Sunday 11th December 2016

Resource Clips


Propping up the oil patch

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Explorers hope for near-term cash flow as the fracking demand for sand expands

Historic reports and maps have helped identify exploration targets
on Rainmaker’s rail-accessible Peace River project.

 

Along with economy comes speed. “In most cases you can drill an auger hole twice as fast as a core hole,” he adds. “If we identify an area we want to advance rapidly, we can do a lot of the drilling very quickly. Your money will go two to three times as far with auger drilling as core drilling. Augering will be the main tool that would potentially build a 43-101 resource.”

The oil patch demands precise requirements for frac sand, Kluczny emphasizes. But Rainmaker’s Alberta property sits beside an existing operation, the Peace River Frac Sand Quarry operated by Canadian Silica Industries. “We were lucky enough to look at some data from the existing operation and it shows their sand meets all the requirements,” he says. “We want to see if that layer extends onto our property and still meets the specifications.”

If we identify an area we want to advance rapidly, we can do a lot of the drilling very quickly. Your money will go two to three times as far with auger drilling as core drilling. Augering will be the main tool that would potentially build a 43-101 resource.—Patrick Kluczny,
project geologist/manager with
Dahrouge Geological Consulting

Lab tests would determine whether sand meets American Petroleum Institute standards regarding purity (over 99% silicon dioxide SiO2), mesh size, roundness and sphericity, crush resistance, acid solubility and turbidity.

Processing varies in its complexity and might be done by an established company’s existing facility or a new producer. As Healey explains, “In its simplest case, processing is a matter of screening for the sizes. In some cases you might have to do a preliminary crush before the screening, washing and drying. Washing removes contaminants. If you’re dealing with surface deposits there might be some organic material or some material that’s too fine. That would be the procedure for a very simple operation. Some operations are substantially more complex than that.”

While Rainmaker develops as a pure frac sand play, some companies have seen the potential of near-term cash flow that might further the quest for other commodities. In December Declan Resources TSXV:LAN said it was evaluating a silica sand prospect found by Dahrouge on Declan’s Firebag River uranium property in northeastern Alberta. The company’s flagship is Gibbon’s Creek, an Athabasca Basin uranium joint venture with Lakeland Resources TSXV:LK.

In January an Argentine company was granted frac sand rights by U3O8 Corp TSX:UWE on part of its Carina uranium prospect.

The frac boom convinced Victory Nickel TSX:NI to transform its Minago nickel project in Manitoba into a “nickel/frac sand co-production.” In late January the company’s newly opened Seven Persons processing plant in southeastern Alberta received its first shipment of washed, concentrated Wisconsin sand for drying and screening. Under a subsidiary, Victory hopes to acquire a Wisconsin mine and a Winnipeg processing plant, and to extract both nickel and sand from Minago.

Aggregate supplier Athabasca Minerals TSXV:ABM has also branched off into a silica sand project in northern Alberta.

Explorers hope for near-term cash flow as the fracking demand for sand expands

Charts for the year ending February 7, 2014,
show the performance of two frac sand majors.

In January Claim Post Resources TSXV:CPS announced a sonic drill program on its Seymourville project 200 kilometres northeast of Winnipeg, which the company points out is “about 1,000 kilometres closer to the Canadian market than Wisconsin sand deposits.” With the benefit of 58 holes drilled by 2008, the company hopes to release a resource estimate in Q1 this year.

The space doesn’t, however, provide immunity from problems plaguing juniors in general. Back in December 2011 Stikine Energy TSXV:SKY released a preliminary economic assessment for its Angus frac sand property in northeastern B.C., only to see the project stall for lack of funding. Last month president/CEO Scott Broughton told the Prince George Citizen Canada’s burgeoning liquefied natural gas sector could change his company’s outlook.

“Frac sand is probably 10 to 20% of their completion costs, a huge number, a strategic material, and if they don’t have a ready supply there are expensive standby delays,” the Citizen quoted him.

LNG, of course, potentially offers even greater expansion of demand. And, as World Oil dispatches from countries like China, Poland, Australia, Algeria and Argentina show, shale gas exploration is hardly limited to this continent.

Meanwhile the performance of some frac sand majors has the juniors drooling. As of February 7 U.S. Silica, with a market cap of $1.43 billion, closed at $26.71—down from a 52-week high of $37.14 but well above $20.41 of a year earlier. Frac sand’s superstar would be the $1.21-billion market cap Hi-Crush Partners NYE:HCLP, which closed on $37.10, having more than doubled its market share over 52 weeks.

Disclaimer: Zimtu Capital Corp and Lakeland Resources Inc are clients of OnPage Media Corp, the publisher of ResourceClips.com. The principals of OnPage Media may hold shares in those companies.

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