Alkane Resources Forms Ferro-Niobium Production Alliance With Treibacher Industrie AG
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Seeking Alpha Analyst Since 2009
Alkane Resources (ASX: ALK, OTCQX: ANLKY) has reached another milestone on the road to production at the Dubbo Zirconia Project (DZP) in New South Wales, and has signed an agreement with Austria's Treibacher Industrie AG (TIAG) for DZP production of ferro-niobium (FeNb).
The agreement is through Alkane's wholly owned subsidiary Australian Zirconia Limited (AZL), with the agreement replacing the MoU announced on 26 October 2011.
The joint venture expects to produce over 3,000 tonnes of FeNb utilising all of the niobium concentrate produced from the 1 million tonnes per annum development of the DZP, which will generate revenue of approximately US$90 million with AZL's share estimated to be about A$80 million.
The intended Joint Venture activities are the production and marketing of ferro-niobium using niobium concentrate from the DZP.
The parties will form a company, initially wholly owned by AZL, to use TIAG's proprietary technology to process DZP niobium concentrate at a facility in Australia (or other agreed location) to produce FeNb.
TIAG will have the option to purchase 50% of the new company within three years of commissioning of the plant and will have exclusive rights to market the FeNb.
DZP is a very large polymetallic resource of the metals zirconium (hafnium), niobium (tantalum), yttrium and rare earths, and importantly has a strategic metal mix, including 25% heavy rare earth. The open pit life is at least 70 years.
The project has a demonstrated flow sheet with pilot plant and products for market evaluation, with a robust technical and financial feasibility completed.
Treibacher Industrie AG
Treibacher Industrie AG is a privately owned international metal alloy and chemical products company based in Althofen, Austria.
TIAG has since developed into a leading European company that specialises in the production of advanced materials through its chemical and metallurgical expertise and distributes metals, alloys, ferro-alloys, oxides and non-oxide performance materials to consumers globally, with turnover on 2012 being €451M (>AUD$600M).
Annual production revenue of US$90 million
The joint venture expects to produce over 3,000 tonnes of FeNb utilising all of the niobium concentrate produced from the 1 million tonnes per annum development of the DZP.
At current prices, annual production of FeNb will generate revenue of approximately US$90 million with AZL's share estimated to be about A$80 million (depending upon A$/US$ exchange rate), which is 16% of total anticipated annual project revenue as determined by the recently completed Definitive Feasibility Study.
AZL will be the only producer of niobium in Australia once production commences in 2016.
The EIS for DZP was lodged with the NSW Department of Planning and Infrastructure on 28 June 2013 marking the start of the approval process for this State Significant Project.
TIAG's obligations under this agreement:
- Undertake a marketing study of the business, identify potential customers for off-take
agreements and determine the design, capital and operating costs of the FeNb facility;
- Jointly fund and undertake a research project at ANSTO using their specialised knowledge
and expertise to optimise the DZP concentrate for production of FeNb;
- Develop and provide AZL with technology and process design plans for the construction and operation of an FeNb plant; and
- Provide ongoing technical support for the FeNb plant once in operation.
Rare Earths
Alkane said that recent marketing trips to Japan, China and Europe have confirmed significant interest in the DZP zirconium output and this interest will be supported by distribution of samples from the demonstration pilot plant (DPP) at ANSTO for testing by potential customers.
In all cases, there is a very good appreciation of the strategic significance of the DZP which is independent of the zircon supply chain and traditional downstream suppliers.
AZL's MoU partner Shin-Etsu Chemical is currently focused on improving recoveries of individual rare earth elements from the heavy rare earth concentrate supplied from the DPP.
In anticipation that the toll treatment joint venture with Shin-Etsu will provide AZL with the full suite of separated rare earth oxides, the marketing effort to secure off-take agreements in Europe and Japan for those not required by Shin-Etsu has been advanced.
TIAG has rare earth interest
Apart from FeNb, TIAG has expressed an interest to purchase from AZL certain separated rare earth products that will be generated through AZL's agreement with Shin-Etsu Chemical Co., Limited of Japan or other processing facility.
Any such purchases would be subject to a separate off-take agreement.
Analysis
Today's deal is significant achievement for Alkane in attracting a leading European company to joint venture at the Dubbo Zirconia Project, as the company moves towards becoming the only producer of niobium in Australia in 2016.
Providing another boost to the deal is that TIAG has expressed an interest to purchase from AZL certain separated rare earth products that will be generated through AZL's agreement with Shin-Etsu Chemical Co., Limited of Japan or other processing facility.
Adding further off-take interest to the DZP, significant interest in the DZP zirconium output has come from recent trips to Japan, China and Europe.
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