Small Cap Strategist is published by Crystal Equity Research an independent research resource on small capitalization stocks. Follow along as we discuss the most recent trends in the small-cap sector, investigate interesting companies and pan a few not-so-promising stocks.
Scandium Developers Hope to Turn Scarcity to Profits
rare earth elements have become increasingly important in our economy as
chemists and engineers have turned to these metals to enhance the performance
of metal alloys. There are seventeen of
these metals with tongue twister names like neodymium, yttrium and gadolinium.Some have begun to call them the technology
elements because they have become so vital for innovations in electronics,
aerospace and energy.
of the ‘light rare earth elements,’ scandium, does not seem to get as much
attention as the rest-at least from investors.It is a relatively soft and light element and
has a much higher melting point that aluminum.This makes it very interesting to aerospace engineers.
Scandia Alumina Stabilized Zirconia Material for Electrolyte
has winnowed its way into a range of both consumer and durable goods.Metals for baseball bats, golf clubs and
bicycle frames also get improved with small amounts of scandium.Another important application is high
intensity lights used in television and movie production.Scandium is also used to stabilize zirconia
in electrolyte for solid oxide fuel cells in alternative energy devices.However, most of the 5,000 kilograms that get
used each year end up in aluminum alloys for aerospace components.
supply situation for scandium has some interesting twists.Scandium is present in very small amounts in
over 800 minerals and is distributed all over the world.Yet most of the current supply originates as
a by-product of uranium and platinum mining operations.This provides about 2,000 kilograms per
year.The rest of demand had been met by
tapping into the ample stores of scandium held in Russia from leftovers of
military stockpiles of the former Soviet Union. Unfortunately, U.S.-Russia treaties have
restricted some of the scandium exports from Russia. At any rate, the stock piles are not being replenished and will eventually run out.
no dedicated Scandia mining operations prices could be considered somewhat
dear. A survey of sources advertising on the Internet produced a range of prices.High
purity scandium evaporation materials were quoted at $270 per gram or about
$122,500 per pound.Quotes from China
and Russia sources for scandium oxide were between $3,000 and $7,000 per
kilogram. High prices have precluded
some from using scandium.The U.S. Navy
has announced plans to use aluminum-scandium alloys for certain components in
ships.Even in the small quantities that
are needed to strengthen aluminum for metal components, demand from the Navy
could put even greater pressure on scandium oxide prices.
Scandium International Mining Corp.
(SCY: TSX or EMMCF:OTC/PK) is counting on the
scandium supply-demand dynamic to turn a profit from its scandium mining
project near Sydney, Australia. When
ready the company’s Nyngan Scandium Project as it is called could be the first
dedicated scandium mine.Granted increase
in supply could lead to a reduction in prices.However, that could also trigger increased use and the company could
benefit from higher quantities demanded at the lower prices.Based on recent progress it appears the
company could bring new scandium supplies to the market as early as 2017.
Scandium International is a publicly traded stock, even minority investors can
get a piece of the action.The stock is
traded on the Toronto Venture exchange and is quoted on the U.S. Pink
Sheets.The stock trades regularly on the
Toronto exchange, but is priced in pennies and has been stuck near a Canadian
dime per share for over a year.
company does file financial reports with the U.S. SEC as well as remaining
compliance with Canada’s SEDAR.In a
recent financial report the company provided projections of annual revenue of
$72.0 million on which they apparently expect to reap a whopping $47.7 million
in EBITDA.That would be about $0.24 per
share in earnings before capital costs and taxes.That seems aggressive, but if even half that
successful an investor could come out looking very good having bought a stock
the same financial report the company declared a $77.4 million price tag for
the Nyngan mine project.Unfortunately, there
was only $1.1 million in cash on the balance sheet at the end of September
2014.About half of this was made
available through private placements of common stock in May, June and July
is a second way to play scandium in the public equity market with an Australian
company called Metallica Minerals Ltd. (MLM:ASX; MLMZF:OTC/PK).Metallica also has its plans for scandium mining from proven
nickel-cobalt laterite deposits in northern Queensland.It too was aiming for first-to-the-market bragging
rights and has thrown up some buildings and equipment at the site.However, management has declared their
intention to find a joint venture partner for Queensland scandium project.Until then the project is on hold until a
partner and financing materialize.
already has made some progress in developing nickel, cobalt and bauxite
properties.However, its common stock
trades at AUS$0.05 (US$0.04), giving it a market capitalization of about AUS$50
million (US$41 million).For those
investors who have still not opted for electronic delivery of brokerage information,
their paper statements probably cost more than a share of Metallica.
appears scandium will become increasingly important to our economy even if it
is used a gram at a time.It can be very
good business supplying a hard-to-get product some customers are willing to pay
a good price.Neither Metallica nor
Scandium International operates from a position of great financial
strength.However, these companies both
have control over scandium-rich resources.Even if neither company cannot muster the capital to bring scandium
supplies to the market on its own, some sort of return could still be extracted
from the asset through sale or lease.
Neither the author
of the Small
Cap Strategist web log, Crystal Equity
Research nor its affiliates have a beneficial interest in the companies