On time and on budget; industry leader Alkane Resources advancing two projects — rare earths and gold
December 19, 2013 —Tracy Weslosky, Publisher and Editor-in-Chief of InvestorIntel interviews Ian Chalmers, Managing Director of Alkane Resources Ltd. (ASX: ALK | OTCQX: ALKEF), one of Australia’s premier multi-commodity mining and exploration companies focused on gold, zirconium, niobium, and rare earths (both light and heavy rare earths) in the Central West region of New South Wales, Australia. Currently Alkane has two projects headed towards production — The Tomingley Gold Project (February 2014) and the Dubbo Zirconia Project (a rare earths projects advancing towards a 2016 production timeline). Tracy continues her conversation with Ian and discusses Alkane’s soon-to-be-producing Tomingley Gold Project (a near 1-million ounce gold resource, slated to produce — on time and on budget — in mere weeks), as well as updates InvestorIntel viewers on the Dubbo Zirconia Project.
Ian starts: “We think we are at the bottom of the gold price. I think it’s very similar to the rare earths in that I believe we’re at the bottom. I think that even what happens in the US in the next 6 months, is probably already factored into the gold price. With gold, what you’ve got to have is an effective cost structure that enables you to make profits at this current gold price… and luckily that’s where we’re at!” Ian mentioned that the Australian dollar is trading lower, giving domestic producers a better gold price, and explains that one can make money in gold, but that “you’ve got to be pretty sharp”.
Tracy noted that Alkane has “some of the most substantial leadership in the entire industry” and confirmed that “we are looking at revenue from gold, starting in February of next year, correct?” Ms. Weslosky also referenced the likelihood of “potential production rare earth elements as early as 2016 — and that’s about as fast as anybody is going to come online for producing rare earths.”
Ian addressed one peculiarity about the rare earth market, in that you just can’t just have a process you think works and then go sign off-take agreements, but rather you need to actually take product to your potential customers (hence production from the ANSTO Demonstration Pilot Plant, running for the last 5 years).
“We’ve got the chemistry really right,” explains Chalmers. He notes that the recent improvement in REE recoveries — which Alkane has been highlighting — has come about because they had the foresight to build a Pilot Plant and conduct recovery practice and research along the way.
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Tracy remarks that a number of large (high CAPEX) players are seeking construction monies, during a very difficult funding environment. Alkane reports having AUD$60 million in the bank, and will need another AUD$30 million to get Tomingley (gold) into production. However, as Ian explains, once production gets underway, “the cash starts coming back.”
The capital costs for the Dubbo Zirconia Project, including contingencies, come in at AUD$1 billion and the Alkane team has been working on funding for most of this year, with good advisors from Sumitomo Mitsui Bank (Japan), and Credit Suisse. Ian believes that “we think it will take us much of next year to put that into a package that we can sell, and go out to markets and say ‘Yes, we’ve got the financing in place’. You’re right, it’s not easy, but I think attitudes are changing, and for good projects, the funding is there.”
Ian concluded that the middle of next year “will be a very, very big point for us. If the market has become friendlier toward good projects, it is likely that we might start seeing some decent returns in the share price again.”
Disclaimer: Alkane Resources Ltd. is an advertorial member of InvestorIntel.
An accomplished entrepreneur and corporate finance professional, Tracy Weslosky is the CEO for InvestorIntel Corp. and the VP of Business Development for Bellotti Capital Partners ... <Read more about Tracy Weslosky>