Alkane Resources is holding out against buyers wanting “a substantial discount to the established Chinese domestic market” for rare earth metals from the shovel-ready $1.3 billion Dubbo Project.
Chairman Ian Gandel told shareholders at its annual general meeting this week that succumbing to the demand would not benefit the yet-to-be-launched project or Australia.
The chairman said buyers were interested in establishing a non-Chinese supply chain to “diversify their supply risk”.
“..they also expect new entrants to supply at a substantial discount to the established Chinese domestic market,” he said.
“Your company is well positioned with a low-risk, permitted and development-ready project, and it is not appropriate to bind our company to an inferior pricing position for many years, nor is it in Australia’s national interests.”
Mr Gandel said Alkane Resources was confident that the attitude of buyers would change “in the near term”.
“Market conditions for our materials continue to tighten,” he said.
The chairman outlined the reasons why including new legislation discouraging the United States (US) Department of Defence, a major consumer of rare-earth products, from acquiring rare earth magnets from China.
“The tariffs on Chinese goods imposed by President (Donald) Trump and the escalation in the trade tensions between China and the US will lead companies to seek security from non-Chinese suppliers,” he said.
“We are financially well-positioned to persist to seek an offtake at fair terms, and are currently interfacing with the Australian government and export credit agencies to further our project.”
Mr Gandel said China would continue to be a “dominant player for the foreseeable future” but the Dubbo Project represented an alternative, sustainable and reliable source of materials in high demand not only for electric vehicles but also a range of other existing and future technologies.
Alkane Resources’ gold operations have underpinned the progression of the company’s flagship Dubbo Project.
“We find ourselves in a very strong position with the solid result from the gold operations providing the foundation to that strength,” Mr Gandel said.
“In our gold business, revenue topped $130 million, cash flow exceeded $40 million, profit was $24 million and earnings per share was 4.8c, a very impressive annual result from the small but capable team.”