Located near the world’s largest silica sand mine in North Queensland, Diatreme’s Galalar Silica Project is capable of producing premium-quality silica for the fast-growing Asian solar panel market.

Introduction

High-purity silica sand has become an increasingly strategic resource due to its usage in photovoltaic panels and other applications.

Similarly, increasing demand from Asia’s infrastructure and automotive sectors for mineral sands has added to the positive outlook for Diatreme's Galalar project (part of the Cape Bedford EPM), which is favourably positioned to access these growing markets.

Significantly, Diatreme is working in genuine partnership with the traditional owners, Hopevale Congress, to ensure the community receives the full benefits from the project's potential.

A scoping study released in September 2019 highlighted the project's potential to generate strong returns for all stakeholders:

* Pre-tax nominal NPV $231 million

* IRR (internal rate of return) of 150%

* Estimated capital payback within 8 months; start-up capital $24.4m

* 15-year mine life, producing 750,000 tonnes per annum based on a 79% recovery rate.

The project could generate 30-40 jobs in the construction phase and 60 in production, with a focus on local employment including for the traditional owners.

Further improvements to project economics have been identified, including logistics (development of a purpose-built barge ramp 3km from the mine site) and product (potential to develop an ultra-low iron silica export product priced at a significant premium).

Diatreme has signed two MOU agreements for offtake from the project, including with China's Wan Zhong Investment Group, a Hong-Kong based group that supplies major glass manufacturers in China, and with Fengsha Group, China's largest processor and supplier of photovoltaic (solar) and specialty high end silica sand. 

Both agreements may be scaled to reflect targeted production output and are subject to detailed negotiations and binding agreements.

In May 2019, Diatreme announced a maiden Indicated Resource for the Galalar project, comprising 21.5Mt > 99% SiO2, with total resources (Indicated and Inferred) rising to 30.2Mt > 99% SiO2, with a new satellite deposit identified at West Nob Point. The results have further increased confidence in the project's ability to become a source of premium quality silica product to growing Asian markets, including the fast-growing solar panel market.

Bulk testing results have confirmed the project's ability to produce a world-class silica sand product at 99.9% SiO2, meeting the requirements for high-end glass and solar panel manufacturing, capable of attracting premium prices. Significantly, testwork has demonstrated the Galalar silica sand product can be upgraded to "ultra-low iron" (sub 50ppm Fe2O3), attracting even higher prices.

In December 2019, Diatreme lodged a Mining Lease Application (MLA) for the project encompassing an area of 523 ha, including all of the identified Mineral Resource.

PROJECT SUMMARY

  • One of the largest high purity silica exploration land packages in Australia, covering an area of 542 sq km in Queensland’s Eastern Cape York region, around 200km north of Cairns
  • Cape Bedford EPM17795 covers a large Quaternary sand dune field, part of which is currently being mined by Mitsubishi Corporation subsidiary, Cape Flattery Silica Mines Pty Ltd and is the world’s largest silica sand mining operation
  • Closest proximity high-grade undeveloped project to the world’s largest silica markets in China, Japan, South Korea and Taiwan
  • High-grade silica used in glass manufacture, foundry casting, electronics, ceramics and construction – industries in demand and growing in developing Asia, with the market expected to expand at a compound annual growth rate of 7.2% through to 2022, reaching revenues of US$9.6 billion (source: IMARC Group)
  • The global solar PV glass market is seen growing to US$48.2 billion by 2025, up from US$3.3 billion in 2016, amid strong demand from the Asia-Pacific region (source: Bizwit Research & Consulting)

Exploration Overview

The Cape Bedford EPM17795 is located approximately 200km north of Cairns in North Queensland, and covers the extent of a large Quaternary sand dune field, part of which is currently being mined by Cape Flattery Silica Mines Pty Ltd (CFSM), a wholly owned subsidiary of Mitsubishi Corporation. Cape Flattery has operated since 1967 and is the world's largest silica sand mining operation.

The Cape Bedford / Cape Flattery region of north Queensland is dominated by an extensive Quaternary sand mass and dune field that stretches inland from the present coast for approximately 10km and extends 50km from north to south.

Diatreme executed a Conduct and Compensation Agreement (CCA) in January 2017, and a Cultural Heritage Agreement (CHA) in June 2017 with the traditional owners, Hopevale Congress. The CCA allows access for ground disturbing exploration activity and ensures the traditional owners share in the potential economic benefits of this new project, while the CHA sets out the protocol for cultural heritage issues.

Cultural heritage surveys for the first proposed exploration program were undertaken in August 2017 and subsequent exploration access granted in September 2017.

In 2018, Diatreme identified high purity silica sand resources after initial activities at the Nob Point target area. Regional exploration commenced in 2019 to prioritise targets generated from desktop studies.

In March 2019, Diatreme completed an initial regional helicopter sampling program of all the target sand dunes. In May 2019, this was followed up with shallow auger hole drilling at the Elim Road North and South exploration targets to confirm sand quality and surface continuity.

 

Galalar Resource

Based on air-core drilling programs, an initial Inferred Resource of 21.6 Mt of high purity silica sand was estimated in August 2018 by Ausrocks Pty Ltd. The resource was upgraded in March 2019 to 30.2 Mt of high purity silica sands following additional air-core drilling and processing studies. Within the new resource, 21.5 Mt >99% SiO2 was categorised with Indicated confidence.

Previous bulk testing results undertaken in specialist labs have demonstrated the project’s ability to produce using industry standard processing techniques a premium-grade silica product (silica sand at 99.9% SiO2) (refer ASX announcement 16 August 2018), including grain size being within a 30-120 mesh size range (125-600 micron) and iron content below 100ppm. This meets the requirements for high-end glass and solar panel manufacturing, capable of attracting premium prices (refer ASX announcement 9 January 2019).

Excellent recovery rates during testing were obtained for the final product of approximately 79% from raw sand feed. These results also showed the potential to obtain secondary, high-value heavy mineral sands during mining, adding to the project’s value.

Galalar Silica Project  – Resource Boundaries

 

Galalar Silica Project – Resource Update (as at 9 May 2019)

 

Resource Estimate Base Assumptions

The following summary parameters, base assumptions, exploration activities and laboratory testing results form the basis for the Inferred Resource Estimate prepared independently by Ausrocks Consulting Mining Engineers:


• In-situ density of target material – 1.62 t/m3
• Cut-Off grade material - >99% SiO2
• Topography – Sourced from Geo Image photogrammetry survey and Ausrocks UAV drone survey with DGPS by Veris used as ground control
• Topsoil Thickness – 0.3m sourced from Cape Flattery topsoil thickness, anything that is less than 0.3m below the surface was excluded from the resource estimate
• Top and Base of Resource – This was determined by completing weighed averages of each 3m composites by ensuring the top composite tested and all in between down to the bottom of the hole had a weighed average >99% SiO2 by blending. The top could not exceed 0.3m below the surface (top soil) and the base was generally the bottom of the drillhole which either finished in clay or the water table was met
• No resource below the water table was considered, as the drilling method could not drill below this level and hence no data is available
• Resource Boundary was determined by modelling the top and bottom surface in SURPAC 6.6.1 and considering where the surface meets the topography and ensuring that the boundary was within 200m from the drillhole
• Grid Spacing used for interpolation – 20m by 20m grid
• Spatial Interpolation Method – Inverse Distance.

Regional Exploration

In March 2019, Diatreme announced an initial silica sands Exploration Target at Galalar, ranging from 210Mt to 2.1Bt of silica (refer ASX announcement 25 March 2019). In the same month, Diatreme completed an initial helicopter sampling program of target sand dunes.

Results received confirmed the existence of high purity silica sand in the priority target areas as well as highlighting significantly elevated TiO2 within the Gubbins Range sand dune system. Key outcomes from the regional exploration/sampling and testing program included:

• Potential Existing Resource Extensions - Elim Road North & South – High Purity Silica Sands: Sampling of the sand dunes where accessible returned high SiO2 results, including a high of 99.67% in situ purity and averaging 98.95% Si02 over the whole sampling area. This confirmed the aerially large dune system could potentially host a large and significant occurrence of high purity silica sand. These areas will continue to be prioritised for their potential to add significant additional high purity silica resource to the existing discovery.

• Heavy Minerals - Gubbins Range HMS: Sampling highlighted elevated TiO2 within the dune system immediately east of Gubbins Range. Gubbins Range is a large basement high which forms the western boundary to the sand dune system to the south of McIvor River (see Figure 1).

The Gubbins Range dune system consists predominantly of longitudinal sand dunes, all of which are approximately 6,000m in length and of varying height and size. The northern sand dune terminates into a large active elongate parabolic dune sometimes referred to as “Seagrens Dune” near the McIvor River.

In all, 12 sand auger samples were collected from the Gubbins Range dune system at six locations on three of the sand dunes. TiO2 percentages ranged from 0.32 to 1.17% and averaged 0.8%. This confirmed historic sampling conducted in the dune system in 1981 by exploration company Essington Breen.

In May 2019, Diatreme announced test results from hand auger exploration program sampling that confirmed potential resource extension targets Elim Road North and South contained extremely high purity silica sand suitable for the premium silica market (refer ASX announcement 21 June 2019).

Nearly all 20 auger holes returned >99% SiO2, showing the potential for a further resource upgrade following the maiden Indicated Resource estimate (refer ASX announcement 14 May 2019). Sampling was conducted using a sand auger to vertically drill test to a depth of 4m, which was the limit of available extension rods. Sampling was conducted on 1m intervals and generally three samples were taken between 1m and 4m.

Regional Exploration Targets - Galalar Silica Project

Note: The potential quantity and grade of the Exploration Target is conceptual in nature. There has been insufficient exploration completed to date to estimate a Mineral Resource in accordance with the JORC 2012 Edition Guidelines. It is uncertain if further exploration will result in the estimation of a Mineral Resource.

Cautionary Statement: An Exploration Target is a statement or estimate of the exploration potential of a mineral deposit in a defined geological setting where the statement or estimate, quoted as a range of tonnes and a range of grade (or quality), relates to mineralisation for which there has been insufficient exploration to estimate a Mineral Resource.

May 2019- Auger Hole Location (SiO2)

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