Alkane Resources (ASX: ALK) will raise A$107 million in new capital for the construction and commissioning of the Tomingley Gold Project and the continuing development of the Dubbo Zirconia Project.
Over the next two years, Alkane is planning to develop two significant resource projects in central west New South Wales which will have a combined capital expenditure of about $1 billion.
The company could be in production at Tomingley by as early as mid-next year once it begins the 12 month construction phase.
A Definitive Feasibility Study for the project delivered production of 50,000 to 60,000 ounces of gold a year for an initial 7.5 years, and based on a gold price of A$1,700 per ounce the project should generate cash flow (EBITDA) of around A$250 million with an internal rate of return of 32%.
Meanwhile, at the Dubbo Project, Alkane is in the process of completing a revised 1 million tonne per annum project financial assessment.
An earlier Feasibility Study estimated earnings before interest taxes, depreciation and amortisation of $6 billion and a net present value of $1.2 billion.
Late last year Alkane delivered an ore reserve upgrade to the project that will support a 36 year mine life from a proposed 1 million tonnes per annum production parameter.
The project is already positioned to be a long term supplier of zirconium and heavy rare earth products when it begins production in 2014.
Dubbo is one of the world's largest known in-ground resources of the metals zirconium, hafnium, niobium, tantalum, yttrium, and rare earth elements.
The Proved and Probable Ore Reserves at the Toongi deposit are now 35.9 million tonnes at 1.93% zirconium, 0.04% hafnium, 0.46% niobium, 0.03% tantalum, 0.14% yttrium, 0.74% rare earth oxides (0.9% total rare earth oxides).
Alkane will raise the $107 million through an entitlement offer and placements.
The company is offering up to $30 million through a partially underwritten 1 for 10 non-renounceable entitlement offer at $1.10 per new share.
A shortfall of up to $12.2 million is underwritten by Regal Funds Management.
Under the placements, Alkane will raise $44 million through the issue of 40.3 million shares at $1.10 each, and $33 million through the issue of 30 million shares at $1.10 each to professional and sophisticated investors.
The issue price represents a discount of about 8% to the volume weighted average price of Alkane shares for the 20 trading days since 31 January 2012.
Importantly, Alkane has full investor backing through firm commitments for the total $77 million in placements which were substantially oversubscribed.