Monday, 25 July 2011

Alkane Resources JV unlocks cash flow potential of up to US$48m annually from Dubbo Zirconia Project

Alkane Resources (ASX: ALK) will joint venture with Australia’s Mintech Chemical Industries to produce zirconium oxychloride (ZOC) at the company's existing plant at East Rockingham, Western Australia.

The companies signed a Memorandum of Understanding to undertake a Scoping Study to produce 10,000 to 12,000 tonnes annually of ZOC.

This requires 25% of the zirconium output from the expanded 1 million tonnes per annum development scenario of the Dubbo Zirconia Project.

Most importantly is the cash flow generation, and based on current prices of ZOC, revenue of US$40 million to US$48 million annually will be generated, which Alkane said represents around 9% to 11% of the total revenue potential of the project.

Alkane added that revenue estimates for 75% of zirconium production now exceed earlier estimates for 100% production, with zirconium revenue representing around 25% to 30% of annual Dubbo Zirconia Project revenues.

Mintech has plant and equipment at the company's East Rockingham site which currently uses ZOC, and previously produced other zirconium chemicals and zirconium dioxide products.

Mintech has extensive chemical manufacturing expertise and a ready supply of low cost hydrochloric acid available nearby, which is a key reagent for producing ZOC.

Revenue potential for existing MOUs which relate to ZOC now totals around US$100 million to US$120 million per year, representing around 25% of total projected Dubbo Zirconia Project revenue.

The Scoping Study which Alkane is contributing $50,000, will include a study of the ZOC market both domestically and overseas, and is expected to be completed within three months.

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