Australia’s leading silica sand exploration firm, VRX Silica Limited (ASX: VRX) focusses on the development of silica sand assets in Western Australia (WA). Amidst increasing demand and a dwindling supply of silica sand across the world, the company aims to address the silica sand shortage via its significant projects in Western Australia.
The company has identified an enormous shortage of silica sand in the Asia-Pacific region that accounts for 47% of global silica sand demand that is expected to grow by 6.1% to 138MMT in 2019 (As per Freedonia Group’s forecast).
VRX Silica holds a robust project portfolio, which includes Arrowsmith, Muchea, Boyatup, Biranup and Warrawanda Projects. Arrowsmith and Muchea projects are the two most advanced silica sand projects of the company that have witnessed substantial progress so far.
VRX Silica is vigorously evaluating other silica sand projects in Australia.
The Arrowsmith Silica Sand Project, located 270 km to the north of Perth, covers three areas, including Arrowsmith North, Arrowsmith South and Arrowsmith Central.
In a recent update on the ASX, VRX Silica has released the Bankable Feasibility Study (BFS) that contains the details of Arrowsmith Central Silica Sand Project, along with the financial attributes supporting the development of the project.
The company has also announced a maiden Probable Ore Reserve for its Arrowsmith Central Project. Last month, the company released BFS Details and Probable Ore Reserve for its Arrowsmith North Project.
Key Details of BFS
As per VRX Silica, although Arrowsmith Central is a smaller resource, but it has captivating financial metrics and compliments the company’s Arrowsmith North Project. The BFS provided an Ungeared NPV10 of AUD 147 million for Arrowsmith Central, that is based on 25 years of a potential mine life of over 35 years.
The key BFS outcomes are summarised in the below figure:
The BFS highlighted that the project will possibly be a new long-term industry for WA with massive economic benefits, including royalties and long-term employment with a substantial economic contribution to the Mid West and local region.
VRX Silica has conducted meetings with Mid West Development Commission, local Shires, various local Members of State and Federal Parliament and Mid West Chamber of Commerce & Industry, obtaining great support for the Arrowsmith Central Project.
Post preliminary environmental studies, the silica sand explorer engaged with the Department of Water and Environmental Regulation to determine key concerns related to environmental approvals of the project for mining, especially the habitat for likely foraging by Carnaby’s Black cockatoos.
The company has framed a mining and rehabilitation methodology at Arrowsmith Central, specific to the environment, which will facilitate a fruitful restoration of mined areas.
Probable Ore Reserve
VRX Silica reported a total Probable Ore Reserve of 18.9 Mt @ 99.6% SiO2 for Arrowsmith Central in line with the JORC Code 2012 edition. Out of the total Probable Ore Reserve, 18.7Mt @ 99.6% SiO2 (maiden Probable Ore Reserve) was included within the area of the Mining Lease application (M70/1392) for Arrowsmith Central.
Recently, the company also informed about an increase in Arrowsmith Central total Mineral Resource estimate to 76.5 Mt @ 96.8% SiO2, which included an Indicated Mineral Resource of 28.2 Mt @ 96.6% SiO2 and an Inferred Mineral Resource of 48.3 Mt @ 96.9% SiO2.
The company has already finalised the work to transform the Indicated Mineral Resource to Probable Ore Reserve.
The company mentioned that the Probable Ore Reserve will be generated from mining of the Indicated Mineral Resource and processing in an especially designed, wet sand processing plant. The processing plant is likely to produce four saleable silica sand products fit for local and international markets with the Probable Ore Reserve.
VRX Silica stated that the maiden Probable Ore Reserve has been estimated from the Indicated Mineral Resource only and comprises around 48 % of the projected total production target over the 25-year mine life for the project BFS.
The company intends to mine exclusively from Probable Ore Reserves throughout the initial 13 to 14 years of the Arrowsmith Central project. Also, the company plans to mine the balance 29.4 Mt @ 96.2% SiO2 from the Inferred Mineral Resource from year 14 onwards.
VRX Silica has conducted enough drilling to assume metallurgical and geological continuity of the sand deposit and has found insignificant difference between the modelled sand in each kind. The company predicts that an additional 500 m of aircore drilling will be needed to upgrade the Inferred Mineral Resource.
Also, the cost of assaying, drilling and associated studies is assessed to be in the range of $100,000 at current rates, which are required to be conducted within the initial 13 years of mining operations. In view of the metallurgical and geological confidence, and simple nature of the silica sand deposit, the company expects that this additional drilling will be adequate to attain the production target.
VRX Silica expects Arrowsmith Central Project to produce substitute products to its Arrowsmith North Project, thereby adding to the company’s available catalogue of products to be manufactured from its silica sand projects.
However, the company is not certain whether further exploration work associated with inferred mineral resources will result in the determination of indicated mineral resources or that the production target itself will be attained.
As per VRX Silica, the reported Arrowsmith Central’s Reserve Estimate is in accordance with the company’s expectations and is complementary to its Arrowsmith North Project. Also, the positive financial metrics of the BFS provides encouragement as to the prospect of meeting ideal project and corporate capital requirements.
Stock Performance: VRX closed the trading session at $0.145 on 18th September 2019. The stock has delivered substantial returns of 76.14% and 64.89% during the last six and three months, respectively.
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