At the time of our last note, the market was awaiting the shareholder approval of SIL. This was closely watched by many because the initial catalyst (receiving the mining lease on May 5th) did not have the expected impact on valuation. Since then, SCY.TO issued the following releases.
Sep. 12 - Received shareholder approval to the share exchange with (SIL). Pursuant to the transaction SIL will sell its 20% interest in EMC Australia to the Company in exchange for common shares of the Company. Transaction to be completed on or before November 30, 2017.
Sep. 25 - Secures Scandium Exploration Property in Finland. The reserved exploration area is approximately 24.6 hectares This reservation grants SCY.TO a first position right to apply for an exploration license on the property (protected through 2018).
Oct. 10 - Scandium Investments LLC. (SIL) exchanged their 20% direct project stake for a 20% SCY.TO common share interest. The Company now holds 100% ownership of EMC-A but SIL is the largest single shareholder. Evensens brothers to SCY.TO's board and 58M shares were issued at $0.34 cents for a total of 62M share (including prior = 21%).
Oct. 19 - Initiates EPCM Critical Path Engineering on Nyngan Scandium. This includes design, engineering, electrical, roads.
SCY.TO reports that project construction will take 18 months to be completed and a target of Q1 2019 was assigned.
Dec. 14 - Corporate Update: Alcereco Inc., extends the deadline for initial production and shipments from the Nyngan Scandium Project from December 1, 2017, to as late as December 1, 2022. The Company has been working extensively with Alcereco on test production batches of aluminum alloys containing scandium, for third party customers.
Jan. 16 - LOI with AML Technologies ("AML") - applying aluminium alloys to additive layer manufacturing processes.
SCY.TO's to supply aluminium-scandium alloys ("Al-Sc"), for testing by AML. 6 month test period required.
Jan. 22 - SCY.TO's board members were granted options to buy 4.1 million shares at $0.225.
Jan. 23 - LOI with Ohm & Haner Metallwerk to test scandium alloys in casting applications.
Jan. 31 - LOI with Granges AB to Test Scandium Alloys in Heat Exchanger Applications.
Jan. 31 - Director Barry T. Davies bought 223K at $0.17.
Since our last update, SCY.TO lost more than 50% of its valuation. SIL's shareholder approval was not the catalyst it was purported to be. From there, a similar type of sell off (slow and gradual - like the one from May 5 to August 14) occurred. Then came the Alcereco off-take extension. The potential added five year extension on the off-take surprised the market and raised serious questions about the whole Nygan Project timeline.
By the time the AML Tech LOI was announced, SCY.TO was already in 52 week low territory. The granting of 4M options at $0.225 was the ultimate "sell" catalyst leading to yet another set of 52 week lows. Even with two additional LOI, the stock has been unable to fully recover.
Looking back, SCY.TO did not communicate clearly with the market. Prior to the SIL approval, the compass pointed toward financing the Nyngan project and off-takes as the "next steps". The EMPC path were confirmation of this. What occurred thereafter is a "radio silence" for nearly two months. Then, the Alcereco off-takes extension, the AML Technology LOI agreement, and thereafter the granting of stock options.
Two LOIs later (Ohm & Haner , Granges AB), one understands the focus on developing industrial application prior to raising funds for Nygan. While the strategy is welcomed, it was not certainly not made explicit in the last few months. The market was expecting financing and off-takes, not LOI.
As such, the optics on the option granted at a 52 week low is considered "opportunistic." Though, SCY.TO previously engaged in similarly questionable activity once before (raising funds at $0.30 while the stock was trading at $0.43), the latest were unexpected.
The granted options are not the issue, but the timing and the price is. For timing, options could have been granted after the latest LOI agreement.
As for the price, options could have been granted at $0.25 cents, $0.30 cents (latest private placement), or even $0.34 cents (SIL's conversion price).
While we continue to be long on SCY.TO and see the vision, we believe that the market was certainly blindsided.
However, it looks like the stock is starting to trend back in the right direction.
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