Galalar PFS and Maiden Ore Reserve
DRX.AX
only
ASX
ANNOUNCEMENT
9 November 2021
Galalar Maiden Ore Reserve, PFS delivers substantial boost to
new Silica Sand mine
Highlights
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Galalar Silica Project's Pre-Feasibility Study (PFS) returns post-tax net present value (NPV8) of A$358 million,
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(vs Scoping Study of $158 million) Internal Rate of Return (IRR) of 66% and Life of Mine (LOM) net revenue of
Emphasis on supporting North QLD businesses and Service providers
A$2.5 billion
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Pre-tax NPV noted as A$495 million, IRR at 74%
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Low initial Capex of A$60.1 million (plus 11% contingency of $7.8 million) with payback period estimated at
1.4 years
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Maiden mineral reserve estimate (JORC 2012) delivered at 32 Mt, sufficient for an estimated 18 years of
initial operations (at 1.65 Mt ore processed per annum); total JORC Mineral Resource stands at 75 Mt
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Mine life of 23.5 years scheduled
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Sensitivity and scenario analyses demonstrate Project is financially robust and maintains positive NPV
through stress testing with a low economic sensitivity to initial Capex
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Galalar Silica Sand Project is to become a significant employer in the region directly employing 80-85 people,
with an estimate of >40% of workers sourced from local communities
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Contributions to the local economies in wages, royalties and taxes to exceed $800 million during life-of-mine
Operations to deliver a single product through selective mining and progressive rehabilitation, resulting in low impact mine with expected annual yield of 1.32 Mt of premium "low iron" SiO2 product at full production (vs Scoping Study of 0.75 Mt of SiO2 product per annum)
Conventional mine extraction and physical separation processing plant with limited footprint, short construction timeline to production
onlyEmerging silica sand explorer and high purity silica producer, Diatreme Resources Limited (ASX: DRX, Diatreme or the Company) has upgraded the potential of its Galalar Silica Sand Project (GSSP), following the delivery of a maiden Ore Reserve and Pre-Feasibility Study (PFS) for the North Queensland New Economy Mineral Development.
The increase in scale and improvements on the 2019 Scoping Study (refer ASX release 9 September 2019), has delivered a substantial upside to the initial forecast on returns for the project; including a post-tax net present
usevalue (NPV8) of A$358 million and a net revenue of A$2.5 billion.
Other improvements on the project's original scoping study include an increase in targeted production (exported product) from 750,000 tonnes to 1.32 million tonnes per annum and a reduction in total costs (C1 costs - mining, processing and domestic barging). This delivers final product to export point (Cape Flattery Port) reducing C1 costs from A$58/t to A$34/t, facilitating a greatly improved project viability and delivering long term sustainable
personaleconomics.
Diatreme's CEO, Neil McIntyre commented:
"We are delighted to announce our maiden Ore Reserve at 32 million tonnes and the exceptional results of our PFS study for our flagship Galalar Silica Project. These results are a substantial upgrade on the previous Scoping Study and highlight how fundamentally robust the project is as we advance through the final stages of the permitting and approvals process.
"Importantly for the local community, the PFS shows how Galalar could deliver long-lasting jobs and other economic benefits to First Nations and other Stakeholders, supporting the region in its post-COVID recovery, with potential for downstream processing in Queensland to capture further value.
"The Asian solar PV market is booming on the back of the solar energy boom, and we are seeing strong demand from the region for Galalar's premium-quality, low iron silica product.
For"The Galalar project is truly ready to take its place as one of Queensland's important mining projects as we play our part in Queensland's new economy minerals drive. The opportunity is right here in front of us, and we look forward to advancing this project's development with the support of all Stakeholders."
SUMMARY OF PRE-FEASIBILITY STUDY FINANCIAL EVALUATION
The Galalar PFS was commissioned to determine the required capital expenditure (Capex), operating expenditure (Opex), annual revenue and deliver a project economic evaluation to a PFS level. The intent is to continue the economic assessments through a next step definitive feasibility study (DFS) and reach a financial
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onlyinvestment decision (FID) over the coming two quarters, justifying further investment towards project development and commissioning.
Whilst the 2019 Scoping Study showed favourable economics, including pre-tax NPV of $231 million, IRR 150% and capital payback in eight (8) months, DRX has in the intervening period continued to upgrade its mineral resources (ASX release 28 September 2021) and fundamental project economics. The following table (Table 1) summarises the PFS results and key metrics.
useTable 1: Key - Life Of Mine (LOM) financial and production outcomes (expressed in $A)
personal Notes:
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Model is ungeared on an equity basis
All figures are presented in Australian dollars, unadjusted for inflation
Assumed exchange rates US$/A$0.72
*Based on reasonable expectation to exploit resources identified in the Galalar Dune and extending form the western boundary to current Mineral Resources
Engineered process plant maximum capacity is 1.65 Mtpa 11% contingency included in Capex estimate
Mining commences 3 months prior to commissioning at 0.95 Mtpa and ramps up to 1.65 Mtpa at month 3 in operations (initial 6 months at reduced production)
Processing commences at 0.75 Mtpa output and ramps up to 1.32 Mtpa at month 3 Operations
DRX is reviewing the commercial justification for constructing an onsite accommodation facility in early mine life at an estimated $3.5-4 million (excluded from PFS Capital)
The Probable Ore Reserve and Measured, Indicated and Inferred Mineral Resource underpinning the above production assumptions targets has been prepared by a Competent Person in accordance with the requirements of the JORC Code 2012
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onlyMAIDEN ORE RESERVE AND REVISED JORC RESOURCE
The Ore Reserve estimate (maiden) has been completed by independent firm Ausrocks Pty Ltd, applying updated inputs on the basis of the PFS financial model. Approximately 43% of the previously defined Mineral Resources (75 Mt) have now been converted to Ore Reserves (refer to Table 2 and Table 3).
There have been ten exploration and drilling campaigns since September 2017 and data from 191 drillholes and use24 hand-auger holes has been used to define the Measured, Indicated and Inferred Mineral Resources in accordance with the JORC Code (2012) at Galalar area (Figure 1). The most recent campaign included infill holes in Galalar Main and Galalar East specifically for the Ore Reserve Estimate as well as exploration holes in Galalar
Extended.
Table 2: Ore reserves summary at 98.5% SiO2 cut-off grade
JORC Resource
Silica
Silica
Sand
sand
sand
waste
SiO2 %
Fe2O3 %
TiO2 %
LOI %
Al2O3 %
Category
(Mt)
(Mm3)
(Mt)
Probable ore reserves
32.5
20.3
.04
99.20
0.08
0.11
0.16
0.13
Table 3: Resource estimate, September 2021*
JORC Resource
Silica
Silica
Cut-off
Density
sand
sand
SiO2 %
Fe2O3 %
TiO2 %
LOI %
Al2O3 %
Category
SiO2 (%)
(t/m3)
(Mt)
(Mm3)
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Measured
43.12
26.95
98.5
99.21
0.09
0.11
0.16
0.13
1.60
Indicated
23.12
14.45
98.5
99.16
0.09
0.13
0.24
0.10
1.60
Inferred
9.22
5.76
98.5
99.10
0.11
0.16
0.27
0.11
1.60
Total**
75.46
47.16
98.5
99.18
0.09
0.12
0.20
0.12
1.60
* Resource Estimate current as of 13 September 2021
** Total inferred, indicated and measured
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CUT-OFF GRADE
A SiO2 % grade cut-off was used to define the in-situ resource to achieve a marketable, high-purity silica sand. Geological logging returned assay grades and intersections showed an obvious grade demarcation of ore versus waste at 98.5% SiO2. This was further supported by statistical analysis and representation. Lengthy continuous vertical intervals of >98.5% SiO2 was the norm, and these intervals were used for the modelling and Mineral
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onlyResource Estimate. The clear in-situ grade demarcation of >98.5% SiO2 is persistent across the whole resource area.
The surface to one (1) metre interval consistently returned a <98.5% silica assay and retuned higher than normal LOI. The 1 m logged interval included a thin average 0.3 m topsoil and recorded organic material, causing minor contamination, was excluded from the Mineral Resource Estimate. A silica grade cut-off of 98.5% SiO2 is robust and was applied as the cut-off grade for the resource modelling and Mineral Resource Estimate for all JORC
usereporting levels. personalFor
Figure 1: Areas of measured, indicated and inferred mineral resource estimation
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Disclaimer
Diatreme Resources Limited published this content on 08 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 November 2021 21:56:42 UTC.