Alkane at the front of the line for zirconium and rare earths
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.
Get our daily investorintel update
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.