re Article

This is the article by Tim Treadgold FYI

Alkane Resources (ALK)


Patience is not normally an asset associated with small mining companies but it can be found in Alkane Resources. The company has survived 36 years of commodity cycles and could soon surprise by developing one of the world’s more interesting polymetallic orebodies in western NSW.



Hints that the $1 billion Dubbo Zirconia Project (DZP) is getting ready to move off the drawing board can be found in the recent improvement in Alkane’s share price and the news that the final pieces of an exceedingly complex proposal are falling into place.



Challenges remain because the DZP is unlike any other mining project in Australia, and unique in a global sense because of the cocktail of metals Alkane proposes to extract from an orebody rich in zirconia, rare earths, niobium and hafnium – names which mean nothing to most investors, with the possible exception of rare earths.



A few years ago, when rare earth prices rose sharply thanks to Chinese control of 90 per cent of the global market of elements essential in a number of modern technologies, the DZP was tagged a rare earth project – but when rare earth prices fell its name was changed.



The DZP today is a project which will have the effect of turning Alkane into a diversified miner from a single orebody thanks to multiple revenue streams from metals sold into different markets. Zirconia is used in chemicals and electronics. Rare earths have uses such as high-strength magnets. Niobium is used in steel, and hafnium is used in the nuclear power industry.



For a small company capitalised at $160 million the DZP is a huge undertaking but Alkane has been able to maintain 100 per cent control by generating revenue from another project, a small goldmine at Tomingley, also near Dubbo.



Over the past few years a steady stream of private and government organisations have beaten a path to Alkane’s door. Japanese buyers are keen to get access to the rare earths to avoid dealing with China. Steel mills want the niobium because 90 per cent of that element currently comes from Brazil, and a deal was signed last week to supply all zirconium to a British minerals trading company.



It was the signing of the zirconium offtake deal with Minchem Ltd which triggered a stock-market response and re-awakened interest in Alkane with its share price rising to a 12-month high of 34.5c last week, before easing back to around 32c.



How Alkane funds the DZP is the next test and while $1bn is an extremely heavy lift for a small company there is considerable international interest in the DZP and its range of strategically important minerals. It could attract the support of Asian and European governments keen to break the Chinese grip on rare earths and Brazil’s niobium dominance.