ALK 2.40% 61.0¢ alkane resources limited

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    At last, investors start to catch up with Alkane Resources' golden glitter

    * Barry FitzGerald
    * March 3, 2008

    Alkane ResourcesTHE market looks finally to have realised that Alkane Resources (ASX code: ALK) is on to something big at the McPhillamys gold prospect in its Moorilda joint venture with US heavyweight Newmont near Orange in central western NSW.

    It's early days and McPhillamys is not the next best thing since sliced bread.

    But in a market crying out for leverage to decent gold discoveries because of the surge in gold prices to record highs, the prospect's multimillion-ounce potential has made Alkane something of a hot stock.

    Alkane closed at 51.5¢ on Friday, a 3.5¢ increase on the day. It is up 49% from the 34.5¢ it was trading at two weeks ago as word spreads on McPhillamys and the group's near-term gold production plans at Tomingley near Dubbo.

    Recent drill results from McPhillamys extended the gold mineralisation to 350 metres deep, serving to confirm Alkane/Newmont were on to a "large gold system".

    Newmont is one of the world's biggest gold producers and needs multimillion-ounce discoveries to keep its interest up.

    It is earning a 51% interest in McPhillamys by spending $5 million - and judging by results, McPhillamys might just be what Newmont is looking for in a region best known for Newcrest's big-time gold/copper operations in the nearby Cadia Valley.

    On February 18 Alkane - as operator of the joint venture - released the results from one of the two diamond core holes drilled late in 2007 into the central section of the football-shaped McPhillamys deposit to test the down dip and down plunge extension of the gold and base metal (zinc) mineralisation encountered in the 2006 drilling program.

    Hole KPD002 returned 349.25 metres grading 0.87 grams of gold a tonne from 97.75 metres, including 224.75 metres grading 1.16 g/tonne from 207 metres, 51 metres grading 1.87 g/tonne from 212 metres and, for good measure, a discrete zone of zinc mineralisation of 11 metres grading 1.35% zinc from 103 metres.

    On February 26, results from the second hole - KPD003 120 metres north of KPD002 - were released.

    It was more of the same, with 262.7 metres grading 1.32 g/tonne gold from 134 metres and including 203.7 metres grading 1.62 g/tonne gold from 193 metres, 48.7 metres grading 2.83 g/tonne from 348 metres and a discrete 15-metre zinc zone that returned 1.07% zinc from 53 metres.

    The forward drilling program has yet to be determined but you would have to think that with McPhillamys' previous land access issues a thing of the past, Newmont will want to pick up the pace as much as Alkane would like to.

    Normally a hiatus in exploration drilling at a property such as McPhillamys could be expected to dim interest in a junior such as Alkane. But Alkane is not a one-trick pony thanks to its Tomingley gold project and its Dubbo zirconia project.

    Those projects were the main focus of a February 15 research note by Basil Burmeister at Lonsec. Alkane was then trading at 34.5¢ a share and Burmeister reckoned that based solely on the Tomingley gold project, cash and a shareholding in iron ore hopeful BCI, Alkane shares were worth 49¢. Development of the Dubbo zirconium project would add between 29¢ and 96¢ a share.

    After assuming a nominal value for exploration projects (the McPhillamys results were not in at the time), Lonsec arrived at a valuation range of between 80¢ and $1.47 a share. The report is there for all to see on Alkane's website.

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