Jason Stutman’s “upgrade” newsletter, The Cutting Edge ($1,499/yr), is out with a teaser campaign that promises you the chance at riches from “Charged Ore” … and, in fact, an actual sample of that ore itself as part of your subscription.
So what is “Charged Ore,” and what’s this little Nebraska mine that Stutman thinks will make you rich? Let’s dig in and see if we can Thinkolate some answers for you.
Here’s how the ad gets our attention…
“Whether it’s Tesla, GM, Nissan, BMW, or any other carmaker…
“They’re all looking at a rare energy metal that I call ‘Charged Ore’ to take electric cars into the mainstream.
“But what’s truly exciting for investors like you is the tiny $1 stock with a monopoly on America’s ONLY domestic source of this metal.
“To be blunt: I’ve never seen a mining play quite like this before.
“The scarcity of Charged Ore and the pent-up demand for it because of electric vehicles means…
“You could stand to turn a modest $1,000 investment into $126,400 in the coming months.”
Cool your jets… and know that when you’re getting clearance from your lawyers to run an ad, “in the coming months” is not a specific promise, particularly when it’s prefaced by “could.” Yes, anything is possible… but we knew that already. What’s likely? What’s probable? What’s the risk of loss?
Those are the questions to mull as we consider little junior miners… and the answer must almost always be “100% of my capital is at real risk of loss.” So try to keep that “risk” thought in your head as we go along, right next to the dreams of 1,000% gains.
But let’s move right on to the clues. What is “Charged Ore?” Some hints…
“At a quick glance, you might confuse this silvery metal with iron.
“But that’s not why Bloomberg calls it ‘The Metal That Everyone Wants to Buy….’
“Before a recent scientific discovery, Charged Ore was mainly used to produce stronger, lighter steel. Just $9 worth of this metal could reduce the weight of a car by 100 kg….
“But it’s most important use — and the reason why it costs seven times more than copper — is because of the opportunity I’ve shown you today: It’s taking electric cars into the mainstream.
“Even more exciting? It’s mined in just three places on Earth.”
And he goes on to imply that batteries need to use this “Charged Ore” to improve their recharging speeds — which he says is critical for mass adoption of electric cars.
So what is it?
Well, this “Charged Ore” is niobium, a niche metal used mostly in steel alloys that also has some use in superconductors (like in CERN’s large hadron collider in Switzerland, or in MRI machines)… and there are indeed battery chemistries using niobium that are much faster to recharge, like Toshiba’s titanium-niobium oxide lithium batteries that use niobium in the anode (replacing the graphite anodes typically used in lithium batteries, and upgrading the original Toshiba SCiB battery’s titanium oxide anode).
Those Toshiba batteries are not yet commercially available (the original SCiB is, without niobium, but the new ones are perhaps a year away), so I have no idea whether batteries are likely to become a major niobium demand driver. Right now, it seems that niobium demand is almost entirely from the makers of steel pipe for oil and gas pipelines and similar steel products, and, to a lesser degree, higher performance alloys for things like turbines.
And yes, supply of niobium is highly concentrated — some mines produce a little bit as a byproduct, but essentially all of the world niobium supply comes from three mines, two in Brazil and one in Quebec, and the dominant Brazilian producer, CBMM, which produces more than 80% of the world’s niobium by itself, has had cartel-like power over pricing for a long time (ramp up supply when prices get high, slow down production when prices are too low).
Like rare earths, there’s also a strategic aspect to niobium — which is perhaps why China Molybdenum (3993 in Hong Kong, CMCLF OTC in the US) bought up one of the Brazilian producers back in 2016, reportedly paying 50% more than the next highest bid in that auction (the major Canadian producer that was for years run by Iamgold, the Niobec mine in Quebec, was bought by Aaron Regent’s private Magris Resources in 2014 for $500 million cash). So there’s not a lot of “investable” niobium out there in “pure play” form, which is perhaps what has Stutman excited.
And yes, Stutman says that his publisher has “committed to buying $100,000 of Charged Ore” and that he’ll send you a cut — “your own stash of this rare energy metal to put on your desk.”
Which is fine, and a curiosity, but niobium is not actually all that expensive — so unless he’s sending you a honking giant hunk of ore that’s not really a financial consideration. Stutman says that “your cut” of that $100,000 worth of niobium will be “$105 Worth of Charged Ore”, so my guess would be that he’s probably talking about one of the collectible niobium coins, but I don’t really know. There’s no “set” price for niobium, since there’s no liquid exchange where the metal is traded regularly, so you can decide it’s worth pretty much whatever you want. You can buy a decent chunk of several ounces for $20 on eBay, or a nice decorative silver-niobium coin (several different mints have put them out over the years) for roughly $100, depending on the coin. The actual metal is a lot cheaper than silver, if you want a typical “metal you buy and hold in your hand” comparison.
So that’s what “Charged Ore” is… let’s see what this stock is, shall we? Clues, please!
“I’d bet my hat that there’s not a soul on Wall Street who knows about the energy goldmine sitting beneath a small town in south Nebraska…
“… tiny $71 million company….
“Its mining operation is about to get the green light….
“… a small town of just 98 Nebraskans close to the state border is now home to America’s only domestic supply of Charged Ore.
“It’s an energy goldmine with 225,760 tons of the silvery metal…
“… at today’s prices, its energy goldmine is worth an estimated $17.6 billion!”
That ought to be enough, right? So what is this secret “Next Lithium” stock being teased by The Cutting Edge? Thinkolator sez this is NioCorp Developments (NB.V in Canada, NIOBF OTC in the US), which during the last rare earths mania was named Quantum Rare Earth (they changed the name in 2013).
And yes, NioCorp does control a niobium deposit (with some titanium and scandium) near the (tiny) town of Elk Creek, Nebraska… and it has had a market cap of roughly $100 million and a share price of 70 cents or so in the recent past (as of today it’s C$129 million at C$0.62 per share). It has traded at roughly this valuation, with a few dips and spikes along the way, for close to four years.
The Elk Creek deposit, according to their feasibility study, could produce between 4,500-5,000 tonnes of niobium annually for 30+ years… so both the production level and the grade seem pretty similar to the historical numbers for the Niobec mine in Quebec that changed hands (as a fully developed and operational mine, with expansion potential) for $530 million in 2014. Obviously things have probably changed a bit in the mining finance and niobium markets over those years, but that’s an interesting number to keep in mind as a comparison… as recently as a few years ago, it would have been a lot cheaper to buy the producing Niobec mine than to build the Elk Creek mine.
You can see the company’s latest presentation here… their feasibility study, revised last year, apparently shows an after-tax NPV of $1.7 billion for the project, with a nice high 22% after-tax return, but the challenge, I imagine, is that the estimated total up-front investment in this mine would be about a billion dollars to get it built. Even with a mine life of 32 years and what seem like favorable economics, it’s hard to raise that much money — and perhaps harder when the end market is potentially enticing but not very certain.
Elk Creek has agreements to sell 75% of its niobium production to Thyssenkrupp and CMC Cometals, so they would have buyers — but they probably wouldn’t have any pricing power. Presumably those deals are at some market price (which effectively means, whatever CBMM in Brazil decides the price wiill be), though the Thyssenkrupp deal didn’t specify pricing, and it doesn’t appear that either of those partners paid a meaningful premium for access to this future supply (though as distributors/suppliers, they would get some market access and clout).
And to illustrate the challenges of building a mine, for those of you who aren’t familiar with junior miners, that Thyssenkrupp offtake agreement, signed in 2014, envisioned production beginning in 2017 and Spring 2015 news coverage indicated operations might begin in 2016… and they’re not even close. NioCorp is still tinkering with the engineering design for the mine and with various possible strategies for handling water (both the substantial underground water, and the water intake and disposal that would both impact the Missouri river) — and partly because this is farm country, I imagine, the possibility of that underground saltwater being dumped in the river did raise at least some concerns.
I don’t know what the permitting process is for the mine or how long it will take, or whether there will be meaningful roadblocks, but from the limited project schedule in the investor presentation it looks like they could be commissioning the mine within about four years of whenever they get financing (and presumably the permits) in place.
So… will this stock take off at some point? I don’t really know, but from a couple hours of browsing through their materials it looks to me like the key considerations are water handling/permitting and finding someone to lend them a billion dollars.
Junior niobium stocks are not universally in demand at the moment, though that could change… Cradle Resources in Australia, which is cited in the ad a couple times, has a substantial potential mine, the Panda Hill project in Tanzania, and that has been more or less on hold for more than a year after the completion of a definitive feasibility study back in 2016. That company owns half of the project, which their DFS says is worth close to $800 million, but the shares are currently valued at about $20 million. I don’t know why, or what the other complications are (though Tanzania does have some new mining laws that are worrying resource investors), but that’s a reminder that just owning a big chunk of niobium in the ground is not enough to guarantee riches.
Why is that? Well, partly because there’s not a niobium shortage — there are only a few suppliers, but, according to this piece of analysis from Roskill last Spring, at least, there is also still huge surplus capacity… if CBMM in Brazil has the theoretical capacity to produce dramatically more niobium and maintain price stability, as they have done for a long time, does that take away the potential for skyrocketing niobium prices?
I have no idea — it is a pretty new market, one that has really been shepherded into existence by the owners of CBMM over the past couple decades, as they have convinced steelmakers of the merits of niobium as a strengthening additive. I guess the size of the end market is still pretty unclear, but even if niobium does get adopted as an important component of batteries, and gradually sees wider usage in lithium ion batteries, it seems likely that the steel industry will be the primary driver of niobium demand for at least the next few years. If you want a bit more skepticism to alleviate your FOMO urges, “Niobium in a Nutshell” from Mining Geology HQ from a couple years ago provides a bit of that, as well as a good overview of niobium in general (as of 2016, at least).
So that’s your “charged ore” and the possible niobium miner in Nebraska… but wait, there’s more!
In case you’re curious, Stutman also reiterates the cobalt story that you’ve heard elsewhere, with bullish sentiment also based on electric vehicle demand for more and better lithium ion batteries (many chemistries of which use cobalt as a cathode material), and then drops some hints about other “energy metal” stocks — including one in the US and one elsewhere:
“COBALT OPPORTUNITY No. 1: Tesla’s Neighbor — the Tiny $230 Million Cobalt Producer….
“It’s a small $2 stock that’s holding the keys to a goldmine of ‘premium’ cobalt sulfate heptahydrate — a purer form of the rare energy metal that carries a 33% premium.
“Not only that, but it’s also within spitting distance of Tesla’s cobalt-hungry Gigafactory 1.”
I don’t know what “spitting distance” is in this case, but that pretty well has to be eCobalt Solutions (ECS.TO, ECSIF), which I also bought a while back as a cobalt speculation and have covered a few times… mostly following “blue gold” teaser pitches from Stutman’s colleague Keith Kohl. Their Idaho Cobalt Project is about a 700 mile drive from Tesla’s Nevada Gigafactory, though perhaps that counts as “spitting distance” out west, and the shares were around $230 million (Canadian, at least) at their highs a few weeks back.
“COBALT OPPORTUNITY No. 2: Get in on the Ground Floor of One of the World’s Largest Cobalt Reserves
“If you buy any cobalt stock, buy this one.
“There’s not another miner outside the U.S. ramping up production as fast as it is…
“This year alone, this $2 stock is forecast to produce 11,000 tonnes of the rare energy metal, before skyrocketing to 34,000 tonnes in 2019!”
That’s the Katanga Mine, run by Glencore in the Democratic Republic of Congo (DRC) — and it is ramping up production, which is probably one of the things keeping cobalt prices from really going bonkers. Katanga is separately traded (KAT.TO in Canada, KATFF OTC in the US), and is trading for just under C$2 currently with a market cap of C$3.5 billion after a big run with the cobalt surge last year, but giant Glencore (GLEN in London, GLNCY or GLNCF OTC in the US, market cap around $75 billion) owns something like 85% of Katanga and is probably the global mining company with the most leverage over the price of cobalt, among other minerals… though much of it is, as folks will be quick to remind you, within the borders of the DRC and thus subject to more political risk (most recently because of the increase in taxes in the DRC, but in the bigger picture because of political instability, and human rights concerns among some cobalt purchasers).
So there you have it, friends — interested in the potential of niobium as a lithium battery anode? Think NioCorp will be able to fund and build their Elk Creek mine and create value? Want to leave that risk for someone else? Like those “extra” cobalt plays Stutman hints at? Let us know with a comment below.
Disclosure: I own shares of eCobalt Solutions. I am not invested in any of the other stocks mentioned above, and will not trade in any covered stock for at least three days, per Stock Gumshoe’s trading rules.