Thank You China -- A big Plus for Ucore

I have written periodically about UCORE Rare Metals Inc. (symbol UCU in Canada and UURAF on the pink sheets). UCORE owns the mining rights to the Bokan Mountain deposit in Alaska, a site which is rich in rare earth elements. The company is in the process of developing a mine at the site and it still has a way to go before actual production begins. Like all prospective mines, there will be permitting, financing, and all sorts of other issues presented before the mine ever opens. The Chinese, however, just did something that gives UCORE a major helping hand towards getting to its goal of opening the mine. Let me explain:

Bokan is a deposit of rare earth elements (REE's). It is unusual in that most of the REE's are heavy rather than light; the heavy REE's are more valuable than the rest. Right now, about 95% of the world production of REE's comes from China. About a year and a half ago, the Chinese decided to leverage their monopoly of REE's to help their own economic development. China instituted a tight control on export of REE's and favored Chinese companies for delivery of these minerals which are critical parts of many items needed in our everyday lives. When that happened, the price of REE's soared on world markets. Then the Chinese made clear to manufacturers around the world that they could get a secure supply of REE's if they moved their plants to China. The USA and other countries began a protest over this action in front of the World trade organization, but that will take many years to come to a conclusion. Meanwhile, a mad scamble began to find REE sources outside China. That is where UCORE's mine comes in.

Over the last year, REE's declined in price from their initial high after the Chinese first acted. As a result, the impetus to develop more REE mines was somewhat lessened. Then came today's news. China is going to impose a Value Added Tax on the REE's that it exports. According to the news reports China is trying to combat a large amount of smuggling of REE's out of the country. It would seem that by taxing the REE's at the source, the Chinese are hoping to reduce the amount of the minerals that get taken secretly out of the country.

The effect of this VAT on the world price for REE's will be an immediate and substantial raise. No one knows yet just how large the Chinese VAT will be, but it is likely to be substantial if the purpose is to combat smuggling. That price rise means that the minerals in UCORE's Alaskan mine are suddenly worth more, and the chance of full development of the UCORE mine also just went up by a great deal.

The market has reacted in just the way that one would expect. So far today, volume in UCORE stock has been quite heavy. With two hours still left in the trading day, UCORE has already reached just about four times its ten day average volume. The price is also up about 14%.

Despite the 14% price increase, this looks like a buying opportunity to me.

DISCLOSURE: I remain long UCORE