
|
|
Issue costs
|
|
|
-
|
|
|
|
(708
|
)
|
|
|
187
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(521
|
)
|
Exercise of warrants
|
|
|
5,125,805
|
|
|
|
2,368
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,368
|
|
Exercise of options
|
|
|
6,250,000
|
|
|
|
1,042
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,042
|
|
Fair value of stock options exercised
|
|
|
-
|
|
|
|
680
|
|
|
|
(680
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Fair value of warrants
granted to ThyssenKrupp
|
|
|
-
|
|
|
|
-
|
|
|
|
1,854
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,854
|
|
Fair value of warrants
for financial services agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
268
|
|
|
|
-
|
|
|
|
-
|
|
|
|
268
|
|
Fair value of warrants
for sponsorship agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
99
|
|
|
|
-
|
|
|
|
-
|
|
|
|
99
|
|
Share-based payments
|
|
|
-
|
|
|
|
-
|
|
|
|
2,589
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,589
|
|
Reporting currency presentation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(959
|
)
|
|
|
(959
|
)
|
Loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(23,115
|
)
|
|
|
-
|
|
|
|
(23,115
|
)
|
Balance, June 30, 2015
|
|
|
156,420,334
|
|
|
$
|
47,617
|
|
|
$
|
7,250
|
|
|
$
|
(48,814
|
)
|
|
$
|
(1,042
|
)
|
|
$
|
5,011
|
|
Exercise of warrants
|
|
|
12,549,309
|
|
|
|
5,838
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,838
|
|
Exercise of options
|
|
|
1,415,000
|
|
|
|
405
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
405
|
|
Fair value of broker warrants granted
|
|
|
-
|
|
|
|
-
|
|
|
|
15
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15
|
|
Fair value of Lind Warrants granted
|
|
|
-
|
|
|
|
-
|
|
|
|
620
|
|
|
|
-
|
|
|
|
-
|
|
|
|
620
|
|
Private placement - January 2016
|
|
|
9,074,835
|
|
|
|
3,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,750
|
|
Debt conversions
|
|
|
1,008,512
|
|
|
|
638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
638
|
|
Share issuance costs
|
|
|
-
|
|
|
|
(151
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(151
|
)
|
Fair value of stock options exercised
|
|
|
-
|
|
|
|
304
|
|
|
|
(304
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Share-based payments
|
|
|
-
|
|
|
|
-
|
|
|
|
1,049
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,049
|
|
Reporting currency presentation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
427
|
|
|
|
427
|
|
Loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,408
|
)
|
|
|
-
|
|
|
|
(11,408
|
)
|
Balance, June 30, 2016
|
|
|
180,467,990
|
|
|
$
|
58,401
|
|
|
$
|
8,630
|
|
|
$
|
(60,222
|
)
|
|
$
|
(615
|
)
|
|
$
|
6,194
|
|
The accompanying notes
are an integral part of these consolidated financial statements
NioCorp Developments
Ltd.
|
Notes to Consolidated Financial Statements
|
June 30, 2016
|
(expressed in thousands of U.S. dollars, unless otherwise
stated)
|
|
1.
|
DESCRIPTION OF BUSINESS
|
NioCorp Developments Ltd. (the
“Company”) was incorporated on February 27, 1987 under the laws of the Province of British Columbia and currently
operates in one reportable operating segment consisting of exploration and development of mineral deposits in North America, specifically,
the Elk Creek Niobium/Scandium/Titanium property (the “Elk Creek Project”) located in Southeastern Nebraska.
These consolidated financial
statements have been prepared on a going concern basis that contemplates the realization of assets and discharge of liabilities
at their carrying values in the normal course of business for the foreseeable future. These financial statements do not reflect
any adjustments that may be necessary if the Company is unable to continue as a going concern.
The Company currently earns
no operating revenues and will require additional capital in order to advance the Elk Creek Project. The Company’s ability
to continue as a going concern is uncertain and is dependent upon the generation of profits from mineral properties, obtaining
additional financing and maintaining continued support from its shareholders and creditors.
|
a)
|
Basis of Preparation and
|
Consolidation These consolidated
financial statements have been prepared in conformity with generally accepted accounting principles of the United States of America
(“US GAAP”). Certain transactions include reference to Canadian dollars (“C$”) where applicable.
These consolidated financial
statements include the accounts of the Company and the subsidiaries listed in the following table. All intercompany transactions
and balances have been eliminated.
|
|
Country of
|
|
|
Ownership at June 30,
|
|
|
|
incorporation
|
|
|
2016
|
|
|
2015
|
|
0896800 BC Ltd.
|
|
|
Canada
|
|
|
|
100
|
%
|
|
|
100
|
%
|
Elk Creek Resources Corp.
|
|
|
USA
|
|
|
|
100
|
%
|
|
|
100
|
%
|
Silver Mountain Mines Corp.
|
|
|
USA
|
|
|
|
100
|
%
|
|
|
100
|
%
|
b) Use of Estimates
The preparation of consolidated
financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of expenses during the reporting period. The Company regularly evaluates estimates and assumptions related
to the deferred income tax asset valuations and share-based compensation. The Company bases its estimates and assumptions on current
facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results
of which form the basis for making judgments about the other sources. The actual results experienced by the Company may differ
materially and adversely from the Company’s estimates. To the extent there are material differences between estimates and
the actual results, future results of operations will be affected.
NioCorp Developments Ltd.
|
Notes to Consolidated Financial Statements
|
June 30, 2016
|
(expressed in thousands of U.S. dollars, unless otherwise
stated)
|
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
a)
|
Exploration Stage Enterprise
|
The Company is in the exploration
stage of operation and devotes substantially all of its efforts to acquiring and exploring mining interests that management believes
should eventually provide sufficient net profits to sustain the Company’s existence. Until such interests are engaged in
commercial production, the Company will continue to seek additional funding to support the completion of its exploration and development
activities. The Company’s activities are subject to significant risks and uncertainties, including its ability to secure
sufficient funding to continue operations, to obtain proven and probable reserves, to comply with industry regulations and obtain
permits necessary for development of the Elk Creek Project, as well as environmental risks and market conditions.
|
b)
|
Cash and Cash Equivalents
|
Cash and cash equivalents includes
cash on hand, cash in banks, investments in certificates of deposit with original maturities of 90 days or less, and money market
funds.
|
c)
|
Foreign Currency Translation
|
Functional and reporting currency
Items included in the financial
statements of each of the Company’s entities are measured using the currency of the primary economic environment in which
the entity operates (“the functional currency”). The functional currency of the Company is the Canadian Dollar. Effective
July 1, 2015, the Corporation changed the functional currency for Elk Creek Resources Corp., a wholly-owned subsidiary, from the
Canadian Dollar to the U.S. Dollar. This change was made as a greater percentage of expenditures for technical and administrative
services, and raised financings are denominated in U.S. Dollars. No other entities in the Group were affected by this change in
functional currency. This change in judgment has been accounted for prospectively in accordance with Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) 830.
The reporting currency for these
consolidated financial statements is U.S. Dollars.
Transactions in foreign currency
Transactions made in a currency
other than Canadian Dollars are translated to the functional currency at exchange rates at the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the
exchange rate at that date and non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are
translated at the exchange rates approximating those in effect on the date of the transactions. Foreign currency gains and losses
arising from translation are included in profit or loss.
Translation to reporting currency
The results and financial position
of entities that have a functional currency different from the reporting currency are translated into the reporting currency as
follows:
|
•
|
Assets and liabilities
for each statement of financial position presented are translated at the closing rate
at the end of the reporting date.
|
|
•
|
Income and expenses for
each statement of income are translated at average exchange rates, unless this average
is not a reasonable approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are translated at the rate on
the dates of the transactions.
|
|
•
|
All resulting exchange
differences are recognized in other comprehensive income.
|
NioCorp Developments Ltd.
|
Notes to Consolidated Financial Statements
|
June 30, 2016
|
(expressed in thousands of U.S. dollars, unless otherwise
stated)
|
|
d)
|
Available for Sale Securities
|
Available for sale securities
are recorded at fair value through the statement of operations pursuant to the fair value option permitted by ASC 825, Financial
Instruments.
Equipment is stated at cost less
accumulated depreciation. The residual value, useful life and depreciation method are evaluated every reporting period and changes
to the residual value, estimated useful life or depreciation method resulting from such review are accounted for prospectively.
Depreciation is provided for using the straight line basis at the following rates per annum:
Computer
equipment
|
three
years
|
Furniture and equipment
|
five years
|
Mineral property acquisition
costs, including indirectly related acquisition costs, are capitalized when incurred. Acquisition costs include cash consideration
and the fair market value of common shares issued as consideration. Properties acquired under option agreements, whereby payments
are made at the sole discretion of the Company, are capitalized as mineral property acquisition costs at such time as the payments
are made. Exploration costs are expensed as incurred. When it is determined that a mining deposit can be economically and legally
extracted or produced based on established proven and probable reserves under SEC Industry Guide 7, development costs related
to such reserves and incurred after such determination will be considered for capitalization. The establishment of proven and
probable reserves is based on results of feasibility studies, which indicate whether a property is economically feasible. Upon
commencement of commercial production, capitalized costs will be amortized over their estimated useful lives or units of production,
whichever is a more reliable measure. Capitalized amounts relating to a property that is abandoned or otherwise considered uneconomic
for the foreseeable future are written off.
Long-lived assets held and used
by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed
using undiscounted net cash flows related to the long-lived assets. If such assets are considered to be impaired, the impairment
recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to
be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
The Company’s financial
instruments consist of cash, receivables, available for sale securities, accounts payable and accrued liabilities, convertible
debt and the related party loan. It is management’s opinion that the Company is not exposed to significant interest, currency
or credit risks arising from its financial instruments. The fair values of these instruments approximate their carrying value
unless otherwise noted.
|
i)
|
Concentration of Credit Risk
|
The financial instrument which
potentially subjects the Company to credit risk is cash and cash equivalents, The Company holds invests or maintains available
cash primarily in two commercial banks located in Vancouver, British Columbia and Santa Clara, California. As part of its cash
management process, the Company regularly monitors the relative credit standing of these institutions.
NioCorp Developments Ltd.
|
Notes to Consolidated Financial Statements
|
June 30, 2016
|
(expressed in thousands of U.S. dollars, unless otherwise
stated)
|
|
j)
|
Asset Retirement Obligation
|
The Company is subject to various
government laws and regulations relating to environmental disturbances caused by exploration and evaluation activities. The estimated
costs associated with environmental remediation obligations are accrued in the period in which the liability is incurred if it
is reasonably estimable or known. Until such time that a project life is established, the Company records the corresponding cost
as an exploration stage expense, and has accrued $85 related to estimated obligations as of June 30, 2016 (2015 - $nil).
Future reclamation and environmental-related
expenditures are difficult to estimate in many circumstances due to the early stage nature of the exploration project, the uncertainties
associated with defining the nature and extent of environmental disturbance, the application of laws and regulations by regulatory
authorities and changes in reclamation or remediation technology. The Company periodically reviews accrued liabilities for such
reclamation and remediation costs as evidence indicating that the liabilities have potentially changed becomes available. Changes
in estimates are reflected in the consolidated statement of operations in the period an estimate is revised.
Income taxes are provided based
upon the liability method of accounting pursuant to ASC 740-10-25,
“Income Taxes – Recognition”.
Under
the approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax
basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against
deferred tax assets if management does not believe the Company has met the “more likely than not” standard imposed
by ASC 740-10-25-5 to allow recognition of such an asset.
|
l)
|
Basic and Diluted Per Share Disclosure
|
Basic earnings (loss) per share
is computed by dividing net income (loss) by the weighted average number of common shares outstanding. In computing diluted earnings
per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities.
Potentially dilutive shares, such as stock options and warrants, are excluded from the calculation when their inclusion would
be anti-dilutive, such as when the exercise price of the instrument exceeds the fair market value of the Company’s common
stock and when a net loss is reported. The dilutive effect of convertible debt securities is reflected in the diluted earnings
(loss) per share calculation using the if-converted method. Conversion of the debt securities is not assumed for purposes of calculating
diluted earnings (loss) per share if the effect is anti-dilutive.
|
m)
|
Stock Based Compensation
|
The Company grants stock options
to directors, officers, and employees. Option terms and vesting conditions are at the discretion of the Board of Directors. The
option exercise price is equal to the closing market price on the Toronto Stock Exchange on the Toronto Stock Exchange on the
day preceding the date of grant.
The Company estimates the fair
value of stock options using the Black-Scholes option pricing model. The Company estimates forfeitures of stock-based awards based
on historical data and periodically adjusts the forfeiture rate. The adjustment of the forfeiture rate is recorded as a cumulative
adjustment in the period the forfeiture estimate is changed.
NioCorp Developments Ltd.
|
Notes to Consolidated Financial Statements
|
June 30, 2016
|
(expressed in thousands of U.S. dollars, unless otherwise
stated)
|
|
n)
|
Recent Accounting Standards
|
From time to time, new accounting
pronouncements are issued by the FASB that are adopted by the Company as of the specified effective date. Unless otherwise discussed,
management believes that the impact of recently issued standards did not or will not have a material impact on the Company’s
consolidated financial statements upon adoption.
In February 2016, the FASB issued
Accounting Standard Update
(“ASU”)
2016-02, Leases
. The standard requires that a lessee recognize on
the balance sheet assets and liabilities for leases with lease terms of more than 12 months. The recognition, measurement, and
presentation of expenses and cash flows arising from a lease have not significantly changed from the previous GAAP. The standard
is effective for fiscal years beginning after December 15, 2018, including interim periods within such fiscal year, with early
adoption permitted. The Company is currently assessing the impact, if any, of implementing this guidance on its consolidated financial
position, results of operations and liquidity.
In November 2015, the FASB issued
ASU 2015-17 which simplifies income tax accounting. The update requires that all deferred tax assets and liabilities be classified
as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. This update is effective
for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, and early adoption is permitted.
The Company elected to early adopt this standard as of July 1, 2014.
In April 2015, the FASB issued
ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs
.
This update simplifies the presentation of debt issuance costs by requiring debt issuance costs to be presented as a deduction
from the corresponding debt liability. The update is effective in fiscal years, including interim periods, beginning after December
15, 2015, and early adoption is permitted. The Company elected to early adopt this standard effective July 1, 2014.
In November 2014, the FASB issued
ASU 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin
to Debt or to Equity
. The ASU clarifies how current guidance should be interpreted in evaluating the economic characteristics
and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments
clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated
for bifurcation, in evaluating the nature of a host contract. The ASU is effective for fiscal years and interim periods beginning
after December 15, 2015. The Company is currently assessing the impact, if any, of implementing this guidance on its consolidated
financial position, results of operations and liquidity.
In August 2014, the FASB issued
ASU 2014-15, Presentation of Financial Statements – Going Concern
. The new standard requires management of public
and private companies to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern
and, if so, disclose that fact. Management will also be required to evaluate and disclose whether its plans alleviate that doubt.
The new standard is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning
after December 15, 2016. Adoption of the new guidance is not expected to have a material impact on the financial statement presentation
of the Company.
The Company incurred a loss
of $11,408 for the year ended June 30, 2016 (2015 - $23,115), and has an accumulated deficit of $60,222 as of June 30, 2016. These
factors indicate the existence of a material uncertainty that raises substantial doubt about the Company's ability to continue
as a going concern.
NioCorp Developments Ltd.
|
Notes to Consolidated Financial Statements
|
June 30, 2016
|
(expressed in thousands of U.S. dollars, unless otherwise
stated)
|
The Company’s ability
to continue operations and fund its expenditures is dependent on Management’s ability to secure additional financing. Management
is actively pursuing such additional sources of financing, and while it has been successful in doing so in the past, there can
be no assurance it will be able to do so in the future.
These consolidated financial
statements do not give effect to any adjustments required to realize its assets and discharge its liabilities in other than the
normal course of business and at amounts different from those reflected in the accompanying financial statements.
During the year ended June
30, 2011, the Company completed the acquisition of the Elk Creek property through a share exchange agreement with 0859404 BC Ltd,
a Canadian company, which owned all the issued and outstanding shares of Elk Creek Resources Corp. ("Elk Creek"). The
Company issued 18,990,539 common shares to acquire all of the issued and outstanding shares of 0859404 BC Ltd. and issued 1,034,348
common shares as a finder’s fee with respect to the acquisition. The transaction did not meet the definition of a business
acquisition, as set forth in ASC 805, and therefore was accounted for as a purchase of assets. The acquisition price was based
on the market value of the Company’s common shares on the closing date and total consideration given was C$13,246, including
associated deferred tax impacts, of C$4,736.
The property interests of Elk
Creek consist of a number of prepaid five-year mineral exploration lease agreements, and include a pre-determined buyout for permanent
ownership of the mineral rights. Terms of the agreements require no further significant payments until the conclusion of the prepaid
lease, at which time the Company may negotiate lease extensions or elect to buyout the mineral rights. Certain agreements also
contain provisions to purchase surface rights, and several contain provisions whereby the landowners would retain a 2% NSR. During
the year ended June 30, 2015, the Company executed 5-year extensions to all landholder agreements covering 100% of the mineralized
materials at the Elk Creek Project.
|
6.
|
FLOW THROUGH LIABILITIES
|
The Company issued 8,337,000
common shares to Canadian investors on a flow-through basis for gross proceeds of C$2,501 in November 2010. The Company was required
to incur eligible flow-through expenditures up to November 2011. The Company was short by approximately C$1,470 in meeting this
requirement. Under the subscription agreement with the Canadian investors, the Company has an obligation to indemnify the subscriber
for any taxes that may arise from the Company failing to meet the flow-through expenditure requirements. The Company did not receive
any claims through April 30, 2016 against this accrual, and the accrual was reversed on April 30, 2016 and the Company recorded
a corresponding gain of $587 in ‘other gains’. All claims after May 1, 2016 will be evaluated through the statute
of limitations of the Canada Revenue Agency and expensed as incurred.
|
|
As of June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Convertible Notes
|
|
$
|
475
|
|
|
$
|
-
|
|
Convertible Security
|
|
|
5,991
|
|
|
|
-
|
|
|
|
$
|
6,466
|
|
|
$
|
-
|
|
NioCorp Developments Ltd.
|
Notes to Consolidated Financial Statements
|
June 30, 2016
|
(expressed in thousands of U.S. dollars, unless otherwise
stated)
|
Convertible Notes
The Company completed a non-brokered
private placement of unsecured convertible promissory notes (the “Notes”), for gross proceeds of $800 (the “Private
Placement”) in October 2015. The Notes bear interest at a rate of 8%, payable quarterly in arrears, are non-transferable
and have a term of three years from the date of issue. Principal under the Notes is convertible by lenders at any time into, and
payable by the Company in, common shares of the Company at a conversion price of C$0.97 per common share, calculated on conversion
or repayment using the then-current Bank of Canada noon exchange rate. Accrued but unpaid interest on the Notes will be convertible
by lender into, and payable by the Company in, common shares at a price per common share equal to the most recent closing price
of the Company’s common shares prior to the delivery to the Company of a request to convert interest, or the due date of
interest, as applicable, calculated using the then-current Bank of Canada noon exchange rate. Interest, when due, is payable either
in cash or Shares, at the election of the Company.
The conversion feature of
the debentures meets the definition of a derivative liability instrument because the conversion feature is denominated in a currency
other than the Company’s Canadian dollar functional currency and the conversion rate is variable and therefore does not
meet the “fixed-for-fixed” criteria outlined in ASC 815-40-15. As a result, the conversion feature of the debentures
is required to be recorded as a derivative liability recorded at fair value and marked-to-market each period with the changes
in fair value each period being charged or credited to income.
The following table discloses
the components associated with this transaction on the closing date:
|
|
Convertible Notes
|
|
Face value of Notes on closing
|
|
$
|
800
|
|
Less:
|
|
|
|
|
Transaction costs
|
|
|
(47
|
)
|
Conversion component
|
|
|
(360
|
)
|
Convertible notes, opening balance
|
|
$
|
393
|
|
The Company incurred transaction
costs of $47, which have been added to the carrying amount of the financial liability and are amortized as part of the effective
interest rate.
Changes in the Notes balance
are comprised of the following:
|
|
Convertible Notes
|
|
Notes, balance on closing
|
|
$
|
393
|
|
Accreted interest, net of interest paid
|
|
|
82
|
|
Balance, June 30, 2016
|
|
$
|
475
|
|
The changes in the derivative
liability related to the conversion feature are as follows:
|
|
Derivative Liability
|
|
Opening balance
|
|
$
|
360
|
|
Change in fair value of derivative liability
|
|
|
(30
|
)
|
Balance, June 30, 2016
|
|
$
|
330
|
|
Lind Partners Convertible
Security Funding
On December 22, 2015, the Company
closed a definitive convertible security funding agreement (the "Lind Agreement") with Lind Asset Management IV, LLC
(“Lind”). The Lind Agreement is comprised of a $4,500 principal amount, 10% secured convertible security (the “Convertible
Security”) and 3,125,000 transferable common share purchase warrants (the “Lind Warrants”). The Convertible
Security has a term of two years from its date of issuance, and interest is prepaid and added to its principal amount; accordingly,
the initial face value of the Convertible Security is $5,400, and the yield of the Convertible Security (if held, unconverted,
to maturity) will be 10% per annum, or $900. Each Lind Warrant will entitle the holder to purchase one additional common share
(a “Lind Warrant Share”) at a price of C$0.72 on or before December 22, 2018. Lind can increase the funding under
the Convertible Security by an additional $1,000 during its two-year term. Further, provided certain conditions are met, the Company
will have the right to call an additional $1,000 under the funding agreement.
NioCorp Developments Ltd.
|
Notes to Consolidated Financial Statements
|
June 30, 2016
|
(expressed in thousands of U.S. dollars, unless otherwise
stated)
|
The Convertible Security is
convertible into common shares of the Company at a conversion price equal to 85% of the volume weighted average trading price
of the common shares (in Canadian dollars) for the five consecutive trading days immediately prior to the date on which the Investor
provides the Company with notice of its intention to convert an amount of the Convertible Security from time to time. The issuance
of the Convertible Security and the Lind Warrants was completed on a non-brokered private placement basis.
The Company has elected to account
for the Convertible Security at fair value. Transaction costs of $214, including a 3% closing fee paid to Lind $135, were expensed
at closing. In addition, the Company recognized $620 in change in financial instrument fair value in the consolidated statement
of operations related to fair value of the Lind Warrants at closing. The fair value of the Lind Warrants was estimated based on
the Black Scholes pricing model using a risk free interest rate of 1.30%, an expected dividend yield of 0%, a volatility of 86.58%,
and an expected life of 3.0 years.
Changes in the Convertible Security
balance are comprised of the following:
|
|
Convertible Security
|
|
Opening balance
|
|
$
|
4,500
|
|
Conversions
|
|
|
(638
|
)
|
Change in fair market value
|
|
|
2,129
|
|
Balance, June 30, 2016
|
|
$
|
5,991
|
|
The Convertible Security contains
financial and non-financial covenants customary for a facility of this size and nature, and includes a financial covenant defining
an event of default as all present and future liabilities of the Company or any of its subsidiaries, exclusive of related party
loans, for an amount or amounts exceeding $2,000, and which have not been satisfied on time or within 90 days of invoice, or have
become prematurely payable as a result of its default or breach. This covenant became effective after February 1, 2016 and the
Company was in compliance as of June 30, 2016.
2016 Issuances
On January 19, 2016, the Company
closed a private placement and issued 9,074,835 units (each a “Unit”) at a price of C$0.57 per Unit, resulting in
total gross proceeds of $3,750. Each Unit consisted of one common share of the Company and one transferable common share purchase
warrant (a “Private Placement Warrant”). Each Private Placement Warrant is exercisable to acquire one additional common
share of the Company for a period of three years at a price of C$0.75 per common share. In addition, the Company issued 75,450
broker warrants at closing, under the same terms as a Private Placement Warrant. The fair value of the broker warrants of $15
was estimated based on the Black-Scholes pricing model using a risk free interest rate of 0.75%, an expected dividend yield of
0%, a volatility of 100.13%, and an expected life of 3.0 years.
NioCorp Developments Ltd.
|
Notes to Consolidated Financial Statements
|
June 30, 2016
|
(expressed in thousands of U.S. dollars, unless otherwise
stated)
|
2015 Issuances
In February 2015 the Company
announced it had closed a partially brokered and partially non-brokered private placement of 2,914,000 special warrants (“2015
Warrants”) at an issue price of C$0.75 to raise aggregate gross proceeds of $1,722. Each 2015 Warrant is exchangeable at
any time after the closing date of the offering into one unit of the Company; each unit consists of one common share of the Company
and one common share purchase warrant. Each warrant entitles the holder to acquire one additional common share at a price of C$1.00
per share until February 27, 2017. The Company filed a prospectus and obtained the required receipt for that prospectus on March
23, 2015 and qualified the distribution of 2,914,000 2015 Warrants which were deemed exercised on March 30, 2015.
The agent, Mackie Research Capital
Corporation ("MRCC") received a cash commission equal to 6.5% of the gross proceeds of the brokered portion of the offering
being $112 and 182,910 compensation warrants. The broker warrants are exercisable into common shares at a price C$0.85 per share
until February 27, 2017. The fair value of the agent warrants of $79 was estimated based on the Black-Scholes pricing model using
a risk free interest rate of 1.25%, an expected dividend yield of 0%, a volatility of 100.95%, and an expected life of 2.0 years.
Total cash issue costs including agents' commission, legal and filing fees were $230.
In November 2014 the Company
announced it had closed a partially brokered and partially non-brokered private placement of 19,245,813 special warrants (“2014
Special Warrants”) at an issue price of C$0.55 to raise aggregate gross proceeds of $8,846. Each 2014 Special Warrant is
exchangeable at any time after the closing date of the offering into one unit of the Company; each unit consists of one common
share of the Company and one common share purchase warrant. Each warrant entitles the holder to acquire one additional common
share at a price of C$0.65 per share until November 10, 2016. The Company filed a prospectus and obtained the required receipt
for that prospectus on January 14, 2015 and qualified the distribution of 19,245,813 2014 Special Warrants which were deemed exercised
on January 19, 2015.
The agent, MRCC received a cash
commission equal to 6.5% of the gross proceeds of the brokered portion of the offering and 205,304 non-transferable compensation
units. The broker warrants are exercisable into units having the same terms as the units issued under the Offering. Each unit
entitles the agent to purchase a unit at a price of C$0.55 each. Each unit consists of one common share and one warrant exercisable
at a price of C$0.65 per share until November 10, 2016. The fair value of the agent warrants of $108 was estimated based on the
Black Scholes pricing model using a risk free interest rate of 1.25%, an expected dividend yield of 0%, a volatility of 108.9%,
and an expected life of 2.0 years. Total cash issue costs including agents' commission, legal and filing fees was $300.
The Company has a rolling stock
option plan (the “Plan”) whereby the Company may grant stock options to executive officers and directors, employees,
and consultants at an exercise price to be determined by the board of directors, provided the exercise price is not lower than
the market value on the date of grant. The Plan provides for the issuance of up to 10% of the Company’s issued common shares
as at the date of grant with each stock option having a maximum term of five years. The board of directors has the exclusive power
over the granting of options and their vesting provisions.
NioCorp Developments Ltd.
|
Notes to Consolidated Financial Statements
|
June 30, 2016
|
(expressed in thousands of U.S. dollars, unless otherwise
stated)
|
Stock option transactions are
summarized as follows:
|
|
Number of
Options
|
|
|
Weighted
Average Exercise
Price (C$)
|
|
Balance, July 1, 2014
|
|
|
7,060,000
|
|
|
$
|
0.19
|
|
Granted
|
|
|
7,320,000
|
|
|
|
0.76
|
|
Exercised
|
|
|
(6,250,000
|
)
|
|
|
0.20
|
|
Cancelled/expired
|
|
|
(25,000
|
)
|
|
|
0.30
|
|
Balance, June 30, 2015
|
|
|
8,105,000
|
|
|
|
0.69
|
|
Granted
|
|
|
5,875,000
|
|
|
|
0.62
|
|
Exercised
|
|
|
(1,415,000
|
)
|
|
|
0.38
|
|
Cancelled/expired
|
|
|
(1,100,000
|
)
|
|
|
0.75
|
|
Balance June 30, 2016
|
|
|
11,465,000
|
|
|
$
|
0.69
|
|
Number of options currently exercisable
|
|
|
5,765,000
|
|
|
$
|
0.75
|
|
The following table summarizes
the information and assumptions used to determine option costs:
|
|
Year ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Fair value per option granted during the period (C$)
|
|
$
|
0.30
|
|
|
$
|
0.42
|
|
Risk-free interest rate
|
|
|
0.75
|
%
|
|
|
1.25
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected stock price volatility (historical basis)
|
|
|
98.2
|
%
|
|
|
105.6
|
%
|
Expected option life in years
|
|
|
2.15
|
|
|
|
2.15
|
|
The following table summarizes
information about stock options outstanding at June 30, 2016:
Exercise
price (C$)
|
|
Expiry date
|
|
Number
outstanding
|
|
|
Aggregate
Intrinsic Value
(C$000s)
|
|
|
Number
exercisable
|
|
|
Aggregate
Intrinsic Value
(C$000s)
|
|
$ 0.50
|
|
May 9, 2017
|
|
|
370,000
|
|
|
|
133
|
|
|
|
370,000
|
|
|
|
133
|
|
$ 0.62
|
|
January 19, 2021
|
|
|
5,575,000
|
|
|
|
1,338
|
|
|
|
-
|
|
|
|
-
|
|
$ 0.65
|
|
May 20, 2017
|
|
|
50,000
|
|
|
|
11
|
|
|
|
50,000
|
|
|
|
11
|
|
$ 0.65
|
|
July 28, 2017
|
|
|
1,250,000
|
|
|
|
263
|
|
|
|
1,250,000
|
|
|
|
263
|
|
$ 0.76
|
|
September 2, 2017
|
|
|
500,000
|
|
|
|
50
|
|
|
|
500,000
|
|
|
|
50
|
|
$ 0.80
|
|
December 22, 2017
|
|
|
3,220,000
|
|
|
|
193
|
|
|
|
3,220,000
|
|
|
|
193
|
|
$ 0.94
|
|
April 28, 2018
|
|
|
500,000
|
|
|
|
-
|
|
|
|
375,000
|
|
|
|
-
|
|
Balance June 30, 2016
|
|
|
11,465,000
|
|
|
$
|
1,988
|
|
|
|
5,765,000
|
|
|
$
|
650
|
|
The aggregate intrinsic value
in the preceding table represents the total intrinsic value, based on the Company’s closing stock price of C$0.86 as of
June 30, 2016, which would have been received by the option holders had all option holders exercised their options as of that
date. The total number of in-the-money options vested and exercisable as of June 30, 2016 was 5,390,000. The total intrinsic value
of options exercised during the year ended June 30, 2016 was $322.
As of June 30, 2016, there was
$328 of unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Plan. The cost
is expected to be recognized over a weighted average period of approximately one year.
NioCorp Developments Ltd.
|
Notes to Consolidated Financial Statements
|
June 30, 2016
|
(expressed in thousands of U.S. dollars, unless otherwise
stated)
|
Warrant transactions are summarized
as follows:
|
|
Warrants
|
|
|
Weighted average
exercise price (C$)
|
|
Balance, July 1, 2014
|
|
|
1,064,140
|
|
|
$
|
0.25
|
|
Granted:
|
|
|
|
|
|
|
|
|
Warrants: November financing
|
|
|
19,245,813
|
|
|
|
0.65
|
|
Warrants: March financing
|
|
|
2,914,000
|
|
|
|
1.00
|
|
Agents' warrants: November financing
|
|
|
205,304
|
|
|
|
0.55
|
|
Agents' warrants: November financing
|
|
|
205,304
|
|
|
|
0.65
|
|
Agents' warrants: March financing
|
|
|
182,910
|
|
|
|
0.85
|
|
Agents' advisory warrants*
|
|
|
750,000
|
|
|
|
0.55
|
|
Agents' sponsorship warrants**
|
|
|
250,000
|
|
|
|
0.60
|
|
ThyssenKrupp offtake agreement***
|
|
|
8,569,000
|
|
|
|
0.67
|
|
Exercised
|
|
|
(5,125,805
|
)
|
|
|
0.35
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Balance, June 30, 2015
|
|
|
28,260,666
|
|
|
|
0.73
|
|
Granted:
|
|
|
|
|
|
|
|
|
Lind Warrants
|
|
|
3,125,000
|
|
|
|
0.72
|
|
January Private Placement
|
|
|
9,074,835
|
|
|
|
0.75
|
|
Broker warrants: December Private Placement
|
|
|
75,450
|
|
|
|
0.75
|
|
Advisory Warrants*
|
|
|
750,000
|
|
|
|
0.65
|
|
Sponsorship warrants**
|
|
|
250,000
|
|
|
|
0.65
|
|
Exercised
|
|
|
(12,549,309
|
)
|
|
|
0.65
|
|
Expired
|
|
|
(7,068,500
|
)
|
|
|
0.67
|
|
Balance June 30, 2016
|
|
|
21,918,142
|
|
|
$
|
0.75
|
|
|
*
|
Pursuant
to a financial services advisory agreement with Mackie Research Capital Corporation (“MRCC”)
the Company issued 500,000 advisory warrants on December 4, 2014 and 250,000 advisory
warrants on January 14, 2015. Each advisory warrant entitled MRCC to purchase a unit
of the Company at a price of C$0.55 each, on or before December 4, 2016. Each such unit
consisted of one Common Share and one warrant exercisable at a price of C$0.65 per share
until December 4, 2016. These units were exercised during the year ended June 30, 2016,
resulting in the granting of these additional 750,000 warrants.
|
|
**
|
Pursuant to a sponsorship
agreement between MRCC and the Company in connection with the Company's graduation to
the Toronto Stock Exchange, the Company issued 250,000 sponsorship warrants on January
14, 2015, entitling MRCC to purchase units of the Company at C$0.60 per unit until January
14, 2017. Each such unit consisted of one Common Share and one warrant exercisable at
C$0.65 per share until January 14, 2017. These units were exercised during the year ended
June 30, 2016, resulting in the granting of these additional 250,000 warrants.
|
|
***
|
The Company
entered into an offtake agreement with ThyssenKrupp Metallurgical Products GmbH (“ThyssenKrupp”) whereby
ThyssenKrupp will purchase 50% of future ferroniobium production up to 3,750 metric tons
from the Elk Creek property for an initial term of ten years from commencement of commercial
production which may be extended by mutual agreement of the parties. The Agreement presupposes
the Company obtaining project financing, obtaining all necessary approvals and constructing
a mine at Elk Creek. Pursuant to the agreement, the Company granted ThyssenKrupp a non-transferable
warrant to acquire 8,569,000 common shares of the Company at an exercise price of C$0.67
per common share, which expired on December 12, 2015.
|
NioCorp Developments Ltd.
|
Notes to Consolidated Financial Statements
|
June 30, 2016
|
(expressed in thousands of U.S. dollars, unless otherwise
stated)
|
At June 30, 2016 the Company
has outstanding exercisable warrants, as follows:
Number
|
|
|
Exercise
Price (C$)
|
|
|
Expiry Date
|
|
|
6,745,947
|
|
|
$
|
0.65
|
|
|
|
November
10, 2016
|
|
|
182,910
|
|
|
|
0.85
|
|
|
|
February
27, 2017
|
|
|
2,714,000
|
|
|
|
1.00
|
|
|
|
February
27, 2017
|
|
|
3,125,000
|
|
|
|
0.72
|
|
|
|
December
22, 2018
|
|
|
9,150,285
|
|
|
|
0.75
|
|
|
|
January
19, 2019
|
|
|
21,918,142
|
|
|
|
|
|
|
|
|
|
On April 20, 2016, the Company
announced an early warrant exercise program (the “Program”) designed to encourage the early exercise of (unlisted)
share purchase warrants exercisable at C$0.65 that otherwise expire on November 10, 2016 (the “November 2016 Warrants”).
The Program and its commencement were approved at a Special Meeting of Shareholders held on Tuesday May 17, 2016.
The warrant exercise program
closed on June 17, 2016, resulting in gross proceeds of C$4,807. A total of 7,394,822 C$0.65 share purchase warrants expiring
November 10, 2016 were exercised during the incentive period, representing about 47.6% of all C$0.65 Warrants outstanding and
66% of warrant holders eligible to participate. Each holder who exercised one warrant during the program received 1.11029 Common
Shares, representing one warrant share and 0.11029 of a Common Share, as the incentive portion. A total of 8,210,394 common shares
were issued under the program, which was previously approved by our shareholders on May 17, 2016. The Company recognized a warrant
expense of $535 in other operating expenses in the consolidated statement of operations related to the fair market value of the
incentive shares issued.
|
9.
|
RELATED PARTY TRANSACTIONS AND BALANCES
|
On June 17, 2015, the Company
entered into a one-year loan in the amount of $1,500 with Mark A. Smith, Chief Executive Officer and Executive Chairman of NioCorp.
The one-year term loan bears an interest rate of 10%, is secured by the Company’s assets pursuant to a concurrently executed
general security agreement, and is subject to both a 2.5% establishment fee and 2.5% prepayment fee.
On July 1, 2015, the Company
entered into a non-revolving credit facility agreement (collectively, with the loan above, the “Smith Loans”) in the
amount of $2,000 with Mark Smith and completed a drawdown of $500 on that day, and an additional $100 was drawn under the credit
facility on December 2, 2015. The credit facility bears an interest rate of 10%, is secured by the Company's assets pursuant to
a general security agreement, and is subject to both a 2.5% establishment fee and 2.5% prepayment fee.
With the receipt of additional
funding proceeds from the December Private Placement and Convertible Security, on January 13, 2016, the Company repaid $1,100
of the outstanding Smith Loans, representing 100% of amounts drawn down under the credit facility, plus $500 of the amount due
under the one-year loan. Interest and establishment fees payable as of December 31, 2015 were also paid. As of June 30, 2016 accounts
payable and accrued liabilities included interest payable to Mr. Smith of $53.
Effective June 16 2016, the
Company and Mr. Smith agreed to extend the due date for the remaining loan amount of $1,000 until June 16, 2017.
NioCorp Developments Ltd.
|
Notes to Consolidated Financial Statements
|
June 30, 2016
|
(expressed in thousands of U.S. dollars, unless otherwise
stated)
|
|
10.
|
Exploration Expenditures
|
|
|
For the year
ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Feasibility study and engineering
|
|
$
|
2,671
|
|
|
$
|
5,892
|
|
Field management and other
|
|
|
940
|
|
|
|
1,791
|
|
Drilling
|
|
|
197
|
|
|
|
4,976
|
|
Metallurgical
|
|
|
844
|
|
|
|
4,506
|
|
Geologists and field staff
|
|
|
67
|
|
|
|
886
|
|
Total
|
|
$
|
4,719
|
|
|
$
|
18,051
|
|
Additions to exploration and
evaluation assets during the year ended June 30, 2016 related to ongoing engineering and metallurgical costs incurred in connection
with a feasibility study, as well as land-related payments and general project management costs.
Domestic and foreign components
of loss before income taxes for the years ended June 30, 2016 and 2015 are as follows:
|
|
For the year
ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Canada
|
|
$
|
4,542
|
|
|
$
|
7,365
|
|
United States
|
|
|
6,866
|
|
|
|
18,505
|
|
Total
|
|
$
|
11,408
|
|
|
$
|
25,870
|
|
Major components of income tax
benefit for the year ended June 30, 2016 and 2015 are as follows:
|
|
For the year
ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Current taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred taxes:
|
|
|
|
|
|
|
|
|
Canada
|
|
|
-
|
|
|
|
-
|
|
United States
|
|
|
-
|
|
|
|
(2,755
|
)
|
Total deferred tax benefit
|
|
|
-
|
|
|
|
(2,755
|
)
|
Total income tax benefit
|
|
$
|
-
|
|
|
$
|
(2,755
|
)
|
NioCorp Developments Ltd.
|
Notes to Consolidated Financial Statements
|
June 30, 2016
|
(expressed in thousands of U.S. dollars, unless otherwise
stated)
|
The following table is a reconciliation
of income taxes at statutory rates with the reported taxes:
|
|
For the year
ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Loss before income taxes
|
|
$
|
11,408
|
|
|
$
|
25,870
|
|
Combined federal and provincial statutory income tax rate
|
|
|
26
|
%
|
|
|
26
|
%
|
Income tax recovery at statutory tax rates
|
|
|
2,966
|
|
|
|
6,726
|
|
Foreign rate differential
|
|
|
893
|
|
|
|
2,405
|
|
Warrant expense
|
|
|
(399
|
)
|
|
|
-
|
|
Share based compensation
|
|
|
(270
|
)
|
|
|
(651
|
)
|
Change in estimates related to prior years
|
|
|
(635
|
)
|
|
|
-
|
|
Change in valuation allowance
|
|
|
(2,169
|
)
|
|
|
(5,725
|
)
|
Other
|
|
|
(386
|
)
|
|
|
-
|
|
Income tax benefit
|
|
$
|
-
|
|
|
$
|
2,755
|
|
Deferred income taxes
reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The Company's net deferred tax asset balances as of June 30,
2016 and 2015 have been revised to reflect the appropriate jurisdictional tax rate applied to Canadian temporary
differences. On a consolidated basis, there was no impact on the Company's income tax provision for the years ended June 30,
2016 and 2015 and the net deferred tax balance as of June 30, 2016 and 2015 has not changed due to a full valuation
allowance, however, the net deferred tax assets before valuation allowance as of June 30, 2016 and 2015 decreased by $1,783
and $1,996, respectively.The significant components of deferred taxes are as follows:
|
|
As of June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Mineral interest
|
|
$
|
6,555
|
|
|
$
|
4,963
|
|
Net operating losses available for future periods
|
|
|
3,951
|
|
|
|
3,312
|
|
Other
|
|
|
144
|
|
|
|
206
|
|
Total deferred tax assets
|
|
|
10,650
|
|
|
|
8,481
|
|
Valuation allowance
|
|
|
(10,650
|
)
|
|
|
(8,481
|
)
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company establishes
a valuation allowance against future income tax assets if, based on available information, it is more likely than not that all
of the assets will not be realized. The valuation allowance of $10,650 at June 30, 2016 relates mainly to net operating loss carryforwards
in Canada and mineral interest due to deferred exploration expenditures in the United States, where the utilization of such attributes
is not more likely than not. During the year ended June 30, 2015, the Company recognized $2,755 of deferred tax benefit which
was generated during the year to offset existing deferred tax liabilities associated with the acquisition of the Elk Creek mineral
interest.
The Company had cumulative net
operating losses of $13,625 as of June 30, 2016 (2015 - $12,453) for federal income tax purposes and these carryforwards will
expire between 2017 and 2035.
The Company had no unrecognized
tax benefits as of June 30, 2016 or 2015. The Company recognizes interest accrued related to unrecognized tax benefits and penalties
in its income tax provision. The Company has not recognized any interest or penalties in the fiscal years presented in these financial
statements. The Company is subject to income tax in the U.S. federal jurisdiction and Canada. Certain years remain subject to
examination but there are currently no ongoing exams in any taxing jurisdictions.
NioCorp Developments Ltd.
|
Notes to Consolidated Financial Statements
|
June 30, 2016
|
(expressed in thousands of U.S. dollars, unless otherwise
stated)
|
|
12.
|
Fair
Value Measurements
|
The Company measures the fair
value of financial assets and liabilities based on US GAAP guidance which defines fair value, establishes a framework for measuring
fair value, and expands disclosures about fair value measurements.
The Company classifies financial
assets and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables or other financial liabilities
depending on their nature. Financial assets and financial liabilities are recognized at fair value on their initial recognition.
Financial assets and liabilities
classified as held-for-trading are measured at fair value, with gains and losses recognized in net income. Financial assets classified
as held-to-maturity, loans and receivables, and financial liabilities other than those classified as held-for-trading are measured
at amortized cost, using the effective interest method of amortization. Financial assets classified as available-for-sale are
measured at fair value, with unrealized gains and losses being recognized in income.
Financial instruments, including
receivables, accounts payable and accrued liabilities, and related party loans are carried at amortized cost, which management
believes approximates fair value due to the short term nature of these instruments.
The following table presents
information about the assets and liabilities that are measured at fair value on a recurring basis as at June 30, 2016 and 2015,
and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In general,
fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical instruments. Fair
values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates, and yield curves.
Fair values determined by Level 3 inputs are unobservable data points for the financial instrument, and included situations where
there is little, if any, market activity for the instrument:
As of June 30, 2016
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,412
|
|
|
$
|
4,412
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Available for sale securities
|
|
|
32
|
|
|
|
32
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
4,444
|
|
|
$
|
4,444
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
$
|
5,991
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,991
|
|
Derivative liability, convertible debt
|
|
|
330
|
|
|
|
-
|
|
|
|
-
|
|
|
|
330
|
|
|
|
$
|
6,321
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,321
|
|
As of June 30, 2015
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
753
|
|
|
$
|
753
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Available for sale securities
|
|
|
46
|
|
|
|
46
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
799
|
|
|
$
|
799
|
|
|
$
|
-
|
|
|
$
|
-
|
|
NioCorp Developments Ltd.
|
Notes to Consolidated Financial Statements
|
June 30, 2016
|
(expressed in thousands of U.S. dollars, unless otherwise
stated)
|
The Company measures the fair market
value of the Level 3 components using the Black-Scholes model and discounted cash flows, as appropriate. These models are prepared
by a third party and take into account management's best estimate of the conversion price of the stock, an estimate of the expected
time to conversion, an estimate of the stock's volatility, and the risk-free rate of return expected for an instrument with a
term equal to the duration of the convertible debt.
The significant unobservable valuation inputs for the Convertible
Debt includes an expected return of 51.06%. A 15% decrease (increase) in the expected return would result in an increase (decrease)
to fair value of $94, or approximately 2%.
The derivative liability was valued
using a Black-Scholes pricing model with the following inputs:
Risk-free interest rate
|
|
|
1.25
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
Expected stock price volatility
|
|
|
88.63
|
%
|
Expected option life in years
|
|
|
2.50
|
|
The following table sets forth a reconciliation
of changes in the fair value of the Company's convertible debt components classified as Level 3 in the fair value hierarchy:
|
|
As of June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Beginning balance
|
|
$
|
-
|
|
|
$
|
-
|
|
Convertible securities closings
|
|
|
4,860
|
|
|
|
-
|
|
Conversions to equity
|
|
|
(638
|
)
|
|
|
-
|
|
Realized and unrealized losses
|
|
|
2,099
|
|
|
|
-
|
|
Ending balance
|
|
$
|
6,321
|
|
|
$
|
-
|
|
|
13.
|
COMMITMENTS AND CONTINGENCIES
|
Other Exploration Properties
The Company held an option to
acquire a 100%
interest in certain claim units located in the Kenora Mining Division, Ontario,
referred to as the Tait Lake property, and had previously written the exploration asset down to $nil. In April 2015, the Company
sold the Tait Lake option for a cash payment of $9.
The Company, through its wholly-owned
subsidiary, Northeast Minerals, held exploration rights for the Jungle Well and Laverton projects in Australia (the “Exploration
Rights”). On July 2, 2015, the Company entered into an agreement to sell its investment in Northeast Minerals to a third
party. Assets of Northeast Minerals included the Explorations Rights, with a nil book value, and 3,750,000 shares of Victory Mines
Limited (“Victory”), an Australian public entity. The book value of the Victory shares was written down to one dollar
at June 30, 2015 to reflect the estimated market value. No other gain or loss was incurred related to the sale of Northeast Minerals.
NioCorp has the following land,
office, facility and equipment lease commitments in place as of June 30, 2016:
|
|
|
|
|
Payments due by period
|
|
|
|
Total
|
|
|
Less than
1 year
|
|
|
1-3
years
|
|
|
4-5
years
|
|
|
After 5
years
|
|
Debt
|
|
$
|
7,510
|
|
|
$
|
1,214
|
|
|
$
|
6,296
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Operating leases
|
|
|
349
|
|
|
|
207
|
|
|
|
123
|
|
|
|
19
|
|
|
|
-
|
|
Total contractual obligations
|
|
$
|
7,859
|
|
|
$
|
1,421
|
|
|
$
|
6,419
|
|
|
$
|
19
|
|
|
$
|
-
|
|
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE
AND DISTRIBUTION
The following table lists the costs and
expenses payable by the Company in connection with the offering of securities covered by this prospectus, other than any sales
commissions or discounts. All amounts shown are estimates except for the SEC registration fee, and all of the fees and expenses
will be borne by the Company.
|
|
Amount
|
|
Securities and Exchange Commission registration fee
|
|
$
|
648.98
|
|
Legal fees and expenses
|
|
|
60,000
|
*
|
Accounting fees and expenses
|
|
|
50,000
|
*
|
Printing and engraving expenses
|
|
|
7,000
|
*
|
Travel and miscellaneous expenses
|
|
|
1,000
|
*
|
Total
|
|
$
|
120,000
|
*
|
*Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS
AND OFFICERS
The corporate laws of British Columbia
allow us, and our corporate articles require us (subject to the provisions of the BCBCA noted below), to indemnify our Directors,
former Directors, alternate Directors and their heirs and legal personal representatives against all eligible penalties to which
such person is or may be liable, and the Company must, after the final disposition of an eligible proceeding, pay the expenses
actually and reasonably incurred by such person in respect of that proceeding if the eligible party has not been reimbursed for
those expenses and is wholly successful, on the merits or otherwise, in the outcome of the proceeding or is substantially successful
on the merits in the outcome of the proceeding. Each Director and alternate Director is deemed to have contracted with the Company
on the terms of the indemnity contained in our articles.
For the purposes of such an indemnification:
“eligible party”, in relation
to the Company, means an individual who
|
(1)
|
is or was a Director or officer of the Company,
|
|
(2)
|
is or was a director or officer of another corporation
|
|
(i)
|
at a time when the corporation is or was an affiliate of the Company, or
|
|
(ii)
|
at the request of the Company, or
|
|
(3)
|
at the request of the Company, is or was, or holds or held a position equivalent to that of, a director or officer of a partnership, trust, joint venture or other unincorporated entity,
|
and includes, except in the definition
of “eligible proceeding” and certain other cases, the heirs and personal or other legal representatives of that individual;
“eligible penalty” means a
judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding;
“eligible proceeding” means
a proceeding in which an eligible party or any of the heirs and personal or other legal representatives of the eligible party,
by reason of the eligible party being or having been a director or officer of, or holding or having held a position equivalent
to that of a director or officer of, the Company or an associated corporation:
|
(1)
|
is or may be joined as a party, or
|
|
(2)
|
is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding;
|
“expenses” includes costs,
charges and expenses, including legal and other fees, but does not include judgments, penalties, fines or amounts paid in settlement
of a proceeding; and
“proceeding” includes any legal
proceeding or investigative action, whether current, threatened, pending or completed.
In addition, under the BCBCA, the Company
may pay, as they are incurred in advance of the final disposition of an eligible proceeding, the expenses actually and reasonably
incurred by an eligible party in respect of that proceeding, provided that the Company first receives from the eligible party a
written undertaking that, if it is ultimately determined that the payment of expenses is prohibited by the restrictions noted below,
the eligible party will repay the amounts advanced.
Notwithstanding the provisions of the Company’s
articles noted above, the Company must not indemnify an eligible party or pay the expenses of an eligible party, if any of the
following circumstances apply:
|
(1)
|
if the indemnity or payment is made under an earlier agreement to indemnify or pay expenses and, at the time that the agreement to indemnify or pay expenses was made, the company was prohibited from giving the indemnity or paying the expenses by its memorandum or articles;
|
|
(2)
|
if the indemnity or payment is made otherwise than under an earlier agreement to indemnify or pay expenses and, at the time that the indemnity or payment is made, the company is prohibited from giving the indemnity or paying the expenses by its memorandum or articles;
|
|
(3)
|
if, in relation to the subject matter of the eligible proceeding, the eligible party did not act honestly and in good faith with a view to the best interests of the company or the associated corporation, as the case may be;
|
|
(4)
|
in the case of an eligible proceeding other than a civil proceeding, if the eligible party did not have reasonable grounds for believing that the eligible party’s conduct in respect of which the proceeding was brought was lawful.
|
In addition, if an eligible proceeding
is brought against an eligible party by or on behalf of the Company or by or on behalf of an associated corporation, the Company
must not do either of the following:
|
(1)
|
indemnify the eligible party under section 160 (a) in respect of the proceeding; or
|
|
(2)
|
pay the expenses of the eligible party in respect of the proceeding.
|
Notwithstanding any of the foregoing, and
whether or not payment of expenses or indemnification has been sought, authorized or declined under the BCBCA or the articles of
the Company, on the application of the Company or an eligible party, the Supreme Court of British Columbia may do one or more of
the following:
|
(1)
|
order a company to indemnify an eligible party against any liability incurred by the eligible party in respect of an eligible proceeding;
|
|
(2)
|
order a company to pay some or all of the expenses incurred by an eligible party in respect of an eligible proceeding;
|
|
(3)
|
order the enforcement of, or any payment under, an agreement of indemnification entered into by a company;
|
|
(4)
|
order a company to pay some or all of the expenses actually and reasonably incurred by any person in obtaining an order under this section;
|
|
(5)
|
make any other order the court considers appropriate.
|
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the last three fiscal years, the Company
completed the following financings on an unregistered basis outside the United States pursuant to the exclusion from registration
provided under Rule 903 of Regulation S and inside the United States pursuant to the exemptions from registration provided by Rule
506 of Regulation D and Section 4(a)(2), in each case in reliance upon the representations received from the purchasers of the
securities.
During the three years preceding the
date hereof, NioCorp has granted an aggregate total 15,880,000 incentive stock options and issued 45,597,616 share purchase warrants.
During the three years preceding the date hereof, NioCorp option holders have exercised an aggregate total of 9,305,000 incentive
stock options for Common Shares and 20,175,748 share purchase warrants for Common Shares. The Common Shares were sold to option
holders upon exercise of options to holders that were officers, directors or employees of the Company outside the United States
in accordance with Rule 903 of Regulation S based on the representations of the investors that they reside outside the United
States and were not offered the Common Shares while in the United States and did not exercise the incentive stock options while
in the United States. The Common Shares were sold to option holders upon exercise of options to holders that were officers, directors
or employees of the Company inside the United States pursuant to Rule 701 and Section 4(a)(2) of the Securities Act. The Common
Shares issued upon exercise of warrants were sold to private investors outside the United States in accordance with Rule 903 of
Regulation S based on the representations of the investors that they reside outside the United States and were not offered the
Common Shares while in the United States. The Common Shares issued upon exercise of warrants were sold inside the United States
to “accredited investors” as defined under Rule 501 of Regulation D pursuant to Rule 506 of Regulation D and Section
4(a)(2) pursuant to the representations of the investors that they qualified as accredited investors.
On December 24, 2013 the Company announced
the second and final tranche of its brokered private placement announced September 23, 2013 for gross proceeds of $1,653,542 through
the sale of 11,023,612 Common Shares. The Common Shares were sold to private investors outside the United States in accordance
with Rule 903 of Regulation S based on the representations of the investors that they reside outside the United States and were
not offered the Common Shares while in the United States. The Common Shares were sold inside the United States to “accredited
investors” as defined under Rule 501 of Regulation D pursuant to Rule 506 of Regulation D and Section 4(a)(2) pursuant to
the representations of the investors that they qualified as accredited investors.
On March 20, 2014 NioCorp announced
the closing of the second and final tranche of a private placement of 18,860,668 Common Shares at a price of C$0.20 per Common
Share for gross proceeds of C$3,772,133. Proceeds of the placement were used to advance the Elk Creek Property and for general
working capital. The Common Shares were sold to private investors outside the United States in accordance with Rule 903 of Regulation
S based on the representations of the investors that they reside outside the United States and were not offered the Common Shares
while in the United States. The Common Shares were sold inside the United States to “accredited investors” as defined
under Rule 501 of Regulation D pursuant to Rule 506 of Regulation D and Section 4(a)(2) pursuant to the representations of the
investors that they qualified as accredited investors.
On November 10, 2014, the Company closed
a partially brokered and partially non-brokered private placement of 19,245,813 special warrants (“2014 Special Warrants”)
at an issue price of C$0.55 per 2014 Special Warrant to raise aggregate gross proceeds of C$10,585,197 (the “2014 Offering”).
The brokered portion of the 2014 Offering was completed using Mackie Research Capital Corporation (“MRCC”), and each
2014 Special Warrant was exchangeable for no additional consideration into one unit of the Company (a “2014 Unit”).
Each 2014 Unit consisted of one Common Share and one Common Share purchase warrant (a “2014 Warrant”). Each 2014 Warrant
entitles the holder to acquire one Common Share at a price of C$0.65 until November 10, 2016. MRCC received C$112,917.59 and 205,304
options to acquire 2014 Units in consideration of its services in connection with the 2014 Offering. On January 15, 2015 the Company
announced it had filed and obtained a receipt from the British Columbia Securities Commission for a final short form prospectus
dated January 14, 2015. The receipt also evidences that the Ontario Securities Commission has received the filing, as well as
regulators in Alberta and New Brunswick under the Multilateral Instrument 11-102 Passport System. That prospectus qualified the
distribution of 19,245,813 2014 Units underlying the 2014 Special Warrants pursuant to the terms thereof, which were deemed to
be issued on January 19, 2015. Proceeds of the Special Warrant private placement were to be used to advance the Elk Creek Property
and for general working capital. The securities were sold to private investors outside the United States in accordance with Rule
903 of Regulation S based on the representations of the investors that they reside outside the United States and were not offered
the securities while in the United States. The securities were sold inside the United States to “accredited investors”
as defined under Rule 501 of Regulation D pursuant to Rule 506 of Regulation D and Section 4(a)(2) pursuant to the representations
of the investors that they qualified as accredited investors.
Pursuant to a financial services advisory
agreement with MRCC, the Company issued 500,000 advisory warrants on December 4, 2014 and 250,000 advisory warrants on January
14, 2015 (the “Advisory Warrants”). Each Advisory Warrant entitled MRCC to purchase a unit of the Company at a price
of C$0.55 each, on or before December 4, 2016 (each an “Advisory Unit”). Each Advisory Unit consisted of one Common
Share and one warrant exercisable at a price of C$0.65 per share until December 4, 2016. These Advisory Warrants were exercised
during the three-month period ended March 31, 2016, resulting in gross proceeds to the Company of C$412,500, the issuance of 750,000
Common Shares and granting of an additional 750,000 warrants comprised in the Advisory Units. The warrants were sold to MRCC outside
the United States in accordance with Rule 903 of Regulation S based on the representations of MRCC that they reside outside the
United States and were not offered the warrants while in the United States.
On November 10, 2014 the Company entered
into an off-take agreement with ThyssenKrupp Metallurgical Products GmbH (“TK”) whereby TK will purchase approximately
3,750 tonnes or roughly 50 per cent of the Company's planned ferro-niobium production from its Elk Creek Project for an initial
10-year term, with an option to extend beyond that time frame. The agreement presupposes the company obtaining project financing,
obtaining all necessary approvals and constructing a mine at the Elk Creek Project. Pursuant to the agreement with TK, the Company
also granted TK a non-transferable warrant entitling TK to acquire 8,569,000 Common Shares at an exercise price of C$0.67 until
December 12, 2015. The warrant was sold to TK outside the United States in accordance with Rule 903 of Regulation S based on the
representations of TK that they reside outside the United States and were not offered the warrant while in the United States.
On February 27, 2015 the Company announced
that it had closed a bought deal private placement offering with MRCC consisting of 2,914,000 special warrants (“2015 Special
Warrants”), including the exercise of 15% over-allotment option in full, at an issue price of C$0.75 per 2015 Special Warrant
for aggregate gross proceeds of C$2,185,500 (the “2015 Offering”). Each 2015 Special Warrant was exchangeable for
no additional consideration into one unit of the Company (a “2015 Unit”). Each 2015 Unit consisted of one Common Share
and one Common Share purchase warrant (a “2015 Warrant”). Each 2015 Warrant entitles the holder to acquire one Common
Share at a price of C$1.00 until February 27, 2017. The securities were sold to private investors outside the United States in
accordance with Rule 903 of Regulation S based on the representations of the investors that they reside outside the United States
and were not offered the securities while in the United States.
In consideration for its services in
connection with the 2015 Offering, MRCC received a cash commission of C$137,182.50 and 182,910 non-transferable Compensation Options
(“Compensation Options”). Each Compensation Option entitles MRCC to purchase one Common Share at a price of C$0.85
for a period of 24 months from the closing date of the 2015 Offering. The Compensation Options were sold to MRCC outside the United
States in accordance with Rule 903 of Regulation S based on the representations of MRCC that they reside outside the United States
and were not offered the Compensation Options while in the United States.
On October 22, 2015, the Company announced
that it had closed a non-brokered private placement of unsecured convertible promissory notes (the “Notes”), for gross
proceeds of up to $0.8 million. The Notes bear interest at a rate of 8%, payable annually in arrears, are non-transferable and
have a term of three years from the date of issue. Principal under the Notes is convertible by lenders into, and payable by the
Company in, common shares of the Company at a conversion price of C$0.97 per common share, calculated on conversion or repayment
using the then-current Bank of Canada noon exchange rate. Accrued but unpaid interest on the Notes will be convertible by lender
into, and payable by the Company in, Common Shares at a price per Common Share equal to the most recent closing price of the Company’s
common shares prior to the delivery to the Company of a request to convert interest, or the annual due date of interest, as applicable,
calculated using the then-current Bank of Canada noon exchange rate. The Notes were sold to private investors outside the United
States in accordance with Rule 903 of Regulation S based on the representations of the investors that they reside outside the
United States and were not offered the Notes while in the United States.
On December 15, 2015, the Company announced
that it would conduct a private placement of up to nine million units (each a “Unit”) of the Company at a price of
C$0.57 per Unit to raise gross proceeds of up to C$5.13 million (the “December Private Placement”). On January 19,
2016, the Company announced the closing of the December Private Placement on an oversubscribed basis and issued 9,074,835 Units
of the Company at a price of C$0.57 per Unit, which raised total gross proceeds of C$5.2 million. Each Unit consists of one Common
Share of the Company and one transferable Common Share purchase warrant (a “Warrant”). Each Warrant is exercisable
to acquire one additional Common Share of the Company for a period of 3 years at a price of C$0.75 per Common Share. In addition,
the Company issued 75,450 broker warrants at closing, each having the same terms as a Warrant, with the exception of transferability.
The securities were sold to private investors outside the United States in accordance with Rule 903 of Regulation S based on the
representations of the investors that they reside outside the United States and were not offered the securities while in the United
States. The securities were sold inside the United States to “accredited investors” as defined under Rule 501 of Regulation
D pursuant to Rule 506 of Regulation D and Section 4(a)(2) pursuant to the representations of the investors that they qualified
as accredited investors.
On December 15, 2015, the Company announced
the signing of a definitive convertible security funding agreement (the “Lind Agreement”) with Lind Asset Management
IV, LLC (“Lind”). Through December 31, 2015, an initial $4.0 million was funded pursuant to the issuance of an initial
convertible security (“Convertible Security”), with an additional $0.5 million received as of January 19, 2016 on
the issuance of a further equivalent amount of the Convertible Security, including interest. Lind can increase the funding under
the Convertible Security by an additional $1.0 million during its two-year term. Further, provided certain conditions are met,
the Company will have the right to call an additional $1.0 million under the initial Convertible Security. The securities were
sold inside the United States to Lind as “accredited investor” as defined under Rule 501 of Regulation D pursuant
to Rule 506 of Regulation D and Section 4(a)(2) pursuant to the representations of Lind that they qualified as an accredited investor.
On December 22, 2015, the Company closed
the first tranche of its private placement with Lind, which comprised an aggregate of (received in tranches ending January 19,
2016) $4.5 million principal amount 10% secured Convertible Security and 3,125,000 transferable Common Share purchase warrants
(the “Lind Warrants”). The Convertible Security has a term of two years from its date of issuance, and interest on
the Convertible Security is prepaid and added to its principal amount; accordingly, the initial face value of the Convertible
Security is $5.4 million, and the yield of the Convertible Security (if held, unconverted, to maturity) will be 10% per annum,
or $0.9 million. Each Lind Warrant entitles the holder to purchase one additional Common Share at a price of C$0.72 on or before
December 22, 2018. The Convertible Security and Lind Warrants were issued pursuant to the Lind Agreement. The Convertible Security
is convertible into Common Shares of the Company at a conversion price equal to 85% of the volume weighted average trading price
of the Common Shares on the TSX (in Canadian dollars) for the five (5) consecutive trading days immediately prior to the date
on which Lind provides the Company with notice of its intention to convert an amount of the Convertible Security from time to
time. The issuance of the Convertible Security and the Lind Warrants was completed on a non-brokered private placement basis.
The Convertible Security is classified as a compound financial instrument for accounting purposes. Because the Convertible Security
is denominated in a currency that is different from the Company’s functional currency, both the liability and conversion
components are carried as borrowings. During the three months ended March 31, 2016, upon the final funding of the convertible
security, the Company recorded the fair values of each of the components and allocated the proportionate costs of the security
resulting in some revisions to previously recorded amounts which were not material. The Convertible Security is secured by the
assets of the Company, being the shares of its subsidiaries 0896800 and ECRC. The Convertible Security is also secured by a security
interest over all assets of ECRC. The securities were sold inside the United States to Lind as “accredited investor”
as defined under Rule 501 of Regulation D pursuant to Rule 506 of Regulation D and Section 4(a)(2) pursuant to the representations
of Lind that they qualified as an accredited investor.
Pursuant to a sponsorship agreement
between MRCC and the Company in connection with the Company’s graduation to the Toronto Stock Exchange, the Company issued
250,000 agent’s sponsorship warrants on January 14, 2015 (the “Sponsor Warrants”), entitling MRCC to purchase
a unit of the Company (the “Sponsor Units”) at C$0.60 per Sponsor Unit until January 14, 2017. Each Sponsor Unit consisted
of one common Share and one warrant exercisable at C$0.65 per share until January 14, 2017. These Sponsor Warrants were exercised
during the three-month period ended March 31, 2016, resulting in gross proceeds to the Company of C$150,000, the issuance of 250,000
Common Shares and the granting of an additional 250,000 warrants comprised in the Sponsor Units. The Sponsor Units were sold to
MRCC outside the United States in accordance with Rule 903 of Regulation S based on the representations of MRCC that they reside
outside the United States and were not offered the Sponsor Units while in the United States.
On July 11, 2016, we announced the
completion of our warrant exercise program for gross proceeds to us of C$4.8 million. A total of approximately 7.04 million C$0.65
share purchase warrants expiring November 10, 2016 were exercised. Each holder who exercised one warrant during the program received
1.11029 Common Shares, representing one warrant share and 0.11029 of a Common Share, as the incentive portion. The program had
been previously approved by our shareholders on May 17, 2016. The Common Shares issued upon exercise of warrants were sold to
private investors outside the United States in accordance with Rule 903 of Regulation S based on the representations of the investors
that they reside outside the United States and were not offered the Common Shares while in the United States. The Common Shares
issued upon exercise of warrants were sold inside the United States to “accredited investors” as defined under Rule
501 of Regulation D pursuant to Rule 506 of Regulation D and Section 4(a)(2) pursuant to the representations of the investors
that they qualified as accredited investors.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
Exhibits
The Exhibits filed herewith are set
forth on the Index to Exhibits filed as a part of this Registration Statement beginning on page II-9 hereof.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
To file, during any period in which offers
or sales are being made, a post-effective amendment to this registration statement:
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(i)
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to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended;
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(ii)
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to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
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(iii)
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To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
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That, for the purpose of determining any
liability under the Securities Act of 1933, as amended, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
To remove from registration by means of
a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
Insofar as indemnification for liabilities
arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933, as amended,
and will be governed by the final adjudication of such issue.
For determining liability of the undersigned
registrant under the Securities Act to any purchaser:
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i.
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That each prospectus filed by the undersigned pursuant to Rule 424(b)(3) shall be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
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ii.
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Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.
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iii.
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Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
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SIGNATURES
Pursuant to the
requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Registration Statement on Form S-1/A
to be signed on its behalf by the undersigned, thereunto duly authorized, in Denver, Colorado, on September 22, 2016.
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NIOCORP DEVELOPMENTS LTD.
(Registrant)
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By:
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/s/ Mark
A. Smith
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Mark A. Smith
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President and Chief Executive Officer (Principal Executive Officer)
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Pursuant to the requirements
of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities
and on the dates indicated.
/s/ Mark A. Smith
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President, Chief Executive Officer (Principal
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September 22, 2016
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Mark A. Smith
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Executive Officer and Authorized U.S. Representative) and Chairman of the Board of Directors
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/s/ Neal Shah
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Chief Financial Officer (Principal Financial and
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September 22, 2016
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Neal Shah
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Accounting Officer)
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/s/ Joseph A. Carrabba*
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Director
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September 22, 2016
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Joseph A. Carrabba
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/s/ Michael Morris*
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Director
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September 22, 2016
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Michael Morris
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/s/ David C. Beling*
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Director
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September 22, 2016
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David C. Beling
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/s/ Joseph D. Cecil*
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Director
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September 22, 2016
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Joseph D. Cecil
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/s/ Anna Castner Wightman*
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Director
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September 22, 2016
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Anna Castner Wightman
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* - By:
/s/ Neal Shah
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Attorney-in-Fact
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September 22, 2016
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Neal Shah
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Pursuant to Power of Attorney filed with Commission on September 2, 2016
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INDEX TO EXHIBITS
Exhibit
No.
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Title
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3.1(1)
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Notice
of Articles dated April 5, 2016
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3.2(1)
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Articles
dated January 27, 2015
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4.1#(1)
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Option
Plan
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4.2(1)
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Special
Warrant Indenture in respect of 2014 Special Warrants
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4.3(1)
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Special
Warrant Indenture in respect of 2015 Special Warrants
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4.4(1)
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Warrant
Indenture in respect of the 2014 Warrants
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4.5(1)
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Warrant
Indenture in respect of the 2015 Warrants
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5.1(2)
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Opinion
of Miller Thomson LLP
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10.1#(1)
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Employment
Agreement between the Company and Mark A. Smith
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10.2(1)
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Convertible Security Funding Agreement between the Company
and Lind Asset Management IV, LLC, dated December 14, 2015.
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10.3(2)**
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Commercial
sales with CMC Cometals
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10.4(1)
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Offtake
agreement with ThyssenKrupp Metallurgical Products GmbH
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10.5(2)**
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Beethe008
Extension to Option to Purchase
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10.6(2)**
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Woltemath
003 Extension to Option to Purchase
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16.1(2)
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Letter
of Davidson & Company LLP
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21.1(1)
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Subsidiaries
of NioCorp Developments Ltd.
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23.1(2)
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Consent
of Miller Thomson LLP (included in Exhibit 5.01)
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23.2
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Consent
of BDO USA.
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23.3
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Consent
of Eric Larochelle, BEng (SMH Process Innovation)
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23.4
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Consent
of Jeff Osborn, BEng Mining, MMSAQP (SRK Principal Consultant, Mining Engineer)
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24.1(2)
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Power
of Attorney
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#
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Management compensation plan, arrangement or agreement.
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(1)
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Previously filed as an exhibit to the Company’s draft
registration statement on Form S-1 submitted to the Commission on July 27, 2016 and incorporated herein by reference.
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(2)
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Previously filed as an exhibit to the Company’s registration
statement on Form S-1 filed with the Commission on September 2, 2016 and incorporated herein by reference
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**
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Certain portions of this exhibit have been redacted pursuant
to a confidential treatment request filed with the Commission on September 20, 2016.
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