SCANDIUM INTERNATIONAL MINING CORP.
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the
transition period from _______________ to
_______________
000-54416
(Commission
File Number)
Scandium International Mining Corp.
(Exact
Name of Registrant as specified in its charter)
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British Columbia, Canada
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98-1009717
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(State
or other Jurisdiction of Incorporation or
organization)
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(I.R.S.
Employer
Identification
No.)
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1430 Greg Street, Suite 501
Sparks, Nevada
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89431
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Registrant’s
Telephone Number, including area code:
(775) 355-9500
Securities
registered pursuant to Section 12(b) of the Act:
None
Securities to be
registered pursuant to Section 12(g) of the
Act:
Common
Shares without par value
(Title
of class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No
[X]
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No
[X]
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T
(§
232.405 of this chapter)
during the preceding
12 months (or for such shorter period that the registrant was
required to submit such files). Yes [X] No [ ]
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company
or an emerging
growth company. See the definitions of “large
accelerated filer,” “accelerated filer”
“smaller reporting company” and
“emerging
growth company” in Rule 12b-2 of the Exchange Act (Check
one):
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Large
Accelerated Filer ☐
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Accelerated
Filer ☐
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Non-Accelerated
Filer ☐
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Smaller
Reporting Company☒
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|
Emerging
Growth Company ☐
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If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate
by check mark whether the registrant has filed a report on and
attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b))
by the registered public accounting firm that prepared or issued
its audit report. [ ]
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
State
the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at
which the common equity was sold, or the average bid and asked
price of such common equity, as of the last business day of the
registrant’s most recently completed second fiscal quarter:
$14,493,219 as at June 30, 2020.
Indicate
the number of shares outstanding of each of the registrant’s
classes of common equity, as of the latest practicable
date
:
316,172,595
common shares as at
February 25,
2021
.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the registrant's Proxy Statement for the Annual Meeting of
Stockholders are incorporated by reference into Part III of this
Form 10-K, which Proxy Statement is to be filed within 120 days
after the end of the registrant's fiscal year ended December 31,
2020.
TABLE OF CONTENTS
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Note about Forward-Looking Statements
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3
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Glossary of Terms
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3
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ITEM 1. BUSINESS
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5
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ITEM 1A. RISK FACTORS
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9
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ITEM 2.
PROPERTIES
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11
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ITEM 3. LEGAL PROCEEDINGS
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33
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ITEM 4. MINE SAFETY DISCLOSURES
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33
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| ITEM 5. MARKET FOR REGISTRANTS’ COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
33
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ITEM 6. SELECTED FINANCIAL DATA
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35
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| ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS |
36
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
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41
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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41
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| ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
42
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ITEM 9A. CONTROLS AND PROCEDURES
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42
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ITEM 9B. OTHER INFORMATION
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42
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ITEM 15. EXHIBITS, FINANCIAL STATEMENTS
SCHEDULES
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43
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P
ART I
Note about Forward-Looking Statements
Certain
statements contained in this annual report on Form 10-K and the
documents incorporated by reference herein constitute
"forward-looking statements.” Forward-looking statements may
include, but are not limited to, statements with respect to the
future price of commodities, the estimation of mineral resources,
the realization of mineral resource estimates, the timing and
amount of estimated future production, costs of production, capital
expenditures, costs and timing of the development of new deposits,
success of exploration activities, our ability to fund property
acquisition costs, our ability to reach targeted time frames for
establishing feasibility, permitting time lines, currency
fluctuations, requirements for additional capital, government
regulation of mining operations, environmental risks, unanticipated
reclamation expenses, title disputes or claims, our ability to
raise funds necessary for ongoing and planned expenditures and
operations, and regulatory approvals. In certain cases,
forward-looking statements can be identified by the use of words
such as "plans,” "expects" or "does not expect,” "is
expected,” "scheduled,” "estimates,” "intends,
"anticipates" or "believes,” or variations of such words and
phrases or state that certain actions, events or results
"may,” "could,” "would" or "will be taken,”
"occur" or "be achieved.” Forward-looking statements involve
known and unknown risks, uncertainties and other factors which may
cause our actual results, performance or achievements to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking
statements. Such factors may include, among others, risks related
to our joint venture operations; actual results of current
exploration activities or production technologies that we are
currently testing; actual results of reclamation activities; future
metal prices; accidents, labour disputes and other risks of the
mining industry; delays in obtaining governmental or regulatory
approvals or financing or in the completion of development
activities, as well as those factors discussed in the section
entitled "Risk Factors" and elsewhere in this Form 10-K. Although
we have attempted to identify important factors that could cause
actual actions, events or results to differ materially from those
described in forward looking statements, there may be other factors
that cause actions, events or results not to be as anticipated,
estimated or intended. There can be no assurance that
forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements.
Glossary of Terms
“Company,”
“SCY,” “we,” “us,”
“our” and similar words of similar meaning refer to
Scandium International Mining Corp.
$, A$,
C$
mean respectively,
United States dollars, Australian dollars and Canadian
dollars.
Alteration
Usually referring
to chemical reactions in a rock mass resulting from the passage of
hydrothermal fluids.
Assay
An analysis to
determine the presence, absence or quantity of one or more
components, elements or minerals.
Core
The long
cylindrical piece of a rock, up to several inches in diameter,
brought to the surface by Diamond drilling.
Diamond drilling
A drilling method
in which the cutting is done by abrasion using diamonds embedded in
a matrix rather than by percussion. The drill cuts a core of rock,
which is recovered in long cylindrical sections.
Fractures
Breaks in a rock,
usually due to intensive folding or faulting.
Grade
The
concentration of a valuable mineral within an Ore.
Hydrothermal
Hot fluids, usually
water, which may or may not carry metals and other compounds in
solution to the site of mineral deposition or wall rock
alteration.
Igneous
A rock formed by
the cooling of molten silicate material.
Intrusion
A general term for
a body of igneous rock formed below the surface of the
earth.
3
Kg
Kilogram which is
equivalent to approximately 2.20 pounds.
Km
Kilometer which is
equivalent to approximately 0.62 miles.
Mineralization
A term used to
describe the presence of minerals of possible economic value. Also
used to describe the process by which concentration of economic
minerals occurs.
Net Smelter
A share of the net
revenues generated from the sale of metal produced by a
mine.
Returns
Royalty
NI 43-101
National Instrument
43-101 –
Standards for
Disclosure of Mineral Projects
, being the regulation adopted
by Canadian securities regulators that governs the public
disclosure of technical and scientific information concerning a
mineral property
.
Ore
A
naturally occurring solid material from which a metal or valuable
mineral can be profitably extracted.
Outcrop
An exposure of rock
at the earth’s surface.
ppm
Parts per
million.
Pyrite
Iron sulphide
mineral. The most common and abundant sulphide mineral and often
found in association with copper and gold.
Qualified Person
Means a Qualified
Person as defined in National Instrument 43-101, including an
engineer or geoscientist in good standing with their professional
association, with at least five years of relevant
experience.
Quartz
The second most common rock forming mineral in
the earth’s crust. SiO
2.
Resource
Means any of a
measured, indicated or inferred resource as used in NI 43-101, and
having the following meanings:
“
measured resource
”
is that part of a Mineral Resource
for which quantity, grade or quality, densities, shape, and
physical characteristics are so well established that they can be
estimated with confidence sufficient to allow the appropriate
application of technical and economic parameters, to support
production planning and evaluation of the economic viability of the
deposit. The estimate is based on detailed and reliable
exploration, sampling and testing information gathered through
appropriate techniques from locations such as outcrops, trenches,
pits, workings and drill holes that are spaced closely enough to
confirm both geological and grade continuity.
“
indicated resource
” is that part
of a Mineral Resource for which quantity, grade or quality,
densities, shape and physical characteristics, can be estimated
with a level of confidence sufficient to allow the appropriate
application of technical and economic parameters, to support mine
planning and evaluation of the economic viability of the deposit.
The estimate is based on detailed and reliable exploration and
testing information gathered through appropriate techniques from
locations such as outcrops, trenches, pits, workings and drill
holes that are spaced closely enough for geological and grade
continuity to be reasonably assumed.
4
“
inferred resource
” is that part of
a Mineral Resource for which quantity and grade or quality can be
estimated on the basis of geological evidence and limited sampling
and reasonably assumed, but not verified, geological and grade
continuity. The estimate is based on limited information and
sampling gathered through appropriate techniques from locations
such as outcrops, trenches, pits, workings and drill
holes.
For the
purposes of the above a “
mineral resource
” means a
concentration or occurrence of diamonds, natural solid inorganic
material, or natural solid fossilized organic material including
base and precious metals, coal, and industrial minerals in or on
the Earth’s crust in such form and quantity and of such a
grade or quality that it has reasonable prospects for economic
extraction. The location, quantity, grade, geological
characteristics and continuity of a Mineral Resource are known,
estimated or interpreted from specific geological evidence and
knowledge.
(Please
refer to “
Item 2. Properties -
Cautionary Note to U.S. Investors Regarding Resource
Estimates
”
in regards to the use of the above terms in this
Form 10-K.)
Sulphide
A class of minerals
characterized by the linkage of sulphur with a metal (such as
Pyrite (FeS
2
)).
Tpd/Tpa
Tonnes per
day/tonnes per annum.
Tonne
A metric ton which
is equivalent to approximately 2,204 pounds.
Sediments
The debris
resulting from the weathering and breakup of rocks that have been
deposited by or carried by runoff, streams and rivers, or left over
from glacial erosion or sometimes from wind action.
Vein
A geological
feature comprised of minerals (usually dominated by quartz) that
are found filling openings in rocks created by faults or replacing
rocks on either side of faults or fractures.
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.
5
Our
primary development 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 nearby 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) technology and
knowhow to recover 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 the remainder of 2021 is to obtain copper
industry partners for our ion exchange (IX) technology, and to
subsequently secure offtake sales agreements with counterparties
for those critical metals planned to be produced at participating
separation sites. The Company continues to pursue scandium product
customers for offtakes, either from critical metals projects or
from the Nyngan Scandium Project product. We will seek additional
funding for corporate working capital in 2021, and also for
advanced development of an approved CMR Project, once that project
is identified.
Intercorporate Relationships
The
chart below illustrates our corporate structure on December 31,
2020, 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.
6
Business Operations
Company Summary
We are
a mineral exploration and development company that is primarily
focused on the development of scandium mineral resources, and
scandium end-use markets, through identification of value-added
applications for scandium in aluminum alloys and end products. The
Company has also considered exploration and project development
opportunities in rare earth minerals, and other specialty metals,
specifically including nickel, cobalt, boron, manganese, tantalum,
titanium, zirconium and high-purity alumina (HPA). We have not
commenced construction on of any of our scandium projects, and as a
result we are an exploration stage company.
Our
principal project is the Nyngan Scandium Project located in New
South Wales, Australia, in which we own 100% of the mineral rights.
The Company is in possession of both a development consent and a
mining lease grant on the property that corresponds to 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 – 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
●
an exploration
license on the Kiviniemi Scandium Property a scandium-prospective
property in central Finland, granted in 2018.
In
addition, the Company is currently pursuing copper industry
interest in our ion exchange (IX) technology and knowhow to recover
various critical metals (usually including scandium) from mineral
processing solutions and other acidic waste streams present in acid
leach copper operations. This effort has a principal focus on
opportunities in North America.
Corporate Objectives and Strategy
Our
corporate focus is in the development of projects that enable the
production and sale of scandium and scandium-based products. That
scandium focus has now been expanded to include other specialty
metals, identified by the US Department of Commerce in 2018 on a
list of 35 critical metals, which specifically includes scandium.
In this regard, the Company is pursuing various host project
opportunities that can produce a basket of metal products,
including scandium, along with other technology-driven critical
metals.
The
Nyngan Scandium Project remains the most advanced project in the
Company portfolio at this time, with permitting largely complete
and a published DFS on SEDAR. Subject to successful construction
financing and customer sales agreements, we intend to develop the
Nyngan Scandium Project for production and supply of scandium oxide
and scandium-content products. The Company has been successful in
developing capability to manufacture an aluminum-scandium master
alloy product, specifically for sale to aluminum alloy customers.
This additional product capability enhances the Company’s
ability to sell scandium-containing products to the aluminum
industry, and potentially generate additional margins in certain
markets. For further information on the Nyngan Scandium Project,
please refer to “
Item 2.
Properties
-
Description of
Mineral Projects
–
Nyngan Scandium Project” and “Item
1A. Risk Factors.”
The
Company is independently pursuing opportunities to deploy both ion
exchange (IX) and solvent extraction (SX) separation technologies
and knowhow to recover critical metals from mineral processing
solutions and acidic waste streams, commonly found in copper
leaching operations. The critical metals present are dependent on
the specific operation, and value depends on concentration, but
cobalt, nickel and scandium represent key targets for recovery.
This strategy depends on SCY’s ability to identify suitable
mine operations with acceptable economics and to establish hosting
arrangements with existing mine operators that will support
attractive project returns. For further information on our ion
exchange technology, please refer to “
Item 2. Properties
-
Description of Mineral Projects –
Critical Metals Recovery Technology Program” and “Item
1A. Risk Factors.”
7
Global Scandium Production and Market
Scandium
is the 31
st
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
scandium oxide (Sc
2
O
3
), more properly
known as scandia.
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. There are five known, primary production sources
globally today: stockpiles from the former Zhovti Voty uranium mine
in Ukraine, the rare earth mine at Bayan Obo in China, apatite
mines on the Kola Peninsula in Russia, by-product production from
titanium dioxide (TiO
2
) pigment refiners
in China, and recent start-up production of scandium oxide
concentrates from the Taganito Nickel Mine in the Philippines
(Sumitomo Metal Mining Co., Ltd.). Recent announcements from Rio
Tinto indicate their Quebec titanium feedstock producer, Rio Tinto
Fer et Titane (RTFT), is planning to initiate small scale scandium
production in 2021, with expansion capability planned for the
future.
There
is no reliable pricing data on global scandium oxide trading. The
U.S. Geological Survey (“USGS”) in its latest available
report (dated January 2021) documents the 2020 price of scandium
oxide (99.99% grade) at US$3,800/kg, indicating a reduction from
the 2019 price estimate of US$3,900/kg. Small quantities of
scandium oxide, suitable for laboratory investigations, are
currently offered on the internet by traders for prices at this
level. Larger quantities of oxide product at varying purities are
available at considerably lower prices, typically below
US$2,000/kg. Scandium oxide grades of 95% or greater are considered
commercially suitable, with 99.9% grade used for electrical
applications, and grades higher than 99.9% reserved for science and
new technical applications. Scandium oxide grades of 95-99% are
generally considered suitable for aluminum alloy
applications.
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. Prices do vary, based
on purity and quantity supplied. Small sale quantities tend to
command premium prices, and large quantities (over one tonne) are
simply not available to establish appropriate commercial
pricing.
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 latest available 2021 USGS report
indicates the 2020 price for Al-Sc 2% master alloy at US$340/kg,
somewhat higher than the 2019 USGS average. Recent USGS estimated
prices for Al-Sc 2% master alloy have also been high relative to
commonly available prices, 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.
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. Our ability to acquire
further properties will depend not only on our ability to operate
and develop our properties but also on our ability to select and
acquire suitable properties or prospects for development or mineral
exploration.
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 margins at
prices that will be set by customers and competitors in a market
yet to mature.
8
Governmental Regulations and Environmental Laws
The
development of any of our properties, and specifically the Nyngan
Scandium Project, 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”.
Employees
As at January 1, 2021, 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 1A. RISK FACTORS
In
addition to the factors discussed elsewhere in this Form 10-K, the
following are certain material risks and uncertainties that are
specific to our industry and properties that could materially
adversely affect our business, financial condition and results of
operations.
Risks Associated with the Nyngan Scandium Project
There are technical challenges to scandium production that may
render the Nyngan Scandium Project not economic.
The
economics of scandium recovery are known to be challenging. There
are very few facilities producing scandium and the existing
scandium producers are secretive in their techniques for recovery.
In addition, the recovery of scandium product from laterite
resources, such as are found on the Nyngan property, has not been
demonstrated at an operating facility. The Nyngan processing
facility design, if constructed, will be the first of its kind for
scandium production. These factors increase the possibility that we
will encounter unknown or unanticipated production and processing
risks. Should we encounter any of these risks, they could increase
the cost of production thereby reducing margins on the Nyngan
Scandium Project or rendering it uneconomic.
There is no guarantee that we will be able to finance the Nyngan
Scandium Project for production.
Any decision to proceed
with production on the Nyngan Scandium Project will require
significant production financing. Scandium projects are uncommon,
and economic and production uncertainty may limit our ability to
attract the required amount of capital to put the project into
production. If we are unable to source production financing on
commercially viable terms, we may not be able to proceed with the
project and may have to write off our investment in the
project.
We may not be successful in attracting copper industry interest in
our ion exchange (IX) technology
. Our technology is designed
to recover scandium, cobalt and other critical metals from solvent
extraction (SX) raffinate and other acidic waste streams in certain
acid leach copper operations. Access to these processing streams is
dependent on obtaining contractual relationships with existing
copper mine operations. If we are unable to locate any existing
copper mine operations willing to initiate access rights, then we
may not be able to proceed with a CMR Project.
If we are successful at achieving scandium production, we may have
difficulty selling scandium-containing products.
Scandium is characterized by
unreliable supply, resulting in limited development of markets for
scandium oxide. Markets may take longer to develop than
anticipated, and Nyngan and other potential scandium producers may
have to wait for products and applications to create adequate
demand. Certain applications may require lengthy certification
processes that could delay usage or acceptance. In addition,
certain scandium applications require very high purity scandium
product, which is much more difficult to produce than lower grade
product. If we commence production, our inability to supply
scandium in sufficient quantities, in a reliable and timely manner,
and in the correct quality, could reduce the demand for any
scandium produced from our projects and possibly render the project
uneconomic.
9
General Risks Associated with our Mining Activities and
Company
We may not receive permits necessary to proceed with the
development of a mining project.
The development of any of
our properties, including the Nyngan Scandium Project, will require
the acquisition and sustained possession of numerous local and
national government approvals and permits. Our ability to secure
all necessary permits required to develop any of our projects is
unknown until such permits are received. If we cannot obtain or
retain all necessary permits, the Nyngan Scandium Project cannot be
developed, and our investment in the project will potentially be
lost. While the critical permits for the Nyngan Scandium Project
have been received, other permits remain outstanding at this time
and continuing compliance with the terms of the permits is
required. Our future market value will likely be significantly
reduced to the extent one or more of our projects cannot proceed to
the development or production stage due to an inability to secure
all required permits.
Mineral Resource Estimates on our properties are subject to
uncertainty and may not reflect what may be economically
extracted.
Resource estimates
included for scandium on our Nyngan property are estimates only and
no assurances can be given that the estimated levels of scandium
minerals will actually be produced or that we will receive the
metal prices assumed in determining our resources. Such estimates
are expressions of judgment based on knowledge, mining experience,
analysis of drilling and exploration results and industry
practices. Estimates made at any given time may change
significantly when new information becomes available or when
parameters that were used for such estimates change. By their
nature resource estimates are imprecise and depend, to a certain
extent, upon statistical inferences which may ultimately prove
unreliable. Furthermore, market price fluctuations in scandium, as
well as increased capital or production costs or reduced recovery
rates, may limit our ability to establish reserves at some future
point on Nyngan, or on any of our properties. The extent to which
more Nyngan project resources may ultimately be reclassified as
proven or probable reserves is dependent upon the demonstration of
their profitable recovery. The evaluation of reserves or resources
is always influenced by economic and technological factors, which
may change over time. Accordingly, further current resource
estimates on our material properties may never be converted into
reserves, or be economically extracted, and we may have to write
off such properties or incur a loss on sale of our interest on such
properties, which will likely reduce the value of our
shares.
Our potential for a competitive advantage in specialty and rare
metals production depends on the availability of our technical
processing abilities, as currently provided by our Chief Technology
Officer.
We
are dependent upon the personal efforts and commitment of Willem
Duyvesteyn, our CTO, a director and significant shareholder of the
Company, for the continued development of new extractive
technologies related to scandium and other rare and specialty
metals production. The loss of the services of Mr. Duyvesteyn would
likely limit our ability to use or continue the development of such
technologies, which would remove the potential competitive and
economic benefit of such technologies.
Our operations are subject to losses due to exchange rate
fluctuation.
We
maintain accounts in Canadian, Australian, Euro and U.S. currency.
Our equity financings have to date been priced in Canadian dollars.
All of our material projects and non-cash assets are located
outside of both Canada and the USA, however, and require regular
currency conversions to local currencies where such projects and
assets are located. Our operations are accordingly subject to
foreign currency fluctuations and such fluctuations may materially
affect our financial position and results. We do not engage in
currency hedging activities.
We do not currently earn any revenue and without additional
funding, we will not be able to carry out our business plan, and if
we raise additional funding existing security holders may
experience dilution.
As an
exploration stage mining company, none of our principal properties
are in operation and we do not currently earn any revenue. In order
to continue our exploration activities and to meet our obligations
on the Nyngan Scandium Project, we will need to raise additional
funds. Recently, we have relied entirely on the sale of our
securities to raise funds for operations. Our ability to continue
to raise funds from the sale of our securities is subject to
significant uncertainty due to volatility in the mineral
exploration marketplace. If we are able to raise funds from the
sale of our securities, existing security holders may experience
significant dilution of their ownership interests and possibly to
the value of their existing securities.
Risks Related to the COVID-19 Pandemic.
The current outbreak of the novel coronavirus
(COVID-19) that was first reported from Wuhan, China in December
2019, and the spread of this virus could continue to have a
material adverse effect on global economic conditions which may
adversely impact our business. The World Health Organization
(WHO) declared a global emergency on January 30, 2020 with respect
to the outbreak and characterized it as a pandemic on March 11,
2020. Cases of COVID-19 have been reported in 223 countries, areas
or territories as of February 17, 2021, including China, Australia,
the United States, Canada and countries in the European Union. The
extent to which the outbreak impacts the Company’s business
will depend on future developments, which are highly uncertain and
cannot be predicted, including new information which may emerge
concerning the severity of the coronavirus and the actions to
contain the outbreak or treat its impact, among
others. Moreover, the actual and threatened spread of the
coronavirus globally could also have a material adverse effect on
the regional economies in which the Company intends to operate,
continue to negatively impact stock markets and adversely impact
the Company’s ability to raise capital. Any of these
developments, and others, could have a material adverse effect on
the Company’s business.
In
particular, the COVID-19 pandemic has resulted in restrictions
including quarantines, closures, cancellations and travel
restrictions, which may have a material adverse effect on the
Company’s business including delays or disruptions in
regulatory submissions, exploration activities on the Nyngan
Scandium Project and CMR Project development.
10
Cautionary Note to U.S. Investors Regarding Resource
Estimates
Certain terms used in this section are those used in accordance
with the requirements of the securities laws in effect in Canada,
which differ from the requirements of U.S. securities laws.
Canadian requirements, including NI 43-101, differ significantly
from the requirements of the U.S. Securities and Exchange
Commission (the “SEC”), and resource information
contained herein may not be comparable to similar information
disclosed by U.S. companies.
In particular, and without limiting the generality of the
foregoing, the term “resource” does not equate to the
term “reserves.” The requirements of NI 43-101 for
identification of “reserves” are not the same as those
of the SEC, and reserves reported in compliance with NI 43-101 may
not qualify as “reserves” under SEC standards. Under
U.S. standards, mineralization may not be classified as a
“reserve” unless the determination has been made that
the mineralization could be economically and legally produced or
extracted at the time the reserve determination is
made.
The SEC’s disclosure standards normally do not recognize
information concerning “measured mineral resources.”
“indicated mineral resources” or “inferred
mineral resources” or other descriptions of the amount of
mineralization in mineral deposits that do not constitute
“reserves” by U.S. standards, in documents filed with
the SEC. In addition, resources that are classified as
“inferred mineral resources” have a great amount of
uncertainty as to their existence and great uncertainty as to their
economic and legal feasibility. It cannot be assumed that all or
any part of an “inferred mineral resource” will ever be
upgraded to a higher category. Under Canadian rules, estimated
“inferred mineral resources” may not generally form the
basis of feasibility or pre-feasibility studies. Investors are
cautioned not to assume that all or any part of an “inferred
mineral resource” exists or is economically or legally
mineable.
Disclosure of “contained ounces” in a resource is
permitted disclosure under Canadian regulations, however, the SEC
normally only permits issuers to report mineralization that does
not constitute “reserves” by SEC standards as in-place
tonnage and grade without reference to unit measures.
Accordingly, information concerning mineral deposits set forth
herein may not be comparable with information presented by
companies using only U.S. standards in their public
disclosure.
Description of Mineral Projects
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 town
of Nyngan to the town of Cobar. The license area can be reached via
the paved Barrier Highway, which allows year-round access, but
final access to the site itself is reached by clay farm tracks. The
general area can be characterized as flat countryside and is
classified as agricultural land, used predominantly for wheat
farming and livestock grazing. Infrastructure in the area is good,
with available water and electric power in close proximity to the
property boundaries.
The
Nyngan property is classified as an Australia Property
for purposes of financial statement segment
information.
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.
11
The
general location of the Nyngan Scandium Project is provided in
Figure 1 below. The specific location of the exploration licenses
that we may earn an interest in are provided in Figure 2
below.
Figure 1: Location of Nyngan Scandium Project
Note:
None of the Existing Mines identified in Figure 1 produce
scandium.
12
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 both the
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.
13
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;
●
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;
●
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;
●
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
●
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
.”
●
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 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.
14
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 NPV
10%
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,
●
Annual scandium
oxide product volume averages 37,690 kg, over 20
years,
●
Annual revenue of
US$75.4 million (oxide price assumption of
US$2,000/kg),
●
Operating cost
estimate for the project is US$557/kg scandium oxide,
●
Project Constant
Dollar NPV10% is US$177 million, (NPV8% is US$225
million),
●
Project Constant
Dollar IRR is 33.1%,
●
Oxide product
grades of 98-99.8%, as based on customer requirements,
●
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
●
Project Reserve
totalling 1.43 million tonnes, grading 409ppm Sc was established on
part of the resource.
DFS Conclusions and Recommendations
The
production assumptions in the Feasibility Study are backed by solid
independent flow sheet test work on the planned process for
scandium recovery. The Feasibility Study consolidates a significant
amount of metallurgical test work and prior study on the Nyngan
Scandium Project, including important test work results completed
since the PEA was generated in 2014. The entire body of work
demonstrates a viable, conventional process flow sheet utilizing a
continuous-system HPAL leaching process, and good metallurgical
recoveries of scandium from the resource. 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 continuous autoclave configuration, as
opposed to batch systems explored in previous flow sheets, is also
a more conventional and current design choice.
The
level of accuracy established in the Feasibility Study
substantially reduces the uncertainty levels inherent in earlier
studies, specifically the PEA. The greater confidence intervals
around the Feasibility Study were achieved by reliance on
significant project engineering work, a capital and operating cost
estimate supported by detailed requirements and vendor pricing,
plus one conditional offtake agreement and an independent marketing
assessment, both supportive of the marketing assumptions for the
business.
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. Recommendations were made
therein for additional immediate work, notably to win additional
offtake agreements with customers, complete some optimizing flow
sheet studies, and to initiate as early as possible detailed
engineering required on certain long-lead capital items. The
Company intends to act on these recommendations as financing
permits.
15
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,
●
Settling
characteristics of leach discharge slurry show substantial
improvement,
●
Residue
neutralization work meets or exceeds all environmental requirements
as presented in the DFS and the environmental impact
statement,
●
Solvent extraction
circuit optimization tests generated improved performance,
exceeding 99% recovery in single pass systems, and
●
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.
●
The proposed
development design achieves sustainable environmental
outcomes.
●
The EIS finds
net-positive social and economic outcomes for the
community.
●
Nine independent
environmental consulting groups conducted analysis over five years,
and contributed report findings to the EIS.
●
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
●
The EIS is fully
aligned with the DFS and with a NSW Mining License Application for
the Nyngan project.
16
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,
●
State and local
approval for construction of the intersection of the Site Access
Road and Gilgai Road,
●
An approval from
the NSW Dams Safety Committee for the design and construction of
the Residue Storage Facility, and
●
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.
17
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.
Patent Application Filings
Patent Application Filings
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.
To
date, the following seven US patents have been granted to the
Company:
|
TBD
10,450,634
|
Scandium
Master Alloy Production
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
8,372,367
|
Systems
And Methodologies For Direct Acid Leaching Of Scandium-Bearing
Ores
System
and Method for Recovering Boron Values from Plant
Tailings
|
18
Below
is a list of thirteen US patents that have been filed, but have not
been granted yet:
|
US20200001407
|
Control Of Recrystallization In Cold-Rolled AlMn(Mg)ScZr Sheets For
Brazing Applications
|
|
US20190161827
|
Extraction Of Scandium Values From Copper Leach
Solutions
|
|
US20160289795
|
Systems and Processes for Recovering Scandium Values From Laterite
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
(4)
|
Titles
not yet publicly disclosed
|
Patent Applications Discussion:
●
These patents and
patent applications cover novel, unique flowsheet designs,
applicable to both scandium extraction and other metals
extraction;
●
The patented
designs on scandium are largely supported by test work done with
Nyngan Scandium Project resource material and known design
parameters;
●
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
●
A number of the
scandium-focussed designs are incorporated as part of the
DFS.
●
Recovery by-product
scandium from certain other mineral resources is also
covered.
●
Recovery of base
metals, such as copper, cobalt, nickel, manganese and aluminum from
process solutions or waste products is also covered.
●
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 by the US Patent Office will take further time, but
the 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 potentially from 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.
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.
19
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, on 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.
20
Research
Highlights:
●
Program achieved
full 2% target product quality requirement,
●
Sc recoveries from
oxide exceeded target, demonstrated in final tests,
●
The microstructure
and metal quality meet major alloy producers’
specifications,
●
Rapid kinetics
achieved, important for commercial viability,
●
Individual testing
batches done at 4kg scale, and
●
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
(Sc
2
O
3
) 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.
21
Letters of Intent with Potential Customers
During
2018 and 2019, the Company announced that it entered into letter of
intent (“LOI”) agreements with nine unrelated
partnering entities. In each LOI, we have 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
These
formal LOI sampling agreements, with distinct industry segment
leaders, represent a key marketing program for the Company,
demonstrating how scandium will perform 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 and benefits of introducing scandium
into their traditional aluminum feedstocks.
The
partnering entities in these LOI agreements are set out
below:
Austal
Ltd. (“Austal”), headquartered in Henderson, Western
Australia, (Australia). Austal is a public corporation, listed on
the Australian Stock Exchange (ASB.ASX), with shipbuilding
facilities in Perth, Australia, Mobile, Alabama (USA), Vung Tau,
Vietnam and Balamban, Cebu (Philippines). The company is a
recognized world leader in the design and construction of large
aluminum commercial and defense vessels.
Impression
Technologies Ltd. (“ITL”), based in Coventry, UK. ITL
is a privately held technology company, developing and licensing
its advanced aluminum forming technology, Hot Form Quench
(“HFQ®”), to automotive, aerospace, rail and
electronics industries, globally.
PAB
Coventry Ltd. (“PAB”), based in Coventry, UK. PAB is a
privately held manufacturing and prototyping company offering
specialty metal parts and design capabilities, serving the
automotive, aerospace, defense and HVAC industries.
Eck
Industries Inc. (“Eck”), based in Manitowoc, Wisconsin,
USA. Eck is a privately held manufacturer of precision sand cast
parts, and engineering services. Customer segments include
commercial aircraft parts, automotive and trucking cast parts,
military drivetrain casings, marine propulsion system castings, and
military aerospace components.
Grainger
& Worrall Ltd. (“GW”), based in Shropshire, UK. GW
is a privately held manufacturer of precision sand cast parts, and
engineering services. GW is a well-recognized precision air-set
sand cast parts manufacturer in the UK, specializing in low to
intermediate volume cast parts for commercial automotive,
motorsports/racing, defense, marine, and aerospace
applications.
Gränges
AB (“Gränges”), based in Stockholm, Sweden.
Gränges is a public company, traded on the NASDAQ Stockholm
Stock Exchange (GRNG:OMX), and a large global player in the rolled
aluminum products business, with production assets in Europe, USA,
and China. Gränges holds a leading global position in rolled
products for brazed heat exchangers.
Ohm
& Häner Metallwerk GmbH & Co. GK
(“O&H”), based in Olpe, Germany. O&H is a
privately held manufacturer of sand cast and gravity die cast
parts, servicing a significant, global customer base.
AML
Technologies (“AML”), is an Adelaide, Australia based
start-up company with proprietary technology for applying aluminum
wire alloys to additive manufacturing (3D printing)
processes.
Bronze-Alu
Group (“BAL”), based in La Couture-Boussey,
northern France. BAL is a privately held precision high-pressure
die cast parts manufacturer, offering prototyping, machining,
finishing and engineering services.
These
LOI agreements are part of the Company’s marketing strategy
to engage with innovative, research-capable partners, willing to
test scandium in their applications. The various programs cover a
wide range of specific testing and R&D efforts. Some of these
trials delivered positive results to our program, while others did
not show clear benefits from scandium additions, particularly as
they relate to specific parts or individual partner processes. Each
of the results has, however, progressed the Company forward in the
pursuit of applications for scandium in aluminum alloys that
outperform the incumbent alloy choices.
22
These
programs have had very encouraging results in both the wrought and
casting segments of the aluminum marketplace. Scandium has
demonstrated an ability to deliver meaningful strength improvement,
both at ambient temperature and at significantly elevated
temperature, along with improved corrosion resistance, and superior
welding characteristics, and to do so without diminished electrical
conductivity, where that property is also demanded. These benefits
have been documented by our work with Alcereco, reinforced by these
commercial partner trials and testing, and will continue to support
future customer trials and sales discussions.
The
Company has similar agreements with other research capable partners
whom do not wish to be publicly named at this time. The emphasis
for the program is now to seek out additional testing partners who
we know are best suited to advancing the scandium story. That
priority comes in front of any ability to disclose those partners
and ongoing programs prior to recognizing results. The Company
plans to conduct further application-specific programs in pursuit
of sales contracts with quality aluminum alloy customers across
numerous industry segments.
Cerium-Scandium Aluminum Alloy Program Agreement
On February 27, 2020, the Company announced signing a Program
Agreement with Eck Industries (“ECK”) located in
Manitowoc, Wisconsin, to pursue novel alloy development of a
combined cerium-scandium aluminum alloy, based on previous work
done independently by the companies in this area.
The companies intend to pursue alloy refinements in both wrought
and cast alloy applications, specifically targeting property
improvements related to strength, corrosion resistance, and
heat-working tolerance, principally in A5000 series
alloys.
Program Highlights:
●
Joint economic and technical support to alloy design,
●
Joint sharing of previous data, and new data produced from this
program,
●
Samples production for customer trials, either as cast products, or
wrought sample shapes for various potential customers and alloy
manufacturers,
●
Initial high value application expected to be in marine
applications, and
●
Program work is protected by existing patent applications filed by
ECK.
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.
●
Scandium doping
applications are explained for anodes, cathodes and
electrolytes.
●
Scandium offers
conductivity advantages as a dopant, over other options,
and
●
Scandium in other
aluminum components offers numerous property improvements,
including conductivity, strength and corrosion
resistance.
23
Patent Application Discussion:
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.
●
Improving the
durability of liquid electrolytes with dopants, or substitution
with safer and higher performing liquid or solid electrolyte
systems.
●
Designing for
higher voltage potential by utilizing different anode or cathode
materials.
●
Determining
combinations of metals that can better withstand harsh internal
conditions.
●
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 the LNMO
cathode, 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 Li
3
Sc
2
(PO
4
)
3
,
LiScP
2
O
7
and Li
3
Sc(BO
3
)
2
,
LiScO
2
as well as certain doped compounds such as Li
1.33
ScSi
0.33
P
1.67
O
7
,
Li
3.375
Mg
0.375
Sc
0.625
(BO
3
)
2
,
Li
1.5
Al
0.33
Sc
0.17
Ge
1.5
(PO
4
)
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:
Li
3
ScCl
6
, as well as its
fluoride counterpart Li
3
ScF
6
.
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 next-gen LNMO 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.
24
Nyngan Scandium Project - Planned Activities for
2021-2022
The
following development steps are planned for the Company’s
initiatives in 2021 and 2022;
●
Pursue scandium
offtake agreements in support of future scandium product
sales,
●
Seek copper
industry host(s) for a CMR Project development.
●
CMR development
includes a project LOI and advanced test work, pilot plant studies,
and marketing samples generation in 2021,
●
Negotiate customer
sales contracts for specific products planned for production, and
raise capital for a CMR Project in 2022, on basis of success in a
development program,
●
Commence
construction of a CMR separation facility and an off-site product
finish plant, in 2022.
●
Initiate project
commissioning in early 2023, with product available for sale by
mid-year 2023.
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.
25
Highlights
of initial drilling program results are as follows:
●
The highest 3-meter
intercept graded 572 ppm scandium (hole EHAC 11);
●
EHAC 11 also
generated two additional high grade scandium intercepts, grading
510 ppm and 415 ppm, each over 3 meters;
●
The program
identified a 13-hole cluster which was of particular
interest;
●
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;
●
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
●
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:
26
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.
27
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.
28
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. Work performed during 2018 does not change the previous
conclusions, as described above. No work was required or performed
during 2019 and 2020.
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.
29
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,
●
Property is a high
iron content, medium grade scandium target, located on surface,
with on-site upgrade potential,
●
Early resource
upgrade work done for GTK promising, confirmed by SCY,
●
Property is
all-weather accessible, close to infrastructure, and
●
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 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 %).
30
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 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.
31
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.
Critical Metals Recovery Technology Program
On May
13, 2020, we announced our pursuit of copper industry interest in
our ion exchange (IX) technology and knowhow to recover scandium,
cobalt and other critical metals from solvent extraction (SX)
raffinate and other acidic waste streams in certain acid leach
copper operations.
Recovery
metals targeted by this application include cobalt, copper, nickel,
scandium, and zinc, and possibly other metals and rare earth
elements, depending on recovery economics. The suitability of this
IX technology, and the target metal opportunities, vary with the
specifics of individual orebodies, and associated SX 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.
Concept Highlights
●
IX technology
offers rapid deployment to existing Cu operation waste
streams,
●
Recoveries target
critical metals with transparent, established markets,
●
Includes potential
for significant scandium production alongside other valuable
products,
●
Represents near
term production sources that can address security of supply issues,
conflict metal issues, and concentrated supply source
issues,
●
Represents a
project focus on metals prominent in the US Critical Metals
priority list, and on production from US and North American
operation locations, and
●
Promises real
potential to deliver positive economic benefits to both SCY and the
established copper producers that can host this
program.
Program Discussion
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 value from recovery of multiple metals,
specifically metals used in lithium-ion battery manufacture, along
with scandium, zinc and other metals present in source systems
employing solvent extraction techniques.,
The
potential new revenue stream of the combined metals residual varies
by orebody, and also by the specifics of the mineral processing
systems in place, but collectively the metals basket is more
instantly marketable and shows superior economics to the solo
scandium target we had in mind at the start. This IX technology
also represents a viable precursor for direct refining cobalt,
nickel and potentially copper into high purity sulfate product
forms, as required for battery manufacture, specifically in the
electric vehicle (EV) industry.
The
Company has filed for patent protection on various aspects of its
relevant technical program ideas with the US Patent Office, using
technical information from preliminary bench scale testing with
actual copper SX raffinate solutions. The Company believes this
work can be demonstrated with a working and successful copper plant
installation, with proven knowhow, and intends to pursue a copper
industry partner to demonstrate the economic viability of this
technology. It is the Company’s intent to fully participate
in the operation, ownership and production economics associated
with a plant asset that is developed in concert with that
partner.
32
I
TEM 3. LEGAL PROCEEDINGS
We are
not a party to any pending legal proceedings and, to the best of
our knowledge, none of our properties or assets are the subject of
any pending legal proceedings.
I
TEM 4. MINE SAFETY
DISCLOSURES
The
Company has no active mining operations or dormant mining assets at
this time, and has no outstanding mine safety violations or other
regulatory safety matters to report.
P
ART II
I
TEM 5. MARKET FOR REGISTRANTS’
COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Price Range of Common Shares
The
principal market on which our common shares are traded is the
Toronto Stock Exchange. Our common shares commenced trading on the
Toronto Stock Exchange on April 24, 2008 under the symbol
“GP”. Effective March 11, 2009, the common shares were
listed and posted for trading on the Toronto Stock Exchange under
the symbol “EMC”. Effective November 28, 2014, the
common shares were listed and posted for trading on the Toronto
Stock Exchange under the symbol “SCY”. The following
table shows the high and low trading prices of our common shares on
the Toronto Stock Exchange for the periods indicated.
|
Year
|
High
(C$)
|
Low
(C$)
|
|
Fiscal
Year ended December 31, 2020
|
|
|
|
First
quarter
|
0.095
|
0.060
|
|
Second
quarter
|
0.135
|
0.060
|
|
Third
quarter
|
0.135
|
0.110
|
|
Fourth
quarter
|
0.230
|
0.110
|
|
Fiscal
Year ended December 31, 2019
|
|
|
|
First
quarter
|
0.220
|
0.145
|
|
Second
quarter
|
0.170
|
0.110
|
|
Third
quarter
|
0.190
|
0.095
|
|
Fourth
quarter
|
0.145
|
0.075
|
33
Exchange Rates
We
maintain our books of account in United States dollars and
references to dollar amounts herein are to the lawful currency of
the United States except that we are traded on the Toronto Stock
Exchange and, accordingly, stock price quotes and sales of stock
are conducted in Canadian dollars (C$). The following table sets
forth, for the periods indicated, certain exchange rates based on
the noon rate provided by the Bank of Canada. Such rates are the
number of Canadian dollars per one (1) U.S. dollar (US$). The high
and low exchange rates for each month during the previous six
months were as follows:
|
|
High
|
Low
|
|
January
2021
|
1.2788
|
1.2627
|
|
December
2020
|
1.2952
|
1.2718
|
|
November
2020
|
1.3257
|
1.2965
|
|
October
2020
|
1.3349
|
1.3122
|
|
September
2020
|
1.3396
|
1.3055
|
|
August
2020
|
1.3377
|
1.3042
|
The
following table sets out the exchange rate (price of one U.S.
dollar in Canadian dollars) information as at each of the years
ended December 31, 2019 and 2020.
|
|
Year Ended December
31
(Canadian $ per U.S.
$)
|
|
|
|
2020
|
2019
|
|
Rate at end of
Period
|
1.2732
|
1.2988
|
|
Low
|
1.2718
|
1.2988
|
|
High
|
1.4496
|
1.3600
|
As of
February 25, 2021
,
there were
104
registered holders of record of the Company’s common shares
and an undetermined number of beneficial holders.
Dividends
We have
not paid any cash dividends on our common shares since our
inception and do not anticipate paying any cash dividends in the
foreseeable future. We plan to retain our earnings, if any, to
provide funds for the expansion of our business.
34
Securities Authorized for Issuance under Compensation
Plans
The
following table sets forth information as at December 31, 2020
respecting the compensation plans under which shares of the
Company’s common stock are authorized to be
issued.
|
Plan
Category
|
Number of
securities to be issued upon exercise of outstanding options,
warrants and rights
(a)
|
Weighted-average
exercise price of outstanding options, warrants and
rights
(b)
|
Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
(c)
|
|
Equity compensation
plans approved by security holders
|
35,100,000
|
C
$
0.170
|
12,004,889
|
|
Equity compensation
plans not approved by security holders
|
Nil
|
Nil
|
Nil
|
|
Total
|
35,100,000
|
C
$
0.170
|
12,004,889
|
Purchases of Equity Securities by the Company and Affiliated
Purchasers
Neither
the Company nor an affiliated purchaser of the Company purchased
common shares of the Company in the year ended December 31,
2020.
I
TEM 6. SELECTED FINANCIAL
DATA
Not applicable.
35
I
TEM 7. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
Overview
The
Company is a specialty metals and alloys company focusing on
scandium and other specialty metals.
The
Company was incorporated under the laws of the Province of British
Columbia, Canada in 2006. The Company currently trades on the
Toronto Stock Exchange under the symbol
“SCY”.
The
Company’s focus is on the exploration, evaluation and future
development of its specialty metals assets, specifically the Nyngan
Scandium Project and Honeybugle Scandium property located in New
South Wales, Australia and the Kiviniemi scandium prospect in
Finland, all of which are 100% owned by SCY. The Company is also
actively seeking an appropriate copper mine owner to host an
ion-exchange metals recovery project, designed to harvest select
metals including scandium from recirculating process solutions. The
Company is an exploration stage company and anticipates incurring
significant additional expenditures prior to production at any and
all of its properties.
These
consolidated financial statements have been prepared on a going
concern basis that contemplates the realization of assets and
discharge of liabilities at their carrying values in the normal
course of business for the foreseeable future. These financial
statements do not reflect any adjustments that may be necessary if
the Company is unable to continue as a going concern.
The
Company currently earns no operating revenues and will require
additional capital to advance both the Nyngan Scandium Project and
the Honeybugle property. The Company’s ability to continue as
a going concern is uncertain and is dependent upon the generation
of profits from mineral properties, obtaining additional financing
and maintaining continued support from its shareholders and
creditors. These are material uncertainties that raise substantial
doubt about the Company’s ability to continue as a going
concern. If additional financial support is not received or
operating profits are not generated, the carrying values of the
Company’s assets may be adversely affected.
RESULTS FOR THE YEAR ENDED DECEMBER 31, 2020
Liquidity and Capital Resources
At December 31, 2020, we had working capital of $(951,674)
including cash of $170,284 and current liabilities of $1,154,388 as
compared to working capital of $(376,893) including cash of
$115,568 at December 31, 2019.
At December 31, 2020, we had a total of 35,100,000 (2019 –
34,610,000) stock options exercisable between C$0.065 and C$0.37
(2019 – between C$0.10 and C$0.60) which have the potential
upon exercise to generate a total of C$5,962,625 (2018 –
C$6,513,250) in cash over the next four and a half years. There is
no assurance that these securities will be exercised.
Our continued development is contingent upon our ability to raise
sufficient financing both in the short and long term. There are no
guarantees that additional sources of funding will be available to
us; however, management is committed to pursuing all possible
sources of financing to execute our business plan.
Our
major capital requirement in the next 12 months relates to the
start of construction on the Nyngan Scandium Project and our entry
into a critical metals recovery program.
The Company will need additional funding to develop the Nyngan
project into a mine in 2022 and will seek to raise additional
equity financing at that time.
36
Results of Operations
Quarter ended December 31, 2020
The net
loss for the quarter increased by $394,499 to $706,306 from a loss
of $311,807 in the prior year mainly as a result of increased
stock-based compensation costs which is partially offset by lower
consulting fees.
Details of the
individual items contributing to the decreased loss are as
follows:
|
Q4 2020 vs. Q4 2019 - Variance Analysis (US$)
|
||
|
Item
|
Variance Favourable / (Unfavourable)
|
Explanation
|
|
Stock based compensation
|
($422,026)
|
In Q4 of 2020 the Company granted 5,900,000 stock options all of
which vested immediately. In the comparative quarter of 2019, no
options grant was made, and the only expense was the amortization
of certain options that had a two-year vesting period.
|
|
Foreign exchange loss
|
($18,946)
|
In Q4 2020 the US dollar weakened against both the Canadian and
Australian dollar. This meant that for any accounts payable held in
Canadian and Australian dollars those liabilities increased. Such
was not the case in the comparative quarter of one year
ago.
|
|
General and administrative
|
($17,371)
|
The Q4 2020 expense is higher than in Q4 2019 due to higher
property tax expense at our Nyngan project.
|
|
Exploration
|
($6,387)
|
The Company spent funds on procuring aluminum/scandium alloys at a
higher cost when compared to the comparative quarter of
2019.
|
|
Professional fees
|
($3,497)
|
The higher cost in Q4 2020 is due to a general increase in fees for
tax return filings and financial statement review.
|
|
Salaries and benefits
|
($2,168)
|
The slightly higher cost in Q4 2020 is due to the strengthening of
the Australian dollar and against the US dollar.
|
|
Insurance
|
($631)
|
Higher insurance premiums for the Company when compared to one year
ago results in this minor negative variance.
|
|
Travel
|
$11,869
|
The Company has curtailed travel due to the Corona virus pandemic
in 2020 resulting in the much lower expenditure in the comparative
periods.
|
|
Consulting
|
$64,661
|
The
Company released several contractors who were no longer required,
resulting in this positive variance in the current 3-month
period.
|
37
Results of Operations for the Year ended December 31,
2020
The net
loss for the year decreased by $560,097 to $1,378,840 from
$1,947,934 in the prior year, mainly because of a one-time royalty
sale and lower consulting and general and administrative costs.
Details of the individual items
contributing to the decreased net loss are as
follows:
|
2020 vs. 2019 - Variance Analysis (US$)
|
||
|
Item
|
Variance Favourable / (Unfavourable)
|
Explanation
|
|
Sale of
royalty interest
|
$382,430
|
In
January of 2020, the Company sold a royalty interest for net
proceeds of $382,430. This was a non-recurring event.
|
|
Consulting
|
$259,177
|
The
Company released several contractors who were no longer required,
resulting in this positive variance in the current
year.
|
|
General and administrative
|
$91,879
|
The
decrease in this expense is due to the downturn of activity in 2020
compared to 2019.
|
|
Travel
|
$66,689
|
Less
travel in 2020 was due to an overall decrease in Company activities
when compared to 2019. Also, in Q3 2019, the Company did extensive
travel in Europe.
|
|
Exploration
|
$38,721
|
With
the Company in a conservation of cash mode in 2020, less funds were
expended on this activity.
|
|
Professional fees
|
$10,024
|
Lower
2020 activity levels resulted in the favourable
variance.
|
|
Insurance
|
($1,841)
|
The
slightly higher cost in 2020 is due to overall increases in
insurance premiums for the Company’s operations.
|
|
Salaries and benefits
|
($2,759)
|
The slightly higher cost in 2020 is due to the strengthening of the
Australian dollar and against the US dollar.
|
|
Foreign exchange loss
|
($31,302)
|
In 2020 the US dollar weakened against both the Canadian and
Australian dollar. This meant that for any accounts payable held in
Canadian and Australian dollars those liabilities increased. Such
was not the case one year ago.
|
|
Stock-based compensation
|
($252,922)
|
In 2020
the Company granted 14,425,000 stock options compared to 9,860,000
stock options issued in 2019. However, more immediate vesting
provisions resulted in a higher expense in 2020.
|
Cash flow discussion for the year ended December 31, 2020 compared
to December 31, 2019
The cash outflow from operating activities decreased by $1,211,649
to $81,981 (2019 – $1,129,668) due mainly to the sale of a
royalty interest, increased accounts payable and overall lower
operating costs.
Cash inflows from financing activities of $136,697 reflect no
private placements in the year when compared with private
placements of $799,484 in 2019. Cash inflows from exercises of
stock options of $136,697 were lower than $160,995 for the year
ending December 31, 2019.
38
Summary of quarterly results (US$)
|
|
2019
|
2019
|
||||||
|
|
Q4
|
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
|
Net
Sales
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Net
Income (Loss)
|
(706,306
)
|
(265,057
)
|
(270,463
)
|
(146,014
)
|
(311,807
)
|
(443,426
)
|
(859,934
)
|
(332,766
)
|
|
Basic
and diluted
Net
Income (Loss) per share
|
(0.00
)
|
(0.00
)
|
(0.00
)
|
(0.00
)
|
(0.00
)
|
(0.00
)
|
(0.01
)
|
(0.00
)
|
Financial Position
Cash
The increase in cash of $54,716 to $170,284 (2019 - $115,568)
results from lower operations spending.
Prepaid expenses and receivables
Prepaid expenses and receivables have decreased by $3,333 to
$42,430 (2019 - $45,763) due to lower activity levels in
2020.
Reclamation bond
A reclamation bond of $11,444 was purchased for the Kiviniemi
property in 2018.
Property, plant and equipment
Property plant and equipment consists of office furniture and
computer equipment at the Sparks, Nevada office. The decrease of
$2,307 to $4,660 at December 31, 2020 (2019 - $6,967) is due to
depreciation of computer servers at the Sparks office.
Mineral interests
Mineral interests remained at $704,053 at December 31, 2019 (2018 -
$704,053).
Accounts Payable,
Accounts
payable with related parties and Accrued
Liabilities
Accounts payable
,
accounts payable with related parties
and accrued liabilities have increased by $616,164to $1,154,388 at
December 31, 2020 (2019 – $538,224) due to the deferral of
consulting fees and salaries.
Capital Stock
Capital stock increased by $251,410 to $109,627,071 (2019 -
$109,375,661) due to stock option exercises.
39
Additional paid-in capital decreased by $569,342 to $6,505,416
(2019 - $5,936,074) as a result of stock option expensing which was
partially offset by stock option exercises.
Treasury shares remained at $1,264,194 through the 2020 fiscal
period.
Off-balance sheet arrangements
At December 31, 2020, we had no material off-balance sheet
arrangements such as guarantee contracts, contingent interest in
assets transferred to an entity, derivative instruments obligations
or any obligations that trigger financing, liquidity, market or
credit risk to us.
Transactions with related parties
During
the year ended December 31, 2020, the Company expensed $542,722 for
stock-based compensation for stock options issued to Company
directors. During the year ended December 31, 2019, the Company
expensed $314,104 for stock options issued to Company
directors.
During
each of the years ended December 31, 2020 and December 31, 2019 the
Company paid a consulting fee of $102,000 to one of its
directors.
As at
December 31, 2020, the Company owed $702,456 (2019 - $269,165) to
officers of the Company.
Additional Information and Accounting Pronouncements
Outstanding share data
At February 25, 2021 we had 316,172,595 issued and outstanding
common shares and 30,925,000 outstanding stock options at a
weighted average exercise price of C$0.175. No warrants are
outstanding at February 25, 2021.
Critical Accounting Estimates
The
preparation of financial statements in conformity with generally
accepted accounting policies requires our management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. These estimates are based on past experience, industry
trends and known commitments and events. By their nature, these
estimates are subject to measurement uncertainty and the effects on
the financial statements of changes in such estimates in future
periods could be significant. Actual results will likely differ
from those estimates.
Stock-based compensation
We use the Black-Scholes option pricing model to calculate the fair
value of stock options and compensatory warrants granted. This
model is subject to various assumptions. The assumptions we make
will likely change from time to time. At the time the fair value is
determined, the methodology that we use is based on historical
information, as well as anticipated future events. The assumptions
with the greatest impact on fair value are those for estimated
stock volatility and for the expected life of the
instrument.
40
Deferred income taxes
We account for tax consequences of the differences in the carrying
amounts of assets and liabilities and our tax bases using tax rates
expected to apply when these temporary differences are expected to
be settled. When the deferred realization of income tax assets does
not meet the test of being more likely than not to occur, a
valuation allowance in the amount of the potential future benefit
is taken and no future income tax asset is recognized. We have
taken a valuation allowance against all such potential tax
assets.
Mineral properties and exploration and development
costs
We
capitalise the costs of acquiring mineral rights at the date of
acquisition. After acquisition, various factors can affect the
recoverability of the capitalized costs. Our recoverability
evaluation of our mineral properties and equipment is based on
market conditions for minerals, underlying mineral resources
associated with the assets and future costs that may be required
for ultimate realization through mining operations or by sale. We
are in an industry that is exposed to a number of risks and
uncertainties, including exploration risk, development risk,
commodity price risk, operating risk, ownership and political risk,
funding and currency risk, as well as environmental risk. Bearing
these risks in mind, we have assumed recent world commodity prices
will be achievable. We have considered the mineral resource reports
by independent engineers on the Nyngan project in considering the
recoverability of the carrying costs of the mineral properties. All
of these assumptions are potentially subject to change, out of our
control, however such changes are not determinable. Accordingly,
there is always the potential for a material adjustment to the
value assigned to mineral properties and equipment.
Recent Accounting Pronouncements
Accounting Standards Update 2019-12 –
Income Taxes
(Topic 740) The Financial Accounting Standards Board
(“Board”) is issuing this Update as part of its
initiative to reduce complexity in accounting standards.
This standard is effective for interim
and annual reporting periods beginning after December 15, 2020,
with early adoption permitted. The Company is currently evaluating
the impact this guidance will have on its financial
statements.
Accounting Standards Update 2019-01 –
Leases (Topic
842) Codification Improvements - Issue 3 Transition Disclosures
Related to Topic 250, Accounting Changes and Error Corrections. The
amendments in this Update clarify the Board’s original intent
by explicitly providing an exception to the paragraph 250-10-50-3
interim disclosure requirements in the Topic 842 transition
disclosure requirements. The effective date is for fiscal years
beginning after December 15, 2020, and interim periods within
fiscal years beginning after December 15, 2020.
The Company has evaluated that this guidance will
have little or no impact on its financial
statements.
Financial instruments and other risks
Our
financial instruments consist of cash, receivables, accounts
payable and accrued liabilities, accounts payable with related
parties, and promissory notes payable. It is management's opinion
that we are not exposed to significant interest, currency or credit
risks arising from our financial instruments. The fair values of
these financial instruments approximate their carrying values
unless otherwise noted. The Company has its cash primarily in two
commercial banks, one in Vancouver, British Columbia, Canada and in
one in Chicago, Illinois.
I
TEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Not applicable.
I
TEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
The
Consolidated Financial Statements of the Company and the notes
thereto are attached to this report following the signature page
and Certifications.
41
I
TEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
For the
fiscal years ended December 31, 2020 and 2019 we did not have any
disagreement with our accountants on any matter of accounting
principles, practices or financial statement
disclosure.
I
TEM 9A. CONTROLS AND
PROCEDURES
Disclosure controls and procedures
The
Company’s
management, including our principal executive officer and our
principal financial officer, evaluated the effectiveness of
disclosure controls and procedures (as defined in Exchange Act Rule
13a-15(e)) as of the end of the period covered by this report.
Based on that evaluation, the principal executive officer and
principal financial officer concluded that as of the end of the
period covered by this report, the Company has maintained effective
disclosure controls and procedures in all material respects,
including those necessary to ensure that information required to be
disclosed in reports filed or submitted with the SEC
(i) is recorded, processed, and
reported within the time periods specified by the sec, and (ii) is
accumulated and communicated to management, including the principal
executive officer and principal financial officer, as appropriate
to allow for timely decision regarding required
disclosure.
Management’s report on internal control over financial
reporting
The
Company’s management is responsible for establishing and
maintaining adequate internal control over financial reporting (as
defined in Rule 13a-15(f) or 15d-15(f) of the Exchange Act).
Management assessed the effectiveness of our internal control over
financial reporting as of December 31, 2019, using criteria
established in
Internal
Control-Integrated Framework
issued in 1992 by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). Even
an effective internal control system, no matter how well designed,
has inherent limitations, including the possibility of human error
and circumvention or overriding of controls and therefore can
provide only reasonable assurance with respect to reliable
financial reporting. Furthermore, the effectiveness of an internal
control system in future periods can change with
conditions.
A
material weakness is a deficiency, or combination of deficiencies,
in internal control over financial reporting such that there is a
reasonable possibility that a material misstatement of the
Company’s annual or interim financial statements will not be
prevented or detected on a timely basis.
The
Company’s management has determined that the internal
controls over financial reporting are effective as of December 31,
2020.
Changes
in Internal Control
There
have been no changes in internal control over financial reporting
that occurred during the last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, internal
control over financial reporting.
I
TEM 9B. OTHER INFORMATION
None.
42
P
ART III
Information
with respect to Items 10 through 14 is set forth in the definitive
Proxy Statement to be filed with the Securities and Exchange
Commission on or before April 30, 2020 and is incorporated herein
by reference. If the definitive Proxy Statement cannot be filed on
or before April 30, 2020, the Company will instead file an
amendment to this Form 10-K disclosing the information with respect
to Items 10 through 14.
P
ART IV
I
TEM 15. EXHIBITS, FINANCIAL STATEMENTS
SCHEDULES
Financial Statements
The
following Consolidated Financial Statements are filed as part of
this report.
|
Description
|
Page
|
|
Financial
statements for the years ended December 31, 2020 and 2019 and audit
reports thereon.
|
F-1
|
Exhibits
The
following table sets out the exhibits filed herewith or
incorporated herein by reference.
|
Exhibit
|
Description
|
|
Certificate
of Incorporation, Certificate of Name Change dated March 2009,
Notice of Articles dated March 2009
(1)
Certificate
of Name Change dated November 19, 2014 and Notice of Articles dated
November 19, 2014
(2)
|
|
|
Corporate
Articles
(1)
Amendment
to Corporate Articles dated November 10, 2014
(2)
|
|
|
2015
Stock Option Plan
|
|
|
10.2
(1)
|
Management
Contract with George Putnam dated May 1, 2010
|
|
Management
Contract with Edward Dickinson dated August 13, 2011
|
|
|
Share
Exchange Agreement dated June 30, 2017
|
|
|
List of
Subsidiaries
|
|
|
Consent
of Davidson & Company LLP
|
|
|
Consent
of Stuart Hutchin
|
|
|
Consent
of Dean Basile
|
|
|
Consent
of Geoffrey Duckworth
|
|
|
Certification
Pursuant to Rule 13a-14(a) or 15d-14(a) of the U.S. Securities
Exchange Act of 1934 of the Principal Executive
Officer
|
|
|
Certification
Pursuant to Rule 13a-14(a) or 15d-14(a) of the U.S. Securities
Exchange Act of 1934 of the Principal Financial
Officer
|
|
|
Section
1350 Certification of the Principal Executive Officer and Principal
Financial Officer of the Principal Executive Officer
|
|
|
Section
1350 Certification of the Principal Executive Officer and Principal
Financial Officer of the Principal Financial Officer
|
(1)
Previously filed as exhibits to the Form 10 filed May
24, 2011 and incorporated herein by reference.
(2)
Previously filed as exhibits to the Form 10-K filed
February 27, 2015 and incorporated herein by
reference.
(3)
Previously filed as Schedule “A” to the Form
DEF 14A filed October 5, 2015 and incorporated herein by
reference.
(4)
Previously filed as an exhibit to the Form 10-K/A filed
May 1, 2014 and incorporated herein by reference.
(5)
Previously filed as an exhibit to the Form 8-K filed
July 26, 2017 and incorporated herein by reference.
(7)
Filed herewith.
43
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
SCANDIUM INTERNATIONAL MINING CORP.
By:
/s/ George
Putnam
George
Putnam
President and
Principal Executive Officer
Date:
February 25, 2021
Pursuant
to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates
indicated.
|
Signature
|
Title
|
Date
|
|
|
|
|
|
|
|
|
|
/s/
George Putnam
|
President,
Principal Executive Officer, and Director
|
February
25, 2021
|
|
George
Putnam
|
|
|
|
|
|
|
|
|
|
|
|
/s/
William Harris
|
Chairman
and Director
|
February
25, 2021
|
|
William
Harris
|
|
|
|
|
|
|
|
/s/
James Rothwell
|
Director
|
February
25, 2021
|
|
James
Rothwell
|
|
|
|
|
|
|
|
/s/
Willem Duyvesteyn
|
Director
|
February
25, 2021
|
|
Willem
Duyvesteyn
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Warren Davis
|
Director
|
February
25, 2021
|
|
Warren
Davis
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Peter Evensen
|
Director
|
February
25, 2021
|
|
Peter
Evensen
|
|
|
|
|
|
|
|
|
|
|
|
/s/
R.Christian Evensen
|
Director
|
February
25, 2021
|
|
R.
Christian Evensen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Edward Dickinson
|
Principal
Accounting Officer and
Principal
Financial Officer
|
February
25, 2021
|
|
Edward
Dickinson
|
|
|
44
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2020
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the
Shareholders and Directors of
Scandium
International Mining Corp.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of
Scandium International Mining Corp. (the “Company”) as
of December 31, 2020 and 2019, and the related consolidated
statements of loss and comprehensive loss, changes
in
equity (deficiency), and cash flows for the years
ended
December 31, 2020 and 2019, and the related notes
and schedules (collectively referred to as the “financial
statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of
the Company as of December 31, 2020 and 2019, and the results of
its operations and its cash flows for the years ended December 31,
2020 and 2019, in conformity with accounting principles generally
accepted in the United States of America.
Going Concern
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the entity has suffered recurring
losses from operations and has a net capital deficiency that raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in
Note 1. The financial statements do not include any adjustments
that might result from the outcome of this
uncertainty.
Basis for Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) ("PCAOB") and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.
As part of our audits we are required to obtain an understanding of
internal control over financial reporting but not for the purpose
of expressing an opinion on the effectiveness of the entity’s
internal control over financial reporting. Accordingly, we express
no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
F-2
Critical Audit Matters
The
critical audit matters communicated below are matters arising from
the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee
and that: (1) relate to accounts or disclosures that are material
to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the
financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or
disclosures to which they relate.
Mineral property interests impairment consideration
At December 31, 2020, the Company’s mineral property
interests balance totaled $704,053. As more fully described in Note
2 to the financial statements, the Company evaluates its mining and
mineral rights for impairment whenever events or changes in
circumstances indicate that the carrying amounts of the asset or
group of assets may not be recoverable. Management evaluates
various qualitative factors in determining whether or not events or
changes in circumstances indicate that the carrying amount of an
asset or group of assets may not be recoverable.
Auditing the Company’s impairment assessment involved our
subjective judgment because, in determining whether any indicators
of impairment occurred, management uses judgments that include,
among others, assumptions about management’s intentions and
future exploration plans, the ability to fund continued exploration
activities, forecasts on future scandium metal prices, and market
capitalization. Significant uncertainty exists with these
assumptions. Further, management’s evaluation of any new
information indicating that continued exploration will not likely
occur requires significant judgment.
To test the Company’s impairment assessment, our audit
procedures included, among others, assessing the Company’s
right to explore in the relevant exploration area which included
obtaining and assessing supporting documentation such as mining
lease applications and final decisions from governmental bodies;
evaluating the Company’s ability and intent to carry out
significant exploration and evaluation activity; considering
whether there was any other data or information that indicated the
carrying amount of the capitalized mineral property interests would
not be recovered in full from successful development or by sale;
and assessing the adequacy of the associated disclosures in the
financial statements.
We have served as the Company’s auditor since
2008.
/s/ DAVIDSON & COMPANY LLP
|
Vancouver,
Canada
|
Chartered
Professional Accountants
|
February
25, 2021
F-3
Scandium
International Mining Corp.
CONSOLIDATED BALANCE
SHEETS
(Expressed in US
Dollars)
|
|
||
|
As
at:
|
December 31,
2020
|
December 31,
2019
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
|
|
|
|
Cash
|
$
170,284
|
$
115,568
|
|
Prepaid
expenses and receivables
|
42,430
|
45,763
|
|
|
|
|
|
|
212,714
|
161,331
|
|
|
|
|
|
Reclamation bond
(Note 4)
|
11,444
|
11,444
|
|
Equipment
(Note 3)
|
4,660
|
6,967
|
|
Mineral property interests
(Note
4)
|
704,053
|
704,053
|
|
|
|
|
|
Total
Assets
|
$
932,871
|
$
883,795
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND EQUITY (DEFICIENCY)
|
|
|
|
|
|
|
|
Current
|
|
|
|
Accounts payable
and accrued liabilities
|
$
451,932
|
$
269,059
|
|
Accounts
payable with related parties (Note 5)
|
702,456
|
269,165
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
1,154,388
|
538,224
|
|
|
|
|
|
|
|
|
|
Equity
(Deficiency)
|
|
|
|
Capital stock (Note
6) (Authorized: Unlimited number of common shares; Issued and
outstanding: 314,032,595 (2019 – 312,482,595))
|
109,627,071
|
109,375,661
|
|
Treasury stock
(Note 7) (1,033,333 common shares) (2019 –
1,033,333)
|
(1,264,194
)
|
(1,264,194
)
|
|
Additional paid in
capital (Note 6)
|
6,505,416
|
5,936,074
|
|
Accumulated
other comprehensive loss
|
(853,400
)
|
(853,400
)
|
|
Deficit
|
(114,236,410
)
|
(112,848,570
)
|
|
|
|
|
|
Total
Equity (Deficiency)
|
(221,517
)
|
345,571
|
|
|
|
|
|
Total
Liabilities and Equity (Deficiency)
|
$
932,871
|
$
883,795
|
Nature
and continuance of operations (Note 1)
Subsequent
event (Note 12)
The
accompanying notes are an integral part of these consolidated
financial statements.
F-4
Scandium
International Mining Corp.
CONSOLIDATED
STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Expressed in US
Dollars)
|
Years
ended:
|
December 31,
2020
|
December 31,
2019
|
|
|
|
|
|
EXPENSES
|
|
|
|
Amortization (Note
3)
|
$
2,307
|
$
2,307
|
|
Consulting (Note
5)
|
129,553
|
388,730
|
|
Exploration
|
80,782
|
119,503
|
|
General and
administrative
|
289,462
|
381,341
|
|
Insurance
|
33,298
|
31,457
|
|
Professional
fees
|
53,795
|
63,818
|
|
Salaries and
benefits
|
460,809
|
458,050
|
|
Stock-based
compensation (Notes 5 & 6)
|
684,055
|
431,133
|
|
Travel and
entertainment
|
5,180
|
71,868
|
|
|
|
|
|
|
(1,739,241
)
|
(1,948,207
)
|
|
|
|
|
|
Foreign exchange
gain (loss)
|
(31,029
)
|
273
|
|
Sale of royalty
(Note 11)
|
382,430
|
-
|
|
|
|
|
|
Loss
and comprehensive loss for the year
|
$
(1,387,840
)
|
$
(1,947,934
)
|
|
|
|
|
|
Basic
and diluted loss per common share
|
$
(0.00
)
|
$
(0.01
)
|
|
|
|
|
|
Basic
and diluted weighted average number of common shares
outstanding
|
312,605,335
|
310,561,693
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-5
Scandium
International Mining Corp.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Expressed in US
Dollars)
|
Years
ended:
|
December 31,
2020
|
December 31,
2019
|
|
|
|
|
|
CASH
FLOWS USED IN OPERATING ACTIVITIES
|
|
|
|
Loss for the
year
|
$
(1,387,840
)
|
$
(1,947,934
)
|
|
Items not affecting
cash:
|
|
|
|
Amortization
|
2,307
|
2,307
|
|
Stock-based
compensation
|
684,055
|
431,133
|
|
Changes in non-cash
working capital items:
|
|
|
|
(Increase) decrease
in prepaids and receivables
|
3,333
|
(6,812
)
|
|
Increase in
accounts payable, accrued liabilities and accounts payable with
related parties
|
616,164
|
391,638
|
|
|
(81,981
)
|
(1,129,668
)
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
Common shares
issued
|
-
|
799,484
|
|
Options exercised
for common shares
|
136,697
|
160,995
|
|
|
136,697
|
960,479
|
|
|
|
|
|
Change
in cash during the year
|
54,716
|
(169,189
)
|
|
Cash,
beginning of year
|
115,568
|
284,757
|
|
|
|
|
|
Cash,
end of year
|
$
170,284
|
$
115,568
|
|
|
||
|
Supplemental disclosure with respect to cash
flows
(Note 10)
|
||
The accompanying
notes are an integral part of these consolidated financial
statements.
F-6
Scandium International Mining
Corp.
CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY (DEFICIENCY)
(Expressed in
US Dollars)
|
|
Number of Shares
|
Capital Stock
|
Additional Paid in
Capital
|
Treasury Stock
|
Accumulated Other Comprehensive
Loss
|
Deficit
|
Total Equity
(Deficiency)
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2018
|
304,781,294
|
$
108,244,311
|
$
5,675,812
|
$
(1,264,194
)
|
$
(853,400
)
|
$
(110,900,636
)
|
$
901,893
|
|
Private
placement
|
5,926,301
|
799,484
|
-
|
-
|
-
|
-
|
799,484
|
|
Options
exercised
|
1,775,000
|
331,866
|
(170,871
)
|
-
|
-
|
-
|
160,995
|
|
Stock-based
compensation
|
-
|
-
|
431,133
|
-
|
-
|
-
|
431,133
|
|
Loss for the
year
|
-
|
-
|
-
|
-
|
-
|
(1,947,934
)
|
(1,947,934
)
|
|
Balance,
December 31, 2019
|
312,482,595
|
109,375,661
|
5,936,074
|
(1,264,194
)
|
(853,400
)
|
(112,848,570
)
|
345,571
|
|
Options
exercised
|
1,550,000
|
251,410
|
(114,713
)
|
-
|
-
|
-
|
136,697
|
|
Stock-based
compensation
|
-
|
-
|
684,055
|
-
|
-
|
-
|
684,055
|
|
Loss for the
year
|
-
|
-
|
-
|
-
|
-
|
(1,387,840
)
|
(1,387,840
)
|
|
Balance,
December 31, 2020
|
314,032,595
|
$
109,627,071
|
$
6,505,416
|
$
(1,264,194
)
|
$
(853,400
)
|
$
(114,236,410
)
|
$
(221,517
)
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-7
|
Scandium International Mining Corp.
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
December
31, 2020
|
|
(Expressed
in US Dollars)
|
|
1.
|
NATURE AND CONTINUANCE OF OPERATIONS
|
Scandium
International Mining Corp. (the “Company”) is a
specialty metals and alloys company focusing on scandium and other
specialty metals.
The
Company was incorporated under the laws of the Province of British
Columbia, Canada in 2006. The Company currently trades on the
Toronto Stock Exchange under the symbol
“SCY”.
The
Company’s focus is on the exploration and evaluation of its
specialty metals assets, specifically the Nyngan scandium deposit
located in New South Wales, Australia. The Company is an
exploration stage company and anticipates incurring significant
additional expenditures prior to production at any and all of its
properties.
These
consolidated financial statements have been prepared on a going
concern basis that contemplates the realization of assets and
discharge of liabilities at their carrying values in the normal
course of business for the foreseeable future. These financial
statements do not reflect any adjustments that may be necessary if
the Company is unable to continue as a going concern.
The
Company currently earns no operating revenues and will require
additional capital in order to advance the Nyngan property. The
Company’s ability to continue as a going concern is uncertain
and is dependent upon the generation of profits from mineral
properties, obtaining additional financing and maintaining
continued support from its shareholders and creditors. These are
material uncertainties that raise substantial doubt about the
Company’s ability to continue as a going concern. In the
event that additional financial support is not received, or
operating profits are not generated, the carrying values of the
Company’s assets may be adversely affected.
In
March 2020, the World Health Organization declared coronavirus
COVID-19 a global pandemic. This contagious disease outbreak, which
has continued to spread, and related adverse public health
developments, have adversely affected workforces, economies, and
financial markets globally, leading to an economic downturn. It is
not possible for the Company to predict the duration or magnitude
of the adverse results of the outbreak and its effects on the
Company’s business or ability to raise funds.
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
a)
Basis
of presentation
These
consolidated financial statements have been prepared in conformity
with generally accepted accounting principles of the United States
of America (“US GAAP”).
These
consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, EMC Metals USA Inc.,
Scandium International Mining Corp. Norway AS, SCY Exploration
Finland Oy and EMC Metals Australia Pty
Ltd.(“EMC-A”).” All significant intercompany
accounts and transactions have been eliminated on
consolidation.
b)
Use
of estimates
The
preparation of consolidated financial statements in conformity with
US GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of expenses during
the reporting period. The Company regularly evaluates estimates and
assumptions related to the deferred income tax asset valuations,
asset impairment, stock-based compensation and loss contingencies.
The Company bases its estimates and assumptions on current facts,
historical experience and various other factors that it believes to
be reasonable under the circumstances, the results of which form
the basis for making judgments. The actual results experienced by
the Company may differ materially and adversely from the
Company’s estimates. To the extent there are material
differences between estimates and the actual results, future
results of operations will be affected.
The
Company considers itself to be an exploration stage company and
will consider the transition to development stage after it receives
funding to begin mine construction, and board
approval.
F-8
|
Scandium International Mining Corp.
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
December
31, 2020
|
|
(Expressed
in US Dollars)
|
2.
SIGNIFICANT ACCOUNTING POLICIES
(cont’d…)
c)
Equipment
Equipment is
recorded at cost less accumulated amortization, calculated as
follows:
|
Computer
equipment
|
30%
straight line
|
d)
Mineral interests and exploration and development
costs
The
costs of acquiring mineral rights are capitalized at the date of
acquisition. After acquisition, various factors can affect the
recoverability of the capitalized costs. If, after review,
management concludes that the carrying amount of a mineral interest
is impaired, it will be written down to estimated fair value.
Exploration costs incurred on mineral interests are expensed as
incurred. Development costs incurred on proven and probable
reserves will be capitalized. Upon commencement of production,
capitalized costs will be
amortized using the
unit-of-production method over the estimated life of the ore body
based on proven and probable reserves.
e)
Asset retirement obligations
The
Company records the fair value of an asset retirement obligation as
a liability in the period in which it incurs a legal obligation
associated with the retirement of tangible long-lived assets that
result from the acquisition, construction, development, and/or
normal
use of the
long-lived assets. The Company also records a corresponding asset
which is amortized over the life of the asset. Subsequent to the
initial measurement of the asset retirement obligation, the
obligation is adjusted at the end of each period to reflect the
passage of time (accretion expense) and changes in the estimated
future cash flows underlying the obligation (asset retirement
cost).
f)
Long-lived assets
Long-lived
assets held and used by the Company are reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. For purposes of
evaluating the recoverability of long-lived assets, the
recoverability test is performed using undiscounted net cash flows
or fair value in use related to the long-lived assets. If such
assets are considered to be impaired, the impairment recognized is
measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less
costs to sell.
g)
Income taxes
The
Company accounts for income taxes under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled. Under the asset and
liability method the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that
includes the enactment date. A valuation allowance is recognized if
it is more likely than not that some part or all of the deferred
tax asset will not be recognized.
F-9
|
Scandium International Mining Corp.
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
December
31, 2020
|
|
(Expressed
in US Dollars)
|
2.
SIGNIFICANT ACCOUNTING POLICIES
(cont’d…)
h)
Loss per share
Basic
loss per common share is computed using the weighted average number
of common shares outstanding during the year. To calculate diluted
loss per share, the Company uses the treasury stock method and the
if converted method. As at December 31, 2020 and 2019 there were no
warrants outstanding and 35,100,000 options (2019 –
34,610,000) outstanding which have not been included in the
weighted average number of common shares outstanding as these were
anti-dilutive.
i)
Foreign exchange
The
Company's and subsidiaries’ functional currency is the US
Dollar (“USD”). Any monetary assets and liabilities
that are in a currency other than the USD are translated at the
rate prevailing at year end. Revenue and expenses in a foreign
currency are translated at rates that approximate those in effect
at the time of translation. Gains and losses from translation of
foreign currency transactions into USD are included in current
results of operations. Fixed assets and mineral properties have
been translated at historical rates, the rate on the date of the
transaction.
j)
Stock-based compensation
The
Company accounts for stock-based compensation under the provisions
of Accounting Standard Codification (“ASC”) 718,
“Compensation-Stock Compensation.” Under the fair value
recognition provisions, stock-based compensation expense is
measured at the grant date for all stock-based awards to employees,
directors and non-employees and is recognized as an expense over
the requisite service period, which is generally the vesting
period. The Black-Scholes option valuation model is used to
calculate fair value.
k)
Financial instruments
The
Company’s financial instruments consist of cash, receivables,
accounts payable and accrued liabilities, and accounts payable with
related parties. It is management's opinion that the Company is not
exposed to significant interest, currency or credit risks arising
from its financial instruments. The fair values of these financial
instruments approximate their carrying values unless otherwise
noted. The Company has its cash primarily in three commercial
banks, one in Chicago, Illinois, United States of America, one in
Vancouver, British Columbia, Canada and one in Melbourne, Victoria,
Australia.
l)
Concentration of credit risk
The
financial instrument which potentially subjects the Company to
concentration of credit risk is cash. The Company maintains cash in
bank accounts that, at times, may exceed federally insured limits.
As at December 31, 2020, the Company has not exceeded the federally
insured limit. The Company has not experienced any losses in such
amounts and believes it is not exposed to any significant risks on
its cash in bank accounts.
F-10
|
Scandium International Mining Corp.
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
December
31, 2020
|
|
(Expressed
in US Dollars)
|
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
(cont’d…)
|
m)
Fair value of financial assets and liabilities
The
Company measures the fair value of financial assets and liabilities
based on US GAAP guidance which defines fair value, establishes a
framework for measuring fair value, and expands
disclosures about fair value measurements.
The
Company classifies financial assets and liabilities as
held-for-trading, available-for-sale, held-to-maturity, loans and
receivables or other financial liabilities depending on their
nature. Financial assets and financial liabilities are recognized
at fair value on their initial recognition, except for those
arising from certain related party transactions which are accounted
for at the transferor’s carrying amount or exchange
amount.
Financial assets
and liabilities classified as held-for-trading are measured at fair
value, with gains and losses recognized in net income. Financial
assets classified as held-to-maturity, loans and receivables, and
financial liabilities other than those classified as
held-for-trading are measured at amortized cost, using the
effective interest method of amortization. Financial assets
classified as available-for-sale are measured at fair value, with
unrealized gains and losses being recognized as other comprehensive
income until realized, or if an unrealized loss is considered other
than temporary, the unrealized loss is recorded in
income.
Financial
instruments, including receivables, accounts payable and accrued
liabilities, and accounts payable with related parties are carried
at amortized cost, which management believes approximates fair
value due to the short-term nature of these
instruments.
The
following table presents information about the assets that are
measured at fair value on a recurring basis as at December 31,
2020 and indicates the fair value hierarchy of the valuation
techniques the Company utilized to determine such fair value. In
general, fair values determined by Level 1 inputs utilize quoted
prices (unadjusted) in active markets for identical assets. Fair
values determined by Level 2 inputs utilize data points that are
observable such as quoted prices, interest rates and yield curves.
Fair values determined by Level 3 inputs are unobservable data
points for the asset or liability, and include situations where
there is little, if any, market activity for the
asset:
|
|
December
31,2020
|
Quoted Pricesin
Active Markets (Level 1)
|
Significant Other
Observable Inputs
(Level
2)
|
Significant
Unobservable Inputs (Level 3)
|
|
Assets:
|
|
|
|
|
|
Cash
|
$
170,284
|
$
170,284
|
$
—
|
$
—
|
|
|
|
|
|
|
|
Total
|
$
170,284
|
$
170,284
|
$
—
|
$
—
|
The
fair values of cash are determined through market, observable and
corroborated sources.
F-11
|
Scandium International Mining Corp.
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
December
31, 2020
|
|
(Expressed
in US Dollars)
|
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
(cont’d…)
|
n)
Recently
Adopted and Recently Issued Accounting Standards
Accounting Standards Update 2019-12 –
Income Taxes (Topic 740) The Financial Accounting Standards Board
(“Board”) is issuing this Update as part of its
initiative to reduce complexity in accounting standards.
This standard is effective for interim
and annual reporting periods beginning after December 15, 2020,
with early adoption permitted. The Company is currently evaluating
the impact this guidance will have on its financial
statements.
Accounting Standards Update 2019-01 –
Leases (Topic 842) Codification Improvements - Issue 3 Transition
Disclosures Related to Topic 250, Accounting Changes and Error
Corrections. The amendments in this Update clarify the
Board’s original intent by explicitly providing an exception
to the paragraph 250-10-50-3 interim disclosure requirements in the
Topic 842 transition disclosure requirements. The effective date is
for fiscal years beginning after December 15, 2020, and interim
periods within fiscal years beginning after December 15, 2020.
The Company has evaluated that this
guidance will have little or no impact on its financial
statements.
|
3.
|
EQUIPMENT
|
2020
|
|
December 31, 2019
Net Book Value
|
Additions
(disposals)
|
Amortization
|
December 31, 2020
Net Book Value
|
|
Computer
equipment
|
$
6,967
|
$
-
|
$
(2,307
)
|
$
4,660
|
2019
|
|
December 31, 2018
Net Book Value
|
Additions
(disposals)
|
Amortization
|
December 31,
2019 Net Book Value
|
|
Computer
equipment
|
$
9,274
|
$
-
|
$
(2,307
)
|
$
6,967
|
|
4.
|
MINERAL PROPERTY INTERESTS
|
|
|
Scandium and
other
|
|
|
|
|
Acquisition
costs
|
|
|
|
|
|
Balance,
December 31, 2020, 2019, and 2018
|
$
704,053
|
Title
to mineral property interests involves certain inherent risks due
to the difficulties of determining the validity of certain claims
as well as the potential for problems arising from the frequently
ambiguous conveyancing history characteristic of many mineral
property interests. The Company has investigated title to all of
its mineral property interests and, to the best of its knowledge,
title to all of its properties is in good standing.
F-12
|
Scandium International Mining Corp.
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
December
31, 2020
|
|
(Expressed
in US Dollars)
|
|
4.
|
MINERAL PROPERTY INTERESTS
(cont'd)
|
SCANDIUM
PROPERTIES
Nyngan, New South Wales Property
The
Company holds a 100% interest in the Nyngan property in New South
Wales, Australia (NSW). A definitive feasibility study was
completed on the property in fiscal 2016.
In
April 2019, the Company received notice from the New South Wales
Department of Planning and Environment (the
“Department”) that, due to a procedural issue within
the Department, the Company’s Mine Lease Grant (“ML
1763”) pertaining to the Nyngan Scandium Project, previously
issued by the Department, is invalid. On September 10, 2020, the
Company announced receipt of a Final Determination letter from the
Deputy Secretary, Mining, Exploration and Geoscience resolving the
outstanding objection filed by the landowner in 2016. This Final
Determination will allow all measured and indicated resources
included in the Nyngan Scandium Project Definitive Feasibility
Study (“DFS”) to be reinstated in a Mining Lease grant.
In May 2019, the Company filed a new mine lease application with
the Department, related to the Nyngan Scandium Project to
compensate for the procedural issue. On July 24, 2019, the Company
announced that a new mine lease (“ML 1792”) had been
granted.
Royalties
attached to the Nyngan property include a 0.7% royalty on gross
mineral sales on the property, a 1.5% Net Profits Interest royalty
to private parties involved with the early exploration on the
property, and a 1.7% Net Smelter Returns royalty payable for 12
years after production commences. Another revenue royalty is
payable to private interests of 0.2%, subject to a $370,000 cap. A
NSW minerals royalty will also be levied on the project, subject to
negotiation, currently 4% on revenue.
Honeybugle property, Australia
The
Company holds a 100% interest in its Honeybugle
property.
Kiviniemi Scandium Property Finland
In
August 2018, the Company was granted an
Exploration License for the Kiviniemi Scandium Property
in
central
Finland from the Finnish regulatory body governing mineral
exploration and mining in Finland.
As of
December 31, 2020, no funds have been capitalized for this
property. During fiscal 2018, a reclamation bond of $11,444
(€10,000) was placed.
5.
RELATED PARTY TRANSACTIONS
During the
year ended December 31, 2020, the Company expensed $542,772 for
stock-based compensation for stock options issued to Company
directors. During the year ended December 31, 2019, the Company
expensed $314,104 for stock options issued to Company
directors.
During
each of the years ended December 31, 2020 and December 31, 2019 the
Company paid a consulting fee of $102,000 to one of its
directors.
As at
December 31, 2020, the Company owed $702,456 (2019 - $269,165) to
officers of the Company.
6.
CAPITAL
STOCK AND ADDITIONAL PAID IN CAPITAL
On
March 21, 2019, the Company issued 5,926,301 common shares at a
value of C$0.18 per common share for total proceeds of C$1,066,734
($799,484).
F-13
|
Scandium International Mining Corp.
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
December
31, 2020
|
|
(Expressed
in US Dollars)
|
6.
CAPITAL
STOCK AND ADDITIONAL PAID IN CAPITAL
(cont'd)
Stock
Options
The
Company established a stock option plan (the “Plan”)
under which it is authorized to grant options to executive officers
and directors, employees and consultants and the number of options
granted under the Plan shall not exceed 15% of the shares
outstanding. Under the Plan, the exercise period of the
options may not exceed ten years from the date of grant and vesting
is determined by the Board of Directors.
Stock
option transactions are summarized as follows:
|
|
Stock
Options
|
|
|
|
Number
|
Weighted average
exercise price in Canadian
$
|
|
|
|
|
|
Outstanding,
December 31, 2018
|
29,065,000
|
$
0.19
|
|
Granted
|
9,860,000
|
0.15
|
|
Exercised
|
(1,775,000
)
|
0.12
|
|
Expired
|
(2,540,000
)
|
0.16
|
|
|
|
|
|
Outstanding,
December 31, 2019
|
34,610,000
|
0.19
|
|
Granted
|
14,425,000
|
0.10
|
|
Exercised
|
(1,550,000
)
|
0.12
|
|
Expired
|
(12,385,000
)
|
0.14
|
|
|
|
|
|
Outstanding,
December 31, 2020
|
35,100,000
|
$
0.17
|
|
|
|
|
|
Number currently
exercisable
|
35,100,000
|
$
0.17
|
|
|
|
|
F-14
|
Scandium International Mining Corp.
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
December
31, 2020
|
|
(Expressed
in US Dollars)
|
6.
CAPITAL
STOCK AND ADDITIONAL PAID IN CAPITAL
(cont'd)
As at
December 31, 2020, incentive stock options were outstanding as
follows:
|
|
Number of
Options
(outstanding)
|
Number of
Options
(exercisable)
|
Exercise
Price in Canadian
$
|
Expiry Date
|
|
|
|
|
|
|
|
Options
|
|
|
|
|
|
|
4,100,000
|
4,100,000
*
|
0.130
|
February 8,
2021
|
|
|
400,000
|
400,000
|
0.370
|
August 19,
2021
|
|
|
400,000
|
400,000
|
0.225
|
August 19,
2021
|
|
|
400,000
|
400,000
|
0.150
|
August 19,
2021
|
|
|
400,000
|
400,000
|
0.065
|
August 19,
2021
|
|
|
4,400,000
|
4,400,000
|
0.370
|
February 21,
2022
|
|
|
250,000
|
250,000
|
0.300
|
October 6,
2022
|
|
|
5,700,000
|
5,700,000
|
0.225
|
January 19,
2023
|
|
|
350,000
|
350,000
|
0.185
|
August 30,
2023
|
|
|
4,625,000
|
4,625,000
|
0.150
|
May 9,
2024
|
|
|
50,000
|
50,000
|
0.130
|
June 24,
2024
|
|
|
8,025,000
|
8,025,000
**
|
0.065
|
March 19,
2025
|
|
|
100,000
|
100,000
|
0.075
|
May 22,
2025
|
|
|
5,900,000
|
5,900,000
|
0.140
|
November 13,
2025
|
|
|
|
|
|
|
|
|
35,100,000
|
35,100,000
|
|
|
*
2,065,000
of these options were exercised subsequent to December 31, 2020.
2,035,000 expired unexercised.
**
75,000 of these options were exercised subsequent to December 31,
2020.
As at
December 31, 2020 the Company’s outstanding and exercisable
stock options have an aggregate intrinsic value of $1,891,329 (2019
- $Nil).
Stock-based
compensation
During
the year ended December 31, 2020, the Company recognized
stock-based compensation of $684,055 (December 31, 2019 - $431,133)
in the statement of loss and comprehensive loss. There were
14,425,000 stock options granted during the year ended December 31,
2020 (December 31, 2019 – 9,860,000).
The
weighted average fair value of the options granted in the year was
C$0.10 (2019 - C$0.15).
F-15
|
Scandium International Mining Corp.
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
December
31, 2020
|
|
(Expressed
in US Dollars)
|
6.
CAPITAL
STOCK AND ADDITIONAL PAID IN CAPITAL
(cont'd)
The
fair value of all compensatory options granted is estimated on
grant date using the Black-Scholes option pricing model. The
weighted average assumptions used in calculating the fair values of
stock options granted in the year ended December 31,2020 are as
follows:
|
|
2020
|
2019
|
|
|
|
|
|
Risk-free interest
rate
|
2.31
%
|
2.31
%
|
|
Expected
life
|
5 years
|
5 years
|
|
Volatility
|
90.40
%
|
90.40
%
|
|
Forfeiture
rate
|
0.00
%
|
0.00
%
|
|
Dividend
rate
|
0.00
%
|
0.00
%
|
|
|
|
|
7.
TREASURY
STOCK
|
|
Number
|
Amount
|
|
|
|
|
|
Treasury shares,
December 31, 2020, 2019, and 2018
|
$
1,033,333
|
1,264,194
|
Treasury shares
comprise shares of the Company which cannot be sold without the
prior approval of the TSX.
F-16
|
Scandium International Mining Corp.
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
December
31, 2020
|
|
(Expressed
in US Dollars)
|
|
8.
|
SEGMENTED INFORMATION
|
The
Company’s mineral properties are located in Australia. The
Company’s capital assets’ geographic information is as
follows:
|
December
31, 2020
|
Australia
|
United States
|
Total
|
|
|
|
|
|
|
Equipment
|
$
-
|
$
4,660
|
$
4,660
|
|
Mineral property
interests
|
704,053
|
-
|
704,053
|
|
|
|
|
|
|
|
$
704,053
|
$
4,660
|
$
708,713
|
|
December
31, 2019
|
Australia
|
United States
|
Total
|
|
|
|
|
|
|
Equipment
|
$
-
|
$
6,967
|
$
6,967
|
|
Mineral property
interests
|
704,053
|
-
|
704,053
|
|
|
|
|
|
|
|
$
704,053
|
$
6,967
|
$
711,020
|
F-17
|
Scandium International Mining Corp.
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
December
31, 2020
|
|
(Expressed
in US Dollars)
|
9.
INCOME TAX
A reconciliation of income taxes at
statutory rates with the reported taxes is as follows:
|
|
2020
|
2019
|
|
|
|
|
|
Loss before income
taxes
|
$
(1,387,840
)
|
$
(1,947,934
)
|
|
|
|
|
|
Expected income tax
(recovery)
|
(361,000
)
|
(506,000
)
|
|
Change in
statutory, foreign exchange rates, and other
|
120,000
|
(3,000
)
|
|
Permanent
difference
|
182,000
|
112,000
|
|
Impact of foreign
exchange
|
(190,000
)
|
263,000
|
|
Adjustment to prior
years provision versus statutory tax returns
|
(293,000
)
|
(3,278,000
)
|
|
Change in
unrecognized deductible temporary differences
|
542,000
|
3,412,000
|
|
Total Income tax
expense (recovery)
|
$
-
|
$
-
|
The
significant components of the Company’s deferred tax assets
that have not been included on the consolidated statement of
financial position are as follows:
|
|
2020
|
2019
|
|
Deferred Tax Assets
(Liabilities)
|
|
|
|
Exploration
and evaluation assets
|
$
1,803,000
|
$
1,715,000
|
|
Property and
equipment
|
104,000
|
65,000
|
|
Share issue
costs
|
-
|
-
|
|
Marketable
securities
|
19,000
|
19,000
|
|
Allowable capital
losses
|
1,845,000
|
1,845,000
|
|
Non-capital losses
available for future periods
|
6,450,000
|
6,075,000
|
|
|
10,261,000
|
9,719,000
|
|
Unrecognized
deferred tax assets
|
(10,261,000
)
|
(9,719,000
)
|
|
Net deferred tax
assets
|
$
-
|
$
-
|
|
Scandium International Mining Corp.
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
December
31, 2020
|
|
(Expressed
in US Dollars)
|
9.
INCOME TAX
(cont'd)
The
significant components of the Company’s temporary
differences, unused tax credits and unused tax losses that have not
been included on the consolidated statement of financial position
are as follows:
|
|
2020
|
Expiry Date
Range
|
2019
|
Expiry Date
Range
|
|
Temporary
Differences
|
|
|
|
|
|
Exploration
and evaluation assets
|
$
6,937,000
|
No expiry
date
|
$
6,551,000
|
No expiry
date
|
|
Property
and equipment
|
400,000
|
No expiry
date
|
251,000
|
No expiry
date
|
|
Marketable
securities
|
145,000
|
No expiry
date
|
145,000
|
No expiry
date
|
|
Allowable
capital losses
|
7,250,000
|
No expiry
date
|
7,097,000
|
No expiry
date
|
|
Non-capital
losses available for future periods
|
24,807,000
|
2020 to
2040
|
22,965,000
|
2019 to
2039
|
10.
SUPPLEMENTAL
DISCLOSURE WITH RESPECT TO CASH FLOWS
There
were no major non-cash transactions in the year ended December 31,
2020 and 2019.
There
were no amounts paid for taxes and interest in the years ended
December 31, 2020 and December 31, 2019.
11.
SALE
OF ROYALTY
On
January 16, 2020, the Company received net proceeds of $382,430
(C$500,000) from completion of a royalty buyback agreement.
The Company’s royalty interest was related to the Windfall
Lake gold property in Quebec, Canada, and was carried at zero value
on the balance sheet.
12.
SUBSEQUENT
EVENT
Subsequent to
year-end 2,065,000 options were exercised at C$0.13 for proceeds of
C$268,450 (US$211,334). Also 75,000 options were exercised at
C$0.065 for proceeds of C$4,875 (US$3,861).
F-18
TABLE OF CONTENTS
Part IItem 2. Properties - Cautionary Note To U.s. Investors Regarding Resource EstimatesItem 1. BusinessItem 2. Properties Description Of Mineral Projects Nyngan Scandium Project Nyngan Feasibility StudyItem 2. PropertiesItem 1A. Risk FactorsItem 3. Legal ProceedingsItem 4. Mine Safety DisclosuresPart IIItem 5. Market For Registrants Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Conditions and Results Of OperationsItem Variance Favourable / (unfavourable) ExplanationItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIPart IVItem 15. Exhibits, Financial Statements Schedules