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Kaiser Media Watch Blog - May 1, 2016 to May 31, 2016


Kaiser Media Watch Blog enables John Kaiser to share online content from other media he deems interesting or relevant to Kaiser Research Online audiences. He collects links to such content and writes a brief explanation. The KMW Blog gets updated during the evening KRO update. After a week or so the current KMW Blog gets archived and a new one is started. Tweets are sent with a link to the item in the KMW Blog when it is of particular interest. Right clicking the JK header allows one to share or copy a link directly to that specific blog post.

Posted: May 24, 2016JK: The latest on favorite picks and the upcoming Zombie Search and Rescue Mission
Published: May 24, 2016ABR: John Kaiser and Allan talk about Junior Mining
Allan Barry and I talk about favorite KRO picks such as Sirios, Arizona Mining, Canalaska and Peregrine among other topics, some of them touching on stuff talked about during the CEO.CA session on May 24, 2016 between 1-3 pm pst during which Eric Coffin, Brent Cook, Joe Mazumdar and I found ourselves swatting at fast, slow and curve balls coming from everywhere. It was supposed to be a public discussion among ourselves but we hardly had time to see what each other was writing. Next time we'll pick a topic and try again. The ABR interview runs for 1:22 hours. We also talk a bit about an upcoming session where we plan to use the KRO Search Engine to filter for zombie resource juniors and then go through the list starting with some yet to be selected letter of the alphabet. The goal is to see how quickly we can discard the truly living dead from those that are still alive and deserve to be rescued.

Posted: May 16, 2016JK: The Motley Fool's Foolish Takeway
Published: May 16, 2016Misc: Why the Clean TeQ Holdings Limited share price is up 122% this year
Robert Friedland's Clean TeQ Holdings Ltd surged to $0.35 on 11.76 million shares volume on the ASX on May 16, 2016 in the wake of an AUD $4 million private placement at $0.21 with two institutional investors based in Sydney and Hong Kong. That boosts fully diluted capitalization to 459 million shares, assigning a AUD $161 million value to the Syerston scandium project for which Clean TeQ hopes to deliver a feasibility study in June 2016. Compare that to the CAD $55 million the market is currently assigning to the Nyngan project for which Scandium International Mining Corp published a feasibility study on April 18, 2016. Mike King on behalf of The Motley Fool tries to make sense of this market move. He sees Clean TeQ as part technology and part mining company due to its water purification technology which has yet to generate any commercial business and thus, according to the Motley Fool, is not likely to pay for Syerston's development. What he does not quite get is that the water treatment business was a money pit that threatened Friedland's initial investment with extinction, but the technology was potentially useful for stripping scandium out of solution once the heavy lifting of cracking and dissolving the ore with high pressure acid leaching (HPAL) was done. That is why Syerston was shifted from Ivanhoe Mines Ltd into Clean TeQ rather than some other shell. So far it still looks like Clean TeQ thinks its ion exchange technology is critical to Syerston's recovery process though conventional solvent extraction does the job fine with Nyngan's scandium enriched ore.

When it comes to mineralogy lots of devils lurk in the details and ion exchange may be the only solution for Syerston and the adjacent deposits which is bad news for Platina and Jervois unless Clean TeQ is misguided about the importance of ion exchange for scandium recovery. But if Clean TeQ is correct in its conclusion about the need for ion exchange technology, that is good news for Nyngan's owners because Friedland is very unlikely to share Clean TeQ's technology edge with its neighbors 150 km south of Nyngan, and has so much ore at Syerston that his best strategy is to use his control of the regional water supply and a recovery process relevant to local mineralogy to keep competing scandium supply in limbo until needed. A flow-sheet that works with one scandium laterite deposit probably will not work with a similar deposit in another region unless its peculiarities are worked out through trial and error testing. Nyngan and Syerston are the most advanced in this regard, and if successful supply from their initial "pilot plant" study equivalent operations does indeed coax serious offtake demand from the sidelines, they are in position to capture the first 300 tonnes of scandium oxide demand that emerges through capacity of expansion of fully permitted minesites, not johnny-come-latelies who may have the grade but not the flowsheet. Clean TeQ has worked on its flow-sheet while others such as Platina have simply cut and pasted the Nyngan PEA into their news releases, something that was the case a year ago with Clean TeQ but will no longer be the case when it publishes its own DFS because Clean TeQ invested the risk capital needed to solve the processing problem.

In a nod to the problems rare earth juniors encountered with their flow-sheets, The Motley Fool draws a comparison with the rare earth project of Lynas Corp and opines that investors are hoping for a different outcome. Its "Foolish Takeaway" is that Clean TeQ is "for the punters prepared to lose all of their investment if it doesn't work out". What the Motely Fool does not understand is that while recovering scandium is not a cakewalk, bringing a single target element into solution and dropping it out as a single oxide is nowhere near as complicated as cracking 14 elements squirreled away inside different minerals, and when they drop out as two piles of mixed light and heavy oxides, the work of separating them into saleable individual piles has only just begun. Furthermore, recovering a single element such as scandium oxide which has a range of end uses with different price points that will determine what the output gets sold at is very different from producing 14 elements with very different end uses, each with their own price points and demand dynamics unrelated to many of the other rare earths. To make matters worse, with rare earths only the supply of cerium and lanthanum, the cheapest of the bunch, can be scaled in response to demand growth potential. It is simply wrong to use the complexity of the rare earth sector to cluck warnings about scandium which is a transition metal different from the lanthanides. It is closer to yttrium which gets classified as a rare earth, but its special role in enhancing the properties of one of the world's most abundant and important metals, aluminum, makes scandium far more interesting than yttrium, more in the style of niobium as an alloying agent for iron. Overall, while the Motley Fool frets about recovery and its cost, it does concede that making scandium oxide available is a good thing, even if it costs end-users $2 million to $3 million per tonne.

If you want to read something foolish about scandium, check out Jack Lifton's article Lifton on Scandium as the new Gold published on May 16, 2016 by Investortel whose CleanTech Conference run by Tracy Weslosky in Toronto last week was, according to Jack, a "hoot". His article contains snippets of insight about the critical metals space that unfortunately drown in a grammatically challenged and incoherent ramble at the end of which one is left wondering if he is bashing scandium as just another rare earth delusion (he does not mention lithium) or praising the next big thing in critical metals (not sure who gets credit for the foolish title that scandium is the next gold). My sense is that Lifton belongs in the camp of skepticism about scandium recovery processes and the idea that if you build primary, scaleable scandium supply, the demand will come. His cynicism about critical metals is understandable, given the $100 million that disappeared into a radioactive bat cave which boasted the world's highest rare earth grade in a mineralogical form with an established recovery process whose proposed output scale was small enough not to disturb China's domination of rare earth supply. Rest in peace Steenkampskraal or Steaming Pile of Crap as the street used to call it.

As somebody who joined Chris Ecclestone in proclaiming "small is beautiful" with regard to critical metal supply, Jack Lifton's myopia on scandium does not make a lot of sense. Sure the current supply is tiny, but relative to the demand potential if that supply can be scaled bigger at a stable price, the proposed scandium mines very easily meet Lifton's "small is beautiful" criterion. At least his pal Ecclestone, who somewhat grudgingly is sympathetic to scandium, is consistent in that regard. Neither do Jack's comments about a Japanese fantasy regarding the recovery of critical metals from seabed mud make sense (I cannot tell if he is mocking the idea or warning us about a future deluge of seabed mud derived scandium). If he wondered aloud about recovering scandium from the red mud left over from processing bauxite into alumina, which can run up to 150 ppm, then at least he would be relevant, though only if he addressed the problems the Japanese encountered trying to recycle Jamaican red muds before giving up. Jack, however, is brilliant in pointing out a flaw in Mark Smith's flow-sheet for Elk Creek, namely the decision to drop the lower value by-products titanium and scandium out of solution before the primary metal, niobium. Doing that is a no-no in process engineering economics where the rule is to convert into saleable form the most valuable target metal first, not keep it orbiting the vessel circuit while a lower value metal gets teased out. This apparently is also a problem the Japanese encountered with their efforts to recover scandium from nickel-cobalt laterites in the Philippines. At Elk Creek figuring out when to drop out the elevated thorium and what to do with it afterwards is going to be an additional problem the good farm folks of Nebraska may not dismiss as a technical detail. For now Niocorp shareholders need not worry about a moratorium being created to allow Nebraska to establish its own mine permitting regime, because despite all the hand-wringing about a "scandium bubble", no such thing has so far developed. Mark Smith has another couple years to talk about $3,500 per kg scandium oxide before there are 50 plus juniors talking up smallish zones with 1,000 ppm plus scandium grab samples, or babbling about 30-70 ppm "bulk tonnage" ultramafic bodies.

Scandium is such an important alloying agent for aluminum that all this low cost scandium supply which "experts" warn will flood the market if an offtake market emerged due to a couple primary mines such as Nyngan and Syerston coming on stream would have happened a long time ago if it were feasible. And given the functional value created by scandium for aluminum, end users will not waste time doing offtake deals with future scandium suppliers piggybacking on the established pioneers. They will line up at the doors of SCY and Clean TeQ to do offtake deals just as the two consortia of Chinese and Japanese/Korean steelmakers did with Brazil's CBMM in 2010 to secure their long term supply of niobium from Araxa. There will, of course, be wishful thinkers such as the German conglomerate ThyssenKrupp which gave Niocorp words of encouragement in exchange for warrants to buy the stock at a cheap price, warrants they probably still own unexercised for the same reasons why they were not standing side by side with the Asians at CBMM's door in 2010. At least when Robert Friedland and Sam Riggall got Airbus to gush about the future of scandium and Clean TeQ's potential supply role they did not have to pay anything for the publicity. But in rare moments of doubt I do sometimes wonder if sombeody paid people like Tim Worstall and Jack Lifton to say dumb things about scandium in order to rile up the audience. Sometimes the best way to promote a story is to mobilize its bashers. Perhaps that explains why Clean TeQ's Syerston project commands a $161 million implied value compared to the $55 million value of SCY's Nyngan.


Posted: May 6, 2016JK: Nearsighted vs Farsighted: which is Friedland and which is you?
Published: Apr 25, 2016Misc: Scandium: Robert Friedland's Little Secret
Barry Fitzgerald, Resources Editor for The Australian Business Review, has written an excellent article about the scandium story which is especially interesting because it marks the first time that Robert Friedland rather than CEO Sam Rigall is presented as the brains behind Clean TeQ Holdings Ltd which will soon follow Scandium International Mining Corp in delivering a definitive feasibility study for a world class scandium deposit. Friedland invested in ASX-listed Clean TeQ a few years ago based on the company's environmental services business that included applying ion exchange technology to recovering minute concentrations of metals from waste water. One of the applications was applying ion exchange to titanium dixoide waste streams which include scandium and which has apparently become the primary source of the scandium oxide Bloom Energy needs for its solid oxide fuel cells. Along the way Friedland realized that the sub-economic Syerston nickel-cobalt laterite deposit in Australia's New South Wales hosts perhaps the world's biggest scandium deposit with primary production potential. Ivanplats Australia spent over $30 million on a feasibility study that, ironically, used an elevation in scandium grade as a marker for delineating the nickel-cobalt mineralization for economic development. Where the nickel-cobalt grades dropped off, the scandium grade spiked to over 300 ppm, the minimum grade needed to call your scandium deposit a potential primary supplier of scandium oxide profitable at $1,500-$2,000 per kg.

The prices that nickel and cobalt ended up after 2008 rendered Syerston worthless and the project, along with other "private equity" busts, disappeared into Ivanhoe Mines Ltd where it did not even receive a footnote in any of Ivanhoe's disclosures. Somewhere along the path of Syerston's descent into worthlessness, but no later than 2014, it came to Friedland's attention that while the nickel-cobalt resource was worthless at prevailing metal prices, the scandium doughnut around the nickel-cobalt hole was worth billions at a scandium oxide price of US $1,500-$2,000 per kg. And unlike the slow-wits who depend on somebody like Friedland to show them the way, Robert Friedland quickly figured out that scandium was a far more interesting metal than rhenium whose super-alloying role is critical to jet engines thanks to its third highest melting point (3,180 degrees C) but not much else (46 tonnes supply for 2015 according to the USGS worth about $114 million at $2,500/kg compared to 10-15 tonnes of scandium oxide worth between $20-$50 million depending on the size lot sold).

Rhenium is so low grade in nature that its presence normally is computed from molybdenum roaster returns, the only element with which rhenium seems to have any quantitative correlation. Friedland's Ivanplats Australia discovered the Merlin molybdenum-rhenium deposit in Australia's Queensland in 2008. Merlin was remarkable in that it fire assayed a rhenium grade slightly better than the crustal abundance of scandium (21 ppm) and eventually delivered an M+I+I resource of 6.4 million tonnes of 1.5% Mo and 26 ppm Re. The contained 166.4 tonnes of rhenium have a value of about USD $376 million. Friedland did not keep Merlin; it ended up in the control of a Chinese company called Chinova. That was a smart move by Friedland because even though rhenium might have "magical" properties with applications well beyond "extreme heat" jet engine turbines, the absence of any primary scalable supply that is profitable at $2,000/kg or less makes the commercialization of rhenium enhanced applications not a practical option. The discovery of the scandium enriched laterite deposits in Australia's New South Wales is a game changer for scandium based applications, much as happened in the sixties when the world class Araxa niobium deposit was developed. Today niobium has an iron enhancing market worth $2.4 billion dominated 85% by CBMM's Araxa Mine in Brazil. Scandium has the potential to enhance aluminum in many areas, and in some cases even assist aluminum in displacing steel as a key input.

Friedland wisely punted Merlin to the Chinese, but nobody, including the Chinese who at that time were not yet cognizant of their growth trajectory's limitations, had any interest in a marginal nickel-cobalt project whose metal supply was being inundated by nickel-pig-iron from Indonesian and Filippino laterites and cobalt from the DRC. Syerston thus ended up inside Ivanhoe whose focus was a portfolio of world class copper (Kamoa), zinc (Kipushi) and platinum (Platreef) projects in southern Africa which required serious capital spending. So in late 2014 Ivanhoe sold Syerston to Clean TeQ for a pittance consisting of a royalty, some stock and AUD $1 million. It was a coup for Clean TeQ whose brilliance for obvious reasons Friedland did not trumpet to the world. Although the energy efficiency boosting function of scandium and its potential role on many innovation fronts fits very well with Friedland's penchant for futurism, he has had to hold his tongue while Sam Riggall pushed the project through the feasibility demonstration cycle, which includes sorting out the metallurgy of this scandium enriched laterite and probing potential end-users for offtake agreements.

Not long after the acquisition, Clean TeQ, whose environmental services business was a financial black hole, saw its market cap expand to AUD $80 million plus based on Syerston (Australia's premiere stock forum, HotCopper, dwells on nothing but the scandium story), and yet nary a word from Robert. Now it may be possible that Barry Fitzgerald is just a cheeky, prescient journalist, but, precisely because scandium is such a good story it does not need a cheerleader like Friedland, possibly ruining a good story by raising the hackles of a prickly mining executive the market no longer adores but does sullenly respect, makes no sense unless Robert's endorsement is lurking behind the scenes. The Australian Business Review article is a signal that Friedland's self-imposed silence on scandium is coming to an end. Scandium Bob is about to be unleashed on the world.

That is why it was so funny to see Tim Worstall, a former peddler of small amounts of scandium oxide sourced from Russian stockpiles left over after the Soviet Union collapsed, post an article on Seeking Alpha (Be Very Wary Indeed Of The Coming Excitement About Scandium) indirectly calling Robert Friedland a buffoon for thinking that adding 40 plus tonnes to the 5-15 tonnes of current global supply of scandium oxide will accomplish anything but crush the price well below what it will cost to extract from deposits like Nyngan and Syerston. Worstall, who has accumulated a reputation as a "know-it-all" blogger annoying enough people to earn an online "why we hate Worstall" page (see Eziwrestler: Tim Worstall, British Attack Dog), used to have a side business sourcing scandium oxide from Russians and supplying it to the army of scientists playing with scandium as a magic "facilitating element" (start wandering through the Google Scholar Scandium Search to get a feel for this beehive of activity). But these days he can source nothing, and he bitterly admits it.

For somebody who has made such an effort to immerse himself in scandium I find his negativity puzzling if not outright perverse. I saw one article by him (A riveting chapter in Boeing and Airbus' rivalry) in which he first talks about the headache aircraft rivets pose, and in the second part talks about a Taiwanese bike manufacturer who exports bicycles with branded aluminum-scandium frames that sell for US $3,000 plus. That in itself is not interesting because we all know that the lighter a bike frame that does not twist out of shape or break, the more desirable that bicycle. Lightness plus strength commands a premium among cycling fanatics. But then he went on to explain that the bike maker produces an identical bicycle he sells in the domestic market for substantially less and which does not publicize the scandium content. How can that be possible he marvels? The answer is that although the scandium in the aluminum frame costs $10-$20 extra, the ease with which an extremely reliable frame can be welded together, a bicycle that quickly gains a reputation as a lot better than similarly priced brands though nobody knows why, more than offsets the extra material input cost. When I read that, I thought, if Worstall reported this correctly, the market for bikes with Al-Sc alloy frames goes far beyond a high income elite that is equally enamoured with carbon composite bikes. And he clearly gets it that scandium's attractiveness to end users goes well beyond the functionality it bestows on aluminum, that a good part lies in fabrication cost savings over alternatives with lower cost physical inputs.

When you consider that 15-20 million bikes are sold annually, and the vast majority sell below $500 each, and a Taiwanese manufacturer with access to scandium finds it worthwhile to use Al-Sc alloy frames for this low cost category, what if enough scandium were available at a stable price to allow Al-Sc alloy to be used for all bikes? It hardly matters that the high-end bikes use Al-Sc alloy because they have many additional features that explain the high price. The simple fabrication cost saving realized by utilizing Al-Sc alloy could turn scandium into an input for every single bicycle sold on the planet. When I first came across Worstall's insight I was absolutely stunned. An Al-Sc frame and fork will weigh 2-3 kg, which at 0.1% Sc would cost US$6-$12 per bike in scandium oxide input and would require 60,000-90,000 kg of scandium oxide (0.1% X 2 kg X 1.534 = 0.003 kg Sc2O3 X $2,000/kg= $6) for all annual bike production. If 0.2% is the magic number, the limit demand doubles and the input costs range $12-$24 per bike. Obviously bicycles are not what takes scandium demand to 1,000 tpa, but 10%-20% penetration would help absorb some of the new supply from Nyngan and Syerston. The important thing about this type of end-use is that a bike maker who does an offtake deal with the intent of marketing low to medium cost bicycles not branded as "scandium bikes" is not vulnerable to the possible failure of the Nyngan or Syerston mines to perform as expected. Such an end-user would phase in Al-Sc alloy as it becomes available, and only turn the scandium content into a marketing advantage when ongoing scandium supply is assured.

What I cannot understand is why Tim Worstall, despite deeply understanding subtle "fabrication cost advantage" aspect of the scandium story, is so pessimistic that if juniors like SCY and CLQ succeed in bringing 40 tpa of Sc2O3 each on steam annually, the demand from mundane sources such as the bicycle market will not absorb a good chunk of the "monumentally" bigger supply. Bicycles and other sports equipment are not the only mundane applications of Al-Sc alloy. Consider hydro-formed beverage cans, those fancy shaped beer cans that turn consumption into a fashion "cool" statement. The aluminum beverage container market soaks up about 8% of the annual 58.3 million tonne (USGS 2015) aluminum supply which, if converted into Al-Sc alloy could absorb 7,000-14,000 tonnes of Sc2O3 at 0.1% to 0.2% Sc content if the transportation cost saving created by thinner container walls along with a fabrication cost saving more than offset the extra scandium input cost. It would be quite a few years before such a conversion took place. Fancy shaped beer cans would be the initial adoption frontier because the fancy shapes require thicker container walls to ensure rigidity. Warm parts of the world where people drink beer outside and being seen by others is part of the experience would love a cool beverage can that does not soak up the sun's rays as does a bottle of Corona beer which contains a mediocre beer but has a cool silk-screened container. What if a brewer of cheap beer such as Pabst or Schlitz that America's cost conscious beer drinkers love and which is so uncool that hipsters have taken a shine to those beers came out with a "limited edition" of hydro-formed cans? If the Al-Sc alloy reduces the cost of a conventionally hydro-formed beer can, enabling the sale of a Pabst or Schlitz brew almost as cheaply as the normal can, their market would relish brandishing the fancy cans as a middle finger to drinkers of pricier beer brands. Even the hipsters would appreciate the irony of undermining the ironic posture implicit in their consumption of Pabst or Schlitz.

Another mundane use of Al-Sc alloy would be smart phone cases which have a high fabrication cost associated with making them look "cool" and scratch or corrosion proof. Apple is currently using a Series 7 aluminum-magnesium-zinc alloy for the case of certain editions. Not only is this material difficult to work with, but the case requires a veneer that prevents the aluminum alloy from taking on that cloudy look so familiar with aluminum window frames. It would not be a big risk for a smartphone maker to do an offtake on scandium that fails to deliver because the planned special editions simply never materialize with an Al-Sc case.

It is puzzling that Worstall does not understand that if you promise an "unlimited" supply of a critical ingredient at a fixed price to an end-user, and that end-user comes to believe you can deliver over the long run, the demand will grow to absorb the supply as it expands. The automotive and aircraft industries will initially dabble only in components that are not critical for the safety or functionality of a car or plane. They are the gorillas on the sideline with the potential to absorb 200-300 tonnes annually each if they incorporate Al-Sc alloy into their designs. They will not do so until Nyngan and Syerston are both successfully in production and prepared to scale up production. But even before the automotive and aircraft industries adopt Al-Sc based components, consider the possibility that the electricity sector will adopt Al-Sc as the basis for high tension wires which currently suffer from a sag problem when made only of aluminum that can only be alleviated by measures that reduce conductivity such as incorporating a copper core. Electricity related end-uses represent 13% of the annual aluminum supply. As for his assertion that the new scandium projects will not deliver, he has no technical qualifications for making such an assertion, nor, if he did, does he have access to the technical details of the processing plant flow-sheets so that he would be in a position to question the assumptions made by the engineering firms retained by SCY and CLQ for their feasibility studies. While the technical reports contain lots of mumbo jumbo intelligible only to process engineers, the writers are engineers who know exactly what to leave out so that the competition does not learn any shortcuts.

Somebody like Robert Friedland understands all this, which is why he finessed Syerston out of a simple mining company with operations in a challenging location into an entity with process engineering capacity. While he can dismiss Tim Worstall as an ignoramus bleating into the blogosphere, it will be interesting to see how he deals with an institutional audience which by its nature bleats the language of sheep and will no doubt find validation in Worstall's warning.


 
 

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