Mining and exploration player, VRX Silica Limited (ASX: VRX) has made considerable progress in the resources sector via its three highly prospective silica sand projects - Muchea, Arrowsmith Central and Arrowsmith North projects. These three projects have a total JORC compliant Indicated and Inferred silica sand Resources of 1,056 Mt at an average grade of 98.2% SiO2.
To accelerate the development of these projects, the company has recently completed a bookbuild successfully to raise $4 million via placement of securities to a wide range of institutional and sophisticated investors. The capital raised would be used for long lead capital items, permitting and approvals, hydro and resource drilling, detailed engineering work and for working capital reasons.
VRX Silica’s advanced projects have demonstrated fascinating financial metrics in their Bankable Feasibility Studies (BFS). The economic analysis performed under these studies indicated that the financials of these projects are very strong, and there is great confidence that a sustainable long-term mining operation can be justified.
Under the economic analysis, ungeared post-tax net present value (NPV) were calculated at 10 per cent and 20 per cent discount for these projects, which are summarised in the table below:
In addition to BFS, the company also declared the following Probable Ore Reserves for all these three projects:
- Arrowsmith North: 223 Mt @ 99.7% SiO2 with 204 Mt @ 99.9% SiO2 contained within the Mining Lease application area (M70/1389)
- Arrowsmith Central: 1 Mt @ 99.6% SiO2 with 18.9Mt @ 99.6% SiO2 contained within the Mining Lease application area (M70/1392)
- Muchea: 7 Mt @ 99.9% SiO2 with 14.6Mt @ 99.9% SiO2 contained within the Mining Lease application area (M70/1390)
The recent Bankable Feasibility Studies and Probable Ore Reserves for these three projects demonstrate their world class potential.
VRX Silica’s Project Implementation Plan
The company intends to carry out the construction of its advanced silica sand projects in two stages - construction of the processing facility and the remote feeder station. Mining will initially comprise an excavation and trucking component to eliminate up to 2Mt of sand to form a level route corridor for the ultimate conveyor system.
The processing plant is planned for 300 t/hour output and will generate up to 3 distinct silica sand products.
Before commencing the construction of processing plant, the company will complete detailed mining and processing scheduling. As per the company, the scheduling detail is made considerably easier due to the symmetry of the ore source, which will also be reflected in the sound quality of the finished products. The implementation plan for the projects will be contingent on:
- Final offtake contract for at least 1Mt per year
- Final approvals for mining
- Financing of construction and working capital
- Definitive Feasibility Study
- Commencement of mining and processing
VRX Silica will own, maintain and operate the processing operations, feeder station and manage the project operations. However, the supply of mining and power supply equipment will be contracted by the company.
The company has planned the construction of the advanced projects in two stages to minimise upfront capital costs and enter the market in a more viable and less disruptive manner. The staged approach is likely to support the planned ramp up of production (2Mt per year).
The company has already undertaken initial engineering within 10 per cent capital cost estimates and power requirements for the processing plant (CDE Global) and the feeder and trommel stations, pumping and conveyor system.
It is planning to conduct detailed engineering to confirm final designs before construction, which will commence subsequent to a final Board decision and will complete the critical path linked with the timely construction of the projects.
VRX Silica seems to be well positioned to produce high-grade silica sand products from its projects as per the requirements of the potential buyers. The robust project economics is likely to aid a rapid pathway to production and financing in the future.
Stock Performance: VRX traded at $0.105, up 5% on 18th December 2019 (1:05 PM AEDT). The stock has generated a return of 267.58 per cent in the last five years.
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