TORONTO, ONTARIO--(Marketwired - Nov. 24, 2014) - Claim Post Resources Inc. (TSX VENTURE:CPS) (the "Company" or "Claim Post") is pleased to announce the results of a Preliminary Economic Assessment ("PEA") for its Seymourville Frac Sand Project located approximately 200km NE of Winnipeg, Manitoba. The PEA was prepared by P & E Mining Consultants Inc. ("P&E") of Brampton, Ontario.
In June, 2014, Claim Post announced an initial NI 43-101 Inferred Mineral Resource Estimate of 25,959,000 tonnes of high quality silica sand on 20% of the Project Lease Area for the Seymourville Frac Sand Project (SEDAR June 20, 2014).
The initial PEA demonstrates the potential for development of a low-cost economically robust quarry operation in Seymourville, Manitoba. At a Tier 1 frac sand price of CDN$110 per tonne, the Seymourville Frac Sand Project Base Case has an estimated CDN$617 million after-tax net cash flow, a CDN$151 million after-tax Net Present Value at a 10% discount rate, an after-tax Internal Rate of Return of 21%, and an initial capital expenditure of CDN$93 million for construction of a quarry, wash/screening plant and trans-loading truck to rail facility to produce 1.0 million tonnes per annum of product as of the third production year.
It is anticipated that the primary market for the frac sand will be to Western Canada locations and potentially to the Bakken oil field in the United States. The frac sand price of CDN$110 per tonne is derived from a base price of US$80 per tonne at an exchange rate of US$1.00=CDN$0.92, plus transportation costs to Winnipeg and loading into rail cars. Rail transportation, off-loading and haulage to the end user are assumed to be reimbursed to Claim Post at cost.
The completed PEA technical report will be filed on SEDAR within 45 days of this news release.
| Base Case Operating Highlights and Project Performance ($CDN) | ||
| Frac Sand Price: | Base case economic evaluation: $110/tonne FOB Winnipeg transload | |
| Mineral Resource: | Inferred Resource of 26 Mt @ 94.31% SiO2, 1.94% Al2O3, 0.91% Fe2O3 | |
| Production: | 1.0 Mt/year sand product as of Year 3, over 18-year quarry life | |
| After-Tax Net Cash Flow: | $617 million | |
| Cash Cost: | $47.2/tonne sand FOB Winnipeg transload facility, including royalties | |
| Initial Capital Cost: | $93 million (incl. 20% contingency) | |
| NPV @ 10% (after-tax): | $151 million | |
| IRR (after-tax): | 21% | |
| IRR (pre-tax): | 27% | |
| Payback (after-tax): | 4.4 years | |
| Sustaining Capital: | $83 million | |
Charles Gryba, President and CEO of Claim Post Resources Inc. stated "We are extremely pleased with the results of the initial PEA study for the Seymourville Frac Sand Project. The PEA report shows an initial after-tax NPV of CDN$151 million for the 1Mtpa Base Case. The project will evolve quickly. Line cutting is in progress and sonic drilling will start December 1st, 2014, to commence an exploration program that is targeting resource expansion. Our Social License is in place for a year and the initial 20 sonic drill holes should be completed by Christmas. Additionally, Claim Post anticipates the Seymourville location will lead to highly competitive frac sand pricing due to it being situated approximately 1,000 kilometres closer to the market than existing producers. Transportation costs, which comprise the majority of frac sand price components, should give us a competitive advantage. We could also benefit from exchange rate considerations."
Project Design and Economics
The Project considered in the PEA involves the shallow surface stripping of overburden and quarrying and processing of the underlying silica sand. The proposed Project starts with a 714,000 tonnes/year quarry operation feeding sand to a wash plant at a 70% recovery rate, yielding 500,000 tonnes/year of sand product. In production year two, the wash plant capacity is increased by 100% to enable a production rate of 1.0 million tonnes of sand product per year, resulting in a projected 18 year quarry life with total sand production of 16.4 million tonnes. Initial capital costs including owner's costs and a 20% contingency are estimated at CDN$93 million. This includes overburden stripping to expose the first area of sand to be quarried and development of a pit for deposition of plant reject material. It also includes purchase of land for a transload facility in Winnipeg, and building the transload structure to enable offloading of trucks and loading of rail cars. Sand will be transported by highway trucks from the quarry site to Winnipeg, with a leased fleet, each unit being capable of hauling 32 tonnes. Sustaining capital costs over the project's life are projected to be an additional CDN$83 million and include doubling the wash plant production rate during production year two. Projected average cash operating costs are CDN$45.00/tonne of recovered sand ready to ship by rail at the Winnipeg transload facility, plus CDN$2.15/tonne for royalties. Payback for initial capital is estimated at 4.4 years.
The PEA provides a basis to estimate project operating and capital costs and establish a projection of the potential minable resource, including Inferred resources, as permitted under National Instrument 43-101.
Mineral Resource Estimate
In June 2014, P&E completed a National Instrument 43-101 mineral resource estimate for the Seymourville frac sand project (see news release dated June 20, 2014). There has been no further exploration since that date. The resulting resource estimate is summarized in the table below. P&E considers that the Seymourville sand deposit is potentially amenable to quarrying by open pit methods. Seymourville deposit size fraction distribution studies indicate that by weight an average of 11% of the sand is in the 20/40 mesh range, 43% is in the 40/70 mesh range and 40% is in the 70/140 mesh range. API-ISO tests on samples from the Seymourville Project have determined that sand meets or exceeds API guidelines for frac sand. Seymourville frac sand test samples have significantly exceeded API-ISO Tier 1 frac sand compressive strength specifications for 40/70 mesh, 50/140 mesh and 70/140 mesh frac sand.
| Inferred Mineral Resource Estimate (1-4) | |||
| Tonnes | SiO2 (%) | Al2O3 (%) | Fe2O3 (%) |
| 25,959,000 | 94.31 | 1.94 | 0.91 |
| (1) | Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues. |
| (2) | The quantity and grade of reported Inferred resources in this estimation are uncertain in nature and there has been insufficient exploration to define these Inferred resources as an Indicated or Measured mineral resource and it is uncertain if further exploration will result in upgrading them to an Indicated or Measured mineral resource category. |
| (3) | The mineral resources were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by the CIM Council. |
| (4) | Screening at SGS labs in Lakefield, Ontario indicates approximately 70% of the sand/clay matrix is in the frac sand size range of 20 to 140 mesh. |
PEA Base Case Operating Highlights and Project Performance
| Pre-Tax | After Tax | ||||
| NPV0% | $852 | $617 | CDN millions | ||
| NPV5% | $437 | $306 | CDN millions | ||
| NPV10% (Base Case) | $230 | $151 | CDN millions | ||
| IRR = | 26.8 | % | 21.0 | % | |
| Payback Period = | 3.9 | 4.4 | years |
| CAPITAL COSTS | |||||
| Initial Capital | $ | 93 | CDN millions | ||
| Total Sustaining Capital | $ | 83 | CDN millions | ||
| Total Capital | $ | 176 | CDN millions | ||
| OPERATING COST | $Million LOM | $/t Sand Product | ||
| Quarrying Cost | $ | 87 | $ | 5.3 |
| Wash Plant | $ | 219 | $ | 13.3 |
| Trucking Cost to Winnipeg | $ | 363 | $ | 22.2 |
| Winnipeg Transload Cost | $ | 13 | $ | 0.8 |
| G&A Fixed Cost | $ | 55 | $ | 3.4 |
| Total Operating Cost | $ | 737 | $ | 45.0 |
| Operating Plan | |
| Pre-strip Period (yrs) | 0.5 |
| Operating Life (yrs) | 18 |
| Quarrying Sand (days/yr) | 180 |
| Overburden Stripping (days/yr) | 300 |
| Wet Plant (days/yr) | 180 |
| Dry Plant (days/yr) | 300 |
| Quarrying | |
| Average Quarrying Sand Rate (tpd) | 3,900 |
| Average Annual Quarry Material Production (tpd) | 7,200 |
| Total Material Moved Over Quarry Life (Mt) | 45.2 |
| Overall Average Strip Ratio (W:O) | 0.9 |
| Wash Plant (as of production Year 3) | |
| Wet Plant Rate (Mtpa) | 1.4 |
| Dry Plant Sand Production (Mtpa) | 1.0 |
| Recovery (%) | 70 |
Economic Sensitivities
Frac Sand Price Sensitivity
| Price ($/t) FOB Winnipeg | NPV10% ($M) |
IRR | Payback (yrs) |
||
| $88 | $ | 59 | 11.2 | % | 5.9 |
| $99 | $ | 105 | 16.4 | % | 5.0 |
| $110 (Base Case) | $ | 151 | 21.0 | % | 4.4 |
| $121 | $ | 198 | 25.1 | % | 4.0 |
| $132 | $ | 244 | 29.0 | % | 3.6 |
| $143 | $ | 290 | 32.5 | % | 3.4 |
| $153 | $ | 337 | 35.8 | % | 3.1 |
NPV Sensitivity (After-Tax CDN$M)
| -20% | -10% | 0% Base Case | +10% | +20% | ||||||
| Capex | $ | 173.3 | $ | 162.3 | $ | 151.3 | $ | 140.3 | $ | 129.3 |
| Opex | $ | 191.4 | $ | 171.3 | $ | 151.3 | $ | 131.3 | $ | 111.3 |
IRR Sensitivity (After-Tax %)
| -20% | -10% | 0% Base Case | +10% | +20% | ||||||
| Capex | 26.4 | % | 23.5 | % | 21.0 | % | 18.8 | % | 16.9 | % |
| Opex | 24.9 | % | 23.0 | % | 21.0 | % | 18.9 | % | 16.8 | % |
Quarrying
The quarrying operation is planned to primarily utilize dozers and excavators. No drilling/blasting is anticipated. Overburden stripping by dozers will clear the quarry blocks and subsequently backhoes will be used to feed a slurry pump system for delivering sand to the wet plant. The objectives of the quarrying method are:
- Minimize quarrying capital and operating costs by optimizing personnel and equipment requirements.
- Allow for six (summer) months of sand quarrying to feed the wet processing plant. Sand quarrying would take place 24 hours per day during the six month operation period.
- Allow for 10 months of overburden stripping, operating during day shift only.
- Minimize noise and dust impacts on the local communities.
- Provide capacity to place plant reject material back into quarried areas as soon as possible.
- Allow pit backfilling and progressive reclamation to occur concurrently with the advance of quarrying.
Approximately 23.4 Mt of sand will be quarried from six nominal 16 hectare blocks of land over the course of the estimated project life. It is estimated that 21.8 Mt of overburden will be dozed, for total life of quarry material movement of 45.2 Mt at an overall strip ratio for the project of 0.93:1.
Wash Plant
A mobile pump station will receive sand from the quarry operation and transport the sand as a slurry to the wash plant. Water used to slurry transport the sand to the wash plant will eventually be pumped back to sumps at the quarry and recycled.
The quarry and wet plant will operate during warm weather months only. These areas are sized to support year round operation of the dry plant. Both the wet and dry plants will be enclosed in buildings. No reagents are required in the process. The grade of the final product is anticipated to be +99% pure silica after scrubbing and washing operations.
The Wet Plant process is based on rougher hydroseparation for primary classification. Impurities generally occur as surface coatings and are liberated with attrition scrubbing. A second stage of hydroseparation is assigned for desliming, to produce a clean proppant. The cleaner hydrosizer product is dewatered using a belt filter and then stored in a building with 250,000 tonne capacity. The bulk product storage building is equipped with a reclaim system to provide feed to the dry plant.
The Dry Plant is designed to operate all year. However, the design criteria is configured so that operation can be stopped when road limits are in effect. In this manner, total annual throughput can be achieved in a 300 day period of operation.
The Dry Plant process is based on receipt of product from the bulk storage building. The bulk product is dried using a propane fired rotary dryer. The dried product is then screened to four product sizes and conveyed to four load-out hoppers, suitably equipped to charge and weigh highway haulage trucks. It is expected that most of the product would be hauled to a transfer facility in Winnipeg and loaded into rail cars.
The project is scheduled to produce up to one million tonnes of frac sand per year. The quarry would be operated 6 months per year with half the production stockpiled in a storage building so that the wash plant can operate year round. Wash Plant reject materials including clay and rock particles would be pumped back to the quarry to reclaim the quarry cells.
Environmental and Social Management
P&E has reviewed and assessed the scope and permitting requirements for the sand quarry (a non-aggregate quarry); the sand processing facility and use of rejected materials in progressive rehabilitation; frac sand trucking; and social engagement activities to date. The project whilst still at the conceptual level already incorporates a number of relevant environmental protection controls and takes progressive rehabilitation and final closure into consideration. P&E understands that the sand quarry could be permitted under Manitoba's Mines and Mineral Act and that the sand processing facility could be classified as a Class 1 type project and require an environmental review and public consultation as part of its permitting process under the Environment Act. Based on its current understanding of the project and permitting requirements, P&E is not aware of any insurmountable impediments to project permitting.
Upside Case Sensitivity Analysis
The PEA considered an Upside Case sensitivity analysis that doubled production compared to the Base Case, in order that as of the third year of production, the quarry operation would produce 2.0 million tonnes per annum of frac sand product. Compared to the Base Case, the Upside Case has less certainty that sales contracts could be established for the product, and the level of capital and operating cost estimating has not been carried out in as much detail as the Base Case.
At a Tier 1 frac sand price of CDN$110 per tonne, the Seymourville Frac Sand Project Upside Case has an estimated CDN$617 million after-tax net cash flow, a CDN$200 million after-tax Net Present Value at a 10% discount rate, an after-tax Internal Rate of Return of 29% (pre-tax IRR of 37%), and an initial capital expenditure of CDN$95 million for construction of a quarry and wash/screening plant, and transloading facility in Winnipeg, to produce 2.0 million tonnes per annum of product as of the third production year. Sustaining capital costs over the 10 year quarry life are estimated at CDN$177 million. The Upside Case requires a more detailed evaluation in the next stage of engineering study.
About the Frac Sand Market
The market for natural frac sand continues to grow at a high rate in North America (approximately 35% per annum) with production reaching about 38,000,000 tonnes in the US in 2013. Raymond James Ltd., in their June 30th 2014 Research Report, estimates a year-over-year increase in proppants of 13.2 million tons in 2014 and ~60 million tons by 2016. The Raymond James August 19th 2014 North American Sand Rush Research Report updated the estimates the consumption of frac sand to ~78 million tons by 2016; substantially higher than the June report estimate. The Canadian market is about 10% of the North American market.
Claim Post's Seymourville Frac Sand Deposit is approximately 1,000 km closer to the Canadian market than the Wisconsin sand deposits; indicating the potential for significant transportation savings in addition to the Canadian dollar differential. The Canadian oil and gas industry will continue to import natural frac sand for the foreseeable future, thus Seymourville sand will be competitively priced relative to imported Tier 1 sand plus Claim Post should be able to capture some the freight cost savings from Wisconsin to Canada.
Claim Post is evaluating a transload facility at the Centre Port site in Winnipeg which will provide unit train loading with access to CN, CPR and the BNSF railroads. In addition, Claim Post plans to provide bulk truck or container service to the oil industry in Manitoba, Saskatchewan and the U.S. side of the Williston Basin. Containers delivered to the well site are very economic within a 600 km range from the Winnipeg transload facility.
About P&E Mining Consultants Inc.
P&E Mining Consultants Inc. is an established geological and mine engineering consulting firm (since 2004) specializing in the area NI 43-101 geological and engineering reports and has undertaken over 200 mineral industry projects worldwide including Mineral Resource Estimates, Preliminary Economic Assessments, Prefeasibility studies and has jointly collaborated with major consulting firms on Feasibility Studies.
Qualified Person
Eugene Puritch, P.Eng. President of P&E, is the Independent Qualified Person responsible for preparing the PEA. Mr. Puritch has reviewed and approved the technical contents of this news release.
Claim Post Resources Inc. is a Canadian based mineral exploration company and a reporting issuer in Ontario, Alberta and British Columbia. The Company is focused on becoming a leading provider of premium white silica sand proppant to oil operations in the Williston Basin (both the Canadian and U.S. sides of the border), and to the entire Western Canadian Sedimentary Basin from its Seymourville Frac Sand Project, located 200 km northeast of Winnipeg, Manitoba. Claim Post also has mineral claims in the Timmins area for gold and base metal exploration. There are 118,019,160 common shares of the Company currently issued and outstanding.
Statements in this release that are forward-looking reflect the Company's current views and expectations with respect to its performance, business, and future events. Such statements are subject to various risks and assumptions, some, but not necessarily all, are disclosed elsewhere in the Company's periodic filings with Canadian securities regulators. Such statements and information contained herein represent management's best judgment as of the date hereof based on the information currently available; however actual results and events may vary significantly.
The Company does not assume the obligation to update any forward-looking statement. Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the accuracy of this release.
Contact Information:
Charles Gryba
President and Director
416-801-6366
Claim Post Resources Inc.
Peter Gryba
Corporate Affairs
416-203-3776
www.claimpostresources.com