Ucore Rare Metals Gets $4.9 Million For MRT Royalty

Ucore Rare Metals (TSXV:UCU) has granted a royalty to a high net worth US-based investor on the sale of products and services related to processing rare earth elements using the SuperLig® Molecular Recognition Technology (MRT). The investor will pay US$4 million (C$4.9 million) for the royalty.

As quoted in the press release:

Under the terms of the Agreement, the Investor will make a USD$4 Million payment to Ucore, with a USD$1Million down payment on or before May 26, 2015, with the balance payable within 120 days thereafter (collectively, the “Investment”).

In consideration of the foregoing, the Investor will receive a royalty from the production of Ucore’s early stage MRT installations (the “Royalty”). The Royalty will be comprised of two components: (i) a Gross Royalty equal to 5% of gross sales from the Company’s first MRT installation or installations, payable until the recapture of the Investment; and (ii) a Net Smelter Royalty (“NSR”) equal to 2% of the net sales from the Company’s first Tier I production client. A Tier I production client is considered to be one with an estimated gross revenue volume to Ucore exceeding CAD$50 Million per annum, with net sales figures to be calculated by Ucore on an annual basis during the production term, in accordance with IFRS accounting procedures.

The Investor has the option to increase the amount of the Investment by up to USD$ 1 Million in exchange for a larger Royalty. If, prior to August 13, 2015, the Investor provides written notice to Ucore that it would like to increase the Investment, it can do so in tranches of USD$500,000 in exchange for a pro-rata increase in its royalty. Each USD$500,000 additional investment will result in an increase in the NSR by a factor of 0.25%.

Pursuant to the Agreement and subject to any required regulatory, stock exchange or shareholder approvals, the Investor has the right to convert the total amount of the Investment (minus any Royalty amounts already then paid by Ucore) into common shares of Ucore. If the Investor elects to convert such amount, then Ucore’s Royalty obligations shall cease and the conversion amount shall be converted into common shares at the greater of: (i) the 30 day volume weighted average share price of Ucore’s common shares, less a 20% discount; or (ii) the market price of Ucore’s common shares on the day immediately prior to the conversion date, less a 20% discount; or (iii) $0.25 per common share.

The Agreement and the closing of the transaction remain subject to and conditional upon the acceptance and approval of the TSX Venture Exchange.

Ucore president and CEO, Jim McKenzie, said:

We’re excited to announce this royalty financing arrangement. The investment is favorable for Ucore since there is no debt burden, and is prospectively non-dilutive, given that shares will not be issued by Ucore upon closing. What’s more, the transaction is a vote of confidence from a major investor in the remarkable growth potential of MRT, as well as an endorsement and financing milestone for Ucore, as it transitions towards near term revenue status and vertical integration.

Click here to read the Ucore Rare Metals (TSXV:UCU) press release