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Independent Study Details Misleading and Biased Practices of Rare Earth Mining Projects

The date of: 2019-07-29
viewed: 1

source:Yahoo Finance

AMERICAN FORK, Utah , July 28, 2019 /CNW/ -- On July 22 , President Trump sent five Presidential Determinations to the Secretary of Defense stating that domestic production capabilities for the following are essential for the national defense:

Separation and processing of heavy rare earth elements;

Separation and processing of light rare earth elements;

Rare earth metals and alloys;

Samarium cobalt rare earth permanent magnets; and

Neodymium iron boron rare earth sintered material and permanent magnets

Rare earth mining projects are increasingly being promoted as a way to achieve such domestic production capabilities.  However, IBC Advanced Technologies, Inc. ('IBC') provides the following cautionary information, based on an independent study and independent expert findings, in order to inform policy makers as they carry out the Presidential Determinations.

A valuable framework for assessing the Presidential Determinations is provided by an independent study, entitled, 'A Review of Misleading Methods and Biased Practices in Evaluating the Feasibility of Rare Earth Mining Projects,' co-authored by G. Barakos and H. Mischo, Technische Universit?t Bergakademie, Freiberg, Germany (the 'Independent Study'):

https://www.researchgate.net/publication/318308231_A_review_of_misleading_methods_

and_biased_practices_in_evaluating_the_feasibility_of_rare_earth_mining_projects

The Independent Study's authors noted that '[the evaluation of a mining deposit] is depicted in feasibility studies and technical reports which are required in the preproduction stages to justify continued investment.'  The authors' scope was to 'expose…fallacious methods and specify how such reports should be conducted.'

Among others, the 2013 Preliminary Economic Assessment ('PEA') prepared for Ucore Rare Metals Inc.'s ('Ucore') Bokan Mountain rare earth element ('REE') deposit in Alaska ('Bokan Mine') was included in the study.

The authors stated:

'A thorough review on many reports, presentations and press releases from mining companies and their consulting associates denotes the utilisation of an array of different misleading metrics and ambiguous methodologies.  These controversial reporting practices have infused the REE mining industry and are widely adopted despite being in discordance with regulated reporting standards.'

In one of its many findings, the Independent Study reported on the jump in REE prices which occurred after the '…crisis and spike of 2011 when fears of Chinese monopolistic control of production, export restrictions and global supply shortages drove prices up nearly tenfold.  The crisis was sufficient to cause a global treasure hunt by way of exploration of REE deposits; the high prices of REE made investments in start-up projects seem temptingly easy.  Yet the crisis did not last long; the prices plummeted in a relatively short time…'  However, '…in many projects conducted from 2011 to 2013 [specifically referencing the Bokan Mine project], the REE price predictions are based on a three-year average evaluation that incorporates the price bubble of mid-2011.'  The authors noted that '…projects including the period of the 2011 price spike in their forecast models will be getting erroneous results.'

In discussing their conclusions, the authors stated:

'Given these deceptive and in many cases fallacious reporting practices, it becomes obvious that any assessment of the deposits and of the feasibility of the potential REE projects is difficult to make.'

The Independent Study supports findings found in the sworn declaration of expert Dr. David R. Hammond (Hammond International Group), an independent mineral economics consultant ('Independent Expert Findings').  Dr. Hammond conducted an update of the economic value indicators represented by Ucore in its March 13, 2013 PEA.  Among other things, the Independent Expert Findings make clear that the Bokan Mine will not be commercially feasible for approximately 30-40 years, if ever.  In fact, the updated analysis of Ucore's 2013 PEA indicates the Bokan Mine project's current Net Present Value is negative $819 million at an after-tax nominal discount rate of 12%.

In his sworn declaration, Dr. Hammond also stated that 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.


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