VRX Silica (ASX:VRX) aiming to become a global supplier of high-quality silica sand

Interviews

by Lauren Evans

VRX Silica Limited (ASX:VRX) Managing Director Bruce Maluish provides an update on the company's Arrowsmith and Muchea silica sand projects, potential offtake partners and financing.

Lauren Evans: Hi. This is Lauren Evans for the Finance News Network. Joining me from VRX Silica (ASX:VRX) is Managing Director Bruce Maluish. Bruce, welcome back, and it's nice to meet you.

Bruce Maluish: Nice meeting you, Lauren. Happy to have a chat.

Lauren Evans: So, VRX Silica is aiming to become a global supplier of high-quality silica sand. Can you tell us more about this?

Bruce Maluish: I recognised, back in 2017, that there was going to be a shortage, particularly in Asia, for silica sand. So, I pivoted the company to silica sand. And I looked around all around Australia and ultimately, lo and behold, we've got significant deposits almost in our backyard. The silica sand market in Asia is quite significant. Between flat glass, container glass, they use about 130 million tonnes per year. But what we find is the supply side of the equation within Asia is becoming fairly dire. The bulk of the high-quality silica sand, at least silica sand suitable for making glass, has been dredged from freshwater rivers and lakes. And notwithstanding the downstream effect of it, but the banks of rivers are in some jeopardy. So, it's not sustainable. Most of the countries in Asia recognise that and have banned dredging within freshwater rivers and lakes. I mean, a classic example was the Mekong River. Mekong River used to supply about 20 million tonnes a year. And both Vietnam and Cambodia combined to ban dredging in the Mekong river. So, it took 20 million tonnes out of the market. And since then, the price of silica sand has steadily increased.

Lauren Evans: Thanks, Bruce. So, now to your flagship project, Arrowsmith North, can you provide an update, starting with permitting?

Bruce Maluish: We're very close to finalising all the work that's required. We're rewriting parts of the referral document now, and making sure we're addressing all the concerns of the EPA. But I might also add that any studies that we do undertake at Arrowsmith North we're duplicating at Aerosmith Central and Muchea, our other projects. And we've developed… Vegetation Direct Transfer, it's called. It's a rehabilitation technique that's particularly suitable for this type of country. It is new and it needs a lot of supporting evidence to be able to get approval from the EPA. And we've had a number of meetings with the EPA, we've lodged draft documents, we've got draft comments. So, it's progressing. And it's getting pretty close now.

Lauren Evans: So, before we move on, Bruce, where are you with the financing and offtake partners?

Bruce Maluish: We've been modifying our design of the plant to provide exactly the product that potential offtake partners want. So, when it comes to foundry sand, for example, there is a particular sizing and size distribution of grains and grain shapes that the foundry companies prefer. And, of course, that improves the saleability of the product, and it allows us to put in place long-term contracts with buyers that we want to do business with. So, it takes a little bit longer to get to that point. And same with the glass sand. It's a bit of an iterative process. They will take a sample, send us back comments. We might modify the design, and get closer to what their ideal is. And we're dealing with end-users here. These are not traders that we're dealing with. These are end-users that want the product.

So, when it comes to financing, we've got a number of boutique-type companies that are lined up. We're in the middle of independent technical review, which the financiers will require in any case. So, the finance is there for us, but they will want to see a better timeline for the EPA, which we should be able to establish much better in the next couple of weeks.

Lauren Evans: Now, to your other project, Muchea, how's that progressing, and how does it fit within your ambitions of becoming a global supplier of high-quality silica sand?

Bruce Maluish: Muchea is different to Aerosmith North. Its grain size and quality is better, particularly for what's called the ultra-clear market. And the ultra-clear market is dominated by the glass that goes over solar panels. Now, you can imagine, the glass that goes over solar panels has to be ultra clear because sunlight equals power. So, you want as much of the sunlight as you can get through it. But it's actually a very high-tech glass. It's got to withstand hail. So, it's more difficult to produce than you might think. However, every glass manufacturer in Asia wants to be making that glass. And they're entirely dependent on the quality of the sand that they can get in to make their glass. Glass manufacturers in Asia all understand that waiting for them is the domestic market in Asia. You might drive around Australia, every second house has got solar panels on it, it seems these days, but not in Asia. There are big industrial parks, big industrial solar power supply systems, but not domestic. And all the glass manufacturers and the solar panel manufacturers understand that that market is waiting for them, and it's huge.

Lauren Evans: So, the last question from me, Bruce, is there anything else you'd like to add?

Bruce Maluish: We've finished all engineering on it. We're in the process of finalising construction diagrams. And, also, we're buying a bit of secondhand gear at the moment, which hopefully will speed up that construction process, so we're not waiting for equipment. And the bulk of the equipment that we require actually comes out of the mineral sands industry. We use very similar equipment, but for different reasons. For example, spirals. The mineral sands industry use it to pull out heavy mineral, and they keep the heavy mineral. We're going to pull out any heavy mineral that might be there and throw it away. We want to keep the other bit. But there's a lot of that equipment around in Western Australia. Western Australia is one of the world's largest producers of mineral sand. So, the engineering support here in WA is some of the best in the world, and there's an enormous amount of equipment.

And the other thing I would say is there will become a silica sand sector on the ASX. We're leading the pack there. But there will, that will become the case, because Asia is running out of sand and Australia has got a lot of it.

Lauren Evans: Well, Bruce, thanks so much for the update today, and we look forward to hearing from you again later this year.

Bruce Maluish: Thanks, Lauren. Nice chatting.


Ends

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