Ryan Castilloux, founding director and market research analyst with Adamas Intelligence, is getting a lot more inquiries about scandium. Investors are asking: What is scandium? How is it used? What are its growth prospects? And how can I make money in scandium? In this interview with The Gold Report, Castilloux provides an overview of the scandium market and its publicly listed players with advanced-stage projects. With one tonne of scandium fetching $5 million or more, Castilloux says those with a bullish outlook on scandium will never find a better buyer's market.
The Gold Report: At the annual Prospectors and Developers Association of Canada (PDAC) convention in March, scandium was probably the most talked about metal after gold. Please give us an overview of the scandium market.
Ryan Castilloux: Scandium initially found applications in Soviet aircraft and weaponry during the Cold War. It wasn't until the 1990s that commercial uses for scandium emerged when a now-defunct Canadian company, Ashurst Technology, together with a Ukrainian partner, harvested scandium from Zhovti Vody, a historic iron-uranium mine in Ukraine. Ashurst conceived a number of novel uses for scandium-aluminum alloys, including baseball bats and bicycle frames. It developed patents for these applications, later licensing them to Easton Sports, now Performance Group Sports Ltd. (PSG:TSX), and others.
Ashurst's mining operation was short-lived but the commercial uses of scandium that it birthed live on, with a number of others following suit, including the use of scandium-aluminum alloys in golf clubs, ski poles and handgun frames. Since then, scandium has also found its way into electrolyte material in solid oxide fuel cells, an application that fuels a major portion of global scandium demand and will continue to for the foreseeable future.
Scandium is one of the most high-value elements on the periodic table. The value of just a few tonnes of scandium oxide would acquire almost any emerging scandium producer on the market. Projects that contain billions, even hundreds of billions, worth of scandium in the ground are owned by companies with market capitalizations less than $10 million ($10M). Anyone with a bullish outlook on scandium will never find a better buyer's market.
TGR: In the rare earth market, China is the gorilla in the room. What role does China play in the scandium market?
RC: China doesn't play as large of a role when it comes to scandium. Russia is really the pioneer in scandium production and end-use development. In the 1950s, scientists in the Soviet Union were the first to recognize the metal's remarkable properties and how it could enhance aluminum. A small concentration of scandium, often just 0.2% scandium, alloyed with aluminum enables that aluminum to be effectively welded to another piece of similar scandium-aluminum alloy, so you don't need heavy hardware to join pieces together. Key to making this happen is scandium's ability to inhibit grain regrowth within the alloy during welding, preserving the strength and integrity of the alloy at the weld.
From 1960 through 1990, Russia, Ukraine, Kazakhstan and Uzbekistan produced the vast majority of the world's scandium concentrates and other scandium compounds. Over this period the U.S. and Australia produced small amounts of scandium as a byproduct of fluorite, uranium and tungsten ore processing. In the 1980s China began extracting scandium from mine tailings and other existing production streams but I understand that output never exceeded 25–30 kilograms (25–30kg) per year for the two decades or more thereafter. From 1990 until now, scandium has been sourced primarily from mine tailings in former Soviet Union countries, as well as from previously produced master alloys, much of which was accumulated in the Cold War era.
TGR: What is the total global annual market for scandium?
RC: The estimates vary widely. The low-end estimate is that 5 tonnes per year of scandium oxide are produced, or harvested from stockpiles, and consumed; the high-end estimate is 15 tonnes. It's a really tiny market but one that has explosive potential.
TGR: Why is the market so small?
RC: The reason is twofold. The lack of consistent supply is one issue, but the other is price. Depending on the purity level and whether it's scandium oxide or scandium metal, you could be looking at $5–10M per tonne. That obviously precludes its use in a lot of applications that are cost sensitive. End users have been waiting for a consistent and elevated level of supply to come onstream and bring the price down.
TGR: So you're not going to get a scandium chassis in your Toyota Corolla.
RC: Not this year but automotive is a huge potential use for scandium, perhaps the greatest one on the horizon; that is a longer-term play. With the way things are heading, we could conceivably have 3-D printed engine blocks in the future that don't have heavy hardware weighing them down, but that's a topic for another day, or perhaps another decade.
TGR: What are some "primary" scandium producers with recent news?
RC: There are only a handful of advanced emerging primary scandium producers globally. Those companies all have projects in Australia; all are geologically similar in that the scandium is hosted in laterites. Scandium International Mining Corp.'s Nyngan is a preliminary economic assessment (PEA) stage project with a resource of 12 million tonnes (12 Mt) grading 401 parts per million (401 ppm) scandium oxide. The PEA for Nyngan proposes a 20-year initial mine life yielding around 36,000kg of scandium oxide annually at cash costs of AU$707/kg, excluding sustaining capital and royalties, from 75,000 tonnes per year run of mill.
It's a modest initial production scale with lots of room to ramp up as demand grows. The project has a lean preproduction capital requirement of AU$86M. In March Scandium Mining signed a memorandum of understanding with ALCERECO Inc., a Canadian specialty alloys manufacturer. As part of the agreement, Scandium Mining would supply ALCERECO with 7,500kg of scandium oxide annually. The companies also plan to work together to develop and market scandium-bearing alloys.