Edison Investment Research re-initiated coverage on Alkane Resources Ltd. (ALK:ASX; ANLKY:OTCQX) on May 15. The firm noted that while Alkane had a challenging H1/17 because of heavy rainfall at the Tomingley Gold Operation (TGO) —four times the average rainfall, which affected operations—Alkane's Q3/17 results showed a return to profitable operations for the project located in central-west New South Wales (NSW), Australia. According to Edison, "as weather conditions improved in NSW, Q317 gold production recorded a q-o-q increase of 59%, with 18,721ozs Au produced at AISC costs of A$1,201/oz."
Exploration has become a focus for the TGO, noted Edison: "This is not only to replenish depleted reserves, but also to gain greater confidence in planning for building out a UG [underground] mining phase at Wyoming and possibly also either at Caloma or Caloma Two." According to Alkane, TGO is an important revenue stream "to fund corporate and exploration expenditures."
Alkane's flagship is the Dubbo Project, also located in New South Wales. According to Alkane, the Dubbo Project hosts "one of the world's largest in-ground resources of zirconium, hafnium, niobium, yttrium and rare earth metals."
Edison stated that "the longstanding investment case for Alkane Resources is tied to the development of the Dubbo Project (DP), a strategic project in that it carries a multitude of key speciality metals outside of the dominant supplier, China. These metals feed not only into a wide range of green technologies and electric vehicles, but also into defence technologies that do not wish to be subjected to Chinese export controls, in whatever form they take. . .Alkane continues to progress its flagship DP, with financing to follow a finalisation of bankable studies into the project's revised modular design (by its consultant Outotec, due later in 2017)."
Alkane has a pilot plant facility at ANSTO, near Sydney. Edison stated that the plant "has provided the company with a crucial tool to tailor the DP's products to meet the ever-changing landscape of specialist metal applications alongside the development of the DP's front-end design. The use of the ANSTO pilot plant facility has allowed Alkane to develop its product suite at minimal cost."
The research firm noted that the multi-commodity DP "will extract and sell 12 of the 15 lanthanide group elements. . .the DP will also produce a highly pure form of chemical zirconia (free of the element hafnium, which itself will form a distinct revenue stream to service the growth in demand seen particularly in the aerospace sector) and zirconium basic carbonate, as it is the preferred feedstock material for use in a range of downstream industrial applications. The DP will also produce ferro-niobium, with this output already subject to a binding offtake agreement with German company, Treibacher Industrie." The elements that Alkane will produce at DP are in demand for clean energy, nuclear power generation, electric cars, jet engines and medical devices.
Managing Director Ian Chalmers stated that "the world class Dubbo Project is construction ready awaiting financing, and will become a strategically important producer of a number of metals required for modern technologies. Unlike other companies looking to develop similar projects, Alkane has profitable gold operation and maintains active exploration programs for copper and gold."
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1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
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Disclosures from Edison Investment Research, Alkane Resources, May 15, 2017
Alkane Resources is a research client of Edison Investment Research Limited.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report.