Commodities, Features

The precise world of silica


Silica is beholden to a complex global marketplace and precise-albeit-relatively-simple mining process. Australian Resources & Investment shines a light on emerging silica sand company Diatreme Resources.

In far north Queensland – about 220km north of Cairns – lies the world’s largest silica sand mine.

Cape Flattery is owned by Mitsubishi Corporation, which ships roughly three million tonnes (Mt) of silica sand from the operation each year, bound for Japan and other parts of Asia.

Silica has traditionally been used in glass, foundry and chemical industries, but it has a growing profile in the renewable energy sector, where the commodity is important in the manufacture of photovoltaic cells in solar panels.

There are several emerging Australian companies looking to bring silica sand projects online in the coming years. Chief among these is Diatreme Resources, with its Galalar and Northern Resource projects located adjacent to Cape Flattery.

Galalar and Northern Resource are situated at the south and north of a single tenement, covering an extent of a large dune field which has been accumulating sand for millions of years.

A 2021 pre-feasibility study (PFS) indicates Galalar has a post-tax net-present value (NPV) of $358 million, an internal rate of return (IRR) of 66 per cent, and capital payback within 1.4 years.

Diatreme chief executive officer Neil McIntyre.

Diatreme said Galalar had the potential to support the manufacture of 3.2 billion solar panels, the equivalent of taking 132 million cars off the road.

Diatreme inked a landmark agreement with global industrial minerals company Sibelco in late June.

Sibelco became a major Diatreme shareholder through a $13.97 million share placement, while Diatreme’s existing major shareholder Ilwella raised a further $3.3 million for the emerging miner.

Sibelco and Diatreme have also agreed to a joint venture to develop Galalar and Northern Resource, supported by a $35 million investment from Sibelco split across two tranches of $11 million and $24 million.

Diatreme chief executive officer Neil McIntyre said the Sibelco partnership was “transformational” for the company.

“Sibelco is one of the world’s largest industrial minerals companies,” McIntyre told Australian Resources & Investment. 

“The company is European headquartered but has worldwide operations and, particularly in the silica space and high-end silica, Sibelco is a world leader. 

“There’s no company that understands the silica market better.”

McIntyre said the agreement with Sibelco is made more significant by the fact silica projects aren’t straightforward for emerging miners.

“The struggle for a junior in transitioning from exploration into pre-development and development, particularly in industrial minerals, is (the fact) getting genuine offtake in place with major manufacturers is very difficult,” he said. “Particularly in high-purity silica because you’re mining and selling a product almost at a chemical grade. 

“The specifications for this product are so fine – down to parts per million – and as a start-up the end users look at you somewhat sceptically regarding your ability to deliver the quality of product they need.”

For glass manufacturers producing on continuous batching processes, incorrect silica specifications (impurities) can lead to glass bubbling and other issues, which can ruin the product altogether. The ramifications can be more severe than an errant piece of glass, with a company’s industry standing on the line.

“Manufacturers are hypersensitive about their reputation and their ability to be able to deliver the products they need,” McIntyre said.

McIntyre said while the silica market has a long history, it lacks the transparency of other commodity markets and has traditionally been difficult to understand. 

But that’s changing.

“Traditionally, a lot of the silica market in Australia has been dominated by trading houses – Japanese trading houses, in particular,” McIntyre said. “Mitsubishi is one of them and there are two or three others out of Western Australia that dominate that market. 

“This creates a market that’s incredibly opaque and you can’t easily see the substance behind it in terms of pricing and in terms of the products they’re producing. 

“So what we’re seeing is a level of maturity coming into the silica market now, with a number of listed companies like us. There’s about three or four in Western Australia.

“We’re a public company, we publish and talk about everything to do with our business, and that’s new.”

As part of the Sibelco partnership, McIntyre said Diatreme will continue to manage the day-to-day on-ground matters, including exploration, permitting approvals, engagement with Traditional Owners and government. 

Sibelco will enable Diatreme access to its network of specialist processing technology, expertise, and 150 years’ worth of experience in silica sand.

McIntyre said this would be critical in establishing future offtake agreements, as Sibelco understands how to develop a supply chain and what buyers want.

“In many ways, it’s a great marriage of the offshore, technical and market understanding married up with the domestic, deep understanding of the resource,” he said.

Diatreme is targeting three to five million tonnes of silica production within five years.

Diatreme aims to complete its Galalar bankable feasibility study (BFS) and lodge its environmental studies by early 2023.

The company aims to complete permitting and approvals by late 2023, before Galalar production begins in 2024.

Diatreme established an MoU with Far North Queensland Ports Corporation in August to support its Northern Resource project. The MoU outlines key terms of cooperation in advancing exports from Northern Resource via the Cape Flattery port.

The company also lodged two mining lease applications (MLAs), as well as four infrastructure MLAs for Northern Resource, which McIntyre said was the first step in opening this project to potential export development activity.

Diatreme will continue resource drilling at Northern Resource to upgrade resource categories and further understand the tenure.

With a PFS and BFS still to be completed for Northern Resource, McIntyre said it was about 18 months behind Galalar.

But that doesn’t mean it isn’t impressive.

“While they are separate and distinct projects, the advantage of the northern project (Northern Resource) is we believe it’s probably of a larger scale than the southern project (Galalar),” McIntyre said. 

“If we’re looking at potentially about 1.3 million tonnes of exported product from the south, we’ve probably got two to three million tonnes from the northern project subject to, of course, further proof through resource drilling and higher categories in the resource. 

“We think the north has much larger potential, so it would be an important addition moving forward as we aspirationally aim for three to five million tonnes of production within five years, subject to advancement through permitting and approvals processes.” 

This feature appeared in the October issue of Australian Resources & Investment.

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