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.