Special Report: With recent progress on securing mining leases for its projects, VRX Silica is increasingly confident of becoming a silica sand producer next year.

Perth-based VRX Silica (ASX:VRX) is moving towards silica sand production following the grant of a mining lease at its flagship Muchea project and the impending grant of mining leases at its Arrowsmith North and Central projects.

The grant last week for Muchea to the company’s wholly-owned subsidiary, Wisecat, covers over 1,000ha and will support a mining operation for at least 25 years.

This followed news late last month of formal registration of an Indigenous Land Use Agreement (ILUA) between the Western Australia state government and local indigenous groups covering the company’s Arrowsmith North and Arrowsmith Central projects, clearing the path for grant of mining leases for those projects.

VRX Silica managing director Bruce Maluish told Stockhead that the grant of mining leases allows the company to proceed with negotiating formal offtake agreements for the sale of high-quality silica sand products from these projects.

“Since the beginning of the COVID 19 pandemic, we have been in regular contact with over 50 groups that expressed an interest in buying our silica sand products,” Maluish explained.

“We have ranked them on a number of a different criteria with the groups that we know to be reliable and able to commit to long term contracts on the top of our list.

“When it comes down to the nitty gritty, we can certainly lock-in good reliable buyers for at least a million tonnes per year offtake, which will allow us to pull the trigger on construction.”


Silica sand demand

Silica sand may not be a ‘sexy’ commodity, but it is certainly in great demand.

Maluish noted that the company had received interest from South Korea for glass making and foundry sand as well as interest in glass making sand from Japan, Taiwan, Philippines, Thailand and Malaysia.  The company also received a great deal of interest from China, adding that it was keen to pursue its strategic alliance with China Southern Glass and had not really engaged with any other players from the world’s most populous country.

So just how much interest has VRX received?

“We have received interest for the purchase of up to 5 million tonnes per annum from individual buyers and about 16.5 million tonnes a year in total,” Maluish told Stockhead.

That’s a lot of sand and specifically excludes the staggering demand for lower quality construction sand.

With combined ore reserves of 242 million tonnes ranging from 99.6 to 99.9 per cent SiO2 and resources of over 1 billion tonnes, the projects are expected to generate total sales of nearly $8.3 billion over the first 25 years.

Bankable feasibility studies have estimated combined net present value and internal rate of return – both measures of a project’s anticipated profitability – at $728 million and 83 per cent respectively.


Ongoing activity

VRX Silica recently completed detailed Aboriginal heritage surveys over the first 10 years of mining at Arrowsmith North and is currently undertaking detailed flora and vegetation surveys at all three projects, critical to the final environmental assessments process.

Maluish said, “We’re also about to lodge a program of works with the Mines Department for grade control drilling at Arrowsmith North over the first 10 years of production and to finalise approvals to drill the water bore.

As previously flagged, the company still expects to get environmental and mining approvals at Arrowsmith North by the end of this year, which is before any of its other projects.


This article was developed in collaboration with VRX Silica, a Stockhead advertiser at the time of publishing.


This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.