Competition to get the next rare earths project off the ground is hotting up, with Alkane Resources (ASX:ALK) confirming that it may spin-out its long-stalled Dubbo project in western NSW.

In NSW’s central west, where Alkane already has an operating gold mine, recent impressive copper-gold exploration results triggered a spike in its share price — as well as a rush by neighbours to update the market on their own interests in the region.

READ: These explorers are right next door to Alkane’s massive copper-gold discovery

For Alkane, spinning out its rare earths project — the vehicle is dubbed Australian Strategic Materials — would give this asset the investor attention it deserves.

Alkane’s Dubbo project has been shovel-ready for several years, awaiting the commitment from buyers and potential funders before giving it the go ahead.

In an attempt to get the project off the starting blocks, it has conducted various engineering studies demonstrating a smaller initial project processing 500,000 tonnes of ore costing around $800 million is viable.

This would avoid an upfront $1.3 billion capital outlay for a full-scale project which could process 1 million tonnes a year of ore.

Alkane’s current move to spin out its Dubbo asset also comes as geopolitical pressures mount for new supplies of rare earths, which are used in a broad range of applications spanning consumer electronics to military hardware.


The macro stars are aligning

Earlier this year, global #1 rare earths producer China sent shockwaves through the sector when President Xi Linping visited a major domestic rare earths project.

This triggered immediate speculation that he may ban rare earths exports as part of the escalating trade stoush with the US.

There’s precedent here. Earlier this decade, a ban on Chinese exports of rare earths to Japan sent prices skyrocketing. In response, large Japanese users of rare earths had to work hard to slash their consumption of the materials.

At that time, Alkane was talking with a large Japanese user about backing its Dubbo project, although more recently, it has begun conducting joint research with a Korean group.

That’s because separate to the trade row between the US and China, Korea and Japan have also become embroiled in a trade dispute.

Japan had threatened to block the supply of some specialty materials to Korean buyers, which has prompted the Korean government to pledge large sums of money for the development of greater domestic supplies of selected high-tech materials.

Furthermore, during Prime Minister Scott Morrison’s recent visit to Washington, an agreement was reached with the US government to develop new sources of supply for rare earths.


The Aussie players to keep an eye on

Australia’s sole existing producer of rare earths is Lynas Corp, which faced a near-death experience due to low metal prices and high level of debt in its early years.

But these macro events are putting the spotlight back on a number of Australian rare earths projects vying to get to the starting line.

Alongside Alkane’s Dubbo project are a slew of advanced WA players including Hastings Technology Metals (ASX:HAS), Northern Minerals (ASX:NTU), Sagon Resources (ASX:SG1) and Red Mountain Mining (ASX:RMX), as well as Arafura Resources (ASX:ARU) in the Northern Territory.


The Federal government could be willing to use some of its North Australia Infrastructure Facility, giving potential projects in the north of Western Australia, Queensland and also the Northern Territory access to long term, cheap government funding.

This could handicap Alkane’s project in NSW, although rare earths projects rely heavily on processing to unlock the value of the metals and Alkane has already conducted extensive studies into the best way to process its ore to maximise earnings.

Other projects would need to finalise extensive studies on how their ore would be processed before backers would be ready to step forward.

“The Dubbo project remains construction ready, with the mineral deposit and surrounding land wholly owned, all material State and Federal approvals in place, an established flowsheet and a solid business case,” Alkane told the ASX this morning.

A pilot plant being built in Korea is to be commissioned in the March quarter.

“The first priority of the plant is the production of zirconium and hafnium metals for high value applications, which addresses current supply chain risks from China, as well as market concentration by a few dominant companies,” Alkane said.