Is there a meteoric market rise for scandium next?

It is extremely rare to find a metal where the potential demand is much greater than what anyone can supply. It has happened the past year with the emissions metals palladium and rhodium which were up 75% and 366%; so it makes good sense that scandium may be next.

Scandium-Aluminum alloy is a key material in the lightweighting industry

Lightweighting of vehicles is a massive new trend this decade as we switch over to electric vehicles. Just 2% scandium added to aluminum increases strength, heat tolerance, corrosion resistance, and weldability. A lighter vehicle will require less energy (less gasoline or less lithium-ion batteries) to move a set distance.

Scandium offers improvements in aluminum particularly suited to the transport sector; marine, automotive, and aerospace.

Scandium’s place in lightweighting is on the rise which means the need for new scandium mines has never been greater. Whilst still a niche industry with a high scandium metal price, if a miner was able to produce significant volumes then prices would go down, which in turn would mean order volumes would go up.

A 2019 scandium report stated:

“The major factors driving the growth of market studied are the accelerating usage in solid oxide fuel cells (SOFCs), and growing demand for aluminum-scandium alloys. On the flipside, lack of awareness, high cost, and inconsistent supply are hampering the growth of the studied market.”

According to the aircraft designers, about 0.1% to 0.5% trace amount of scandium added to aluminum can help to increase not only the strength of aluminum but also helps to reduce the weight of aircrafts by 15% – 20%.

Scandium demand will surge as scandium prices fall as new scandium supply comes online

Scandium is used in some fuel cells

A little known fact is that scandium is used in certain fuel cells as the electrolyte. For example, Bloom Energy sells a solid oxide fuel cell (SOFC) that produces electricity directly from oxidizing a fuel. Scandium oxide (Scandia) with zirconia (ScSZ) is the electrolyte. Scandium in SOFCs enables a lower operating temperature resulting in longer-lived equipment and less costly materials of construction. Bloom Energy in the US is the leading SOFC manufacturer and one of the largest scandium users.

Scandium’s greatest potential is in light-weighting such as with aluminum alloys

The space and aviation industry is very aware of scandium and its lightweighting effects. Given the massive fuel savings lightweighting has enormous potential.

With the current movement to vehicle electrification, lightweighting becomes so much more important for mass market vehicles. A lighter electric car will mean more power and range for the same size battery.

Airbus has already been involved in designing new lightweight scandium-magnesium-aluminum alloys. One example is the lightweight bike shown below.

A super light weight bike made from Sc-Mg-Al alloy by Airbus subsidiary APWorks

Source

The problem to date has been that global scandium supply is only around 10 tonnes, which means scandium is expensive. Once larger scandium supply is made available then prices can fall. Miners with good grade scandium projects can still be profitable.

The potential market for Al-Sc alloys is enormous once costs come down

Scandium International Mining Corp.

Scandium International Mining Corp. (TSX: SCY) 100% owns the Nyngan Scandium Project, located in New South Wales, Australia. Scandium International’s New South Wales lateritic clay belt, represents a recent game-changing discovery of scandium grades approximately four times the grade of existing sources. The resources are surface mineable enabling the company to deliver scandium at a large enough economical scale to promote much wider use and development of the metal.

Scandium International is at the stage where they can now offer an aluminum-scandium alloy (Al-Sc2%) master product using scandium from their Nyngan Scandium Project. This is highly significant as potential customers can now sample a final Al-Sc product. As the Company stated in their recent news release:

“The aluminum industry largely relies on independent master alloy manufacturers to make and supply alloying products, including small amounts of Al-Sc 2%.”

Sampling a product is an essential stage that most miners go through before having their product accepted and subsequently sign off-take agreements.

Also of utmost importance is increasing scandium production volumes so as economies of scale kick in to lower scandium prices to more affordable levels. Scandium International stated:

“The Nyngan mine scandium output will change the scale of Al-Sc2% master alloy manufactured, globally, and the Company can utilize that scale advantage to effectively minimize the manufacture cost of scandium feedstock to the aluminum alloy customer.”

The next step for Scandium International is to assess and then build a large-scale demonstration plant for conversion of scandium oxide to Al-Sc2% master alloy.

Scandium International stated:

“The size of the demonstration plant is being investigated, but will be flexible in operation and output, and will allow for much more direct customer/supplier relationships with potential scandium product customers globally.”

Scandium International’s goal is to build the world’s first primary scandium mine as soon as possible (~2021) from their 100% owned Nyngan Scandium Project. All key approvals are in place, including a mining lease, making the Project ‘shovel ready’. The May 2016 Definitive Feasibility Study resulted in a Phase 1 project NPV8% of US$225 million, and a IRR of 33%, and only US$87 million CapEx, based on a cost estimate for the Project of US$557/kg scandium oxide, selling price of US$2,000/kg scandium oxide, and 37,690 kilograms (37.69 tonnes) of scandium oxide production per year. The Project has potential to expand as scandium product demand grows. Exploration at the site has defined a measured and indicated resource 7x larger than what was used in the currently planned 20 year mine life outlined in the DFS.




Making scandium mainstream in the very near future

Light weighting of vehicles using aluminium-scandium alloys can reduce costs, increasing range, and reduce emissions

More than ever before, new innovations are reshaping the automotive industry. One trend that is gaining in importance is “light weighting”. That is, making vehicles lighter, and hence more fuel efficient. Even tiny reductions in aircraft weight can lead to significant fuel cost reductions.

By using composite materials and alloys that are strong, but lighter than steel, companies are able to manufacture vehicles that require less fuel and create fewer emissions to meet tightening emission standards. China and Europe are tightening their emission standards in 2020, so this is of imminent concern for auto manufacturers. In the case of electric vehicles, a lighter vehicle offers a greater range. By using a lighter vehicle a smaller battery is needed, and the vehicle cost is reduced.

Scandium

Scandium (Sc), combined with aluminium (Al), is an effective way of light weighting vehicles. It can be added to aluminium to make alloys lighter, stronger and more malleable. This can dramatically reduce the weight of parts for not only cars, but also aircraft and ships, helping deliver savings on fuel costs. Right now a lack of scandium supply, and hence an expensive price, is holding back the industry. Scandium supply is a mere <50 tons pa.

Scandium is mostly used in aerospace and high end sports equipment. It has enormous potential to reduce fuel costs in the aviation sector as Al-Sc alloys may reduce aircraft weights by 15%-20%. As the price falls the use could spread into the auto sector, initially into high end electric vehicles.

The chart below highlights the potential enormous growth for the scandium market should lower price (US$2,000/kg) scandium oxide be available. The potential growth forecast below is a 6 fold increase in the scandium market from 2018 to 2025.

Source: Kaiser Research

Scandium International Mining Corp. (TSX: SCY) is a junior scandium developer. The Company has a 100% interest in the advanced stage Nyngan Scandium Project, located in New South Wales, Australia. Completing a DFS for the Project in May 2016 they are now focused on advancing the Nyngan Scandium Project to construction, with the goal of being the first company to achieve production from a primary scandium mine.

The 2016 DFS for the Nyngan Scandium Project

Looking at the DFS results below a key is that the unit cash cost is just US$557/kg Sc oxide. This means the project is very economic (after tax NPV8% is US$225 million) at US$2,000/kg Sc oxide. Also at this price the scandium market can grow strongly if new supply becomes available.

The Nyngan operation is forecast to produce around 40 tonnes of scandium oxide per annum. Some may say this would flood the market, but the reality is the market can absorb a lot more scandium if prices were lower (US$2,000/kg Sc oxide).

The Company has completed all required governmental approvals required for construction. The Company also owns a 100% interest in the Honeybugle Scandium property, an exploration property adjacent to the Nyngan Scandium Project.

The absence of a reasonably priced and reliable source of scandium has limited commercial uptake of scandium. Despite this low level of use, scandium offers significant benefits. Both the aircraft and automotive industries discovered in the 1970’s that if they alloyed aluminium with scandium it could produce a stronger, more corrosion resistant material. The bonus was the alloy was strong enough to be welded rather than riveted, resulting in lighter, more fuel-efficient crafts that are cheaper to produce and run.

At current prices scandium remains too expensive for anything more than use in the aerospace industry or sports equipment; however, with increased production comes reduced prices. With Scandium International’s projected annual production alongside other Australian projects like Clean TeQ’s Sunrise Project we could see scandium become mainstream in the very near future.

Scandium International Mining Corp. will be attending the 2020 PDAC Convention March 1-4, 2020 at the Metro Toronto Convention Centre, Toronto, Canada. Note that InvestorIntel will be one of the PDAC media sponsors.




Scandium International CEO on making end-user ready products

March 21, 2018 – “Scandium is different. We can make products that go directly to the end-user. There is a shorter supply chain and we are much more in control of that.” states George Putnam, CEO, President and Director of  Scandium International Mining Corp. (TSX: SCY), in an interview with InvestorIntel’s Peter Clausi.

Peter Clausi: I have not talked to you since May. We were chatting before this and I mentioned that scandium was a rare earth. You told me I am wrong. Tell me about that. 

George Putnam: Scandium is actually a light transition metal. The difference that we see is that if you are in the rare earth business you are going to make a concentrate and you are going to need a refining capability downstream to actually get your product to the end-user. Scandium is different. We can make products that go directly to the end-user. There is a shorter supply chain and we are much more in control of that.

Peter Clausi: Your CAPEX must be less than. 

George Putnam: The rare earth guys tend not to own the refinery that is downstream of them. I would say it is simpler and it is more direct. That is the biggest different for scandium. It is a plus.

Peter Clausi: Right. When we talked in May you were looking at signing a couple of letters of intent and moving the projects along. You have since done that. Tell me about that.

George Putnam: Right. We are now focused on finding customers and signing sales contracts.  This is what the first start of a sales contract looks like, a letter of intent to do some study and do some work on efficacy of scandium and understand what that value is to customers. That is when we know whether they are a true customer or not. It is important to note that the LOIs represent folks we are working with who are happy to have a public disclosure. We have got two kinds of programs underway. There is another set of programs that is very secretive because the customers, the potential customers, want it to be. We can tell you what we can tell you about and we will work with either type.

Peter Clausi: Given what scandium does, one would expect the military and aerospace to be involved in some way. Scandium makes metals lighter with more strength basically.

George Putnam: Right.

Peter Clausi: You were showing me some anodized pieces yesterday.

George Putnam: Yes. We think there is a real finish advantage, an anodization finish advantage to aluminum-scandium alloys. That may be the key element that brings some customers to the table. Not strength, not other properties, anodization. That finish is so important.

Peter Clausi: It would then resist oxidization or what we like to call rust.

George Putnam: Right. It would be more durable and it would be better looking for a very long time.

Peter Clausi: Right. You have a property in Finland. You have done some work on, but the majority of your scandium would be coming out of your property in Australia…to access the complete interview, click here

Disclaimer: Scandium International Mining Corp. is an advertorial member of InvestorIntel Corp.




The Age of Scandium

Historically, scandium applications have flown under the majority of investors’ radars since economical deposits are extremely rare. As a result, small quantities of the metal are traded between private entities for undisclosed sums, and as such, the world has no accurate idea of how much is traded and at what price. At the beginning of any market, however, there comes a point when enough material changes hands that people begin to take note; analysts begin to accurately track stockpiles, supply and demand, and the resource may even appear on terminals and futures markets. Right now, the only thing missing to initiate this new age for scandium is decent supply, as unique applications are already widely known.

Scandium International Mining Corp. (TSX: SCY)(“Scandium International”) are inching ever closer to a primary supply out of New South Wales, Australia, and things are looking good; the company recently acquired 100% interest in its flagship resource (previously it held 80%) in order to accelerate its development. The project has now received all key approvals, including a mining lease, necessary to proceed with project construction, which comes in at $87.1million, according to the Definitive Feasibility Study (DFS) completed in 2016.

Scandium has been used in the past to create uniquely strong aluminium alloys that were thought to be utilised by the Russian military in the construction of lightweight parts for their MiG fighters. Russia still sells these historic stockpiles to industry, but it is thought that the coffers are rapidly emptying. Demand for scandium is still an estimated quantity, but it is believed that global consumption is now around 15 tonnes per year. Looking back, annual scandium consumption was always thought to be around 2 – 10 tonnes, so not only have we seen an increase of late, but furthermore, if only a miniscule fraction (0.1%) of the global aluminium market were to involve scandium in production, we would see demand surge to around 350 tonnes annually. The only missing ingredient here is stable supply of useful quantities.

I firmly believe that, since Scandium International are on-track to bring online the world’s first primary scandium deposit, this company could itself be the black swan that initiates the paradigm shift that takes scandium out of ambiguity and into the hearts and minds of traders and analysts. The company’s deposit, known as Nyngan, could produce 37,690 kg of scandium oxide each year according to its Definitive Feasibility Study (DFS), with operating costs of US$557/kg scandium oxide. The DFS also assumes that the price of the finished oxide material is US$2000/kg, but in reality, this is the very bottom end of the scandium oxide selling price, with 1kg going for as much as three times that today.

It is well known that scandium is difficult to find due to it being a dispersoid; it can’t stand to be around itself. The fact that the Nyngan deposit features grades as high as four times what we’d normally see means that the company has a real chance of pioneering mass consumption of a metal, whilst enjoying the protection from competition afforded by its obstinate loneliness. Scandium is a big deal of an opportunity, and since it cannot currently be traded on futures markets, an interested investor would do well to pay close attention to the company closest to initiating meaningful supply.




Scandium International – DFS sets the CAPEX Bar Low

In 2014 when we first brought Scandium to the attention of investors, one of “first movers” was Scandium International Mining (TSX: SCY) then called EMC Metals that was advancing its project which has now reached the Definitive Feasibility stage while gaining a potential offtaker. The very affordable capex number has set the bar low and Scandium wannabes will find it very hard to come in with numbers lower than those for the Nyngan project.

Its operational focus is on scandium project holdings, specifically the Nyngan Scandium project (and the neighbouring Honeybugle property) in Australia. The NSW laterite clay belt offers a unique production advantage. The Nyngan deposit is large and the grades are rather stunning. Nyngan might be described as the “Bayan Obo of Scandium”. The company also holds the Tørdal Scandium project in Norway. It is on the Nyngan Project that the Latest DFS has been published.

The Rationale

Scandium is one of the lesser talked of technology metals but one that is getting increasing focus and mention. This is despite the fact that the supply situation is dire with literally only a few tons of product hitting the market per annum and even that is as a by-product of the refining and processing of other metals. The applications for the element are known, particularly in aluminium alloys, solid oxide fuel cells and lighting but it’s just that manufacturers will not tool up for the metal if they cannot be guaranteed greater (reliable) supply.

Nyngan

The Nyngan scandium resource is located approximately 500 kilometers northwest of Sydney, Australia. It has in its time been trawled over by such substantial (now disappeared) players as Selection Trust, North Broken Hill and Anaconda. The property consists of three exploration licenses encompassing over 9,000 hectares, and is accessible via a 25 km sealed road from the local town of Nyngan.

NSW-Map

Resource & Reserves

The original resource was established on the Nyngan property in 2010.

The revised NI 43-101 Measured and Indicated scandium resource now totals 16.9 million tonnes at an average grade of 235ppm scandium, from all scandium-bearing sources including hematite, limonite, saprolite and some bedrock resource material. The updated resource retains the same economic cut-off value of 100ppm as was used in the earlier resource estimate.

Nyngan-Scandium-Resource

Another result of the DFS was the publication of the first Reserve on a portion of the resource, associated specifically with that portion of the limonite resource. The DFS utilizes 1.4334 million tonnes of limonite resource over 20 years, almost all in the Measured Resource category, and that portion of the overall resource has generated the Reserve figure.

Nyngan-Mineral-Reserve

PEA/PFS

In October 2014, the company published its Technical Report on the Feasibility on Nyngan prepared by the engineering firm of Larpro Pty Ltd, of Brisbane. The main mining assumptions were that a portion of limonite-only resource, in one particular area of the overall resource, would provide a 20-year mining pit sufficient to supply the processing facility at a rate of 75,000 tpa, at an average grade of 371ppm Scandium. The results of that PEA are shown in a comparative table below. It is important to note that the estimates utilized an AUD/USD foreign exchange rate of US$0.90 even though the rate subsequently dived to nearly US0.70.

The PEA premised a conventional flow sheet, employing high pressure acid leach (HPAL) and solvent extraction (SX) techniques, which were modeled and validated from METSIM modeling and bench scale/pilot scale metallurgical test work.

Nyngan-Project-Metrics

The Definitive Feasibility Study

Nyngan-DFS-CapexIn April of 2016, the company published its long awaited DFS. This document was important not only in that it updated the previous PEA but in that it is the only DFS on a primary Scandium property that we know of and thus gave the market an in-depth view of how such a project might evolve and its implications in costings and potential addition of supply to Scandium Oxide to the global marketplace.

The well-known Australian consulting firm, Lycopodium Limited, (ASX:LYL) led the feasibility study.

The DFS outlines that the likely capex is US$87.14mn, most of which is related to processing costs and infrastructure, as detailed at the right.

Mining & Processing

The Nyngan deposit is surface-mineable, with an overall strip ratio approximating 3.4:1. The mine plan is limited to a 20-year duration, with the plan utilising less than 12% of the total measured and indicated resource contained in the resource model.  There will be two pits with the depths being 50 m and 45 m for the western and eastern pit respectively.

The mine plan targets delivery of only limonite resource to the processing facility, the processing route designed in this Feasibility Study is tailored for limonite-only production, at a 75,000 tpa ore feed rate.

At a daily process plant feed rate of 240 tpd, the strategy is to campaign mine and stockpile the mined material several times during the year, rather than attempt to maintain and operate an even smaller mining fleet throughout the year. It is envisaged that 25,000 to 30,000 tonnes of scandium-bearing material will be mined during each campaign. The mining strategy will minimise stockpile quantities by only mining the required ore quantities during each mining campaign. On this basis, the required ROM capacity is relatively small, at 50,000 t maximum.

The High Pressure Acid Leach (HPAL) test work, solvent extraction and precipitation programs conducted in 2015 have resulted in an evolution of the flowsheet compared to that developed by other researchers in the following areas:

  • The extraction phase could be conducted successfully on HPAL discharge liquor
  • Stripping was easily conducted with a low acid strip solution
  • High purity scandium oxalate could be precipitated from the solvent extraction loaded strip liquor
  • Calcined scandium oxide, approaching 99.9% purity can be produced using the process flowsheet that has been developed with 83.7% scandium recovery of scandium in feed to final product

nyngan_site

The scandium oxalate precipitate is filtered in a plate and frame filter press. The scandium oxalate is added to rotating kiln furnace and calcined to scandium oxide at 900°C, before being washed with deionised water and filtered. The scandium oxide is then dried and dispatched in small security drums.

Nyngan_process

Once at nameplate capacity, the processing plant is forecast to produce between 36,600 and 42,000 kilograms of scandium oxide product per year, averaging 37,690 kilograms/year over the 20 year feasibility study production period. Oxide product will be produced on-site at grades between 98% and 99.9%, as Sc2O3, and will be offered at grades that meet various customer requirements, suitably packaged for direct sales to end users.

So in summary the main features of the current study are:

  • A Reserve totaling 1.43 million tonnes, grading 409ppm Sc was established on the limonite part of the resource
  • Recently published Definitive Feasibility Study estimates CapEx at a low US$87mn
  • DFS projects NPV (at 10%) of US$177 million and IRR is 33.1%, (NPV at 8% is US$225 million)
  • Cash costs of US$557 per kg of Scandium Oxide, with DFS utilizing US$2,000 per kg pricing while current price is somewhere around US$5,000 per kg
  • Oxide product volume averages 37,690 kg per year, over 20 years, giving revenues of over US$75mn per annum and operating revenues (EBITDA) of around US$50mn per annum
  • Strong potential for expansion of demand based upon increased availability at current or lower prices – applications follow supply

Pricing

There is a certain element of licking your finger and sticking it in the air to see which way the breeze is blowing in Scandium pricing. It seems be conducted mainly by nods and winks. The USGS has some number available but their accuracy remains undecided. At least they give us a guide.

Scandium-Oxide-Price-per-kg-99-99

It is key to note the SCY is using a price of $2,000, so a good 60% below supposed current market prices. Scandium International will not only be a first mover it will be a game changer in the Scandium space.

Conclusion

Now the DFS has come off the presses, the investment community can see that the capex is on the right side of achievable helped by the infrastructure and jurisdictional advantages of being located in central New South Wales.

While the project’s rated production is higher than the perceived global consumption, that global consumption number is suspect and more likely to be upwardly revised than to be an over-estimation. The dynamic of “build it and they will come” also seems to have promise here with Scandium having a potential for expanded demand if only end-users could be sure they can get all they need if they tool up for greater production of lamps, bicycles, auto parts, wheels, aircraft, high speed trains—-whatever wants a lightweight high performing metal alloy, ideally already being made from aluminum.

Certainly Nyngan moving into operation might also drive down prices making the metal more accessible to potential users with the potential to create a virtuous cycle of affordability and enhanced supply driving widened applications. Beyond all this it creates a market for a specialty metal, in a safe Western jurisdiction, over which the Chinese do not have a stranglehold.

In the absence of other comps in this metal another way to look at the Nyngan scandium project is as an equivalent to a one ounce/tonne gold project.  One tonne of 400 ppm (g/t) elemental Sc = US$1,200 revenue, assuming a US$2,000/kg sales price for oxide, equates to an ounce of gold at US$1,200/oz.

The challenge now will be financing, with the most likely scenario being an offtaker stepping up to ensure that they get first dibs on the product flow from the mine upon completion.