My Conversation with Mark McDonaldFirst off, Mark in an incredibly nice guy. I called him twice in the past week, the second time actually he remembered my name. We spoke on the phone for over 45 minutes, in which, I tried to gain as much useful insight as possible.
Let me start by correcting a previous poster. It IS NOT Ucore policy to issue shares at a 20% discount to market value. This practice is common place in the market and is dictated by market forces. Sure, management might have a say in SEO issuance prices, but when it comes to solvency and the need for a steady stream of cash flow to meet going concern obligations, I tend to agree with management’s decision to guarantee a stream of cash flows, even if it means a discount to market value. Personally I would rather have my management team working on issues related to developing Bokan rather than scrambling for cash. This would be a different story if Ucore wasn’t close to being backed by the state of Alaska (The hearing is 1:30 tomorrow btw) AND sitting on one of the most advanced REE resources. So stop complaining or sell your shares to me.
I took a few questions from the board, and asked a few of my own. What you read below is not word for word, rather a summary of a long conversation that happened few days ago.
Do you have a timeline for the BFS? (Bankable Feasibility Study)
Ucore is looking to reward the contract for the BFS as soon as next month. They are currently evaluating bids for this process and Tetra Tec was specifically mentioned. They are very well known in the industry and were the entity responsible for Ucore’s PEA. This process will take 9-12 months once awarded.
Where will the remaining 1/3 financing come from? The U.S. DOD or Private Entities?
This questions’ answer is analogous to fishing. Once the BFS is complete, fish will be jumping in the boat so to speak. The DOD and DLA are interested in how the pilot plant is executed. However, the end user has zero demand REE metal and oxide, the demand is for a product that can be consumed by the end user… Magnets. On this topic, Mark also commented that the State of Alaska is interested in the entire supply chain, and although a REE mine is instrumental to this strategy, they are looking much further.
Also on this topic, Mark commented on grass roots movements that are gaining traction to accomplish two things: Road Access and Access to Grid Power. This is huge. Not only are we seeing support from the very top of the Alaskan Gov’t, we are also seeing support from locals and local governments. Correct me if I’m wrong, but isn’t this one of the largest issues being faced by our arch enemy, Tasman? Looks like we don’t have that problem. Also, if we get access to grid power or Mountain Lake power, this could result in cost savings for Ucore and a higher IRR. Why, because the state is not looking for a dime from Ucore. (These are independent initiatives)
Do you expect the need for more SEO funding?
Ucore has in the money warrants. The BFS is likely to give new access to short and long term debt financing with the ability to finance Opp Costs through to mine construction. Further assistance from the state of Alaska, private sources of debt and offtake agreements are all viable possibilities and are all being looked into. With that being said, the company is well cashed with the most recent SEO, but unfortunately we can still expect some minor dilution.
Investors want to see an Offtake Agreement with commodity upside…
Manufacturers are being currently talked to on the subject. Patrick Ryan is an auto industry expert. Jeff Clark represents the legal and banking side of these negotiations. Jim Mckenzie is also a very strong negotiator and will do the best for shareholders.
SPE – Is this process complete at scale? Can you tell me anything on the subject?
This process will be proven soon, but is not currently complete at scale. The next news break will cover this topic, but Ucore is keeping this one “Close to the chest”.
Note: The tone of this part of the conversation seemed positive. Why else would it be “breaking news”?
So, to save the best for last… It seems as if this AIDEA funding is granted to Ucore, it could result in a huge increase in the company’s IRR. From 43% to as high as high as 60% Low cost debt funding people! Could have a huge impact...
Disclaimer: I am a shareholder. I make money when the share price goes up.
GLTA