Diatreme Study Values Cape Flattery Silica Mine at $1.29B With 36% Return
Key Takeaways
- The Phase 1 base case delivers a $1.29 billion pre-tax NPV and 36% IRR from 3 Mtpa over 25 years, with $443.5 million of construction capital and a four-year payback.
- Phase 2 lifts output to 5 Mtpa for only $38.5 million extra capital, taking pre-tax NPV to $2,419 million and cutting C1 cash cost to $18/t.
- A maiden Ore Reserve of 151.25 Mt at 99.25% SiO₂ is 100% Probable and draws on Measured and Indicated resources only, with no Inferred material.
- The PFS price of US$55/t sits below Wood Mackenzie's US$60 FOB forecast by 2040, so the economics do not rely on an aggressive price.
- Funding is not secured, with Phase 1 modelled on an equity placement that may dilute shareholders, and the DFS (Q3 CY2028) and FID (Q4 CY2028) are the next catalysts.
PFS confirms Northern Silica Project as a 3 Mtpa, $1.29b NPV silica sand operation
On 15 October 2026, Diatreme Resources (ASX: DRX) completed a Pre-Feasibility Study (PFS) for its Northern Silica Project (NSP) at Cape Flattery in Far North Queensland. The study confirms the project’s potential as a long-life, low-cost silica sand operation.
The Phase 1 base case models 3 Mtpa (million tonnes per year) over an initial 25-year mine life. It delivers a pre-tax net present value (NPV, the value of future cash flows in today’s dollars) of $1.29b and a pre-tax internal rate of return (IRR) of 36%.
C1 cash cost (FOB, meaning the cost of getting product onto the ship) is $25/t. Construction capital is $443.5m, with a four-year payback.
An optional Phase 2 would lift production to up to 5 Mtpa from Year 3. It shows a pre-tax NPV of $2.4b (precisely $2,419m) and an IRR of 46%, for additional capital of $38.5m.
A maiden Ore Reserve of 151m tonnes grading 99.25% SiO₂ underpins the plan.
Neil McIntyre, Chief Executive Officer
“This Pre-Feasibility Study confirms what we have long known, that the NSP is a genuine world-class asset. […] places NSP among the most compelling critical minerals developments in Australia.”
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Phase 1 and Phase 2 economics compared
Phase 1 is the base case. Phase 2 is an upside scenario, and the gap between them shows what the expansion could add.
| Metric | Phase 1-only (3 Mtpa) | Phase 1 & 2 (5 Mtpa) |
|---|---|---|
| NPV (pre-tax) | **$1,290m** | **$2,419m** |
| NPV (post-tax) | **$867m** | **$1,661m** |
| IRR (pre-tax) | **36%** | **46%** |
| IRR (post-tax) | **29%** | **38%** |
| C1 cash cost (FOB) | **$25/t** | **$18/t** |
| Net revenue (LOM) | **$6,066m** | **$9,787m** |
| EBITDA | **$4,571m** | **$7,975m** |
| Net free cash flow (post-tax) | **$2,764m** | **$5,048m** |
The PFS rests on these key assumptions:
- Average silica sand price of US$55/t FOB (A$80.9/t).
- AUD:USD exchange rate of 0.68.
- Real, unleveraged discount rate of 8%.
- Average product recovery of 80%.
The US$55/t price sits slightly below the mid-point Base Case forecast of US$60 FOB by 2040 (real terms) from research firm Wood Mackenzie.
For you as an investor, the point is that the base case stands on its own. The Phase 2 expansion needs only $38.5m and is expected to be funded from Phase 1 free cash flows, which will be further evaluated during the Definitive Feasibility Study (DFS). Any expansion decision remains subject to market conditions and product demand.
Maiden Ore Reserve backs a world-class silica resource
An Ore Reserve is the portion of a mineral resource shown to be economically mineable. The Si2 Ore Reserve totals 151.25 Mt, classified 100% Probable.
It was derived from approximately 87.3% Measured and approximately 12.7% Indicated Mineral Resources. No Inferred Resources are included in the production target or the forecast financial information.
The Ore Reserve sits within the 301.5 Mt Si2 Mineral Resource at 99.2% SiO₂. Diatreme’s global silica sand portfolio totals approximately 633 Mt at 99.19% SiO₂.
Key quality and processing points include:
- Ore Reserve Fe₂O₃ (iron oxide) grade of 0.10%.
- Bulk testwork results of 89 to 107 ppm Fe₂O₃ at 81.6% to 85.6% recovery.
- An 80% recovery rate used for the PFS.
On exports, the project would use existing Port of Cape Flattery infrastructure, with estimated utilisation of around 32%. Overall fees and charges payable to Cape Flattery Silica Mines and Ports North are estimated at $3.815 per tonne, though no commercial agreement is in place.
Why low-iron silica sand matters for solar
Solar panels are covered in glass, and iron in the sand used to make that glass tints it and reduces the light passing through. PV grade (photovoltaic grade) silica sand is therefore defined mainly by low iron, ideally no more than 100 ppm (parts per million), though manufacturers will accept 50 to 150 ppm.
The source describes a clear quality-based pricing hierarchy. Standard construction sand sells for tens of dollars per tonne, premium glass-grade sand commands US$50 to $100, and the solar PV glass sector, which mandates ultra-low iron, sharpens that premium further.
That solar segment is projected to be the fastest-growing grade segment, expanding at a compound annual growth rate (CAGR) of over 6.4% through 2030.
The NSP is capable of producing this PV grade product, and the project’s testwork results sit within the range manufacturers accept. The PFS price assumption of US$55/t sits slightly below the Wood Mackenzie forecast, which suggests the economics do not lean on an aggressive price.
Sibelco partnership and community benefits
The NSP is being advanced through a joint venture with Sibelco Asia Pacific. Diatreme holds c.73% and Sibelco c.27%.
Sibelco has invested c.$56m in DRX and the silica joint venture, and is a significant committed offtaker at 27% of production. Product pricing is yet to be agreed on an arm’s length commercial basis, with offtake subject to agreement of terms and any required shareholder approvals.
The project also carries local employment commitments:
- 214 jobs during construction and 128 in operation.
- A 50% Indigenous employment target.
- A focus on the communities of Hope Vale and Cooktown.
- Federal Major Project and Queensland Coordinated Project recognition.
Brian Flannery, Chairman
“…a rare opportunity to build an inter-generational, low-iron high purity silica business…”
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Next steps toward a final investment decision
A PFS is preliminary, and the company states further work is required before a Final Investment Decision (FID) can be made. The key next steps are:
- DFS, targeting completion in Q3 CY2028 to support financing and FID.
- Environmental Impact Statement (EIS), described as well advanced, with a draft submitted.
- Mining agreement negotiations with Traditional Owners, which are progressing.
- A port export commercial arrangement with Ports North and Cape Flattery Silica Mines.
- Financing and offtake discussions, which are advancing.
- FID, currently targeted for Q4 CY2028.
Project financing has not been secured. The PFS assumes Phase 1 capital of $443.5m is funded through an equity placement, with final funding potentially combining debt, equity and government sources, including the Northern Australia Infrastructure Facility and Export Finance Australia. Funding through new equity may result in dilution of existing shareholders.
The DFS and the outstanding approvals are the next catalysts to watch.
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