Support from China ENFI Engineering Limited: Diatreme Resource Limited (ASX: DRX) has indicated to inch towards establishing Western Australia’s next new mineral sands mine as it signed necessary agreements for its Cyclone Zircon Project. The group has replaced its previous MOU, and DRX and China ENFI Engineering Limited (ENFI) have signed up new agreements for completing the definitive feasibility study (DFS) for Diatreme’s Cyclone Zircon Project. The contracts comprise a Cooperation Agreement under which ENFI will use its network within China state-owned enterprise and in the banking sectors, and will help in assisting in sourcing project investors and funding other project debts; and a Consulting Service Agreement which covered the remaining DFS aspects to be completed by ENFI and included project costings and economics and other engineering studies. The agreements with ENFI represent the final push forward for its Cyclone project and it has a potential for completing its first production by the end of this decade in an environment of rising prices and constrained supply. DRX is moving to complete its DFS while few risks including the ones relating to water supply have been mitigated. The group also has requisite Environmental approvals by WA Environment Minister as obtained in January 2017.
 
It also completed its drilling over the southern area of Diatreme’s Cape Bedford Silica which is a Heavy Mineral Project and this project helps in satisfying an emerging Asian silica sand supply deficit and in becoming an increasingly strategic resource due to its usage in photovoltaic panels and in other applications. DRX is also working closely with Hopevale Congress, government and with other stakeholders to help in maximising the value of this new project and it can benefit all the stakeholders. While cost control is a big factor for the group to demonstrate profitability, revenue growth over last two years has also been an issue.
 
In last six months, the stock price has increased by almost 275%, and rose by 100% in last five days (as at January 11, 2018) followed by a drop of 10% on January 12, 2018. The stock seems to be moving on volatility; and by looking at the overall health, we believe that the stock is now ‘Overvalued’ at the current price of $0.027, while it will be interesting to watch out the space.
 

Global Silica Sand Market Trend (Source: Company Reports)

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