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VRX Silica higher on grant of Mining Lease for Muchea Silica Sand Project

The company is focused on leveraging growing demand in Asia for its high-grade low-iron silica sand from projects north of Perth in Western Australia.

VRX Silica Ltd - VRX Silica higher on grant of Mining Lease for Muchea Silica Sand Project
Development of the project will support a large export industry in Western Australia

VRX Silica Ltd (ASX:VRX) has been granted a Mining Lease for the Muchea Silica Sand Project, which is around 50 kilometres north of Perth, Western Australia.

The Mining Lease covers about 1,008 hectares, including the development area, and contains a probable ore reserve of 14.6 million tonnes at 99.9% SiO2 and an inferred mineral resource of 61.4 million tonnes at 99.6% SiO2.

This is sufficient for at least 25 years of production in line with the project’s bankable feasibility study (BFS) released in October 2019.

The news was cheered by investors with the company’s shares as much as 24% higher to 21 cents intra-day, a new seven-year high.

“Significant milestone”

VRX’s managing director Bruce Maluish said: “The grant of the Mining Lease is a significant milestone for VRX Silica and a major step forward in our journey to becoming a global, long-life supplier of high-quality silica sand.

“Demand from potential customers for long-term supply of silica sand from the Muchea Project is strong.”

Stepping up sales negotiations

Maluish said: “With the Mining Lease secured, we look forward to stepping up negotiations to finalise sales contracts for high-quality silica sand products and secure the necessary funding for the project’s $32 million development.

“The Muchea Project is a world-class, high-grade and low environmental impact silica sand project with outstanding economics and located in a Tier 1 jurisdiction.

“Its development will support a substantial export industry in Western Australia and provide significant financial and employment benefits in the north-eastern corridor of Perth.”

Probable ore reserve

The company has completed the necessary work to convert the indicated mineral resource to a probable ore reserve.

This maiden reserve is estimated from the indicated mineral resource only and constitutes about 30% of the estimated total production target over a 25-year mine life.

VRX intends to mine solely from the probable ore reserve during the first nine to 10 years of mining operations.

The ore that forms the inferred resource is contiguous with the indicated resource and has been categorised as lower confidence because of wider-spaced drilling.

An estimated additional 1,500 metres of drilling is required to upgrade the inferred resource category.

The company has set out in the BFS an initial production target of 48.3 million tonnes from the Muchea Project with processing in a purpose-built, wet-sand processing plant.

Silica sand products

Based on metallurgical test-work to date, the silica sand at Muchea is readily amenable to upgrading by conventional washing and screening methods to produce a high-purity silica sand product with high mass recoveries.

The high-purity silica sand product specifications are expected to be suitable for industries such as glassmaking and foundry sand.

Potential for extended Life of Mine

VRX intends to extend the Muchea Project’s mine life to well beyond 25 years and to realise this will continuously assess available options.

The company is finalising further studies and compilation of necessary data to support formal referrals to the Federal Department of Agriculture, Water and Environment (DAWE) and the State Environmental Protection Authority (EPA) to secure environmental approvals for the development of the project.

Pre-referral meetings have been held between the company and its environmental consultants with representatives from DAWE and the EPA and these have resulted in valuable feedback as to requirements for these referrals.

The company is also seeking to expedite approval for its mine plan and the issue of a mining permit from the Department of Mines, Industry Regulation and Safety.

Quick facts: VRX Silica Ltd

Price: 0.2 AUD

ASX:VRX
Market: ASX
Market Cap: $89.02 m
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