VRX Silica’s BFS reveals billions in life-of-mine revenue for Arrowsmith North silica sand project

VRX Silica ASX Arrowsmith North Bankable Feasibility Study BFS
Underpinning VRX Silica’s BFS is a maiden reserve of 223Mt at 99.7% silica.

VRX Silica (ASX: VRX) has debuted a positive bankable feasibility study for its Arrowsmith North silica sand project in Western Australia, with sales over the mine’s initial 25-year life predicted to bring in $2.773 billion.

The study estimates a low capital expenditure of $28.26 million to build a 2 million tonne per annum operation over 25-years.

Total sales from Arrowsmith North are forecast at $2.773 billion over the period, to generate after tax and finance cashflow of $835 million.

Payback for the capital expenditure is estimated at 2.4-years, with the study putting a 79% post tax ungeared internal rate of return on the asset.

The study is based on ore reserves of 204Mt at 99.7% silica within the mining lease application area, with total reserves amounting to 223Mt at 99.7% silica – capable of underpinning a 102-year operation.

“We are delighted with the results of ongoing work for Arrowsmith North, and following our BFS, the conversion of the mineral resource estimate into a maiden probably ore reserve,” VRX managing director Bruce Maluish said.

“We expect Arrowsmith North to be a long-life mining project with a significant proportion of the ore reserve sitting within our mining lease application area,” he added.

Offtake discussions and silica sands market

VRX noted that offtake discussions for its silica sands products are ongoing.

“Demand for identified saleable products remains strong and we have generated significant interest from potential customers across the Asia Pacific region and continue to engage with potential customers,” Mr Maluish said.

High-grade silica sand is a key raw material in construction and creating glass, metal casting and ceramics.

In glass, silica sand is a primary component of all types of standard and specialty glass, with its chemical purity the primary determinant of glass’s colour, clarity and strength.

According to VRX, high-grade silica sands are sought for a combination of their physical and chemical attributes and are also using in water filtration, and hydraulic fracturing.

The construction sector is currently driving demand for the material with volume and value increasing world-wide.

Between 2009 and 2016, sales of silica sand experienced at a compound annual growth rate of about 8.7%.

By late morning trade, shares in VRX were up 12% to $0.14.