EDITOR: | July 15th, 2016 | 20 Comments

NioCorp and scandium — walking the walk

| July 15, 2016 | 20 Comments
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When it comes to scandium, it seems to be have been a case of so many plans, so little scandium — quite a deal of talking the talk, not so much walking the walk.

Until now. It may be only at the bench-testing level, but NioCorp Developments Ltd. (TSX: NB | OTCQX: NIOBF | FSE: BR3) has produced the first sample of scandium material from its Elk Creek, Nebraska resource. So that’s a milestone, right? Especially given the tortuous road of the past decade when it comes to someone, somewhere actually delivering scandium after all the promises and plans.

“This may very well be the first scandium material made from a U.S. domestic in-situ mineral resource in decades,” said Mark A. Smith, Executive Chairman and CEO of NioCorp. “While this is not the final commercial-grade product we intend to make, this production marks a major milestone for the Elk Creek project.” NioCorp has the ambition to be “one of the largest producers of scandium in the world.” Just to put that in perspective, NioCorp has previously indicated it would be looking to produce 97 tonnes a year — that would be almost 10 times present world supply.

The scandium precipitate was produced through a process that, the company says, is a precursor to the commercial process that will make higher purity commercial grade scandium trioxide.

As NioCorp states, it is developing a superalloy materials project in southeast Nebraska that will produce niobium, scandium and titanium. Scandium can be combined with aluminium to make alloys with increased strength and improved resistance to corrosion.

But let us look at the NioCorp achievement from two angles.

One is the history of U.S. scandium production. The archives of the U.S. Environmental Protection Agency contain a 1993 update on scandium. “Although scandium was not mined domestically in 1993, scandium ore was intermittently recovered from tailings and concentrates as needed,” the EPA noted. Apparently at that time scandium concentrates previously produced in Utah and tailings previously generated by mining fluorite in Montana were available for processing to recover high purity scandium oxide.

In fact, the EPA lists nine companies as having been involved in scandium: these included Kennecott and its copper mine at Garfield, Utah, where scandium was available as a byproduct from processing uranium, and the Climax mine in Colorado where scandium was a byproduct of its molybdenum operation. The others were involved in the refining end.

So the NioCorp development does show it’s been some time between drinks on the U.S. scandium front.

The second point is that, once you begin delving back into the archives, you find how many false starts there have been with scandium.

In 1998 an Australian junior Uranium Australia (no longer with us) claimed it had found enough scandium in New South Wales to supply the world for 40,000 years at the then present rate of consumption. (NSW is back on the scandium map with three projects being progressed.)

More recently, Metallica Minerals tried to get scandium going in Queensland, but that turned out to be too hard. In 2013 Sumitomo announced plans to extract scandium from its processing plant at a nickel-cobalt project in the Philippines. I cannot find any further announcements on that, but one recent Australian report stated that 10kg a month of scandium was being produced in the Philippines without naming the company, but it sounds like the Sumitomo project. There have also been plans in Japan to extract the metal from residues of titanium dioxide processing, and in Russia from the red mud left after alumina processing.

In 2013 a meeting of the American Geological Union heard a presentation about research in the Arctic Ocean that had discovered nodules and crusts enriched with scandium, although producing it in Nebraska might involve simpler logistics.


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Comments

  • Jack Lifton

    Robin,

    You have overlooked the April 26, 2016 announcement by Sumitomo that it has authorized USD$40 million to build a scandium recovery circuit at its Philippines’ nickel operations. The stated goal is to produce 6-8 tons per year of scandium (form not disclosed) for a specific customer (not named). I inquired of Sumitomo as to what recovery processes they will use for extracting and purifying the scandium. I was told it would be traditional, which I assume to mean by solvent extraction from a PLS created as a residue during the processing of the nickel.

    I note that even at the often stated (with no validation) price of USD$2000/kg for the oxide this project makes no sense as a stand alone, because it would take too many years to recover such an investment. But as a revenue generator it may make the sense of adding value by turning a liability (a waste stream) into an asset. The $40 million may also include some value-add that is not being disclosed so that it does not need to be offset in its entirety.

    That being said the big advantage for Sumitomo is that it has an end-use customer; it is not producing on speculation. If I assume that the industry “story” that Bloom Energy has contracted with a “Chinese” producer for all of its needs (The “story” says 6 tonnes per annum) then I wonder just who or what the Sumitomo customer may be.

    Niocorp’s problems include the need to secure nearly a billion dollars to bring off production of any commercial amounts of scandium at all, and its lack (as least as far as we know) of an end-use customer. Signing up MOUs with trading companies really doesn’t count for much other than with day traders.

    As to scandium. in deep sea ocean “crusts,” Robin, it is also found in significant concentrations in the warmer, but much deeper waters of the South Pacific as well as in surface or near surface deposits (of rare earths) that I know of in the USA, Canada, Europe, and West Africa. In the past the cost of producing scandium and its limited uses prevented its production. The times they may be “a changing.”

    Jack

    July 15, 2016 - 10:14 AM

  • Ted

    Jack,
    Scandium that will be produced as a co-product with Niobium at the Niocorp mine. The price of 1 billion dollars to build a mine may appear to be a “big” number to you, but with a projected cash flow of 438 million annually and a NPV of over 3 billion dollars, the cost to build is not that significant. I suggest you look at the recent Niobium-Phosphate mine that Anglo-American just sold for 1.5 billion, 10x the EBITA. By comparison, the Niocorp mine would have a NPV of 4.38 billion.

    July 15, 2016 - 10:50 AM

  • John

    There’s one clear standout and that’s CleanTeq (CLQ) who can sell Sc for $1500 but they never get a mention on this site.

    July 15, 2016 - 10:37 PM

  • Malcom

    Niocorp is the clear standout with Niobium as a primary product, Scandium as a coproduct and TItanium as a byproduct. Niocorp will produce Scandium through the process flow sheet while producing it’s primary product, Niobium and would be able to sell Scandium at cost. Niocorp would be able bury any Scandium only player. Niocorp is set to produce more than twice the tonnage of CleaTeq or Scandium International. Niocorp will be the pioneer of Scandium production and can bankroll the mine off Niobium while bringing Scandium to the masses. I think the other Scandium only players will eventually benefit, but Niocorp is the gorilla in the room when it comes to Scandium.

    July 15, 2016 - 11:21 PM

  • John

    Lol
    Check what CLQ’s capex is compared to Niocorp. Check what grade CLQ Sc is compared to Niocorp and check how much Sc CLQ have compared to Niocorp.

    Apples and oranges…

    July 16, 2016 - 3:50 AM

  • Malcom

    Apples and Oranges indeed. Check out NB”s cash flow and NPV compared to Clean Teq. The grade may be higher, but Niocorp doesn’t have a high OPEX per kg either because it will be produced along side the flow sheet for Niobium and Titanium. I’m not saying either Clean Teq or Scandium International are not good projects, but Niocorp will be producing as much Scandium as both of these companies combined and as a coproduct to Niobium. Niocorp will be the Walmart of Scandium, Clean Teq will be the Dollar Store. I believe Clean Teq and Scandium International will benefit from Niocorp”s success, but Niocorp is clearly in the dominant position by not being a Scandium only play.

    July 16, 2016 - 9:17 AM

  • Ted

    Agreed, Niocorp will be producing scandium as a coproduct generated during the manufacturing process for niobium with an overall lower operating expense. Niocorp will be a very profitable operation.

    July 16, 2016 - 10:38 AM

  • Jack Lifton

    This thread of commentary has now joined the junior mining mainstream with its endless repetition of investment valuation metrics such as NPV, or, in my favorite version, “pounds in the ground,” EBITA, and “Cash-Flow. But no one is talking about the most important metric, “risk.”

    Even if we ignore the standard and well known risk created by investing our money in people who have not before done such a project, and we ignore the fact that the production of niobium is a virtual monopoly of one family owned company in Brazil and that the demand for niobium comes 50% and more from China where foreign traders are not highly regarded and that Chinese investors are even now buying into the Brazilian monopoly producer, we still have to be concerned that being the largest producer of scandium only means that even if there is ever a demand the lowest cost, not the biggest volume, producer will still get the business.
    I think that a domestic American niobium production industry is a vital need. I also think that a domestic scandium producer would be very successful.
    But the management and financing of the production of a commodity does not insure a successful business unless there is built simultaneously a strong downstream marketing and servicing business. Niocorp’s story is that it will be a vertically integrated “superalloy” business. This will require the vertical integration of Niocorp into IBC Advanced Alloys and a dedicated marketing and customer service group.
    The junior rare earth industry failed to achieve anything with more than 10 billion dollars of “investment,” because there was NO understanding of the membership or the mechanics of the value chain for supplying raw materials to sub-tier fabricators and assemblers who then processed the materials and then fabricated and supplied end-use components to OEMs according to the specifications of the OEMs.
    I well remember my disappointment at hearing, over and over again, that a junior was planning to supply only a “mixed con.” It was one of the best “cons” of recent times.
    High tech, high volume manufacturing requiring large amounts of metals is growing only in Asia. Replacement for the domestic and new products for the export trade are the business and hope of volume manufacturers in the West and Japan.
    Japanese and Chinese corporate R&D is today focused on reducing and or replacing technology metals wherever possible to conserve critical raw materials. For this reason alone, conservation, the recycling of technology metals in Asia is leaps and bounds ahead of the USA and even Europe.
    Niobium and scandium, if it can be regularly produced in significant volume, are among the most important technology metals today. Their production is critical, but their deployment into the value chain is a different problem from their production. This is where I am skeptical that resources are not being allocated.
    The only metric of value is the probability that a project will result in finished goods with high volume industrial or consumer markets. By not addressing this risk at the beginning junior miners completely miss the point.

    Jack

    July 16, 2016 - 10:49 AM

  • Ted

    Having read up on the Niocorp project, I’m pretty confident that Mark Smith and the Niocorp team will make this happen. Mark has a long history with CBMM and the Moralles family in Brazil. The demand for niobium is high and keeps growing. The fact that this project is significantly derisked by having 75% of the niobium already spoken for 10 years in offtake agreements before the feasibility study is a very positive indication. There are still risks with any investment, but I think that the Niocorp team with decades of experience in mining will be able to bring the project to fruition. This junior mining company has some major mining talent at the helm.

    July 16, 2016 - 3:23 PM

  • Ted

    I meant the Salles family in Brazil. Considering Mark’s relationship and history with them, I don’t see any issue. If CBMM wanted to have caused issues in the niobium market, they would have done so already with the Niobec and Anglo-American mines. I believe they are welcoming of any new players in the niobium market and diversity of supply is needed. I guess we’ll see what happens in the coming months as this project is getting close to completion of the feasibility study.

    July 16, 2016 - 3:39 PM

  • Robert Richardson

    Jack, my friends have been (privately) following and discussing your interesting and energetic comments on the rare metals scene for many years. But while there is much to praise in your piece above, we disagree with: “Japanese and Chinese corporate R&D is today focused on reducing and or replacing technology metals wherever possible to conserve critical raw materials.”

    Surely it would be better to say: “Japanese and Chinese corporate R&D is today focused on the most efficient tech metals produced at maximum cost efficiency”.

    It seems that your continual focus on a now non-existent US supply chain, rather than a more practical 21st Century focus on development of a multi national ex China supply chain, as well as your other focus on recycling that for RE has minimal impact and apparently very dubious economics at best – is missing the key issues.

    With the world’s largest RE processing plant now in full production at close to 20,000 tonnes annually, the Lynas LAMP in Malaysia, Japan now has priority access to high quality-assured segment REs produced at very near maximum cost-efficiency.

    Of course, only the impending release of Lynas’s Quarterly Report on Monday will prove the degree of correctness of our confidence!

    July 16, 2016 - 6:04 PM

  • Carlo

    As John above stated, Clean Teq is a company to watch in the short term. Watch for the feasibility which is due soon,….will be an eye opener and not just for the scandium. Its market cap is not as high as it is for no reason.

    July 16, 2016 - 7:04 PM

  • Jack Lifton

    Robert Richardson,

    I appreciate the fact that you have been following my rare metals’ commentary “for many years,” but I think that even so we disagree on more than you think.
    My experience has led me to try to emphasize not the non-existence, but more accurately, the disappearance of U.S. domestic total supply chains and their replacement by an increasingly (to me) foolish dependence not on widely distributed truly global supply chains but rather by dependence upon nationalistic ones intended to be controlled both for economic and for political purposes by governments that do not care about the economic future of any but their own polities.
    The Chinese have mastered supply chain dominance to a degree that would make the mercantilists of the nineteenth century empires green with envy. The financialization of the American economy has weakened or perhaps destroyed our ability to control our own destiny by replacing the production of useful goods with profit as the sole goal of business.

    It is not “Japan” that has access to “to high quality-assured segment REs produced at very near maximum cost-efficiency” it is the Japanese trading company, Sojitz. But it is the Chinese government that controls the world’s access to 95+% of the world’s light rare earth production and 100% of the world’s production of SEGs and HREEs.
    Sadly, you’re right about recycling. If we are not going to mass manufacture products dependent on rare technology metals then we do not need to produce them. But if the West is not to become just a giant Wal-Mart-like distribution system for Asian manufacturing then we had better conserve and re-use what we have.
    The globalization of natural resource based supply chains worked only so long as the primary suppliers of the resources were poor and/or undeveloped. That period is now drawing to a close.

    Jack

    July 16, 2016 - 10:51 PM

  • JJBeswick

    Jack it appears your US-centric view fails to appreciate the strength and strategic significance of the Lynas-Sojitz-JOGMEC partnership; formed in March 2011 and reaffirmed by the excellent terms of the refunding agreement last year.
    Coupled with Japan’s magnet manufacturing capacity and the recent announcement by Honda of Dy -free motors in their next Freed minivan models and I’d say we’re looking at an emergent ROW magnetics supply chain without even a wiff of Dy needed. Of course some Dy/Tb will still be used in high end applications for a while yet, but it’s telling that Lynas aren’t bothering to get their SEG-HREE tolled at the moment because the market’s so poor.
    It’s also worth noting that:
    – JOGMEC (aka Japanese Government) put up most of the money.
    – Sojitz was appointed sole agent & distributor for Lynas in Japan.
    – The deal is explicitly about guaranteed supply to Japanese companies with minimum amounts stipulated and interest reductions for meeting production targets.
    – In their last Quarterly Lynas reported supplying over 50% of the Japanese magnet market requirements.

    July 17, 2016 - 5:12 AM

  • Islay

    Money is money. Niocorp are doing their sums, with one of their major assumptions being that they will receive US$3500 per kg for scandium oxide. The Scoping Study from Clean Teq shows them operating very profitably at a LOM price of US$1500 per kg – i.e., less than half what Niocorp are assuming. If, as Carlo has gently suggested above, the formal Feasibility Study confirms that LOM assumption from Clean Teq as valid, some serious thinking may be called for.

    It’s all very well to say that the scandium is “only a co-product”, but it is a significant contributor to the overall company profitability. Those 90 tpa of scandium, selling at a price $2000 per kg less than planned, would immediately hit the bottom line by $180m per year.

    What would that do to the Niocorp NPV?

    July 17, 2016 - 6:22 AM

  • investor

    Niocorp?? Are you serious? What is the current global demand for Scandium Vs Supply ?

    July 17, 2016 - 6:34 AM

  • Jack Lifton

    Jjbeswick

    Be aware that Japan’s is not a command economy. But in practice foreign trading companies as well as foreign raw material, manufacturing, and financial services companies, do NOT operate in Japan without a Japanese partner. EVEN SO Japanese industry is ruthlessly competitive within Japan. Note that Toyota Tsusho (the trading arm of Toyota) is independently of Sojitz (its fierce competitor) “developing” rare earths mining and refining ventures in Viet Nam and India. Lynas is a supplier to the customers of Sojitz not to any fictional Japan, Inc. Sumitomo also produces rare earths as byproducts and refines them for its customers. I have always wondered if that type of relationship weren’t the original impetus for Traxys to invest in Molycorp originally.
    The inner workings and the customer bases of the world’s trading companies as well as pricing are secrets and will remain so to ensure competitive advantage among them. Judgements therefore of the impact of any one supplier, contract, or quarterly results taken on their face value are almost valueless other than to day traders.

    Jack

    July 17, 2016 - 11:05 AM

  • JJBeswick

    Hi Jack, not sure what point you’re trying to make.
    Lynas aren’t operating in Japan with just any Japanese partner, but with JOGMEC, essentially the government.
    Maybe the Japanese Govt play favourites with the likes of Sojitz but I’d like to see some substantial evidence before accepting that!!
    In the meantime everyone is signing feelgood “offtake agreements” and the like but I’m unaware of a single binding agreement that supports RE capacity expansion in ROW: would be very interested if you have any documented examples of that. Otherwise it’s just good intentions, motherhood statements and no $$s.
    You may see the effect on the market of Lynas as trivial: “the impact of any one supplier, contract, or quarterly results taken on their face value are almost valueless” but frankly a startup, still ramping up production, that services over 50% of the biggest (by far) ROW market is anything BUT trivial.
    With this Q’s Nd/Pr production expanded to effectively nameplate I’d expect this to be even more obvious.

    July 17, 2016 - 12:19 PM

  • John

    Yes Carlo. They have one of the worlds largest cobalt deposits and their water tech was just commercialised in China 3 weeks ago. I will stick with Friedland on this one.

    July 18, 2016 - 1:50 AM

  • Mat

    Jack,
    You rightfully state that “the only metric of value is the probability that a project will result in finished goods with high volume industrial or consumer markets. By not addressing this risk at the beginning junior miners completely miss the point”.
    Wouldn’t you agree that the Niocorp management, through its partnership with IBC, is addressing this very point at an early stage of development, suggesting that it has the right plan and tools for success?

    July 21, 2016 - 7:27 AM

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