NioCorp Developments Ltd. (TSX:NB, OTCQX:NIOBF) and GX Acquisition Corp II (GXII) have announced the signing of a proposed business combination between the two companies, to acquire funds for high-grade niobium mining in Nebraska.
Under the business combination agreement, NioCorp said it will acquire GXII, a US-based special purpose acquisition company, and intends to be listed on the Nasdaq Stock Exchange soon after the acquisition closes, which is expected in the first quarter of 2023. NioCorp shares will also continue to trade on the Toronto Stock Exchange.
The proposed transaction values the combined entity at an estimated enterprise value of US$313.5 million, according to NioCorp, adding that GXII will survive the merger as a subsidiary of NioCorp. GXII shareholders will receive shares in NioCorp at closing, based on a conversion ratio reflecting that post-merger enterprise value.
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When the deal closes, the combined business could have access to as much as US$285 million in net cash, after transaction expenses, from the GXII trust account to advance the Elk Creek critical minerals project. Final proceeds will depend upon redemption rates of current GXII shareholders at the consummation of the proposed transaction, NioCorp said.
Additionally, the company said it has signed non-binding letters of intent (LOI) for two separate finance packages with Yorkville Advisors Global LP. Subject to entering into definitive agreements, the finances could provide the company with access to up to an additional $81 million for the Elk Creek Project.
The company said the finance packages would include $16 million in convertible debentures expected to be funded at the closing of the business combination, and can be repaid by it in either cash or its common shares. The LOI also included a standby equity purchase facility, after which NioCorp will have the ability to require Yorkville to purchase up to $65 million of its common shares.
NioCorp CEO Mark A. Smith said the business combination with GXII, and the two additional financing packages, have the potential to significantly accelerate the company’s efforts to obtain the required project finances and to ultimately bring the Elk Creek project to construction and eventual commercial operation.
“Our goal is to rapidly build secure and reliable US supply chains of the critical minerals that multiple industries need to help us build a more sustainable and less carbon-intensive future and for other critical domestic uses. Once completed, these transactions have the potential to put NioCorp on the fast track to obtain the required project financing to deliver on that promise, and to do so in an environmentally smart manner," Smith said in a statement.
GXII CEO Dean C. Kehler said NioCorp's Elk Creek project is the highest-grade niobium deposit under development in North America, and the second largest indicated rare earth resource in the US.
“Critical minerals such as niobium and scandium, and magnetic rare earth elements, can accelerate the world's transition to a lower carbon economy. We believe NioCorp is well positioned to be a reliable, US-based supplier that will produce these products on a sustainable basis,” said Kehler, adding that GXII shareholders will have the opportunity to invest in the Elk Creek project and help accelerate the transition to a greener world.
Niobium is used to produce specialty alloys as well as high strength, low alloy steel, which is lighter and stronger steel used in automotive, structural, and pipeline applications.
Located in southeast Nebraska, the Elk Creek project could become a significant producer of niobium, scandium, and titanium, as well as the potential for several magnetic rare earth oxides, according to NioCorp.
The project is located on private land that NioCorp said it either owns or has option to purchase agreements in place with landowners. NioCorp said it has secured all federal, state, and local permits necessary to proceed to construction once sufficient project funds are secured.
In June, NioCorp said it conducted a feasibility study, which shows a $2.8 billion net present value and a 29.2% internal rate of return, both on a pre-tax basis, and an estimated $403 million in average annual EBITDA generated. This does not include the possible addition of magnetic rare earth oxide products to NioCorp's planned product suite.
According to NioCorp, the project has strong local support in Nebraska and is projected to create approximately 450 permanent full-time jobs, more than 1,200 contract construction jobs over its three-plus year construction period, and an estimated 2,100 indirect jobs.
The Colorado-based company said Elk Creek is projected to generate $1.1 billion in employee payroll, $298 million in new tax revenue to state and local governments, and $148 million in royalty payments to local landowners over the life of the mine. NioCorp said it has contracted with the State of Nebraska for tax benefits over the first 10 years of operations that are potentially worth in excess of $200 million.
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