VRX Silica Approvals Imminent - Low-Cost Developer Offering Robust Margins

• VRX Silica has 5 silica sand projects in Western Australia targeting export and domestic markets
• The environmental approval process has taken longer than expected, now expecting approvals in early 2024
• Updated capital and operating costs still support attractive margins and financing
• Production expected to start in 2025 after 6-8 month plant construction
• Plan to initially produce at 1 million tonnes per annum, ramping up over 2 years

About VRX Silica

VRX Silica is a leading pure-play silica sand company focused on meeting the growing global demand for this vital resource. Silica sand has essential uses in manufacturing glass products and concrete. It is also crucial for the production of the high-tech flat glass used in solar panels and electronics.

With the world's population expected to reach 9.7 billion by 2050 and urbanization rising, silica sand consumption is likely to increase substantially. VRX Silica aims to capitalize on the opportunity to supply this market from its portfolio of high-quality projects in Western Australia.

The company is developing silica sand projects in strategic locations across Western Australia, including the Arrowsmith North, Brand Silica, Central Silica Sand, Muchea Silica Sand, and Boyatup Silica Sand Projects.

VRX Silica is positioned to meet the growing need for high-purity silica sand globally through its portfolio of Australian projects. The company plans to commence mining at its most advanced site within the next two years.

Interview with Managing Director, Bruce Maluish

Environmental Approvals Delayed But Progressing

VRX Silica has 5 projects with combined resources of 1.4 billion tonnes. The flagship Arrowsmith North project is closest to development but has faced delays in securing environmental approvals from the EPA. As VRX's CEO Bruce Maluish explained, "Where we used to get responses in weeks is now taking months". The final submission was made in October 2023 with no further requests for information from the EPA. Maluish expects approvals potentially in "anytime soon".

"We don't see any pitfalls in there or major hurdles to get over at this point. We think it's a major step forward, we just expected to do it a lot earlier last year."

The delays have not been due to substantive issues but rather the slow administrative process. VRX Silica remains confident of securing approval for its rehabilitation-focused mining method.

Updated Costs Maintain Attractive Margins

VRX Silica has updated its capital and operating cost estimates in light of rising input prices. Capital costs are around double the original estimates mostly due to higher steel prices. However, operating costs have increased more modestly by around 5% as cheaper gas-powered electricity offsets rise in other input prices like diesel. Meanwhile, silica sand prices have increased by about 10%.

"The outcome is very much the same, other than the capital cost. The margins are there to be able to pay back relatively high-interest rates"

The project economics remain intact, assisted by VRX's 30+ year expected mine life. VRX is also confident of securing 60-80% debt financing given the financial viability.

Development Timeline

Subject to securing approvals in early 2024, VRX has allowed 6-8 months for plant construction. Initial production in 2025 will be at 1 million tonnes per annum, ramping up over 2 years. The production ramp-up is primarily about establishing end-user markets rather than mining or processing constraints. VRX already has off-take agreements for 200,000 tonnes per annum in place.

The initial project focuses on the Asian export glass market but there is potential to later supply Australian domestic glass manufacturing. The separate projects target different product types and export facilities, providing expansion options for VRX.

Investment Thesis for VRX Silica

• Attractive exposure to growing Asian demand for high-quality silica sand
• Approvals expected soon would likely re-rate share price materially higher
• Robust margins demonstrated on updated cost estimates
• Initial 1 million tpa production provides cash flow with expansion upside

After extended delays, VRX Silica is nearing key approvals to develop its silica sands projects in WA. Updated costs continue to support an economically attractive long-term development while strong demand growth underpins the market dynamics. With its modest market cap and positive share price catalysts on the horizon, VRX offers investors leveraged exposure to an industrial mineral play with global tailwinds.