ITEM 1. BUSINESS
General
We were incorporated on July 17, 2006, under the laws of British Columbia, Canada under the name Golden Predator Mines Inc. We were incorporated as a wholly owned subsidiary of Energy Metals Corp. for the purpose of holding precious metals and certain specialty metals assets. In order to focus on specialty metals, during February 2009 we transferred most of our precious mineral assets to our then wholly owned subsidiary Golden Predator Corp., and on March 6, 2009 we completed a spin-out of Golden Predator Corp. to our shareholders. Effective March 12, 2009, we changed our name to EMC Metals Corp. In order to reflect a new emphasis on mining for scandium minerals, effective November 19, 2014, we changed our name to Scandium International Mining Corp (“SCY” or the “Company”).
We are a reporting issuer in the Canadian Provinces of British Columbia, Alberta and Ontario and our common shares are listed for trading on the Toronto Stock Exchange under the trading symbol “SCY.”
Our head office is located at 1430 Greg Street, Suite 501, Sparks, Nevada 89431. The address of our registered office is 1200 - 750 West Pender Street, Vancouver, British Columbia, Canada, V6C 2T8.
Our most advanced project is the Nyngan Scandium Project, located in New South Wales, Australia (the “Nyngan Scandium Project”), on which we hold a mine lease grant and a development consent. We also hold an exploration license on a scandium mineral property located near Nyngan known as the “Honeybugle Scandium property” and a reservation on an exploration license on a scandium mineral property in Finland, known as the “Kiviniemi Scandium property.”
In addition to these scandium mining project interests, the Company is pursuing copper industry interest in our ion exchange (IX) and solvent extraction (SX) technology and knowhow, to recover high purity alumina (HPA), scandium, nickel, cobalt and other technology-driven metals from mineral processing solutions and other acidic waste streams in certain acid leach copper operations. This project effort is known as the “Critical Metals Recovery (CMR) Project,” with a specific focus on North American opportunities.
Our plan of operation for 2021 has been to obtain copper industry partners for our critical metals harvesting technology, and subsequently initiate discussions regarding offtake sales agreements with counterparties for those critical metals planned to be produced at participating separation sites. In June of 2021, we announced an LOI with a copper industry partner which established a development path for this strategy.
Our plan of operation for 2022 is to progress development of our CMR Project with our partner to the point where we can make joint decisions to build a production facility, and to pursue relevant sales agreements related to that contemplated production facility. We also intend to continue pursuit of scandium product customers for offtakes, either from our critical metals projects or from the Nyngan Scandium Project. We will also seek additional funding for corporate working capital and CMR project development costs in 2022.
Intercorporate Relationships
The chart below illustrates our corporate structure on December 31, 2021, including our subsidiaries, the jurisdictions of incorporation, and the percentage of voting securities held.
Pursuant to a share exchange agreement dated June 30, 2017, the Company acquired the remaining 20% interest in EMC Metals Australia Pty. Ltd. from Scandium Investments LLC (“SIL”). On completion of the share exchange, the Company issued an aggregate of 58,830,645 common shares to SIL and granted to SIL the right to nominate two individuals to the board of the Company for so long as SIL holds at least 15% of SCY’s issued and outstanding shares, and one director for so long as SIL holds at least 5% but less than 15% of SCY’s issued and outstanding shares.
Business Operations
Company, Projects and Markets Summary
We are a mineral exploration and development company that is primarily focused on the development of critical metals recovery projects from mine-based feedstock sources, principally in North America, and from mine-based scandium mineral resources, principally in Australia. The Company has previously also considered exploration and project development opportunities in rare earth minerals, and other specialty metals, specifically including nickel, cobalt, boron, manganese, tantalum, titanium, and zirconium. We have not commenced construction on of any of our mineral development projects, and as a result we are an exploration stage company.
Our most advanced project is the Nyngan Scandium Project, located in New South Wales, Australia (the “Nyngan Scandium Project”), on which we hold a mine lease grant, a development consent, and 100% of the mineral rights. The Company has completed a definitive feasibility study on the Nyngan Scandium Project dated May 4, 2016 (the “Feasibility Study” or “DFS”), which was prepared independently in accordance with NI 43-101. The results of the DFS include a 16.9 million tonne measured and indicated resource (grading 235ppm at a 100ppm cut-off) and a 1.43 million tonne mineral reserve (combined proven and probable), based on economics established in that study. The DFS was filed on May 6, 2016 and is available on SEDAR (www.sedar.com), on the Company’s website (www.scandiummining.com) and on the SEC’s website (www.sec.gov). A summary of the DFS is provided herein under “Item 2. Properties, Projects and Patents – Description of Mineral
Projects – Nyngan Scandium Project – Nyngan Feasibility Study.”
The Company also holds exploration licenses on two separate scandium-prospective properties:
| · | an exploration license on the Honeybugle Scandium property, located 24 kilometers from the Nyngan Scandium Project, granted in 2014; and |
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| · | an exploration license on the Kiviniemi Scandium Property a scandium-prospective property in central Finland, granted in 2018. |
In addition to these scandium mining project interests, the Company is pursuing copper industry interest in our ion exchange (“IX”) and solvent extraction (SX) technology and knowhow to recover scandium, nickel, cobalt, high purity alumina (“HPA”) and other technology-driven metals from acidic waste streams in certain acid leach copper operations. This project effort is known as the “Critical Metals Recovery (“CMR”) Project,” with a specific focus on North American copper mine opportunities.
During June 2021, the Company announced signing a Letter of Intent (“LOI”) with Nevada Gold Mines (“NGM”) to initiate a joint technical and economic feasibility program at NGM’s Phoenix Mine, near Battle Mountain, Nevada. The purpose of this joint development program is to confirm the economic and technical viability of a critical metals recovery project (the “Phoenix CMR Project”) at the mine site. Development programs began in late 2021, and HPA has become the primary metal focus of the effort. Development efforts will continue to consider nickel, cobalt and scandium harvesting opportunities at copper oxide mine sites other than the Phoenix Mine.
We are also pursuing industry interest in our technology and capability to produce high purity alumina (HPA) from various other aluminum-containing feedstocks, associated with non-mine suppliers, either embedded in existing industrial facilities or stand-alone.
SCY’s critical metals recovery programs, including scandium and now HPA, are supported by a series of patent-protected processes and pending protections, filing-date preserved. The Company has been granted a US Patent Office Patent for scandium recovery and has filed additional patent applications for other metals, each using either IX or SX (or both) technologies, based on feedstock sources that encompass and extend beyond copper oxide mine process solutions. The Company has also specifically filed additional patent applications on HPA processing technology in 2020 and 2021 which are directly applicable to our joint development program at the Phoenix Mine with NGM.
Corporate Objectives and Strategy
Our corporate focus is on the development of projects that enable the production and sale of critical metals from mine or mine-related sources. It is our intent to add a series of related metal recovery business opportunities alongside the Nyngan Scandium Project, which has otherwise been SCY’s primary project and product focus. This change reflects a marketplace priority for production of identified critical metals from new, local sources. That fact, along with the Company’s CMR capability, has broadened the immediate product opportunity for SCY. This strategy reflects SCY’s desire to build a suite of projects that can deliver products tailored directly to lithium-ion battery markets, and specifically to battery components that have application in the electric vehicle industry.
While the Nyngan Scandium Project remains the most advanced project in the Company portfolio as at the end of 2021, the Company anticipates this position will be replaced by a CMR Project by the end of 2022.
| · | For further information on the Nyngan Scandium Project, please refer to “Item 2. Properties, Projects and Patents - Description of Mineral Projects– Nyngan Scandium Project” and “Item 1A. Risk Factors.” |
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| · | For further information on our ion exchange and solvent extraction technology related to CMR, please refer to “Item 2.Properties, Projects and Patents - Description of Mineral Projects – Critical Metals Recovery Technology Program” and “Item 1A. Risk Factors.” |
Product Markets for Scandium
Scandium is the 31st most abundant element in the earth’s crust (average 33 ppm), which makes it more common than lead, mercury, and precious metals, but less common than copper. Scandium has characteristics that are similar to rare earth elements, and it is often classified as a member of that group, although it is technically a light transition metal. Scandium occurs in nature as an oxide, rarely occurs in concentrated quantities because it does not selectively combine with the common ore-forming anions and is very difficult to reduce to a pure metal state. Scandium is typically produced and sold as a powder, in oxide form, and known as scandium oxide, scandia or Sc2O3.,
Global annual production estimates of scandium range from 15 tonnes to 20 tonnes, but accurate statistics are not available due to the lack of public information from countries in which scandium is currently being produced, specifically China and Russia. Two relatively recent production sources have entered the market which may prove more transparent. The Taganito Nickel Mine in the Philippines (Sumitomo Metal Mining Co., Ltd.) announced plans to produce an oxide concentrate for upgrade, and operations have commenced. Recent announcements from Rio Tinto indicate their Quebec titanium feedstock producer, Rio Tinto Fer et Titane (RTFT), has undertaken small scale scandium production, beginning in 2021, with expansion capability planned for the future.
There is no reliable pricing data on global scandium oxide trading. Scandium oxide is typically traded in small quantities, between private parties, and pricing is not transparent to other buyers or sellers as there is no clearing facility as is more common with commercially traded metals and commodities. The U.S. Geological Survey (“USGS”) in its latest available report (dated January 2022) documents the 2021 price of scandium oxide (99.99% grade) at US$2,200/kg, indicating a significant reduction from the 2020 price estimate of US$3,800/kg. They also estimate the global sales of scandium oxide to be between 15-25 tpy, principally from China, Russia and the Philippines.
Prices vary, based on purity and quantity supplied. The USGS pricing generally reflects small volume sales, with larger quantities selling at lower prices, typically under US$2,000/kg. USGS reporting also acknowledged that ex-works China prices for 99.99% purity oxide were considerably lower than US-observed prices in 2021, based on underutilization of existing Chinese production capacity. Scandium oxide grades of 95-99% are generally considered suitable for manufacturing AlSc 2% master alloy, the form demanded for aluminum alloy applications
Scandium can also be effectively purchased in the form of aluminum-scandium (Al-Sc) master alloy, typically containing 2% scandium by weight. This product is the preferred form for manufacture of aluminum alloys containing scandium. The current January 2022 USGS report indicates the 2021 price for Al-Sc 2% master alloy at US$350/kg, slightly higher than the 2020 USGS average. Recent USGS estimated prices for Al-Sc 2% master alloy have also been high relative to commonly available prices ex-works China, which have trended under US$100/kg and are available in one tonne lots or greater today.
Principal uses for scandium are in high-strength aluminum alloys, high-intensity metal halide lamps, electronics, and laser research. Recently developed applications include welding wire and fuel cells which are expected to be in future demand. Approximately 15 different commercial aluminum-scandium alloys have been developed, and some of them are used for aerospace applications. In Europe and the U.S., scandium-containing alloys have been evaluated for use in structural parts in commercial airplanes and high stress parts in automobile engines and brake systems. Military and aerospace applications are known to be of interest, although with less specificity. The combination of high strength, weldability and ductility makes aluminum-scandium alloys potentially attractive replacements for existing aluminum alloys in a number of applications where improved alloy properties can add value to final products.
Product Markets for High Purity Alumina
Aluminum oxide, known as alumina ((Al2O3), is a plentiful and globally available commodity today. It is almost always a product of refining bauxite via the Bayer Process for use in the manufacture of aluminum metal and alloys and is available in varying grades. Smelter grade alumina (SGA) is typically traded at 99.0% purity, or slightly higher.
High purity alumina, or HPA, is a specialty grade product, and the designation typically begins at 99.9%, or 3N, and extends to 99.999% or higher. The process of aluminum feedstock purification to these very high purity standards, and the virtual elimination of certain deleterious elements, is challenging and costly. The volumes of HPA traded globally are a small fraction of the worldwide SGA marketplace, and represent a high value, highly demanded product in specialty applications, based on alumina’s hardness, non-conducting electrical properties, thermal protective properties, and chemically inert nature.
HPA is otherwise commonly known as synthetic sapphire. Traditional demand has come from manufacturers who utilize this form, with the largest individual application in lighting, specifically light-emitting diodes (LED’s). that are constructed on synthetic sapphire wafers. Synthetic sapphire is also used in some semiconductor applications, scratch-resistant lenses and glass products, most commonly in watches, phones and handheld electronic devices.
The emerging demand for HPA is in lithium-ion battery (LiB) applications. HPA is used as a ceramic coating on battery separators, typically made of specialty polyvinyl materials, to add both physical strength and protection, and to significantly improve thermal durability. HPA also shows promising applications as an addition to the material composition of both the anode and cathode in LiB’s, based on the same contributing characteristics.
HPA is typically offered in two forms: as very fine powders for coating applications, or in a pellet form required for the manufacture of boules that are the feedstock for wafer manufacture. Product pricing is highly influenced by product form and the ability to meet strict customer quality parameters, including specific contaminant values. The market segments into two product grade categories: grades of 4N or better and grades of 3N or lower, with marked pricing differences between these two segments. The global HPA market is estimated at approximately US$1Bn today, with the 4N+ segment representing over 60% of the total, on a value basis. Consumer trends show preference for higher purities (4N+), based on safety and performance, but cost and supply pressures in high growth areas will encourage exploration of 3N HPA alternatives.
Competitive Conditions
We compete with numerous other companies and individuals in the search for and the acquisition or control of attractive rare earth and specialty metals mineral properties and opportunities. Our ability to profitably build a portfolio of commercial operations in this market segment will depend on our acquisition success in finding and securing attractive positions for development, our ability to operate the plants and facilities we commit to construct, and our success in marketing the products we manufacture against competing producers in the marketplace.
In regard to our plan to produce scandium, there are a limited number of scandium producers presently. If we are successful at becoming a producer of scandium, our ability to be competitive will require that we establish a reliable supply of scandium to the market, delivered at purity levels demanded by various applications, and that our operating costs generate satisfactory margins, recognizing true prices will be set by customers and competitors in a market that is yet to mature.
Governmental Regulations and Environmental Laws
The development of any of our mining properties or CMR projects will require numerous local and national government approvals and environmental permits. For further information about governmental approvals and permitting requirements, please refer to “Item 1A. Risk Factors” and Nyngan Scandium Project -
Environmental Permitting/Development Consent/Mining Lease below for additional information.
Employees
As at January 1, 2022, we have 5 full and part time employees and 2 individuals working on a consulting basis. Our operations are managed by our officers with input from our directors. We engage geological, metallurgical, and engineering consultants from time to time as required to assist in evaluating our property interests and recommending and conducting work programs.
ITEM 2. PROPERTIES, PROJECTS AND PATENTS
Cautionary Note to U.S. Investors Regarding Resource Estimates
The Company’s technical disclosure in this section uses certain terms which are defined by the Canadian Institute of Mining, Metallurgy and Petroleum, and required to be disclosed in accordance with Canadian National Instrument 43-101 (“NI 43-101”). The disclosure standards in the United States Securities and Exchange Commission’s (the “SEC”) Subpart 1300 of Regulation S-K contain significant differences from the disclosure requirements of NI 43-101 and information presented in this section may not be comparable with United States standards in documents filed with the SEC. Accordingly, information concerning mineral deposits set forth in this section may not be comparable with information presented by companies using only United States standards in their public disclosures.
Description of Mineral Projects
Critical Metals Recovery Project
On May 13, 2020, we announced the Company’s pursuit of copper industry interest in both our ion exchange (IX) technology, select solvent exchange (SX) technology, and knowhow to recover scandium, high purity alumina, and potentially other critical metals from solvent extraction (SX) raffinate and other acidic waste streams in certain acid leach copper operations.
Recovery metals targets include cobalt, copper, nickel, scandium, and zinc, and possibly other metals and rare earth elements, plus high purity alumina (HPA), depending on recovery economics and project specifics. The suitability of our technologies varies with the specifics of individual orebodies, and associated recovery plant characteristics. Depending on specific project variables, and the value and volume of critical metals recovered, the end result economics are expected to be significant to the parties involved.
The copper industry is fully aware of the opportunity to harvest valuable metals from copper process waste streams, and the industry does so with significant success today in precious metals. Most specialty metals recovery work has historically been considered un-economic, based on effective recovery costs, and recovered metals pricing. The technology in this area has advanced, improving both operating costs and recoveries. New, technology-driven uses for critical metals are stressing supply channels. Traditional jurisdiction risk concerns are now multiplied by ethical sourcing issues, and long-term sustainability questions, all of which elevate the interest in broader, more localized sourcing. These issues are receiving heightened governmental and industry priority, and metals markets customers are now seeking and favoring new, economic, responsible solutions.
On the basis of this dynamic critical metals opportunity, and the fact that SCY has a significant capability to apply advanced mineral recovery technologies to the separation of critical metals from both ores and waste streams, the Company began a search for a North American copper industry host, in order to build a Critical Metals Recovery (CMR) Project. This effort immediately recognized an attractive economic potential for recovery of multiple metals, specifically metals used in lithium-ion battery manufacture. The potential new revenue stream of the combined metals residual does vary by orebody, and also by the specifics of the existing mineral processing systems in place.
In anticipation of securing a partner host with a copper oxide circuit that was suitable to develop this harvesting concept, the Company filed three US Patent Applications, seeking patent protection for its technical concepts. The work supporting these filings was based on bench scale testing with actual copper SX raffinate solutions. Those three filed patent applications were as follows:
| 1. | “Extraction of Scandium Values from Copper Leach Solutions”. Filed-2018, status-granted. |
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| 2. | “Recovery of Critical Metals from SX-EW Copper Raffinate and Other Solutions Derived from Leaching Ores with Sulfuric Acid”. Filed-2021, status-pending. |
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| 3. | “Process for the Preparation of High Purity Alumina”. Filed-2020, status-published/pending. |
The Company believes these extraction technologies can be demonstrated with a working and successful copper plant installation, with proven knowhow.
Phoenix CMR Project Initiated with Nevada Gold Mines
On June 28, 2021, the Company announced signing a Letter of Intent (“LOI”) with Nevada Gold Mines (“NGM”) to initiate a joint technical and economic feasibility program at NGM’s Phoenix Mine, near Battle Mountain, Nevada (the “Phoenix CMR Project”). The purpose of this joint development program is to confirm the economic and technical viability of a critical metals recovery project at the mine site. The LOI defines a detailed US$2.7 million spend program which includes bench test work, pilot plant testing, and feasibility study design work. The program is anticipated to require 15 months to complete. With program completion, the partners intend to take an investment decision on construction and operation of a plant facility to recover critical metals from mine solutions. The LOI also outlines key parameters of a partnership, including formation of a joint venture to hold the plant facility, and a 50:50 ownership in the recovery circuit asset.
On November 8, 2021, the Company announced the addition of HPA to the target metals list, based on work that confirmed the presence of significant aluminum content in both the Phoenix Mine copper oxide ore, and raffinate. This contained aluminum represents a suitable feedstock for high purity aluminum (HPA) product manufacture and is likely to be the most attractive metals product target for the Phoenix orebody. The June 2021 news release did not specifically identify HPA as a specific metals target, but it is now formally included as an important part of the technical development work program and expected to be the primary product of value to be recovered at Phoenix mine.
The Company has had a longstanding interest in oxide copper project sources for HPA manufacture. They tend to present aluminum-containing solutions in relatively pure form and at high enough grades to form an advantageous low-cost HPA feedstock. The harvesting of aluminum from Phoenix mine copper raffinate and similar projects at other mines will provide similar advantages to ongoing copper operations, including improved mine valuations, reserve life extensions, cleaner tailings, and potentially lower reclamation expenses. The environmental impact from this production process is minimal – no new mines are required.
The Phoenix Mine is a gold-copper producer owned and operated by Nevada Gold Mines, a joint venture between Barrick Gold Corporation (61.5%) and Newmont Corporation (38.5%). The mine produces a copper/gold concentrate, copper cathode and gold dore. Nevada Gold Mines assets in Nevada represent the single largest gold-producing complex in the world.
Nyngan Scandium Project
Property Description and Location
The Nyngan Scandium Project site is located approximately 450 kilometres northwest of Sydney, NSW, Australia and approximately 20 kilometres due west from the town of Nyngan, a rural town of approximately 2,900 people. The deposit is located 5 kilometres south of Miandetta, off the Barrier Highway that connects the towns of Nyngan and Cobar. Final license area access is reached by clay farm tracks. The general area can be characterized as flat agricultural land, used predominantly for wheat farming and livestock grazing. Infrastructure in the area is good, including available water and electric power. The property is classified as an Australia Property for financial statement segment information purposes.
The general location of the Nyngan Scandium Project is provided in Figure 1 below.
Figure 1: Location of Nyngan Scandium Project
Note: None of the Existing Mines identified in Figure 1 produce scandium.
The scandium resource is hosted within the lateritic zone of the Gilgai Intrusion, one of several Alaskan-type mafic and ultramafic bodies which intrude Cambrian-Ordovician metasediments collectively called the Girilambone Group. The laterite zone, locally up to 40 meters thick, is layered with hematitic clay at the surface followed by limonitic clay, saprolitic clay, weathered bedrock and finally fresh bedrock. The scandium mineralization is concentrated within the hematitic, limonitic, and saprolitic zones with values up to 350 ppm scandium.
Figure 2: Location of the Exploration Licenses and Mining Lease for the Nyngan Scandium Project
Mineral License Details
The scandium resource is held under Exploration License (EL) 8316 (Block Number 3132, units d, e, j, k and Block no. 3133, unit f) and EL 6096 (Block 3132, unit p, and Block 3133, units l, m, r and s); a total of ten (10) graticular units. The exploration licenses allow the license holder to conduct exploration on private land (with landowner consents and signed compensation agreements in place) and public lands not including wildlife reserves, heritage areas or National Parks. The scandium resource is fully enclosed on private agricultural land.
The Company’s Australian subsidiary holds legal title to specific surface and mineral exploration rights on the Nyngan Scandium Project. During 2017, an additional EL (EL 8448) was granted. Figure 2 provides details of the location of EL 8448 and the locations of Mining Lease 1792 and Mining Lease Application 531, both of which overlay the exploration license area.
The exploration licenses cover 29.25 square kilometers (2,925 hectares). The resource site is located at geographic coordinates MGA zone 55, GDA 94, Lat: - 31.5987, Long: 146.9827, Map Sheets 1:250k – Cobar (SH/55-14) and 1:100k Hermidale (8234).
The project surface rights (freehold) total 810 acres (370 hectares) on the portion of the exploration license area corresponding to the Mine Lease 1792 area. The freehold property boundaries are defined by standard land survey techniques undertaken by the Lands Department and currently presented in the form of Cadastral Deposited Plans (DP) and Lots. The land associated with the project rights is DP 752879, Lots 6 and 7 (Appendix 2, Lots 6 and 7 - Nyngan).
The Company is required to lodge individual A$10,000 environmental bonds with the NSW Mines Department for each license and must meet total minimum work requirements annually of approximately A$65,000, covering both licenses.
Royalties attached to the properties include a 1.5% Net Profits Interest royalty to private parties involved with the early exploration on the property, a 1.7% Net Smelter Returns Royalty payable to Jervois for 12 years after production commences, subject to terms in the settlement agreement, and a 0.7% royalty on gross mineral sales to a private investor. Another revenue royalty is payable to private interests of 0.2%, subject to a US$370k cap. A NSW minerals royalty will also be levied on the project, subject to negotiation, currently 4% on revenue.
Metallurgy Development
The Company has invested in and developed methodology for extracting scandium from the Nyngan property resource since 2010. A portion of the work done over this period has been superseded by work that followed, but subsequent test programs universally benefitted from prior efforts. In summary, the programs have been as follows:
| · | 2010 – The Company inherited work done on Nyngan from the previous property owner, and applied that work to a quick flowsheet and capital estimate done for management by Roberts & Schaefer of Salt Lake City, Utah; |
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| · | 2011 – The Company employed Hazen Research, Inc., of Golden, Colorado, USA (“Hazen”) to test acid baking techniques and solvent extraction (“SX”) processes with Nyngan resource material. The Company also employed SGS-Lakefield (Ontario) to test pressure acid leach techniques on Nyngan resource, as a replacement for or an enhancement to acid bake techniques done earlier in the year by Hazen; |
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| · | 2012 – The Company engaged SNC-Lavalin to do an economic study for management, utilizing an acid bake flowsheet and SX work from the Hazen test program; |
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| · | 2014 – The Company published a preliminary economic assessment (“PEA”) entitled NI 43-101F1 Technical Report on the Feasibility of the Nyngan Scandium Project, authored by Larpro Pty Ltd, utilizing both Hazen and SGS-Lakefield test work results; and |
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| · | 2015 – The Company amended and refiled the 2014 PEA Report as the “Amended Technical Report and Preliminary Economic Analysis on the Nyngan Scandium Project, NSW, Australia.” |
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| · | 2016 – The Company published an independently prepared definitive feasibility study (“DFS”) on the Nyngan Scandium Project. The technical report on the feasibility study entitled “Feasibility Study – Nyngan Scandium Project, Bogan Shire, NSW, Australia” was independently compiled pursuant to the requirements of NI 43-101 and incorporated the results of current and previous test work. |
Nyngan Definitive Feasibility Study
On April 18, 2016, the Company announced the results of an independent definitive feasibility study on the Nyngan Scandium Project. The technical report on the feasibility study entitled “Feasibility Study – Nyngan Scandium Project, Bogan Shire, NSW, Australia” is dated May 4, 2016, and was independently compiled pursuant to the requirements of NI 43-101 (the “Feasibility Study” or “DFS”). The report was filed on May 6, 2016 and is available on SEDAR (www.sedar.com), the Company’s website (www.scandiummining.com) and the SEC’s website (www.sec.gov). A full discussion on the technical report was provided in the Company’s Form 10Q for the quarterly period ending March 31, 2016, as filed with the SEC and on SEDAR on May 13, 2016.
The Feasibility Study concluded that the Nyngan Scandium Project has the potential to produce an average of 37,690 kilograms of scandium oxide (scandia) per year, at grades of 98.0%-99.8%, generating an after-tax cumulative cash flow over a 20 year project life of US$629 million, with an NPV10% of US$177 million. The average process plant feed grade over the 20 year project life is 409ppm of scandium.
The financial results of the Feasibility Study are based on a conventional flow sheet, employing continuous high pressure acid leach (HPAL) and solvent extraction (SX) techniques. The flow sheet was modeled and validated from METSIM modeling and considerable bench scale/pilot scale metallurgical test work utilising Nyngan resource material. A number of the key elements of this flowsheet work have been protected by the Company under US patent applications.
The Feasibility Study has been developed and compiled to an accuracy level of +15%/-5%, by a globally recognized engineering firm that has considerable expertise in laterite deposits and process facilities, as well as in smaller mining and processing projects, and has excellent familiarity with the Nyngan Scandium Project location and environment.
Nyngan Scandium Project Highlights
| · | Capital cost estimate for the project is US$87.1 million, |
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| · | Annual scandium oxide product volume averages 37,690 kg, over 20 years, |
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| · | Annual revenue of US$75.4 million (oxide price assumption of US$2,000/kg), |
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| · | Operating cost estimate for the project is US$557/kg scandium oxide, |
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| · | Project Constant Dollar NPV10% is US$177 million, (NPV8% is US$225 million), |
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| · | Project Constant Dollar IRR is 33.1%, |
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| · | Oxide product grades of 98-99.8%, as based on customer requirements, |
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| · | Project resource increases by 40% to 16.9 million tonnes, grading 235ppm Sc, at a 100ppm cut-off in the measured and indicated categories, and |
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| · | Project Reserve totalling 1.43 million tonnes, grading 409ppm Sc was established on part of the resource. |
The Feasibility Study consolidates a significant amount of metallurgical test work and prior study on the Nyngan Scandium Project. The metallurgical assumptions are supported by various bench and pilot scale independent test work programs that are consistent with known outcomes in other laterite resources. A number of the key elements of this flowsheet work have been protected by the Company under US Patent Applications.
The Feasibility Study delivered a positive result on the Nyngan Scandium Project, and recommends the Nyngan Scandium Project owners seek finance and proceed to construction, provided suitable offtake agreements with customers are arranged
Confirmatory Metallurgical Test Results
The final Nyngan Project DFS contained several recommended confirmatory process investigations be undertaken prior to commencing detailed engineering and construction. Specific study areas included pressure leach (“HPAL”), counter-current decant circuits (“CCD”), solvent extraction (“SX”), and oxalate precipitation, with specific work steps suggested in each area. The Company engaged Altrius Engineering Services (AES) of Brisbane, Australia to undertake these studies, which AES devised and supervised at the SGS laboratory in Perth, Australia and at the Nagrom laboratory in Brisbane, Australia.
On June 29, 2016, the Company announced the results of the subsequent AES metallurgical test work, which confirmed recoveries and efficiencies that either meet or exceed the parameters used in the DFS. Highlights of the independent testing were as follows:
| · | Pressure leach test work achieved 88% recoveries, from larger volume tests, |
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| · | Settling characteristics of leach discharge slurry show substantial improvement, |
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| · | Residue neutralization work meets or exceeds all environmental requirements as presented in the DFS and the environmental impact statement, |
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| · | Solvent extraction circuit optimization tests generated improved performance, exceeding 99% recovery in single pass systems, and |
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| · | Product finish circuits produced 99.8% scandium oxide, completing the recovery process from Nyngan ore to finished scandia product. |
Engineering, Procurement and Construction Management Contract
On May 30, 2017, the Company announced that its subsidiary EMC Metals Australia Pty. Ltd. signed an Engineering, Procurement and Construction Management ("EPCM") contract with Lycopodium Minerals Pty Ltd ("Lycopodium"), to build the Nyngan Scandium Project in New South Wales, Australia. The EPCM contract also provides for start-up and commissioning services.
The EPCM contract appoints Lycopodium (Brisbane, QLD, Australia) to manage all aspects of project construction. Lycopodium is the principal engineering firm involved with the DFS. Lycopodium's continued involvement in project construction and commissioning ensures valuable technical and management continuity for the project during the construction and start-up of the project.
On October 19, 2017, we announced that Lycopodium has been instructed to initiate critical path engineering for the Nyngan Scandium Project. Lycopodium commenced work on select critical path components for the project, including design and specification engineering on the high-pressure autoclave unit, associated flash and splash vessels and several specialized high-pressure input pumps. The engineering work was completed in 2018 and will enable final supplier selection, firm component pricing and delivery dates for these key process components.
Environmental Permitting/Development Consent/Mining Lease
On May 2, 2016, the Company announced the filing of an Environmental Impact Statement (“EIS”) with the New South Wales, Australia, Department of Planning and Environment, (the “Department”) in support of the planned development of the Nyngan Scandium Project. The EIS was prepared by R.W. Corkery & Co. Pty. Limited, on behalf of the Company’s subsidiary, EMC Metals Australia Pty. Ltd. (“EMC Australia”), to support an application for Development Consent for the Nyngan Scandium Project. The EIS is a complete document, including a Specialist Consultants Study Compendium, and was submitted to the Department on April 29, 2016.
EIS Highlights:
| · | The EIS finds residual environmental impacts represent negligible risk. |
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| · | The proposed development design achieves sustainable environmental outcomes. |
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| · | The EIS finds net-positive social and economic outcomes for the community. |
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| · | Nine independent environmental consulting groups conducted analysis over five years, and contributed report findings to the EIS. |
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| · | The Nyngan project development is estimated to contribute A$12.4M to the local and regional economies, and A$39M to the State and Federal economies, annually |
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| · | The EIS is fully aligned with the DFS and with a NSW Mining License Application for the Nyngan project. |
Conclusion statement in the EIS: “In light of the conclusions included throughout this Environmental Impact Statement, it is assessed that the Proposal could be constructed and operated in a manner that would satisfy all relevant statutory goals and criteria, environmental objectives and reasonable community expectations.”
EIS Discussion
The EIS is the foundation document submitted by a developer intending to build a mine facility in Australia. The Nyngan Scandium Project is considered a State Significant Project, in that capital cost exceeds A$30million, which means State agencies are designated to manage the investigation and approval process for granting a Development Consent from the Minister of Planning and Environment. This Department will manage the review of the Proposal through a number of State and local governmental agencies.
The EIS is a self-contained set of documents used to seek a Development Consent. It is however, supported in many ways by the recently completed DFS.
On November 10, 2016, the Company announced that the Development Consent had been granted. This Development Consent represents an approval to develop the Nyngan Scandium Project and is based on the EIS. The Development Consent follows an in-depth review of the EIS, the project plan, community impact studies, public EIS exhibition and commentary, and economic viability, and involved more than 12 specialized governmental agencies and groups.
Mining Lease
During July 2019, EMC Australia received notice of approval for its mining lease (ML) application. The ML (ML 1792) overlays select areas previously covered by exploration licenses and represents the final major development approval required from the NSW Government to begin construction on the project. The ML 1792 grant is issued for a period of 21 years and is based on the development plans and intent submitted in the ML application. The ML can be modified by NSW regulatory agencies, as requested by EMC Australia over time, to reflect changing operating conditions.
In addition to these two key governmental approvals, other required licenses and permits must be acquired but are considered routine and require only compliance with fixed standards and objective measurements. These remaining approvals include submittal of numerous plans and reports supporting compliance with Development Consent and Mining Lease. In addition, the following water, roads, dam and electrical access reviews and arrangements must be finalized:
| · | Water Supply Works and Use Approval and Water Access License, |
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| · | State and local approval for construction of the intersection of the Site Access Road and Gilgai Road, |
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| · | An approval from the NSW Dams Safety Committee for the design and construction of the Residue Storage Facility, and |
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| · | A high voltage connection agreement with Essential Energy. |
The 2019 ML 1792 grant covers 810 acres (370 hectares) of surface area fully owned by the Company, an area adequate to construct and operate a scandium mine of a scale outlined in the definitive Feasibility Study. The Company had originally filed a mining lease application (MLA 531) covering an area of 874 hectares, which was granted in 2017 as a mining lease (ML 1763), and later ruled invalid. At that time, it was unknown, to both the Department and the Company, that a local landowner had filed a prior, timely and valid objection to the granting of that mining lease. The reduction in area between the initial 2017 ML 1763 and the replacement 2019 ML 1792 represented acreage protested in an “Agricultural Land” objection lodged by a local landowner. The landowner holds freehold surface ownership over a portion of the original grant that was previously covered by the 2017 ML 1763.
On September 10, 2020, the Company announced receipt of a final determination letter from the Deputy Secretary, Department of Regional NSW, Division of Mining, Exploration and Geoscience resolving the outstanding objection filed by the landowner in 2016.
Written advice from the Department to the Company makes clear that all required independent investigative processes, and all affected party comment periods, are now completed, and the Department’s decision is final. There are further state courts of appeal available to the landowner, but the facts supporting this final decision are confirmed by the NSW Department of Primary Industry and follow governing law.
This Final Determination from the NSW Government will again allow all measured and indicated resource included in the Nyngan Scandium Project DFS to be reinstated in a new mining lease grant, for which the Company intends to file application.
Downstream Scandium Products
In February 2011, we announced results of a series of laboratory-scale tests investigating the production of aluminum-scandium master alloys directly from aluminum oxide and scandium oxide feed materials. The overall objective of this research was to demonstrate and commercialize the production of aluminum-scandium master alloy using impure scandium oxide as the scandium source, potentially significantly improving the economics of aluminum-scandium master alloy production. In 2014, the Company announced it applied for a US patent on master alloy production, which is still in the application phase.
During the 2015-2017 timeframe, we continued our own internal laboratory-scale investigations into the production of aluminum-scandium master alloys, furthering our understanding of commercial processes and achievable recoveries. We advanced our abilities to make a standard-grade 2% scandium master alloy product typical of commercially available products offered today.
On March 2, 2017, we announced the signing of a Memorandum of Understanding ("MOU") with Weston Aluminium Pty Ltd. ("Weston") of Chatswood, NSW, Australia. The MOU defines a cooperative commercial alliance to jointly develop the capability to manufacture aluminum-scandium master alloy. The intended outcome of this alliance will be to develop the capability to offer Nyngan Scandium Project aluminum alloy customers scandium in form of Al-Sc master alloy, should customers prefer that product form.
The MOU outlines steps to jointly establish the manufacturing parameters, metallurgical processes, and capital requirements to convert Nyngan Scandium Project scandium product into Master Alloy, at Weston's existing production site in NSW. The MOU does not include a binding contract with commercial terms at this stage, although the intent is to pursue the necessary technical elements to arrive at a commercial contract for conversion of scandium oxide to master alloy, and to do so prior to first mine production from the Nyngan Scandium Project.
On March 5, 2018, the Company announced that it had initiated a small-scale pilot program (4kg scale) at the Alcereco Inc. metallurgical research facilities in Kingston, Ontario, to confirm and refine previous lab-scale work on the manufacture of aluminum-scandium 2% master alloy (MA). The program advanced the process understanding for commercial scale upgrade of Nyngan scandium oxide product to master alloy product.
The 2018 pilot program consisted of five separate trials on two MA product types, production of MA in various forms, and dross analysis to ascertain scandium recoveries to product. The mass of master alloy and product variants produced in the program totaled approximately 20kg and was completed in December of 2018. The results of the program included the successful production of 2% grade MA, with recoveries of scandium to product of 85%.
A second phase of the small-scale pilot program was initiated in the first half of 2019, again at 4kg scale, building on the work done in phase I. The results of this second program included successful production of 2% grade MA, with improvements in form of rapid kinetics, and recoveries of scandium to product of +90%.
On March 5, 2018, the Company also announced that it filed for patent protection on certain process refinements for master alloy manufacture that it believes are novel methods, and also on certain product variants that it believes represent novel forms of introducing scandium more directly into aluminum alloys.
Master Alloy Capability Demonstrated
On February 24, 2020, the Company announced the completion of a three year, three stage program to demonstrate the capability to manufacture aluminum-scandium master alloy (Al-Sc2%), from scandium oxide, using a patent pending melt process involving aluminothermic reactions.
This master alloy capability will allow the Company to offer scandium product from the Nyngan Scandium Project in a form that is used directly by aluminum alloy manufacturers globally, either major integrated manufacturers or smaller wrought or casting alloy consumers.
Research Highlights:
| · | Program achieved full 2% target product quality requirement, |
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| · | Sc recoveries from oxide exceeded target, demonstrated in final tests, |
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| · | The microstructure and metal quality meet major alloy producers’ specifications, |
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| · | Rapid kinetics achieved, important for commercial viability, |
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| · | Individual testing batches done at 4kg scale, and |
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| · | Successful program testing forms a basis for a larger scale demonstration facility, supporting large scale samples required for industrial aluminum alloy trials. |
Focus on Aluminum Alloy Applications for Scandium Products
The Company is in the process of obtaining sales agreements for scandium products produced from our Nyngan Scandium Project. Our focus is on the use of scandium as an alloying ingredient in aluminum-based products. The specific scandium product forms we intend to sell from the Nyngan project include both scandium oxide (Sc2O3) and aluminum-scandium master alloys (Al-Sc 2%).
Scandium as an alloying agent in aluminum allows for aluminum metal products that are much stronger, more easily weldable and exhibit improved performance at higher temperatures than current aluminum-based materials. This also means lighter structures, lower manufacturing costs and improved performance in areas that aluminum alloys do not currently compete.
Aluminum Alloy Research Partner – Alcereco
In 2015, the Company entered into a memorandum of understanding (“MOU”) with Alcereco Inc. of Kingston, Ontario (“Alcereco”), forming a strategic alliance to develop markets and applications for aluminum alloys containing scandium. This MOU represented keen mutual interest in foundry-based test work on aluminum alloys containing scandium, based on understandings that Alcereco’s team had gained from prior work with Alcan Aluminum, and based on SCY’s twin goals of understanding and identifying quality applications for scandium, and also understanding the scandium value proposition for customers.
The Company subsequently sponsored considerable research work with the Alcereco team. This work has developed and documented the improvement in strength characteristics scandium can deliver to aluminum alloys without degrading other key properties. The Alcereco team has run multiple alloy mix programs where scandium loading is varied, in order to look at response to scandium additions on a cost/benefit basis. This work has been done in the context of industries and applications where these alloys are suitable for application today. The programs focused on 1000 series, 3000 Series, 5000 Series and 7000 Series Al-Sc alloys, and have served to make independent data and volume samples available for sales efforts.
Along with the signing of the MOU in 2015, the parties also signed an offtake agreement for scandium sales from the Nyngan Scandium Project. The 2015 offtake agreement specified product prices, annual delivery volumes, and timeframes for commencement of delivery of scandium oxide product. This offtake agreement expired in late 2017 and was renewed on similar price/volume terms, although the sale product was redefined to an aluminum-scandium 2% master alloy. Neither of these offtake agreements contained a mandatory annual minimum purchase volume of scandium product by Alcereco, nor any requirement for payment in lieu of purchase.
The 2017 Alcereco offtake agreement expired in December 2020 and was not renewed by the parties. Alcereco was seeking new company sponsorship at this time, was financially distressed, and the parties could see no benefit to renewal under those circumstances. Alcereco had notified SCY of a planned closure of operations in December, with future re-start possibilities unknown. Alcereco halted operations in late December, at which time all current programs with SCY were completed.
The results of our research work with Alcereco are positive, and consistent with the body of published literature available today on aluminum scandium alloys. We are observing noteworthy strengthening effects with scandium additions at and above 0.1%, and dramatic strengthening improvements with additions of 0.3%, while preserving or enhancing other alloy properties and characteristics. We have also demonstrated that alloy hardening process techniques can have significant effect on the final alloy properties, offering the opportunity to tune alloy characteristics to suit specific applications. These findings belong to SCY and can continue to be shared with select potential customers, as is deemed relevant to their specific areas of commercial interest.
Letters of Intent Signed with Aluminum Scandium Alloy Testing Partners
During 2018 and 2019, the Company announced that it entered into letter of intent (“LOI”) agreements with nine unrelated partnering entities who either manufactured parts from aluminum or consumed aluminum in the making of products. In each instance, we agreed to contribute scandium samples, either in form of scandium master alloy product, or aluminum-scandium alloy product, for trial testing by the partners in their downstream manufacturing applications. Each of the parties in receipt of the scandium samples agreed to report the general results of their testing programs, once completed. One of the agreements, specifically with Eck Industries, was extended in 2020 to a wider development program.
These formal LOI agreements, with various industry segment leaders, were designed to demonstrate how scandium performs in specific products, and in production-specific environments. Potential scandium customers insist on these sample testing opportunities, directly in their research facilities or on their shop floor, to ensure their full understanding of the impacts, benefits, and costing implications of introducing scandium into their traditional aluminum feedstocks.
The results of the nine programs varied, with some showing positive results and others either showing little advantage or not enough to offset cost impacts. Some outcomes were limited in significant ways by the parameters of the testing itself. Based on the reported testing results, all nine partners would need to enter into new testing agreements, with more compelling outcomes, in order to contemplate the introduction of scandium into the aluminum alloy contained in their products in the future.
Some further specifics:
Alloy Casting Partners. Four agreements were executed with the following entities: Eck Industries Inc. (Manitowoc, Wisconsin, USA), Grainger & Worrall Ltd., based in Shropshire, UK, Ohm & Häner Metallwerk GmbH & Co. GK, based in Olpe, Germany, and Bronze-Alu Group, based in La Couture-Boussey, northern France. Eck Industries is expected to continue their work with scandium (and cerium) additions in cast alloys, based on success in strength retention in high heat environments. The other groups did not see cost-offsetting benefits in existing alloys with existing customers.
Wrought Aluminum Manufacturing Partners. Two agreements were executed with the following entities:
Austal Ltd. headquartered in Henderson, Western Australia, and Gränges AB, based in Stockholm, Sweden. Results on marine alloys with Austal were encouraging, but further development of both plate and wire samples were deemed required to draw commercially favorable conclusions. Both corrosion and weld strength properties were pursued. Results on heat exchanger alloys with Gränges were ultimately less successful, based on the impacts of downstream manufacturing processes on scandium, and a challenging cost environment in the business sector.
Metal Forming Partners. Two agreements were executed with the following entities: Impression Technologies Ltd., based in Coventry, UK., and PAB Coventry Ltd., based in Coventry, UK. These entities were both interested in determining whether ITLdefine? sheet-forming technology would see advantage in shaping aluminum containing scandium. A brief testing regime indicated that the machines saw no improvement, and in fact had difficulty managing the properties in the AlSc samples provided.
3D Print Partners. Only one agreement was executed, with AML Technologies, based in Adelaide, Australia. SCY found significant challenge in sourcing quality AlSc wire for AML, and also for making suitable wire for this purpose ourselves. However, AML has had success with other wire sourcing partners, and ultimately received sample material in wire form from SCY. AML has not provided test results on SCY-supplied samples to date. Our independent testing results on these wire samples have been favorable.
While working with these nine industry partner groups during the 2018-2021 period, the Company also pursued independent work on aluminum-scandium alloys in two areas: welding/heat tolerance and electrical conductivity. Results of the work in both of these areas is incomplete but shows good promise in specific applications. SCY’s intent is to continue to pursue opportunities to test these specific property-driven applications for aluminum-scandium alloys with appropriate testing partners in the future, whether those partners and programs can be disclosed or not disclosed.
The Company’s objectives regarding all future sample and testing programs with industry participants remains unchanged – to build a market for scandium alloys and to secure long term customers for the purchase of scandium products supplied by SCY.
Use Of Scandium in Lithium-Ion Batteries
On September 24, 2020, the Company announced the filing of a provisional patent application with the US Patent Office seeking patent rights on various applications of scandium in lithium-ion batteries. The patent application covers a number of scandium enhancements, including doping potential for both anodes and cathodes, and for solid electrolytes.
Patent Application Highlights:
| · | US Patent Application filed for use of scandium in lithium-ion battery applications. |
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| · | Scandium doping applications are explained for anodes, cathodes and electrolytes. |
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| · | Scandium offers conductivity advantages as a dopant, over other options, and |
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| · | Scandium in other aluminum components offers numerous property improvements, including conductivity, strength and corrosion resistance. |
Rechargeable lithium-ion batteries (LIBs) are a staple of everyday life. The search for improved performance through design and materials advances is intense today. Considerable effort is being expended in developing next-generation materials for LIBs that will make batteries safer, lighter, more durable, faster to charge, more powerful, and more cost-effective. A sampling of some these efforts are as follows:
| · | Minimizing or removing cobalt from cathode materials, based on cost, supply and geographic sourcing issues. |
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| · | Improving the durability of liquid electrolytes with dopants, or substitution with safer and higher performing liquid or solid electrolyte systems. |
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| · | Designing for higher voltage potential by utilizing different anode or cathode materials. |
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| · | Determining combinations of metals that can better withstand harsh internal conditions. |
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| · | Scandium, along with other specialty metals, has a clear role to play in each of these areas. |
One particularly promising area for scandium contributions is in a lithium nickel manganese oxide (LNMO) battery. The cathode in this design substitutes manganese for cobalt and supports a higher nickel content as well. The substitution then delivers higher working potentials (voltage), higher energy densities, and faster charge/discharge rates, all of which offer the promise of improved battery performance.
Delivering on that promise requires a number of improvements, including employing a dopant for stabilization of the manganese in certain cathode compositions, potential stabilization of lithium titanate (LTO) anode materials as well, and use of dopants to improve the conductivity of both these anode and cathode materials. Conventional liquid electrolytes may see improved function and longevity with the improved cathode and anode conductivity. Scandium represents a suitable and effective dopant in each of these applications.
Solid state electrolytes (SSEs) represent another potential break-through improvement in LIBs. They will handle higher voltages, higher temperatures, greater power densities, are potentially easier to package, and are considered safer in use. Scandium represents a suitable and effective dopant in these applications, analogous to the use of scandium to stabilize solid zirconia electrolytes in solid oxide fuel cells. Recently technical papers (available upon request) covering the use of Lithium Super Ion Conductors (LiSICON) for SSEs have indicated that primary compounds containing scandium, such as Li3Sc2(PO4)3, LiScP2O7 and Li3Sc(BO3)2, LiScO2 as well as certain doped compounds such as Li1.33ScSi0.33P1.67O7, Li3.375Mg0.375Sc0.625(BO3)2, Li1.5Al0.33Sc0.17Ge1.5(PO4)3, etc. can provide desirable crystal structural frameworks for solid state electrolytes. Non-oxide LiSICON fast conductors have also been identified recently, such as some lithium cryolite types: Li3ScCl6, as well as its fluoride counterpart Li3ScF6.
Lithium-ion batteries employ aluminum in a number of areas, specifically in cathode structure, current connectors, and in general battery structure. Aluminum-scandium alloys represent an enhanced aluminum alloy option, based on their combination of conductivity and strength.
The intent of this SCY patent filing was to advise the battery industry that scandium is a prospective dopant choice for enhanced performance of LIBs, both under existing design parameters and in particular for certain next-gen lithium-ion batteries. We want to ensure that battery research and design groups consider scandium additions, amongst their various materials choices, as they race to build a better lithium-ion battery.
Honeybugle Scandium Property
On April 2, 2014, the Company announced that it had secured a 100% interest in an exploration license (EL 7977) covering 34.7 square kilometers in New South Wales (NSW), Australia referred to as the Honeybugle Scandium property. The license area is located approximately 24 kilometers west-southwest from SCY’s Nyngan Scandium Project. The license area covers part of the Honeybugle geologic complex and will carry that name in our future references to the property. The ground was released by the prior holder, and SCY intends to explore the property for scandium and other metals.
The Company does not consider the Honeybugle Scandium property to be a material property at this time. No resources or reserves are known to exist on the property. The property is classified as an Australian property for purposes of financial statement segment information.
The location of the Honeybugle Scandium property is provided below.
Figure 4. Location of Honeybugle Scandium property
Honeybugle Drill Results
On May 7, 2014, the Company announced completion of an initial program of 30 air core (AC) drill holes on the property, specifically at the Seaford anomaly, targeting scandium (Sc). Results on 13 of these holes are shown in detail in the table below. These holes suggest the potential for scandium mineralization on the property similar to our Nyngan Scandium Project.
Highlights of initial drilling program results are as follows:
| · | The highest 3-meter intercept graded 572 ppm scandium (hole EHAC 11); |
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| · | EHAC 11 also generated two additional high grade scandium intercepts, grading 510 ppm and 415 ppm, each over 3 meters; |
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| · | The program identified a 13-hole cluster which was of particular interest; |
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| · | Intercepts on these 13 holes averaged 270 ppm scandium over a total 273 meters at an average continuous thickness of 21 meters per hole, representing a total of 57% (354 meters) of total initial program drilling; |
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| · | The 13 holes produced 29 individual (3-meter) intercepts over 300 ppm, representing 31% of the mineralized intercepts in the 273 meters of interest; and |
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| · | This initial 30-hole AC exploratory drill program generated a total of 620 meters of scandium drill/assay results, over approximately 1 square kilometer on the property. |
The detail results of 13 holes in the initial drill program are as follows:
Table 7. Results of 13-Hole Initial Drill Program
Seaford is characterized by extensive outcrops of dry, iron-rich laterites, allowing for a particularly shallow drill program. Thirty (30) air core (AC) holes on nominal 100-meter spacing were planned, over an area of approximately 1 square kilometer. Four holes were halted in under 10 meters depth, based on thin laterite beds, low scandium grades, and shallow bedrock.
The 13 holes highlighted in the table are grouped together on either side of Coffills Lane and represent all of the drill locations where meaningful intercept thickness generated scandium grades exceeding 175 ppm. Some of these 13 holes showed significant scandium values on the immediate surface, and alternately, other holes exhibited favorable scandium grades that began at shallow depth. The highest-grade Sc sample was found in a 21-24 meter interval (572 ppm), although several holes produced better than 350 ppm Sc intercepts at depths of under 9 meters. The deepest hole (EHAC 7) was drilled to 57 meters, showing good scandium grades over a 12-meter horizon (245 ppm) near the bottom of the hole, from 39 to 51 meters depth. Higher scandium grades were associated with higher iron levels. Holes were drilled to a depth where they contacted the fresh ultramafic bedrock, which generally signaled the end of any scandium enrichment zones.
The drill plan divided Seaford into four sub-areas, 1-4, as highlighted Figure 5, below. Area 1 was relatively higher ground and therefore the least impacted by ground moisture. Consequently, this dryer area received the greatest attention, although that had been the general intention in the plan. Area 1 received 17 holes, with 13 presented in detail in the table above. Areas 2-4 were each intended as step-out areas that need to be further examined in the next program. The three step-out areas did not generate results of particular note, although hole locations were not optimal due to ground conditions and access.
Area 2 received 3 holes, 60 meters total, and generated Sc grades from 45-75 ppm,
Area 3 received 4 holes, 87 meters total, and generated Sc grades from 47-122 ppm,
Area 4 received 5 holes, 72 meters total, and generated Sc grades from 60-101 ppm, and
The average depth of all of these holes was 18 meters, with the deepest 30 meters.
Figure 5. Initial Drill Program Map
This 13-hole cluster (Area 1) was noted to be in a relatively thick laterite zone which was constrained to the west by contact with meta-sediments, to the east by fresh ultramafic bedrock, and to some extent in the north by a poor intersection result in hole 30. Area 1 remains somewhat open to the south, with the two southern-most holes (EHAC 9 and EHAC 29) generating some of the best scandium grade intercepts in the area.
The surface and near surface mineralization at this property is an advantage, both in locating areas of interest for future exploration work, and also because of extremely low overburden ratios. This particular characteristic for the Honeybugle Scandium property is different from our Nyngan Scandium Project, where mineralization is typically covered by 10-20 meters of barren alluvium.
Further drilling at Seaford is warranted, based on the results of this introductory and modest program, specifically to the north and south of the existing area 1 drill pattern, along with investigation and select drilling at the other three remaining anomalies on the property.
During 2018, we performed site work at the Honeybugle Scandium property to meet the expenditure commitment to maintain the exploration license. That 2018 work did not change the previous conclusions, as described above. Work is planned for 2022 on the property.
Qualified Person and Quality Assurance/Quality Control
John Thompson, B.E. (Mining); Vice President - Development at SCY is a qualified person as defined in NI 43-101 and has reviewed the technical information on this property. The drilling, sampling, packaging and transport of the drill samples was carried out to industry standards for QA/QC. SCY employed an independent local geology consulting and drill supervisory team, Rangott Mineral Exploration Pty. Ltd., (RME) of Orange, NSW, Australia, to manage the drill work on-site. Bulk samples of drill returns were collected at one metre intervals from a cyclone mounted on the drilling rig, and a separate three-tier riffle splitter was used on site to obtain 2.0-4.5kg composite samples collected over 3 metre intervals, for assay. Individual sample identifiers were cross-checked during the process. The assay samples were placed in sealed polyweave bags which remained in RME’s possession until the completion of the drilling program, at which time they were transported to RME’s office in Orange. There, the sequence of sample numbers was validated, and the assay samples were immediately submitted to Australian Laboratory Services’ (ALS’) laboratory in Orange. The remnant bulk samples, which were collected in sealed polythene bags, were transported by RME to a local storage unit at Orange, for long-term storage. ALS/Orange dried and weighed the samples and pulverized the entire sample to 85% passing 75 microns or better (technique PUL-21). These 50g sample bags of pulps were then sent to the ALS laboratory at Stafford in Brisbane, Queensland for analysis. ALS/Brisbane analyzed the pulps for scandium, nickel, cobalt, chromium, iron and magnesium, using Inductively Coupled Plasma Atomic Emission Spectroscopy (ICP-AES) after a four acid (total) digestion (technique ME-ICP61). The lower detection limit for scandium using this technique is 1ppm. For their internal quality control, ALS/Brisbane added 4 standard samples (for 20 repeat analyses), 10 blank samples and 16 duplicate samples to the batch. Please see news release see news release dated May 7, 2014, and available on www.sedar.com for further information on the Honeybugle drill results.
Kiviniemi Scandium Property (Eastern Finland Province, Finland)
On September 25, 2017, the Company announced that its wholly owned subsidiary company, Scandium International Mining Corp., Norway AS, was granted a reservation on an Exploration License for the Kiviniemi Scandium property in central Finland from the Finnish regulatory body governing mineral exploration and mining in Finland. The exploration license was subsequently granted during August 2018, and our exploration rights have been moved to SCY Exploration Finland Oy, a wholly owned Finnish subsidiary.
The Geological Survey of Finland (“GTK”) conducted airborne survey work on the area in 1986, conducted exploration drilling on the property in 2008-2010, and published those program results on their public GTK website in 2016.
The Company does not consider the Kiviniemi Scandium property to be a material property at this time. No NI 43-101 resources or reserves are known to exist on the property. The property is classified as the Finland property for purposes of financial statement segment information.
Highlights
| · | Kiviniemi property was previously identified for scandium and explored by GTK, |
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| · | Property is a high iron content, medium grade scandium target, located on surface, with on-site upgrade potential, |
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| · | Early resource upgrade work done for GTK promising, confirmed by SCY, |
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| · | Property is all-weather accessible, close to infrastructure, and |
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| · | Finland location is mining-friendly and ideally suited to EU customer markets. |
Property/Location
The Kiviniemi property is located in the municipality of Rautalampi, Eastern Finland Province, approximately 350km northeast of Helsinki, by road. The closest major city/airport is Kuopio (pop. 110,000), approximately 70km to the northeast of the property. The exploration target is located on a small portion of a family farm, partially cleared for farming. Most of the property is wooded, including the area where the mineralization has been located,
Exploration License
During August 2018, an exploration license for the Kiviniemi Scandium property was granted from the Finnish regulatory body governing mineral exploration and mining in Finland. The exploration area is approximately 24.6 hectares (0.25 square kilometer), identical to the historic GTK exploration license on the property, which expired in 2015. The mineralized area, as defined on GTK resource modeling maps, is approximately 25% of the total reservation. The exploration license requires us to report our exploration activities annually to Finland government agencies and to demonstrate in the annual reports that any exploration work has been effective and systematic.
Prior Exploration Work
GTK performed magnetic surveys on the general area in 1986, focused on copper/nickel/cobalt targets, and based on current mining activity in the area. That initial field work located a significant magnetic anomaly on the Kiviniemi property. In 2008, GTK initiated an exploration drilling program on the property, completing 4 diamond core holes in that first program phase, followed by a further 5 diamond holes in 2010, totaling 1,250 meters, at an average (angled) length of 139 meters, and a maximum vertical extension of 167 meters. The drill spacing varied from 50-200 meters, using a diamond drill size of 46mm (T56).
Four of the nine total holes drilled (approx. 850 meters) are in the mineralized area, with the remainder defining portions of the mag zone that did not contain scandium. The mag zone is generally very high in iron, ranging from about 20% to 35% Fe. The GTK published the results of the drill program assays, and other information on the geology and mineralization, on their website in 2016.
Geology of Resource Target. The host rock is very iron-rich, garnet-bearing fayalite ferro(monzo) diorite. The main minerals in the deposit include plagioclase, potassium feldspar, ferrohedenbergite (clinopyroxene), ferrohastingsite (amphibole), almandine garnet and fayalite. The principal scandium carrier minerals are ferrohastingsite (59 %) and ferrohedenbergite (40 %).
Resource Modeling
GTK completed and published a paper outlining property work including a 3D modeling and resource estimation on the project, in March 2016. The authors employed data from 6 holes and used an industry standard GEOVIA Surpac software to produce a geological 3D domain model, and inverse distance was run to estimate resource grades into the block model. The authors declined to specifically characterize the resource on the basis of limited holes and uneven spacing, describing their estimate as an “exploration potential measurement.” The authors estimated that another 500-700 meters of drilling (5-7 holes) would establish 50-meter centers on the target and allow a resource classification. The mineralized target remains open at depth. The authors did provide a table of results on tonnage estimates from their modeling work, at various cut off values, excerpts of which are presented below.
The Company believes the standards and controls employed by GTK are reliable and consistent with proper industry practice. However, the potential quantity and grade is conceptual in nature and there has been insufficient exploration to define a mineral resource and it is uncertain whether further exploration will result in a mineral resource. The Company considers the above estimates as historical in nature, and such estimates do not use the categories prescribed by NI 43-101. A qualified person (as defined in NI 43-101) has not done sufficient work to classify the historical estimate as a current mineral resource. The Company is not treating the historical estimate as a current mineral resource.
Metallurgical Upgrade Work
In 2010, GTK engaged their metallurgical research laboratory (at Outokumpu) to conduct standard upgrade testing on the drill core sample material, specifically magnetic gravity separations. The mag separation work suggested a scandium upgrade to approximately 346ppm, based on a resource material head grade of 160-200ppm, and a 72% scandium recovery.
In June 2017, SCY engaged FLSmidth (Salt Lake City, Utah) seeking to duplicate the earlier 2010 upgrade work and confirm the earlier results. The earlier results were generally confirmed, in that the 2017 work achieved magnetic separation upgrade assays of 286ppm on a resource material head grade of 186ppm. We supplied FLSmidth with approximately 16kg of resource material sourced from GTK, all samples from a single hole (P433-R3). FLSmidth also carried out scandium check assays on the individual drill hole samples provided by GTK, with good grade correlation to GTK data.
Kiviniemi Project Summary
The Kiviniemi property represents a medium grade scandium resource target that has remained unrecognized and overlooked by earlier exploration work, largely due to the absence of the more commonly sought-after minerals in the region, specifically copper, nickel and cobalt. We believe that Kiviniemi is Europe’s largest underdeveloped primary scandium mining resource.
The target has benefited significantly from valuable early exploration work by the GTK, which has advanced the property to a stage where successful metallurgical investigations may prove value that offsets grade concerns. SCY estimates roughly US$2M of work value has been directed at this property to date, including field work, drilling programs, assay work, overheads, and metallurgical upgrade studies, but firm numbers are not available.
We plan a limited drill program to augment the existing GTK data and provide more sample material for metallurgical test work programs to define economic site upgrade possibilities on the scandium mineralization observed to date.
Patent Program Summary- Applications and Grants
Patent Filings - Summary
The Company is in the process of establishing a significant portfolio of intellectual property through the filing of scandium related patents both in the US and abroad.
On 10/12/2021 the company was granted a patent for the recovery of scandium from nickel laterite ores.
To date, the following nine US patents have been granted to the Company:
11,142,809 | Systems and Processes for Recovering Scandium Values from Laterite Ores |
10,988,830 | Scandium Master Alloy Production |
10,988,828 | Extraction of Scandium Values from Copper Leach Solutions |
10,450,634 | Scandium-Containing Master Alloys and Method for Making The Same |
10,378,085 | Recovery Of Scandium Values Through Selective Precipitation of Hematite and Basic Iron Sulfates from Acid Leachates |
10,260,127 | Method For Recovering Scandium Values from Leach Solutions |
9,982,326 | Solvent Extraction of Scandium from Leach Solutions |
9,982,325 | Systems And Methodologies for Direct Acid Leaching of Scandium-Bearing Ores |
8,372,367 | System and Method for Recovering Boron Values from Plant Tailings |
Below is a list of thirteen US patents that have been filed, but have not been granted yet:
US20210371294-A1 | Process for the Preparation of High Purity Alumina* |
US202163038873 | Recovery of Critical Metals from SX-EW Copper Raffinate and Other Solutions Derived from Leaching Ores with Sulfuric Acid |
US20210347651 | Counter Current Process for Recovering High Purity Copper Sulfate Values from Low Grade Ores |
US20200001407 | Control Of Recrystallization In Cold-Rolled AlMn(Mg)ScZr Sheets For Brazing Applications |
US20210172041 | Byproduct Scandium Recovery from Low Grade Primary Metal Oxide Ores |
US20190218645 | Direct Scandium Alloying |
US20120305452 | Dry, Stackable Tailings and Methods for Producing the Same |
US20110298270 | In Situ Ore Leaching Using Freeze Barriers |
US2012005585l | Low Carbon Dioxide Footprint for Coal Liquefaction |
US20120204680 | System and Method for Recovery of Nickel Values from Nickel-Containing Ores |
US20120207656 | System and Method for Recovery of Scandium Values from Scandium-Containing Ores |
Provisional (2) | Titles not yet publicly disclosed |
*NOTE: This Final Patent Application was published by the US Patent office on December 2, 2021 (A1)
Patent Applications Discussion
| · | These patents and patent applications cover novel, unique flowsheet designs, applicable to both scandium extraction and other metals extraction. |
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| · | The patented designs on scandium are largely supported by test work done with Nyngan Scandium Project resource material and known design parameters. |
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| · | The scandium patents cover HPAL system material flows, solvent extraction (SX), ion exchange systems (“IX”), atmospheric tank and heap leaching systems and techniques, and processes for directly making select master alloys containing scandium; and |
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| · | A number of the scandium-focussed designs are incorporated as part of the DFS. |
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| · | Recovery of by-product scandium from certain other mineral resources is also covered. |
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| · | Recovery of base metals, such as copper, cobalt, nickel, manganese and aluminum from process solutions or waste products is also covered. |
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| · | Use of scandium in lithium-ion batteries is addressed. |
These patent applications, filed with the US Patent Office, protect the Company’s position and rights to the intellectual property (IP) contained and identified in the applications as of the date filed, within the worldwide jurisdiction limits of the US patent system. Review of patent applications by the US Patent Office takes time, but the initial dates of filing these patents define the basis of IP ownership claims, as is generally afforded U.S. patentholders.
The Company intends to utilize the IP contained in these process patents in the development of process flowsheets for recovery of scandium from its Nyngan Scandium Project, as well as its Honeybugle project and future by-product opportunities from leach solutions and/or waste products. The Company believes that patent protection of these specific, novel process designs will be granted.
Many of the basic design elements contemplated in the Nyngan Scandium Project flowsheet are commonly applied to other specialty metals, particularly nickel. However, the application of these basic design elements has not been commonly applied to scandium extraction from laterite resources, and there are enough intended and required operational differences in the application to permit the Company to patent-protect IP on those differences.
Our history of work on solution separation technologies using ion exchange and/or solvent extraction has widened our opportunity to pursue recovery of select elements of a growing list of critical metals, as defined by governments, concerned customers and industry groups, specifically prioritising lithium-ion battery metals. Our current high-priority CMR Project development program at the Phoenix Mine, focussed on aluminum harvesting and HPA manufacture from copper oxide raffinate solutions is a direct beneficiary. HPA patent application US20210371294-A1, filed in May 2021, is directly applicable to this project and currently defines our approach in development work with Nevada Gold Mines.
These patent claims are the result of ten years of metallurgical test work with independent resource laboratories and specific design work by Willem Duyvesteyn, the Company’s Chief Technology Officer. This work is ongoing. Patent protection on flowsheet intellectual property will serve to limit or prevent the unauthorized use of that IP by others without the Company’s consent. We believe these filings are an important action to protect the ownership of a Company asset, on behalf of all SCY shareholders.
Principal Projects - Planned Activities for 2022-2023
The following development steps are planned for the Company’s initiatives in 2022 and 2023:
| · | Continue and complete the 15-month Phoenix CMR Project development program, including test work, pilot plant studies, and high grade financial and costing studies required to take Final Investment Decision (FID). Work is scheduled to complete by end 2022. |
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| · | Investigate and identify suitable customers for products planned for CMR production, |
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| · | Seek additional copper industry host(s) for additional CMR Project developments. |
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| · | Seek possible non-mine partners or collaborations that will support an HPA project, specifically targeting opportunities in North America and Europe. |
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| · | With results of a successful CMR development program with NGM, raise capital for a Phoenix CMR Project, beginning in late 2022. |
With successful completion of the Phoenix CMR development program, and a mutual decision between NGM and SCY to build a critical metals recovery project at Phoenix Mine, the Company intends to commence construction of production facilities and make product available for sale in early 2024.
Project work on any potential stand-alone HPA project will follow a similar but independent course to the Phoenix CMR Project, and is subject to identifying suitable industry partners, in those individual situations where a partner is deemed necessary.