The company’s three Western Australia high-value silica sand projects – Muchea, Arrowsmith North and Arrowsmith Central - are multi-decade scale contiguous sand deposits with a combined resource of 1,056 million tonnes of silica sand.
In a recent investor presentation, the company provided a number of investment highlights that shareholders should keep their sights on as the company nears the completion of environmental permitting.
An estimated capex cost of $30 million has been set for each project with ‘off-the-shelf’ processing plants and convenient access to existing underutilised rail to port transport infrastructure supporting high capacity logistics.
Although each of the three projects may be developed and operated separately, they will all use simple and conventional mining process.
All three are within proximity to established infrastructure such as power and water with rail lines running adjacent to the tenements.
The projects have the following combined highlights:
- 25-year mine life (with the potential for more than 100 years);
- Aggregate capital expenditure of $87 million (for all three projects);
- Initial financing requirement of $28.3 million (for Arrowsmith North);
- Average annual EBITDA of $140 million;
- Post-tax project NPV of $728 million; and
- Post-tax IRR of 83%.
- Indicative project timeline
Approvals, offtakes and funding are progressing well with plans to begin development towards the end of 2020.
Bankable feasibility studies (BFS) for all three projects have been completed and environmental permitting is well advanced.
Construction for the Arrowsmith North Project is due to start in late 2020 once permitting, offtake and financing are secured while construction for the Muchea project is expected to take place in mid-2021.
Silica sand is forecast to increase in price across the Asia-Pacific region in line with rising demand and supply constraints due to depletion and environmental restrictions on dredging.
Developing countries in the APAC region are anticipated to experience substantial infrastructural spending, driving glass demand.
The foundry industry in Asia has grown as countries have gained manufacturing specialisation and automotive demand has risen - VRX believes this market represents a key growth market for silica sand over the coming years.
Collectively, the foundry and glass industries represent 65% of the APAC silica sand market and are high-value targets for VRX’s products.