by Travis Johnson, Stock Gumshoe | May 1, 2014 1:20 pm
There’s nothing like a nice, mysterious teaser pitch to greet you upon a return from vacation — I’ve been traveling for ten days or so, returned to the frozen north feeling perhaps slightly grumpy about sitting at my desk instead of at the beach…
… but this morning I saw the spiel about Chuck de Castro’s new pitch for an unnamed rare metal (and, as usual, the “tiny company” that will soon be producing it), and it put a smile right back on my face. Ahh, it’s good to have a mission!
So what’s the deal? De Castro, who edits the Penny Mining Speculator, says he just opened up 200 spots in his newsletter for discriminating investors like you and I for the low, low price of just $1,000. Yippee! That’s a discount from the $5,000 “regular” price, naturally, since pretty much every pitch for every newsletter offers a discount off of the “retail” price (though to be fair, that is a lower price than they offered last time I looked at the newsletter — I think they were pitching it for $1,500-2,000 a year or so last time around, though that’s no surprise given how little enthusiasm there is for mining stocks these days).
And, yes, it’s all about some special metal. Mysterious! Here’s how the pitch begins:
“Just $9 of this rare metal can cut the weight of a car by 220 pounds (vastly increasing gas mileage)
“Few people have ever heard of it, but it’s critical to American economic and national security.
“The US is completely dependent on imports, because there are only 3 mines that produce this metal — all in foreign countries.
“The youngest mine is 37 years old, and getting long in the tooth.
“Now a tiny company is developing a new giant mine that will bust the foreign monopoly and supply the US with 7,500 tonnes of this rare metal every year.”
Good story, right? So what is this?
First, let’s figure out which metal he’s talking about — secret number one.
“This rare metal is also essential for oil and gas pipelines, because tiny amounts of it greatly strengthen steel and enable it to withstand extreme pressures and temperatures.
“No modern refinery or petrochemical plant can be built without it. It’s critical for making super alloys necessary for jets and rocket engines.
“Because this rare metal hardens steel, it’s also essential for tall buildings, railroad tracks, and bridges. Beijing, for instance, recently mandated new building codes that require stronger steel to make Chinese buildings and bridges earthquake proof….
“The consumption of this metal has almost quadrupled in the last decade. Going forward, industry expectations are for usage to double in the next two years.
“Meanwhile, supplies are skimpy, because there are only three mines in the whole world that produce it.”
So what’s the metal? The Mighty, Mighty Thinkolator comes out of hibernation to tell us that de Castro is teasing Niobium.
And from there, it’s a pretty short hop to the name of the company — here’s a bit more clueyness on that:
“This is the company that’s going to bust the monopoly of the foreign mines. It has $27.5 billion of the metal. The value of this rare metal is about 500 times the company’s market cap.
“Moreover, the CEO is buying shares in the company hand over fist. I love it when the CEO buys into a company that I’m recommending because nobody knows the company better than him.
“Once this mine goes into production, I expect it to be selling at a price/earnings ratio of less than 1. And we all know that no profitable company sells for a p/e of less than 1.
“I think this company will give you 3 to 5-fold profits by the end of 2015….”
So who is it? The Thinkolator needs to chug along for just a few seconds to tell us that de Castro is teasing … NioCorp Developments (NB on the Venture Exchange in Canada, NIOBF over the counter in the US).
NioCorp used to be called Quantum Rare Earth minerals, under which name it was a beneficiary of the crazy bubble in rare earth stocks a few years back, but now they’re focused on niobium — which is one of the metals often mined with rare earths, but isn’t nearly as rare or expensive as most of them (it’s about $45/kg and is used mostly in large quantities to alloy steel, some rare earth metals are well over $1,000/kg). They’re still talking up the same project they’ve been working on for years now (and which other miners, including Molycorp, have been drilling and exploring, off and on, for 40 years), but now the talk is niobium.
NioCorp explains what niobium is here on their website, talking up the strategic and irreplaceable importance (particularly for superalloys in aerospace, and for high-pressure alloys in pipelines — in other applications, like structural steel, there are apparently other viable options like molybdenum, but niobium is key for high pressure and a high melt point).
And if they’re actually producing it at the end of next year, I’ll be shocked. They are making some progress recently at moving the project forward toward the goal of a bankable feasibility study by the end of this year, with cash raised recently for a bit more drilling and some accelerated analysis, and they have a new CEO (from Molycorp) who has said the right things and bought shares in recent months (at 15 and 20 cents, so he got a better deal than you can get in the open market today at near 50 cents — the stock has spiked up this year, including a double in just the last few weeks)… so the optimism and the new management has everyone pretty excited.
Will it last? I have no idea. Most reports indicate that the rural area where their leases are is hungry for some development, so they may be able to get through permitting — I have no idea what the holdup has been over the many years that this site has been known. The company thinks their deposit holds $25+ billion worth of niobium, though the next move would likely be some kind of partnership or offtake deal if they’re going to actually build the mine themselves — they’re not going to come up with the several hundred million in capital costs on their own, I expect, so the feasibility study will be key at getting someone with deep pockets on board.
Beyond that, I know almost nothing about Niobium or NioCorp, other than the fact that IamGold is the smallest of the three Niobium producers with their Niobec mine in Quebec, and the only one in North America (the other two, both much larger, are in Brazil) — I don’t know if there are other new mines being planned or built. So if you’re one of the many folks who rode the rare earths rollercoaster a few years back and happen to be a Quantum Rare Earth expert, or have other thoughts to share on these folks and their Elk Creek project, well, I’m sure we’d all be delighted to hear from you, just use the friendly little comment box below.
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