Kaiser interview about Scandium in the Mining Report
This is just part of the interview that pertains to the Scandium story. It is recent on
May 13, 2014 and here is the text that i cut and paste:
TMR:Let's switch to scandium. What's the supply and demand picture going forward?
JK:Scandium is fairly abundant in the earth's crust but it does not concentrate well in the manner of less abundant metals such as lead. When it's alloyed at very low percentages, 0.5%, with aluminum, it makes the resulting alloy much stronger. It has an anti-corrosion characteristic, good conductivity and is much more heat resistant. If the $100 billion ($100B) aluminum industry had a reliable annual supply of hundreds of tonnes of scandium oxide, there would be no shortage of applications using aluminum scandium alloy, which end-users would rush to commercialize.
Unfortunately, the world only produces about 10 tonnes of scandium oxide annually from a hodgepodge of byproduct sources that are not scalable. Emerging byproduct sources include certain titanium dioxide processing operations in China. Another source is in situ leaching of uranium deposits in Russia and Kazahkstan, as well as nickel-cobalt operations in the Philippines. Tests are underway to see if scandium can be recovered through the remediation of red mud, the toxic waste created when bauxite is converted into alumina. The only primary scandium mine was the Zhovti Vody deposit in Ukraine, which was part of an iron mine in which the Soviets discovered 100 g/t scandium that they exploited to make aluminum scandium alloy for their MiG fighter jets. The supply situation of 10 ton per annum (10 tpa), even at a $2,000/kilogram ($2,000/kg) price, has an inconsequential value of $20–40M/year. But over the last six years scandium-enriched laterite deposits were discovered in Queensland and New South Wales, Australia at or near surface with grades of 200-500 g/t.
I have high hopes forEMC Metals Corp. (EMC:TSX). It is $3M away from owning the Nyngan deposit in New South Wales, which has a resource at $2,000/kg, $9B in situ value and a rock value of $800/ton on a 100% recovery basis. According to my speculative cash flow model of this system, a mine producing only 50 tonnes annually could be worth $200M. But there is a chicken-and-the-egg problem: If there is no supply, there is no demand, and nobody wants to put up capital for something that does not have an offtake agreement. The aluminum alloy industry isn't willing to help EMC. It wants to see the scandium first.
But Bloom Energy, based in Silicon Valley, has developed a solid oxide fuel cell that relies on scandium to reduce the temperature of its Bloom Boxes. This would reduce the high maintenance cost that prevented solid oxide fuel cells from commercialization as a way to convert natural gas into electricity much more efficiently than ordinary combustion.
Bloom reached an installed capacity of 100 megawatts (100 MW) last year. That would only have consumed about 7 tons of scandium oxide, but if its annual sales doubling trend continues, annual demand could be 20–40 tons scandium oxide by 2017. This could result in a marriage of necessity between EMC Metals and Bloom. If Nyngan can be in production by 2016-2017, it solves Bloom Energy's supply problem. I would also expect the aluminum industry to be interested.
Until very recently, EMC Metals has been an extremely risky pick because it had a market cap of only $5M but needed to raise $3M by June 24 to secure the Nyngan asset, on which it has done feasibility work since 2010. What changed during the past week was news from EMC Metals that it has made a new scandium oxide discovery not far from Nyngan in Australia with similar grades and a tonnage footprint sufficient to meet Bloom's needs for the next decade. The Honeybugle discovery can be fast-tracked in place of Nyngan, though it is still important for EMC Metals to acquire Nyngan. But with a market cap of about $15M reflecting both the value of Honeybugle and the option it has on 100% of Nyngan, it should be much easier for EMC to raise the $3M acquisition cost and another $3-4M needed to deliver a feasibility study by the end of 2015.
TMR:Is Bloom talking with EMC Metals about that funding?
JK:Bloom Energy has been in discussions with EMC Metals since 2010. The talks derailed in 2012 when a title dispute arose over EMC's acquisition of a stake in Nyngan, at which point, Bloom Energy did an offtake agreement withMetallica Minerals Ltd. (MLM:ASX)for Metallica's lower-grade Lucknow deposit in the amount of 20–30 tons scandium oxide and an option for another 30 tons. But Metallica could not scale down to just produce 20–30 tons. It tried to find another offtake partner for the surplus, but could not.
Bloom has done deals with Chinese titanium oxide producers, but the byproduct supplies are incremental and cannot be scaled up. If Bloom Energy is going to succeed, it needs a primary supply that can guarantee it 30–50 tpa scandium oxide.
I like the Bloom story because it's about making things more efficient and utilizing an energy source of which America has a growing supply, natural gas. Solid oxide fuel cells have a smaller carbon dioxide footprint than conventional combustion of natural gas. As Japan looks at ways to avoid nuclear energy, including the import of liquefied natural gas, it becomes an obvious and big market for Bloom's technology.
TMR:Could the other Australian scandium project be a partner for Bloom?
JK:Yes, indeed. In 2011,Platina Resources Ltd. (PGM:ASX), discovered the Owendale scandium deposit along with a platinum system. The platinum grades aren't high enough yet to justify development, but Platina raised money to extract a bulk sample for metallurgical studies on the Owendale scandium deposit, which is separate from the platinum zone. In about a year, we'll know more about the metallurgy.
As with rare earths, metallurgy and mineralogy are key factors. Owendale will have a grade close to 400 g/t. The question is whether the difference between 300 grams (300g) and 400g is wiped out because the ore has a higher content of magnesium and other acid-consuming elements. The companies have to assess the grade and whatever else scandium-enriched ore contains. The cost of getting rid of the other stuff may balance out the grade difference.
Nonetheless, this is a substantial resource. Now that Metallica has returned to the drawing board with Lucknow, EMC's Nyngan deposit has the first-mover advantage, which I doubt Platina's Owendale will overtake. Owendale will arrive to serve the alumnimum-scandium alloy market. The end users want to see multiple sources of ore-grade, primary scandium deposits so they are not reliant on a single source. The situation is different from rare earths in that no meaningful scandium supply currently exists, but there is a latent potential consumption of 500-1,000 tonnes scandium oxide annually by 2025. There is a race underway now to be the party that supplies Bloom's needs, but the very completion of this race will coax demand from the aluminum-scandium alloy sector, so that the runner-ups collect the same prize.
Those juniors with scandium deposits grading 300 g/t or better do not need to stab each other in the back, as rare earth juniors felt compelled to do because their goal was to each supply the world's incremental demand growth. It will be a while before a lot more deposits are found, even if New South Wales undergoes a scandium rush.
TMR:You consider investing in scandium an investment in changing the world. How will scandium make the world a better place?
JK:If airlines converted the skins of the planes and all the brackets into aluminum-scandium alloy, it would reduce the weight by 15–20%. That would greatly reduce fuel consumption. It might even persuade the airlines to shelve their very unwelcome plan to add a fifth seat to the middle row of their overseas aircraft.
Ford is producing aluminum-based pickup trucks to help it reach the 2025 target of 54-mile-per-gallon fuel efficiency. Apart from fiddling with the engine and aerodynamics, the only way you can do that is reducing the weight of the vehicle. Even electric cars would benefit from a lighter weight that does not sacrifice safety. Unlike other metals such as beryllium, which bestow remarkable properties to alloys, scandium is not toxic. It is not often that resource juniors can positively change the world by finding and developing a mine. Scandium is that opportunity.