Niocorp (NASDAQ: NIOB) is a putative mining company which is attempting an interesting feat. Selling many more times the world uses of a metal at a price higher than the world currently pays for that metal. It's difficult to escape the thought that this is a plan that isn't going to work out well.
However, between now and the denouement of this process there is this thought that the stock price will jump 1000% today. This for a purely technical reason, not because the prospects of the mine not the company have radically changed. As part of the fundraising and development process Niocorp is moving from the OTC markets to the main NASDAQ. The process is through a merger with a SPAC. That increases the capital available for mine development of course. But there's one more technical issue that will also affect that price.
Niocorp share price from NASDAQYesterday's quotation was more like 80 cents. So, there's that 1000% rise. The reason for this is that people who yesterday held 10 pieces of stock now own one. This is known as a reverse share split or, to Brits, a consolidation. The reason for it is that NASDAQ has a minimum price requirement. To be on NASDAQ your stock price has to remain above $1. So, if you're moving up to NASDAQ your opening price also needs to be above $1. The reverse split is a purely technical move to enable compliance with these rules.
As to what Niocorp actually does we have our doubts about that, as we've said in the past about NIOB. Elk Creek is a niobium deposit of a particular type. Nothing wrong with that - and also nothing wrong with the fact that it has significant scandium contained. It's well known that this type of deposit does indeed have that potential byproduct.
The problem is that Niocorp is predicting that it will be able to sell (in one version of their flowcharts) 103 tonnes a year of scandium oxide. This strikes us as being unlikely, given that the current global (yes, entire world) market for scandium oxide is around 15 tonnes a year. NIOBF also claims that the selling price will be in the $3,500 to $4,000 per kg range. This also strikes us as unlikely given that the current price is more like $1,100 per kg.
The thing we really, really, do not believe is that it's possible to come to market with 5 or 7 times current global usage and also sell at 3 or more times current global prices.
There might well be interesting movements in the Niocorp stock price over the years but we're - to put it mildly - unconvinced that the end result is going to be a good one.