Ventnor Resources builds on sand with 200pc price rise
There is nothing terribly exciting about sand.
But there is something quite exciting about a stock which has risen by 200 per cent over the past month because it plans to mine sand in Australia and sell it to customers in Asia — where sand is emerging as a strategically important asset.
Ventnor Resources (ASX:VRX), a company previously known for its copper assets in the north of WA, is the stock kicking up a sand storm on the ASX with a price rise from 1.4c early last month to recent sales at 3.7c. The shares reached a 12-month high of 6c two weeks ago.
On the way to its discovery by investors with an eye for the unusual, Ventnor has batted back several “speeding” inquiries from exchange regulators with Ventnor management pointing to detailed reports on the opportunity to become a supplier of Australian sand to Asia.
The primary sand asset in Ventnor’s portfolio is the Arrowsmith project, a series of exploration tenements near the fishing village of Dongara on WA’s west coast, a region also known for its heavy mineral mines, or beach sands, producing material such as titanium dioxide and zircon.
Wind and wave action over millions of years created the deposits of heavy minerals, as well as big sand dunes of high-quality silica, Ventnor’s target.
Anyone who has driven near the coast between Dongara and Geraldton understands the effect of the powerful wind blowing off the Indian Ocean, forcing trees to bend as they grow, creating a bizarre effect of trees at 45-degrees on a stretch of country known as the Greenough Flats.
Ventnor’s work so far has been to peg its exploration tenements, re-visit historic data and previous attempts to start a sand-export business, and to investigate market opportunities with the construction industry, glass making, ceramics, and chemical processing among the potential buyers of Australian sand.
Evidence of emerging demand
While some hard-nosed mining investors might consider sand exports to be an unlikely business opportunity there is evidence of emerging demand, complete with geopolitical overtones which might underpin Australia’s entry into the sand business.
Anyone flying into Singapore can see the importance of sand to that island country as it expands its “footprint” by reclaiming the ocean for residential building projects and critical infrastructure such as the giant Changi airport.
So much sand has been imported into Singapore over the past 30 years that the country has effectively expanded by 20 per cent, with the bulk of the sand coming from Malaysia and Indonesia where sand mining is becoming a political hot potato.
India also is becoming concerned about sand exports and the mining of sand close to the coast where the activity is being blamed for erosion and the pollution of drinking water.
Enter, possibly, a country with an abundance of spare sand, Australia, with Ventnor one of the early movers in what could become an interesting industry.
Emerging ‘sand war’
Earlier this year, analysts in the London office of the financial research firm AllianceBernstein said there were signs of an emerging “sand war” as demand for a basic building material rose and supplies became harder to source.
According to AllianceBernstein an estimated 24 small Indonesian islands have already disappeared because of illegal mining activity by groups dubbed the “sand mafia”.
What interested AllianceBernstein was not domestic politics but the question of whether an Asian sand war was “investible”, with the answer being yes because the cost of sand is a very small part of an overall building project which means there is scope for prices to rise.
Sand, according to the analysis, represents about 0.5 per cent of an overall construction budget meaning “there should be considerable latitude to raise prices”.
Another factor underpinning the AllianceBernstein research was the observation that while sand might seem to be an abundant raw material that was not necessarily the case.
Construction sand sources limited
“The existing sources of construction sand are limited and usually found in the most environmentally sensitive locations,” AllianceBernstein said.
“There is also the problem of sustainability. Sand reserves are being depleted far faster than they are being created, and the (construction) industry has to find more sustainable sources of sand.
“We believe near term sand shortages and price spikes are inevitable, especially in the emerging world, as regulation struggles to control the industry and authorities attempt to find a healthy balance between protecting the environment and supplying the needs of construction.
“Sand is still too cheap today, and the price will inevitably rise as a result”.
It is into that fast-growing market for sand, with the promise of significant price increases as governments tighten their regulatory grip that Ventnor has made its west coast move.
In theory, the company’s Arrowsmith sand project could become quite substantial because of the combination of Asian market demand, the quality of the Australian sand, and the location of Ventnor’s tenements which straddle a railway line that runs to the port of Geraldton from which titanium and zircon has been exported for more than 40 years.
Tim Treadgold’s The Explorer column appears weekly in Stockhead.
Tim is a Perth-based finance journalist who has been covering the resources sector for more than 40 years for national and international publications, long enough to know what’s gold and what’s fool’s gold — of which there’s quite a bit in the mining world.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.