EDITOR: | August 17th, 2016 | 2 Comments

Alkane Resources and its Zirconium – What Comes Around…

| August 17, 2016 | 2 Comments

In the beginning there was the word… and the word was Zirconium….

Back in the mists of time the intriguingly named DZP of Alkane Resources (ASX: ALK | OTCQX: ANLKY) was more commonly known as the Dubbo Zirconium Project, then along came Rare Earths (and later other metals, like Hafnium) and the project become a mere acronym. Other company’s morphed the names of their projects over time (dare we mention the company that lost the “lake” because it reminded investors that the resource was underwater) but the management at Alkane resisted the temptation to change to the Dubbo project and maybe this was due to a sneaking suspicion that in the long term, the Zirconium aspect would eventually deliver for them.

In light of the latest developments they were right…


Offtakers on the Horizon

Just this week Alkane announced that it had signed an exclusive worldwide marketing, sales and distribution agreement with a major Zirconium player for them to take all zirconium materials produced by the DZP. Understandably this electrified the stock price and sent it substantially higher. The interesting thing now is to see how Alkane reconfigures its plans to meet this new demand.

The offtake deal was forged with Minchem Ltd., a technical ceramics marketing and manufacturing business that has been involved in zirconium chemicals and zirconium dioxide (ZrO2 or zirconia) products for over 40 years. The company is based in England and is one of the heavy hitters in the zirconium industry. It is privately owned and was formed in 2000 as a result of the management buyout of the Minerals and Chemicals division of Palabora Mining. PMC was originally owned by Rio Tinto/Anglo American and since 2012 has been a partnership with 74% held by Anglo American and 26% held by a Black Economic Empowerment group.

The Deal

The initial term of the agreement is for five years from commencement of DZP production, with an option to extend for a further five years by mutual agreement.

Minchem’s responsibilities will also include providing technical support to customers and assisting to identify new applications for zirconium materials. This includes value added zirconium dioxide products and stabilised zirconium dioxide products using Rare Earths from the DZP. Interestingly, Rare Earths include Yttrium oxide and Cerium oxide (that many regard as a throwaway) that are used to stabilise zirconia, and praseodymium oxide which is used to produce yellow pigments in ceramics.

The Strategy

The DZP is aiming to meet the demand for zirconium dioxide, specialty zirconium chemicals and value added zirconium products that can compete with Chinese production of zirconium chemicals and fused zirconia.  A major advantage of the DZP is the quality of its zirconium product output which is derived directly from the ore and not a zircon source.

The specs of zircon produced are very important to end-users as global zircon production is becoming increasingly “dirty”. This impacts on the ability of the processors to achieve on-spec Zr products.

The company is aiming to produce 16,374 tpa of 99% ZrO2, which is about 8% of current world demand for chemicals.

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.


I have written on Zirconium before but it is worth revisiting the subject now that it is likely to be the main driver of the Dubbo project for the short and medium term.

The name of zirconium is taken from the name of the mineral Zircon (ZrSiO4), a silicate mineral which is the principal commercial source of zirconium, with 97% of all zirconium chemicals/fused zirconia being derived from zircon. Zirconium also occurs in more than 140 other minerals, including the commercially useful ores baddeleyite and kosnarite.

Zirconium is a lustrous, grey-white, strong transition metal . Zirconium is mainly used as a refractory and opacifier, although small amounts are used as an alloying agent for its strong resistance to corrosion.

Processing of zircon takes two general routes. The first using an electric arc furnace produces fused zirconia with the principal end being in ceramic pigments.


Chemical leaching is the second process which generates a variety of products (including “chemical” zirconias) which are used in many applications ranging from drying agents, fire retardants, advanced ceramics, electronics and catalysts. These zirconias are also a key component of Solid Oxide Fuel Cells, a developing and important source of “clean” electricity.

The zirconium chemicals market consumes about 21% of annual zircon production and is the fastest growing segment of zircon consumption.


USGS figures for 2015 show the ranking of primary producers from mines as being Australia, producing 500,000 tpa, South Africa 380,000tpa and China, in a distant third place, with 140,000 tpa. Therefore around two-thirds of zircon mining occurs in Australia and South Africa.

Zirconium resources are estimated by the USGS to be around 78mn tonnes worldwide of which they credit Australia with 51mn tonnes and China with a mere 500,000 tonnes.

Zircon is processed in a number of countries but China currently dominates supply of processed zirconium products.

It is useful to note that Zircon currently is overwhelmingly a by-product of the mining and processing of the titanium minerals ilmenite and rutile, as well as tin mining. Collected from beaches and the near offshore (particularly in Western Australia), zircon-bearing sand is purified by spiral concentrators to remove lighter materials, which are then returned to the water because they are natural components of beach sand. Using magnetic separation, the titanium ores ilmenite and rutile are removed.

However, in contrast, the DZP sources its ore from hard rock.


Zircon consumption bottomed out in 2014 at its lowest point for a decade. Consumption had dropped by over 30% to 1mn tonnes from its 2011 peak. The use of zircon in some key markets, including traditional ceramics and foundries, had been affected by substitution from competing minerals or its outright elimination from product formulations. According to Zircomet, a leading Western converter, the fall in consumption occurred in spite of continued growth in the traditional ceramics market, the largest application for zircon, as consumers sought to reduce their reliance on the opacifier mineral owing to high raw material costs.

Lower consumption of zircon has been achieved by manufacturers through substitution, changing fashions and manufacturing innovations. In ceramics, zircon substitution has been particularly pronounced in the traditional Western European hubs of Spain and Italy. Ceramic producers have achieved similar quality levels by partially or completely substituting zircon with aluminosilicate minerals such as calcined alumina and feldspar in some applications. However it should be noted that some European ceramic producers sustain that the substitutes do not possess the same opacifier quality of zircon or zircon chemicals. Therefore substitution is mainly being driven by price considerations alone. This is somewhat like the situation we have encountered in the Antimony space.

While some substitution has also been seen in Asian ceramics, mainly those produced for the export market, producers in the much larger domestic markets in the region have sacrificed quality in favour of lower production costs. In many cases consumers have entirely removed zircon from their formulations.

Zircon use in chemicals and refractories also showed a decline between 2011 and 2013, but this was linked to lower output of these end-products rather than raw material substitution. However growth has returned to an uptrend with a forecast compound annual growth rate of ~5%, the zirconium chemicals market is anticipated to reach 190,000 tpa by 2020, and 240,000 tpa by 2025 and be worth in excess of US$1.5 bn per annum.


Pricing of zircon has been a wild ride in the first decade and a half of this century. From 2003 to 2007, while prices for the mineral zircon steadily increased from $360 to $840 per tonne, the price for unwrought zirconium metal decreased from $39,900 to $22,700 per ton. Zirconium metal is much higher priced than zircon because the reduction processes are expensive.

Zircon prices were volatile between 2010 and 2012, more than doubling in the space of 18 months to reach $2,500/t in mid-2012. This was the result of supply shortages, as end markets recovered from the financial downturn more rapidly than anticipated. In many cases, zircon consumers were unable to pass on increased costs, particularly in the traditional ceramics market.

Zircomet reported that, as a result of lower zircon demand, supply significantly exceeded consumption which led to the creation of large stockpiles. During this period, prices stabilised and then fell sharply. Australian zircon export prices fell to an average of $1,650/t in late 2012, and continued to fall throughout 2013 and into 2014. By mid-2014, they had reached an average of $1,000/t.

Prices for zircon sand have been weak over the last year as the chart below showing prices in Renminbi from the two major producers makes evident.


Source: Mining Bulletin


The latest deal was a major fillip for Alkane, demonstrating that its original thesis that Zirconium made for a worthwhile project by being endorsed by one of the world’s largest players in that mineral. The agreement with Minchem provides Alkane with an experienced partner to market DZP zirconium products directly to key end users in all major markets. It will also assist in the creation of higher value zirconium products which have been identified and are under active development.

Our vision is that Rare Earths will most likely make an upturn as the Chinese realise how fundamentally unsustainable their “loss-leading” in those minerals have been for themselves and their own interests. However, that may take a while and so then begs the question as to whether the DZP project can be moved forward (at a lower capex) without the Rare Earth element of the plan, in the first instance, to ride the Zirconium opportunity while leaving the REEs (and other components like Hafnium, Niobium etc) in abeyance for later monetisation. The market will be eagerly awaiting a signal on this from management.



InvestorIntel is a trusted source of reliable information at the forefront of emerging markets that brings investment opportunities to discerning investors.

Copyright © 2019 InvestorIntel Corp. All rights reserved. More & Disclaimer »


  • Asher Berube

    Excellent Article Christopher, zirconium is a very interesting mineral that deserves more attention.

    August 17, 2016 - 11:06 AM

  • Ian Chalmers

    Christopher, another good summary of the zirconium industry and the DZP. However I should point out that the circuit for the zirconium is not separate to the production of all the other metals (Hf, Nb, REEs). The major effort, including capital and operating costs, goes into the front end of the process which gets all the metals into solution. We then have solvent extraction for separation, followed by chemical precipitation for recovery and refining. Also the project financials are based upon current spot prices for all output except Hf, which we have discounted substantially. So we do not need RE prices to rise and can compete with China today. Supported by our partnership with Vietnam Rare Earth JSC to produce the full spectrum of REs, and have the capacity to convert to RE metals for all downstream applications.

    August 21, 2016 - 5:49 AM

Leave a Reply

Your email address will not be published. Required fields are marked *