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Why Ucore’s Positioning Makes it the BEST Source for Critical U.S. HREE’s

Omri Wallach Omri Wallach, Stockhouse
2 Comments| October 11, 2019

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(Image via Ucore Rare Metals. Click image to enlarge)

Click to enlarge

Rarely is a venture successful if it lets opportunities pass them by. When a prospect appears, the truly successful adapt and make a move.

That’s what Jim McKenzie looked to do when he was presented with an opportunity. The CEO of Ucore Rare Metals Inc. (TSX-V:UCU, OTC:UURAF, Forum) read the signs that an opening in the rare earth elements (REE) market had presented itself, and the window was limited.

The mineral exploration company was already on track for success, with a healthy deposit of Heavy REE, strong geopolitical and financial support in Alaska, and a roadmap to development being followed. But progressions in the market meant that the time to ramp up was imminent.

The Company decided to make its move, and on Sept. 4, shareholders of Ucore woke up to an almost 3000-word letter from McKenzie outlining an updated direction. The contents, and the depth to which the Company had prepared, showed that McKenzie and the executive team weren’t messing around. The opportunity was clear: the US needed a supply of Heavy REE, and it needed it now.

In an interview with Stockhouse Editorial, Ucore’s CEO Jim McKenzie elaborated on his letter to shareholders. To him, Ucore’s plan was a more efficient path that would benefit the company, the shareholders, and the US.

“Ucore isn’t reinventing itself. We're rearranging the pieces on the board to move ahead more swiftly, placing more emphasis on speed of completion and the path of least resistance . That’s what the letter to shareholders is: its an expedited road map to success.”


The Fundamentals: Strong and Accessible Resource

Fortunately for Ucore, all of its building blocks have already been assembled. When the company was initially started in the mid-2000’s, it acquired the Bokan Mountain Property in Southeast Alaska. Very close to the city of Ketchikan and just over 100 km from Prince Rupert, the area already had a storied mining history.

Originally the Bokan Mountain acquisition was for a different strategic metal, uranium. But when drilling just off the initial site in the Dotson Ridge area, what Ucore found was an extraordinary content of some of the most important strategic metals in the world today: the Heavy Rare Earths, or “HREE”.


(Image via Ucore Rare Metals. Click image to enlarge)

The timing couldn’t have been better for the Company, as the market was about to experience what some have called “REE Mania.” Modern magnetics and multiple advanced technologies rely on REE to function, and almost all of the supply was coming from China. In the early 2010’s, the threat of constrained supplies sent prices for the individual metals skyrocketing, right as Ucore was preparing to finalize its resource. What’s more, the Bokan deposit appeared to have an extraordinary skew towards the most valuable and sought-after metals in the world today: Heavy REE such as dysprosium and terbium, which trade at significant premiums to the rest of the rare earth group.

What Ucore had found turned out to be the highest-grade NI 43-101 compliant Heavy REE deposit on US soil. After 15,904 m of drilling, it released an inferred resource estimate, a preliminary economic assessment, and a resource upgrade all in the span of 5 years. Together, the defined Bokan-Dotson Ridge Deposit: Indicated resources of 4,787,900 tonnes averaging 0.602% TREO (total rare earth oxide) and inferred resources of 1,050,000 tonnes averaging 0.603% TREO. Remarkably, the HREE content at Bokan looked to be sufficient to meet US domestic needs for the foreseeable future. This was no small achievement, given the increasingly precarious Sino-American trade conflict. In short, Bokan had some of the most important commodities required to assure US competitiveness in industries as diverse as national defense, artificial intelligence, supercomputing and low carbon emission transportation.

Perhaps most important, Ucore’s findings happened to be in the perfect place to do business. The Bokan-Dotson Ridge Deposit location, right beside Ketchikan, means it has access to a well established deep water port immediately on the Pacific Rim, one of the most prolific shipping channels in the world.

And being located in the state of Alaska has additional benefits. Besides the wealth of mining experience in the region, the project already has accumulated overwhelming government support. In 2014, the State’s House and Senate officials voted unanimously to provide funding for the Bokan-Dotson Ridge Project in the tune of USD $145 million, with both Republicans and Democrats cooperating to recognize what Ucore had on its hands.


(Image via Ucore Rare Metals. Click image to enlarge)

In his interview with Stockhouse Editorial, McKenzie explained what made the location of Bokan-Dotson Ridge so vital:

“If you were to throw a dart at the globe, you have something like a 70% chance that the dart would hit water or 30% chance that would hit land. The odds that it would hit the nexus of land and sea – the absolute best configuration for mine materials transport -- is very, very finite, and that's where our deposit is. Not only are we the best-of-breed for heavy rare earth deposits on US soil, but you couldn't get a better location, since ocean access provides the least expensive means of transporting materials and finished goods. What’s more, the fact that our deposit is on US soil is a huge factor, given the current drive by the US to achieve complete independence from China in critical HREE.”


The Opportunity: Government Demand for US-Based REE

Recent international developments have changed the game for Ucore, making a once compelling story now even more urgent and well defined. Demand for US-based HREE has not only skyrocketed, but has been significantly expedited, courtesy of one of the best clients a company could ask for: The US government.

As the US entered a prolonged trade war with China, the threat of a retraction of HREE supply landed on the table. In turn, the White House moved to reduce its reliance on foreign metals, with US President Trump issuing an Executive Order in December of 2017 for the federal government to ensure “secure and reliable supplies of critical minerals.”

In May of 2018, the government released its list of the 35 minerals that were deemed critical to the economic and national security of the US, and the REE group was included. Aside from being critical components in high technology, five specific rare earth elements were previously identified by a 2016 government report as vital for defense and aerospace applications. Not only does Ucore’s Bokan-Dotson Ridge Project have all five, but the majority of the five are classified as HREE (dysprosium, terbium and gadolinium), which the Bokan deposit has at higher grades than any other NI 43-101 compliant deposit in America.


(Image via Ucore Rare Metals. Click image to enlarge)

Everything culminated this year with a June 4, 2019 release of the US government’s critical minerals strategy , which included locating domestic supplies of critical minerals, ensuring access to information necessary for production, and expediting permitting for those projects. While promising on its own, the White House went one step further on July 22, 2019 by invoking the Defense Production Act (“DPA”) to order the Department of Defense to prioritize contracts for REE magnet production.

Remarkably, the DPA is a war-measures act originally set in place in the 1950’s in response to the Korean War. The act allows the White House, in times of sufficient national crisis, to authorize the American government to take action to make available materials critically required by the US defense sector. Such is now the case, with the DPA Title III Office now having the authority to take steps required to secure US access to select HREE, amongst other critical materials.

For McKenzie and the Ucore team, this fast-tracking has made it the Company’s time to shine. Ucore got to work and promptly responded to the government’s request for information on HREE supplies and projects, with the Alaskan government pitching in to highlight the importance of Bokan-Dotson Ridge.

Already, the Project stands out as a frontrunner. Having five of the government’s most sought-after REE is vital, as well as the fact that the Deposit leans towards the heavier and far rarer REE. In his interview with Stockhouse Editorial, McKenzie highlighted what makes heavy rare earths more valuable.

“It's important to acknowledge that the more strategically important rare metals are the heavy REE. Bokan is a true geological rarity. There are very few REE deposits at a world level that are skewed towards the heavies, making Bokan a member of a very exclusive global club. Within the US, Bokan is even more of a ‘strategic unicorn’. An HREE deposit, located on US soil, containing the very metals that the White House has now earmarked as among the most strategically important to US defense and growth industries, and which can be put into production in the near term. This is a remarkable combination that only Ucore can offer.”


The Plan: Three-Pronged Strategy for Success

What McKenzie’s shareholder update included was a plan for Ucore that matched the current opportunity. On the table for the Company: tens of millions of dollars of potential Federal and State1 government funding and an expedited track to production.

1 With the State component already pre-approved exclusively for the use of Ucore, by way of the $145 M undertaking of the Alaska State Legislature, subject to release by the Alaska Import Development and Export Authority (“AIDEA”).

That has led to Ucore’s current strategy, The M3 Plan of Action . It highlights the Company’s initiatives in a “Mine to Metal to Market” plan that would see the Bokan-Dotson Ridge Deposit shovel-ready in just three years.


(Image via Ucore Rare Metals. Click image to enlarge)

In the “Mine” section of the plan, the Company noted that the Project is ready to commence engineering and permitting required to prep the mine for construction. Next, it is updating the financial projections of the mine, with a substantive amount of co-product elements that weren’t initially assessed within the potential value of the Bokan-Dotson Ridge Deposit.

The “Metal” plan includes the planning and development of an REE processing and separation plant, the Alaska Strategic Metals Complex (SMC). Besides processing the material from the company’s HREE deposit, the SMC offers Ucore’s strategy a big advantage by processing concentrates from other sources, as currently, US-based REE deposits still have to be shipped internationally for processing.

That’s why management outlined the creation of the SMC as a priority (for both the Company and the US) and is planning to complete the REE processing facility before the mine. The plan is for a hybrid technology facility that would start by using the current commercially viable Solvent Extraction platform for mineral processing, before being complemented by developing nanotechnology solutions in the future.

Finally, the “Market” plan focuses on two primary end markets Ucore is targeting. The first is the US government and especially the recent moves by the Department of Defense for the development of HREE-dependent military hardware. Heavy rare earths are required for everything from radar and sonar to fighter jet production, which the Company is able to supply.

The second market is the commercial industry and particularly the automotive sector. Ucore’s plan to operate as the North American HREE solution makes it an attractive supplier of these metals for electric vehicles, smartphone technology, and many electronics that operate with superpowered magnets.

Perhaps the best news for Ucore and its investors is that the US federal government opportunity is, in essence, icing on the cake. The Company already has the strong fundamentals of a resource in demand, financial support, and accessibility to market. Even without the involvement of the White House and the US Department of Defense, the sizable financial contribution of the State of Alaska alone, along with the new fast track plan to production, puts the company on track to become a primary player in the US and international rare earths market.

There’s an additional reason Ucore is developing the SMC processing facility as the first planned physical component of the Bokan Project. Even before the Bokan-Doston Ridge mine goes into production, there is existing demand from international suppliers for REE processing. And as China’s stock of REE reduces, it has already turned into a net importer of REE, which the Bokan-Doston Project will be ready to supply.

Overall, Ucore has assembled a complete package. It has the fundamentals in its strong HREE Bokan-Dotson Ridge Project. It has the opportunity in the increased demand for US-based REE sources and processing. And it has the M3 plan that will bring everything to fruition.



ucore.com



FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.




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