The Gold Report: Clean TeQ Holdings Limited (CLQ:ASX) was founded in 1990
as an air-purification business; a quarter-century later it's now in the
water purification and metals business. Tell us about the evolution of your
company.
Sam Riggall: By 2000, Clean TeQ had become Australia's largest
air-treatment company for biological odor control. The company then looked to
expand its technology base. It identified very promising technologies around
ion exchange and moved to license them. The next decade was devoted to
developing, modifying and improving our proprietary continuous-ion exchange
process and applying it to those industries where it demonstrates the
greatest value.
TGR: You're no longer in the air purification business?
SR: Even though this was Clean TeQ's sole revenue-generating
business, we sold it earlier this year for around AU$2 million (~AU$2M) with
an arrangement for future payments contingent on future performance. The
problem was that its business model was cost-plus-margin in a quite
competitive industry. We decided that our resources and capital were better
directed to the core technology of continuous-ion exchange. So, we are now
focused on water treatment and metals recovery.
TGR: Tell us about your history in business.
SR: My career has been spent mostly in the mining sector. I worked
for the Rio Tinto Group (RIO:NYSE; RIO:ASX; RIO:LSE; RTPPF:OTCPK) for almost
15 years, first in exploration, then business development, project generation
and project development—the last six years mainly for Rio's copper group,
leading the negotiations with the Mongolian government for the development of
the Oyu Tolgoi project now owned by Turquoise Hill Resources Ltd. (TRQ:TSX;
TRQ:NYSE). After leaving Rio Tinto I ran business development and strategy
for Ivanhoe Mines Ltd. (IVN:TSX) until Rio bought that company.
I moved to Clean TeQ as chairman in 2013 as a result of Ivanhoe's founder,
Robert Friedland, becoming Clean TeQ's biggest shareholder.
TGR: Talk about the other members of your management team and what
they bring to the table.
SR: Our founder, Peter Voigt, is now an executive director. He is a
biochemist with a long track record of successful technology development. His
passion is solving seemingly intractable environmental problems. He believes
that good economic outcomes and good environmental outcomes can be
compatible.
Ealden Tucker, VP/GM Global Water, has had a long career in this sector,
much of it spent in China. John Carr, our GM of Metals, is an extremely
accomplished chemical engineer who worked formerly for Rio Tinto. Ben
Stockdale, our new CFO, has 16 years of experience in mining.
Our team demonstrates a good balance of technological expertise and
business acumen.
TGR: What is continuous-ion exchange?
SR: An extremely selective and efficient process that extracts
materials from solutions, either water or acid leaches, using resin beads
that have been produced to hold a particular ionic charge. Imagine one
continuous flow of resin extracting target metals or cleaning water, being
removed, regenerated and then recirculated into a system.
This is a superior alternative to membrane or filtration processes, which
squeeze materials through meshes or filters with the expectation of
extraction based on size. These can be effective processes, but they tend to
be extremely energy intensive because of the high pressure required to force
the materials through the membranes or filters. The beauty of ion exchange is
that all the mechanical work is affected by the resin's chemistry.
The selectivity of our process is crucial to its value. We can expressly
extract specific materials, such as gold, copper, particular organics or
salts in commercially viable amounts.
TGR: Is this a proprietary process?
SR: Ion exchange has been well known for decades, but our
continuous-flow process is proprietary. Our technology is much superior to
traditional batch processing and is the result of the $10M+ we have invested
in it.
TGR: To what commercial uses does Clean TeQ employ continuous-ion
exchange?
SR: It is highly effective in desalination, which is needed in the
development of northern Australia's coal-seam gas fields, where gas is often
trapped underground under pressure by large amounts of water with a
significant salt content. Freeing the gas brings this salty water to the
surface, which leads to environmental problems with soil erosion and salt
pans. We have operated a sizable demonstration plant in Queensland that
demonstrates how efficiently our technology removes the salt from the gas
field brine.
In industrial applications, our technology can treat organics in water and
extract heavy metals and other pollutants from industrial waste streams. In
mining, it abets recycling and is used to treat water tainted with acids and
sulfides so it can be safely discharged into the environment.
With metals, it's simply a matter of looking at the periodic table. Most
carry an ionic charge that makes them amenable to extraction using
continuous-ionic exchange.
TGR: Can ionic exchange be used to remove precious and base metals
from mine tailings?
SR: It is exceptionally good at this, for two reasons. First, our
process is efficient with low-grade material, which tailings typically are.
Second, our process is exceptionally good with oxidized material, which
tailings typically are as well.
TGR: What is the present and future of Clean TeQ's
water-purification efforts in China?
SR: One year ago, we signed an agreement with the Shanghai
Investigation, Design and Research Institute (SIDRI), a subsidiary of China
Three Gorges Corp., China's largest power generator. This agreement
anticipates the formation of a joint venture (55% SIDRI, 45% Clean TeQ) to
leverage the cost and environmental benefits of our continuous-ion exchange
technology in the mitigation of the degrading water quality of China's
rivers, lakes and groundwater systems. The technology also can be used for
metals recovery.
After eight months of trials, SIDRI has confirmed that the necessary
technical verification steps have been achieved. We are now negotiating with
SIDRI the structure and documentation of the joint-venture agreement that
would apply within China.
TGR: Given the Chinese government's commitment to environmental
remediation, this is a vast market, correct?
SR: It is. But we must be pragmatic and understand that it will
take time for markets to place a value on water. China has taken the view,
and I think this will be confirmed in the next five-year plan, that the
environment in general and water in particular will be key investment
priorities.
We don't profess to have a technology that will solve all of China's water
problems, but we can say that we have a versatile technology that can be
employed successfully in many different applications. Our relationship with
SIDRI and Three Gorges will facilitate a significant transfer of knowledge
and expertise in the water-treatment space. We are positioning our company for
the future of water, and we are working with partners in China that will make
this reality.
TGR: How much cash does Clean TeQ have?
SR: At the end of August, we had ~AU$9.5M in the bank.
TGR: When do you expect that Clean TeQ will become profitable?
SR: We expect the details of our Chinese joint venture to be
determined by the end of 2015 or early 2016. Our ramp up in China will be
progressive, and we should have our first batch of projects underway by next
year.
But so far I've described only half our business. We have the scandium
side as well.
TGR: What is the business opportunity for scandium?
SR: Scandium is a rare earth element, one that is rarely found in
nature in appreciable concentrations. It is a metal little known even to
industrial chemists. What we have known about scandium for half a century is
that it is the best alloy for aluminum. It is also used in the manufacture of
solid-oxide fuel cells.
We decided to buy the Syerston mine in New South Wales from Ivanhoe in
order to produce scandium with supply reliability delivering known pricing to
markets, thus making it an attractive metal for deployment in aluminum-based
applications, principally transportation. We believed that by combining a
large, high-grade resource with Clean TeQ's proprietary technology we could
unlock latent value.
Syerston Project
Location. Courtesy of Clean TeQ Holdings Limited
TGR: Given that scandium makes aluminum lighter yet stronger, why
isn't all aluminum treated this way? Is it a shortage problem?
SR: Yes. Those companies that would wish to use scandium alloys for
mainstream industrial applications, such as building cars or airplanes, have
always lacked confidence that sufficient scandium would be available. That is
because no mine has ever been built that produces scandium as a primary
product. To date, most scandium has been produced as a by-product of the
treatment of industrial waste, mostly in the titanium pigment industry. Clean
TeQ has successfully produced scandium in this manner through the application
of our continuous-ion exchange process in Japan.
But what we are offering now at Syerston is something radically different.
We propose the development of the world's first mine devoted 100% to scandium
production, by first leaching the scandium into a solution, then using ion
exchange to extract it and yield scandium oxide for commercial use.
TGR: The published prices for scandium metal are wildly variable.
SR: There's not an openly traded price in the market, as all
contracts are private. Published figures I have seen vary from anywhere
between $1,700 per kilogram ($1,700/kg) and $6,000/kg. That says to us that
this is quite a dysfunctional market. In order to create a viable scandium
market, we must not only establish supply reliability but also establish a
price that creates value for customers and creates end users. Scandium is now
a niche rare metal. Our objective is to commoditize it with reliable supply,
consistent product specifications and significantly lower pricing.
To achieve that, we need a scandium mine. The benefits of a minable supply
of scandium are clear. First, a known, reliable production base that is not
dependent on by-product production, which is subject to indirect, secondhand
reduction. Second, a reliable production base leads to cost certainty, as
well as significant cost reduction.
We have a valuable proposition for industry with Syerston: stable production
with lower costs. And we intend to supply key players in the transportation
sector.
TGR: How does the Syerston site stand for permitting and
infrastructure?
SR: Exceptionally well placed, as it is fully permitted for a
mining development. Even better, it has a government granted water
allocation, which is essential, considering both the hydrometallurgical
process we will employ and the region of Australia where it will be employed.
The Syerston mine is in a remote location with virtually no population,
but there is extensive copper mining there, which means access to
infrastructure and a trained workforce.
TGR: You issued a maiden Syerston resource in January. What do you
have there?
SR: We examined two potential scenarios: a global resource with a
lower cut-off and a high-grade resource with a higher cut-off. We hope to
maximize grades and therefore recoveries in the early years. Globally, there
are ~16 kilotonnes of contained scandium oxide in the ground. This estimate
is based principally on historic drilling. We are also undertaking our own
drilling, and we believe the potential exists to increase the resource.
To put the above figure in context, the global market for scandium today
is only 15 tonnes. It's a niche market because users cannot obtain the metal
at a desired price. Once operational, Syerston will exploit the latent demand
in the market.
TGR: How close is Syerston to releasing a feasibility study?
SR: We are aiming to complete the feasibility study by the middle
of 2016. We are just completing a crucial piloting program in Perth. Its
purpose is to provide input and feedback for our metallurgical testing, to
measure leaching efficiency, recoveries and extraction throughout the
process. This program processed around 12 tonnes of ore directly from the
site.
We are committed to providing samples for potential customers to test and
verify for product qualification purposes, and our pilot program has positioned
us to produce these samples on a relatively large scale.
TGR: Could you give us a ballpark capital expenditure (capex)
figure for Syerston?
SR: It would be a very small mine with a very small footprint and a
relatively modest capex: ~$70–80M. We aim to develop a facility that will
produce 30–40 tonnes of scandium oxide per annum at a cost of US$400–500 per
tonne.
Initially, Syerston would process only 65,000 tonnes of ore annually. This
is so small as to cause some to wonder why we would bother. The answer is
that this is incredibly high-value material, which fully justifies such a
small footprint and development plan. Of course, once we begin delivering
scandium reliably and cheaper than ever before, what would happen to demand
then? And what would our expansion plans look like?
TGR: What is the significance of Clean TeQ's agreement with Airbus
APWorks GmbH and KBM Affilips BV?
SR: Airbus is, as you know, one of the world's largest aircraft
manufacturers. APWorks is an Airbus division that commercializes technologies
developed by Airbus, in particular manufacturing technologies focused on 3-D
printing. KBM is one of the world's largest manufacturers of master alloys,
which that company calls the "spice rack for the metal industry."
In other words, the particular composition of a master alloy fine tunes the
properties of the metal product.
Scandium's challenge is not in permitting, mining or processing; it is in
marketing. As Clean TeQ progresses the development of Syerston, we must prove
a demand for the scandium it produces. From the start of this process, it was
clear we needed to engage with end users all along the supply chain. The
significance of our agreements with Airbus APWorks and KBM is that they
demonstrate our eagerness to work with major end users and persuade them of
our ability to provide a reliable supply of scandium at the right price.
TGR: With 17% ownership, Robert Friedland is your company's biggest
shareholder. What does his name bring to Clean TeQ?
SR: It brings a great deal of attention to who we are and what we
do. Just as important, however, is that Robert is a long-term advocate in the
resource-preservation movement. He is keenly interested in employing emerging
technology to make mining cleaner and more efficient, and to develop metals
and minerals that assist in making the world a cleaner place.
I believe Robert's investment track record often anticipates his
expectations for significant shifts in society, whether they be driven by
urbanization, technology or trends in global wealth transfer. Some of these
will require delivery of more base and precious metals, some will depend on
more exotic metals. But the key for our industry is to produce with minimal
environmental impact and at a cost that justifies the end use. We will always
look to develop synergies where we can, whether it be in electric vehicles,
aerospace or any future transportation applications. We wish to leverage our
relationship with all parties the better to secure Clean TeQ's future.
TGR: Where do you see your company in three years?
SR: I would like to think we would be the world's first producer of
scandium from standalone mining after having established important offtake
and supply arrangements in key industrial markets. We believe the future of
scandium will be bright indeed. It is the best aluminum alloy available
today. It adds strength and weldability, while reducing weight and resisting
corrosion. Its applications are almost limitless to improve the current
performance of conventional alloys.
In three years, we should also have built a valuable partnership with
China and demonstrated the flexibility of our continuous-ion exchange process
in treating that country's water problems.
Clean TeQ has a vision. It has two key focuses. It is now our job to deliver.
TGR: Sam, thank you for your time and your insights.
