News Niocorp signs contracts with Nebraska to reduce tax
2019-10-08 17:15 ET - News Release
Mr. Mark Smith reports
NIOCORP EXECUTES CONTRACTS WITH STATE OF NEBRASKA FOR AN ESTIMATED $200 MILLION IN POTENTIAL TAX INCENTIVES OVER FIRST 10 YEARS OF PROPOSED OPERATIONS OF THE ELK CREEK SUPERALLOY MATERIALS PROJECT
Niocorp Developments Ltd. has signed contracts with the State of Nebraska under the existing Nebraska advantage program to reduce the company's state and local tax liability by as much as $200-million over 10 years, conditional upon Niocorp meeting the program's job creation and investment requirements at its Elk Creek critical mineral project site in Nebraska.
"We are very pleased to have executed contracts with the State of Nebraska under the Nebraska Advantage Act for these tax incentives," said Mark A. Smith, Niocorp's chief executive officer and executive chairman. "With the potential to reduce tax liabilities over the first 10 years of operations for our new manufacturing facilities, these provisions help incentivize companies like Niocorp to site manufacturing operations and create new, high-wage jobs in Nebraska, which the Elk Creek superalloy materials project proposes to do in rural southeast Nebraska.
"The expected return on this investment to Nebraska taxpayers and state and local government is significant, since the Elk Creek project is estimated to create hundreds of high-wage jobs in Nebraska that will span three-plus decades and is expected to inject billions of dollars into Nebraska's economy over that period of time," Mr. Smith added. "That underscores why state incentive programs such as Nebraska advantage can be a win-win for industry and for states seeking greater investment in new manufacturing operations."
Estimated economic benefits and new tax revenue generated by the Elk Creek project (1)
Direct full-time permanent jobs created: 436
Indirect jobs created: 1,000
Peak construction-related jobs: 1,200
Total investment over 36-year project life: $7.76-billion
Cumulative operating expenses over project life: $6,618-million
Employee payroll over project life (included in cumulative operating expenses): $882-million
New tax revenue to state and local government over project life: $742.4-million
Royalties paid to Nebraska landowners over project life: $279-million
Scott Honan, president of the Elk Creek Resources Corp., said: "Over the projected 36-year operational life of the Elk Creek project, hundreds of millions of dollars of cumulative new revenue to state and local Nebraska governments are expected to be generated as a result of the project. We are excited to see the many beneficial outcomes to Nebraska once this project advances to full-scale commercial operation."
The value of the Nebraska tax incentives is assumed in the company's April, 2019, feasibility study for the Elk Creek project.
Niocorp expects to significantly exceed program's job creation and investment requirements
To qualify for the incentives, Niocorp must first meet and verify to the state that certain job creation and investment milestones have been met, including the following:
- Create at least 50 new full-time manufacturing jobs that pay the greater of 200 per cent of the county average, or 150 per cent of the state average, and invest at least $103-million into the state;
- Create at least 75 new full-time manufacturing jobs that pay the greater of 200 per cent of the county average, or 150 per cent of the state average, and invest at least $10-million into the state.
Niocorp's Elk Creek project is expected to far exceed these requirements, as detailed herein (2):
- Creation of approximately 436 new, full-time jobs, including approximately 182 mining jobs and 224 jobs associated with the project's primary metal manufacturing operations;
- Creation of nearly 1,200 construction/contract jobs at the height of the project's expected three-plus-year construction period;
- Total capital expenditures of approximately $1,143-million associated with the project's construction;
- Total operating expenditures of approximately $6,618-million over the facility's expected 36-year operational life, including $882-million in cumulative employee payroll;
- Cumulative royalties of $279-million to local landowners over 36 years of operation.
The estimates are based on Niocorp's April, 2019, Elk Creek feasibility study (FS) or are derived from analyses conducted as part of the FS. They are based upon static 2019 dollars and do not assume factors such as cost and wage inflation, potential project and/or production expansion, or any other dynamic economic adjustments over the life of the project.
Additional jobs and tax revenue to state and local Nebraska government
In addition to the direct jobs that Niocorp expects to create through construction and operation of the Elk Creek facility, a model developed by the U.S. Department of Commerce's Bureau of Economic Analysis (BEA) projects the creation of approximately 1,000 additional jobs throughout the economy as a result of the increased economic activity generated by the project. For every new job created by metal mining projects in the United States, the BEA's model projects that an average of 2.3 additional jobs will be created.
The company also estimates that the project will generate $742.4-million in cumulative new tax revenue to Nebraska over its 36 years of operation, which include approximately $218.6-million in cumulative tax revenue to Nebraska counties and another $523.8-million in cumulative tax revenue to the State of Nebraska (3).
Nebraska advantage program incentivizes manufacturing to be sited in Nebraska
Niocorp chief financial officer Neal Shah noted that programs such as Nebraska advantage provide compelling incentives for companies such as Niocorp to site new manufacturing facilities in Nebraska instead of in other states.
"Mining of the Elk Creek orebody must be conducted where the ore is situated," Mr. Shah noted. "While industrial logic often encourages companies to co-locate ore processing and manufacturing operations with mining operations, the processing and manufacturing operations for ore mined at the Elk Creek deposit can be done elsewhere. As a result, we had a business obligation to examine multiple options when designing the project. In the end, the tax provisions of the Nebraska advantage program are a powerful incentive to locate all of the project's operations in Nebraska, and we are excited with that outcome."
Qualified persons
Scott Honan, MSc, SME-RM, of Niocorp Developments, a qualified person as defined by National Instrument 43-101, has read and approved the technical information contained in this news release.
About Niocorp Developments Ltd.
Niocorp is developing a superalloy material project in southeast Nebraska that will produce niobium, scandium and titanium. Niobium is used to produce superalloys, as well as high-strength, low-alloy (HSLA) steel, which is a lighter, stronger steel used in automotive, structural and pipeline applications. Scandium is a superalloy material that can be combined with aluminum to make alloys with increased strength and improved corrosion resistance. Titanium is used in various superalloys and is a key component of pigments used in paper, paint and plastics, and is also used for aerospace applications, armour and medical implants.
(1) The economic data and projections cited are contained in Niocorp's April, 2019, Elk Creek feasibility study, or are derived from analyses conducted as part of the FS, which was prepared in accordance with National Instrument 43-101 and is available for download at SEDAR and on the Niocorp website.
(2) The economic data and projections cited are contained in Niocorp's April, 2019, Elk Creek feasibility study, or are derived from analyses conducted as part of the FS, which was prepared in accordance with National Instrument 43-101 and is available for download at SEDAR and on the Niocorp website.
(3) Derived from analyses conducted as part of Niocorp's April, 2019, Elk Creek project feasibility study.