VRX Silica (VRX) - Learning About & Investing in Silica Sands Market

VRX Silica Ltd. is a silica sands mining company with three projects in Western Australia. Silica is the most common and most used commodity on the planet, with it used in the glass production, foundry and concrete production sectors primarily. The global silica sand market has seen large demand recently, due to an increase in the global construction rate as well as a shortage of high-purity silica sands necessary for glass production. The Asia-Pacific region is responsible for 47% of the global silica sand demand and is projected to grow with a 7.7% compound annual growth rate in the next 5 years.

Interview with Bruce Maluish, MD of VRX Silica (ASX: VRX)

Company Overview

The company’s silica sands asset portfolio is comprised of the Arrowsmith, Muchea and Boyatup silica sands projects. The Arrowsmith silica sands project consists of the Arrowsmith North and Arrowsmith Central silica sands areas and is located 270 km north of Perth. The company’s Muchea Silica sand project is located 50 km north of Perth and the company’s Boyatup silica sand project lies 100 km east of the city of Esperance. The Arrowsmith and Muchea projects have bankable feasibility studies with the Muchea project boasting high-grade silica ideally suited for the production of ultra-clear glass for solar panels. The three projects each have the potential to deliver 2 million tons of silica sands per year.

VRX Silica Ltd. announced at the end of May 2022 that it had commenced with the procurement of various pieces of processing equipment at its Arrowsmith North project. The procurement of the equipment is aimed at enabling production at the project, pending EPA approval.  The company purchased most of the major capital equipment second-hand with the refurbishment of the equipment currently underway. The company is well-financed for its endeavours, with no immediate plans to raise funds until the decision to mine has been made and approval from the EPA has been received. 

Management

The board of VRX Silica Ltd. consists of Paul Boyatzis as the Non-Executive Chairman, Bruce Maluish as the company’s Managing Director and Peter Pawlowitsch and David Welch as non-executive directors.  

Boyatzis has been involved in the management of various publicly traded companies and has more than 30 years of experience in the investment and equity markets. He has been involved in the raising of funds from local as well as international institutional investors and is a member of the Australian Institute of Company Directors, the Securities and Derivative Industry Association and the Certified Practising Accountants of Australia. He is currently involved as a director at Nexus Minerals Ltd., Aruma Resources Ltd. and Transaction Solutions International Ltd.

Maluish has been involved in the mining sector for more than 30 years and has held various positions including Managing Director and General Manager at companies such as the Monarch Group of Companies, Matilda Minerals, Abelle, Hill 50 and Forsyth Mining. Maluish has been involved in various commodity sectors including gold, nickel and mineral sands and has worked in both open-pit as well as underground operations. He has been involved in the setup and marketing of initial public offerings, which include the commencement of exploration up to full production, development and expansion of various projects. He is also currently a director of Nexus Minerals Ltd.

Peter Pawlowitsch has over ten years of experience in accounting as well as business management specialising in the evaluation of businesses and mining projects. David Welch has been involved in the mineral sector for over 30 years and has held positions including Vice President of Market Development at Aurizon as well as serving as a non-executive director at Aquila Resources Inc.

The board of VRX Silica Ltd. is charged with steering the company through the global silica sands market.

The Silica Sands Market

Silica is the most commonly used commodity in the world, with it primarily used in the glass-making and concrete industries. The global silica sands market was reportedly worth USD$ 21.6 billion in 2021, with the market predicted to reach approximately USD$ 30.9 billion by 2027. Silica sand is used to produce not only flat glass for vehicles or buildings but also container glass for food and specialty glass for photovoltaic cells and mobile phones. The application of silica sands is versatile with it also being used in the foundry industry for the casting of various products, in the ceramic, chemicals and paint and coatings industries, in the oil and gas and water treatment sector as well as being used as construction sand. The versatility of silica sands and the current global shortage provides an opportunity for companies such as VRX Silica Ltd.

The Asia-Pacific region is responsible for 47% of the global silica sands demand, with the majority thereof being its automotive industry. The container glass industry is also growing at a rate of between 5% and 6%.

VRX Silica Ltd. aims to supply the global silica sands shortage through its three western-Australian projects, the Arrowsmith, Muchea and Boyatup projects. The three projects each have the potential to deliver 2 million tons of silica sands per year.

Projects

The Boyatup silica sands project of the company is a 124 km2 land package which is located 100 km east of the port town of Esperance. The project consists of almost 100% unallocated crown land, with a small section of the land position which the company is not interested in located over farming freehold land. The project is connected to the port of Esperance via a sealed road, which runs past the city of Esperance. The port of Esperance is the hub of nickel and iron exports in Australia and can load ships of up to 200,000 tons.

The Muchea silica sands project is situated 50 km north of the city of Perth and is located adjacent to the Brand highway and a rail connection to the Kwinana port, which is suitable for bulk shipping. The project consists of one granted exploration licence, two exploration licence applications, a granted mining lease, three granted miscellaneous licences and one miscellaneous licence application for a total of 74.4 km2.

VRX Silica Ltd. published a mineral resource estimate (MRE) of the Muchea Silica Sands project in 2019, which consists of 29 million tons of silica sands at a grade of 99.6% SiO2 in the indicated category and 179 million tons of silica sands at a grade of 99.6% SiO in the inferred category. The mineral resource estimate consists of the project’s upper white silica sand layer.

The Arrowsmith silica sands project of the company is a 377 km2 land package which is located 270 km north of the city of Perth and consists of five exploration licences, two mining leases and five miscellaneous leases. The project consists of the Arrowsmith North and Arrowsmith Central areas, which both hold silica sands suitable for the production of flat and container glass as well as foundry glass. The Eneabba-Geraldton rail line runs through the Arrowsmith Central area of the project, with the railway line leading directly to the ship loading facilities at the Geraldton Port.

The Arrowsmith project has had bankable feasibility studies conducted on both the North and Central areas of the project. The Central area of the project holds 76.5 million tons of mineralisation at a grade of 96.8% SiO2. The mineral resource estimate consists of 28.2 million tons of mineralisation in the indicated category at a grade of 96.6% SiOand 48.3 million tons of mineralisation at a grade of 96.9% SiO. The bankable feasibility study of the area has shown a 25-year life of mine, with a capital cost of AUD$ 25,880,000. The area further shows an un-escalated total sales amount of AUD$ 2,167,000,000 and an internal rate of return (IRR) of 60%.

The Arrowsmith North area hosts a total of 771 million tons of mineralisation at a grade of 98.0% SiO2. The mineral resource estimate of the area includes an indicated resource estimate of 248 million tons at a grade of 97.7% in the indicated category and 523 million tons of mineralisation at a grade of 98.2% Si the inferred category. The area’s bankable feasibility study has shown a life of mine for the area of 25 years, an un-escalated total sales amount of AUD$ 2,773,000,000, an internal rate of return of 79% and a payback period of 2.4 years.

The Arrowsmith project also hosts the Arrowsmith South area, which is an exploration target hosting an estimate of 40 million to 80 million tons of silica sands at a grade of approximately 95% SiO2.

Activities

The company is currently underway with a revised capital estimate for a 2 million tons per annum processing plant, which is envisioned to consist of a unique and patented processing circuit at the Arrowsmith North project. The processing system has been designed following an extensive metallurgical testing regime. The analysis results of the conducted metallurgical program are pending, with the final samples produced by the metallurgical test work to be sent to various potential buyers, upon receipt of the results.

The company also announced that the Environmental Protection Authority (EPA) of Western Australia has approved its environmental scoping document (ESD) for the proposed mining activities at the Arrowsmith north project. The company has submitted the project’s environmental review document (ERD), in the middle of April 2022. The final report of the project’s environmental assessment and approval is expected in December 2022.

The company announced at the end of May 2022, that it had begun with the procurement of various key plant equipment for the Arrowsmith North silica sands project. The procurement included the purchase of a high-quality, second-hand fee trommel and vibrating screen. The company is underway with the refurbishment of the equipment.

Future

VRX Silica Ltd. will follow a staggered approach regarding the development of its projects. The company plans to first initiate production at the Arrowsmith North silica sands project, which is then planned to be followed by the Muchea silica sands project and then the Arrowsmith Central silica sands project.

The company is well-financed for its endeavours, with no immediate plans to raise funds until the decision to mine has been made and environmental approval has been received from the EPA.  VRX Silica Ltd. is investigating the best route regarding the possible raising of funds. The company states that it may either follow the route of equity finance or debt financing, should it follow the equity financing route it will aim to keep its share dilution to an absolute minimum. 

To find out more, go to the VRX Silica website