There is speculation Australian Mines is buying Metallica Minerals’ stake in a scandium–cobalt–nickel tri–metal project in Queensland after both companies entered trading halts yesterday.

Australian Mines (ASX:AUZ) is expected to take ownership of the project, which would supersede an existing earn-in deal with Metallica (ASX:MLM).

Metallica signed an agreement last year that would allow Australian Mines to earn up to 75 per cent of the project after conducting a feasibility study.

The project is about three hours northwest of Townsville. It consists of five deposits — Greenvale, Lucknow, Bell Creek, Minnamoolka and Kokomo — with mining leases covering key deposits.

The total scandium resource is 12 million tonnes at 162 ppm scandium for 2989 tonnes of scandium oxide.

The combined nickel and cobalt Mineral Resource is 89 million tonnes at 0.58 per cent nickel + 0.06 per cent cobalt for 514,000 tonnes of contained nickel metal and 54,000 tonnes of contained cobalt metal.

A pre-feasibility study in 2013 found the project could produce 50 tonnes of high purity scandium oxide (Sc203) per year over 20 years, and generate an average EBITDA of $59 million per annum.

According to Australian Mines, the site could become the world’s largest source of this critical metal.

Scandium, a silvery-white metallic element found in association with rare earth elements, is used especially in alloys and in high-intensity electric lamps.

The acquisition would free up Metallica to focus on its Urquhart bauxite project which is a near-term production opportunity.

Urquhart last month received federal environmental approval and is now waiting Queensland government backing. It’s also progressing a separate approval for the haul road linking the project to established port infrastructure at Hey Point.

Both companies requested trading halts yesterday until September 6 or the release of an announcement.

Prior to entering trading halt, Metallica was trading at 6.6c, capitasling the company at around $21 million. Australian Mines was trading at 1.8c, valuing the company at around $36 million.