ASX-listed silica sands developer Diatreme Resources’ subsidiary Metallica Minerals has entered into a binding share sale agreement with joint venture (JV) company Cape Silica Holdings to sell the Cape Flattery Silica project, in Australia's Cape York Peninsula, in exchange for shares in the JV.

Diatreme, which owns 73.2% of Cape Silica Holdings, aims to streamline its ownership of its Far North Queensland silica sand assets, with the divestment of its Cape Flattery project stake set to rationalise project ownership and facilitate increased funding and synergies for Diatreme’s flagship Northern Silica project.

The share sale agreement values the Cape Flattery project at $26-million.

Sibelco Silica, which owns 26% of the JV – Cape Silica Holdings – will contribute up to $9.5-million in exchange for shares in the JV, such that Sibelco can retain its interest.

Sibelco will, at completion of the transaction, subscribe for $5-million for shares in the JV upon transfer of the Cape Flattery project, and will also be granted an option to subscribe for a further $4.4-million of shares in the JV – which are exercisable before July 7.

Using the funds by Sibelco, the JV will reimburse Diatreme about $2.1-million for costs incurred in undertaking the takeover of Metallica, which was completed in September 2024.

The JV company will pay any stamp duty that may be applicable to the sale transaction and the issue of shares to Sibelco and Diatreme.

The transaction will ultimately generate additional funding of about $7.4-million into the JV.

The deal is still subject to shareholder approval, which Diatreme says will be sought as soon as practicable.

Diatreme CEO Neil McIntyre says the sale transaction makes a lot of strategic sense for Diatreme shareholders as well as Sibelco and the JV. “Having all of the Cape Flattery regional silica assets together and under one entity will enable significant synergies to be realised, including the consolidation of costs and environmental activities, controlled by a single management team, and a focused traditional owner and community engagement,” he explains.

This is particularly important as Diatreme move towards development, providing clear long life-of-mine visibility for third-party stakeholders such as financiers, offtakers and project development contractors.

“Further, the consideration for the sale transaction provides strong forward corporate funding for both the JV and Diatreme to advance the Northern Silica project, enabling us to be responsive to major project permitting advancing over the coming months,” McIntyre states.

He affirms that the company is focused on generating value for shareholders and considers this the best pathway forward for the former Metallica project, which has considerable potential to contribute to these strategic majority Diatreme-owned Queensland critical minerals projects, facilitating regional development and helping power the global push to renewables and decarbonisation.

Sibelco Asia Pacific executive Nick Traber agrees, saying he sees good value in the Cape Flattery project and is delighted to have agreed this transaction with its JV partner, Diatreme, to facilitate the consolidation of regional silica assets within the JV.

“The Far North Queensland projects have shown their ability to produce a low-iron, high-purity product perfect for speciality glass and PV panel makers and we look forward to bringing our global marketing expertise to work on ensuring the best value is realised from these assets,” he states.

The parties will now proceed to satisfy the conditions precedent, coordinate completion mechanics and fulfil their respective obligations. Diatreme intends to call a shareholder meeting as soon as possible, following which the company will keep them up to date on anticipated completion timelines and further material developments.