Ucore advances on the road to heavy rare earth production

Screen shot 2013-11-07 at 9.07.25 AMNovember 7, 2103 — Tracy Weslosky, Publisher and Editor-in-Chief of InvestorIntel interviews Jim McKenzie, President and CEO of Ucore Rare Metals Inc. (TSXV: UCU | OTCQX: UURAF) to discuss the company’s recently released resource update for its flagship Bokan Dotson-Ridge Rare Earth (REE) Project in southeast Alaska, as well as some of the other milestones Ucore has achieved to date, Jim’s take on the recent WTO ruling against China and its REE industry, and what investors can look forward to as Ucore advances on the road to REE production. Ucore’s 100% owned Bokan Dotson-Ridge Project is particularly enriched with heavy rare earth elements (HREEs), including the critical elements dysprosium, terbium and yttrium.

Tracy starts by asking Jim to comment on Ucore’s recent upgraded resource estimate. “That was a significant piece of information we just put out,” explains McKenzie. “It was the culmination of $12 million in expenditures, so even though the release came out and it’s exhausted in one day, the fact is that was the result of a great deal of effort. And we are very proud of it. The resource estimate has been upgraded to the better part of an indicated resource, from what was previously an inferred resourced. We’re now at ‘indicated;’ the highest is ‘measured’ and we are moving in that direction.”

Recapping the sizable accomplishments made by Ucore this year, Jim stated: “2013 has been a gangbuster year for us, notwithstanding the fact that the resource capital markets have been a bit beleaguered, but internally — operationally — we’ve just had a tremendous year. The first deliverable that we came through with was the Preliminary Economic Assessment (PEA), delivered in Q1 of this year. We think the PEA was amongst the ‘best of breed’ in the junior rare earth resource space; tremendous figures are associated with that. We had one of the highest internal rates of returns (IRR) in the space at 43% and a very, very respectable net present value (NPV). I think the most import figure that we came out with in the PEA was the CAPEX to get into production. It was estimated a little bit north of $200 million, which really is a small amount relative to not only the other players in the space, but to mining in general.”

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Regarding Ucore’s continued success, McKenzie commented: “I believe the fact that we’re in the US market — addressing one of the largest and most prolific consumers of rare earths in the world — is a big reason why we’ve performed reasonably well. 2012 was actually a phenomenal year for us in the markets. We outperformed, I think, by and large the entire space. This year, it’s been more a matter of ‘holding your own’ in a very challenging market. We’ve succeeded in hitting benchmark after benchmark on the road to construction and production. We have delivered the resource, we’ve upgraded the resource, we’ve delivered the PEA, and we have delivered numerous other interim geopolitical benchmarks.”

In closing, Tracy asks Jim to discuss what upcoming milestones investors can look forward to from Ucore. “The two remaining objectives we are looking to achieve over the year and a half to two years are delivering the Feasibility Study (FS), which is the ultimate document for any resource company looking to go into production.” McKenzie explains. “The FS we are looking to deliver next year – and a lot of smaller, subordinate items are feeding into that. The other deliverable is the NEPA permitting process. We are looking to trigger that in 2014. Every mine in the free world has to go through a permitting process of sorts — and certainly being in the US, we are no exception — and we will pursue that as quickly as we can.”

Other topics include forthcoming updates to Ucore’s metallurgical process, the State of Alaska and US Forest Service’s continued strong support for Ucore, infrastructure at Bokan Dotson-Ridge, and off-take discussions.

Disclaimer: Ucore Rare Metals Inc. is an advertorial member of InvestorIntel.


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Tracy Weslosky

About Tracy Weslosky

Tracy Weslosky is the Publisher and Editor-in-Chief of InvestorIntel, a leading global investment intelligence source created for the innovative and entrepreneurial minded that represents publicly listed companies that are listed on InvestorIntel.com. Tracy is also the Founder & CEO for ProEdge Media Corp., an online publishing and media production company since 2001 that owns InvestorIntel. Tracy is also the Managing Partner for 724 Capital Corp., a business consulting firm that lists all clients on 724Capital.com. Previously she has owned a boutique Investment Banking firm for 7 years that was the basis for a business reality television series called, DealFlow. Aired around the world for 3 years on CNBC World, WealthTV and many other networks globally; Tracy is a speaker, writer and an entrepreneur.
      • American Industry cannot exist without rare earths.

        The world is not stupid and now realizes that rare earths put China in a position to produce many important products at prices lower than foreign competitors.

        Alternative sources of supply will be established outside of China – and I believe Ucore will be one of them.

        A measure I have been using to determine which rare earth explorers will be the first into production is:- “Capital expenditure requirements divided by market capitalization.”

        It’s a simple but very effective measure, and Ucore rates highly.

        • With regard to the formula, I suppose the lower the number the better? Ucore is about 5 then? Obviously the lower the capex the better, but why exactly is an REE explorer more likely to go into production sooner the higher its market cap? According to the formula QRM scores quite poorly, but isn’t it generally considered one of the companies that will go into production sooner? Or are you not classifying it as an explorer? Thanks.

          • As far as QRM going into production soon, I don’t think it’s a slam dunk for it to raise $2.6 billion. And yeah, that is a rather large multiple of its current market cap. So a straight secondary offering of common shares to Joe and Jane Q. Public does not appear likely to do the trick. Not that it would be a piece of cake with Ucore either.

          • Hi Joe,

            I believe this measure “Capital expenditure requirements divided by market capitalization.” tells me what the market is thinking.

            For example a company needing to raise around 100 times it’s market cap. to get into production is going to find that a very difficult task to accomplish – don’t laugh there is one out there that I am aware of. Yet it amazes me how one particular commentator continues to mention this company as a likely HREE producer.

            Where as a company needing to raise say 1,2,3,4 or 5 times it’s market cap. to get into production is going to find that a much easier task to accomplish.

            The lower the ratio the easier it should be to raise the required capital expenditure – that’s the theory.

            The lower the capital expenditure for any HREE company means that their Internal Rate of Return, Return on Equity and Free Cash Flow levels “should be” far superior to all their HREE peers.

            I want to be invested in the next heavy rare earth producer – don’t you.

            Do the numbers – put it in your diary and tell me in a couple of years time if it works or not.

            Regards
            Bill

  1. Thanks for the education! I’m just an individual investor who’s gotten slammed with REE stocks (think GWG and MCP) over the past few years. I’m thinking this is close to bottom but trying to find the 5 or so companies to invest in. Incidentally, do you think either GWG or MCP has a future? Leaving your formula aside, MCP’s conference call the other day was quite encouraging when you ignore the fact that most prior expectations from management have not come to pass. GWG seems dirt cheap at this price, but why? Is the market right on this one? Levier seems to be the right guy for the job and says the project is a “go?” The company has significant cash and low capex requirements compared to others, and does well with your formula. But the stock keeps plummeting!!! Thanks in advance.

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