November 2, 2010

Ucore Rare Metals (UCU: TSX-V) enjoyed a share price run-up during the rare earths boom of the past two months, and now the shares are back down near where we bought them. Hold on, though. I'm not worried, and in fact I'm VERY optimistic about where Ucore is headed in the next year or so. Indeed, I think Ucore is under-valued.

Here's my thinking on Ucore. Right now, it's more of a mining and first-stage processing play, than an end-to-end rare earths idea like Molycorp or Lynas. That is, Ucore has a superb ore body at Bokan Mountain, Alaska. It's one of the best ore bodies in North America. That's its key strength, and I'm not looking hard at the "downstream" processing aspect.

Why just focus on the upstream, mining-processing side of Ucore? Because the Ucore plan is very do-able, and soon. I like "do-able" and I like "soon."

Over and above great ore, the Bokan site is an old uranium mine. It's already permitted for mining. (Management needs to update the permits, though. Hint, hint.) It's inside a national forest, so there are no annoying, NIMBY-neighbors to complain. There are about $20 million-equivalent of roads already constructed. There's electric power. There's a deepwater pier right at the foot of the mountain. It's right across the water from the Port of Ketchikan.

That is, of all the many rare earths ideas out there, Ucore holds an ore body that's among the most easily mineable. You've got to like that.

Being adjacent to a deepwater pier, the processed ore can go wherever in the world a boat can float. That would include one or more of the following... Japan, which is screaming for rare earths and is desperately moving to build up its internal processing capability. Or China, which is not above buying foreign ore. Or Malaysia -- think about Lynas using Alaskan ore at its new plant. Or California -- think about Molycorp using Alaskan ore. Or Ucore can ship its product pretty much anywhere else.

last week's ESI alert, I discussed the Ucore drilling results. I think that Ucore is getting a bad rap, based on a few holes out of many. There are more drill holes for Ucore to discuss in future news releases. Plus, there are the results of an extensive trenching effort that have yet to hit the wires.

In my view, we're going to be very pleased with the Bokan Mountain ore body, when the results come out. We'll see a very mineable ore body, with very good, consistent ore grades -- including enviable quantities of "heavy" rare earths that command premium prices.

Finally, the infrastructure is already there to start mining, and in fairly short order. Really, that matters. When you look at many other rare earths sites, they're on the far side of nowhere. It would take truly heroic efforts, and very big bucks, for some of these other plays ever to see the light of day.

That's all for now. Thanks for reading...

Byron W. King