Alkane Resources (ASX:ALK) has completed front-end engineering and design (FEED) work that demonstrates the robust project economics of its world-class Dubbo Zirconia Project (DZP) in New South Wales.
The project is expected to generate annual revenue of $580 million delivering EBITDA of $320 million and a 20-year NPV of $1.22 billion.
Capital expenditure required to bring the project into operation is about $1.3 billion including a contingency of $103 million.
Alkane’s financing strategy remaining unchanged, including a combination of strategic investors, Export Credit Agency (ECA) finance and commercial debt.
DZP hosts a very large polymetallic resource of the metals zirconium, hafnium, niobium (tantalum), yttrium and rare earths.
As a non-Chinese source of these critical metals, the project is expected to be an internationally strategic project.
Its Reserve supports 35 year mine life at 1 million tonne ore processing per annum, with a defined resource potentially supporting a significantly longer operation.
Since completing Feasibility studies in 2013, the company has made a number of project improvements.
This includes substantial improvements and optimisation of the flow sheet have delivered significant reduction in annual water consumption by 50 per cent to 2 gigalitres, and reduction of the site footprint by 50 per cent to 500 hectares.
Alkane has also received Federal Government environmental approval for the proposed mining of the Toongi deposit.
The project also received in late May final development approval for the project from the New South Wales Planning Assessment Commission.
Discussions have also been held in relation to process development, tolling, product off take and financing.
Dubbo Zirconia could finalise offtake and financing in 2016 with first production towards the end of 2018.
Front-End Engineering and Design
With completion of the FEED by Hatch, the Dubbo Zirconia Project is s ready for detailed design and construction to commence, contingent on financing.
The $1.3 billion Capex was prepared on an Engineering, Procurement & Construction Management (EPCM) basis with firm pricing for most of the packages from the marketplace.
Through the tendering process, a supplier was identified who is able to deliver many of the processing packages.
Alkane is working with that supplier to conduct a study with an aim to identify further value opportunities for project execution, both in application of technology as well as cost reductions.
Marketing
The company has been very active with numerous visits and meetings covering all of the product outputs from the DZP.
Meetings have been held in Asia, Europe and North America, involving process development, toll treatment options, product offtake and financing discussions.
In addition, discussions in Australia have taken place with several leading international companies interested in product offtake and working with Alkane to maximize value adding of process streams.
Finance
The company is working with engineering contractors to deliver a fixed cost Engineering, Procurement & Construction for development and to prepare a bankable study for financing of the Project.
It is also working with advisors to progress funding of the Project.
The broad strategy has not changed with strategic investment, Export Credit Agency finance and commercial debt remaining as the key components of the envisaged project funding suite.
Analysis
Alkane Resources’ Dubbo Zirconia Project is an important new source of critical metals and oxides with support coming from companies and governments seeking to reduce dependence from China.
That FEED work has confirmed the robust project economics including annual revenue of $580 million, EBITDA of $320 million and 20-year NPV of $1.22 billion is further demonstration of its importance.
The company expects to receive the Mining Licence and EPL within the coming months and the project could come on stream in two or so years’ time.
Alkane remains well-funded with A$14.8 million in cash at the end of June 2015, along with A$4.8 million in bullion and no debt.
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