(MENAFN- ProactiveInvestors)
’ () goal of becoming a significant world producer of zirconium products and heavy rare earths has achieved a key milestone with the New South Wales government approving the development application for its Dubbo Zirconia Project.
This enables the company to proceed with applications for the Environmental Protection Licence (EPL) Mining Lease and other permitting as well as secure project financing and advance the DZP into a development phase.
DZP is expected to be an internationally strategic project with supply of several critical metals from non-Chinese sources.
In addition Front-end Engineering and Design pre-construction work has been completed by international engineering company Hatch on primary design with tender responses from vendors providing revised capital costs.
Further analyses incorporating vendor feedback and the review of revenue streams will provide a bankable standard document within the next 3-4 months.
The study will enable updated operating costs and revised revenues for the financing program to be advanced.
Progress has also been made on optimising the flow sheet to decrease the amount of water required to provide an alternate waste management stream and to improve the quality and yield of the DZP products.
“We recognise there are a number of important steps before construction begins but we are delighted to achieve development consent for the Dubbo Zirconia Project and are looking forward to taking the next steps towards establishing this globally significant operation” managing director Ian Chalmers said.
“This project will not only mean a transformation for Alkane but it will have a significant impact on the region creating some 300 jobs and strategically important resources exports for Australia.”
Dubbo Zirconia could finalise offtake and financing in 2016 with first production towards the end of 2018.
Process and product improvements
Over the last 12 months Alkane has focussed on optimising the flow sheet to decrease the amount of water required to provide an alternate waste management stream and to improve the quality and yield of the DZP products.
This included development of a new zirconium basic carbonate (ZBC) process which will provide the DZP with a simpler zirconium product process and more diverse offtake options.
Recoveries for rare earths have also been improved and the design and costing for these have been included in the current bankable study.
In recent months substantial interest has been generated in the metal hafnium driven by expanding applications.
As a result ANSTO commenced R&D on hafnium separation and has prepared a new and simple flow sheet for its recovery using solvent extraction.
Small additional capital and operating costs will be required to extract an estimated 200 tonnes per annum of hafnium (based on 50% recovery).
This conceptual flow sheet will be tested initially at bench scale by ANSTO. Importantly the process is simpler than current industrial techniques which recover hafnium from a complex process used in the production of high purity zirconium metal.
Market Development and Off-take
The demand for hafnium is escalating for use in superalloys for aerospace and industrial gas turbines.
Importantly the potential for hafnium product from the Project has provided the catalyst for the aerospace industry to look closely at the full suite of DZP output as several products are critical additives in superalloys or as protective coatings on jet engine components.
Current global production levels of hafnium are estimated to be between 50-60 tonnes per annum with real demand estimated to be in excess of 100 tonnes per annum.
The DZP offers the potential to encourage further usage of hafnium in existing and new applications by managing increased supply.
It would become a reliable long term source of hafnium independent of zirconium metal production for the nuclear industry (the predominant source of hafnium to industry).
The spot price for hafnium has increased to about US$1200 per kilogram currently from US$850-900/kg late last year according to Metal pages.
While DZP does not plan to produce hafnium metal it may produce high purity HfO2.
The niobium joint venture with Treibacher Industrie AG (TIAG) is progressing with TIAG recently the company with detailed engineering and costing for the ferro-niobium (FeNb) plant to be integrated into the DZP processing facility and based on their study of producing marketable FeNb from niobium concentrate feed from the DZP.
In addition negotiation of the marketing agreement with the European manufacturing and trading company is proceeding to establish off-take for DZP products in Europe North America and other agreed locations.
In the interim EMTC has continued to act on Alkane’s behalf to progress off-take agreements.
A draft rare earth toll-treatment and off-take agreement was provided to Shin-Etsu late last year as a basis for commercial discussions which are continuing.
Concurrently the company is extending its efforts in Europe North America and North Asia to develop agreements to expand processing and product opportunities.
Financing
Alkane is working with its advisors to progress funding of the project.
With project development approval in hand AZL is redoubling efforts in relation to funding
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.
Dubbo Zirconia Project
The Dubbo Zirconia Project (DZP) is located 25 kilometres south of the large regional centre of Dubbo in the Central West Region of New South Wales.
It is based upon the large in-ground resources of the metals zirconium hafnium niobium tantalum yttrium and rare earth elements – including the full spectrum of rare earth magnet materials such as neodymium praseodymium dysprosium and terbium.
This diversified output could provide robust revenues even at current Chinese domestic rare earth prices.
Dubbo Zirconia currently has Proved and Probable Ore Reserves of 35.93 million tonnes at 1.93% ZrO2 0.04% HfO2 0.46% Nb2O5 0.03% Ta2O5 0.14% Y2O3 and 0.74% rare earth oxides.
Markets
The rare earth industry is a US$3-5 billion global market with annual consumption of 115000 tonnes in 2013.
Annual growth is estimated at between 5% and 10%.
China’s move to manage its rare earths industry which includes removing export taxes and implementation of a new internal resource tax is expected to positively impact on prices.
Zirconium is a US$2-3 billion market that saw consumer inventories running down in 2014.
The market is expected to stabilise through 2015-16 with compound annual growth rate (CAGR) estimated at 5% to 7%.
Niobium is a steel feedstock sold into a liquid offtake market which has seen an impressive 10% CAGR over the last decade. This is expected to continue due to demand being driven by greater intensity of use in steels by BRIC producers.
Notably Brazilian producer CBMM and ’s Catalao mine control over 87% of global supply.
Hafnium prices have been escalating due to demand by the aerospace industry with super alloys using up 73% of 2015 supply to date.
Analysis
’ share price is up 75% to $0.34 since December 2014 and based on this approval for Dubbo Zirconia should continue to rally as investors twig to the importance of the news.
The development consent allows the company to proceed with the key Environmental Protection Licence (EPL) Mining Lease and other permitting. This could be completed by the end of July.
It also paves the way for Alkane to secure project financing with strategic investment Export Credit Agency finance and commercial debt remaining as the key components of the envisaged funding suite.
DZP is an internationally strategic project that could make the company a significant non-Chinese producer of zirconium products and heavy rare earths.
It also has the potential to be the world’s largest hafnium producer and supply long term stable production and pricing into the expanding aerospace industry.
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