The following Interview of CEO & Chairman Jim McKenzie of Ucore Rare Metals Inc. (TSXV:UCU) (OTCQX:UURAF) was conducted by phone and email in the week ended September 25th. Reported views, opinions, assumptions and facts are entirely those of Mr. McKenzie. Interviewer Peter Epstein, CFA, MBA, believes information provided by Mr. McKenzie is accurate, but can make no assurances.
Ucore Rare Metals Inc. (TSXV:UCU) (OTCQX:UURAF) is a well-funded development-stage mining company focused on establishing rare metal resources with near term potential. Ucore’s primary focus is its 100% owned Bokan – Dotson Ridge Rare Earth Elements, “REE” property in Alaska. The Company’s Bokan project is located 60 km southwest of Ketchikan, Alaska and 140 km northwest of Prince Rupert, British Columbia. It has direct ocean access to western U.S. seaboard and Pacific Rim ports. This is a major advantage in developing near-term production facilities and limiting capital costs associated with mine construction.
The Bokan property is particularly well endowed with Heavy Rare Earths Elements “HREE,” including critical elements Dysprosium, Terbium
Ucore‘s exciting news from early March has been widely discussed. What news is most important since then?
Most important news? Upcoming commissioning of our pilot plant, first discussed at length in our July 8th press release is probably it. Utilizing our pilot plant for the testing of MRT is slated to commence within six months. Many have asked what the throughput will be. We’ve upgraded our design to accept throughput volumes satisfying feasibility requirements of our flagship Bokan-Dotson Ridge project and projects being evaluated with partners. Some projects require significantly larger capacity. However, depending on the input material we’re testing and who we’re testing, our pilot plant should be capable of scaling to larger volumes,
We anticipate that our, “SuperLig®-One” (pilot plant) will be a high-value asset. The intention is for the unit to be capable of accepting Pregnant Leach Solution (“PLS”) and bulk concentrates from prospective REE feed stocks around the world. Ucore has already entered into agreements with a number of feed stock providers. Still, the highest priority source of test material is from our own Bokan-Dotson Ridge Project.
Beyond the pilot plant, perhaps under-appreciated is that our partnership with IBC extends at a global level. Recall that Ucore announced an exclusive agreement with IBC for the use of SuperLig® technology, MRT, for metals in tailings and reclamation sectors, as well as processing applications related to REE’s. Make no mistake, we’re highly committed to the successful completion of our pilot plant for the purpose of refining rare earths. We’re being approached by a range of parties wanting to discuss alternative uses for MRT.
What’s the status on Ucore‘s pilot plant? How soon might it be completed? Assuming successful completion, what happens next?
As mentioned, our pilot plant is expected to reach production within 6 months. It’s already in late-stage planning. We’ll be assembling the plant in Utah. Once the pilot plant is completed, the plan is to conduct batch jobs to work out the kinks and then run it continuously for 20-30 days to demonstrate operational capability. In our opinion, the pilot plant should prove that scale up risk is more an engineering exercise, than a technology challenge.
The pilot plant will be both modular and portable in design, capable of transport to remote testing sites. To optimize utility, the plant will be customizable with capacity for treating varying ratios of metals in different PLS feed solutions.
What could go wrong with the, “SuperLig®-One unit,” (pilot plant)?
Although we remain confident that the pilot plant will work as advertised, there is of course a chance of operating issues early on. We are prepared to work through potential issues as they arise. Readers should remember that IBC has engaged in the building of MRT systems in dozens of applications at bench, pilot and full commercial scale, just not yet in the REE sector. We recognize that there’s a chance of intermittent process flows. If that were to happen, we would tweak the design as required and move on. Operating kinks are to be expected in starting pilot plants.
What is the range of end uses being contemplated?
Without going into too much detail, and in fact I’m not at liberty to do so, we are being inundated by parties anxious to interact with Ucore/IBC’s MRT. Suffice it to say that upon a successful completion of our pilot plant, the wait time to test materials will grow even longer. This is a good problem to have. Most prospective end users are peer REE juniors, upstream and downstream parties, reclamation projects and tailings applications. This information is already in the public domain, but the substantial interest of upstream and downstream entities caught us by surprise.
Has Ucore generated revenue this year with the transaction with a U.S. investor for $US 4 million?
To be honest, whether it’s revenue or not depends on the investor’s actions regarding the conversion of investments into common shares of Ucore. Personally, I don’t believe that the two royalty deals we’ve announced so far are with parties looking to make a quick profit. We believe they’re longer-term investors, true believers in Ucore, IBC and MRT. Revenue or not, this cash infusion does not dilute shareholder interests, so we’re quite pleased about that.
Please comment on Ucore’s upgraded and increased resource estimate
Yes, thanks for the question. We recently upgraded and increased our resource estimate at Bokan-Ridge. Essentially, an additional million tonnes of Inferred mineralization grading 0.604% was added. More than 98% of previously established resource was upgraded to the Indicated category under NI 43-101 compliant standards. We’re also pleased to report that the anomalous skew towards more valuable HREEs remains consistent across the entire deposit. The resource remains open at depth and along strike. Again, Bokan feed stock is but one of many sources that Ucore has on offer. REE suppliers around the globe are closely examining MRT.
It seems every country and aspiring REE producer knows that energy and pollution intensive Solvent Extraction (SX) methods are coming to an end. What will replace it and how soon?
That’s a great question. Most now agree that the days of widespread use of SX are numbered. The feeling is that SX will not be tolerated in most countries outside of China (and indeed within China over time), as carbon emissions and environmental waste from processing come under increasing scrutiny. We believe MRT is likely to become the go-to replacement for SX, both economically and environmentally. MRT represents far fewer process steps, (simpler flow sheet), far less waste, limited tailings, faster production runs, and REE recoveries and purity levels above 99%. Other technologies that might also achieve environmentally & economically viable results are welcome to share in this massive market opportunity.
That said, we believe we are the de facto front runner, given that MRT has more than 25 years of successful history, whereas other would-be SX killers are fresh out of the gates, yet to be proven at pilot scale. It will probably take 10+ years to make a significant dent in China’s huge SX dominance. This is a key goal of Ucore, the Military, “USDOD” and Department of Energy, “DOE,” as well as innumerable REE users in the West. Having multiple sources of refined material, security of supply, from environmentally sound jurisdictions is of paramount importance.
As a reminder, please share with readers Ucore’s latest capital structure
Ucore Rare Metals (TSXV:UCU) (OTCQX:UURAF)
Sure, as of August, 2015:
Cash & Short-Term Deposits: $4.5 million
Issued and O/S Shares: 197,563,472
Fully Diluted shares: 266,683,029 (vast majority of warrants and options out-of-the money)
Debt = zero
Can you comment on possible collaborations with the Military (“USDOD”) and Department of Energy (“USDOE”)?
Without diving too deep, I remind readers that delivering a successful pilot plant is of upmost importance. Simply put, the USDOD uses an increasing amount of REEs that we anticipate producing. Suffice it to say that the Military has deep pockets and a long-term horizon. The last thing our Military wants to face is a shortage in key resources such as oil and REEs. Regarding the DOE, that agency has similar security of supply concerns. For example, there’s been a tremendous amount of talk about Electric Vehicles (“EV’s”). However, keep in mind that traditional internal combustion engines, representing 96%+ of the market, also use a considerable and increasing amount of dysprosium. Dysprosium is expected to be one of our most significant product offerings.
Are there misconceptions about Ucore Rare Metals worth addressing?
I think that we’ve covered a good number. I would like to reiterate key takeaways, including a few that might not have been touched upon. If MRT scales up as expected, Ucore would be both a valuable owner of perhaps the best HREE project in North America, (Bokan, Alaska), and also a technology company with applications across a wide spectrum of end uses. Select applications could be generating revenues as soon as 1h 2016. Much potential feed stock is already mined, waiting for the right technology to unlock its value.
That alone differentiates us. Next up, not mentioned, but extremely important, is our $145 million low-cost loan from the State of Alaska. In no way do we plan our budgets around possible sources of non-equity capital. However Ucore submitted its initial application with AIDEA for the proposed $145 million low-cost loan quite some time ago, and we’ve seen no red flags. We have other avenues of possibly obtaining nearer-term grants, low-cost loans and load guarantees from various State and Federal agencies, but no assurances at this time.
As busy as we are with the pilot plant and developing Alaska’s Bokan project, I remind readers that if a successful pilot plant is achieved, the number of unsolicited inquires is likely to explode. Ucore Rare Metals‘ Canadian-listed stock (UCU.V) is down 43% from its 52-week high of C$0.44 to C$0.25. Despite meaningful accomplishments serving to de-risk the Company, I submit that this could be an excellent entry point ahead of what we hope to be able to announce over the next 6 months.
Disclosure: Ucore Rare Metals has a small market cap. Small market cap stocks are highly speculative, not suitable for all investors. I, Peter Epstein, own shares of Ucore Rare Metals purchased in the open market. Mr. Epstein, CFA, MBA is not a licensed financial advisor. Readers should take that fact into careful consideration before buying or selling any stocks.
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