The bill would create a $20 per kilogram production tax credit for magnets that are manufactured in the U.S., or $30 per kilogram for magnets that are both manufactured in the U.S. and for which all component rare earth material is produced and recycled or reclaimed wholly within the U.S.
To be eligible, the rare earth magnets may not include any component rare earth magnet material produced in non-allied foreign nations, such as China, Iran, North Korea, and Russia.
“This bipartisan legislation would provide important tax incentives for the production of permanent rare earth magnets, which, if enacted, could provide powerful incentives for investment across all areas of rare earth production in the U.S., from mining to magnet manufacturing,” said NioCorp CEO Mark Smith in an August 30 media release.
“We are pleased to support this legislation and to work in this alliance to push this bill and other legislative initiatives designed to promote greater production of these and other critical minerals in the U.S.”
Most electric cars today contain a powertrain driven by rare earth magnets, and virtually all modern automobiles use rare earth magnets in smaller electric motors throughout the vehicle
Rare earth magnets are used in various applications, such as electric vehicles, wind power turbines, home appliances, factory automation systems, computers, cell phones, and energy-saving electric motors. Most electric cars today contain a powertrain driven by rare earth magnets, and virtually all modern automobiles use rare earth magnets in smaller electric motors throughout the vehicle.
The Biden administration recently issued an executive order setting a goal that 50% of all new vehicles sold in 2030 will be zero-emissions vehicles, including battery-electric, plug-in hybrid electric, or fuel cell electric vehicles, all of which rely on rare earth magnets.
The bipartisan infrastructure bill recently passed by the U.S. Senate includes $5.75 billion to replace thousands of transit vehicles, including buses, with zero-emission vehicles.
NioCorp is currently evaluating the potential to produce rare earth elements (REEs) as a by-product of the planned production of the critical minerals niobium, scandium, and titanium from the Elk Creek project, in southeast Nebraska.
Subject to receiving the necessary project funding, the company’s REE initiative was launched in response to intense interest by governments and industrial consumers worldwide for additional sources of rare earths beyond current suppliers.
In a recent interview, Smith told The Northern Miner the company was considering producing neodymium-praseodymium oxide, dysprosium oxide, and terbium oxide.
“These are the primary REEs used to manufacture the world’s most powerful permanent magnets, known as neodymium-iron-boron magnets,” he said.
The company’s three products are valuable superalloy additives used in large, diverse end markets, including transportation, aerospace and defence, oil and gas, advanced manufacturing, and steel mega-structures. Niobium alone has a global market value of over $2 billion.
Much of NioCorp’s planned production over the first ten years is pre-sold. It has in place contracts or letters of intent to sell all of the project’s projected ferro niobium (FeNb) production over the first ten years to ThyssenKrupp. That deal enables in-principle eligibility for a German Government Loan Guarantee of between $146 million to $179 million. It has also pre-sold 12% of the average projected annual scandium production over the first ten years to Traxys North America, a global leader in specialty metals.
To date, NioCorp has defined a sizeable orebody and expects Elk Creek to have a 36-year mine life. The Elk Creek project is the highest-grade primary niobium resource in North America and the only such resource under development in the U.S.
“That ore body is open to the northwest, to the southeast, and at depth. And all our drilling has indicated that the grade is increasing for niobium the deeper we go. For that reason, we think we’ve got many years beyond 36 years,” said Smith.
A 2019 feasibility study had pegged pre-production costs at $1.14 billion, a sizeable challenge for a junior developer. Other financial metrics include a 2.86-year after-tax payback period from production.
The project has an after-tax net present value of $2.1 billion and an internal rate of return of 25.8%. Elk Creek is expected to generate average annual earnings before interest, taxes, depreciation and amortization (EBITDA) of $370 million over the life of the mine, providing an average EBITDA margin over the project life of 67%.
“We are ready to go. We have all the permits we need in hand right now to start construction at the site. So now we’ve negotiated some EPC contracts with our underground mining contractor and, at surface, the process facility contractor. All they must do is be signed,” Smith said.
According to Smith, the company has now entered “that very interesting time” where management is focused on securing the capital required to start the actual construction effort.
The company has been making progress on the finance front. Earlier in 2021, the company brought in a $10 million private placement, followed by a private placement and the exercise of in-the-money warrants.
“We are ready to go. We have all the permits we need in hand right now to start construction at the site”
NioCorp CEO Mark Smith
Smith said the company used that money to buy an essential piece of land, heralding a transition from renting the ground it is working on to owning it.
He also said the company had its work cut out to bring the rare earths component at Elk Creek into the economic model.
The mining executive said people were generally skeptical about the company’s plan to produce 100 tonnes of scandium per year as a by-product per into a tiny market of only about 20 tonnes annually.
“By bringing the rare earths component into this project, we now have three very well-established products that are known in the world, and there are excellent indexes for pricing. So, we think that the rare earths piece will to a large extent, temper the risk that’s associated with the scandium, at least on the debt and the equity raisings that we’ve been out trying to undertake,” Smith said.
“And it’s made a big impact already, but we have to develop the technical information to support that and be able to include it in the economics for the project,” said the former Molycorp executive, credited with raising more than $3 billion for critical mineral projects to date.
In the interim, Smith is looking to secure a $25 million cornerstone investor to get the project out of the starting blocks.
“There are lots of front-end things that we can do. If we bring that anchor equity investor in with that amount of money, we can start to get the infrastructure together for the project, like getting gas lines and electrical lines out to the project.
“Not only will we make a start on construction, but we can also send a message to the debt markets that we have an anchor equity investor, which is a powerful momentum builder for the debt providers. Debt providers want to make sure that the equity is going to be there, and the equity guys want to make sure that the debt is going to be there,” said Smith.
The company has a market capitalization of C$313 million ($248m).
(This article first appeared in The Northern Miner)
