Hard to believe, 170 days since potentially game-changing announcements by Ucore Rare Metals (OTCQX:UURAF) (TSXV:UCU), yet the stock is lower than it was then. On March 3rd, Ucore's stock closed at C$ 0.33, the day of its 2nd blockbuster announcement. On August 18th, the stock closed at C$ 0.305, (down 7.5%). Both early March press releases centered on the Company's use of Molecular Recognition Technology, "MRT." The March 2nd news concluded that Ucore, “…successfully separated each of the rare earth elements (“REE’s”) at high purity.” How high? 7 of the 14 reported results came in at 99.9% with the single lowest at 99.0%.
Both Samarium and Gadolinium were separated in April at 99.2% purities. On March 3rd, Ucore reported that it entered into an agreement with IBC to obtain "exclusive rights to IBC’s SuperLig® MRT for rare earth separation, recycling and tailings processing applications." This represents the culmination of decades of hard work, spearheaded by the Izatts and privately-held IBC Advanced Technologies, “IBC.” Old news, right? 170 days old? Yes and No. Since then, a number of skeptics have been silenced and, "believers" born. Mark MacDonald, VP Business development has this to say,
"The HREE market will require the development of new resources simply because of the restricted global supply of magnet input materials such as Dysprosium, Terbium and Neodymium. Demand for HREE is expected to have a 8%-11% compound annual growth rate (CAGR) until 2020. We expect that Ucore’s Bokan‐Dotson Zone resource could be the first producing HREE deposit in North America. With a 40% skew toward heavy rare earths, the Bokan‐Dotson Zone deposit has one of the most valuable ore baskets of any deposit in the world. However, Bokan’s development will only play a small role in satisfying the impending global supply shortage of HREE."
Not all highly promising news is 170 days old! Please consider these condensed (by me) press releases:
August 17th. Ucore Rare Metals entered into an agreement with a high net worth U.S. investor through which the Investor will pay US$ 1.0 million (C$1.3 million) to Ucore for a Royalty on the sale of products and services related to the processing of REEs and other specialty metals and critical materials utilizing MRT. Note, this is the second such Royalty deal. The Royalty will be comprised of two components: (i) a Gross Royalty equal to 5% of gross sales from the Company's first MRT installation(s), payable until the recapture of the initial Investment; and thereafter (ii) a Net Smelter Royalty ("NSR") equal to 0.5% of the net sales from the Company's first Tier I production client. A Tier I production client is considered to be one with an estimated gross revenue volume to Ucore exceeding C$ 50 million.
July 8th. Ucore Rare Metals commissioned the construction of a pilot plant for testing its MRT for the separation of REEs at bulk scale. Ucore contracted IBC for design & construction, targeting completion before year end. Ucore confirms agreements with REE feedstock providers to secure test material. The proposed pilot plant would be capable of accepting Pregnant Leach Solution, "PLS" and bulk concentrates from multiple prospective REE feedstock locations around the world. The plant would be customizable, for treating varying metals in different PLS feed solutions. The mid-term objective is to have the plant serve as a prototype for a full-sized separation plant to be located in North America. President and CEO Mr. Jim McKenzie noted,
"We expect to have a mini-plant commissioned to provide pilot scale separation tests on the Bokan-Dotson Zone PLS by the end of the calendar year. These tests will inform our Bankable Feasibility Study (BFS). The mini-plant will be engineered for pilot scale testing on PLS or mixed concentrate originating from sources other than Bokan. We are currently under contract to test PLS from various sources including ongoing process flow, tailings as well as other development stage resources....There's tremendous interest in our pilot plant within the REE sector as well as from producers of iron, uranium and phosphates. Given beleaguered commodity prices since 2011, resource companies are focused on increasing their revenue. Utilizing a proven economic and environmentally sound technology to extract elements previously inaccessible is a sound business practice for both Ucore and the interested parties."
June 16. Ucore announced the appointment of Dr. Reed and Mr. Steven Izatt to the Company's Advisory Board. Dr. Reed Izatt is one of the founding principals of IBC, specializing in MRT. He's author or co-author of over 550 publications, and has broad research experience in macrocyclic and separations chemistry, calorimetry, and thermodynamics of metal-ligand interactions. Dr. Izatt received a PhD degree in Chemistry with an Earth Sciences minor from Pennsylvania State University (1954). Steven Izatt is President and CEO of IBC, serves on the Board of the International Precious Metals Institute, "IPMI." He received the IPMI Distinguished Achievement Award (2008) in recognition of his entrepreneurial contributions to the precious metals industry. Mr. Steven Izatt has authored or co-authored over 100 publications. He graduated in 1984 from the Massachusetts Institute of Technology (MIT) with an S.M. degree in Chemical Engineering.
President & CEO Jim McKenzie commented, "We’re extremely pleased to have attracted two such distinguished scientific minds to our advisory team... With Ucore’s expanding focus on metals separation technologies, the insights provided by Dr. Reed and Mr. Steven Izatt, combined with the benefit of IBC’s experience as the world leader in commercial scale MRT applications to the mining industry, will be invaluable... "
June 12th. An agreement with a high net worth U.S.-based investor calls for payments totaling US$ 4.0 million (roughly C$ 4.9 million) to Ucore in consideration for a Royalty on the sale of products and services related to the processing of REE and other specialty metals and critical materials utilizing MRT. The first payment in the amount of US$ 1.0 million has been received. The Investor has the right to convert the total amount of the Investment (minus any Royalty amounts already then paid by Ucore) into common shares for three years after the date the full US$ $4.0 million is delivered to Ucore. If the Investor elects to convert, it can convert into shares at the greater of: (i) the 30 day volume weighted average share price, less a 20% discount; (ii) the price of shares on the day immediately prior to the conversion date, less a 20% discount; or (iii) C$ 0.25 per Common Share.
May 11th. Ucore Rare Metals Inc. (TSX-V:UCU) (OTCQX:UURAF) announced an upgraded and increased resource estimate for the Bokan Dotson-Ridge REE project in Southeast Alaska. An additional 1.043 million tonnes Inferred mineralization has been added to the total Resource at Bokan, as a result of deeper exploratory drilling during the 2014 field season. More than 98% of the previously established Resource has now been upgraded to the fully Indicated category under NI 43-101 standards. The previously announced Resource, consisting of 2.936 million tonnes in the Indicated category and 1.995 million tonnes in the Inferred category under NI 43-101 standards. The Company reports that the anomalous skew towards the more valuable heavy rare earths (“HREO”) remains consistent across the entire deposit, at approximately 40% of total rare earths. The Resource remains open both at depth and along strike.
In the interest of keeping this article under 10,000 words, here are links to 3 additional press releases.
Why go to the trouble of summarizing press releases? I believe investors may not be reading and digesting them. Likely licking their wounds, to scared to look at their demolished portfolios. However, from among today's "penny dreadfuls," are the rising stars of tomorrow. Trading evidence in Ucore's stock suggests that the above mentioned developments have pretty much been ignored. Even if one or two referenced news events are not as impactful as I presume, taken together with the March 2nd & March 3rd press releases, gives me increased confidence and excitement in Ucore. When a prospective investor in Ucore calls or emails me asking why invest now? I have several answers: near-term catalysts, recent successes, funded balance sheet, strong management team, potentially game-changing technology. There's plenty to sink one's teeth into. When the big-shot Portfolio Managers return from their summer vacations, Ucore Rare Metals will be spewing from a growing list of analysts lips.
Not only is the Company de-risking, but the investment opportunity at C$ 0.31 offers compelling risk / reward compared to 170 days ago. The chances of key project level investment(s) or earn-in(s) by global trading companies (and strategic investors) is increasing by the day. There have been no material setbacks for Ucore Rare Metals in quite some time. Equity dilution has been minimal. How many junior natural resource companies can make the same claim?
I highly suggest readers and investors carefully review Reed's Izatt's 550 publications. Links to the most important 250 are provided below. It took me a few months, the loss of sleep, appetite and hair, but it was well worth the effort. To reiterate what I said earlier, The Izatts, Board, Management and Stakeholders' efforts is the culmination of decades of hard work. This is not a flash in the pan Company, jumping on the Rare Earth Elements bandwagon in 2011. Ucore has been at this for almost 8 years. One last quote of from a well done and informative research report from Gareth P Hatch, PhD, Founding Principal, Technology Metals Research, LLC, dated January, 2015.
Here's a quote of the conventional wisdom before MRT was introduced to the world.
"REEs are chemically very similar to each other - thus: They are always found together and have to be mined together. They are very difficult to separate from each other. They require complex processing routes. Facilities require significant capital & operational expenditures. Facilities have to be tuned to the mix of REEs present. The supply dynamics of the REEs are entwined with each other."
From the same report, "China officially admits major pollution issue, 20% of all arable land is polluted with heavy metals 60% of China’s water is moderately or seriously polluted. Chinese officials state that heavy REE resources in China will be exhausted in 10-20 years at current rates of exploitation."
This is why MRT is potentially a game-changing technology for the separation of TREO. Experts agree that multiple solutions for TREO separation could be developed, I for one believe that since MRT is further along than peers, it will enable other inferior separation methods to be scrapped to save time, money and technology risk.
I regret that I am unable to address the Chinese wildcard impacting virtually all metals and minerals, as it's beyond the scope of this article on Ucore. The two quotes above, taken together, suggest that demand for most HREEs and a select number of LREEs will be increasing difficult to meet, especially with respect to security of supply. The race is on to counter China's needs, (and dominance). Only after China is satisfied and perhaps (Russia as well), will global supply of the most important REEs be readily available for ongoing technological breakthroughs. Alaska's Ucore Rare Metals could help be the solution to North America's problem. It's said that the next global war will be fought over oil, some say over water. I believe it could be fought over a handful of the rarest of rare REEs.
Conclusion:
It's always tempting, the potential of large or very large returns by playing the smaller market caps in REEs, uranium, gold, copper, potash, lithium, graphite etc. Large returns on one's invested capital, in rare instances, make for a great story at the county club. Make no mistake, Ucore's in the top quartile of market caps in the REE / HREE space. However, its risk / reward spectrum as measured only by market cap is misleading. Ucore Rare Metals, (OTCQX:UURAF) (TSXV:UCU) having access to MRT, one of the most promising TREO separation technologies in the world, revenues coming in this year and next offsetting SG&A, a high skew to HREEs, a potential low-cost AIDEA loan for US$ 145 million from the mining friendly State of Alaska, including a deep water sea port set it apart from smaller and larger market cap companies. Speaking to one risk, investors and readers alike risk missing out on the continued progress and positive announcements over the next 6-12 months.
Please see management presentation.