BUY. Dubbo Zirconia ASX: ALK. Price: $1.10/share. M/Cap: $296M. Valuation: $2.00/share. Valuation: $538M. Shares/options: 0.0M

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1 Alkane Resources World Class Zirconia and REE project March 2011 Recommendation: BUY Dubbo Zirconia BFS underway with potential mine life of 200 years Upside from gold at Tomingley and McPhillamys Forward multiples of 2-3x and 377% upside to Expanded Casee NPV ASX: ALK Price: $1.10/share M/Cap: $296M Valuation: $2.00/share Valuation: $538M Shares/options: 0.0M Monthly T/over: $17.0M Andrew Richards Petra Capital Pty Ltd

2 Contents Alkane Resources... 3 Base Case 0.4Mtpa rates... 4 Expanded Case 1.0Mtpa rates... 5 Executive Summary... 6 Unique long life asset strategic significance... 6 Base Case NPV of A$2.00/share Expanded Case NPV of A$5.15/share... 6 Attractive location... 6 Numerous positives exist... 6 Risks... 6 Dubbo Zirconia Project (100%) - summary... 7 A world class project... 7 Bankable Feasibility Study... 8 Metallurgy... 8 Rare Earth Recovery... 8 Flowsheet... 9 Resources Geology Site Layout Peer Comparisons Tomingley Gold Project (100%) summary Moving towards production Definitive Feasibility Study Reserves and Resources Additional Projects The Board & Top Shareholders Appendix 1: Rare Earths Appendix 2: Niobium Appendix 3: Zirconium

3 Alkane Resources ALK A$1.10/share World class zirconia and REE project Alkane is on the verge of becoming a significant player in the zirconia and rare earths markets with its Dubbo Zirconia Project (DZP) 100%. Having operated a demonstration plant for over 2.5 years, the company has a proven flowsheet and is confident of a transition to commercial scale. The BFS is on track to be completed by June this year with a potential mine life of 200 years from Q Upside also exists from the Tomingley gold project which is targeting ~50kozpa from Q We recommend buying ALK with 82% upside to our base case NPV of A$2.00ps, and 377% upside to our expanded case NPV of A$5.15ps. Base Case Valuation of A$2.00/share with upside DZP base case of A$2.00/share at 0.4Mtpa rates. NPV rises to A$5.15ps at 1.0Mtpa rates. At spot prices NPV rises further to A$8.15ps. Tomingley exploration likely to extend mine life. McPhillamys (Newmont earning 75%) significant 2.96Moz resource, BFS underway. Dubbo Zirconia Project (Australia) world class Resources 73.2Mt containing 1.4Mt ZrO 2, 549kt REO Pilot plant operating in Sydney for >2.5 years. High quality products successfully produced. ALK confident of successful commercial scale up. BFS to be completed in July. Potential annual revenue of US$450Mpa. Cheap entry into a unique asset. Tomingley Gold Project (Australia) Reserves 209koz, resources of 659koz. Initial 7.5 year mine life. 50kozpa at cash costs A$940/oz. Hedging to be used to lock in margins. Exploration upside exists. Newsflow ahead Q US OTCQX listing (ADRs). Q1/ MOUs with customers for DZP. Q DZP BFS completion. Q Tomingley Gold development consent. Q Financing and construction Tomingley. Q Financing and approvals DZP. Q Construction DZP. Q First production Tomingley. Q First production DZP. Company Data BUY Shares ordinary 269.0M Options 0M Total (fully diluted) 269.0M Market Cap $295.9M 12 month low/high $0.23 / $1.31 Average monthly turnover $17.0M Average monthly volume 21.8M Financial Summary (fully diluted) Year end June 2010F 2011F 2012F 2013F 2014F 2015F Revenue ($M) Costs ($M) EBITDA ($M) NPAT ($M) EPS ( ps) PER (x) na na na na Cashflow (Gross-$M) CFPS ( /sh) PCFPS (x) na na na DPS Substantial Shareholders (FPO) Shares (M) (%) Abbotsleigh % Board Director Position Executive Independent Ian Chalmers MD Executive - John Dunlop Chairman Non-Exec Independent Ian Gandel Director Non-Exec Independent Tony Lethlean Director Non-Exec Independent Alkane Resources performance over one year Disclosure and Disclaimer This report must be read with the disclosure and disclaimer on the final page of this document. Petra Capital was a broker to the issue of 20M shares at $1.05/share in February 2011, raising A$21.0M. A fee was received. 3

4 Base Case 0.4Mtpa rates ALKANE RESOURCES Share Price ($) 1.10 (ALK) Iss. Shares (M) Feb-11 Iss. Options (M) 0.0 Year End 31 Dec Mkt Cap. ($M) PROFIT & LOSS 2010F 2011F 2012F 2013F 2014F 2015F RESOURCES 2010F 2011F 2012F 2013F 2014F 2015F Sales Revenue $M Tomingley Gold (NSW) Other Income $M Tonnes Mt Operating Costs $M Grade (gold) g/t Exploration $M Contained Gold oz 661, , , , , ,151 Other $M McPhillamys Gold (NSW) EBITDA $M (2.5) (2.2) Tonnes Mt Depreciation & Amort. $M Grade (gold) g/t EBIT $M (2.5) (2.2) (0.8) Contained Gold Moz Net Interest $M (0.2) Dubbo Zirconia (NSW) Pre-Tax Profit $M (2.3) (5.0) (11.9) (8.2) Tonnes Mt Tax $M Zirconium (ZrO 2) % 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Minorities $M Niobium % 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% Net Profit $M (2.3) (5.0) (11.9) (8.2) Yt + REE % 0.9% 0.9% 0.9% 0.9% 0.9% 0.9% Abnormal $M Contained product Mt Reported Profit $M 7.3 (5.0) (11.9) (8.2) ATTRIBUTABLE PRODUCTION Dividends Paid $M Tomingley Gold oz ,323 49,335 49,335 49,335 Adjustments $M DZP - ZrO 2 products t ,528 6,339 Retained Earnings $M (17.1) (22.1) (34.0) (42.2) (9.0) 50.1 DZP - Niobium t ,338 CASH FLOW DZP - LREE t ,377 1,928 Revenue $M DZP - YHREE t Costs $M (2.0) (2.2) (15.8) (56.4) (94.8) (109.5) Other t Net Interest $M 0.2 (2.8) (11.1) (18.6) (18.9) (14.2) Total - Dubbo t ,212 7,272 10,181 Tax Paid $M (14.2) REVENUE Gross Cash Flow $M (1.8) (5.0) (7.2) Tomingley Gold $M Net Capex $M (2.0) (95.0) (130.7) (69.5) (6.6) (6.6) Dubbo Zirconia $M Exploration $M (7.0) Other $M Dividends $M Total $M Other $M COSTS Free Cashflow $M (10.8) (100.0) (137.9) (61.3) Tomingley Gold A$/oz Equity Issues $M Tomingley Gold $M Net Borrowings $M (40.0) (40.0) Dubbo Zirconia $M Net Investments $M Other $M Surplus Cash Flow $M (1.2) (1.3) Total $M BALANCE SHEET CAPEX Cash $M Tomingley Gold $M Other Current $M Dubbo Zirconia $M Total Current $M Other $M Fixed Assets $M Total $M Exploration $M DEPRECIATION Intangibles $M Tomingley Gold $M Other $M Dubbo Zirconia $M Total NC Assets $M Other $M TOTAL ASSETS $M Total $M Total Debt $M EBITDA Current Liab $M Tomingley Gold $M Non Current Liab $M Dubbo Zirconia $M TOTAL LIAB $M Other $M NET ASSETS $M Total $M SH/HLDRS FUNDS $M HEDGING RATIO ANALYSIS Gold hedged oz EPS (0.9) (1.8) (4.4) (3.0) Hedged price US$/oz PER x na na na na Hedged price A$/oz EPS Growth % (31.4) (505.9) 78.0 Sales hedged % 0% 0% 0% 0% 0% 0% EBITDA per share Ave. deliverable price US$/oz EBITDA Multiple x Ave. deliverable price A$/oz 1,333 1,445 1,379 1,294 1,188 1,188 EV/EBITDA x CFPS (0.7) (1.8) (2.7) ASSUMPTIONS PCFR x na na na Exchange Rate A$/US$ DPS Gold Price US$/oz Yield % Gold Price A$/oz Franking % Zirconia price US$kg Payout Ratio % 0% 0% 0% 0% 0% 0% LREE Price US$kg Gearing D/E % na YHREE Price US$kg Interest Cover x 12.6 na na day Bank Bills % EBITDA Margin % na na Yr Bond rate % EBIT Margin % na na (4.0) Interest Rate Charged % Return On Assets % (4.3) (1.4) (0.3) Return On Equity % (4.5) (7.5) (22.0) (17.8) VALUATION A$M A$ps Eff Tax rate % Tomingley Gold 27.2 $ 0.10 Dubbo Zirconia (NSW) $ 1.55 McPhillamys 55.5 $ 0.21 Other 15.0 $ 0.06 Net Cash (Debt) 24.0 $ 0.09 Source: Petra Capital Total $

5 Expanded Case 1.0Mtpa rates ALKANE RESOURCES Share Price ($) 1.10 (ALK) Iss. Shares (M) Feb-11 Iss. Options (M) 0.0 Year End 31 Dec Mkt Cap. ($M) PROFIT & LOSS 2010F 2011F 2012F 2013F 2014F 2015F RESOURCES 2010F 2011F 2012F 2013F 2014F 2015F Sales Revenue $M Tomingley Gold (NSW) Other Income $M Tonnes Mt Operating Costs $M Grade (gold) g/t Exploration $M Contained Gold oz 661, , , , , ,151 Other $M McPhillamys Gold (NSW) EBITDA $M (2.5) (2.2) Tonnes Mt Depreciation & Amort. $M Grade (gold) g/t EBIT $M (2.5) (2.2) (0.8) Contained Gold Moz Net Interest $M (0.2) Dubbo Zirconia (NSW) Pre-Tax Profit $M (2.3) (6.4) (18.8) (20.9) Tonnes Mt Tax $M Zirconium (ZrO 2) % 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Minorities $M Niobium % 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% Net Profit $M (2.3) (6.4) (18.8) (20.9) Yt + REE % 0.9% 0.9% 0.9% 0.9% 0.9% 0.9% Abnormal $M Contained product Mt Reported Profit $M 7.3 (6.4) (18.8) (20.9) ATTRIBUTABLE PRODUCTION Dividends Paid $M Tomingley Gold oz ,323 49,335 49,335 49,335 Adjustments $M DZP - ZrO 2 products t ,810 15,696 Retained Earnings $M (17.1) (23.5) (42.3) (63.2) DZP - Niobium t ,070 3,312 CASH FLOW DZP - LREE t ,984 4,775 Revenue $M DZP - YHREE t ,426 Costs $M (2.0) (2.2) (15.8) (54.9) (128.3) (172.1) Other t Net Interest $M 0.2 (4.2) (18.0) (32.5) (32.9) (20.0) Total - Dubbo t ,212 15,756 25,210 Tax Paid $M (40.5) REVENUE Gross Cash Flow $M (1.8) (6.4) (14.1) (4.2) Tomingley Gold $M Net Capex $M (2.0) (130.0) (230.7) (137.0) (11.1) (11.1) Dubbo Zirconia $M Exploration $M (7.0) Other $M Dividends $M Total $M Other $M COSTS Free Cashflow $M (10.8) (136.4) (244.8) (141.2) Tomingley Gold A$/oz Equity Issues $M Tomingley Gold $M Net Borrowings $M (100.0) (150.0) Dubbo Zirconia $M Net Investments $M Other $M Surplus Cash Flow $M (1.2) Total $M BALANCE SHEET CAPEX Cash $M Tomingley Gold $M Other Current $M Dubbo Zirconia $M Total Current $M Other $M Fixed Assets $M Total $M Exploration $M DEPRECIATION Intangibles $M Tomingley Gold $M Other $M Dubbo Zirconia $M Total NC Assets $M Other $M TOTAL ASSETS $M Total $M Total Debt $M EBITDA Current Liab $M Tomingley Gold $M Non Current Liab $M Dubbo Zirconia $M TOTAL LIAB $M Other $M NET ASSETS $M Total $M SH/HLDRS FUNDS $M HEDGING RATIO ANALYSIS Gold hedged oz EPS (0.9) (2.4) (7.0) (7.8) Hedged price US$/oz PER x na na na na Hedged price A$/oz EPS Growth % (551.7) 89.3 Sales hedged % 0% 0% 0% 0% 0% 0% EBITDA per share Ave. deliverable price US$/oz EBITDA Multiple x Ave. deliverable price A$/oz 1,333 1,445 1,379 1,294 1,188 1,188 EV/EBITDA x CFPS (0.7) (2.4) (5.2) (1.6) ASSUMPTIONS PCFR x na na na na Exchange Rate A$/US$ DPS Gold Price US$/oz Yield % Gold Price A$/oz Franking % Zirconia price US$kg Payout Ratio % 0% 0% 0% 0% 0% 0% LREE Price US$kg Gearing D/E % na , YHREE Price US$kg Interest Cover x 12.6 na na day Bank Bills % EBITDA Margin % na na Yr Bond rate % EBIT Margin % na na (4.0) Interest Rate Charged % Return On Assets % (4.3) (1.1) (0.2) Return On Equity % (4.5) (9.9) (41.2) (84.2) VALUATION A$M A$ps Eff Tax rate % Tomingley Gold 27.2 $ 0.10 Dubbo Zirconia (NSW) 1,263.2 $ 4.70 McPhillamys 55.5 $ 0.21 Other 15.0 $ 0.06 Net Cash (Debt) 24.0 $ 0.09 Source: Petra Capital Total 1,384.9 $

6 Executive Summary Unique long life asset strategic significance Alkane purchased the Dubbo Zirconia Project (DZP) in It is one of the world s largest in-ground resources of the metals zirconium, hafnium, tantalum, yttrium and rare earth elements. Current resources of 75Mt equate to a potential mine life of 200 years. Serious work on the project commenced in 1999 and ALK received an AusIndustry grant of A$3.3M in 2006 to complete and operate a demonstration pilot plant (DPP). Operation of the plant commenced in May 2008 and has successfully recovered substantial quantities of zirconium products and niobium concentrate. Yttrium heavy rare earth (YHREE) and light rare earth (LREE) oxide concentrates were recovered in laboratory work. Further work is underway to produce a marketable YHREE product and LREE product from the DPP. Increased demand for these metals is driven by environmental legislation to reduce emissions and improve energy consumption efficiency. China controls the market with ~95% of rare earth oxide global supply (~130ktpa). Recently the Chinese again restricted exports of rare earths to 30kt for 2011, down from 50kt in Additionally, it has banned the export of yttrium and the heavy rare earth dysprosium. The DZP provides an alternative and strategic source for a number of these important metals, and is potentially capable of producing for 200 years from one ore body. Whilst it has been a long road for ALK since purchase of the asset 24 years ago, the company is set to reap the rewards as it develops its world class project in a strong market for zirconium and rare earths products. Base Case NPV of A$2.00/share Expanded Case NPV of A$5.15/share We value Alkane Resources at A$2.00/share using NPV analysis and a discount rate of 10%. This valuation uses long term zirconia price of US$6.00/kg, niobium prices of US$25/kg, LREE prices of US$35/kg, YHREE prices of US$50/kg, long term gold prices of US$950/oz and long term A$US$ exchange rates of Key input parameters include (i) DZP processing plant throughput rates of 0.4Mtpa (ii) zirconia grades of 1.96% (iii) rare earth grades of 0.75% (iv) zirconium recoveries of 77%, rare earth recoveries of 67% and (v) Tomingley gold production of 50kozpa over 8 years. We model DZP mine life of 30 years noting measured resources (37Mt) equate to 89 years. Increasing throughput to the expanded case of 1.0Mtpa for the DZP sees NPV rise to A$5.15/share. Attractive location The assets are situated in New South Wales approximately 400km northwest of Sydney. Infrastructure for the Dubbo Zirconia project and Tomingley gold project is excellent with available power, water and labour. The area is serviced by sealed roads and is adjacent to the Mitchell and Newell highways. The legislative framework is also favourable at state and federal level. Numerous positives exist In addition to the attractive location and extensive infrastructure, other positives include (i) a potential expansion of the Dubbo Zirconia processing plant from 0.4Mtpa to 1.0Mtpa, (ii) further plant enhancements to improve recoveries and generate additional products such as ferroniobium (iii) exploration upside at Tomingley and (iv) continued growth at McPhillamys where 2.96Moz has already been delineated. Risks Key risks include: BFS risk that the Dubbo Zirconia project is not viable; this is low in our opinion. Project approvals risk of delay. Capital costs risk of increases. Commodity prices risk of decline. Processing rare earth processing is difficult; risk has been mitigated with the pilot plant. Offtake agreements are required for the zirconium, niobium and rare earths markets. 6

7 Dubbo Zirconia Project (100%) - summary A world class project Located 30km south of Dubbo, ALK s DZP contains significant in-ground resources of metals zirconium, hafnium, niobium, tantalum, yttrium and rare earth elements. Mineralisationn is consistentt across the orebody, open pittable with low strip ratio and well located to infrastructure. Considerablee work has been completed on the metallurgical processes with successful production of zirconium, niobium and rare earth products. These products are vital for the manufacture of materials used in ceramics, catalysts, electronics, rechargeable batteries, permanent magnets, specialty glasses, alloy industries and nuclear power industries. Construction of the demonstration pilot plant (DPP) att the Australian Nuclear Science and Technology Organisation (ANSTO) in Lucas Heights (Sydney) was completed in early The DPP was designed to test the complete flowsheet, providing process and engineering data and produce several tonnes of product for distribution to potential end users. A series of processing campaigns has successfully produced both zirconium and niobium concentrates at planned quality specifications. These have been despatched to potential customers. Test work to prove the recovery of yttrium and rare earths from the flow sheet has h also beenn successful. The aim is to underpin the feasibility study with letters of intent from customers as well as update the feasibility model with completion targeted in July The DZP is well located with power and gas available from state grids at Dubbo, waterr is accessiblee from the Macquarie river 10km to the north and a nearbyy labour forcee exists (Fig. 1). Numerous local roads servicee the site withh the Mitchell and Newell highways adjacent. The currently disusedd Dubbo to Molong railway r to the west and south of the site could c be reactivated to provide supply for process chemicals. Figure 1: Dubbo Zirconia Project Location The Dubbo Zirconia project is well located with good infrastructure.. 7

8 BFS to be completed in July ALK expects to be the biggest YHREE producer outside of China. Bankable Feasibility Study ALK has engaged TZ Minerals International Pty Ltd (TZMI) to provide an assessment on the Dubbo Zirconia project with targeted completion in July The base case consists of a 0.4Mtpa plant producing zirconium products, a niobium-tantalum concentrate, a light rare earth concentrate and yttrium-heavy rare earth concentrate. The flow sheet consists of sulphuric acid leach followed by solvent extraction recovery and refining. Uranium recovered by the process is expected to be stabilised and dispersed into the residue storage facility at concentrations lower than currently in the host rock. Revenue is based on concentrate production and assumes 70% of total separated REO value is payable. Costs are spread across the full four metal suites (Fig. 2). Figure 2: Production scenario analysis Initial Production Upside Case Production Mill Throughput 0.4Mtpa 1.0Mtpa Strip Ratio 0.1:1 0.1:1 ZrO 2 - grade 1.96% 1.96% REO - grade 0.75% 0.75% Nb / Ta grade 0.48% 0.48% Y 2 O 3 - grade 0.14% 0.14% Recoveries 60-75% 60-75% ZBS, ZOH, ZBC, ZrO 2 product 6,000ktpa ZrO 2 15,000tpa ZrO 2 Nb-Ta concentrate 1,400tpa Nb 2 O 5 3,500tpa Nb 2 O 5 LREE concentrate 1,980tpa (REOs) 4,950tpa (REOs) YHREE concentrate 600tpa (REOs) 1,500tpa (REOs) Total Production 9,980tpa 24,950tpa Capex US$200M US$400M Revenue US$180M US$450M Cash costs US$60M US$120M EBITDA US$120M US$330M Source: ALK, Petra Capital, ZBS = zirconium basic sulphate; ZOH = zirconium hydroxide; ZBC = zirconium carbonate; Nb-Ta concentrate = 77% Nb 2 O 5, 1% Ta 2 O 5 calcined basis; LREE = La, Ce, Nd; YHREE = Y, Gd, Dy, Tb. Assumes Zr US$5.50/kg, Nb US$25/kg, LREE US$57/kg, YHREE US$79/kg. Metallurgy Ore minerals are very fine grained (<100microns) in size with most <20microns. The minerals that host the ore are soluble in sulphuric acid and only minor amounts of refractory zircon and niobium have been detected. The orebody also contains low levels of uranium and thorium however it is not classified as radioactive ore. A number of process routes have been tested since 1999 including physical beneficiation of ore minerals, various chemical leaches and solvent extraction recovery. Physical beneficiation was not successful due to the fine grain size of the minerals whilst chemical leaches were moderately positive. Only sulphuric acid produced results that could be considered to have economic potential. The flowsheet is explained in more detail on the following page. The DPP is often the most important step to commercialisation for a REE project. Rare Earth Recovery The demonstration pilot plant (DPP) was commissioned in May 2008 and has confirmed the process flow sheet. It has also provided engineering data for capital and operating costs and product for market evaluation. The DPP is rated at 60kg/hour and has processed 100t of ore producing 1,300kg of zirconium chemicals and 300kg of niobium concentrate. The yttrium-rare earth recovery circuit was added in August 2010 with about 40kg of filter cake recovered to date. This filter cake is being further processed to produce a marketable YHREE product (YHREE = yttrium, gadolinium, terbium, dysprosium and erbium). Laboratory scale testing of LREE has successfully produced a high quality rare earth oxide concentrate containing +99% REOs. Further laboratory scale optimisation was completed and the LREE circuit within the DPP is planned to be operational in March (LREE = lanthanum, cerium, neodymium, praseodymium and samarium). Samples have been sent to potential customers globally where they are being analysed to meet specific manufacturing criteria. ALK continues to talk to potential customers regarding offtake. 8

9 The flowsheet has been tested over the past 2.5 years at the Lucas Heights facility. Cost of production is predominantly at the front end crushing, acid and roasting. Rare earth orebodies tend to be different, hence the process routes are project specific. Flowsheet The current flow sheet can be broadly divided into 4 steps: 1) Mining ore will be mined via open cut followed by crushing and grinding (50 microns). 2) Sulphation Low temperature sulphation roasting (in a kiln) with concentrated sulphuric s acid. Cooled roaster product is leached in water and filtered to produce a stable pregnant leach solution (PLS). 3) Extraction PLS is contacted with a commercially available organic solvent extractant. The zirconium is preferentially extracted, stripped from the loaded organic and precipitated as a sulphate. The niobium-tantalum and yttrium-rare earthss remain with the PLS to be recovered in subsequent flow sheet steps. 4) Refining Final washing in water enables a high purityy (~99% calcined) acid soluble zirconium basic sulphate product (ZBS) to be produced. ZBS can be converted to zirconium hydroxide (ZOH) and a zirconium z carbonate (ZBC). The ZrO 2 product has been produced from ZOH with ZrO 2 content at ~99%. Niobium (and tantalum) concentrate is precipitated (~ 70% Nb2O5) directly from the PLS after zirconium extraction. Testing to convert the niobium concentrate to a commercial ferro-niobium (FeNb) product is continuing. The primary filter f cake retains the majority of the light rare earthss and a process to recoverr these has been developed to produce a 99% LREO concentrate. The PLS remaining after zirconium and niobium recovery is enriched in yttrium and heavy rare earths. The process to recover a mixed yttrium and heavy rare earthh concentrate with relatively high concentrations of the yttrium, terbium and dysprosium is being trialled at the plant. The current flowsheet design has both uranium and thorium being stabilised and dispersed into the residue storage facility. Production of uranium is currently prohibited in NSW. Figure 3: Dubbo Zirconia flowsheet Pilot plant studies are an essential element of a BFS. The full flowsheet is in operation at the DPP key process is the solvent extraction. Process time is 2-4 hours for finall product. 9

10 Resources The Measured resources of 35.7Mt exist from surface to a depth of 55m (Fig.4). The Indicatedd resources of 37.5Mt were drilled from 55m to 100m depth. Resources R remain open at depth. Current resources are sufficient to support a potential 200 year minee life at 400ktpa rates. Although the ore is not classified as a radioactive deposit, it contains 23Mlbs (10.2kt) of uranium. Uranium production is currently prohibited in the state of New South Wales. Drillingg to date consists of 120 RC holes and 2 diamond drill holess completed on a 50m grid. The majority of the drilling has been carried out in the top 50m of the deposit. Figure 4: JORC Resources Measured resources equate to an 89 year mine life at 400ktpa rates. Category Measured Inferred Total Tonnes Mt ZrO 2 HfO 2 Nb 2 O 3 % 1.96 % 0.04 % Ta 2 O 5 % Y 2 O 3 REO U 3 O 8 % 0.14 % 0.75 % Geology The project is located at the northern end of the Lachlan Fold F Belt, centred on an alkaline suite of intrusive and extrusive rocks. Mineralisation is hosted within a volcanicc trachyte intrusive (Fig. 5) approximately 900m in diameterr (east-west) and 600m longg (north-south). It appears to be a vertical pipe of indeterminate depth. Thee host rock is very fine grained (<0.5mm) and pale green in colour. Weathering or oxidation extends to a depth of ~10m but the t effects onn the host trachyte and ore minerals are limited. Minerals generally occur as zirconiumm silicates with most yttrium and heavy rare earths contained within thee zirconium silicates. Niobium occurs as natroniobite (NaNbO3) and the light REEs occur within calcian bastnasite. Grades of zirconium, niobium and rare earths are consistent both laterally and vertically. The resource displays a distinctive radiometricc signature on regional geophysical data reflecting the uranium (110ppm) and thoriumm (470ppm) content c of the host rock. At those concentrations however, the ore is not classified c as radioactive. Mineralisationn is hosted in a volcanic trachyte intrusive. Figure 5: DZP Geology 10

11 Site Layout The DZP is to be mined via open pit methods (Fig.6) with a negligible strip ratio (0.1:1). An important aspect of the depositt is the uniform and consistent mineralisation acrosss the orebody whichh will aid in providing a good consistent feed to the plant. Thee plant is expected to be constructed adjacent to the pit (Figs. 6 & 7). The trachyte pipe is around 900m long and 600m wide. Figure 6: DZP 3D Site Image At 1.0Mtpa rates, around 120 people are required for mining and processing. Figure 7: DZP Process Plant Layout Scale up from the DPP to commercial scale is 400x. 11

12 Peer Comparisons It is difficult to make peer comparisons given the DZP mineralisation comprises four separate suites. However, we have compared Alkane to Lynas Corporation, Molycorp and Arafura, which are primarily rare earth plays (Fig.8). In our view, ALK appears cheap in comparison given its market capitalisation, world class resource and extensive studies carried out over the past 11 years. Figure 8: Peer Comparisons Company Mkt Cap Project Reserves Resource Mine Life Prodn REO Capex Funded (US$M) (yrs) Start (ktpa) (US$M) Lynas Corp 3,300 Mt Weld 13.6% REO 8% REO >25 Q Yes Molycorp 3,700 Mt Pass 8.2% REO 7% REO >30 Q Yes Arafura 460 Nolans na 3% REO+P,U >25 Q No Alkane 300 Dubbo na 1% REO+Zr,Nb >85 Q No Source: Petra Capital ALK s project is unique given its high proportion of HREEs compared to peers Lynas, Molycorp and Arafura (Fig.9). This is important as HREEs tend to command higher prices than LREEs. Figure 9: REE Content (% of total REO) Lynas Molycorp Arafura Alkane China Mt Weld Mt Pass Nolans Dubbo Ionic clays LREEs 98.3% 99.4% 96.7% 76.7% 50.0% HREEs 1.7% 0.6% 3.3% 23.3% 50.0% Source: ALK, ARU, LYC Lynas Corporation (LYC.AU) owns the Mt Weld project near Laverton in Western Australia. First production is targeted Q at 11ktpa of REO. Plans are in place to double production to 24ktpa by Total resources at Mt Weld equate to 8% REO for 1,416kt REO. The current mine plan within the central zone equates to 13.6% REO for 608kt REO. The strip ratio is 4.6:1. Mining, ore beneficiation and a concentrate production is to be done at Mt Weld. From there the concentrate is to be trucked 1000km to Fremantle and shipped to the advanced minerals plant located in Pahang, Malaysia. At Pahang, LYC plans to separate the rare earth oxides. Mt Weld geology consists of a volcanic plug existing as a carbonatite. The central lanthanide deposit is in the weathered regolith above the central part of the carbonatite and originated due to supergene processes that have concentrated REEs in minerals such as monazite, apatite, churchite and crandallite. Molycorp (MCP.US) owns the Mt Pass project in California. Historical production occurred from 1952 to 2002 however the operation was closed due to the inability to continue using off-site wastewater evaporation facilities. Molycorp purchased Mountain Pass from Chevron in Sep 2008 and the mine re-opened in Reserves equate to 8.2% REO for 1,111kt REO for a +30 year mine life. Annual production of 19ktpa REO is targeted by the end of 2012 with separated rare earths produced. Capex of US$511M is required to reach full production. The geology of Mt Pass comprises an uplifted block of metamorphic and igneous rocks with carbonatites associated with higher levels of REEs. Ore is predominantly carbonatite and bastnasite hosted. Arafura Resources (ARU.AU) owns the Nolans Bore project located in the Northern Territory. Mining, ore beneficiation and concentrate production are planned on site at Nolans. The concentrate is expected to be transported by rail to Whyalla SA for further treatment to produce separated rare earths. During 2011, ARU plans to complete a technology demonstration program and finish the BFS. Resources equate to 2.8% REO (840kt REO), 12.9% P 2 O5 and 0.02% U 3 O 8. Phase 1 sees production of 20ktpa REO for a 25 year mine life with cash costs after credits (uranium, phosphate and gypsum) of US$11/kg. Capex is estimated at US$950M and first production is targeted Q Nolans Bore is a phosphate-ree deposit. Mineralisation is apatite hosted and occurs in a series of tabular zones of massive fluorapatite (Ca 5 (PO 4 ) 3 (F,OH). Zones dip steeply to the NNW and are up to 75m thick hosted in gneissic granite. 12

13 Tomingley Gold Project (100%) summary ALK will look to hedge production and lock in margins. Moving towards production The Tomingley gold project is located ~40km from Dubbo in NSW. The project is located in an area of existing infrastructure with the Newell Highway transecting the project and linking a number of towns with regional population ~150,000. No camp facilities are required and the workforce can be sourced locally. A natural gas pipeline and railway are located 5km west of Tomingley and power is available from the NSW state grid at Peak Hill, 16km south of the site. Water supply is expected via a pipeline to be laid from established sources near Narromine, 40km to the north. Definitive Feasibility Study The definitive feasibility study was completed by Mintrex in December 2010 (Fig. 10). The final environmental assessment is scheduled to be lodged by the end of January 2011 and the review and consent process is expected to take approximately 5 months. Construction time is estimated at 15 months and first gold production anticipated 2H Metallurgical test work indicates 93% recoveries from standard gravity CIL circuit with gravity recoveries of +50% in the fresh ore. Design plant throughput is 1Mtpa with two stage crushing, single stage ball milling and gravity/cil gold recovery for production of gold dore at ~50kozpa. The base case shows production of 369koz over a 7.5 year mine life. Operating cash costs are estimated at A$942/oz for life of mine (Fig. 11). Figure 10: DFS Results (Dec 2010) A solid cashflow generator at A$1,500/oz prices. Capex A$95M Mine Life 7.5yrs Start Date 2H 2012 Strip ratio 7.6:1 Throughput 1Mtpa Grade open cut 1.8g/t Au Grade underground 4.0g/t Au Recoveries 93% Annual production ~50kozpa Cash Costs A$942/oz A$1,500/oz $42M IRR 22% A$1,400/oz $15M IRR 15% Figure 11: Summary of Mine Operating Costs High cash costs primarily reflect the combination of strip ratio and low grade. LOM $M A$/t (processed) A$/oz (recovered) Mining Processing and Maintenance RSF lifting costs Rehabilitation Bullion and refining Total ALK has proposed mining 3 pits (Fig.12) initially commencing with the Caloma pit followed by Wyoming Three and Wyoming One. Caloma remains open below 200m vertical depth with underground potential. Wyoming One is also open at depth and to the south. Mining, development and site construction work will be carried out by contractors, supervised by Alkane staff. Open pit mining plan is based on the use of 120 tonne excavators and 90t off road dump trucks. Underground mining is planned at Wyoming One after the open pit is completed by year 6. Access is expected to be via a 1:7 decline through a portal located close to the base of the pit. The north and south areas of the underground will be mined concurrently to ensure a steady production rate. The preferred proposal is based on contract mining using a single 40-50t truck with two load-haul dump units (LHDs) for development, production loading and backfilling stopes. 13

14 Open pit mining is planned to 180m depth however mineralisationn extends to 350m. Reserves and Resources s Mineralisation covers a sequence of Ordovician volcanic rocks within an andesitic porphyry host. At Caloma, multiple mineralised structures have been definedd within the main feldspar host which is m wide. Much of the areaa is covered by transported and un-mineralised clay sediments with an average depth of 25m at Wyoming One and 5-10m at Wyoming W Threee and Caloma. Open pit ore reserves comprise 1.8g/t Au for 209koz Au andd were estimated from pit optimisationss based on Measured and Indicated resources. A further 3.98g/t Au for 87koz iss classified as mining inventory for the underground. Figure 12: JORC Reserves Open Pit Proved Probable Total Deposit Tonnage (t) Grade (g/t) Tonnage (t) Gradee (g/t)) Tonnage (t) Gradee (g/t)) Ounces (minable) Wyoming 1 Wyoming 3 Caloma Total 1, 700, ,000 1, 100,000 3, 300, , , , ,900, ,000 1,200,000 3,600, ,500 28,100 86, ,100 Figure 13: Tomingley Gold Plan Production is planned from 3 open pits with further underground planned at Wyoming One. An underpasss ($2.5M) is required at Caloma to allow haulage to the mill. Open pit resourcess comprise 1.82g/t Au for 659koz (Fig.14). Upside existss from several nearby prospects including Caloma 2, Wyoming 2, McLeans, Tomingley 1 & 2, Black Snake and Smiths. Figure 14: JORC Resources Measured Indicated Inferred Total Category Tonnage Grade Tonnage Grade Tonnagee Grade Tonnage Grade Ounces (t)( (g/t) (t) (g/t) (t) (g/t) (t) (g/t) Wyoming 1 2,227, , ,478, ,,857, ,200 Wyoming 3 Caloma Total 630,000 2,047,750 4,904, , ,050 1,380, ,0000 1,371,6200 5,003, ,000 3,,859,420 11,,288, , , ,900 14

15 Additional Projects Peak Hill (100%) - The Peak Hill project operated as a heap leach from recovering 152koz from an oxide cap. Sulphide mineralisation below the existing open cuts equates to 1.29g/t Au for 467koz. The sulphides are moderately refractory however ALK is investigating the possibility of using Peak Hill sulphide ore to generate sulphuric acid for the Dubbo Zirconia project (50km northeast). The process involves producing a sulphide concentrate and transport to DZP. Sulphuric acid is produced from roasting the sulphides. The oxidised product could be transported back to Tomingley and treated byy standard CIL techniques to t recover the e gold (30-50kozpa). McPhillamys (25%) - First drilled in Aug 2006, the McPhillamys discovery in Western NSW has continued to grow with a maiden resource announced in July 2010 forr 2.96Moz Au and 60kt Cu (Fig.15). JV partner Newmont Australia spent $5M to earn 51% and in March 2010 elected to proceed to 75% byy completing a BFS. ALK is free carried through to completion of the BFS. The bulk of the resource is within a zone with dimensions of 600m by 200m and extending to 525m depth (Fig.16). Ore outcrops at surface and remains open at depth. Drilling is underway to test the suitability for potential bulk tonnage mining. Figure 15: JORC Resources McPhillamys 100% Indicated Category Tonnage Grade Grade Tonnage (Mt) (g/t) (%Cu) (Mt) 0.3g/t cut-off 0.5g/t cut-off 1.0g/t cut-off Source: Alkane Resources (July 2010) Inferred Total Grade Grade Tonnage Grade (g/t) (%Cu) (Mt) (g/t) Grade (%Cu) Gold koz Copper tonnes , , , , ,892 30,4033 McPhillamys is open pittable with a strip ratio of ~3:1. Figure 16: McPhillamys McPhillamys can be compared to Lake Cowal (Barrick) with resources of 1.2g/t Au and producing 250kozpa. Wellington (100%) An open pittable resource of 1% Cu and 0.3g/t Au forr 20kt Cu and 6koz Au exists at the t Wellingtonn (Galwadgere) project. Drilling is currently testing targets separatee to the defined resource. Cudal (100%) ALK recently announced a new gold and base metal discovery at Cudal. Best results include 1.2g/t Au and 2.9% Zn from 96m (including 2.2g/t Au and 7% Zn). Follow up drilling iss planned. 15

16 The Board & Top Shareholders ALK has an experienced and credible board. John Dunlop (Non-Exec Chairman). Engineer with over 40 years mining experience. Former director of the Aus IMM ( ). Non-exec Chairman of Alliance Resources and non-executive director of Gippsland Ltd and Copper Strike Ltd. Ian Chalmers (Managing Director). Geologist with over 40 years experience in the mining and exploration industry. Appointed director June 1986 and MD October Ian Gandel (Non-Exec Director). Director Gandel Retail Trust, director Alliance Resources, nonexec Chairman Gippsland and Octagonal Resources. Major shareholder in ALK. Anthony Lethlean (Non-Exec Director). Geologist with over 10 years experience. Consultant to Helmsec Global Capital Ltd. Non-exec director Alliance Resources. Figure 17: Directors interests Director Shares (M) Options Total (M) John Dunlop Ian Chalmers Ian Gandel Anthony Lethlean Total Figure 18: Top 20 Shareholders (22 February 2011) Name Amount (M) % 1 Abbotsleigh Pty Ltd JP Morgan Nominees Pty Ltd HSBC Custody Nominees Ltd JP Morgan Nominees Ltd Penson Australia Nominees Ltd National Nominees Ltd Sydney Equities Pty Ltd Funding Securities Pty Ltd Citcorp Nominees Pty Ltd Nefco Nominees Pty Ltd Bond Street Custodians Ltd Merrill Lynch Nominees Pty Ltd RBC Dexia Nominees Pty Ltd Leefab Pty Ltd UBS Wealth Management Nominees Pty Ltd Lampsac Pty Ltd Berne No 132 Nominees Pty Ltd Spacebull Pty Ltd RM Dimond & Associates Pty Ltd UBS Nominees Pty Ltd Total

17 Appendix 1: Rare Earths Rare earths are not rare however they are currently scarce in economically exploitable deposits. Rare earths are a unique group of 15 chemical elements in the periodic table known k as the Lanthanide series, plus yttrium and scandium (Fig. 19). The oxides produced from processing rare earths are known as Rare Earth Oxides (REOs). Heavy rare earth elements (HREEs) generally command higher prices as they are rarer than light rare earth elements (LREEs). HREEs comprise elements with atomic numbers 63 to 71 and include europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, t ytterbium and lutetium. LREEs comprise c elements with atomic numbers 57 to 62 and include cerium, lanthanum, neodymium, praseodymium and samarium. REEs have unique chemical, magnetic and luminescent properties thatt make them critical to manyy existing and emerging applications (Fig 20). Figure 19: Rare Earth Elements (REEs) Source: Petra Capital China dominates the t rare earthh and yttrium production market m producing ~95% of world outputt (~130ktpa). China continues to cut export quotas of rare earths (50kt 2009, 30kt 2010) given its strategic importance to the country. Japan has recently stepped up efforts to diversify supply of rare earths away from China and hass increased its national stockpile program. South Korea is following suit. REEs are used in clean energy technologies and devices including: Figure 20: Rare Earth Elements (REEs) -permanent magnets -hybrid/electric cars -computers -smart phones -ipods -LED televisions -energy efficient light bulbs -lasers -petroleum cracking catalysts -missile guidance systems. 17

18 Yttrium is used as phosphors for TV and computer screens, lasers and compactt fluoro lights (energy efficient bulbs). The major uses for rare earths are a in magnets, fluid cracking catalystss (FCC), polishing powders and batteries (Fig.21). The split of rare earths usage by application is outlined below with current production at ~130ktpa (Fig. 22) ). Roskill and IMCOA estimate total demand for REOs to grow at 6% pa to 190ktpa by Figure 21: Rare earths usage Source: Lynas Corporation Figure 22: Rare earths usage by application Dysprosium, neodymium, terbium, europium and yttrium are seen as critical in terms of supply over the next 5 years (US Dept of Energy). Application Magnets Battery Alloy 50.0% 33.4% Metallurgy ex batt 26.0% 52.0% Auto catalysts 5.0% 90.0% FCC La Ce 90.0% 10.0% Polishing Powder 31.5% 65.0% Glass Additives Phosphors Ceramics Others 24.0% 8.5% 17.0% 19.0% 66.0% 11.0% 12.0% 39.0% Pr Nd 23.4% 69.4% 3.3% 10.0% 5.5% 16.5% 2.0% 3.0% 3.5% 1.0% 3.0% 6.0% 12.0% 4.0% 15.0% Sm 3.3% 2.0% Eu 4.9% Gd Tb Dy 2.0% 0.2% 5.0% 1.8% 4.6% 1.0% Y Other 2.0% 4.0% 69.2% 53.0% 19.0% Source: Lynas Corporation The split of products from the DZP is outlined below (Fig. 23) with the HREE production expected to be one of the largest (at 1,00ktpaa case) from a project outside of China. Split of products expected from the DZP. Figure 23: Yttrium and REE Individual Production for the DZP 400ktpaa Ore (base case) Lanthanum Oxide ( La 2 o 3 ) 5044 Cerium Oxide (CeO 3 ) 9500 Praseodymium Oxide (Pr 6 L 11 ) 1044 Neodymium Oxide (Nd 2 O 3 ) 3644 Samarium Oxide (Sm 2 O 3 ) 566 Total LREE 1,9800 1,000ktpa (upside case) 1,260 2, ,950 Europium Oxide (Euu 2 O 3 ) Gadolinium Oxide ( Gd 2 O 3 ) Terbium Oxide (Tb4O 4 7 ) Dysprosium Oxide (Dy( 2 O 3 ) Holmium Oxide (Hoo 2 O 3 ) Erbium Oxide (Er 2 O 3 ) Thulium Oxide (Tm2O 2 3 ) Ytterbium Oxide (Ybb 2 O 3 ) Lutetium Oxide (Lu2O 2 3 ) Yttrium Oxide (Y 2 O3) 3 Total YHREE Total YREE tpaa 2,580tpaa ,022 1,500tpa 6,450tpa 18

19 Forecast supply deficit of >20kt by Total REE demandd is estimated to rise from 127kt in 2010 to t 177kt by 2014 with an expected deficit of ~21kt (Fig. 24). Figure 24: Forecast supply deficit (2014) Application Magnets Battery Alloy Metallurgy ex batt Auto catalysts FCC Polishing Powder Glass Additives Phosphors Others Annual Growth rate 12.0% 15.0% 2.0% 8.0% 4.0% 10.0% 0.0% 8.0% 8.0% Demand (t) 49, , , , , , 600 7,800 10, 800 6,100 Supply Sources Baotou Sichuan Ionic Clay Regions Recycling China China Total Mt Weld Mt Pass Others Recycling ex China Supply (t) 60,000 20,000 17,000 3, ,600 22,000 20,000 12,000 1,600 Ex China Total 55,600 Total Demand 8.0% 177,200 Total Supply 156,200 Source: Lynas Corporation Prices have soared this year reflecting increasing demand and the reduction in export quotas from China. LREE prices have risen strongly from US$10/kg in Q to > >US$80/kg. YHREE prices have risen from US$33/kg to >US$100/kg over the same period (Fig. 25 & 26). Figure 25: Rare Earths Prices 2010 (US$kg REO) Prices have risen strongly in 2010 and into Light Rare Earth Lanthanum Oxide Cerium Oxide Praseodymium Oxide Neodymium Oxide Samarium Oxide DZP Distribution 19.50% 36.70% 4.00% 14.10% 2.20% Q2 Average $7.13 $5.58 $30.60 $31.13 $4.50 Q3 Average $25.75 $24.50 $48.25 $49.50 $22.25 Q4 Average $53.00 $50.00 $77.00 $80.00 $34.00 Current Spot $75.00 $75.00 $ $ $70.00 Heavy Rare Earth Europium Oxide Gadolinium Oxide Terbium Oxide Dysprosium Oxide Ho,Er, Tm, Yb, Lu Yttrium Oxide 0.07% 2.15% 0.34% 2.05% 2.90% 15.80% $ $8.25 $ $ $11.42 $ $28.75 $ $ $26.25 $ $44.00 $ $ $56.00 $ $80.00 $ $ $90.00 DZP LREE 76.68% DZP YHREE 23.32% DZP LREE Conc. Value DZP YHREE Conc. Value Source: Metal Pages, Alkane Resources $12.06 $42.23 $8.44 $29.59 $30.58 $62.34 $21.41 $43.64 $57.20 $78.70 $36.47 $57.20 Figure 26: Historic and forecast Supply, Demand and Pricing Source: Lynas Corporation 19

20 Appendix 2: Niobium Niobium applications include thee manufacture of high strength low alloyy (HSLA) steels, alloys and glasses (Fig.27). Niobium is a common additive in steel production p as it improves the strength of steel and makes itt easier to work with. It is being increasingly used in the auto industry noting the addition of 0.15kg of niobium to the steel content of an average car,, decreases the t weight by ~100kg which in turn lowers COO 2 emissions. Brazil dominates the market producing ~90% of world outpu from one company (CBMM). Around 75% of niobium consumption is in specialty steels and alloys. Figure 27: Niobium Applications Niobium is used in a variety of forms however the most important use inn tonnage terms is standardd grade ferro-niobium (Fig.28), which has applications in HSLA H and stainless steels. The market accounts for ~90% of niobium usage. The global market forr ferroniobiumm is ~85ktpa and targeted to grow to 120ktpa byy The most important use for niobium is in the production of ferro-niobium.. Figure 28: Structure of the Niobium Industry 20

21 Ferroniobium prices spiralled upp to US$60/kg in March 07 as consumption grew (Fig. 29). Current prices are ~US$35-40/kg. Long term prices are expected too be in US$25-35/kg range. Prices are trending back up. Figure 29: Global Consumption Forecast (FeNb) The table below outlines the various applications for niobium and its technical attributes (Fig.30).. The most important appears to be niobium s ability to increase the strength of steel and reduce its overall weight. Figure 30: Applications for Niobium Niobium Product Applircation Technical Attributes/Benefits HSLA Ferro Niobium (60% Nb) Niobium additive to HSLA and stainlesss Imparts a doubling of strength and steel for oil and gas pipelines, car and toughness due to grain refining. truck bodies, architectural requirements, Weight reduction. tool steels, ship hulls, railroad tracks Niobium oxide Niobium carbide Niobium powder Niobium metal plates, sheets, wire, rod, tubing Niobium-titanium alloy Niobium-tin alloy Niobium-1% zirconium alloy Vacuum-grade ferroniobium and nickel-niobium Manufacture lithium niobate for surface acoustic wave filters. Camera lenses, coating on glass computer screens, ceramic capacitors. Cutting tool compositions Niobium capacitors for electronic circuits Sputtering targets, cathode protections systems for large steel structures, chemical processing equipment. Superconducting magnetic coils in mag resonance imagery (MRI), magnetic levitation transport systems, particle physics experiments, magnetoencephalography. Sodium vapor lamps Chemical processing equipment Source: Tantalum Niobium International Study Centre High index of refraction, highh dielectric constant, increase light transmittance. High temperature deformation, controls grain growth. High dielectric constant, stability of oxide dielectric. Corrosion resistance, formation of oxide and nitride films. Increase in high temp resistance and corrosion resistance, oxidation resistance, improved creep resistance, reduced erosion at high temp Electrical resistance of alloy wire drops to virtually zero at or below temperature of liquid helium ( o C). Corrosion resistance, fixation of oxygen, resistance to embrittlement. Superally additons for turbine blade Increase in high temperaturee resistance applications in jet engines and land and corrosion resistance, oxidation based turbines. Inconel family of alloys, resistance, improved creep resistance, superalloys. reduced erosion at high temperatures. 21

22 Appendix 3: Zirconium The majority of downstream zirconium products are derived from zirconn whose outpu is governed by ilmenite / rutile from f mineral sands mining operations. The T global zircon market is ~1.4Mtpa with zircon prices up from US$900/t to US$1500/t over the past 12 months. This reflects the lack of new supply and continuing strong demand from China which controls the downstream zirconium industry. Around 20% of global zircon is used in downstream products (280ktpa) of which around 60% then goes into zirconia products ( ktpa). China dominates s the zirconium business at ~90% of global production ( ktpa). The DZP will be an important source of zirconium outside the current tight zircon market. Zirconium is used in a wide rangee of applications including engineering ceramics, auto catalysts, electronics and fuel rods in nuclearr power plantss (Fig.31). High growth areas are catalysts and ceramics. Figure 31: Zirconium Applications The spread of current zirconia chemical uses is outlined below (Fig.32). High growth areas have been identified in ceramics c and catalysts (13%pa), ceramic pigments (8%pa) and zirconium metal for nuclear applications. Figure 32: Zirconium Chemical Uses 22

23 China is a major importer of zircon of which ~30% is used to produce zirconium oxychloride (ZOC) and fused zirconia (FZA). Higher zircon prices plus higher operating and greater environmenta l management costss within Chinaa have impacted on the price of ZOC andd FZA, as well as chemical zirconia derived from ZOC. Fused zirconia has risen from US$4,000/ /t to US$5,000/t, ZOC and chemical zirconia from US$4,000/t to US$7, 000/t (Fig. 33). The recentt price increases for zircon and zirconia products has increased the likelihood of expanding e thee DZP plant from 0.4Mtpa throughput to 1Mtpa. Figure 33: Zirconium Materialss Pyramid China produces 90% of global zirconium oxychloride and 60% of fused zirconia. 160kt zircon converts to 96kt zirconia (equivalent) and 13kt zircon metal. The DZP has potential to produce additional products for markets below (Fig.36). ALK plans to produce zirconium chemicals and chemical zirconia. Figure 34: Structure of the Zirconium Industry 23