EDITOR: | November 1st, 2017 | 10 Comments

Alkane at the front of the line for zirconium and rare earths

| November 01, 2017 | 10 Comments
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Today’s markets are dominated by the economics of technological progress, and mineral resources have never been more important. Clean energy, transport, medicine, the internet of things and artificial intelligence are all powerful trends, the requisite materials for which are undergoing substantial market changes. Recent developments in Chinese domestic policies, for instance, are expected to have far-reaching effects, particularly in heavy manufacturing countries, and producers of modern-gadgetry’s core ingredients must step up to fill these emerging supply gaps.

One such company, Alkane Resources Ltd. (ASX: ALK | OTCQX: ANLKY) (“Alkane”), famed owners of the Dubbo Zirconia Project, are at the front of the line when it comes to zirconium, rare earths, niobium and hafnium. The global markets for these products are largely controlled by the vast Chinese manufacturing industry, and while China currently produces more than 75% of the world’s zirconium and over 90% of high-value rare earth elements, recent policy developments are expected to increase the country’s consumption and curb its ability to supply.

Announced in March 2017, the Made in China 2025 policy aims to move Chinese industry away from low-value, polluting industries to manufacturing higher-value, downstream goods. As a result, several high-technology sectors must domestically source up to 80% of their refined minerals by 2025. These new policies could have the unintended consequence of restricting rest-of-world supply of certain critical elements including zirconium and rare earth elements due to increased consumption by downstream Chinese manufacturers.

Moreover, supply of technology components containing these elements, such as rare earth permanent magnets and electric motors, would potentially cease as China focuses on finished products such as electric vehicles or total wind turbine systems. This means countries which currently rely on supply from China will need to seek alternatives and develop complete mine-to-market supply chains in order to continue and guarantee production, since the imposition of additional regulations along with environmental inspections and audits are causing widespread closures of both legitimate and illicit operations.

The Dubbo Project will produce a host of critical materials that underpin many of the so-called megatrends driving today’s global economy. Growth of these megatrend industries is escalating, and moreover, several are converging to create growth rates much higher than historical levels. These megatrends all rely on myriad new and emerging technologies, many of which rely in turn on specialty materials or “technology metals” that will be produced by Alkane’s Dubbo project once financed.

At the end of the 2017 financial year, zirconium chemical prices were 40% higher than YE2016, breaching US$2000/t for the base product, zirconium oxychloride (ZOC), to reach the highest levels in four to five years. Continued strong and growing demand for rare earth permanent magnets in large-volume markets, such as renewable energy, electric vehicles and robotics, remains the primary driver for rare earths, mainly praseodymium and neodymium, both of which closed the financial year at their highest levels in two years. At present, over 90% of the supply of high-value rare earths is from China, making the market highly sensitive to the recent developments.

Due to this crazy number of changes in China’s manufacturing sector, it appears clear that the period of low prices and oversupply is officially over for rare earths and zirconium materials. The Chinese government has already embarked upon its war on pollution, leading to stricter enforcement of environmental laws across the sector and leaving a definite dent in the supply chain. As the most advanced poly-metallic project of its kind outside China, the Dubbo Project is a prime candidate as a long-term, reliable and independent supply option for critical materials including zirconias and rare earth elements.


Lara Smith

Editor:

A Sr. Editor and Analyst for InvestorIntel and Managing Director and Founder of Core Consultants, Lara is an internationally recognized expert in the field of ... <Read more about Lara Smith>


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Comments

  • Tim Ainsworth

    “mainly praseodymium and neodymium” > ALK’s full production forecast is just 1158tpa NdPr and the half scale module @ $480M CapEx <600tpa. Balance of the forecast is wildly overpriced HREE, i.e. DyO $350kg, Yttrium $15kg, at scale they will find difficult to place to mkt.
    Particularly given toll separation and a very limited path to mkt RE can only be viewed as by-product credits IMO, and I'd suggest finance would view it similarly.

    November 1, 2017 - 10:35 AM

  • Tim Ainsworth

    On another note the 800lb Gorilla in the space just released Jan/Sept production numbers:

    RE “compounds” 30766t +42.8%

    Magnetic materials production 11966t +51.6%

    Permanent magnet alloy production 8835t +307.2%

    repeat for emphasis > +307.2%

    http://www.repe.com.cn/index.php?op…=1235:2017-10-31-08-05-46&catid=22&Itemid=119

    You hardly need to be a rocket scientist to see where this is headed, although a basic understanding of the Dragon’s processing quotas, and Nth RE’s recently completed 12ktpa magnetic metals plant, probably a prerequisite.

    Ain’t going to be much Chinese NdPr available to any outside the SOE verticals, starting about now.

    Q is, where do any of the wannabes propose to enter the incredibly skinny magnet supply chain, particularly competitive to the built scale inside China?

    Asked that many times, and yet to receive a factual response, glossies certainly no help, they inevitably end in warm fuzzies.

    November 1, 2017 - 11:03 AM

  • Joe O

    Tim ie. ausheds,
    Correct me if I am wrong. Your thought process is basically its the chinese and Lynas, that is it. From past posts you obviously think Ucore is a joke and you seem to think alkane has no shot?
    FYI I am a lynas shareholder and may add more once dust settles from reverse split and debt/equity conversions.

    November 1, 2017 - 4:43 PM

  • Ian Chalmers

    Tim, appreciate you have some exposure to the rare earth industry by your attendance at RE conferences and contributions to blog sites but you don’t seem to consider all the available public date on the Dubbo project when commenting. The last published revenue numbers for the Project used May 2017 prices (AMEC presentation 7 June 2017). Since that time Nd, Pr and Zr prices have risen and Dy is about the same. So of total project revenue (Zr, Hf, Nb, REs) Nd, Pr, Dy, Tb contribute about 25% of that total (NdPr ~ 15% , DyTb ~10%), the others ~5%. From the many negotiations we have had (many ongoing), we can sell all of that output including other heavies. We can also sell all of the Y we produce that is not consumed producing yttria stabilised zirconia by the DP. The cost of toll treatment is included in the quoted OPEX. So yes you can say that the REs are coproducts with Zr, Hf and Nb production but that is the financial strength of the Project. Happy to discuss with you in Hong Kong next week.

    November 2, 2017 - 5:16 AM

    • Tim Ainsworth

      Certainly agree Ian, little to be learnt from developers at RE conferences.
      Only comparative value expressed in AMEC was a marginally reduced total revenue number, RE values expressed as 30%, plus your further breakdown here NdPr 15%/DyTb 10% suggests the same retail value Dy @ $350kg. Given SRB has placed nearly 2ys demand into storage and reports Chinese producers operating ~30% capacity I’d call that number “soft”, at best.
      The big mover in that AMEC piece was in fact Zirconium from 29% to 42% total revenues, perhaps further boosted by recent comment:
      ‘ “China’s continuing ‘war on pollution’ via strict environmental inspections is having far reaching effects on supply of all types of chemicals, including zirconium and rare earths. Reported shortages in availability of zirconium oxychloride (ZOC) have increased delivery times, and raised concerns about ongoing supply.”
      ZOC prices increased 40% in the first half of 2017. Prices are now over 60% higher compared to the end of last year and are currently $6,700 USD per tonne on a 100% zirconia basis.’

      November 5, 2017 - 2:26 PM

  • Kitjean

    So why is the share price of ALKANE falling at least 20% in the last month. However I still believe it’s one of the best investments of the RE companies.

    November 5, 2017 - 10:47 PM

    • Tim Ainsworth

      Perhaps because ALK doesn’t know what it wants to be when it grows up?

      November 7, 2017 - 10:51 AM

      • Tracy Weslosky

        Tim – are you back on a “terrorize tracy” campaign again just because your life clearly aches for someone in the universe to find you intelligent? Congratulations, your back on my PIA list. And I am allowing your ridiculous comment to be published because when Alkane becomes the only full supply chain supplier of battery materials in the public markets outside of China, we can go down in history for someone finally calling you out for being limited in your capacity to do anything but write 1-liners for the distinct pleasure of — adding displeasure. Throwing as we say in university football…throwing a flag down on the field for poor sportsmanship.

        November 7, 2017 - 3:18 PM

  • Tim Ainsworth

    Fortunately Tracy I can sit down with many of the leading individuals in the RE space and hold an intelligent conversation, incl Ian Chalmers.
    I’ll mail you a list from the last month and you can chase them for references should you wish.

    November 11, 2017 - 7:58 AM

  • JJBeswick

    “Alkane becomes the only full supply chain supplier of battery materials” once they find viable deposits of Li, Co and Ni down the back of their block. Graphite would be a bonus.

    November 11, 2017 - 8:55 AM

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