Why the Clean TeQ Holdings Limited share price is up 122% this year

Does Clean TeQ Holdings Limited (ASX:CLQ) have the ability to fullfil its potential?

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Clean TeQ Holdings Limited (ASX: CLQ) has seen its share price soar 12.9% today to 35 cents, and is now up 122% since the start of 2016.

What does Clean TeQ do?

Clean TeQ provides purification technology for various uses in various sectors. The company’s Ionic Filtration & Exchange (CIF) and Macroporous Polymer Adsorption (MPA) resin technology allows companies to treat water and extract harmful and unwanted water contaminants, as well as extracting metals from leaching solutions. The latter is especially important for mineral resources companies such as nickel and copper miners – and for Clean TeQ itself.

The company is also developing one of the world’s highest grade and largest scandium deposits utilising its Clean-iX technology – the Syerston Project in Western NSW – which could be an incredibly valuable asset as you’ll see below.

What’s scandium and why’s it important?

Scandium is sometimes classified as a rare earth element, but while it is not that rare, it is rarely found in high concentrations. The US Geological Society estimates the worldwide trade in scandium oxide at just 10 tonnes, although there is no market place and is usually traded between private parties. Clean TeQ estimates supply at between 10-15 tonnes per year.

Most supply of scandium is used in aluminium alloys thanks to the additional benefits such as strength, particularly for commercial aircraft and the aerospace industry.

However, demand could boom if global supply can become available in decent quantities, and prices could follow – with recent prices between US$2,000 and US$3,000 per kilogram of scandium oxide – in other words US$2 to US$3 million per tonne. The Syerston project contains 603 tonnes of scandium oxide measured resources at the higher cut-off grade of 600 parts per million.

That’s why the ability of Clean TeQ’s technology to extract Scandium is so important to the company.

In January this year, Clean TeQ produced its first batch of high purity (99.9%) scandium oxide from the Syerston project. A Feasibility Study is due in the June 2016 quarter.

Risks

There’s plenty of work still to do before Clean TeQ begins commercial production of scandium oxide at Syerston, including raising capital from investors and banks to construct the full-scale operating plant.

It has yet to sign any commercial orders for its water treatment technology too, so is highly speculative at the moment. However, that might not be far away with Clean TeQ indicating that it expects to discuss contractual arrangements for its first project in the next quarter.

Ideally, the company’s water treatment technology would pay for the development of the Syerston project – but that may be more hope than reality.

Foolish takeaway

Clean TeQ is an unusual company in the fact it is part mineral resource developer and part technology company. One might compare it to rare earths producer Lynas Corporation Limited (ASX: LYC) – which also has a mine and a processing plant – but investors will be hoping for a much better outcome.

Given the high-risk nature of Clean TeQ, this is one for the punters prepared to lose all of their investment if it doesn’t work out.

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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