Announcement PDF VRX SILICA LIMITED ABN 59 142 014 873 INTERIM FINANCIAL REPORT FOR HALF-YEAR ENDED 31 DECEMBER 2020 CORPORATE DIRECTORY DIRECTORS Paul Boyatzis (Non-Executive 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 DIRECTORS’ REPORT Your directors submit the financial report of the consolidated entity for the half-year ended 31 December 2020. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows: DIRECTORS The names of the Directors who held office during or since the end of the half-year and until the date of this report are noted below. Directors were in office for this entire period unless otherwise stated: Paul Boyatzis (Non-Executive Chairman) Bruce Maluish (Managing Director) Peter Pawlowitsch (Non-Executive Director) PRINCIPAL ACTIVITIES The principal continuing activities during the half-year of entities within the consolidated entity was mineral exploration. REVIEW OF OPERATIONS The net loss for the half-year attributable to members of VRX Silica Limited was $822,135 (2019: loss of $1,379,165). The following is a summary of the activities conducted by VRX Silica Ltd (VRX or Company) (ASX: VRX) during the half year ending 31 December 2020. Arrowsmith Silica Sand Projects Native Title Clearance VRX holds the Arrowsmith North and Arrowsmith Central Silica Sand Projects (Arrowsmith Projects), which are located 270km north of Perth, Western Australia, in its wholly owned subsidiary Ventnor Mining Pty Ltd. In October 2020, conclusive registration of the Yamatji Nation Indigenous Land Use Agreement (ILUA) occurred, which cleared the path for grant of the Company’s Mining Lease and Miscellaneous Licence applications for its Arrowsmith Projects. The ILUA is an alternative settlement by the West Australian Government of Native Title claims covering a significant portion of land in the Mid West, including the Southern Yamatji People’s claim covering the Arrowsmith Projects. This Government-led ILUA settled all Native Title claims over the Arrowsmith Projects area and superseded the negotiations that had been progressing in good faith between VRX and the Southern Yamatji People Native Title claimants over the Arrowsmith Projects. The strong and supportive relationships established with the Southern Yamatji People will continue to benefit all parties as the Arrowsmith Projects are developed, and the Company intends to continue to consult and work closely with the Southern Yamatji People. VRX Silica Limited 2 DIRECTORS’ REPORT Aboriginal Heritage Survey In November 2020, VRX announced the results of an Aboriginal heritage survey at its Arrowsmith Projects. The comprehensive archaeological and ethnographic survey was conducted during October in conjunction with Amangu representatives of the Yamatji Nation and Yamatji Marlpa Aboriginal Corporation (YMAC) personnel over proposed initial mining and critical infrastructure areas. The survey found no isolated artifacts and no onerous heritage recommendations were made. Preliminary advice received by the Company from YMAC confirmed that the Arrowsmith North Access Road, Services Corridor and Production Area have been approved for the stated works to proceed for 10 years of production. The Arrowsmith Central Production Area and Arrowsmith Central Infrastructure Areas are cleared for five years of production. See Figure 1. Figure 1: Critical infrastructure and mining areas surveyed at Arrowsmith Projects VRX Silica Limited 3 DIRECTORS’ REPORT Grant of Mining Leases On 17 November 2020, VRX announced the grant of Mining Leases for its Arrowsmith Projects (see Figure 2). This, together with the Aboriginal heritage clearance for the proposed works on both projects, is an important step forward for their development. The combined Mining Lease areas cover over 3,600ha, sufficient for more than 100 years of production. The grant of these Mining Leases was another significant milestone for the Company and came shortly after the grant of the Mining Lease for VRX’s Muchea Silica Sand Project (Muchea Project) (see below). It enables the Company to step up negotiations to finalise sales contracts for the high-quality silica sand products and secure the necessary funding for their development. Figure 2: Arrowsmith Silica Sand Projects Location VRX Silica Limited 4 DIRECTORS’ REPORT Environmental Approval As part of the environmental approvals process for the grant of a Mining Permit at the Arrowsmith Projects, the Company continued to compile the necessary data to support the Environmental Referral Document (ERD) referrals to the Federal Department of Agriculture, Water and Environment (DAWE) and the State Department of Water and Environmental Regulation (DWER). The Company and its environmental consultants held pre-referral meetings with representatives from DWER and received comments regarding further requirements for the referral. Pre-referral meetings with representatives from DAWE and the DWER provided valuable feedback regarding requirements for these referrals. During the half-year period, VRX submitted a formal Environmental Review Document to DAWE for assessment under the Environmental Protection and Biodiversity Conservation Act 1999 (EPBC Act). DAWE responded with a determination that Arrowsmith North was a controlled action subject to assessment by DWER and approval under the EPBC Act before it can proceed. In October 2020, VRX submitted a draft ERD to DWER with comments returned in November 2020 requiring further clarification in the formal ERD and follow-up work and consultation. VRX anticipates submitting its formal ERD to DWER in March 2021 as part of the process to secure environmental approvals for the development of Arrowsmith North. Since the end of the review period, in February 2021 VRX received approval to conduct a trial rehabilitation program over 7,200m2. VRX proposes to trial and video a front-end loader to establish the capability of removing and replacing sods of topsoil as proposed in our mining and rehabilitation methodology. The front-end loader will be equipped with a standard sand bucket, not the proposed modified bucket. The trial will be undertaken between late March and April 2021. In parallel with the environmental approval process, the Company will seek approval for its Mining Proposal and the issue of a mining permit from the Department of Mines, Industry Regulation and Safety (DMIRS). Muchea Silica Sand Project On 29 October 2020, VRX announced the grant of a Mining Lease for its Muchea Silica Sand Project (Muchea Project), located 50km north of Perth, Western Australia. The Mining Lease (M70/1390), held in the Company’s wholly owned subsidiary Wisecat Pty Ltd, covers approximately 1,008ha including the development area, sufficient for at least 25 years of production (see Figure 3). The grant of the Mining Lease was a significant milestone for VRX and a major step forward in the Company’s journey to becoming a global, long-life supplier of high-quality silica sand. During the period, as for its Arrowsmith Projects, the Company progressed compilation of necessary data to support referrals to DAWE and the EPA with pre-referral meetings held with representatives from DAWE. Demand from potential customers for long-term supply of silica sand from the Muchea Project is strong. As with the Arrowsmith Projects, the grant of the Mining Lease enables the Company to step up negotiations to finalise sales contracts for the high-quality silica sand products and secure the necessary funding for the project’s development. VRX Silica Limited 5 DIRECTORS’ REPORT The Muchea Project is a world-class, high-grade and low environmental impact silica sand project with outstanding economics and located in a Tier 1 jurisdiction. Its development will support a substantial export industry in Western Australia and provide significant financial and employment benefits in the north-eastern corridor of Perth. Figure 3: Muchea Silica Sand Project Location VRX Silica Limited 6 DIRECTORS’ REPORT Silica Sand Offtake The Company has continued discussions with potential customers in Asia for long-term contracts for offtake of products from its Arrowsmith Projects and Muchea Project. These customers are in Malaysia, Thailand, Taiwan, Japan and South Korea. The outbreak of COVID-19 in early 2020 caused the cessation of all possible face-to-face meetings with potential clients. However, the Company has progressed discussions via video conferencing and interest remains strong, despite the current challenging health and economic climate in those countries. More recently second and third-wave lockdowns in Japan and Korea have further postponed offtake discussions, with no possibility for VRX to conduct face-to-face meetings. Despite the COVID-19 impediment, global market conditions continued to improve over the period. Sources of supply of high-quality silica sand throughout the Asian region are shrinking at a rapid rate and increasing the already strong demand for VRX’s silica sand products, providing the Company with comfort its considered and disciplined approach to offtake deals will deliver significant value to shareholders. Product samples have been shipped to potential offtake partners and grade-control drilling planned for March 2021 will generate additional commercial samples for interested parties. The majority of recipients have confirmed that the sand quality meets their specification requirements and underpins their desire to secure long-term supply. The Company is well-positioned to benefit from the rapidly changing, and improving, market conditions and will continue negotiations to secure formal offtake agreements. Project Economics The Company’s silica sand projects have outstanding economic prospects and will support a substantial export industry in Western Australia that can provide significant financial and employment benefits to the State. With all three Mining Leases granted at the Arrowsmith Projects and the Muchea Project and development of the projects on-track, VRX is on the cusp of becoming a global player in highquality silica sand supplies. ARROWSMITH NORTH Project Location Arrowsmith North is located approximately 270km north of Perth between the regional towns of Eneabba and Dongara (see Figure 1 and Figure 2). The project sits proximate to Brand Highway and is connected to the Geraldton Port via the Eneabba-Geraldton Railway. VRX Silica Limited 7 DIRECTORS’ REPORT Mineral Resource and Ore Reserve The Mineral Resource Estimate (MRE) for Arrowsmith North comprises an Indicated Mineral Resource of 248 Mt @ 97.7% SiO2 in addition to an Inferred Mineral Resource of 523 Mt @ 98.2% SiO2 for a Total MRE of 771 Mt @ 98.0% SiO2 1 reported in accordance with the JORC Code 2 (Table 1). Classification Domain Million Tonnes SiO2% Al2O3% Fe2O3% TiO2% LOI% Indicated White Sand 33 98.7 0.50 0.20 0.20 0.20 Yellow Sand 215 97.5 1.10 0.40 0.20 0.50 All Sand 248 97.7 1.00 0.40 0.20 0.50 White Sand 280 98.7 0.50 0.10 0.20 0.20 Yellow Sand 243 97.7 1.00 0.40 0.20 0.50 All Sand 523 98.2 0.80 0.30 0.20 0.40 White Sand 313 98.7 0.54 0.15 0.18 0.24 Yellow Sand 458 97.6 1.08 0.40 0.17 0.52 All Sand 771 98.0 0.86 0.30 0.17 0.41 Inferred Indicated + Inferred *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 Mineral Resource Estimate The Company completed the necessary work to convert the Indicated Mineral Resource to a Probable Ore Reserve 3. Table 2 details the Probable Ore Reserve reported in accordance with the JORC Code that will be produced from mining of the Indicated Mineral Resource and processing in a purpose-built, wet-sand processing plant. Recovery Million Tonnes Within M70/1389 Million Tonnes 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 Global Chemical Composition Classification Probable Product Total Reserve SiO2 % Al2O3 % Fe2O3 % TiO2 % LOI % Table 2: Arrowsmith North Probable Ore Reserve Production Target The Company set out in the Arrowsmith North bankable feasibility study (BFS) a production target of 47.7Mt from the first 25 years of mine life at Arrowsmith North, reported in accordance with the JORC Code and sourced from the Probable Ore Reserve of 204Mt @ 99.7% SiO2 within the Mining Lease (M70/1389) area. Full details are set out in the Arrowsmith North BFS 4. 1 ASX announcement of 9 July 2019, “Arrowsmith North Mineral Resource Estimate Upgrade” 2 Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, 2012 Edition (JORC Code). 3 ASX Announcement of 28 August 2019, “Arrowsmith North BFS and Maiden Ore Reserve” 4 ASX Announcement of 28 August 2019, “Arrowsmith North BFS and Maiden Ore Reserve” VRX Silica Limited 8 DIRECTORS’ REPORT Silica Sand Products Based on metallurgical test work completed to date, the silica sand at Arrowsmith North is readily amenable to upgrading by conventional washing and screening methods to produce a high-purity silica sand product with high-mass recoveries. The high-purity silica sand product specifications are expected to be suitable for industries such as glass making and foundry sand. The plant will produce four saleable products for different markets. Table 3 shows the particle-size distribution of the products. Particle Size Sieve Opening (Mesh/μm Retained) Product 10 / 2mm 20 / 850 30 / 600 40 / 425 50 / 300 70 / 212 140 / 106 0.10% 100 / 150 - AFS No - 200 / 75 - Arrowsmith-N20 0.10% 3% 87% 8% 1% 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% - 21 Table 3: Arrowsmith North saleable products, particle size distribution ARROWSMITH CENTRAL Project Location Arrowsmith Central is located approximately 270km north of Perth between the regional towns of Eneabba and Dongara (see Figure 1 and Figure 2). The project sits proximate to Brand Highway and is connected to the Geraldton Port via the Eneabba-Geraldton Railway. Mineral Resource and Ore Reserve The Mineral Resource Estimate (MRE) for Arrowsmith Central comprises 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 5 reported in accordance with the JORC Code (Table 4). Classification Million Tonnes SiO2% Al2O3% Fe2O3% TiO2% LOI% Indicated 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 * Note: Interpreted silica sand mineralisation is domained above a basal surface wireframe defined based on 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 4: Arrowsmith Central Silica Sand Mineral Resource Estimate The Company has completed the necessary work to convert the Indicated Mineral Resource to a Probable Ore Reserve. Table 5 below details the Probable Ore Reserve that will be produced from the mining of the Indicated Mineral Resource and processing in a purposebuilt, wet-sand processing plant. 5 ASX announcement of 15 August 2019, “Arrowsmith Central Mineral Resource Estimate Upgrade”. VRX Silica Limited 9 DIRECTORS’ REPORT Product Recovery Million Tonnes Within M70/1392 Million Tonnes Arrowsmith-CF400 17% 4.2 4.1 Arrowsmith-C20 34% 8.4 8.2 Arrowsmith-C50 17% 4.2 4.1 TiO2 Concentrate 9% 2.2 2.2 18.9 18.7 Global Chemical Composition Classification Probable Total Reserve SiO2 % Al2O3 % Fe2O3 % TiO2 % LOI % 99.6 0.25 0.04 0.03 0.1 <1% +2% Table 5: Arrowsmith Central Probable Ore Reserve Production Target The Company has set out in the Arrowsmith Central BFS a production target of 18.9 Mt @ 99.6% SiO2 as reported in accordance with the JORC Code with 18.7 Mt @ 99.6% SiO2 contained within the area of the Company’s Mining Lease (M70/1392). Full details are set out in the Arrowsmith Central BFS 6. Silica Sand Products Based on metallurgical test work completed to date, the silica sand at Arrowsmith Central is readily amenable to upgrading by conventional washing and screening methods to produce a high-purity silica sand product with high-mass recoveries. The high-purity silica sand product specifications are expected to be suitable for industries such as glass making and foundry sand. The plant will produce three saleable silica sand products for different markets. Table 6 shows the particle-size distribution of the products. Particle Size Sieve Opening (Mesh / μm Retained) Product 10 / 2mm 20 / 850 30 / 600 40 / 425 50 / 300 70 / 212 140 / 106 16.1% 100 / 150 0.5% Arrowsmith-CF400 - 0% 0.5% 44% 38.9% Arrowsmith-C20 6.2% 22.2% 30.4% 37.9% Arrowsmith-C50 - - 0.3% 31.9% AFS No - 200 / 75 - 2.9% 0.3% 0.1% - - 22 27.5% 17.3% 13.7% 8.2% 1.1% 49 37 Table 6: Arrowsmith Central Silica Sand Probable Ore Reserve In addition to these products, the plant will produce a by-product that contains a concentration of titanium minerals such as rutile and ilmenite, which can be sold at a nominal value to a company with specialist equipment for separating mineral concentrate (see Table 5 for summary of TiO2 concentrate). 6 ASX Announcement of 17 September 2019, “Arrowsmith Central BFS and Maiden Ore Reserve” VRX Silica Limited 10 DIRECTORS’ REPORT MUCHEA Project Location The Muchea Project is located 50km north of Perth between the regional towns of Muchea and Gingin (see Figure 3) and sits adjacent to Brand Highway and the Moora–Kwinana Railway, with a rail connection direct to the multi-user Kwinana Bulk Terminal. Mineral Resource and Ore Reserve The Mineral Resource Estimate (MRE) for the Muchea Project comprises 208Mt @ 99.6% SiO2 7 reported in accordance with the JORC Code 8 (Table 7). The MRE is based on the results obtained from 44 hand auger drill holes for 260.7m and 103 air core (AC) drill holes for 1,401m used to define the modelled silica sand layer. Classification Million Tonnes SiO2% Al2O3% Fe2O3% LOI% TiO2% Indicated 29 99.6 0.09 0.03 0.22 0.07 Inferred 179 99.6 0.05 0.02 0.23 0.1 Indicated + Inferred 208 99.6 0.06 0.02 0.23 0.1 *Note: Interpreted silica sand mineralisation is domained above a basal surface wireframe. The upper (overburden) 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 7: Muchea Mineral Resource Estimate The Company has completed the necessary work to convert the Indicated Mineral Resource to Probable Ore Reserve 9. Table 8 details the Probable Ore Reserve reported in accordance with the JORC Code that will be produced from mining of the Indicated Mineral Resource and processing in a purpose-built, wet-sand processing plant. Product Recovery Million Tonnes Within M70/1390 Million Tonnes Muchea-F80 48% 10.2 8.0 +99.9 0.02 0.008 0.030 0.1 Muchea-F80C 20% 4.25 3.3 +99.9 0.02 0.008 0.030 0.1 Muchea-F150 20% 4.25 3.3 99.8 0.07 0.015 0.035 0.1 18.7 14.6 Global Ore Reserve Classification Probable Total Reserve SiO2 % Al2O3 % Fe2O3 % TiO2 % LOI % Table 8: Muchea Silica Sand Probable Ore Reserve Initial Production Target The Company has set out in the BFS an initial production target of 48.3Mt from the Muchea Project reported in accordance with the JORC Code, sourced from the Probable Ore Reserve of 14.6Mt @ 99.9% SiO2 and a portion of the Inferred Mineral Resource of 61.4Mt @ 99.6% SiO2 within the Mining Lease area. 7 ASX announcement of 17 June 2019, “Muchea Mineral Resource Estimate Upgrade”. 8 Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, 2012 Edition (JORC Code). 9 ASX Announcement of 18 October 2019, “Muchea BFS and Maiden Ore Reserve” VRX Silica Limited 11 DIRECTORS’ REPORT The maiden Probable Ore Reserve is estimated from the Indicated Mineral Resource only and constitutes approximately 30% of the estimated total production target (in terms of processed tonnes of silica sand) over a 25-year mine life. The Company intends to mine solely from the Probable Ore Reserve during the first nine to 10 years of mining operations. The ore that forms the Inferred Mineral Resource is contiguous with the Indicated Mineral Resource and has been categorised as lower confidence because of wider-spaced drilling. There is negligible difference between the modelled sand in each category. VRX believes an additional 1,500m of drilling is required to upgrade the inferred resource category. Notwithstanding this, there is a low level of geological confidence associated with inferred mineral resources and no certainty that further exploration work will result in the determination of indicated mineral resources or that the production target itself will be realised. Full details are set out in the BFS. 10 Silica Sand Products Based on metallurgical test work completed to date, the silica sand at Muchea is readily amenable to upgrading by conventional washing and screening methods to produce a highpurity silica sand product with high-mass recoveries. The high-purity silica sand product specifications are expected to be suitable for industries such as glass making and foundry sand. The plant will produce three saleable products for different markets with a Probable Ore Reserve of 14.6Mt @ 99.9% SiO2 reported in accordance with the JORC Code and contained within the area of the Mining Lease. Table 9 shows the particle-size distribution of the products. Particle Size Product Sieve Opening (μm Retained) 850 Muchea-F80 Muchea-F80C 9.0% 600 425 300 212 0.5% 49% 50% 0.5% 90.0% 1.0% 0.5% 88% Muchea-F150 150 106 11% 0.5% 75 Table 9: Muchea saleable products, particle size distribution Potential for Extension of Life of Mine Mining Lease M70/1390 is a conversion of part of Exploration Licence E70/4886, which covers a portion of file notation area 12671 (FNA). The FNA ground within the Exploration Licence sits adjacent to the Mining Lease and outside of the current proposed development area and does not affect the BFS-modelled 25-year production life. VRX intends to seek access to this ground to extend the Muchea Project’s mine life to well beyond 25 years. To that end, the Company will continue to assess available options while addressing concerns relating to the FNA. 10 ASX Announcement of 18 October 2019, “Muchea BFS and Maiden Ore Reserve” VRX Silica Limited 12 DIRECTORS’ REPORT Key outcomes from Muchea Project BFS The Muchea Project has outstanding economic prospects. Key outcomes from the BFS 11 and summary financial model outputs are set out below. Muchea (including Inferred) Muchea (Reserve only) Post Tax, ungeared NPV10 $337,900,000 $180,500,000 Post Tax, ungeared NPV20 $146,400,000 $104,600,000 Post Tax, ungeared IRR 96% 96% Payback period (yrs) (post tax) (ramp up rate) 2.3 2.3 Exchange Rate US$/A$ $0.70 $0.70 Life of Mine (yrs) (Scope of BFS Study) 25 15 Total Sales (initial 25 years) no escalation $3,345,000,000 $1,011,000,000 EBIT $1,540,000,000 $447,000,000 Cashflow after finance and tax $1,123,000,000 $321,000,000 Shares on Issue 404,318,617 404,318,617 $0.11 $0.09 $32,820,000 $32,820,000 Capex contingency (inc) 20% 20% Life of Mine C1 costs, FOB Kwinana (inc royalties) $32.74 $33.84 54 16 EPS after tax (per year) Capex (2 mtpa) Tonnes Processed (initial 25 years) (Mt) Production Target (Mt) (BFS Study) (25 years) 48.3 (9-10 years) 14.6 Probable Ore Reserves @ 99.9% SiO2 (Mt) 18.7 18.7 Ore Reserve life (yrs) 9-10 9-10 JORC Resources (million tonnes) 208 208 Notes: 1. The first column shows outputs when aggregated with the Inferred Mineral Resource and the second column shows outputs from the Probable Ore Reserve only. 2. There is a low level of geological confidence associated with inferred mineral resources and there is no certainty that further exploration work will result in the determination of indicated mineral resources or that the production target itself will be realised. 3. The Probable Ore Reserve and the Inferred Mineral Resource underpinning the above production targets have been prepared by a Competent Person in accordance with the requirements of the JORC Code. 4. Full summaries of economic assumptions are set out in the BFS. All such material assumptions continue to apply and have not materially changed from the date of release of the BFS. 5. All figures are presented in Australian dollars, unadjusted for inflation. 11 ASX Announcement of 18 October 2019, “Muchea BFS and Maiden Ore Reserve” VRX Silica Limited 13 DIRECTORS’ REPORT Aggregate Project Metrics Key outcomes and summary financial model outputs for each individual project, and in aggregate, from the BFSs for each project 12 are set out below. The combined post-tax NPV10 of $727.8 million Arrowsmith North Arrowsmith Central Muchea Total Post Tax, ungeared NPV10 $242.3m $147.6m $337.9m $727.8m Post Tax, ungeared NPV20 $99.8m $56.1m $146.4m $302.3m Post Tax, ungeared IRR 79% 60% 96% 83% Payback period (yrs) (post tax) (ramp up rate) 2.4 2.8 2.3 2.4 Exchange Rate US$/A$ $0.70 $0.70 $0.70 $0.70 Life of Mine (yrs) (Scope of BFS Study) 25 25 25 25 Total Sales (initial 25 years) no escalation $2,773m $2,167m $3,345m $8,285m EBIT $1,144m $737m $1,540m $3,421m Cashflow after finance and tax $835m $539m $1,123m $2,497m Capex (2 mtpa) $28.3m $25.9m $32.8m $87m Capex contingency (inc) 20% 20% 20% 20% Life of Mine C1 costs, FOB Kwinana (inc royalties) $30.18 $27.67 $32.74 $30.24 Tonnes Processed (initial 25 years) (Mt) 53 51 54 158 Production Target (Mt) (BFS Study) (initial 25 Years) 47.7 39.6 48.3 136 Probable Ore Reserves (Mt) 204 18.9 18.7 242 Ore Reserve life (yrs) 102 10 9-10 JORC Resources (million tonnes) 771 77 208 1,056 Notes: 1. A proportion of the production target for each of Arrowsmith Central and Muchea is based on Inferred Mineral Resource. There is a low level of geological confidence associated with inferred mineral resources and there is no certainty that further exploration work will result in the determination of indicated mineral resources or that the production target itself will be realised. 2. The Ore Reserves and, in the case of Arrowsmith Central and Muchea, the Inferred Mineral Resource underpinning the above production targets have been prepared by a Competent Person in accordance with the requirements of the JORC Code. 3. Full summaries of economic assumptions are set out in the BFS for each project. All such material assumptions continue to apply and have not materially changed from the dates of release of the BFSs. 4. All figures are presented in Australian dollars, unadjusted for inflation. 12 ASX announcements of 28 August 2019, “Arrowsmith North BFS and Maiden Ore Reserve”, 17 September 2019, “Arrowsmith Central BFS and Maiden Ore Reserve” and 18 October 2019, “Muchea BFS and Maiden Ore Reserve”. VRX Silica Limited 14 DIRECTORS’ REPORT Biranup On 1 July 2020, the Company announced it had entered into a conditional agreement with New Energy Metals Limited (to be renamed Nickel X Limited) for the sale of its Biranup Project and an IPO and listing of that company on the ASX. Originally expected to complete by the end of 2020, increasing activity for new ASX listings generally has delayed progress on the IPO. The Company has agreed a new completion sunset date of 30 June 2021, subject to minimum exploration expenditure obligations being satisfied by the purchaser in Q1 2021. Corporate On 20 November 2020, VRX announced that it had received binding commitments for a capital raising via a share placement to institutional, professional and sophisticated investors to raise $7 million before costs. VRX received strong support for the capital raising from a wide range of investors, with bids received well in excess of the amount raised. This placement positioned VRX to rapidly advance the development of its silica sand projects, in particular at Arrowsmith North for grade-control drilling for the first 10 years of production, confirmatory test work, drilling and equipping water bores, port access design, construction of access roads and final engineering. The placement was conducted at 18 cents per share, which represented a 23.4% discount to the last closing price of VRX shares on ASX of 23.5 cents prior to announcing the placement and a 13.6% discount to the 10-day volume-weighted average price (VWAP) of 20.8 cents as at the same date. A total of 38.9 million new shares wer