Indeed, Australia’s renowned silica sand explorer, VRX Silica Limited (ASX:VRX) marked several significant milestones at its three advanced silica sand projects in 1H FY20. The Company’s projects progressed considerably towards the commencement of construction during the period, with the completion of Bankable Feasibility Studies (BFSs) and the announcement of Maiden Ore Reserves.
The boosted investors’ sentiment soared the VRX stock by ~7% on ASX on 11 March 2020, settling the day’s trade at $0.075.
Before diving into the details of the Company’s key operational achievements during the period, let’s take a look at spotlights of the half year:
- Mineral Resource Estimate (MRE) Upgrade at Arrowsmith North and Arrowsmith Central
- BFS and Maiden Ore Reserve at Advanced Silica Sand Projects
- China Southern Glass Strategic Alliance
Announced MRE Upgrade at Arrowsmith Projects
During the half-year, the Company reported MRE upgrades at its Arrowsmith North and Arrowsmith Central Silica Sand projects following the completion of an aircore drill program conducted in March 2019.
The analytical results received from the aircore drill program enabled the Company to upgrade the Arrowsmith North’s MRE to 771 Mt @ 98.0% SiO2 and the Arrowsmith Central’s MRE to 76.5 Mt @ 96.8% SiO2.
Arrowsmith North: The total MRE was an overall increase of 398 per cent on the maiden MRE and comprised of:
- an Inferred Resource estimate of 523 Mt @ 98.2% SiO2, and
- an Indicated Resource estimate of 248 Mt @ 97.7% SiO2.
Considerably, the Mineral Resource consisted of an unexpected 313Mt of white sand at 98.7% SiO2. Moreover, the majority of the Indicated Resource (predominately within the Mining Lease application area) was subsequently converted to Probable Ore Reserves, supporting the Company’s continued assessment of Arrowsmith North being an extremely long-life mining project with world-class potential.
Arrowsmith Central: The total MRE was an overall increase of 273 per cent on the maiden MRE and comprised of:
- an Indicated Resource estimate of 28.2 Mt @ 96.6% SiO2 and
- an Inferred Resource estimate of 48.3 Mt @ 96.9% SiO2.
The Company notified that the Arrowsmith Central MRE complements Arrowsmith North, and not only adds to its total inventory but will also produce alternative products for the foundry and glassmaking industries in Asia.
Reported BFS and Maiden Ore Reserve at Advanced Silica Sand Projects
Following the completion of the BFS at its three advanced silica sand projects, the Company reported Probable Reserves along with the BFS details at each of its projects during the period. The feasibility studies demonstrated remarkable financial metrics and validated the potential of the Company’s projects to produce high-grade silica sand products.
The Company evaluated the economics of its projects based on the capital and operating cost estimates via financial models. The key outcomes from the BFSs and summary financial model outputs are set out in the below table:
Source: Company’s Report (18th October 2019)
Arrowsmith North: The Company reported a total Probable Ore Reserve of 223 Mt @ 99.7% SiO2, with 204 Mt @ 99.7% SiO2 contained within the mining lease application MLA70/1389.
Moreover, the Company notified that this Probable Ore Reserve will support in manufacturing of 4 saleable products for various international markets.
Arrowsmith Central: A total Probable Ore Reserve of 18.9 Mt @ 99.6% SiO2 was announced, with 18.7 Mt @ 99.6% SiO2 contained within the mining lease application MLA70/1392.
The Company mentioned that the processing plant will generate 4 saleable products for various international markets with the project’s Probable Ore Reserve.
Muchea: The Company announced a total Probable Ore Reserve of 18.7 Mt at 99.9% SiO2, out of which 14.6 Mt at 99.9% SiO2 is contained within the MLA70/1390. With the project’s Probable Ore Reserve, the processing plant will generate 3 saleable products for various international markets, notified VRX Silica.
The Company added that the Muchea project will manufacture alternative high-quality products to Arrowsmith, adding to its existing catalogue of products from its silica sand projects.
Entered into a China Southern Glass Strategic Alliance
During the half-year, VRX Silica entered into a MOU with the largest architectural glass manufacturer of Peoples’ Republic of China (PRC) - China Southern Glass, to form a strategic alliance regarding the Muchea project.
The objectives of the strategic alliance comprised exploring:
- the potential of silica sand products from the Muchea project for marketing, sale and promotion in the PRC,
- the potential sources of capital finance at the project for the construction of production facilities, and
- the potential for the development of a high-grade glass manufacturing facility in WA for silica sand products produced from the project.
Subsequent to the half-year, the Company’s wholly-owned subsidiary, Wisecat Pty Ltd also signed a Native Title Mining Project Agreement with the Whadjuk People Native Title Claim Applicants and the South West Aboriginal Land & Sea Council Aboriginal Corporation for the Muchea project.
Review of Financial Performance
The Company reported the following financial activities during the period:
- exercised 6 million 2.8c options.
- successfully completed a bookbuild to raise $4 million (before costs) via a placement of securities to a range of sophisticated and institutional investors, including existing shareholders and new investors. The placement funds were raised to speed up the development of its silica sand projects.
The Company held a general meeting of shareholders subsequent to the half-year seeking ratification of the issue of the placement shares and approval for the issue of the free-attaching options and options to the lead manager, in which all resolutions were successfully passed.
VRX reported a loss of about $1.38 million for the period after adjusting for revenue and expenditures, including exploration and evaluation expenditure of $303.5k. Moreover, the Company’s net assets stood at $11.12 million as at 31st December 2019, considerably higher than $8.43 million as at 30th June 2019.
Significantly, the Company’s cash balance increased to $3.86 million as at 31st December 2019, in comparison to $1.15 million in the prior corresponding period.
Apparently, VRX Silica progressed substantially with the development of its advanced silica sand projects during the half year period and is well on track to commence construction and production from its projects in the next two years.
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