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Athabasca Minerals Inc. – Amended Annual Information Form
January 10, 2020
January 10th, 2020 - EDMONTON, ALBERTA. Athabasca Minerals Inc. (“AMI” or the “Corporation”) – TSX Venture symbol: ‘AMI’ – announces that it has filed an amended and restated Annual Information Form (AIF) on SEDAR on January 10th, 2020.
The AIF changes from the original (filed October 3rd, 2019) incorporate updates from the Technical Report for the White Rabbit Property, associated with AMI’s Duvernay Premium Domestic Sand Project (filed on SEDAR November 6th, 2019), as well as mineral reserves and mineral resource estimates for AMI’s Richardson and Firebag Projects (filed on SEDAR December 11th, 2019).
About Athabasca Minerals Inc. (AMI)
Athabasca Minerals Inc. (www.athabascaminerals.com) is an integrated group of companies focused on the aggregates and industrial minerals sectors, including resource development, aggregates marketing and midstream supply-logistics solutions. Business activities include aggregate production, sales and royalties from corporate-owned pits, management services of third-party pits, acquisitions of sand and gravel operations, and new venture development. Athabasca Minerals Inc. is the parent company of Aggregates Marketing Inc. (www.aggregatesmarketing.com) – a midstream technology-based business using its proprietary RockchainTM digital platform, associated algorithm and QA/QC services to provide cost-effective integrated supply /delivery solutions of industrial minerals to industry, and the construction sector. It is also the parent company of AMI Silica Inc. (www.amisilica.com) – a subsidiary positioning to become a leading supplier of premium domestic in-basin sand with regional deposits in Alberta and NE British Columbia. It is the joint venture owner of the Montney In-Basin and Duvernay Basin Frac Sand Projects. Additionally, the Corporation has industrial mineral leases, such as those supporting AMI’s Richardson Quarry Project, that are strategically positioned for future development in industrial regions with historically and consistently high demand for aggregates.
Demand For Frac Sand Expands Into Canada
The frac sand boom continues to gain traction in the Southern United States, where drillers are pumping more sand than ever down wells in an effort to boost crude oil and natural gas production. Drilling is ramping up North of the border as well, as Canada looks to maximize production of the commodities.
In addition to increased demand for the proppant sand, the industry is seeing a shift in the type of sand used in the hydraulic fracturing process, with premium sand becoming less favorable.
DEMAND FOR FRAC SAND
On the back of recovering oil prices, drillers are again ramping up production, particularly in Texas. The lone star state’s Permian Basin is experiencing a flurry of activity as drillers look to obtain as much oil and gas as possible from hydraulic fracturing operations. This has again brought rise to a frac sand boom reminiscent of the one experienced in previous years. The proppant sand is pumped down wells to hold open fractures so oil and/or natural gas can freely flow out for collection.
Similarly, a race for oil and gas in Canada, particularly in Alberta’s Duvernay shale formation, which many are comparing to the prized Eagle Ford, is also causing a push for more sand.
A recent article states that Source Energy Services, a supplier bringing sand to Canada’s Western Sedimentary Basin, saw sales increase by 255% in 2017’s third quarter compared to 2016.
According to Global News, the Alberta Energy Regulator states that in 2016, 82 wells were fracked in the first two months of the year; that number jumped to 140 wells for the same time period in 2017.
In addition to increasing demand for oil and natural gas prompting a requirement for more sand, demand for sand is further being pushed as a result of the amount of sand employed per well. Longer wells are requiring more sand, and drillers have discovered that increasing the amount of sand per well increases hydrocarbon recovery. In a report by Carbo Ceramics, the company cites a staggering statistic from ProppantIQ: since 2011, the amount of sand used per well in the US has increased by 210%.
While the industry looks to accrue frac sand in an effort to meet demand, the difference between this frac sand boom and the last, is that producers are looking to reduce costs by opting for lesser quality, more local sand sources.
THE SHIFT AWAY FROM PREMIUM SAND
In the initial frac sand boom, producers used premium quality sand, steering away from the cheaper “brown” sands, despite their closer proximity and lower cost. The Midwest, and in particular, Wisconsin, is home to North America’s most high quality frac sand, known as “Northern White,” or “Ottawa White.” The sand is embedded in sandstone deposits in the western portion of the state, as well as in northern Minnesota.
The Upper Midwest’s sand is prized for its purity, high crush strength, spherical shape, grain size, and uniformity – all key characteristics in utilizing sand as a proppant in the hydraulic fracturing process.
A recent industry downturn forced producers to cut costs wherever possible and this prompted them to experiment with lower quality sands in their operations. The industry found the sand, despite being of a lesser quality, was sufficient for their fracking needs in most cases. Now that the industry has recovered, the low quality sand trend continues to progress as producers use the brown, or “Brady” sands in place of premium sand in an effort to maximize economic returns.
While Texas previously relied primarily on the Midwest to satiate its demand for sand, frac sand mines have been cropping up closer to home, mitigating the high shipping costs that come along with Midwestern sand. Shipping costs are a key consideration in the procurement of frac sand – before Texas began mining its own sand, shipping costs from the Midwest could account for up to 65% of the sand’s cost, according to IHS Markit.
And while this has slowed some of the demand from the South, activity north of the border is helping to provide an outlet for the region’s high quality sand, but some suspect that the demand may not last for long.
A similar trend as was seen in Texas is emerging in Canada; Canada’s shale formations currently rely on high quality sand from the Midwest, but like Texas, more local sand mines are beginning to crop up in the region, supplying a lower quality, but sufficient product at a reduced cost.
According to Global News, Mike Burvill, VP of Fracturing at STEP Energy Services, a Canada-based provider, says that prior to the industry downturn, only about 10% of frac sand was coming from their domestic operations, but in recent times, domestically supplied frac sand has grown closer to ⅓ of what they supply.
NORTHERN WHITE FRAC SAND STILL HOLDS VALUE
Despite the growing trend toward employing lower cost sands, Northern White sand still accounts for around ⅔ of the market share. This premium sand boasts a higher crush strength than sands mined in Texas, allowing it to be used in deeper wells. Furthermore, some producers still prefer the higher quality sand over the lesser cost types.
Some people in the industry are skeptical that brown sand will overtake Northern White, due to its lesser quality. Additionally, some worry that insufficient infrastructure exists near the Permian to meet the demanding logistical requirements of the booming industry, which could result in some producers hauling in sand from the Midwest. Other industry experts anticipate that demand will be so high, Texas will still require sand from the Midwest on top of what it can supply itself. Kent Syverson, industry consultant and chairman of UW-Eau Claire’s Geology department told Wisconsin State Journal: “If the projections hold true and they’re going to need so terribly much sand, then they will need the Texas sand and all of the other sand as well, or they won’t be able to meet demand.”
And while Northern White is primarily mined in Wisconsin and Minnesota, the premium sand can also be found (albeit in much smaller formations), in Missouri and Arkansas. These deposits are geographically closer to the drilling activity, and could provide a source of Northern White with a reduced price tag on shipping to the region.
FRAC SAND MINING & PROCESSING
Mining frac sand is similar to many mining operations, where overburden is removed to expose the sandstone formation, after which the sand may be extracted, sometimes with the assistance of blasting to break up the sandstone.
Upon extraction, frac sand goes through a series of steps to optimize its properties for use in the hydraulic fracturing process. The sand is first crushed to reduce the particle size of the sand into grains. The sand is then washed in order to remove impurities such as clay and silt that would ultimately clog wells in a hydraulic fracturing setting, defeating the purpose of the proppant sand.
After washing, sand is typically stockpiled for storage. During stockpiling, the sand will naturally reduce in water content. However, a further drying step is required in order to bring sand down to the desired moisture level. This also helps to reduce shipping costs, as less water is being transported. Drying is most commonly carried out using a rotary drum dryer – an industrial drying system known for its robust build, reliability, and tolerance of variations in feedstock.
In addition to the shift away from Northern White sand, the industry has also been switching low-cost dryers out with higher quality systems. Dryer systems designed with the unique challenges frac sand can present have proven to offer a better processing solution, boasting reduced carryover and dust, improved product integrity, engineered customizations, and increased reliability.
CONCLUSION
Despite a shift from premium Northern White sand to “brown” sands, the frac sand industry is showing signs of growth and optimism in the wake of recovering oil prices, and as drillers increase the amount of sand they use per well.
And while local sources of sand provide a greater economic return, premium Northern White sand still holds a valuable place in the market, allowing deeper wells to be fracked than what brown sands can tolerate.
FEECO is a preferred provider of rotary dryers to the frac sand industry. Our rotary dryers are designed around the unique challenges that frac sand can present in order to provide the most efficient and long lasting solution possible. We can also supply an array of material handling equipment to support the process. For more information on our frac sand capabilities, visit our frac sand page, or contact us today!
Huge increase in Canadian frac sand deliveries boosts Source results
By Deborah Jaremko Nov. 13, 2017
Image: Joey Podlubny/JWN
Increased drilling activity in the Montney, Duvernay and Deep Basin plays in Western Canada is driving significantly improved financial performance for Source Energy Services.
The company, which delivers Source White frac sand to the Western Canada Sedimentary Basin from Wisconsin, reported a 255 percent increase in sand sales in the third quarter of 2017 compared to the previous year.The company sold 510,446 metric tonnes of sand in the third quarter of 2017, compared to 157,210 metric tons in the third quarter of 2016.
This generated $62.2 million in sand revenue in the third quarter of 2017, up from $19.1 million in the third quarter of 2016, contributing to Source’s 2017 third quarter net income of $3.0 million, compared to a a net loss of $12.3 million in the previous year period.
“Average Canadian well completion sand intensities continue to lag the average US well completion sand intensities; however, the Canadian average is rising as US style completions are being gradually adopted by Canadian exploration and production companies,” Source said in its earnings statement.
“Provided that commodity prices remain at similar levels to what they are today, and that exploration and production companies continue with their previously announced capital plans, significant improvement in sand sales compared to 2016 is expected to continue through the remainder of 2017. Source also expects that activity levels and sand intensity levels will continue to rise in 2018.”
The company has also “taken critical steps behind the scenes to meet growing proppant requirements,” noted CEO Brad Thomson. This includes the recent purchase of the company’s third Northern White Wisconsin mine and processing facility.
“As an organization, it's important that we continue to expand our ability to produce and distribute more northern white proppant,” Thomson said.
“Standing still is not an option."
Increased drilling activity in the Montney, Duvernay and Deep Basin plays in Western Canada is driving significantly improved financial performance for Source Energy Services.
The company, which delivers Source White frac sand to the Western Canada Sedimentary Basin from Wisconsin, reported a 255 percent increase in sand sales in the third quarter of 2017 compared to the previous year.The company sold 510,446 metric tonnes of sand in the third quarter of 2017, compared to 157,210 metric tons in the third quarter of 2016.
This generated $62.2 million in sand revenue in the third quarter of 2017, up from $19.1 million in the third quarter of 2016, contributing to Source’s 2017 third quarter net income of $3.0 million, compared to a a net loss of $12.3 million in the previous year period.
“Average Canadian well completion sand intensities continue to lag the average US well completion sand intensities; however, the Canadian average is rising as US style completions are being gradually adopted by Canadian exploration and production companies,” Source said in its earnings statement.
“Provided that commodity prices remain at similar levels to what they are today, and that exploration and production companies continue with their previously announced capital plans, significant improvement in sand sales compared to 2016 is expected to continue through the remainder of 2017. Source also expects that activity levels and sand intensity levels will continue to rise in 2018.”
The company has also “taken critical steps behind the scenes to meet growing proppant requirements,” noted CEO Brad Thomson. This includes the recent purchase of the company’s third Northern White Wisconsin mine and processing facility.
“As an organization, it's important that we continue to expand our ability to produce and distribute more northern white proppant,” Thomson said.
“Standing still is not an option."
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