We say something is “as abundant as sand on the beach” when we want to describe abundance. The reality in the sand market looks different: sand is a finite resource, especially high-quality sand for the glass or even the solar industry. Unregulated overexploitation of sand and sometimes even theft occur worldwide at the expense of people and the environment. Ethically responsibly extracted sand is increasingly becoming a scarce commodity. This is why about half a dozen sand companies are now positioning themselves on the Australian stock exchange.

The latest addition to the sand sector on the Australian stock exchange is Allup Silica (ASX: ASP; FRA: U77). The company has just raised AUD 5 million at AUD 0.20. Due to the weak stock market environment, the price has fallen to AUD 0.125. The company has enough money in the bank for the next two years to implement its business plan: The company has secured a portfolio of twelve promising quartz sand projects in Western Australia. When selecting the projects, care was taken to ensure good access to ports with transport capacity. In addition, attention was paid to the special quality of the sand. It should be as high as possible so that the projects are suitable not only for construction sand but also for glass production and for processing the sand for the solar industry. www.goldinvest.de spoke with Philippe Caillot, who is technically and operationally responsible for Allup Silica:

Eleven Questions for Philippe Caillot, Technical Director at Allup Silica Limited

1. Sand is proverbially abundant. How can one build an international business on sand – especially when this sand has long transport routes, like that from Australia?

Draw the comparison with iron ore, as Australia has superior handling and transport capacities.

Australia’s imports and exports of goods and services account for nearly half of its GDP. As Australia is largely dependent on its mining industry and is a leader in several exported commodities, namely iron ore and coal, the country has excellent infrastructure for handling, shipping, and transporting bulk goods, which benefits the quartz sand export market, especially as the nearest markets (Asia-Pacific) are the main growth engine for quartz sand.

2. Is there something like a special role for Australia when it comes to sand? One would think that there is enough sand in the Sahara. But apparently, sand is not just sand? What’s the truth behind the saying that Australia could one day become the Saudi Arabia for sand?

After water, sand is the second most traded natural resource in the world, with consumption tripling over the last two decades, reaching an estimated 40-50 billion tons per year (UNEP 2019). Despite its strategic importance, the extraction, use, and management of sand in many regions of the world remain largely uncontrolled, unregulated, and inadequately regulated, leading to numerous ecological and social consequences that are often overlooked (UNEP 2022). The United Nations report on Sand and Sustainability (2022) states: “Governance is an essential component of the global challenge for sand sustainability”.

Given its significant mining and minerals industry, Australia is a country where mining is heavily regulated to protect the environment. So it’s safe to say that Australian companies operating in the quartz sand market have good chances to benefit from the growing market opportunities.

3. There are about half a dozen companies on the Australian stock exchange that also want to produce sand or develop sand projects. Isn’t there a risk of overcapacity in the short term?

This risk exists but is mitigated by factors such as access to port capacity, quality, and permits. Not all projects will go into production, which is why the Allup strategy with multiple eggs (projects) in multiple baskets (locations) mitigates the risk profile.

4. Allup is banking on a future scarcity of the sand resource. Which markets will see the greatest demand?

Allup is focusing more on a shortage of ethical suppliers for high-quality sands (for more advanced glass products). Additionally, Allup is betting on a sustained or increasing demand for solar energy and other technical products such as high-tech glass, as well as ongoing demand from accelerated construction needs and the foundry industry. The likely market, based on proximity and demand, is the Asia-Pacific region.

5. What are the characteristics of a good sand project?

High-purity quartz sand with adequate access to infrastructure and ports.

High-purity quartz sand with low iron content, present in a form that allows for cost-efficient processing – grains mixed with separate impurity grains, as opposed to quartz sand grains coated with or containing impurities – resulting in a much higher value product. Adequate access to infrastructure and ports ensures the profitability of logistics to reach global markets.

6. What are the biggest risks in developing sand projects? Permits? Sand quality?

The single biggest risk for an exploration project moving into production is obtaining permits and required approvals, including environmental permits.

7. What are the major differences between gold exploration and the development of sand projects?

Cost and time. Drilling is the most cost-intensive part of an exploration program; therefore, the most promising targets are prioritized. Drilling rigs are typically selected based on the characteristics and accessibility of the resource and the target depth. The costs for quartz sand exploration are generally much lower than typical exploration costs for base metals/precious metals, as quartz sand is usually shallow/near-surface, meaning drilling depth is typically no more than 30 meters, compared to gold drilling where holes can be over two kilometers deep. As the resource is near the surface, quartz sand exploration programs are conducted using both air core and hand auger drilling, as opposed to base/precious metals which require more costly methods such as diamond core and RC drilling.

8. The highest-grade use of quartz sand is in solar cells. What qualities are required? How high are the additional costs for cleaning the sand? How is demand developing? Are there concrete figures?

Technical glass applications such as photovoltaic solar cells (PV) and mobile phones require high-grade quartz sand with 99%+ purity and low iron content (100ppm). The processing costs to obtain high-grade quartz sand with these specifications largely depend on the nature of the quartz sand grains. At Allup Silica, we focus on high-purity quartz sand grains that are mixed with separate impurity grains, as opposed to quartz sand grains that are coated with impurities or contain inclusions; these are easier to separate through more cost-effective processing.

The global solar PV market is growing as demand is driven by worldwide government and non-government incentives to switch to renewable energy. The global solar PV market, estimated at $154.47 billion in 2020 and $199.26 billion in 2021, is expected to grow annually at a CAGR of 25.9% between 2021 and 2028.

9. Is it conceivable in principle for Allup to also make money with less pure sands? What could that look like?

Yes, that is conceivable in principle, at least for projects that are very close to ports and have cost-effective logistics, it may be possible to economically ship lower-grade quartz sand products. Also, if market factors, such as ethical supply issues, restrict global supply, this would promote the anticipated feasibility of these types of projects.

10. Speaking of investment costs. What does it cost to bring a sand project into production? And how long can a project run after that?

Allup is not yet able to provide its own cost analysis, but based on feasibility studies by other operators such as VRX (Arrowsmith BFS) and an analysis conducted by CDE Global, a typical quartz sand plant – consisting of screening, washing, classifying, separating, and drying – with a capacity of 2 million tonnes per year has estimated capital costs of $13.3 to $16.8 million before installation and commissioning costs.

The project timeline post-production depends on the size of the resource – mine life was initially estimated at 25 years (Arrowsmith BFS) – with the potential to run for over 100 years (depending on the available resource).

11. What are the short-term milestones investors should watch for?

As it is an exploration company, the short-term milestones are the JORC mineral estimates and the metallurgical results (quality of the sand).