ALKANE Resources expects to receive approvals for its $1 billion rare earths project in the first quarter of 2015, which it anticipates will pave the way for a rerating of its shares as it finalises financing of the project.
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Only a small portion of the capital needed will be raised from shareholders, with other options such as seeking a cornerstone investor in the project along and financing from foreign government agencies expected to provide much of the needed capital.
Difficulties Lynas Corp and US company Molycorp experienced commissioning new rare earths processing plants had pushed the share prices of both companies to low levels amid doubts about their prospects for financial survival given their heavy debt burdens.
That had soured sentiment towards Alkane's prospects, managing director Ian Chalmers said.
"It is in all of our interests for these projects to succeed," he said.
Ahead of the receipt of government approvals for Alkane's rare earths project at Toongi, Alkane launched detailed engineering studies so that once the green light was received, it could finalise the financing and fast-track work on the project.
Unlike Lynas and Molycorp, Alkane would not be processing its rare earths itself but selling the material to third parties for treatment, which significantly reduced its risk profile.
Oversupply of rare earths had pushed prices for many products to long-term lows.
But with China expected to absorb a rising volume of its own production, that was expected to see key product prices rise over the next few years.
This year Alkane commissioned the Tomingley gold mine, which was expected to generate cashflow of about $35 million a year.
"The company should have a market capitalisation of $250 million just on Tomingley alone, which would equal 40c to 50c a share," Mr Chalmers said, referring to the company's goldmine.
