Diatreme’s Northern Silica study reveals a billion-dollar development case

Northern Silica PFS puts billion-dollar economics on paper

Diatreme Resources Limited (ASX:DRX) has placed a large project ambition beside a much smaller near-term balance sheet. Its post-quarter Pre-Feasibility Study for the Northern Silica Project in Far North Queensland estimates a pre-tax net present value of $1.29 billion for a 3 million tonne per annum operation, with a pre-tax internal rate of return of 36% and a four-year payback period.

The study assumes a 25-year mine life, 75 million tonnes of production and construction capital expenditure of $443.5 million, including contingency. It also outlines an expansion case to 5 Mtpa from year three, requiring a further $38.5 million of capital and lifting the pre-tax NPV to $2.419 billion, with a 46% pre-tax IRR. Diatreme has adopted the 3 Mtpa case as its base case, leaving any expansion dependent on market conditions and product demand.

Funding transaction restores Diatreme’s 73.2% joint venture stake

The company’s silica position was reshaped during the quarter through the sale of the Cape Flattery Silica Project to Cape Silica Holdings, the Diatreme-Sibelco joint venture. The transaction generated approximately $7.4 million in total funding and left Diatreme with a 73.2% interest in the joint venture, while Sibelco holds 26.8%.

The deal extends the Cape Flattery sale, which had previously delivered a $2.1 million reimbursement and was intended to consolidate the Far North Queensland silica assets. The joint venture held $6.9 million at 30 September after exploration and evaluation spending, but that money sits at the project level and is not the same as unrestricted corporate cash.

Corporate cash covers roughly 2.4 quarters

Diatreme reported $1.919 million in cash and cash equivalents at the end of September, down from $2.733 million at the end of June. Operating activities used $684,000 during the quarter, while exploration and evaluation spending absorbed another $113,000. On those reported outgoings, the company calculated an estimated 2.4 quarters of funding.

The half-year report recorded a net loss of $3.025 million, compared with a $728,000 loss in the prior corresponding period. Diatreme also disclosed $106,000 in related-party payments during the quarter, including director fees and specialist marketing consultancy services. A $1 million unsecured debt facility is due for repayment on 30 May 2027 and carries a 7.5% interest rate after a 12-month extension.

Permits, port access and financing stand between study and mine

The PFS relies on access to existing export infrastructure at the Port of Cape Flattery, where Diatreme says spare capacity could support the project. Negotiations with Ports North and Cape Flattery Silica Mines remain in progress, alongside the Environmental Impact Statement process and discussions with Traditional Owners on a mining project agreement.

Diatreme is targeting completion of a Definitive Feasibility Study in the second or third quarter of calendar 2028, with a final investment decision targeted for the third quarter of 2028. Financing and offtake talks are also advancing, but the project still needs commercial port arrangements, approvals, agreements and development capital before the PFS economics can translate into construction.

Cyclone remains a separate value-realisation option

The company continues to assess a sale, joint venture or possible spin-out for its Cyclone Zircon Project in Western Australia. Discussions with potential partners and investors followed metallurgical test work that reported 76.5% heavy mineral recovery to concentrate, a 21.6% improvement on earlier work. The asset remains a potential source of value, but the quarter’s central investment story is still the funding and permitting path for Northern Silica.