EDITOR: | June 2nd, 2015 | 10 Comments

Alkane jumps key hurdle as it vies to be world’s next rare earth mine

| June 02, 2015 | 10 Comments
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Alkane-ResourcesTwo more routine regulatory hurdles to jump and Australia’s long awaited Dubbo project will be ready to go ahead. Oh, did I mention the A$1 billion needing to be raised to build the mine? Fortunately, that last-mentioned task has just become a great deal less forbidding.

The reason? Today the project’s owner, Alkane Resources (ASX: ALK | OTCQX: ANLKY) received its key approval for the Dubbo Zirconia project, its permission to mine, the project being cleared by the New South Wales Planning Assessment Commission. The project is located 20km from the NSW regional centre of Dubbo (pop. 41,000). The lease will run for 20 years – a fraction of the mine’s potential life – and will allow Alkane to produce a variety of rare earth and metal concentrates including zirconium, niobium, hafnium, yttrium, europium, dysprosium and neodymium. Alkane will be permitted to mine 19.5 million tonnes over the 20 years, producing 75,000 tonnes of concentrate a year.

Alkane managing director Ian Chalmers says the task of raising the A$1 billion will now be possible. Although there are a few more regulatory boxes to be ticked – including environmental clearance – the approval to mine means that potential offtake partners can now be approached knowing that the mine will get up and running. All the niobium has been spoken for, but customers will need to be firmed up for the other elements. These possible customers were naturally waiting for the approvals to be in place before making any commitment. “These companies have been very selective about who they’ll talk to,” he adds.

Alkane is speaking to about 30 companies, covering REE magnets, phosphors, ceramics and – particularly – aerospace companies.

Alkane has several memorandums-of-understanding, including one with Shin-Etsu for processing of the rare earths, but these need to be nailed down in the form of firm undertakings.

Chalmers is particularly interested in the aerospace sector because of the increasing number of applications, starting with zirconium coatings for engine turbines. Yttrium, terbium and gadolinium are increasingly of interest in emerging aerospace technologies and special alloys.

As I reported on InvestorIntel in April after my previous interview with Ian Chalmers, he is trying to impress on people that they cannot be blasé when it comes to rare earth security. The Chinese will crack down on REE being illegally mined and smuggled via Vietnam, Laos and Thailand to major users, notably the Japanese. He considers that both Japan and South Korea have a false sense of security about REE supplies in the light of the World Trade Organization ruling. They think the REE supply problem has gone away. But, in his view, the new export licensing system and China’s introduction of the a new resource tax will see supply to the rest of the world reduced rather than eased (and probably prices increasing modestly).

Alkane has rising hopes for the hafnium to be produced at Dubbo, this metal having seen a good price increase in recent months and with some commentators saying it could reach $2,000/kg by the end of the year.

Hafnium, due to its high melting point (2, 233°C) and its alloying ability with other metals, is used in nuclear rods, engines for space rockets, and aircraft turbine blades. The global demand is only 80 tonnes a year but it is argued that limit is imposed by the fact that not much is available; increase the output, and applications will multiply – the scandium story replicated. Chalmers believes Dubbo could produce 200 tonnes a year.

There is no significance in the fact that NSW has permitted mining for 20 years: this is standard practice in the state, and companies then apply for permit renewal at the end of that period. The main Dubbo project has an expected life of 80 years, and 3km away there is the Railway deposit with a further 80 years of life in it, although the grades are not as good. So far four holes have been drilled there but Ian Chalmers said it will be for someone else, and at a time many years into the future, to make a decision about this satellite resource.

He still believes Dubbo will be the next non-China rare earth mine coming into existence. His initial focus will be on securing enough finance in Tranche 1 to complete the infrastructure – the road, power, water supply and offices – so that mine development can proceed smoothly as more money is raised. (The company also has the option of using a nearby railway line closed in 1987; it has been estimated that rehabilitation would cost about A$30 million.)


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Comments

  • Positroll

    “Chalmers is particularly interested in the aerospace sector because of the increasing number of applications, starting with zirconium coatings for engine turbines. Yttrium, terbium and gadolinium are increasingly of interest in emerging aerospace technologies and special alloys.”
    Put the other way round, for the price of just one A380, Airbus (or Boeing) can now secure their needs for most critical metals for the next 160 years (DZP and Railway deposit) …

    June 2, 2015 - 6:56 AM

  • Positroll

    BTW, nice write up. Thanks.

    Is there any additional information on how the reduced panic in Japan/Korea government circles re: REE plays out wrt loans by their export agencies (Less loans available? Higher interests to be paid? slower timeframes?)? Is it relevant for Alk given that they will also produce other stuff so far provided by near-monopolists (China for ZOC, Brasil for Niobium) where critically remains unimpacted from the WTO decision?

    June 2, 2015 - 7:03 AM

  • Positroll

    Last sentence is supposed to read: where criticallity is not impacted by the WTO decision?

    June 2, 2015 - 7:06 AM

  • InvestorIntelReport: It's all about batteries. | InvestorIntel

    […] the OTCQX, and $0.50 CAD on the TSXV. Next was Alkane who rose $0.436 USD on the OTCQX. Alkane are considered to be the next rare earth producer outside of China. The #1 in percentage, Elcora, was #3, up […]

    June 2, 2015 - 2:27 PM

  • charles.1

    Congratulations to Ian and the Alkane team. The result of a lot of great research and commitment.

    June 2, 2015 - 7:24 PM

  • asrms

    One billion $ seems like a lot of financing to get from financiers in the extremely risky area of rare earths. I read in another article that Chalmers 1. had also said that if they can’t raise the money in the West they will be forced to look to China for investment, which as he stated raises all sorts of other red flags. 2. If things go to plan a production start in mid 2016 is possible. I think one thing that rare earth investors have learned is that there is no need to rush to invest in companies with so many major ifs and theoretical projections – ask Lynas and Molycorp investors.

    June 2, 2015 - 9:03 PM

  • Robin Bromby

    It is not my place to answer for Alkane, but the only point I would make is that, unlike Molycorp and Lynas, this company does have a spread of metals, and the niobium off take has already been pre-sold. If Alkane was developing a project dominated by light REE, then the MCP and LYC precedents would be worth studying.

    June 2, 2015 - 10:00 PM

  • Qing

    I don’t think the mine eill run because the low rare earth price.

    June 3, 2015 - 12:27 PM

  • Investor

    One billion dollars? US or AUD? Not much money anyway.
    Such a simple plant with numerous products will ram up easily, all products will be on spec and return on investment becomes simple.
    As we have learned before it is always easier to get billion dollars for a large project than few millions even for a simple recycling project. The larger the better. Invest in ALK, and I forgot to mention they have a gold mine which makes money so this can help to provide working capital for DZP. Why make profit when you can channel it elsewhere.

    June 3, 2015 - 8:33 PM

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