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Two junior explorers
in Australia could dominate the world's scandium supply in the next two to three years, according to Richard Karn, managing editor of The
Emerging Trends Report. In this
exclusive interview with The Critical
Metals Report, he paints a picture of a supply-demand loop that feeds on itself and pinpoints the companies that could benefit from the dynamic.
Companies Mentioned: EMC Metals
Corp. - Jervois Mining
Ltd. - Metallica Minerals
Ltd.
The
Critical Metals Report:
The metal scandium is often grouped with Rare Earth Elements (REEs) because of its chemical similarity with lanthanides. Is it really rare and why is it in demand?
Richard Karn: Scandium occurs
at roughly 10 parts per
million in the earth's crust,
mostly in silicates. Historically,
however, for a number of reasons it has been very difficult to extract and process economically.
Like many of the REEs, scandium has some extraordinary properties.
Alloyed with aluminum, it produces one of the lightest, strongest alloys in the
world—one with significantly
improved durability, plasticity, weldability and
corrosion resistance.
Aerospace could be the biggest demand driver because anything that adds strength while saving weight is invaluable.
Airbus estimates that aircraft made from welded aluminum scandium
zirconium (AlScZr) alloy would be 15% lighter and 15% cheaper to build compared to present materials.
Another promising use for
scandium is when Scandium
Stabilized Zirconium is used in place of Yttrium Stabilized
Zirconium in Solid Oxide Fuel Cells.
It lowers operating temperatures,
improves performance and extends
the operational life of the fuel cell. This is due to scandium's high ionic conductivity.
A third use for scandium that
is set to grow is in lighting. Scandium being combusted on the sun is what
gives us daylight. Today, lighting on film sets
and in some stadium lighting
applications employs scandium to mimic this natural
light. Next generation, environmentally friendly light
bulbs are increasingly using
scandium for this reason.
It is also used in high-end sporting goods such as bicycle frames, baseball bats and golf clubs.
However, it is important to keep in mind that today's
advanced computer analytics
and modeling software allow
metallurgists to test combinations
of specialty metals more rapidly than ever before, which is leading
to the design of ever more efficient products at ever
lower prices. In short, these laboratories are finding more uses for scandium every
year.
TCMR: Exactly how much
scandium is produced and what is the going
rate?
RK: Scandium is usually
marketed in the form of
scandium oxide (Sc2O3), but like
many specialty metals, the market is decidedly opaque: USGS data suggests it currently
trades for about $1,400/kg.—when you can
get it. Anecdotal evidence suggests the price is far, far higher, often multiples of that price.
However, the miniscule amounts of scandium consumed
per application would render
it utterly price inelastic because the competitive advantage gained from its use at minimal additional cost far outweighs any other considerations—if
only sufficient quantities could be reliably delivered
to the market to enable its widespread use.
Today's erratic supply, which varies between 2-10 tons per annum (tpa), simply isn't enough to warrant revamping production lines for its use. For example, word on the street is that Bloom Energy, a California company that developed the Bloom Box, a 20,000 lb.,
solid-oxide fuel cell, would like to get its hands on 30 tons of
scandium each year for its next generation
fuel cells.
TCMR: Will potential demand
for alternative energy and aerospace
uses be enough to fuel increased scandium exploration and mining?
RK: What scandium has been available is primarily sourced from those bastions of free market capitalism, Russia, Ukraine and China—until
now. Russian stockpiles are thought to be between 12-20 tons, but may be lower.
We think a secure supply of scandium will be developed
from the Lucknow, Kokomo and Nyngan
deposits in far north
Queensland and New South Wales respectively. These Australian deposits are unusually large, high-grade deposits grading in excess of 165 grams per ton (gpt) in relatively isolated mineralogical settings. Natural weathering
over millions of years has leached
away most other minerals, including yttrium and REEs. The
fact that no uranium or
thorium is present helps make the scandium economically recoverable.
TCMR: What companies
could deliver scandium in
consistent enough quantities
to nurture a growing industrial demand? And what are the development threats?
RK: Metallica Minerals Ltd.
(ASX:MLM) is uniquely
positioned to deliver unprecedented tonnages of scandium and to be instrumental in the growth of
a whole new market for this remarkable metal. The company has a $50M market cap and is managed by veteran mining director Andrew Gillies. Its NORNICO project, which is a collection of five nickel-cobalt laterite
deposits in the historic Greenvale mining district in northern Queensland, has transportation, housing and electric
infrastructure in place. Included in this group are the Lucknow and Kokomo scandium deposits. Current plans are for
a High Pressure Acid Leach (HPAL) treatment plant that could be in operation
as early as the mid-2014, if feasibility,
financing and permitting
go as planned, with
initial gross revenues running in the vicinity of AUD$200M per year.
EMC Metals Corp. (TSX:EMC), which has a $20M market cap, is in a 50-50 joint venture with Jervois Mining
Ltd. (ASX:JVR) to develop the Nyngan Gilgai Scandium Project
in New South Wales. Intriguingly, EMC's prime asset is the Springer tungsten mine
and mill in Nevada, but it
has decided to sell the project in order to raise the money to put Nyngan into production. It is currently in the process of doing an independent feasibility study, aerial mapping and Aboriginal heritage review. A 100-200 ton per day (tpd) commercial plant could produce 10-20 tpa of scandium at 99.99% purity as early as mid-2012. The company
plans to implement a new recovery
process under the
supervision of Chief Technology
Officer Willem Duyvesteyn.
In terms of development threats, the primary ones as far as we are concerned are related to the markets, not necessarily the companies involved. Scandium, like many specialty
metals, is traded off-exchange and pricing
is frankly muddy. Because scandium cannot be hedged,
arranging project financing is difficult. In this regard, Metallica, with its polymetallic NORNICO project (nickel, cobalt and scandium), has an advantage because two of its three
metals are hedgeable, which may make
financing less problematic.
Although we believe Metallica and/or EMC could end up largely controlling the world's supply of scandium, there are risks. Both companies
are micro caps and in addition to the uncertainty regarding project financing, market timing today is highly
uncertain.
But the rewards are simply
staggering, for from these two projects
a new metal market will be
born. Combined, these two micro-cap companies have more than 5,100
tons of scandium metal (7,800 tons of Sc2O3)—enough to ramp up production
and supply world markets with ample quantities of this versatile specialty metal for decades to come.
These are literally company-making projects: one way or another, we are convinced these deposits will be developed,
which is why we recommended
buying both companies. We can sort out the winners and losers later.
TCMR: What are the catalysts
investors should be looking for at the company and global level when considering
timing?
RK: For Metallica, the results
of a bankable feasibility
study, scheduled for the
middle of next year, will likely be
the most immediate
driver. For EMC, the sale of the Springer tungsten
mine will be a critical milestone in that it will
largely provide the company with the funds to move Nyngan significantly closer to
production.
TCMR: Any final thoughts
on the future of scandium supplies?
RK: The world wants scandium—there just isn't
enough of it available today in sufficient quantities for manufacturers to make the switch to using it. The closest parallel we can
find is niobium, another metal we like a great
deal. Until the Brazilians
discovered their massive pyrochlore deposit, niobium was just a curiosity
and the only organizations
that could afford it were
space programs, for whom weight considerations took precedence over everything else. Today, niobium is used extensively, especially in the automotive industry, and is a
multi-billion dollar industry controlled
by the Brazilians. We see the global scandium market eventually being dominated by the Australians largely on the back of these three deposits.
Richard Karn, managing editor of The
Emerging Trends Report, has a broad, multidisciplinary
background, industry contacts and a working knowledge of precious and specialty metals, as well as considerable research, analytical and writing experience. He has written for
publications ranging from
Barron's to Kitco, Fullermoney to Financial Sense
online. He is 20 months into a three-year
circumnavigation of Australia investigating
precious and specialty metal projects.
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