EXPLORATION & DEVELOPMENT

Diatreme delivers strong numbers for Galalar silica sands project

DIATREME Resources says it will make a development decision on the Galalar silica sand project in Queensland the second quarter next calendar year, with the prefeasibility numbers promoted by the company pointing strongly to a positive outcome.

 Cape Flattery, Qld

Cape Flattery, Qld

The A$60-70 million development has a post-tax net present value of $358 million, an internal rate of return of 66% and a 23.5-year scheduled mine life.

Diatreme says it has taken a "conservative" view on pricing, with the Asian solar PV market is "booming on the back of the solar energy boom, and … strong demand from the region for Galalar's premium-quality, low iron silica product".

Further, while Diatreme notes shipping costs are "abnormally high" it has used five-year forward projections from independent shipping consultants based on "normalised" projections.

In terms of questions marks, the principal risks are seen as both of the above (product pricing and shipping costs), as well as the "social and environmental license to operate (and) finalisation of environmental and mine lease permitting".

Still, earlier this month, former Australian deputy prime minister and treasurer Wayne Swan appointed as the company's chairman.

Moreover, the project is next door to the Mitsubishi-owned Cape Flattery project that's the world's largest silica sand mine and which has been in operation for 30 years.

With regards key export infrastructure, "weather patterns and sea conditions are considered suitable for transhipment operations in the (Cape Flattery Port) anchorage area", with preliminary infrastructure cost estimates being included in the PFS. 

Having recently undertaken a $10 million placement pricing new shares at 2.3c each, Diatreme had cash at the end of the September quarter of $8.9 million.

Shares in Diatreme were unchanged at 2.3c in early trade, capitalising the company at $69 million.

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