One of the world's largest undeveloped zirconium resources is a step closer to becoming an operating mine that could be worth as much as $1.2 billion, says minerals explorer Alkane Resources.

Alkane has released a definitive feasibility study based on the resource, near Dubbo in New South Wales, of 400,000 tonnes per annum (tpa).

The company says a more likely mine production is one million tpa, which will give the project a net present value of $1.2 billion.

At 400,000 tpa the project's value would be $181 million, the study by Perth-based TZ Minerals International found.

Alkane says it has signed three memoranda of understanding with chemical and trading companies for all the zirconium output, worth between $125 million and $150 million a year.

About 25 to 33 per cent of revenue would come from zirconium, with the rest from niobium and a combination of light and heavy rare earths.

Each element is in increasingly scarce supply, with China and Japan declaring zirconium a strategic metal.

China, which controls about 97 per cent of the world's rare earths, has imposed quotas on its exports.

Zirconium is used in ceramics, and rare earth elements are used in high-tech consumer goods such as iPods and flat screen televisions.

Soaring zirconium prices of about $US2000/tonne have propelled Alkane into the ASX300 and mineral sands miner Iluka Resources into the Australian share market's top 50 companies.

Shares in Alkane had dropped nine cents, or 4.99 per cent, to $1.715 by 1442 AEST.

The Dubbo project would create 300 to 400 jobs in the construction phase and 200 jobs when fully operating, Alkane said in a statement.

The company is hoping for production around mid 2014.