Alkane Resources’ wholly-owned subsidiary Australian Zirconica Ltd (AZL) has signed a letter of intent (LOI) with Vietnam Rare Earths JSC (VRE) for toll processing of rare earths concentrates from its $1 billion Dubbo Zirconia and Rare Earths Project (DZP) in Central West New South Wales into individual rare earth products.

VRE has an established rare earths processing plant near Hanoi and the agreement proposes joint marketing of Alkane’s and VRE’s processed rare earths and associated downstream products. This will assist in building familiarity globally with VRE products in advance of the DZP products coming on stream in 2018.

The LOI states that AZL will have an exclusive right for 12 months to complete due diligence and for the parties to finalise the terms of the agreements, including the option to purchase equity in VRE.

Alkane sees the agreement as having several advantages, since VRE has an existing rare earths separation plant supplying certified products to Japan, with capacity for scaling up. It also has a separate metal plant that produces individual rare earths metals for alloying.

Other advantages with VRE are a cost structure less than China, giving it a competitive market position, and it has the support of the Vietnamese Government.

The partnership will allow AZL to provide an alternate supply to China of separated rare earth products, guaranteeing certification and supply chain traceability from ore mined and processed in Australia through to customers’ products. It will also allow AZL to participate in downstream markets and capture further value adding for its rare earth products.

ASX-listed Alkane also sees the agreement as advancing the DZP financing process since it is the route for providing the rare earths products required by major industrial and aerospace corporations.

The DZP has received all required government approvals, is construction ready and projected annual revenue from the project of US$430-$470 million will comprise approximately 32% from zirconium products, 37% from primary rare earths, 10% from hafnium, 17% from niobium and 4% from additional rare earths elements.

Alkane will be the world’s largest producer of heavy rare earths outside China, with products principally used for rare earth magnets and special ceramics and alloys.

VRE’s rare earths processing facility is near Phu Ly, Ha Nam Province, south of Hanoi and covers 2.1 hectares. The facility was built in 2011, commissioned in 2012, and has a processing capacity to produce over 4,000 tonnes per year of separated rare earths. Its rare earth alloy facilities are near the port city of Hai Phong east of Hanoi and were built in 2014.

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