Scandium (“Sc”) is element 21 on the periodic table, next to titanium at 22. It is a soft, white transition metal that has some properties that are similar to rare-earth elements, as does yttrium. Both are in the same row of the periodic table as the rare-earths.

Although scandium is not rare, it does not form concentrates because it cannot combine with common ore forming anions such as sulphide. For example, lead is less common in the Earth’s crust than scandium, but it readily forms lead sulphide, in a variety of settings that are easily, and economically, exploitable.

The_elements

Image Courtesy periodictable.com

Uses

Scandium is used in aluminium-scandium alloys, which are used in the aerospace industry and for sporting goods such as baseball bats. Scandium increases strength and improves weldability.

It is also sometimes used in solid oxide fuel cells. It is used to dope the zirconia electrolyte. However, while it improves zirconia’s conductivity, it is very expensive and increases aging of the electrolyte.

Scandium is also used in mercury vapour lamps, such as those used to brightly illuminate stadiums. It also has minor uses in electronics and lasers and its radioactive variant is used as a tracing agent in oil refineries.

Production & Resources

World production for 2016 was thought to be around 10 to 15 tonnes, but production data are sparse. Scandium is typically produced as a by-product of the leaching of other metals and minerals. For example, titanium and rare-earths in China, uranium in Kazakhstan and apatite in Russia.

Scandium also occurs in coal and coal fly ash –  the US Department of Energy is studying extraction methods from these sources.

While most scandium deposits are insignificant, Australia is an exception. Lateritic clays in New South Wales, that are nickel and cobalt rich, often also host significant quantities of scandium. More on this below.

The Market

As is usual for specialty metals and minerals, market data for scandium is difficult to acquire. The United States Geological Survey has published some prices for scandium compunds, as shown in the table below.

 

Scandium Compounds Purity USD
Chloride 99.9% $126/gram
Fluoride 99.9% $276/gram
Iodide 99.999% $140/gram
Oxide 99.99% $4.60/gram

These prices are a guide, but do not indicate what a particular scandium compound may be worth. For example, purity is exceedingly important. Scandium oxide, at 99.9999% is worth much more than scandium oxide at 99.9%.

The Australian Scene

There are at least six companies with scandium projects in Australia: Scandium International Mining Corp. (TSX: SCY, MCAP: CAD90M); Clean Teq Holdings Ltd (ASX: CLQ, MCAP: AUD500M); Australian Mines Ltd (ASX: AUZ, MCAP: AUD32M); Platina Resources Ltd (ASX: PGM, MCAP AUD37M); Metallica Minerals Ltd (ASX: MLM, MCAP: AUD12M); Jervois Mining Ltd (ASX: JRV, MCAP AUD7M).

I shall briefly review the first three as they are more advanced than the others.

Scandium International holds 80% of the Nyngan project, located near Nyngan in NSW, about 700Km northwest of Sydney. The project hosts a mineral resource of 16.9Mt @ 235ppm Sc and a reserve of 1.4Mt @ 409ppm Sc.

A definitive feasibility study was completed in 2016. It shows the project has the potential to produce up to 37t of scandium oxide per year at a grade of 98.0% to 99.9% scandium. The project has a capital cost of USD87M, operating cost of USD557/kg Sc and NPV10% of USD177. It assumes an oxide price of USD2,000/kg ($2.00/gram).

The feasibility numbers look robust, although the expected price for a relatively low grade product may be optimistic. The production of 37t of oxide (containing 24t of metal) also seems optimistic, if the current market is indeed 10 to 15 tonnes. Nonetheless, the company is worth watching, particularly once it has project finance in place.

Clean Teq owns the Syerston nickel-cobalt-scandium project located near Fifield in NSW, 350km west-northwest of Sydney. The scandium and nickel-cobalt mineralisation only partly overlap, consequently there are two resources. A scandium resource of 28Mt @ 419ppm Sc, and a nickel cobalt resource of 109Mt @ 0.65%Ni & 0.10%Co.

A prefeasibility study completed in 2016 envisages a nickel-copper operation with scandium credits. The project would have a capital cost of USD680M and treatment rate of 2.5Mtpa. It envisages production of 18,700tpa of contained nickel, 3,200tpa of contained cobalt and 50tpa of contained scandium. The NPV8% is USD891M for nickel and cobalt, or USD1,1233 including scandium. The feasibility uses a scandium oxide price of USD1,500/kg.

Clean Teq has developed a proprietary ion exchange process to extract a range of metals from solution. It can be used to extract precious metals, base metals, rare earth metals and specialty metals such as scandium. The process also has other applications such as water purification. The company has a pilot plant in Perth that has been used to extract nickel, cobalt and scandium.

The company has MOU’s in place for offtake and is focusing its marketing on the global transport sector. It strategy is to produce cheaper scandium that will in turn increase demand for use in aluminium-scandium and related alloys.

Australian Mines Ltd can earn up to 75% of the Sconi deposit (currently 100% MLM) through completion of a definitive feasibility study. The project is located 250km west of Townsville in Queensland. The resource is 89.1Mt @ 0.58% Ni & 0.06% Co along with a resource of 12Mt @ 162ppm Sc. Although it is currently under feasibility, the grades seem low.

The company is also earning up to 100% of the Flemington deposit, located adjacent to CLQ’s Syerston project. This project host a resource of 3.14Mt @ 434ppm Sc, it is effectively the extension of CLQ’s deposit. The scandium is also accompanied by cobalt and nickel, which are less well defined than the scandium.

A recently completed scoping study on Flemington envisages a small operation, 100,000pa, to produce 50tpa of scandium along with unquantified cobalt and nickel. The project would cost AUD74M to construct and has an NPV8% of AUD255M.

Conclusion

The development of scandium operations in Australia is predicated upon the fact that NSW hosts lateritic clays with scandium content much higher than any other occurrences around the world. That is for now, there may be high scandium lateritic clays found elsewhere, as it has never really been an exploration target.

The thought with scandium is that as more production comes on line, the price will fall and demand will increase. Quite logical, as its use in aluminium alloys could easily increase substantially.

If the above three companies successfully develop their resources as planned, about 120tpa of scandium will be added to the market. This compares with estimates of the current market being 10 to 15tpa. So, if the supply is increased 10-fold, what will happen to the scandium (oxide) price? And that is without considering developments elsewhere in the world.

The opaqueness of the scandium market is also cause for concern. Scandium oxide is a precursor to other compounds, such as scandium fluoride which, when reduced by calcium, forms scandium metal used in alloys. Will cheaper oxide be reflected in the price of fluoride?

CLQ is by far the most advanced in terms of marketing and is ahead with its technology. It is also important that it has very strong board and management. For example, Mr Robert Friedland is Co-Chair. But perhaps its market cap already reflects that advantage.

It is an interesting, but difficult, sector. Caution is required, but there will certainly be profitable periods of exuberance.

Aside from marketing issues, producing high quality scandium compounds,  such as scandium oxide, has significant technical risk. It is more complex than treating lateritic clay nickel deposits, and that sector consumed a lot of capital before getting it right.

 

29 March 2017 Commodities