Proactive Investors - Run By Investors For Investors
Why invest in ALK?
Alkane Resources Ltd: THE INVESTMENT CASE
INVESTMENT OVERVIEW

Alkane Resources' gold is fuelling prospects for Dubbo rare earths development

The Dubbo project could deliver rare earths from the Central West of NSW to international markets.
A pit at Alkane's Tomingley Gold Project
INVESTMENT OVERVIEW: ALK The Big Picture
Aerial view of Alkane's Tomingley Gold Project, south of Dubbo

Alkane Resources Limited (ASX:ALK) has topped revenue from its gold business at $130 million as the rare earths project holder keeps watch on the effect of US policy changes on price and demand for battery minerals.

The company held its annual general meeting in Sydney today with chairman Ian Gandel saying Alkane had found itself “in a very strong position with the solid result from the gold operations providing the foundation to that strength.”

READ: Alkane Resources to invest $8 million in gold junior Explaurum

Gandel used his chairman’s address to highlight the New South Wales-focused company’s 2017-18 annual results.

These included a cash flow of more than $40 million, profit of $24 million and earnings per share of 4.8 cents.

Gandel called the financials a “very impressive annual result from (a) small but capable team.”

 

The chairman acknowledged the company’s increased cash balance could underpin development of its flagship Dubbo Rare Earths Project in Central West NSW, which includes hafnium, niobium and zirconium among those found in its polymetallic ore body.

Gandel said, “We are financially well positioned to persist to seek an offtake at fair terms, and are interfacing with the Australian Government and Export Credit Agencies to further our project.

“Your board remains very optimistic in the prospects for the Dubbo project and, more broadly, for your company.”

Dubbo project’s pre-tax net present value (NPV) has been forecast at between $909 million and $1.297 billion, depending on the development route its owner takes.

A 20-year base case of 1 million tonnes a year will require a $1.3 billion capital expenditure (capex), to generate $663 million revenue, with $341 million operating costs.

Earnings before interest, tax, depreciation and amortisation (EBITDA) is tipped at $320 million, while the internal rate of return (IRR) is 17.5% and NPV is $1.24 billion.

Alkane hopes to take a two-stage modular approach to ramp-up, starting at an annual production rate of 500,000 tonnes a year.

The company has argued the modular approach would involve large elements of off-site construction, reducing built time and start-up capex.

WATCH: Alkane Resources says 'demand must come' for rare earths as EV revolution continues

Dubbo project is one of only a few global rare earths projects not backed by a major Chinese shareholding or offtake agreement.

Alkane managing director Nic Earner spoke to Proactive Investors’ Stocktube video channel in August about the US’ push for non-Chinese-sourced minerals it considers vital to national security.

China currently supplies about 85-90% of the world’s rare earths to global markets, with the supply shift and price pressure a potential opportunity for the NSW-focused company that may prompt development of its project.

The push for non-Chinese battery metals inputs is expected to push up prices and lead to the development of more rare earth projects in international destinations and Western countries such as Australia.

READ: Alkane Resources hits high-grade gold in Tomingley regional drill program

Gandel said of the Dubbo project today, “We remain convinced that changes in the world environment indicate the time is right for its development.

“Electric vehicle production and sales are growing steadily, meaning manufacturers will be under pressure to source sufficient volumes of critical minerals.

“Already, manufacturers are looking to mitigate supply chain risk through diversification of supply.

“Whilst China will continue to be a dominant player for the foreseeable future, the Dubbo project represents an alternative, sustainable and reliable source of materials that are in high demand – not only for electric vehicles but also for a range of other existing and future technologies.”

Alkane has secured the land the project is located on and obtained a suite of approvals, including approvals to build the mine, and state and federal environmental approvals.

The company also completed engineering for the project, running a pilot plant at the Australian Nuclear Science and Technology Organisation facility in Sydney’s southern suburbs for more than a decade.

 

Earner gave a corporate address at the company’s AGM today, affirming demand for clean energy and transport was increasing.

The MD flagged the high purity of hafnium at its Dubbo project and highlighted its project activities would be funded by cashflows from the company’s nearby Tomingley Gold Operations 

Alkane’s cash cow Tomingley produced 78,533 ounces in the 2018 financial year, for a pre-tax cash flow of $60.1 million.

The operation’s profit before income tax and non-recurring items was $39.1 million.

Alkane’s leader tipped the company would increase the size of its resource at Tomingley with depth drilling.

He also flagged the company had confirmed a mineralisation corridor at the project.

READ: Alkane Resources reveals gold resource at Peak Hill mine near Tomingley Gold Operations

Earner laid out the company’s strategy to increase shareholder value.

Its actions included underground mining at Tomingley, continued exploration in its vicinity, an evaluation of the feasibility of extending Peak Hill Gold Mine to the south of Tomingley, and investment in junior gold mining companies and projects with potential.

Last month, the company’s board approved an $8 million investment in gold explorer Explaurum Ltd (ASX:EXU).

The investment is expected to help accelerate exploration and finalise a bankable feasibility study for Tampia Gold Project in WA’s Wheatbelt area, 240 kilometres east of Perth.

Alkane’s recent deals have also included a $3.7 million transaction with Calidus Resources Ltd (ASX:CAI) as it applies investment criteria to assessing projects and companies.

The company’s wholly-owned subsidiaries on June 30, 2018, were: the WA companies Australian Zirconia Holdings Pty Ltd and Australian Strategic Materials Ltd; and the NSW companies Tomingley Holdings Pty Ltd, Tomingley Gold Operations Pty Ltd and the Toongi Pastoral Company Pty Ltd.

Alkane’s top-four shareholders at end of the financial year were Abbotsleigh Pty Ltd (19.01%), Citicorp Nominees Pty Limited (8.05%), HSBC Custody Nominees Pty Limited (7.39%) and JP Morgan Nominees Australia Limited (3.73%).

View full ALK profile View Profile

Alkane Resources Ltd Timeline

Related Articles

Aircore drilling efforts by workers in Mali during the 2017-18 field season
November 09 2018
The company will pick up drilling at its projects which have delivered high-grade African gold.
miners
February 06 2018
Coro Mining is on the move in Chile, with feasibility work nearing completion and new ground to work on
graphite
January 18 2018
NextSource Materials Inc (TSE:NEXT) (OTCQB:NSRCF) may just be the best graphite company few investors know of.

© Proactive Investors 2018

Proactive Investors Australia PTY LTD ACN:132787654 ABN:19132787654.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use