Alkane Resources (ASX:ALK) kept its gold production in New South Wales in line with forecasts over the three months to December despite some weather-related interruptions.
Gold output at the Tomingley gold operations (TGO) came in at 15,347 ounces, bringing production for FY16 to 35,136 ounces.
For FY16, production to date came in at 35,136 ounces of gold, within guidance, and site cash flow totalled A$12.5 million.
Site cash flow for the quarter after site operating expenses and development expenditure was $2.4 million.
Other key TGO metrics on the quarter included the following:
- Site operating cash costs were A$1,166 per ounce and total operating costs were A$1,316 per ounce
- Gold sales totalled 14,250 ounces for revenue of A$22.6 million at an average price of A$1,583 per ounce
- Gold hedged in December 2015 of 14,500 ounces at an average forward price of A$1,606 per ounce
The company increased its bullion on hand by 56% over the period to 3,040 ounces.
A maiden underground reserve was estimated at 524,400 tonnes at 3.66g/t gold for 61,600 ounces of gold, representing a significant potential for expansion of the project.
FY16 production is estimated to be 60,000 – 70,000 ounces within an all-in sustaining cost (AISC) range of A$1,200 -1,300 per ounce.
Alkane said that these costs were higher than the anticipated long-term life-of-mine AISC of A$1,000 – 1,100 per ounce due to waste stripping in FY16 at TGO’s Wyoming One pit.
Strategic metals
Importantly, the operational success and expansion potential of TGO represents only a fraction of Alkane’s investment appeal as the company continues to focus on long-term development of DZP, also in NSW.
Further process development work on the project's hafnium and zirconium refining circuit was performed during the quarter improving understanding of the flowsheet.
Inclusion of the hafnium circuit in DZP has added significant value to the Project and has been well recognised by key stakeholders.
The intellectual property developed in the hafnium and zirconium circuit is considered to be a valuable asset of the company and measures are being taken to protect it.
Further demonstration pilot plant trials are planned to produce additional products to assist with process refinement and confirmation of test results obtained at laboratory scale.
This will also involve the production of hafnium concentrate and zirconium products for customer evaluations, which will include the full suite of products during 2016.
Progress on the toll processing of rare earths concentrates into separated rare earths oxides was made during the quarter with the expectation that the full range of separated products will be available when the Project commences production.
Analysis
The stability and expansion potential inherent in Alkane’s gold operations is an encouraging sign for the company, demonstrating an uncommonly advantageous diversification for a strategic and rare earths developer.
The company’s ability to leverage the resilience of the precious metals space to steadily advance DZP is a key strength of the company versus its peers in the zirconia, strategic metals and rare earths sphere.
Following land acquisitions for DZP of A$4 million, the group’s cash position was A$14.76 million, with bullion on hand valued at A$4.4 million (at A$1456 per ounce).
Spot gold as last trading at about A$1,605 per ounce.
Flowsheet development progress at DZP has been encouraging and has set up Alkane to benefit from a number of potential price catalysts including the demonstration of additional product streams and progress converting a memorandum of understanding with a European company into an agreement to market all DZP zirconium products worldwide.
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