Prepping for a Goliath in rare earths, hafnium, niobium and zirconium
Generally speaking, this year’s turnaround in a variety of commodity spaces was characterised by three major factors: China’s extensive closure and restriction of polluting operations, both mining and production, created a tidal wave of opportunity to break into associated supply chains from outside of the PRC; increased geopolitical uncertainty and resulting market pessimism fuelled precious metals growth, and the continued rush on materials essential to booming technologies, from jet engines and wind turbines to batteries, rescued a number of minerals from almost a decade of decline.
Considering some segments with high growth rates and positive futures, electric vehicle (EV) motors are expected to grow at a CAGR of 23% through to 2021, jet engines have been forecasted at 7.41% and rocket motors are expected to grow by 6.66% CAGR. Another disruptive factor is the increasing construction of offshore wind farms, forecasted at a 20% CAGR. Each of these growing industries has very specific mineral needs, and dominant supplier China has taken swathes of production offline this year in a sincere bid to curb pollution. In 2018, we can look forward to the new-look market really taking shape, with many prospective companies developing product offerings that are likely to be in high demand for a number of decades.
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While many organisations will make a good fortune by having a feasible quantity of one or two of these future-essential materials, there exist a good few which are sitting on high concentrations of three or more. These are the companies which will dominate the supply chains of the coming decades, benefitting from growth in multiple sectors; this very diversity providing some protection against boom-time market fluctuations. Alkane Resources Ltd. (ASX: ALK | OTCQX: ANLKY) (“Alkane”) has one such portfolio, featuring rare earths, hafnium, niobium and zirconium, which gives it the ability to supply almost every single one of the aforementioned industries.
The largest growth can be expected in the electric vehicle and wind turbine markets, for which the rare earth elements neodymium and praseodymium (NdPr) are critical materials. Particularly considering Tesla’s decision to use permanent magnet motors instead of the usual AC inductor in its 2017 Model 3, as well as NdPr being one of the hardest-hit materials in China’s industry consolidation.
Zirconium is also found in solid oxide fuel cells that provide reliable and affordable portable power, and mobile phones and phone towers incorporate signal amplifiers containing zirconium to boost signal strength and clarity. Zirconia ceramics also provide diamond-like coating protection for jet turbines, allowing them to run hotter and cleaner.
Owing to the high-temperature performance of hafnium and its compounds, the aerospace industry uses it to manufacture jet engines and other high-intensity systems. A niobium-based alloy containing 10% hafnium is being used for rocket engine nozzles, while hafnium-based ultra-high-temperature ceramics are used for thermal shielding. Nickel-based superalloys containing hafnium are used in jet engines and land-based industrial gas turbines for power generation, owing to their high strength and stability when operating at very high temperatures. This accounts for nearly 60% of current world hafnium demand.
Furthermore, hafnium is seen by many as a material that would see much higher demand if only it were produced in larger quantities. There are myriad applications in which hafnium is an invaluable addition due to its unique strengthening and heat-resistant properties, and this would certainly benefit Alkane considerably. The company’s construction ready Dubbo project is the most advanced polymetallic deposit of its kind outside China, and with a potential mine life of 70+ years, it could easily be a strategic and independent supply of critical minerals for a range of sustainable technologies and future industries.
With most global powers aiming for commercial space travel and revolutions in both personal vehicle manufacture and energy generation, Alkane have a strong case indeed. Moreover, diamond drilling has proved that gold systems continue 300 metres below the planned base of the existing pit at the company’s Tomingley Gold Operations, with 5.14 metres at 8.85 g/t Au measured in the process. This will be incorporated into a resource model which will form the basis of an underground mining study scheduled for completion during the first quarter of 2018. This company has everything going for it this year; once Dubbo is constructed, I expect that Alkane will become a goliath.