Scandium SC thread., page-12

@daniel86.

The scandium numbers being bandied about just don’t make sense to me.

I have read the statement below from a variety of articles promoting the global scandium opportunity.

“Despite the lack of known, stable supply, scientists and engineers have been working hard to develop new products incorporating the metal. Scandium’s potential in high-tech applications is well documented. Highlights of the metal’s properties include:

• Can be used in the creation of stronger, corrosion-resistant, heat-tolerant and weldable aluminium alloys for lightweight aircraft and automobiles.
• Outstanding electrical properties and heat resistance valuable for solid oxide fuel cells.
• Unique optical properties for high-intensity lamps.

Aluminium alloys present the largest of these potential scandium applications. If only a tiny fraction (0.1 percent) of the annual aluminium market absorbed scandium in alloy at a 0.5-percent level, it would represent 350 tonnes in annual global scandium demand. Many observers believe global demand could reach this level in a relatively short time.”

So, let’s run a few numbers as it relates to Cleanteq’s scandium play. Assume “relatively short time” is 25 years, i.e. the current Sunrise life of mine. Demand growth from 15 tpa (current guesstimates) to 350 tpa in 25 years means a compounded annual growth rate of around 14% - high in my opinion but accept for this exercise.

Other assumptions:

• Scandium production from Sunrise of 80 tpa as per DFS
• Sunrise market share = 10 tpa Sunrise supply ÷ 15 tpa current annual demand = 67% market share for Sunrise life of mine. So as scandium demand increases at 14% CAGR, sales volume from Sunrise increases to maintain 67% market share, i.e. not static at 10 tpa as per the DFS – wildly optimistic but accept for this exercise.

With these assumptions, after 25 years, Sunrise still has about 175 t scandium in inventory, not an ideal outcome. To reduce the scandium inventory to zero at the end of the mine’s life, average scandium production must reduce to 73 tpa, a modest 9% reduction from the DFS rate of production. No concern here but there doesn’t appear to be any scandium demand left to mop up the additional 80 tpa if Cleanteq production is doubled to 160 tpa, which is suggested in the DFS. So, in my mind, the basic (and I accept they are basic) supply-demand numbers do not support scandium production higher than 80 tpa, let alone 160 tpa.

Another obvious concern is that my calculations are massively stacked in Cleanteq’s favour with the assumption that Cleanteq maintains a 67% market share. Considering the plethora of scandium hopefuls, it’s not reasonable to assume a single company will maintain 67% market share. Let’s assume a more realistic market share of 25%.

Under this scenario, maintaining an 80 tpa production rate for 25 years builds an un-sold scandium inventory of over 1,300 t – at US$1,500/kg, nearly US$2B in potential revenue waiting for a buyer. Why would anyone do this? To deplete the inventory over life of mine, requires the design scandium production rate to drop to around 27 tpa.

I guess the point of my post is to highlight that none of the scandium metrics are making sense. I suspect this is true for most scandium hopefuls. The only way any of the numbers start to make sense is if I have seriously under-estimated the CAGR of 14%. Does anyone seriously believe that a CAGR > 14% is a reasonable prediction?

I'm still of the view that scandium for Sunrise is a sales gimmick - there's no market for it yet. Why do you think Cleanteq has dropped the scandium project for the nickel/cobalt project? In 10 or 20 years time when there is a market (?), then scandium may be of some value. Shareholders should only consider nickel and cobalt as the revenue generating commodities.

Will gladly take criticism from those with better data, assumptions and analysis.