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 PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September
30, 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
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|
(State
or other jurisdiction
|
(IRS
Employer
|
|
of
incorporation or organization)
|
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) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes [
X
] No [ ]
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
Yes [
X
] No [ ]
Indicate by check mark
whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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
November 9, 2020, the registrant’s outstanding common stock
consisted of 313,282,595 shares.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30,
2020
2
|
Scandium International Mining Corp.
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|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
(Expressed
in US Dollars) (Unaudited)
|
|
As
at:
|
September
30,
2020
|
December
31,
2019
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ASSETS
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|
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|
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Current
|
|
|
|
Cash
|
$
145,825
|
$
115,568
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|
Prepaid
expenses and receivables
|
14,952
|
45,763
|
|
|
|
|
|
Total
Current Assets
|
160,777
|
161,331
|
|
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Reclamation bond
(Note 4)
|
11,444
|
11,444
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Equipment
(Note 3)
|
5,237
|
6,967
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|
Mineral property interests
(Note
4)
|
704,053
|
704,053
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|
|
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|
Total
Assets
|
$
881,511
|
$
883,795
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LIABILITIES
AND EQUITY (DEFICIENCY)
|
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Current
|
|
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Accounts payable
and accrued liabilities
|
$
380,745
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$
269,059
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Accounts
payable with related parties (Note 5)
|
578,353
|
269,165
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Total
Liabilities
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959,098
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538,224
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Equity
(Deficiency)
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Capital stock (Note
6) (Authorized: Unlimited number of common shares; Issued and
outstanding: 312,482,595 (2019 – 312,482,595)
|
109,375,661
|
109,375,661
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|
Treasury stock
(Note 7) (1,033,333 common shares) (2019 –
1,033,333)
|
(1,264,194
)
|
(1,264,194
)
|
|
Additional paid in
capital (Note 6)
|
6,194,450
|
5,936,074
|
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Accumulated
other comprehensive loss
|
(853,400
)
|
(853,400
)
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Deficit
|
(113,530,104
)
|
(112,848,570
)
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Total
Equity (Deficiency)
|
(77,587
)
|
345,571
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Total
Liabilities and Equity (Deficiency)
|
$
881,511
|
$
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
|
|
(Expressed in US
Dollars) (Unaudited)
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Three
months ended September 30,
2020
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Three months
ended September 30,
2019
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Nine months
ended September 30,
2020
|
Nine months
ended September 30,
2019
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EXPENSES
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Amortization (Note
3)
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$
576
|
$
576
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$
1,730
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$
1,730
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Consulting
|
40,499
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98,159
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103,064
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297,580
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Exploration
|
19,694
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46,828
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48,875
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93,983
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General and
administrative
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69,802
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126,118
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223,985
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333,235
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Insurance
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8,048
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7,808
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24,321
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23,111
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Professional
fees
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7,235
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7,353
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44,095
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57,616
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Salaries and
benefits
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116,139
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114,823
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344,549
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343,958
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Stock-based
compensation (Notes 5 & 6)
|
-
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4,844
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258,376
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427,480
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Travel and
entertainment
|
234
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32,550
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3,892
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58,712
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(262,227
)
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(439,059
)
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(1,052,887
)
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(1,637,405
)
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Foreign exchange
gain (loss)
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(2,830
)
|
(4,367
)
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(11,077
)
|
1,279
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Sale of royalty
(Note 9)
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-
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-
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382,430
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-
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Loss
and comprehensive loss for the period
|
$
(265,007
)
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$
(443,426
)
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$
(681,534
)
|
$
(1,636,126
)
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|
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|
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Basic
and diluted loss per common share
|
$
0.00
|
$
0.00
|
$
0.00
|
$
0.01
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding – basic and
diluted
|
312,482,595
|
311,926,082
|
312,482,595
|
309,914,357
|
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
4
Scandium International Mining Corp.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed
in US Dollars) (Unaudited)
|
9-month period
ended
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September
30,
2020
|
September
30,
2019
|
|
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CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
Loss for the
period
|
$
(681,534
)
|
$
(1,636,126
)
|
|
Items not affecting
cash:
|
|
|
|
Amortization
|
1,730
|
1,730
|
|
Stock-based
compensation
|
258,376
|
427,480
|
|
|
|
|
|
Changes in non-cash
working capital items:
|
|
|
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Decrease in prepaid
expenses and receivables
|
30,811
|
24,198
|
|
Increase in
accounts payable, accrued liabilities and accounts payable with
related parties
|
420,874
|
156,626
|
|
|
30,257
|
(1,026,092
)
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CASH
FLOWS FROM FINANCING ACTIVITIES
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Common shares
issued
|
-
|
799,483
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Options exercised
for common shares
|
-
|
160,996
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|
|
-
|
960,479
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|
|
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Change
in cash during the period
|
30,257
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(65,613
)
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|
Cash,
beginning of period
|
115,568
|
284,757
|
|
|
|
|
|
Cash,
end of period
|
$
145,825
|
$
219,144
|
|
|
2020
|
2019
|
|
Cash
paid during the 9-month period for interest
|
$
-
|
$
-
|
|
Cash
paid during the 9-month period for taxes
|
$
-
|
$
-
|
There
were no significant non-cash investing and financing activities
during the periods ended September 30, 2020 and 2019.
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
5
|
Scandium International Mining Corp.
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CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(DEFICIENCY)
|
|
(Expressed
in US Dollars) (Unaudited)
|
|
|
Number of
Shares
|
Capital
Stock
|
Additional Paid
in Capital
|
Treasury
Stock
|
Accumulated
Other Comprehensive Loss
|
Deficit
|
Total
Stockholders’ Equity (Deficiency)
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2018
|
304,781,294
|
$
108,244,311
|
$
5,675,812
|
$
(1,264,194
)
|
$
(853,400
)
|
$
(110,900,636
)
|
$
901,893
|
|
Private
placement
|
5,926,301
|
799,483
|
-
|
-
|
-
|
-
|
799,483
|
|
Options
exercised
|
1,075,000
|
197,778
|
(101,098
)
|
-
|
-
|
-
|
96,680
|
|
Stock-based
compensation
|
-
|
-
|
13,116
|
-
|
-
|
-
|
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
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
-
|
-
|
3,616
|
-
|
-
|
-
|
3,616
|
|
Loss for the three
months
|
-
|
-
|
-
|
-
|
-
|
(270,463
)
|
(270,463
)
|
|
Balance, June30,
2020
|
312,482,595
|
$
109,375,661
|
$
6,194,450
|
$
(1,264,194
)
|
$
(853,400
)
|
$
(113,265,047
)
|
$
187,470
|
|
|
|
|
|
|
|
|
|
|
Loss for the three
months
|
-
|
-
|
-
|
-
|
-
|
(265,057
)
|
(265,057
)
|
|
Balance,
September 30, 2020
|
312,482,595
|
$
109,375,661
|
$
6,194,450
|
$
(1,264,194
)
|
$
(853,400
)
|
$
(113,530,104
)
|
$
(77,587
)
|
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
6
|
Scandium International Mining Corp.
|
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
September
30, 2020
|
|
(Expressed
in US Dollars) (Unaudited)
|
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 related adverse public health
developments, have adversely affected workforces, economies, and
financial markets globally, leading to an economic downturn. It is
not possible for the Company to predict the duration or magnitude
of the adverse results of the outbreak and its effects on the
Company’s business or ability to raise funds.
2.
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 nine-month period
ended September 30, 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.
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.
7
|
Scandium International Mining Corp.
|
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
September
30, 2020
|
|
(Expressed
in US Dollars) (Unaudited)
|
2.
BASIS OF PRESENTATION
(cont’d…)
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 $14,766 during the nine months ended
September 30, 2020 and $13,932 during the nine months ended
September 30, 2019.
The
following table presents information about the assets that are
measured at fair value on a recurring basis as at
September 30, 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:
|
|
September
30,
2020
|
Quoted Pricesin
Active Markets (Level 1)
|
Significant
Other Observable Inputs (Level 2)
|
Significant
Unobservable Inputs (Level 3)
|
|
Assets:
|
|
|
|
|
|
Cash
|
$
145,825
|
$
145,825
|
$
—
|
$
—
|
|
|
|
|
|
|
|
Total
|
$
145,825
|
$
145,825
|
$
—
|
$
—
|
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. Accounting Standards
Update 2020-05 – Revenue from Contracts with Customers (Topic
606) and Leases (Topic 842) changed the effective date for Leases
(Topic 842) to fiscal years beginning after December 15, 2021, and
interim periods within fiscal years beginning after December 15,
2022.
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
|
September 30,
2020 Net Book Value
|
|
Computer
equipment
|
$
6,967
|
$
-
|
$
(1,730
)
|
$
5,237
|
|
|
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
|
Scandium International Mining Corp.
|
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
September
30, 2020
|
|
(Expressed
in US Dollars) (Unaudited)
|
4.
MINERAL
PROPERTY INTERESTS
|
September
30, 2020
|
Scandium and
other
|
|
|
|
|
Balance,
September 30, 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 2016.
In
April 2019, the Company received notice from the New South Wales
Department of Planning and Environment (the
“Department”) that, due to a procedural issue within
the Department, the Company’s Mine Lease Grant (“ML
1763”) pertaining to the Nyngan Scandium Project, previously
issued by the Department, is invalid. On September 10, 2020, the
Company announced receipt of a Final Determination letter from the
Deputy Secretary, Mining, Exploration and Geoscience resolving the
outstanding objection filed by the landowner in 2016. This Final
Determination will allow all measured and indicated resources
included in the Nyngan Scandium Project Definitive Feasibility
Study (“DFS”) to be reinstated in a Mining Lease grant.
In May 2019, the Company filed a new mine lease application with
the Department, related to the Nyngan Scandium Project to
compensate for the procedural issue. On July 24, 2019, the Company
announced that a new mine lease (“ML 1792”) had been
granted.
Royalties
attached to the Nyngan property include a 0.7% royalty on gross
mineral sales on the property, a 1.5% Net Profits Interest royalty
to private parties involved with the early exploration on the
property, and a 1.7% Net Smelter Returns royalty payable for 12
years after production commences. Another revenue royalty is
payable to private interests of 0.2%, subject to a $370,000 cap. A
NSW minerals royalty will also be levied on the project, subject to
negotiation, currently 4% on revenue.
Honeybugle property, Australia
The
Company holds a 100% interest in 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
June 30, 2020, no funds have been capitalized for this property.
During fiscal 2018, a reclamation bond of $11,444 (€10,000)
was placed.
5.
RELATED
PARTY TRANSACTIONS
During
the 9-month period ended September 30, 2020, the Company expensed
$196,551 for stock-based compensation for stock options issued to
Company directors. During the 9-month period ended September 30,
2019, the Company expensed $314,104 for stock-based compensation
for stock options issued to Company directors.
During
the 9-month period ended September 30, 2020, the Company expensed a
consulting fee of $76,500 to one of its directors. During the
9-month period ended September 30, 2019, the Company expensed a
consulting fee of $76,500 to one of its directors.
As of
September 30, 2020, the Company owed $578,353 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).
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.
9
|
Scandium International Mining Corp.
|
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
September
30, 2020
|
|
(Expressed
in US Dollars) (Unaudited)
|
6.
CAPITAL STOCK AND ADDITIONAL PAID IN
CAPITAL
(cont’d…)
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
|
8,525,000
|
0.065
|
|
Expired
|
(8,885,000
)
|
0.159
|
|
|
|
|
|
Outstanding,
September 30, 2020
|
34,250,000
|
$
0.165
|
|
|
|
|
|
Number currently
exercisable
|
34,250,000
|
$
0.165
|
As at
September 30, 2020, incentive stock options were outstanding as
follows:
|
|
Number
of
Options
Outstanding
|
Number
of
Options
Exercisable
|
Exercise
Price in
Canadian $
|
Expiry
Date
|
|
|
|
|
|
|
|
Options
|
|
|
|
|
|
|
4,300,000
|
4,300,000
|
0.100
|
November 5,
2020*
|
|
|
4,850,000
|
4,850,000
|
0.130
|
February 8,
2021
|
|
|
400,000
|
400,000
|
0.370
|
August 19,
2021
|
|
|
400,000
|
400,000
|
0.225
|
August 19,
2021
|
|
|
400,000
|
400,000
|
0.150
|
August 19,
2021
|
|
|
400,000
|
400,000
|
0.065
|
August 19,
2021
|
|
|
4,400,000
|
4,400,000
|
0.370
|
February 21,
2022
|
|
|
250,000
|
250,000
|
0.300
|
October 6,
2022
|
|
|
5,700,000
|
5,700,000
|
0.225
|
January 19,
2023
|
|
|
350,000
|
350,000
|
0.185
|
August 30,
2023
|
|
|
4,625,000
|
4,625,000
|
0.150
|
May 9,
2024
|
|
|
50,000
|
50,000
|
0.130
|
June 24,
2024
|
|
|
8,025,000
|
8,025,000
|
0.065
|
March 19,
2025
|
|
|
100,000
|
100,000
|
0.075
|
May 22,
2025
|
|
|
|
|
|
|
|
|
34,250,000
|
34,250,000
|
|
|
*
800,000 of these options were exercised in early November for
proceeds of C$80,000 (US$60,344). 3,500,000 options expired
unexercised November 5, 2020.
As at
September 30, 2020 the Company’s outstanding and exercisable
stock options have an aggregate intrinsic value of $414,412
(December 31, 2019 - $Nil).
Stock-based
compensation
During
the 9-month period ended September 30, 2020, the Company recognized
stock-based compensation of $258,376 (September 30, 2019 -
$427,280) in the statement of operations and comprehensive loss.
There were 8,525,000 stock options granted during the 9-month
period ended September 30, 2020 (September 30, 2019 –
9,860,000).
The
weighted average fair value of the options granted in the 9-month
period was C$0.065 (September 30, 2019 –
C$0.09).
10
|
Scandium International Mining Corp.
|
|
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
September
30, 2020
|
|
(Expressed
in US Dollars) (Unaudited)
|
6.
CAPITAL STOCK AND ADDITIONAL PAID IN
CAPITAL
(cont’d…)
The
fair value of all compensatory options granted is estimated on
grant date using the Black-Scholes option pricing model. The
weighted average assumptions used in calculating the fair values of
stock options granted in the 9-month period ended September 30 are
as follows:
|
|
2020
|
2019
|
|
|
|
|
|
Risk-free interest
rate
|
1.31
%
|
2.31
%
|
|
Expected
life
|
5 years
|
5 years
|
|
Volatility
|
86.26
%
|
90.40
%
|
|
Forfeiture
rate
|
N/A
|
N/A
|
|
Dividend
rate
|
N/A
|
N/A
|
7.
TREASURY
STOCK
|
|
Number
|
Amount
|
|
|
|
|
|
Treasury shares,
September 30, 2020, and December 31 2019
|
$
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:
|
September
30, 2020
|
Australia
|
United
States
|
Total
|
|
|
|
|
|
|
Equipment
|
$
-
|
$
5,237
|
$
5,237
|
|
Mineral property
interests
|
704,053
|
-
|
704,053
|
|
|
|
|
|
|
|
$
704,053
|
$
5,237
|
$
709,290
|
|
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 $382,430
(C$500,000) from completion of a royalty buyback agreement.
The Company’s royalty interest was related to the Windfall
Lake gold property in Quebec, Canada, and was carried at zero value
on the balance sheet.
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”,
“SCY”, “Scandium”, “Scandium
International” or the “Company”) and its
subsidiaries provides an analysis of the operating and financial
results for the three and nine month periods ended September 30,
2020 and should be read in conjunction with our unaudited interim
consolidated financial statements and the notes thereto for the
nine month period ended September 30, 2019, and with the
Company’s audited consolidated financial statements and the
notes thereto for the year ended December 31, 2019 (the
“Annual Statements”).
This
discussion and analysis contain 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 November
9, 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.
12
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.
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.” In addition, the Company
is pursuing copper industry interest in our ion exchange (IX)
technology and knowhow to recover scandium, cobalt and other
critical metals from solvent extraction (SX) raffinate and other
acidic waste streams in certain acid leach copper
operations.
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.
13
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 third quarter of 2020, we focused on Nyngan Scandium Project
activities including scandium marketing arrangements. In addition,
we pursued copper industry interest in our ion exchange (IX)
technology and knowhow to recover scandium, cobalt and other
critical metals from solvent extraction (SX) raffinate and other
acidic waste streams in certain acid leach copper
operations..
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.
14
Figure
1: Location of Nyngan Project
Note: None of the Existing Mines identified in Figure 1 produce
scandium.
15
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.
16
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 utilizing Nyngan
resource material. A number of the key elements of this flowsheet
work have been protected by the Company under US patent
applications.
The
Feasibility Study has been developed and compiled to an accuracy
level of +15%/-5% by a globally recognized engineering firm that
has considerable expertise in laterite deposits and process
facilities, as well as in smaller mining and processing projects,
and has excellent familiarity with the Nyngan Scandium Project
location and environment.
Nyngan Scandium Project Highlights
●
Capital cost
estimate for the Project is US$87.1 million,
●
Annual scandium
oxide product volume averages 37,690 kg 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% 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
totaling 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.
17
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.
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.
18
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.
19
In
addition to these two key governmental approvals, other required
licenses and permits must be acquired but are considered routine
and require only compliance with fixed standards and objective
measurements. These remaining approvals include submittal of
numerous plans and reports supporting compliance with Development
Consent and Mining Lease. In addition, the following water, roads,
dam and electrical access reviews and arrangements must be
finalized:
●
Water
Supply Works and Use Approval and Water Access
License,
●
State and local
approval for construction of the intersection of the Site Access
Road and Gilgai Road,
●
An approval from
the NSW Dams Safety Committee for the design and construction of
the Residue Storage Facility, and
●
A high voltage
connection agreement with Essential Energy.
The
2019 ML 1792 grant covers
810 acres
(370 hectares) of
surface area fully owned by the Company,
an area adequate to construct and operate a scandium mine of a
scale outlined in the definitive Feasibility Study. The Company had
originally filed a mining lease application (MLA 531) covering an
area of 874 hectares, which was granted in 2017 as a Mining Lease,
and later ruled invalid. The reduction in area between the initial
and the replacement ML grants represented acreage protested in an
“Agricultural Land’ objection lodged by a local
landowner. The landowner holds freehold surface ownership over a
portion of the original grant.
On
September 10, 2020, The Company announced receipt of a Final
Determination letter from the Deputy Secretary,
Mining, Exploration and Geoscience
resolving the outstanding objection filed by the landowner in
2016.
Written
advice from the Department to the Company makes clear that all
required independent investigative processes, and all affected
party comment periods, are now completed, and the
Department’s decision is final. There are further State
Courts of Appeal available to the landowner, but the facts
supporting this final decision are confirmed by the NSW Department
of Primary Industry and follow governing Law. We believe the NSW
Government will defend its decisions in any court of appeals to
which it would be summoned.
This
Final Determination from the NSW Government will again allow all
measured and indicated resource included in the Nyngan Scandium
Project Definitive Feasibility Study (“DFS”) to be
reinstated in a new Mining Lease grant, for which the Company
intends to file application.
Downstream Scandium Products
In
February 2011, we announced the 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 also advanced
our abilities to make a commercial-grade 2% scandium master alloy
product.
20
On
March 2, 2017, we announced the signing of a Memorandum of
Understanding ("MOU") with Weston Aluminium Pty Ltd. ("Weston") of
Chatswood, NSW, Australia. The MOU defines a cooperative commercial
alliance to jointly develop the capability to manufacture
aluminum-scandium master alloy. The intended outcome of this
alliance will be to develop the capability to offer Nyngan Scandium
Project aluminum alloy customers scandium in form of Al-Sc master
alloy, should customers prefer that product form.
The MOU
outlines steps to jointly establish the manufacturing parameters,
metallurgical processes, and capital requirements to convert Nyngan
Scandium Project scandium product into Master Alloy, on Weston's
existing production site in NSW. The MOU does not include a binding
contract with commercial terms at this stage, although the intent
is to pursue the necessary technical elements to arrive at a
commercial contract for conversion of scandium oxide to master
alloy, and to do so prior to first mine production from the Nyngan
Scandium Project.
On
March 5, 2018, the Company announced that it had initiated a small
scale pilot program (4kg scale) at the Alcereco Inc. metallurgical
research facilities in Kingston, Ontario, to confirm and refine
previous lab-scale work on the manufacture of aluminum-scandium 2%
master alloy (MA). The program advanced the process understanding
for commercial scale upgrade of Nyngan scandium oxide product to
master alloy product.
The
2018 pilot program consisted of 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.
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.
21
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 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 Parties remain free to agree to further extensions on
this offtake agreement, but it is unlikely that the Nyngan Scandium
Project will be in production and able to deliver product within
the next 24 months.
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.
22
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 has signed no additional industry partnering LOI’s to
date in 2020, but does plan to continue the LOI program of
introducing scandium for trial testing by partners through
agreements in the future.
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%.
23
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.
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.
Nyngan Scandium Project - Planned Activities for
2020-2021
The
following steps are planned for the Nyngan Project during the 2020
and 2021 calendar years:
●
Complete master
alloy pilot trials and optimization work in Q1 2020
(completed),
●
Pursue additional
offtake agreements in support of planned future scandium
sales,
●
With offtakes, seek
construction financing for project, mid 2021,
●
Commence site
construction with signed offtakes, with anticipated completion over
14 months, and
●
Initiate project
commissioning earliest end 2022, with product available for sale by
early 2023.
24
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.
34
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.
35
The 13 holes
produced 29 individual (3-meter) intercepts over 300 ppm,
representing 31% of the mineralized intercepts in the 273 meters of
interest.
36
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.
●
Finland location is
mining-friendly and ideally suited to EU customer
markets.
25
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.
Critical Metals Recovery Technology Program
On May
13, 2020, we announced the Company’s pursuit of copper
industry interest in our ion exchange (IX) technology and knowhow
to recover scandium, cobalt and other critical metals from solvent
extraction (SX) raffinate and other acidic waste streams in certain
acid leach copper operations.
Recovery
metals targeted by this application include cobalt, copper, nickel,
scandium, and zinc, and possibly other metals and rare earth
elements, depending on recovery economics. The suitability of this
IX technology, and the target metal opportunities, vary with the
specifics of individual orebodies, and associated SX plant
characteristics. Depending on specific project variables, and the
value and volume of critical metals recovered, the end result
economics are expected to be significant to the parties
involved.
Concept Highlights
●
IX technology
offers rapid deployment to existing Cu operation waste
streams,
●
Recoveries target
critical metals with transparent, established markets,
●
Includes potential
for significant scandium production alongside other valuable
products,
●
Represents near
term production sources that can address security of supply issues,
conflict metal issues, and concentrated supply source
issues,
●
Represents a
project focus on metals prominent in the US Critical Metals
priority list, and on production from US and North American
operation locations, and
●
Promises real
potential to deliver positive economic benefits to both SCY and the
established copper producers that can host this
program.
Program Discussion
The
copper industry is fully aware of the opportunity to harvest
valuable metals from copper process waste streams, and the industry
does so with significant success today in precious metals. Most
specialty metals recovery work has historically been considered
un-economic, based on effective recovery costs and recovered metals
pricing. The technology in this area has advanced, improving both
operating costs and recoveries. New, technology-driven uses for
critical metals are stressing supply channels. Traditional
jurisdiction risk concerns are now multiplied by ethical sourcing
issues, and long-term sustainability questions, all of which
elevate the interest in broader, more localized sourcing. These
issues are receiving heightened governmental and industry priority,
and metals markets customers are now seeking and favoring new,
economic, responsible solutions.
26
On the
basis of this dynamic critical metals opportunity, and the fact
that SCY has a significant capability to apply advanced mineral
recovery technologies to the separation of critical metals from
both ores and waste streams, the Company began a search for a North
American copper industry host, in order to build a Critical Metals
Recovery (CRM) Project. This effort immediately recognized an
attractive economic value from recovery of multiple metals,
specifically metals used in lithium-ion battery manufacture, along
with scandium, zinc and other metals present in source systems
employing solvent extraction techniques.,
The
potential new revenue stream of the combined metals residual varies
by orebody, and also by the specifics of the mineral processing
systems in place, but collectively the metals basket is more
instantly marketable and shows superior economics to the solo
scandium target we had in mind at the start. This IX technology
also represents a viable precursor for direct refining cobalt,
nickel and potentially copper into high purity sulfate product
forms, as required for battery manufacture, specifically in the
electric vehicle (EV) industry.
This
SCY program is led by SCY’s Chief Technology Officer, Willem
P.C. Duyvesteyn, who is the primary inventor of close to 100 US
patents and patent applications in the field of materials
processing and commercial recovery processes for base metals,
specialty metals, and chemical compounds. The Company has filed for
patent protection on various aspects of its relevant technical
program ideas with the US Patent Office, using technical
information from preliminary bench scale testing with actual copper
SX raffinate solutions.
The
Company believes this work can be demonstrated with a working and
successful copper plant installation, with proven knowhow, and
intends to pursue a copper industry partner to demonstrate the
economic viability of this technology. It is the Company’s
intent to fully participate in the operation, ownership and
production economics associated with a plant asset that is
developed in concert with that partner.
This
new critical metals recovery program contains a scandium component
that utilizes the same technology applied to other targeted
critical metals recoveries. This program is intended to allow SCY
to benefit from early and attractive scandium production, in
addition to producing a basket of other metals with currently
established markets. The program has the potential to generate
commercial scale scandium production from the USA and the Americas,
which produces little or no scandium today. Early scandium
production can be expected to more quickly build the nascent
scandium market globally, thus supporting the development of the
Company’s Nyngan and Honeybugle scandium assets in
Australia.
Other Developments – Third Quarter 2020
Patent Application For Use Of Scandium In Lithium-Ion
Batteries
On
September 24, 2020 the Company announced the filing of a
provisional patent application with the US Patent Office seeking
patent rights on various applications of scandium in lithium ion
batteries. The patent application covers a number of scandium
enhancements, including doping potential for both anodes and
cathodes, and for solid electrolytes.
Patent Application Highlights:
●
US Patent
Application filed for use of scandium in lithium ion battery
applications.
●
Scandium doping
applications are explained for anodes, cathodes and
electrolytes.
●
Scandium offers
conductivity advantages as a dopant, over other options,
and
●
Scandium in other
aluminum components offers numerous property improvements,
including conductivity, strength and corrosion
resistance.
27
Patent Application Discussion:
Rechargeable
lithium ion batteries (LIBs) are a staple of everyday life. The
search for improved performance through design and materials
advances is intense today. Considerable effort is being expended in
developing next-generation materials for LIBs that will make
batteries safer, lighter, more durable, faster to charge, more
powerful, and more cost-effective. A sampling of some of the more
public efforts are as follows:
●
Minimizing or
removing cobalt from cathode materials, based on cost, supply and
geographic sourcing issues.
●
Improving the
durability of liquid electrolytes with dopants, or substitution
with safer and higher performing liquid or solid electrolyte
systems.
●
Designing for
higher voltage potential by utilizing different anode or cathode
materials.
●
Determining
combinations of metals that can better withstand harsh internal
conditions.
●
Scandium, along
with other specialty metals, has a clear role to play in each of
these areas.
One
particularly promising area for scandium contributions is in a
lithium nickel manganese oxide (LNMO) battery. The cathode in this
design substitutes manganese for cobalt, and supports a higher
nickel content as well. The substitution then delivers higher
working potentials (voltage), higher energy densities, and faster
charge/discharge rates, all of which offer the promise of improved
battery performance.
Delivering
on that promise requires a number of improvements, including
employing a dopant for stabilization of the manganese in the LNMO
cathode, potential stabilization of lithium titanate (LTO) anode
materials as well, and use of dopants to improve the conductivity
of both these anode and cathode materials. Conventional liquid
electrolytes may see improved function and longevity with the
improved cathode and anode conductivity. Scandium represents a
suitable and effective dopant in each of these
applications.
Solid
electrolytes represent another potential break-through improvement
in LIBs. They will handle higher voltages, higher temperatures,
greater power densities, are potentially easier to package, and are
considered safer in use. Scandium represents a suitable and
effective dopant in these applications, analogous to the use of
scandium to stabilize solid zirconia electrolytes in solid oxide
fuel cells.
Lithium
ion batteries employ aluminum in a number of areas, specifically in
cathode structure, current connectors, and in general battery
structure. Aluminum-scandium alloys represent an enhanced aluminum
alloy option, based on their combination of conductivity and
strength.
The
intent of this SCY patent filing was to advise the battery industry
that scandium is a prospective dopant choice for enhanced
performance of LIBs, both under existing design parameters and in
particular for next-gen LNMO batteries. We want to ensure that
battery research and design groups consider scandium additions,
amongst their various materials choices, as they race to build a
better lithium ion battery.
The
Company’s operating intent remains focused on producing a
scandium product, and advises that it considers the lithium ion
battery markets to be a viable application for use.
Operating results - Revenues and Expenses
The Company’s results on a year-to-date basis reflect lower
operating costs. Cash expenditures were down by $403,694 due to
lower consulting fees, travel expenditures, general and
administrative fees, and exploration expenses. Also, during the
nine-month period the Company received funds from the sale of a
royalty interest.
28
The Company’s results when comparing Q3 2020 to Q3 2019
reflect a decrease of $173,426 in cash operating costs due to lower
consulting fees, exploration, travel expenditures, general and
administrative fees and professional fees.
Summary of quarterly results
A summary of the Company’s quarterly results is shown below
at Table 10.
Table 10. Quarterly Results Summary (US$)
|
|
2020
|
2019
|
2018
|
|||||
|
|
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
Q4
|
|
Net
Sales
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Net
Income (Loss) attributable to Scandium Mining Corp.
|
(265,057
)
|
(270,463
)
|
(146,014
)
|
(311,807
)
|
(443,426
)
|
(859,934
)
|
(332,766
)
|
(543,316
)
|
|
Basic
and diluted
Net
Income (Loss) per share attributable to Scandium Mining
Corp.
|
(0.00
)
|
(0.00
)
|
(0.00
)
|
(0.00
)
|
(0.00
)
|
(0.01
)
|
(0.00
)
|
(0.00
)
|
Results of Operations for the three months ended September 30,
2020
The net loss for the quarter was $265,057, a decrease of $178,369
from $443,426 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:
29
Table 11. Variance Analysis for Net Loss
|
Q3 2020 vs. Q3 2019 - Variance Analysis
|
||
|
Item
|
Variance Favourable / (Unfavourable)
|
Explanation
|
|
Consulting
|
$57,660
|
The
Company released several contractors who were no longer required,
resulting in this positive variance in the current quarter positive
variance in the current quarter.
|
|
General and administrative
|
$56,316
|
The
decrease in this expense is due to the downturn of activity in Q3
2020 compared to Q3 2019.
|
|
Travel and entertainment
|
$32,316
|
In Q3
2019, the Company did extensive travel in Europe. In Q3 2020 there
was no travel expense at all as the Company focused on cash
preservation.
|
|
Exploration
|
$27,134
|
Limited
work was done on our exploration projects in Q3 2020. Higher levels
of activity occurred in Q3 2019 resulting in this positive
variance.
|
|
Stock-based
compensation
|
$4,844
|
All
outstanding options have been fully expensed prior to Q3 2020
resulting in no charge in this quarter. In the corresponding
quarter of 2019, there were still unvested options being
expensed.
|
|
Foreign exchange
|
$1,537
|
The
Company maintains a significant portion of our cash in Canadian
dollar accounts. Subsequently, when the US currency lowers in
value relative to Canadian currency (weakens), a book foreign
exchange gain is recognized. The US dollar weakened against most
world currencies in Q3 2020 creating the favorable
variance.
|
|
Professional fees
|
$118
|
Costs
are very much the same for the comparative quarters.
|
|
Insurance
|
$(240)
|
The
slightly higher cost in Q3 2020 is due to overall increases in
insurance premiums for the Company’s operations.
|
|
Salaries
and benefits
|
$(1,316)
|
This
unfavourable variance is due to foreign exchange impacts to accrued
payments due individuals.
|
30
Results of Operations for the nine months ended September 30,
2020
The net loss for the nine-month period was $681,534, a decrease of
$954,592 from $1,636,126 in the same nine-month period of the prior
year. Details of the individual items contributing to the decreased
net loss are set out below at Table 12:
Table 12. Variance Analysis for Net Loss
|
Nine-months ended September 30, 2020 vs. nine-months ended
September 30, 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
|
$194,516
|
The
Company released several contractors who were no longer required,
resulting in this positive variance in the current 9-month
period.
|
|
Stock-based
compensation
|
$169,104
|
In the
first nine months of 2020 the Company issued 8,885,000 stock
options at an average price of C$0.065. In the comparative period
in 2019, the Company issued 5,075,000 stock options at an average
price of C$0.15. The lower price of the options issued in the
current year resulted in a much lower expense despite more options
being issued.
|
|
General and administrative
|
$109,250
|
The
decrease in this expense is due to the downturn of activity in 2020
compared to 2019.
|
|
Travel and entertainment
|
$54,820
|
Less
travel in 2020 was due to an overall decrease in Company activities
when compared to 2019. Also in Q3 2019, the Company did extensive
travel in Europe.
|
|
Exploration
|
$45,108
|
With
the Company in a conservation of cash mode in 2020, less funds were
expended on this activity.
|
|
Professional fees
|
$13,521
|
Lower
2020 activity levels resulted in the favourable
variance.
|
|
Salaries
and benefits
|
$(591)
|
This
unfavourable variance is due to foreign exchange impacts on accrued
payments due individuals.
|
|
Insurance
|
$(1,210)
|
The
slightly higher cost in 2020 is due to overall increases in
insurance premiums for the Company’s operations.
|
|
Foreign exchange
|
$(12,356)
|
The
Company maintains a significant portion of our cash in Canadian
dollar accounts. Subsequently, when the US currency rises in
value relative to Canadian currency (strengthens), a book foreign
exchange loss is recognized. The US dollar strengthened against
most world currencies in 2020 creating the unfavorable
variance.
|
31
Cash flow discussion for the nine-month period ended September 30,
2020 compared to September 30, 2019
The cash inflow for operating activities was $30,257, an increase
of $1,056,349 (September 30, 2019 – ($1,026,092)), due mainly
to the sale of a royalty interest and overall lower operating
costs.
Cash inflows from financing activities of $Nil reflect the fact
that there were no private placements or options exercised in the
current nine month period when compared to the nine month period
ended September 30, 2019, in which there was private placements of
$799,483, and options exercised of $160,996.
Financial Position
Cash
The Company’s cash position increased during the nine-month
period by $30,257 to $145,825 (December 31, 2019 - $115,568) due
mainly to the sale of a royalty interest.
Prepaid expenses and receivables
Prepaid expenses and accounts receivable decreased by $30,811 to
$14,952 during the nine-month period 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 $1,730 to $5,237 (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 $420,874 to $959,098 (December
2019– $538,224) due to the continued deferral of salaries to
certain individuals.
Capital Stock
Capital stock remained the same at $109,375,661 (December 31, 2019
- $109,375,661).
Additional paid-in capital increased by $258,376, to $6,194,450
(December 31, 2019 - $5,936,074) as a result of the expensing of
stock options.
Liquidity and Capital Resources
At September 30, 2020, the Company had a working capital of
$(798,321) including cash of $145,825 as compared to a working
capital of $(376,893) including cash of $115,568 at December 31,
2019.
At September 30, 2020, the Company had a total of 34,250,000 stock
options exercisable between CAD$0.065 and CAD$0.37 that have the
potential upon exercise to generate a total of C$5,664,125 in cash
over the next four and a half 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.
32
Outstanding share data
At the date of this report, the Company has 313,282,595 issued and
outstanding common shares and
29,950,000
stock options currently outstanding at a weighted
average exercise price of CAD$0.165.
Off-balance sheet arrangements
At September 30, 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 9-month period ended September 30, 2020, the Company expensed
$196,551 for stock-based compensation for stock options issued to
Company directors. During the 9-month period ended September 30,
2019, the Company expensed $314,104 for stock-based compensation
for stock options issued to Company directors.
During
the 9-month period ended September 30, 2020, the Company accrued a
consulting fee of $76,500 to one of its directors.
As at
September 30, 2020, the Company owed $578,353 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.
33
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 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. Accounting Standards Update 2020-05
– Revenue from Contracts with Customers (Topic 606) and
Leases (Topic 842) changed the effective date for Leases (Topic
842) to fiscal years beginning after December 15, 2021, and interim
periods within fiscal years beginning after December 15, 2022.
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 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.
34
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.
35
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 nine months ended September 30, 2020, formatted in XBRL
(filed herewith)
36
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.
Date: November 12, 2020
|
|
SCANDIUM INTERNATIONAL MINING CORP.
(Registrant)
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
George
Putnam
|
|
|
|
|
George
Putnam
|
|
|
|
|
Principal Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
Edward
Dickinson
|
|
|
|
|
Edward
Dickinson
|
|
|
|
|
Principal Financial
Officer
|
|
37
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