VRX Silica Limited (ASX: VRX) is an Australian-headquartered mining and exploration company with core activities centred on tapping the global shortage of silica sand. The Asia-Pacific region, where the substantial shortage of silica sand has been identified, provides a unique opportunity to VRX Silica. The company’s significant silica sand projects - Arrowsmith, Muchea and Boyatup Projects – are located in Western Australia as the state is well positioned to fulfil the dwindling supply of the product in the Asia-Pacific region.
Recently, VRX Silica has released its Quarterly Activities and Cashflow report for the quarter ending 30th June 2019. Let us have a look at the activities undertaken by the company during the quarter:
Muchea MRE Upgrade
In June 2019, VRX Silica released the results of the aircore drill program for the Muchea Silica Sand Project, that was undertaken by the company during the March quarter. Following the receipt of assay results, a new Mineral Resource Estimate or MRE was determined by the company.
VRX Silica informed that the total JORC 2012 compliant MRE for the project has been increased by 9 per cent to 208 Mt @ 99.6% SiO2 from previously reported MRE. Besides, the JORC 2012 Indicated MRE and JORC 2012 Inferred MRE was upgraded by 49 per cent and 4 per cent to 29 Mt @ 99.6% SiO2 and 179 Mt @ 99.6% SiO2, respectively.
The company reported a maiden MRE for the project earlier on 20th November 2018, following which a close spaced aircore drill program was conducted. According to VRX Silica, the previous MRE did not define all the material that could be modified to beneficiation to produce foundry and glass grade silica sand. Low iron sand layers which were earlier discounted due to colour were investigated under the drill program, along with the higher levels of clay and organic matter – characterized as Al2O3 and LOI1000C - in the assay dataset.
It is expected that the subsequent testwork centred on the currently discounted sand layers might lead to additional upgrades and reinterpretation to the Muchea Mineral Resource Estimate. A more comprehensive PoW has also been filed to undertake aircore drilling activities at the areas that were hand augered in the past.
The drilling activity is likely to be conducted in September 2019 quarter.
Testwork Results for Arrowsmith and Muchea Projects
The company announced confirmation assays and testwork results for the retrieval of silica sand commercial products from its key projects – Arrowsmith and Muchea Projects. CDE Global had conducted the final iteration of testwork in March 2019, and VRX Silica finalised confirmation assays on final products from that testwork with the help of Perth-based Nagrom Laboratories.
During the June 2019 quarter, VRX Silica released a process circuit design for a processing plant, along with engineering and cost estimate. The estimates were provided by CDE Global and were based on the testwork results. Optimistic over the process circuit design, the company is now confident that the final silica sand products will be capable of production. The company has compiled the following recovered products into its products catalogue:
VRX Silica notified that these recoveries are of products which will meet the requirements of the potential offtake customers that had shown interest in silica sand products to-date from the company’s projects.
Arrowsmith and Muchea Projects in High Demand
In April this year, twenty manufacturers including purchasing agents, across the Asia-Pacific region had shown interest for the company’s silica sand products from Arrowsmith and Muchea Projects. As per the company, the enquiries of interest were received following the appointment of its International Sales Manager, Mr Yoonil Kim, in November 2018. South Korean national, Mr Kim, holds over 15 years of experience in selling and marketing of silica sand products across the Asia-Pacific area to foundries and glass manufacturers.
The highest level of demand in the foundry and glassmaking industry came from Korea (five manufacturers) and China (three manufacturers), respectively. South Korea has the world’s largest foundry market while the glassmaking industry of China is a leading industry of Aisa-Pacific region.
Take a look at the table below that shows the number of enquiries received for foundry and glassmaking industries from various regions:
VRX Silica will be able to engage in binding offtake agreements with these manufacturers post receiving approval of Mining Permits at its silica sand projects. Although all these enquiries might not result in binding contracts, the company is hopeful of securing enough offtake to support its silica sand projects development activities. VRX Silica is looking forward to receiving further enquiries, and sign binding offtake agreements with these manufacturers prior to any commitment of funding arrangements for processing plants.
Events Subsequent to June 2019 Quarter
Strategic Alliance with China Southern Glass
The company entered into a MOU with CSG Holding Co Ltd in July this year, to form a strategic alliance with regard to VRX Silica’s Muchea Project. The strategic alliance was formed between China Southern Glass and VRX Silica to explore:
- The possible capital finance sources in order to construct the manufacturing facilities at the Muchea Silica Sand Project.
- The prospects for marketing of silica sand products in China from the company’s Project.
- The possibility for building a superior glass manufacturing facility in Western Australia produced for the products from the Project.
- The potential for a significant silica sand mining operation at the Project.
VRX Silica mentioned that the strategic alliance supports its evaluation of improving dwindling supply of silica sand in the Asia-Pacific area.
Arrowsmith North MRE Upgrade
On 9th July 2019, VRX Silica also released the results of the aircore drill program that was undertaken at the Arrowsmith North Silica Sand Project during the last quarter. The company determined a new Mineral Resource Estimate for the project following the receipt of assay results.
VRX Silica informed that the total JORC 2012 MRE for the project has been increased by 398 per cent to 771 Mt @ 98.0% SiO2 from previously reported MRE. Also, the JORC 2012 Indicated MRE and JORC 2012 Inferred MRE was upgraded to 248 Mt @ 97.7% SiO2 and 523 Mt @ 98.2% SiO2, respectively.
The company is hopeful that most of the Indicated Mineral Resource will be converted into Probable Reserves with the mineral resource being primarily within the Mining Lease application area. The new MRE will help it finalise Ore Reserves estimates that will be useful in the approaching BFS. VRX Silica will conduct a further testwork program on the white sand and complete the process of Environmental Approvals and Mining Lease Applications at its both Arrowsmith Silica Sand Projects (North and Central).
Financial Position of VRX Silica
VRX Silica received commitments for raising capital of ~$2.26 million (37.67 million shares at an issue price of $0.06 cents issued) before costs in April 2019, via a share placement to sophisticated and professional investors, along with current shareholders. The company informed that the funds raised through the Placement had been allocated to finalise the feasibility studies and process of Environmental Approvals and Mining Lease Applications at its Muchea and Arrowsmith Projects. The company intended to use a part of the net Placement proceeds for the exploration activities at Warrawanda HPQ and Boyatup Projects, and for general working capital purposes.
VRX Silica spent AUD 576k for exploration and evaluation payments during the quarter and has estimated a further expenditure of AUD 250k on these payments in the next quarter. The cash balance of the company at the end of the June 2019 quarter stood at ~AUD 1.54 million.
The company’s stock settled the day’s trading session at AUD 0.145, with a rise of 3.57 per cent on 30th July 2019. The stock has delivered a return of 7.69 per cent on a YTD basis with an impressive return of 60.92 per cent in last one last month.
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