Silica sand explorer VRX Silica (ASX: VRX) has laid out a path to selling its silica sand products in China after striking a strategic alliance with the largest architectural glass manufacturer in the world’s most populous country.
VRX has entered into a memorandum of understanding (MoU) with China Southern Glass (CSG) Holding to form a strategic alliance in connection with its Muchea silica sand project, located around 50km north of Perth, Australia.
The agreement has been signed for an initial term of six months with a provision for an automatic renewal for an additional six-month period.
The Chinese glass-making industry is currently the most dominant in the Asia Pacific region with the deal announced today expected to provide VRX with a strong platform to supply the Chinese market.
VRX said the strategic alliance will include promotion and sale of silica sand products in China and potential sourcing of capital finance for production facilities at Muchea.
In April this year, the silica sand explorer announced the receipt of enquiries and expressions of interest from 20 manufacturers across the Asia Pacific with potential annual silica sand sales of over 1.6 million tonnes for glass-making.
To China with silica sand
CSG is the largest architectural glass manufacturer in China and is currently involved in the manufacture and sale of glass products including float, display, automotive, coated, colour filter, solar and conservation glass.
Under the terms of the MoU, CSG has agreed to assist VRX in determining demand and logistics requirements for silica sand supply in China, including specification for silica sand products and tonnages, pricing across a range of specifications, contract supply length and transport alternatives.
The MoU also states that the parties are to “act in good faith and fair dealing” with one another in a “co-operative working relationship”, although the alliance remains non-exclusive which means VRX can continue to seek out other offtake partners.
In addition, the parties will consider the potential for developing a high-quality glass manufacturing facility in Western Australia for silica sand products generated from Muchea.
Australian silica sand projects
Muchea comprises one granted exploration licence, with one exploration licence and one mining lease application pending.
Test work has confirmed a range of silica sand products are capable of being produced from the project.
In addition to Muchea, VRX is also progressing the Arrowsmith silica sand project, the Boyatup silica sand project and the Warrawanda project – a prospective source of high purity quartz and nickel sulphides.
VRX has said that the silica sand JORC Mineral Resource identified at both its Arrowsmith and Muchea projects is “significant” and “expected to increase”. Furthermore, VRX has declared that it is capable of producing large quantities of silica sand from each project to satisfy demand.
“This strategic alliance further highlights the potential for a significant, world-class silica sand mining operation at Muchea and supports our assessment of increasing silica sand supply constraints in the Asia Pacific region,” said Bruce Maluish, managing director of VRX.
“We are excited by the prospect of working with China Southern Glass and exploring opportunities in the Chinese silica sand market,” said Mr Maluish.
Today’s news helped VRX shares to jump higher by almost 18% by midday to $0.135.