Staged DZP plan de-risks financing and off-take
Alkane’s (ALK’s) recently announced revised execution plan for the DZP provides for a significant re-rating of the project’s value. We calculate that the new modular design, where two trains of 0.5Mtpa will be constructed between end 2017 and 2023, will yield the same 1Mtpa size project as before but by using a staged capex spend will result in a c 16% uplift to our fully diluted (at a share price of A$0.40) DDF value of ALK’s shares. We view this plan as pivotal to the DZP’s successful execution and something that reduces risk in a multitude of areas, such as lower financing risk and construction costs from building components in lower-cost jurisdictions. Customer participation should also be improved by lowering commitments in off-take agreements geared to initially smaller production.Alkane Resources is a mining and exploration company with a focus on gold, copper, zirconium, hafnium, niobium and rare earth elements. Co. has two reportable segments, being gold operations and the exploration and evaluation of rare metals. Co.'s projects and operations are located in the Central West of New South Wales in eastern Australia. Primary among them are the Tomingley Gold Operations, a medium-sized gold operation near Dubbo in which Co. is engaged in the production of gold. Co. is also developing the Dubbo Zirconia Project, which will produce zirconium, hafnium, niobium and rare earths.
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