Diatreme Resources inks offtake deal to supply silica to China’s solar panel market

Diatreme Resources ASX DRX Galalar silica Fengsha Group offtake
Under a signed MoU, Diatreme Resources could potentially supply up to 750,000 tonnes per annum of photovoltaic-grade silica sand to China’s largest silica supplier Fengsha Group.

Emerging silica sands developer Diatreme Resources (ASX: DRX) hopes to lock in the first offtake partner for its Galalar silica project in north Queensland, inking a deal with Chinese silica processor and supplier Anhui Fengsha Mining Group Co (Fengsha Group).

Diatreme today announced the signing of a non-binding memorandum of understanding, which could see its potential new silica sand mine at Galalar supply premium-quality silica to Asia’s fast-growing solar panel market.

Under the MoU, Fengsha Group is looking to offtake a potential 500,000 tonnes per annum of photovoltaic-grade (sub 100 parts per million iron oxide) silica sand.

In addition, the companies will jointly undertake a further silica sand product testing program to examine the potential for Diatreme to supply an additional 250,000tpa of photovoltaic-grade sand, making the potential offtake 750,000tpa in total.

This additional product would undergo further chemical processing in China to achieve sub 50ppm and sub 30ppm iron oxide high-end silica specifications.

Diatreme has described the deal as a “major step forward” for the Galalar project, with Fengsha Group being considered China’s largest domestic supplier to major glass manufacturers of photovoltaic (solar) and specialty high-end silica sand products.

According to Diatreme, Fengsha Group currently produces and markets more than 2.5 million tonnes of product, which is used in the manufacture of photo-electric glass, thin-film transistor glass and high-end automotive paints.

It has also recently expanded its facility in China’s Anhui Province and is aiming to boost production and sales to more than 6Mtpa from 2020.

“The Chinese market consumes approximately a third of the world’s industrial silica and we have identified and started the first stage of an important relationship with China’s largest supplier and processor of photovoltaic (solar) and high-end silica sand product,” Diatreme chief executive officer Neil McIntyre said.

“It is our intention to form a significant part of the long-term supply solution in a market that is undergoing significant and constant demand growth,” he added.

Further testing will now be undertaken to determine the existing silica product’s amenability to the further beneficiation planned for the extra 250,000t, Diatreme reported.

The company said if the process is successful, reducing the iron oxide to these lower levels could have a “significant multiplier effect on product sales prices”.

“Final commercial agreements on the further processing are subject to successful testing results but may include a product tolling or end price profit-sharing agreement for the services provided by the [Fengsha] Group, subject to further negotiation,” Diatreme stated.

The Galalar silica project was launched last December, after HopeVale Congress Aboriginal Corporation approved a name change from the previous Nob Point prospect.

In March, Diatreme announced a maiden indicated resource for the project, expanding the total resource (indicated and inferred) to 30.2Mt at 99% purity silica, comprising an indicated resource of 21.5Mt at 99% silicon dioxide.

Danica has extensive experience writing and editing business news in the Oceanic and Southeast Asian regions. She has written across a range of industries including oil and gas, mining, energy, science and research, retail and travel. Danica has covered small and large cap companies listed on the Australian, Singapore, Hong Kong, Indian, London and Toronto exchanges.