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Why VRX Silica (ASX:VRX) Shares Zoom up on ASX Today?

  • November 20, 2020 03:05 PM AEDT
  • Kunal Sawhney
    CEO Kunal Sawhney
    2781 Posts

    Kunal Sawhney is founder & CEO at Kalkine and is a richly experienced and accomplished financial professional with a wealth of knowledge in the Australian Equities Market. Kunal obtained a Master of Business Administration degree from University of T...

Why VRX Silica (ASX:VRX) Shares Zoom up on ASX Today?

Summary

  • VRX Silica (ASX:VRX) has obtained strong support for $7 million capital raising via placement from a wide range of investors.
  • An aggregate of 38.9 million new shares will be issued within its current placement capacity at an issue price of 18 cents per share.
  • VRX Silica intends to allocate funds raised under the placement towards additional drilling at its Muchea and Boyatup projects, pre-production preparatory work at Arrowsmith North project, and for general working capital purpose.
  • The capital raising closely tracks the recent grant of mining leases for the Company’s Muchea and Arrowsmith projects.
Gold MTF non-AMP

Shares of VRX Silica Limited (ASX:VRX) soared by 10.64 per cent to $0.260 during the early trading session on 20 November 2020 following a capital raising update. The silica sand exploration company announced that it has obtained binding commitments for capital raising worth $7 million (before costs) via a share placement to professional, institutional and sophisticated investors.

VRX Silica notified that an aggregate of 38.9 million new shares will be issued within its current placement capacity at an issue price of 18 cents per share.

The issue price represents a 23.4 per cent discount to the last closing price of the Company’s shares on ASX of 23.5 cents and a 13.6 per cent discount to the 10-day volume weighted average price (VWAP) of 20.8 cents as at the same date.

Euroz Hartleys Limited worked as the lead manager for the placement, which is scheduled to settle on 27 November 2020.

Let us quickly take a dive into additional details of capital raising activity:

Use of Funds

VRX Silica intends to allocate funds raised under the placement towards additional drilling at its Muchea and Boyatup Silica Sand Projects, pre-production preparatory work at Arrowsmith North Silica Sand Project, and for general working capital purpose.

The placement positions VRX Silica in good stead to fast-track the development of its silica sand projects, particularly the Arrowsmith North project. The Company has planned to undertake the following activities at its Arrowsmith North project:

  • grade control drilling for the initial ten years of production,
  • port access design,
  • drilling and equipping water bores,
  • confirmatory test work,
  • construction of access roads, and
  • final engineering.

Follows Grant of Mining Leases

The capital raising closely tracks the recent grant of mining leases for the Company’s Muchea and Arrowsmith projects.

Early this week, VRX Silica announced the grant of Mining Leases - M70/1392 and M70/1389 for Arrowsmith Central and North projects, respectively. The combined Mining Lease areas comprise over 3,600ha, which appears sufficient for over 100 years of production. The Arrowsmith North and Central Mining Lease areas include Probable Ore Reserves of 204 Million Tons @ 99.7% SiO2 and 18.7 Million Tons @ 99.6% SiO2, respectively.

Late in October 2020, the Company also informed about the grant of Mining Lease (M70/1390) for its Muchea project. The Mining Lease encompasses an area of around 1,008ha, which comprise the development area, appropriate for at least 25 years of production. Importantly, the grant area contains Probable Ore Reserve of 14.6 Million Tons @ 99.9% SiO2 coupled with Inferred Mineral Resource of 61.4 Million Tons @ 99.6% SiO2.

The grant of mining leases has cleared the development for Arrowsmith North, Arrowsmith Central and Muchea Projects with a total post-tax NPV10 of $728 million. All these three projects are expected to aid a sizeable export industry in WA (Western Australia), delivering substantial employment and financial benefits to the State.

The recent capital raising activity is expected to accelerate the development of VRX Silica’s silica sand projects. Going forth, the Company is likely to conclude sales contracts for its high-quality silica sand products, backed by robust demand for Muchea and Arrowsmith sand by potential customers.

 

 


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