Holy Shit This Pisses Away Our Money

Why is UK Govt to subsidise Niocorp?

The idea that the British government should subsidise an American mine is pretty weird. Very weird even. But it does seem to be about to happen.

NioCorp Developments Ltd. announced receipt of a preliminary, non-binding Expression of Interest (EOI) from UK Export Finance (UKEF) for a potential debt guarantee of up to $200 million. This guarantee would support the construction of the Elk Creek Critical Minerals Project designed to produce niobium, scandium, and titanium.

The guarantee is contingent upon meeting certain criteria, including establishing an offtake agreement for NioCorp's products with UK-based companies. NioCorp is in ongoing discussions regarding potential sales of scandium-based products.

The EOI from UKEF aligns with prospective financing from the Export-Import Bank of the United States and Germany's Untied Loan Guarantee Loan Program, for which NioCorp is eligible. However, the EOI is not legally binding and depends on standard project finance terms and due diligence under UKEF policies.

Now, OK, the finance is dependent upon them selling stuff to UK firms but even so that’s really a pretty odd deal. Niocorp is a US mine, US owned, in the US. What’s UK export guarantee about that?

But there’s something worse. Niocorp is one of these ideas that just isn’t going to work. There’s just no chance it will.

Hmm, OK, let me walk back just a tad from that. Even I, as near omniscient as I am, do not have perfect knowledge of the future. So, let me down grade that to in my opinion this hasn’t a hope in hell of working.

I’ve written about it a number of times at Seeking Alpha. Here and here as examples. The basics:

The ore they want to mine contains what they say it does. Niobium, scandium, titanium, fine with that. Separation of them isn’t difficult. So, we’re good to go, right?

Except the project finances depend upon scandium, For those who don’t know I used to run the shadowy international scandium oligopoly. In the sense that for well over a decade I was wholesaling some 50% of the world’s usage - yes, the entire globe’s - of this wondrous and exciting element. No, I do not claim perfect knowledge of the state of the market. But, you know, pretty good knowledge, yes, Timmy R Us can handle that.

At Niocorp 70% of revenues come from scandium. OK, fine, ambitious, but not problematic in its essence.

They also claim that they’ll be able to sell 100 and up tonnes a year. The current global consumption is 15 to 20 tonnes, around there. So, they’re claiming they can sell 5x what everyone currently uses. This is problematic. Of course, it is also potentially possible. People do find new uses for things and use does rise. Lutetium, another of the rare earths, has gone from a couple of tonnes a year to perhaps 80 tonnes a year in the past couple of decades.

Niocorp also insists that they’ll sell this vastly larger quantity at $3,500 a kg and up (for a simple oxide). The current price is below $1,000 and I was given a quote of $540 a couple of weeks back (I no longer am involved in the market but I do still occasionally get emails etc).

Niocorp’s claim is that they can sell 5x the market at 3x and up the market price. That’s not going to happen. And to reiterate, scandium is not a useful byproduct for them, it’s the main revenue earner and what the entire project depends upon.

That’s really not going to happen because above the unlikelihood is that there are many potential sources of scandium. Rusal extracts from red mud from the alumina process. I’ve paid for research which shows how to do the same. Such a process works even if it’s a tad pricey for current market prices. But at the getting on for $4k a kilo it looks well tasty. Samsung extracts from nickel laterites. Or would do, again, if prices rose about their about $1,200 production costs. Even the Murrin Murrin mine (Of Twiggy Forrest and Anaconda nickel fame) has an extraction circuit to do the same. Which had production costs of about $1,100 if I recall correctly.

And this is before the current Chinese capacity which has been quoted to me at 50 tonnes a year at $900 a kg or so.

That is, even if it were possible to sell 100 tonnes a year at $3,700 a kg it wouldn’t be Niocorp doing that selling.

Yes, yes, I know about those defence uses, I’ve sold into the US Navy and Airbus in my time. Actually, was the guy who sold them their research materials (as also Qinetiq and so on) as well as some production runs. Heck, I’ve known, vaguely, the - excellent - engineer on the USN programme for 30 years now.

To the extent that we’ve got a scandium expert lying around I’m it. Niocorp isn’t going to work. But the British government, using your and my money, is eager to invest in it?

Why can’t they leave us just to piss away our own money in our own ways? Why this insistence upon doing it wholesale on obvious disasters?