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Molycorp's Loss Is NioCorp's Gain
One of the key fundamentals to finding a winning mining stock is the company's management.
In the case of NioCorp Developments Ltd. (OTC:NIOBF), successful moves by its management team have translated into investors getting excited about the stock once again.
On September 23rd, the Company announced that it had hired a new CEO in Mark A. Smith, the former CEO of Molycorp Inc. (MCP), a Colorado-based rare-earths producer and operator of the famed Mountain Pass Rare Earth Elements facility in California.
Smith was successful in taking Molycorp public in 2008 even as Mountain Pass fell off the radar in the early 2000's when it closed due to US environmental restrictions and depressed prices for rare earth elements.
Soon after, Smith secured new environmental permits required to reopen Mountain Pass for production. For his efforts, Molycorp's stock shot up seven-fold in less than three years.
However, before he got to see Mountain Pass commence commercial production at the end of last year, he was abruptly let go by Molycorp.
Though it was never officially confirmed, Smith's departure occurred in the wake of an SEC probe into the Molycorp's public disclosures which began in August 2012.
Smith's name was cleared this past June when the investigation ended with no legal action taken by the Commission.
Niocorp didn't hesitate to pounce on Smith.
Smith's track record of moving a start-up company through to production in a relatively short time has gotten investors excited about Niocorp's future.
But that's not all.
In a time when raising capital has been rather tough for junior miners, Niocorp is managing to buck the trend - thanks to management once again.
Following Smith's appointment as CEO as well as a director, Niocorp announced and recently completed the first tranche of a new private placement financing to raise gross proceeds of $10 million. As of October 22nd, 6.187 million shares were subscribed for gross proceeds of $927,992.
The new CEO personally picked up 3.4 million shares while Niocorp President Peter Dickie subscribed for 500,000 shares.
Here, management's willingness to participate in the private placement certainly shows they're betting on the future success of the company. This also shows that management is bullish on the long term upside of the industry as well.
While there are many interesting uses for niobium, its primary use is as an alloying agent for strengthening steel. And global steel demand is expected to rise in the next couple of years.
The World Steel Association, a group comprised of 170 steel producers, forecasts 2013 production to rise 3.1% to 1.475 billion tons.
With the global economy showing signs of recovery, steel output is expected to climb another 3.3% in 2014 to reach 1.52 billion tons. This should bode well for niobium producers.
NioCorp operates the Elk Creek Carbonatite in South East Nebraska -- the only primary niobium project in the United States.
Elk Creek is the highest-grade, large-tonnage undeveloped niobium deposit in North America, with over 19.0 million tonnes indicated and over 83.0 million tonnes inferred.
Yet even with all that potential, shares had barely moved for most of 2013 -- a trend which changed recently thanks to the big move by the company.
Niocorp's stock is up 38% since the former Molycorp leader signed on as CEO. I see further upside as he settles in and begins leading the company in a new direction.