www.alkane.com.au
Alkane Resources (ASX: ALK) is a multi commodity mining and exploration company focused on the Central West of New South Wales, Australia. Alkane's shares are also listed as American Depository Receipts (ADR's). The company has built a gold resource inventory of over 1 million ounces at McPhillamys near Orange in a venture with Newmont Australia.
The Company has an advanced feasibility study in progress for the development of the Dubbo Zirconia Project which is based upon a very large in-ground resource of the metals zirconium, hafnium, niobium, tantalum, yttrium and rare earth elements.
Alkane Resources snares third agreement to sell zirconium from Dubbo Project
Alkane Resources (ASX: ALK) has signed a third Memorandum of Understanding (MOU) with a leading European manufacturing and trading company to form a joint venture to market zirconium products from the Dubbo Zirconia Project (DZP) in Dubbo, New South Wales.
Significantly, this MOU will assure that subject to the feasibility study detail, the DZP will proceed directly to the 1 million tonne per annum development.
Although not disclosed, the European company is known to specialise in advanced ceramic materials and will service markets in Europe and North America.
The non binding agreement and participating interests of the parties are 80% Alkane and 20% the company.
The joint venture will undertake a marketing study to identify opportunities for zirconium output not yet committed from the expanded 1 million tonne per annum development scenario of the DZP.
This will ensure all product is assigned to key end users.
Alkane has received positive customer feedback for zirconium chemicals and zirconium dioxide powders supplied from the DZP demonstration pilot plant.
The new joint venture, in addition to the existing agreements to produce zirconium oxychloride (ZOC), has significantly expanded the sales and revenue potential for the Project.
Potential revenue from zirconium output at the 1Mtpa development is estimated to be US$125-150 million per annum (25-33% of total revenue), and total revenue from the Project is estimated to be around US400-450 million based upon conservative and long term sustainable commodity prices.
About Zircon and Zirconium Materials
The total downstream zirconium market worldwide is forecast by TZ Minerals International Pty Ltd (TZMI) to reach 163,000 tpa of zirconia (ZrO2) by 2012, which will require 250,000 tpa of zircon feed or approximately 18% of total zircon usage.
The zirconium market is the highest growth market for zircon at around 11% per annum and includes zirconium chemicals, chemical and fused zirconia and zirconium metal.
Put in perspective, at this growth rate, the zirconium market will require the equivalent one new DZP sized operation each year (1M tpa ore processed to produce 15,000 tpa zirconia) to meet demand.
Strong zircon demand, combined with a flat to falling supply outlook, has fuelled a dramatic increase in zircon prices. Contracted zircon prices from mineral sands companies are US$2,300-2,500/tonne in the third quarter.
While spot prices reached RMB 21,000 per tonne (US$3,200/t) or higher in China (17% VAT included) in early May. This resulted in ZOC prices increasing by over 285% in the past year to approximately US$4,000/t, FOB China for August deliveries.
As ZOC contains 36% zirconia, the current ZOC price equates to approximately US$11,100 per tonne of zirconia for August deliveries. Current Chinese chemical zirconia prices range from US$10,000 to 15,000/t.
Other DZP production
Alkane is continuing to work on several other MOUs dealing with the niobium concentrate and ferroniobium products; and the light rare earth concentrate and heavy rare earth concentrate.
The MOU on zirconium marketing brings closer the development commitment for the DZP with a Definitive Feasibility Study anticipated to be released at the end of August 2011 and production to commence possibly late in 2013 or early in 2014.
