Meeting during September quarter with Kiwirrkurra representatives, successfully resulting in land access agreement with the traditional owners
1 According to expected annual production capacity, as independently observed by Platina Resources Limited: Platina Resources Limited, Owendale scandium project, released 17 March 2015
Australian Mines Limited ("Australian Mines" or "the Company"; ASX: AUZ) is pleased to provide shareholders with its Quarterly Activities Report for the period ended 30 September 2016.
Scandium Project Acquisitions and Strategy
Australian Mines Limited is pleased to announce its strategy to aggressively pursue a dominant position in the global supply of scandium through two separate transactions to acquire projects focused on this emerging technology metal.
The Company applied significant corporate resources in the September quarter to the evaluation and negotiation of these agreements, allowing it to pursue majority positions in, and operate, advanced projects focused on the primary production of scandium.
Australian Mines announced, post the conclusion of the period, it had entered into an option agreement with Jervois Mining Limited (ASX: JRV) to acquire 100% of the Flemington Scandium- Cobalt Project near Fifield in New South Wales.
Simultaneously, the Company also announced it had entered into a separate and independent agreement with Metallica Minerals Limited (ASX: MLM) to earn up to a 75% interest in the advanced Sconi Scandium-Cobalt Project near the historic mining centre of Greenvale in Queensland.
Completion of these transactions will be a significant milestone for Australian Mines, providing the Company with a clear pathway to production through the development of the premium-quality scandium resource at Sconi, before expanding to bring the high-grade Flemington Scandium- Cobalt Project on line by 2022.
Managing Director, Benjamin Bell commented, "These transactions enable Australian Mines to take a globally significant position in a strategic metal via two established projects that offer near-term development potential. It also puts the Company in a strong position to fund its existing gold and copper projects in the longer term, to ultimately deliver significant value to investors across a diversified portfolio."
Our indicative development timetable for the Sconi Scandium Project is to immediately commence a Definitive Feasibility Study, with the goal of having this completed by December 2018. This DFS will further detail the project's economic and technical potential. Anticipating a positive conclusion of this study, the Company expects to commence construction of a mining operation at Sconi, with a target to be in production during 2020 (Figure 1).
"We have also commenced a Scoping Study on the Flemington Scandium-Cobalt Project to define the economic potential of the existing Mineral Resource as well as the preferred mining schedule and processing options. We expect the results of this study to be available by March 2017 and we have also started the process of applying for a Mining Licence over this deposit.
"Australian Mines sees a huge future for scandium as a product, with the largest growth market likely to be the automotive manufacturing sector. Aluminium alloys are already used by leading global car manufacturers to great effect as in addition to reducing the weight of an average family car by up to 200 kilograms and SUV's by up to 400 kilograms, it also makes the bodyshell of a car more than 50% stiffer, thereby offering valuable improvements in body strength and driveability2.
"We see this trend of car makers transitioning from steel to aluminium alloys continuing, with potential application of aluminium-scandium alloys in structural components including doors and chassis parts. This is due to the unique ability of aluminium-scandium alloys to be welded as easily as conventional steel and exhibiting superior strength characteristics.
"This application would enable manufacturers to build lighter vehicles using smaller engines to generate the same power-to-weight performance, in turn, resulting in reduced fuel consumption and lower carbon emissions. The suitable aluminium alloy need only contain 0.2-0.4% scandium3 or about 1 kilogram of scandium per vehicle. In 2015 alone, over 68 million new passenger vehicles rolled off production lines around the world4, creating an enormous potential market for aluminium-scandium alloys.
"Australian Mines plans to become the world's largest scandium supplier producing from a primary deposit, resulting in cost-effective and reliable production. Our whole focus will be around optimising scandium production and quality to provide certainty for our future off-take partners."
Figure 1: Australian Mines' proposed project development timeline of its Flemington and Sconi scandium deposit.
2 European Aluminium Association, The Aluminium Automotive Manual 2013, http://european-aliminium.eu/media/1543/1_aam_body-structures.pdf, 1 October 2016
3 AZO Materials, http://www.azom.com/article.aspx?ArticleID=10670, 1 October 2016
4 Organisation Internationale des Constructeurs d'Automobiles (OICA),http://www.oica.net/category/production- statistics/, 1 October 2016
Flemington Scandium-Cobalt Project
Australian Mines has commenced a Scoping Study on the Flemington Scandium-Cobalt Project, which the Company believes represents an attractive development opportunity based on the results of a Feasibility Study completed on the neighbouring Syerston Scandium-Cobalt-Nickel resource5.
Hosting an existing Mineral Resource of 3.14 million tonnes at 434 ppm scandium, including 2.67 million tonnes at 435 ppm scandium in the Measured Resource category6 (see Table 1), the Flemington Scandium-Cobalt Project is arguably one of the highest-grade scandium deposits in the world7.
Based on this identified Mineral Resource at Flemington, this project currently includes a total of 2,085tonnes of scandium oxide (Sc203)8,with 77% of that metal contained within the limonitic laterite, which appears similar in nature to Clean TeQ's adjoining Syerston deposit9.
This similarity between Clean TeQ's Syerston mineralisation and that at the Company's Flemington Project is, of course, not surprising given that Australian Mines' project is the northern continuation of the Syerston ore body - separated only by a tenement boundary (Figure 4).
Flemington offers considerable exploration upside for additional high-grade scandium deposits as well as complementary mineralisation including cobalt and nickel.
Previous drilling at the project returned relatively thick intersections of cobalt mineralisation, including 14 metres @ 0.21% Cobalt from 6 metres (drill hole SY14)10 and 9 metres @ 0.21% Cobalt from 10 metres (drill hole SY56)11.
Under the terms of the agreement entered into with Jervois Mining, Australian Mines has been granted a series of options to enable the Company to purchase 100% of the Flemington Scandium-Cobalt Project: