Alkane Resources final planning before full commercial rare earth mine
The supply of rare-earth metals (REEs) has long been dominated by China, with over 90% of the world’s REEs originating from Chinese companies and their associates. Ian Chalmers, managing director of Alkane Resources Limited (ASX: ALK | OTCQX: ANLKY), promises a change to the current paradigm from the unlikely starting point of Toongi, Australia. 25km south of Dubbo, the site has been in pilot operations for over eight years and has reportedly cleared the final planning hurdle to create a full commercial mine.
The Dubbo Zirconia Project (DZP) is based on one of the world’s largest in-ground deposits of zirconium, hafnium, niobium, tantalum, yttrium and other REEs. Particularly promising is the abundance of increasingly desirable metals such as zirconium and niobium, essential for a wide range of everyday and specialised devices such as magnets, phosphors and technical ceramics. While originally seen as a potential strategic and alternative global supplier of critical minerals, recent developments at the DZP highlight just how realistic a prospect it is for Australia to become a world-leading supplier of the so-called “metals of the future”.
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On 28 October 2016, Alkane released the results of a cost reduction study demonstrating that the use of a modular, two-step plant construction could reduce initial capital needs from almost $1bn to around $480m. The separate modules, able to extract 500ktpa each, will be fabricated off-site and transported as needed; not only reducing initial costs but providing increased financial stability to the project as it permits the plant to expand in-line with establishing markets. The announcement closely follows the news that Siemens will be supplying a substantial quantity of equipment and services, whilst also sourcing REEs from the DZP directly. Alkane secured processing services from Vietnam Rare Earth JSC (VTRE) earlier this year to separate ore material into its constituents, and with costs in some areas lower than China, have ensured that future production costs can be truly globally competitive.
The DZP will produce over 16,000tpa of zirconium products (100% ZrO2 basis) and includes zirconium dioxide, specialty zirconium chemicals and value added zirconium products. At full capacity, the DZP zirconium revenue is estimated to be US$100 -120 million, which equates to about 30 – 32% of total project revenue at current spot prices for the project’s output. UK-based company Minchem Ltd., a technical ceramics marketing and manufacturing business, have signed an exclusive worldwide marketing, sales and distribution deal for all zirconium materials produced at the DZP.
The zirconium chemicals market consumes about 21% of annual zircon production and is the fastest growing segment of zircon consumption. With a forecast compound annual growth rate of ~5%, the zirconium chemicals market is anticipated to reach 190,000tpa by 2020, and 240,000tpa by 2025, worth in excess of US$1.5B per annum. With the DZP expected to begin full operations in the next two years, Alkane and their new associates seem perfectly placed to take advantage of present sector growth.
The DZP may focus on the extraction and processing of zirconium products, but its polymetallic model makes for a considerably more robust setup than a single-material mine. The site at Toongi is expected to last for 70-100 years, and there is purportedly another similar resource also owned by Alkane that has yet to be fully investigated. Looking forward, a detailed assessment of concept is due to be completed early in the new year, with full revised financials to be released in the March Quarter of 2017. Given the magnitude of recent developments it seems highly likely that Alkane will emerge successful in its endeavour to put Australian REE mining firmly on the map.
On the 23 November 2015, Alkane Resources Ltd’s share price (OTCQX: ANLKY) was trading at $1.71. The ASX price was at AU$0.24. At the time of writing, the company’s share price was at $3.43 while the ASX price was at AU$0.365, which can be regarded as a testament to the development of the Dubbo project. The market is rewarding Alkane, for what we regard as one of the most viable prospective rare earth companies outside of China which has a real chance of reaching commercial production.
Lara has been an analyst for over ten years, starting her career as an equity analyst at Foord Asset Management and more recently as the ... <Read more about Lara Smith>