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Alkane Resources Ltd.


Alkane Resources Ltd. is a multicommodity mining and exploration company with a focus on gold, copper, zirconium, niobium and rare earths. Its projects and operations are located in the central west of New South Wales, in eastern Australia. Alkane commenced gold production in early 2014, after commissioning its Tomingley gold project in February, on time and on budget. The company is also developing the Dubbo zirconia project, with operations scheduled for 2016. This will position Alkane as a strategic and significant world producer of zirconium products and heavy rare earths. Several other copper-gold exploration projects in the region are being evaluated. The company is heavily committed to safe environmental practices and local community wellbeing.

The information provided below is from analysts, newsletters and other contributors. Please contact the company and visit its website before making an investment decision.

Expert Comments:

Tom Hayes, Edison Investment Research (11/28/14) "Alkane Resources Ltd.'s Tomingley gold operations (TGO) continue to outperform, with gold production ahead of our Q1/15 estimate and at low quartile total cash operating costs. . .continued positive mine-to-mill reconciliations have now resulted in the company reviewing its resource base and mine planning with a view to optimizing the TGO's future production profile."

The Mining Report Interview with Jack Lifton (11/11/14) "Alkane Resources Ltd. is producing and selling gold. It has an offtake for its REEs. Alkane is moving along, going into production." More >

Vincent Pisani, Shaw Stockbroking (11/5/14) "Alkane Resources Ltd.'s Tomingley gold operations performed well in Q3/14 with gold production of 22,363 oz. . .gold revenues totaled AU$33.4M. . .Tomingley is a cash cow and will assist the company to further fund studies and market the Dubbo zirconia project."

Tom Hayes, Edison Investment Research (10/15/14) "Alkane Resources Ltd.'s Tomingley gold operations (TGO) continue to outperform, with gold production ahead of our Q1/15 estimate and at low quartile total cash operating costs of AU$867/oz. Continued positive mine-to-mill reconciliations have now resulted in Alkane reviewing its resource base and mine planning with a view to optimising the TGO's future production profile."

The Gold Report Interview with Richard Karn (9/24/14) "In the zirconia, ferroniobium and rare earth element space, we continue to like Alkane Resources Ltd.'s Dubbo Zirconia project, which is probably the most intriguing resource we have encountered in Australia and can be thought of as an exchange-traded fund for the specialty metal space. The New South Wales Planning and Environmental departments have just conditionally approved the Dubbo Zirconia project, which clears the way for existing memorandums of understanding with off-take and processing partners to be converted into contracts, and enables Alkane to commence the financing and development stages for the slightly less than $1 billion project. Helping to fund these efforts, Alkane's Tomingley gold project is performing above design specifications, and the company has reduced all-in cash costs to approximately $900/oz and increased gold reserves by 47% this year. As the ratio of tons mined (overburden) to tons milled is optimized, which is expected to be completed by Q1/15, profitability should increase further—all things being equal. Tomingley will produce roughly $15M in free cash flow this year and then $20–25M per year over the next eight years of visible mine life." More >

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Tom Hayes, Edison Investment Research (9/16/14) "Alkane Resources Ltd.'s all-in sustaining costs of production are down 47% from FY14E, and upgrades to its resources (up 2.2%) and reserves (up a significant 41%) estimates are positive for the Tomingley gold operation's profitability and mine life. The New South Wales authorities have conditionally approved the Dubbo zirconia project (although final clarification is still required and is expected by year-end), which should trigger conversion of memos of understanding to offtake agreements and, in turn, financing of the project."

Christopher Ecclestone, Investor Intel (8/14/14) "Alkane Resources Ltd. is a paradox in a gently improving market for rare earths and specialty metals as it test new lows. This is despite managing to bring on board sizeable financing and one of the world's largest institutional investors. . .as one of the few REE stories to catch (and retain) a Japanese end-user/partner, Alkane also stands out from the pack. . .whatever the temporary price setback might be the rare earth race will ONLY go to the serious players, and Alkane with its Japanese partner is up there amongst the sector leaders."

Tom Hayes, Edison Investment Research (8/13/14) "During 2014, Alkane Resources Ltd. has successfully moved from explorer to producer for the first time since 1996, bringing its Tomingley gold mine into production. In doing so, it has improved its corporate structure in preparation for the main phase of development for its flagship project, the Dubbo zirconia project."

Esmarie Swanepoel, Mining Weekly (7/18/14) "Diversified junior, Alkane Resources Ltd., produced 16,348 oz gold during the three months to June 30, 2014 from its Tomingley gold mine. . .the mine was officially opened in March this year, with design capacity achieved in late May."

The Mining Report Interview with Tom Hayes (7/15/14) "I cover a company called Alkane Resources Ltd., which holds an interesting asset in New South Wales, the Dubbo Zirconia project. This is predominantly a zirconia project with coproduction of niobium and rare earths. The important heavy rare earths make up 25% of the output. Alkane is persistent and has chosen to take a slow-and-steady approach to Dubbo and has been investigating the project since 1999, long before the rare earth "boom." It holds a number of prospective projects within a tight geographic area that has already allowed the company to divest a 49% share in its McPhillamys gold resource, which netted Alkane about A$75M. Bringing the Tomingley Gold project into production this year is providing cash flow for its project development pipeline and bolstered the company's infrastructure, as well as its ties with its banking partners, Credit Suisse and Sumitomo Mitsui Bank. Dubbo's revised definitive feasibility study (DFS) was published in April 2013. It has a mine life of 70+ years, a net present value of A$1.15B, an internal rate of return of 19.3% and an initial capex of A$931M. Construction should begin by the end of 2014, with production scheduled for 2016. Dubbo will produce about 1,300 tonnes of HREEs annually. This is quite an interesting opportunity because the company is cash flow generative, and it has the potential to yield further gold and base metals discoveries, which it may be able to divest.

TMR: Do you see Alkane's gold hedge of A$1,444/oz (A$1,444/oz) with Credit Suisse as clearing the decks in order to concentrate on Dubbo?

That gold hedge applies to 24,000 oz of production, which will underpin the Tomingley revenue over the next 6 to 12 months. That will provide some comfort in terms of cash flow in the current gold price environment and should lead to its banking partners defining a funding strategy for Dubbo. The capex for Dubbo should be met with a mix of international credit agency and bank funding, offtake partnerships and strategic partner investment. The actual project itself sits within a separate entity called Australia Zirconia Ltd., which enables some flexibility with the funding structure. When you take into account a producing gold mine, cash flow, the ongoing exploration around Dubbo, and the company's continuing improvements in REE recoveries, I would say that Alkane has the means to ride out the current mining downtrend and be well positioned for the recovery. . .Alkane is one of my favorites because of its current position and financial health. " More >

Tom Hayes, Edison Investment Research (6/23/14) "Alkane Resources Ltd. has raised AU$10.4M via the issue of 40M ordinary shares at AU$0.26/share. This financing allows Alkane to maintain its 2016 development timeline for Dubbo while it tackles the main issue of permitting the mine with the New South Wales authorities."

The Mining Report Interview with Richard Karn (4/22/14) "Alkane Resources Ltd. has had a demonstration plant at the Australian Nuclear Science and Technology Organization for nearly six years and is one of the few companies in the space that has been able to deliver samples across its entire product line for end-users to evaluate. This has led to Treibacher committing to market the entire first five years' production of the Alkane's ferro-niobium product. Shin-Etsu, the Japanese chemical giant, has signed an MoU to toll treat Alkane's REE concentrates with the option to purchase a range of products; news of the MoU being converted into a contract is pending. Talks are ongoing with a range of Japanese, Korean and EU end-users for Alkane's line of zirconia compounds and other REE products. By the end of the calendar year, Alkane expects to have a number of these agreements finalized.

"In addition to this kind of standard project finance, Alkane expects to conclude a strategic investment by sovereigns and key product end-users by year-end to purchase 10-15% of the Dubbo Zirconia project; that event alone will force a significant revaluation of the entire company. Alkane is also in talks with various entities regarding Export Credit Agency debt facilities, which amount to substantial sovereign institutional loans on favorable terms for large projects deemed to be of strategic importance." More >

Thibaut Lepouttre, Caesars Report (4/21/14) "Alkane Resources Ltd. announced the results of a 1,100m drill program at its Kaiser project in New South Wales in Australia which seem to indicate a new copper-gold porphyry zone has been discovered on the Bodangora project. Of interest are intercepts of 41m of 1.24% copper and 1.15g/t gold and 22 meters of 1.64% copper and 1.63g/t gold from a depth of respectively 18m and 37m. These are good results with a respective rock value of $130/t and $176/t and we'd love to see some follow-up drilling to test the extensions of this new zone."

Tom Hayes, Edison Investment Research (2/27/14) "Alkane Resources Inc. has announced, on time, the first gold pour at its Tomingley gold project, marking the official transition from the commissioning stage to commencement of operations. Furthermore, the company announced it has executed a gold hedge with Credit Suisse for delivery of 25 Koz gold by May 16, 2014 at a price of AU$1,449/oz (US$1,308/oz), which limits Alkane's risk to current gold price volatility and, if fully utilized, equates to revenue of AU$36.2M."

Tom Hayes, Edison Investment Research (2/18/14) "Alkane Resources Ltd. has executed a gold hedge with Credit Suisse for delivery of 25 Koz by May 16, 2014 at a price of AU$1,449/oz (US$1,308/oz). . .the company's successful first pour of a gold bar weighing 8.191 kg (or 230 troy ounces) by end February is in line with its stated development timeline for its Tomingley Gold Operation. This supports our view that Alkane can deliver a project from grass-roots exploration, through development, and into production on time and on budget."

Tom Hayes, Edison Investment Research (2/13/14) "Alkane Resources Ltd. has advanced the Dubbo Zirconia project (DZP) planning approval process to the Planning Assessment Commission, a department of the New South Wales state government. Furthermore, five major engineering companies have been invited to tender for the project's front-end engineering and design. Alkane's DZP financing teams continue to hold advanced discussions with international government agencies over sourcing potentially considerable amounts of export credit agency funding for DZP's estimated capex of AU$996.4M."

Tom Hayes, Edison Investment Research (12/10/13) "Alkane Resources Ltd. has managed to improve metallurgical recoveries at the Dubbo Zirconia project (with no additional operating or capital cost envisaged), and has released an initial resource for the Caloma Two deposit at the Tomingley gold project (TGP). Together, they increase our fully diluted valuation by 11%. . .we believe that the company's progress developing the TGP (currently >85% complete) and commissioning in early CY/14 should provide a positive catalyst for the shares as it moves from developer to producer."

The Mining Report Interview with Richard Karn (11/19/13) "Alkane Resources Ltd. is actually putting two greenfield projects into production in the vicinity of Dubbo New South Wales, one gold, the other a suite of zirconium compounds, ferro-niobium and REE products, and the company is utilizing different finance routes for each project. . .in 2012, Alkane made two decisions that resulted in Tomingley being developed without commercial finance. The first was a AU$100M capital raising in April; and the second was the sale of Alkane's 49% interest in the McPhillamys Gold project for AU$70M in Regis Resource shares. With the flexibility this liquidity provided, Alkane was able to respond proactively to the collapse in gold prices in April 2013: The company closed the 90 Koz gold hedge at a AU$7M profit and made the decision to self-fund the Tomingley gold project—all the while completing the bankable feasibility study for the Dubbo Zirconia project and actively negotiating offtake and financing arrangements. In fact, the cash flow from Tomingley will provide Alkane with additional flexibility as it puts together the financing package for its mega-project: theAU$1B polymetallic Dubbo Zirconia project.

Alkane is looking to fund the Dubbo Zirconia project through a combination of Export Credit Agency (ECA) loans, strategic investments, standard commercial project finance and a potential equity raising. . .Alkane's product suite has also put it in an enviable position in terms of securing standard commercial project finance for a portion of the required AU$1B. Generally, such finance is tied directly to offtake sales agreements, and to date Alkane has reached agreements with Austrian powerhouse Treibacher Industrie AG (private) for the purchase of the first five years of the Dubbo Zirconia project's ferro-niobium production as well as a Memorandum of Understanding (MoU) with Shin-Etsu, Japan's largest chemical company, to toll treat Alkane's HREE and LREE chlorides with an option to buy any or all of the products. Negotiations continue with more than a dozen Japanese, Korean, North American and European companies for the 14–16 tonnes of annual zirconium compounds Alkane will produce. Once the zirconium compound agreements are finalized, the size and scope of commercial finance package will be determined." More >

Andrew Richards, Petra Capital (10/31/13) "The quarter revealed positive developments at both Alkane Resources Ltd.'s Dubbo zirconia project and Tomingley gold project. Key takeaways are significantly higher rare earth recoveries achieved at Dubbo and the environmental impact study is on public exhibition until Nov. 18. . .we maintain our Buy recommendation."

John Phillips, Proactive Investors (9/3/13) "Alkane Resources Ltd. has a proven history of discovering gold deposits such as the 2.96 Moz McPhillamnys gold deposit near Blayney. The company has now expanded its footprint in the region and will use its considerable technical knowledge to target new McPhillamys-style gold mineralization in the form of two exploration licensing agreements with Balamara Resources Ltd. . .under the agreement, Alkane can earn up to 80% interest in the tenements by spending $500K over three years."

Andrew Richards, Petra Capital (8/1/13) "During the quarter, Alkane Resources Ltd. lodged the Dubbo Zirconia Project (DZP) environmental impact statement and signed a joint venture with Treibacher Industrie AG for the production and marketing of ferro-niobium using the niobium concentrate from the DZP. Recent market discussions in Japan, China and Europe have confirmed strong interest in all of DZP's planned products and potential exists for additional offtake agreements in rare earths and zirconium."

Tom Hayes, Edison Investment Research (8/1/13) "Alkane Resources Ltd. has announced its wholly owned subsidiary Australia Zirconia Ltd., which holds its flagship Dubbo zirconium project, has entered into a joint venture (JV) framework agreement with Austrian firm Treibacher Industrie AG over the production and sale of ferroniobium derived from Dubbo's niobium concentrate. At current market prices ferroniobium products could potentially generate annual revenue of CA$80M, factoring in a potential 50/50 Alkane/Treibacher ownership structure to the JV company."

The Gold Report Interview with Stephan Bogner (7/15/13) "I am positive that Australia-based Alkane Resources Ltd. will bring into production its Dubbo REE project in New South Wales in early 2016. Management is right on track demonstrating how to successfully develop a large deposit into a profitable mine quickly, namely with MOUs, agreements and strategic alliances. Dubbo represents a world-class deposit enriched with zirconium, hafnium, niobium, tantalum, yttrium, as well as LREEs and HREEs. Alkane already seems to have found the right partners to advance this project. The financing of around $1B is planned to be arranged by Sumitomo Mitsui Bank of Japan, Credit Suisse Australia and Sydney-based Petra Capital, and is expected to coincide with the final project approvals, allowing mine construction to commence in Q2/14.

"Alkane's Definite Feasibility Study of April 2013 shows Dubbo being a 'technically and financially robust project.' A base case of a 20-year mine life gave a net present value of $1.23B, yet mine life is likely to be in excess of 70 years, which makes this deposit an important strategic asset for REE world supply. What makes Alkane a great investment today is that shareholders do not have to wait two or three years until REE production at Dubbo starts; shareholder value is likely to be increased substantially within the next few months as construction on the company's Tomingley gold mine is underway and commissioning is anticipated in late 2013. With a resource of 800+ Koz, a head-grade of 2 g/t, a yearly gold production of around 50 Koz for a minimum of eight years and operating costs at only $1,000/oz, this project is set to generate important cash flow in the near future to advance the Dubbo project successfully without the need for excessive dilution." More >

The Metals Report Interview with Jack Lifton (7/9/13) I'm very impressed by what I know of Alkane Resources Ltd.'s business model. Alkane is a polymetallic producer and its mix of metals, which includes zirconium, niobium, yttrium, REEs and gold, has allowed it to minimize the risk of depending entirely on REE production. Alkane is making a series of individual offtake agreements with separate vertically integrated refiners who themselves are also downstream end users and marketing experts in the products for which Alkane will provide the feedstock. This is an outstanding 21st-century business model that has allowed Alkane to create a synergistic revenue stream. In a sense, Alkane has become a mini-Glencore International Plc (GLEN:LSE), a vertically integrated trading company. This is a business model that I urge juniors with polymetallic deposits to emulate. More >

The Metals Report Interview with Andrew Richards (6/18/13) "Alkane Resources Ltd.'s Dubbo zirconium-niobium project is certainly unique. Alkane has had a pilot plant operating for over four years now, so it has actually proven that flowsheet and sent product off to customers. It has signed an offtake agreement with a significant Japanese company, Shin-Etsu Chemical Co. Ltd. . .Alkane's [feasibility study] did [show a] $70M capex reduction. The company made some improvements with the water recycling, which means that it could reduce the size of the evaporation ponds required. That was quite positive. Also, it slightly improved the costs, and the company has some improvements coming through on recoveries, which could help on the revenue side.

"The plan with Dubbo is to sell up to 15% at the project level for anywhere from $150–$200M. Alkane has appointed Credit Suisse and Sumitomo Corp. of Japan to help facilitate the project selldown and negotiate government debt. Altogether, that could mean $800M in funding. The balance would be equity, and Alkane is targeting a maximum of $200M. The first thing we'll see will be the selldown, hopefully by the end of this year. . .Alkane is in a great position. I'm confident that it will get the funding for Dubbo and deliver on what it has said it is going to do. Dubbo's economics are very attractive. The $1B capex should be paid back within five years. Dubbo's current reserve equates to a mine life of over 30 years, and the resources equate to over 70 years. And it will be providing not just light rare earths but a majority of heavy rare earths, which are in short supply, as well as the zirconium and niobium. It is certainly far more advanced than a number of other competing projects globally." More >

The Metals Report Interview with Richard Karn (5/7/13) "Of the projects we invest in, Alkane Resources Ltd. may be the healthiest at the moment. Alkane has roughly AU$130M in cash and marketable securities, and its Tomingley gold project is on schedule to be in production by January of 2014. But as far as we are concerned, Alkane has always been about its polymetallic Dubbo zirconia project, which will produce a balanced range of zirconium, niobium and rare earth elements. The company recently completed a definitive feasibility study that indicates very robust economics: The AU$1B project (including a 20% contingency) will process 1 Mmtpa for 20 years and generate total annual revenues of AU$500M (AU$210M in OPEX and AU$290M EBITDA). Alkane has lined up an outstanding array of partners, and the company's financing options are such that I think it likely that management will be able to maintain its excellent track record of subjecting shareholders to minimal dilution, which in developing a billion-dollar project amounts to quite an accomplishment." More >

Andrew Richards, Petra Capital (4/11/13) "Alkane Resources Ltd. has provided updated numbers for the Dubbo zirconia project (DZP). . .the improved numbers primarily reflect higher rare earth revenue via production of separated rare earths with the Shin Etsu joint venture. The study confirms the DZP as a very robust project backed by attractive margins over a long mine life; we maintain our Buy recommendation."

Angela Kean, Proactive Investors (4/11/13) "Alkane Resources Ltd. has completed a definitive feasibility study (DFS) for its Dubbo zirconia project in New South Wales that estimates an initial 20 year life and an NPV of AU$1.23B. The DFS has confirmed a technically and financially robust project that will deliver a total life of mine EBITDA of AU$5.23B from a 1 Mmtpa operation. . .Alkane remains well funded, with around AU$80M in cash at the end of December 2012."

Andrew Richards, Petra Capital (4/7/13) "Alkane Resources Ltd. has reported multiple high-grade intersections over economic widths at Caloma Two, indicating further resource upgrades. The highest grade intersection to date was recorded with 9m at 110 g/t Au from 196m; we estimate current resources at Caloma Two equates to >100 Koz, potentially increasing mine life at Tomingley from 7.5 years to 10 years."

Tom Hayes, Edison Investment Research (2/27/13) "Alkane Resources Ltd.'s Tomingley gold project, which constitutes around 15% of group revenues in 2018, has been granted its mining license, allowing the company to aggressively target first gold production and production revenues by the end of 2013. . .Alkane is a near-term producer trading at book value. . .and is overly discounted considering progress made."

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