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Kaiser Watch September 30, 2022: Will scandium's time ever come?

Posted: Sep 30, 2022JK: Kaiser Watch September 30, 2022 with Jim Goddard and John Kaiser
Published: Sep 30, 2022KRO: Kaiser Watch September 30, 2022: Will scandium's time ever come?
Kaiser Watch is a weekly 15-30 minute audio show produced by KaiserResearch.com with Jim Goddard and John Kaiser discussing the junior resource sector. The show has three parts: the first is a general topic, the second discusses developments involving the KRO Favorites which as of January 1, 2022 are no longer exclusive to KRO members, and the third is a peek inside the members only KRO Bottom-Fish Workshop. KRO is transitioning into a Do-It-Yourself research platform that covers all Canadian and Australian resource listings and which also features a Bottom-Fish Workshop where John Kaiser highlights juniors with solvable "missing pieces". Companies that graduate from the Workshop may become part of the Annual Favorites collection whose profiles and related commentary are unrestricted for non-members. Visit the KRO Favorites Dashboard for quick access to all the unrestricted Favorites related content. KRO is not sponsored or compensated directly or indirectly by public companies. The business model is based solely on membership fees in the form of a USD $450 Annual Individual Membership that at some point will increase substantially to reflect KRO's shift to a research platform. However, when the change happens active members will be grandfathered to renew indefinitely at the current rate provided they maintain a continuous paid membership. Kaiser Watch is available at Kaiser Research YouTube and as a Podcast downloadable from KaiserResearch.com. Each episode will be made available through the publication of a Kaiser Media Watch blog report which will provide links to specific questions and include supplementary graphics. All episodes will be archived at Kaiser Watch.

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Kaiser Watch September 30, 2022: Will scandium's time ever come?
Jim (0:00:00): What is going on in the scandium world?
Scandium is the ideal marriage partner for aluminum, the third most abundant element in the earth's crust. Niobium is the ideal marriage partner for iron, the fourth most abundant element. When scandium and niobium get alloyed into aluminum and iron respectively, they make these basic metals better in many ways. But unlike niobium, which can achieve 5,000+ ppm concentrations in carbonatite deposits such as Araxa, scandium is a dispersoid, an element whose atoms flee each other. Ironically this property is what makes it such a good alloying agent for aluminum, but the offset is that this limits the ability of geological processes to concentrate the scandium grade, unlike other elements in its crustal abudance range like lead. The result is a high per unit extraction cost which has historically inhibited the incorporation of scandium u=into common materials used by society, in particular aluminum. An additional problem has been that no deposit has achieved a high enough grade to allow scandium to be the primary mined metal, and whose size is large enough to scale up supply if demand grows. That changed in the 2000's when laterite deposits were discovered in Australia's New South Wales which graded 200-600 ppm Sc, compared to the 120 ppm grade of the Zhovty Vodi iron project in Ukraine which the Soviets mined to fabricate their Mig fighter fleet with Al-Sc alloy. John Kaiser's self-coronation as the Original Scandium Bug in 2010 was based on the belief that these deposits would unleash scandium demand if they were simply turned into mines. Build it and they will come. But this assumed a high roller with deep pockets would be willing to risk losing $200 million to make it so. This never happened, and scandium soon was dismissed as trapped in a circular chicken-egg loop. It takes at least 2 years to build and commission a small scale mine such as Nyngan which will be the first ever such primary scandium mine. The flow-sheet involves processes such as autoclaves which have been a nightmare in the development of HPAL based nickel laterite mines. On top of that, the end-user must toll up to use an entirely new material. How confident can the end-user be that the extra inout cost is outweighed by the value of the performance boost? How confident can the end-user be that even if it invests in verifying the end result and tools up to use scandium as an input, that the mine will perform as predicted? Isn't it much smarter not to undertake a binding offtake argeement and let somebody else take the risk? Especially since the mine promoters emphasize the supply scalability of the existing mine? And potential CapEx providers quail at the prospect of a game of chicken where they bankroll the mine on the premise that if you build it they will come, but the end-users play a game of chicken where they refuse to adopt scandium except at a price that wipes out the mine's profit margin. It is so much easier for end-users to carry on without the benefit of Al-Sc alloy as they have always done.

What scandium does for aluminum and the 2 key alloy series for end users

USGS Crustal Abundance Chart ordered by atomic number

Ranking by Crustal Abundance
Jim (0:09:01): What game changing role does Rio Tinto represent for the future of scandium?
In 2020 Rio Tinto announced that it had developed a method for recovering scandium at its Sorel-Tracy smelter northeast of Montreal which has for decades smelted ore from its Lac Tio iron-titanium mine north of Havre Saint-Pierre on the Quebec side of the St Larence Seaway. According to USGS annual supply data Canada has been the second highest global supplier of titanium since 1930. Most of this supply came from Lac Tio which began operation in the 1950s. Titanium has a schizophrenic preception. On the one hand it is associated with cutting edge titanium metals used in aerospace and defence, but on the other hand is its dominant not so exciting usage as the key pigment input for paint as titanium dioxide. My 2017 USGS usage data indicates less than 3% of titanium supply goes into applications more exciting than paint. Most titanium comes from the processing of mineral sands rich in ilmenite or rutile, the key titanium minerals. Lac Tio and the similar Tellnes Mine in Norway are the only igneous in situ sources of titanium dioxide for the pigment industry. In 2021 Canada had faded to fifth place with 6.3% of global supply, mainly from Lac Tio. After the Lac Tio was smelted to produce iron, what was left behind was a slag that was 80% titanium dioxide. The world's paint makers use two processes to make paint, of which the newer one requires a feedstock with rutile equivalent grade, 95% TiO2, compared to 54% TiO2 for the mineral ilmenite. Rio Tinto's titanium slag had a ready market for the older process, but eventually that process shrank down to China which had emerged as the world's biggest producer of titanium at 32% which fed the shrinking base of old process pgment makers. Rio Tinto faced the prospect of its titanium slag turning into a waste product with a disposal cost, and researched how it could upgrade the slag to 95% TiO2 purity. This meant removing all the other stuff and in the process it recognized that the scandium present in the Lac Tio ore at 50-70 ppm ended up into the titanium slag. So Rio Tinto's precoess engineers developed a way to extract the scandium, which was the most valuable of the "impurities" it needed to remove. While the real breakthrough was upgrading the titanium slag to 95% TiO2, Rio Tinto trumpeted the scandium recover breakthrough in mid 2020.The mining rate of Lac Tio wasn;t going to change, so it was easy to calculate the theoretical scandium recovery potential from the slag as 40-50 tpa SC2O3. The reality will be less, but given current estimated by-product supply of 15-25 tpa from a variety of sources, this was a big deal. As part of saving its skin at Sorel-Tracy Rio Tinto had created the opportunity to gradually grow the supply of scandium beyond existing collective sources and tease an offtake market into existence. When John Kaiser realized this in 2020 he saw an emerging solution to the chicken-egg problem and the Original Scandium Bug got quite excited. Alas, Rio Tinto is not a rocket ship company. In mid 2022 Rio Tinto finally disclosed that it was building a 3 tpa pilot plant, with scalability to 9 tpa scandium oxide output. In other words, growing global supply to a likely demand tipping point of 50 tpa would take some time, and resource juniors with advanced scandium projects have not gotten any market traction. So the question, will scandium's time ever come has the same degree of optimism as what is bestowed on the prospect that fusion energy will become a reality. In other words, a cult minority believes scandium's time will come sooner than later.
Rio Tinto Limited (RIO-ASX)

Unrated Spec Value
RTFT - Lac Tio Canada - Quebec 9-Production Ti Fe

Titanium Supply Evolution Chart featuring ilmenite ore equivalent production

2021 Distrubution of Titanium Ore Supply

Rio Tinto's Sorel-Tracy facility and the Titanium Slag upgrading scandium breakthrough
Jim (0:16:35): Imperial Mining Group published a PEA for its Crater Lake scandium project in Quebec. Is this a potential project for Rio Tinto to acquire and develop?
When I did the KW interview I had already done a deep dive on the PEA for Imperial Mining Group's Crater Lake project. I realized that the PEA's positive numbers were based on a fantasy that prices quoted by Chinese vendors for master alloy in one kg units would scale to 2.5 milliom annual kg of master alloy with scandium oxide embedded at a price of $6,400/kg when IPG was selling scandium oxide for $1,500/kg to any other party capable of making master alloy. But I was willing to give the benefit of the doubt so my discussion was sympathetic to the cause of Crater Lake eventually becoming a source of scandium supply. Afterwards while assembling the graphics I came across IPG's June 2022 PDAC presentation on its web site and saw the table of comparable projects. When Peter Cashin first brought Crater Lake's scandium potential to my attention a few years ago he spewed grades in Sc2O3 form he asserted were superior to most of the other scandium projects. I told him everybody else is reporting grades as elemental scandium, so he either start doing the same or puff everybody else's grades up by 154.3% so that they are truly comparable to his Sc2O3 Crater Lake grades. Ignorance is always a problem when one begins something new, but if ignorance persists as one is exposed to knowledge, it becomes to malice. I am apalled and disgusted that Peter Cashin, after plenty of feedback, would list deposit grades in elemental Sc ppm except for his company's deposit which is presented in Sc2O3 ppm. And then declare that "Imperial has the best scandium grades". This is unacceptable.
Imperial Mining Group Ltd (IPG-V)

Unrated Spec Value
Crater Lake Canada - Quebec 5-PEA Sc REM

Ore Schedule for 25 year Mine Life at Crater Lake

Mining Plan and Flow Sheet for Crater Lake scandium mine

Transportation of concentrate that is only 50% of mined ore is a big cost center for Crater Lake

IPG's base case prices assume $6,400/kg Sc2O3 for the vast majority of itys revenues

Imperial Mining has a very puzzling cost allocation for its Sept Iles hydromet facility

IPG's cash flow model hinges on selling Al-Sc master alloy at an implied price of $6,400/kg Sc2O3

IPG's inclusion of rare earths as a recoverable by-product is a Quebec government IQ test

Despite multiple feedback IPG misleads the market about how Crater Lake compares to other advanced scandium projects

After Tax NPV Sensitivity of Crater Lake at different scandium oxide prices

After Tax NPV per Share Sensitivity of Crater Lake at different scandium oxide prices
Jim (0:26:18): Is Niocorp a potential scandium supplier?
Niocorp started off as a niobium story, but mutated into a scandium story, apparently because the future niobium price has no destiny other than what the CBMM family which controls the Araxa mine in Brazil is willing to sell it at. Assuming the Elk Creek recovery and cost assumptions are correct, the FS fails if we use $1,500-$2,000/kg scandium oxide prices. But at $3,675/kg base case price the project works. The price is arbitrary and based on the price of the sale of very small units. I am interested in Mark Smith's belief that this is a valid price, because it makes the company in which I have all my eggs invested extremely valuable. But that quibble aside, what interests me about Niocorp is that the company has done the work to put what is essentially a niobium mine into production at a base case price of $47.kg ferro=niobium (the price reflects the 65% Nb content) which is very reasonabler because that is the current price managed by CBMM. But we are in turbulent times, Brazil especially so because for the past 4 years it has had a wannabe autocrat as president, one whose has studied the methods of the Supreme Putin Poodle, Brazil's economy is run by private businesses which work with whatever power ends up in charges. If Bolsonaro declares a Lula victory a fraud and somehow persuades the military to install him as an autocrat, Brazilian business will carry on as usual. However, forcing Brazil back into a dictatorship may unleash civil unrest.This normally just causes local harm, and beacuse Brazil's economic elite has dispersed affairs, it is hard to harm any family that backs Bolsonaro. But CBMM is different because its Araxa niobium is a tiny pinpoint in Mias Gerais next to a semi derelict resort-spa, and this mine supplies over 85% of the world's niobum. It is a staggering security of supply vulnerabilty which is ignored because everybody assumes that no matter what happens politically in Brazil, business will carry on as usual. If Brazil succumbs to a "black swan" event it may take a long time for disrupted niobium supply to resume feeding the world's needs. During the interim one could expect niobium prices to quadruple and everybody get on side to fund and permit Elk Creek.If we use a sane scandium oxide price like $2,000/kg and run the Ek Creek mine scenario at higher prices, Elk Creek starts looking really good. Such numbers would allow scandium to resume being a by-product rather than the primary product at an unrealistic price. But this in turn would make Niocorp's scandium supply a major factor in stimuilating demand. I hope Brazil won't become a shitshow, but if it does, Niocorp stands to benefit.
Niocorp Developments Ltd (NB-T)

Unrated Spec Value
Elk Creek United States - Nebraska 7-Permitting & Feasibility Nb Sc Ti

Niobium Ferro Price Chart (price refers to 65% niobium content)

Long Term Niobium Supply Evolution Chart

2019 Global Niobium Supply Distribution Chart

Elk Creek Resources and Reserves

Usage of Niobium as of 2019 is mostly steel related

Economic Output of June 2022 Feasibility Study for Elk Creek

Looking at Elk Creek USD NPV at various Sc2O3 prices

Looking at Elk Creek CAD NPV per share at various Sc2O3 prices

Looking at Elk Creek USD NPV with $2,000/kg Sc2O3 at various niobium prices

Looking at Elk Creek CAD NPV per share with $2,000/kg Sc2O3 at various niobium prices
Jim (0:38:09): What does the future look like for Scandium International?
The largest shareholder of SCY kicked out the management team in April and then raised $3.4 million at $0.09 full units with a 5 year expiry which became part of cleaning up the balance sheet so that the company play a waiting game for a buyour by somebody who needs a primary scandium supply that is ready to go inot production if the funds are available. Rio Tinto is the obvious potential bidder, but Rio Tinto is plodding along too slowly at Sorel-Tracy to justify any short term optimism for SCY shareholders. I am currently unhappy with the new SCY management because they diluted the company with a cheap financing with an unnecessarily long warrant which historcially has signaled that a junior will never succeed. But I could live with that. What I have a gard time accepting is that 4 months after kicking out the old management, the web site is unchanged, managament has become unresponsive, and it looks like we were back where we started, expect with people in charge who lack the knowledge of the ousted management and are not exhibiting the piss and vinegar that was so sorely missing with the former management. So I think SCY is fundamentally very undervalued, and the prime target for anybody who wants control of primary, scalable scandium supply, but crippled by the curse "the more things change the more they stay the same". The hope is that the Evensens are simply slow getting started, the fear is that what we see is all that we can expect to get.
Scandium Intl Mining Corp (SCY-T)

Bottom-Fish Spec Value
Nyngan Australia - New South Wales 8-Construction Sc

Possible Conversation about updating SCY web site

Nyngan Expansion Scenario NPV per share at different scandium oxide prices

Nyngan Expansion Scenario NPV at Different scandium oxide prices
Disclosure: JK owns shares of Scandium Intl; Scandium Intl is Bottom-Fsh Spec Value rated; Imperial Mining and Niocorp are unrated.

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