Canadian Premium Sand Announces Completion of a Positive Preliminary Feasibility Study Technical Report at the Wanipigow Sand Project in Manitoba
CALGARY, June 12, 2019 - Canadian Premium Sand Inc. (“CPS” or the “Company”) (TSXV:CPS) is pleased to announce the results of an independent Preliminary Feasibility Study (“PFS” or the “Study”) and Mineral Resource update of Wanipigow Sand Project, on the Company’s 100% owned Ordovician silica sand deposit in southeastern Manitoba. The PFS was completed jointly by APEX Geoscience Ltd. and John T. Boyd Company with other technical inputs completed by sub-consultants including Turnkey Processing Solutions (“TPS”).
Key Updates of the Preliminary Feasibility Study
- New definition of geological units based on CPS’s 2018 drill program, which included 93 sonic core holes (see Jan. 23, 2019 News Release) and includes: Lower Black Island (“LBI”); Upper Black Island (“UBI”); Black Shale (“BS”); and Pleistocene Glaciofluvial (“Pgf”). The PFS resource and reserve estimations and mine plan were developed in consideration of these geological sub-units.
- Definition of Measured & Indicated Mineral Resources of 49.6 million tonnes reported for LBI and UBI.
- Definition of an Inferred Mineral Resource of 97.3 million tonnes reported for Pgf and UBI.
- Definition of Proven & Probable Mineral Reserves of 30.6 million tonnes.
- Initial 25-year mine life
- After-Tax Net Present Value of CDN$220 million discounted at an 8% discount rate
- After-Tax Internal Rate of Return of 20.2%.
- Initial CAPEX of CDN$220 million and sustaining capital of CDN$110-$115 million
Mineral Resources
The mineral resource update benefited from the results of the 93-drillhole program (1,574 metres; vertical -90º holes with true width intersections), which was managed, logged and sampled by APEX Geoscience Ltd. A total of 761 samples were collected including 237 LBI, 57 UBI, 17 BS and 450 Pgf samples. All 761 samples were analyzed for particle grainsize distribution analysis using a Camsizer P4 Particle analyzer. A subset of 675 grain size fractions were analyzed for proppant characterization test work including Krumbein shape factor and crush resistance. An additional 14 samples underwent complete proppant test work that included acid solubility and turbidity (in addition to Krumbein shape factors and crush resistance test work). A split of 58 samples were collected and analyzed for loose-sand bulk density analysis.
Quality Assurance – Quality Control samples were collected and analyzed to test the precision and accuracy of duplicate sample pairs for both gradation measurements and crush resistance tests (and at multiple labs).
The analytical work was completed at Turnkey Processing Solutions in Ottawa, IL and Stim-Lab in Duncan, OK. The analytical work was carried out by independent, accredited laboratories. The analytical methods are standard and routine in the field of silica sand, or proppant, test work pursuant to International Organization for Standardization 13503-2.
The mineral resources within the Wanipigow Property has been classified as Measured, Indicated and Inferred Resources in accordance with NI 43-101, and has been estimated using the CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines (2003) and the CIM “Definition Standards for Mineral Resources and Mineral Reserves (2014). Several factors were considered for the Mineral Resource classification including: drillhole spacing; nature of the geological contacts; the degree of testing; proppant quality, and lateral and vertical continuity. These factors serve as a proxy for geological confidence and the level of uncertainty of the individual units.
The 3-D geological model is defined by 93 vertical drillholes completed by CPS in 2018. The gradation data form an assay file that was used to calculate the Wanipigow Property Silica Sand Resource Estimate. The resource is calculated using a block model with a size of 20 by 20 m in the horizontal directions and 2 m in the vertical direction. The Wanipigow estimation of the individual sieve size fractions was completed and reported using a lower cutoff of mesh-sizes that are greater to or equal to 20-mesh and less than or equal to 140-mesh fraction. The loose bulk densities were converted to in-situ compacted bulk densities using a bulking factor of 30% and include: Pgf: 1.90 g/cm3; UBI: 1.91 g/cm3; LBI: 1.88 g/cm3. Bulk densities were utilized to convert volume (cubic metres) to tonnages.
Mineral resources are not mineral reserves and do not have demonstrated economic viability. This Wanipigow Property Silica Sand Resource Estimate predicts total (i.e., global) resources of:
- Lower Black Island Measured & Indicated Resources of 45.1 million tonnes;
- Upper Black Island Indicated Resource of 4.4 million tonnes and Inferred Resource of 1.7 million tonnes; and
- Pleistocene glaciofluvial Inferred Resource of 95.6 million tonnes (Tables 1 and 2).
Mineral Reserves
The Mineral Resources were converted to Mineral Reserves through the application of the appropriate Modifying Factors to potential mining volumes created during the mine design and planning process. In this PFS, a Mineral Reserve is defined as the Measured and Indicated Mineral Resource that would be extracted by the mine design and which can then be processed and sold at a profit. Inferred Resources were not converted to Mineral Reserves. The Measured resources meeting that standard were classified as Proven mineral reserves, while the Indicated resources meeting that standard were classified as Probable mineral reserves.
To derive the estimate of the saleable product tons, or Mineral Reserves: no external dilution was applied; internal dilution consisted of the +20 and -140 size fractions as interpolated in the Mineral Resource block model; mining losses of 5% represent Mineral Resources not extracted due to operational constraints encountered during routine mining operations; and processing losses of 5% due to general inefficiencies in the processing of silica sand.
The Mineral Reserve complies with CIM definitions and is supported by a detailed mine plan and cash flow model. The Mineral Reserves estimated for the Wanipigow Silica Sand Project are subject to the types of risks common to most silica sand quarry operations that exist in Canada. These risks include but are not limited to: site-specific mining and geological conditions, management and personnel capabilities, availability of funding to properly operate and capitalise the operation, variations in cost elements and market conditions, developing and operating the mine in an efficient manner, unforeseen changes in legislation and new industry developments. There is no guarantee that all or any part of the estimated Mineral Resource or Mineral Reserve will be recoverable.
The mineral reserves, expressed as saleable product tonnages, estimates Proven & Probable reserves of: 26.8 million tonnes of LBI; and 3.8 million tonnes of UBI (Table 3).
Mining Method
The Wanipigow Silica Sand Project is projected to include a conventional, open pit quarry employing typical truck-and-excavator mining operations. The quarry and fully enclosed plant are planned to operate 24 hours per day, 7 days per week year-round (weather permitting) and are expected to extract approximately 1.8 million tonnes of raw sand per year at full production. At this mining rate, the operation will produce an average of 1.2 million product tonnes per year after processing losses. The mine life is projected to be at least 26 years after which an estimated 43.2 million tonnes of raw sand and 11.6 million bank cubic metres of waste materials will have been mined.
Table 1. https://www.globenewswire.com/NewsRoom/AttachmentNg/601ebd44-7606-422a-a662-83006dd53d5f
Table 2. https://www.globenewswire.com/NewsRoom/AttachmentNg/fa5b7fbd-7fd4-4fc8-adb3-926bd20cc60b
Notes for Table 1 and Table 2
Note 1: Mineral resources are not mineral reserves and do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by geology, environment, permitting, legal, title, taxation, socio-political, marketing or other relevant issues.
Note 2: The Qualified Person (QP) responsible for the Mineral Resource estimates is Mr. Roy Eccles, P. Geo., of APEX Geoscience Ltd. The Effective Date of the Mineral Resource estimates is 28 March 2019.
Note 3: The weights are reported in metric tonnes (1,000 kg or 2,204.6 lbs) and United States short tons (2,000 lbs or 907.2 kg).
Note 3: Numbers may not add up due to rounding of the resource values percentages (rounded to the nearest 100,000 unit).
Note 4: The product size fractions overlap and are not cumulative.
Note 5: The total volume and weights are estimated on a global basis and represent the main Measured & Indicated LBI and UBI Silica Sand Resource (Table 1) and main Inferred Pgf and UBI Silica Sand Resource (Table 2).
Table 3. https://www.globenewswire.com/NewsRoom/AttachmentNg/227c42d6-5a05-4922-b8d2-6ab02205147b
Note 1: The Mineral Reserve is expressed as saleable product tonnages.
Note 2: The Qualified Person (QP) responsible for the Mineral Reserve estimate is Mr. Robert J. Farmer, P.Eng., Vice President of John T. Boyd Company
Note 3: The Effective Date of the Mineral Reserve estimates is 28 March 2019.
Note 4: The Mineral Reserve has been estimated in accordance with Canadian Institute of Mining and Metallurgy and Petroleum (CIM) definitions, as required under NI 43-101.
Note 5: The Mineral Reserve is a subset of, not additive to, the Mineral Resource and is quoted on a 100% project basis.
Note 6: The Mineral Reserve may be materially affected by geology, environment, permitting, legal, title, taxation, socio-political, marketing or other relevant issues.
Note 7: Tonnages are reported in metric tonnes (1,000 kg or 2,204.6 lbs) and United States short tons (2,000 lbs or 907.2 kg).
Capital Costs
Capital expenditure estimates were provided by TPS and developed by using first principles and applying direct project experience. The estimates were reviewed by the qualified persons and found to be reasonable and appropriate for a Preliminary Feasibility Study. The accuracy of the capital expenditure estimate is +/-10% and includes initial, sustaining and total Capital Cost estimations. Salvage value was not considered in the PFS.
The capital expenditure estimate for the CPS wet and dry plant, loadout and related infrastructure is approximately CDN$220 million, including a contingency of approximately CDN$16 million. Additionally, the company expects to lease mobile equipment to minimize upfront expenditures. Mobile equipment lease payments are estimated to total approximately CDN$90 million over the life of the mine (“LOM”). A further CDN$20 to CDN$25 million are contemplated for miscellaneous development and rebuilds for sustaining capital expenditures over the LOM. As a result, the total capital expenditure and lease‑related costs are estimated at CDN$330 to CDN$335 million for LOM plan.
Sustaining capital expenditures are incurred to maintain production and expected to be in the range of CDN$0.75 per tonne, or CDN$20 to CDN$25 million over LOM. Exclusions from the capital expenditures estimate include, but are not limited to, project financing and interest charges and working capital.
Operating Costs
Operating cost estimates were provided by TPS. These were reviewed by the qualified persons and found to be reasonable and appropriate for a Preliminary Feasibility Study. A summary of the first five years of operating costs is presented in Table 4.
Table 4. https://www.globenewswire.com/NewsRoom/AttachmentNg/687fafa3-005e-4192-b800-2d7d61835337
QP Recommended Programs
As part of CPS’s plan for the future, funding should be considered to include work necessary to:
- Enhance the economics of the deposit by upgrading inferred resource areas or geo-units to higher levels of resource/reserve classification by way of additional exploratory work;
- Prepare the silica sand resources/reserves to a feasibility level of mine design and costing accuracy and/or open pit mining and mine production phases at the discretion of CPS;
- Conduct exploratory work to define the extent of the deposit beyond the current resource/reserve area; and
- Ongoing environmental management planning, permitting, and social and local community engagement.
About Canadian Premium Sand Inc.
The Preliminary Feasibility Report is the culmination of a 9-month program initiated by the Company in 2018 which focused on the completion of a 93 sonic drill hole exploration program completed by Boart Longyear of Calgary with independent oversight by APEX including 1,574 meters of core within its 42 Quarry Leases encompassing 2,289 hectares. Laboratory testing was conducted on 761 samples by Stim-Lab and TPS to estimate the potential product quality of the silica sand reserves and to allow development of a mine plan and conduct the engineering to develop a detailed plant flowsheet. In addition, a market study was completed and the necessary infrastructure improvements were identified to support the entire facility.
Simultaneously with this program, the Company began the permitting and licensing process to obtain all necessary approvals from Hollow Water First Nation, the local community of Seymourville and the province of Manitoba. All of these approvals have been granted including a confirmation from the Canadian Minister of Environment and Climate Change that the project would not be designated for environmental assessment under CEAA 2012.
Technical Disclosure
The technical information in this News Release with respect to the PFS has been reviewed and approved by Roy Eccles, P. Geol. of APEX Geoscience Ltd. and Robert Farmer P. Eng. of John T. Boyd Company, each of whom is independent of CPS and a “qualified person” under National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI-43-101”).
A Technical Report in respect of the PFS will be filed on SEDAR (www.sedar.com) within 45 days of this News Release providing details of the Wanipigow Sand Project including the quality assurance program and quality control measures applied and key assumptions, parameters and methods used to estimate the Mineral Resources and Reserves.
Forward Looking Information
Certain statements contained in this press release constitute forward-looking statements relating to, without limitation, expectations, intentions, plans and beliefs, including information as to the future events, results of operations and the Company’s future performance (both operational and financial) and business prospects. In certain cases, forward-looking statements can be identified by the use of words such as “expects”, “estimates”, “forecasts”, “intends”, “anticipates”, “believes”, “plans”, “seeks”, “projects” or variations of such words and phrases, or state that certain actions, events or results “may” or “will” be taken, occur or be achieved. Such forward-looking statements reflect the Company's beliefs, estimates and opinions regarding its future growth, results of operations, future performance (both operational and financial), and business prospects and opportunities at the time such statements are made, and the Company undertakes no obligation to update forward-looking statements if these beliefs, estimates and opinions or circumstances should change. Forward-looking statements are necessarily based upon a number of estimates and assumptions made by the Company that are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Forward-looking statements are not guarantees of future performance. In particular, this press release contains forward-looking statements pertaining, but not limited, to: the amount of raw sand to be extracted and produced from the Wanipigow Sand Project; the mine life of the Wanipigow Sand Project; the design and operation of the Wanipigow Sand Project and related operating, capital and sustaining costs; the ability to transport silica sand to market from the Wanipigow Sand Project and the ultimate uses of such sand; the number of jobs to be created from the development of the Wanipigow Sand Project; the anticipated effects on local sand beaches or the local water table or community wells from the Wanipigow Sand Project; the anticipated economic and social benefits and opportunities, including employment, contracting and training initiatives; the plans with respect to financing ongoing operating activities; the timing and approval or permitting process with respect to the Wanipigow Sand Project; the intention to use cash on hand and proceeds from future equity issuances to fund the Company's operations and future development plans; industry activity levels; industry conditions pertaining to the silica sand industry; the ability of and manner by which the Company expects to meet its capital needs; and the Company's objectives, strategies and competitive strengths.
By their nature, forward-looking statements involve numerous current assumptions, known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to differ materially from those anticipated by the Company and described in the forward-looking statements.
With respect to the forward-looking statements contained in this press release, assumptions have been made regarding, among other things: the ability to obtain the necessary stakeholder, regulatory and environmental approval to advance the development of the Wanipigow Sand Project; the ability to continue to consult with, and address feedback received from interested stake holders including the Hollow Water First Nation and surrounding communities; environmental risks and regulations; future global economic and financial conditions; future commodity prices; operating, capital and sustaining costs; that the regulatory environment in which the Company operates will be maintained in the manner currently anticipated by the Company; future exchange and interest rates; geological and engineering estimates in respect of the Company's silica sand quantities; the recoverability of the Company’s silica sand and its quality; the accuracy and veracity of information and projections sourced from third parties respecting, among other things, future industry conditions and product demand; demand for horizontal drilling and hydraulic fracturing and the maintenance of current techniques and procedures, particularly with respect to the use of silica sand; the Company's ability to obtain qualified staff and equipment in a timely and cost-efficient manner; the regulatory framework governing royalties, taxes and environmental matters in the jurisdictions in which the Company conducts its business and any other jurisdictions in which the Company may conduct its business in the future; future capital expenditures to be made by the Company; future sources of funding for the Company's capital program; the Company's future debt levels; the impact of competition on the Company; and the Company's ability to obtain financing on acceptable terms.
A number of factors, risks and uncertainties could cause results to differ materially from those anticipated and described herein including, among others: the effects of competition and pricing pressures; effects of fluctuations in the price of proppants; risks related to indebtedness and liquidity, including the Company's capital requirements; risks related to interest rate fluctuations and foreign exchange rate fluctuations; changes in general economic, financial, market and business conditions in the markets in which the Company operates; changes in the technologies used to drill for and produce oil and natural gas; the Company's ability to obtain, maintain and renew required permits, licenses and approvals from regulatory authorities; the stringent requirements of and potential changes to applicable legislation, regulations and standards; the ability of the Company to comply with unexpected costs of government regulations; liabilities resulting from the Company's operations; the results of litigation or regulatory proceedings that may be brought against the Company; uninsured and underinsured losses; risks related to the transportation of the Company's products, including potential rail line interruptions or a reduction in rail car availability; the geographic and customer concentration of the Company; the ability of the Company to retain and attract qualified management and staff in the markets in which the Company operates; labour disputes and work stoppages and risks related to employee health and safety; general risks associated with the oil and natural gas industry, loss of markets, consumer and business spending and borrowing trends; limited, unfavourable, or a lack of access to capital markets; uncertainties inherent in estimating quantities of mineral resources; sand processing problems; and the use and suitability of the Company's accounting estimates and judgments.
Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in its forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will materialize or prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement. Readers should not place undue reliance on forward-looking statements. These statements speak only as of the date of this press release. Except as may be required by law, the Company expressly disclaims any intention or obligation to revise or update any forward-looking statements or information whether as a result of new information, future events or otherwise.
Any financial outlook and future-oriented financial information contained in this press release regarding prospective financial performance, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action based on management’s assessment of the relevant information that is currently available. Projected operational information contains forward-looking information and is based on a number of material assumptions and factors, as are set out above. These projections may also be considered to contain future oriented financial information or a financial outlook. The actual results of the Company's operations for any period will likely vary from the amounts set forth in these projections and such variations may be material. Actual results will vary from projected results. Readers are cautioned that any such financial outlook and future-oriented financial information contained herein should not be used for purposes other than those for which it is disclosed herein. The forward-looking information and statements contained in this document speak only as of the date hereof and the Company does not assume any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws.
CONTACT INFORMATION:
Canadian Premium Sand Inc.
Glenn Leroux
President and Chief Executive Officer
403.815.9907
glenn.leroux@cpsmail.com
Media Contact
Bronwyn Weaver
Communications and Community Liaison Officer
204.363.7202
Bronwyn.Weaver@cpsmail.com
www.canadianpremiumsand.com