Ann: Nyngan Scandium Settlement , page-2

It is good to see the company respond publicly when asked pertinent questions requesting further information.

I still haven't got my head around the merits / pitfalls of this agreement so I would welcome other views.

1.) we have avoided legal action
2.) we could receive $2.6m
3.) if 2.) above occurs we have lost a rare ore resource & 1 of only 2 known large such ore resources in the world.
4.) we will receive royalties for a limited time if the purchaser ever developes that resource. NB: under the agreement there is no time frame determining when or if they must develope the resource. Bear in mind the purchaser owns another Scandium resource.

Comments:

2.) EMC do not appear too flush with cash themselves. Their last PPP was 30/7/12 & raised $700k, they issued convertible notes for $650k on 4/2/13 but have a loan of $3.0m (+ interest) to pay back in August this year.It will be interesting to see if they can raise the money.

3.) Sure we avoided legal action but we have lost a resource that in time (once MLM make the world aware of the new availabilty of Scandium)could, I believe, be sold for many times the value of the royalties we MAY receive. Management put themselves into a position whereby they had to do a deal under duress IMO.
Countering this viewpoint is the fact we may have another Nyngan at Syverston.

4.) Once MLM start producing, & they will be the first cab off the ranks, it will be interesting what that does to the price of Scandium. Let's assume a price range of $6k - $9k / kg. If EMC only get to, or fail to exceed production of ScO3 of 10tpa in the first 12 years of production our total royalties will be $12m - $18m.
Hopefully they will go in boots & all & really develope Nyngan. MLM are planning on a stage 1 production of 50-65tpa with a set-up cost likely to be north of $200m. Can EMC raise that sort of finance is the question? Bear in mind MLM already have a 5 year HOA (with ROR) with Bloom Technology for 30-60tpa.A major client taken out of the equation.
Maybe EMC would be better to just sit on Nyngan until the world is crying out for Scandium, sell it & flick JRV the minimum royalty payment. Hopefully, like Bullabulling, the royalty transfers with any on sale.It would still be a profitable on sale as 1.7% isn't going to kill the sale price.

JRV management seem to be determined to go the royalty route in terms of future income streams. This can be a rewarding way to go if :-
- the producing party is able to produce the required product in a significantly large volume
- the royalty % is financially worthwhile given the volumes likely to be produced
- the royalty timeframe produces long term revenue to the company.
I am not sure that 1 & 2 apply in this agreement.

My mind boggles as to what the management plan is for Syverston as that does look promising as well.

Look forward to other viewpoints.