The latest addition to the Australian stock market in terms of sand is Allup Silica Limited (ASX: ASP; FRA: U77). The company just raised A$5 million at A$0.20. The price has fallen to A$0.125 due to the weak stock market environment. The company has enough cash in its coffers 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. In selecting the projects, care was taken to ensure good access to ports with transport capacity. Attention was also paid to the particular quality of the sand. If possible, it should be of such a high quality that the projects are suitable not only for construction sand, but also for glass production, as well as for processing the sand for the solar industry. www.goldinvest.de spoke with Philippe Caillot, who is technically and operationally responsible for Allup:
Eleven questions for Philippe Caillot, Technical Director at Allup Silica Limited
- the abundance of sand is proverbial. How can you build an international business on sand - even more so when that sand has long transportation routes like the one from Australia?
Use the iron ore analogy comparison in terms of transportation with Australia having superior bulk handling and shipping capabilities.
Australia’s imports and exports of goods and services comprises just under half of its GDP. Being largely dependent on its mining industry and a leader in multiple exported commodities, namely iron ore and coal; Australia is poised with superior bulk handling, shipping capabilities and bulk transportation infrastructure, thus supporting the silica sand export market, particularly with the closest markets (Asia-Pacific) being the leading driver in silica sand market growth.
- is there such a thing as a special role for Australia when it comes to sand? You would think that there is enough sand in the Sahara. But apparently not all sand is the same? What is there to the saying that Australia could one day become the Saudi Arabia for sand?
Sand is the world’s second most traded natural resource in the world, after water, with use tripling in the last two decades to reach an estimated 40-50 billion metric tons per year (UNEP 2019). Despite its strategic importance, sand’s extraction, use, and management remain largely ungoverned, unregulated, and under-regulated in many regions of the world, leading to numerous environmental and social consequences that have mostly overlooked (UNEP 2022). As per the Sand and Sustainability report by the United Nations (2022), “governance is integral to the global sand sustainability challenge.”
Given it’s prominent mining and minerals industry, Australia is one such country where mining is heavily regulated to make peace with the environment. Thus, it would be safe to say that Australian companies operating in the silica sand market are in a bright spot when it comes to cashing in on the growing market opportunities.
3. There are about half a dozen companies on the Australian stock exchange that also produce sand or want to develop sand projects. Isn't there a risk of overcapacity in the short term?
This risk exists, but is mitigated by factors of access to port capacity, quality and approvals. Not all projects will come to production, which is why Allup strategy on multiple eggs (projects) in multiple baskets (locations) gives risk mitigation to the risk profile.
4. Allup is betting on a future shortage of sand as a resource. From which markets will the greatest demand come?
Allup is more betting on a shortage of ethical suppliers for high-quality sands (for more advance glass products). It is also betting on continued or increased demand for solar energy and other technical products such as high-tech glass, plus the continued demand from accelerated construction requirements and foundry industries. The likely market, based on proximity and demand, would be the Asia-Pacific market.
5. what are the characteristics of a good sand project
High purity silica sand, with reasonable access to infrastructure and ports.
High purity silica sand with low iron content that is in a form that allows for cost-effective processing – grains that are mixed with separate impurity grains as opposed to silica sand grains coated with impurities or with inclusions inside them – resulting in a product with a much higher value. Reasonable accessibility to infrastructure and to ports ensures the viability of logistics to reach global markets.
6. what are the biggest risks in developing sand projects? Permitting? The quality of the sand?
Permitting and the necessary approvals, including environmental, are the single largest risk to an exploration project moving into production.
7. When comparing gold exploration and sand project development, what are the biggest differences?
Cost and time. Drilling is the most cost intensive part of an exploration program; thus, the most promising targets are prioritised. Drill rigs are typically selected depending on the properties and accessibility of the resource and target depth. The cost of silica sand exploration is generally much lower than the typical exploration costs of base/precious metals exploration due to silica sand typically being shallow/near surface, meaning that drilling depths are typically no greater than 30 metres, as opposed to gold drilling, for example, where drill holes can be over two kilometres deep. Due to the resource being near surface, silica sand exploration programs are conducted using both air core and hand auger drilling as opposed to base/precious metals which require more cost intensive methods such as diamond core and RC drilling.
8. The highest quality use of silica sand is for solar panels. What qualities are required? What is the additional cost of cleaning the sand? How is the demand developing? Are
there any concrete figures?
Technical glass applications such as solar photovoltaic (PV) cells and mobile phones require high grade silica sand 99%+ with low iron (<100ppm). Processing costs to achieve high-grade silica sand with these specifications largely rely on the type of silica sand grains. At Allup Silica our focus is on high purity silica sand grains which, as opposed to silica sand grains coated with impurities or with inclusions inside them, are mixed with separate impurity grains; these can be more readily separated using lower-cost clean-up processing.
The global solar PV market is experiencing growth as demand is being driven by global governmental and non-governmental incentives to transition to renewable energy. The global solar PV market, valued at USD 154.47 billion in 2020 and USD 199.26 billion in 2021 is projected to increase yearly with a CAGR of 25.9% during 2021 -2028.
9. is it also conceivable in principle for Allup to earn money with less pure sands? What might that look like?
Cost logistics, it may be possible to economically ship lower-value silica sand products. Also, if market-factors, such as ethical supply issues restricting global supply, then this would help the prospective viability of doing this type of project.
10. Speaking of capex. What does it cost to bring a sand project into production? And how long can a project run afterwards?
Allup has not yet reached the stage of providing its own costing analysis, however based on feasibility studies by other operators such as VRX (Arrowsmith BFS) as per an analysis done by CDE Global; a typical silica sand plant – consisting of screening, washing, classifying, separation and drying – with a 2m TPA capacity - has a capital cost estimate of USD 13.3-16.8 million before the costs of its installation and commissioning.
Project timeline post-production is dependent on the size of the resource – life of mines have been seen to be projected for an initial 25 years (Arrowsmith BFS) – with potential to run for 100+ years (dependant on available resource)
11. What are the near-term milestones that investors should look out for?
Being an exploration company the near-term milestone are JORC minerals estimations and metallurgical (quality of the sand) results.
According to §34b WpHG and according to paragraph 48f paragraph 5 BörseG (Austria) we would like to point out that principals, partners, authors and employees of GOLDINVEST Consulting GmbH hold or may hold shares of Allup Silica and therefore a possible conflict of interest exists. We also cannot exclude that other stock letters, media or research firms discuss Allup Silica during the same period. Therefore, symmetrical information and opinion generation may occur during this period. Furthermore, there is a consulting or other service contract between Allup Silica and GOLDINVEST Consulting GmbH, which means that a conflict of interest exists, especially since Allup Silica remunerates GOLDINVEST Consulting GmbH for its reporting.