Perpetual Resources Ltd (ASX:PEC) is targeting a rapid start to production at Beharra Silica Sand Project in Western Australia after delivering a pre-feasibility study (PFS) that confirmed a compelling low capex and strong free cashflow project underpinned by a reserve supporting a 32-year mine life.
The maiden probable ore reserve of 64.1 million tonnes at 98.6% SiO2 is estimated to produce a saleable product of 47.6 million tonnes at 99.6% SiO2 and positions Beharra as the pre-eminent silica sand project in the Mid-West region.
DFS planning has commenced with permitting and planning underway in parallel and the company is aiming for a rapid production start in line with strong market demand.
Robust economics
The financial metrics of the PFS demonstrate the robustness of the project and outlined an annual nameplate production capacity of 1.5 million tonnes produced from a Run of Mine (ROM) production of 2 million tonnes.
Silica sand sales are expected to generate an NPV of $236 million, a compelling IRR of 77% and an annual EBITDA of A$37 million in first year of full operation (Year 2).
Asia Pacific is the fastest growing silica sand market in the world.
Optimisation potential
The PFS also confirms simple mining and processing with off-the-shelf processing technologies applied and optimal plant configuration sized to allow maximum flexibility and optimal capital cost.
Additionally, a rigorous bulk sample metallurgical program displayed the lowest known impurity profile of end product streams in the Mid-West region - ideal for burgeoning APAC markets.
There is also considerable upside potential through further optimisation of the metallurgical circuit with the project able to be readily upscaled based on a modular plant configuration, that will assist in achieving the lowest possible capital intensity.
APAC proximity
Notably, the project is on the doorstep of the fastest-growing silica sand markets in the world and is just one hour by high-quality road to Geraldton Port.
The company is confident that initial inbound and outbound enquiries from potential off-takers and silica sand trading groups, as well as data compiled from independent price forecasters and other industry contacts, demonstrate strong support of Beharra’s ability to achieve robust sales prices in the growing APAC silica sand markets.
Progressing rapid development
The company will continue to move towards a subsequent project study and/or a decision to fund later in 2021 with first production targeted for late 2022.
Perpetual anticipates strong interest in debt financing for up to 40% of the total Beharra Project capital costs, with the remainder anticipated to be funded by equity and/or strategic investor interest.
Key to securing the debt will be further engagement with end-users and potential for binding offtake agreements to underpin debt payback period.