Ucore Rare Metals, The Next US Mine

According to local Alaskan media, Ucore is set to become America’s second producing rare earth elements mine after Molycorp Inc, commencing production in 2016, if all goes to plan. Ucore, will develop its flagship Bokan Mountain rare earth element property situated at the southernmost part of the Alaskan panhandle, on the southern end of Prince of Wales Island. The Bokan Mountain project covers 30 sq. km (19 sq. miles.) Construction of the mine is due to start in 2014. Once in production, Chinese domination of the rare earths and metals sector, will come to a long overdue end. In recent years China has become something of an unreliable exporter of rare earth elements, due to an island dispute in the East China Sea with Japan.

Last November Ucore released their preliminary economic assessment on Bokan, showing a before-tax net present value of $577 million at a 10% discount rate and an impressive internal rate of return of 43 percent. According to Jim McKenzie, Ucore’s CEO, Bokan Mountain is the largest NI 43-101 compliant heavy REE resource located in the United States of America.

From Ucore’s website:

The Bokan – Dotson ridge REE project is located 60 km southwest of Ketchikan, Alaska and 140 km northwest of Prince Rupert, British Columbia and has direct ocean access to the western seaboard and the Pacific Rim, a significant advantage in developing near term production facilities and limiting the capital costs associated with mine construction.

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The Bokan property is particularly enriched with heavy rare earth elements, including the critical elements Dysprosium, Terbium and Yttrium. Approximately 40% (by weight) of the rare earth elements contained on the Dotson Ridge property are heavy rare earths elements, as disclosed in the Company’s NI43-101 compliant resource estimate, released in March of 2011.

As anyone who follows the rare earths sector knows, it’s the heavy rare earths that are most desirable for profitability, being key components used in defence systems, green energy projects, electric vehicles, and medical devices, among other critical uses.  That desirability in unlikely to alter anytime soon.

But that’s not all, Ucore’s property comes with some additional advantages that can fast track the development of the Bokan property. According to Bokan’s management, the Bokan-Dotson ridge project is the “only rare earth element deposit worldwide that comes with immediate deep water access; accessible labour and prospective power.” The US project also lies in Alaska, America’s most mining friendly state. There are unlikely to be permitting delays, meaning their timetable has a better than average chance of staying on track.

Being a second critical materials mine located in the USA, and blessed with the heavy rare earths, raising additional finance is unlikely to become an issue. And with the global economy tentatively having turned the corner in 2012, Ucore’s 2016 production timetable looks to me fortuitous at this time. Come 2016 there’s likely to be a resurgent REE demand.

Ucore
link

Ucore Management Discussion, September 30, 2012.
Link.


  1. The IRR figure (pre-tax) of 43% is hilarious. It used 3 year trailing average REO prices which are way higher than current prices.

    Look at Section 22 of http://ucore.com/documents/PEA.pdf .
    Here are the base case prices on which the 43% IRR is based.

    Table 22.1 Base Case Prices
    REO
    Base Case
    Prices
    (US$/kg)
    La2O3 48.69
    Ce2O3 47.21
    Pr2O3 113.10
    Nd2O3 126.70
    Sm2O3 57.74
    Eu2O3 1,834.94
    Gd2O3 81.70
    Tb2O3 1,520.83
    Dy2O3 845.80
    Ho2O3 211.39
    Er2O3 88.20
    Tm2O3 N/A
    Yb2O3 102.79
    Lu2O3 1,036.40
    Y2O3 80.41

    The alternate cases and sensitivity analysis (in terms of REO prices) are a joke too.

  2. With prices so low, they’re practically giving it all away. But who are they? I’ll guess that the marginal Chinese operators getting the big government squeeze have drastically liquidated and the buyers have stockpiled but this is just a temporary state of affairs since demand is very likely to perk up by the time they get Bokan open. There’s plenty of national strategic interest to consider that go beyond the current metal prices. At least they have a PEA.Too bad that they didn’t do it a year earlier but currently skewed prices aside, they have the memes to build it. You know, dysprosium, jobs, green tech, national security, lowest capex etc. That’s all currency that points to a shiny new mine so take your price deck, shuffle it for another year or two and get back to us then.

  3. hackenzac, you ought to bankroll the whole enchilada – after all, it has the lowest capex. And of course, current prices are skewed, as opposed to the price spike in 2010/2011 being a skew, even though current prices are lower than before the spike. And as you are so certain, demand will increase, more than enough to offset increase in supply. By the way, take a look at what would be produced – Ucore’s not going to live on Dysprosium alone – prices of other oxides matter as well.

    • Sorry, “typo” immediately above. Meant
      “even though current prices are higher than before the spike”, not
      “even though current prices are lower than before the spike”

  4. I did a little math: based on 1500 tons of raw material per day, only Eu- (21 ppm, Cut-Off Grade 0,4 % TREO)), Tb-(37 ppm) and Dy-(232 ppm) oxides taken into account, the revenues based on REE prices of today would be 48 % lower than the base case used…
    So who’s fooling who?

    • Is that based on FOB China or China Domestic? China Domestic is lower by almost a factor of two, and may be more representative of a “true” price (over the long term).

      • And what does a 48% reduction in revenues do to profitability? It reduces it a heck of a lot more than 48%? Perhaps even more than 100% (but I didn’t check).

      • Prices are FOB, not domestic.
        Pre-tax Net Present Value (NPV) at 10% Discount Rate of 577 M US$, over 11 years (24*7) makes 143.7 K / per day. Based on Eu, TB and Dy alone they lose 74.3K a day as a result from the difference between their base case and the FOB prices of today…

  5. Magnets are pretty much established as the major demand driver for REO in coming years with growth forecast circa 9%pa and reports of some demand coming back into the sector.
    Recent presentation from a Chinese magnet maker set the cost effective threshold for RE magnets at Nd $68kg/Dy $620. Provides a good illustration of the demand destruction both in and out of China resulting from the price spike and I’d suggest with Lynas at 22ktpa later this year and Moly talking an additional 9ktpa the opportunity for rampant speculation is greatly diminished.
    Lynas is also on line to produce 84t Eu, 21t Tb & 21t Dy which will go someway to ease ROW HRE pressure.

  6. Ucore are very glib dismissing Lynas as a “lights” company, while ignoring some significant HRE, particularly Eu, slated to come out of the LAMP this year, but are they totally unaware of Duncan?

    Currently 6 months into a DFS they may find it difficult to ignore in 6 months or so. While holding higher HRE values, particularly Dy, than the main CLD deposit Lynas has proposed to discard the Ce thereby enhancing the CREO values dramatically and taking initial process thru to a mixed RE chloride. Higher production costs but well supported by the CREO values.

    A few comparison’s:

    TREO Bokan 0.75 Duncan 4.84
    TREO MT 0.03 0.44
    $T TREO $536 $2586
    Basket $71 $75 (with Ce discard)

    Bokan production numbers were daily so I simply multiplied by 365:

    Bokan/Duncan TPA

    Nd 319/4034
    Eu 6.5/178
    Tb 13/62
    Dy 92/300
    Y 489/1126

    Ucore marketing may need a little rejig when the Duncan DFS is published later this year.

  7. Like Steenkampskraal it’s a small resource at 30 kt REE (18 months output from Lynas in full production).
    Viable or not Ucore are unlikely to significantly shift the global market.

  8. ” Once in production, Chinese domination of the rare earths and metals sector, will come to a long overdue end.”

    Not very likely.

    I will say that the ongoing discussion here in the comments attempting to pin down the exact pricing where Ucore will need to be to make money was very enlightening. I am learning pretty quick to take junior miner’s price projections as best case scenarios, just as in any other investment opportunity. So thanks to you folks for the education here on the pricing.

  9. I will be interviewing Jim tomorrow…thank you for your comments as I am considering conversation topics this evening. If you have any additional ideas, please do let me know. Thanks.

  10. UCore Mines Investors Not Land

    Bokan-Dotson Mountain, Alaska—Ucore Rare Earth Metals (TSXVENTURE:UCU)(UURAF)

    FOR IMMEDIATE RELEASE

    PRLog (Press Release) – Jun. 26, 2014 – KETCHIKAN, Alaska — UCore failed on its last two mining claims, Lost Pond in Newfoundland and Canada, leaving the sole asset Bokan-Dotson Mountain. UCore defaulted on paying annual installments of $60,000 on some of these mining claims and tried to bully other miners off their claims. Now the State of Alaska Legislature passes SB99 by willing to jeopardize its credit rating in lending $154 million Alaskan dollars to a nearly bankrupt insolvent Canadian company, UCore, who has yet to book any income within the last four years on its KPMG audited financial statements. UCore doesn’t seem to have any supplier contracts from buyer companies which any bank would require as part of the loan application if ever these mines produced anything. UCore’s current patterns of behavior suggest that UCore is only interested in speculative commodity trading contracts for its executives to fish its own penny-stocks for a profit. Historically, the people of Alaska didn’t get the high-paid jobs they were promised and were left holding unpaid bills by these companies, some to a tune of $1 million dollars nearly creating ghost-towns. UCore was given a draft two years ago for the local people to start an educational program for a specific career path for these mining jobs at UCore. UCore refused to read it much less help Alaskans into a professional high-paid career. The only thing UCore has become good at is taking your money.

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