Alkane Resources Ltd (AX:ALK), via its wholly owned subsidiary Australia Zirconia (AZL), has signed a letter of intent with a private Vietnamese specialty metals refiner and trader relating to the toll treatment of DZP rare earth (RE) output. The agreement, although early stage, removes a degree of uncertainty over the future sale of a significant portion of the DZP’s annual production. We also see the agreement as de-risking project financing. We continue to maintain our view that the DZP, through its diversified product suite and very advanced stage of engineering and product offtake arrangements, remains the strongest non-Chinese contender for exposure to the strategically important REE (and other speciality metals) space.
Agreement positions for longer-term engagement
The letter of intent (LOI) has been signed with Vietnam Rare Earth JSC (VTRE) to toll treat the DZP’s rare earth concentrate into separated rare earth products (both RE alloys and oxides). VTRE has its own rare earth and specialty metals processing plant in Vietnam, a facility that would likely cost four times as much to develop if it were in Australia. The LOI also details a joint marketing company to be formed between AZL and VTRE to market the latter’s currently produced RE and associated downstream products. This marketing company should provide AZL with a window of opportunity to broaden its footprint in the downstream RE marketplace.
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