VRX Silica Ideally Placed to Tap Robust Market Outlook with Outstanding Project Economics

  • Oct 31, 2019 AEDT
  • Team Kalkine
VRX Silica Ideally Placed to Tap Robust Market Outlook with Outstanding Project Economics

Amidst the growing demand of silica sand products across the world, an emerging strategic silica sand producer of Australia, VRX Silica Limited (ASX: VRX) is tapping opportunities in the buoyant silica sand market.

Though silica sand is used in multiple industries worldwide, VRX Silica is primarily targeting the metal casting/foundry and glassmaking markets. The company has noted that the largest demand for silica sand in glassmaking industry comes from the Asia Pacific region (47 per cent of total demand), with glass making production improving at the rate of 5-6 per cent per year (~8 - 10Mtpa growth).

Source: Company’s Presentation (30th October 2019)

A Sneak Peek into VRX Silica’s Advanced Silica Sand Projects

VRX Silica is making speedy progress with its three advanced silica sand projects – Arrowsmith North, Arrowsmith Central and Muchea projects. The company has highlighted the strong attributes of these projects in its recently released corporate presentation.

Arrowsmith Projects

VRX Silica’s Arrowsmith Projects are located at 100 km to the south of Geraldton Port and at 270km to the north of Perth, with rail connections to Geraldton Port. These are high-grade projects and lie in close proximity to the port and rail infrastructure.

The projects have demonstrated exceptional project economics in their recently announced BFS or Bankable Feasibility Study. (see figure below)

Source: Company’s Presentation (30th October 2019)

Arrowsmith North Project

Substantial testwork has confirmed the potential of the Arrowsmith North project to produce a silica sand product with high-purity and high mass recoveries. The project has a total JORC Resource of 771Mt @ 98% SiO2 and a potential +100 year mine life.

With a very large-scale potential, the project has a total Probable Ore Reserve of 223 Mt @ 99.7% SiO2. The company had filed a Mining Lease application for the Project.

VRX Silica considers the Arrowsmith North’s Probable Ore Reserve as substantial and world class. The company believes that it will support a very long-life mining and processing project with significant benefits to the region and Western Australia generally.

In its latest BFS, the project has demonstrated:

  • Post Tax, ungeared NPV10 of $242 million
  • Post Tax, ungeared IRR of 79 per cent
  • Capex (2mtpa) of $28.3 million
  • BFS LoM of 25 years

The company is proposing to mine and process raw sand from Arrowsmith North, which can be processed to a quality suitable for the glass making and foundry industries.

Arrowsmith Central Project

The Arrowsmith Central project is also a high-grade project that has demonstrated strong financial metrics in its latest BFS, including:

  • Post Tax, ungeared NPV10 of $147 million
  • Post Tax, ungeared IRR of 60 per cent
  • Capex (2mtpa) of $25.9 million
  • BFS LoM of 25 years

The project has a total JORC Resource of 76.5 Mt @ 96.8% SiO2 and a total Probable Ore Reserve of 18.9 Mt @ 99.6% SiO2.

As per VRX Silica, Arrowsmith Central can produce saleable products that can meet the required specifications for both glass making and foundry industries.

Muchea Project

The Muchea project is located on unallocated Crown Land, at 50 km to the north of Perth and 14 km to the north of Muchea. It is situated adjacent to Brand Highway with a rail access to Kwinana Port.

The project is prospective of becoming a world class high-grade silica sand deposit, with a potential 100-year mine life.

The project has a total JORC Resource of 208 Mt @ 99.6% SiO2 and a total Probable Ore Reserve of 18.7Mt @ 99.9% SiO2. The Company had lodged an application for a Mining Lease (M70/1390) for the project in January 2019.

In its recently completed BFS, the project has shown remarkable economics, including:

  • Post Tax, ungeared NPV10 of $338 million
  • Post Tax, ungeared IRR of 96 per cent
  • Capex (2mtpa) of $32.8 million
  • BFS LoM of 25 years

Significant testwork has indicated that simple processing can upgrade silica sand at Muchea sand to specialised glass quality.

VRX Silica is progressing the environmental approval process for both Arrowsmith and Muchea projects, with both State and Federal Government authorities and completing additional requisite studies necessary for the grant of a Mining Permit.

Take a look at the Silica Sand Development Timeline below:

Source: Company’s Presentation (30th October 2019)

VRX closed the trading session at $0.140 on 30th October 2019. Today, on 31 October, the stock is placed on trading halt on ASX, pending a capital raising announcement by the company. VRX Silica anticipates the trading halt to remain in place for two days with the company returning to trading on 4 November 2019.


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