Alkane Resources — Capital/Financing Update 2009

Dec 15, 2009

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RESOURCES LTD
ABN 35 000 689 216
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ASX ANNOUNCEMENT – 16 December 2009

Corporate Profile

Alkane Board

J. S. F. Dunlop (Chairman) D. I. Chalmers (Managing Dir)

TOMINGLEY GOLD PROJECT PROGRESS REPORT

A. D. Lethlean (Director)

I. J. Gandel (Director)

I. R. Cornelius (Director)

L. A. Colless (Joint Secretary)

• Alkane has decided to extend the timetable of its Tomingley Gold Project Definitive Feasibility Study to enable it to maximise the project’s economics and extend its mine life.

K. E. Brown (Joint Secretary)

Contact

Ian Chalmers

• An important factor in extending mine life is commencing underground mining earlier. Inclusion of a larger ore body at an earlier stage would have the advantage of achieving robust returns at current A$ spot gold prices.

• Extending the Definitive Feasibility Study timetable also enables a closer look at project infrastructure and preproduction costs.

• A review of the underground resource potential at Wyoming One and Caloma will start shortly and will form the basis of a conceptual underground mining operation.

• Additional drilling to test extensions to the Caloma open pitable mineralisation to the south of the current resource will commence early in the New Year.

• The Environmental Assessment for the project is nearing completion and a Development Application will be lodged with the NSW Department of Planning in January.

• Further results from geotechnical core holes have been received for Caloma and Wyoming One, and these include:

HOLE NO. INTERSECTION PEGT 001 7 metres grading 4.39g/t gold from 170 metres PEGT 005 6.6 metres grading 5.07g/t gold from 166 metres WYGT 019 4.4 metres grading 7.04g/t gold from 227.7 metres WYGT 020 6 metres grading 7.14g/t gold from 214 meters WYGT 021 10 metres grading 3.43g/t gold from 174 metres

Managing Director

96 Parry Street PERTH WA 6000 Telephone: +61 8 9328 9411 Facsimile: +61 8 9227 6011 Email: ichalmers@alkane.com.au Web: www.alkane.com.au

12 month share price range A$0.515 - $0.15

Market Cap 15 Dec 09

~A$93 million

ASX Code: ALK

249 million shares (Sept 09)

November 2009 Cash Cash ~ $4.7 million Investments ~ $5.5 million No debt

Media Relations

Westbrook Communications Level 1, 17 Castlereagh Street SYDNEY NSW 2000 Telephone: +61 2 9231 0922 Facsimile: +61 2 9231 0131 Web: www.westbrookfin.com.au

Registered Office: 129 Edward Street Perth WA 6000 Telephone: 61 8 9227 5677 Facsimile: 61 8 9227 8178 PO Box 8178 Perth Business Centre Western Australia 6849 www.alkane.com.au mail@alkane.com.au

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Tomingley Gold Project (TGP)

The TGP is located in the Central West of New South Wales, about 400 kilometres northwest of Sydney. The Project is centred on three gold deposits Wyoming One, Wyoming Two and Caloma, located 14 kilometres north of the Company’s Peak Hill Gold Mine (Figure 1). Substantial resources have been defined in this area and these were detailed in ASX releases of 25 March and 2 October 2009.

Definitive Feasibility Study (DFS)

The DFS is being managed by Mintrex Pty Ltd, the consulting division of Perth engineering group, Holtfreters Pty Ltd with input from Alkane personnel and external consultants. There have been delays with the contributions from external consultants in recent months.

The initial base case development model for the project comprises three open pit mines, Wyoming One, Wyoming Three and Caloma with gold production through a conventional Gravity-CIL gold recovery circuit at a mining rate of around 1.0 million tonnes per annum and production of an average of 50,000 ounces per annum for about six years.

As the detailed cost components for the development have been compiled in the last month, there has been an unanticipated and substantial increase in some capital items. These increases do not relate to the capital components of the treatment plant but have come from associated infrastructure and preproduction costs.

While Tomingley is located in an area of substantial existing infrastructure, the site presents some unusual aspects such as having the very busy Newell Highway separating the Caloma deposit from the treatment plant (Figure 2) which requires an underpass to be constructed under the highway. Water remains a critical supply item in the region which forms part of the Murray-Darling River Catchment Area and which limits the availability of access to supply. An option to acquire part of an existing production licence on the Macquarie River Aquifer near Narromine has been agreed but this location requires the construction of a 45 kilometre pipeline to the mine site. The proximity of the site to the town of Tomingley and the Newell Highway also requires additional infrastructure to minimise the impact of noise, dust and visual amenity to the residents and vehicle traffic.

The escalated capital costs are impacting on the TGP’s financial results at the current A$ spot gold price and the project requires additional ore feed to extend the project life and generate robust returns.

As a result, an assessment of the underground potential will commence as soon as practical with the aim of defining underground operations at the Wyoming One and Caloma deposits and extend the life of the operations to around ten years. The sub-pit resource at Wyoming One has been reasonably defined by existing drilling and application of a 2g/t gold cut off within the existing block model generates:

Table 1: Wyoming One Identified Mineral Resources below the proposed open pit above a cut off of 2.0g/t gold

gold
	MEASURED		INDICATED		INFERRED			TOTAL
Top Cut	Tonnage	Grade	Tonnage	Grade	Tonnage	Grade	Tonnage	Grade	Gold
2.5x2.5x5.0m model	(t)	(g/t)	(t)	(g/t)	(t)	(g/t)	(t)	(g/t)	(oz)
Wyoming One	315,000	4.2	315,000	3.8	665,000	3.3	1,295,000	3.7	154,000

These Mineral Resources are based upon information compiled by Mr Richard Lewis MAusIMM (Lewis Mineral Resource Consultanting Pty Ltd) and Mt Terry Ransted MAusIMM (Multi Metal Consultants Pty Ltd) who are competent persons as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Richard Lewis and Terry Ransted consent to the inclusion in the report of the matters based on their information in the form and context in which it appears. The details of methodology are given in the Notes 1 and 2, in the ASX Report dated 25March 2009.

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Alkane Resources Ltd – ASX Announcement 16 December 2009

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This resource extends over a vertical extent of about 200 metres and further work is required to determine the mining methods and viability of extracting this mineralisation.

The Caloma sub-pit mineralisation is not defined at this time, although recent core drilling has confirmed that the mineralised zones extend to at least 200 metres below the planned pit floor (see ASX announcements of 2 October and 2 November). Within the existing Caloma resource, application of a 2g/t gold cut off within the Top Cut, 2.5m x 2.5m x 5.0m block model generates a total Measured, Indicated and Inferred resource of 1.0 million tonnes grading 3.2g/t gold for 100,000 ounces (ASX announcement 25 March 2009).

The sub-pit mineralisation requires substantial drilling to define and a resource may ultimately not be demonstrated, but on the basis of the above resource a 1.0 million tonnes grading 3.5g/t gold (120,000 ounces) can be regarded as an initial potential mineralisation target for underground mining.

As with the Wyoming One resource, the geometry of the mineralisation will determine its underground mining viability but a conceptual 250,000tpa operation from both deposits will be considered. This cumulative 500,000tpa could produce 50,000 ounces per year for four years and provide the revenue to improve the TGP financial results.

Environmental Assessment and Development Consent

Compilation of the Environmental Assessment for the project is nearing completion, and it is anticipated that this will be lodged with the NSW Department of Planning with the Development Application before the end of January 2010.

Further Exploration

The porphyry unit that hosts the Caloma deposit extends 400 metres to the south and this zone has not been subject to systematic exploration, however early reconnaissance drilling did locate ore grade intercepts. Also a new area of alteration and veining was located about 500 metres east of Caloma as part of the site sterilisation drilling. Aircore drill testing of both of these target areas will commence late January to assess their potential to provide additional open pitable ore.

Other nearby regional targets will also be reviewed for potential.

Geotechnical drilling

Results have been received for five more geotechnical drill holes. These holes were drilled around the planned margins of the Caloma and Wyoming One pits to measure the geotechnical characteristics of the wall rocks (Figure 3). Any observed mineralisation was sampled for future reference particularly that below current pit base and current results are summarised in Table 2 below.

Unless stated above, the information in this report that relates to exploration results, mineral resources and ore reserves is based on information compiled by Mr D I Chalmers, FAusIMM, FAIG, (director of the Company) who has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Ian Chalmers consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.

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Alkane Resources Ltd – ASX Announcement

16 December 2009

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Table 2: TGP – Geotech core results from Caloma and Wyoming One greater than 1.0g/t gold @ 16 December 09

Hole No.	East	North	RL (m)	Azimuth	Dip	Intercept (m)	Grade (g/t Au)	Interval (m)	EOH (m)	Comments
PEGT001	615018	6394173	272	258°	50°	1.6	2.49	19 – 20.6	235	Caloma
also						3.0	1.75	161 – 164
also						7.0	4.39	170 – 177
also						4.0	1.57	207 - 211
PEGT002	614992	6394011	272	295°	50°	1.0	1.00	43 – 44	233	Caloma
also						3.0	2.63	230 – 233
PEGT003	614800	6393935	271	348°	50°	5.0	1.49	180 – 185	235	Caloma
also						10.3	1.42	224 – 234.3
PEGT005	614699	6394256	271	118°	50°	1.7	3.83	156 – 157.7	236	Caloma
also						6.6	5.07	166 – 172.6
WYGT018	613921	6393373	267	078°	50°	3.0	1.06	174 – 177	240	Wyoming 1
also						17.0	1.10	210 - 227
incl						3.0	2.49	210 - 213
and						3.0	2.09	224 - 227
WYGT019	613985	6393197	267	045°	50°	42.7	1.51	221.3 – 264	265	Wyoming 1
incl						21.7	2.08	221.3 - 243
and						4.4	7.04	227.6 - 232
WYGT020	614073	6393550	268	168°	50°	1.0	1.39	166 – 167	271	Wyoming 1
also						1.0	1.27	198 - 199
also						6.0	7.14	241 - 247
WYGT021	614242	6393175	267	305°	50°	10.0	3.43	174 – 184	235	Wyoming 1
~~5~~ also						2.0	4.36	222 - 224

Gold analysis of generally one metre half core samples by 50g fire assay. True widths are variable due to orientation of holes.

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Alkane Resources Ltd – ASX Announcement

16 December 2009

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BACKGROUND

Alkane is a multi commodity explorer and miner with its operations focussed in the Central West of New South Wales , centred about 400 kilometres northwest of Sydney. Over several years, including experience in developing the Peak Hill Gold Mine, Alkane has built a substantial resource base and is proceeding towards several developments:

The Tomingley Gold Project currently has an 840,000 ounce gold resource within the Wyoming and Caloma deposits , (full details are in the 2008 Annual Report and ASX Announcement of 2 October 2009). A feasibility study for the development of the project with potential 50,000 ounce per annum production is in progress.

The Dubbo Zirconia Project is based upon a world class resource of the metals zirconium, hafnium, niobium, tantalum, yttrium and rare earth elements. The deposit also contains significant uranium. Over several years Alkane has developed a flow sheet which can recover a variety of products which have expanding applications in electronics, ceramics, catalysts, special alloys and glasses, fuel cells, special batteries and permanent magnets, nuclear power and as environmental drying agents. A feasibility study in progress includes the construction and operation of a Demonstration Pilot Plant, and a development commitment is anticipated later in 2010.

Near Orange, the Company has a joint venture ( ODEJV ) with Newmont, one of the world’s largest gold miners, which resulted in the discovery in 2006 of a potentially significant gold deposit at McPhillamys within the Moorilda Project . This discovery includes intersections of 123 metres grading 1.96g/t gold and 77 metres at 1.65g/t gold within a 600 metre by 200 metre mineralised zone. Follow up diamond drilling has confirmed the potential of the project to host a major gold system with an intersection in KPD003 of 366 metres grading 1.85g/t gold.

Elsewhere within the region, Alkane has defined a 2 million tonne 1.00% copper Indicated Resource (details 2005 Annual Report) which is being reviewed for its development potential at Galwadgere within the Wellington Project , and several other advanced exploration projects with encouraging drill intercepts. New exploration targets have been identified at several other locations.

In Western Australia the Company holds 5 million shares (6%) of listed iron ore explorer BC Iron Limited and a diluting 23% residual interest in a nickel sulphide joint venture with Xstrata Nickel (Jubilee) near Leinster .

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Alkane Resources Ltd – ASX Announcement

16 December 2009

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