ALK 5.22% 54.5¢ alkane resources limited

and another read to explain the sudden interes

  1. 7,079 Posts.
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    Suddenly the market is waking up to the huge potential of ALK.

    Another little bedtime story for the weekend..Cheers..... Posting for interest...and to make the point that even in terrible markets there are some gems and bad markets play havoc with our memory.

    Tectonic Shift Looming for Rare Earth Market Dynamics

    By Sarah Belfield
    09 Oct 2007 at 11:58 AM GMT-04:00

    PERTH, Australia ( -- Buyers of rare earth elements are looking for potential alternatives to Chinese sources given a tight market is mooted for the medium term at least, and cropping up on their radars is the Australian rare earth hopeful Alkane Resources [ASX:ALK].

    The rare earth elements (REEs) are lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium and lutetium.

    The name "rare earth" is something of a misnomer, given their abundance in the earth's crust is higher in some cases than silver, tin and lead.

    Because they are all chemically similar to each other, REEs are typically bundled together in a concentrate, with the precise concentration of each REE changing from deposit to deposit. Further processing by solvent extraction needed to separate out individual REEs.

    Gluts or shortages can exist for each REE depending on its major uses at any given time. For instance, neodymium, which is used in rare earth magnets and MP3 players, is highly sought after, while stocks of cerium are said to be building up.

    REE production is largely on-sold via annual contracts.

    Chinese Policies at Centre of Rare Earth Market Outlook

    According to Dudley Kingsnorth, Executive Director of private consulting firm Industrial Minerals Company of Australia and REE marketing consultant, current forecasts held that the general REE market would see further tightening in coming years.

    Details appearing in a presentation Kingsnorth gave at a September conference in Hong Kong showed that, on the whole, prices for REEs have climbed markedly in the past year or so, following a relatively flat performance in the three or four years before that.

    Europium oxide was selling at about $350 per kilogram in 2007's third quarter, up from $240 a year before. In that same timeframe, neodymium oxide went from $19 to $33 per kilogram. Terbium oxide reached around $575 per kilogram, after trading at around $320 in the first quarter of 2006.

    China, which currently comes up with the vast majority of the world's annual REE production, is also the largest REE consumer. Of the 108,000 tonnes of rare earth oxides consumed globally last year, China gobbled up more than 60%, while the U.S. accounted for about 10%. Japan and southeast Asia together represented about 24% of the overall figure.

    Kingsnorth's figures showed demand for REEs was forecast to grow at about 9%-11% per year, with annual consumption pipped to reach between 180,000 and 190,000 tonnes of rare earth oxides in 2012.

    His projections also showed that while China's REE production outstripped its consumption last year, growth in its own REE needs were expected to outpace its REE production increases, so that by the time 2012 rolled around, that country's demand would be about equal in magnitude to its own production. That figure would be about 130,000-140,000 tonnes, Kingsnorth said.

    He said a variety of factors was constraining the Chinese REE industry, putting downward pressure on production growth. Among those factors were the government policies of having downward ratcheting quotas on production, suspending the issuing of REE mining licenses, and imposing quotas and tariffs on exports.

    "I think there's genuine concern in China that they don't want to run out of [REE] resources," he said.

    Kingsnorth said he felt the reasons behind China's actions also included a desire to maintain its REE expertise, and to build up a REE manufacturing subsector.

    The policies in place in China were likely to see considerable attrition in its REE industry, with only the strong surviving, he said. Between 130 and 160 REE firms in China currently existed, but within 10 years this figure would likely shrink to around five or six major companies plus around 15-20 specialized companies.

    Where Will the Rest of the World Find Its Rare Earths?

    While China will still import and export REE materials, its policies meant that in 2012 the West would have to supply its own rare earths in a net sense, Kingsnorth said.

    In 2012, the rest of the world will likely be demanding roughly 50,000 tonnes for REE applications, he said. Around 50,000 tonnes could in theory be reachable in 2012 if hoped-for production came to fruition in India, Russia, Australia, and the Mountain Pass project being recommissioned in the U.S.

    Complicating things was what Kingsnorth called "the neodymium equation."

    "We're now into a situation where neodymium is driving the market," he said.

    He said the 2012 forecast demand of 180,000-190,000 tonnes assumed that relative proportions among the REEs during mining and selling were identical, which wasn't the case.

    "If we're going to satisfy the neodymium demand, we're probably going to have to process 220,000 to 240,000 tonnes, which obviously puts a lot of pressure on things altogether."

    He said nobody knows what the answer might be to this situation.

    He believed the Chinese will come up with more than the 130,000-140,000 tonnes they say they'll be producing in 2012. They may increase the figure by more than 10%-15%, he suggested.

    "And if the Western companies ... all do what they say they're going to do, then we'll get there."

    However, there was "no slack in the system", according to Kingsnorth. The supply-demand situation would eventually improve, but hiccups in supply were inevitable along the way. As China's REE consumption level encroached on its production level, the rest of the world would become increasingly vulnerable to any supply squeezes.

    Judging by other observations of Kingsnorth's, the winds of change were already blowing.

    He has noted altered buying behaviours in recent times, such as buyers' tendency to cover a greater proportion of their REE needs via long-term contracts, say 80%, and to leave only small amounts to be purchased via spot markets. He said he had also observed buyers' increasing desire to enter into longer contracts: say 3 years long instead of the traditional 12 months' duration. And Japanese buyers were tending to stockpile materials during price dips.

    Rare Earth Hopeful Sees Promising Signs

    The flip-side of the REE market's current fundamentals is that the situation may prove a fillip for companies looking to bring non-Chinese REE production online in the near future.

    One outfit hoping to become a rare earth producer, the multi-commodity junior Alkane Resources is sitting on a zirconium-niobium deposit that also contains REEs. The project, named Dubbo after a nearby town, is located in the eastern Australian state of New South Wales. The company worked up the project from scratch after latching onto tenements previously picked over by other companies looking for other commodities. The company also holds a gold project in the same region.

    To date, Alkane has seemingly flown in under the radar as far as REEs are concerned.

    A bankable feasibility was already in swing at the Dubbo project to assess a $180 million capex operation involving annual ore throughput of 200,000 to 500,000 tonnes. A development decision would probably be made towards the end of 2008.

    The project's Toongi deposit had a measured resource grading at 0.745% total rare earth oxides, which would see about 1,500 tonnes of oxides produced each year if the lower end of the ore throughput range were selected or about 3,700 tonnes for the upper end of the range. The main products at Dubbo would be zirconium and niobium oxide, with concurrent production of additional, smaller amounts of hafnium, tantalum, uranium, yttrium and rare earth oxides.

    The company had no plans to work on shifting the deposit's inferred resource to a higher confidence category as part of the BFS because the measured resource stood at 35.7 million tonnes, sufficient to support a mine life of around 100-200 years depending on annual ore throughputs.

    According to company managing director Ian Chalmers, the company anticipated beginning a demonstration-scale pilot plant at a scientific research facility in Sydney in late October or early November.

    "Obviously it proves the [processing] flow sheet, but also we're going to get substantial amounts of product off it," Chalmers told RI.

    "We'll distribute that product around the world to various end users and get feedback from them, the idea being that on the back of that we can start getting some real, hard revenue numbers."

    He said revenue-related data obtained by about the middle of next year would go into the Dubbo BFS.

    According to Chalmers, potential buyers already making contact with Alkane have largely been Japanese companies, although some European companies have approached the company as well.

    "They really have been particularly interested in our heavy rare earth distribution. In other words, things like dysprosium and terbium and erbium."

    He said the global market adjustments that China's policies were sparking had been a major force in prompting those potential customers to seek early contact with Alkane.

    "You've got the Japanese end-users and European end-users suddenly saying 'Hang on, we've got to look very closely at every other potential rare earth supply around the world.' And for these guys to come to us - I take that as a real positive, because they have obviously tracked back, gone through the public domain, found that Alkane is a potential rare-earth producer, and made the effort to come and see us."

    At the time of writing, Alkane Resources shares last traded at A$0.29 on the Australian Securities Exchange."

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