EDITOR: | December 14th, 2015 | 22 Comments

Ucore Closes $6.9 Million Royalty Financing with Option to Increase to $8.2 Million

| December 14, 2015 | 22 Comments
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Ucore-Rare-Metals-200x125December 14, 2015 (Source: Marketwired) — Ucore Rare Metals Inc. (TSX VENTURE:UCU) (OTCQX:UURAF) (“Ucore” or the “Company”) is pleased to announce that the Company has entered into an agreement (the “Agreement”) with a foreign investment fund (the “Investor”) through which the Investor will pay USD $5.0 million (approximately CAD $6.9 Million) to Ucore in consideration for a royalty or profit share on the sale of products and services related to the processing of rare earth elements and other specialty metals and critical materials utilizing SuperLig® Molecular Recognition Technology (“MRT”).

Under the terms of the Agreement, the Investor will make a USD $5 Million payment to Ucore, with USD$2.5 Million due immediately on execution of the agreement and the balance payable by April 30, 2016 (collectively, the “Investment”).

In consideration of the foregoing, the Investor will receive a profit share or royalty from the production of Ucore’s early stage MRT installations (the “Royalty”). 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 or installations, payable until the recapture of the Investment; and (ii) a Net Profits Royalty (“NSR”) equal to 5% of Ucore’s net profits from the installation. Net profit figures are to be calculated by Ucore on an annual basis during the production term, in accordance with IFRS accounting procedures.

“We’re pleased to announce the agreement for yet another significant royalty financing”, said Jim McKenzie, President & CEO of Ucore. “The obtainment of repeated financings during this challenging time in the resource sector is an exceptional achievement. We believe this shows the potential for MRT as a revenue maker in both procyclical and countercyclical environments. Remarkably, this form of financing is prospectively non-dilutive, a substantial plus for new and existing Ucore shareholders. The Company is excited to be pushing forward with the development of this promising MRT platform. This funding will contribute toward the completion of our MRT pilot plant, which we anticipate during Q1 of 2016.”

The Investor has the option to increase the amount of the Investment by up to USD$ 1 Million (approximately CAD$1.37 Million) in exchange for a larger Royalty. If, prior to April 30, 2016, the Investor provides written notice to Ucore that it would like to increase the Investment, it can do so in tranches of USD$500,000 in exchange for a pro-rata increase in its royalty. Each USD$500,000 additional investment will result in an increase in the NSR by a factor of 0.50%. If so exercised, the option to increase will bring the total financing deal to USD $6 Million (or approximately CAD $8.2 Million).

Pursuant to the Agreement and subject to any required regulatory, stock exchange or shareholder approvals, 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 of Ucore. If the Investor elects to convert such amount, then Ucore’s Royalty obligations shall cease and the conversion amount shall be converted into common shares at the greater of: (i) the 30 day volume weighted average share price of Ucore’s common shares, less a 20% discount; or (ii) the market price of Ucore’s common shares on the day immediately prior to the conversion date, less a 20% discount; or (iii) $0.20 per common share.

The Agreement and the closing of the transaction remain subject to and conditional upon the acceptance and approval of the TSX Venture Exchange.

Background

It is expected by the parties that the products created and services provided related to generating the revenues and net profits that will be the subject of the Royalty will be furnished under the terms of the anticipated joint venture announced on March 3, 2015 (the “Joint Venture”) between Ucore and IBC Advanced Technologies Inc. of American Fork, Utah (“IBC”). Under the terms of the Joint Venture, Ucore will retain a controlling interest (60%) while IBC will retain a 40% beneficial interest in the exclusive rights to IBC’s SuperLig® MRT platform for rare earth separation and recycling applications, as well as tailings processing applications. With MRT installations around the world, IBC is the leading purveyor of MRT processing to the mining industry.

About Ucore

Ucore Rare Metals is a development-phase company focused on rare metals resources, extraction and beneficiation technologies with near term potential for production, growth and scalability. On March 3, 2015, Ucore announced the right to acquire a controlling ownership interest in the exclusive rights to IBC SuperLig® technology for rare earths and multi-metallic tailings processing applications in North America and associated world markets. The Company has a 100% ownership stake in Bokan- Dotson Ridge (“Bokan”), the highest grade heavy rare earth project within the United States based on NI 43-101 standards. On March 31, 2014, Ucore announced the unanimous support of the Alaska State Legislature for the investment of up to USD $145 Million in the Bokan project at the discretion of the Alaska Import Development and Export Agency (“AIDEA”).

About IBC

IBC Advanced Technologies, Inc. (IBC) is an award-winning, green chemical selective separations company based on innovative MRT products. IBC specializes in MRT, utilizing green chemistry to achieve highly selective separations of metal ions in complex matrices. Related to Nobel Prize-winning technology (Chemistry, 1987), IBC’s proprietary products and processes are used worldwide by premier metals refining and mining companies such as Tanaka Kikinzoku K.K. (Japan), Asarco Grupo Mexico (USA), Impala Platinum Ltd. (South Africa), and Sino Platinum (China). In 2014, the Japanese Government (Mitsubishi Research, Inc.) awarded to IBC a highly competitive subsidy grant, “Demonstration Project for Seawater Purification Technologies”, concerning the selective separation of the radionuclides strontium and cesium from contaminated seawater at Fukushima, Japan. The recent successful completion of this project by IBC demonstrated the viability of using SuperLig® products in this vital application.

Cautionary Notes

This press release includes certain statements that may be deemed “forward-looking statements”. All statements in this release, other than statements of historical facts, that address future exploration drilling, exploration activities, research and development timelines, and events or developments that the Company expects, are forward looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include exploitation and exploration successes or setbacks, research and develop successes or setbacks, continued availability of financing, and general economic, market or business conditions.

MRT is at advanced testing stages and has yet to be proven, at a commercial scale, for the separation of rare earth elements. The Company has not yet released an economic assessment on the use of MRT for the separation of rare earth elements and does not yet have any specific contracts for the processing of rare earths using MRT.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined by the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.


Raj Shah

Editor:

Raj Shah has professional experience working for over a half a dozen years at financial firms such as Merrill Lynch and First Allied Securities Inc., ... <Read more about Raj Shah>


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Comments

  • hackenzac

    So technology skeptics? Makes you go hmmmmmm doesn’t it?

    December 14, 2015 - 1:05 PM

  • JOE O

    not exactly thrilled about having to give 5% of net profits
    hope super lig is the bomb but I wonder if bokan ever gets off the ground

    December 14, 2015 - 2:09 PM

  • Robert Mackay

    Huge difference between a 5%NSR and a 5% NPR. They say it is a Net Profits Royalty but the in their press release they put NSR [Net Smelter Return]

    Which one is it?

    December 14, 2015 - 2:57 PM

  • alvarita

    Stock conversion option at 20 cents or 20% discount makes me go hmmmmmmm alright…lmao. So does the non-disclosure of the “foreign investment fund”. So what’s the big secret? Hmmmmmmmm

    December 14, 2015 - 4:19 PM

  • hackenzac

    Buncha snifflers you guys are. Show me another junior miner monetizing their technology like this. You can’t. You’d rather quibble over a worst case contingency share conversion or over what exactly net profit means. Maybe you guys are all about seeing the downside of everything that others achieve and that’s too bad for you but it looks like really good news to me. They just put 5 million dollars US on their balance sheets without dilution and validated the technology all in the midst of a “commodity rout”.

    December 14, 2015 - 7:01 PM

  • JOE O

    hack,
    Until the pilot plant does what it does with the samples it gets and we find out the cost of super lig vs Chinese separation costs, I cant say look what technology does. I have 45k shares that hope you are correct. And ucore needs like 250 million to get bokan operational

    December 14, 2015 - 7:04 PM

  • Robert Mackay

    Hackenzac..

    If you put out a press release to shareholders and the investing public you should make sure it is written properly. In Mining a NSR is a short form for a Net Smelter Return.
    A NPR or NPI is MUCH different than a NSR. In Ucore’s press release they talk about a Net Profits Interest of 5% which is not a bad deal. Most good CFO’s can make sure that that will never get paid.
    If it is a 5% NSR that comes off the top and makes most deals uneconomic.

    December 14, 2015 - 7:20 PM

  • hackenzac

    Net comes off the bottom, not the top.

    December 14, 2015 - 7:25 PM

  • Robert Mackay

    A NSR comes off the top. Sorry. You have things like transportation and insurance but it still is considered off the top.
    Net profits comes off the bottom and that is why you see 15% net profit interests never getting paid. If you want I can give you examples of 10 to 15% Net Profit Interests that the companies never saw a dime even after being in production for years.
    NSR’s are usually written so they are payable ever quarter and sorry, they ARE off the top.

    December 14, 2015 - 7:38 PM

  • Alex

    It was interesting data from Solvey at Conference at Singapour about SX and MRT economic comparison ways. So, it will be interesting to see results at real scale to see economic.

    December 15, 2015 - 2:04 AM

  • KLHDAN

    As an investor in Ucore I am not as hung up was it net profit or net smelter. I am hugely impressed that management has brought fresh new capital into the company without dilution. The royalty investor’s confidence and belief in Ucore is equal to mine. Welcome to the team.

    December 15, 2015 - 2:22 AM

  • Robert Mackay

    KlLHDAN

    It seems my comments about NSR vs NPI are causing some loyal Ucore shareholders to be upset and question why anyone would question the deal they announced in this press release. To raise $0.05 in this market is a huge achievement IMO and I complement Ucore’s management. What I don’t complement is the poorly written press release that made me comment in the first place. I hope management takes the time to correct the press release so the shareholders and the investing public can understand what kind of deal they really did.

    December 15, 2015 - 8:11 AM

  • hackenzac

    If you’re so hung up on good writing, try using ‘compliments’ instead but maybe you’re right when you write that you sic “don’t complement” the piece. Here’s what we can reasonably surmise about the deal, Like the first royalty deals made months ago, it’s a “net profit”, whatever that means exactly, royalty on the first MRT installation, just the first one and it certainly points to actually having a large customer against which royalties can be sold, about US10 million dollars worth so far. That’s the main gist and no matter how sharp your pencils are, your insinuation that they’re somehow giving away the farm for a mere 5% net profit royalty is likely hogwash.

    December 15, 2015 - 9:28 AM

  • Lou

    Even before the efficacy of MRT at bench scale was announced at PDAC 2015, Ucore management acknowledged that they had “been approached by” or “were talking to” parties interested in their prospective MRT capabilities. At that time, Lifton pointed out that because of the almost instant kinetics of MRT chemistry, and the quick turn-around capability to accommodate various feedstocks, he could foresee Ucore using its capability in the future to toll separate rare earths (or other metals) from other mines. Since their are almost no producing ROW rare earth mines in need of this service (including Bokan) at the moment, the market for the MRT travelling pilot plant will likely be to monetize tailings for other miners.

    We don’t know who Ucore will be contracting with, or on what terms, but as Ecclestone pointed out, neither Ucore nor the royalty investors seem to be sweating the prospective customer demand. That tells me the line is long. And if the line is long, and since the MRT travelling pilot plant is currently the only one of its kind, Ucore can negotiate very favorable pricing terms. I assume tailing clean-up is a liability for a mining companies. If they can monetize their tailings, even if they just break even, they are ahead of the game. I am not an expert, just an investor who likes the Ucore story. I don’t understand the intricacies of the royalty deals, but I believe that Ucore’s management’s interest is aligned with the interest of stockholders. Lou

    December 15, 2015 - 10:38 AM

  • alvarita

    Robert Mackay…looks like you hit a nerve amongst a group who admit that they don’t know the difference between NSR and NPI. Not to mention the continued claim of the royalty deals being non-dilutive when there are stock conversion options in every one of them. It’s called lack of objectivity due to chronic denial. Unfortunately there’s no known cure.

    December 15, 2015 - 12:15 PM

  • Nevada George

    Still holding…. Time will tell.

    December 15, 2015 - 12:44 PM

  • JOE O

    at least ucore seems to be making progress unlike some other juniors I
    hold 2016 could be a good yr for them if they get good results from pilot someday commodities will turn around, financing will free up and some juniors may come to fruition

    December 15, 2015 - 2:01 PM

  • Mark MacDonald

    NSR vs Profit Share: These two terms are essentially shades of the same meaning. An NSR and a Profit Share are both percentages applied against revenue, after allowable deductions have been applied. They are both net calculations. The Ucore press release utilized both terms (royalty and profit share) because, depending on the jurisdiction that the product originates from, the use of the term “profit share” could have advantages from a tax planning perspective.

    December 15, 2015 - 3:09 PM

  • Janet

    Appreciate the information provided here and the intelligent conversation. Thank you to all the other readers for their comments, I find this incredibly valuable in my learning curve.

    December 15, 2015 - 3:42 PM

  • Robert Mackay

    Mr MacDonald

    I respectfully disagree with your post on NSR and NPI. They have totally different meanings in the mining world. I have had experiences with both and a NSR is always preferable because it comes off the top regardless of whether or not the company is making a profit. As I said, I consulted for a company that had a 15% NPI on a property Noranda mined for 3 years and the company received not one cent from Noranda. Noranda wrote off everything but the kitchen sink against and potential profit so that is why I said a good CFO can make a NPI meaningless.
    The best NSR contract I have ever seen was written by the late Albert Ristimaki who Pat Sheridan called the best mining lawyer he ever met. Albert would never allow his clients who were some of the best prospectors in the Timmins camp to ever do a NPI deal because he knew what the value of a NPI was vs a NSR.

    December 15, 2015 - 4:20 PM

  • Nevada George

    🙂

    December 16, 2015 - 11:18 AM

  • Ucore Rare Metals finances pilot plant through royalty financing | InvestorIntel

    […] Rare Metals Inc. (TSXV:UCU | OTCQX:UURAF) (“Ucore” or the “Company”) announced that it has closed $6.9 M royalty financing based on expectations of revenues from its Molecular […]

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