Allup Silica (ASX: APS) has nabbed a prize at-surface heavy mineral sands project next to the Eyre highway in the west Eucla Basin of Western Australia as it looks to take advantage of a looming global titanium shortage.
The McLaren project, which has excellent road and rail access to the port of Esperance, boasts a 2022 JORC compliant resource of 280 million tonne running at 4.8 per cent heavy minerals.
In return for 100 per cent of the exploration licences, the company has agreed to pay the vendors a $150,000 cash payment and a 1.5 per cent royalty. 4.24 million shares are payable on completion of a pre-feasibility study (PFS), subject to certain criteria and a further 4.3 million shares in Allup will be issued once a full feasibility is finished.
A $360,000 placement, which includes $150,000 for directors, has also been raised from investors to provide working capital.
Although it is too early to nail down the initial details of the project economics, the criteria to satisfy the successful conclusion of a pre-feasibility may just provide an insight into what the numbers might look like. The conditions include a capital expenditure of no more than $110 million, an operating expense of less than $215 a tonne of concentrate and a pre-tax net present value (NPV) of more than $800 million.
What makes the deposit so interesting, though, is that because it starts at surface, the project has a low strip ratio which leads to less up-front costs and ultimately makes it more environmentally friendly to mine.
And, according to the company, ilmenite, the main source of titanium oxide - used primarily for white pigment - is trading at more than US$300 (A$460) a tonne due to looming titanium shortages due to an expected supply deficit and mine closures in Kenya, South Africa and Mozambique.
The current owners, who, according to the company, are hanging up their boots, have spent nearly $13 million firming up the inferred resource at McLaren However, they seemingly know a thing or two about mineral sands exploration having been responsible for the initial discovery in 1970’s of the historic Allied Eneabba minerals sands deposit 150km north of Perth.
Part of the reason for the $13 million expenditure was to bring in an updated resource estimate which included assay and mineralogical analysis results that were received after a previous estimate was completed in 2015. The recent estimate of 280 million tonnes at 4.8 per cent heavy minerals incorporated a cut-off grade of 2 per cent and less than 30 per cent slimes, the clay component of most mineral sand deposits.
In total, 653 air core holes were drilled between 2009 and 2021 with the mineralisation being hosted in relatively free flowing red-orange sand which is made up of 90 per cent well sorted, fine to medium grained quartz becoming more clay rich at depth.
Metallurgical work done on a 14-tonne sample in 2017 identified sulphate grade ilmenite which produced typical quality rutile and zircon with low levels of uranium and thorium.
This Project presents an excellent opportunity for Allup Silica to fulfill its plan of moving into production. Albeit a different (titanium) sand, the mining and washing processes are similar to silica sand, as well as the near surface mineralisation and low strip ratios. However, the higher product price and lower shipping volumes present a compelling opportunity for development.
Allup Silica Managing Director Andrew Haythorpe
Haythorpe said the accessability to the project's ground in all seasons of the year allowed for more rapid progress, while infill drilling and further metallurgical work is being planned to begin "as soon as practicable".
Allup is now poised to advance with the PFS, which is expected to be completed within 18 months, although it is believed that the company has already begun the process. The initial steps in the PFS include conducting infill drilling to upgrade the JORC classification to Measured and Indicated and running further metallurgical and mineralogical tests to optimise the product.
Additionally the company needs to assess the modest slime content and develop an effective management program and confirm saline and potable water sources for mine supply.
Once completed, the PFS will allow Allup to firm up the project economics by increasing confidence in the deposit, mining methods and logistics. The study will use the previous conceptual work, with a focus on validating the proposed dry mining and dozer trap mining methods.
It’s not often that a sizable brownfields site with a resource at surface and close to infrastructure becomes available at bargain basement prices, but when it does, investors usually sit up and take notice.
The McLaren project appears to be just that and keen eyes will undoubtedly keep a close watch as the story unfolds.
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