GX Acquisition Corp. II (NB) Earnings Call Transcript & Summary

Good day, everyone, and welcome to this investor briefing from NioCorp Developments Limited. Our mission at NioCorp, to accelerate the transition to a lower carbon economy by serving as a reliable U.S. supplier of sustainably produced critical minerals. During today's presentation, we will be making forward-looking statements. Investors are cautioned to review the disclaimers and technical disclosures shown on this slide and in the following 2 slides, as well as in our public filings with the U.S. Securities and Exchange Commission and our filings on sedar.com. Joining us today are Mark Smith, CEO and Executive Chairman of NioCorp. NioCorp is focused on developing the Elk Creek Critical Minerals project in Southeast Nebraska, an exciting project we will hear a lot about today. NioCorp stock is traded on the Toronto Stock Exchange under the ticker symbol NB and on the OTCQX under the ticker symbol NIOBF. Also joining us today is Dean Kehler, Co-Chairman and CEO of GX Acquisition Corp II, a special purpose acquisition company listed on the NASDAQ under the ticker symbol GXII. Our discussion today will center on the recently announced proposed business combination agreement between NioCorp and GX and on NioCorp's Elk Creek Critical Minerals project, which NioCorp seeks to advance by way of this business combination with GX. Gentlemen, welcome. Dean, why don't I have you start out with your thoughts on the proposed transaction? And why GX believes it has found in NioCorp an attractive merger partner?

Thank you, Jim. We're pleased to meet with you today to discuss our business combination with NioCorp, which is developing the Elk Creek Critical Minerals project in Nebraska. Elk Creek is the highest grade niobium deposit under development in North America, and the second largest indicated rare earth resource in the U.S. Critical minerals such as niobium and scandium and magnetic rare earth elements are absolutely central to accelerating the world's transition to a lower carbon economy. As we'll discuss on this call, we believe that NioCorp represents a unique opportunity for investors to participate in that transition. We founded GX with a view towards finding that one special transformative company that fills an important need, can grow dramatically, and in so doing, can create attractive shareholder returns for many, many years to come. We've been fortunate in our careers to have been involved in a number of groundbreaking investments that became public companies, and our goal has been to find another one of these to be the merger partner for GX. Over the years, the GX team has also been involved in several companies that utilize project financing to create substantial value. We believe that we can be helpful to Nio in this regard. Since completing our IPO, we have evaluated in-depth many dozens of companies, but none was as compelling an opportunity as NioCorp. Let me explain why. First, demand for critical minerals is growing as the world economy transitions toward electrification and lower carbon technologies. The huge need for these materials is well understood. The problem is that the vast majority of these critical minerals are produced outside the United States and often in difficult or unfriendly jurisdictions. The Elk Creek Project has a number of positive attributes starting with the fact that the project is located in Nebraska. The critical minerals and rare earth deposits there are substantial. There is local infrastructure in place and a strong local workforce. The project is on private land. The key permits to commence construction are already in place. Elk Creek is projected to have a 38-year mine life. So once developed, it can become a reliable domestic producer of critical materials for a long time. And based on the company's 2022 feasibility study of the project and the assumptions in that study, the Elk Creek project pencils out to have a discounted net present value of $2.8 billion pretax, and that is before, let me repeat, before adding in any benefit from extracting rare earth elements from the resource. You will hear more about all this in a minute. A brief description of the transaction. GX will merge into NioCorp and a transaction that values NioCorp's existing equity at $255 million. NioCorp's existing shareholders will retain all of their equity in the combined company and will take no money out of the transaction. In addition, we have executed nonbinding letters of intent that subject to entering into definitive agreements can provide NioCorp with access to up to an additional $81 million to help advance the Elk Creek project. The transaction is subject to, among other things, approval by NioCorp's and GX's shareholders and the satisfaction or waiver of other customary closing conditions. NioCorp has an exceptional Board of Directors and a fantastic management team, led by its Chairman and CEO, Mark Smith. Mark is a seasoned mining executive with over 40 years industry experience. He previously served as CEO of Chevron Mining and Molycorp, the predecessor to MP Materials, and also served as the Director of CBMM, the largest niobium company in the world. As Mark reviews the Elk Creek Project in greater detail, you will understand why these aspects of his background make him perfectly suited to lead NioCorp and develop Elk Creek. We are excited that GX shareholders will have the opportunity to invest in NioCorp's Elk Creek project and help accelerate the transition to a greener world. It is my great pleasure to introduce Mark Smith.

Thank you, Dean, for those kind words. On behalf of the NioCorp Board and our entire management team, let me express both my gratitude and my profound excitement about the prospect for this business combination to enable NioCorp to rapidly advance our efforts to secure the financing necessary to move the Elk Creek Critical Minerals Project to construction and eventual commercial operation. With that, let me take investors through a brief tour of NioCorp, our Elk Creek Minerals Project and why I believe that this proposed merger with GX is the right move with the right set of partners for NioCorp. After that, we will take questions that we've been receiving from investors this past week. The rapidly accelerating global transition to net zero emissions is driving demand growth for the critical minerals that are NioCorp's focus. This once-in-a-generation paradigm shift represents a tremendous opportunity for NioCorp and for our society's efforts to transition to a cleaner energy economy with reduced emissions. Here's why I think this is the case. First of all, our Elk Creek Critical Minerals Project is shovel-ready. What do we mean by that? We mean that the technical work is at the feasibility study level. That means we've done the drilling, we've done the metallurgy, we've done the mine planning, and we've done the economic analysis to name a few. We've also secured the state and local permits we need to immediately start construction once we have obtained project financing. Second, NioCorp is positioned to become a major U.S. producer of the critical mineral, niobium. This strategic metal is largely used as a very powerful steel additive as it makes steel lighter, stronger and more corrosion resistant. However, applications for niobium and its potential market are rapidly shifting to include its use in rapid-charging solid-state niobium-lithium-ion batteries. This new application has the potential to dramatically increase global demand for niobium. Third, NioCorp is also a large prospective U.S. producer of scandium. Our project is the only one in the United States to have declared a scandium mineral reserve that is supported by a feasibility study. Scandium has large latent demand in the commercial aviation and automotive sectors, which we'll talk about today. In addition to the products we now plan to produce, niobium, scandium and titanium, we're also conducting technical and economic analyses on the potential addition to our planned product suite of several magnetic rare oxides such as neodymium-praseodymium or NdPr oxide, dysprosium oxide and terbium oxide. All of these critical minerals are forecast to experience large supply shortages because of sharply rising demand, largely led by the electric vehicle revolution and the need for wind power generation. Our project is strongly focused on environmental, social and governance values or ESG. It is already aligned with the Equator Principles ESG framework. For us, sustainability is not simply a buzzword. We walk the talk at NioCorp when it comes to sustainability and environmental protection. One of the big differentiators of the Elk Creek project is the unusual and high-value critical minerals we have in our mineral resource. Here you can see the elements that we are focused on and how much of these critical minerals we have in our mineral resource. I would like to note the current overwhelming reliance of the U.S. on foreign producers of these critical minerals. 100% of the niobium we consume in the U.S. is imported from foreign nations. 100% of the scandium we consume in the U.S. is imported from foreign nations. 91% of the titanium concentrate we consume in the U.S. is imported from foreign nations. And 100% of the separated rare oxide products shown in green on the right-hand side of the slide, are imported into the U.S. primarily from China. With regard to rare earth, the Elk Creek Project contains the second largest indicated NdPr mineral resource in the United States. We have the second largest indicated dysprosium mineral resource in the U.S., and we have the largest indicated terbium mineral resource in the U.S. Together with this array of high-value critical minerals in the Elk Creek ore body, we expect to make a real difference in strengthening U.S. supply chains for these critical minerals. Our principal target metal in the Elk Creek Project is niobium. Niobium is considered a critical mineral by the United States government for both commercial and defense applications. But again, the U.S. is 100% dependent on foreign imports of niobium. To make matters worse, niobium is only produced at commercial scale in 2 countries today. That supply chain risk has forced the United States government to place supplies of niobium in the national defense stockpile, that further underscores just how critical of an element niobium is to the United States. The size of global markets for niobium are large and are getting larger. While the construction, automotive, aerospace, and oil and gas sectors are the largest consumers of niobium today, one emerging application promises to become a new and rapidly growing market in and of itself and that is solid-state niobium-lithium-ion batteries. The world's largest producer of niobium, CBMM, has teamed with Toshiba, Nano One, Nyobolt, Volkswagen, and others to develop next-generation solid-state niobium-lithium-ion batteries. These batteries promise to be fully rechargeable in less than 10 minutes. They provide a longer range for the car per charge. They've been shown to deliver 5x the battery life of current lithium-ion technologies, and these advances are really made possible by niobium. These advances also represent the holy grail of battery performance to electric vehicle manufacturers. It's exciting to say the least. Not surprisingly, CBMM expects that demand for niobium for these batteries could reach 45,000 metric tons per year by 2030. The niobium market for current applications today is 75,000 metric tons per year, and that market is growing at a very healthy rate as well. Niobium used in these solid-state batteries could expand these markets quite dramatically. Scandium is another high-value critical mineral that we intend to produce in Nebraska. What niobium does for steel, scandium does for aluminum. Scandium-aluminum alloys promise to significantly lightweight transportation systems such as electric and hybrid vehicles and commercial aircraft that will help save energy and reduce greenhouse gas and other harmful air emissions. Current global consumption of scandium is actually quite small, but that's only because very little scandium is produced today, only about 25 metric tons. Economically viable deposits of Scandium are very rare. Fortunately, we have an extraordinary scandium resource in Nebraska. Momentum in scandium markets is building too, especially after the second largest mining company in the world, Rio Tinto, is now making scandium products in Canada. Independent forecasts show that if more standing were produced, latent demand greatly exceeds the 100 tons per year scandium that Naracoorte plans to produce. And as new applications for lightweight scandium alloys are put into production, we see scandium demand growing far beyond what we intend to make. Let me highlight one application for scandium, which you can see on the far right-hand side of this slide, this application alone could easily consume NioCorp's entire annual production of scandium. Electric vehicles utilize an enclosure for the lithium-ion batteries that carry. These battery enclosures are designed to protect the batteries from damage and corrosion and to reduce the potential known fire hazards and the trays also provide structural integrity to the chassis. Automakers are increasingly using aluminum as the main material in these battery enclosures, which can reduce weight by 40% and provide better range, acceleration, payload and energy use performance. However, alloying aluminum with scandium in these battery trays can further reduce the weight, provide improved structural integrity for the chassis and provide cost savings in terms of producing the trays. As I mentioned, NioCorp is conducting technical and economic analyses on the potential addition to our planned product suite of several magnetic rare oxides such as neodymium-praseodymium or NdPr oxide, dysprosium oxide, and terbium oxide. In our most recent NI 43-101 feasibility, it showed the Elk Creek Project contains the second largest indicated rare earth mineral resource in the United States. As we mine and process ore, and we put niobium, scandium and titanium into solutions, so we can separate and purify them into commercial products, we will also be putting the rare earth in our ore in this solution. That positions us very well to potentially make separated rare oxides in addition to our other products. If our ongoing technical evaluation shows that it is feasible to produce separated high-purity rare earth oxides from our ore, and if our economic analysis shows that it makes sense to add these to our product offering, we will announce the specifics of that through an updated feasibility study. We expect to complete that study in the coming months. Why are we looking to potentially add rare earths? The information on this slide shows why. Demand for magnetic rare earth oxides is forecast to triple by 2035. Moreover, it is estimated that production will lag far behind demand, creating potential shortages of magnetic rare earth oxides in particular. This supply-demand imbalance would be felt particularly hard by the automotive and renewable energy sectors. At NioCorp, we're looking forward to completing our ongoing analysis and reporting updates to the market as our work progresses. Another differentiator of the Elk Creek Project is that we have already placed, under enforceable sales contracts, a significant amount of our products. As you can see, 75% of our planned ferroniobium production over the first 10 years of operations has been sold to 2 companies, 50% to Thyssen Krupp Metallurgical Products and 25% to CMC Cometals. Notably, the Thyssen Krupp contract provides NioCorp with potential access to a German government loan guarantee of as much as $200 million, which can go a long way in our project financing effort. We've also sold approximately 12% of our planned scandium production over the first 10 years of operation to Traxys North America. This sales agreement is the single largest such agreement for Scandium known to have been executed, and we are very proud of that accomplishment. Finally, I would note that while we have not yet announced definitive plans to produce magnetic rare earth oxides, we are already in discussions with large automotive and renewable energy manufacturers for offtake agreements for these potential rare earth products. We will certainly notify the market if and when we're able to execute rare earth sales contracts. The business combination with GX should strongly position NioCorp to emerge as America's second major rare earth project behind MP Materials, Mountain Pass California Rare Earth Mine should NioCorp make the final decision to produce rare earths. As you can see here, MP Materials project was capitalized in part through a SPAC merger, which also led to MP's listing on the New York Stock Exchange. NioCorp is seeking to advance our Elk Creek Project through a SPAC merger with GX, and we expect to get the NASDAQ listing following the closing of our deal. MP Materials primary production focus at the Mountain Pass Mine is NdPr, which is the principal constituent of the permanent rare earth magnets used in automotive, aerospace, defense, and renewable energy applications. NdPr would also be NioCorp's primary rare earth focus. But here are 2 major differences between these 2 projects. NioCorp plans to produce a diverse set of critical minerals that also includes niobium, scandium, and titanium. Second, if we proceed with rare earth production, we will be able to make 2 very important rare earth oxides in addition to NdPr. Those are high-purity dysprosium oxide and high-purity terbium oxide. Known as heavy rare earths, these elements are present in the Mountain Pass deposit, but at very low concentrations, which makes their commercial production from California a question at best. In contrast, NioCorp will make all of these constituents of the centric permanent rare earth magnets used in EV traction motors. I should also note that dysprosium and/or terbium are important additions to the normal neodymium-iron-boron centric magnets when the magnets are expected to operate in higher temperature environments. So they're an important component of the permanent rare-earth magnet industry. Finally, you'll see here a number of major project milestones on which we're working at NioCorp. They include completion of the demonstration plant testing as optimized flow sheet and rare earth recovery rates, exercising our option to purchase agreements for additional land, conducting detailed engineering necessary for the launch of construction, site preparation and development of infrastructure and the launch of shaft sinking operations, completion of project financing, plant commissioning, full-scale commercial production. Thank you for the opportunity to discuss our project and our products. I'll hand it back to you, Jim.

Thank you, Mark. Let's now go to questions that we have received from investors over the past week. The first question, Dean, goes to you. What is a SPAC? And how does it approach mergers with companies seeking to grow, like NioCorp?

Thank you for that question, Jim. A SPAC is a publicly traded company that raises capital through an initial public offering for the purpose of affecting a merger or a similar business combination with one or more businesses. In this case, GX has entered into the business combination agreement to complete the business combination with NioCorp. In connection with the shareholder meeting to approve the transaction, the investors in the SPAC can choose whether they want to keep their money in the SPAC or cash out, that is redeem their shares. The amount of cash remaining in the SPAC's trust account after any such redemptions and after the payment of expenses would then be available to the combined company upon consummation of the transaction. GX received proceeds of USD 300 million in connection with its IPO. Assuming no redemptions by GX shareholders, NioCorp may receive up to $285 million in cash to the balance sheet upon closing of the transaction after giving effect to expenses. If any GX shareholders elect to redeem, however, the amount of cash available to NioCorp upon the closing of the transaction will be decreased by the amount that GX is required to repay towards redeeming shareholders. And the number of shares issued by NioCorp will be reduced proportionately.

Thanks, Dean. Our second question from investors goes to you, Mark. Why is this business combination right for NioCorp?

Thanks, Jim. The approximate USD 0.89 per NioCorp share equity rollover value represents an approximately 14% and approximately 12.6% premium to NioCorp's common share spot price and 20-day volume weighted average common share price, respectively, as of September 23, 2022. The transaction has the potential to significantly accelerate NioCorp's efforts to obtain the required Elk Creek Project financing by increasing exposure to institutional investors looking to make strategic investments in critical minerals plays that are crucial to the world's clean energy transition. The transaction also has the potential to provide NioCorp with up to $285 million in net cash proceeds at the consummation of the transaction, depending upon GX share redemptions, and up to an additional $81 million over the next 3 years, depending on the consummation of other additional financing arrangements that NioCorp and GX intend to pursue prior to and following the expected closing of the proposed transaction. It also improves trading liquidity due to the expected listing of NioCorp's common shares on the NASDAQ. It will also increase public awareness of NioCorp resulting from the expected listing of NioCorp's common shares on NASDAQ. It will provide access to a broader range of financing alternatives, if the NASDAQ listing is achieved, and it should also increase public awareness with respect to the unique position of the Elk Creek Project at a critical time as a potentially vital component to help secure U.S. supply chains for critical minerals needed for rapidly growing technologies such as electric vehicles, renewable power and energy-efficient electric motors.

Our next question, Dean, goes to you from an investor. It's a version of what we just asked Mark. Why is this business combination right for GX?

Well, Jim, we considered a number of factors, and I'll mention some of the main ones. First, the business combination provides an opportunity for GX shareholders to become investors in NioCorp's Elk Creek Project, which, as we discussed, is a pure-pay critical minerals project with the highest grade niobium resource in North America and the second largest indicated rare earth resource in the United States. We believe that NioCorp is well positioned to be a reliable U.S.-based supplier of niobium, scandium, titanium, and subject to further development, potentially rare earth elements, helping to meet the growing demand for these minerals and providing domestic supply security. Another important reason is that NioCorp has an experienced management team, led by Mark, to advance the company's strategic and growth plans. NioCorp's mission is to accelerate the global transition to a lower carbon economy by serving as a reliable and sustainable U.S. supplier of critical minerals and with a strong ESG focus. We're excited to be a part of it.

Mark, our next question goes to you. The question is, when will the business combination be completed and what will shareholders have to vote on?

The parties currently expect the business combination to be completed during the first quarter of 2023. The actual data closing will be dependent upon a number of factors, including without limitation, the SEC's review of the registration statement to be filed in connection with the proposed transaction. Following the effectiveness of the registration statement, NioCorp will hold a special meeting of shareholders, at which shareholders will be asked to approve the following: First, the issuance of the NioCorp securities issuable in connection with the transaction or other financing arrangements; an amendment to the articles of NioCorp as amended effective January 27, 2015, to comply with applicable listing requirements of NASDAQ; and any other proposals that are necessary to effectuate the transaction. GX will also hold a shareholders' meeting, at which GX shareholders will be asked to approve the following: First, an amendment to GX's amended and restated Certificate of Incorporation, the GX Charter, to eliminate the automatic conversion of shares of Class B common stock of GX, all of which are held by the GX founders, into GX Class A shares at the time of a business combination. They will be asked to approve the transaction and any other proposals that are necessary to effectuate the transaction. After approval of the GX and NioCorp shareholders, and assuming satisfaction of the other conditions to the consummation of the transaction, the transaction will be consummated.