Against Mine to Market

Innovation Metals Corp. was founded in Toronto in early 2011 "to provide downstream processing and marketing services to the rare-earth sector". The business was: Centralized separation facilities open to anyone. A Consortium binding producers, end users, traders and government stockpile managers into one arrangement. And an auction platform built for price discovery. Revenue was to come from tolling fees charged by an independent third-party processor running other people's material. That architecture starts at the buyer and works backwards toward the mine, which is the reverse of how a mining company is assembled.

The company was explicit about why it had not been built the other way.

There is a popular belief in the industry that a 'mine to market' strategy is the only way to succeed in this sector," it wrote. "This vertical-integration model is often based on flawed assumptions pertaining to value creation; in most cases, the jump from one part of the value chain to the next, cannot overcome a junior-mining company's cost of capital. Pursuit of this strategy alone, has the potential to lead to shareholder-value erosion.

In September 2019, Ucore announced MINE to METAL to MARKET plan, and later in 2020 bought Innovation Metals. Two organising ideas went into one company, and only one of them could be true.

They also wrote Separation "requires some degree of use of proprietary intellectual property (IP)," but such intellectual property "is not limited to a few companies".

Read that twice. The company that would later be bought for a separation technology had put in writing that a separation technology is not a moat. What it thought the moat was, was being the one processor everybody could use because it belonged to nobody. But where did the processing technology come from?

The East

The technology now sold as the answer to Chinese control of rare earth separation began by going to China to learn. Innovation Metals' site records that in 2011 it "initiated research at a prestigious Chinese REE research institute," which demonstrated that concentrates from different mineral sources could be processed together with attractive recovery rates. IMC was looking for: "promising new separation technologies that have not been tried with rare earths before". Four years later, it settled on a column-based approach and named it RapidSX.

RapidSX

RapidSX uses the chemistry of conventional solvent extraction, which the company has always said is well-known. What it changes is the direction the liquids travel. The rare earth industry runs the two streams against each other through a cascade of mixer-settlers. RapidSX sends both down a column together, "in the same direction as one another, as opposed to flowing in different directions, such as, opposite directions (counter-current)".

But who else had experimented with this configuration?

Prior Art

A Beijing company filed a Chinese patent on co-current falling-film extraction in a packed column on 7 December 2012, and a Japanese liquid-liquid extraction device that claims extraction counter-current or co-current, written for equipment continuously processing solutions bearing rare metals and rare earths, was published in October 2014, the year before Innovation Metals settled on columns.

Both are prior art, the patent world's term for anything already public before you file and both turn up in the international search report on Innovation Metals' application: the Chinese one as background (category A), the Japanese one in the category X reserved for a document that, on its own, leaves an invention neither novel nor inventive.

It's tempting to judge the competitive advantage of RapidSX now, but the finding above is what the Canadian intellectual property office found. It's not a decision. Nobody was refused, applicants routinely respond by narrowing their claims until something is theirs, and the examiner was working from a machine translation. It says nothing about where the idea came from.

That is state of the application in 2024, at the first search. By the time you read this the position may have changed, so check it yourself.

How Ucore Got There

RapidSX was under development around the same time Ucore abandoned IntelliMet's solid phase extraction and adopted IBC's molecular recognition.

September 2019 Ucore told its own shareholders that the separation technology (IBC's) it had spent four and a half years acquiring would not be available in the near term, and that the Alaskan plant would be built instead on solvent extraction, without the involvement of IBC. Ucore elected solvent extraction instead of molecular recognition technology.

Then, in February 2020, Ucore announced RapidSX. It was a binding technical services agreement for bench-scale test work on a mixed concentrate. Ucore described the technology as a competitive advantage. The technology is "IMC's proprietary RapidSX™ REE separation technology," "Developed and successfully piloted by IMC. Ucore was not the only company after acquiring RapidSX.

Somebody else was already there

Before Ucore, Innovation Metals had optioned the rare earth use of it to Hexagon Resources of Australia. To take up the option Hexagon had to put US$2,000,000 into two things: a demonstration pilot plant, and "procurement by IMC of initial patent protections in the name of IMC". It could not raise the money and withdrew before the deadline.

Five months earlier Ucore had bought the company for C$5,801,000, of which C$1,000 was cash and the rest was its own shares. The purchase agreement warrants that what it bought included a patent application, and the schedule that says which one is redacted. So the thing at the centre of this story was, at the moment it changed hands, a redacted document in public records.

Buy the thing, then check it works

Weeks after closing the deal, Innovation Metals took premises in Kingston, Ontario and signed Kingston Process Metallurgy as its "long-term laboratory partner". Five months after paying for it, Ucore published the first objective as "Validation of previous RapidSX REE technical work".

The Forgotten Bond

By the autumn of 2020 Ucore had a plan. The completion of the demonstration plant and the testing of customers' feedstocks are "the prerequisite activities to be completed prior to" three things: licensing the technology, the physical creation of the Alaska plant, and "the creation of any definitive feasibility study related to the Bokan-Dotson Ridge Rare Earth Project".

Alaska's US$145 million bond from AIDEA was conditional upon, among other things, the Company delivering a positive definitive feasibility study, as you remember.

So read it forward. A rented laboratory in Kingston, Ontario has to finish validating a technology, so that a demonstration plant can be built, so that a feasibility study can be written, so that a state agency's money becomes available, so that the mine can be developed.

The deposit sits at the end of that queue. Ucore has owned it since 2007. In the same filing the vision is restated as "to become vertically integrated and become a leading advanced technology company," with the order written down, the plant "and then the eventual development of the Company's rare earth minerals property located at Bokan Mountain in Alaska".

The New Architects

Five weeks after the deal closed, Ucore's chief executive of thirteen years resigned, and the chairman took the job on an interim basis. The material change report records the resignation as voluntary, made in order to move into a consulting and advisory role. By May 2021 the interim label was dropped.

On 16 February 2022 Ucore accepted the resignations of the entire senior team of the company it had bought the technology from: the co-founder, chairman and chief executive, the president, and the chief operating officer and vice president of metallurgy. The release tied the departures to "Ucore's planned transition to the commercialization phase" and gave notice periods running to 14 May and 14 November. Nine weeks later those periods were waived, and one sentence records what followed: "The Ucore Board of Directors, led by Chairman and CEO Pat Ryan, will hereafter direct the activities of IMC". The founders of Kingston Process Metallurgy "have taken a more prominent role" at the Kingston facility.

Outside Opinion

In January 2021 AIDEA, Alaska's state development agency, approved diligence on a prospective US$3.5 million investment in the plant and said it would retain an independent consultant. A footnote in the same release calls that US$3.5 million "an entirely different funding opportunity" from the US$145 million the company had been citing since 2014.

On 27 April 2022 Ucore published something it had never had before: a technical opinion on its technology written by someone with no stake in it. AG Hydrometallurgy Services Inc., in the person of Dr. Ahmad Ghahreman, had been engaged by AIDEA, the state agency weighing an investment, to review RapidSX. The test ran in two phases, a review of the existing record in March 2021, and the observation of two rounds of testing in the last quarter of 2021, reported in January 2022.

The numbers are specific and they are good. On a synthetic solution, conventional solvent extraction reached equilibrium in about 120 seconds while RapidSX achieved a higher separation factor within 40. On a commercial mixed rare earth concentrate, conventional took over 300 seconds against under 100. From that and reported throughout as what the process "shows itself to likely be" and what a plant "can potentially have": three times as efficient, a plant footprint a third the size, capital cost lower by half or better, operating costs more than 20 per cent lower, and modular from 1,000 to 10,000 tonnes a year.

Here is what that can and cannot tell you. All the testing was performed by Kingston Process Metallurgy, Innovation Metals' laboratory partner, with the expert observing and receiving the data from them. Ucore said later what he had had to work with: at the time of the review, "only the Research Rig was available at the CDF". (RapidSX Commercialization and Development Facility)

Louisiana

The Strategic Metals Complex had been Ketchikan, Alaska, "the first physical component of the Mine". In October 2022 the board committed to Louisiana instead. In April 2023 Ucore chose a brownfield building in Alexandria, ramping its total production to 5,000 tonnes by 2026 and 7,500 tonnes a year by 2027. The plant that was to be the first piece of an Alaskan mine is now in Louisiana, and the mine is still where it was in 2007.

Somebody finally pays

The United States Army Contracting Command in Orlando awarded Innovation Metals a firm-fixed-price US$4 million Other Transaction Agreement to run a rare earth separation prototype project on the Kingston demonstration plant. The audited accounts book it as a government grant, paid in milestone tranches, not as revenue.

DoD came and it all began.

Ucore in 2024 was an entirely new company, with new people and a new technology. If, a decade earlier, it applauded the decisions of the US government, in 2024 and beyond it bragged about its relationship with the same government.

The Louisiana plant was to reach 5,000 tonnes a year by 2026. It is 2026.

Did they do what they promised?

References

Hatch, G. P., Wong, P., Schrider, M., Hurditch, J., Leung, J., Teuma-Castelletti, R., Davis, B., & Forrester, K. (2024, August 29). Solvent extraction method and system (International patent application No. WO2024174036A1; application PCT/CA2024/050219, filed 2024, February 23; priority United States provisional application 63/448,060, filed 2023, February 24). World Intellectual Property Organization. Includes the International Search Report established by the Canadian Intellectual Property Office, mailed 2024, June 17.

Hexagon Resources Limited, & Innovation Metals Corp. (2019, October). Investment agreement: Incorporated joint venture [Material contract filed on SEDAR, 9 June 2020].

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