Ucore Rare Metals continues to get more interesting as two investors who provided royalty financings in 2015 converted their investments into equity in January, 2016. Some may say this was planned all along (back-door private placement?) but I wonder if it doesn’t reflect how Ucore has become a multi-engine story. If the investors thought the primary driver of success for Ucore was just the "early stage MRT installations" (the Bokan Project), then they would have kept their royalty on the single project. Instead, they are investing in all possible uses of MRT by Ucore with the rest of us in the common shares.
What is the focus of Ucore? Is it "exploration and development of economically viable rare earth element properties", or "processing of third party concentrates using Molecular Recognition separation technology", or processing tailings with MRT, or some other recycling applications of MRT? I am afraid the answer is "yes" because that raises a concern about management''s ability to prioritize these opportunities. This variety of opportunities is certainly valuable, see writing by Peter Epstein or interviews with Byron King or Jack Lifton to get a sense for just how inspiring all this stuff is, but these opportunities may impose a cost on management: more opportunities means more possible ways forward, more choices. Depending on how events proceed, it may be better to pursue Bokan Project aggressively immediately or to pause the Bokan Project and attempt to generate smaller cash flow from the MRT pilot plant. Are management ready for these tough choices?
I applaud management for getting the company to this strong position and I believe they can lead us to further success. The near-term goal for Ucore seems simple enough: get the MRT pilot plant up and running. If they can show that MRT can process feedstock from the Bokan Project and other mines, then I believe this will encourage the company to advance the feasibility study more aggressively (has been slow so far, "Approximately $76,000 was spent on early work on the feasibility study, $8,000 of which was incurred in the third quarter 2015" from Q3 Financial Statements). If the metallurgy, bankable feasibility study, and funding from State of Alaska are all approved together, then the Bokan Project may prove to be wildly economic. But, even then, Management will face big questions about best way forward: build mine yourself, sell it, or bring in partner to help build it?
I may be off-base talking about pausing the Bokan Project to focus on MRT because of the momentum in the project, but cash flow. The potential for Ucore to generate some immediate cash flow with the pilot plant and further cash flow in near-term from further projects with MRT must be appealing to some who are scared and scarred by this brutal resource market. The three royalty deals in 2015 were very exciting, but that money goes quickly. The cost of rights to MRT from IBC are $2.9M USD and the company has paid $1.7M USD by Q3, up from $0.9M in Q2. I hope that the financing in December 2015 helped complete the payments and secure the rights to MRT. I look forward to further news from the company as it approaches several significant ten-year anniversaries (initial listing as a capital pool in February 2006, appointment of Jim McKenzie as President in January 2007).
