The Brisbane, Australia-based Diatreme Resources Limited (ASX: DRX) is a diversified and emerging mineral exploration company with its flagship project being the Cyclone Zircon Project in Eucla Basin of Western Australia. Its primary interest lies in mining for mineral sand, gold, diamond, and base metal deposits.
On March 7th, 2019, the company announced about an expanded resource estimate for its Galalar Silica Project in North Queensland, testifying the project’s immense potential to become a source of premium quality silica sand for exports to the ever-expanding Asian markets.
The results are derived from an independent assessment undertaken by Ausrocks Pty Ltd, commissioned by Diatreme, and upgraded the project’s Inferred Mineral Resource estimate to 26.4 Mt > 99% SiO2, up 22% on the maiden resource estimate of 21.6 Mt >99% Si02 as at August 2018. The analysis follows significant testing and drilling and thus provides scope for the resource, that is also open for considerable expansion to the north and east, to be upgraded to ‘Indicated’ status following further bulk density sampling.
Going forward, the company estimates an initial mining operation producing 300,000 to 500,000 tonnes of high-grade silica annually. Progressively, as market penetration deepens, the production will rise to 1 million tonnes.
As per the estimate by the IMARC Group, the global silica sand market is expected to be worth around USD 10 billion in annual revenues by 2022, with a compound annual average growth rate (CAGR) of 7.2%.
During the last quarter ended December 31st, 2018, the company reported a couple of significant developments. The results of the Positive Definitive Feasibility Study (DFS) for the Cyclone Zircon Project were released, affirming its potential and the net present value (NPV) estimated at AUD 113 million with an internal rate of return of 27% and capital payback expected within three years. The DFS was conducted by China ENFI Engineering Corporation (ENFI), which is endorsing the project and recommends immediate development.
Besides, the DFS also identified a reduction in the project development cost to $ 135.7 million, inclusive of contingencies with an assumed base price of USD 1,500 per tonne for premium zircon whose current base price lies in the range of USD 1,580-USD 1,700 per tonne for spot purchases.
Currently, the company is negotiating to appoint a major project development partner and establish a joint venture processing plant in China to cater to the refining of Cyclone’s HMC product. In January 2019, the corporate advisory firm Blackbird Partners was appointed to assist the management and ensure benefits to the shareholders.
At the end of the quarter, Diatreme Resources had net cash and cash equivalents to the value of AUD 858K. The operating activities including payments for exploration and evaluation, staff costs, corporate costs and others led to net cash burns of AUD 1.33 million. Also, there were cash outflows from investing activities amounting to AUD 47K on account of proceeds from the disposal of property and equipment. However, the financing activities, mainly the proceeds from issues of shares, contributed to $ 1.96 million of cash inflows.
DRX closed the day’s session flat at 1.5 cents with a market capitalization of A$19.95 million as on 7 March 2019.
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