Winners flying high as gold hits US$2,000/oz

A look at some winners and who might be the next

Gold just hit a new all-time record high, breaking through the US$2,000/oz mark as the gold bull run continues in 2020. Gold started 2020 at US$1,498, and as I write this article is at US$2,013, for an impressive 37% gain YTD. Many gold miners are up much more than that due to their leverage to the gold price. Today we look at some of the strong performers and some others that may soon play catch up.

Gold breaks through US$2,000/oz to hit a new record high

Source: Trading Economics

Looking at the gold companies we follow at InvestorIntel, here are the past 1 year performances:

Alkane Resources had the best year of the above group as they continued to produce good volumes of gold in a rising gold price environment. Harte Gold had the least impressive year of the group as their mine had start up issues and a COVID-19 interruption. They also had higher operating expenses (OpEx) as they have not yet dug deep enough to reach the high grade gold.

Reviewing the top 5 performers yesterday on InvestorChannel’s Gold Watchlist Update, we see Granada Gold doing the best, up an impressive almost 35% on no news.

The top 5 gold performers yesterday as gold broke through US$2,000/oz

Source: InvestorChannel’s Gold Watchlist Update

Just last month I wrote “Granada Gold looks to be ‘underestimated’ by the market as drilling continues” and it looks like the market agreed with this yesterday.

Looking ahead, it is abundantly clear that those gold miners that can deliver will be handsomely rewarded. Investors need to always review the management to see if they have a good track record. Certainly if a gold miner can either increase their production and profits, grow their resource, or discover more gold (ideally high grade above 5 g/t), then at US$2,000/oz the shareholders will likely be very well rewarded.

Of the seven gold stocks InvestorIntel covers above, all look promising in a strong gold price environment.

Even the laggards Angkor Resources and Harte Gold can turn things around very fast. In the case of Angkor the current market cap (C$14m) looks cheap considering their numerous gold, silver, base metals, oil & gas exploration assets in Cambodia. With Harte Gold it is more just a matter of patience as the mine gets deeper they can access the higher grade gold, thereby reducing operating costs and increasing profits. This means investors willing to give the Company another 1-2 years may be well rewarded at the current reduced market cap (C$132m). Quebec Precious Metals is probably the most unloved and under the radar gold miner of the group covered, explaining their 0% one year return. With some good past drill results (1.15 g/t over 80.1 m, 14.20 g/t Au over 2 m, 5.05 g/t Au over 5.06 m, and 4.66 g/t Au over 3.50 m) and further results expected soon, a maiden resource estimate at the Sakami Project due by late 2020/early 2021, and with a market cap of just C$18m, this is one to get excited about. You can read more in my recent article “Quebec Precious Metals announces a ‘very promising gold discovery’ in James Bay.”

Of the recent winners – namely Alkane Resources, Euro Sun Mining, Granada Gold Mine, and West Red Lake Gold Mines – I would probably say Granada Gold Mine appears to have the most exciting potential given their existing ~1.2m I&I gold Resource, some exciting high grade drill results (including 11.45 g/t gold over 33 meters), and a market cap of only C$27m. West Red Lake Gold Mines also continues to look very promising after the one year +126% return. That’s because West Red Lake’s 3,100 hectare property has a 12 km strike length and 3 former gold mines, and contains 1.1 million inferred ounces of high-grade gold (7.57g/t) open at depth. The market cap is still only C$30m.

What a wonderful time to be following the gold miners. Let’s hope the Bank of America forecast comes true and I am writing about US$3,000/oz gold in the near future.

Disclosure: The author Matthew Bohlsen owns shares in Harte Gold, Eastmain Resources and Granada Gold, and may soon take a position in Quebec Precious Metals. The information in this article is general in nature and should not be relied upon as personal financial advice.




Jack Lifton with David Woodall on Alkane’s rare earths demerger and ASM’s ‘game changer’ technology for strategic minerals

“We had an AGM with Alkane where shareholders voted 99.95% in approval to de-merge. The rationale is very simple. The market likes to have pure plays. So, Alkane which went into rare earths and then into gold, will be purely a gold focused company and ASM will be purely a strategic minerals company.” States David Woodall, Managing Director of Australian Strategic Materials Limited (ASX: ASM), in an interview with the InvestorIntel’s Jack Lifton.

David went on to say that ASM will be producing key strategic minerals like neodymium, dysprosium, zirconium, hafnium and praseodymium at its Dubbo Project. He also said that ASM’s strategy is to become a vertically integrated strategic materials company.

David also provided an update on ASM’s joint venture with Korean R&D partner ZironTech which he said will be a “game changer for the rare earths and strategic minerals industry”. ASM and ZironTech recently produced titanium metal alloy using 45% less energy. David continued, “The trade tensions and the COVID-19 impact on the supply chains has made people look at the modification of the global supply chain. I think ASM is well located to be able to go into that supply chain and work cooperatively with various companies.”

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Alkane to demerge Australian Strategic Materials (ASM) to unlock value of its rare earths project

Alkane Resources Ltd. (ASX: ALK | OTCQX: ALKEF) plans to soon demerge their poly-metallic and rare earths holding company Australian Strategic Materials Limited (ASM) and pursue a separate listing of ASM on the Australian Stock Exchange. ASM is the 100% owner of the very promising, long life, poly-metallic and rare earths project known as The Dubbo Project, located in NSW, Australia.

Today I look at what investors need to know and the potential of the new company.

About Australian Strategic Materials (ASM)

ASM’s three key assets include:

  • The Dubbo Project – ASM owns a 100% interest in the project which is a ‘construction ready’ poly-metallic and rare earths project with potential to become a key global supplier of specialty metals and rare earths.
  • Metals Technology Business – ASM is investing in new technologies related to the separation, purification and metallisation of oxides. ASM’s goal is to establish an independent facility that produces high-purity metals and value-added metal oxides, particularly in relation to hafnium separation from zirconium and other materials from The Dubbo Project. In 2019 ASM initiated a joint venture with South Korea’s Zirconium Technology Corporation (ZironTech) to pilot the production of hafnium and zirconium by combining their proprietary process with ZironTech’s metallisation technology. ASM has exclusive global commercialisation rights under the licence. The pilot plant is in the final stage of construction in South Korea and production is due to commence in mid-2020.
  • Toongi Pastoral Company – The Company owns 3,500 hectares of freehold and leasehold land 25kms south of Dubbo, NSW, Australia.

Highlights of ASM’s 100% owned Dubbo Project

Source

The Dubbo Project

The Dubbo Project is a large resource of zirconium, hafnium, niobium, and rare earths (including praseodymium, neodymium, and yttrium). It is the most advanced poly-metallic project of its kind outside China. The Project has an incredible estimated 70 year mine life and can be an open pit design. The Project is ready for construction with all major state and federal approvals and licences in place.

The 2013 DFS resulted in a pre-tax NPV8% of A$1.235 billion, and a pre-tax IRR of 19.3%. The Company has since proposed a two stage production start up so as to lessen the first stage CapEx from an estimated US$930 million to US$480 million.

Total Mineral Resources are 75.18Mt @ 1.89% ZrO2, 0.04% HfO2, 0.44% Nb2O5, 0.03% Ta2O5, 0.74% TREO. Total Ore Reserves are 18.90Mt @ 1.85% ZrO2, 0.04% HfO2, 0.44% Nb2O5, 0.029% Ta2O5, 0.735% TREO.

The Dubbo Project resource estimate

Next steps for ASM will include:

  • Proof of capability for commercial-scale production of hafnium and zirconium.
  • An updated FS or BFS.
  • Forming strategic customer relationships and offtake agreements.
  • Establishing the capability to process other Dubbo Project outputs, including rare earth metals, in Australia and South Korea.
  • Project financing. Export Finance Australia (EFA) recently confirmed interest in being part of the financing consortium for The Dubbo Project.

About the demerger

  • The demerger is subject to finalisation of outstanding regulatory matters and shareholder approval at the Alkane Resources extraordinary general meeting scheduled for 16 July 2020. ASM is currently anticipated to list shortly after on the ASX on July 30 (indicative date only).
  • Alkane Resources shareholder are to receive one share in ASM for every five Alkane Shares held (rounded down to the nearest whole number) on the demerger record date. Ineligible Foreign Shareholders are excluded.
  • Under the demerger, the Alkane and ASM entities will be separated, and no cross-holdings between companies will exist.
  • ASM will be demerged with its cash reserves of A$20 million and no bank debt.
  • All interests in the Dubbo Project and associated assets (including land and water rights), together with ASM’s investment in South Korean metals technology company RMR Tech Corporation (RMR Tech), will be 100% owned by ASM following the demerger. Note that ASM is a part-owner of RMR Tech, which is majority-owned by ZironTech.

Alkane Resources Chairman Ian Gandel stated:

“Since joining in February, ASM Managing Director, David Woodall, and the ASM team have focused on distilling the key value drivers for ASM and the Dubbo Project, and have brought new focus, momentum and opportunity to the team which is working hard to realise catalysts for the Dubbo Project and the ‘Clean Metal’ metallisation technology in South Korea. The demerger of ASM will provide investors two opportunities to grow value; in Alkane as a growing gold exploration, development and production company, and in ASM as an exciting critical materials business leveraged to the changing world economy.”

As a ‘rough’ guide as to what ASM’s market cap may end up being once listed we can look at current listed pure play Australian rare earth developer Arafura Resources (ASX: ARU) which has a market cap of A$119 million. Of course the mix and grade of critical metals and rare earths differ, so this is only a rough guide. If we value ASM based on say 10% of the 2013 DFS value of a pre-tax NPV8% of A$1.235b, then we get a rough value of A$123 million. This gives zero value to the extraction technology or the A$20 million in cash.

Closing remarks

Given the gold production success at Alkane Resources their massive Dubbo poly-metallic and rare earths Project was left in the shadow. The proposed demerger will help ASM to stand on their own and focus on getting their Project and processing up and running. For investors it should unlock value that was not recognized previously in Alkane Resources.

The Dubbo Project is development-ready, subject to financing, with the mineral deposit and surrounding land acquired, all major State and Federal approvals in place and extensive piloting and engineering completed. In term of financing the Australian Government (via EFA) has shown interest and we all know that the US government is also looking seriously at developing a safer rare earths supply chain and safely sourcing critical materials.

Investors in Alkane Resources will automatically get shares in the demerged company on a one for five basis. For new investors ASM is indicated to list on the ASX on July 30, 2020. It will be very interesting to see what value the market assigns Australian Strategic Materials and how it progresses from here.




Is $3000 gold possible? A look at the ‘for and against’, and Australian gold miner Alkane Resources

2020 has seen unprecedented levels of global economic disruption due to the COVID-19 (coronavirus) pandemic. This has seen share markets collapse and the gold price rise 15% in just a few months. Some say this is just the beginning of the gold bull run, with Bank of America now forecasting gold prices could reach US$3,000/oz, which is almost double the current price of US$1,721/oz.

Today we look at the arguments for and against US$3,000/oz gold.

Gold 1 year price chart – Gold = US$1,721

Source

The case for US$3,000/oz gold

  • COVID-19 has so far caused 2,994,958 confirmed cases and 206,997 deaths, and is severely disrupting the global economy. Some countries are now re-opening their economies; however the risk remains high of a second wave of infections. We may still be a long way away from herd immunity, successful treatments, and a successful vaccine.
  • Goldman Sachs recently stated: The downturn will be 4 times worse than the Global Financial Crisis (GFC). In the U.S., second-quarter activity likely dropped 35% while unemployment could hit 15%.
  • The IMF forecasts global GDP to be minus 3% in 2020, then recover to +5.2% in 2021, assuming pandemic fades in the second half of 2020.
  • The coronavirus health crisis may be followed by a coronavirus debt crisis. Global governments have responded to the COVID-19 with massive stimulus, and hence trillions of dollars in new money printing.
  • Bank of America (BoA) forecasts gold to hit US$3,000/oz by October 2021, in a report titled: “The Fed can’t print gold.” BoA states that with an official recession looming, monetary authorities are poised to buy record amounts of financial assets and double the sizes of their balance sheets.
  • Global gold supply is struggling to increase each year as it becomes harder and more costly to find and mine gold.
  • Gold performs best when rates are low, and right now we have historic low interest rates.
  • Historically gold has proved to be the best storage of wealth.

The case against US$3,000/oz gold

  • Lower jewelry demand in India and China may put downward pressure on the gold price. Gold jewelry represents the largest source of annual demand for gold. Though it has declined over recent decades, but it still accounts for around 50% of total demand.
  • A stronger US dollar may mean a lower USD gold price.
  • We may recover quickly from COVID-19, and stock market sentiment could improve, thereby lowering sentiment towards gold investment.

Viewpoint

I think BoA hit the nail on the head with their report title: “The Fed can’t print gold.” Gold’s scarcity and centuries long history as a preserver of wealth means investors will always seek gold as a safe haven. The global supply of new gold struggles to increase YoY, yet the supply of new fiat currencies such as the USD continues to flood the market, as printing presses work 24/7 to print new dollars.

Investor’s takeaway

Investors would be wise to have some gold in their portfolio, as a hedge against a collapse in paper money and the global economy. Physical gold is always the safest and purest way to play. Next can be the gold backed ETFs, followed by gold miner ETFs, and finally gold miners.

Smaller gold producers with exploration upside

For investors wanting to leverage their gold exposure, investing into gold producers and successful explorers can achieve this. One example that comes to mind would be Alkane Resources Ltd. (ASX: ALK). Alkane Resources has gold production at their Tomingley Gold Mine, successful gold exploration, and a 100% ownership of the Dubbo Rare Earth Project. They are very well funded to achieve success with cash, bullion and investments of A$91.7 million.

Alkane Resources Tomingley Gold Mine forecast to produce 30-35,000 oz Au at AISC A$1,250-$1,400 in FY 2020

Source

Alkane Resources has very significant exploration upside at their Kaiser-Boda target zone (part of the Northern Molong Porphyry Project)

Apart from a producing gold mine (Tomingley Gold Project) and their Tomingley corridor exploration projects; Alkane Resources has very significant exploration upside at the Kaiser-Boda target zone (within the Northern Molong Porphyry Project), which has been mapped over a north-south strike length of a massive 6km long and 1km wide.

Alkane Resources recently announced: “Further extensive porphyry Gold-Copper mineralisation at Boda“. What’s striking about this announcement was the long length of mineralisation, and it started near surface. For example, 965.7m grading 0.21g/t gold, 0.11% copper from 7.3m, and 153.0m grading 0.40g/t gold, 0.13% copper from 480m. In March 2020, Alkane Resources announced another very long drill result also at the Kaiser-Boda target zone. Drill hole KSDD007 resulted in 1,167m @ 0.55g/t Au, 0.25% Cu from 75m. Another was KSDD003, 507m @ 0.48g/t Au, 0.20% Cu from 211m.

Gold copper porphyry style deposits can be very large making them economic despite lower gold grades, due to efficiencies of scale and copper by-products credits.

Alkane Resources’ Managing Director, Nic Earner, stated:

“We’re delighted to confirm further extensive mineralisation at the Boda Prospect. Our drilling to date demonstrates broad, ore-grade mineralisation over at least a 300m north-south by 400m wide zone with over 800m depth, with the mineralisation open along strike and at depth, and a significant higher grade core with exceptional characteristics.”

A summary image of Alkane Resources extensive exploration projects and mine in Australia

Source

Closing remarks

There has probably never been a better time to buy gold or a quality gold miner. For investors wanting higher risk and reward the small gold producers, with growing production and exploration upside offer an exciting opportunity.

As financial and debt markets melt down, very few sectors will show positive returns, let alone a chance to double or triple. And remember gold is very rare, and as BoA says: “The Fed can’t print gold.”

And ‘yes’, US$3,000/oz gold by October 2021 is very possible.




Gold rises as the coronavirus threatens to become a pandemic

Gold is up ~25% over the past year and is up ~12% in 2020 outperforming almost all commodities so far this year. Of course, I should mention the emissions metals palladium and rhodium which were up 75% and 366% over the past year respectively.

Gold rises as coronavirus threaten to cause a pandemic

The coronavirus and the threat of a pandemic are driving gold prices higher in 2020. A pandemic is defined asan epidemic of disease that has spread across a large region; for instance multiple continents, or even worldwide……” It also needs to be unstable, that is, new cases rising significantly.

Gold is up ~25% over the past 1 year – Now at US$ 1,659

Some history of flu virus pandemics

Some recent flu pandemics include: HIV, Spanish flu, and the 2009 swine flu.

  • The Swine flu pandemic (2009/10) was an influenza pandemic that killed ~201,200 people worldwide. It ran for about 16 months from April 2009 – 10 August 2010.
  • The Spanish flu pandemic (1918-20) infected 500 million people around the world, or about 27% of the then world’s population at the time. The death toll is estimated to have been 40-50 million, and possibly as high as 100 million, making it one of the deadliest epidemics in human history. It should be noted that World War I was a factor.

Gaining some perspective

It is estimated that the seasonal flu kills between 291,000 to 646,000 people worldwide each year, mostly the very old or the very young, or those with weakened immune systems.

To date, the coronavirus has caused 2,619 deaths.

Coronavirus cases, deaths, and recovered cases as of February 23, 2020

Coronavirus deaths versus seasonal flu deaths so far in 2020

Source

What this means is that currently, the coronavirus is not yet a huge concern, even if we assume China’s statistics are not accurate and that global cases were in fact 10x worse at 26,190 deaths. That would still only be 36% of the seasonal flu death toll. My conclusion, for now, is that the coronavirus ‘at this stage’ is still only a ‘potential’ significant threat to the global population and economy.

Economic disruption has been greater so far due to China’s measures to try to contain the virus; however recent numbers in China suggest new cases are falling and workers are returning to work.

However given what we know from history that pandemics can cause millions of deaths then it would be very wise for investors to add some insurance to their portfolios, just in case, the coronavirus does become a severe pandemic. Two ways to do that are to build up your cash levels and buy some gold or quality gold stocks.

10 gold stocks we are following at InvestorIntel

Alkane Resources Ltd. (ASX: ALK | OTCQX: ANLKY)

Alkane Resources is a gold production company with multi-commodity exploration and development projects predominantly in the Central West region of NSW, Australia. The Tomingley Project is expected to produce about 30,000 to 35,000 ounces of gold for FY20 at an AISC of A$1,250 to A$1,400 per ounce, in line with the recent move to underground mining. Alkane is also ramping up nearby regional gold exploration to help support the feed at the Tomingley Mill. The Company is also well known for its rare earths project known as the Dubbo Project which has a potential mine life of 70+ years. You can read more here.

Angkor Resources Corp. (TSXV: ANK)

Angkor Resources (formerly Angkor Gold) is the first North American publicly-traded mineral exploration company in Cambodia. Angkor Gold is a project generator with a focus on gold exploration, and in more recent times oil and gas exploration. They have a huge land package (983 km²) in Cambodia with multiple prospects focused on gold, silver and base metals. Their oil and gas exploration license is known as Block VIII (7,300 km² concession). You can read more here.

Eastmain Resources Inc. (TSX: ER | OTCQX: EANRF)

Eastmain is a Canadian gold exploration and development company focused on the James Bay area, Quebec, Canada. Eastmain has several gold projects; however, their flagship is the advanced Eau Claire Project with an open pit and underground M&I Resource estimate of 853,000 oz Au, grading 6.18 g/t. In total, Eastmain has a pipeline of 11 exploration projects ranging from early exploration to pre-development. You can read more here.

Euro Sun Mining Inc. (TSX: ESM) 

Euro Sun Mining is advancing its 100%-owned Rovina Valley Project, located in west-central Romania. It is the second-largest undeveloped gold deposit in Europe. Euro Sun has an M&I resource of 7.05 million gold ounces and 1.39 billion copper pounds at their Rovina Valley Project. In addition, Euro Sun has discovered four new gold-copper porphyry targets, with a cluster of three porphyry targets just 1.5 km apart from each other, only 6 km east from their existing Project. Grades are lower however that is normal in large size copper-gold porphyries. You can read more here.

Granada Gold Mine Inc. (TSXV: GGM)

Granada Gold is a Canadian junior mining and exploration company with gold and silver properties in Quebec and Ontario. The Company’s current focus is directed towards the development and continued exploration of the Granada Property situated in the heart of the famous Abitibi Greenstone Belt and along the prolific “Cadillac Trend”. Drill results have been promising including from surface 7.67 g/t over 15 metres. You can read more here.

Harte Gold Corp. (TSX: HRT)

Harte Gold Corp. commenced gold production in early 2019 at their wholly owned Sugar Zone underground mine in White River Ontario, Canada. The current Resource estimate is 1,108,000 contained gold ounces @8.12g/t Indicated and 558,00 contained gold ounces @5.88g/t Inferred. There is also excellent exploration upside with a 30 km strike potential with only 5km so far explored, over a massive 79,335 hectares land package. Full-year 2020 guidance is 42,000–48,000 ounces of gold production at an AISC estimate of US$1,475–US$1,650 per ounce. Costs are expected to fall in subsequent years as the mine gets deeper and reaches higher grades. The mine is planned to ramp up to 61,000 Au ounces pa over an initial 14 year mine life. You can read more here.

Quebec Precious Metals Corp. (TSXV: CJC | OTCBB: CJCFF | FSE: YXEP)

Quebec Precious Metals (QPM) is a new gold explorer with a large 874 square kilometre land position in the highly-prospective Eeyou Istchee James Bay region, Quebec, Canada (not far from Newmont Goldcorp Corporation’s Éléonore gold mine). QPM’s flagship project is the 100% owned Sakami Project with well defined drill ready targets. Sakami has already had some great drill results including 26.35g/t over 11 metres. In 2020 QPM plans to drill 25,000 meters at Sakami. The drill program is fully-funded. You can read more here.

Signature Resources Ltd. (TSXV: SGU | OTCQB: SGGTF)

Signature Resources is a Canadian gold exploration company with advanced and early exploration assets. Their core asset encompasses the Lingman Lake Gold Mine in northwestern Ontario, Canada. Signature Resources has a historic resource estimate of 234,648 oz of contained gold, grading 6.86 g/t, over an area of 9,896.8 hectares. The Company’s other assets include two new early exploration projects: Lingside West and Lingside East. All three projects are located within the Lingman Lake greenstone belt. Signature plans to advance and expand these projects centering on targeted diamond drilling of the high-grade gold zones. Some good airborne geophysical surveys results in 2019 are also positive for further exploration in a new area “known to host over 40 mineral occurrences, reported to contain gold, copper and molybdenum mineralization.” This area is situated 12.5-kilometers west of the Lingman Lake gold mine. You can read more here.

TNR Gold Corp. (TSXV: TNR)

TNR is a project generator that focuses on gold and the key energy metals, copper and lithium. TNR Gold’s current three main projects involve gold in Alaska, copper and gold in Argentina, and lithium in Argentina. A 2013 resource estimate at their Shotgun Gold Project in Alaska resulted in an Inferred Resource of 20,734,313 tonnes at 1.06 grams per tonne (g/t) gold for a total of 705,960 ounces gold (Au). TNR holds a 0.36% net smelter return royalty on the 100% owned McEwen Mining Los Azules Project, and a 1.8% NSR royalty on the Mariana Lithium Project in Argentina which is being developed by a JV with Ganfeng Lithium and International Lithium (ILC). You can read more here.

West Red Lake Gold Mines Inc. (CSE: RLG | OTCQB: RLGMF)

West Red Lake Gold Mines is focused on gold exploration and development in the prolific Red Lake Gold District of Northwestern Ontario, Canada. The district is host to some of the richest gold deposits in the world and has produced 30 million ounces of gold from high grade zones. West Red Lake’s 3,100 hectare property has a 12 km strike length and 3 former gold mines (Rowan Mine, Red Summit Mine, Mount Jamie Mine), and contains 1.1 million inferred ounces of high grade gold (7.57g/t) which remain open at depth. You can read more here.




738 Billion Defense Bill plus U.S. and Canadian Critical Materials Memorandum Equals Pivotal Year for Rare Earths

On Friday, we received a call from the CBC requesting more data on how the recent Fiscal Year 2020 National Defense Authorization Act (NDAA) that was passed on December 17th would impact the North American rare earths market. This combined with the recently signed memorandum of understanding (MOU) for critical materials signed on December 18th between the U.S. and Canada to reduce our dependence on Chinese rare earths and from all vantage points, Jack Lifton is correct in saying “2020 looks to be a pivotal year for rare earths”.

This timely passing of a “massive $738 billion defense authorization bill” by both the U.S. House and Senate, unquestionably holds ramifications for those of us following the North American public markets. In fact, it should mean that the leading players in this market should not only experience an increase in market valuations effective immediately, but this will inevitably result in much needed financings to achieve a successful rare earths supply chain in North America.

Jack Lifton commented that “The 2020 National Defense Authorization Act, which authorizes funding for the U.S. military, has expanded its recognition of the critical importance of the rare earths from the FY 2019’s mandate that the U.S. military only buy non-Chinese rare earth permanent magnets to the requirement that the U.S. Defense Department develop a plan and implement a strategy to discover or develop and integrate each of the necessary industrial components into a total domestic American rare earth supply chain for any and all rare earth enabled products utilized by the U.S. Dept of Defense.” He adds: “This is the greatest opportunity to revive a non-Chinese rare earth industry, since the movement to China of that industry in the last years of the twentieth century.”

In reviewing the 2020 NDAA, we have cut out the relevant excerpt from clause (c) listed under Section 850 titled “Acquisition and Disposal of certain Rare Earth Materials” for our readership.

NDAA Excerpt:

(c) REPORT ON SUPPLY CHAIN ISSUES FOR RARE EARTH MATERIALS.—Not later than 180 days after the date of the enactment of this Act, the Administrator of the Defense Logistics Agency, in coordination with the Deputy Assistant Secretary of Defense for Industrial Policy, shall submit a report to Congress assessing issues relating to the supply chain for rare earth materials. Such report shall include the following:

(1) An assessment of the rare earth materials in the reserves held by the United States.

(2) An estimate of the needs of the United States for rare earth materials—

(A) in general; and

(B) to support a major near-peer conflict as described in war game scenarios in the 2018 National Defense Strategy.

(3) An assessment of the extent to which substitutes for rare earth materials are available.

(4) A strategy or plan to encourage the use of rare earth materials mined, refined, processed, melted, or sintered in the United States, or from trusted allies, including an assessment of the best acquisition practices (which shall include an analysis of best value contracting methods) to ensure the viability of trusted suppliers of rare earth materials to meet national security needs.

While the above will inevitably be the catalyst for finally addressing the supply chain and inevitable sustainability issues in North America around these technology metals, I agree with Alkane Resources Ltd.’s (ASX: ALK | OTCQX: ANLKY) Managing Director Nic Earner who wrote “It is good to see continued moves by the US Government to establish independent supply. We look forward to seeing this lead into purchasing and commercial arrangements with US Defence suppliers in time.”

I have reached out to my favorite and most knowledgeable players in the industry with a request for them to provide practical feedback on what this means for our sector and how it will impact us in 2020. Their comments are below, and I have added everyone to the commentary section so you may respond directly to them.

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“In a complementary initiative, on December 18th, Canada and the U.S. signed a Memorandum of Understanding confirming Canada’s participation in the U.S.-led Energy Resource Governance Initiative (ERGI), part of a multi-pronged strategy by Washington to break free of China’s near-monopoly on so-called critical energy minerals essential for high-tech industries — producing everything from lithium batteries for electric cars, to smartphones and computers, wind turbines and defense assets. There are great economic benefits for Canada if our natural resource wealth and industrial capabilities can be adapted toward creating both new primary mineral supply sources and the value-added derivative products needed for electric vehicles as well as other clean technology and defense applications. I look forward to learning more about the Governments’ plans and I know that industry leaders and technical experts across the full supply chain can contribute toward creating collaborative and innovative solutions.” — Ian London, Chair, Chair, Canadian Rare Earth Elements Network (CREEN)

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This year should be the culmination of nearly 10 years of effort to move the U.S. government from endless studies and research projects to actually investing in the production of rare earth materials needed to support the Department of Defense, which should serve as a catalyst to long-term commercial viability for the industry. The DOD currently has three active Requests for Proposal to invest in establishing the capability to separate light and heavy rare earths through two new facilities, and the establishment of an inventory of NdFeB magnets. With the continued support of Congress and the Pentagon, 2020 should be the year that separates the wheat from the chaff in the prospective rare earth market, as only the most viable prospective producers of rare earths will be selected for government funding – the time for hype and pipe dreams is over as we move to an era of actual investment in production.” — Jeff Green, President, J.A. Green & Company

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These two initiatives are essential to attract and renew investment interest in the rare earth sector. Search has participated in the requests from both the US and Canadian governments, which identifies Search Minerals as a key participant in the North American rare earth supply chain. It is also helpful that Canada rare earth resources are considered ‘domestic source’ for these additional funding opportunities.” – Greg Andrews, CEO, Search Minerals Inc. (TSXV: SMY)

Dr. David Dreisinger, Vice-President, Metallurgy of Search Minerals adds: “Since our inception, we have met our objectives to have a proven processing technology which has low capital and operating costs, environmentally friendly and scalable. The new initiatives could help fund separation facilities or technologies in North America which could process our concentrate into individual oxides. Our resources contain both light and heavy rare earths required for many applications deemed critical under NDAA. The initiative allows the ability for new government funding opportunities required to advance the supply chain initiative, ie offtake agreement or direct investing.”

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The 2020 NDAA is an excellent additional step in a process that will ultimately lead to the establishment of a rare earth supply chain in the United States. Various agencies in the Department of Defense are now also beginning to put serious funding into the establishment of a domestic supply chain. Texas Mineral Resources and its funding and development partner USA Rare Earth Inc. is not waiting to take action. Rather, it has proactively established a Colorado based rare earth pilot facility that will ultimately be transported to Texas and ultimately envisions Texas as the center of a domestic rate earth and critical mineral supply chain.” — Anthony Marchese, Chairman, Texas Mineral Resources Corp. (OTCQB: TMRC)

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“The NDAA will bring focus on the rare earths sector and some much-needed funding to implement a North American strategy for rare earths. Six months is a very short time to summarize the state of the industry unless they have multiple inputs from those with knowledge of the space. Hopefully they will look at investing in the magnet supply chain, which needs rebuilding for the production of neodymium magnets (NdFeB). This initiative should build more confidence in the investment side and raise the profile for projects that can go into production in a short period of time.” – Alastair Neill, Trinity Management Ltd.

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“Trillions of dollars of all-important products are dependent on one dominant group which, in the past, has used rare earths for economic, political, social and technical gains. The United States’ most recent vocalized concern over threatened or possible disruption of rare earth supply is once again drawing attention to the potentially tenuous situation and the importance of the companies addressing this situation. Prudent business practice dictates the use of multiple suppliers particularly for key inputs. That said, the sourcing of rare earth raw materials in the United States and its allies can be arranged in the not too distant future, however, the paramount issue is establishing and implementing the technical know-how to process the raw materials into refined rare earths and then into useful applications and products. Processing capability is of paramount importance and is fundamental to unlocking supply dependency and will take considerably longer to implement due to the unique characteristics and the technical aspects of the rare earths.” — Tracy A. Moore, CEO of Canada Rare Earth Corp.

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“Lynas welcomes the U.S. Defense Department’s plan to encourage the development of a rare earth supply chain in the United States, or with trusted allies. As the world’s second largest Rare Earths producer, Lynas is well positioned to help the establishment of a sustainable and resilient rare earth supply chain from mine to magnet and to energy efficient electric motors.” – Lynas Corporation
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“Bringing together the NDAA, the Australian Government’s AUD4.4bn Defence Export Facility being made available to rare earth development projects, and joint U.S.-Australia critical minerals initiatives, it’s clear that not since the Government of Japan helped fund Lynas in 2011 to build their Malaysian process plant, have we seen Western governments, including those of the EU member states, focus, co-operate and now act on the issues that have allowed China to effectively take control of the rare earth market over the past 20 years. These efforts could result in further diversification (beyond Lynas) of NdPr and heavy rare earth supply, including by Arafura Resources, into ex-China NdPr metal-NdFeB magnet alloy/magnet manufacturing and the downstream clean energy supply chain.” — Richard Brescianini, Arafura Resources Limited
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“Medallion Resources has been focused on the development of rapid ‘go to production’ rare earth business model and proprietary extraction process using by-product monazite feedstocks. These are available throughout the Americas, Australia and Southern Africa. We recently announced the start of US site selection process for an initial REE extraction plant with capital requirements that are a fraction of traditional REE mining and processing operations.” — Donald Lay, President & CEO Medallion Resources



Alkane celebrates a gold anniversary and shares the wealth with a +258% return for investors

This year Alkane Resources Limited (ASX: ALK | OTCQX: ANLKY) celebrated 50 years of business. It’s appropriate that 50 years is celebrated as a ‘Golden Anniversary’ as the Company’s focus is gold production, exploration and partnerships. And what a golden year it has been with the stock price up 258% year to date, having risen from A$0.17 to A$0.61 so far in 2019. Alkane Resources shareholders are certainly celebrating 2019, thanks in part to record high Australian dollar gold prices (currently A$2,146/oz).

Alkane Resources’s other focus, rare earths, also had a good year, suggesting 2020 could also be a great year as the US takes a stronger interest in Australian rare earth projects.

Alkane Resources corporate history timeline

Alkane Resources gold operations at Tomingley, NSW, Australia

In 2019, the Tomingley Gold Mine operations have transitioned towards underground mining away from open pit mining with just under 3,000 mt of lateral development completed, which includes 1,000 mt on the decline. The underground development is progressing a little bit ahead of schedule and budget mainly because of a new underground development team performing exceptionally well.

Alkane Resources is searching for more nearby gold ounces to feed their Tomingley Mill

With a view to define additional ore resources for the Tomingley Mill, Alkane is also ramping up nearby regional gold activity. This year Alkane identified an exploration gold corridor between Tomingley and Peak Hill in New South Wales. The three prospects of San Antonio, Roswell and El Paso received encouraging results suggesting real potential for mine development in the area.

At Alkane Resources’ recent AGM, Chairman Ian Gandel stated: “We have centered our gold activities around one of Alkane’s key assets, the gold mine and processing facility at Tomingley. Many of our activities have centered around extending the production life of our gold mill.”

The San Antonio and Roswell prospects

A 60,000-metre resource definition drilling program on the San Antonio and Roswell prospects is in progress. Drilling is being undertaken to define an initial Inferred Resource at both prospects to a minimum 200 metre vertical depth. Phase one of Roswell drilling has been completed with samples now being prepared and assayed to form part of an initial resource that is expected to be released in early December. San Antonio drilling is continuing.

The Boda Project

Alkane is also continuing gold exploration more broadly at the Northern Molong Porphyry Prospect, 35 km east of Dubbo. Significant porphyry style gold-copper has been discovered at the Boda project. A single diamond drill hole was drilled to test the depth extent of gold mineralisation identified and returned a broad intercept of 502 m @ 0.48 g/t gold, 0.20% copper from 211 m. Alkane will now embark upon a drilling program of five diamond cores to test mineralization.

Alkane is also looking to enhance its gold strategy by investing in advanced junior gold mines with potential that Alkane can contribute additional capital, expertise and operational capability.

The Dubbo Project (rare earths)

Alkane has continued to develop its rare earths Dubbo Project in NSW, Australia. Key rare earths at the Project include zirconium, niobium, and hafnium. Estimated NPV is A$1,236 million over an initial 20 year mine life, with potential to expand to a 75+ year mine life. The Project is permitted and construction ready, pending finance.

Alkane Resources rare earths Dubbo Project revenue to be driven by zirconium, niobium, and hafnium

Investment in Zirconium Technology Corporation

In a notable development in the past year, Alkane made a significant investment in Zirconium Technology Corporation of South Korea. The Company will fund the final stages of research and feasibility of a new metallisation technology which is more environmentally sustainable and cost effective than conventional processes. This potentially represents the best process route for materials at the Dubbo Project into highly marketable high purity metals. Alkane is also looking at leveraging this technology with the Company’s own proprietary oxide separation technology for commercial scale.

It certainly has been a big year for gold, and also for Alkane Resources celebrating its 50th anniversary. With a 2019 YTD stock price return of 258% investors can feel very happy with the way things are going.

Looking towards 2020 strong interest and co-operation from the US towards Australian rare earth projects bodes well for Alkane Resources’ Dubbo Project achieving funding. With some gold exploration success, solid gold production, and if gold prices hold, 2020 should be another solid year for Alkane Resources.

Alkane Resources is based in Burswood Western Australia; and has a market cap of AU$ 308 million. Investors can read my January 2019 article discussing Alkane Resources on InvestorIntel here.