Lithium and cobalt at the Syerston project have underpinned Clean-TeQ’s runaway share price. But Syerston’s lesser-loved scandium may be about to have its day in the sun thanks to a deal with China’s aerospace industry. Plus, Red 5 makes a strong start to life as a WA gold miner.
It is a case of back to the future for billionaire mining entrepreneur Robert Friedland’s ASX-listed Clean TeQ (ASX:CLQ).
In the past two years, Clean TeQ – owned 16.3% by Friedland and 16% by China’s Pengxin Mining – has been something of a tearaway success, growing from $70m to the $800m-plus company it is today, headed as it is towards nickel and cobalt sulphate production for the lithium-ion battery market from its Syerston deposit (recently renamed Sunrise) near Condoblin in central NSW.
Friedland originally made his way on to the register of Clean TeQ in 2013 and initially at least, his interest was in the Melbourne-based group’s continuous ion-exchange technology and its ability to clean up waste water, either on environmental grounds alone or a combination of the environmental with valuable metals and minerals recovery.
The water technology is still there and is bubbling away in the background because as we all know, one of the big challenges the world faces as the decades roll by will be in keeping up the supply of fresh water to the world’s growing, and more demanding, population.
It was in 2014 that Clean TeQ acquired Syerston, with its initial interest being in the deposit’s scandium component. Friedland was being his usual visionary self and had decided scandium had a big role to play in the “light weighting” of the aerospace and automotive industries, and in the actual manufacturing process they involve.
Light weighting of cars and trucks is a sure-fire way to reduce emissions. And if you can change the manufacturing process, all the better.
Scandium has a role to play in all that. As an alloying element, scandium refines the crystal structure of aluminium to the point where the alloyed metal can be welded without loss in strength, as well as delivering other benefits (increased plasticity in the moulding of complex shapes, improved corrosion resistance, and higher thermal conductivity).
Its weldability is what has got scandium fans really excited. The world, on Boeing estimates, is going to need 35,000 new planes by 2032. Trouble is building planes (and aluminium bodied carts and trucks) is a slow process because of the time-consuming practice of riveting aluminium panels and the specialist welding techniques required.
But the problem with scandium is that it faces the classic chicken or the egg situation. Current global consumption is miniscule. Why? Because of the lack of mine supply, with what amount of scandium is available currently coming from the reprocessing of residues in the titanium dioxide industry.
Clean TeQ was out to fix all that two years ago by developing Syerston’s scandium component – it is the biggest known deposit of the stuff in the world. At the time it knew it had to effectively commoditise the metal by creating reliable supply, produce a consistent product and offer significantly lower prices for scandium oxide (the precursor to the metal).
A low-level scoping study actually got around to valuing a project producing (all of ) 42.5 tonnes annually with an average cash cost of $US446 a kg against a long-run selling price of $US1,500/kg.
Needless to say that Syerston has been re-invented big time since, and it is now all about plugging central NSW in to the global electric vehicle and power storage phenomenon. Planned scandium output is about the same but it is nevertheless swamped by nickel and cobalt.
But scandium’s potential to be a much more important component of Syerston has not gone away. More to the point is that its potential to be more than a smallish by-product to the main game of nickel and cobalt sulphate production has just taken a big step forward.
China Inc, in the form of aluminium giant Chinalco, has appeared on the scene, signing a “landmark” agreement with Clean TeQ for the “development and adoption of scandium alloys in the global transport industry”.
The agreement covers a two-year development program to investigate the functional and commercial benefits of scandium in a range of aluminium alloys currently used in China’s automotive and aerospace industries.
Where it goes is anyone’s guess. But if you’re a western manufacturer in either of those industries, it might well be something to worry about. As for Clean TeQ, the potential for Syerston’s scandium component to become a bigger contributor for decades to come has taken a leap forward.
RED 5’s pivot to WA pays off
Another quarterly reporting period has come and gone with the usual swings and roundabouts being reported.
But if it was game changing stuff that readers were looking for, a squiz at the December quarterly of Red 5 (ASX:RED) could be worthwhile. It is trading at an unchallenging 7.1c for a market cap of $88m.
Red 5 had to reinvent itself last year after parking up its fully-developed mine and 500,000oz gold resource base at Siana in the Philippines while the country goes through the process of deciding whether it wants a mining industry.
While Siana could come into its own one day, Red 5 decided it was time to come home. It set out to become a West Australia gold producer where sovereign risk is not quite the same as operating in the Philippines.
Just when everyone thought that the bigger gold groups had done with selling off what to them were lesser assets, Red 5 popped up through the haze of last August’s Diggers & Dealers to announce the dual $34.5m acquisition of the Darlot mine and King of the Hills gold project, respectively from South African gold producer Gold Fields and local mid-tier Saracen Mineral Holdings (SAR).
Darlot shot the lights out in the December quarter by producing 17,777oz, which was well ahead of expectations. The all-in sustaining cost of production was $A1,291 an ounce, a big improvement on the $A1,600/oz costs that were common under the previous ownership.
At the KOTH project, first ore from stockpiles was sent off to Darlot for processing and underground mining started early in January. Red 5 is forecasting gold output for the (calendar) year to range from 85,000-95,000oz. Net cash from operations was $14.1m for the quarter and there has been some sensible hedging of production, albeit small scale stuff, at $A1,686/oz.
So it can be said that life as a WA producer has got off to a good start for Red 5. The real upside though is in giving the assets acquired a junior’s intensity to growing the resource base at the mine, near mine, and regionally. The intensity a junior can bring to assets sold by bigger gold groups with bigger fish to fry is a well worn path to value creation in the Australian gold scene. And so it might well be for an Aussified Red 5.