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-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended
March
31, 2020
[ ] TRANSITION REPORT UNDER 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
|
|
(State or other
jurisdiction
of incorporation or
organization)
|
(IRS
Employer
Identification
No.)
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1430 Greg Street, Suite 501, Sparks, Nevada 89431
(Address
of principal executive offices) (Zip Code)
(775)
355-9500
(Registrant’s
telephone number, including area code)
N/A
(Former
name, former address and former fiscal year, if changed since last
report)
Securities
registered pursuant to Section 12(b) of the Act:
None
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by sections 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.
Large
accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [
] Smaller reporting company [
X
] Emerging growth company [
]
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 is a shell company,
as defined in Rule 12b-2 of the Exchange Act. Yes [ ] No
[
X
]
Indicate
the number of shares outstanding of each of the registrant’s
classes of common stock, as of the latest practicable date:
As of
May 7, 2020, the registrant’s outstanding common stock
consisted of 312,482,595 shares.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2020
|
Scandium
International Mining Corp.
|
||
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CONDENSED
CONSOLIDATED BALANCE SHEETS
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||
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(Expressed in US
Dollars) (Unaudited)
|
||
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|
||
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As
at:
|
March
31,
2020
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December
31,
2019
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ASSETS
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Current
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Cash
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$
310,629
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$
115,568
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Prepaid
expenses and receivables
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31,805
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45,763
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Total
Current Assets
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342,434
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161,331
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Reclamation bond
(Note 4)
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11,444
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11,444
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Equipment
(Note 3)
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6,390
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6,967
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Mineral property interests
(Note
4)
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704,053
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704,053
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Total
Assets
|
$
1,064,321
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$
883,795
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LIABILITIES
AND EQUITY
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Current
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Accounts payable
and accrued liabilities
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$
266,784
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$
269,059
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Accounts
payable with related parties (Note 5)
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343,220
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269,165
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Total
Liabilities
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610,004
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538,224
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Equity
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Capital stock (Note
6) (Authorized: Unlimited number of common shares; Issued and
outstanding: 312,482,595 (2019 – 312,482,595)
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109,375,661
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109,375,661
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Treasury stock
(Note 7) (1,033,333 common shares) (2019 –
1,033,333)
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(1,264,194
)
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(1,264,194
)
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Additional paid in
capital (Note 6)
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6,190,834
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5,936,074
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Accumulated
other comprehensive loss
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(853,400
)
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(853,400
)
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Deficit
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(112,994,584
)
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(112,848,570
)
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Total
Equity
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454,317
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345,571
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Total
Liabilities and Equity
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$
1,064,321
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$
883,795
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Nature
and continuance of operations (Note 1)
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
3
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Scandium
International Mining Corp.
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CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS
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(Expressed in US
Dollars) (Unaudited)
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3-month period
ended
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March 31,
2020
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March 31,
2019
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EXPENSES
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Amortization (Note
3)
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$
577
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$
577
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Consulting
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30,375
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95,618
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Exploration
(recovery)
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15,961
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(26,184
)
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General and
administrative
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62,450
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94,492
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Insurance
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8,239
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7,584
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Professional
fees
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27,545
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29,204
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Salaries and
benefits
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113,570
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114,109
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Stock-based
compensation (Note 6)
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254,760
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13,116
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Travel and
entertainment
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3,657
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13,731
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(517,134
)
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(342,247
)
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Foreign exchange
gain (loss)
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(11,310
)
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9,481
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Sale
of royalty (Note 9)
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382,430
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-
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Loss
and comprehensive loss for the period
|
$
(146,014
)
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$
(332,766
)
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Basic
and diluted loss per common share
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$
0.00
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$
0.00
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Weighted
average number of common shares outstanding – basic and
diluted
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312,482,595
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305,571,161
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The
accompanying notes are an integral part of these condensed
consolidated financial statements.
4
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Scandium International Mining Corp.
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CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Expressed
in US Dollars) (Unaudited)
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3-month period
ended
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March 31,
2020
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March 31,
2019
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CASH
FLOWS FROM OPERATING ACTIVITIES
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Loss for the
period
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$
(146,014
)
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$
(332,766
)
|
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Items not affecting
cash:
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Amortization
|
577
|
577
|
|
Stock-based
compensation
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254,760
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13,116
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|
|
|
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Changes in non-cash
working capital items:
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|
|
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Decrease in prepaid
expenses and receivables
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13,958
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8,493
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(Decrease) increase
in accounts payable, accrued liabilities and accounts payable with
related parties
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71,780
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(96,018
)
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|
195,061
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(406,598
)
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CASH
FLOWS FROM FINANCING ACTIVITIES
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Common shares
issued
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-
|
799,483
|
|
Options exercised
for common shares
|
-
|
96,680
|
|
|
-
|
896,163
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|
|
|
|
|
Change
in cash during the period
|
195,061
|
489,565
|
|
Cash,
beginning of period
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115,568
|
284,757
|
|
|
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|
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Cash,
end of period
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$
310,629
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$
774,322
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|
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2020
|
2019
|
|
Cash
paid during the 3-month period for interest
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$
-
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$
-
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Cash
paid during the 3-month period for taxes
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$
-
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$
-
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5
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Scandium International Mining
Corp.
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|||
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CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN
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|||
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EQUITY
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|
|||
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(Expressed in
US Dollars) (Unaudited)
|
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|||
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Number of Shares
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Capital Stock
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Additional Paid in
Capital
|
Treasury Stock
|
Accumulated Other Comprehensive
Loss
|
Deficit
|
Total Stockholders’
Equity
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2018
|
304,781,294
|
$
108,244,311
|
$
5,675,812
|
$
(1,264,194
)
|
$
(853,400
)
|
$
(110,900,636
)
|
$
901,893
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|
Private
placement
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5,926,301
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799,483
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-
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-
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-
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-
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799,483
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|
Options
exercised
|
1,075,000
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197,778
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(101,098
)
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-
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-
|
-
|
96,680
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|
Stock-based
compensation
|
-
|
-
|
13,116
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-
|
-
|
-
|
13,116
|
|
Loss for the three
months
|
-
|
-
|
-
|
-
|
-
|
(332,766
)
|
(332,766
)
|
|
Balance, March
31, 2019
|
311,782,595
|
$
109,241,572
|
$
5,587,830
|
$
(1,264,194
)
|
$
(853,400
)
|
$
(111,233,402
)
|
$
1,478,406
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
-
|
-
|
409,520
|
-
|
-
|
-
|
409,520
|
|
Loss for the three
months
|
-
|
-
|
-
|
-
|
-
|
(859,934
)
|
(859,934
)
|
|
Balance, June
30, 2019
|
311,782,595
|
$
109,241,572
|
$
5,997,350
|
$
(1,264,194
)
|
$
(853,400
)
|
$
(112,093,336
)
|
$
1,027,992
|
|
|
|
|
|
|
|
|
|
|
Options
exercised
|
700,000
|
134,089
|
(69,773
)
|
-
|
-
|
-
|
64,316
|
|
Stock-based
compensation
|
-
|
-
|
4,844
|
-
|
-
|
-
|
4,844
|
|
Loss for the three
months
|
-
|
-
|
-
|
-
|
-
|
(443,426
)
|
(443,426
)
|
|
Balance,
September 30, 2019
|
312,482,595
|
$
109,375,661
|
$
5,932,421
|
$
(1,264,194
)
|
$
(853,400
)
|
$
(112,536,762
)
|
$
653,726
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
-
|
-
|
3,653
|
-
|
-
|
-
|
3,653
|
|
Loss for the three
months
|
-
|
-
|
-
|
-
|
-
|
(311,808
)
|
(311,808
)
|
|
Balance,
December 31, 2019
|
312,482,595
|
$
109,375,661
|
$
5,936,074
|
$
(1,264,194
)
|
$
(853,400
)
|
$
(112,848,570
)
|
$
345,571
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
-
|
-
|
254,760
|
-
|
-
|
-
|
254,760
|
|
Loss for the three
months
|
-
|
-
|
-
|
-
|
-
|
(146,014
)
|
(146,014
)
|
|
Balance, March
31, 2020
|
312,482,595
|
$
109,375,661
|
$
6,190,834
|
$
(1,264,194
)
|
$
(853,400
)
|
$
(112,994,584
)
|
$
454,317
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
6
|
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
condensed 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 any related adverse public health
developments, has adversely affected workforces, economies, and
financial markets globally, potentially 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.
|
BASIS OF PRESENTATION
|
Basis
of presentation
The
accompanying unaudited interim condensed consolidated financial
statements have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission
(“SEC”). The interim condensed consolidated financial
statements include the consolidated accounts of the Company and its
wholly-owned subsidiaries with all significant intercompany
transactions eliminated. In the opinion of management, all
adjustments necessary for a fair statement of the consolidated
financial position, results of operations and cash flows for the
interim periods have been made. Certain information and footnote
disclosures normally included in the consolidated financial
statements prepared in accordance with generally accepted
accounting principles of the United States of America (“US
GAAP”) have been condensed or omitted pursuant to such SEC
rules and regulations. These interim condensed consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements for the year ended December 31,
2019 and with our Annual Report on Form 10-K filed with the SEC on
February 28, 2020. Operating results for the three-month period
ended March 31, 2020 may not necessarily be indicative of the
results for the year ending December 31, 2020.
These
unaudited interim condensed 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”).
Use
of estimates
The
preparation of unaudited interim condensed 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 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.
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.
7
|
2.
|
BASIS OF PRESENTATION
(cont’d…)
|
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
Company has no leases with a term of greater than 12 months. Short
term lease expenses totaled $7,383 during the quarter ended March
31, 2020 and $6,699 during the quarter ended March 31,
2019.
The
following table presents information about the assets that are
measured at fair value on a recurring basis as at March 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 included situations where
there is little, if any, market activity for the
asset:
|
|
March
31,
2020
|
Quoted Pricesin
Active Markets
(Level
1)
|
Significant Other
Observable Inputs
(Level
2)
|
Significant
Unobservable Inputs
(Level
3)
|
|
Assets:
|
|
|
|
|
|
Cash
|
$
310,629
|
$
310,629
|
$
—
|
$
—
|
|
|
|
|
|
|
|
Total
|
$
310,629
|
$
310,629
|
$
—
|
$
—
|
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.
Accounting Standards Update 2018-13 – Fair
Value Measurement (Topic 840)
Disclosure
Framework—Changes to the Disclosure Requirements for Fair
Value Measurement.
The
amendments in this update apply to all entities that are required,
under existing GAAP, to make disclosures about recurring or
nonrecurring fair value measurements.
This standard is effective for interim and annual
reporting periods beginning after December 15, 2019, with early
adoption permitted. The Company has adopted this policy which has
no material effect on the consolidated financial
statements.
|
3.
|
EQUIPMENT
|
|
|
December 31,
2019
Net Book
Value
|
Additions
(disposals)
(write-offs)
|
Amortization
|
March 31,
2020
Net Book
Value
|
|
Computer
equipment
|
$
6,967
|
$
-
|
$
(577
)
|
$
6,390
|
|
|
December 31,
2018
Net Book Value
|
Additions
(disposals)
(write-offs)
|
Amortization
|
December 31,
2019
Net Book Value
|
|
Computer
equipment
|
$
9,274
|
$
-
|
$
(2,307
)
|
$
6,967
|
8
|
4.
|
MINERAL PROPERTY INTERESTS
|
|
March 31,
2020
|
Scandium and
other
|
|
|
|
|
Balance,
March 31, 2020, December 31, 2019
|
$
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.
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. In May 2019, the Company
filed a new mine lease application with the Department, related to
the Nyngan Scandium Project. 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 the 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
March 31, 2019, 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 3-month period
ended March 31, 2020, the Company expensed $196,551 for stock-based
compensation for stock options issued to Company directors. During
the 3-month period ended March 31, 2019, the Company expensed $Nil
for stock-based compensation for stock options issued to Company
directors.
During the 3-month period
ended March 31, 2020, the Company expensed a consulting fee of
$25,500 to one of its directors.During the 3-month period ended
March 31, 2019, the Company expensed a consulting fee of $25,500 to
one of its directors.
As at March 31, 2020, the
Company owed $343,220 to various directors and officers of the
Company. (December 31, 2019 - $269,165).
6.
CAPITAL STOCK AND ADDITIONAL PAID IN
CAPITAL
Private
placements
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
($799,483).
9
|
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
|
0.188
|
|
Granted
|
8,425,000
|
0.065
|
|
Expired
|
(4,660,000
)
|
0.150
|
|
|
|
|
|
Outstanding, March
31, 2020
|
38,375,000
|
$
0.166
|
|
|
|
|
|
Number currently
exercisable
|
38,375,000
|
$
0.166
|
As at
March 31, 2020, incentive stock options were outstanding as
follows:
|
|
Number
of
Options
Outstanding
|
Number
of
Options
Exercisable
|
Exercise
Price in Canadian
$
|
Expiry Date
|
|
|
|
|
|
|
|
Options
|
|
|
|
|
|
|
3,450,000
|
3,450,000
|
0.140
|
April 17,
2020*
|
|
|
250,000
|
250,000
|
0.600
|
May 11,
2020
|
|
|
100,000
|
100,000
|
0.225
|
July 11,
2020
|
|
|
25,000
|
25,000
|
0.150
|
July 11,
2020
|
|
|
400,000
|
400,000
|
0.115
|
August 28,
2020
|
|
|
4,300,000
|
4,300,000
|
0.100
|
November 5,
2020
|
|
|
4,850,000
|
4,850,000
|
0.130
|
February 8,
2021
|
|
|
4,800,000
|
4,800,000
|
0.370
|
February 21,
2022
|
|
|
250,000
|
250,000
|
0.300
|
October 6,
2022
|
|
|
6,100,000
|
6,100,000
|
0.225
|
January 19,
2023
|
|
|
350,000
|
350,000
|
0.185
|
August 30,
2023
|
|
|
5,025,000
|
5,025,000
|
0.150
|
May 9,
2024
|
|
|
50,000
|
50,000
|
0.130
|
June 24,
2024
|
|
|
8,425,000
|
8,425,000
|
0.065
|
March 19,
2025
|
|
|
|
|
|
|
|
|
38,375,000
|
38,375,000
|
|
|
*
These options expired unexercised on April 17, 2020.
As at
March 31, 2020 the Company’s outstanding and exercisable
stock options have an aggregate intrinsic value of $Nil (December
31, 2019 - $Nil).
10
|
6.
|
CAPITAL STOCK AND ADDITIONAL PAID IN CAPITAL
(cont’d…)
|
Stock-based
compensation
During
the 3-month period ended March 31, 2020, the Company recognized
stock-based compensation of $254,760 (March 31, 2019 - $13,116) in
the statement of operations and comprehensive loss. There were
8,425,000 stock options granted during the 3-month period ended
March 31, 2020 (March 31, 2019 – Nil).
The
weighted average fair value of the options granted in the quarter
was C$0.065 (2018 – C$ Nil).
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 3-month period ended March 31 are as
follows:
|
|
2020
|
2019
|
|
|
|
|
|
Risk-free interest
rate
|
1.31
%
|
N/A
|
|
Expected
life
|
5 years
|
N/A
|
|
Volatility
|
86.26
%
|
N/A
|
|
Forfeiture
rate
|
N/A
|
N/A
|
|
Dividend
rate
|
N/A
|
N/A
|
|
7.
|
TREASURY STOCK
|
|
|
Number
|
Amount
|
|
|
|
|
|
Treasury shares,
March 31, 2020 and December 31 2019
|
1,033,333
|
$
1,264,194
|
|
|
|
|
|
|
1,033,333
|
$
1,264,194
|
Treasury shares
comprise shares of the Company which cannot be sold without the
prior approval of the TSX.
|
8.
|
SEGMENTED INFORMATION
|
The
Company’s mineral properties are located in Australia. The
Company’s capital assets’ geographic information is as
follows:
|
March 31,
2020
|
Australia
|
United
States
|
Total
|
|
|
|
|
|
|
Equipment
|
$
-
|
$
6,390
|
$
6,390
|
|
Mineral property
interests
|
704,053
|
-
|
704,053
|
|
|
|
|
|
|
|
$
704,053
|
$
6,390
|
$
710,443
|
|
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
|
|
9.
|
SALE OF ROYALTY
|
On
January 16, 2020, the Company received net proceeds of 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.
11
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The
following discussion of the operating results, corporate activities
and financial condition of Scandium International Mining Corp.
(hereinafter referred to as “we”, “us”,
“Scandium International”, “SCY”, or the
“Company”) and its subsidiaries provides an analysis of
the operating and financial results between December 31, 2019 and
March 31, 2020 and a comparison of the material changes in our
results of operations and financial condition between the
three-month period ended March 31, 2019 and the three-month period
ended March 31, 2020. This discussion should be read in conjunction
with Management’s Discussion and Analysis of Financial
Condition and Results of Operations included in our Annual Report
on Form 10-K for the year ended December 31, 2019.
This
discussion and analysis contains forward-looking statements that
involve risks, uncertainties and assumptions. Our actual results
may differ materially from those anticipated in these
forward-looking statements as a result of many factors, including,
but not limited to, those set forth under the heading “Risk
Factors and Uncertainties” in our Annual Report on Form 10-K
for the year ended December 31, 2019, and elsewhere in this
Quarterly Report on Form 10-Q.
The
interim statements have been prepared in accordance with US
Generally Accepted Accounting Principles, as required under U.S.
federal securities laws applicable to the Company, and as permitted
under applicable Canadian securities laws. The Company is a
reporting company under applicable securities laws in Canada and
the United States. The reporting currency used in our financial
statements is the United States Dollar.
The
information contained within this report is current as of May 7,
2020 unless otherwise noted. Additional information relevant to the
Company’s activities can be found on SEDAR at www.sedar.com
and on EDGAR at www.sec.gov.
Technical
information in this Form 10Q, including the MD&A, has been
reviewed and approved by Willem Duyvesteyn, a Qualified Person as
defined by Canadian National Instrument 43-101 (“NI
43-101”). Mr. Duyvesteyn is a director of and consultant to
Scandium International.
Cautionary Note to U.S. Investors Regarding Reserve and Resource
Estimates
The
Company uses Canadian Institute of Mining, Metallurgy and Petroleum
definitions for the terms “proven reserves”,
“probable reserves”, “measured resources”
and “indicated resources”. U.S. investors are cautioned
that while these terms are recognized and required by Canadian
regulations, including National Instrument 43-101
Standards of Disclosure for Mineral
Projects
(“NI 43-101”), the U.S. Securities and
Exchange Commission (“SEC”) does not recognize them.
Canadian mining disclosure standards differ from the requirements
of the SEC under SEC Industry Guide 7, and reserve and resource
information referenced in this Form 10-Q may not be comparable to
similar information disclosed by companies reporting under U.S.
standards. In particular, and without limiting the generality of
the foregoing, the term “resource” does not equate to
the term “reserve”. Under United States 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 permit the inclusion of information
concerning “measured mineral resources” or
“indicated 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. Disclosure of “contained ounces” in
a resource estimate 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 tonnage and grade
without reference to unit measures. The requirements of NI 43-101
for identification of “reserves” are also not the same
as those of the SEC, and reserves in compliance with NI 43-101 may
not qualify as “reserves” under SEC
standards.
Cautionary Note Regarding Forward-Looking Statements
Certain
statements made in this Quarterly Report on Form 10-Q may
constitute forward-looking statements
about the Company and its business.
Forward looking statements are statements that are not historical
facts and include, but are not limited to, reserve and resource
estimates, estimated value of the project, projected investment
returns, anticipated mining and processing methods for the project,
the estimated economics of the project, anticipated scandium
recoveries, production rates, scandium grades, estimated capital
costs, operating cash costs and total production costs, planned
additional processing work and environmental permitting. The
forward-looking statements in this report are subject to various
risks, uncertainties and other factors that could cause the
Company's actual results or achievements to differ materially from
those expressed in or implied by forward looking statements. These
risks, uncertainties and other factors include, without limitation,
risks related to uncertainty in the demand for scandium and pricing
assumptions; uncertainties related to raising sufficient financing
to fund the Nyngan Scandium Project in a timely manner and on
acceptable terms; changes in planned work resulting from
logistical, technical or other factors; the possibility that
results of work will not fulfill expectations and realize the
perceived potential of the Company's properties; uncertainties
involved in the estimation of scandium reserves and resources; the
possibility that required permits may not be obtained in a timely
manner or at all; the possibility that capital and operating costs
may be higher than currently estimated and may preclude commercial
development or render operations uneconomic; the possibility that
the estimated recovery rates may not be achieved; risk of
accidents, equipment breakdowns and labor disputes or other
unanticipated difficulties or interruptions; the possibility of
cost overruns or unanticipated expenses in the work program; risks
related to projected project economics, recovery rates, and
estimated NPV and anticipated IRR and other factors identified in
the Company's SEC filings and its filings with Canadian securities
regulatory authorities. Forward-looking statements are based on the
beliefs, opinions and expectations of the Company's management at
the time they are made, and other than as required by applicable
securities laws, the Company does not assume any obligation to
update its forward-looking statements if those beliefs, opinions or
expectations, or other circumstances, change.
12
Scandium International Corporate Overview
Scandium International is a specialty metals and alloys company
focused on developing the production and sales of scandium and
other specialty metals. The Company intends to utilize its knowhow
and, in certain instances, patented technologies to maximize
opportunities in scandium and other specialty metals.
The Company was formed in 2006, under the name Golden Predator
Mines Inc. As part of a reorganization and spin-out of the
Company’s precious metals portfolio in March 2009, the
Company changed its name to EMC Metals Corp.
In order to
reflect our emphasis on mining for scandium minerals, effective
November 19, 2014, we changed our name to Scandium International
Mining Corp.
The Company currently
trades on the Toronto Stock Exchange under the symbol
“SCY”.
Our
focus of operations is the exploration and development of the
Nyngan scandium deposit located in New South Wales
(“NSW”,) Australia (“Nyngan” or the
“Nyngan Scandium Project.”) We also hold exploration
stage properties in Australia, known as the “Honeybugle
Scandium Property”, and in Finland, known as the
“Kiviniemi Scandium Property.”
We
acquired a 100% interest in the Nyngan Scandium Project in June of
2014 pursuant to the terms of a settlement agreement with Jervois
Mining Ltd. of Melbourne, Australia. The project is held through
our Australian subsidiary, EMC Metals Australia Pty Ltd.
(“EMC Australia” or “EMC-A,”) which also
holds the Honeybugle Scandium Property.
Pursuant to a share exchange agreement dated June 14, 2017 between
the Company and Scandium Investments LLC (“SIL”), the
Company purchased SIL’s 20% interest in EMC Australia in
exchange for 57,371,565 common shares of SCY and an additional
1,459,080 common shares as a royalty adjustment payment. Closing of
the purchase of the EMC Australia shares was subject to shareholder
approval, which the Company obtained at a special meeting of
shareholders held on September 11, 2017. The transaction
subsequently closed on October 9, 2017, with SCY holding a 100%
ownership interest in EMC Australia. Under the terms of the share
exchange agreement, SIL was granted the right to nominate two
individuals to the board of the Company for so long as SIL held at
least 15% of SCY’s issued and outstanding shares, and one
director for so long as SIL held at least 5% but less than 15% of
SCY’s issued and outstanding shares. Pursuant to the
nomination rights, Peter Evensen and R. Christian Evensen were
appointed as directors to the SCY Board on closing of the
transaction.
During
the first quarter of 2020, we focused on Nyngan Scandium Project
activities including scandium marketing arrangements.
Principal Properties Review
Nyngan Scandium Project (NSW, Australia)
Nyngan Property Description and Location
The Nyngan Scandium Project
site is located approximately 450 kilometers northwest of Sydney,
NSW, Australia and approximately 20 kilometers due west of the town
of Nyngan, a rural town of approximately 2,900 people. The general
area can be characterized as flat countryside and is classified as
agricultural land, used predominantly for wheat farming and
livestock grazing.
Figure
1: Location of Nyngan Project
Note: None of the Existing Mines identified in Figure 1 produce
scandium.
13
Figure 2: Location of the Exploration Licenses and Mining Lease for
the Nyngan Scandium Project
Note:
All Exploration Licenses and Leases described in Figure 2 are held
100% by EMC-A.
Nyngan Feasibility Study
On
April 18, 2016, the Company announced the results of an
independently prepared 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”).
The report was filed on May 6, 2016 and is available on SEDAR
(
www.sedar.com
),
on 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.
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.
14
Nyngan Scandium Project Highlights
●
Capital cost
estimate for the Project is US$87.1 million,
●
Annual scandium
oxide product volume averages 37,690 kg per year, 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 and consolidates a significant amount of
metallurgical test work and prior study on the Nyngan Scandium
Project. 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. 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. 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 on the business.
The
Feasibility Study delivered a positive result on the Nyngan
Scandium Project, and recommended 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.
Confirmatory Metallurgical Test Results
On June
29, 2016, we announced the results of a confirmatory metallurgical
test work report from Altrius Engineering Services (AES) of
Brisbane, Australia. The test work results directly relate to the
list of recommended programs included in the Feasibility Study. AES
devised and supervised these test work programs at the SGS
laboratory in Perth, Australia and at the Nagrom laboratory in
Brisbane, Australia.
The
project DFS recommended a number of process flowsheet test work
programs be investigated prior to commencing detailed engineering
and construction. Those study areas included pressure leach
(“HPAL”), counter-current decant circuits, solvent
extraction (“SX”), and oxalate precipitation, with
specific work steps suggested in each area. This latest test work
program addressed all of these recommended areas, and the results
confirm recoveries and efficiencies that either meet or exceed the
parameters used in the DFS. Highlights of the testing
are:
●
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.
15
Engineering, Procurement and Construction Management
Contract
On May
30, 2017, the Company announced that its subsidiary EMC Australia
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
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 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.
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.”
Development
Consent:
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$30 million, 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 feasibility
study.
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 application. The Mining Lease (“ML 1792”)
overlays select areas previously covered by Exploration Licenses.
The ML 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.
16
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 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, providing for significant project expansion
capacity. However, due to an objection filed in 2016 by a landowner
who holds freehold surface ownership over a portion of the 874
hectare area, the original MLA 531 remains in review by the New
South Wales Department of Planning and Environment. The landowner
objection claims the property is “Agricultural Land”,
with meaning as defined in the relevant law.
On
April 20, 2020 the Company announced that it received a favorable
‘Notice of Proposed Decision’ (the
‘Notice’) from the Deputy Secretary, Mining,
Exploration and Geoscience (Government of New South Wales,
Australia), related to the landowner objection.
This
Notice references new governmental findings regarding determination
of the longstanding 2016 Agricultural Land Objection, and indicates
that the Deputy Secretary now believes the objection has failed to
meet key legal tests on major portions of the affected area. The
Deputy Secretary engaged staff from the Department of Primary
Industry, with relevant agricultural knowledge, to review the
external consultant work on the objection. These government
agricultural experts opined that most of the land covered under the
objection was in fact not ‘Agricultural Land’ as
defined by Law and recommended only a small portion of specific
areas under question be excluded from a future Mine
Lease.
The
Notice also makes clear the advice is to be understood as a
proposed decision, rather than a final decision. The affected
parties have 21 days to file further information or arguments, at
which time the Deputy Secretary will consider those submissions and
render a final decision on the matter. The Company expects to have
only limited input to insert into the 21 day comment period, and
looks forward to a final and binding determination by the Secretary
or his designate in June of 2020. We have every expectation the
determination will be delivered on the basis of the proposed
decision, as supported by a thorough opinion document shared with
the Company by the decision makers.
However,
if the Department Secretary’s decision upholds the landowner
objection, the Company believes that outcome will not delay or
prevent the development of the Nyngan Scandium Project, as is
generally characterized in the 2016 feasibility study.
As of
the date of this Form 10-Q, the Department Secretary has not made a
decision on the validity of the landowner objection.
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 October 2019 the
Company was granted Patent No. 10450634, titled
“Scandium-Containing Master Alloys And Method For Making The
Same”.
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.
17
The
2018 pilot program consisted of 5 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.
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 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.
To further that alliance, and to reinforce the capability of both
companies to deliver product developed for scandium aluminum alloy
markets, Scandium International and Alcereco also signed an offtake
agreement governing sales terms of scandium oxide product produced
from the Nyngan Scandium Project. The offtake agreement specifies
prices, delivery volumes and timeframes for commencement of
delivery of scandium oxide product. The offtake agreement does not
provide for a mandatory annual minimum purchase volume of scandium
oxide by Alcereco, and there is no requirement for payment in lieu
of purchase.
The 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.
During
December 2017, the Company revised and renewed the scandium product
offtake agreement with Alcereco. The revised agreement extends the
deadline for initial production and shipments from the Nyngan
Scandium Project from December 1, 2017, to as late as December 1,
2020. The defined sale product was changed to an aluminum scandium
2% master alloy from scandium oxide in the prior agreement. The
revised sales agreement covers approximately the same scandium
oxide volume as the prior agreement, representing 55% of
Nyngan’s initial twelve month forecast production, and
approximately 20% of nameplate capacity, as established by the
Definitive Feasibility Study. The revised offtake agreement does
not provide for a mandatory annual minimum purchase volume of
scandium oxide by Alcereco, and there is no requirement for payment
in lieu of purchase.
The
Company has sponsored research work as contemplated by the MOU with
Alcereco and with multiple other unrelated entities in separate
locations. This work develops and documents the improvement in
strength characteristics scandium can deliver to aluminum alloys
without degrading other key properties. The 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 particular alloys are popular
today.
These
programs are 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.
The
results of our research work 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 above 0.1%, and dramatic strengthening
improvements with additions of 0.35%, while preserving or enhancing
other alloy properties and characteristics. We have also
demonstrated that altering the combinations of scandium loads and
alloy hardening process techniques has significant effect on the
final alloy properties, offering the opportunity to tune alloy
characteristics to suit specific applications.
These findings are considered
commercially sensitive, and the data is not intended for public
disclosure at this time, although the findings and data are being
shared with select potential customers under specific
non-disclosure agreement protections, as is deemed relevant to
their specific areas of commercial interest.
18
Letters of Intent
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. Each of
the parties to the LOI agreements have agreed to report the
parameters and general results of the testing program utilizing
these scandium-containing alloys, upon completion of testing. The
Company plans to continue this LOI program of introducing scandium
for trial testing by partners through agreements with more
potential customers in 2020.
These
formal LOI agreements, with distinct industry segment leaders,
represent a key marketing program demonstrating precisely 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, benefits, and costing implications 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 maintains a
focus on research and development of emerging maritime technologies
and cutting-edge ship designs, and 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. ITL manufactures custom parts for
customers with its patented HFQ® technology, which enables the
single-pass forming of complex, lightweight, high-strength aluminum
parts that cannot otherwise be similarly formed today.
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. PAB has been a
well-known parts and forms supplier to the premium market segment
of the British automotive industry for decades.
Eck
Industries Inc. (“Eck”), based in Manitowoc, Wisconsin,
USA. Eck is a privately held manufacturer of precision sand cast
parts, and engineering services. Eck Industries operates a 210,000
sq. ft. facility with over 250 employees, and 110 customers.
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, and a worldwide customer base, majority concentrated in
the USA. Gränges is focused on advanced aluminum materials,
and holds a leading global position in rolled products for brazed
heat exchangers, which it estimates at 20%.
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, using metal alloys, servicing a significant, global customer
base. O&H produces over 3,000 individual cast parts, and
currently works with over 40 different alloys, primarily aluminum
and copper-based alloys.
AML
Technologies (“AML”), an Adelaide, Australia based
start-up company with proprietary technology for applying aluminum
alloys to additive layer manufacturing processes, also commonly
referred to as 3D printing.
Bronze-Alu
Group (“BAL”), based in La Couture-Boussey,
northern France. BAL is a privately held manufacturer of precision
high-pressure die cast parts, and offers prototyping, machining,
finishing and engineering services, employing both aluminum and
copper-based alloys. BAL exports approximately 80% of its
products to customers outside of France.
These
LOI agreements are part of a developing strategy by the Company to
engage with innovative, research-capable partners, willing to test
scandium in their applications. The Company also has similar
agreements with other research capable partners who do not wish to
be publicly named at this time. We are selecting and approaching
these specific partners because we have an understanding, from our
commissioned alloy mixing programs, that scandium additions can
make value-added contributions to their specific products, and we
have the alloy samples to enable an expedient uptake on that
validation. The scandium market for aluminum alloys needs to be
built, and that construction should be seen as underway in the most
direct sense. The Company plans to conduct further
application-specific programs in pursuit of sales contracts with
quality, predominantly existing aluminum alloy customers across
numerous industry segments.
19
Nyngan Scandium Project - Planned Activities for
2020-2021
The
following steps are planned for Nyngan during the 2020 and 2021
calendar years:
●
Complete master
alloy pilot trials and optimization work in Q1 2020
(Done),
●
Pursue additional
offtake agreements in support of planned future scandium
sales,
●
With offtakes, seek
construction financing for project, earliest 2021,
●
Commence site
construction in late 2021, with anticipated completion over 14
months, and
●
Initiate project
commissioning earliest late 2022, with product available for sale
by year end 2022.
Other Properties Review
Honeybugle Scandium Property (NSW, Australia)
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, Australia. The license area we call the
‘Honeybugle Scandium Property’ is located approximately
24 kilometers west-southwest from the Company’s Nyngan
Scandium Project and approximately 36 kilometers southwest from the
town of Nyngan, NSW.
Exploration rights for the Honeybugle Scandium Property include
certain minimum expenditure requirements. The Company intends to
fulfill those minimum expenditure requirements.
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 Nyngan.
Highlights
of initial drilling program results include the
following:
●
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.
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.
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’s Exploration
License area is approximately 24.6 hectares (0.25 square
kilometer), identical to the historic GTK exploration license on
the property.
Highlights
●
Kiviniemi property
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.
20
Kiviniemi Summary
The
Kiviniemi property represents a medium grade scandium resource
target that has remained unrecognized and overlooked by 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 resource.
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
intend to undertake 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.
Other Developments – First Quarter 2020
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.
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.
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,
Operating results - Revenues and Expenses, for the Three Months
Ended March 31, 2020
The Company’s results reflect higher operating costs due to
an increase in stock-based compensation (a non-cash expense).
Excluding non-cash costs, expenditures were down $66,758 due to
lower consulting fees, travel expenditures, and general and
administrative expenses. These lower costs were partially offset by
higher exploration fees. Also, in the current quarter the Company
received funds from the sale of a royalty interest.
21
Summary of quarterly results
A summary of the Company’s quarterly results are shown below
at Table 10.
Table 10. Quarterly Results Summary (US$)
|
|
2020
|
2019
|
2018
|
|||||
|
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
|
Net
Sales
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Net
Income (Loss) attributable to Scandium Mining Corp.
|
(146,014
)
|
(311,807
)
|
(443,426
)
|
(859,934
)
|
(332,766
)
|
(543,316
)
|
(461,781
)
|
(626,398
)
|
|
Basic
and diluted
Net
Income (Loss) per share attributable to Scandium Mining
Corp.
|
|
(0.00
)
|
(0.00
)
|
(0.01
)
|
(0.00
)
|
(0.00
)
|
(0.00
)
|
(0.00
)
|
Results of Operations for the three months ended March 31,
2020
The net loss for the quarter was $146,014, a decrease of $186,752
from $332,766 in the same quarter of the prior year. Details of the
individual items contributing to the decreased net loss are set out
below at Table 11:
Table 11. Variance Analysis for Net Loss
|
Q1
2020 vs. Q1 2019 - Variance Analysis
|
||
|
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
|
$
65,243
|
The Company
released several contractors who were no longer required, resulting
in this positive variance in the current quarter.
|
|
|
|
|
|
General
and administrative
|
$
32,043
|
The decrease in
this expense is due to the downturn of activity in Q1 2020 compared
to Q1 2019.
|
|
|
|
|
|
Travel
and entertainment
|
$
10,074
|
Less travel in Q1
2020 was due to an overall decrease in Company activities when
compared to Q1 2019.
|
|
|
|
|
|
Professional
fees
|
$
1,659
|
Lower 2020 activity
levels resulted in the favourable variance.
|
|
|
|
|
|
Salaries and
benefits
|
$
539
|
This favourable
variance is due to foreign exchange impacts to accrued payments due
individuals.
|
|
|
|
|
|
Insurance
|
$
(655
)
|
The slightly higher
cost in Q1 2020 is due to overall increases in insurance premiums
for the Company’s operations.
|
|
|
|
|
|
Foreign
exchange
|
$
(20,791
)
|
The impact of the
weakening Canadian and Australian currencies led to this
unfavourable variance in Q1 of 2020 when compared to Q1 2019 when
currency fluctuations were moving in opposite
directions.
|
|
|
|
|
|
Exploration
|
$
(42,145
)
|
Q1 of 2019 reflects
the receipt of Australian R&D credits. In 2020 no such credits
were available due to the negligible amounts expended on the
activities that qualify for this credit.
|
|
|
|
|
|
Stock-based
compensation
|
$
(241,644
)
|
In Q1 2020 the
Company issued 8,425,000 stock options all of which were vested and
expensed immediately. In Q1 2019 there were no stock options issued
resulting in this unfavourable variance.
|
22
Cash flow discussion for the three-month period ended March 31,
2020 compared to March 31, 2019
The cash inflow for operating activities was $195,062, an increase
of $601,660 (March 31, 2019 – ($406,598)), due mainly to the
sale of a royalty interest.
Cash inflows from financing activities of $Nil reflect the fact
that there were no private placements or options exercised in the
current quarter when compared to Q1 2019, in which there was
private placements of $799,483, and options exercised of
$96,680.
Financial Position
Cash
The Company’s cash position increased during the three-month
period by $195,061 to $310,629 (December 31, 2019 - $115,568) due
to the sale of a royalty interest.
Prepaid expenses and receivables
Prepaid expenses and accounts receivable decreased by $13,958 to
$31,805 due to funds received from cancellation of promotion events
and the amortization of prepaid expenditures (December 31, 2019 -
$45,763).
Property and equipment
Property and equipment consist of computer equipment at the Sparks,
Nevada office. The decrease of $577 to $6,390 (December 2019 -
$6,967) is due to amortization of that computer equipment in the
quarter.
Mineral interests
Mineral interests remained the same at $704,053.
Accounts payable, accrued liabilities and accounts payable with
related parties
Accounts payable has increased by $71,780 to $610,004 (December
2019– $538,224) due to the continued deferral of salaries to
certain individuals.
Capital Stock
Capital stock remained the same at $109,241,572 (December 31, 2019
- $109,241,572).
Additional paid-in capital increased by $254,760, to $6,190,834
(December 31, 2019 - $5,936,074) as a result of the expensing of
stock options.
Liquidity and Capital Resources
At March 31, 2020, the Company had a working capital of $(267,570)
including cash of $310,629 as compared to a working capital of
$(376,893) including cash of $115,568 at December 31,
2019.
At March 31, 2020, the Company had a total of 38,375,000 stock
options exercisable between CAD$0.065 and CAD$0.60 that have the
potential upon exercise to generate a total of C$6,361,875 in cash
over the next five years. There is no assurance that these
securities will be exercised. The Company’s continued
development is contingent upon its 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 the
Company; however, management is committed to pursuing all possible
sources of financing in order to execute its business plan. The
Company continues its cost control measures to conserve cash to
meet its operational obligations.
Outstanding share data
At the date of this report, the Company has 312,482,595 issued and
outstanding common shares and
34,925,000
stock options currently outstanding at a weighted
average exercise price of CAD$0.17.
23
Off-balance sheet arrangements
At March 31, 2020, the Company 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 the Company.
Transactions with related parties
During
the 3-month period ended March 31, 2020, the Company expensed
$196,551 for stock-based compensation for stock options issued to
Company directors. During the 3-month period ended March 31, 2019,
the Company expensed $Nil for stock-based compensation for stock
options issued to Company directors.
During
the 3-month period ended March 31, 2020, the Company paid a
consulting fee of $25,500 to one of its directors. During the
3-month period ended March 31, 2019, the Company paid a consulting
fee of $25,500 to one of its directors.
As at
March 31, 2020, the Company owed $343,220 to various directors and
officers of the Company (December 31, 2019 -
$269,165).
Proposed Transactions
There are no proposed transactions outstanding other than as
disclosed.
Critical Accounting Estimates
The
preparation of financial statements in conformity with generally
accepted accounting policies requires management of the Company 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
The Company uses 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 the Company makes will likely change from time to time.
At the time the fair value is determined, the methodology the
Company uses 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.
Future income taxes
The Company accounts for tax consequences of the differences in the
carrying amounts of assets and liabilities and their tax bases
using tax rates expected to apply when these temporary differences
are expected to be settled. When the future 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. The
Company has taken a valuation allowance against all such potential
tax assets.
Mineral properties and exploration and development
costs
The Company capitalizes the costs of acquiring mineral rights at
the date of acquisition. After acquisition, various factors can
affect the recoverability of the capitalized costs. The
Company’s 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. The Company is 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, the
Company has assumed recent world commodity prices will be
achievable. The Company has considered the mineral resource reports
by independent engineers on the Nyngan Scandium 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 issued 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 Financial Accounting
Standards 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,
2019, 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.
24
Accounting Standards Update 2018-13 – Fair Value Measurement
(Topic 840)
Disclosure Framework—Changes to the
Disclosure Requirements for Fair Value Measurement. The amendments
in this update apply to all entities that are required, under
existing GAAP, to make disclosures about recurring or nonrecurring
fair value measurements.
This standard
is effective for interim and annual reporting periods beginning
after December 15, 2019, with early adoption permitted. The Company
has adopted this policy which has no material effect to the
consolidated financial statements.
Financial instruments and other risks
The
Company’s financial instruments consist of cash, receivables,
accounts payable, accounts payable with related parties, accrued
liabilities and promissory notes payable. 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: (i) one in Vancouver, British
Columbia, Canada, (ii) one in Mackay, Queensland,
Australia,
and (iii) one
in Chicago, Illinois, United States.
Information Regarding Forward-Looking Statements
This Management’s Discussion and Analysis of Financial
Condition and Results of Operations contain certain forward-looking
statements. Forward-looking statements include but are not limited
to those with respect to the prices of metals, the estimation of
mineral resources and reserves, the realization of mineral reserve
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,
permitting time lines, currency fluctuations, requirements for
additional capital, government regulation of mining operations,
environmental risks, unanticipated reclamation expenses, title
disputes or claims and limitations on insurance coverage and the
timing and possible outcome of pending litigation. In certain
cases, forward-looking statements can be identified by the use of
words such as “plans”, “expects” or
“does not expect”, “is expected”,
“estimates”, “intends”,
“anticipates” or “does not anticipate”, or
“believes” or variations of such words and phrases, or
statements 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 the actual results, performance or
achievements of Scandium International to be materially different
from any future results, performance or achievements expressed or
implied by the forward-looking statements. Such risks and
uncertainties include, among others, the actual results of current
exploration activities, conclusions or economic evaluations,
changes in project parameters as plans continue to be refined,
possible variations in grade and or recovery rates, failure of
plant, equipment or processes to operate as anticipated, accidents,
labor disputes or other risks of the mining industry, delays in
obtaining government approvals or financing or incompletion of
development or construction activities, risks relating to the
integration of acquisitions, to international operations, and to
the prices of metals and risks relating to the COVID-19 pandemic.
While Scandium International has 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. Scandium International expressly disclaims any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
Not
applicable.
Item 4. Controls and Procedures
Disclosure controls and procedures
The
Company’s management is responsible for establishing and
maintaining adequate disclosure controls and procedures. The
Company’s management, including our principal executive
officer and our principal financial officer, evaluated the
effectiveness of our 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.
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.
25
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are
not aware of any material current, pending, or threatened
litigation with respect to the Company.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.
Not
applicable.
Item 3. Defaults Upon Senior Securities.
Not
applicable.
Item 4. Mine Safety Disclosures
Not
applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
Certification of
the Principal Executive Officer, pursuant to Rule 13a-14(a) or
15d-14(a) of the U.S. Securities Exchange Act of 1934 (filed
herewith)
Certification of
the Principal Financial Officer, pursuant to Rule 13a-14(a) or
15d-14(a) of the U.S. Securities Exchange Act of 1934 (filed
herewith)
Section 1350
Certification of the Principal Executive Officer (filed
herewith)
Section 1350
Certification of the Principal Financial Officer (filed
herewith)
101
Financial
Statements from the Quarterly Report on Form 10-Q of the Company
for the three months ended March 31, 2020, formatted in XBRL (filed
herewith)
26
SIGNATURES
Pursuant to the requirements 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.
(Registrant)
|
|
|
|
|
|
|
|
|
Date:
May
7, 2020
|
By:
|
/s/
George
Putnam
|
|
|
|
|
George
Putnam
|
|
|
|
|
Principal Executive
Officer
|
|
|
|
|
|
|
|
|
By:
|
/s/
Edward Dickinson
|
|
|
|
|
Edward
Dickinson
|
|
|
|
|
Principal
Financial Officer
|
|
27
TABLE OF CONTENTS
Part I. Financial InformationItem 1. Financial StatementsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem Variance Favourable / (unfavourable) ExplanationItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II Other InformationItem 1. Legal ProceedingsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits