IBC Files Motion in Utah Litigation Against Ucore Rare Metals, Inc.
American Fork — IBC Advanced Technologies, Inc. (“IBC”) filed a Motion for Leave to File a First Amended Complaint against Ucore Rare Metals Inc. (“Ucore”) and principal officers of Ucore in the Third District Court, Salt Lake County, Utah on June 25, 2019 (the “First Amended Complaint”).
The Motion for Leave to File a First Amended Complaint addresses the discovery of new facts. New claims are Breach of Contract, Civil Conspiracy, and Fraud concerning the contemporary enterprise value and economic viability of Ucore’s Bokan Mountain rare earth element (“REE”) deposit in Alaska (“Bokan Mine”). These allegations have been added as a result of newly discovered information provided by expert Dr. David R. Hammond, Ph.D.,1 which makes clear that the Bokan Mine will not be commercially feasible for approximately 30-40 years, if ever (“Hammond Declaration”).
IBC has repeatedly demanded that Ucore cease associating itself with IBC. Unfortunately, through press releases and marketing, Ucore persists in representing that IBC and Ucore continue to be part of a relationship that involves the Bokan Mine project. Given Dr. Hammond’s findings, and in order to dispel the impression that IBC supports or validates the project in any way, IBC feels compelled to release the following statement.
For IBC’s current clients, potential clients, vendors, and others with significant interest in IBC and/or the industry, the First Amended Complaint and Hammond Declaration can be accessed by clicking on the link below:
First Amended Complaint
New allegations in IBC’s First Amended Complaint include:
- Ucore and its principal officers (the “Defendants”) committed a series of fraudulent acts in furtherance of a plan to manipulate the price of Ucore stock to defraud investors.
- Only after Plaintiffs read the expert report did they learn that the Bokan Mine REE project was not economically feasible. In fact, an updated analysis of Ucore’s 2013 Preliminary Economic Assessment (“PEA”) indicates the project’s current Net Present Value is negative $819 million at an after-tax nominal discount rate of 12%.
- Ucore intended to cause confusion as to the affiliation, connection, or association between it and IBC.
- Defendants made many express misrepresentations regarding the Bokan Mine project that were made with reckless indifference, and/or that Defendants knew or should have known were false.
- Each of the Defendants had a meeting of the minds with the others to accomplish unlawful objectives, including but not limited to, facilitating the plan and its component parts, tortiously interfering with IBC’s economic relations, and misappropriating IBC’s trade secrets.
- Defendants’ conduct was and is willful or malicious, or intentionally fraudulent conduct, or conduct that manifests a knowing and reckless indifference toward, and disregard of IBC’s rights.
The expert findings were provided by independent mineral economics consultant Dr. David R. Hammond (Hammond International Group), who conducted an update of the economic value indicators represented by Ucore in its March 13, 2013 PEA.
The Hammond Declaration encapsulates Dr. Hammond’s findings, including the following:
- The economic value indicators presented in Ucore’s Bokan Mine PEA, which are now over six years old, are out of date and not reflective of what current pro forma profitability of the venture looks like.2
- The current enterprise value of the Bokan Mine operation is zero; the 2019 evaluation shows a pre-tax, current dollar Net Present Value for the project at a 10 percent nominal discount rate of negative $897 million, with a projected Life of Mine net cash flow of negative $1.582 billion, on a pre-tax, nominal dollar value basis.
- Rare earth prices have dropped significantly since the 2013 PEA. Sensitivity analysis indicates that current rare earth oxide prices would have to increase by a minimum factor of seven to eight (7 to 8) in order for the Bokan Mine to achieve a nominal after tax return of 12 percent.
- Based on his understanding and assessment of global REE markets and the likely future supply/demand situation (inclusive of present political and trade conditions), Dr. Hammond’s opinion is that the Bokan Mine project is highly unlikely to find an opportunity for competitive market entry during the next 30 to 40 years.
In his sworn declaration, Dr. Hammond also made the following statements regarding prospects for the Bokan Mine:
- While the REE oxide prices assumed in the 2013 PEA are out of date, it should also be noted that in the present global REE market, revenue from the sale of rare earth elements Ho, Er, Tm, Yb or Sc oxides is questionable, even though the updated analysis did incorporate such sales.
- The permitting schedule presented in the PEA, while accepted in the updated evaluation, seems overly optimistic. Any realistic environmental studies, permitting, regulatory filings and hearings will likely require six to ten (6 to 10) years at a minimum, given the type and number of entities (Army Corps of Engineers, State, Indigenous Peoples Groups, Federal, U.S. Forest Service, National Environmental Policy Act, and a Record of Decision) which will be involved. This will be the case irrespective of the political criticality of certain REE supply to U.S. industries.
- As a result of previous uranium mining operations between 1957 and 1971, contaminated soils, mine workings, and waste rock remain at the Bokan Mine location, which is now designated as a Superfund Site by the United States Environmental Protection Agency. Although not currently on the National Priority List, cleanup and other remediation costs are unknown and offer potentially enormous financial liability to any owner or Potentially Responsible Party.
- The technology assumed in the PEA is largely unproven. Therefore, the risk of the plant as described suffering significant start-up and performance problems is very high.
It is further noted that Ucore, in its Management’s Discussion and Analysis for the year ended December 31, 2018, stated that the Bokan Mine resources are so speculative that they cannot be categorized as mineral reserves:
[Ucore’s] PEA…is preliminary in nature. The PEA includes indicated and inferred mineral resources only, which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Steven R. Izatt, IBC’s President and CEO, commented, “As an organization with a high level of scientific and engineering integrity, IBC has great respect for independent experts such as Dr. Hammond that utilize advanced technical and economic methodologies to formulate their conclusions and provide key insights for rational decision-making.”
Background of IBC
IBC is an award-winning provider of proprietary and innovative Molecular Recognition Technology (“MRT”) products and processes, based on green chemistry and green engineering, to premier customers worldwide. IBC’s SuperLig®, AnaLig® and MacroLig® products and associated processes are used in manufacturing, analytical and laboratory applications.
In 1988, IBC was founded by and named after three Brigham Young University professors: Dr. Reed M. Izatt, Dr. Jerald S. Bradshaw and Dr. James J. Christensen.
IBC is the proud sponsor of the International Izatt-Christensen Award. This Award, founded in 1991 and named after Dr. Reed M. Izatt and Dr. James J. Christensen, two of the founders of IBC, recognizes excellence in macrocyclic and supramolecular chemistry. It is known as one of the most prestigious small awards in chemistry. The Award is presented annually at the International Symposium on Macrocyclic and Supramolecular Chemistry (“ISMSC”). Two of the early recipients of the Award later shared the 2016 Nobel Prize in Chemistry. The precursor of the ISMSC was founded by Dr. Izatt and Dr. Christensen in 1977.
A privately-held Utah corporation, IBC counts among its shareholders a multi-billion dollar international manufacturing company, which has been a major customer and benefactor of IBC for over thirty (30) years. IBC has built its business upon integrity, trust and excellence and values its close association with such top-tier companies.
IBC provides proprietary, green chemistry and green engineering SuperLig® Molecular Recognition Technology products and processes worldwide. More information can be found at www.ibcmrt.com.
1 Dr. Hammond has a PhD in Mineral Economics from the Colorado School of Mines, an MBA in Finance from the University of Denver, an MS in Geological Engineering from the University of Utah, and a BS in Geological Engineering from the South Dakota School of Mines & Technology. Dr. Hammond has over 40 years of experience in the natural resources industries focusing on mineral asset and business valuation/appraisals, mining feasibility studies, due diligence investigations, risk assessments, and commodity market research, and has held technical and management positions with the Global Energy & Mining Group of PricewaterhouseCoopers, Atlantic Richfield, Anaconda Minerals, ARCO Coal, the International Royalty Corporation, Shell Oil and General Electric’s Ladd Petroleum.
2 Key adjustments made by Dr. Hammond to bring the PEA model current are as follows:
a) REE price assumptions were changed to those cited in Asian Metal publications for the April 2019 time period. These current prices are on average 80% lower than values used in the PEA.
b) Capital and operating costs were escalated to 2019 current dollar basis assuming a conservative 2% per annum inflation rate.
c) REE resources were adjusted upward to reflect the Inferred and Indicated category tons and grade disclosed by Ucore as of May 11, 2015, using a grade cut-off of 0.40% TREO (Total Rare Earth Oxide).
d) Production of rare earth oxide products in the PEA is based on Solid Phase Extraction, a rare earth separation process that Ucore has abandoned. Thus, processing capital and operating costs reflecting conventional solvent extraction technology were assumed. These inputs were developed by Marc LeVier of K. Marc LeVier & Associates.