Australian Mines Ltd – Can’t See This Working Myself

A little report in from the wilder shores of the junior metals market:

Australian Mines Ltd, a very junior gold and base metals explorer, is about to become the largest producer of scandium, a rare metal key to making better alloys for cars and planes.

A short time ago, its shares were 27% higher at $0.014. Before the announcement the company had a market capitalisation of just $12 million.

The Perth-based company today announced two deals: the 100% acquisition of the Flemington Scandium-Cobalt Project in NSW, one of the highest grade scandium deposits in the world; and up to 75% interest in the Sconi Scandium-Cobalt Project in Queensland, Australia’s largest, and one of the most advanced, scandium mining projects.

“Australian Mines plans to become the world’s largest scandium supplier producing from a primary deposit, resulting in cost-effective and reliable production,” says managing director Benjamin Bell.

I did some work 12, 14, years ago on one of those projects under a different owner and it’s nice to see that they’re still using my rhetoric.

The two projects have been bouncing around the junior mining companies and groupuscules for all that time. And they’ve both got the same basic problem. It’s is undoubtedly possible to extract scandium from either or both of these projects. It’s a piece of piss actually. But the economics are hard.

Current global market for scandium is some 15 tonnes a year. And there’re plenty of Chinese (and now Russian again) sources to supply that. OK, so, perhaps coming in with a more reliable supply and maybe lower operating costs would allow someone to clean up. Sure.

However, each of these projects needs to be producing in the 40 – 80 tonne a year range in order to be economic. That’s just a result of the technology and the deposit. So, either of the projects comes to market and they’re producing, at minimum, 3 x global consumption. And the way this all works they come to market with that in their first year too. To make the plant work you’ve got to be running it at full pelt.

Currently scandium oxide is around $2,000 a kg. The production costs from these projects will be in the $1,400 to $1,600 range. And again, they must run at full pelt to achieve that.

What happens to that $2,000 price when there’s 3 x global consumption on the market?

This isn’t a problem which putting both projects into one company solves either.

And this is the thing I pointed out to them that decade back as well. Incremental production might well work (although I wasn’t able to make my attempt do so). But the leap to volume, I just can’t see it working economically.

25 thoughts on “Australian Mines Ltd – Can’t See This Working Myself”

  1. Not really, no, as they’ve also got to pay back the capital cost of the plant (large). and they can’t ship the two ores to one plant either, it’s much too low value an ore to do that. Must be processed in situ.

  2. I ‘spose they could try to bury the excess somewhere else in case need takes off – then they’ve got a ready-made supply of easy-to-extract materials ready to go.

    But likely, if you dug deep enough, there’s a government subsidy being claimed in there somewhere and its that subsidy that is the actual business.

  3. I’m wondering. Is there a price point where all those super scandium alloys, Tim’s spoken of, become viable. And whether, from there, there’s economy of scale would reduce production costs/enable consumption increases.
    There must have been something similar happening when aluminium moved from being a precious metal to a cheap engineering metal

  4. Yes, absolutely there is. At $300 per kg (to stick with the same form of scandium as the prices above) the car makers would bite hands off to get the material. But that is markedly below production costs from the above ores and technology.

  5. @TimW
    Aerospace use for a higher price-point on the way down? Provide incentives to develop technology.

  6. Yep, aerospace use. Airbus was a customer of mine for exactly that reason. Built a whole wing out of the stuff to test. Desired price point at present is 10-20% below current market. But even if that ddid come to fruition as full production, it would still use less than the production of just one of these mines.

  7. As my one geologist friend said: You guys ruin these lovely deposits with your bloody spreadsheets!

    Q. What is the definition of good orebody?
    A. The number of bad managers it takes to screw it up.

  8. Is the venture you refer to as not working the scraping up of slag heaps in Eastern Europe? Didn’t think you could get a much cheaper source of ore than that; pre-mined, loose-ish, ready to process, owners might even pay you to take it away.

    What was the problem? Processing still didn’t pay for itself or did the EU regs screw it up?

  9. Processing didn’t pay. Would coproduce W, but initial estimates of W too high thus not economic. What’;s really fun is that this Oz ore, other people do process it for other materials (Ni). These deposits not rich enough to process for that. But it would be a lot cheaper to add an Sc capture circuit (one such mine actually has one designed in, just not used) to one extant.

    These people are mining for capital on the stock market, not mining for Sc in the ground.

  10. So it’s just bloody hard to separate from ore, but its properties mean that if it could be done a bit cheaper the demand would be huge.
    Sounds like Eldorado… just a little further to go, not far now…

  11. The real problem is that concentrations are always low. 1,000 ppm would be regarded as a very rich source indeed.

  12. isn’t it the rare earth syndrome? I know Sc isn’t a rare earth, but isn’t the problem that they are relatively abundant but the deposits are not concentrated in small areas; they hard to get at and they are bloody hard to split out?

  13. Not being economic as a by-product is pretty awful. So you need a tailings pile (“slag heap” is processed waste, not waste stuff sorted out before processing) that has enough Vanadium or whatever to justify refining, with a bit of Scandium in it. Is that right? Have you tried Siberia which has some of the richest tailing heaps from some of the least efficient processing in 1940-89?

  14. It appears to me the only way to make this work is to produce enough value from other metals in the ore to pay for the capital costs. Assuming we were to start using Th as fuel in MSRs could this be enough to make the venture profitable despite the low demand for Sc?

    If so I’d love to know the price points and necessary demand involved or where to find the information for myself.

  15. Sorry.. current price of Scandium is here

    Price : Scandium Oxide ≥ 99.95% – USD 7,200/KG
    Price : Scandium metal 99.99% – USD 18,000/KG

    Source : http://mineralprices.com/default.aspx#min

  16. Scandium is something of a specialty of mine,. There was a time when I was handling a good chunk of the world’s trade in it, although I’m semi-retired from the business now. I can get Sc2O3 from China at $850 a kg at present.

    Those published prices are less than accurate.

  17. Commodity prices change you know. This post is from October 2016. We’re now in August 2017. You know, commodity prices change over time?

  18. Sure, I even know which companies they are looking at to get those off take agreements. I assure you they’re not going to be at $5,000 or even $2,000 per kg. They’ll be able to sign all the MOUs they want, but not off take deals at those prices.

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