Undoubtedly, the pace at which silica sand player VRX Silica Limited (ASX:VRX) is progressing towards the development of its projects in Western Australia (WA) is commendable. With the completion of the Bankable Feasibility Study (BFS) and identification of the maiden Probable Ore Reserve, the Company is now just a few steps away from commencing production at its advanced silica sand projects, including Arrowsmith and Muchea.
The Company has to date made substantial progress at its advanced silica sand projects, which have demonstrated robust financial metrics in their respective BFS, as seen in the below figure:
Additionally, the Company has reported compelling Probable Ore Reserves for its advanced projects:
- Muchea: 18.7Mt @ 99.9% SiO2
- Arrowsmith North: 223 Mt @ 99.7% SiO2
- Arrowsmith Central: 18.9 Mt @ 99.6% SiO2
In this context, let us discuss the key factors driving VRX Silica’s advanced silica sand projects below:
As a part of the upgraded Mineral Resource Estimate for VRX Silica’s advanced projects, CSA Global reviewed the metallurgical testwork and provided conclusions on the available process testwork for all the three projects.
According to CSA Global, the available process testwork has indicated the following likely product qualities as appropriate for eventual economic extraction from the Company’s advanced projects:
- Muchea: Glass and Ceramics
- Arrowsmith North: Glass, Ceramics and Foundry Sand
- Arrowsmith Central: Glass, Ceramics and Foundry Sand
Besides, the favourable logistics and the location of the Company’s advanced projects support the classification of its projects as an industrial mineral with an Indicated/Inferred Mineral Resource.
The extensive metallurgical testwork has allowed for the creation of a catalogue of silica sand products that can be produced from the Company’s advanced silica sand projects, as shown in the below figure:
Material Modifying Factors – Infrastructure
The superior location of the advanced silica sand projects, with existing infrastructure on-site, places VRX Silica at an advantage. In addition, the projects are accessible via rail and road transport:
- Muchea: Accessible via sealed Timaru Road from Brand Highway and rail line to the Kwinana Bulk Terminal, running east of the Brand Highway.
- Arrowsmith North: Accessible via the Mount Adams Road from the north or Brand Highway to the south and Eneabba/Geraldton rail line lying to the south west of the project.
- Arrowsmith Central: Accessible via an unsealed road from Brand Highway and Eneabba/Geraldton rail line, running through the western part of the Project area.
VRX Silica’s economic analysis has calculated a 10 per cent and 20 per cent discounted ungeared post tax NPV (net present value) for all its advanced silica sand projects (Refer: first figure of the article).
The economic analysis suggested that the financials of all the three projects are very strong, providing great confidence that a sustainable mining operation for a long-term can be justified. It is worth mentioning that the average sales price of Muchea silica sand products was estimated higher than the price of products from Arrowsmith projects due to Muchea’s higher-grade products.
As per VRX Silica, its projects are situated wholly on unallocated crown lands; hence, there is a little adverse impact on local communities.
Currently, the Company is in negotiations with the claimant group regarding the mining lease applications M70/1389 and M70/1392 for Arrowsmith North and Arrowsmith Central projects, respectively. It expects to reach an agreement with the claimant group, enabling grant of both the mining leases.
For the Muchea project, the Company has already signed a formal agreement with representatives of the SWALSC (South West Aboriginal Land & Sea Council Aboriginal Corporation) and Whadjuk People Native Title Claim Group.
It is imperative to note that a number of organisations across Asia have expressed interest in becoming a funding partner of VRX Silica for development of a mine through pre-paid offtake arrangements.
The optimistic feedback from the potential funding partners and robust BFS financial metrics offer encouragement to the prospects of meeting optimum project and corporate capital requirements for all the three advanced projects.
VRX closed the trading session at $0.060 on 15th April 2020.
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