After a break for a few months, the stock of the month feature is back. For December, the choice is UCORE Rare Metals, Inc. (symbol UCU in Canada or UURAF on the pink sheets). UCORE is a highly speculative mining stock that will be producing rare earth elements or REE’s. The principal UCORE mine is in Alaska at Bokan Mountain on the sourthern part of Prince of Wales Island. While the company has other mining sites, Bokan is the only one currently of significance.
In order to understand the rationale for UCORE, one first needs a bit of background with regard to REE’s. Rare earth elements have been used for a while in glassmaking, lighting, and metallurgy and REE’s are also increasingly needed for battery alloys, ceramics, and permanent magnets. Many high tech applications like lasers require REE’s in their manufacturing process. About 95% of all REE’s are produced by China which only began mining the REE’s about 20 years ago. Now, with the Chinese holding a stranglehold on the world supply of REE’s, China is imposing export quotas on these minerals. The Chinese aim appears to be to force manufacturers that need the REE’s to build plants within China in order to get sufficient quantities of REE’s. As a result of the Chinese actions, the price of REE’s skyrocketed earlier this year. Those prices have come down a bit now, but they are still substantially elevated. Many manufacturers are coming up with substitutes for REE’s, but the need for these minerals remains substantial and growing.
One response to the Chinese actions has been the opening of REE mines around the globe. Despite the name “rare” earths, REE’s are located in many places around the world. The problem is that there are not many locations that have a sufficient quantity of these materials in one location so as to make a mine economically feasible. The Bokan site is, however, one such location. Bokan was originally a uranium mine. It already has the necessary permits for mine operation. In addition, Bokan is in an area of Alaska already designated as appropriate for mining so there should not be any of the environmental fights that slow down so many mines and drill sites.
The company estimates that Bokan contains 374 million pounds of Rare earth oxides making it the largest deposit of REE’s in the USA. There are also extensive reports and presentations on the company website. These documents are too complex to summarize here, but for anyone who is interested, the company website can be reached by clicking on the title to this post.
So, in summary, we have a market that is being squeezed in dramatic fashion by the Chinese. UCORE controls the biggest deposit of the REE’s in the USA and it has all the permits necessary to go ahead with the mine. If the price of REE’s stays in the stratosphere, UCORE should be extremely profitable once production starts next year. In other words, this is a highly speculative company that brings with it the promise of a major profit.
The stock price is currently 47.5 cents per share. If the company successfully gets production going next year as planned, and if the Chinese keep the pressure on the price of REE’s, UCORE could easily go up by many multiples over the next two years. UCORE has the potential to provide huge returns.
DISCLOSURE: I am long UCORE stock.
WARNING: UCORE is much more speculative than other stock about which I have written. Anyone interested in buying the stock should make sure to read the reports on the company’s website and to do further review of the available materials. Even if you decide to buy, I strongly suggest that you limit your purchases to only that small portion of your portfolio that you set aside for high speculations. The return could easily be enormous, but the risk of loss is also major.
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