VRX SILICA LIMITED ABN 59 142 014 873 ANNUAL REPORT 30 JUNE 2020 CORPORATE DIRECTORY DIRECTORS Paul Boyatzis (Chairman) Bruce Maluish (Managing Director) Peter Pawlowitsch (Non-executive Director) SECRETARY John Geary REGISTERED AND PRINCIPAL OFFICE Level 1, 6 Thelma Street West Perth WA 6005 Telephone: (08) 9226 3780 Facsimile: (08) 9226 3764 Website: www.vrxsilica.com.au SHARE REGISTRY Computershare Investor Services Pty Ltd Level 11, 172 St George's Terrace Perth WA 6000 Telephone: (08) 9323 2000 Facsimile: (08) 9323 2033 AUDITORS RSM Australia Partners Level 32, Exchange Tower 2 The Esplanade Perth WA 6000 AUSTRALIAN SECURITIES EXCHANGE VRX Silica Limited shares (VRX) are listed on the Australian Securities Exchange. VRX Silica Limited 1 LETTER FROM THE BOARD OF DIRECTORS TO SHAREHOLDERS Dear Shareholders This year VRX Silica Limited achieved significant milestones in the Company’s progression to becoming a global supplier of high-grade silica sand, whilst always being guided by the levels of social and environmental responsibility expected of a responsible corporate citizen. Management was very early in proactively engaging with the Native Title Claimants of the Arrowsmith and Muchea silica sand project areas. Our negotiations in good faith aimed to reach a set of shared long-term objectives for all parties, and a range of measures designed to achieve those objectives over the terms of all agreements. The Company was pleased to announce in January 2020 these negotiations with the Whadjuk People Native Title Claimants and their representative body had resulted in the parties entering into a Native Title Mining Project Agreement for the Muchea Silica Sand Project. Subsequent to the end of the financial year the Company received confirmation that the Working Group for the Southern Yamatji People, Native Title claimants over the Arrowsmith North and Arrowsmith Central Silica Sand Projects project areas, had approved the terms of its proposed Mining Project Agreement covering the areas. On the ground the Company has undertaken sufficient drilling to assume geological and metallurgical continuity of the sand deposits, released substantial resource upgrades and robust Bankable Feasibility Studies (BFS) for Arrowsmith North and Central as well as our Muchea Project. Continued and extensive metallurgical test work commissioned by VRX Silica during the year has allowed for the creation of a catalogue of silica sand products that can be produced from each of the Silica Sand Projects. This test-work indicates likely qualities for the manufacture of glass, ceramics and foundry sand products considered appropriate for eventual economic extraction from the Arrowsmith projects which has favourable logistics with a rail line to the Geraldton Port and Muchea which has a nearby rail link to the bulk terminal at Kwinana. VRX Silica has developed a unique mining and rehabilitation methodology specific to the environment at our Silica Sand Projects which will enable a successful restoration of mined areas by keeping the top half metre of topsoil intact and relocated to previously mined areas. The COVID-19 virus has intruded into all facets of our daily lives and business this year and looks to continue doing so for the near future. Despite this we continue to engage with our potential offtake customers by video meetings. We expect to maintain the momentum and to this end, on behalf of the Board, I would like to thank all staff and contractors for their valuable contribution during the year. I would also like to thank our shareholders for their support. Bruce Maluish Director For and on behalf of the Board VRX Silica Limited 2 COMPANY REVIEW REVIEW OF OPERATIONS Highlights of the activities conducted by VRX Silica Ltd during the financial year ending 30 June 2020 were: • Arrowsmith North Mineral Resource Estimate Upgrade followed by Arrowsmith North BFS and Maiden Ore Reserve • Arrowsmith Central Mineral Resource Estimate Upgrade followed by Arrowsmith Central BFS and Maiden Ore Reserve • Executed a Strategic Alliance with China Southern Glass • Muchea BFS and Maiden Ore Reserve • Entered into a Native Title Mining Project Agreement for the Muchea Silica Sand Project with the Whadjuk People Native Title Claim Applicants The announcements for mineral resource estimate upgrades at the Arrowsmith North and Arrowsmith Central Silica Sand Projects were followed by a Bankable Feasibility Study (BFS) and Maiden Ore Reserve announcements for each of the projects and later in the period by a BFS and maiden Probable Ore Reserve at the Muchea Silica Sand Project. ARROWSMITH NORTH PROJECT Arrowsmith North Mineral Resource Estimate Upgrade The Arrowsmith North Silica Sand Project (Arrowsmith North) is located 270km north of Perth, WA (see Figure 1). The maiden Mineral Resource Estimate (MRE)1 previously reported for Arrowsmith North was based on a shallow hand auger drilling2 program. This was followed by an aircore drill program completed during March 2019 and the receipt of the analytical results from this program enabled the Company to upgrade the MRE on 9 July 2019 to 771 Mt @ 98.0% SiO23. This is comprised of an Indicated Resource estimate of 248 Mt @ 97.7% SiO2 and an Inferred Resource estimate of 523 Mt @ 98.2% SiO2 which was an overall increase of 398% on the maiden MRE (see Table 1 and Table 2 below). All Mineral Resources are reported in accordance with the 2012 edition JORC Code4. The MRE included an unpredicted 313 million tonnes of high-grade white sand at 98.7% SiO2. The resulting model defined two different sand types, “Yellow” and “White” sand (Table 1 and Table 2) which differ with respect to their chemistry and particle size distribution. The Indicated Resource is predominately within the Mining Lease application area which is within the 100% VRX Silica owned and granted tenements E70/5109 and E70/5027. The majority was subsequently converted to Probable Ore Reserves (see below) and supports the Company’s continued assessment of Arrowsmith North being an extremely long-life mining project with world-class potential. No more drilling is required prior to the Company commencing mining operations. 1ASX announcement of 2 October 2018, “Arrowsmith North Maiden Mineral Resource.” 2ASX announcement of 13 March 2019, “Drilling at Muchea and Arrowsmith Silica Sand Projects.” 3ASX announcement of 9 July 2019, “Arrowsmith North Mineral Resource Estimate Upgrade.” 4 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves VRX Silica Limited 3 COMPANY REVIEW Figure 1: Arrowsmith North Project Location The MRE allows for a Mining Reserve to be estimated following the completion of a positive feasibility study. The mining depth in the Arrowsmith North Project area is limited to mining above the water table, which is 10 metres below the drilled depths and below the Resource. Additionally, the top half metre of topsoil has been discounted in the MRE as it will be used for rehabilitation. VRX Silica Limited 4 COMPANY REVIEW VRX Silica will undertake a further testwork program on the white sand, however metallurgical testwork completed to-date confirms this updated silica sand resource is considered readily amenable to upgrading by conventional washing and screening methods to produce a high-grade silica sand product with high mass recoveries. The high-grade silica sand product specifications are expected to be suitable for industries such as the glass making, foundry and ceramics industries. Figure 2: Arrowsmith North Project schematic geology map showing MRE with separate drill type, Black dots = aircore, Blue dots = auger Figure 2 above shows the drill coverage over the tenements with the underlying sand types shown. VRX Silica Limited 5 COMPANY REVIEW Classification Domain White Sand Yellow Sand All Sand White Sand Yellow Sand All Sand White Sand Yellow Sand All Sand Indicated Inferred Indicated + Inferred Million Tonnes 33 215 248 280 243 523 313 458 771 SiO2% Al2O3% Fe2O3% TiO2% LOI% 98.7 97.5 97.7 98.7 97.7 98.2 98.7 97.6 98.0 0.50 1.10 1.00 0.50 1.00 0.80 0.54 1.08 0.86 0.20 0.40 0.40 0.10 0.40 0.30 0.15 0.40 0.30 0.20 0.20 0.20 0.20 0.20 0.20 0.18 0.17 0.17 0.20 0.50 0.50 0.20 0.50 0.40 0.24 0.52 0.41 *Note: Interpreted silica sand mineralisation is domained above a basal surface wireframe defined based on drill logging data. The upper (Topsoil) layer within 0.5 m of surface is depleted from the modelled silica sand unit, being reserved for rehabilitation purposes. All classified silica sand blocks in the model are reported. Differences may occur due to rounding. Table 1: Arrowsmith North Silica Sand Mineral Resource Estimate as at July 2019 Classification Domain Indicated White Sand Yellow Sand Updated MRE (Mt) 33 215 Inferred All Sand White Sand Yellow Sand 44 149 248 280 243 633% 163% All Sand White Sand Yellow Sand All Sand 194 44 149 194 523 313 458 771 270% 708% 307% 398% Indicated + Inferred Table 2: VRX Silica Limited Maiden MRE (Mt) Difference Tonnage Comparison with Prior estimate 6 COMPANY REVIEW Arrowsmith North BFS and Maiden Ore Reserve On 28 August 2019 VRX Silica announced details of its BFS and maiden Probable Ore Reserve at Arrowsmith North5. Financial Model Based on capital and operating cost estimates a financial model was developed to evaluate the economics of the Arrowsmith North project. Key outcomes from the BFS and summary financial model outputs are set out below. Maiden Probable Ore Reserve Post Tax, ungeared NPV10 $242,300,000 Post Tax, ungeared NPV20 $99,800,000 Post Tax, ungeared IRR 79% Payback period (yrs) (post tax) (ramp up rate) 2.4 Exchange Rate US$/A$ $0.70 Life of Mine (yrs) (Scope of BFS) 25 EBIT $1,144,000,000 Total Sales (initial 25 years) (no escalation) $2,773,000,000 Cashflow after finance and tax $835,000,000 Capex (2 mtpa) $28,260,000 Capex contingency (inc) Life of Mine C1 costs, FOB Geraldton (inc royalties) 20% $30.18 Tonnes Processed (initial 25 years) (Mt) 53 Production Target (initial 25 years) (Mt) 47.7 Probable Ore Reserves @ 99.7% SiO2 (Mt) 204 Ore Reserve life (yrs) 102 JORC Resources (million tonnes) 771 Notes: 1. The Ore Reserve underpinning the above production target has been prepared by a Competent Person in accordance with the requirements of the JORC Code. 2. The material assumptions for the BFS are set out below. All such material assumptions continue to apply and have not materially changed. 3. All figures are presented in Australian dollars, unadjusted for inflation 5 ASX announcement of 28 August 2019, “Arrowsmith North BFS and Maiden Ore Reserve.” VRX Silica Limited 7 COMPANY REVIEW Key Points and Assumptions The BFS is based on only 25 years production from a considerable potential +100 year mine life. The project will be a potentially new long-term industry for Western Australia with substantial economic benefits, including long-term employment and royalties with a significant economic contribution to the local and Mid West region. The Company has received great support for the project at meetings with the local Shires, Mid West Development Commission, Mid West Chamber of Commerce & Industry and various local Members of State and Federal Parliament. The Company has engaged with the Department of Water and Environmental Regulation following preliminary environmental studies to identify key issues pertaining to the project environmental approvals for mining particularly the habitat for potential foraging by Red Tail and Carnaby’s black cockatoos. VRX Silica has developed a mining and rehabilitation methodology specific to the environment at Arrowsmith North which will enable a successful restoration of mined areas. Key economic assumptions for the Arrowsmith North BFS are as follows: Currency Australian dollars Sales contracts in Asia for silica sand are invariably based $US and a A$0.70 exchange rate has been applied Project life 25 years Total probable Ore Reserve is well in-excess of this time period, however the model is conservatively restricted to 25 years Depreciation 15% rate on capital Corporate tax rate 27% on taxable profit Production Steady state of production from Probable Ore Reserves over life of mine, with the first 3 years at 1 million tonnes per year and thereafter at 2 million tonnes per year The Company has currently expressions of interest and letters of intent to purchase 1.5 million tonnes per year of Arrowsmith North products and expects further interest once these products are made available to the market Shares on Issue 404,318,617 NPV estimation discount rates Standard financial modelling conducted at both 10% and 20% discount rates. The 20% rate is generally above standard reporting rates but demonstrates that the Project is still financially robust at this higher rate Capital cost Based on estimates ±15% from engineering companies with extensive experience in sand separation Operating costs A$30.18 C1 costs, including royalties Based on first principles and current rates for equipment Sales revenue US$35-53 per dry metric tonne dependent on product type, product quality, contract terms and quantity Revenue is constant based on current prices and ignores any projected growth in prices Maximum debt A$26 million Borrowing rates 12% Accounts receivable 30 days Accounts payable 30 days VRX Silica Limited 8 COMPANY REVIEW Plant maintenance 5% of capital cost per year Environmental bond A$500,000 May be substituted by the WA Department of Mines, Industry Regulation and Safety’s “Mining Rehabilitation Fund” Capex contingency 20% Recoveries N40 (Foundry ASF 40) 40% N20 (Foundry ASF 20) 24% NF400 (Glass 400 ppm Fe2O3) 20% Recoveries are based on CDE testwork at ±5% Probable Ore Reserve Table 3 below details the Probable Ore Reserve that will be produced from the mining of the Indicated Mineral Resource and processing in a purpose built, wet sand processing plant. The plant will produce four saleable products for different markets with a total Probable Ore Reserve of 223Mt, with 204Mt contained within the mining lease application MLA70/1389. Chemical Composition Within MLA70/ 1389 Product Recovery Million Tonnes Million Tonnes SiO2 % Al2O3 % Fe2O3 % TiO2 % LOI % Arrowsmith-N20 24% 60 54 99.7 0.2 0.05 0.035 0.1 Arrowsmith-N40/ NF500 60% 149 136 99.7 0.2 0.05 0.035 0.1 Local Market 6% 15 14 223 204 Classification Probable Global Total Reserve Particle Size Sieve Opening (Mesh/μm Retained) 40 / 50 / 70 / 100 / 140 / 425 300 212 150 106 Product 10 / 2mm 20 / 850 30 / 600 200 / 75 AFS No Arrowsmith-N20 0.10% 3% 87% 8% 1% 0.10% - - - 21 Arrowsmith-N40 - 0% 21% 36% 24% 13% 5% 1% 0% 36 Arrowsmith-NF500 - - 0.50% 40% 42% 17% 1% 0% - 38 Local Market - - - - - - 64% 22% 14% - Table 3: Arrowsmith North Silica Sand Probable Ore Reserve as at July 2019 VRX Silica Limited 9 COMPANY REVIEW Metallurgical Factors As a part of the upgraded MRE, CSA Global reviewed the metallurgical testwork to comply with Clause 49 of the JORC Code. CSA Global has concluded that the available process testwork indicates likely product qualities for glass, ceramics and foundry sand are considered appropriate for eventual economic extraction from Arrowsmith North. Favourable logistics and the location of the project support the classification of Arrowsmith North (in accordance with Clause 49) as an industrial mineral with an Inferred/Indicated Mineral Resource The extensive metallurgical testwork which has been completed by CDE Global at their facility in Cookstown, Northern Ireland, and Nagrom in Kelmscott, Perth, allowed for the creation of a catalogue of silica sand products that could be produced from Arrowsmith North6 (see Table 4). A key challenge for industrial minerals projects is meeting market specifications. The silica sand market has specifications for parameters such as purity (e.g. SiO2 content) in addition to tight specifications for trace elements such as Fe, Ti, Al and Cr in the glass industry. The Company is confident that it can meet these specifications from Arrowsmith North. Chemical Composition (%) Product Industry SiO2 Al2O3 Fe2O3 TiO2 CaO MgO K2O Arrowsmith-N20 Arrowsmith-N40 Arrowsmith-NF500 Foundry Foundry Glass 99.7 99.7 99.7 0.20 0.20 0.20 0.050 0.050 0.050 0.035 0.035 0.035 0.010 0.010 0.010 0.002 0.002 0.002 0.030 0.030 0.030 Particle Size Product Arrowsmith-N20 Arrowsmith-N40 ArrowsmithNF500 Sieve Opening (Mesh/μm Retained) 10 / 20 / 30 / 40 / 50 / 70 / 2mm 850 600 425 300 212 0.1% 3% 87% 8% 1% 0.1% 0% 21% 36% 24% 13% 0.5% 40% 42% 17% 100 / 150 140 / 106 200 / 75 5% 1% 0% 1% 0% AFS No 21 36 Table 4: Arrowsmith North saleable products from catalogue Table 4 shows the recovered products which make up the Probable Ore Reserve. The mass balance of the particle sizes was analysed allowing for the recoveries of these products in a wet processing plant to be estimated.7 The recovery of each product is shown in Table 5. Product Arrowsmith-N20 Arrowsmith-N40 / NF500 Local Market Industry Foundry Foundry / Glass Fine sand Total Recovery Recovery 24% 60% 6% 90% Table 5: Arrowsmith North Product Recovery 6ASX announcement of 26 February 2019, “Testwork Update and product Catalogues”. 7ASX announcement of 3 May 2019, “High Recovery from Silica Sand Process Plant Design”. VRX Silica Limited 10 COMPANY REVIEW Material Modifying Factors – Mining Factors The mining method chosen for Arrowsmith North is a rubber wheeled front-end loader, feeding into a 3 mm trommel screen to remove oversize particles and organics. The undersize sand is slurried and pumped to a sand processing plant located proximal to the Eneabba to Geraldton railway line. After processing, the silica sand is loaded into railway trucks for bulk export from the Geraldton Port. Mining of the dune sand will extract to the base of the Indicated Resource/Probable Ore Reserve. This level is roughly the same as the freehold land boundary on the western side of the mining area and will leave a slightly undulating surface. On the eastern side of the mining area the sand will slope upward as a 10% gradient to the top of the adjacent dunes. 100% of the material in the Mining Lease application area is considered to be sand that can be beneficiated to a saleable silica sand project. The top 500mm has been excluded from the MRE as it will be reserved for rehabilitation purposes. As there is no waste material, the recovery factor is considered to be 100% and ore loss therefore is considered to be 0%. Material Modifying Factors – Environmental Studies Development location: • South of the Yardongo Nature Reserve • Approximately 10 km inland of the coast • North of the Arrowsmith River (Registered Aboriginal Heritage Site) • Outside of World Heritage Areas, National Heritage Places, Ramsar Wetlands, Conservation Reserves or Commonwealth Marine Reserves The Probable Ore Reserve is located within an area of deep sands, leached of nutrients. The vegetation is coastal low scrub heath (known as Kwongan heath). There are relict dune structures which are represented as low rolling hills. Assessment process: • Referral submission to the Federal Department of the Environment and Energy (DotEE); • Submission of Section 38 referral to State Environmental Protection Authority (EPA) • Seek an Accredited Environment Protection and Biodiversity Conservation Act 1999 (Cth) Assessment under the State Environmental Protection Act 1986 (WA) via an Environmental Review Document with public comment • Undertake any further studies required • Submission of Environmental Review Document Mitigation strategies: • Proposed Action lies within a large Development Envelope, allowing for the flexibility to target areas of lower significance to matters of national environmental significance (MNES) • Disturbance will be kept to a minimum, up to 35 ha per year and 14 ha at any one time • Progressive rehabilitation using topsoil re-location to ensure topsoil and plants are translocated intact to previously mined areas • Conduct further surveys to identify MNES • Use findings to steer the project and avoid MNES where possible There are no mine tailings storage requirements, there are no waste dumps and processing requires no chemicals. VRX Silica Limited 11 COMPANY REVIEW Material Modifying Factors – Infrastructure The project is located on unallocated crown land which is east of freehold land and bounded to the north by a Nature Reserve and South by a proposed Nature Reserve. The west boundary of the project area is the limit of tenure. The Brand Highway is proximal to the area and access is via the Mount Adams Road from the north or Brand Highway to the south. The Eneabba/Geraldton rail line lies to the south west of the project and will be used to transport the processed silica sand to the Geraldton Port for bulk export. The project will require its own installed power and water infrastructure and labour will be sourced from the nearest towns Dongara and Eneabba (approximately 30km from the mine site) and there will be no accommodation installed at the mine site. Costs Operating Costs Operating costs have been determined from first principles and are estimated to include all costs to mine, process, transport and load product on to ships. They are estimated on 1 million tonnes per year throughput, with expected unit cost savings if throughput is increased as anticipated to potentially 2 million tonnes per year. Royalties The prevailing rate of royalty due to the State is used in the Company’s economic assessments. The State Royalty rate is A$1.17 per dry metric tonne and reviewed every 5 years with the next review due in 2020. There are no other royalties payable (including private) though a royalty may be negotiated with Native Title claimants. Revenue Product Quality Multiple products will be differentiated during processing subject to required particle size distribution by screening. Recovery of products has been independently assessed by CDE Global, a world leading silica sand testing laboratory. Commodity Prices Commodity prices for silica sand products have been determined by independent industry source Stratum Resources. The industry standard is that sales contracts are in US dollars. The exchange rate to convert to Australian dollars will be the prevailing rate at the time of payment. Subject to final quality produced, the prices for the commodity will range from US$38 to US$58 per dry metric tonne Free on Board (FOB). There will be no other treatment, smelting or refining charges. There are no shipping cost estimates with all contracts to be based on FOB rates. Revenue will be based on a negotiated per shipment basis per dry metric tonne FOB with payment by demand on an accredited bank letter of credit. Market Assessment Industry leader Stratum Resources was commissioned by the Company to prepare an independent assessment of the current market prices for proposed products. The assessment includes projections for future demand and supply of silica sand and concludes there is a future tightening of supply of suitable glassmaking silica sand with a commensurate future increase in price. Sales volumes have been estimated as a result of received letters of intent and expressions of interest to purchase products. VRX Silica Limited 12 COMPANY REVIEW Economic Factors The Company’s economic analysis has calculated a 10% and 20% discounted ungeared post tax net present value (NPV). A 20% discounted NPV has also been calculated to demonstrate the strength of the economic analysis. The analysis is based on a 25-year production profile despite the Probable Ore Reserve far exceeding that project life and has not considered any escalated future product prices nor any inflation to operating costs. The analysis has used a US$/A$ exchange rate of US$0.70/A$1.00. The analysis is most sensitive to the exchange rate and sales prices. The analysis indicates the financials of the project are very robust and there is a high confidence that a viable long-term mining operation can be justified. Capital requirements are based on independent estimates. Social Factors The Company made an application for a mining lease (M70/1389) on 21 December 2018. The application lies within the Southern Yamatji Native Title claim boundaries (WC2017/002), which replaced a precombination claim (WC2004/002) by the Amangu People. The Company has completed negotiations with the claimant group regarding the mining lease application and the Company expects full execution of the formal agreement for the grant of the mining lease is imminent. The project is wholly on unallocated crown land and there is little negative impact on local communities. Project Funding The financial model summarised in the BFS sets out the project metrics and provides a basis for the potential capital structure of the Company for the development of the project. Total capital expenditure at Arrowsmith North (for a 2 million tonnes per annum processing plant) is estimated at approximately A$28 million (the BFS details capital cost estimates). The Company anticipates that the source of funding the capital investment at Arrowsmith North will be any one, or a combination of, equity, debt and pre-paid offtake from the project. Whilst no final decision has been made in that regard, the financial model assumes a maximum A$26 million in debt. The Company has received a number of enquiries and expressions of interest from debt financiers for the project. The financial model provides for debt capacity and is designed to meet the expectations of any providers of potential debt funding for their due diligence and other internal requirements. In addition, VRX Silica has also received enquiries and expressions of interest from organisations across Asia for silica sand products from the project and holds signed letters of intent for substantial tonnages. A number of these organisations have expressed interest in becoming a funding partner of the Company for development of a mine by way of pre-paid offtake arrangements. The balance of the Company’s capital requirements will be funded from equity capital. Whilst the envisaged project development requires a low capital intensity relative to a greenfields hard rock mining project, and any one of, or a combination of equity, debt and pre-paid offtake is planned, VRX Silica has not as yet secured the required capital. The positive financial metrics of the BFS and feedback from potential funding partners provides encouragement as to the likelihood of meeting optimum project and corporate capital requirements. VRX Silica Limited 13 COMPANY REVIEW ARROWSMITH CENTRAL PROJECT Arrowsmith Central Mineral Resource Estimate Upgrade The Arrowsmith Central Silica Sand Project (Arrowsmith Central) is located 270km north of Perth, WA (see Figure 3). Figure 3: Arrowsmith Central Project Location The air core drill program conducted at Arrowsmith North during March 2019 (see above) also included Arrowsmith Central. VRX Silica Limited 14 COMPANY REVIEW The previously reported maiden MRE for Arrowsmith Central8 was based on shallow hand auger drilling9 and the receipt of the air core analytical results enabled the MRE to be upgraded to an Indicated Mineral Resource of 28.2 Mt @ 96.6% SiO2 in addition to an Inferred Mineral Resource of 48.3 Mt @ 96.9% SiO2 for a total MRE of 76.5 Mt @ 96.8% SiO2. This was announced to ASX in August 2019. 10 All Mineral Resources are reported in accordance with the JORC Code (see Table 6 and Table 7). The Indicated MRE is predominately within the Mining Lease application area for Arrowsmith Central and the Company expects that the majority of the Indicated Mineral Resource will convert to Probable Reserves and a long-life mining project. The estimation of an Indicated Mineral Resource will allow for an Ore Reserve to be estimated once a feasibility study is completed. This Arrowsmith Central MRE complements Arrowsmith North and adds not only to VRX Silica’s total inventory but will also produce alternative products for the glassmaking and foundry industries in Asia. SiO2% Al2O3% Fe2O3% TiO2% LOI% Indicated Million Tonnes 28.2 96.6 1.7 0.4 0.2 0.7 Inferred 48.3 96.9 1.5 0.4 0.2 0.7 Indicated + Inferred 76.5 96.8 1.5 0.4 0.2 0.7 Classification * Note: Interpreted silica sand layer is domained above a basal surface wireframe defined based on the drill sampling depths. A depletion zone, consisting of the upper 0.5 m, is reserved for rehabilitation purposes and is not estimated or reported. Differences may occur due to rounding Table 6: Arrowsmith Central Silica Sand Mineral Resource Estimate as at July 2019 Maiden MRE (Mt) Updated MRE (Mt) 28.2 Difference Inferred 28.0 48.3 173% Indicated + Inferred 28.0 76.5 273% Classification Indicated Table 7: Tonnage Comparison with Prior estimate The MRE is wholly within granted tenement E70/4987 which is 100% owned by the Company. This MRE update is based on the results of the most recent drilling, with the initial hand auger drilling being used to assist in the model estimation. The modelled extents are further limited to within the VRX Silica nominated Arrowsmith Central target area and based on the geologically logged drill data and with reference to the publicly available soil mapping data (see Figure 5). 8ASX announcement of 13 December 2019, “Arrowsmith Central Maiden Mineral Resource.” 9ASX announcement of 13 March 2019, “Drilling at Muchea and Arrowsmith Silica Sand Projects.” 10ASX announcement of 15 August 2019, “Arrowsmith Central Mineral Resource Estimate Upgrade.” VRX Silica Limited 15 COMPANY REVIEW Based on the so