Could Dubbo’s volcano supply the world’s jet engine builders?
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Want to launch a rocket or power a jet engine? You’ll need a metal you’ve probably never heard of — hafnium — which will likely be sourced from a western NSW town you should have heard of — Dubbo.
Much of the world’s future supply of this chemical Element is likely to come from the region.
It’s on the outskirts of Dubbo, 400km north-west of Sydney, that one of the world’s truly unique orebodies — rich in rare earths and other metals such as hafnium and zirconia — has been waiting for the right conditions to justify the estimated $1 billion development cost.
Those conditions are arriving, and can be seen in the recovering share price of the company which owns the Dubbo Zirconia Project (DZP), Alkane Resources, which has risen 62 per cent over the past two months, from 21c to 34c.
Experienced investors, at this point, might be inclined to say they’re heard the DZP story before. And they’d be right.
Alkane (ASX:ALK) has been beavering away with its plan to become a producer of a cocktail of specialty metals for 18 years.
Thin markets and wildly fluctuating prices for metals seemingly traded by the handful rather than the kilo or tonne have inhibited development of the Dubbo project.
Return of Rare Earth
But the return of the rare-earth sector as an attractive investment class can be seen in the recovery of Australia’s only producer of the material, Lynas Corporation.
Alkane has been more cautious than Lynas in trying to enter the world of exotic metals, investing in project design and the process route which will yield the best financial returns from a complex orebody.
To help pay for the pre-construction work on what is a high-technology project, Alkane has turned to one of the world’s oldest and most popular metals, gold.
Profits from a small goldmine at Tomingley, also close to Dubbo, are providing the cash which might otherwise have come from shareholders.
Tomingley remains the current profit-centre for Alkane, but the DZP is the future – a future which is now starting to arrive.
Development of the DZP starts with the orebody, a unique geological structure called a trachyte, which is the core of a long-extinct volcano.
Alkane has enough ore to last for 70 years at a production rate of one million tonnes a year – and perhaps a lot more than that.
Once mined, the ore will be split into product streams designed to meet customer demand with two rare earth streams producing material similar to that produced by Lynas, such as praseodymium, neodymium and dysprosium – destined for the high-strength magnet market.
The other products streams are niobium, used to strengthen steel; zirconium, used as an alloy with other metals in high temperature situations; and hafnium, used in super-high temperature environments such as rocket nozzles and the hot parts of jet engines thanks to a ridiculously high melting point of 2233 degrees Celsius.
Small quantities, big profits
Demand for hafnium is growing off a low-base — the world consumes just 67 tonnes a year — but that small amount masks a whopping price of around $US1750 a kilogram.
The other issue with hafnium is most of the current supply of 70 tonnes a year comes from Russia and China as a by-product of the nuclear power industry where it is separated from zirconia, a metal from the same family as hafnium.
By the year 2026 it is estimated the world will want 152 tonnes of hafnium a year and Alkane has the only known resource not connected to the nuclear industry.
Potentially, the DZP could meet much of the world’s demand for hafnium which is growing with the jet engine market as well in other areas that include medical devices and micro-processors.
Getting the Dubbo project to the starting line has been a heavy lift for Alkane which has been working with Australia’s nuclear research centre at Lucas Heights in Sydney’s south-eastern suburbs to perfect an ore process route to meet maximum customer demand.
Marketing and financing options associated with a $1 billion project have been an equally big challenge for Alkane, a company valued on the stock market today at just $170 million.
International interest in the DZP has always been stronger than in Australia because of the strategic uses of its metals in military and advanced manufacturing, as well as a desire of countries such as Japan and the US to develop supplies separate from China and Russia.
With prices for its cocktail of metals moving up after five flat years, and with a hafnium stream added to its proposed production, the DZP is closer than ever to winning development approval.