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Corporate Spotlight

Diatreme Resources (ASX: DRX) is an emerging Australian producer of mineral/silica sands. The company’s Galalar Silica Project in North Queensland is in a world-class silica province near the world’s biggest silica mine, while in WA, its Cyclone Zircon Project is de-risked and ready for development.
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Regional support builds for Galalar silica mine

ASX Announcement 7 August 2019 

  • Key regional stakeholders back Galalar Silica Project’s development at Cairns meeting, including support from traditional owners and partners, Hopevale Congress

  • New premium-quality silica sand mine seen delivering new jobs and other economic benefits for region

  • Potential for carbon-neutral mining activity (subject to independent verification) for supply of fast-growing solar PV market in Asia, while reducing China’s reliance on coal-fired power

  • Meeting follows recent MOU for offtake to leading privately owned Chinese group, as project’s development picks up speed with roadmap for rapid implementation.

Emerging silica sands explorer and developer, Diatreme Resources Limited (ASX:DRX), welcomed today the support of key stakeholders for a new silica sand mine in Far North Queensland, following recent stakeholder meetings held in Cairns.

The meetings were co-ordinated by the project’s key development partner, traditional owners Hopevale Congress and included representatives from Queensland Government agencies, Office of Indigenous Affairs, the Department of the Prime Minister and Cabinet, Northern Australia Infrastructure Fund (NAIF), Hope Vale Aboriginal Shire Council and Cook Shire Council.

The latest meetings follow Diatreme’s signing of a MOU with leading privately owned Chinese group, Anhui Fengsha Mining Group, for the potential supply of up to 500,000 tonnes of photovoltaic grade silica sand for the fast-growing solar PV market (refer ASX announcement 16 July 2019).

Diatreme’s CEO, Neil McIntyre, thanked the stakeholders for their crucial support for the emerging project, located adjacent to the world’s largest silica sand mine at Cape Flattery.

“The Galalar project continues to gain significant regional support and we’re delighted with the success of these key meetings,” he said.

“We are particularly focused on delivering potential new jobs for the Hopevale community and spin-off benefits for Cooktown and Hope Vale shire through mine support services, with positive flow-on effects for employment and training.”

He added: “An important outcome from these meetings is more direct engagement with key Queensland Government agencies and their Ministers that will allow Hopevale Congress and Diatreme as project proponents to facilitate a more focused permitting and regulatory pathway to project development. 

“With the project’s scoping study nearing completion, this more direct engagement may allow Galalar a highly cost-effective development pathway and consents for project infrastructure approvals.”

Hope Vale Congress Aboriginal Corporation’s General Manager, Ivan Deemal said: “Congress has been working collaboratively with Diatreme Resources and the various levels of government to progress this groundbreaking project for some years now. 

“This project will not only potentially employ 50-60 local people in long term, fulltime jobs, but will also provide Congress with a real ongoing income stream to invest in new business opportunities and significantly contribute to progressing our community’s journey away from welfare dependency. 

“We will shortly commence a detailed consultation process with the community and key stakeholders to seek input to ensure the operation does not disrupt the community, respects and sustains our traditional country and maximises economic benefits for the whole region.”

In further positive news for the project’s environmental credentials, Diatreme has been advised by its potential offtake partner, China’s Fengsha Group that all of Galalar’s supplied project would likely be used domestically in China as part of the Chinese Government’s active program to reduce dependence on coal-fired power. This is particularly focused in regions where air quality has become a serious health issue. 

“Subject to appropriate independent certification, the positive environmental credits accrued from the silica product’s end use in China will further validate our ’green’ credentials regarding our mining activity at Galalar,” Mr McIntyre said.

“With community support vital for any new mining project, this can only strengthen its environmental case which together with the economic gains could offer long-term benefits for the whole community, working in partnership with the traditional owners.”

Click here to view the full announcement


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Offtake, EPC deals progressing for Cyclone Zircon Project

ASX Announcement 5 August 2019

  • Memorandum of Understanding (MOU) signed with Hunan Rare Earth Industry Group for potential life of mine (LOM) offtake of heavy mineral concentrate (HMC) product and potential investment into Diatreme’s Cyclone Zircon Project, WA

  • Expression of Interest (EOI) received from MCC International for potential provision of engineering, procurement and construction services (EPC) to Cyclone and assistance in sourcing project finance

  • Other potential project participants’ interests currently being formalised amid strong demand and constrained supply for zircon.

Mineral and silica sands developer Diatreme Resources Limited (ASX:DRX) announced today new proposed agreements for its Cyclone Zircon Project located in the zircon-rich Eucla Basin, with demand heating up for its high grade zircon-dominant HMC product.

The agreements follow January’s appointment of independent corporate advisers Blackbird Partners (refer ASX announcement 23 January 2019) with the aim of extracting maximum value for shareholders from Cyclone, one of only a handful of major zircon-rich discoveries over the past decade.

Diatreme continues to engage in detailed discussions with a range of other potential project participants in addition to these identified parties. Amid strong interest in Cyclone, the Company can advise the following non-binding agreements concerning the Western Australian project:

  1. MOU with China’s Hunan Rare Earth Industry Group Ltd (HRE)

HRE, whose parent holding company is Hunan Gold Corporation Ltd (see below) has executed a non-binding MOU with particular interest in HMC product offtake. Key terms include an immediate progression to more binding agreements, and examination of the potential for direct project participation (investment). 

Specifically during the current negotiation process, HRE has expressed its interest in acquiring 100% of available HMC for the life of the mine (LOM), which is under further consideration by Diatreme.

HRE’s General Manager, Long Songbai said: “We look forward to progressing with Diatreme our HMC offtake discussions on this high quality project as soon as possible to more binding agreements.”

(2) Expression of interest (EOI) from MCC International Corporation Ltd (MCC)

MCC, part of the China Minmetals Group (see below) has expressed interest in providing engineering, procurement and construction (EPC) services to Cyclone, in addition to assisting in sourcing suitable (Chinese banks and lending institutions) project finance to facilitate development. Key terms include both parties advancing towards more binding agreements, subject to suitable negotiations.

MCC has a representative office in Perth, has undertaken EPC contracts for a range of resource projects in Western Australia and hence is familiar with Australian standards and requirements of the resource sector. Additionally, China Minmetals group company, China ENFI Engineering undertook Cyclone’s definitive feasibility study (refer ASX announcement 15 November 2018), making it well immersed in the project.

Cautionary Note: The Company notes both the MOU and EOI are non-binding at this stage and whilst both parties have agreed to move forward in good faith, there is a material uncertainty as to whether these will lead to more binding agreements.

Next steps for Cyclone

Diatreme is focused on achieving the following goals for Cyclone:

  • Advancing discussions to potentially binding agreements with both HRE and MCC, providing suitable final terms are agreed;
  • Progressing discussions with other interested parties;
  • Assembling the final commercial mix of parties into binding agreements that will facilitate commercial  development of Cyclone;
  • Achieving the best possible commercial outcome for Diatreme, which may include a significant interest in a fully developed project generating ongoing revenues for the Company.

Development timeline

Diatreme is working towards a detailed understanding on which parties will be participating in various aspects of project development, followed by formal binding agreements being put in place. The Company anticipates these discussions progressing rapidly during the third quarter 2019. 

The Company will keep the market informed as these negotiations progress, together with any potential entry of other participants.

Diatreme’s CEO, Neil McIntyre said the agreements showed the potential for Cyclone to become a profitable new mine for Western Australia, providing new jobs and investment for the benefit of the community, including the traditional owners.

“We are delighted by the high level of interest in Cyclone, which has rapidly advanced following last year’s positive DFS and are confident of progressing these negotiations towards a successful outcome for all parties,” he said.

“In addition to Cyclone, our emerging Galalar Silica Project in Far North Queensland is showing potential to become a new source of premium quality silica for fast-growing Asian markets. 

“With growing demand and constrained supply for both silica and mineral sands, Diatreme is on track to generate increased shareholder value as we achieve our development targets.”

Click here to view the full announcement


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Boost for Galalar with sampling of regional exploration targets confirming continuity of high silica grades

ASX Announcement 20 June 2019 

  • Potential for Galalar Silica Project to further expand resource, with sampling test results confirming regional exploration targets Elim Road North and South contain high purity silica sand (> 99% purity silica) 
  • Diatreme targeting a resource target range at Elim Road North and South of 110 million tonnes (Mt) to 1.1 Billion tonnes (Bt) of high purity silica, suitable for premium quality silica market such as solar panels 
  • New program follows recent upgrade of Galalar’s Indicated Mineral Resource estimate (Nob Point) and upcoming release of commercial scoping study, amid solid demand for premium-quality silica 
  • Galalar Silica Project located in world-class silica exploration province, adjacent to the world’s largest operating silica mine at Cape Flattery.

Emerging silica sands explorer and developer, Diatreme Resources Limited (ASX: DRX) announced today a further boost for its Galalar Silica Project, with test results from hand auger exploration program sampling confirming that potential resource extension targets Elim Road North and South contain extremely high purity silica sand suitable for the premium silica market.

The majority of the twenty (20) auger holes returned >99% SiO2, (see Appendices that follow for auger results) showing the potential for a further resource upgrade following the recent maiden Indicated Resource estimate of 21.5 million tonnes (Mt) >99% SiO2 and a total resource of 30.2Mt (refer ASX announcement 14 May 2019).

Sampling was completed using a sand auger to vertically drill test to depth of 4m, which was the limit of available extension rods (see images below). Sampling was conducted on 1m intervals and generally 3 samples were taken between 1 and 4m.

Diatreme is currently progressing a commercial scoping study for Galalar, following discussions with potential offtakers showing a ready market into Asia for its potential premium product. 

Located around 200km north of Cairns, Galalar lies within the same sand dune system and in close proximity to the world’s largest operating silica mine at Cape Flattery (owned by Mitsubishi Corporation).

The Cape Flattery silica sand product is recognised as a global benchmark for quality silica sand and is widely used for industrial purposes throughout Asia and the world. The global silica sand market is seen reaching nearly US$10 billion in annual revenues by 2022, with a compound annual average growth rate of 7.2% (source: IMARC Group), while the global solar PV glass market is estimated to reach US$48.2 billion by 2025, up from US$3.3 billion in 2016 (source: Bizwit Research & Consulting). 

Bulk testing results have demonstrated the project’s ability to produce premium-grade silica using standard processing techniques, meeting the requirements for high-end glass and solar panel manufacturing and capable of attracting premium prices (refer ASX announcement 9 January 2019).

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).

Table 1: 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.

Click here to view the full announcement


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Regional exploration identifies new silica targets,
 plus new heavy minerals discovery at Galalar

ASX Announcement 11 April 2019 

  • Results from March 2019 regional exploration program confirm target areas for resource extensions at Galalar Silica Project for high purity silica sand, as well as newly identified Heavy Mineral Sands (HMS) 

  • Sampling confirms Elim Road North Prospect and Elim Road South Prospect contain high-quality, high purity silica sands, with potential to add to existing Galalar Silica resource along the same dune system

  • Exploration reveals HMS exploration target at Gubbins Range, containing significant TiO2 levels (up to 1.17% Ti02), with the potential for a major new HMS discovery

Prospects for a new silica mine in North Queensland continue to strengthen, with emerging silica sands explorer and developer, Diatreme Resources Limited (ASX: DRX) announcing today new exploration targets at its Galalar Silica Project, including both high-quality silica sands and potentially a major new Heavy Minerals Sands (HMS) discovery.

Regional Exploration Results

In March 2019, Diatreme completed an initial helicopter sampling program of all the target sand dunes (refer Fig 1.). Sampling was completed using a sand auger to vertically drill test a nominal 1m sample interval below the identifiable topsoil layer. A 1m sample was deemed sufficient for a first pass program. Generally, at least 2 samples were collected at most sample locations, at least 100m apart to determine potential variation in the sand dune. Bagged samples were dispatched to independent laboratory ALS in Townsville for detailed analysis.  Analysis is used to determine SiO2, heavy minerals, iron and for selective samples further particle size distribution analysis.

Test Results now received from the testing program confirm 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 program include:

  • 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 confirms 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 the Gubbins Range. Gubbins Range is a large basement high which forms the western boundary to the sand dune system to the south of the McIvor River (see Figure 2).

The Gubbins Range dune system consists predominantly of longitudinal sand dunes, all of which are approximately 6,000m in length and vary in 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 confirms historic sampling conducted in the dune system in 1981 by Essington Breen (exploration company).

Figure 1. Galalar Exploration Tenement, Regional Targets and Existing Silica Resource Area

Next Steps 

Silica Resource Expansion

An exploration program is being developed to better test the Elim Road silica sand target areas as well as the Gubbins Range HMS target. This program will involve more thorough low impact coverage of target areas with sand augering testing to determine quality continuity and confirm first pass results.

Confirmation of targets will then lead to high impact targeted drilling to undertake a selective deeper sampling program to determine potential resources and testing of bulk sample mineralogy, with a particular focus on identifying the silica deposits that are capable of meeting the standards required for the high value product.

Further exploration activity is planned for early May with results, following drilling sample independent testing, to follow some weeks later.

Heavy Minerals Strategy

The elevated Ti02 (titanium minerals) and zircon minerals indicate the potential for mineable quantities of heavy minerals within the Gubbins Range dune system. Further sample metallurgical testing is immediately underway to determine the following:

  • Mineral assemblage within the Ti02 – to determine the potential value of the contained heavy minerals;
  • More detailed metallurgical analysis to determine ease of separation of the contained mineral assemblage;
  • Determine variation within the samples to examine grade and composition trends within the heavy mineral deposition at Gubbins Range deposit;
  • Enable prioritisation within the Gubbins Range for further targeted exploration and drilling activity.

Results from this further minerals testing are anticipated within two to three weeks.

Click here to view the full announcement


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$1.5m placement to progress Galalar Silica Project

ASX Announcement 27 March 2019 

Emerging silica sands explorer and developer, Diatreme Resources Limited (ASX:DRX) announced today the completion of a bookbuild to raise $1.5 million (before costs) via a placement of approximately 136 million fully paid ordinary shares at an issue price of 1.1 cents, with the funds targeted towards the Company’s emerging Galalar Silica Project in North Queensland.

The placement was well supported by new sophisticated and professional investors and existing shareholders, with leading Australian financial services company Hartleys Limited acting as Lead Manager.

The funds raised from the placement will be used to advance the Galalar project, including:

  • Further resource drilling focussed on major resource extension targets Elim Road North/South;
  • Bulk testing and product definition - delivery of larger bulk samples to potential off-takers;
  • Advancement of permitting and development approvals (mining lease, environmental and other approvals); 
  • Advancement of project economic studies; and
  • Working capital.

The successful fund-raising follows Diatreme’s recent announcement  of an initial silica sands Exploration Target ranging from 210 million tonnes (Mt) to 2.1 billion tonnes (refer ASX announcement 25 March 2019), and the previous upgrade of its Inferred Mineral Resource estimate to 26.4 Mt > 99% SiO2 (silicon dioxide) (refer ASX announcement 7 March 2019).

Commenting on the placement, Diatreme’s Chief Executive Officer, Neil McIntyre, said: “Diatreme thanks the support of shareholders and welcomes new investors to our register following this significant investment in the future of our Company.

“We continue to advance the Galalar project at a rapid pace in this world-class silica province, with previous results showing our ability to produce premium-grade silica for fast-growing Asian markets (refer ASX announcement 9 January 2019).

“Our recent mineral resource upgrade and large maiden regional Exploration Target have further demonstrated the project’s potential to make an important contribution to the region’s development, in partnership with the traditional owners, Hopevale Congress.

“We will now further test priority exploration targets and further delineate resource extensions, along with other studies evaluating Galalar’s ability to deliver genuine economic returns for the benefit of all stakeholders.”

Placement Details

The new shares will be issued on the same terms and rank equally in all respects with the existing fully paid ordinary shares in the Company. The allotment of the placement (except for Director participation) is not subject to shareholder approval and will fall within the Company’s 15% placement capacity under ASX LR 7.1 shares.

Settlement is expected on or around Wednesday, 3 April 2019

Click here to view the full announcement 

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